The Safer Affordable Fuel-Efficient (SAFE) Vehicles Rule for Model Years 2021-2026 Passenger Cars and Light Trucks

Cited as:85 FR 24174
Court:National Highway Traffic Safety Administration
Publication Date:30 Apr 2020
Record Number:2020-06967
Federal Register, Volume 85 Issue 84 (Thursday, April 30, 2020)
[Federal Register Volume 85, Number 84 (Thursday, April 30, 2020)]
                [Rules and Regulations]
                [Pages 24174-25278]
                From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
                [FR Doc No: 2020-06967]
                [[Page 24173]]
                Vol. 85
                Thursday,
                No. 84
                April 30, 2020
                Part IV
                Book 2 of 3 Books
                Pages 24173-25278
                Environmental Protection Agency
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                40 CFR Parts 86 and 600
                Department of Transportation
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                National Highway Traffic Safety Administration
                49 CFR Parts 523, 531, 533, et al.
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                The Safer Affordable Fuel-Efficient (SAFE) Vehicles Rule for Model
                Years 2021-2026 Passenger Cars and Light Trucks; Final Rule
                Federal Register / Vol. 85 , No. 84 / Thursday, April 30, 2020 /
                Rules and Regulations
                [[Page 24174]]
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                ENVIRONMENTAL PROTECTION AGENCY
                40 CFR Parts 86 and 600
                DEPARTMENT OF TRANSPORTATION
                National Highway Traffic Safety Administration
                49 CFR Parts 523, 531, 533, 536, and 537
                [NHTSA-2018-0067; EPA-HQ-OAR-2018-0283; FRL 10000-45-OAR]
                RIN 2127-AL76; RIN 2060-AU09
                The Safer Affordable Fuel-Efficient (SAFE) Vehicles Rule for
                Model Years 2021-2026 Passenger Cars and Light Trucks
                AGENCY: Environmental Protection Agency and National Highway Traffic
                Safety Administration.
                ACTION: Final rule.
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                SUMMARY: EPA and NHTSA, on behalf of the Department of Transportation,
                are issuing final rules to amend and establish carbon dioxide and fuel
                economy standards. Specifically, EPA is amending carbon dioxide
                standards for model years 2021 and later, and NHTSA is amending fuel
                economy standards for model year 2021 and setting new fuel economy
                standards for model years 2022-2026. The standards set by this action
                apply to passenger cars and light trucks, and will continue our
                nation's progress toward energy independence and carbon dioxide
                reduction, while recognizing the realities of the marketplace and
                consumers' interest in purchasing vehicles that meet all of their
                diverse needs. These final rules represent the second part of the
                Administration's action related to the August 24, 2018 proposed Safer
                Affordable Fuel-Efficient (SAFE) Vehicles Rule. These final rules
                follow the agencies' actions, taken September 19, 2019, to ensure One
                National Program for automobile fuel economy and carbon dioxide
                emissions standards, by finalizing regulatory text related to
                preemption under the Energy Policy and Conservation Act and withdrawing
                a waiver previously provided to California under the Clean Air Act.
                DATES: This final rule is effective on June 29, 2020.
                 Judicial Review: NHTSA and EPA undertake this joint action under
                their respective authorities pursuant to the Energy Policy and
                Conservation Act and the Clean Air Act. Pursuant to CAA section 307(b),
                42 U.S.C. 7607(b), any petitions for judicial review of this action
                must be filed in the United States Court of Appeals for the D.C.
                Circuit. Given the inherent relationship between the agencies' action,
                any challenges to NHTSA's regulation under 49 U.S.C. 32909 should also
                be filed in the United States Court of Appeals for the D.C. Circuit.
                ADDRESSES: EPA and NHTSA have established dockets for this action under
                Docket ID Nos. EPA-HQ-OAR-2018-0283 and NHTSA-2018-0067, respectively.
                All documents in the docket are listed in the http://www.regulations.gov index. Although listed in the index, some
                information is not publicly available, e.g., confidential business
                information (CBI) or other information whose disclosure is restricted
                by statute. Certain other material, such as copyrighted material, will
                be publicly available in hard copy in EPA's docket, and electronically
                in NHTSA's online docket. Publicly available docket materials can be
                found either electronically in www.regulations.gov by searching for the
                dockets using the Docket ID numbers above, or in hard copy at the
                following locations:
                 EPA: EPA Docket Center, EPA/DC, EPA West, Room 3334, 1301
                Constitution Ave. NW, Washington, DC. The Public Reading Room is open
                from 8:30 a.m. to 4:30 p.m., Monday through Friday, excluding legal
                holidays. The telephone number for the Public Reading Room is (202)
                566-1744.
                 NHTSA: Docket Management Facility, M-30, U.S. Department of
                Transportation (DOT), West Building, Ground Floor, Rm. W12-140, 1200
                New Jersey Ave. SE, Washington, DC 20590. The DOT Docket Management
                Facility is open between 9 a.m. and 5 p.m. Eastern Time, Monday through
                Friday, except Federal holidays.
                FOR FURTHER INFORMATION CONTACT: EPA: Christopher Lieske, Office of
                Transportation and Air Quality, Assessment and Standards Division,
                Environmental Protection Agency, 2000 Traverwood Drive, Ann Arbor, MI
                48105; telephone number: (734) 214-4584; fax number: (734) 214-4816;
                email address: [email protected], or contact the Assessment
                and Standards Division, email address: [email protected]. NHTSA: James Tamm,
                Office of Rulemaking, Fuel Economy Division, National Highway Traffic
                Safety Administration, 1200 New Jersey Avenue SE, Washington, DC 20590;
                telephone number: (202) 493-0515.
                SUPPLEMENTARY INFORMATION:
                Does this action apply to me?
                 This action affects companies that manufacture or sell new light-
                duty vehicles, light-duty trucks, and medium-duty passenger vehicles,
                as defined under EPA's CAA regulations,\1\ and passenger automobiles
                (passenger cars) and non-passenger automobiles (light trucks) as
                defined under NHTSA's CAFE regulations.\2\ Regulated categories and
                entities include:
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                 \1\ ``Light-duty vehicle,'' ``light-duty truck,'' and ``medium-
                duty passenger vehicle'' are defined in 40 CFR 86.1803-01. Generally
                speaking, a ``light-duty vehicle'' is a passenger car, a ``light-
                duty truck'' is a pick-up truck, sport-utility vehicle, or minivan
                up to 8,500 lbs. gross vehicle weight rating, and a ``medium-duty
                passenger vehicle'' is a sport-utility vehicle or passenger van from
                8,500 to 10,000 lbs. gross vehicle weight rating.
                 \2\ ``Passenger car'' and ``light truck'' are defined in 49 CFR
                part 523.
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                [[Page 24175]]
                [GRAPHIC] [TIFF OMITTED] TR30AP20.000
                 This list is not intended to be exhaustive, but rather provides a
                guide regarding entities likely to be regulated by this action. To
                determine whether particular activities may be regulated by this
                action, you should carefully examine the regulations. You may direct
                questions regarding the applicability of this action to the person
                listed in FOR FURTHER INFORMATION CONTACT.
                I. Executive Summary
                II. Overview of Final Rule
                III. Purpose of the Rule
                IV. Purpose of Analytical Approach Considered as Part of Decision-
                Making
                V. Regulatory Alternatives Considered
                VI. Analytical Approach as Applied to Regulatory Alternatives
                VII. What does the analysis show, and what does it mean?
                VIII. How do the final standards fulfill the agencies' statutory
                obligations?
                IX. Compliance and Enforcement
                X. Regulatory Notices and Analyses
                I. Executive Summary
                 NHTSA (on behalf of the Department of Transportation) and EPA are
                issuing final rules to adopt and modify standards regulating corporate
                average fuel economy and tailpipe carbon dioxide (CO2)
                emissions and use/leakage of other air conditioning refrigerants for
                passenger cars and light trucks for MYs 2021-2026.\3\ These final rules
                follow the proposal issued in August 2018 and respond to each agency's
                legal obligation to set standards based on the factors Congress
                directed them to consider, as well as the direction of the United
                States Supreme Court in Massachusetts v. EPA, which stated that ``there
                is no reason to think the two agencies cannot both administer their
                obligations and yet avoid inconsistency.'' \4\ These standards are the
                product of significant and ongoing work by both agencies to craft
                regulatory requirements for the same group of vehicles and vehicle
                manufacturers. This work aims to facilitate, to the extent possible
                within the statutory directives issued to each agency, the ability of
                automobile manufacturers to meet all requirements under both programs
                with a single national fleet under one national program of fuel economy
                and tailpipe CO2 emission regulation.
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                 \3\ Throughout this document and the accompanying FRIA, the
                agencies will often use the term ``CO2'' or ``tailpipe
                CO2'' to refer broadly to EPA's suite of light duty
                vehicle GHG standards.
                 \4\ 549 U.S. 497, 532 (2007).
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                 The CAFE and CO2 emissions standards established by
                these final rules will increase in stringency at 1.5 percent per year
                from MY 2020 levels over MYs 2021-2026. The ``1.5 percent'' regulatory
                alternative is new for the final rule and was not expressly analyzed in
                the NPRM, but it is a logical outgrowth of the NPRM analysis, being
                well within the range of alternatives then considered and consistent
                with discussions by both the agencies and commenters that there are
                benefits to having standards that increase at the same rate for all
                fleets. These standards apply to light-duty vehicles, which NHTSA
                divides for purposes of regulation into passenger cars and light
                trucks, and EPA divides into passenger cars, light-duty trucks, and
                medium-duty passenger vehicles (i.e., sport utility vehicles, cross-
                over utility vehicles, and light trucks). Both the CAFE and
                CO2 standards are vehicle-footprint-based, as are the
                standards currently in effect. These standards will become more
                stringent for each model year from 2021 to 2026, relative to the MY
                2020 standards. Generally, the larger the vehicle footprint, the less
                numerically stringent the corresponding vehicle CO2 and
                miles-per-gallon (mpg) targets. As a result of the footprint-based
                standards, the burden of compliance is distributed across all vehicle
                footprints and across all manufacturers. Each manufacturer is subject
                to individualized standards for passenger cars and light trucks, in
                each model year, based on the vehicles it produces. When standards are
                carefully crafted, both in terms of the footprint curves and the rate
                of increase in stringency of those curves, manufacturers are not
                [[Page 24176]]
                compelled to build vehicles of any particular size or type.
                 Knowing that many readers are accustomed to considering CAFE and
                CO2 emissions standards in terms of the mpg and grams-per-
                mile (g/mi) values that the standards are projected to eventually
                require, the agencies include those projections here. EPA's standards
                are projected to require, on an average industry fleet-wide basis, 201
                grams per mile (g/mi) of CO2 in model year 2030, while
                NHTSA's standards are projected to require, on an average industry
                fleet-wide basis, 40.5 miles per gallon (mpg) in model year 2030. The
                agencies note that real-world CO2 is typically 25 percent
                higher and real-world fuel economy is typically 20 percent lower than
                the CO2 and CAFE compliance values discussed here, and also
                note that a portion of EPA's expected ``CO2'' improvements
                will in fact be made through improvements in minimizing air
                conditioning leakage and through use of alternative refrigerants, which
                will not contribute to fuel economy but will contribute toward
                reductions of climate-related emissions.
                 In these final rules, NHTSA and EPA are reaching similar
                conclusions on similar grounds: even though each agency has its own
                distinct statutory authority and factors, the relevant considerations
                overlap in many ways. Both agencies recognize that they are balancing
                the relevant considerations in somewhat different ways from how they
                may have been balanced previously, as in the 2012 final rule and in
                EPA's Initial Determination, but the current balancing is called for in
                light of the facts before the agencies. The balancing in these final
                rules is also somewhat different from how the agencies balanced their
                respective considerations in the proposal, in part because of updates
                to analytical inputs and methodologies, previewed in the NPRM and made
                in response to public comments, that collectively resulted in changes
                to the analytical outputs. For example, between the notice and final
                rule, the agencies updated fuel price projections to somewhat greater
                values, updated the analysis fleet to MY 2017, updated estimates of the
                efficacy and cost of fuel-saving technologies, revised procedures for
                calculating impacts on vehicle sales and scrappage, updated models for
                estimating highway safety impacts, updated estimates of highway
                congestion costs, and updated estimates of annual mileage accumulation,
                holding VMT (before applying the rebound effect) constant between
                regulatory alternative. Moreover, the cost-benefit analysis conducted
                for these final rules has even been overtaken by events in many ways
                over recent weeks. Based upon current events, and for additional
                reasons discussed in Section VI.D.1 the benefits of saving additional
                fuel through more stringent standards are potentially even smaller than
                estimated in this rulemaking analysis.
                 The standards finalized today fit the pattern of gradual, tough,
                but feasible stringency increases that take into account real world
                performance, shifts in fuel prices, and changes in consumer behavior
                toward crossovers and SUVs and away from more efficient sedans. This
                approach ensures that manufacturers are provided with sufficient lead
                time to achieve standards, considering the cost of compliance. The
                costs to both industry and automotive consumers would have been too
                high under the standards set forth in 2012, and by lowering the auto
                industry's costs to comply with the program, with a commensurate
                reduction in per-vehicle costs to consumers, the standards enhance the
                ability of the fleet to turn over to newer, cleaner and safer vehicles.
                 More stringent standards also have the potential for overly
                aggressive penetration rates for advanced technologies relative to the
                penetration rates seen in the final standards, especially in the face
                of an unknown degree of consumer acceptance of both the increased costs
                and of the technologies themselves--particularly given current
                projections of relatively low fuel prices during that timeframe. As a
                kind of insurance policy against future fuel price volatility,
                standards that increase at 1.5 percent per year for cars and trucks
                will help to keep fleet fuel economy higher than they would be
                otherwise when fuel prices are low, which is not improbable over the
                next several years.\5\ At the same time, the standards help to address
                these issues by maintaining incentives to promote broader deployment of
                advanced technologies, and so provides a means of encouraging their
                further penetration while leaving manufacturers alternative technology
                choices. Steady, gradual increases in stringency ensure that the
                benefits of reduced GHG emissions and fuel consumption are achieved
                without the potential for disruption to automakers or consumers.
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                 \5\ For example, EIA currently expects U.S. retail gasoline
                prices to average $2.14/gallon in 2020, compared to $2.69/gallon in
                2019 (see https://www.eia.gov/outlooks/steo/archives/mar20.pdf), and
                $3.68/gallon in 2012 (see https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=EMM_EPM0_PTE_NUS_DPG&f=A). While gasoline
                prices may foreseeably rise over the rulemaking time frame, it is
                also very foreseeable that they will not rise to the $4-5/gallon
                that many Americans saw over the 2008-2009 time frame, that caused
                the largest shift seen toward smaller and higher-fuel-economy
                vehicles. See, e.g., Figure VIII-2 below.
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                 Standards that increase at 1.5 percent per year represent a
                reasonable balance of additional technology and required per-vehicle
                costs, consumer demand for fuel economy, fuel savings and emissions
                avoided given the foreseeable state of the global oil market and the
                minimal effect on climate between finalizing 1.5 percent standards
                versus more stringent standards. The final standards will also result
                in year-over-year improvements in fleetwide fuel economy, resulting in
                energy conservation that helps address environmental concerns,
                including criteria pollutant, air toxic pollutant, and carbon
                emissions.
                 The agencies project that under these final standards, required
                technology costs would be reduced by $86 to $126 billion over the
                lifetimes of vehicles through MY 2029. Equally important, purchase
                prices costs to U.S. consumers for new vehicles would be $977 to $1,083
                lower, on average, than they would have been if the agencies had
                retained the standards set forth in the 2012 final rule and originally
                upheld by EPA in January 2017. While these final standards are
                estimated to result in 1.9 to 2.0 additional billion barrels of fuel
                consumed and from 867 to 923 additional million metric tons of
                CO2 as compared to current estimates of what the standards
                set forth in 2012 would require, the agencies explain at length below
                why the overall benefits of the final standards outweigh these
                additional costs.\6\
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                 \6\ 1.9 to 2.0 barrels of fuel is approximately 78 to 84 gallons
                of fuel.
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                 For the CAFE program, overall (fleetwide) net benefits vary from
                $16.1 billion at a 7 percent discount rate to -$13.1 billion at a 3
                percent discount rate. For the CO2 program, overall
                (fleetwide) societal net benefits vary from $6.4 billion at a 7 percent
                discount rate to -$22.0 billion at a 3 percent discount rate. The net
                benefits straddle zero, and are very small relative to the scale of
                reduced required technology costs, which range from $86.3 billion to
                $126.0 billion for the CAFE and CO2 programs across 7
                percent and 3 percent discount rates. Likewise, net benefits are very
                small relative to the scale of reduced retail fuel savings over the
                full life of all vehicles manufactured during the 2021 through 2029
                model years, which range from $108.6 billion to $185.1 billion for the
                CAFE and CO2 programs across 7 percent and 3 percent
                discount rates. Similarly, all of the alternatives have small net
                benefits, ranging from $18.4 billion to -$31.1
                [[Page 24177]]
                billion for the CAFE and CO2 programs across 7 percent and 3
                percent discount rates.\7\
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                 \7\ See Table II-12 to Table II-15 for costs, benefits and net
                benefits.
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                 NHTSA and EPA believe their analysis of the final rule represents
                the best available science, evidence, and methodologies for assessing
                the impacts of changes in CAFE and CO2 emission standards.
                In fact, the agencies note that today's analysis represents a marked
                improvement over prior rulemakings. Previously, the agencies were
                unable to model the impact of the standards on new vehicle sales or the
                retirement of older vehicles in the fleet, and, instead, were forced to
                assume, contrary to economic theory and empirical evidence, that the
                number of new vehicles sold and older vehicles scrapped remained static
                across regulatory alternatives. Today's analysis--as commenters to
                previous rulemakings and EPA's Science Advisory Board have argued is
                necessary \8\--quantifies the sales and scrappage impacts of the
                standards, including the associated safety benefits, and represents a
                significant step forward in agencies' ability to comprehensively
                analyze the impacts of CAFE and CO2 emission standards.
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                 \8\ Science Advisory Board, U.S. EPA. Review of EPA's Proposed
                SAFE rule at 4 (Feb. 27, 2020), available at https://
                yosemite.epa.gov/sab/sabproduct.nsf/LookupWebProjectsCurrentBOARD/
                1FACEE5C03725F268525851F006319BB/$File/EPA-SAB-20-003+.pdf
                [hereinafter ``SAB Report''].
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                 However, the agencies also believe it is important to be
                transparent about analytical limitations. For example, EPA's Science
                Advisory Board stressed that the agencies account for ``evolving
                consumer preferences for performance and other vehicle attributes,''
                \9\ yet due to limitations on the agencies' current ability to model
                buyers' choices among combinations of various attributes and their
                costs, the primary analysis does not account for the consumer benefits
                of other vehicle features that may be sacrificed for costly
                technologies that improve fuel economy. The agencies' analysis assumes
                that under these final standards, attributes of new cars and light
                trucks other than fuel economy would remain identical to those under
                the baseline standards, so that changes in sales prices and fuel
                economy would be the only sources of benefits or costs to new car and
                light truck buyers. In other words, the agencies' primary analysis does
                not consider that producers will likely respond to buyers' demands by
                reallocating some their savings in production costs due to lower
                technology costs to add or improve other attributes that consumers
                value more highly than the increases in fuel economy the augural
                standards would have required. The agencies have long debated whether
                and how best to model the consumer benefits of other vehicle
                attributes, and note that they have made considerable progress.\10\
                However, despite these potential analytical shortcomings, the agencies
                reaffirm that today's analysis represents the most complete and
                rigorous examination of CAFE and CO2 emission standards to
                date, and provide decision-makers a powerful analytical tool--
                especially since the limitations are known, do not bias the central
                analysis' results, and are afforded due consideration.
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                 \9\ SAB at 10.
                 \10\ In their evaluations of previous CAFE and CO2
                rules, the agencies attempted to account for this possibility by
                conducting sensitivity analyses that reduced the fuel savings and
                other benefits to vehicle buyers by a significant fraction. For
                example, NHTSA's analysis supporting the Final Rule establishing
                CAFE standards for model year 2012-16 cars and light trucks tested
                the sensitivity of their central estimates of social costs and
                benefits to the assumptions that 25 percent and 50 percent of
                benefits to buyers were offset by opportunity costs of foregone
                improvements in attributes other than fuel economy; see NHTSA, Final
                Regulatory Impact Analysis: Corporate Average Fuel Economy for Model
                year 2012-16 Passenger Cars and Light Trucks, March 2010, at 563-565
                and Table X-9, at 566-56; see also, NHTSA, Final Regulatory Impact
                Analysis: Corporate Average Fuel Economy for Model year 2017-25
                Passenger Cars and Light Trucks, August 2012, at 1087 and Tables X-
                18a, X-18b, and X-18c, at 1099-1104. The agencies acknowledged that
                this was not a completely satisfactory way to represent the
                sacrifices in vehicles' other attributes that car and light truck
                manufacturers might find it necessary to make in order to comply
                with the increasingly stringent standards those previous rules
                established. At the time, however, the agencies were unable to
                identify specific attributes that manufacturers were most likely to
                sacrifice, measure the tradeoffs between increased fuel economy and
                improvements in those attributes, or assess the potential losses in
                utility to car and light truck buyers. In an effort to improve on
                their previous treatment of this issue, the agencies' evaluation of
                this final rule includes a sensitivity case that assumes
                manufacturers redirect their technology cost savings from complying
                with less stringent standards to instead improve a combination of
                cars' and light trucks' other attributes that offers benefits to
                their buyers significantly exceeding those costs. The magnitude of
                these (net) benefits is interpreted as the opportunity cost of the
                improvements in vehicles' other attributes that would have been
                sacrificed if the augural standards had been enacted. The method the
                agencies use to approximate these benefits, together with its effect
                on the rule's overall benefits and costs, is discussed in detail in
                Section VI.D.1.b)(8). Briefly, the results of this sensitivity
                analysis suggest the Final Rule would generate net benefits for the
                CAFE and CO2 programs ranging from $34.9 to $55.4 billion
                at 3% and 7% discount rates.
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                 In terms of the agencies' respective statutory authorities, EPA is
                setting national tailpipe CO2 emissions standards for
                passenger cars and light trucks under section 202(a) of the Clean Air
                Act (CAA),\11\ and taking other actions under its authority to
                establish metrics and measure passenger car and light truck fleet fuel
                economy pursuant to the Energy Policy and Conservation Act (EPCA),\12\
                while NHTSA is setting national corporate average fuel economy (CAFE)
                standards under EPCA, as amended by the Energy Independence and
                Security Act (EISA) of 2007.\13\ As summarized above and as discussed
                in much greater detail below, the agencies believe that these represent
                appropriate levels of CO2 emissions standards and maximum
                feasible CAFE standards for MYs 2021-2026, pursuant to their respective
                statutory authorities. Sections III and VIII below contain detailed
                discussions of both agencies' statutory obligations and authorities.
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                 \11\ 42 U.S.C. 7521(a).
                 \12\ 49 U.S.C. 32904(c).
                 \13\ 49 U.S.C. 32902.
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                 Section 202(a) of the CAA requires EPA to establish standards for
                emissions of pollutants from new motor vehicles that cause or
                contribute to air pollution that may reasonably be anticipated to
                endanger public health or welfare. Standards under section 202(a) thus
                take effect only ``after providing 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.'' \14\ In establishing such standards,
                EPA must consider issues of technical feasibility, cost, and available
                lead time, among other things.
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                 \14\ CAA Sec. 202(a); 42 U.S.C. 7512(a)(2).
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                 EPCA, as amended by EISA, contains a number of provisions governing
                how NHTSA must set CAFE standards. EPCA requires that the Department of
                Transportation establish separate passenger car and light truck
                standards \15\ at ``the maximum feasible average fuel economy level
                that the Secretary decides the manufacturers can achieve in that model
                year,'' \16\ based on the agency's consideration of four statutory
                factors: technological feasibility, economic practicability, the effect
                of other standards of the Government on fuel economy, and the need of
                the United States to conserve energy.\17\ EPCA does not define these
                terms or specify what weight to give each concern in balancing them--
                such considerations are left within the discretion of the Secretary of
                Transportation (delegated to NHTSA) based upon current information.
                Accordingly, NHTSA interprets these factors and determines the
                appropriate weighting that leads to the maximum
                [[Page 24178]]
                feasible standards given the circumstances present at the time of
                promulgating each CAFE standard rulemaking. While EISA, for MYs 2011-
                2020, additionally required that standards increase ``ratably'' and be
                set at levels to ensure that the CAFE of the industry-wide combined
                fleet of new passenger cars and light trucks reach at least 35 mpg by
                MY 2020,\18\ EISA requires that standards for MYs 2021-2030 simply be
                set at the maximum feasible level as determined by the Secretary (and
                by delegation, NHTSA).\19\
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                 \15\ 49 U.S.C. 32902(b)(1).
                 \16\ 49 U.S.C. 32902(a).
                 \17\ 49 U.S.C. 32902(f).
                 \18\ 49 U.S.C. 32902(b)(2)(A) and (C).
                 \19\ 49 U.S.C. 32902(b)(2)(B).
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                 In the NPRM, the agencies sought comment on a variety of possible
                changes to existing compliance flexibilities that have been created
                over the past several years. The vast majority of the existing
                compliance flexibilities are not being changed, but a small number of
                flexibilities related to real-world fuel efficiency improvements are
                being finalized. In addition, EPA will continue to allow manufacturers
                to make improvements relating to air conditioning refrigerants and
                leakage and will credit those improvements toward CO2
                compliance, and EPA is making no changes in the amounts of credits
                available. EPA is also not making any changes to the existing
                CH4 and N2O standards. EPA is also extending the
                ``0 g/mi upstream'' incentive for electric vehicles beyond its current
                sunset of MY 2021, through MY 2026. EPA is also establishing a credit
                multiplier for natural gas vehicles through the 2026 model year.
                Otherwise, compliance flexibilities in the two programs do not change
                significantly for the final rule. These changes should help to
                streamline manufacturer use of those flexibilities in certain respects.
                While manufacturers and suppliers sought a number of other additional
                compliance flexibilities, the agencies have concluded that the
                aforementioned existing flexibilities are reasonable and appropriate,
                and that additional flexibilities are not justified.
                 Table I-1 and Table I-2 present the total costs, benefits, and net
                benefits for the 2021-2026 preferred alternative CAFE and
                CO2 levels, relative to the MY 2022-2025 existing/augural
                standards (with the MY 2025 standards repeated for MY 2026) and current
                MY 2021 standard. The preferred alternative exhibits a stringency rate
                increase of 1.5 percent per year for both passenger cars and light
                trucks. The values in Table I-1 and Table I-2 display (in total and
                annualized forms) costs for all MYs 1978-2029 vehicles, and the
                benefits and net benefits represent the impacts of the standards over
                the full lifetimes of the vehicles sold or projected to be sold during
                model years 1978-2029.
                 For this analysis, negative signs are used for changes in costs or
                benefits that decrease from those that would have resulted from the
                existing/augural standards. Any changes that would increase either
                costs or benefits are shown as positive changes. Thus, an alternative
                that decreases both costs and benefits, will show declines (i.e., a
                negative sign) in both categories. From Table I-1 and Table I-2, the
                preferred alternative (Alternative 3) is estimated to decrease costs
                relative to the baseline by $182 to $280 billion over the lifetime of
                MYs 1978-2029 passenger vehicles (range determined by discount rate
                across both CAFE and CO2 programs). It will also decrease
                benefits from $175 to $294 billion over the life of these MY fleets.
                The net impact will be a decrease from $22 billion to an increase of
                $16 billion in total net benefits to society over this roughly 52-year
                timeframe. Annualized, this amounts to roughly -$0.8 to 1.2 billion in
                net benefits per year.
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                [[Page 24179]]
                 Table I-3 and Table I-4 lists costs, benefits, and net benefits for
                all seven alternatives that were examined.
                [GRAPHIC] [TIFF OMITTED] TR30AP20.003
                [GRAPHIC] [TIFF OMITTED] TR30AP20.004
                 Table I-5 and Table I-6 show a summary of various impacts of the
                preferred alternative for CAFE and CO2 standards. Impacts
                are presented in monetized and non-monetized values, as well as from
                the perspective of society and the consumer.
                [[Page 24180]]
                [GRAPHIC] [TIFF OMITTED] TR30AP20.005
                [[Page 24181]]
                [GRAPHIC] [TIFF OMITTED] TR30AP20.006
                BILLING CODE 4910-59-C
                 The agencies note that the NPRM drew more public comments (and,
                particularly, more pages of substantive comments) than any rulemaking
                in the history of the CAFE or CO2 tailpipe emissions
                programs--exceeding 750,000 comments. The agencies recognized in the
                NPRM that the proposal was significantly different from the final rules
                set forth in 2012, and explained at length the reasons for those
                differences--namely, that new information and considerations, along
                with an expanded and updated analysis, had led to different tentative
                conclusions. Today's final rules represent a further evolution of the
                work that supported the proposal, based on improved quantitative
                methodology and in careful consideration of the hundreds of thousands
                of public comments and deep reflection on the serious issues before the
                agencies. Simply put, the agencies have heard the comments, and today's
                analysis and decision reflect the agencies' grappling with the issues
                commenters raised, as well as all of the other information before the
                agencies. These programs and issues are weighty, and the agencies
                believe that a reasonable balance has been struck in these final rules
                between the many competing national needs that these regulatory
                programs collectively address.
                II. Overview of Final Rule
                A. Summary of Proposal
                 In the NPRM, the National Highway Traffic Safety Administration
                (NHTSA) and the Environmental Protection Agency (EPA) (collectively,
                ``the
                [[Page 24182]]
                agencies'') proposed the ``Safer Affordable Fuel-Efficient (SAFE)
                Vehicles Rule for Model Years 2021-2026 Passenger Cars and Light
                Trucks'' (SAFE Vehicles Rule). The proposed SAFE Vehicles Rule would
                set Corporate Average Fuel Economy (CAFE) and carbon dioxide
                (CO2) emissions standards, respectively, for passenger cars
                and light trucks manufactured for sale in the United States in model
                years (MYs) 2021 through 2026.\20\
                ---------------------------------------------------------------------------
                 \20\ NHTSA sets CAFE standards under the Energy Policy and
                Conservation Act of 1975 (EPCA), as amended by the Energy
                Independence and Security Act of 2007 (EISA). EPA sets
                CO2 standards under the Clean Air Act (CAA).
                ---------------------------------------------------------------------------
                 The agencies explained that they must act to propose and finalize
                these standards and do not have discretion to decline to regulate.
                Congress requires NHTSA to set CAFE standards for each model year.\21\
                Congress also requires EPA to set emissions standards for light-duty
                vehicles if EPA has made an ``endangerment finding'' that the pollutant
                in question--in this case, CO2--``cause[s] or contribute[s]
                to air pollution which may reasonably be anticipated to endanger public
                health or welfare.'' \22\ NHTSA and EPA proposed the standards
                concurrently because tailpipe CO2 emissions standards are
                directly and inherently related to fuel economy standards,\23\ and, if
                finalized, the rules would apply concurrently to the same fleet of
                vehicles. By working together to develop the proposals, the agencies
                aimed to reduce regulatory burden on industry and improve
                administrative efficiency.
                ---------------------------------------------------------------------------
                 \21\ 49 U.S.C. 32902.
                 \22\ 42 U.S.C. 7521; see also 74 FR 66495 (Dec. 15, 2009)
                (``Endangerment and Cause or Contribute Findings for Greenhouse
                Gases under Section 202(a) of the Clean Air Act'').
                 \23\ See, e.g., 75 FR 25324, at 25327 (May 7, 2010) (``The
                National Program is both needed and possible because the
                relationship between improving fuel economy and reducing tailpipe
                CO2 emissions is a very direct and close one. The amount
                of those CO2 emissions is essentially constant per gallon
                combusted of a given type of fuel. Thus, the more fuel efficient a
                vehicle is, the less fuel it burns to travel a given distance. The
                less fuel it burns, the less CO2 it emits in traveling
                that distance. [citation omitted] While there are emission control
                technologies that reduce the pollutants (e.g., carbon monoxide)
                produced by imperfect combustion of fuel by capturing or converting
                them to other compounds, there is no such technology for
                CO2. Further, while some of those pollutants can also be
                reduced by achieving a more complete combustion of fuel, doing so
                only increases the tailpipe emissions of CO2. Thus, there
                is a single pool of technologies for addressing these twin problems,
                i.e., those that reduce fuel consumption and thereby reduce
                CO2 emissions as well.'').
                ---------------------------------------------------------------------------
                 The agencies discussed some of the history leading to the proposal,
                including the 2012 final rule, the expectations regarding a mid-term
                evaluation as required by EPA regulation, and the rapid process over
                2016 and early 2017 by which EPA issued its first Final Determination
                that the CO2 standards set in 2012 for MYs 2022-2025
                remained appropriate based on the information then before the EPA
                Administrator.\24\ The agencies also discussed President Trump's
                direction in March 2017 to restore the original mid-term evaluation
                timeline, and EPA's subsequent information-gathering process and
                announcement that it would reconsider the January 2017
                Determination.\25\ EPA ultimately concluded that the standards set in
                2012 for MYs 2022-2025 were no longer appropriate.\26\ For NHTSA, in
                turn, the ``augural'' CAFE standards for MYs 2022-2025 were never
                final, and as explained in the 2012 final rule, NHTSA was obligated
                from the beginning to undertake a new rulemaking to set CAFE standards
                for MYs 2022-2025.
                ---------------------------------------------------------------------------
                 \24\ See 83 FR at 42987 (Aug.24, 2018).
                 \25\ Id.
                 \26\ 83 FR 16077 (Apr. 2, 2018).
                ---------------------------------------------------------------------------
                 The NPRM thus began the rulemaking process for both agencies to
                establish new standards for MYs 2022-2025 passenger cars and light
                trucks. Standards were concurrently proposed for MY 2026 in order to
                provide regulatory stability for as many years as is legally
                permissible for both agencies together. The NPRM also included revised
                standards for MY 2021 passenger cars and light trucks, because the
                agencies tentatively concluded, based on the information and analysis
                then before them, that the CAFE standards previously set for MY 2021
                were no longer maximum feasible, and the CO2 standards
                previously set for MY 2021 were no longer appropriate. Agencies always
                have authority under the Administrative Procedure Act to revisit
                previous decisions in light of new facts, as long as they provide
                notice and an opportunity for comment, and the agencies stated that it
                is plainly the best practice to do so when changed circumstances so
                warrant.\27\
                ---------------------------------------------------------------------------
                 \27\ See FCC v. Fox Television, 556 U.S. 502 (2009).
                ---------------------------------------------------------------------------
                 The NPRM proposed to maintain the CAFE and CO2 standards
                applicable in MY 2020 for MYs 2021-2026, and took comment on a wide
                range of alternatives, including different stringencies and retaining
                existing CO2 standards and the augural CAFE standards.\28\
                Table II-1, Table II-2, and Table II-3 show the estimates, under the
                NPRM analysis, of what the MY 2020 CAFE and CO2 curves would
                translate to, in terms of miles per gallon (mpg) and grams per mile (g/
                mi), in MYs 2021-2026, as well as the regulatory alternatives
                considered in the NPRM. In addition to retaining the MY 2020
                CO2 standards through MY 2026, EPA proposed and sought
                comment on excluding air conditioning refrigerants and leakage, and
                nitrous oxide and methane emissions for compliance with CO2
                standards after model year 2020, in order to improve harmonization with
                the CAFE program. EPA also sought comment on whether to change existing
                methane and nitrous oxide standards that were finalized in the 2012
                rule. The proposal was accompanied by a 1,600 page Preliminary
                Regulatory Impact Analysis (PRIA) and, for NHTSA, a 500 page Draft
                Environmental Impact Statement (DEIS), with more than 800 pages of
                appendices and the entire CAFE model, including the software source
                code and documentation, all of which were also subject to comment in
                their entirety and all of which received significant comments.
                ---------------------------------------------------------------------------
                 \28\ The agencies noted that this did not mean that the miles
                per gallon and grams per mile levels that were estimated for the MY
                2020 fleet in 2012 would be the ``standards'' going forward into MYs
                2021-2026. Both NHTSA and EPA set CAFE and CO2 standards,
                respectively, as mathematical functions based on vehicle footprint.
                These mathematical functions that are the actual standards are
                defined as ``curves'' that are separate for passenger cars and light
                trucks, under which each vehicle manufacturer's compliance
                obligation varies depending on the footprints of the cars and trucks
                that it ultimately produces for sale in a given model year. It was
                the MY 2020 CAFE and CO2 curves that the agencies
                proposed would continue to apply to the passenger car and light
                truck fleets for MYs 2021-2026. The mpg and g/mi values which those
                curves would eventually require of the fleets in those model years
                would be known for certain only at the ends of each of those model
                years. While it is convenient to discuss CAFE and CO2
                standards as a set ``mpg,'' ``g/mi,'' or ``mpg-e'' number,
                attempting to define those values based on the information then
                before the agency would necessarily end up being inaccurate.
                ---------------------------------------------------------------------------
                BILLING CODE 4910-59-P
                [[Page 24183]]
                [GRAPHIC] [TIFF OMITTED] TR30AP20.007
                [[Page 24184]]
                [GRAPHIC] [TIFF OMITTED] TR30AP20.008
                
                ---------------------------------------------------------------------------
                 \29\ The carbon dioxide equivalents of air conditioning
                refrigerant leakage, nitrous oxide emissions, and methane emissions
                were included for compliance with the EPA standards for all MYs
                under the baseline/no action alternative in the NPRM. Carbon dioxide
                equivalent is calculated using the Global Warming Potential (GWP) of
                each of the emissions.
                 \30\ Beginning in MY 2021, the proposal provided that the GWP
                equivalents of air conditioning refrigerant leakage, nitrous oxide
                emissions, and methane emissions would no longer be able to be
                included with the tailpipe CO2 for compliance with
                tailpipe CO2 standards.
                ---------------------------------------------------------------------------
                [[Page 24185]]
                [GRAPHIC] [TIFF OMITTED] TR30AP20.009
                BILLING CODE 4910-59-C
                 The agencies explained in the NPRM that new information had been
                gathered and new analysis performed since publication of the 2012 final
                rule establishing CAFE and CO2 standards for MYs 2017 and
                beyond and since issuance of the 2016 Draft TAR and EPA's 2016 and
                early 2017 ``mid-term evaluation'' process. This new information and
                analysis helped lead the agencies to the tentative conclusion that
                holding standards constant at MY 2020 levels through MY 2026 was
                maximum feasible, for CAFE purposes, and appropriate, for
                CO2 purposes.
                 The agencies further explained that technologies had played out
                differently in the fleet from what the agencies previously assumed:
                That while there remain a wide variety of technologies available to
                improve fuel economy and reduce CO2 emissions, it had become
                clear that there were reasons to temper previous optimism about the
                costs, effectiveness, and consumer acceptance of a number of
                technologies. In addition, over the years between the previous analyses
                and the NPRM, automakers had added considerable amounts of technologies
                to their new vehicle fleets, meaning that the agencies were no longer
                free to make certain assumptions about how some of those technologies
                could be used going forward. For example, some technologies that could
                be used to improve fuel economy and reduce emissions had not been used
                entirely for that purpose, and some of the benefit of these
                technologies had gone instead toward improving other vehicle
                attributes. Other technologies had been tried, and had been met with
                significant customer acceptance issues. The agencies underscored the
                importance of reflecting the fleet as it stands today, with the
                technology it has and as that technology has been used, and considering
                what technology remains on the table at this point, whether and when it
                can realistically be available for widespread use in production, and
                how much it would cost to implement.
                 The agencies also acknowledged the math of diminishing returns: As
                CAFE and CO2 emissions standards increase in stringency, the
                benefit of continuing to increase in stringency decreases. In mpg
                terms, a vehicle owner who drives a light vehicle 15,000 miles per year
                (a typical assumption for analytical purposes) \31\ and trades in a
                vehicle with fuel economy of 15 mpg for one with fuel economy of 20
                mpg, will reduce their annual fuel consumption from 1,000 gallons to
                750 gallons--saving 250 gallons annually. If, however, that owner were
                to trade in a vehicle with fuel economy of 30 mpg for one with fuel
                economy of 40 mpg, the owner's annual gasoline consumption would drop
                from 500 gallons/year to 375 gallons/year--only 125 gallons even though
                the mpg improvement is twice as large. Going from 40 to 50 mpg would
                save only 75 gallons/year. Yet each additional fuel economy improvement
                becomes much more expensive as the easiest to achieve low-cost
                technological improvement options are chosen. In CO2 terms,
                if a vehicle emits 300 g/mi CO2,
                [[Page 24186]]
                a 20 percent improvement is 60 g/mi, so the vehicle would emit 240 g/
                mi; but if the vehicle emits 180 g/mi, a 20 percent improvement is only
                36 g/mi, so the vehicle would get 144 g/mi. In order to continue
                achieving similarly large (on an absolute basis) emissions reductions,
                the percentage reduction must also continue to increase.
                ---------------------------------------------------------------------------
                 \31\ A different vehicle-miles-traveled (VMT) assumption would
                change the absolute numbers in the example, but would not change the
                mathematical principles.
                ---------------------------------------------------------------------------
                 Related, average real-world fuel economy is lower than average fuel
                economy required under CAFE and CO2 standards. The 2012
                Federal Register notice announcing augural CAFE and CO2
                standards extending through MY 2025 indicated that, if met entirely
                through the application of fuel-saving technology, the MY 2025
                CO2 standards would result in an average requirement
                equivalent to 54.5 mpg. However, because the CO2 standards
                provide credit for reducing leakage of AC refrigerants and/or switching
                to lower-GWP refrigerants, and these actions do not affect fuel
                economy, the notice explained that the corresponding fuel economy
                requirement (under the CAFE program) would be 49.7 mpg. These estimates
                were based on a market forecast grounded in the MY 2008 fleet. The
                notice also presented analysis using a market forecast grounded in the
                MY 2010 fleet, showing a 48.7 mpg average CAFE requirement.
                 In the real world, fuel economy is, on average, about 20% lower
                than as measured under regulatory test procedures. In the real world,
                then, these new standards were estimated to require 39.0-39.8 mpg.
                 Today's analysis indicates that the requirements under the
                baseline/augural CAFE standards would average 46.6 mpg in MY 2029. The
                lower value results from changes in the fleet forecast which reflects
                consumer preference for larger vehicles than was forecast for the 2012
                rulemaking. In the real world, the requirements average about 37.1 mpg.
                Under the final standards issued today, the regulatory test procedure
                requirements average 40.5 mpg, corresponding to 33.2 mpg in the real
                world. Buyers of new vehicles experience real-world fuel economy, with
                levels varying among drivers (due to a wide range of factors). Vehicle
                fuel economy labels provide average real-world fuel economy information
                to buyers.
                [GRAPHIC] [TIFF OMITTED] TR30AP20.010
                 Vehicle owners also face fuel prices at the pump. The agencies
                noted in the NPRM that when fuel prices are high, the value of fuel
                saved may be enough to offset the cost of further fuel economy/
                emissions reduction improvements, but the agencies recognized that
                then-current projections of fuel prices by the Energy Information
                Administration did not indicate particularly high fuel prices in the
                foreseeable future. The agencies explained that fundamental structural
                shifts had occurred in global oil markets since the 2012 final rule,
                largely due to the rise of U.S. production and export of shale oil. The
                consequence over time of diminishing returns from more stringent fuel
                economy/emissions reduction standards, especially when combined with
                relatively low fuel prices, is greater difficulty for automakers to
                find a market of consumers willing to buy vehicles that meet the
                increasingly stringent standards. American consumers have long
                demonstrated that in times of relatively low fuel prices, fuel economy
                is not a top priority for the majority of them, even when highly fuel
                efficient vehicle models are available.
                 The NPRM analysis sought to improve how the agencies captured the
                effects of higher new vehicle prices on fleet composition as a whole by
                including an improved model for vehicle scrappage rates. As new vehicle
                prices increase, consumers tend to continue using older vehicles for
                longer, slowing fleet turnover and thus slowing improvements in fleet-
                wide fuel economy, reductions in CO2 emissions, reductions
                in criteria pollutant emissions, and advances in safety. That aspect of
                the analysis was also driven by the agencies' updated estimates of
                average per-vehicle cost increases due to
                [[Page 24187]]
                higher standards, which were several hundred dollars higher than
                previously estimated. The agencies cited growing concerns about
                affordability and negative equity for many consumers under these
                circumstances, as loan amounts grow and loan terms extend.
                 For all of the above reasons, the agencies proposed to maintain the
                MY 2020 fuel economy and CO2 emissions standards for MYs
                2021-2026. The agencies explained that they estimated, relative to the
                standards for MYs 2021-2026 put forth in 2012, that an additional 0.5
                million barrels of oil would be consumed per day (about 2 to 3 percent
                of projected U.S. consumption) if that proposal were finalized, but
                that they also expected the additional fuel costs to be outweighed by
                the cost savings from new vehicle purchases; that more than 12,700 on-
                road fatalities and significantly more injuries would be prevented over
                the lifetimes of vehicles through MY 2029 as compared to the standards
                set forth in the 2012 final rule over the lifetimes of vehicles as more
                new and safer vehicles are purchased than the current (and augural)
                standards; and that environmental impacts, on net, would be relatively
                minor, with criteria and toxic air pollutants not changing noticeably,
                and with estimated atmospheric CO2 concentrations increasing
                by 0.65 ppm (a 0.08 percent increase), which the agencies estimated
                would translate to 0.003 degrees Celsius of additional temperature
                increase relative to the standards finalized in 2012.
                 Under the NPRM analysis, the agencies tentatively concluded that
                maintaining the MY 2020 curves for MYs 2021-2026 would save American
                auto consumers, the auto industry, and the public a considerable amount
                of money as compared to EPA retaining the previously-set CO2
                standards and NHTSA finalizing the augural standards. The agencies
                explained that this had been identified as the preferred alternative,
                in part, because it appeared to maximize net benefits compared to the
                other alternatives analyzed, and recognizing the statutory
                considerations for both agencies. Relative to the standards issued in
                2012, under CAFE standards, the NPRM analysis estimated that costs
                would decrease by $502 billion overall at a three-percent discount rate
                ($335 billion at a seven-percent discount rate) and benefits were
                estimated to decrease by $326 billion at a three-percent discount rate
                ($204 billion at a seven-percent discount rate). Thus, net benefits
                were estimated to increase by $176 billion at a three-percent discount
                rate and $132 billion at a seven-percent discount rate. The estimated
                impacts under CO2 standards were estimated to be similar,
                with net benefits estimated to increase by $201 billion at a three-
                percent discount rate and $141 billion at a seven-percent discount
                rate.
                 The NPRM also sought comment on a variety of potential changes to
                NHTSA's and EPA's compliance programs for CAFE and CO2 as
                well as related programs, including questions about automaker requests
                for additional flexibilities and agency interest in reducing market-
                distorting incentives and improving transparency; and on a proposal to
                withdraw California's CAA preemption waiver for its ``Advanced Clean
                Car'' regulations, with an accompanying discussion of preemption of
                State standards under EPCA.\32\ The agencies sought comment broadly on
                all aspects of the proposal.
                ---------------------------------------------------------------------------
                 \32\ Agency actions relating to California's CAA waiver and EPCA
                preemption have since been finalized, see 84 FR 51310 (Sept. 27,
                2019), and will not be discussed in great detail as part of this
                final rule.
                ---------------------------------------------------------------------------
                B. Public Participation Opportunities and Summary of Comments
                 The NPRM was published on NHTSA's and EPA's websites on August 2,
                2018, and published in the Federal Register on August 24, 2018,
                beginning a 60-day comment period. The agencies subsequently extended
                the official comment period for an additional three days, and left the
                dockets open for more than a year after the start of the comment
                period, considering late comments to the extent practicable. A separate
                Federal Register notice also published on August 24, 2018, which
                announced the locations, dates, and times of three public hearings to
                be held on the proposal: One in Fresno, California, on September 24,
                2018; one in Dearborn, Michigan, on September 25, 2018; and one in
                Pittsburgh, Pennsylvania, on September 26, 2018. Each hearing started
                at 10 a.m. local time; the Fresno hearing ended at 5:10 p.m. and
                resulted in a 235 page transcript; the Dearborn hearing ran until 5:26
                p.m. and resulted in a 330 page transcript; and the Pittsburgh hearing
                ran until 5:06 p.m. and also resulted in a 330 page transcript. Each
                hearing also collected several hundred pages of comments from
                participants, in addition to the hearing transcripts.
                 Besides the comments submitted as part of the public hearings,
                NHTSA's docket received a total of 173,359 public comments in response
                to the proposal as of September 18, 2019, and EPA's docket a total of
                618,647 public comments, for an overall total of 792,006. NHTSA also
                received several hundred comments on its DEIS to the separate DEIS
                docket. While the majority of individual comments were form letters,
                the agencies received over 6,000 pages of substantive comments on the
                proposal.
                 Many commenters generally supported the proposal and many
                commenters opposed it. Commenters supporting the proposal tended to
                cite concerns about the cost of new vehicles, while commenters opposing
                the proposal tended to cite concerns about additional fuel expenditures
                and the impact on climate change. Many comments addressed the modeling
                used for the analysis, and specifically the inclusion, operation, and
                results of the sales and scrappage modules that were part of the NPRM's
                analysis, while many addressed the NPRM's safety findings and the role
                that those findings played in the proposal's justification. Many other
                comments addressed California's standards and role in Federal decision-
                making; as discussed above, those comments are further summarized and
                responded to in the separate Federal Register notice published in
                September 2019. Nearly every aspect of the NPRM's analysis and
                discussion received some level of comment by at least one commenter.
                The comments received, as a whole, were both broad and deep, and the
                agencies appreciate the level of engagement of commenters in the public
                comment process and the information and opinions provided.
                C. Changes in Light of Public Comments and New Information
                 The agencies made a number of changes to the analysis between the
                NPRM and the final rule in response to public comments and new
                information that was received in those comments or otherwise became
                available to the agencies. While these changes, their rationales, and
                their effects are discussed in detail in the sections below, the
                following represents a high-level list of some of the most significant
                changes:
                 Some regulatory alternatives were dropped from
                consideration, and one was added;
                 updated analysis fleet, and changes to technologies on
                ``baseline'' vehicles within the fleet to reflect better their current
                properties and improve modeling precision;
                 no civil penalties assumed to be paid after MY 2020 under
                CAFE program;
                 updates and expansions in accounting for certain over-
                compliance
                [[Page 24188]]
                credits, including early credits earned in EPA's program;
                 updates and expansions to CAFE Model's technology paths;
                 updates to inputs defining the range of manufacturer-,
                technology-, and product-specific constraints;
                 updates to allow the model to adopt a more advanced
                technology if it is more cost-effective than an earlier technology on
                the path;
                 precision improvements to the modeling of A/C efficiency
                and off-cycle credits;
                 updates to model's ``effective cost'' metric;
                 extended explicit simulation of technology application
                through MY 2050;
                 expanded presentation of the results to include ``calendar
                year'' analysis;
                 quantifying different types of health impacts from changes
                in air pollution, rather than only accounting for such impacts in
                aggregate estimates of the social costs of air pollution;
                 updated costs to 2018 dollars;
                 updated fuel costs based on the AEO 2019 version of NEMS;
                 a variety of technology updates in response to comments
                and new information;
                 updated accounting of rebound VMT between regulatory
                alternatives;
                 updated estimates of the macroeconomic cost of petroleum
                dependence;
                 updated response of total new vehicle sales to increases
                in fuel efficiency and price; and
                 updated response of vehicle retirement rates to changes in
                new vehicle fuel efficiency and transaction price.
                 Sections IV and VI below discuss these updates in significant
                detail.
                D. Final Standards--Stringency
                 As explained above, the agencies have chosen to set CAFE and
                CO2 standards that increase in stringency by 1.5 percent
                year over year for MYs 2021-2026. Separately, EPA has decided to retain
                the A/C refrigerant and leakage and CH4 and N2O
                standards set forth in 2012 for MYs 2021 and beyond, and the stringency
                of the CO2 standards in this final rule reflect the
                ``offset'' also established in 2012 based on assumptions made at that
                time about anticipated HFC emissions reductions.
                 When the agencies state that stringency will increase at 1.5
                percent per year, that means that the footprint curves which actually
                define the standards for CAFE and CO2 emissions will become
                more stringent at 1.5 percent per year. Consistent with Congress's
                direction in EISA to set CAFE standards based on a mathematical
                formula, which EPA harmonized with for the CO2 emissions
                standards, the standard curves are equations, which are slightly
                different for CAFE and CO2, and within each program,
                slightly different for passenger cars and light trucks. Each program
                has a basic equation for a fleet standard, and then values that change
                to cause the stringency changes are the coefficients within the
                equations. For passenger cars, consistent with prior rulemakings, NHTSA
                is defining fuel economy targets as follows:
                [GRAPHIC] [TIFF OMITTED] TR30AP20.011
                where:
                TARGETFE is the fuel economy target (in mpg) applicable to a
                specific vehicle model type with a unique footprint combination,
                a is a minimum fuel economy target (in mpg),
                b is a maximum fuel economy target (in mpg),
                c is the slope (in gallons per mile per square foot, or gpm, per
                square foot) of a line relating fuel consumption (the inverse of
                fuel economy) to footprint, and
                d is an intercept (in gpm) of the same line.
                 Here, MIN and MAX are functions that take the minimum and maximum
                values, respectively, of the set of included values. For example,
                MIN[40,35] = 35 and MAX(40, 25) = 40, such that MIN[MAX(40, 25), 35] =
                35.
                 For light trucks, also consistent with prior rulemakings, NHTSA is
                defining fuel economy targets as follows:
                [GRAPHIC] [TIFF OMITTED] TR30AP20.012
                where:
                TARGETFE is the fuel economy target (in mpg) applicable to a
                specific vehicle model type with a unique footprint combination,
                a, b, c, and d are as for passenger cars, but taking values specific
                to light trucks,
                e is a second minimum fuel economy target (in mpg),
                f is a second maximum fuel economy target (in mpg),
                g is the slope (in gpm per square foot) of a second line relating
                fuel consumption (the inverse of fuel economy) to footprint, and
                h is an intercept (in gpm) of the same second line.
                 The final CAFE standards (described in terms of their footprint-
                based curves) are as follows, with the values for the coefficients
                changing over time:
                [[Page 24189]]
                [GRAPHIC] [TIFF OMITTED] TR30AP20.013
                 These equations are presented graphically below, where the x-axis
                represents vehicle footprint and the y-axis represents fuel economy,
                showing that in the CAFE context, targets are higher (fuel economy) for
                smaller footprint vehicles and lower for larger footprint vehicles:
                BILLING CODE 4910-59-C
                [[Page 24190]]
                [GRAPHIC] [TIFF OMITTED] TR30AP20.014
                BILLING CODE 4910-59-P
                [[Page 24191]]
                [GRAPHIC] [TIFF OMITTED] TR30AP20.015
                BILLING CODE 4910-59-C
                 EPCA, as amended by EISA, requires that any manufacturer's
                domestically-manufactured passenger car fleet must meet the greater of
                either 27.5 mpg on average, or 92 percent of the average fuel economy
                projected by the Secretary for the combined domestic and non-domestic
                passenger automobile fleets manufactured for sale in the U.S. by all
                manufacturers in the model year, which projection shall be published in
                the Federal Register when the standard for that model year is
                promulgated in accordance with 49 U.S.C. 32902(b).\33\ Any time NHTSA
                establishes or changes a passenger car standard for a model year, the
                MDPCS for that model year must also be evaluated or re-evaluated and
                established accordingly. Thus, this final rule establishes the
                applicable MDPCS for MYs 2021-2026. Table II-8 lists the minimum
                domestic passenger car standards.
                ---------------------------------------------------------------------------
                 \33\ 49 U.S.C. 32902(b)(4).
                 [GRAPHIC] [TIFF OMITTED] TR30AP20.016
                
                 EPA CO2 standards are as follows. Rather than expressing
                these standards as linear functions with accompanying minima and
                maxima, similar to the approach NHTSA has followed since 2005 in
                specifying attribute-based standards, the following tables specify flat
                standards that apply below and above specified footprints, and a linear
                function that applies between those footprints. The two approaches are
                mathematically identical. For passenger cars with a footprint of less
                than or equal to 41 square feet, the gram/mile CO2 target
                value is selected for the appropriate model year from Table II-9:
                [[Page 24192]]
                [GRAPHIC] [TIFF OMITTED] TR30AP20.017
                 For passenger cars with a footprint of greater than 56 square feet,
                the gram/mile CO2 target value is selected for the
                appropriate model year from Table II-10:
                [GRAPHIC] [TIFF OMITTED] TR30AP20.018
                 For passenger cars with a footprint that is greater than 41 square
                feet and less than or equal to 56 square feet, the gram/mile
                CO2 target value is calculated using the following equation
                and rounded to the nearest 0.1 grams/mile.
                [[Page 24193]]
                Target CO2 = [a x f] + b
                Where f is the vehicle footprint and a and b are selected from Table
                II-11 for the appropriate model year:
                [GRAPHIC] [TIFF OMITTED] TR30AP20.019
                 For light trucks with a footprint of less than or equal to 41
                square feet, the gram/mile CO2 target value is selected for
                the appropriate model year from Table II-12:
                [[Page 24194]]
                [GRAPHIC] [TIFF OMITTED] TR30AP20.020
                 For light trucks with a footprint greater than the minimum value
                specified in the table below for each model year, the gram/mile
                CO2 target value is selected for the appropriate model year
                from Table II-13:
                [GRAPHIC] [TIFF OMITTED] TR30AP20.021
                [[Page 24195]]
                 For light trucks with a footprint that is greater than 41 square
                feet and less than or equal to the maximum footprint value specified in
                Table II-14 below for each model year, the gram/mile CO2
                target value is calculated using the following equation and rounded to
                the nearest 0.1 grams/mile.
                Target CO2 = (a x f) + b
                Where f is the footprint and a and b are selected from Table II-14
                below for the appropriate model year:
                [GRAPHIC] [TIFF OMITTED] TR30AP20.022
                 These equations are presented graphically below, where the x-axis
                represents vehicle footprint and the y-axis represents the
                CO2 target. The targets are lower for smaller footprint
                vehicles and higher for larger footprint vehicles:
                BILLING CODE 4910-59-P
                [[Page 24196]]
                [GRAPHIC] [TIFF OMITTED] TR30AP20.023
                [[Page 24197]]
                [GRAPHIC] [TIFF OMITTED] TR30AP20.024
                BILLING CODE 4910-59-C
                 Except that EPA elected to apply a slightly different slope when
                defining passenger car targets, CO2 targets may be expressed
                as direct conversion of fuel economy targets, as follows:
                [GRAPHIC] [TIFF OMITTED] TR30AP20.025
                where 8887 g/gal relates grams of CO2 emitted to gallons
                of fuel consumed, and OFFSET reflects the fact that that HFC
                emissions from lower-GWP A/C refrigerants and less leak-prone A/C
                systems are counted toward average CO2 emissions, but
                EPCA provides no basis to count reduced HFC emissions toward CAFE
                levels.
                 For the reader's benefit, Table II-15, Table II-16, and Table II-17
                show the estimates, under the final rule analysis, of what the MYs
                2021-2026 CAFE and CO2 curves would translate to, in terms
                of miles per gallon (mpg) and grams per mile (g/mi).
                BILLING CODE 4910-59-P
                [[Page 24198]]
                [GRAPHIC] [TIFF OMITTED] TR30AP20.026
                BILLING CODE 4910-59-C
                [[Page 24199]]
                [GRAPHIC] [TIFF OMITTED] TR30AP20.027
                 As the following tables demonstrate, averages of manufacturers'
                estimated requirements are more stringent (i.e., for CAFE, higher, and
                for CO2, lower) under the final standards than under the
                proposed standards:
                [GRAPHIC] [TIFF OMITTED] TR30AP20.028
                [[Page 24200]]
                [GRAPHIC] [TIFF OMITTED] TR30AP20.029
                E. Final Standards--Impacts
                 This section summarizes the estimated costs and benefits of the MYs
                2021-2026 CAFE and CO2 emissions standards for passenger
                cars and light trucks, as compared to the regulatory alternatives
                considered. These estimates helped inform the agencies' choices among
                the regulatory alternatives considered and provide further confirmation
                that the final standards are maximum feasible, for NHTSA, and
                appropriate, for EPA. The costs and benefits estimated to result from
                the CAFE standards are presented first, followed by those estimated to
                result from the CO2 standards. For several reasons, the
                estimates for costs and benefits presented for the different programs,
                while consistent, are not identical. NHTSA's and EPA's standards are
                projected to result in slightly different fuel efficiency improvements.
                EPA's CO2 standard is nominally more stringent in part due
                to its assumptions about manufacturers' use of air conditioning
                leakage/refrigerant replacement credits, which are expected to result
                in reduced emissions of HFCs. NHTSA's final standards are based solely
                on assumptions about fuel economy improvements, and do not account for
                emissions reductions that do not relate to fuel economy. In addition,
                the CAFE and CO2 programs offer somewhat different program
                flexibilities and provisions, primarily because NHTSA is statutorily
                prohibited from considering some flexibilities when establishing CAFE
                standards, while EPA is not.\34\ The analysis underlying this final
                rule reflects many of those additional EPA flexibilities, which
                contributes to differences in how the agencies estimate manufacturers
                could comply with the respective sets of standards, which in turn
                contributes to differences in estimated impacts of the standards. These
                differences in compliance flexibilities are discussed in more detail in
                Section IX below.
                ---------------------------------------------------------------------------
                 \34\ See 49 U.S.C. 32902(h); CAA Sec. 202(a).
                ---------------------------------------------------------------------------
                 Table II-20 to Table II-23 present all subcategories of costs and
                benefits of this final rule for all seven alternatives proposed. Costs
                include application of fuel economy technology to new vehicles,
                consumer surplus, crash costs due to changes in VMT, as well as, noise
                and congestion. Benefits include fuel savings, consumer surplus,
                refueling time, and clean air.
                BILLING CODE 4910-59-P
                [[Page 24201]]
                [GRAPHIC] [TIFF OMITTED] TR30AP20.030
                [[Page 24202]]
                [GRAPHIC] [TIFF OMITTED] TR30AP20.031
                [[Page 24203]]
                [GRAPHIC] [TIFF OMITTED] TR30AP20.032
                [[Page 24204]]
                [GRAPHIC] [TIFF OMITTED] TR30AP20.033
                [[Page 24205]]
                [GRAPHIC] [TIFF OMITTED] TR30AP20.034
                [[Page 24206]]
                [GRAPHIC] [TIFF OMITTED] TR30AP20.035
                [[Page 24207]]
                [GRAPHIC] [TIFF OMITTED] TR30AP20.036
                [[Page 24208]]
                [GRAPHIC] [TIFF OMITTED] TR30AP20.037
                [[Page 24209]]
                BILLING CODE 4910-59-C
                F. Other Programmatic Elements
                1. Compliance and Flexibilities
                 Automakers seeking to comply with the CAFE and CO2
                standards are generally expected to add fuel economy-improving
                technologies to their new vehicles to boost their overall fleet fuel
                economy levels. Readers will remember that improving fuel economy
                directly reduces CO2 emissions, because CO2 is a
                natural and inevitable byproduct of fossil fuel combustion to power
                vehicles. The CAFE and CO2 programs contain a variety of
                compliance provisions and flexibilities to accommodate better
                automakers' production cycles, to reward real-world fuel economy
                improvements that cannot be reflected in the 1975-developed test
                procedures, and to incentivize the production of certain types of
                vehicles. While the agencies sought comment on a broad variety of
                changes and potential expansions of the programs' compliance
                flexibilities in the NPRM, the agencies determined, after considering
                the comments, to make a few changes to the flexibilities proposed in
                the NPRM in this final rule. The most noteworthy change is the
                retention, in the CO2 program, of the flexibilities that
                allow automakers to continue to use HFC reductions toward their
                CO2 compliance, and that extend the ``0 grams/mile''
                assumption for electric vehicles through MY 2026 (i.e., recognizing
                only the tailpipe emissions of full battery-electric vehicles and not
                recognizing the upstream emissions caused by the electricity usage of
                those vehicles). In the NPRM, EPA had proposed to remove and sought
                comment on removing those flexibilities from the CO2
                program, but determined not to remove them in this final rule. EPA and
                NHTSA are also removing from the programs, starting in MY 2022, the
                credit/FCIV for full-size pickup trucks that are either hybrids or
                over-performing by a certain amount relative to their targets, and
                allowing technology suppliers to begin the petition process for off-
                cycle credits/adjustments.
                 Table II-24, Table II-25, Table II-26, and Table II-27 provide a
                summary of the various compliance provisions in the two programs; their
                authorities; and any changes included as part of this final rule:
                BILLING CODE 4910-59-P
                [GRAPHIC] [TIFF OMITTED] TR30AP20.038
                [[Page 24210]]
                [GRAPHIC] [TIFF OMITTED] TR30AP20.039
                BILLING CODE 4910-59-P
                [[Page 24211]]
                [GRAPHIC] [TIFF OMITTED] TR30AP20.040
                
                ---------------------------------------------------------------------------
                 \35\ The CAFE program uses an energy efficiency metric and
                standards that are expressed in miles per gallon. For PHEVs and
                BEVs, to determine gasoline the equivalent fuel economy for
                operation on electricity, a Petroleum Equivalency Factor (PEF) is
                applied to the measured electrical consumption. The PEF for
                electricity was established by the Department of Energy, as required
                by statute, and includes an accounting for upstream energy
                associated with the production and distribution for electricity
                relative to gasoline. Therefore, the CAFE program includes upstream
                accounting based on the metric that is consistent with the fuel
                economy metric. The PEF for electricity also includes an incentive
                that effectively counts only 15 percent of the electrical energy
                consumed.
                ---------------------------------------------------------------------------
                 Providing a technology neutral basis by which manufacturers meet
                fuel economy and CO2 emissions standards encourages an
                efficient and level playing field. The agencies continue to have a
                desire to minimize incentives that disproportionately favor one
                technology over another. Some of this may involve regulations
                established by other Federal agencies. In the near future, NHTSA and
                EPA intend to work with other relevant Federal agencies to pursue
                regulatory means by which we can further ensure technology neutrality
                in this field.
                2. Preemption/Waiver
                 As discussed above, the issues of Clean Air Act waivers of
                preemption under Section 209 and EPCA/EISA preemption under 49 U.S.C.
                32919 are not addressed in today's final rule, as
                [[Page 24212]]
                they were the subject of a separate final rulemaking action by the
                agencies in September 2019. While many comments were received in
                response to the NPRM discussion of those issues, those comments have
                been addressed and responded to as part of that separate rulemaking
                action.
                III. Purpose of the Rule
                 The Administrative Procedure Act (APA) requires agencies to
                incorporate in their final rules a ``concise general statement of their
                basis and purpose.'' \36\ While the entire preamble document represents
                the agencies' overall explanation of the basis and purpose for this
                regulatory action, this section within the preamble is intended as a
                direct response to that APA (and related CAA) requirements. Executive
                Order 12866 further states that ``Federal agencies should promulgate
                only such regulations as are required by law, are necessary to
                interpret the law, or are made necessary by compelling public need,
                such as material failures of private markets to protect or improve the
                health and safety of the public, the environment, or the well-being of
                the American people.'' \37\ Section III.C of the FRIA accompanying this
                rulemaking discusses at greater length the question of whether a market
                failure exists that these final rules may address.
                ---------------------------------------------------------------------------
                 \36\ 5 U.S.C. 553(c); see also Clean Air Act section
                307(d)(6)(A), 42 U.S.C. 7607(d)(6)(A).
                 \37\ E.O. 12866, Section 1(a).
                ---------------------------------------------------------------------------
                 NHTSA and EPA are legally obligated to set CAFE and GHG standards,
                respectively, and do not have the authority to decline to regulate.\38\
                The agencies are issuing these final rules to fulfill their respective
                statutory obligations to provide maximum feasible fuel economy
                standards and limit emissions of pollutants from new motor vehicles
                which have been found to endanger public health and welfare (in this
                case, specifically carbon dioxide (CO2); EPA has already set
                standards for methane (CH4), nitrous oxide (N2O),
                and hydrofluorocarbons (HFCs) and is not revising them in this rule).
                Continued progress in meeting these statutory obligations is both
                legally necessary and good for America--greater energy security and
                reduced emissions protect the American public. The final standards
                continue that progress, albeit at a slower rate than the standards
                finalized in 2012.
                ---------------------------------------------------------------------------
                 \38\ For CAFE, see 49 U.S.C. 32902; for CO2, see 42
                U.S.C. 7521(a).
                ---------------------------------------------------------------------------
                 National annual gasoline consumption and CO2 emissions
                currently total about 140 billion gallons and 5,300 million metric
                tons, respectively. The majority of this gasoline (about 130 billion
                gallons) is used to fuel passenger cars and light trucks, such as will
                be covered by the CAFE and CO2 standards issued today.
                Accounting for both tailpipe emissions and emissions from ``upstream''
                processes (e.g., domestic refining) involved in producing and
                delivering fuel, passenger cars and light trucks account for about
                1,500 million metric tons (mmt) of current annual CO2
                emissions. The agencies estimate that under the standards issued in
                2012, passenger car and light truck annual gasoline consumption would
                steadily decline, reaching about 80 billion gallons by 2050. The
                agencies further estimate that, because of this decrease in gasoline
                consumption under the standards issued in 2012, passenger car and light
                truck annual CO2 emissions would also steadily decline,
                reaching about 1,000 mmt by 2050. Under the standards issued today, the
                agencies estimate that, instead of declining from about 140 billion
                gallons annually today to about 80 billion gallons annually in 2050,
                passenger car and light truck gasoline consumption would decline to
                about 95 billion gallons. The agencies correspondingly estimate that
                instead of declining from about 1,500 mmt annually today to about 1,000
                mmt annually in 2050, passenger car and light truck CO2
                emissions would decline to about 1,100 mmt. In short, the agencies
                estimate that under the standards issued today, annual passenger car
                and light truck gasoline consumption and CO2 emissions will
                continue to steadily decline over the next three decades, even if not
                quite as rapidly as under the previously-issued standards.
                 The agencies also estimate that these impacts on passenger car and
                light truck gasoline consumption and CO2 emissions will be
                accompanied by a range of other energy- and climate-related impacts,
                such as reduced electricity consumption (because today's standards
                reduce the estimated rate at which the market might shift toward
                electric vehicles) and increased CH4 and N2O
                emissions. These estimated impacts, discussed below and in the FEIS
                accompanying today's notice, are dwarfed by estimated impacts on
                gasoline consumption and CO2 emissions.
                 As explained above, these final rules set or amend fuel economy and
                carbon dioxide standards for model years 2021-2026. Many commenters
                argued that it was not appropriate to amend previously-established
                CO2 and CAFE standards, generally because those commenters
                believed that the administrative record established for the 2012 final
                rule and EPA's January 2017 Final Determination was superior to the
                record that informed the NPRM, and that that prior record led
                necessarily to the policy conclusion that the previously-established
                standards should remain in place.\39\ Some commenters similarly argued
                that EPA's Revised Final Determination--which, for EPA, preceded this
                regulatory action--was invalid because, they allege, it did not follow
                the procedures established for the mid-term evaluation that EPA
                codified into regulation,\40\ and also because the Revised Final
                Determination was not based on the prior record.\41\
                ---------------------------------------------------------------------------
                 \39\ Comments arguing that the prior record was superior to the
                current record, and thus a better basis for decision-making, will be
                addressed throughout the balance of this preamble.
                 \40\ 40 CFR 86.1818-12(h).
                 \41\ See, e.g., comments from the States and Cities, Attachment
                1, Docket No. NHTSA-2018-0067-11735, at 40-42; CARB, Detailed
                Comments, Docket No. NHTSA-2018-0067-11873, at 71-72; CBD et. al,
                Appendix A, Docket No. NHTSA-2018-0067-12000, at 214-228.
                ---------------------------------------------------------------------------
                 The agencies considered a range of alternatives in the proposal,
                including the baseline/no action alternative of retaining the existing
                EPA carbon dioxide standards. As the agencies explained in the
                proposal, the proposal was entirely de novo, based on an entirely new
                analysis reflecting the best and most up-to-date information available
                to the agencies.\42\ This rulemaking action is separate and distinct
                from EPA's Revised Final Determination, which itself was neither a
                proposed nor a final decision that the standards ``must'' be revised.
                EPA retained full discretion in this rulemaking to revise the standards
                or not revise them. In any event, the case law is clear that agencies
                are free to reconsider their prior decisions.\43\ With that legal
                principle in mind, the agencies agree with commenters that the amended
                (and new) CO2 and CAFE standards must be consistent with the
                [[Page 24213]]
                CAA and EPCA/EISA, respectively, and this preamble and the accompanying
                FRIA explain in detail why the agencies believe they are consistent.
                The section below discusses briefly the authority given to the agencies
                by their respective governing statutes, and the factors that Congress
                directed the agencies to consider as they exercise that authority in
                pursuit of fulfilling their statutory obligations.
                ---------------------------------------------------------------------------
                 \42\ 83 FR 42968, 42987 (Aug. 24, 2018).
                 \43\ See, e.g., Encino Motorcars, LLC v. Navarro, 136 S. Ct.
                2117, 2125 (2016) (``Agencies are free to change their existing
                policies as long as they provide a reasoned explanation for the
                change.''); FCC v. Fox Television Stations, Inc., 556 U.S. 502, 515
                (2009) (When an agency changes its existing position, it ``need not
                always provide a more detailed justification than what would suffice
                for a new policy created on a blank slate. Sometimes it must--when,
                for example, its new policy rests on factual findings that
                contradict those which underlay its prior policy; or when its prior
                policy has engendered serious reliance interests that must be taken
                into account . . . . In such cases it is not that further
                justification is demanded by the mere fact of policy change, but
                that a reasoned explanation is needed for disregarding facts and
                circumstances that underlay or were engendered by the prior
                policy.'')
                ---------------------------------------------------------------------------
                A. EPA's Statutory Requirements
                 EPA is setting national CO2 standards for passenger cars
                and light trucks under Section 202(a) of the Clean Air Act (CAA).\44\
                Section 202(a) of the CAA requires EPA to establish standards for
                emissions of pollutants from new motor vehicles which cause or
                contribute to air pollution which may reasonably be anticipated to
                endanger public health or welfare.\45\ In establishing such standards,
                EPA considers issues of technical feasibility, cost, available lead
                time, and other factors. Standards under section 202(a) thus take
                effect only ``after providing 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.'' \46\ EPA's statutory requirements are further
                discussed in Section VIII.A.
                ---------------------------------------------------------------------------
                 \44\ 42 U.S.C. 7521(a).
                 \45\ See Coalition for Responsible Regulation v. EPA, 684 F.3d
                102, 114-115 (D.C. Cir. 2012) (`` `If EPA makes a finding of
                endangerment, the Clean Air Act requires the [a]gency to regulate
                emissions of the deleterious pollutant from new motor vehicles . . .
                . Given the non-discretionary duty in Section 202(a)(1) and the
                limited flexibility available under Section 202(a)(2), which this
                court has held related only to the motor vehicle industry, . . . EPA
                had no statutory basis on which it could ground [any] reasons for
                further inaction' '') (quoting Massachusetts v. EPA, 549 U.S. 497,
                533-35 (2007).
                 \46\ 42 U.S.C. 7521(a)(2).
                ---------------------------------------------------------------------------
                B. NHTSA's Statutory Requirements
                 NHTSA is setting national Corporate Average Fuel Economy (CAFE)
                standards for passenger cars and light trucks for each model year as
                required under EPCA, as amended by EISA.\47\ EPCA mandates a motor
                vehicle fuel economy regulatory program that balances statutory factors
                in setting minimum fuel economy standards to facilitate energy
                conservation. EPCA allocates the responsibility for implementing the
                program between NHTSA and EPA as follows: NHTSA sets CAFE standards for
                passenger cars and light trucks; EPA establishes the procedures for
                testing, tests vehicles, collects and analyzes manufacturers' data, and
                calculates the individual and average fuel economy of each
                manufacturer's passenger cars and light trucks; and NHTSA enforces the
                standards based on EPA's calculations.
                ---------------------------------------------------------------------------
                 \47\ EPCA and EISA direct the Secretary of Transportation to
                develop, implement, and enforce fuel economy standards (see 49
                U.S.C. 32901 et. seq.), which authority the Secretary has delegated
                to NHTSA at 49 CFR 1.94(c).
                ---------------------------------------------------------------------------
                 The following sections enumerate specific statutory requirements
                for NHTSA in setting CAFE standards and NHTSA's interpretations of
                them, where applicable. Many comments were received on these
                requirements and interpretations. Because this is intended as an
                overview section, those comments will be addressed below in Section
                VIII rather than here, and the agencies refer readers to that part of
                the document for more information.
                 For each future model year, EPCA (as amended by EISA) requires that
                DOT (by delegation, NHTSA) establish separate passenger car and light
                truck standards at ``the maximum feasible average fuel economy level
                that the Secretary decides the manufacturers can achieve in that model
                year,'' \48\ based on the agency's consideration of four statutory
                factors: ``technological feasibility, economic practicability, the
                effect of other motor vehicle standards of the Government on fuel
                economy, and the need of the United States to conserve energy.'' \49\
                The law also allows NHTSA to amend standards that are already in place,
                as long as doing so meets these requirements.\50\ EPCA does not define
                these terms or specify what weight to give each concern in balancing
                them; thus, NHTSA defines them and determines the appropriate weighting
                that leads to the maximum feasible standards given the circumstances in
                each CAFE standard rulemaking.\51\
                ---------------------------------------------------------------------------
                 \48\ 49 U.S.C. 32902(a) and (b).
                 \49\ 49 U.S.C. 32902(f).
                 \50\ 49 U.S.C. 32902(g).
                 \51\ See Center for Biological Diversity v. NHTSA, 538 F.3d
                1172, 1195 (9th Cir. 2008) (hereafter ``CBD v. NHTSA'') (``The EPCA
                clearly requires the agency to consider these four factors, but it
                gives NHTSA discretion to decide how to balance the statutory
                factors--as long as NHTSA's balancing does not undermine the
                fundamental purpose of the EPCA: Energy conservation.'')
                ---------------------------------------------------------------------------
                 EISA added several other requirements to the setting of separate
                passenger car and light truck standards. Standards must be ``based on 1
                or more vehicle attributes related to fuel economy and express[ed] . .
                . in the form of a mathematical function.'' \52\ New standards must
                also be set at least 18 months before the model year in question, as
                would amendments to increase standards previously set.\53\ NHTSA must
                regulations prescribing average fuel economy standards for at least 1,
                but not more than 5, model years at a time.\54\ A number of comments
                addressed these requirements; for the reader's reference, those
                comments will be summarized and responded to in Section VIII. EISA also
                added the requirement that NHTSA set a minimum standard for
                domestically-manufactured passenger cars,\55\ which will also be
                discussed further in Section VIII below.
                ---------------------------------------------------------------------------
                 \52\ 49 U.S.C. 32902(b)(3)(A).
                 \53\ 49 U.S.C. 32902(a), (g)(2).
                 \54\ 49 U.S.C. 39202(b)(3)(B).
                 \55\ 49 U.S.C. 32902(b)(4).
                ---------------------------------------------------------------------------
                 For MYs 2011-2020, EISA further required that the separate
                standards for passenger cars and for light trucks be set at levels high
                enough to ensure that the achieved average fuel economy for the entire
                industry-wide combined fleet of new passenger cars and light trucks
                reach at least 35 mpg not later than MY 2020, and standards for those
                years were also required to ``increase ratably.'' \56\ For model years
                after 2020, standards must be set at the maximum feasible level.\57\
                ---------------------------------------------------------------------------
                 \56\ 49 U.S.C. 32902(b)(2)(A) and (C). NHTSA has CAFE standards
                in place that are projected to result in industry-achieved fuel
                economy levels over 35 mpg in MY 2020. EPA typically provides
                verified final CAFE data from manufacturers to NHTSA several months
                or longer after the close of the MY in question, so the actual MY
                2020 fuel economy will not be known until well after MY 2020 has
                ended. The standards for all MYs up to and including 2020 are known
                and not at issue in this regulatory action, so these provisions are
                noted for completeness rather than immediate relevance to this final
                rule. Because neither of these requirements apply after MY 2020,
                they are not relevant to this rulemaking and will not be discussed
                further.
                 \57\ 49 U.S.C. 32902(b)(2)(B).
                ---------------------------------------------------------------------------
                1. Factors That Must Be Considered in Deciding What Levels of CAFE
                Standards are ``Maximum Feasible''
                (a) Technological Feasibility
                 ``Technological feasibility'' refers to whether a particular method
                of improving fuel economy can be available for commercial application
                in the model year for which a standard is being established. Thus, in
                determining the level of new standards, the agency is not limited to
                technology that is already being commercially applied at the time of
                the rulemaking. For this rulemaking, NHTSA has evaluated and considered
                all types of technologies that improve real-world fuel economy,
                although not every possible technology was expressly included in the
                analysis, as discussed in Section VI and also in Section VIII.
                (b) Economic Practicability
                 ``Economic practicability'' refers to whether a standard is one
                ``within the
                [[Page 24214]]
                financial capability of the industry, but not so stringent as to'' lead
                to ``adverse economic consequences, such as a significant loss of jobs
                or the unreasonable elimination of consumer choice.'' \58\ The agency
                has explained in the past that this factor can be especially important
                during rulemakings in which the automobile industry is facing
                significantly adverse economic conditions (with corresponding risks to
                jobs). Economic practicability is a broad factor that includes
                considerations of the uncertainty surrounding future market conditions
                and consumer demand for fuel economy in addition to other vehicle
                attributes.\59\ In an attempt to evaluate the economic practicability
                of different future levels of CAFE standards (i.e., the regulatory
                alternatives considered in this rulemaking), NHTSA considers a variety
                of factors, including the annual rate at which manufacturers can
                increase the percentage of their fleet(s) that employ a particular type
                of fuel-saving technology, the specific fleet mixes of different
                manufacturers, assumptions about the cost of the standards to
                consumers, and consumers' valuation of fuel economy, among other
                things, including, in part, safety.
                ---------------------------------------------------------------------------
                 \58\ 67 FR 77015, 77021 (Dec. 16, 2002).
                 \59\ See, e.g., Center for Auto Safety v. NHTSA (``CAS''), 793
                F.2d 1322 (D.C. Cir. 1986) (Administrator's consideration of market
                demand as component of economic practicability found to be
                reasonable); Public Citizen v. NHTSA, 848 F.2d 256 (D.C. Cir. 1988)
                (Congress established broad guidelines in the fuel economy statute;
                agency's decision to set lower standard was a reasonable
                accommodation of conflicting policies).
                ---------------------------------------------------------------------------
                 It is important to note, however, that the law does not preclude a
                CAFE standard that poses considerable challenges to any individual
                manufacturer. The Conference Report for EPCA, as enacted in 1975, makes
                clear, and the case law affirms, ``a determination of maximum feasible
                average fuel economy should not be keyed to the single manufacturer
                which might have the most difficulty achieving a given level of average
                fuel economy.'' \60\ Instead, NHTSA is compelled ``to weigh the
                benefits to the nation of a higher fuel economy standard against the
                difficulties of individual automobile manufacturers.'' \61\
                Accordingly, while the law permits NHTSA to set CAFE standards that
                exceed the projected capability of a particular manufacturer as long as
                the standard is economically practicable for the industry as a whole,
                the agency cannot simply disregard that impact on individual
                manufacturers.\62\ That said, in setting fuel economy standards, NHTSA
                does not seek to maintain competitive positions among the industry
                players, and notes that while a particular CAFE standard may pose
                difficulties for one manufacturer as being too high or too low, it may
                also present opportunities for another. NHTSA has long held that the
                CAFE program is not necessarily intended to maintain the competitive
                positioning of each particular company. Rather, it is intended to
                enhance the fuel economy of the vehicle fleet on American roads, while
                protecting motor vehicle safety and paying close attention to the
                economic risks.
                ---------------------------------------------------------------------------
                 \60\ Center for Auto Safety v. NHTSA (``CAS''), 793 F.2d 1322,
                1352 (D.C. Cir. 1986).
                 \61\ Id.
                 \62\ Id. (``. . . the Secretary must weigh the benefits to the
                nation of a higher average fuel economy standard against the
                difficulties of individual automobile manufacturers.'')
                ---------------------------------------------------------------------------
                (c) The Effect of Other Motor Vehicle Standards of the Government on
                Fuel Economy
                 ``The effect of other motor vehicle standards of the Government on
                fuel economy'' involves an analysis of the effects of compliance with
                emission, safety, noise, or damageability standards on fuel economy
                capability and thus on average fuel economy. In many past CAFE
                rulemakings, NHTSA has said that it considers the adverse effects of
                other motor vehicle standards on fuel economy. It said so because, from
                the CAFE program's earliest years,\63\ the effects of such compliance
                on fuel economy capability over the history of the program have been
                negative ones. For example, safety standards that have the effect of
                increasing vehicle weight lower vehicle fuel economy capability and
                thus decrease the level of average fuel economy that the agency can
                determine to be feasible. NHTSA has considered the additional weight
                that it estimates would be added in response to new safety standards
                during the rulemaking timeframe. NHTSA has also accounted for EPA's
                ``Tier 3'' standards for criteria pollutants in its estimates of
                technology effectiveness.\64\
                ---------------------------------------------------------------------------
                 \63\ 42 FR 63184, 63188 (Dec. 15, 1977). See also 42 FR 33534,
                33537 (Jun. 30, 1977).
                 \64\ See Section VI, below.
                ---------------------------------------------------------------------------
                 The NPRM also discussed how EPA's CO2 standards for
                light-duty vehicles and California's Advanced Clean Cars program fit
                into NHTSA's consideration of ``the effect of other motor vehicle
                standards of the Government on fuel economy.'' The agencies note that
                on September 19, 2019, to ensure One National Program for automobile
                fuel economy and carbon dioxide emissions standards, the agencies
                finalized regulatory text related to preemption of State tailpipe
                CO2 standards and Zero Emission Vehicle (ZEV) mandates under
                EPCA and partial withdrawal of a waiver previously provided to
                California under the Clean Air Act.\65\ This final rule's impact on
                State programs--including California's--will therefore be somewhat
                different from the NPRM's consideration. In the interest of brevity,
                this preamble will hold further discussion of that point, along with
                responses to comments received, until Section VIII.
                ---------------------------------------------------------------------------
                 \65\ 84 FR 51310 (Sept. 27, 2019).
                ---------------------------------------------------------------------------
                (d) The Need of the United States To Conserve Energy
                 ``The need of the United States to conserve energy'' means ``the
                consumer cost, national balance of payments, environmental, and foreign
                policy implications of our need for large quantities of petroleum,
                especially imported petroleum.'' \66\ Environmental implications
                principally include changes in emissions of carbon dioxide and criteria
                pollutants and air toxics. Prime examples of foreign policy
                implications are energy independence and security concerns.
                ---------------------------------------------------------------------------
                 \66\ 42 FR 63184, 63188 (1977).
                ---------------------------------------------------------------------------
                (1) Consumer Costs and Fuel Prices
                 Fuel for vehicles costs money for vehicle owners and operators. All
                else equal (and this is an important qualification), consumers benefit
                from vehicles that need less fuel to perform the same amount of work.
                Future fuel prices are a critical input into the economic analysis of
                potential CAFE standards because they determine the value of fuel
                savings both to new vehicle buyers and to society, the amount of fuel
                economy that the new vehicle market is likely to demand in the absence
                of new standards, and they inform NHTSA about the consumer cost of the
                nation's need for large quantities of petroleum. In this final rule,
                NHTSA's analysis relies on fuel price projections estimated using the
                version of NEMS used for the U.S. Energy Information Administration's
                (EIA) Annual Energy Outlook for 2019.\67\ Federal government agencies
                generally use EIA's price projections in their assessment of future
                energy-related policies.
                ---------------------------------------------------------------------------
                 \67\ The analysis for the proposal relied on fuel price
                projections from AEO 2017; the difference in the projections is
                discussed in Section VI.
                ---------------------------------------------------------------------------
                (2) National Balance of Payments
                 Historically, the need of the United States to conserve energy has
                included consideration of the ``national balance of payments'' because
                of concerns that importing large amounts of oil created a
                [[Page 24215]]
                significant wealth transfer to oil-exporting countries and left the
                U.S. economically vulnerable.\68\ As recently as 2009, nearly half of
                the U.S. trade deficit was driven by petroleum,\69\ yet this concern
                has largely lain fallow in more recent CAFE actions, in part because
                other factors besides petroleum consumption have since played a bigger
                role in the U.S. trade deficit.\70\ Given significant recent increases
                in U.S. oil production and corresponding decreases in oil imports, this
                concern seems likely to remain fallow for the foreseeable future.\71\
                Increasingly, changes in the price of fuel have come to represent
                transfers between domestic consumers of fuel and domestic producers of
                petroleum rather than gains or losses to foreign entities.
                ---------------------------------------------------------------------------
                 \68\ See, e.g., 42 FR 63184, 63192 (Dec. 15, 1977) (``A major
                reason for this need [to reduce petroleum consumption] is that the
                importation of large quantities of petroleum creates serious balance
                of payments and foreign policy problems. The United States currently
                spends approximately $45 billion annually for imported petroleum.
                But for this large expenditure, the current large U.S. trade deficit
                would be a surplus.'')
                 \69\ See ``Today in Energy: Recent improvements in petroleum
                trade balance mitigate U.S. trade deficit,'' U.S. Energy Information
                Administration (Jul. 21, 2014), available at https://www.eia.gov/todayinenergy/detail.php?id=17191.
                 \70\ See, e.g., Nida [Ccedil]akir Melek and Jun Nie, ``What
                Could Resurging U.S. Energy Production Mean for the U.S. Trade
                Deficit,'' Mar. 7, 2018, Federal Reserve Bank of Kansas City.
                Available at https://www.kansascityfed.org/publications/research/mb/articles/2018/what-could-resurging-energy-production-mean. The
                authors state that ``The decline in U.S. net energy imports has
                prevented the total U.S. trade deficit from widening further. . . .
                In 2006, petroleum accounted for about 16 percent of U.S. goods
                imports and about 3 percent of U.S. goods exports. By the end of
                2017, the share of petroleum in total goods imports declined to 8
                percent, while the share in total goods exports almost tripled,
                shrinking the U.S. petroleum trade deficit. Had the petroleum trade
                deficit not improved, all else unchanged, the total U.S. trade
                deficit would likely have been more than 35 percent wider by the end
                of 2017.''
                 \71\ For an illustration of recent increases in U.S. production,
                see, e.g., `U.S. crude oil and liquid fuels production,'' Short-Term
                Energy Outlook, U.S. Energy Information Administration (Aug. 2019),
                available at http://www.eia.gov/outlooks/steo/images/Fig16.png. EIA
                noted in April 2019 that ``Annual U.S. crude oil production reached
                a record level of 10.96 million barrels per day (b/d) in 2018, 1.6
                million b/d (17%) higher than 2017 levels. In December 2018, monthly
                U.S. crude oil production reached 11.96 million b/d, the highest
                monthly level of crude oil production in U.S. history. U.S crude oil
                production has increased significantly over the past 10 years,
                driven mainly by production from tight rock formations using
                horizontal drilling and hydraulic fracturing. EIA projects that U.S.
                crude oil production will continue to grow in 2019 and 2020,
                averaging 12.3 million b/d and 13.0 million b/d, respectively.''
                ``Today in Energy: U.S. crude oil production grew 17% in 2018,
                surpassing the previous record in 1970,'' EIA, Apr. 9, 2019.
                Available at http://www.eia.gov/todayinenergy/detail.php?id=38992.
                ---------------------------------------------------------------------------
                 As flagged in the NPRM, some commenters raised concerns about
                potential economic consequences for automaker and supplier operations
                in the U.S. due to disparities between CAFE standards at home and their
                counterpart fuel economy/efficiency and CO2 standards
                abroad. NHTSA finds these concerns more relevant to technological
                feasibility and economic practicability considerations than to the
                national balance of payments. The discussion in Section VIII below
                addresses this topic in more detail.
                (3) Environmental Implications
                 Higher fleet fuel economy can reduce U.S. emissions of various
                pollutants by reducing the amount of oil that is produced and refined
                for the U.S. vehicle fleet, but can also increase emissions by reducing
                the cost of driving, which can result in more vehicle miles traveled
                (i.e., the rebound effect). Thus, the net effect of more stringent CAFE
                standards on emissions of each pollutant depends on the relative
                magnitude of both its reduced emissions in fuel refining and
                distribution and increases in its emissions from vehicle use. Fuel
                savings from CAFE standards also necessarily results in lower emissions
                of CO2, the main greenhouse gas emitted as a result of
                refining, distributing, and using transportation fuels. Reducing fuel
                consumption directly reduces CO2 emissions because the
                primary source of transportation-related CO2 emissions is
                fuel combustion in internal combustion engines.
                 NHTSA has considered environmental issues, both within the context
                of EPCA and the context of the National Environmental Policy Act
                (NEPA), in making decisions about the setting of standards since the
                earliest days of the CAFE program. As courts of appeal have noted in
                three decisions stretching over the last 20 years,\72\ NHTSA defined
                ``the need of the United States to conserve energy'' in the late 1970s
                as including, among other things, environmental implications. In 1988,
                NHTSA included climate change concepts in its CAFE notices and prepared
                its first environmental assessment addressing that subject.\73\ It
                cited concerns about climate change as one of its reasons for limiting
                the extent of its reduction of the CAFE standard for MY 1989 passenger
                cars.\74\ Since then, NHTSA has considered the effects of reducing
                tailpipe emissions of CO2 in its fuel economy rulemakings
                pursuant to the need of the United States to conserve energy by
                reducing petroleum consumption.
                ---------------------------------------------------------------------------
                 \72\ CAS, 793 F.2d 1322, 1325 n. 12 (D.C. Cir. 1986); Public
                Citizen, 848 F.2d 256, 262-63 n. 27 (D.C. Cir 1988) (noting that
                ``NHTSA itself has interpreted the factors it must consider in
                setting CAFE standards as including environmental effects''); CBD,
                538 F.3d 1172 (9th Cir. 2007).
                 \73\ 53 FR 33080, 33096 (Aug. 29, 1988).
                 \74\ 53 FR 39275, 39302 (Oct. 6, 1988).
                ---------------------------------------------------------------------------
                (4) Foreign Policy Implications
                 U.S. consumption and imports of petroleum products can impose
                additional costs (i.e., externalities) on the domestic economy that are
                not reflected in the market price for crude petroleum or in the prices
                paid by consumers for petroleum products such as gasoline. NHTSA has
                said previously that these costs can include (1) higher prices for
                petroleum products resulting from the effect of U.S. oil demand on
                world oil prices, (2) the risk of disruptions to the U.S. economy
                caused by sudden increases in the global price of oil and its resulting
                impact on fuel prices faced by U.S. consumers, and (3) expenses for
                maintaining the strategic petroleum reserve (SPR) to provide a response
                option should a disruption in commercial oil supplies threaten the U.S.
                economy, to allow the U.S. to meet part of its International Energy
                Agency obligation to maintain emergency oil stocks, and to provide a
                national defense fuel reserve.\75\ Higher U.S. consumption of crude oil
                or refined petroleum products increases the magnitude of these external
                economic costs, thus increasing the true economic cost of supplying
                transportation fuels above the resource costs of producing them.
                Conversely, reducing U.S. consumption of crude oil or refined petroleum
                products (by reducing motor fuel use) can reduce these external costs.
                ---------------------------------------------------------------------------
                 \75\ While the U.S. maintains a military presence in certain
                parts of the world to help secure global access to petroleum
                supplies, that is neither the primary nor the sole mission of U.S.
                forces overseas. Additionally, the scale of oil consumption
                reductions associated with CAFE standards would be insufficient to
                alter any existing military missions focused on ensuring the safe
                and expedient production and transportation of oil around the globe.
                See the FRIA's discussion on energy security for more information on
                this topic.
                ---------------------------------------------------------------------------
                 While these costs are considerations, the United States has
                significantly increased oil production capabilities in recent years, to
                the extent that the U.S. is currently producing enough oil to satisfy
                nearly all of its energy needs and is projected to continue to do so
                (or even become a net energy exporter in the near future).\76\ This has
                added stable new supply to the global oil market, which ameliorates the
                U.S.' need to
                [[Page 24216]]
                conserve energy from a security perspective even given that oil is a
                global commodity. The agencies discuss this issue in more detail in
                Section VIII below.
                ---------------------------------------------------------------------------
                 \76\ See AEO 2019, at 14 (``In the Reference case, the United
                States becomes a net exporter of petroleum liquids after 2020 as
                U.S. crude oil production increases and domestic consumption of
                petroleum products decreases.''). Available at https://www.eia.gov/outlooks/aeo/pdf/aeo2019.pdf.
                ---------------------------------------------------------------------------
                (2) Factors That NHTSA Is Prohibited From Considering
                 EPCA states that in determining the level at which it should set
                CAFE standards for a particular model year, NHTSA may not consider the
                ability of manufacturers to take advantage of several EPCA provisions
                that facilitate compliance with CAFE standards and thereby can reduce
                their costs of compliance.\77\ As discussed further below, NHTSA cannot
                consider compliance credits that manufacturers earn by exceeding the
                CAFE standards and then use to achieve compliance in years in which
                their measured average fuel economy falls below the standards. NHTSA
                also cannot consider the use of alternative fuels by dual-fueled
                vehicles (such as plug-in hybrid electric vehicles) nor the
                availability of dedicated alternative fuel vehicles (such as battery
                electric or hydrogen fuel cell vehicles) in any model year. EPCA
                encourages the production of alternative fuel vehicles by specifying
                that their fuel economy is to be determined using a special calculation
                procedure that results in those vehicles being assigned a higher fuel
                economy level than they actually achieve. For non-statutory incentives
                that NHTSA developed by regulation, NHTSA does not consider these
                incentives subject to the EPCA prohibition on considering
                flexibilities. These topics will be addressed further in Section VIII
                below.
                ---------------------------------------------------------------------------
                 \77\ 49 U.S.C. 32902(h).
                ---------------------------------------------------------------------------
                (3) Other Considerations in Determining Maximum Feasible CAFE Standards
                 NHTSA historically has interpreted EPCA's statutory factors as
                including consideration for potential adverse safety consequences in
                setting CAFE standards. Courts have consistently recognized that this
                interpretation is reasonable. As courts have recognized, ``NHTSA has
                always examined the safety consequences of the CAFE standards in its
                overall consideration of relevant factors since its earliest rulemaking
                under the CAFE program.'' \78\ The courts have consistently upheld
                NHTSA's implementation of EPCA in this manner.\79\ Thus, in evaluating
                what levels of stringency would result in maximum feasible standards,
                NHTSA assesses the potential safety impacts and considers them in
                balancing the statutory considerations and to determine the maximum
                feasible level of the standards.\80\ Many commenters addressed the
                NPRM's analysis of safety impacts; those comments will be summarized
                and responded to in Section VI.D.2 and also in each agency's discussion
                in Section VIII.
                ---------------------------------------------------------------------------
                 \78\ Competitive Enterprise Institute v. NHTSA, 901 F.2d 107,
                120 n. 11 (D.C. Cir. 1990) (``CEI-I'') (citing 42 FR 33534, 33551
                (Jun. 30, 1977).
                 \79\ See, e.g., Competitive Enterprise Institute v. NHTSA, 956
                F.2d 321, 322 (D.C. Cir. 1992) (``CEI-II'') (in determining the
                maximum feasible fuel economy standard, ``NHTSA has always taken
                passenger safety into account,'' citing CEI-I, 901 F.2d at 120 n.
                11); Competitive Enterprise Institute v. NHTSA, 49 F.3d 481, 483-83
                (D.C. Cir. 1995) (same); Center for Biological Diversity v. NHTSA,
                538 F.3d 1172, 1203-04 (9th Cir. 2008) (upholding NHTSA's analysis
                of vehicle safety issues with weight in connection with the MYs
                2008-2011 light truck CAFE rulemaking).
                 \80\ NHTSA stated in the NPRM that ``While we discuss safety as
                a separate consideration, NHTSA also considers safety as closely
                related to, and in some circumstances a subcomponent of, economic
                practicability. On a broad level, manufacturers have finite
                resources to invest in research and development. Investment into the
                development and implementation of fuel saving technology necessarily
                comes at the expense of investing in other areas such as safety
                technology. On a more direct level, when making decisions on how to
                equip vehicles, manufacturers must balance cost considerations to
                avoid pricing further consumers out of the market. As manufacturers
                add technology to increase fuel efficiency, they may decide against
                installing new safety equipment to reduce cost increases. And as the
                price of vehicles increase beyond the reach of more consumers, such
                consumers continue to drive or purchase older, less safe vehicles.
                In assessing practicability, NHTSA also considers the harm to the
                nation's economy caused by highway fatalities and injuries.'' 83 FR
                at 43209 (Aug. 24, 2018). Many comments were received on this issue,
                which will be discussed further in Section VIII below.
                ---------------------------------------------------------------------------
                 The above sections explain what Congress thought was important
                enough to codify when it directed each agency to regulate, and begin to
                explain how the agencies have interpreted those directions over time
                and in this final rule. The next section looks more closely at the
                interplay between Congress's direction to the agencies and the aspects
                of the market that these regulations affect, as follows.
                IV. Purpose of Analytical Approach Considered as Part of Decision-
                Making
                A. Relationship of Analytical Approach to Governing Law
                 Like the NPRM, today's final rule is supported by extensive
                analysis of potential impacts of the regulatory alternatives under
                consideration. Below, Section VI reviews the analytical approach,
                Section VII summarizes the results of the analysis, and Section VIII
                explains how the final standards--informed by this analysis--fulfill
                the agencies' statutory obligations. Accompanying today's notice, a
                final Regulatory Impact Analysis (FRIA) and, for NHTSA's consideration,
                a final Environmental Impact Analysis (FEIS), together provide a more
                extensive and detailed enumeration of related methods, estimates,
                assumptions, and results. The agencies' analysis has been constructed
                specifically to reflect various aspects of governing law applicable to
                CAFE and CO2 standards, and has been expanded and improved
                in response to comments received to the NPRM and based on additional
                work by the agencies. The analysis aided the agencies in implementing
                their statutory obligations, including the weighing of competing
                considerations, by reasonably informing the agencies about the
                estimated effects of choosing different regulatory alternatives.
                 The agencies' analysis makes use of a range of data (i.e.,
                observations of things that have occurred), estimates (i.e., things
                that may occur in the future), and models (i.e., methods for making
                estimates). Two examples of data include (1) records of actual odometer
                readings used to estimate annual mileage accumulation at different
                vehicle ages and (2) CAFE compliance data used as the foundation for
                the ``analysis fleet'' containing, among other things, production
                volumes and fuel economy levels of specific configurations of specific
                vehicle models produced for sale in the U.S. Two examples of estimates
                include (1) forecasts of future GDP growth used, with other estimates,
                to forecast future vehicle sales volumes and (2) the ``retail price
                equivalent'' (RPE) factor used to estimate the ultimate cost to
                consumers of a given fuel-saving technology, given accompanying
                estimates of the technology's ``direct cost,'' as adjusted to account
                for estimated ``cost learning effects'' (i.e., the tendency that it
                will cost a manufacturer less to apply a technology as the manufacturer
                gains more experience doing so).
                 The agencies' analysis makes use of several models, some of which
                are actually integrated systems of multiple models. As discussed in the
                NPRM, the agencies' analysis of CAFE and CO2 standards
                involves two basic elements: First, estimating ways each manufacturer
                could potentially respond to a given set of standards in a manner that
                considers potential consumer response; and second, estimating various
                impacts of those responses. Estimating manufacturers' potential
                responses involves simulating manufacturers' decision-making processes
                regarding the year-by-year application of fuel-saving technologies to
                specific vehicles. Estimating impacts involves calculating resultant
                changes in new vehicle costs, estimating a
                [[Page 24217]]
                variety of costs (e.g., for fuel) and effects (e.g., CO2
                emissions from fuel combustion) occurring as vehicles are driven over
                their lifetimes before eventually being scrapped, and estimating the
                monetary value of these effects. Estimating impacts also involves
                consideration of the response of consumers--e.g., whether consumers
                will purchase the vehicles and in what quantities. Both of these basic
                analytical elements involve the application of many analytical inputs.
                 The agencies' analysis uses the CAFE Model to estimate
                manufacturers' potential responses to new CAFE and CO2
                standards and to estimate various impacts of those responses. The model
                may be characterized as an integrated system of models. For example,
                one model estimates manufacturers' responses, another estimates
                resultant changes in total vehicle sales, and still another estimates
                resultant changes in fleet turnover (i.e., scrappage). The CAFE model
                makes use of many inputs, values of which are developed outside of the
                model and not by the model. For example, the model applies fuel prices;
                it does not estimate fuel prices. The model does not determine the form
                or stringency of the standards; instead, the model applies inputs
                specifying the form and stringency of standards to be analyzed and
                produces outputs showing effects of manufacturers working to meet those
                standards, which become the basis for comparing between different
                potential stringencies.
                 The agencies also use EPA's MOVES model to estimate ``tailpipe''
                (a.k.a. ``vehicle'' or ``downstream'') emission factors for criteria
                pollutants,\81\ and use four DOE and DOE-sponsored models to develop
                inputs to the CAFE model, including three developed and maintained by
                DOE's Argonne National Laboratory. The agencies use the DOE Energy
                Information Administration's (EIA's) National Energy Modeling System
                (NEMS) to estimate fuel prices,\82\ and use Argonne's Greenhouse gases,
                Regulated Emissions, and Energy use in Transportation (GREET) model to
                estimate emissions rates from fuel production and distribution
                processes.\83\ DOT also sponsored DOE/Argonne to use Argonne's
                Autonomie full-vehicle modeling and simulation system to estimate the
                fuel economy impacts for roughly a million combinations of technologies
                and vehicle types.84 85 Section VI.B.3, below, and the
                accompanying final RIA document details of the agencies' use of these
                models. In addition, as discussed in the final EIS accompanying today's
                notice, DOT relied on a range of climate and photochemical models to
                estimate impacts on climate, air quality, and public health. The EIS
                discusses and documents the use of these models.
                ---------------------------------------------------------------------------
                 \81\ See https://www.epa.gov/moves. Today's final rule used
                version MOVES2014b, available at https://www.epa.gov/moves/latest-version-motor-vehicle-emission-simulator-moves.
                 \82\ See https://www.eia.gov/outlooks/aeo/info_nems_archive.php.
                Today's final rule uses fuel prices estimated using the Annual
                Energy Outlook (AEO) 2019 version of NEMS (see https://www.eia.gov/outlooks/aeo/data/browser/#/?id=3-AEO2019&cases=ref2019&sourcekey=0).
                 \83\ Information regarding GREET is available at https://greet.es.anl.gov/index.php. Today's notice uses the 2018 version of
                GREET.
                 \84\ As part of the Argonne simulation effort, individual
                technology combinations simulated in Autonomie were paired with
                Argonne's BatPAC model to estimate the battery cost associated with
                each technology combination based on characteristics of the
                simulated vehicle and its level of electrification. Information
                regarding Argonne's BatPAC model is available at http://www.cse.anl.gov/batpac/.
                 \85\ In addition, the impact of engine technologies on fuel
                consumption, torque, and other metrics was characterized using GT
                POWER simulation modeling in combination with other engine modeling
                that was conducted by IAV Automotive Engineering, Inc. (IAV). The
                engine characterization ``maps'' resulting from this analysis were
                used as inputs for the Autonomie full-vehicle simulation modeling.
                Information regarding GT Power is available at https://www.gtisoft.com/gt-suite-applications/propulsion-systems/gt-power-engine-simulation-software.
                ---------------------------------------------------------------------------
                 As further explained in the NPRM,\86\ to prepare for analysis
                supporting the proposal, DOT expanded the CAFE model to address EPA
                statutory and regulatory requirements through a year-by-year simulation
                of how manufacturers could comply with EPA's CO2 standards,
                including:
                ---------------------------------------------------------------------------
                 \86\ 83 FR 42986, 43003 (Aug. 24, 2018).
                ---------------------------------------------------------------------------
                 Calculation of vehicle models' CO2 emission
                rates before and after application of fuel-saving (and, therefore,
                CO2-reducing) technologies;
                 Calculation of manufacturers' fleet average CO2
                emission rates;
                 Calculation of manufacturers' fleet average CO2
                emission rates under attribute-based CO2 standards;
                 Accounting for adjustments to average CO2
                emission rates reflecting reduction of air conditioner refrigerant
                leakage;
                 Accounting for the treatment of alternative fuel vehicles
                for CO2 compliance;
                 Accounting for production ``multipliers'' for PHEVs, BEVs,
                compressed natural gas (CNG) vehicles, and fuel cell vehicles (FCVs);
                 Accounting for transfer of CO2 credits between
                regulated fleets; and
                 Accounting for carried-forward (a.k.a. ``banked'')
                CO2 credits, including credits from model years earlier than
                modeled explicitly.
                 As further discussed in the NPRM, although EPA had previously
                developed a vehicle simulation tool (``ALPHA'') and a fleet compliance
                model (``OMEGA''), and had applied these in prior actions, having
                considered the facts before the Agency in 2018, EPA determined that,
                ``it is reasonable and appropriate to use DOE/Argonne's model for full-
                vehicle simulation, and to use DOT's CAFE model for analysis of
                regulatory alternatives.'' \87\
                ---------------------------------------------------------------------------
                 \87\ 83 FR 42986, 43000 (Aug. 24, 2018).
                ---------------------------------------------------------------------------
                 As discussed below and in Section VI.B.3, some commenters--some
                citing deliberative EPA staff communications during NPRM development,
                and one submitting comments by a former EPA staff member closely
                involved in the origination of the above-mentioned OMEGA model--took
                strong exception to EPA's decision to rely on DOE/Argonne and DOT-
                originated models as the basis for analysis informing EPA's decisions
                regarding CO2 standards. Some commenters argued that the EPA
                Administrator must consider exclusively models and analysis originating
                with EPA staff, and that to do otherwise would be arbitrary and
                capricious. As explained below (and as explained in the NPRM), it is
                reasonable for the Administrator to consider analysis and information
                produced from many sources, including, in this instance, the DOE/
                Argonne and DOT models. The Administrator has the discretion to
                determine what information reasonably and appropriately informs
                decisions regarding emissions standards. Some commenters conflated
                models with decisions, suggesting that the former mechanically
                determine the latter. The CAA authorizes the EPA Administrator, not a
                model, to make decisions about emissions standards, just as EPCA
                provides similar authority to the Secretary. Models produce analysis,
                the results of which help to inform decisions. However, in making such
                decisions, the Administrator may and should consider other relevant
                information beyond the outputs of any models--including public
                comment--and, in all cases, must exercise judgment in establishing
                appropriate standards.
                 Some commenters conflated models with inputs and/or with results of
                the modeling. All of the models mentioned above rely on inputs,
                including not only data (i.e., facts), but also estimates (inputs about
                the future are estimates, not data). Given these inputs, the models
                produce estimates--ultimately, the agencies' reported estimates of the
                potential impacts of standards under
                [[Page 24218]]
                consideration. In other words, inputs do not define models; models use
                inputs. Therefore, disagreements about inputs do not logically extend
                to disagreements about models. Similarly, while models determine
                resulting outputs, they do so based on inputs. Therefore, disagreements
                about results do not necessarily imply disagreements about models; they
                may merely reflect disagreements about inputs. With respect to the
                Administrator's decisions regarding models underlying today's analysis,
                comments regarding inputs, therefore, are more appropriately addressed
                separately, which is done so below in Section VI.
                 The EPA Administrator's decision to continue relying on the DOE/
                Argonne Autonomie tool and DOT CAFE model rather than on the
                corresponding tools developed by EPA staff is informed by consideration
                of comments on results and on technical aspects of the models
                themselves. As discussed below, some commenters questioned specific
                aspects of the CAFE model's simulation of manufacturer's potential
                responses to CO2 standards. Considering these comments, the
                CAFE model applied in the final rule's analysis includes some revisions
                and updates. For example, the ``effective cost'' metric used to select
                among available opportunities to apply fuel-saving technologies now
                uses a ``cost per credit'' metric rather than the metric used for the
                NPRM. Also, the model's representation of sales ``multipliers'' EPA has
                included for CNG vehicles, PHEVs, BEVs, and FCVs reflects current EPA
                regulations or, as an input-selectable option, an alternative approach
                under consideration. On the other hand, some commenters questioning the
                CAFE model's approach to some CO2 program features appear to
                ignore the fact that prior analysis by EPA (using EPA's OMEGA) model
                likewise did not account for the same program features. For example,
                some stakeholders took issue with the CAFE model's approach to
                accounting for banked CO2 credits and, in particular,
                credits banked prior to the model years accounted for explicitly in the
                analysis. In the course of updating the basis for analysis fleet from
                model year 2016 to model year 2017, the agencies have since updated
                corresponding inputs. However, even though the ability to carry forward
                credits impacts outcomes, EPA's OMEGA model used in previous
                rulemakings never attempted to account for credit banking and, indeed,
                lacking a year-by-year structure, cannot account for credit banking.
                Therefore, at least with respect to this important CO2
                program flexibility, the CAFE model provides a more complete and
                realistic basis for estimating actual impacts of new CO2
                standards.
                 For its part, NHTSA remains confident that the combination of the
                Autonomie and CAFE models remains the best available for CAFE
                rulemaking analysis, and notes, as discussed below, that even the
                environmental group coalition stated that the CAFE model is aligned
                with EPCA requirements.\88\ In late 2001, after Congress discontinued
                an extended series of budget ``riders'' prohibiting work on CAFE
                standards, NHTSA and the DOT Volpe Center began development of a
                modeling system appropriate for CAFE rulemaking analysis, because other
                available models were not designed with this purpose in mind, and
                lacked capabilities important for CAFE rulemakings. For example,
                although NEMS had procedures to account for CAFE standards, those
                procedures did not provide the ability to account for specific
                manufacturers, as is especially relevant to the statutory requirement
                that NHTSA consider the economic practicability of any new CAFE
                standards. Also, as early as the first rulemaking making use of this
                early CAFE model, commenters stressed the importance of product
                redesign schedules, leading developers to introduce procedures to
                account for product cadence. In the 2003 notice regarding light truck
                standards for MYs 2005-2007, NHTSA stated that ``we also changed the
                methodology to recognize that capital costs require employment of
                technologies for several years, rather than a single year. . . . In our
                view, this makes the Volpe analysis more consistent with the [manually
                implemented] Stage analysis and better reflects actual conditions in
                the automotive industry.'' \89\ Since that time, NHTSA and the Volpe
                Center have significantly refined the CAFE model with each of
                rulemaking. For example, for the 2006 rulemaking regarding standards
                for MYs 2008-2011 light trucks, NHTSA introduced the ability to account
                for attribute-based standards, account for the social cost of
                CO2 emissions, estimate stringencies at which net benefits
                would be maximized, and perform probabilistic uncertainty analysis
                (i.e., Monte Carlo simulation).\90\ For the 2009 rulemaking regarding
                standards for MY 2011 passenger cars and light trucks, we introduced
                the ability to account for attribute-based passenger car standards, and
                the ability to apply ``synergy factors'' to estimate how some
                technology pairings impact fuel consumption,\91\ For the 2010
                rulemaking regarding standards for MYs 2012-2016, we introduced
                procedures to account for FFV credits, and to account for product
                planning as a multiyear consideration.\92\ For the 2012 rulemaking
                regarding standards for MYs 2017-2025, we introduced several new
                procedures, such as (1) accounting for electricity used to charge
                electric vehicles (EVs) and plug-in hybrid electric vehicles (PHEVs),
                (2) accounting for use of ethanol blends in flexible-fuel vehicles
                (FFVs), (3) accounting for costs (i.e., ``stranded capital'') related
                to early replacement of technologies, (4) accounting for previously-
                applied technology when determining the extent to which a manufacturer
                could expand use of the technology, (5) applying technology-specific
                estimates of changes in consumer value, (6) simulating the extent to
                which manufacturers might utilize EPCA's provisions regarding
                generation and use of CAFE credits, (7) applying estimates of fuel
                economy adjustments (and accompanying costs) reflecting increases in
                air conditioner efficiency, (8) reporting privately-valued benefits,
                (9) simulating the extent to which manufacturers might voluntarily
                apply technology beyond levels needed for compliance with CAFE
                standards, and (10) estimating changes in highway fatalities
                attributable to any applied reductions in vehicle mass.\93\ Also for
                the 2012 rulemaking, we began making use of Autonomie to estimate fuel
                consumption impacts of different combinations of technologies, using
                these estimates to specify inputs to the CAFE model.\94\ In 2016,
                providing analyses for both the draft TAR regarding light-duty CAFE
                standards and the final rule regarding fuel consumption standards for
                heavy-duty pickup trucks and vans, we greatly expanded the agency's use
                of Autonomie-based full vehicle simulations and introduced the ability
                to simulate compliance with attribute-based standards for heavy-duty
                pickups and vans.\95\ And, as discussed at length in the NPRM and
                below, for this rulemaking, we have, among other things, refined
                procedures to account for impacts on highway travel and safety,
                [[Page 24219]]
                added procedures to simulate compliance with CO2 standards,
                refined procedures to account for compliance credits, and added
                procedures to account for impacts on sales, scrappage, and employment.
                We have also significantly revised the model's graphical user interface
                (GUI) in order to make the model easier to operate and understand. Like
                any model, both Autonomie and the CAFE model benefit from ongoing
                refinement. However, NHTSA is confident that this combination of models
                produces a more realistic characterization of the potential impacts of
                new standards than would another combination of available models. Some
                stakeholders, while commenting on specific aspects of the inputs,
                models, and/or results, commended the agencies' exclusive reliance on
                the DOE/Argonne Autonomie tool and DOT CAFE model. With respect to
                CO2 standards, these stakeholders noted not only technical
                reasons to use these models rather than the EPA models, but also other
                reasons such as efficiency, transparency, and ease with which outside
                parties can exercise models and replicate the agencies' analysis. These
                comments are discussed below and in Section VI.
                ---------------------------------------------------------------------------
                 \88\ Environmental group coalition, NHTSA-2018-0067-12000,
                Appendix A, at 24-25.
                 \89\ 68 FR at 16885 (Apr. 7, 2003).
                 \90\ 71 FR at 17566 et seq. (Apr. 6, 2006).
                 \91\ 74 FR at 14196 et seq. (Mar. 30, 3009).
                 \92\ 75 FR at 25599 et seq. (May 7, 2010).
                 \93\ 77 FR 63009 et seq. (Oct. 15, 2012).
                 \94\ 77 FR at 62712 et seq. (Oct. 15, 2012).
                 \95\ 81 FR at 73743 et seq. (Oct. 25, 2016); Draft TAR,
                available at Docket No. NHTSA-2016-0068-0001, Chapter 13.
                ---------------------------------------------------------------------------
                 Nevertheless, some comments regarding the model's handling of CAFE
                and/or CO2 standards, and some comments regarding the
                model's estimation of resultant impacts, led the agencies to make
                changes to specific aspects of the model. Comments on and changes to
                the inputs and model are discussed below and in Section VI; results are
                discussed in Section VII and in the accompanying RIA; and the meaning
                of results in the context of the applicable statutory requirements is
                discussed in Section VIII.
                 As explained, the analysis is designed to reflect a number of
                statutory and regulatory requirements applicable to CAFE and tailpipe
                CO2 standard setting. EPCA contains a number of requirements
                governing the scope and nature of CAFE standard setting. Among these,
                some have been in place since EPCA was first signed into law in 1975,
                and some were added in 2007, when Congress passed EISA and amended
                EPCA. The CAA, as discussed elsewhere, provides EPA with very broad
                authority under Section 202(a), and does not contain EPCA/EISA's
                prescriptions. In the interest of harmonization, however, EPA has
                adopted some of the EPCA/EISA requirements into its tailpipe
                CO2 regulations, and NHTSA, in turn, has created some
                additional flexibilities by regulation not expressly envisioned by
                EPCA/EISA in order to harmonize better with some of EPA's programmatic
                decisions. EPCA/EISA requirements regarding the technical
                characteristics of CAFE standards and the analysis thereof include, but
                are not limited to, the following, and the analysis reflects these
                requirements as summarized:
                 Corporate Average Standards: 49 U.S.C. 32902 requires standards
                that apply to the average fuel economy levels achieved by each
                corporation's fleets of vehicles produced for sale in the U.S.\96\ CAA
                Section 202(a) does not preclude the EPA Administrator from expressing
                CO2 standards as de facto fleet average requirements, and
                EPA has adopted a similar approach in the interest of harmonization.
                The CAFE Model, used by the agencies to conduct the bulk of today's
                analysis, calculates the CAFE and CO2 levels of each
                manufacturer's fleets based on estimated production volumes and
                characteristics, including fuel economy levels, of distinct vehicle
                models that could be produced for sale in the U.S.
                ---------------------------------------------------------------------------
                 \96\ This differs from safety standards and traditional
                emissions standards, which apply separately to each vehicle. For
                example, every vehicle produced for sale in the U.S. must, on its
                own, meet all applicable federal motor vehicle safety standards
                (FMVSS), but no vehicle produced for sale must, on its own, federal
                fuel economy standards. Rather, each manufacturer is required to
                produce a mix of vehicles that, taken together, achieve an average
                fuel economy level no less than the applicable minimum level.
                ---------------------------------------------------------------------------
                 Separate Standards for Passenger Cars and Light Trucks: 49 U.S.C.
                32902 requires the Secretary of Transportation to set CAFE standards
                separately for passenger cars and light trucks. CAA Section 202(a) does
                not preclude the EPA Administrator from specifying CO2
                standards separately for passenger cars and light trucks, and EPA has
                adopted a similar approach. The CAFE Model accounts separately for
                passenger cars and light trucks, including differentiated standards and
                compliance.
                 Attribute-Based Standards: 49 U.S.C. 32902 requires the Secretary
                of Transportation to define CAFE standards as mathematical functions
                expressed in terms of one or more vehicle attributes related to fuel
                economy. This means that for a given manufacturer's fleet of vehicles
                produced for sale in the U.S. in a given regulatory class and model
                year, the applicable minimum CAFE requirement (i.e., the numerical
                value of the requirement) is computed based on the applicable
                mathematical function, and the mix and attributes of vehicles in the
                manufacturer's fleet. In the 2012 final rule that first established
                CO2 standards, EPA also adopted an attribute-based standard
                under its broad CAA Section 202(a) authority. The CAFE Model accounts
                for such functions and vehicle attributes explicitly.
                 Separately Defined Standards for Each Model Year: 49 U.S.C. 32902
                requires the Secretary to set CAFE standards (separately for passenger
                cars and light trucks) at the maximum feasible levels in each model
                year. CAA Section 202(a) allows EPA to establish CO2
                standards separately for each model year, and EPA has chosen to do so
                for this final rule, similar to the approach taken in the previous
                light-duty vehicle CO2 standard-setting rules. The CAFE
                Model represents each model year explicitly, and accounts for the
                production relationships between model years.\97\
                ---------------------------------------------------------------------------
                 \97\ For example, a new engine first applied to given vehicle
                model/configuration in model year 2020 will most likely be ``carried
                forward'' to model year 2021 of that same vehicle model/
                configuration, in order to reflect the fact that manufacturers do
                not apply brand-new engines to a given vehicle model every single
                year.
                ---------------------------------------------------------------------------
                 Separate Compliance for Domestic and Imported Passenger Car Fleets:
                49 U.S.C. 32904 requires the EPA Administrator to determine CAFE
                compliance separately for each manufacturers' fleets of domestic
                passenger cars and imported passenger cars, which manufacturers must
                consider as they decide how to improve the fuel economy of their
                passenger car fleets. CAA 202(a) does not preclude the EPA
                Administrator from determining compliance with CO2 standards
                separately for a manufacturer's domestic and imported car fleets, but
                EPA did not include such a distinction in either the 2010 or 2012 final
                rules, and EPA did not propose or ask for comment on taking such an
                approach in the proposal. The CAFE Model is able to account explicitly
                for this requirement when simulating manufacturers' potential responses
                to CAFE standards, but combines any given manufacturer's domestic and
                imported cars into a single fleet when simulating that manufacturer's
                potential response to CO2 standards.
                 Minimum CAFE Standards for Domestic Passenger Car Fleets: 49 U.S.C.
                32902 requires that domestic passenger car fleets achieve CAFE levels
                no less than 92 percent of the industry-wide average level required
                under the applicable attribute-based CAFE standard, as projected by the
                Secretary at the time the standard is promulgated. CAA 202(a) does not
                preclude the EPA Administrator from correspondingly requiring that
                domestic passenger car fleets achieve CO2 levels no greater
                than 108.7 percent (1/0.92 = 1.087) of the projected industry-wide
                average CO2
                [[Page 24220]]
                requirement under the attribute-based standard, but the GHG program
                that EPA designed in the 2010 and 2012 final rules did not include such
                a distinction, and EPA did not propose or seek comment on such an
                approach in the proposal. The CAFE Model is able to account explicitly
                for this requirement for CAFE standards, and sets this requirement
                aside for CO2 standards.
                 Civil Penalties for Noncompliance: 49 U.S.C. 32912 prescribes a
                rate (in dollars per tenth of a mpg) at which the Secretary is to levy
                civil penalties if a manufacturer fails to comply with a CAFE standard
                for a given fleet in a given model year, after considering available
                credits. Some manufacturers have historically demonstrated a
                willingness to treat CAFE noncompliance as an ``economic'' choice,
                electing to pay civil penalties rather than achieving full numerical
                compliance across all fleets. The CAFE Model calculates civil penalties
                for CAFE shortfalls and provides means to estimate that a manufacturer
                might stop adding fuel-saving technologies once continuing to do so
                would be effectively more ``expensive'' (after accounting for fuel
                prices and buyers' willingness to pay for fuel economy) than paying
                civil penalties. In contrast, the CAA does not authorize the EPA
                Administrator to allow manufacturers to sell noncompliant fleets and
                instead only pay civil penalties; manufacturers who choose to pay civil
                penalties for CAFE compliance tend to employ EPA's more-extensive
                programmatic flexibilities to meet tailpipe CO2 emissions
                standards. Thus, the CAFE Model does not allow civil penalty payment as
                an option for CO2 standards.
                 Dual-Fueled and Dedicated Alternative Fuel Vehicles: For purposes
                of calculating CAFE levels used to determine compliance, 49 U.S.C.
                32905 and 32906 specify methods for calculating the fuel economy levels
                of vehicles operating on alternative fuels to gasoline or diesel
                through MY 2020. After MY 2020, methods for calculating alternative
                fuel vehicle (AFV) fuel economy are governed by regulation. The CAFE
                Model is able to account for these requirements explicitly for each
                vehicle model. However, 49 U.S.C. 32902 requires that maximum feasible
                CAFE standards be set in a manner that does not presume manufacturers
                can respond by producing new dedicated alternative fuel vehicle (AFV)
                models. The CAFE model can be run in a manner that excludes the
                additional application of dedicated AFV technologies in model years for
                which maximum feasible standards are under consideration. As allowed
                under NEPA for analysis appearing in EISs informing decisions regarding
                CAFE standards, the CAFE Model can also be run without this analytical
                constraint. CAA 202(a) does not preclude the EPA Administrator adopting
                analogous provisions, but EPA has instead opted through regulation to
                ``count'' dual- and alternative fuel vehicles on a CO2 basis
                (and through MY 2026, to set aside emissions from electricity
                generation). The CAFE model accounts for this treatment of dual- and
                alternative fuel vehicles when simulating manufacturers' potential
                responses to CO2 standards. For natural gas vehicles, both
                dedicated and dual-fueled, EPA is establishing a multiplier of 2.0 for
                model years 2022-2026.
                 Creation and Use of Compliance Credits: 49 U.S.C. 32903 provides
                that manufacturers may earn CAFE ``credits'' by achieving a CAFE level
                beyond that required of a given fleet in a given model year, and
                specifies how these credits may be used to offset the amount by which a
                different fleet falls short of its corresponding requirement. These
                provisions allow credits to be ``carried forward'' and ``carried back''
                between model years, transferred between regulated classes (domestic
                passenger cars, imported passenger cars, and light trucks), and traded
                between manufacturers. However, these provisions also impose some
                specific statutory limits. For example, CAFE compliance credits can be
                carried forward a maximum of five model years and carried back a
                maximum of three model years. Also, EPCA/EISA caps the amount of credit
                that can be transferred between passenger car and light truck fleets,
                and prohibits manufacturers from applying traded or transferred credits
                to offset a failure to achieve the applicable minimum standard for
                domestic passenger cars. The CAFE Model explicitly simulates
                manufacturers' potential use of credits carried forward from prior
                model years or transferred from other fleets.\98\ 49 U.S.C. 32902
                prohibits consideration of manufacturers' potential application of CAFE
                compliance credits when setting maximum feasible CAFE standards. The
                CAFE Model can be operated in a manner that excludes the application of
                CAFE credits after a given model year. CAA 202(a) does not preclude the
                EPA Administrator adopting analogous provisions. EPA has opted to limit
                the ``life'' of compliance credits from most model years to 5 years,
                and to limit borrowing to 3 years, but has not adopted any limits on
                transfers (between fleets) or trades (between manufacturers) of
                compliance credits. The CAFE Model is able to account for the absence
                of limits on transfers of CO2 standards. Insofar as the CAFE
                model can be exercised in a manner that simulates trading of
                CO2 compliance credits, such simulations treat trading as
                unlimited.\99\ EPA has considered manufacturers' ability to use credits
                as part of its decisions on these final standards, and the CAFE model
                is now able to account for that.
                ---------------------------------------------------------------------------
                 \98\ As explained in Section VI, the CAFE Model does not
                explicitly simulate the potential that manufacturers would carry
                CAFE or CO2 credits back (i.e., borrow) from future model
                years, or acquire and use CAFE compliance credits from other
                manufacturers. At the same time, because EPA has elected to not
                limit credit trading, the CAFE Model can be exercised in a manner
                that simulates unlimited (a.k.a. ``perfect'') CO2
                compliance credit trading throughout the industry (or, potentially,
                within discrete trading ``blocs''). The agencies believe there is
                significant uncertainty in how manufacturers may choose to employ
                these particular flexibilities in the future: for example, while it
                is reasonably foreseeable that a manufacturer who over-complies in
                one year may ``coast'' through several subsequent years relying on
                those credits rather than continuing to make technology
                improvements, it is harder to assume with confidence that
                manufacturers will rely on future technology investments (that may
                not pan out as expected, as if market demand for ``target-beater''
                vehicles is lower than expected) to offset prior-year shortfalls, or
                whether/how manufacturers will trade credits with market competitors
                rather than making their own technology investments. Historically,
                carry-back and trading have been much less utilized than carry-
                forward, for a variety of reasons including higher risk and
                preference not to ``pay competitors to make fuel economy
                improvements we should be making'' (to paraphrase one manufacturer),
                although the agencies recognize that carry-back and trading are used
                more frequently when standards require more technology application
                than manufacturers believe their markets will bear. Given the
                uncertainty just discussed, and given also the fact that the
                agencies have yet to resolve some of analytical challenges
                associated with simulating use of these flexibilities, the agencies
                consider borrowing and trading to involve sufficient risk that it is
                prudent to support today's decisions with analysis that sets aside
                the potential that manufacturers could come to depend widely on
                borrowing and trading. While compliance costs in real life may be
                somewhat different from what is modeled today as a result of this
                analytical decision, that is broadly true no matter what, and the
                agencies do not believe that the difference would be so great that
                it would change the policy outcome.
                 \99\ To avoid making judgments (that would invariably turn out
                to be at least somewhat incorrect) about possible future trading
                activity, the model simulates trading by combining all manufacturers
                into a single entity, so that the most cost-effective choices are
                made for the fleet as a whole.
                ---------------------------------------------------------------------------
                 Statutory Basis for Stringency: 49 U.S.C. 32902 requires the
                Secretary to set CAFE standards at the maximum feasible levels,
                considering technological feasibility, economic practicability, the
                need of the Nation to conserve energy, and the impact of other
                government standards. EPCA/EISA authorizes the Secretary to interpret
                [[Page 24221]]
                these factors, and as the Department's interpretation has evolved,
                NHTSA has continued to expand and refine its qualitative and
                quantitative analysis. For example, as discussed below in Section
                VI.B.3, the Autonomie simulations reflect the agencies' judgment that
                it would not be economically practicable for a manufacturer to
                ``split'' an engine shared among many vehicle model/configurations into
                a myriad of versions each optimized to a single vehicle model/
                configuration. Also responding to evolving interpretation of these
                EPCA/EISA factors, the CAFE Model has been expanded to address
                additional impacts in an integrated manner. For example, the CAFE Model
                version used for the NPRM analysis included the ability to estimate
                impacts on labor utilization internally, rather than as an external
                ``off model'' or ``post processing'' analysis. In addition, NEPA
                requires the Secretary to issue an EIS that documents the estimated
                impacts of regulatory alternatives under consideration. The EIS
                accompanying today's notice documents changes in emission inventories
                as estimated using the CAFE model, but also documents corresponding
                estimates--based on the application of other models documented in the
                EIS, of impacts on the global climate, on tropospheric air quality, and
                on human health. Regarding CO2 standards, CAA 202(a)
                provides general authority for the establishment of motor vehicle
                emissions standards, and the final rule's analysis, like that
                accompanying the agencies' proposal, addresses impacts relevant to the
                EPA Administrator's decision making, such as technological feasibility,
                air quality impacts, costs to industry and consumers, and lead time
                necessary for compliance.
                 Other Factors: Beyond these statutory requirements applicable to
                DOT and/or EPA are a number of specific technical characteristics of
                CAFE and/or CO2 regulations that are also relevant to the
                construction of today's analysis. These are discussed at greater length
                in Section II.F. For example, EPA has defined procedures for
                calculating average CO2 levels, and has revised procedures
                for calculating CAFE levels, to reflect manufacturers' application of
                ``off-cycle'' technologies that increase fuel economy (and reduce
                CO2 emissions) in ways not reflected by the long-standing
                test procedures used to measure fuel economy. Although too little
                information is available to account for these provisions explicitly in
                the same way that the agencies have accounted for other technologies,
                the CAFE Model does include and makes use of inputs reflecting the
                agencies' expectations regarding the extent to which manufacturers may
                earn such credits, along with estimates of corresponding costs.
                Similarly, the CAFE Model includes and makes use of inputs regarding
                credits EPA has elected to allow manufacturers to earn toward
                CO2 levels (not CAFE) based on the use of air conditioner
                refrigerants with lower global warming potential (GWP), or on the
                application of technologies to reduce refrigerant leakage. In addition,
                EPA has elected to provide that through model year 2021, manufacturers
                may apply ``multipliers'' to plug-in hybrid electric vehicles,
                dedicated electric vehicles, fuel cell vehicles, and hydrogen vehicles,
                such that when calculating a fleet's average CO2 levels (not
                CAFE), the manufacturer may, for example, ``count'' each electric
                vehicle twice. The CAFE Model accounts for these multipliers, based on
                either current regulatory provisions or on alternative approaches.
                Although these are examples of regulatory provisions that arise from
                the exercise of discretion rather than specific statutory mandate, they
                can materially impact outcomes. Section VI.B explains in greater detail
                how today's analysis addresses them.
                Benefits of Analytical Approach
                 The agencies' analysis of CAFE and CO2 standards
                involves two basic elements: First, estimating ways each manufacturer
                could potentially respond to a given set of standards in a manner that
                considers potential consumer response; and second, estimating various
                impacts of those responses. Estimating manufacturers' potential
                responses involves simulating manufacturers' decision-making processes
                regarding the year-by-year application of fuel-saving technologies to
                specific vehicles. Estimating impacts involves calculating resultant
                changes in new vehicle costs, estimating a variety of costs (e.g., for
                fuel) and effects (e.g., CO2 emissions from fuel combustion)
                occurring as vehicles are driven over their lifetimes before eventually
                being scrapped, and estimating the monetary value of these effects.
                Estimating impacts also involves consideration of the response of
                consumers--e.g., whether consumers will purchase the vehicles and in
                what quantities. Both of these basic analytical elements involve the
                application of many analytical inputs.
                 As mentioned above, the agencies' analysis uses the CAFE model to
                estimate manufacturers' potential responses to new CAFE and
                CO2 standards and to estimate various impacts of those
                responses. DOT's Volpe National Transportation Systems Center (often
                simply referred to as the ``Volpe Center'') develops, maintains, and
                applies the model for NHTSA. NHTSA has used the CAFE model to perform
                analyses supporting every CAFE rulemaking since 2001, and the 2016
                rulemaking regarding heavy-duty pickup and van fuel consumption and
                CO2 emissions also used the CAFE model for analysis.\100\
                ---------------------------------------------------------------------------
                 \100\ While both agencies used the CAFE Model to simulate
                manufacturers' potential responses to standards, some model inputs
                differed EPA's and DOT's analyses, and EPA also used the EPA MOVES
                model to calculate resultant changes in emissions inventories. See
                81 FR 73478, 73743 (Oct. 25, 2016).
                ---------------------------------------------------------------------------
                 NHTSA recently arranged for a formal peer review of the model. In
                general, reviewers' comments strongly supported the model's conceptual
                basis and implementation, and commenters provided several specific
                recommendations. The agency agreed with many of these recommendations
                and has worked to implement them wherever practicable. Implementing
                some of the recommendations would require considerable further
                research, development, and testing, and will be considered going
                forward. For a handful of other recommendations, the agency disagreed,
                often finding the recommendations involved considerations (e.g., other
                policies, such as those involving fuel taxation) beyond the model
                itself or were based on concerns with inputs rather than how the model
                itself functioned. A report available in the docket for this rulemaking
                presents peer reviewers' detailed comments and recommendations, and
                provides DOT's detailed responses.\101\
                ---------------------------------------------------------------------------
                 \101\ Docket No. NHTSA-2018-0067-0055.
                ---------------------------------------------------------------------------
                 As also mentioned above, the agencies use EPA's MOVES model to
                estimate tailpipe emission factors, use DOE/EIA's NEMS to estimate fuel
                prices,\102\ and use Argonne's GREET model to estimate downstream
                emissions rates.\103\ DOT also sponsored DOE/Argonne to use the
                Autonomie full-vehicle modeling and simulation tool to estimate the
                fuel economy impacts for roughly a million
                [[Page 24222]]
                combinations of technologies and vehicle types.104 105
                ---------------------------------------------------------------------------
                 \102\ See https://www.eia.gov/outlooks/aeo/info_nems_archive.php. Today's notice uses fuel prices estimated
                using the Annual Energy Outlook (AEO) 2019 version of NEMS (see
                https://www.eia.gov/outlooks/archive/aeo19/ and https://www.eia.gov/outlooks/aeo/data/browser/#/?id=3-AEO2019&cases=ref2019&sourcekey=0).
                 \103\ Information regarding GREET is available at https://greet.es.anl.gov/index.php. Availability of NEMS is discussed at
                https://www.eia.gov/outlooks/aeo/info_nems_archive.php. Today's
                notice uses fuel prices estimated using the AEO 2019 version of
                NEMS.
                 \104\ As part of the Argonne simulation effort, individual
                technology combinations simulated in Autonomie were paired with
                Argonne's BatPAC model to estimate the battery cost associated with
                each technology combination based on characteristics of the
                simulated vehicle and its level of electrification. Information
                regarding Argonne's BatPAC model is available at http://www.cse.anl.gov/batpac/.
                 \105\ Furthermore, the impact of engine technologies on fuel
                consumption, torque, and other metrics was characterized using GT
                POWER simulation modeling in combination with other engine modeling
                that was conducted by IAV Automotive Engineering, Inc. (IAV). The
                engine characterization ``maps'' resulting from this analysis were
                used as inputs for the Autonomie full-vehicle simulation modeling.
                Information regarding GT Power is available at https://www.gtisoft.com/gt-suite-applications/propulsion-systems/gt-power-engine-simulation-software.
                ---------------------------------------------------------------------------
                 EPA developed two models after 2009, referred to as the ``ALPHA''
                and ``OMEGA'' models, which provide some of the same capabilities as
                the Autonomie and CAFE models. EPA applied the OMEGA model to conduct
                analysis of tailpipe CO2 emissions standards promulgated in
                2010 and 2012, and the ALPHA and OMEGA models to conduct analysis
                discussed in the above-mentioned 2016 Draft TAR and Proposed and 2017
                Initial Final Determinations regarding standards beyond 2021. In an
                August 2017 notice, the agencies requested comments on, among other
                things, whether EPA should use alternative methodologies and modeling,
                including DOE/Argonne's Autonomie full-vehicle modeling and simulation
                tool and DOT's CAFE model.\106\
                ---------------------------------------------------------------------------
                 \106\ 82 FR 39551, 39553 (Aug. 21, 2017).
                ---------------------------------------------------------------------------
                 Having reviewed comments on the subject and having considered the
                matter fully, the agencies have determined it is reasonable and
                appropriate to use DOE/Argonne's model for full-vehicle simulation, and
                to use DOT's CAFE model for analysis of regulatory alternatives. EPA
                interprets Section 202(a) of the CAA as giving the agency broad
                discretion in how it develops and sets CO2 emissions
                standards for light-duty vehicles. Nothing in Section 202(a) mandates
                that EPA use any specific model or set of models for analysis of
                potential CO2 standards for light-duty vehicles. EPA weighs
                many factors when determining appropriate levels for CO2
                standards, including the cost of compliance (see Section 202(a)(2)),
                lead time necessary for compliance (id.), safety (see NRDC v. EPA, 655
                F.2d 318, 336 n. 31 (D.C. Cir. 1981)) and other impacts on
                consumers,\107\ and energy impacts associated with use of the
                technology.\108\ Using the CAFE model allows consideration of a number
                of factors. The CAFE model explicitly evaluates the cost of compliance
                for each manufacturer, each fleet, and each model year; it accounts for
                lead time necessary for compliance by directly incorporating estimated
                manufacturer production cycles for every vehicle in the fleet, ensuring
                that the analysis does not assume vehicles can be redesigned to
                incorporate more technology without regard to lead time considerations;
                it provides information on safety effects associated with different
                levels of standards and information about many other impacts on
                consumers, and it calculates energy impacts (i.e., fuel saved or
                consumed) as a primary function, besides being capable of providing
                information about many other factors within EPA's broad CAA discretion
                to consider.
                ---------------------------------------------------------------------------
                 \107\ Since its earliest Title II regulations, EPA has
                considered the safety of pollution control technologies. See 45 FR
                14496, 14503 (1980).
                 \108\ 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).
                ---------------------------------------------------------------------------
                 Because the CAFE model simulates a wide range of actual constraints
                and practices related to automotive engineering, planning, and
                production, such as common vehicle platforms, sharing of engines among
                different vehicle models, and timing of major vehicle redesigns, the
                analysis produced by the CAFE model provides a transparent and
                realistic basis to show pathways manufacturers could follow over time
                in applying new technologies, which helps better assess impacts of
                potential future standards. Furthermore, because the CAFE model also
                accounts fully for regulatory compliance provisions (now including
                CO2 compliance provisions), such as adjustments for reduced
                refrigerant leakage, production ``multipliers'' for some specific types
                of vehicles (e.g., PHEVs), and carried-forward (i.e., banked) credits,
                the CAFE model provides a transparent and realistic basis to estimate
                how such technologies might be applied over time in response to CAFE or
                CO2 standards.
                 There are sound reasons for the agencies to use the CAFE model
                going forward in this rulemaking. First, the CAFE and CO2
                fact analyses are inextricably linked. Furthermore, the analysis
                produced by the CAFE model and DOE/Argonne's Autonomie addresses the
                agencies' analytical needs. The CAFE model provides an explicit year-
                by-year simulation of manufacturers' application of technology to their
                products in response to a year-by-year progression of CAFE standards
                and accounts for sharing of technologies and the implications for
                timing, scope, and limits on the potential to optimize powertrains for
                fuel economy. In the real world, standards actually are specified on a
                year-by-year basis, not simply some single year well into the future,
                and manufacturers' year-by-year plans involve some vehicles ``carrying
                forward'' technology from prior model years and some other vehicles
                possibly applying ``extra'' technology in anticipation of standards in
                ensuing model years, and manufacturers' planning also involves applying
                credits carried forward between model years. Furthermore, manufacturers
                cannot optimize the powertrain for fuel economy on every vehicle model
                configuration--for example, a given engine shared among multiple
                vehicle models cannot practicably be split into different versions for
                each configuration of each model, each with a slightly different
                displacement. The CAFE model is designed to account for these real-
                world factors.
                 Considering the technological heterogeneity of manufacturers'
                current product offerings, and the wide range of ways in which the many
                fuel economy-improving/CO2 emissions-reducing technologies
                included in the analysis can be combined, the CAFE model has been
                designed to use inputs that provide an estimate of the fuel economy
                achieved for many tens of thousands of different potential combinations
                of fuel-saving technologies. Across the range of technology classes
                encompassed by the analysis fleet, today's analysis involves more than
                a million such estimates. While the CAFE model requires no specific
                approach to developing these inputs, the National Academy of Sciences
                (NAS) has recommended, and stakeholders have commented, that full-
                vehicle simulation provides the best balance between realism and
                practicality. DOE/Argonne has spent several years developing, applying,
                and expanding means to use distributed computing to exercise its
                Autonomie full-vehicle modeling and simulation tool over the scale
                necessary for realistic analysis of CAFE or average tailpipe
                CO2 emissions standards. This scalability and related
                flexibility (in terms of expanding the set of technologies to be
                simulated) makes Autonomie well-suited for developing inputs to the
                CAFE model.
                 In addition, DOE/Argonne's Autonomie also has a long history of
                development and widespread application by a much wider range of users
                in government, academia, and industry. Many of these users apply
                [[Page 24223]]
                Autonomie to inform funding and design decisions. These real-world
                exercises have contributed significantly to aspects of Autonomie
                important to producing realistic estimates of fuel economy levels and
                CO2 emission rates, such as estimation and consideration of
                performance, utility, and driveability metrics (e.g., towing
                capability, shift business, frequency of engine on/off transitions).
                This steadily increasing realism has, in turn, steadily increased
                confidence in the appropriateness of using Autonomie to make
                significant investment decisions. Notably, DOE uses Autonomie for
                analysis supporting budget priorities and plans for programs managed by
                its Vehicle Technologies Office (VTO). Considering the advantages of
                DOE/Argonne's Autonomie model, it is reasonable and appropriate to use
                Autonomie to estimate fuel economy levels and CO2 emission
                rates for different combinations of technologies as applied to
                different types of vehicles.
                 Commenters have also suggested that the CAFE model's graphical user
                interface (GUI) facilitates others' ability to use the model quickly--
                and without specialized knowledge or training--and to comment
                accordingly.\109\ For the NPRM, NHTSA significantly expanded and
                refined this GUI, providing the ability to observe the model's real-
                time progress much more closely as it simulates year-by-year compliance
                with either CAFE or CO2 standards.\110\ Although the model's
                ability to produce realistic results is independent of the model's GUI,
                the CAFE model's GUI appears to have facilitated stakeholders'
                meaningful review and comment during the comment period.
                ---------------------------------------------------------------------------
                 \109\ From Docket Number EPA-HQ-OAR-2015-0827, see Comment by
                Global Automakers, Docket ID EPA-HQ-OAR-2015-0827-9728, at 34.
                 \110\ The updated GUI provides a range of graphs updated in real
                time as the model operates. These graphs can be used to monitor fuel
                economy or CO2 ratings of vehicles in manufacturers'
                fleets and to monitor year-by-year CAFE (or average CO2
                ratings), costs, avoided fuel outlays, and avoided CO2-
                related damages for specific manufacturers and/or specific fleets
                (e.g., domestic passenger car, light truck). Because these graphs
                update as the model progresses, they should greatly increase users'
                understanding of the model's approach to considerations such as
                multiyear planning, payment of civil penalties, and credit use.
                ---------------------------------------------------------------------------
                 The question of whether EPA's actions should consider and be
                informed by analysis using non-EPA-staff-developed modeling tools has
                generated considerable debate over time. Even prior to the NPRM,
                certain commenters had argued that EPA could not consider, in setting
                tailpipe CO2 emissions standards, any information derived
                from non-EPA-staff-developed modeling. Many of the pre-NPRM concerns
                focused on inputs used by the CAFE model for prior rulemaking
                analyses.111 112 113 Because inputs are exogenous to any
                model, they do not determine whether it would be reasonable and
                appropriate for EPA to use NHTSA's model for analysis. Other concerns
                focused on certain characteristics of the CAFE model that were
                developed to align the model better with EPCA and EISA. The model has
                been revised to accommodate both EPCA/EISA and CAA analysis, as
                explained further below. Some commenters also argued that use of any
                models other than ALPHA and OMEGA for CAA analysis would constitute an
                arbitrary and capricious delegation of EPA's decision-making authority
                to NHTSA, if NHTSA models are used for analysis instead.\114\ As
                discussed above, the CAFE Model--as with any model--is used to provide
                analysis, and does not result in decisions. Decisions are made by EPA
                in a manner that is informed by modeling outputs, sensitivity cases,
                public comments, any many other pieces of information.
                ---------------------------------------------------------------------------
                 \111\ For example, EDF previously stated that ``the data that
                NHTSA needs to input into its model is sensitive confidential
                business information that is not transparent and cannot be
                independently verified, . . .'' and it claimed ``the OMEGA model's
                focus on direct technological inputs and costs--as opposed to
                industry self-reported data--ensures the model more accurately
                characterizes the true feasibility and cost effectiveness of
                deploying greenhouse gas reducing technologies.'' EDF, EPA-HQ-OAR-
                2015-0827-9203, at 12. These statements are not correct, as nothing
                about either the CAFE or OMEGA model either obviates or necessitates
                the use of CBI to develop inputs.
                 \112\ As another example, CARB previously stated that ``another
                promising technology entering the market was not even included in
                the NHTSA compliance modeling'' and that EPA assumes a five-year
                redesign cycle, whereas NHTSA assumes a six to seven-year cycle.''
                CARB, EPA-HQ-OAR-2015-0827-9197, at 28. Though presented as
                criticisms of the models, these comments--at least with respect to
                the CAFE model--actually concern model inputs. NHTSA did not agree
                with CARB about the commercialization potential of the engine
                technology in question (``Atkinson 2'') and applied model inputs
                accordingly. Also, rather than applying a one-size-fits-all
                assumption regarding redesign cadence, NHTSA developed estimates
                specific to each vehicle model and applied these as model inputs.
                 \113\ As another example, NRDC has argued that EPA should not
                use the CAFE model because it ``allows manufacturers to pay civil
                penalties in lieu of meeting the standards, an alternative
                compliance pathway currently allowed under EISA and EPCA.'' NRDC,
                EPA-HQ-OAR-2015-0827-9826, at 37. While the CAFE model can simulate
                civil penalty payment, NRDC's comment appears to overlook the fact
                that this result depends on model inputs; the inputs can easily be
                specified such that the CAFE model will set aside civil penalty
                payment as an alternative to compliance.
                 \114\ See, e.g., CBD et al., NHTSA-2018-0067-12057, at 9.
                ---------------------------------------------------------------------------
                 Comments responding to the NPRM's use of the CAFE model and
                Autonomie rather than also (for CO2 standards) ALPHA and
                OMEGA were mixed. For example, the environmental group coalition stated
                that the CAFE model is aligned with EPCA requirements,\115\ but also
                argued (1) that EPA is legally prohibited from ``delegat[ing] technical
                decision-making to NHTSA;'' \116\ (2) that ``EPA must exercise its
                technical and scientific expertise'' to develop CO2
                standards and ``Anything less is an unlawful abdication of EPA's
                statutory responsibilities;'' \117\ (3) that EPA staff is much more
                qualified than DOT staff to conduct analysis relating to standards and
                has done a great deal of work to inform development of standards; \118\
                (4) that ``The Draft TAR and 2017 Final Determination relied
                extensively on use of sophisticated EPA analytic tools and
                methodologies,'' i.e., the ``peer reviewed simulation model ALPHA,''
                ``the agency's vehicle teardown studies,'' and the ``peer-reviewed
                OMEGA model to make reasonable estimates of how manufacturers could add
                technologies to vehicles in order to meet a fleet-wide [CO2
                emissions] standard;'' \119\ (5) that NHTSA had said in the MYs 2012-
                2016 rulemaking that the Volpe [CAFE] model was developed to support
                CAFE rulemaking and incorporates features ``that are not appropriate
                for use by EPA in setting [tailpipe CO2] standards;'' \120\
                (6) allegations that some EPA staff had disagreed with aspects of the
                NPRM analysis and had requested that ``EPA's name and logo should be
                removed from the DOT-NHTSA Preliminary Regulatory Impact Analysis
                document'' and stated that ``EPA is relying upon the technical analysis
                performed by DOT-NHTSA for the [NPRM];'' \121\ (7) that EPA had
                developed ``a range of relevant new analysis'' that the proposal
                ``failed to consider,'' including ``over a dozen 2017 and 2018 EPA peer
                reviewed SAE articles;'' \122\ (8) that EPA's OMEGA modeling undertaken
                during NPRM development ``found costs half that of NHTSA's findings,''
                ``Yet NHTSA did not correct the errors in its modeling and analysis,
                and the published proposal drastically overestimates the cost of
                complying . . . .;'' \123\ (9) that some EPA staff had requested that
                the technology ``HCR2'' be included in the NPRM analysis, ``Yet NHTSA
                overruled
                [[Page 24224]]
                EPA and omitted the technology;'' \124\ (10) that certain EPA staff had
                initially ``rejected use of the CAFE model for development of the
                proposed [tailpipe CO2] standards;'' \125\ (11) that there
                are ``many specific weaknesses of the modeling results derived in this
                proposal through use of the Volpe and Autonomie models'' and that the
                CAFE model is ``not designed in accordance with'' Section 202(a) of the
                CAA because (A) EPA ``is not required to demonstrate that standards are
                set at the maximum feasible level year-by-year,'' (B) because EPCA
                ``preclude[s NHTSA] from considering vehicles powered by fuels other
                than gas or diesel'' and EPA is not similarly bound, and (C) because
                the CAFE model assumed that the value of an overcompliance credit
                equaled $5.50, the value of a CAFE penalty.\126\ Because of all of
                these things, the environmental group coalition stated that the
                proposal was ``unlawful'' and that ``Before proceeding with this
                rulemaking, EPA must consider all relevant materials including these
                excluded insights, perform its own analysis, and issue a reproposal to
                allow for public comment.'' \127\
                ---------------------------------------------------------------------------
                 \115\ Environmental group coalition, NHTSA-2018-0067-12000,
                Appendix A, at 24-25.
                 \116\ Id. at 12.
                 \117\ Id. at 14.
                 \118\ Id. at 15-17.
                 \119\ Id. at 17.
                 \120\ Id. at 18.
                 \121\ Id. at 19.
                 \122\ Id. at 20.
                 \123\ Id. at 21.
                 \124\ Id. at 21-22.
                 \125\ Id. at 23.
                 \126\ Id. at 24-25.
                 \127\ Id. at 27.
                ---------------------------------------------------------------------------
                 Some environmental organizations and States contracted for external
                technical analyses augmenting general comments such as those summarized
                above. EDF engaged a consultant, Richard Rykowski, for a detailed
                review of the agencies' analysis.\128\ Among Mr. Rykowski's comments, a
                few specifically involve differences between these two models. Mr.
                Rykowski recommended NHTSA's CAFE model replace its existing
                ``effective cost'' metric (used to compare available options to add
                specific technologies to specific vehicles) with a ``ranking factor''
                used for the same purpose. As discussed below in Section VI.A, the
                model for today's final rule adopts this recommendation. He also states
                that (1) ``EPA has developed a better way to isolate and reject cost
                ineffective combinations of technologies . . . [and] includes only
                these 50 or so technology combinations in their OMEGA model runs;'' (2)
                ``NHTSA's arbitrary and rigid designation of leader-follower vehicles
                for engine, transmission and platform level technologies
                unrealistically slows the rollout of technology into the new vehicle
                fleet;'' (3) ``the Volpe Model is not capable of reasonably simulating
                manufacturers' ability to utilize CO2 credits to smooth the
                introduction of technology throughout their vehicle line-up;'' and (4)
                ``the Volpe Model is not designed to reflect the use of these [A/C
                leakage] technologies and refrigerants.'' \129\
                ---------------------------------------------------------------------------
                 \128\ EDF, NHTSA-2018-0067-12108, Appendix B. See also EPA, Peer
                Review of the Optimization Model for Reducing Emissions of
                Greenhouse Gases from Automobiles (OMEGA) and EPA's Response to
                Comments, EPA-420-R-09-016, September 2009.
                 \129\ EDF, op. cit., at 73-75.
                ---------------------------------------------------------------------------
                 Mr. Rogers's analysis focuses primarily on the agencies' published
                analysis, but mentions that some engine ``maps'' (estimates--used as
                inputs to full vehicle simulation--of engine fuel consumption under a
                wide range of engine operating conditions) applied in Autonomie show
                greater fuel consumption benefits of turbocharging than those applied
                previously by EPA to EPA's ALPHA model, and these benefits could have
                caused NHTSA's CAFE model to estimate an unrealistically great tendency
                toward turbocharged engines (rather than high compression ratio
                engines).\130\ Mr. Rogers also presents alternative examples of year-
                by-year technology application to specific vehicle models, contrasting
                these with year-by-year results from the agencies' NPRM analysis,
                concluding that ``that the use of logical, unrestricted technology
                pathways, with incremental benefits supported by industry-accepted
                vehicle simulation and dynamic system optimization and calibration,
                together with publicly-defensible costs, allows cost-effective
                solutions to achieve target fuel economy levels which meet MY 2025
                existing standards.'' \131\
                ---------------------------------------------------------------------------
                 \130\ Roush Industries, NHTSA-2018-0067-11984, at 17-21.
                 \131\ Roush Industries, NHTSA-2018-0067-11984, at 17-30.
                ---------------------------------------------------------------------------
                 Mr. Duleep's analysis also focuses primarily on the agencies'
                published analysis, but does mention that (1) ``the Autonomie modeling
                assumes no engine change when drag and rolling resistance reductions
                are implemented, as well as no changes to the transmission gear ratios
                and axle ratios, . . . [but] the EPA ALPHA model adjusts for this
                effect;'' (2) ``baseline differences in fuel economy [between two
                manufacturers' different products using similar technologies] are
                carried for all future years and this exaggerates the differences in
                technology adoption requirements and costs between manufacturers; (3)
                ``assumptions [that most technology changes are best applied as part of
                a vehicle redesign or freshening] result in unnecessary distortion in
                technology paths and may bias results of costs for different
                manufacturers;'' and (4) that for the sample results shown for the
                Chevrolet Equinox ``the publicly available EPA lumped parameter model
                (which was used to support the 2016 rulemaking) and 2016 TAR cost data
                . . . results in an estimate of attaining 52.2 mpg for a cost of $2110,
                which is less than half the cost estimated in the PRIA.'' \132\
                ---------------------------------------------------------------------------
                 \132\ H-D Systems, op. cit., at 48, et seq.
                ---------------------------------------------------------------------------
                 Beyond these comments regarding differences between EPA's models
                and the Argonne and DOT models applied for the NPRM, these and other
                technical reviewers had many specific comments about the agencies'
                analysis for the NPRM, and these comments are discussed in detail below
                in Section VI.B.
                 Manufacturers, on the other hand, supported the agencies' use of
                Autonomie and the CAFE model rather than, in EPA's case, the ALPHA and
                OMEGA models. Expressly identifying the distinction between models and
                model inputs, Global Automakers stated that:
                 The agencies provided a new, updated analysis based on the most
                up-to-date data, using a proven and long-developed modeling tool,
                known as the Volpe model, and offering numerous options to best
                determine the right regulatory and policy path for ongoing fuel
                efficiency improvements in our nation. Now, all stakeholders have an
                opportunity to come to the table as part of the public process to
                provide input, data, and information to help shape the final
                rule.\133\
                ---------------------------------------------------------------------------
                 \133\ Global Automakers, NHTSA-2018-0067-12032, at 2.
                ---------------------------------------------------------------------------
                 This NPRM's use of a single model to evaluate alternative
                scenarios for both programs provides consistency in the technical
                analysis, and Global Automakers supports the Volpe model's use as it
                has proven to be a transparent and user-friendly option in this
                current analysis. The use of the Volpe model has allowed for a broad
                range of stakeholders, with varying degrees of technical expertise,
                to review the data inputs to provide feedback on this proposed rule.
                The Volpe model's accompanying documentation has historically
                provided a clear explanation of all sources of input and constraints
                critical to a transparent modeling process. Other inputs have come
                from modeling that is used widely by other sources, specifically the
                Autonomie model, allowing for a robust validation, review and
                reassessment.\134\
                ---------------------------------------------------------------------------
                 \134\ Global Automakers, NHTSA-2018-0067-12032, Attachment A, at
                A-12.
                 The Alliance commented, similarly, that ``at least at this time,
                NHTSA's modeling systems are superior to EPA's'' and ``as such, we
                support the Agencies' decision to use NHTSA's modeling tools for this
                rulemaking and recommend that both Agencies continue on this path. We
                encourage Agencies to work together to provide input to the single
                common set of tools.'' \135\
                ---------------------------------------------------------------------------
                 \135\ Alliance, NHTSA-2018-0067-12073, at 134.
                ---------------------------------------------------------------------------
                [[Page 24225]]
                 Regarding the agencies' use of Argonne's Autonomie model rather
                than EPA's ALPHA model, the Alliance commented that (1) ``the benefits
                of virtually all technologies and their synergistic effects are now
                determined with full vehicle simulations;'' (2) ``vehicle categories
                have been increased to 10 to better recognize the range of 0-60
                performance characteristics within each of the 5 previous categories,
                in recognition of the fact that many vehicles in the baseline fleet
                significantly exceeded the previously assumed 0-60 performance metrics.
                This provides better resolution of the baseline fleet and more accurate
                estimates of the benefits of technology. . . .;'' (3) ``new
                technologies (like advanced cylinder deactivation) are included, while
                unproven combinations (like Atkinson engines with 14:1 compression,
                cooled EGR, and cylinder deactivation in combination) have been
                removed;'' (4) ``Consistent with the recommendation of the National
                Academy of Sciences and manufacturers, gradeability has been included
                as a performance metric used in engine sizing. This helps prevent the
                inclusion of small displacement engines that are not commercially
                viable and that would artificially inflate fuel savings;'' (5) ``the
                Alliance believes NHTSA's tools (Autonomie/Volpe) are superior to EPA's
                (APLHA[sic]/LPM/OMEGA). This is not surprising since NHTSA's tools have
                had a significant head start in development. . . .'' (6) ``the
                Autonomie model was developed at Argonne National Lab with funding from
                the Department of Energy going back to the PNGV (Partnership for Next
                Generation Vehicles) program in the 1990s. Autonomie was developed from
                the start to address the complex task of combining 2 power sources in a
                hybrid powertrain. It is a physics-based, forward looking, vehicle
                simulator, fully documented with available training,'' and (7) ``EPA's
                ALPHA model is also a physics-based, forward looking, vehicle
                simulator. However, it has not been validated or used to simulate
                hybrid powertrains. The model has not been documented with any
                instructions making it difficult for users outside of EPA to run and
                interpret the model.'' \136\
                ---------------------------------------------------------------------------
                 \136\ Id. at 135.
                ---------------------------------------------------------------------------
                 Regarding the use of NHTSA's CAFE model rather than EPA's OMEGA
                model, the Alliance stated that (1) NHTSA's model appropriately
                differentiate between domestic and imported automobiles; (2) in NHTSA's
                model, ``dynamic estimates of vehicle sales and scrappage in response
                to price changes replace unrealistic static sales and scrappage
                numbers;'' (3) NHTSA's model ``has new capability to perform
                [CO2 emissions] analysis with [tailpipe CO2]
                program flexibilities;'' (4) ``the baseline fleet [used in NHTSA's
                model] has been appropriately updated based on both public and
                manufacturer data to reflect the technologies already applied,
                particularly tire rolling resistance;'' and (5) ``some technologies
                have been appropriately restricted. For example, low rolling resistance
                tires are no longer allowed on performance vehicles, and aero
                improvements are limited to maximum levels of 15% for trucks and 10%
                for minivans.'' \137\ The Alliance continued, noting that ``NHTSA's
                Volpe model also predates EPA's OMEGA model. More importantly, the new
                Volpe model considers several factors that make its results more
                realistic.'' \138\ As factors leading the Volpe model to produce
                results that are more realistic than those produced by OMEGA, the
                Alliance commented that (1) ``The Volpe model includes estimates of the
                redesign and refresh schedules of vehicles based on historical trends,
                whereas the OMEGA model uses a fixed, and too short, time interval
                during which all vehicles are assumed to be fully redesigned. . . .;''
                (2) ``The Volpe model allows users to phase-in technology based on year
                of availability, platform technology sharing, phase-in caps, and to
                follow logical technology paths per vehicle. . . .;'' (3) ``The Volpe
                model produces a year-by year analysis from the baseline model year
                through many years in the future, whereas the OMEGA model only analyzes
                a fixed time interval. . . .;'' (4) ``The Volpe model recognizes that
                vehicles share platforms, engines, and transmissions, and that
                improvements to any one of them will likely extend to other vehicles
                that use them'' whereas ``The OMEGA model treats each vehicle as an
                independent entity. . . .;'' (5) ``The Volpe model now includes sales
                and scrappage effects;'' and (6) ``The Volpe model is now capable of
                analyzing for CAFE and [tailpipe CO2] compliance, each with
                unique program restrictions and flexibilities.'' \139\ The Alliance
                also incorporated by reference concerns it raised regarding EPA's
                OMEGA-based analysis supporting EPA's proposed and prior final
                determinations.\140\
                ---------------------------------------------------------------------------
                 \137\ Id. at 134.
                 \138\ Id. at 135.
                 \139\ Id. at 135-136.
                 \140\ Id. at 136.
                ---------------------------------------------------------------------------
                 The Alliance further stated that ``For all of the above reasons and
                to avoid duplicate efforts, the Alliance recommends that the Agencies
                continue to use DOT's Volpe and Autonomie modeling system, rather than
                continuing to develop two separate systems. EPA has demonstrated
                through supporting Volpe model code revisions and by supplying engine
                maps for use in the Autonomie model that their expertise can be
                properly represented in the rulemaking process without having to
                develop separate or new tools.'' \141\
                ---------------------------------------------------------------------------
                 \141\ Id. at 136.
                ---------------------------------------------------------------------------
                 Some individual manufacturers provided comments supporting and
                elaborating on the above comments by Global Automakers and the
                Alliance. For example, FCA commented that ``the modeling performed by
                the agencies should illuminate the differences between the CAFE and
                [tailpipe CO2 emissions] programs. This cannot be
                accomplished when each agency is using different tools and assumptions.
                Since we believe NHTSA possesses the better set of tools, we support
                both agencies using Autonomie for vehicle modeling and Volpe (CAFE) for
                fleet modeling.'' \142\
                ---------------------------------------------------------------------------
                 \142\ FCA, NHTSA-2018-0067-11943, at 82.
                ---------------------------------------------------------------------------
                 Honda stated that ``The current version of the CAFE model is
                reasonably accurate in terms of technology efficiency, cost, and
                overall compliance considerations, and reflects a notable improvement
                over previous agency modeling efforts conducted over the past few
                years. We found the CAFE model's characterization of Honda's
                ``baseline'' fleet--critical modeling minutiae that provide a technical
                foundation of the agencies' analysis--to be highly accurate. We commend
                NHTSA and Volpe Center staff on these updates, as well as on the
                overall transparency of the model. The model's graphical user interface
                (GUI) makes it easier to run, model functionality is thoroughly
                documented, and the use of logical, traceable input and output files
                accommodates easy tracking of results.'' \143\ Similarly, in an earlier
                presentation to the agencies, Honda included the following slide
                comparing EPA's OMEGA model to DOT's CAFE (Volpe) model, and making
                recommendations regarding future improvements to the latter: \144\
                ---------------------------------------------------------------------------
                 \143\ Honda, EPA-HQ-OAR-2018-0283, at 21-22.
                 \144\ Honda, NHTSA-2018-0067-12019, at 12.
                ---------------------------------------------------------------------------
                [[Page 24226]]
                [GRAPHIC] [TIFF OMITTED] TR30AP20.041
                 Toyota, in addition to arguing that the agencies' application of
                model inputs (e.g., an analysis fleet based on MY 2016 compliance data)
                produced more realistic results than in the draft TAR and in EPA's
                former proposed and final determinations, also stressed the importance
                of the CAFE model's year-by-year accounting for product redesigns,
                stating that this produces more realistic results than the OMEGA-based
                results shown previously by EPA:
                 The modeling now better accounts for factors that limit the rate
                at which new technologies enter and then diffuse through a
                manufacturer's fleet. Bringing new or improved vehicles and
                technologies to market is a several-year, capital-intensive
                undertaking. Once new designs are introduced, a period of stability
                is required so investments can be amortized. Vehicle and technology
                introductions are staggered over time to manage limited resources.
                Agency modeling now better recognizes the inherent constraints
                imposed by realities that dictate product cadence. We agree with the
                agencies' understanding that ``the simulation of compliance actions
                that manufacturers might take is constrained by the pace at which
                new technologies can be applied in the new vehicle market,'' and we
                are encouraged to learn that ``agency modeling can now account for
                the fact that individual vehicle models undergo significant
                redesigns relatively infrequently.'' The preamble correctly notes
                that manufacturers try to keep costs down by applying most major
                changes mainly during vehicle redesigns and more modest changes
                during product refresh, and that redesign cycles for vehicle models
                can range from six to ten years, and eight to ten-years for
                powertrains. This appreciation for standard business practice
                enables the modeling to more accurately capture the way vehicles
                share engines, transmissions, and platforms. There are now more
                realistic limits placed on the number of engines and transmissions
                in a powertrain portfolio which better recognizes manufacturers must
                manage limited engineering resources and control supplier,
                production, and service costs. Technology sharing and inheritance
                between vehicle models tends to limit the rate of improvement in a
                manufacturer's fleet.\145\
                ---------------------------------------------------------------------------
                 \145\ Toyota, NHTSA-2018-0067-12098, Attachment 1, at 3 et seq.
                 These comments urging EPA to use NHTSA's CAFE model echo comments
                provided in response to a 2018 peer review of the model. While
                identifying various opportunities for improvement, peer reviewers
                expressed strong overall support for the CAFE model's technical
                approach and execution. For example, one reviewer, after offering many
                ---------------------------------------------------------------------------
                specific technical recommendations, concluded as follows:
                 The model is impressive in its detail, and in the completeness
                of the input data that it uses. Although the model is complex, the
                reader is given a clear account of how variables are variously
                divided and combined to yield appropriate granularity and efficiency
                within the model. The model tracks well a simplified version of the
                real-world and manufacturing/design decisions. The progression of
                technology choices and cost benefit choices is clear and logical. In
                a few cases, the model simply explains a constraint, or a value
                assigned to a variable, without defending the choice of the value or
                commenting on real-world variability, but these are not substantive
                omissions. The model will lend itself well to future adaptation or
                addition of variables, technologies and pathways.\146\
                ---------------------------------------------------------------------------
                 \146\ NHTSA, CAFE Model Peer Review, DOT HS 812 590, Available
                at https://www.nhtsa.gov/document/cafe-model-peer-review, at 250.
                 Although the peer review charge focused solely on the CAFE model,
                another peer reviewer separately recommended that EPA ``consider
                opportunities for EPA to use the output from the Volpe Model in place
                of their OMEGA Model output'' \147\
                ---------------------------------------------------------------------------
                 \147\ Id. at 287-288 and 304.
                ---------------------------------------------------------------------------
                 More recently, in response to the NPRM, Dr. Julian Morris, an
                economist at George Washington University, commented extensively on the
                superiority of the agencies' NPRM analysis to previous analyses,
                offering the following overall assessment:
                 I have assessed the plausibility of the analyses undertaken by
                NHTSA and EPA in relation to the proposed SAFE rule. I found that
                the agencies have undertaken a thorough--one might even say
                exemplary--analysis, improving considerably on earlier analyses
                undertaken by the agencies of previous rules relating to CAFE
                standards and [tailpipe CO2] emission standards. Of
                particular note, the agencies included more realistic estimates of
                the rebound effect, developed a sophisticated model of the
                [[Page 24227]]
                scrappage effect, and better accounted for various factors affecting
                vehicle fatality rates.\148\
                ---------------------------------------------------------------------------
                 \148\ Morris, J., OAR-2018-0283-4028, at 6-11.
                 The agencies carefully considered these and other comments
                regarding which models to apply when estimating potential impacts of
                each of the contemplated regulatory alternatives. For purposes of
                estimating the impacts of CAFE standards, even the coalition of
                environmental advocates observed that the CAFE model reflects EPCA's
                requirements. As discussed below in Section VI.A, EPCA imposes specific
                requirements not only on how CAFE standards are to be structured (e.g.,
                including a minimum standard for domestic passenger cars), but also on
                how CAFE standards are to be evaluated (e.g., requiring that the
                potential to produce additional AFVs be set aside for the model years
                under consideration), and the CAFE model reflects these requirements,
                and the agencies consider the CAFE model to be the best available tool
                for CAFE rulemaking analysis. Regarding the use of Autonomie to
                construct fuel consumption (i.e., efficiency) inputs to the CAFE model,
                the agencies recognize that other vehicle simulation tools are
                available, including EPA's recently-developed ALPHA model. However, as
                also discussed in Section VI.B.3, Autonomie has a much longer history
                of development and refinement, and has been much more widely applied
                and validated. Moreover, Argonne experts have worked carefully for
                several years to develop methods for running large arrays of
                simulations expressly structured and calibrated for use in DOT's CAFE
                model. Therefore, the agencies consider Autonomie to be the best
                available tool for constructing such inputs to the CAFE model. While
                the agencies have also carefully considered potential specific model
                refinements, as well as the merits of potential changes to model inputs
                and assumptions, none of these potential refinements and input have led
                either agency to reconsider using the CAFE model and Autonomie for CAFE
                rulemaking analysis.
                 With respect to estimating the impacts of CO2 standards,
                even though Argonne and the agencies have adapted Autonomie and the
                CAFE model to support the analysis of CO2 standards,
                environmental groups, California, and other States would prefer that
                EPA use the models it developed during 2009-2018 for that purpose.\149\
                Arguments that EPA revert to its ALPHA and OMEGA models fall within
                three general categories: (1) Arguments that EPA's models would have
                selected what commenters consider better (i.e., generally more
                stringent) standards, (2) arguments that EPA's models are technically
                superior, and (3) arguments that the law requires EPA use its own
                models.
                ---------------------------------------------------------------------------
                 \149\ The last-finalized versions of EPA's OMEGA model and ALPHA
                tools were published in 2016 and 2017, respectively.
                ---------------------------------------------------------------------------
                 The first of these arguments--that EPA's models would have selected
                better standards--conflates the analytical tool used to inform
                decision-making with the action of making the decision. As explained
                elsewhere in this document and as made repeatedly clear over the past
                several rulemakings, the CAFE model (or, for that matter, any model)
                neither sets standards nor dictates where and how to set standards; it
                simply informs as to the potential effects of setting different levels
                of standards. In this rulemaking, EPA has made its own decisions
                regarding what CO2 standards would be appropriate under the
                CAA.
                 The third of these arguments--that EPA is legally required to use
                only models developed by its own staff--is also without merit. The CAA
                does not require the agency to create or use a specific model of its
                own creation in setting tailpipe CO2 standards. The fact
                that EPA's decision may be informed by non-EPA-created models does not,
                in any way, constitute a delegation of its statutory power to set
                standards or decision-making authority.\150\ Arguing to the contrary
                would suggest, for example, that EPA's decision would be invalid
                because it relied on EIA's Annual Energy Outlook for fuel prices for
                all of its regulatory actions rather than developing its own model for
                estimating future trends in fuel prices. Yet, all Federal agencies that
                have occasion to use forecasts of future fuel prices regularly (and
                appropriately) defer to EIA's expertise in this area and rely on EIA's
                NEMS-based analysis in the AEO, even when those same agencies are using
                EIA's forecasts to inform their own decision-making. Similarly, this
                argument would mean that the agencies could not rely on work done by
                contractors or other outside consultants, which is contrary to regular
                agency practice across the entirety of the Federal Government.
                ---------------------------------------------------------------------------
                 \150\ ``[A] federal agency may turn to an outside entity for
                advice and policy recommendations, provided the agency makes the
                final decisions itself.'' U.S. Telecom. Ass'n v. FCC, 359 F.3d 554,
                565-66 (D.C. Cir. 2004). To the extent commenters meant to suggest
                outside parties have a reliance interest in EPA using ALPHA and
                OMEGA to set standards, EPA and NHTSA do not agree a reliance
                interest is properly placed on an analytical methodology, which
                consistently evolves from rule to rule. Even if it were, all parties
                that closely examined ALPHA and OMEGA-based analyses in the past
                either also simultaneously closely examined CAFE and Autonomie-based
                analyses in the past, or were fully capable of doing so, and thus,
                should face no additional difficulty now they have only one set of
                models and inputs/outputs to examine.
                ---------------------------------------------------------------------------
                 The specific claim here that use of the CAFE model instead of ALPHA
                and OMEGA is somehow illegitimate is similarly unpersuasive. The CAFE
                and CO2 rules have, since Massachusetts v. EPA, all been
                issued as joint rulemakings, and, thus are the result of a
                collaboration between the two agencies. This was true when the
                rulemakings used separate models for the different programs and
                continues to be true in today's final rule, where the agencies take the
                next step in their collaborative approach by now using simply one model
                to simulate both programs. In 2007, immediately following this Supreme
                Court decision, the agencies worked together toward standards for model
                years 2011-2015, and EPA made use of the CAFE model for its work toward
                possible future CO2 standards. That the agencies would need
                to continue the unnecessary and inefficient process of using two
                separate combinations of models as the joint National Program continues
                to mature, therefore, runs against the idea that the agencies, over
                time, would best combine resources to create an efficient and robust
                regulatory program. For the reasons discussed throughout today's final
                rule, the agencies have jointly determined that Autonomie and the CAFE
                model have significant technical advantages, including important
                additional features, and are therefore the more appropriate models to
                use to support both analyses.
                 Further, the fact that Autonomie and CAFE models were initially
                developed by DOE/Argonne and NHTSA does not mean that EPA has no role
                in either these models or their inputs. That is, the development
                process for CAFE and CO2 standards inherently requires
                technical and policy examinations and deliberations between staff
                experts and decision-makers in both agencies. Such engagements are a
                healthy and important part of any rulemaking activity--and particularly
                so with joint rulemakings. The Supreme Court stated in Massachusetts v.
                EPA that, ``The two obligations [to set CAFE standards under EPCA and
                to set tailpipe CO2 emissions standards under the CAA] may
                overlap, but there is no reason to think the two agencies cannot both
                administer their obligations and yet
                [[Page 24228]]
                avoid inconsistency.'' \151\ When agency experts consider analytical
                issues and agency decision-makers decide on policy, which is informed
                (albeit not dictated) by the outcome of that work, they are working
                together as the Court appears to have intended in 2007, even if
                legislators' intentions have varied in the decades since EPCA and the
                CAA have been in place.\152\ Regulatory overlap necessarily involves
                deliberation, which can lead to a more balanced, reasonable, and
                improved analyses, and better regulatory outcomes. It did here. The
                existence of deliberation is not per se evidence of unreasonableness,
                even if some commenters believe a different or preferred policy outcome
                would or should have resulted.\153\
                ---------------------------------------------------------------------------
                 \151\ Massachusetts v. EPA, 549 U.S. 497, 532 (2007).
                 \152\ For example, when wide-ranging amendments to the CAA were
                being debated, S. 1630 contained provisions that, if enacted, would
                have authorized automotive CO2 emissions standards and
                prescribed specific average levels to be achieved by 1996 and 2000.
                In a letter to Senators, then-Administrator William K. Reilly noted
                that the Bill ``requires for the first time control of emissions of
                carbon dioxide; this is essentially a requirement to improve fuel
                efficiency'' and outlined four reasons the H.W. Bush Administration
                opposed the requirement, including that ``it is inappropriate to add
                this very complex issue to the Clean Air Act which is already full
                of complicated and controversial issues.'' Reilly, W., Letter to
                U.S. Senators (January 26, 1990). The CAA amendments ultimately
                signed into law did not contain these or any other provisions
                regarding regulation of CO2 emissions.
                 \153\ See, e.g., U.S. House of Representatives, Committee on
                Oversight and Government Reform, Staff Report, 112th Congress, ``A
                Dismissal of Safety, Choice, and Cost: The Obama Administration's
                New Auto Regulations,'' August 10, 2012, at 19-21 and 33-34.
                ---------------------------------------------------------------------------
                 Over the 44 years since EPCA established the requirement for CAFE
                standards, NHTSA, EPA and DOE career staff have discussed, collaborated
                on, and debated engineering, economic, and other aspects of CAFE
                regulation, through focused meetings and projects, informal exchanges,
                publications, conferences and workshops, and rulemakings.
                 Part of this expanded exchange has involved full vehicle
                simulation. While tools such as PSAT (the DOE-sponsored simulation tool
                that predated Autonomie) were in use prior to 2007, including for
                discrete engineering studies supporting inputs to CAFE rulemaking
                analyses, these tools' information and computing requirements were such
                that NHTSA had determined (and DOE and EPA had concurred) that it was
                impractical to more fully integrate full vehicle simulation into
                rulemaking analyses. Since that time, computing capabilities have
                advanced dramatically, and the agencies now agree that such integration
                of full vehicle simulation--such as the large-scale exercise of
                Autonomie to produce inputs to the CAFE Model--can make for more robust
                CAFE and CO2 rulemaking analysis. This is not to say,
                though, that experts always agree on all methods and inputs involved
                with full vehicle simulation. Differences in approach and inputs lead
                to differences in results. For example, compared to other publicly
                available tools that can be practicably exercised at the scale relevant
                to fleetwide analysis needed for CAFE and CO2 rulemaking
                analysis, DOE/Argonne's Autonomie model is more advanced, spans a wider
                range of fuel-saving technologies, and represents them in more specific
                detail, leaving fewer ``gaps'' to be filled with other models (risking
                inconsistencies and accompanying errors). These differences discussed
                in greater detail below in Section VI.B.3. Perhaps most importantly,
                the CAFE model considers fuel prices in determining both which
                technologies are applied and the total amount of technology applied, in
                the case where market forces demand fuel economy levels in excess of
                the standards. While OMEGA can apply technology in consideration of
                fuel prices, OMEGA will apply technology to reach the same level of
                fuel economy (or CO2 emissions) if fuel prices are 3, 5, or
                20 dollars, which violates the SAB's requirement that the analysis
                ``account for [. . .] future fuel prices .'' \154\ Furthermore, it
                produces a counterintuitive result. If fuel prices become exorbitantly
                high, we would expect consumers to place an emphasis on additional fuel
                efficiency as the potential for extra fuel savings is tremendous.
                ---------------------------------------------------------------------------
                 \154\ See SAB Report 10 (``Constructing each of the scenarios is
                challenging and involve extensive scientific, engineering, and
                economic uncertainties. Projecting the baseline requires the
                agencies to account for a wide range of variables including: The
                number of new vehicles sold, future fuel prices,. . . .'').
                ---------------------------------------------------------------------------
                 Moreover, DOE has for many years used Autonomie (and its precursor
                model, PSAT) to produce analysis supporting fuel economy-related
                research and development programs involving billions of dollars of
                public investment, and NHTSA's CAFE model with inputs from DOE/
                Argonne's Autonomie model has produced analysis supporting rulemaking
                under the CAA. In 2015, EPA proposed new tailpipe CO2
                standards for MY 2021-2027 heavy-duty pickups and vans, finalizing
                those standards in 2016. Supporting the NPRM and final rule, EPA relied
                on analysis implemented by NHTSA using NHTSA's CAFE model, and NHTSA
                used inputs developed by DOE/Argonne using DOE/Argonne's Autonomie
                model. CBD questioned this history, asserting that, ``EPA conducted a
                separate analysis using a different iteration of the CAFE model rather
                than rely on the version which NHTSA used, again resulting and parallel
                but corroborative modeling results.'' \155\ CBD's comment
                mischaracterizes EPA's actual use of the CAFE Model. As explained in
                the final rule, EPA's ``Method B'' analysis was developed as follows:
                ---------------------------------------------------------------------------
                 \155\ CBD, et al., 2018-0067-12000, Appendix A, at 27.
                 In Method B, the CAFE model from the NPRM was used to project a
                pathway the industry could use to comply with each regulatory
                alternative, along with resultant impacts on per-vehicle costs.
                However, the MOVES model was used to calculate corresponding changes
                in total fuel consumption and annual emissions for pickups and vans
                in Method B. Additional calculations were performed to determine
                corresponding monetized program costs and benefits.\156\
                ---------------------------------------------------------------------------
                 \156\ 81 FR 73478, 73506-07 (October 25, 2016).
                 In other words, a version of NHTSA's CAFE Model was used to perform
                the challenging part of the analysis--that is, the part that involves
                accounting for manufacturers' fleets, accounting for available fuel-
                saving technologies, accounting for standards under consideration, and
                estimating manufacturers' potential responses to new standards--EPA's
                MOVES model was used to perform ``downstream'' calculations of fuel
                consumption and tailpipe emissions, and used spreadsheets to calculate
                even more straightforward calculations of program costs and benefits.
                While some stakeholders perceive these differences as evidencing a
                meaningfully independent approach, in fact, the EPA staff's analysis
                was, at its core, wholly dependent on NHTSA's CAFE Model, and on that
                model's use of Autonomie simulations.
                 Given the above, the only remaining argument for EPA to revert to
                its previously-developed models rather than relying on Autonomie and
                the CAFE model would be that the former are so technically superior to
                the latter that even model refinements and input changes cannot lead
                Autonomie and the CAFE model to produce appropriate and reasonable
                results for CO2 rulemaking analysis. As discussed below,
                having considered a wide range of technical differences, the agencies
                find that the Autonomie and CAFE models currently provide the best
                analytical combination for CAFE and tailpipe CO2 emissions
                rulemaking analysis. As discussed
                [[Page 24229]]
                below in Section VI.B.3, Autonomie not only has a longer and wider
                history of development and application, but also DOE/Argonne's
                interaction with automakers, supplier and academies on continuous bases
                had made individual sub-models and assumptions more robust. Argonne has
                also been using research from DOE's Vehicle Technology Office (VTO) at
                the same time to make continuous improvements in Autonomie.\157\ Also,
                while Autonomie uses engine maps as inputs, and EPA developed engine
                maps that could have been used for today's analysis, EPA declined to do
                so, and those engine maps were only used in a limited capacity for
                reasons discussed below in Section VI.C.1.
                ---------------------------------------------------------------------------
                 \157\ U.S. DOE Benefits & Scenario Analysis publications is
                available at https://www.autonomie.net/publications/fuel_economy_report.html. Last accessed November 14, 2019.
                ---------------------------------------------------------------------------
                 As also discussed below in Section VI.A.4, the CAFE model accounts
                for some important CO2 provisions that EPA's OMEGA model
                cannot account for. For example, the CAFE model estimates the potential
                that any given manufacturer might apply CO2 compliance
                credits it has carried forward from some prior model year. While one
                commenter, Mr. Rykowski, takes issue with how the CAFE model handles
                credit banking, he does not acknowledge that EPA's OMEGA model, lacking
                a year-by-year representation of compliance, is altogether incapable of
                accounting for the earning and use of banked compliance credits. Also,
                although Mr. Rykowski's comments regarding A/C leakage and refrigerants
                are partially correct insofar as the CAFE model does not account for
                leakage-reducing technologies explicitly, the comment is as applicable
                to OMEGA as it is to the CAFE model and, in any event, data regarding
                which vehicles have which leakage-reducing technologies was not
                available for the MY 2016 fleet. Nevertheless, as discussed in Section
                VI.A.4, NHTSA has refined the CAFE model's accounting for the cost of
                leakage reduction technologies.
                 The agencies have also considered Mr. Rykowski's comments
                suggesting that using OMEGA would be preferable because, rather than
                selecting from hundreds of thousands of potential combinations of
                technologies, OMEGA includes only the ``50 or so'' combinations that
                EPA has already determined to be cost-effective. The ``better way'' of
                making this determination is also effectively a model, but the
                separation of this model from OMEGA is, as evidenced by manufacturers'
                comments, obfuscatory, especially in terms of revealing how specific
                vehicle model/configurations initial engineering properties are aligned
                with specific initial technology combinations. By using a full set of
                technology combinations, the CAFE model makes very clear how each
                vehicle model/configuration is assigned to a specific initial
                combination and, hence, how subsequently fuel consumption and cost
                changes are accounted for. Moreover, EPA's separation of ``thinning''
                process from OMEGA's main compliance simulation makes sensitivity
                analysis difficult to implement, much less follow. The agencies find,
                therefore, that the CAFE model's approach of retaining a full set of
                vehicle simulation results throughout the compliance simulation to be
                more realistic (e.g., more capable of reflecting manufacturer- and
                vehicle-specific factors), more responsive to changes in model inputs
                (e.g., changes to fuel prices, which could impact the relative
                attractiveness of different technologies), more transparent, and more
                amenable to independent corroboration the agencies' analysis.
                 Regarding comments by Messrs. Duleep, Rogers, and Rykowski
                suggesting that the CAFE model, by tying most technology application to
                planned vehicle redesigns and freshening, is too restrictive, the
                agencies disagree. As illustrated by manufacturers' comments cited
                above, as reinforced by both extensive product planning information
                provided to the agencies, and as further reinforced by extensive
                publicly available information, manufacturers tend to not make major
                changes to a specific vehicle model/configuration in one model year,
                and then make further major changes to the same vehicle model/
                configuration the next model year. There is ample evidence that
                manufacturers strive to avoid such discontinuity, complexity, and
                waste, and in the agencies' view, while it is impossible to represent
                every manufacturer's decision-making process precisely and with
                certainty, the CAFE model's approach of using estimated product design
                schedules provides a realistic basis for estimating what manufacturers
                could practicably do. Also, the relevant inputs are simply inputs to
                the CAFE model, and if it is actually more realistic to assume that a
                manufacturer can change major technology on all of its products every
                year, the CAFE model can easily be operated with every model year
                designated as a redesign year for every product, but as discussed
                throughout this document, the agencies consider this to be extremely
                unrealistic. While this means the CAFE model can be run without a year-
                by-year representation that carries forward technologies between model
                years, doing so would be patently unrealistic (as reflected in some
                stakeholders' comments in 2002 on the first version of the CAFE model).
                Conversely, the OMEGA model cannot be operated in a way that accounts
                for what the agencies consider to be very real product planning
                considerations.
                 However, having also considered Mr. Rykowski's comments about the
                CAFE model's ``effective cost'' metric, and having conducted side-by-
                side testing documented in the accompanying FRIA, the agencies are
                satisfied that an alternative ``cost per credit'' metric is also a
                reasonable metric to use for estimating how manufacturers might
                selected among available options to add specific fuel-saving
                technologies to specific vehicles.\158\ Therefore, NHTSA has revised
                the CAFE model accordingly, as discussed below in Section VI.A.4.
                ---------------------------------------------------------------------------
                 \158\ As discussed in the FRIA, results vary with model inputs,
                among manufacturers, and across model years, but compared to the
                NPRM's ``effective cost'' metric, the ``cost per credit'' metric
                appears to more frequently produce less expensive solutions than
                more expensive solutions, at least when simulating compliance with
                CO2 standards. Differences are more mixed when simulating
                compliance with CAFE standards, and even when simulating compliance
                with CO2 standards, results simulating ``perfect'' trading of
                CO2 compliance credits are less intuitive when the ``cost
                per credit metric.'' Nevertheless, and while less expensive
                solutions are not necessarily ``optimal'' solutions (e.g., if
                gasoline costs $7 per gallon and electricity is free, expensive
                electrification could be optimal), the agencies consider it
                reasonable to apply the ``cost per credit'' metric for the analysis
                supporting today's rulemaking.
                ---------------------------------------------------------------------------
                 Section VI.C.1 also addresses Mr. Rogers's comments on engine maps
                used as estimates to full vehicle simulation. In any event, because
                engine maps are inputs to full vehicle modeling and simulation, the
                relative merits of specific maps provide no basis to prefer one vehicle
                simulation modeling system over another. Similarly, Section VI.B.3 also
                addresses Mr. Duleep's comments preferring EPA's prior approach, using
                ALPHA, of effectively assuming that a manufacturer would incur no
                additional cost by reoptimizing every powertrain to extract the full
                fuel economy potential of even the smallest incremental changes to
                aerodynamic drag and tire rolling resistance. Mr. Duleep implies that
                Autonomie is flawed because the NPRM analysis did not apply Autonomie
                in a way that makes such assumptions. The agencies discuss powertrain
                sizing and calibration in Section VI.B.3, and note here that such
                assumptions are not inherent to
                [[Page 24230]]
                Autonomie; like engine maps, these are inputs to full vehicle
                simulation. Therefore, neither of these comments by Mr. Rogers and Mr.
                Duleep lead the agencies to find reason not to use Autonomie.
                 None of this is to say that Autonomie and the CAFE model as
                developed and applied for the NPRM left no room for improvement. In the
                NPRM and RIA, the agencies discussed plans to continue work in a range
                of specific technical areas, and invited comment on all aspects of the
                analysis. As discussed below in Chapter VI, the agencies received
                extensive comment on the published model, inputs, and analysis, both in
                response to the NPRM and, for newly-introduced modeling capabilities
                (estimation of sales, scrappage, and employment effects), in response
                to additional peer review conducted in 2019. The agencies have
                carefully considered these comments, refined various specific technical
                aspects of the CAFE model (like the ``effective cost'' metric mentioned
                above), and have also updated inputs to both Autonomie and the CAFE
                model. Especially given these refinements and updates, as discussed
                throughout this rule, EPA maintains that for CO2 rulemaking
                analysis, Autonomie and the CAFE model have advantages that warrant
                relying on them rather than on EPA's ALPHA and OMEGA models. Some
                examples of such advantages include: A longer history of ongong
                development and application for rulemaking, including by EPA;
                documentation and model operation stakeholders have found to be
                comparatively clear and enabling of independent replication of agency
                analyses; a mechanism to explicitly reflect the fact that
                manufacturers' product decisions are likely to be informed by fuel
                prices; better integration of various model functions, enabling
                efficient sensitivity analysis; and an annual time step that makes it
                possible to conduct report results on both a calendar year and model
                year basis, to estimate accruing impacts on vehicle sales and
                scrappage, and to account for the fact that not every vehicle can be
                designed in every model year; and other advantages discussed throughout
                today's notice. Therefore, recognizing that models inform but do not
                make regulatory decisions, EPA has elected to rely solely on the
                Autonomie and CAFE models to produce today's analysis of regulatory
                alternatives for CO2 standards.
                 The following sections provide a brief technical overview of the
                CAFE model, including changes NHTSA made to the model since 2012, and
                differences between the current analysis, the analysis for the 2016
                Draft TAR and for the 2017 Proposed Determination/2018 Final
                Determination, and the 2018 NPRM, before discussing inputs to the model
                and then diving more deeply into how the model works. For more
                information on the latter topic, see the CAFE model documentation,
                available in the docket for this rulemaking and on NHTSA's website.
                1. What assumptions have changed since the 2012 final rule?
                 Any analysis of regulatory actions that will be implemented several
                years in the future, and whose benefits and costs accrue over decades,
                requires a large number of assumptions. Over such time horizons, many,
                if not most, of the relevant assumptions in such an analysis are
                inevitably uncertain.\159\ The 2012 CAFE/CO2 rule considered
                regulatory alternatives for model years through MY 2025 (17 model years
                after the 2008 market information that formed the basis of the
                analysis) that accrued costs and benefits into the 2060s. Not only was
                the new vehicle market in 2025 unlikely to resemble the market in 2008,
                but so, too, were fuel prices. It is natural, then, that each
                successive CAFE/CO2 analysis should update assumptions to
                reflect better the current state of the world and the best current
                estimates of future conditions.\160\ However, beyond the issue of
                unreliable projections about the future, a number of agency assertions
                have proven similarly problematic. In fact, Securing America's Future
                Energy (SAFE) stated in their comments on the NPRM:
                ---------------------------------------------------------------------------
                 \159\ As often stated, ``It's difficult to make predictions,
                especially about the future.'' See, e.g., https://quoteinvestigator.com/2013/10/20/no-predict/.
                 \160\ See, e.g., 77 FR 62785 (Oct. 15, 2012) (``If EPA initiates
                a rulemaking [to revise standards for MYs 2022-2025], it will be a
                joint rulemaking with NHTSA. . . . NHTSA's development of its
                proposal in that later rulemaking will include the making of
                economic and technology analyses and estimates that are appropriate
                for those model years and based on then-current information.'').
                 Although the agencies argue ``circumstances have changed'' and
                ``analytical methods and inputs have been updated,'' a thorough
                analysis should provide a side-by-side comparison of the changing
                circumstances, methods, and inputs used to arrive at this
                determination . . . They represent a rapid, dramatic departure from
                the agencies' previous analyses, without time for careful review and
                consideration.\161\
                ---------------------------------------------------------------------------
                 \161\ Securing America's Energy Future, NHTSA-2018-0067-12172,
                at 39.
                 We describe in detail (below) the changes to critical assumptions,
                perspectives, and modeling techniques that have created substantive
                differences between the current analysis and the analysis conducted in
                2012 to support the final rule. To the greatest extent possible, we
                have calculated the impacts of these changes on the 2012 analysis.
                a) The Value of Fuel Savings
                 The value of fuel savings associated with the preferred alternative
                in the 2012 final rule is primarily a consequence of two assumptions:
                \162\ The fuel price forecast and the assumed growth in fuel economy in
                the baseline alternative against which savings are measured. Therefore,
                as the value of fuel savings accounted for nearly 80 percent of the
                total benefits of the 2012 rule, each of these assumptions is
                consequential. With a lower fuel price projection and an expectation
                that new vehicle buyers respond to fuel prices, the 2012 rule would
                have shown much smaller fuel savings attributable to the more stringent
                standards. Projected fuel prices are considerably lower today than in
                2012, the agencies now understand new vehicle buyers to be at least
                somewhat responsive to fuel prices, and the agencies have therefore
                updated corresponding model inputs to produce an analysis the agencies
                consider to be more realistic.
                ---------------------------------------------------------------------------
                 \162\ The value of fuel savings is also affected by the rebound
                effect assumption, assumed lifetime VMT accumulation, and the
                simulated penetration of alternative fuel technologies. However,
                each of these ancillary factors is small compared to the impact of
                the two factors discussed in this subsection.
                ---------------------------------------------------------------------------
                 The first of these assumptions, fuel prices, was simply an artifact
                of the timing of the rule. Following recent periodic spikes in the
                national average gasoline price and continued volatility after the
                great recession, the fuel price forecast then produced by EIA (as part
                of AEO 2011) showed a steady march toward historically high, sustained
                gasoline prices in the United States. However, the actual series of
                fuel prices has skewed much lower. As it has turned out, the observed
                fuel price in the years between the 2012 final rule and this rule has
                frequently been lower than the ``Low Oil Price'' sensitivity case in
                the 2011 AEO, even when adjusted for inflation. The following graph
                compares fuel prices underlying the 2012 final rule to fuel prices
                applied in the analysis reported in today's notice, expressing both
                projections in 2010 dollars. The differences are clear and significant:
                [[Page 24231]]
                [GRAPHIC] [TIFF OMITTED] TR30AP20.042
                 The discrepancy in fuel prices is important to the discussion of
                differences between the current rule and the 2012 final rule, because
                that discrepancy leads in turn to differences in analytical outputs and
                thus to differences in what the agencies consider in assessing what
                levels of standards are reasonable, appropriate, and/or maximum
                feasible. As an example, the agencies discuss in Sections VI.D.3
                Simulating Environmental Impacts of Regulatory Alternatives and
                VIII.A.3 EPA's Conclusion that the Final CO2 Standards are
                Appropriate and Reasonable that fuel price projections from the 2012
                rule were one assumption, among others, that could have led to
                overestimates of the health benefits that resulted from reducing
                criteria pollutant emissions. Yet the agencies caution readers not to
                interpret this discrepancy as a reflection of negligence on the part of
                the agencies, or on the part of EIA. Long-term predictions are
                challenging and the fuel price projections in the 2012 rule were within
                the range of conventional wisdom at the time. However, it does suggest
                that fuel economy and tailpipe CO2 regulations set almost
                two decades into the future are vulnerable to surprises, in some ways,
                and reinforces the value of being able to adjust course when critical
                assumptions are proven inaccurate. This value was codified in
                regulation when EPA bound itself to the mid-term evaluation process as
                part of the 2012 final rule.\163\
                ---------------------------------------------------------------------------
                 \163\ See 40 CFR 86-1818-12(h).
                ---------------------------------------------------------------------------
                 To illustrate this point clearly, substituting the current (and
                observed) fuel price forecast for the forecast used in the 2012 final
                rule creates a significant difference in the value of fuel savings.
                Even under identical discounting methods (see Section 2, below), and
                otherwise identical inputs in the 2012 version of the CAFE Model, the
                current (and historical) fuel price forecast reduces the value of fuel
                savings by $150 billion--from $525 billion to $375 billion (in 2009
                dollars).
                 The second assumption employed in the 2012 (as well as the 2010)
                final rule, that new vehicle fuel economy never improves unless
                manufacturers are required to increase fuel economy in the new vehicle
                market by increasingly stringent regulations, is more problematic.
                Despite the extensive set of recent academic studies showing, as
                discussed in Section VI.D.1.a)(2), that consumers value at least some
                portion, and in some studies nearly all, of the potential fuel savings
                from higher levels of fuel economy at the time they purchase vehicles,
                the agencies assumed in past rulemakings that buyers of new vehicles
                would never purchase, and manufacturers would never supply, vehicles
                with higher fuel economy than those in the baseline (MY 2016 in the
                2012 analysis), regardless of technology cost or prevailing fuel prices
                in future model years. In calendar year 2025, the 2012 final rule
                assumed gasoline would cost nearly $4.50/gallon in today's dollars, and
                continue to rise in subsequent years. Even recognizing that higher
                levels of fuel economy would be achieved under the augural/existing
                standards than without them, the assertion that fuel economy and
                CO2 emissions would not improve beyond 2016 levels in the
                presence of nearly $5/gallon gasoline is not supportable. This is
                highlighted by the observed increased consumer demand for higher-fuel-
                economy vehicles during the gas price spike of 2008, when average U.S.
                prices briefly broke $4/gallon. In the 2012 final rule, this
                assumption--that fuel economy and emissions would never improve absent
                regulation--created a persistent gap in fuel economy between
                [[Page 24232]]
                the baseline and augural standards that grew to 13 mpg (at the industry
                average, across all vehicles) by MY 2025. In the 2016 Draft TAR,
                NHTSA's analysis included the assumption that manufacturers would
                deploy, and consumers would demand, any technology that recovered its
                own cost in the first year of ownership through avoided fuel costs.
                However, in both the Draft TAR and the Proposed and Final Determination
                documents, EPA's analysis assumed that the fuel economy levels achieved
                to reach compliance with MY 2021 standards would persist indefinitely,
                regardless of fuel prices or technology costs.
                 By substituting the conservative assumption that consumers are
                willing to purchase fuel economy improvements that pay for themselves
                with avoided fuel expenditures over the first 2.5 years \164\
                (identical to the assumption in this final rule's central analysis) the
                gap in industry average fuel economy between the baseline and augural
                scenarios narrows from 13 mpg in 2025 to 6 mpg in 2025. As a corollary,
                acknowledging that fuel economy would continue to improve in the
                baseline under the fuel price forecast used in the final rule erodes
                the value of fuel savings attributable to the preferred alternative.
                While each gallon is still worth as much as was assumed in 2012, fewer
                gallons are consumed in the baseline due to higher fuel economy levels
                in new vehicles. In particular, the number of gallons saved by the
                preferred alternative selected in 2012 drops from about 180 billion to
                50 billion once we acknowledge the existence of even a moderate market
                for fuel economy.\165\ The value of fuel savings is similarly eroded,
                as higher fuel prices lead to correspondingly higher demand for fuel
                economy even in the baseline--reducing the value of fuel savings from
                $525 billion to $190 billion.
                ---------------------------------------------------------------------------
                 \164\ Greene, D.L. and Welch, J.G., ``Impacts of fuel economy
                improvements on the distribution of income in the U.S.,'' Energy
                Policy, Volume 122, November 2018, pp. 528-41 (``Four nationwide
                random sample surveys conducted between May 2004 and January 2013
                produced payback period estimates of approximately three years,
                consistent with the manufacturers' perceptions.'') (The 2018 article
                succeeds Greene and Welch's 2017 publication titled ``The Impact of
                Increased Fuel Economy for Light-Duty Vehicles on the Distribution
                of Income in the U.S.: A Retrospective and Prospective Analysis,''
                Howard H. Baker Jr. Center for Public Policy, March 2017, which
                Consumers Union, CFA, and ACEEE comments include as Attachment 4,
                Docket NHTSA-2018-0067-11731).
                 \165\ Readers should note that this is not an estimate of the
                total amount of fuel that will be consumed or not consumed by the
                fleet as a whole, but simply the amount of fuel that will be
                consumed or not consumed as a direct result of the regulation. As
                illustrated in Section VII, light-duty vehicles in the U.S. would
                continue to consume considerable quantities of fuel and emit
                considerable quantities of CO2 even under the baseline/
                augural standards, and agencies' analysis shows that the standards
                finalized today will likely increase fuel consumption and
                CO2 emissions by a small amount.
                ---------------------------------------------------------------------------
                 The magnitude of the fuel economy improvement in the baseline is a
                consequence of both the fuel prices assumed in the 2012 rule (already
                discussed as being higher than both subsequent observed prices and
                current projections) and the assumed technology costs. In 2012, a
                number of technologies were assumed to have negative incremental
                costs--meaning that applying those technologies to existing vehicles
                would both improve their fuel economy and reduce the cost to produce
                them. Asserting that the baseline would experience no improvement in
                fuel economy without regulation is equivalent to asserting that
                manufacturers, despite their status as profit maximizing entities,
                would not apply these cost-saving technologies unless forced to do so
                by regulation. While this issue is discussed in greater detail in
                Section VI.B the combination of inexpensive (or free) technology and
                high fuel prices created a logically inconsistent perspective in the
                2012 rule--where consumers never demanded additional fuel economy,
                despite high fuel costs, and manufacturers never supplied additional
                fuel economy, despite the availability of inexpensive (or cost saving)
                technology to do so.
                 Many commenters on earlier rules supported the assumption that fuel
                economy would not improve at all in the absence of standards. In fact,
                some commenters still support this position. For example, EDF commented
                to the NPRM that, ``NHTSA set the Volpe model to project that, with
                CAFE standards remaining flat at MY 2020 levels through MY 2026,
                automakers would over-comply with the MY 2020 standards by 9 grams/mile
                of CO2 for cars and 15 g/mi of CO2 for light
                trucks during the 2029-2032 timeframe, plus 1%/year improvements beyond
                MY 2032. This assumption unreasonably obscures the impacts of the
                rollback and is not reflective of historical compliance performance.''
                \166\
                ---------------------------------------------------------------------------
                 \166\ EDF, NHTSA-2018-0067-11996, Comments to DEIS, at 4.
                ---------------------------------------------------------------------------
                 EDF is mistaken in two different ways: (1) By acknowledging the
                existence of a well-documented market for fuel economy, rather than
                erroneously inflating the benefits associated with increasing
                standards, this assumption serves to isolate the benefits actually
                attributable to each regulatory alternative, and (2) it is, indeed,
                reflective of historical compliance performance. While the agencies
                rely on the academic literature (and comments from companies that build
                and sell automobiles) to defend the assertion that a market for fuel
                economy exists, the industry's historical CAFE compliance performance
                is a matter of public record.\167\ As shown in Figure IV-3, Figure IV-
                4, and Figure IV-5 for more than a decade, the industry average CAFE
                has exceeded the standard for each regulatory class--by several mpg
                during periods of high fuel prices.
                ---------------------------------------------------------------------------
                 \167\ Data from CAFE Public Information Center (PIC), https://one.nhtsa.gov/cafe_pic/CAFE_PIC_Home.htm, last accessed 10/08/2019.
                ---------------------------------------------------------------------------
                BILLING CODE 4910-59-P
                [[Page 24233]]
                [GRAPHIC] [TIFF OMITTED] TR30AP20.043
                [[Page 24234]]
                [GRAPHIC] [TIFF OMITTED] TR30AP20.044
                BILLING CODE 4910-59-C
                 While this rulemaking has shown the impact of deviations from the
                2012 rule assumptions individually, these two assumptions affect the
                value of fuel savings jointly. Replacing the fuel price forecast with
                the observed historical and current projected prices, and including any
                technology that pays for itself in the first 2.5 years of ownership
                through avoided fuel expenditures, reduces the value of fuel savings
                from $525 billion in the 2012 rule to $140 billion, all else equal.
                Interestingly, this reduction in the value of fuel savings is smaller
                than the result when assuming only that the desired payback period is
                nonzero. While it may seem counterintuitive, it is entirely consistent.
                 The number of gallons saved under the preferred alternative is
                actually higher when modifying both assumptions, compared to only
                modifying the payback period. Updating both assumptions leads to about
                100 billion gallons saved by the preferred alternative in 2012,
                compared to only 50 billion from changing only the payback period, and
                180 billion in the 2012 analysis. This occurs because the fuel economy
                in the baseline is lower when updating both the fuel price and the
                payback period--the gap between the augural standards and the baseline
                grows to 9 mpg, rather than only 6 mpg when updating only the payback
                period. Despite the existence of inexpensive
                [[Page 24235]]
                technology in both cases, with lower fuel prices there are fewer
                opportunities to apply technology that will pay back quickly. As a
                consequence, the number of gallons saved by the preferred alternative
                in 2012 increases--but each gallon saved is worth less because the
                price of fuel is lower.
                b) Technology Cost
                 While the methods used to identify cost-effective technologies to
                improve fuel economy in new vehicles have continuously evolved since
                2012 (as discussed further in Section IV.B.1), as have the estimated
                cost of individual technologies, the inclusion of a market response in
                all scenarios (including the baseline) has changed the total technology
                cost associated with a given alternative. As also discussed in Section
                VI.B, acknowledging the existence of a market for fuel economy leads to
                continued application of the most cost-effective technologies in the
                baseline--and in other less stringent alternatives--up to the point at
                which there are no remaining technologies whose cost is fully offset by
                the value of fuel saved in the first 30 months of ownership. The
                application of this market-driven technology has implications for fuel
                economy levels under lower stringencies (as discussed earlier), but
                also for the incremental technology cost associated with more stringent
                alternatives. As lower stringency alternatives (including the 2012
                baseline) accrue more technology, the incremental cost of more
                stringent alternatives decreases.
                 By including a modest market for fuel economy, and preserving all
                other assumptions from the 2012 final rule, the incremental cost of
                technology attributable to the preferred alternative decreases from
                about $140 billion to about $72 billion. This significant reduction in
                technology cost is somewhat diminished by the associated reduction in
                the value of fuel savings (a decrease of $385 billion) when
                acknowledging the existence of a market for fuel economy. Another
                consequence of these changes is that the incremental cost of fuel
                economy technology is responsive to fuel price, as it should be. Under
                higher prices (as were assumed in 2012), consumers demand higher fuel
                economy in the new vehicle market. Under lower prices (as have occurred
                since the 2012 rule) consumers demand less fuel economy than would have
                been consistent with the fuel price assumptions in 2012.\168\ Including
                a market response in the analysis ensures that, in each case, the cost
                of fuel economy technology within an alternative is consistent with
                those assumptions. Using the same fuel price forecast that supports
                this rule, and the same estimate of market demand for fuel economy, the
                incremental cost of technology in the preferred alternative would rise
                back up to about $110 billion.
                ---------------------------------------------------------------------------
                 \168\ This is why dozens of studies examining the ability of
                fuel taxes (and carbon taxes, which produce the same result for
                transportation fuels) to reduce CO2 emissions have found
                cost-effective opportunities available for those pricing mechanisms.
                ---------------------------------------------------------------------------
                c) The Social Cost of Carbon (SCC) Emissions
                 As discussed extensively in the NPRM, the agencies' perspective
                regarding the social cost of carbon has narrowed in focus. While the
                2012 final rule considered the net present value of global damages
                resulting from carbon emitted by vehicles sold in the U.S. between MY
                2009 and MY 2025, the NPRM (and this final rule) consider only those
                damages that occur to the United States and U.S. territories. As a
                result of this change in perspective, the value of estimated damages
                per-ton of carbon is correspondingly smaller. Had the 2012 final rule
                utilized the same perspective on the social cost of carbon, the
                benefits associated with the preferred alternative would have been
                about $11 billion, rather than $53 billion. However, the savings
                associated with carbon damages are a consequence of both the assumed
                cost per-ton of damages and the number of gallons of fuel saved. As
                discussed above, the gallons saved in the 2012 final rule were likely
                inflated as a result of both fuel price forecasts and the assumption
                that no market exists for fuel economy improvements. Correcting the
                estimate of gallons saved from the preferred alternative in the 2012
                rule and considering only the domestic social cost of carbon further
                reduces the savings in carbon damages to $6 billion.
                d) Safety Neutrality
                 In the 2012 final rule, the agencies showed a ``safety neutral''
                compliance solution; that is, a compliance solution that produced no
                net increase in on-road fatalities for MYs 2017-2025 vehicles as a
                result of technology changes associated with the preferred alternative.
                In practice, safety neutrality was achieved by expressly limiting the
                availability of mass reduction technology to only those vehicles whose
                usage causes fewer fatalities with decreased mass. This result was
                discussed as one possible solution, where manufacturers chose
                technology solutions that limited the amount of mass reduction applied,
                and concentrated the application on vehicles that improve the safety of
                other vehicles on the roads (primarily by reducing the mass
                differential in collisions). However, it implicitly assumed that each
                and every manufacturer would leave cost-effective technologies unused
                on entire market segments of vehicles in order to preserve a safety
                neutral outcome at the fleet level for a given model year (or set of
                model years) whose useful lives stretched out as far as the 2060s.
                Removing these restrictions tells a different story.
                 When mass reduction technology, determined in the model to be a
                cost-effective solution (particularly in later model years, when more
                advanced levels of mass reduction were expected to be possible), is
                unrestricted in its application, the 2012 version of the CAFE Model
                chooses to apply it to vehicles in all segments. This has a small
                effect on technology costs, increasing compliance costs in the earliest
                years of the program by a couple billion dollars, and reducing
                compliance costs for MYs 2022--2025 by a couple billion dollars.
                However, the impact on safety outcomes is more pronounced.
                 Also starting with the model and inputs used for the 2012 final
                rule (and, as an example, focusing on that rule's 2008-based market
                forecast), removing the restrictions on the application of mass
                reduction technology results in an additional 3,400 fatalities over the
                full lives of MYs 2009-2025 vehicles in the baseline,\169\ and another
                6,900 fatalities over those same vehicle lives under the preferred
                alternative. The result, a net increase of 3,500 fatalities under the
                preferred alternative relative to the baseline, also produces a net
                social cost of $18 billion. The agencies' current treatment of both
                mass reduction technology, which can greatly improve the effectiveness
                of certain technology packages by reducing road load, and estimated
                fatalities and now account for both general exposure (omitted in the
                2012 final rule modeling) and fatality risk by age of the vehicle,
                further changes the story around mass reduction technology application
                for compliance and its relationship to on-road safety.
                ---------------------------------------------------------------------------
                 \169\ Relative to the continuation of vehicle mass from the 2008
                model year carried forward into the future.
                ---------------------------------------------------------------------------
                2. What methods have changed since the 2012 final rule?
                 Simulating how manufacturers might respond to CAFE/CO2
                standards
                [[Page 24236]]
                requires information about existing products being offered for sale, as
                well as information about the costs and effectiveness of technologies
                that could be applied to those vehicles to bring the fleets in which
                they reside into compliance with a given set of standards. Following
                extensive additional work and consideration since the 2012 analysis,
                both agencies now use the CAFE Model to simulate these compliance
                decisions. This has several practical implications which are discussed
                in greater detail in Section VI.A. Briefly, this change represents a
                shift toward including a number of real-world production constraints--
                such as component sharing across a manufacturer's portfolio--and
                product cadence, where only a subset of vehicles in a given model year
                are redesigned (and thus eligible to receive fuel economy technology).
                Furthermore, the year-by-year accounting ensures a continuous evolution
                of a manufacturer's product portfolio that begins with the market data
                of an initial model year (model year 2017, in this analysis) and
                continues through the last year for which compliance is simulated.
                Finally, the modeling approach has migrated from one that relied on the
                simple product of single values to estimate technology effectiveness to
                a model that relies on full vehicle simulation to determine the
                effectiveness of any combination of fuel economy technologies. The
                combination of these changes has greatly improved the realism of
                simulated vehicle fuel economy for combinations of technologies across
                vehicle systems and classes.
                 In addition to these changes to the portions of the analysis that
                represent the supply of fuel economy (by manufacturer, fleet, and model
                year) in the new vehicle market, this analysis contains changes to the
                representation of consumer demand for fuel economy. One such measure
                was discussed above--the notion that consumers will demand some amount
                of fuel economy improvement over time, consistent with technology costs
                and fuel prices. However, another deviation from the 2012 final rule
                analysis reflects overall demand for new vehicles. Across ten
                alternatives, ranging from the baseline (freezing future standards at
                2016 levels) to scenarios that increased stringency by seven percent
                per year, from 2017 through 2025, the 2012 analysis showed no response
                in new vehicle sales, down to the individual model level. This implied
                that, regardless of changes to vehicle cost or attributes driven by
                stringency increases, no fewer (or possibly more) units of any single
                model would be sold in any year, in any alternative. Essentially, that
                analysis asserted that the new vehicle market does not respond, in any
                way, to average new vehicle prices across the alternatives--regardless
                of whether the incremental cost is $1,600/vehicle (as it was estimated
                to be under the preferred alternative) or nearly $4,000/vehicle (as it
                was in under the 7 percent alternative). Both the NPRM and this final
                rule, while not employing pricing models or full consumer choice models
                to address differentiated demand within brands or manufacturer
                portfolios, have incorporated a modeled sales response that seeks to
                quantify what was not quantified in previous rulemakings.
                 An important accounting method has also changed since the 2012
                final rule was published. At the time of that rule, the agencies used
                an approach to discounting that combined attributes of a private
                perspective and a social perspective in their respective benefit cost
                analyses. This approach was logically inconsistent, and further
                reinforced some of the exaggerated estimates of fuel savings, social
                benefits (from reduced externalities), and technology costs described
                above. The old method discounted the value of all incremental
                quantities, whether categorized as benefits or costs, to the model year
                of the vehicle to which they accrued. This approach is largely
                acceptable for use in a private benefit cost analysis, where the costs
                and benefits accrue to the buyer of a new vehicle (in the case of this
                policy) who weighs their discounted present values at the time of
                purchase. However, the private perspective would not include any costs
                or benefits that are external to the buyer (e.g., congestion or the
                social cost of carbon emissions). For an analysis that compares
                benefits and costs from the social perspective, attempting to estimate
                the relative value of a policy to all of society rather than just
                buyers of new vehicles, this approach is more problematic.
                 The discounting approach in the 2012 final rule was particularly
                distortionary for a few reasons. The fact that benefits and costs
                occurred over long time periods in the 2012 rule, and the standards
                isolated the most aggressive stringency increases in the latter years
                of the program, served to allow benefits that occurred in 2025 (for
                example) to enter the accounting without being discounted, provided
                that they accrued to the affected vehicles during their first year of
                ownership. In a setting where numerous inputs (e.g., fuel price and
                social cost of carbon) increase over time, benefits were able to grow
                faster than the discount rate in some cases--essentially making them
                infinite. The interpretation of discounting for externalities was
                equally problematic. For example, the discounting approach in the 2012
                final rule would have counted a ton of CO2 not emitted in CY
                2025 in multiple ways, despite the fact that the social cost of carbon
                emissions was inherently tied to the calendar year in which the
                emissions occurred. Were the ton avoided by a MY 2020 vehicle, which
                would have been five years old in CY 2025, the value of that ton would
                have been the social cost of carbon times 0.86, but would have been
                undiscounted if that same ton had been saved by a MY 2025 vehicle in
                its initial year of usage.
                 This approach was initially updated in the 2016 Draft TAR to be
                consistent with common economic practice for benefit-cost analysis, and
                this analysis continues that approach. In the social perspective, all
                benefits and costs are discounted back to the decision year based on
                the calendar year in which they occur. Had the agencies utilized such
                an approach in the 2012 final rule, net benefits would have been
                reduced by about 20 percent, from $465 billion to $374 billion--not
                accounting for any of the other adjustments discussed above.
                3. How have conditions changed since the 2012 final rule was published?
                 The 2012 final rule relied on market and compliance information
                from model year 2008 to establish standards for model years 2017-2025.
                However, in the intervening years, both the market and the industry's
                compliance positions have evolved. The industry has undergone a
                significant degree of change since the MY 2008 fleet on which the
                2012FR was based. Entire brands (Pontiac, Oldsmobile, Saturn, Hummer,
                Mercury, etc.) and companies (Saab, Suzuki, Lotus) have exited the U.S.
                market, while others (most notably Tesla) have emerged. Several dozen
                nameplates have been retired and dozens of other created in that time.
                Overall, the industry has offered a diverse set of vehicle models that
                have generally higher fuel economy than the prior generation, and an
                ever-increasing set of alternative fuel powertrains.
                 As Table IV-1 shows, alternative powertrains have steadily
                increased under CAFE/CO2 regulations. Under the standards
                between 2011 and 2018, the number of electric vehicle offerings in the
                market has increased from 1 model to 57 models (inclusive of all plug-
                in vehicles that are rated for use on the highway), and hybrids (like
                the Toyota Prius) have increased from 20 models to
                [[Page 24237]]
                43 models based on data from DOE's Alternative Fuels Data Center. Fuel
                efficient diesel vehicles have similarly been on the rise in that
                period, more than doubling the number of offerings. Flexible fuel
                vehicles (FFVs), capable of operating on both gasoline and E85 remain
                readily available in the market, but have been excluded from the table
                due to both their lower fuel economy and demonstrated consumer
                reluctance to operate FFVs on E85. They have historically been used to
                improve a manufacturer's compliance position, rather than other
                alternative fuel systems that reduce fuel consumption and save buyers
                money.
                [GRAPHIC] [TIFF OMITTED] TR30AP20.045
                 Not only have alternative powertrain options proliferated since the
                2012 FR, the average fuel economy of new vehicles within each body
                style has increased. However, the more dramatic effect may lie in the
                range of fuel economies available within each body style. Figure IV-6
                shows the distribution of new vehicle fuel economy (in miles per gallon
                equivalent) by body style for MYs 2008, 2016, and 2020 (simulated).
                Each box represents the 25th and 75th percentiles, where 25 and 75
                percent of new models offered are less fuel efficient than that level.
                Not only has the median fuel economy improved (the median shows the
                point at which 50 percent of new models are less efficient) under the
                CAFE/CO2 programs, but the range of available fuel economies
                (determined by the length of the boxes and their whiskers) has
                increased as well. For example, the 25th percentile of pickup truck
                fuel economy in 2020 is expected to be significantly more efficient
                than 75 percent of the pickups offered in 2008. In MY 2008, there were
                only a few SUVs offered with rated fuel economies above 34MPG. By MY
                2020 almost half of the SUVs offered will have higher fuel economy
                ratings--with almost 20 percent of offerings exceeding 40MPG.
                 The improvement in passenger car styles has been no less dramatic.
                As with the other styles, the range of available fuel economies has
                increased under the CAFE/CO2 programs and the distribution
                of available fuel economies skewed higher--with 40 percent of MY 2020
                models exceeding 40MPG. The attribute-based standards are designed to
                encourage manufacturers to improve vehicle fuel economy across their
                portfolios, and they have clearly done so. Not only have the higher
                ends of the distributions increased, the lower ends in all body styles
                have improved as well, where the least fuel efficient 25 percent of
                vehicles offered in MY 2016 (and simulated in 2020) are more fuel
                efficient than the most efficient 25 percent of vehicles offered in MY
                2008.
                BILLING CODE 4910-59-P
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                [GRAPHIC] [TIFF OMITTED] TR30AP20.046
                BILLING CODE 4910-59-C
                 Some commenters have argued that consumers will be harmed by any
                set of standards lower than the baseline (augural) standards because
                buyers of new vehicles will be forced to spend more on fuel than they
                would have under the augural standards. However, as Figure IV-6 shows,
                the range of fuel economies available in the new market is already
                sufficient to suit the needs of buyers who desire greater fuel economy
                rather than interior volume or some other attributes. Full size pickup
                trucks are now available with smaller turbocharged engines paired with
                8 and 10-speed transmissions and some mild electrification. Buyers
                looking to transport a large family can choose to purchase a plug-in
                hybrid minivan. There were 57 electric models available in 2018, and
                hybrid powertrains are no longer limited to compact cars (as they once
                were). Buyers can choose hybrid SUVs with all-wheel and four-wheel
                drive. While these kinds of highly efficient options were largely
                absent from some body styles in MY 2008, this is no longer the case.
                Given that high-MPG vehicles are widely available, consumers must also
                value other vehicle attributes (e.g., acceleration and load-carrying
                capacity) that can can also be improved with the same technologies that
                can be used to improve fuel economy.
                ---------------------------------------------------------------------------
                 \170\ Circles represent specific outlying vehicle models.
                ---------------------------------------------------------------------------
                 Manufacturers have accomplished a portfolio-wide improvement by
                improving the combustion efficiency of engines (through direct
                injection and
                [[Page 24239]]
                turbocharging), migrating from four and five speed transmissions to 8
                and 10 speed transmissions, and electrifying to varying degrees. All of
                this has increased both production costs and fuel efficiency during a
                period of economic expansion and low energy prices. While the vehicles
                offered for sale have increased significantly in efficiency between MY
                2008 and MY 2020, the sales-weighted average fuel economy has achieved
                less improvement. Despite stringency increases of about five percent
                (year-over-year) between 2012 and 2016, the sales-weighted average fuel
                economy increased marginally. Figure IV-7 shows an initial increase in
                average new vehicle fuel economy (the heavy solid line, shown in mpg as
                indicated on the left y axis), followed by relative stagnation as fuel
                prices (the light dashed lines, shown in dollars per gallon as
                indicated on the right y axis) fell and remained low.\171\ It is worth
                noting that average new vehicle fuel economy observed a brief spike
                during the year that the Tesla Model 3 was introduced (as a consequence
                of strong initial sales volumes, as pre-orders were satisfied, and fuel
                economy ratings that are significantly higher than the industry
                average), and settled around 27.5 MPG in Fall 2019. Average fuel
                economy receded further over the next several months to 26.6 MPG in
                February 2020.\172\
                ---------------------------------------------------------------------------
                 \171\ Ward's Automotive, https://www.wardsauto.com/industry/fuel-economy-index-shows-slow-improvement-april. Last accessed Dec.
                13, 2019.
                 \172\ Ward's Automotive, https://wardsintelligence.informa.com/WI964622/Fuel-Economy-Slightly-Down-in-February. Last accessed Mar.
                9, 2020.
                [GRAPHIC] [TIFF OMITTED] TR30AP20.047
                 In their NPRM comments, manufacturers expressed concern that CAFE
                standards had already increased to the point where the price increases
                necessary to recoup manufacturers' increased costs for providing
                further increases in fuel economy outweigh the value of fuel
                savings.173 174 The agencies do not agree that this point
                has already been reached by previous stringency increases, but
                acknowledge the reality of diminishing marginal returns to improvements
                in fuel economy. A driver with a 40MPG vehicle uses about 300 gallons
                of fuel per year. Increasing the fuel economy of that vehicle to 50MPG,
                a 25 percent increase, would likely be over $1000 in additional
                technology cost. However, that driver would only save 25 percent of
                their annual fuel consumption, or 75 gallons out of 300 gallons. Even
                at $3/gallon, higher than the current national average, that represents
                $225 per year in fuel savings. That means that the buyer's $1000
                investment in additional fuel economy pays back in just under 4.5 years
                (undiscounted). The agencies' respective programs have created greater
                access to high MPG vehicles in all classes and encouraged the
                proliferation of alternative fuels and powertrains. But if the value of
                the fuel savings is insufficient to motivate buyers to invest in ever
                greater levels of fuel economy, manufacturers will face challenges in
                the market.
                ---------------------------------------------------------------------------
                 \173\ NHTSA-2018-0067-12064-25.
                 \174\ NHTSA-2018-0067-12073-2.
                ---------------------------------------------------------------------------
                 While Figure IV-3 through Figure IV-5 illustrate the trends in
                historical CAFE compliance for the entire industry, the figures contain
                another relevant fact. After several consecutive years of increasing
                standards, the achieved and required levels converge. When the
                standards began increasing again for passenger cars in 2011, the prior
                year had industry CAFE levels 5.6 mpg and 7.7 mpg in excess of their
                standards for domestic cars and imported cars, respectively. Yet, by
                2016, the consecutive year-over-year increases had eroded the levels of
                over-compliance. Light trucks similarly exceeded their standard prior
                to increasing standards, which began in 2005. Yet, by 2011, after
                several consecutive years of stringency increases, the industry light-
                truck average CAFE was merely compliant with the rising standard.
                 This is largely due to the fact that stringency requirements have
                increased at a faster rate than achieved fuel
                [[Page 24240]]
                economy levels for several years. The attribute-based standards took
                effect in 2011 for all regulatory classes, although light truck CAFE
                standards had been increasing since 2005. Since 2004, light truck
                stringency has increased an average of 2.7 percent per year, while
                light truck's compliance fuel economy has increased by an average of
                1.7 percent over the same period.\175\ For the passenger classes, a
                similar story unfolds over a shorter period of time. Year over year
                stringency increases have averaged 4.7 percent per year for domestic
                cars (though increases in the first two years were about 8 percent--
                with lower subsequent increases), but achieved fuel economy increases
                averaged only 2.2 percent per year over the same period. Imported
                passenger cars were similar to domestic cars, with average annual
                stringency increases of 4.4 percent but achieved fuel economy levels
                increasing an average of only 1.4 percent per year from 2011 through
                2017. Given that each successive percent increase in stringency is
                harder to achieve than the previous one, long-term discrepancies
                between required and achieved year-over-year increases cannot be offset
                indefinitely with existing credit banks, as they have been so far.
                ---------------------------------------------------------------------------
                 \175\ Both the standards and these calculations are defined in
                consumption space--gallons per mile--which also translates directly
                into CO2 based on the carbon content of the fuel
                consumed.
                ---------------------------------------------------------------------------
                 With the fuel price increases fresh in the minds of consumers, and
                the great recession only recently passed, the CAFE stringency increases
                that began in 2011 (and subsequent CAFE/CO2 stringency
                increases after EPA's program was first enforced in MY 2012) had
                something of a head start. As Figure IV-3 through Figure IV-5
                illustrate, the standards were not binding in MY 2011--even
                manufacturers that had historically paid civil penalties were earning
                credits for overcompliance. It took two years of stringency increase to
                catch up to the CAFE levels already present in MY 2011. However, seven
                consecutive years of increases for passenger cars and a decade of
                increases for light trucks has changed the credit situation. Figure IV-
                8 shows CAFE credit performance for regulated fleets--the solid line
                represents the number of fleets generating shortfalls and the dashed
                line represents the number of fleets earning credits in each model
                year.
                [GRAPHIC] [TIFF OMITTED] TR30AP20.048
                 Fewer than half as many fleets earned surplus credits for over-
                compliance in MY 2017 compared to MY 2011--and this trend is
                persistent. The story varies from one manufacturer to another, but it
                seems sufficient to state the obvious--when the agencies conducted the
                analysis to establish standards through MY 2025 back in 2012, most (if
                not all) manufacturers had healthy credit positions. That is no longer
                the case, and each successive increase requires many fleets to not only
                achieve the new level from the resulting increase, but to resolve
                deficits from the prior year as well. The large sums of credits, which
                last five years under both programs, have allowed most manufacturers to
                resolve shortfalls. But the light truck fleet, in particular, has a
                dwindling supply of credits available for purchase or trade. The
                CO2 program has a provision that allows credits earned
                during the early years of over-compliance to be applied through MY
                2021. This has reduced the compliance burden in the last several years,
                as intended, but will not mitigate the compliance challenges some OEMs
                would face if the baseline standards remained in place and energy
                prices persisted at current levels.
                BILLING CODE 4910-59-P
                [[Page 24241]]
                [GRAPHIC] [TIFF OMITTED] TR30AP20.049
                BILLING CODE 4910-59-C
                 Table IV-2 shows the credits earned by each manufacturer over
                time.\176\ As the table shows, when the agencies considered future
                standards in 2012, most manufacturers were earning credits in at least
                one fleet. However, the bold values show years with deficits and even
                some manufacturers who started out in strong positions, such as Ford's
                passenger car fleet, have seen growing deficits in recent years. While
                [[Page 24242]]
                the initial banks for early-action years eases the burden of
                CO2 compliance for many OEMs, the year-to-year compliance
                story is similar to CAFE, see Table IV-3.
                ---------------------------------------------------------------------------
                 \176\ MY 2017 values represent estimated earned credits based on
                MY 2017 final compliance data.
                [GRAPHIC] [TIFF OMITTED] TR30AP20.050
                 Credit position and shortfall rates clearly illustrate
                manufacturers' fleet performance relative to the standards. Recognizing
                that manufacturers plan compliance over several model years at any
                given time, sporadic shortfalls may not be evidence of undue
                difficulty, but sustained, widespread, growing shortfalls should
                probably be viewed as evidence that standards previously believed to be
                manageable might no longer be so. While NHTSA is prohibited by statute
                from considering availability of credits (and thus, size of credit
                banks) in determining maximum feasible standards, it does consider
                shortfalls as part of its determination. EPA has no such prohibition
                under the CAA and is free to consider both credits and shortfalls.
                 These increasing credit shortfalls are occurring at a time that the
                industry is deploying more technology than the agencies anticipated
                when establishing future standards in 2012. The agencies' projections
                of transmission technologies were mixed. While the agencies expected
                the deployment of 8-speed transmissions to about 25 percent of the
                market by MY 2018, transmissions with eight or more gears account for
                almost 30 percent of the market. However, the agencies projected no CVT
                transmissions in future model years, instead projecting high
                penetration of DCTs. However, CVTs currently make up more than 20
                percent of new transmissions. The tradeoff between advanced engines and
                electrification was also underestimated. While the agencies projected
                penetration rates of turbocharged engines that are higher than we've
                observed in the market (45 percent compared to 30 percent), the
                estimated penetration of electric technologies was significantly lower.
                The agencies projected a couple percent of strong hybrids--which we've
                seen--but virtually no PHEVs or EVs. While the volumes of those
                vehicles are still only a couple percent of the new vehicle market,
                they are heavily credited under both programs and can significantly
                improve compliance positions even at smaller volumes. Even lower-level
                electrification technologies, like stop-start systems, are
                significantly more prevalent than we anticipated (stop-start systems
                were projected to be in about 2 percent of the market, compared to over
                20 percent in the 2018 fleet). Despite technology deployment that is
                comparable to 2012 projections, and occasionally more aggressive,
                passenger car and light truck fleets have slightly lower fuel economy
                than projected. As fleet volumes have shifted along the footprint
                curve, the standards have decreased as well (relative to the
                expectation in 2012), but less so. While compliance deficits have been
                modest, they have been accompanied by record sales for several years.
                This has not only depleted existing credit banks, but created
                significant shortfalls that may be more difficult to overcome if sales
                recede from record levels.
                V. Regulatory Alternatives Considered
                 Agencies typically consider regulatory alternatives in proposals as
                a way of evaluating the comparative effects of different potential ways
                of accomplishing their desired goal. NEPA
                [[Page 24243]]
                requires agencies (in this case, NHTSA, but not EPA) to compare the
                potential environmental impacts of their proposed actions to those of a
                reasonable range of alternatives. Executive Orders 12866 and 13563 and
                OMB Circular A-4 also encourage agencies to evaluate regulatory
                alternatives in their rulemaking analyses. Alternatives analysis begins
                with a ``no-action'' alternative, typically described as what would
                occur in the absence of any regulatory action. This final rule, like
                the proposal, includes a no-action alternative, described below, as
                well as seven ``action alternatives.'' The final standards may, in
                places, be referred to as the ``preferred alternative,'' which is NEPA
                parlance, but NHTSA and EPA intend ``final standards'' and ``preferred
                alternative'' to be used interchangeably for purposes of this
                rulemaking.
                 In the proposal, NHTSA and EPA defined the different regulatory
                alternatives (other than the no-action alternative) in terms of
                percent-increases in CAFE and CO2 stringency from year to
                year. Percent increases in stringency referred to changes in the
                standards year over year--as in, standards that become 1 percent more
                stringent each year. Readers should recognize that those year-over-year
                changes in stringency are not measured in terms of mile per gallon or
                CO2 gram per mile differences (as in, 1 percent more
                stringent than 30 miles per gallon in one year equals 30.3 miles per
                gallon in the following year), but in terms of shifts in the footprint
                functions that form the basis for the actual CAFE and CO2
                standards (as in, on a gallon or gram per mile basis, the CAFE and
                CO2 standards change by a given percentage from one model
                year to the next). Under some alternatives, the rate of change was the
                same for both passenger cars and light trucks; under others, the rate
                of change differed. Like the no-action alternative, all of the
                alternatives considered in the proposal were more stringent than the
                preferred alternative.
                 Alternatives considered in the proposal also varied in other
                significant ways. Alternatives 3 and 7 in the proposal involved a
                gradual discontinuation of CAFE and average CO2 adjustments
                reflecting the use of technologies that improve air conditioner
                efficiency or otherwise improve fuel economy under conditions not
                represented by long-standing fuel economy test procedures (off-cycle
                adjustments, described in further detail in Section IX, although the
                proposal itself would have retained these flexibilities. Commenters
                responding to the request for comment on phasing out these
                flexibilities generally supported maintaining the existing program, as
                proposed. Some commenters suggested changes to the existing program
                that were not discussed in the NPRM. Such changes would be beyond the
                scope of this rulemaking and were not considered. Section IX contains a
                more thorough summary of these comments and the issues they raise, as
                well as the agencies' responses. Consistent with the decision to retain
                these flexibilities in the final rule, alternatives reflecting their
                phase-out have not been considered in this final rule.
                 Additionally, in the NPRM for this rule, EPA proposed to exclude
                the option for manufacturers partially to comply with tailpipe
                CO2 standards by generating CO2-equivalent
                emission adjustments associated with air conditioning refrigerants and
                leakage after MY 2020. This approach was proposed in the interest of
                improved harmonization between the CAFE and tailpipe CO2
                emissions programs because this optional flexibility cannot be
                available in the CAFE program.\177\ Alternatives 1 through 8 excluded
                this option. EPA requested comment ``on whether to proceed with [the]
                proposal to discontinue accounting for A/C leakage, methane emissions,
                and nitrous oxide emissions as part of the CO2 emissions
                standards to provide for better harmony with the CAFE program, or
                whether to continue to consider these factors toward compliance and
                retain that as a feature that differs between the programs.'' \178\ EPA
                stated that if EPA were to proceed with excluding A/C refrigerant
                credits as proposed, ``EPA would consider whether it is appropriate to
                initiate a new rulemaking to regulate these programs independently . .
                . .'' \179\ EPA also stated that ``[i]f the agency decides to retain
                the A/C leakage . . . provisions for CO2 compliance, it
                would likely re-insert the current A/C leakage offset and increase the
                stringency levels for CO2 compliance by the offset amounts
                described above (i.e., 13.8 g/mi equivalent for passenger cars and 17.2
                g/mi equivalent for light trucks). EPA received comments from a wide
                range of stakeholders, most of whom opposed the elimination of these
                flexibility provisions.
                ---------------------------------------------------------------------------
                 \177\ For the CAFE program, carbon-based tailpipe emissions
                (including CO2, HC, and CO) are measured, and fuel
                economy is calculated using a carbon balance equation. EPA also uses
                carbon-based emissions (CO2, HC, and CO, the same as for
                CAFE) to calculate tailpipe CO2 for use in determining
                compliance with its standards. In addition, under the no-action
                alternative for the proposal and under all alternatives in the final
                rule, in determining compliance, EPA includes on a CO2
                equivalent basis (using Global Warming Potential (GWP) adjustment)
                A/C refrigerant leakage credits, at the manufacturer's option, and
                nitrous oxide and methane emissions. EPA also has separate emissions
                standards for methane and nitrous oxides. The CAFE program does not
                include or account for A/C refrigerant leakage, nitrous oxide and
                methane emissions because they do not impact fuel economy. Under
                Alternatives 1-8 in the proposal, the standards were closely aligned
                for gasoline powered vehicles because compliance with the fleet
                average standard for such vehicles is based on tailpipe
                CO2, HC, and CO for both programs and not emissions
                unrelated to fuel economy, although diesel and alternative fuel
                vehicles would have continued to be treated differently between the
                CAFE and CO2 programs. While such an approach would have
                significantly improved harmonization between the programs, standards
                would not have been fully aligned because of the small fraction of
                the fleet that uses diesel and alternative fuels (as described in
                the proposal, such vehicles made up approximately four percent of
                the MY 2016 fleet), as well as differences involving EPCA/EISA
                provisions EPA has not adopted, such as minimum standards for
                domestic passenger cars and limits on credit transfers between
                regulated fleets. The proposal to eliminate flexibilities associated
                with A/C refrigerants and leakage was not adopted for this final
                rule, and the reasons for and implications of that decision are
                discussed further below.
                 \178\ 83 FR at 43193 (Aug. 24, 2018).
                 \179\ Id. at 43194.
                ---------------------------------------------------------------------------
                 Specifically, the two major trade organizations of auto
                manufacturers, as well as some individual automakers, supported
                retaining these provisions. Global Automakers commented that ``[a]ir
                conditioning refrigerant leakage . . . should be included for
                compliance with the EPA standards for all MYs, even if it means a
                divergence from the NHTSA standards.'' \180\ Global provides several
                detailed reasons for their comments, including that the existing
                provisions are ``. . . important to maintaining regulatory flexibility
                through real [CO2] emission reductions and would prevent the
                potential for additional bifurcated, separate programs at the state
                level.'' \181\ The Alliance similarly commented that it ``supports
                continuation of the full air conditioning refrigerant leakage credits
                under the [CO2] standards.'' \182\ Some individual
                [[Page 24244]]
                manufacturers, including General Motors,\183\ Fiat Chrysler,\184\ and
                BMW,\185\ also commented in support of maintaining the current A/C
                refrigerant and leakage credits.
                ---------------------------------------------------------------------------
                 \180\ Global, NHTSA-2018-0067-12032, Appendix A at A-5.
                 \181\ Id. Global also stated that excluding A/C leakage credits
                would ``. . . greatly limit the ability [of manufacturers] to select
                the most cost-effective approach for technology improvements and
                result in a costlier, separate set of regulations that actually
                relate to the overall GHG standards.'' Global also expressed concern
                that issuing separate regulations for A/C leakage could take too
                long and create a gap in which States might act to separately
                regulate or even ban refrigerants, and supported continued inclusion
                of A/C leakage and refrigerant regulation in EPA's GHG program to
                avoid risk of an ensuing patchwork. Global argued that manufacturers
                had already invested to meet the existing program, and that ``the
                proposed phase-out also creates another risk that manufacturers will
                have stranded capital in technologies that are not fully
                amortized.'' Global Automakers, EPA-HQ-OAR-2018-0283-5704,
                Attachment A, at A.43-44.
                 \182\ Alliance, NHTSA-2018-0067-12073, Full Comment Set, at 12.
                Alliance also expressed concern about stranded capital and risk of
                patchwork of state regulation if MAC direct credits were not
                retained in the Federal GHG program. Id. at 80-81.
                 \183\ General Motors, NHTSA-2018-0067-11858, Appendix 4, at 1
                (``General Motors supports the extensive comments from the Alliance
                of Automobile Manufacturers regarding flexibility mechanisms, and
                incorporates them by reference. In particular, the Alliance cites
                the widening gap between the regulatory standards and actual
                industry-wide new vehicle average fuel economy that has become
                evident since 2016, despite the growing use of improvement `credits'
                from various flexibility mechanisms, such as off-cycle technology
                credits, mobile air conditioner efficiency credits, mobile air
                conditioner refrigerant leak reduction credits and credits from
                electrified vehicles.'')
                 \184\ FCA, NHTSA-2018-0067-11943, at 8. FCA also expressed
                concern about patchwork in the absence of a federal rule. Id.
                 \185\ BMW, EPA-HQ-OAR-2018-4204, at 3. BMW stated that ``Today's
                rules allow flexibilities to be used by the motor vehicle
                manufacturers for fuel saving technologies and efficiency gains
                which are not covered in the applicable test procedures. To enhance
                the future use of these technologies and to reward motor vehicle
                manufacturer's investments taken for future innovations, the
                agencies should consider the continuation of current flexibilities
                for the model years 2021 to 2026.''
                ---------------------------------------------------------------------------
                 Auto manufacturing suppliers who addressed A/C refrigerant and
                leakage credits also generally supported retaining the existing
                provisions. MEMA commented that ``It is essential for supplier
                investment and jobs, and continuous innovation and improvements in the
                technologies that the credit programs continue and expand to broaden
                the compliance pathways. MEMA urges the agencies to continue the
                current credit and incentives programs . . . . '' \186\ DENSO also
                supported maintaining the current provisions.\187\ However, BorgWarner
                supported the proposed removal of A/C refrigerant credits ``for
                harmonization reasons,'' while encouraging EPA to regulate A/C
                refrigerants and leakage separately from the CO2
                standards.\188\
                ---------------------------------------------------------------------------
                 \186\ MEMA, available at https://www.mema.org/sites/default/files/resource/MEMA%20CAFE%20and%20GHG%20Vehicle%20Comments%20FINAL%20with%20Appendices%20Oct%2026%202018.pdf, comment at p. 2. MEMA also expressed
                concern about stranded capital investments by suppliers and supplier
                jobs if the direct MAC credits were not available; stated that the
                credits were an important compliance flexibility and ``one of the
                highest values of any credit offered in the EPA program;'' and
                stated that ``Harmonizing the programs does not require making them
                identical or equivalent. Rather, harmonization can be achieved by
                better coordinating the two programs to the extent feasible while
                allowing each agency to implement its separate and distinct
                mandate.'' Id. at 15-16.
                 \187\ DENSO, NHTSA-2018-0067-11880, at 8.
                 \188\ BorgWarner, NHTSA-2018-0067-11895, at 10.
                ---------------------------------------------------------------------------
                 The two producers of a lower GWP refrigerant, Chemours and
                Honeywell, commented extensively in support of continuing to allow A/C
                refrigerant and leakage credits for CO2 compliance, making
                both economic and legal arguments. Both Chemours and Honeywell stated
                that A/C refrigerant and leakage credits were a highly cost-effective
                way for OEMs to comply with the CO2 standards,\189\ with
                Chemours suggesting that OEM compliance strategies are based on the
                assumption that these credits will be available for CO2
                compliance \190\ and that any increase in stringency above the proposal
                effectively necessitates that the credits remain part of the
                program.\191\ Honeywell stated that all OEMs (and a variety of other
                parties) supported retaining the credits for CO2
                compliance,\192\ and Chemours, Honeywell, and CBD et al. all noted that
                OEMs are already using the credits for low GWP refrigerants in more
                than 50 percent of the MY 2018 vehicles produced for sale in the
                U.S.\193\ The American Chemistry Council also stated that the ``auto
                industry widely supports the credits, and U.S. chemical manufacturers
                are at a loss as to why EPA would propose to eliminate such a
                successful flexible compliance program.'' \194\ In response to NPRM
                statements expressing concern that the A/C refrigerant and leakage
                credits could be market distorting, both Chemours and Honeywell
                disagreed,\195\ arguing that the credits were simply a highly cost-
                effective means of complying with the CO2 standards,\196\
                and that removal of the credits at this point would, itself, distort
                the market for refrigerants. Honeywell argued that eliminating the A/C
                credit program from CO2 compliance would put the U.S. at a
                competitive disadvantage with other countries, and would risk U.S.
                jobs.\197\
                ---------------------------------------------------------------------------
                 \189\ Chemours at 1 (``MVAC credits many times offer the `least
                cost' approach to compliance . . .'') and 9; Honeywell at 6.
                 \190\ Chemours at 6-7; both Chemours and Honeywell expressed
                concern about OEM reliance on the expectation that HFC credits would
                continue to be part of the CO2 program (Chemours at 31;
                Honeywell at 16-20) and that investments in alternative refrigerants
                would be stranded (Chemours at 1, 3, 4-6; Honeywell at 2, 7-8).
                 \191\ Chemours at 7.
                 \192\ Honeywell at 8-11.
                 \193\ Chemours at 4; Honeywell at 6-7; CBD et al. at 46-47.
                 \194\ American Chemistry Council, EPA-HQ-OAR-2018-0283-1415, at
                9-10 (comments similar to Chemours and Honeywell).
                 \195\ Chemours at 1; Honeywell at 13.
                 \196\ Chemours at 29-30; Honeywell at 13-14.
                 \197\ Honeywell at 20-21.
                ---------------------------------------------------------------------------
                 Regarding the NPRM's statements that removing the A/C refrigerant
                and leakage credits from CO2 compliance would promote
                harmonization with the CAFE program, these commenters argued that
                harmonization was not a valid basis for that aspect of the proposal.
                Chemours, Honeywell, and CBD et al. all argued that Section 202(a)
                creates no obligation to harmonize the [CO2] program with
                the CAFE program.\198\ Chemours further argued that to the extent
                disharmonization between the programs existed, it should be addressed
                via stringency changes (i.e., reducing CAFE stringency relative to
                CO2 stringency) rather than ``dropping low-cost compliance
                options.'' \199\
                ---------------------------------------------------------------------------
                 \198\ Chemours at 23-24; Honeywell at 11-12; CBD et al. at 47.
                 \199\ Chemours at 9-11.
                ---------------------------------------------------------------------------
                 These commenters also expressed concern that the proposal
                constituted an EPA decision not to regulate HFC emissions from motor
                vehicles at all. Commenters argued that the NPRM provided no legal
                analysis or reasoned explanation for stopping regulation of HFCs,\200\
                and that Massachusetts v. EPA requires any final rule to regulate all
                greenhouse gases from motor vehicles and not CO2 alone,\201\
                suggesting that there was a high likelihood of a lapse in regulation
                because EPA had not yet proposed a new way of regulating HFC
                emissions.\202\ Because the NPRM provided no specific information about
                how EPA might regulate non-CO2 emissions separately,
                commenters argued that the lack of clarity was inherently disruptive to
                OEMs.\203\ CBD et al. argued that any lapse in regulation is ``illegal
                on its face'' and that even creating a separate standard for HFC
                emissions would be ``illegal'' because it ``would increase costs to
                manufacturers and result in environmental detriment by removing any
                incentive to use the most aggressive approaches to curtail emissions of
                these highly potent GHGs.'' \204\
                ---------------------------------------------------------------------------
                 \200\ Chemours at 1-2; Honeywell at 11.
                 \201\ Chemours at 18-19; Honeywell at 14-16.
                 \202\ Chemours at 6; Honeywell at 16.
                 \203\ Chemours at 21; Honeywell at 16; ICCT at I-39.
                 \204\ CBD et al. at 46.
                ---------------------------------------------------------------------------
                 Environmental organizations,\205\ other NGOs, academic
                institutions, consumer organizations, and state governments \206\ also
                commented in support of continuing the existing provisions.
                ---------------------------------------------------------------------------
                 \205\ ICCT, NHTSA-2018-0067-11741, Full Comments, at 4
                (describing ``air conditioning GHG-reduction technologies [as]
                available, cost-effective, and experiencing increased deployment by
                many companies due to the standards.''); CBD et al., Appendix A, at
                45-47.
                 \206\ CARB, NHTSA-2018-0067-11873, Detailed Comments, at 120-
                121; Washington State Department of Ecology, NHTSA-2018-0067-11926,
                at 6 (HFCs are an important GHG; compliance flexibility is
                important).
                ---------------------------------------------------------------------------
                 EPA has considered its proposed approach to A/C refrigerant and
                leakage
                [[Page 24245]]
                credits in light of these comments. EPA believes that maintaining this
                element of its program is consistent with EPA's authority under Section
                202(a) to establish standards for reducing emissions from LDVs. Thus,
                maintaining the optional HFC credit program is appropriate. In
                addition, EPA recognizes the value of regulatory flexibility and
                compliance options, and has concluded that the advantages from
                retaining the existing A/C refrigerant/leakage credit program and
                associated offset between the CO2 and CAFE standards--in
                terms of providing for a more-comprehensive regulation of emissions
                from light-duty vehicles--outweigh the disadvantages resulting from the
                lack of harmonization.
                 Regarding the comment from BorgWarner about how having a separate
                A/C refrigerant and leakage regulation would allow for better
                harmonization between the programs, the agencies accept this to be an
                accurate statement, but believe the benefits of continued refrigerant
                regulation as an option for CO2 compliance outweigh the
                problems associated with lack of harmonization with the CAFE program.
                 For these reasons, EPA is not finalizing the proposed provisions,
                and is making no changes in the A/C refrigerant and leakage-related
                provisions of the current program. In light of this conclusion, EPA
                does not need to address the legal arguments made by CBD et al. and
                CARB about regulating refrigerant-related emissions separately, or
                potential lapses in regulation of refrigerant emissions while such a
                program could be developed.
                 As with A/C refrigerant and leakage credits, EPA proposed to
                exclude nitrous oxide and methane from average performance calculations
                after model year 2020, thereby removing these optional program
                flexibilities. Alternatives 1 through 8 excluded this option. EPA
                sought comment on whether to remove those aspects of the program that
                allow a manufacturer to use nitrous oxide and methane emissions
                reductions for compliance with its CO2 average fleet
                standards because such a flexibility is not allowed in the NHTSA CAFE
                program, or whether to retain the flexibilities as a feature that
                differs between the programs. Further, EPA sought comment on whether to
                change the existing methane and nitrous oxide standards. Specifically,
                EPA requested information from the public on whether the existing
                standards are appropriate, or whether they should be revised to be less
                stringent or more stringent based on any updated data.
                 The Alliance in its comments may have misunderstood EPA's proposal
                to mean that EPA was proposing to eliminate regulation of methane and
                nitrous oxide emissions altogether. The Alliance commented in support
                of such a proposal as they understood it, to eliminate the standards to
                provide better harmony between the two compliance programs.\207\ The
                Alliance commented that ``[n]ot only is emission of these two
                substances from vehicles a relatively minor contribution to GHG
                emissions, the Alliance has continuing concern regarding measurement
                and testing technologies for nitrous oxide.'' \208\ The Alliance
                commented further that if ``EPA decides instead to continue to regulate
                methane and nitrous oxide, the Alliance recommends that EPA re-assess
                whether the levels of the standards remain appropriate and to retain
                the current compliance flexibilities. Furthermore, in this scenario,
                the Alliance also recommends that methane and nitrous oxide standards
                be assessed as a fleet average and as the average of FTP and HFET test
                cycles.'' \209\ Several individual manufacturers submitted similar
                comments, including Ford,\210\ FCA,\211\ Volvo,\212\ and Mazda.\213\
                Ford also commented that it does not support the proposal to maintain
                the existing N2O/CH4 standards while removing the
                program flexibilities.\214\
                ---------------------------------------------------------------------------
                 \207\ Alliance, NHTSA-2018-0067-12073, Full Comment Set, at 13.
                 \208\ Id.
                 \209\ Id.
                 \210\ Ford, EPA-HQ-OAR-2018-0283-5691, at 4.
                 \211\ FCA, NHTSA-2018-0067-11943, at 9.
                 \212\ Volvo, NHTSA-2018-0067-12036, at 5.
                 \213\ Mazda, NHTSA-2018-0067-11727, at 3 (``In reality, these
                emissions are at deminimis levels and have very little, if any,
                impact on global warming. So, the need to regulate these emissions
                as part of the GHG program, or separately, is unclear. Although most
                current engines can comply with the existing requirements, there are
                some existing and upcoming new technologies that may not be able to
                fully comply. These technologies can provide substantial
                CO2 reductions.'').
                 \214\ Ford, at 4 (``Finally, without the ability to incorporate
                exceedances into CREE, each vehicle will need to employ hardware
                solutions if they do not comply. We do not believe it was EPA's
                intent in the original rulemaking to require additional after-
                treatment, with associated cost increases, explicitly for the
                control and reduction of an insignificant contributor to GHG
                emissions. Therefore, we do not support the proposal to maintain the
                existing N2O/CH4 standards while removing the
                CREE exceedance pathway.'').
                ---------------------------------------------------------------------------
                 The Alliance further commented that ``data from the 2016 EPA report
                on light-duty vehicle emissions supports the position that
                CH4 and N2O have minimal impact on total GHG
                emissions, reporting only 0.045 percent in exceedance of the standard.
                This new information makes it apparent that CH4 and
                N2O contribute a de minimis amount to GHG emissions.
                Additionally, gasoline CH4 and N2O performance is
                within the current standards. Finally, the main producers of
                CH4 and N2O emissions are flex fuel (E85) and
                diesel vehicles, and these vehicles have been declining in sales as
                compared to gasoline-fueled vehicles.'' \215\ The Alliance also
                commented that CH4 and N2O have minimal
                opportunities to be catalytically treated, as N2O is
                generated in the catalyst and CH4 has a low conversion
                efficiency compared to other emissions. EPA did not intend that
                additional hardware should be required to comply with the
                CH4 or N2O standards on any vehicle.'' \216\
                ---------------------------------------------------------------------------
                 \215\ Alliance, NHTSA-2018-0067-12073, Full Comment Set, at 43.
                 \216\ Id. at 44.
                ---------------------------------------------------------------------------
                 Global Automakers commented in support of continuing inclusion of
                nitrous oxide and methane emissions standards for all MYs, even if it
                means a divergence from the NHTSA standards for these program elements
                in the regulations, ``because they are complementary to EPA's program,
                and are better managed through a coordinated federal policy. They are
                also important to maintaining regulatory flexibility through real
                [CO2] emission reductions and would prevent the potential
                for additional bifurcated, separate programs at the state level.''
                \217\ Global Automakers recommended that they remain in place per the
                existing program but continued to support that the N2O
                testing is not necessary. Global Automakers commented that it
                ``strongly recommends reducing the need for N2O testing or
                eliminating these test requirements in their entirety. It should be
                sufficient to allow manufacturers to attest to compliance with the
                N2O capped standards based upon good engineering judgment,
                development testing, and correlation to NOX emissions. EPA
                could, however, maintain the option to request testing to be performed
                for new technologies only, which could have unknown impacts on
                N2O emissions.'' \218\ Hyundai \219\ and Kia \220\ submitted
                similar comments.
                ---------------------------------------------------------------------------
                 \217\ Global, NHTSA-2018-0067-12032, at 4, 5.
                 \218\ Global, Appendix A, NHTSA-2018-0067-12032, at A-44, fn.
                89.
                 \219\ Hyundai, EPA-HQ-OAR-2018-0283-4411, at 7.
                 \220\ Kia, EPA-HQ-OAR-2018-0283-4195, at 8-9.
                ---------------------------------------------------------------------------
                 Others commented in support of retaining the existing program. MECA
                commented that it supports the existing standards for methane and
                nitrous oxide because catalyst technologies provided by MECA members
                that reduce these climate forcing gases are readily
                [[Page 24246]]
                available and cost-effective.\221\ MECA also commented that the ability
                to trade reductions in these pollutants in exchange for CO2
                gives vehicle manufacturers the flexibilities they need to comply with
                the emission limits by the most cost-effective means.\222\ CBD et al.
                commented that the alternative compliance mechanisms currently
                available in the program exist to provide cost-effective options for
                compliance, and were considered by manufacturers to be a necessary
                element of the program for certain types of vehicles.\223\ CBD et al.
                further argued that ``[e]liminating these flexibilities consequently
                imposes costs on manufacturers without discernible environmental
                benefits,'' and suggested that harmonization with the CAFE program was
                not a relevant decision factor for EPA.\224\ Several other parties
                commented generally in support of retaining the existing program for A/
                C leakage credits, discussed above, and N2O and
                CH4 standards.\225\
                ---------------------------------------------------------------------------
                 \221\ MECA, NHTSA-2018-0067-11994, at 12.
                 \222\ Id.
                 \223\ CBD et al. at 48.
                 \224\ Id.
                 \225\ Washington State Department of Ecology, NHTSA-2018-0067-
                11926, at 6.
                ---------------------------------------------------------------------------
                 After considering these comments, EPA is retaining the regulatory
                provisions related to the N2O and CH4 standards
                with no changes, specifically including the existing flexibilities that
                accompany those standards. EPA is not adopting its proposal to exclude
                nitrous oxide and methane emissions from average performance
                calculations after model year 2020 or any other changes to the program.
                The standards continue to serve their intended purpose of capping
                emissions of those pollutants and providing for more-comprehensive
                regulation of emissions from light-duty vehicles. The standards were
                intended to prevent future emissions increases, and these standards
                were generally not expected to result in the application of new
                technologies or significant costs for manufacturers using current
                vehicle designs.\226\ The program flexibilities are working as intended
                and all manufacturers are successfully complying with the standards.
                Most vehicle models are well below the standards and for those that are
                above the standards, manufacturers have used the flexibilities to
                offset exceedances with CO2 improvements to demonstrate
                compliance. EPA did not receive any data in response to its request for
                comments supporting potential alternative levels of stringency.
                ---------------------------------------------------------------------------
                 \226\ 77 FR 62624, at 62799 (Oct 15, 2012).
                ---------------------------------------------------------------------------
                 While the Alliance and several individual manufacturers recommended
                eliminating the standards altogether, EPA did not propose to eliminate
                the standards, but to eliminate the optional flexibilities, and
                solicited comment on adjusting the standards to be more or less
                stringent. Thus, EPA does not believe it would be appropriate to
                eliminate completely the standards in this final rule without providing
                an opportunity for comment on that idea. Furthermore, as noted above,
                EPA believes the standards are continuing to serve their intended
                purpose of capping emissions and remain appropriate. Manufacturers have
                been subject to the standards for several years, and the Alliance
                acknowledges in their comments that the exceedance of the standards,
                which is offset by manufacturers using compliance flexibilities, is
                very small and that most vehicles meet the standards. Regarding the
                Alliance comments that the standards should be based on a fleet average
                approach, EPA notes that the purpose of the standards is to cap
                emissions, not to achieve fleet-wide reductions.\227\ The fleet average
                emissions for N2O and CH4 are well below the
                numerical level of the cap standards and therefore the existing cap
                standards would not be an appropriate fleet average standard. Adopting
                a fleet average approach using the same numerical level as the
                established cap standards would not achieve the intended goal of
                capping emissions at current levels. If technologies lead to
                exceedances of the caps, automakers have the opportunity to apply
                appropriate flexibilities under the current program to achieve GHG
                emission neutrality. EPA is not aware of any manufacturer that has been
                prevented from bringing a technology to the marketplace because of the
                current cap levels or approach. EPA believes it would need to consider
                all options further, with an opportunity for public comment, before
                adopting such a significant change to the program.
                ---------------------------------------------------------------------------
                 \227\ Relatedly, the Alliance and Global Automakers raised
                concerns in their comments regarding N2O measurement and
                testing burden. EPA did not propose any changes in testing
                requirements and at this time EPA is not adopting any changes.
                Manufacturers have been measuring N2O emissions and have
                successfully certified vehicles to the N2O standards for
                several years and EPA does not believe N2O measurement is
                an issue needing regulatory change. EPA continues to believe direct
                measurement is the best way for manufacturers to demonstrate
                compliance with the N2O standards and is more appropriate
                than an engineering statement without direct measurement.
                ---------------------------------------------------------------------------
                 As explained above, the agencies have changed the alternatives
                considered for the final rule, partly in response to comments. The
                basic form of the standards represented by the alternatives--footprint-
                based, defined by particular mathematical functions--remains the same
                and as described in the NPRM. For the EPA program, EPA has chosen in
                this final rule to retain the existing program for regulation of A/C
                refrigerant leakage, nitrous oxide, and methane emissions as part of
                the CO2 standard. This allows manufacturers to continue to
                rely on this flexibility which they describe as extremely important for
                compliance, although it results in continued differences between EPA's
                and NHTSA's programs. This approach also avoids the possibility of gaps
                in the regulation of HFCs, CH4, and N2O while EPA
                developed a different way of regulating the non-CO2
                emissions as part of or concurrent with the NPRM, and thereby allows
                EPA to continue to regulate GHE emissions from light-duty vehicles on a
                more-comprehensive basis. Thus, all alternatives considered in this
                final rule reflect inclusion of CH4, N2O, and HFC
                in EPA's overall ``CO2'' (more accurately, CO2-
                equivalent, or CO2e) requirements. Besides this change, the
                alternatives considered for the final rule differ from the NPRM in two
                additional ways: First, alternatives reflecting the phase-out of the A/
                C efficiency and off-cycle programs have been dropped in response to
                certain comments and in recognition of the potential real-world
                benefits of those programs. And second, the preferred alternative for
                this final rule reflects a 1.5 percent year-over-year increase for both
                passenger cars and light trucks. These changes will be discussed
                further below, following a brief discussion of the form of the
                standards.
                A. Form of the Standards
                 As in the CAFE and CO2 rulemakings in 2010 and 2012,
                NHTSA and EPA proposed in the NPRM to set attribute-based CAFE and
                CO2 standards defined by a mathematical function of vehicle
                footprint, which has observable correlation with fuel economy and
                vehicle emissions. EPCA, as amended by EISA, expressly requires that
                CAFE standards for passenger cars and light trucks be based on one or
                more vehicle attributes related to fuel economy and be expressed in the
                form of a mathematical function.\228\ While the CAA includes no
                specific requirements regarding CO2 regulation, EPA has
                chosen to adopt attribute-based CO2 standards consistent
                with NHTSA's EPCA/EISA requirements in the interest of harmonization
                and simplifying compliance. Such an approach is permissible under
                section 202(a) of the
                [[Page 24247]]
                CAA, and EPA has used the attribute-based approach in issuing standards
                under analogous provisions of the CAA. Thus, both the proposed and
                final standards take the form of fuel economy and CO2
                targets expressed as functions of vehicle footprint (the product of
                vehicle wheelbase and average track width). Section V.A.2 below
                discusses the agencies' continued reliance on footprint as the relevant
                attribute.
                ---------------------------------------------------------------------------
                 \228\ 49 U.S.C. 32902(a)(3)(A).
                ---------------------------------------------------------------------------
                 Under the footprint-based standards, the function defines a
                CO2 or fuel economy performance target for each unique
                footprint combination within a car or truck model type. Using the
                functions, each manufacturer thus will have a CAFE and CO2
                average standard for each year that is almost certainly unique to each
                of its fleets,\229\ based upon the footprints and production volumes of
                the vehicle models produced by that manufacturer. A manufacturer will
                have separate footprint-based standards for cars and for trucks. The
                functions are mostly sloped, so that generally, larger vehicles (i.e.,
                vehicles with larger footprints) will be subject to lower CAFE mpg
                targets and higher CO2 grams/mile targets than smaller
                vehicles. This is because, generally speaking, smaller vehicles are
                more capable of achieving higher levels of fuel economy/lower levels of
                CO2 emissions, mostly because they tend not to have to work
                as hard (and therefore require as much energy) to perform their driving
                task. Although a manufacturer's fleet average standards could be
                estimated throughout the model year based on the projected production
                volume of its vehicle fleet (and are estimated as part of EPA's
                certification process), the standards to which the manufacturer must
                comply are determined by its final model year production figures. A
                manufacturer's calculation of its fleet average standards as well as
                its fleets' average performance at the end of the model year will thus
                be based on the production-weighted average target and performance of
                each model in its fleet.\230\
                ---------------------------------------------------------------------------
                 \229\ EPCA/EISA requires NHTSA to separate passenger cars into
                domestic and import passenger car fleets whereas EPA combines all
                passenger cars into one fleet.
                 \230\ As discussed in prior rulemakings, a manufacturer may have
                some vehicle models that exceed their target and some that are below
                their target. Compliance with a fleet average standard is determined
                by comparing the fleet average standard (based on the production-
                weighted average of the target levels for each model) with fleet
                average performance (based on the production-weighted average of the
                performance of each model).
                ---------------------------------------------------------------------------
                 For passenger cars, consistent with prior rulemakings, NHTSA is
                defining fuel economy targets as follows:
                [GRAPHIC] [TIFF OMITTED] TR30AP20.051
                where:
                TARGETFE is the fuel economy target (in mpg) applicable to a
                specific vehicle model type with a unique footprint combination,
                a is a minimum fuel economy target (in mpg),
                b is a maximum fuel economy target (in mpg),
                c is the slope (in gallons per mile per square foot, or gpm, per
                square foot) of a line relating fuel consumption (the inverse of
                fuel economy) to footprint, and
                d is an intercept (in gpm) of the same line.
                 Here, MIN and MAX are functions that take the minimum and maximum
                values, respectively, of the set of included values. For example,
                MIN[40,35] = 35 and MAX(40, 25) = 40, such that MIN[MAX(40, 25), 35] =
                35.
                 For light trucks, also consistent with prior rulemakings, NHTSA is
                defining fuel economy targets as follows:
                [GRAPHIC] [TIFF OMITTED] TR30AP20.052
                where:
                TARGETFE is the fuel economy target (in mpg) applicable to a
                specific vehicle model type with a unique footprint combination,
                a, b, c, and d are as for passenger cars, but taking values specific
                to light trucks,
                e is a second minimum fuel economy target (in mpg),
                f is a second maximum fuel economy target (in mpg),
                g is the slope (in gpm per square foot) of a second line relating
                fuel consumption (the inverse of fuel economy) to footprint, and
                h is an intercept (in gpm) of the same second line.
                 Although the general model of the target function equation is the
                same for each vehicle category (passenger cars and light trucks) and
                each model year, the parameters of the function equation differ for
                cars and trucks. For MYs 2020-2026, the parameters are unchanged,
                resulting in the same stringency in each of those model years.
                 Mathematical functions defining the CO2 targets are
                expressed as functions that are similar, with coefficients a-h
                corresponding to those listed above.\231\ For passenger cars, EPA is
                defining CO2 targets mathematically equivalent to the
                following:
                ---------------------------------------------------------------------------
                 \231\ EPA regulations use a different but mathematically
                equivalent approach to specify targets. Rather than using a function
                with nested minima and maxima functions, EPA regulations specify
                requirements separately for different ranges of vehicle footprint.
                Because these ranges reflect the combined application of the listed
                minima, maxima, and linear functions, it is mathematically
                equivalent and more efficient to present the targets as in this
                Section.
                ---------------------------------------------------------------------------
                TARGETCO2 = MIN[b, MAX[a, c x FOOTPRINT + d]]
                where:
                TARGETCO2 is the is the CO2 target (in grams per mile, or
                g/mi) applicable to a specific vehicle model configuration,
                a is a minimum CO2 target (in g/mi),
                b is a maximum CO2 target (in g/mi),
                c is the slope (in g/mi, per square foot) of a line relating
                CO2 emissions to footprint, and
                d is an intercept (in g/mi) of the same line.
                 For light trucks, CO2 targets are defined as follows:
                TARGETCO2 = MIN[MIN[b, MAX[a, c x FOOTPRINT + d]], MIN[f, MAX[e, g x
                FOOTPRINT + h]]
                [[Page 24248]]
                where:
                TARGETCO2 is the is the CO2 target (in g/mi) applicable
                to a specific vehicle model configuration,
                a, b, c, and d are as for passenger cars, but taking values specific
                to light trucks,
                e is a second minimum CO2 target (in g/mi),
                f is a second maximum CO2 target (in g/mi),
                g is the slope (in g/mi per square foot) of a second line relating
                CO2 emissions to footprint, and
                h is an intercept (in g/mi) of the same second line.
                 To be clear, as has been the case since the agencies began
                establishing attribute-based standards, no vehicle need meet the
                specific applicable fuel economy or CO2 targets, because
                compliance with either CAFE or CO2 standards is determined
                based on corporate average fuel economy or fleet average CO2
                emission rates. In this respect, CAFE and CO2 standards are
                unlike, for example, safety standards and traditional vehicle emissions
                standards. CAFE and CO2 standards apply to the average fuel
                economy levels and CO2 emission rates achieved by
                manufacturers' entire fleets of vehicles produced for sale in the U.S.
                Safety standards apply on a vehicle-by-vehicle basis, such that every
                single vehicle produced for sale in the U.S. must, on its own, comply
                with minimum FMVSS. Similarly, criteria pollutant emissions standards
                are applied on a per-vehicle basis, such that every vehicle produced
                for sale in the U.S. must, on its own, comply with all applicable
                emissions standards. When first mandating CAFE standards in the 1970s,
                Congress specified a more flexible averaging-based approach that allows
                some vehicles to ``under comply'' (i.e., fall short of the overall flat
                standard, or fall short of their target under attribute-based
                standards) as long as a manufacturer's overall fleet is in compliance.
                 The required CAFE level applicable to a given fleet in a given
                model year is determined by calculating the production-weighted
                harmonic average of fuel economy targets applicable to specific vehicle
                model configurations in the fleet, as follows:
                [GRAPHIC] [TIFF OMITTED] TR30AP20.053
                where:
                CAFErequired is the CAFE level the fleet is required to achieve,
                i refers to specific vehicle model/configurations in the fleet,
                PRODUCTIONi is the number of model configuration i produced for sale
                in the U.S., and
                TARGETFE,i the fuel economy target (as defined above) for model
                configuration i.
                 Similarly, the required average CO2 level applicable to
                a given fleet in a given model year is determined by calculating the
                production-weighted average (not harmonic) of CO2 targets
                applicable to specific vehicle model configurations in the fleet, as
                follows:
                [GRAPHIC] [TIFF OMITTED] TR30AP20.054
                where:
                CO2required is the average CO2 level the fleet is
                required to achieve,
                i refers to specific vehicle model/configurations in the fleet,
                PRODUCTIONi is the number of model configuration i produced for sale
                in the U.S., and
                TARGETCO2,i is the CO2 target (as defined above) for
                model configuration i.
                 Section VI.A.1 describes the advantages of attribute standards,
                generally. Section VI.A.2 explains the agencies' specific decision to
                use vehicle footprint as the attribute over which to vary stringency
                for past and current rules. Section VI.A.3 discusses the policy
                considerations in selecting the specific mathematical function. Section
                VI.A.4 discusses the methodologies used to develop current attribute-
                based standards, and the agencies' current proposal to continue to do
                so for MYs 2021-2026. Section VI.A.5 discusses the methodologies used
                to reconsider the mathematical function for the proposed standards.
                1. Why attribute-based standards, and what are the benefits?
                 Under attribute-based standards, every vehicle model has fuel
                economy and CO2 targets, the levels of which depend on the
                level of that vehicle's determining attribute (for the MYs 2021-2026
                standards, footprint is the determining attribute, as discussed below).
                The manufacturer's fleet average CAFE performance is calculated by the
                harmonic production-weighted average of those targets, as defined
                below:
                [GRAPHIC] [TIFF OMITTED] TR30AP20.055
                 Here, i represents a given model \232\ in a manufacturer's
                fleet, Productioni represents the U.S. production of that model, and
                Targeti represents the target as defined by the attribute-based
                standards. This means no vehicle is required to meet its target;
                instead, manufacturers are free to balance improvements however they
                deem best within (and, given credit transfers, at least partially
                across) their fleets.
                 \232\ If a model has more than one footprint variant, here each
                of those variants is treated as a unique model, i, since each
                footprint variant will have a unique target.
                ---------------------------------------------------------------------------
                 Because CO2 is on a gram per mile basis rather a mile
                per gallon basis,
                [[Page 24249]]
                harmonic averaging is not necessary when calculating required
                CO2 levels:
                [GRAPHIC] [TIFF OMITTED] TR30AP20.056
                 The idea is to select the shape of the mathematical function
                relating the standard to the fuel economy-related attribute to reflect
                the trade-offs manufacturers face in producing more of that attribute
                over fuel efficiency (due to technological limits of production and
                relative demand of each attribute). If the shape captures these trade-
                offs, every manufacturer is more likely to continue adding fuel-
                efficient technology across the distribution of the attribute within
                their fleet, instead of potentially changing the attribute--and other
                correlated attributes, including fuel economy--as a part of their
                compliance strategy. Attribute-based standards that achieve this have
                several advantages.
                 First, assuming the attribute is a measurement of vehicle size,
                attribute-based standards help to at least partially reduce the
                incentive for manufacturers to respond to CAFE and CO2
                standards by reducing vehicle size in ways harmful to safety, as
                compared to ``flat,'' non-attribute based standards.\233\ Larger
                vehicles, in terms of mass and/or crush space, generally consume more
                fuel and produce more carbon dioxide emissions, but are also generally
                better able to protect occupants in a crash.\234\ Because each vehicle
                model has its own target (determined by a size-related attribute),
                properly fitted attribute-based standards reduce the incentive to build
                smaller vehicles simply to meet a fleet-wide average, because smaller
                vehicles are subject to more stringent compliance targets.
                ---------------------------------------------------------------------------
                 \233\ The 2002 NAS Report described at length and quantified the
                potential safety problem with average fuel economy standards that
                specify a single numerical requirement for the entire industry. See
                Transportation Research Board and National Research Council. 2002.
                Effectiveness and Impact of Corporate Average Fuel Economy (CAFE)
                Standards, Washington, DC: The National Academies Press (``2002 NAS
                Report'') at 5, finding 12, available at https://www.nap.edu/catalog/10172/effectiveness-and-impact-of-corporate-average-fuel-economy-cafe-standards (last accessed June 15, 2018). Ensuing
                analyses, including by NHTSA, support the fundamental conclusion
                that standards structured to minimize incentives to downsize all but
                the largest vehicles will tend to produce better safety outcomes
                than flat standards.
                 \234\ Bento, A., Gillingham, K., & Roth, K. (2017). The Effect
                of Fuel Economy Standards on Vehicle Weight Dispersion and Accident
                Fatalities. NBER Working Paper No. 23340. Available at http://www.nber.org/papers/w23340 (last accessed June 15, 2018).
                ---------------------------------------------------------------------------
                 Second, attribute-based standards, if properly fitted, provide
                automakers with more flexibility to respond to consumer preferences
                than do single-valued standards. As discussed above, a single-valued
                standard encourages a fleet mix with a larger share of smaller vehicles
                by creating incentives for manufacturers to use downsizing the average
                vehicle in their fleet (possibly through fleet mixing) as a compliance
                strategy, which may result in manufacturers building vehicles for
                compliance reasons that consumers do not want. Under a size-related,
                attribute-based standard, reducing the size of the vehicle for
                compliance's sake is a less-viable strategy because smaller vehicles
                have more stringent regulatory targets. As a result, the fleet mix
                under such standards is more likely to reflect aggregate consumer
                demand for the size-related attribute used to determine vehicle
                targets.
                 Third, attribute-based standards provide a more equitable
                regulatory framework across heterogeneous manufacturers who may each
                produce different shares of vehicles along attributes correlated with
                fuel economy.\235\ An industry-wide single-value CAFE standard imposes
                disproportionate cost burden and compliance challenges on manufacturers
                who produce more vehicles with attributes inherently correlated with
                lower fuel economy--i.e. manufacturers who produce, on average, larger
                vehicles. As discussed above, retaining flexibility for manufacturers
                to produce vehicles which respect heterogeneous market preferences is
                an important consideration. Since manufacturers may target different
                markets as a part of their business strategy, ensuring that these
                manufacturers do not incur a disproportionate share of the regulatory
                cost burden is an important part of conserving consumer choices within
                the market.
                ---------------------------------------------------------------------------
                 \235\ 2002 NAS Report at 4-5, finding 10.
                ---------------------------------------------------------------------------
                 Industry commenters generally supported attribute-based standards,
                while other commenters questioned their benefits. IPI argued that
                preserving the current vehicle mix was not necessarily desirable or
                necessary for consumer welfare, and suggested that some vehicle
                downsizing in the fleet might be beneficial both for safety and for
                compliance.\236\ IPI also argued that compliance credit trading would
                ``help smooth out any disproportionate impacts on certain
                manufacturers'' and ``ensure that manufacturers with relatively
                efficient fleets still have an incentive to continue improving fuel
                economy (in order to generate credits)'' \237\ Similarly, citing Ito
                and Sallee, Kathryn Doolittle commented that ``. . . Ito and Sallee
                (2018) have found ABR [``attribute-based regulations''] inefficient in
                cost when juxtaposed with flat standard with compliance trading.''
                \238\
                ---------------------------------------------------------------------------
                 \236\ IPI, NHTSA-2018-0067-12362, at 14-15.
                 \237\ IPI, NHTSA-2018-0067-12362, at 14.
                 \238\ Doolittle, K, NHTSA-2018-0067-7411. See also Ito, K and
                Sallee, J. ``The Economics of Attribute-Based Regulation: Theory and
                Evidence from Fuel Economy Standards.'' The Review of Economics and
                Statistics (2018), 100(2), pp. 319-36.
                ---------------------------------------------------------------------------
                 The agencies have considered these comments. IPI incorrectly
                characterizes the agencies' prior statements as claims that it is
                important to preserve the current vehicle mix. EPA and NHTSA have never
                claimed, and are not today claiming that it is important to preserve
                the current fleet mix. The agencies have said, and are today
                reiterating, that it is reasonable to expect that reducing the tendency
                of standards to distort the market should reduce at least part of the
                tendency of standards to reduce consumer welfare. Or, more concisely,
                it is better to work with the market than against it. Single-value (aka
                flat) CAFE standards in place from the 1970s through 2010 were clearly
                distortionary. Recognizing this, the National Academy of Sciences
                recommended in 2002 that NHTSA adopt attribute-based CAFE standards.
                NHTSA did so in 2006, for light trucks produced starting MY 2008. As
                mentioned above, in 2007, Congress codified the requirement for
                attribute-based passenger car and light truck CAFE standards. Agreeing
                with this history, premise, and motivation, EPA has also adopted
                attribute-based CO2 standards. None of this is to say the
                agencies consider it important to hold fleet mix constant. Rather, the
                agencies expect that, compared to flat standards, attribute-based
                standards can allow the market--including fleet mix--to better
                [[Page 24250]]
                follow its natural course, and all else equal, consumer acceptance is
                likely to be greater if the market does so.
                 The agencies also disagree with comments implying that compliance
                credit trading can address all of the market distortion that flat
                standards would entail. Evidence thus far suggests that trading is
                fragmented, with some manufacturers apparently willing to trade only
                with some other specific manufacturers. The Ito and Sallee article
                cited by one commenter is a highly idealized theoretical construction,
                with the authors noting, inter alia, that their model ``assumes perfect
                competition.'' \239\ Its findings regarding comparative economic
                efficiency of flat- and attribute-based standards are, therefore,
                merely hypothetical, and the agencies find little basis in recent
                transactions to suggest the compliance credit trading market reflects
                the authors' idealized assumptions. Even if the agencies did expect
                credit trading markets to operate as in an idealized textbook example,
                basing the structure of standards on the presumption of perfect trading
                would not be appropriate. FCA commented that ``. . . when flexibilities
                are considered while setting targets, they cease to be flexibilities
                and become simply additional technology mandates,'' and the Alliance
                commented, similarly, that ``the Agencies should keep `flexibilities'
                as optional ways to comply and not unduly assume that each flexibility
                allows additional stringency of footprint-based standards.'' \240\
                Perhaps recognizing this reality, Congress has barred NHTSA from
                considering manufacturers' ability to use compliance credits (even
                credits earned and used by the same OEM, much less credits traded
                between OEMs). As discussed further in Section VIII.A.2, EPA believes
                that while credit trading may be a useful flexibility to reduce the
                overall costs of the program, it is important to set standards in a way
                that does not rely on credit purchasing availability as a compliance
                mechanism.
                ---------------------------------------------------------------------------
                 \239\ Ito and Sallee, op. cit., Supplemental Appendix, at A-15,
                available at https://www.mitpressjournals.org/doi/suppl/10.1162/REST_a_00704/suppl_file/REST_a_00704-esupp.pdf (accessed October 29,
                2019).
                 \240\ FCA, NHTSA-2018-0067-11943, at 6; Alliance, NHTSA-2018-
                0067-12073, Full Comment Set, at 40, fn. 82.
                ---------------------------------------------------------------------------
                 Considering these comments and realities, considering EPCA's
                requirement for attribute-based CAFE standards, and considering the
                benefits of regulatory harmonization, the agencies are, again,
                finalizing attribute-based CAFE and CO2 standards rather
                than, for either program, finalizing flat standards.
                Why footprint as the attribute?
                 It is important that the CAFE and CO2 standards be set
                in a way that does not unnecessarily incentivize manufacturers to
                respond by selling vehicles that are less safe. Vehicle size is highly
                correlated with vehicle safety--for this reason, it is important to
                choose an attribute correlated with vehicle size (mass or some
                dimensional measure). Given this consideration, there are several
                policy and technical reasons why footprint is considered to be the most
                appropriate attribute upon which to base the standards, even though
                other vehicle size attributes (notably, curb weight) are more strongly
                correlated with fuel economy and tailpipe CO2 emissions.
                 First, mass is strongly correlated with fuel economy; it takes a
                certain amount of energy to move a certain amount of mass. Footprint
                has some positive correlation with frontal surface area, likely a
                negative correlation with aerodynamics, and therefore fuel economy, but
                the relationship is less deterministic. Mass and crush space
                (correlated with footprint) are both important safety considerations.
                As discussed below and in the accompanying PRIA, NHTSA's research of
                historical crash data indicates that holding footprint constant, and
                decreasing the mass of the largest vehicles, will result in a net
                positive safety impact to drivers overall, while holding footprint
                constant and decreasing the mass of the smallest vehicles will result
                in a net decrease in fleetwide safety. Properly fitted footprint-based
                standards provide little, if any, incentive to build smaller footprint
                vehicles to meet CAFE and CO2 standards, and therefore help
                minimize the impact of standards on overall fleet safety.
                 Second, it is important that the attribute not be easily
                manipulated in a manner that does not achieve the goals of EPCA or
                other goals, such as safety. Although weight is more strongly
                correlated with fuel economy than footprint, there is less risk of
                artificial manipulation (i.e., changing the attribute(s) to achieve a
                more favorable target) by increasing footprint under footprint-based
                standards than there would be by increasing vehicle mass under weight-
                based standards. It is relatively easy for a manufacturer to add enough
                weight to a vehicle to decrease its applicable fuel economy target a
                significant amount, as compared to increasing vehicle footprint, which
                is a much more complicated change that typically takes place only with
                a vehicle redesign.
                 Further, some commenters on the MY 2011 CAFE rulemaking were
                concerned that there would be greater potential for such manipulation
                under multi-attribute standards, such as those that also depend on
                weight, torque, power, towing capability, and/or off-road capability.
                As discussed in NHTSA's MY 2011 CAFE final rule,\241\ it is anticipated
                that the possibility of manipulation is lowest with footprint-based
                standards, as opposed to weight-based or multi-attribute-based
                standards. Specifically, standards that incorporate weight, torque,
                power, towing capability, and/or off-road capability in addition to
                footprint would not only be more complex, but by providing degrees of
                freedom with respect to more easily adjusted attributes, they could
                make it less certain that the future fleet would actually achieve the
                projected average fuel economy and CO2 levels. This is not
                to say that a footprint-based system eliminates manipulation, or that a
                footprint-based system eliminates the possibility that manufacturers
                will change vehicles in ways that compromise occupant protection, but
                footprint-based standards achieve the best balance among affected
                considerations.
                ---------------------------------------------------------------------------
                 \241\ See 74 FR at 14359 (Mar. 30, 2009).
                ---------------------------------------------------------------------------
                 Several stakeholders commented on whether vehicular footprint is
                the most suitable attribute upon which to base standards. IPI commented
                that ``. . . footprint-based standards may be unnecessary to respect
                consumer preferences, may negatively impact safety, and may be overall
                inefficient. Several arguments call into question the footprint-based
                approach, but a particularly important one is that large vehicles can
                impose a negative safety externality on other drivers.'' \242\ IPI
                commented, further, that the agencies should consider the relative
                merits of other vehicle attributes, including vehicle fuel type,
                suggesting that it would be more difficult for manufacturers to
                manipulate a flatter standard or one ``differentiated by fuel type.''
                \243\ Similarly, Michalek and Whitefoot recommended ``that the agencies
                reexamine automaker response to the footprint-based standards to
                determine if adjustments should be made to avoid inducing increases to
                vehicle size.'' \244\
                ---------------------------------------------------------------------------
                 \242\ IPI, NHTSA-2018-0067-12362, at 12.
                 \243\ IPI, NHTSA-2018-0067-12362, at 13 et seq.
                 \244\ Michalek, J. and Whitefoot, K., NHTSA-2018-0067-11903, at
                13.
                ---------------------------------------------------------------------------
                [[Page 24251]]
                 Conversely, ICCT commented that ``the switch to footprint-based
                CAFE and [CO2] standards has been widely credited with
                diminishing safety concerns with efficiency standards. Footprint
                standards encourage larger vehicles with wider track width, which
                reduces rollovers, and longer wheelbase, which increases the crush
                space and reduces deceleration forces for both vehicles in a two-
                vehicle collision.'' \245\ Similarly, BorgWarner commented that ``the
                use of a footprint standard not only provides greater incentive for
                mass reduction, but also encourages a larger footprint for a given
                vehicle mass, thus providing increased safety for a given mass
                vehicle,'' \246\ and the Aluminum Association commented footprint based
                standards drive ``fuel-efficiency improvement across all vehicle
                classes,'' ``eliminate the incentive to shift fleet volume to smaller
                cars which has been shown to slightly decrease safety in vehicle-to-
                vehicle collisions,'' and provide ``an incentive for reducing weight in
                the larger vehicles, where weight reduction is of the most benefit for
                societal safety,'' citing Ford's aluminum-intensive F150 pickup truck
                as an example.\247\ NADA urged the agencies to continue basing
                standards on vehicle footprint, as doing so ``serves both to require
                and allow OEMs to build more fuel-efficient vehicles across the
                broadest possible light-duty passenger car and truck spectrum,'' \248\
                and UCS commented that footprint-based standards ``increase consumer
                choice, ensuring that the vehicles available for purchase in every
                vehicle class continue to get more efficient.'' \249\ Furthermore,
                regarding concerns that footprint-based standards may be susceptible to
                manipulation, the Alliance commented that ``the data above [from
                Novation Analytics] shows there are no systemic footprint increases (or
                any type of target manipulation) occurring.'' \250\ While FCA's
                comments supported this Alliance comment, FCA commented further that,
                lacking some utility-related vehicle attributes such as towing
                capability, 4-wheel-drive, and ride height, ``it is clear the footprint
                standard does not fully account for pickup truck capability and the
                components needed such as larger powertrains, greater mass and frontal
                area,'' and requested the agencies ``correct LDT standards to reflect
                the current market preference for capability over efficiency, and
                introduce mechanisms into the regulation that can adjust for efficiency
                and capability tradeoffs that footprint standards currently ignore.''
                \251\
                ---------------------------------------------------------------------------
                 \245\ ICCT, NHTSA-2018-0067-11741, at B-4.
                 \246\ BorgWarner, NHTSA-2018-0067-11893, at 10.
                 \247\ Aluminum Association, NHTSA-2018-0067-11952, at 3.
                 \248\ NADA, NHTSA-2018-0067-12064, at 13.
                 \249\ UCS, UCS, NHTSA-2018-0067-12039, at 46.
                 \250\ Alliance, NHTSA-2018-0067-12073, at 123.
                 \251\ FCA, NHTSA-2018-0067-11943, at 49.
                ---------------------------------------------------------------------------
                 When first electing to adopt footprint-based standards, NHTSA
                carefully considered other alternatives, including vehicle mass and
                ``shadow'' (overall width multiplied by overall length). Compared to
                both of these other alternatives, footprint is much less susceptible to
                gaming, because while there is some potential to adjust track width,
                wheelbase is more expensive to change, at least outside a planned
                vehicle redesign. EPA agreed with NHTSA's assessment, nothing has
                changed the relative merits of at least these three potential
                attributes, and nothing in the evolution of the fleet demonstrates that
                footprint-based standards are leading manufacturers to increase the
                footprint of specific vehicle models by more than they would in
                response to customer demand. Also, even if footprint-based standards
                are encouraging some increases in vehicle size, NHTSA continues to
                maintain, and EPA to agree, that such increases should tend to improve
                overall highway safety rather than degrading it. Regarding FCA's
                request that the agencies adopt an approach that accounts for a wider
                range of vehicle attributes related to both vehicle fuel economy and
                customer-facing vehicle utility, the agencies are concerned that doing
                so could further complicate already-complex standards and also lead to
                unintended consequences. For example, it is not currently clear how a
                multi-attribute approach would appropriately balance emphasis between
                vehicle attributes (e.g., how much relative fuel consumption should be
                attributed to, respectively, vehicle footprint, towing capacity, drive
                type, and ground clearance). Also, basing standards on, in part, ground
                clearance would encourage manufacturers to increase ride height,
                potentially increasing the frequency of vehicle rollover crashes.
                Regarding IPI's recommendation that fuel type be included as a vehicle
                attribute for attribute-based standards, the agencies note that both
                CAFE and CO2 standards already account for fuel type in the
                procedures for measuring fuel economy levels and CO2
                emission rates, and for calculating fleet average CAFE and
                CO2 levels.
                 Therefore, having considered public comments on the choice of
                vehicle attributes for CAFE and CO2 standards, the agencies
                are finalizing standards that, as proposed, are defined in terms of
                vehicle footprint.
                3. What mathematical function should be used to specify footprint-based
                standards?
                 In requiring NHTSA to ``prescribe by regulation separate average
                fuel economy standards for passenger and non-passenger automobiles
                based on 1 or more vehicle attributes related to fuel economy and
                express each standard in the form of a mathematical function,'' EPCA/
                EISA provides ample discretion regarding not only the selection of the
                attribute(s), but also regarding the nature of the function. The CAA
                provides no specific direction regarding CO2 regulation, and
                EPA has continued to harmonize this aspect of its CO2
                regulations with NHTSA's CAFE regulations. The relationship between
                fuel economy (and CO2 emissions) and footprint, though
                directionally clear (i.e., fuel economy tends to decrease and
                CO2 emissions tend to increase with increasing footprint),
                is theoretically vague, and quantitatively uncertain; in other words,
                not so precise as to a priori yield only a single possible curve.
                 The decision of how to specify this mathematical function therefore
                reflects some amount of judgment. The function can be specified with a
                view toward achieving different environmental and petroleum reduction
                goals, encouraging different levels of application of fuel-saving
                technologies, avoiding any adverse effects on overall highway safety,
                reducing disparities of manufacturers' compliance burdens, and
                preserving consumer choice, among other aims. The following are among
                the specific technical concerns and resultant policy tradeoffs the
                agencies have considered in selecting the details of specific past and
                future curve shapes:
                 Flatter standards (i.e., curves) increase the risk that
                both the size of vehicles will be reduced, potentially compromising
                highway safety, and reducing any utility consumers would have gained
                from a larger vehicle.
                 Steeper footprint-based standards may create incentives to
                upsize vehicles, potentially oversupplying vehicles of certain
                footprints beyond what consumers would naturally demand, and thus
                increasing the possibility that fuel savings and CO2
                reduction benefits will be forfeited artificially.
                 Given the same industry-wide average required fuel economy
                or CO2 standard, flatter standards tend to place greater
                compliance burdens on full-line manufacturers.
                 Given the same industry-wide average required fuel economy
                or CO2
                [[Page 24252]]
                standard, dramatically steeper standards tend to place greater
                compliance burdens on limited-line manufacturers (depending of course,
                on which vehicles are being produced).
                 If cutpoints are adopted, given the same industry-wide
                average required fuel economy, moving small-vehicle cutpoints to the
                left (i.e., up in terms of fuel economy, down in terms of
                CO2 emissions) discourages the introduction of small
                vehicles, and reduces the incentive to downsize small vehicles in ways
                that could compromise overall highway safety.
                 If cutpoints are adopted, given the same industry-wide
                average required fuel economy, moving large-vehicle cutpoints to the
                right (i.e., down in terms of fuel economy, up in terms of
                CO2 emissions) better accommodates the design requirements
                of larger vehicles--especially large pickups--and extends the size
                range over which downsizing is discouraged.
                4. What mathematical functions have been used previously, and why?
                 Notwithstanding the aforementioned discretion under EPCA/EISA, data
                should inform consideration of potential mathematical functions, but
                how relevant data is defined and interpreted, and the choice of
                methodology for fitting a curve to that data, can and should include
                some consideration of specific policy goals. This section summarizes
                the methodologies and policy concerns that were considered in
                developing previous target curves (for a complete discussion see the
                2012 FRIA).
                 As discussed below, the MY 2011 final curves followed a constrained
                logistic function defined specifically in the final rule.\252\ The MYs
                2012-2021 final standards and the MYs 2022-2025 augural standards are
                defined by constrained linear target functions of footprint, as shown
                below: \253\
                ---------------------------------------------------------------------------
                 \252\ See 74 FR 14196, 14363-14370 (Mar. 30, 2009) for NHTSA
                discussion of curve fitting in the MY 2011 CAFE final rule.
                 \253\ The right cutpoint for the light truck curve was moved
                further to the right for MYs 2017-2021, so that more possible
                footprints would fall on the sloped part of the curve. In order to
                ensure that, for all possible footprints, future standards would be
                at least as high as MY 2016 levels, the final standards for light
                trucks for MYs 2017-2021 is the maximum of the MY 2016 target curves
                and the target curves for the give MY standard. This is defined
                further in the 2012 final rule. See 77 FR 62624, at 62699-700 (Oct.
                15, 2012).
                [GRAPHIC] [TIFF OMITTED] TR30AP20.057
                 Here, Target is the fuel economy target applicable to vehicles
                of a given footprint in square feet (Footprint). The upper
                asymptote, a, and the lower asymptote, b, are specified in mpg; the
                reciprocal of these values represent the lower and upper asymptotes,
                respectively, when the curve is instead specified in gallons per
                mile (gpm). The slope, c, and the intercept, d, of the linear
                portion of the curve are specified as gpm per change in square feet,
                ---------------------------------------------------------------------------
                and gpm, respectively.
                 The min and max functions will take the minimum and maximum values
                within their associated parentheses. Thus, the max function will first
                find the maximum of the fitted line at a given footprint value and the
                lower asymptote from the perspective of gpm. If the fitted line is
                below the lower asymptote it is replaced with the floor, which is also
                the minimum of the floor and the ceiling by definition, so that the
                target in mpg space will be the reciprocal of the floor in mpg space,
                or simply, a. If, however, the fitted line is not below the lower
                asymptote, the fitted value is returned from the max function and the
                min function takes the minimum value of the upper asymptote (in gpm
                space) and the fitted line. If the fitted value is below the upper
                asymptote, it is between the two asymptotes and the fitted value is
                appropriately returned from the min function, making the overall target
                in mpg the reciprocal of the fitted line in gpm. If the fitted value is
                above the upper asymptote, the upper asymptote is returned is returned
                from the min function, and the overall target in mpg is the reciprocal
                of the upper asymptote in gpm space, or b.
                 In this way curves specified as constrained linear functions are
                specified by the following parameters:
                a = upper limit (mpg)
                b = lower limit (mpg)
                c = slope (gpm per sq.ft.)
                d = intercept (gpm)
                 The slope and intercept are specified as gpm per sq. ft. and gpm
                instead of mpg per sq. ft. and mpg because fuel consumption and
                emissions appear roughly linearly related to gallons per mile (the
                reciprocal of the miles per gallon).
                a) NHTSA in MY 2008 and MY 2011 CAFE (Constrained Logistic)
                 For the MY 2011 CAFE rule, NHTSA estimated fuel economy levels by
                footprint from the MY 2008 fleet after normalization for differences in
                technology,\254\ but did not make adjustments to reflect other vehicle
                attributes (e.g., power-to-weight ratios). Starting with the
                technology-adjusted passenger car and light truck fleets, NHTSA used
                minimum absolute deviation (MAD) regression without sales weighting to
                fit a logistic form as a starting point to develop mathematical
                functions defining the standards. NHTSA then identified footprints at
                which to apply minimum and maximum values (rather than letting the
                standards extend without limit) and transposed these functions
                vertically (i.e., on a gallons-per-mile basis, uniformly downward) to
                produce the promulgated standards. In the preceding rule, for MYs 2008-
                2011 light truck standards, NHTSA examined a range of potential
                functional forms, and concluded that, compared to other considered
                forms, the constrained logistic form provided the expected and
                appropriate trend (decreasing fuel economy as footprint increases), but
                avoided creating ``kinks'' the agency was concerned would provide
                distortionary incentives for vehicles with neighboring footprints.\255\
                ---------------------------------------------------------------------------
                 \254\ See 74 FR 14196, 14363-14370 (Mar. 30, 2009) for NHTSA
                discussion of curve fitting in the MY 2011 CAFE final rule.
                 \255\ See 71 FR 17556, 17609-17613 (Apr. 6, 2006) for NHTSA
                discussion of ``kinks'' in the MYs 2008-2011 light truck CAFE final
                rule (there described as ``edge effects''). A ``kink,'' as used
                here, is a portion of the curve where a small change in footprint
                results in a disproportionally large change in stringency.
                ---------------------------------------------------------------------------
                b) MYs 2012-2016 Standards (Constrained Linear)
                 For the MYs 2012-2016 rule, potential methods for specifying
                mathematical functions to define fuel economy and CO2
                standards were reevaluated. These methods were fit to the same MY 2008
                data as the MY 2011 standard. Considering these further specifications,
                the constrained logistic form, if applied to post-MY 2011 standards,
                would likely contain a steep mid-section that would provide undue
                incentive to increase the footprint of midsize passenger cars.\256\ A
                range of
                [[Page 24253]]
                methods to fit the curves would have been reasonable, and a minimum
                absolute deviation (MAD) regression without sales weighting on a
                technology-adjusted car and light truck fleet was used to fit a linear
                equation. This equation was used as a starting point to develop
                mathematical functions defining the standards. Footprints were then
                identified at which to apply minimum and maximum values (rather than
                letting the standards extend without limit). Finally, these
                constrained/piecewise linear functions were transposed vertically
                (i.e., on a gpm or CO2 basis, uniformly downward) by
                multiplying the initial curve by a single factor for each MY standard
                to produce the final attribute-based targets for passenger cars and
                light trucks described in the final rule.\257\ These transformations
                are typically presented as percentage improvements over a previous MY
                target curve.
                ---------------------------------------------------------------------------
                 \256\ 75 FR at 25362.
                 \257\ See generally 74 FR at 49491-96; 75 FR at 25357-62.
                ---------------------------------------------------------------------------
                c) MYs 2017 and Beyond Standards (Constrained Linear)
                 The mathematical functions finalized in 2012 for MYs 2017 and
                beyond changed somewhat from the functions for the MYs 2012-2016
                standards. These changes were made both to address comments from
                stakeholders, and to consider further some of the technical concerns
                and policy goals judged more preeminent under the increased uncertainty
                of the impacts of finalizing and proposing standards for model years
                further into the future.\258\ Recognizing the concerns raised by full-
                line OEMs, it was concluded that continuing increases in the stringency
                of the light truck standards would be more feasible if the light truck
                curve for MYs 2017 and beyond was made steeper than the MY 2016 truck
                curve and the right (large footprint) cut-point was extended only
                gradually to larger footprints. To accommodate these considerations,
                the 2012 final rule finalized the slope fit to the MY 2008 fleet using
                a sales-weighted, ordinary least-squares regression, using a fleet that
                had technology applied to make the technology application across the
                fleet more uniform, and after adjusting the data for the effects of
                weight-to-footprint. Information from an updated MY 2010 fleet was also
                considered to support this decision. As the curve was vertically
                shifted (with fuel economy specified as mpg instead of gpm or
                CO2 emissions) upwards, the right cutpoint was progressively
                moved for the light truck curves with successive model years, reaching
                the final endpoint for MY 2021.
                ---------------------------------------------------------------------------
                 \258\ The MYs 2012-2016 final standards were signed April 1st,
                2010--putting 6.5 years between its signing and the last affected
                model year, while the MYs 2017-2021 final standards were signed
                August 28th, 2012--giving just more than nine years between signing
                and the last affected final standards.
                ---------------------------------------------------------------------------
                5. Reconsidering the Mathematical Functions for Today's Rulemaking
                a) Why is it important to reconsider the mathematical functions?
                 By shifting the developed curves by a single factor, it is assumed
                that the underlying relationship of fuel consumption (in gallons per
                mile) to vehicle footprint does not change significantly from the model
                year data used to fit the curves to the range of model years for which
                the shifted curve shape is applied to develop the standards. However,
                it must be recognized that the relationship between vehicle footprint
                and fuel economy is not necessarily constant over time; newly developed
                technologies, changes in consumer demand, and even the curves
                themselves could influence the observed relationships between the two
                vehicle characteristics. For example, if certain technologies are more
                effective or more marketable for certain types of vehicles, their
                application may not be uniform over the range of vehicle footprints.
                Further, if market demand has shifted between vehicle types, so that
                certain vehicles make up a larger share of the fleet, any underlying
                technological or market restrictions which inform the average shape of
                the curves could change. That is, changes in the technology or market
                restrictions themselves, or a mere re-weighting of different vehicles
                types, could reshape the fit curves.
                 For the above reasons, the curve shapes were reconsidered in the
                proposal using the newest available data from MY 2016. With a view
                toward corroboration through different techniques, a range of
                descriptive statistical analyses were conducted that do not require
                underlying engineering models of how fuel economy and footprint might
                be expected to be related, and a separate analysis that uses vehicle
                simulation results as the basis to estimate the relationship from a
                perspective more explicitly informed by engineering theory was
                conducted as well. Despite changes in the new vehicle fleet both in
                terms of technologies applied and in market demand, the underlying
                statistical relationship between footprint and fuel economy has not
                changed significantly since the MY 2008 fleet used for the 2012 final
                rule; therefore, EPA and NHTSA proposed to continue to use the curve
                shapes fit in 2012. The analysis and reasoning supporting this decision
                follows.
                b) What statistical analyses did EPA and NHTSA consider?
                 In considering how to address the various policy concerns discussed
                above, data from the MY 2016 fleet was considered, and a number of
                descriptive statistical analyses (i.e., involving observed fuel economy
                levels and footprints) using various statistical methods, weighting
                schemes, and adjustments to the data to make the fleets less
                technologically heterogeneous were performed. There were several
                adjustments to the data that were common to all of the statistical
                analyses considered.
                 With a view toward isolating the relationship between fuel economy
                and footprint, the few diesels in the fleet were excluded, as well as
                the limited number of vehicles with partial or full electric
                propulsion; when the fleet is normalized so that technology is more
                homogenous, application of these technologies is not allowed. This is
                consistent with the methodology used in the 2012 final rule.
                 The above adjustments were applied to all statistical analyses
                considered, regardless of the specifics of each of the methods,
                weights, and technology level of the data, used to view the
                relationship of vehicle footprint and fuel economy. Table V-1, below,
                summarizes the different assumptions considered and the key attributes
                of each. The analysis was performed considering all possible
                combinations of these assumptions, producing a total of eight footprint
                curves.
                [[Page 24254]]
                [GRAPHIC] [TIFF OMITTED] TR30AP20.058
                (1) Current Technology Level Curves
                 The ``current technology'' level curves exclude diesels and
                vehicles with electric propulsion, as discussed above, but make no
                other changes to each model year fleet. Comparing the MY 2016 curves to
                ones built under the same methodology from previous model year fleets
                shows whether the observed curve shape has changed significantly over
                time as standards have become more stringent. Importantly, these curves
                will include any market forces which make technology application
                variable over the distribution of footprint. These market forces will
                not be present in the ``maximum technology'' level curves: By making
                technology levels homogenous, this variation is removed. The current
                technology level curves built using both regression types and both
                regression weight methodologies from the MY 2008, MY 2010, and MY 2016
                fleets, shown in more detail in Chapter 4.4.2.1 of the PRIA, support
                the curve slopes finalized in the 2012 final rule. The curves built
                from most methodologies using each fleet generally shift, but remain
                very similar in slope. This suggests that the relationship of footprint
                to fuel economy, including both technology and market limits, has not
                significantly changed.
                (2) Maximum Technology Level Curves
                 As in prior rulemakings, technology differences between vehicle
                models were considered to be a significant factor producing uncertainty
                regarding the relationship between fuel consumption and footprint.
                Noting that attribute-based standards are intended to encourage the
                application of additional technology to improve fuel efficiency and
                reduce CO2 emissions across the distribution of footprint in
                the fleet, approaches were considered in which technology application
                is simulated for purposes of the curve fitting analysis in order to
                produce fleets that are less varied in technology content. This
                approach helps reduce ``noise'' (i.e., dispersion) in the plot of
                vehicle footprints and fuel consumption levels and identify a more
                technology-neutral relationship between footprint and fuel consumption.
                The results of updated analysis for maximum technology level curves are
                also shown in Chapter 4.4.2.2 of the PRIA. Especially if vehicles
                progress over time toward more similar size-specific efficiency,
                further removing variation in technology application both better
                isolates the relationship between fuel consumption and footprint and
                further supports the curve slopes finalized in the 2012 final rule.
                c) What other methodologies were considered?
                 The methods discussed above are descriptive in nature, using
                statistical analysis to relate observed fuel economy levels to observed
                footprints for known vehicles. As such, these methods are clearly based
                on actual data, answering the question ``how does fuel economy appear
                to be related to footprint?'' However, being independent of explicit
                engineering theory, they do not answer the question ``how might one
                expect fuel economy to be related to footprint?'' Therefore, as an
                alternative to the above methods, an alternative methodology was also
                developed and applied that, using full-vehicle simulation, comes closer
                to answering the second question, providing a basis either to
                corroborate answers to the first, or suggest that further investigation
                could be important.
                 As discussed in the 2012 final rule, several manufacturers have
                confidentially shared with the agencies what they described as
                ``physics-based'' curves, with each OEM showing significantly different
                shapes for the footprint-fuel economy relationships. This variation
                suggests that manufacturers face different curves given the other
                attributes of the vehicles in their fleets (i.e., performance
                [[Page 24255]]
                characteristics) and/or that their curves reflected different levels of
                technology application. In reconsidering the shapes of the proposed MYs
                2021-2026 standards, a similar estimation of physics-based curves
                leveraging third-party simulation work form Argonne National
                Laboratories (Argonne) was developed. Estimating physics-based curves
                better ensures that technology and performance are held constant for
                all footprints; augmenting a largely statistical analysis with an
                analysis that more explicitly incorporates engineering theory helps to
                corroborate that the relationship between fuel economy and footprint is
                in fact being characterized.
                 Tractive energy is the amount of energy it will take to move a
                vehicle.\259\ Here, tractive energy effectiveness is defined as the
                share of the energy content of fuel consumed which is converted into
                mechanical energy and used to move a vehicle--for internal combustion
                engine (ICE) vehicles, this will vary with the relative efficiency of
                specific engines. Data from Argonne simulations suggest that the limits
                of tractive energy effectiveness are approximately 25 percent for
                vehicles with internal combustion engines which do not possess
                integrated starter generator, other hybrid, plug-in, pure electric, or
                fuel cell technology.
                ---------------------------------------------------------------------------
                 \259\ Thomas, J. ``Drive Cycle Powertrain Efficiencies and
                Trends Derived from EPA Vehicle Dynamometer Results,'' SAE Int. J.
                Passeng. Cars--Mech. Syst. 7(4):2014, doi:10.4271/2014-01-2562.
                Available at https://www.sae.org/publications/technical-papers/content/2014-01-2562/ (last accessed June 15, 2018).
                ---------------------------------------------------------------------------
                 A tractive energy prediction model was also developed to support
                today's proposal. Given a vehicle's mass, frontal area, aerodynamic
                drag coefficient, and rolling resistance as inputs, the model will
                predict the amount of tractive energy required for the vehicle to
                complete the Federal test cycle. This model was used to predict the
                tractive energy required for the average vehicle of a given footprint
                \260\ and ``body technology package'' to complete the cycle. The body
                technology packages considered are defined in Table V-2, below. Using
                the absolute tractive energy predicted and tractive energy
                effectiveness values spanning possible ICE engines, fuel economy values
                were then estimated for different body technology packages and engine
                tractive energy effectiveness values.
                ---------------------------------------------------------------------------
                 \260\ The mass reduction curves used elsewhere in this analysis
                were used to predict the mass of a vehicle with a given footprint,
                body style box, and mass reduction level. The `Body style Box' is 1
                for hatchbacks and minivans, 2 for pickups, and 3 for sedans, and is
                an important predictor of aerodynamic drag. Mass is an essential
                input in the tractive energy calculation.
                [GRAPHIC] [TIFF OMITTED] TR30AP20.059
                 Chapter 6 of the PRIA show the resultant CAFE levels estimated for
                the vehicle classes Argonne simulated for this analysis, at different
                footprint values and by vehicle ``box.'' Pickups are considered 1-box,
                hatchbacks and minivans are 2-box, and sedans are 3-box. These
                estimates are compared with the MY 2021 standards finalized in 2012.
                The general trend of the simulated data points follows the pattern of
                the previous MY 2021 standards for all technology packages and tractive
                energy effectiveness values presented in the PRIA. The tractive energy
                curves are intended to validate the curve shapes against a physics-
                based alternative, and the analysis suggests that the curve shapes
                track the physical relationship between fuel economy and tractive
                energy for different footprint values.
                 Physical limitations are not the only forces manufacturers face;
                their success is dependent upon producing vehicles that consumers
                desire and will purchase. For this reason, in setting future standards,
                the analysis will continue to consider information from statistical
                analyses that do not homogenize technology applications in addition to
                statistical analyses which do, as well as a tractive energy analysis
                similar to the one presented above.
                 The relationship between fuel economy and footprint remains
                directionally discernable but quantitatively uncertain. Nevertheless,
                each standard must commit to only one function. Approaching the
                question ``how is fuel economy related to footprint'' from different
                directions and applying different approaches has given EPA and NHTSA
                confidence that the function applied here appropriately and reasonably
                reflects the relationship between fuel economy and footprint.
                 The agencies invited comments on this conclusion and the supporting
                analysis. IPI raised concerns that ``. . . several dozen models (mostly
                subcompacts and sports cars) fall in the 30-40 square feet range, which
                are all subject to the same standards'' and that ``manufacturers of
                these models may have an incentive to decrease footprints as a
                compliance strategy, since doing so would not trigger more stringent
                standards.'' \261\ NHTSA and EPA agree that, all else equal, downsizing
                the smallest cars (e.g., Chevrolet Spark, Ford Fiesta, Mini Cooper,
                Mazda MX-5, Porsche 911, Toyota Yaris) would most likely tend to
                degrade overall highway safety. At the same time, as discussed above,
                the agencies recognize that small vehicles do appear attractive to some
                market segments (although obviously the Ford Fiesta and Porsche 911
                compete in different segments).
                [[Page 24256]]
                Therefore, there is a tension between on one hand, avoiding standards
                that unduly encourage safety-eroding downsizing and, on the other,
                avoiding standards that unduly penalize the market for small vehicles.
                The agencies examined this issue, and note that the market for the
                smallest vehicles has not evolved at all as estimated in the analysis
                supporting the 2012 final rule, and attribute this more to fuel prices
                and consumer demand for larger vehicles than to attribute-based CAFE
                and CO2 standards. For example, the market for vehicles with
                footprints less than 40 square foot was about 45 percent smaller in MY
                2017 than in MY 2010. The agencies also found that among the smallest
                vehicle models produced throughout MYs 2010-2017, most have become
                larger, not smaller. For example, while the Mazda MX-5's footprint
                decreased by 0.1 square foot (0.3 percent) during that time, the MY
                2017 versions of the Mini Cooper, Smart fortwo, Porsche 911, and Toyota
                Yaris had larger footprints than in MY 2010. With the market for very
                small vehicles shrinking, and with manufacturers not evidencing a
                tendency to make the smallest vehicles even smaller, the agencies are
                satisfied that it would be unwise to change the target functions such
                that targets never stop becoming more stringent as vehicle footprint
                becomes ever smaller, because doing so could further impede an already-
                shrinking market.
                ---------------------------------------------------------------------------
                 \261\ IPI, NHTSA-2018-0067-12362, p. 14.
                ---------------------------------------------------------------------------
                B. No-Action Alternative
                 As in the proposal, the No-Action Alternative applies the augural
                CAFE and final CO2 targets announced in 2012 for MYs 2021-
                2025.\262\ For MY 2026, this alternative applies the same targets as
                for MY 2025. The carbon dioxide equivalent of air conditioning
                refrigerant leakage credits, nitrous oxide, and methane emissions are
                included for compliance with the EPA standards for all model years
                under the no-action alternative.\263\
                ---------------------------------------------------------------------------
                 \262\ https://www.govinfo.gov/content/pkg/CFR-2014-title40-vol19/pdf/CFR-2014-title40-vol19-sec86-1818-12.pdf
                 \263\ EPA regulations use a different but mathematically
                equivalent approach to specify targets. Rather than using a function
                with nested minima and maxima functions, EPA regulations specify
                requirements separately for different ranges of vehicle footprint.
                Because these ranges reflect the combined application of the listed
                minima, maxima, and linear functions, it is mathematically
                equivalent and more efficient to present the targets as in this
                Section.
                [GRAPHIC] [TIFF OMITTED] TR30AP20.060
                [[Page 24257]]
                 In comments on the DEIS, CBD et al. indicated that it was
                appropriate for NHTSA to use the augural CAFE standards as the baseline
                No Action regulatory alternative.\264\ However, CARB commented that the
                baseline regulatory alternative should include CARB's ZEV mandate, in
                part because EPA must consider ``other regulations promulgated by EPA
                or other government entities,'' and, according to CARB, there will be
                much more vehicle electrification in the future as manufacturers
                respond to market demand and also work to comply with the ZEV
                mandate.\265\ Similarly, EPA's Science Advisory Board recommended--
                despite the action taken in the One National Program Action--that the
                baseline include state ZEV mandates ``to be consistent with policies
                that would prevail in the absence of the rule change.'' \266\ EPA's
                Science Advisory Board further recommended including sensitivity
                analyses with different penetration rates of ZEVs.
                ---------------------------------------------------------------------------
                 \264\ CBD et al., NHTSA-2018-0067-12123, Attachment 1, at 13.
                 \265\ CARB, NHTSA-2018-0067-11873, at 124-125.
                 \266\ SAB at 12 and 29-30.
                ---------------------------------------------------------------------------
                 On the other hand, arguing for consideration of standards less
                stringent than those proposed in the NPRM, Walter Kreucher commented
                that rather than using the augural standards as the baseline, ``a
                better approach would be to assume a clean sheet of paper and start
                from the existing 2016MY fleet and its associated standards as the
                baseline using 0%/year increases for both passenger cars and light
                trucks for MYs 2017-2026.'' \267\ Similarly, AVE argued that because
                previously-promulgated standards for MYs 2018-2021 already present a
                significant challenge that ``will likely require almost every automaker
                to continue using credits for compliance, . . . AVE believes this
                rulemaking should reset . . . the current compliance baseline for cars
                and light trucks at MY 2018 . . .'' \268\ BorgWarner commented
                similarly that ``Beginning in MY 2018, standards should be reset to the
                levels the industry actually achieved. For MY 2018 and beyond,
                succeeding model year targets should be set with an annual rate of
                improvement defined by the slope of improvement the industry has
                achieved over the last six years. . . . Based on these data, our
                analysis suggests the most reasonable and logical rate of improvement
                falls between 2.0% to 2.6% for cars and trucks. Additionally, a single
                rate of improvement for the combined fleet should be considered.''
                \269\
                ---------------------------------------------------------------------------
                 \267\ Kreucher, W., NHTSA-2018-0067-0444, at 8.
                 \268\ AVE, NHTSA-2018-0067-11696, at 8-9.
                 \269\ BorgWarner, NHTSA-2018-0067-11895, at 3, 6.
                ---------------------------------------------------------------------------
                 The No-Action Alternative represents expectations regarding the
                world in the absence of a proposal, accounting for applicable laws
                already in place. Although manufacturers are already making significant
                use of compliance credits toward compliance with even MY 2017
                standards, the agencies are obligated to evaluate regulatory
                alternatives against the standards already in place through MY 2025.
                Similarly, even though manufacturers are already producing electric
                vehicles, EPA and NHTSA appropriately excluded California's ZEV mandate
                from the No-Action alternative for the NPRM, for several reasons.
                First, the ZEV mandate is not Federal law; second, as described in the
                proposal and subsequently finalized in regulatory text, the ZEV mandate
                is expressly and impliedly preempted by EPCA; third, EPA proposed to
                withdraw the waiver of CAA preemption in the NPRM and subsequently
                finalized this withdrawal. Accordingly, the agencies have, therefore,
                appropriately excluded the ZEV mandate from the No-Action alternative.
                However, as discussed below, the agencies' analysis does account for
                the potential that under every regulatory alternative, including the
                No-Action Alternative, vehicle electrification could increase in the
                future, especially if batteries become less expensive as gasoline
                becomes more expensive.
                C. Action Alternatives
                1. Alternatives in Final Rule
                 Table V-5 below shows the different alternatives evaluated in
                today's notice.
                [GRAPHIC] [TIFF OMITTED] TR30AP20.061
                [[Page 24258]]
                 With one exception, the alternatives considered in the NPRM
                included the changes in stringency for the above alternatives.
                Alternative 3, the preferred alternative, is newly included for today's
                notice.\270\
                ---------------------------------------------------------------------------
                 \270\ As the agencies indicated in the NPRM, they were
                considering and taking comment ``on a wide range of alternatives and
                have specifically modeled eight alternatives.'' 83 FR at 42990 (Aug.
                24, 2018). The preferred alternative in this final rule was within
                the range of alternatives considered in the proposal, although it
                was not specifically modeled at that time. This issue is discussed
                in further detail below.
                ---------------------------------------------------------------------------
                 Regulations regarding implementation of NEPA requires agencies to
                ``rigorously explore and objectively evaluate all reasonable
                alternatives, and for alternatives which were eliminated from detailed
                study, briefly discuss the reasons for their having been eliminated.''
                \271\ This does not amount to a requirement that agencies evaluate the
                widest conceivable spectrum of alternatives. For example, a State
                considering adding a single travel lane to a preexisting section of
                highway would not be required to consider adding three lanes, or to
                consider dismantling the highway altogether.
                ---------------------------------------------------------------------------
                 \271\ 40 CFR 1502.14.
                ---------------------------------------------------------------------------
                 Among thousands of individual comments that mentioned the proposed
                standards very generally, some comments addressed the range and
                definition of these regulatory alternatives in specific terms, and
                these specific comments include comments on the stringency, structure,
                and particular provisions defining the set of regulatory alternatives
                under consideration.
                 As discussed throughout today's notice, the agencies have updated
                and otherwise revised many aspects of the analysis. The agencies have
                also reconsidered whether the set of alternatives studied in detail
                should be expanded to include standards less stringent than the
                proposal's preferred alternative, or to include standards more
                stringent than the proposal's no-action alternative. On one hand,
                comments from Walter Kreucher and AVE cited above indicate the agencies
                should consider relaxing standards below MY 2020 levels, and CEI
                challenged the agencies' failure to include less-stringent alternatives
                in the following comments on this question:
                 DOT failed to consider the possibility of freezing CAFE at an
                even more lenient standard than currently exists, nor did it
                consider making its proposed freeze take effect sooner than MY 2020.
                However, as DOT's own analysis strongly indicates, doing so would
                lead to even greater benefits and an even greater reduction in CAFE-
                related deaths and injuries. In short, DOT's failure to consider
                this possibility is arbitrary and capricious. It has an opportunity
                to remedy this in its final rule, and it should do so by selecting a
                standard that is even more lenient than the one it proposed. . . .
                It should have gone beyond its original set of alternatives and
                examined less stringent ones as well--until it found one that, for
                some reason or another, failed to produce greater safety benefits or
                failed to meet the statutory factors.\272\
                ---------------------------------------------------------------------------
                 \272\ CEI, NHTSA-2018-0067-12015, at 1.
                 On the other hand, a coalition of ten environmental advocacy
                organizations stated that the agencies should consider alternatives
                more stringent than those defining the baseline no action alternative,
                arguing that in light of CEQ guidance and the 2018 IPCC report on
                climate change, ``the increasing danger, increasing urgency, and
                increasing importance of vehicle emissions all rationally counsel for
                strengthening emission standards.'' \273\ CBD et al. observe that
                ``none of these alternatives [considered in the NPRM] increases fuel
                economy in comparison with the No Action Alternative, none conserves
                energy . . .'' and go on to assert that ``none represents maximum
                feasible CAFE standards.'' \274\ Similarly, EDF commented that ``. . .
                given its clear statutory directive to maximize fuel savings, NHTSA
                should have considered a range of alternatives that would be more
                protective than the existing standards,'' \275\ and three State
                agencies in Minnesota commented that ``more stringent standards are
                consistent with EPCA's purpose of energy conservation and the CAA's
                purpose of reducing harmful air pollutants.'' \276\ The North Carolina
                Department of Environmental Quality acknowledged the agencies'
                determination in the proposal that alternatives beyond the augural
                standards might be economically impracticable, but nevertheless argued
                that ``alternatives that exceed the stringency of the current standards
                are consistent with EPCA's purpose'' \277\ In oral testimony before the
                agencies, the New York State Attorney General also indicated that the
                agencies should consider alternatives more stringent than the augural
                standards.\278\ A coalition of States and cities commented that ``at a
                minimum, the existing standards should be left in place, but EPA should
                also consider whether to make the standards more stringent, not less,
                just as it has done in prior proposals.'' \279\ More specifically,
                through International Mosaic, some individuals commented that the
                agencies must ``fully and publicly consider a few options that require
                at least a seven annual percent [sic] improvement in vehicle fleet
                mileage.'' \280\ In comments on the DEIS, CBD, et al. went further,
                commenting that ``NHTSA's most stringent alternative must be set at no
                lower than a 9 percent improvement per year.'' \281\ Most manufacturers
                who commented on stringency did not identify specific regulatory
                alternatives that the agencies should consider, although Honda
                suggested that standards be set to increase in stringency at 5 percent
                annually for both passenger cars and light trucks throughout model
                years 2021-2026.282 283
                ---------------------------------------------------------------------------
                 \273\ CBD, et al., NHTSA-2018-0067-12057 p. 10. Also, see
                comments from Senator Tom Carper, NHTSA-2018-0067-11910, at 8-9, and
                from UCS, NHTSA-2018-0067-12039, at 3.
                 \274\ CBD, et al., NHTSA-2018-0067-12123, at 12-13.
                 \275\ EDF, NHTSA-2018-0067-11996, at 20.
                 \276\ Minnesota Pollution Control Agency, Department of
                Transportation, and Department of Health, NHTSA-2018-0067-11706, at
                5.
                 \277\ North Carolina Department of Environmental Quality, NHTSA-
                2018-0067-12025, at 37-38.
                 \278\ New York State Attorney General, Testimony of Austin
                Thompson, NHTSA-2018-0067-12305, at 13.
                 \279\ NHTSA-2018-0067-11735, at 49.
                 \280\ International Mosaic NHTSA-2018-0067-11154, at 1
                 \281\ CBD, et al., NHTSA-2018-0067-12123, at 17.
                 \282\ Honda, NHTSA-2018-0067-12019, EPA-HQ-OAR-2018-0283, at 54.
                 \283\ In model year 2021, the baseline standards for passenger
                cars and light trucks increase by about 4% and 6.5%, respectively,
                relative to standards for model year 2020. Depending on the
                composition of the future new vehicle fleet (i.e., the footprints
                and relative market shares of passenger cars and light trucks), this
                amounts to an overall average stringency increase of about 5.5%
                relative to model year 2020.
                ---------------------------------------------------------------------------
                 The agencies carefully considered these comments to expand the
                range of stringencies to be evaluated as possible candidates for
                promulgation. To inform this consideration, the agencies used the CAFE
                model to examine a progression of stringencies extending outside the
                range presented in the proposal and draft EIS, and as a point of
                reference, using a case that reverts to MY 2018 standards starting in
                MY 2021. Scenarios included in this initial screening exercise ranged
                as high as increasing annually at 9.5 percent during MYs 2021-2026,
                reaching average CAFE and CO2 requirements of 66 mpg and 120
                g/mi, respectively. Results of this analysis are presented in the
                following tables and charts. Focusing on MY 2029, the tables show
                average required and achieved CAFE (as mpg) and CO2 (as g/
                mi) levels for each scenario, along with average per-vehicle costs (in
                2018 dollars, relative to retaining MY 2017 technologies). The proposed
                (0%/0%), final (1.5%/1.5%), and baseline augural standards are shown in
                bold type. The charts present
                [[Page 24259]]
                the same results on a percentage basis, relative to values shown below
                for the scenario that reverts to MY 2018 standards starting in MY 2021.
                 For example, reverting to the MY 2018 CAFE standards starting in MY
                2021 yields an average CAFE requirement of 35 mpg by MY 2029, with the
                industry exceeding that standard by 5 mpg at an average cost of $1,255
                relative to MY 2017 technology. Under the augural standards, the MY
                2029 requirement increases to 47 mpg, the average compliance margin
                falls to 1 mpg, and the average cost increases to $2,770. In other
                words, compared to the scenario that reverts to MY 2018 stringency
                starting in MY 2021, the augural standards increase stringency by 34
                percent (from 35 to 47 mpg), increase average fuel economy by 20
                percent (from 40 to 48 mpg), and increase costs by 121 percent (from
                $1,255 to $2,770).
                 As indicated in the following two charts, the reality of
                diminishing returns clearly applies in both directions. On one hand,
                relaxing stringency below the proposed standards by reverting to MY
                2018 or MY 2019 standards reduces average MY 2029 costs by only modest
                amounts ($54-$121). As discussed in Section VIII, the agencies' updated
                analysis indicates that the proposed standards would not be maximum
                feasible considering the EPCA/EISA statutory factors, and would not be
                appropriate under the CAA after considering the appropriate factors. If
                further relaxation of standards appeared likely to yield more
                significant cost reductions, it is conceivable that such savings could
                outweigh further foregoing of energy and climate benefits. However,
                this screening analysis does not show dramatic cost reductions.
                Therefore, the agencies did not include these two less stringent
                alternatives in the detailed analysis presented in Section VII.
                 On the other hand, increases in stringency beyond the baseline
                augural standards show relative costs continuing to accrue much more
                rapidly than relative CAFE and CO2 improvements. As
                discussed below in Section VIII, even the no action alternative is
                already well beyond levels that can be supported under the CAA and
                EPCA. If further stringency increases appeared likely to yield more
                significant additional energy and environmental benefits, it is
                conceivable that these could outweigh these significant additional cost
                increases. However, this screening analysis shows no dramatic relative
                acceleration of energy and environmental benefits. Therefore, the
                agencies did not include stringencies beyond the augural standards in
                the detailed analysis presented in Section VII.
                BILLING CODE 4910-59-P
                [GRAPHIC] [TIFF OMITTED] TR30AP20.062
                [[Page 24260]]
                [GRAPHIC] [TIFF OMITTED] TR30AP20.063
                [GRAPHIC] [TIFF OMITTED] TR30AP20.064
                [[Page 24261]]
                [GRAPHIC] [TIFF OMITTED] TR30AP20.065
                BILLING CODE 4910-59-C
                 Specific to model year 2021, some commenters argued that EPCA's
                lead time requirement prohibits NHTSA from revising CAFE standards for
                model year 2021.\284\ Regarding the revision of standards for model
                year 2021, NHTSA did consider EPCA's lead time requirement, and
                determined that while the agency would need to finalize a stringency
                increase at least 18 months before the beginning of the first affected
                model year, the agency can finalize a stringency decrease closer (or
                even after) the beginning of the first affected model year. The
                agency's reasoning is explained further in Section VIII. Therefore,
                NHTSA did not change regulatory alternatives to avoid any relaxation of
                stringency in model year 2021.
                ---------------------------------------------------------------------------
                 \284\ State of California, et al., NHTSA-2018-0067-11735, at
                78.; CBD, et al., NHTSA-2018-0067-12000, Appendix A, at 66.;
                National Coalition for Advanced Transportation, NHTSA-2018-0067-
                11969, at 46.
                ---------------------------------------------------------------------------
                 The Auto Alliance stated that ``the truck increase rate should be
                no greater than the car rate of increase and should be the `equivalent
                task' per fleet.'' \285\ Supporting these Alliance comments, FCA
                elaborated by commenting that ``(1) in MY2017, the latest data we have
                available, most trucks have a larger gap to standards than cars, and
                (2) all of the truck segments are challenged because consumers are
                placing a greater emphasis on capability than fuel economy.'' \286\
                Similarly, Ford commented that ``. . . the rates of increase in the
                stringency of the standards should remain equivalent between passenger
                cars and light duty trucks.'' \287\ Other commenters expressed general
                support for equalizing the rates at which the stringencies of passenger
                car and light truck standards increase.\288\
                ---------------------------------------------------------------------------
                 \285\ Alliance, NHTSA-2018-0067-12073, at 7-8
                 \286\ FCA, NHTSA-2018-0067-11943, at 46-47.
                 \287\ Ford, NHTSA-2018-0067-11928, at 3.
                 \288\ See, e.g., Global, NHTSA-2018-0067-12032, at 4; NADA,
                NHTSA-2018-0067-12064, at 13; BorgWarner, NHTSA-2018-0067-11895, at
                6.
                ---------------------------------------------------------------------------
                 For the final rule, the agencies have added an alternative in which
                stringency for both cars and trucks increases at 1.5 percent. This is
                consistent with comments received requesting that both fleets'
                standards increase in stringency by the same amount, and 1.5 percent
                represents a rate of increase within the range of rates of increase
                considered in the NPRM.
                 Throughout the NPRM, the agencies described their consideration as
                covering a range of alternatives.\289\ The preferred alternative for
                this final rule, an increase in stringency of 1.5 percent for both cars
                and trucks, falls squarely
                [[Page 24262]]
                within the range of alternatives proposed by the agencies.
                ---------------------------------------------------------------------------
                 \289\ 83 FR at 42986 (Aug. 24, 2018) (explaining, in ``Summary''
                section of NPRM, that ``comment is sought on a range of alternatives
                discussed throughout this document''); id. at 42988 (stating that
                the agencies are ``taking comment on a wide range of alternatives,
                including different stringencies and retaining existing
                CO2 standards and the augural CAFE standards''); 42990
                (``As explained above, the agencies are taking comment on a wide
                range of alternatives and have specifically modeled eight
                alternatives (including the proposed alternative) and the current
                requirements (i.e., baseline/no action).''); 43197 (``[T]oday's
                notice also presents the results of analysis estimating impacts
                under a range of other regulatory alternatives the agencies are
                considering.''); 43229 (explaining that ``technology availability,
                development and application, if it were considered in isolation, is
                not necessarily a limiting factor in the Administrator's selection
                of which standards are appropriate within the range of the
                Alternatives presented in this proposal.''); 43369 (``As discussed
                above, a range of regulatory alternatives are being considered.'').
                ---------------------------------------------------------------------------
                 The NPRM alternatives were bounded on the upper end by the
                baseline/no action alternative, and the proposed alternative on the
                lower end (0 percent per year increase in stringency for both cars and
                trucks). For passenger cars, the agencies considered a range of
                stringency increases between 0 percent and 2 percent per year for
                passenger cars, in addition to the baseline/no action alternative. For
                light trucks, the agencies considered a range of stringency increases
                between 0 percent and 3 percent per year, in addition to the baseline/
                no action alternative.
                 The agencies considered the same range of alternatives for this
                final rule. As with the proposal, the alternatives for stringency are
                bounded on the upper end by the baseline/no action alternative and on
                the lower end by 0 percent per year increases for both passenger cars
                and light trucks. Consistent with the proposal, for this final rule,
                the agencies considered stringency increases of between 0 and 2 percent
                per year for passenger cars and between 0 and 3 percent per year for
                light trucks, in addition to the baseline/no action alternative.
                 While it was not specifically modeled in the NPRM, the new
                preferred alternative of an increase in stringency of 1.5 percent for
                both cars and trucks was well within the range of alternatives
                considered. The proposal described the alternatives specifically
                modeled as options for the agencies, but also gave notice that they did
                not limit the agencies in selecting from among the range of
                alternatives under consideration.\290\
                ---------------------------------------------------------------------------
                 \290\ See, e.g., 83 FR at 43003 (Aug. 24, 2018) (``These
                alternatives were examined because they will be considered as
                options for the final rule. The agencies seek comment on these
                alternatives, seek any relevant data and information, and will
                review responses. That review could lead to the selection of one of
                the other regulatory alternatives for the final rule or some
                combination of the other regulatory alternatives (e.g., combining
                passenger cars standards from one alternative with light truck
                standards from a different alternative).''); id. at 43229
                (describing a factor relevant to ``the Administrator's selection of
                which standards are appropriate within the range of the Alternatives
                presented in this proposal'').
                ---------------------------------------------------------------------------
                 The agencies explained in the proposal that they were ``taking
                comment on a wide range of alternatives and have specifically modeled
                eight alternatives.'' \291\ As with the proposal, for the final rule,
                the agencies specifically modeled the upper and lower bounds of the
                baseline/no action alternative and 0 percent per year stringency
                increases for both passenger cars and light trucks. In both the
                proposal and the final rule, the agencies also modeled a stringency
                increase of 2 percent per year for passenger cars and 3 percent per
                year for light trucks, as well as a variety of other specific increases
                between 0 and 2 percent for passenger cars and 0 and 3 percent for
                light trucks.
                ---------------------------------------------------------------------------
                 \291\ 83 FR at 42990 (Aug. 24, 2018).
                ---------------------------------------------------------------------------
                 The specific alternatives the agencies modeled for the final rule
                reflect their consideration of public comments. As discussed above,
                multiple commenters expressed support for equalizing the rates at which
                the stringencies of passenger car and light truck standards increase.
                To help the agencies evaluate alternatives that include the same
                stringency increase for passenger cars and light trucks, three of the
                seven alternatives (in addition to the baseline/no action alternative)
                that the agencies specifically modeled for the final rule included the
                same stringency increase for passenger cars and light trucks. This
                includes the new preferred alternative of an increase in stringency of
                1.5 percent for both cars and trucks. This alternative, and all others
                specifically modeled for the final rule, falls within the range of
                alternatives for stringency considered by the agencies in the proposal.
                 Beyond these stringency provisions discussed in the NPRM, the
                agencies also sought comment on a number of additional compliance
                flexibilities for the programs, as discussed in Section IX.
                2. Additional Alternatives Suggested by Commenters
                 Beyond the comments discussed above regarding the shapes of the
                functions defining fuel economy and CO2 targets, regarding
                the inclusion of non-CO2 emissions, and regarding the
                stringencies to be considered, the agencies also received a range of
                other comments regarding regulatory alternatives.
                 Some of these additional comments involved how CAFE and
                CO2 standards compare to one another for any given
                regulatory alternative. With a view toward maximizing harmonization of
                the standards, the Alliance, supported by some of its members'
                individual comments, indicated that ``to the degree flexibilities and
                incentives are not completely aligned between the CAFE and
                [CO2] programs, there must be an offset in the associated
                footprint-based targets to account for those differences. Some areas of
                particular concerns are air conditioning refrigerant credits, and
                incentives for advanced technology vehicles. The Alliance urges the
                Agencies to seek harmonization of the standards and flexibilities to
                the greatest extent possible. . . .'' \292\
                ---------------------------------------------------------------------------
                 \292\ Alliance, NHTSA-2018-0067-12073, at 40. See also FCA,
                NHTSA-2018-0067-11943, at 6-7.
                ---------------------------------------------------------------------------
                 On the other hand, discussing consideration of compliance credits
                but making a more general argument, the NYU Institute for Policy
                Integrity commented that ``. . . EPA is not allowed to set lower
                standards just for the sake of harmonization; to the contrary, full
                harmonization may be inconsistent with EPA's statutory
                responsibilities.'' \293\ Similarly, ACEEE argued that ``any
                consideration of an extension or expansion of credit provisions under
                the [carbon dioxide] or CAFE standards program should take as a
                starting point the assumption that the additional credits will allow
                the stringency of the standards to be increased.'' \294\
                ---------------------------------------------------------------------------
                 \293\ IPI, NHTSA-2018-0067-12213, at 21.
                 \294\ ACEEE, NHTSA-2018-0067-12122, at 3.
                ---------------------------------------------------------------------------
                 EPCA's requirement that NHTSA set standards at the maximum feasible
                levels is separate and ``wholly independent'' from the CAA's
                requirement, per Massachusetts v. EPA, that EPA issue regulations
                addressing pollutants that EPA has determined endanger public health
                and welfare.\295\ Nonetheless, as recognized by the Supreme Court,
                ``there is no reason to think the two agencies cannot both administer
                their obligations and yet avoid inconsistency.'' \296\ This conclusion
                was reached despite the fact that EPCA has a range of very specific
                requirements about how CAFE standards are to be structured, how
                manufacturers are to comply, what happens when manufacturers are unable
                to comply, and how NHTSA is to approach setting standards, and despite
                the fact that the CAA has virtually no such requirements. This means
                that while nothing about either EPCA or the CAA, much less the
                combination of the two, guarantees ``harmonization'' defining ``One
                National Program,'' the agencies are expected to be able to work out
                the differences.
                ---------------------------------------------------------------------------
                 \295\ Massachusetts v. EPA, 549 U.S. 497, 532 (2007).
                 \296\ Id.
                ---------------------------------------------------------------------------
                 Since tailpipe CO2 standards are de facto fuel economy
                standards, the more differences there are between CO2 and
                CAFE standards and compliance provisions, the more challenging it is
                for manufacturers to plan year-by-year production that responses to
                both, and the more difficult it is for affected stakeholders and the
                general public to understand regulation in this space. Therefore, even
                if the two statutes, taken together, do not guarantee ``full
                harmonization,'' steps toward greater
                [[Page 24263]]
                harmonization help with compliance planning and transparency--and meet
                the expectations set forth by the Supreme Court that the agencies avoid
                inconsistencies.
                 The agencies have taken important steps toward doing so. For
                example, EPA has adopted separate footprint-based CO2
                standards for passenger cars and light trucks, and has redefined CAFE
                calculation procedures to introduce recognition for the application of
                real-world fuel-saving technology that is not captured with traditional
                EPA two-cycle compliance testing. Detailed aspects of both sets of
                standards and corresponding compliance provisions are discussed at
                length in Section IX. The agencies never set out with the primary goal
                of achieving ``full harmonization,'' such that both sets of standards
                would lead each manufacturer to respond in exactly the same way in
                every model year.\297\ For example, EPA did not adopt the EPCA
                requirement that domestic passenger car fleets each meet a minimum
                standard, or the EPCA cap on compliance credit transfers between
                passenger car fleets. On the other hand, EPA also did not adopt the
                EPCA civil penalty provisions that have allowed some manufacturers to
                pay civil penalties as an alternative method of meeting EPCA
                obligations. These and other differences provide that even if CAFE and
                CO2 standards are ``mathematically'' harmonized, for any
                given manufacturer, the two sets of standards will not be identically
                burdensome in each model year. Inevitably, one standard will be more
                challenging than the other, varying over time, between manufacturers,
                and between fleets. This means manufacturers need to have compliance
                plans for both sets of standards.
                ---------------------------------------------------------------------------
                 \297\ Full harmonization would mean that, for example, if Ford
                would do some set of things over time in response to CAFE standards
                in isolation, it would do exactly the same things on exactly the
                same schedule in response to CO2 standards in isolation.
                ---------------------------------------------------------------------------
                 In 2012, recognizing that EPCA provides no clear basis to address
                HFC, CH4, or N2O emissions directly, the agencies
                ``offset'' CO2 targets from fuel economy targets (after
                converting the latter to a CO2 basis) by the amounts of
                credit EPA anticipated manufacturers would, on average, earn in each
                model years by reducing A/C leakage and adopting refrigerants with
                reduced GWPs. In 2012, EPA assumed that by 2021, all manufacturers
                would be earning the maximum available credit, and EPA's analysis
                assumed that all manufacturers would make progress at the same rate.
                However, as discussed above, data highlighted in comments by Chemours,
                Inc., demonstrate that actual manufacturers' adoption of lower-GWP
                refrigerants thus far ranges widely, with some manufacturers (e.g.,
                Nissan) having taken no such steps to move toward lower-GWP
                refrigerants, while others (e.g., JLR) have already applied lower-GWP
                refrigerants to all vehicles produced for sale in the U.S. Therefore,
                at least in practice, HFC provisions thus far continue to leave a gap
                (in terms of harmonization) between the two sets of standards. The
                proposal would have taken the additional step of decoupling provisions
                regarding HFC (i.e., A/C leakage credits), CH4, and
                N2O emissions from CO2 standards, addressing
                these in separate regulations to be issued in a new proposal. As
                discussed above, EPA did not finalize this proposal. Accordingly, for
                the regulatory alternatives considered today, EPA has reinstated
                offsets of CO2 targets from fuel economy targets, reflecting
                the assumption that all manufacturers will be earning the maximum
                available A/C leakage credit by MY 2021.
                 In addition to general comments on harmonization, the agencies
                received a range of comments on specific provisions--especially
                involving ``flexibilities''--that may or may not impact harmonization.
                With a view toward encouraging further electrification, NCAT proposed
                that EPA extend indefinitely the exclusion of upstream emissions from
                electricity generation, and also extend and potentially restructure
                production multipliers for PHEVs, EVs, and FCVs.\298\ On the other
                hand, connecting its comments back to the stringency of standards, NCAT
                also commented that ``. . . expansion of compliance flexibilities in
                the absence of any requirement to improve [CO2] reduction or
                fuel economy (as under the agencies' preferred option) could result in
                an effective deterioration of existing [CO2] and fuel
                economy performance, as well as little or no effective support for
                advanced vehicle technology development or deployment.'' \299\ Global
                Automakers indicated that the final rule ``should include a package of
                programmatic elements that provide automakers with flexible compliance
                options that promote the full breadth of vehicle technologies,'' such
                options to include the extension of ``advanced technology'' production
                multipliers through MY 2026, the indefinite exclusion of emissions from
                electricity generation, the extension to passenger cars of credits
                currently granted for the application of ``game changing'' technologies
                (e.g., HEVs) only to full-size pickup trucks, an increase (to 15 g/mi)
                of the cap on credits for off-cycle technologies, an updated credit
                ``menu'' of off-cycle technologies, and easier process for handling
                applications for off-cycle credits.\300\ The Alliance also called for
                expanded sales multipliers and a permanent exclusion of emissions from
                electricity generation.\301\ Walter Kreucher recommended the agencies
                consider finalizing the proposed standards but also keeping the augural
                standards as ``voluntary targets'' to ``provide compliance with the
                statutes and an aspirational goal for manufacturers.'' \302\
                ---------------------------------------------------------------------------
                 \298\ NCAT, NHTSA-2018-0067-11969, at 3-5.
                 \299\ Id.
                 \300\ Global Automakers, NHTSA-2018-0067-12032, at 4 et seq.
                 \301\ Alliance, NHTSA-2018-0067-12073, at 8.
                 \302\ Kreucher, W., NHTSA-2018-0067-0444, at 9.
                ---------------------------------------------------------------------------
                 The agencies have carefully considered these comments, and have
                determined that the current suite of ``flexibilities'' generally
                provide ample incentive more rapidly to develop and apply advanced
                technologies and technologies that produce fuel savings and/or
                CO2 reductions that would otherwise not count toward
                compliance. The agencies also share some stakeholders' concern that
                expanding these flexibilities could increase the risk of ``gaming''
                that would make compliance less transparent and would unduly compromise
                energy and environmental benefits. Nevertheless, as discussed in
                Section IX, EPA is adopting new multiplier incentives for natural gas
                vehicles. EPA is also finalizing some changes to procedures for
                evaluating applications for off-cycle credits, and expects these
                changes to make this process more accurate and more efficient. Also,
                EPA is revising its regulations to not require manufacturers to account
                for upstream emissions associated with electricity use for electric
                vehicles and plug-in hybrid electric vehicles through model year 2026;
                compliance will instead be based on tailpipe emissions performance only
                and not include emissions from electricity generation until model year
                2027. As discussed below, even with this change, and even accounting
                for continued increases in fuel prices and reductions in battery
                prices, BEVs are projected in this final rule analysis to continue to
                account for less than 5 percent of new light vehicle sales in the U.S.
                through model year 2026. To the extent that this projection turns out
                to reflect reality, this means that the impact of upstream emissions
                from electricity use on the projected CO2
                [[Page 24264]]
                reductions associated with these standards would likely remain small.
                Regarding comments suggesting that the augural standards should be
                finalized as ``voluntary targets,'' the agencies have determined that
                having such targets exist alongside actual regulatory requirements
                would be, at best, unnecessary and confusing.
                 Beyond these additional proposals, some commenters' proposals
                clearly fell outside authority provided under EPCA or the CAA. Ron
                Lindsay recommended the agencies ``consider postponing the rule changes
                until the U.S. can establish a legally binding national and
                international carbon budget and a binding mechanism to adhere to it.''
                \303\ EPCA requires NHTSA to issue standards for MY 2022 by April 1,
                2020, and previously-issued EPA regulations commit EPA to revisiting MY
                2021-2025 standards on a similar schedule. These statutory and
                regulatory provisions do not include a basis to delay decisions pending
                an international negotiation for which prospects and schedules are both
                unknown.
                ---------------------------------------------------------------------------
                 \303\ Ron Lindsay, EPA-HQ-OAR-2018-0283-1414, at 6.
                ---------------------------------------------------------------------------
                 SCAQMD, supported by Shyam Shukla, indicated that the agencies
                should consider an alternative that keeps the waiver for California's
                CO2 standards in place.\304\ NCAT and the North Carolina DEQ
                offered similar comments and CBD, et al. commented that ``among the set
                of more stringent alternatives that NEPA requires the agency to
                consider, NHTSA must include action alternatives that retain the
                standards California and other states have lawfully adopted.'' \305\ As
                discussed above, the agencies recently issued a final rule addressing
                the issue of California's authority. NEPA does not require NHTSA to
                include action alternatives that cannot be lawfully realized.
                ---------------------------------------------------------------------------
                 \304\ SCAQMD, NHTSA-2018-0067-5666, at 1-2; Shyam Shukla, NHTSA-
                2018-0067-5793, at 1-2.
                 \305\ NCAT, NHTSA-2018-0067-11969, at 64; NCDEQ, NHTSA-2018-
                0067-12025, at 38; CBD et al., NHTSA-2018-0067-12123, Attachment 1,
                at 18.
                ---------------------------------------------------------------------------
                 International Mosiac commented that NHTSA's DEIS ``is fatally
                flawed . . . because it does not consider any market-based alternatives
                (e.g., a `cap and trade' type option).'' \306\ While EPCA/EISA does
                include very specific provisions regarding trading of CAFE compliance
                credits, the statute provides no authority for a broad-based cap-and-
                trade program involving other sectors. Similarly, Michalek, et al.
                wrote that ``a more economically efficient approach of, taxing
                emissions and fuel consumption at socially appropriate levels would
                allow households to determine whether to reduce fuel consumption and
                emissions by driving less, by buying a vehicle with more fuel saving
                technologies, or by buying a smaller vehicle--or, alternatively, not to
                reduce fuel consumption and emissions at all but rather pay a cost
                based on the damages they cause. Forcing improvements only through one
                mechanism (fuel-saving technologies) increases the cost of achieving
                these outcomes.'' \307\ While some economists would agree with these
                comments, Congress has provided no clear authority for NHTSA or EPA to
                implement either an emissions tax or a broad-based cap-and-trade
                program in which motor vehicles could participate.
                ---------------------------------------------------------------------------
                 \306\ International Mosaic, NHTSA-2018-0067-11154, at 1-2.
                 \307\ Michalek, et al., NHTSA-2018-0067-11903, at 13.
                ---------------------------------------------------------------------------
                3. Details of Alternatives Considered in Final Rule
                a) Alternative 1
                 Alternative 1 holds the stringency of targets constant and MY 2020
                levels through MY 2026.
                [[Page 24265]]
                [GRAPHIC] [TIFF OMITTED] TR30AP20.066
                b) Alternative 2
                 Alternative 2 increases the stringency of targets annually during
                MYs 2021-2026 (on a gallon per mile basis, starting from MY 2020) by
                0.5 percent for passenger cars and 0.5 percent for light trucks.
                [[Page 24266]]
                [GRAPHIC] [TIFF OMITTED] TR30AP20.067
                c) Alternative 3
                 Alternative 3; the final standards promulgated today, increases the
                stringency of targets annually during MYs 2021-2026 (on a gallon per
                mile basis, starting from MY 2020) by 1.5 percent for passenger cars
                and 1.5 percent for light trucks.
                [[Page 24267]]
                [GRAPHIC] [TIFF OMITTED] TR30AP20.068
                d) Alternative 4
                 Alternative 4 increases the stringency of targets annually during
                MYs 2021-2026 (on a gallon per mile basis, starting from MY 2020) by
                1.0 percent for passenger cars and 2.0 percent for light trucks.
                [[Page 24268]]
                [GRAPHIC] [TIFF OMITTED] TR30AP20.069
                e) Alternative 5
                 Alternative 5 increases the stringency of targets annually during
                MYs 2022-2026 (on a gallon per mile basis, starting from MY 2021) by
                1.0 percent for passenger cars and 2.0 percent for light trucks.
                [GRAPHIC] [TIFF OMITTED] TR30AP20.070
                [[Page 24269]]
                [GRAPHIC] [TIFF OMITTED] TR30AP20.071
                f) Alternative 6
                 Alternative 6 increases the stringency of targets annually during
                MYs 2021-2026 (on a gallon per mile basis, starting from MY 2020) by
                2.0 percent for passenger cars and 3.0 percent for light trucks.
                [GRAPHIC] [TIFF OMITTED] TR30AP20.072
                [GRAPHIC] [TIFF OMITTED] TR30AP20.073
                [[Page 24270]]
                g) Alternative 7
                 Alternative 7 increases the stringency of targets annually during
                MYs 2022-2026 (on a gallon per mile basis, starting from MY 2021) by
                2.0 percent for passenger cars and 3.0 percent for light trucks.
                [GRAPHIC] [TIFF OMITTED] TR30AP20.074
                [GRAPHIC] [TIFF OMITTED] TR30AP20.075
                 EPCA, as amended by EISA, requires that any manufacturer's
                domestically-manufactured passenger car fleet must meet the greater of
                either 27.5 mpg on average, or 92 percent of the average fuel economy
                projected by the Secretary for the combined domestic and non-domestic
                passenger automobile fleets manufactured for sale in the U.S. by all
                manufacturers in the model year, which projection shall be published in
                the Federal Register when the standard for that model year is
                promulgated in accordance with 49 U.S.C. 32902(b).\308\ Any time NHTSA
                establishes or changes a passenger car standard for a model year, the
                MDPCS for that model year must also be evaluated or re-evaluated and
                established accordingly. Thus, this final rule establishes the
                applicable MDPCS for MYs 2021-2026. Table V-22 lists the minimum
                domestic passenger car standards.
                ---------------------------------------------------------------------------
                 \308\ 49 U.S.C. 32902(b)(4).
                 [GRAPHIC] [TIFF OMITTED] TR30AP20.076
                
                [[Page 24271]]
                VI. Analytical Approach as Applied to Regulatory Alternatives
                A. Overview of Methods
                 Like analyses accompanying the NPRM and past CAFE and CAFE/
                CO2 rulemakings, the analysis supporting today's notice
                spans a range of technical topics, uses a range of different types of
                data and estimates, and applies several different types of computer
                models. The purpose of the analysis is not to determine the standards,
                but rather to provide information for consideration in doing so. The
                analysis aims to answer the question ``what impacts might each of these
                regulatory alternatives have?''
                 Over time, NHTSA's and, more recently, NHTSA's and EPA's analyses
                have expanded to address an increasingly wide range of types of
                impacts. Today's analysis involves, among other things, estimating how
                the application of various combinations of technologies could impact
                vehicles' costs and fuel economy levels (and CO2 emission
                rates), estimating how vehicle manufacturers might respond to standards
                by adding fuel-saving technologies to new vehicles, estimating how
                changes in new vehicles might impact vehicle sales and operation, and
                estimating how the combination of these changes might impact national-
                scale energy consumption, emissions, highway safety, and public health.
                In addition, the EIS accompanying today's notice addresses impacts on
                air quality and climate. The analysis of these factors informs and
                supports both NHTSA's application of the statutory requirements
                governing the setting of ``maximum feasible'' fuel-economy standards
                under EPCA, including, among others, technological feasibility and
                economic practicability, and EPA's application of the CAA requirements
                for tailpipe emissions.
                 Supporting today's analysis, the agencies have brought to bear a
                variety of different types of data, a few examples of which include
                fuel economy compliance reports, historical sales and average
                characteristics of light-duty vehicles, historical economic and
                demographic measures, historical travel demand and energy prices and
                consumption, and historical measures of highway safety. Also supporting
                today's analysis, the agencies have applied several different types of
                estimates, a few examples of which include projections of the future
                cost of different fuel-saving technologies, projections of future GDP
                and the number of households, estimates of the ``gap'' between
                ``laboratory'' and on-road fuel economy, and estimates of the social
                cost of CO2 emissions and petroleum ``price shocks.''
                 With a view toward transparency, repeatability, and efficiency, the
                agencies have used a variety of computer models to conduct the majority
                of today's analysis. For example, the agencies have applied DOE/EIA's
                National Energy Modeling System (NEMS) to estimate future energy
                prices, EPA's MOVES model to estimate tailpipe emission rates for ozone
                precursors and other criteria pollutants, DOE/Argonne's GREET model to
                estimate emission rates for ``upstream'' processes (e.g., petroleum
                refining), and DOE/Argonne's Autonomie simulation tool to estimate the
                fuel consumption impacts of different potential combinations of fuel-
                saving technology. In addition, the EIS accompanying today's notice
                applies photochemical models to estimate air quality impacts, and
                applies climate models to estimate climate impacts of overall emissions
                changes.
                 Use of these different types of data, estimates, and models is
                discussed further below in the most closely relevant sections. For
                example, the agencies' use of NEMS is discussed below in the portion of
                Section VI that addresses the macroeconomic context, which includes
                fuel prices, and the agencies use of Autonomie is discussed in the
                portion of Section VI.B.3 that addresses the agencies' approach to
                estimating the effectiveness of various technologies (in reducing fuel
                consumption and CO2 emissions).
                 Providing an integrated means to estimate both vehicle
                manufacturers' potential responses to CAFE or CO2 standards
                and, in turn, many of the different potential direct results (e.g.,
                changes in new vehicle costs) and indirect impacts (e.g., changes in
                rates of fleet turnover) of those responses, the CAFE Model plays a
                central role in the agencies' analysis supporting today's notice. The
                agencies used the specific models mentioned above to develop inputs to
                the CAFE model, such as fuel prices and emission factors. Outputs from
                the CAFE Model are discussed in Sections VII and VIII of today's
                notice, and in the accompanying RIA. The EIS accompanying today's
                notice makes use of the CAFE Model's estimates of changes in total
                emissions from light-duty vehicles, as well as corresponding changes in
                upstream emissions. These changes in emissions are included in the set
                of inputs to the models used to estimate air quality and climate
                impacts.
                 The remainder of this overview focuses on the CAFE Model. The
                purpose of this overview is not to provide a comprehensive technical
                description of the model,\309\ but rather to give an overview of the
                model's functions, to explain some specific aspects not addressed
                elsewhere in today's notice, and to discuss some model aspects that
                were the subject of significant public comment. Some model functions
                and related comments are addressed in other parts of today's notice.
                For example, the model's handling of Autonomie-based fuel consumption
                estimates is addressed in the portion of Section VI.B.3 that discusses
                the agencies' application of Autonomie. The model documentation
                accompanying today's notice provides a comprehensive and detailed
                description of the model's functions, design, inputs, and outputs.
                ---------------------------------------------------------------------------
                 \309\ The CAFE Model is available at https://www.nhtsa.gov/corporate-average-fuel-economy/compliance-and-effects-modeling-system with documentation and all inputs and outputs supporting
                today's notice.
                ---------------------------------------------------------------------------
                1. Overview of CAFE Model
                 The basic design of the CAFE Model is as follows: The system first
                estimates how vehicle manufacturers might respond to a given regulatory
                scenario, and from that potential compliance solution, the system
                estimates what impact that response will have on fuel consumption,
                emissions, and economic externalities. A regulatory scenario involves
                specification of the form, or shape, of the standards (e.g., flat
                standards, or linear or logistic attribute-based standards), scope of
                passenger car and truck regulatory classes, and stringency of the CAFE
                and CO2 standards for each model year to be analyzed.
                 Manufacturer compliance simulation and the ensuing effects
                estimation, collectively referred to as compliance modeling, encompass
                numerous subsidiary elements. Compliance simulation begins with a
                detailed user-provided initial forecast of the vehicle models offered
                for sale during the simulation period. The compliance simulation then
                attempts to bring each manufacturer into compliance with the standards
                defined by the regulatory scenario contained within an input file
                developed by the user. For example, a regulatory scenario may define
                CAFE or CO2 standards that increase in stringency by 4
                percent per year for 5 consecutive years.
                 The model applies various technologies to different vehicle models
                in each manufacturer's product line to simulate how each manufacturer
                might make progress toward compliance with the specified standard.
                Subject to a variety of user-controlled constraints, the model applies
                technologies based on
                [[Page 24272]]
                their relative cost-effectiveness, as determined by several input
                assumptions regarding the cost and effectiveness of each technology,
                the cost of compliance (determined by the change in CAFE or
                CO2 credits, CAFE-related civil penalties, or value of
                CO2 credits, depending on the compliance program being
                evaluated and the effective-cost mode in use), and the value of avoided
                fuel expenses. For a given manufacturer, the compliance simulation
                algorithm applies technologies either until the manufacturer runs out
                of cost-effective technologies, until the manufacturer exhausts all
                available technologies, or, if the manufacturer is assumed to be
                willing to pay civil penalties, until paying civil penalties becomes
                more cost-effective than increasing vehicle fuel economy. At this
                stage, the system assigns an incurred technology cost and updated fuel
                economy to each vehicle model, as well as any civil penalties incurred
                by each manufacturer. This compliance simulation process is repeated
                for each model year available during the study period.
                 This point marks the system's transition between compliance
                simulation and effects calculations. At the conclusion of the
                compliance simulation for a given regulatory scenario, the system
                contains multiple copies of the updated fleet of vehicles corresponding
                to each model year analyzed. For each model year, the vehicles'
                attributes, such as fuel types (e.g., diesel, electricity), fuel
                economy values, and curb weights have all been updated to reflect the
                application of technologies in response to standards throughout the
                study period. For each vehicle model in each of the model year specific
                fleets, the system then estimates the following: Lifetime travel, fuel
                consumption, carbon dioxide and criteria pollutant emissions, the
                magnitude of various economic externalities related to vehicular travel
                (e.g., noise), and energy consumption (e.g., the economic costs of
                short-term increases in petroleum prices). The system then aggregates
                model-specific results to produce an overall representation of modeling
                effects for the entire industry.
                 Different categorization schemes are relevant to different types of
                effects. For example, while a fully disaggregated fleet is retained for
                purposes of compliance simulation, vehicles are grouped by type of fuel
                and regulatory class for the energy, carbon dioxide, criteria
                pollutant, and safety calculations. Therefore, the system uses model-
                by-model categorization and accounting when calculating most effects,
                and aggregates results only as required for efficient reporting.
                2. Representation of the Market
                 As a starting point, the model needs enough information to
                represent each manufacturer covered by the program. As discussed below
                in Section VI.B.1, the MY 2017 analysis fleet contains information
                about each manufacturer's:
                 Vehicle models offered for sale--their current (i.e., MY
                2017) production volumes, manufacturer suggested retail prices (MSRPs),
                fuel saving technology content and other attributes (curb weight, drive
                type, assignment to technology class and regulatory class);
                 Production considerations--product cadence of vehicle
                models (i.e., schedule of model redesigns and ``freshenings''), vehicle
                platform membership, degree of engine and/or transmission sharing (for
                each model variant) with other vehicles in the fleet; and
                 Compliance constraints and flexibilities--preference for
                full compliance or penalty payment/credit application, willingness to
                apply additional cost-effective fuel saving technology in excess of
                regulatory requirements, projected applicable flexible fuel credits,
                and current credit balance (by model year and regulatory class) in
                first model year of simulation.
                Representation of Fuel-Saving Technologies
                 The modeling system defines technology pathways for grouping and
                establishing a logical progression of technologies that can be applied
                to a vehicle. Technologies that share similar characteristics form
                cohorts that can be represented and interpreted within the CAFE Model
                as discrete entities. The following Table VI-1 shows the technologies
                available within the modeling system used for this final rule. Each
                technology is discussed in detail below. However, an understanding of
                the technologies considered and how they are defined in the model
                (e.g., a 6-speed manual transmission is defined as ``MT6'') is helpful
                for the following explanation of the compliance simulation and the
                inputs required for that simulation.
                BILLING CODE 4910-59-P
                [[Page 24273]]
                [GRAPHIC] [TIFF OMITTED] TR30AP20.077
                [[Page 24274]]
                [GRAPHIC] [TIFF OMITTED] TR30AP20.078
                BILLING CODE 4910-59-C
                 These entities are then laid out into pathways (or paths), which
                the system uses to define relations of mutual exclusivity between
                conflicting sets of technologies. For example, as presented in the next
                section, technologies on the Turbo Engine path are incompatible with
                those on the HCR Engine or the Diesel Engine paths. As such, whenever a
                vehicle uses a technology from one pathway (e.g., turbo), the modeling
                system immediately disables the incompatible technologies from one or
                more of the other pathways (e.g., HCR and diesel).
                 In addition, each path designates the direction in which vehicles
                are allowed to advance as the modeling system evaluates specific
                technologies for application. Enforcing this directionality within the
                model ensures that a vehicle that uses a more advanced or more
                efficient technology (e.g., AT8) is not allowed to ``downgrade'' to a
                less efficient option (e.g., AT5). Visually, as portrayed in the charts
                in the sections that follow, this is represented by an arrow leading
                from a preceding technology to a succeeding one, where vehicles begin
                at the root of each path, and traverse to each successor technology in
                the direction of the arrows.
                 The modeling system incorporates twenty technology pathways for
                evaluation as shown below. Similar to individual technologies, each
                path carries an intrinsic application level that denotes the scope of
                applicability of all technologies present within that path, and whether
                the pathway is evaluated on one vehicle at a time, or on a collection
                of vehicles that share a common platform, engine, or transmission.
                [[Page 24275]]
                [GRAPHIC] [TIFF OMITTED] TR30AP20.079
                 Even though technology pathways outline a logical progression
                between related technologies, all technologies available to the system
                are evaluated concurrently and independently of each other. Once all
                technologies have been examined, the model selects a solution deemed to
                be most cost-effective for application on a vehicle. If the modeling
                system applies a technology that resides later in the pathway, it will
                subsequently disable all preceding technologies from further
                consideration to prevent a vehicle from potentially downgrading to a
                less advanced option. Consequently, the system skips any technology
                that is already present on a vehicle (either those that were available
                on a vehicle from the input fleet or those that were previously applied
                by the model). This ``parallel technology'' approach, unlike the
                ``parallel path'' methodology utilized in the preceding versions of the
                model, allows the system always to consider the entire set of available
                technologies instead of foregoing the application of potentially more
                cost-effective options that happen to reside further down the
                pathway.\310\ This revised approach addresses comments summarized
                below, and allows the system to analyze all available technology
                options concurrently and independently of one other without having to
                first apply one or more ``predecessor'' technologies. For example, if
                model inputs are such that a 7-speed transmission is cost-effective,
                but not as cost-effective as an 8-speed transmission, the revised
                approach enables the model to skip over the 7-speed transmission
                entirely, whereas the NPRM version of the model might first apply the
                7-speed transmission and then consider whether to proceed immediately
                to the 8-speed transmission. As such, the model's choices for
                evaluation of new technology solutions becomes slightly less
                restrictive, allowing it immediately to consider and apply more
                advanced options, and increasing the likelihood that the a globally
                optimum solution is selected.
                ---------------------------------------------------------------------------
                 \310\ Previous versions of the CAFE Model followed a ``low-
                cost'' first approach where the system would stop evaluating
                technologies residing within a given pathway as soon as the first
                cost-effective option within that path was reached.
                ---------------------------------------------------------------------------
                 Some commenters supported the agencies' use of such pathways in the
                simulation of manufacturers' potential application of technologies. As
                one of a dozen examples of CAFE model design elements that lead to the
                transparent representation of real-world factors, the Alliance
                highlighted ``recognition of the need for manufacturers to follow
                `technology' pathways that retain capital and implementation expertise,
                such as specializing in one type of engine or transmission instead of
                following an unconstrained optimization that would cause manufacturers
                to leap to unrelated technologies and show overly optimistic costs and
                benefits.'' \311\ Similarly, Toyota commented that ``the inertia of
                capital investments and engineering expertise dedicated to one
                compliance technology or set of technologies makes it unreasonable for
                manufacturers to immediately switch to another technology path.'' \312\
                ---------------------------------------------------------------------------
                 \311\ Alliance, NHTSA-2018-0067-12073, at 9.
                 \312\ Toyota, NHTSA-2018-0067-12098, at 7.
                ---------------------------------------------------------------------------
                 Other commenters cited the use of technology pathways as inherently
                overly restrictive. For example, as an example of ``arbitrary model
                constraints,'' a coalition of commenters cited the fact the model
                ``prohibit[s] manufacturers from switching vehicle technology
                pathways.'' \313\ Also, EDF, UCS, and CARB cited the combination of
                technology pathways, decision making criteria, and model inputs as
                producing unrealistic results.\314\ Regarding the technology pathways,
                specifically, EDF's consultant argued that the technology paths are not
                [[Page 24276]]
                transparent, and cited the potential that specific paths may not
                necessarily be arranged in progression from least to most cost-
                effective--that ``NHTSA ignores the cost of the technology when
                developing this list.'' \315\ Relatedly, as EDF's consultant commented:
                ---------------------------------------------------------------------------
                 \313\ CBD, et al., NHTSA-2018-0067-12057, at 3.
                 \314\ EDF, NHTSA-2018-0067-12108, Appendix A, at 57 et seq.;
                UCS, NHTSA-2018-0067-12039, Appendix, at 25 et seq.; Roush
                Industries, NHTSA-2018-0067-11984, at 5.
                 \315\ EDF, NHTSA-2018-0067-12108, Appendix B, at 69.
                 [T]he Volpe Model is not designed to look backwards along its
                technology paths. Thus, the opportunity to recover the expenditure
                of inefficient technology is missed. NHTSA might argue that a
                manufacturer will not invest in 10-speed transmissions, for example,
                and then return to an older design. Whether or not this is true in
                real life, such a view would put too much stake in the Volpe Model
                projections. The model simply projects what could be done, not what
                will be. Anyone examining the progression of technology and noting
                the reversion of transmission technology could easily modify the
                model inputs to avoid this. Also, if NHTSA evaluated combinations of
                technologies prior to entering them in the model piecemeal, it would
                automatically avoid such apparent problems.\316\
                ---------------------------------------------------------------------------
                 \316\ Ibid., at 70.
                 The agencies also received additional public comments on specific
                paths and specific interactions between paths (e.g., involving engines
                and hybridization). These comments are addressed below.
                 The agencies have carefully considered these comments and the
                approach summarized below reflects some corresponding revision. As
                mentioned above, the CAFE model now approaches the technology paths in
                a such way that, faced with two cost-effective technologies on the same
                path, the model can proceed directly to the more advanced technology if
                that technology is the more cost effective of the two.
                 However, the agencies reject assertions that the model's use of
                technology paths is not transparent. The agencies provided extensive
                explanatory text, figures, model documentation, and model source code
                specifically addressing these paths (and other model features). This
                transparency appears evident in that commenters (sometimes while
                claiming that a specific feature of the model is not transparent)
                presented analytical results involving changes to corresponding inputs
                that required a detailed understanding of that feature's operation.
                 Regarding comments that the technology paths should be arranged in
                order of cost-effectiveness, the agencies note that such comments
                presume, without merit, that costs, fuel consumption impacts, and other
                inputs (e.g., fuel prices) that logically impact manufacturers'
                decision-making are not subject to uncertainty. These inputs are all
                subject to uncertainty, and the CAFE Model's arrangement of
                technologies into several paths is responsive to these uncertainties.
                Nevertheless, the agencies maintain that some technologies do reflect a
                higher level of advancement than others (e.g., 10-speed transmissions
                vs. 5-speed transmissions), and while manufacturers may, in practice,
                occasionally revert to less advanced technologies, it is appropriate
                and reasonable to conduct the agencies' analysis in a manner that
                assumes manufacturers will continue to make forward progress. As
                observed by EDF's consultant's remarks, the CAFE Model ``simply
                projects what could be done, not what will be.'' While no model, much
                less any model relying on information that can be made publicly
                available, can hope to represent precisely each manufacturers' actual
                detailed constrains related to product development and planning, such
                constraints are real and important. The agencies agree that the CAFE
                Model's representation of such constraints--including the Model's use
                of technology paths--provides a reasonable means of accounting for
                them.
                4. Compliance Simulation
                 The CAFE model provides a way of estimating how vehicle
                manufacturers could attempt to comply with a given CAFE standard by
                adding technology to fleets that the agencies anticipate they will
                produce in future model years. This exercise constitutes a simulation
                of manufacturers' decisions regarding compliance with CAFE or
                CO2 standards.
                 This compliance simulation begins with the following inputs: (a)
                The analysis fleet of vehicles from model year 2017 discussed below in
                Section VI.B.1, (b) fuel economy improving technology estimates
                discussed below in Section VI.C, (c) economic inputs discussed below in
                Section VI.D, and (d) inputs defining baseline and potential new CAFE
                or CO2 standards discussed above in Section V. For each
                manufacturer, the model applies technologies in both a logical sequence
                and a cost-optimizing strategy in order to identify a set of
                technologies the manufacturer could apply in response to new CAFE or
                CO2 standards. The model applies technologies to each of the
                projected individual vehicles in a manufacturer's fleet, considering
                the combined effect of regulatory and market incentives while
                attempting to account for manufacturers' production constraints.
                Depending on how the model is exercised, it will apply technology until
                one of the following occurs:
                 (1) The manufacturer's fleet achieves compliance \317\ with the
                applicable standard and adding additional technology in the current
                model year would be attractive neither in terms of stand-alone (i.e.,
                absent regulatory need) cost-effectiveness nor in terms of facilitating
                compliance in future model years;
                ---------------------------------------------------------------------------
                 \317\ When determining whether compliance has been achieved in
                the CAFE program, existing CAFE credits that may be carried over
                from prior model years or transferred between fleets are also used
                to determine compliance status. For purposes of determining the
                effect of maximum feasible CAFE standards, however, EPCA prohibits
                NHTSA from considering these mechanisms for years being considered
                (though it does so for model years that are already final) and the
                agency runs the CAFE model without enabling these options. 49 U.S.C.
                32902(h)(3).
                ---------------------------------------------------------------------------
                 (2) The manufacturer ``exhausts'' available technologies; \318\ or
                ---------------------------------------------------------------------------
                 \318\ In a given model year, it is possible that production
                constraints cause a manufacturer to ``run out'' of available
                technology before achieving compliance with standards. This can
                occur when: (a) An insufficient volume of vehicles are expected to
                be redesigned, (b) vehicles have moved to the ends of each
                (relevant) technology pathway, after which no additional options
                exist, or (c) engineering aspects of available vehicles make
                available technology inapplicable (e.g., secondary axle disconnect
                cannot be applied to two-wheel drive vehicles).
                ---------------------------------------------------------------------------
                 (3) For manufacturers assumed to be willing to pay civil penalties
                (in the CAFE program), the manufacturer reaches the point at which
                doing so would be more cost-effective (from the manufacturer's
                perspective) than adding further technology.
                 The model accounts explicitly for each model year, applying
                technologies when vehicles are scheduled to be redesigned or freshened
                and carrying forward technologies between model years once they are
                applied (until, if applicable, they are superseded by other
                technologies). The model then uses these simulated manufacturer fleets
                to generate both a representation of the U.S. auto industry and to
                modify a representation of the entire light-duty registered vehicle
                population. From these fleets, the model estimates changes in physical
                quantities (gallons of fuel, pollutant emissions, traffic fatalities,
                etc.) and calculates the relative costs and benefits of regulatory
                alternatives under consideration.
                 The CAFE model accounts explicitly for each model year, in turn,
                because manufacturers actually ``carry forward'' most technologies
                between model years, tending to concentrate the application of new
                technology to vehicle redesigns or mid-cycle ``freshenings,'' and
                design cycles vary widely among manufacturers and specific products.
                [[Page 24277]]
                Comments by manufacturers and model peer reviewers strongly support
                explicit year-by-year simulation. Year-by-year accounting also enables
                accounting for credit banking (i.e., carry-forward), as discussed
                above, and at least four environmental organizations recently submitted
                comments urging the agencies to consider such credits, citing NHTSA's
                2016 results showing impacts of carried-forward credits.\319\ Moreover,
                EPCA/EISA requires that NHTSA make a year-by-year determination of the
                appropriate level of stringency and then set the standard at that
                level, while ensuring ratable increases in average fuel economy through
                MY 2020. The multi-year planning capability, simulation of ``market-
                driven overcompliance,'' and EPCA credit mechanisms (again, for
                purposes of modeling the CAFE program) increase the model's ability to
                simulate manufacturers' real-world behavior, accounting for the fact
                that manufacturers will seek out compliance paths for several model
                years at a time, while accommodating the year-by-year requirement. This
                same multi-year planning structure is used to simulate responses to
                standards defined in grams CO2/mile, and utilizing the set
                of specific credit provisions defined under EPA's program.
                ---------------------------------------------------------------------------
                 \319\ Comment by Environmental Law & Policy Center, Natural
                Resources Defense Council (NRDC), Public Citizen, and Sierra Club,
                Docket ID EPA-HQ-OAR-2015-0827-9826, at 28-29.
                ---------------------------------------------------------------------------
                 After the light-duty rulemaking analysis accompanying the 2012
                final rule that finalized NHTSA's standards through MY 2021, NHTSA
                began work on changes to the CAFE model with the intention of better
                reflecting constraints of product planning and cadence for which
                previous analyses did not account. This involves accounting for
                expected future schedules for redesigning and ``freshening'' vehicle
                models, and accounting for the fact that a given engine or transmission
                is often shared among more than one vehicle model, and a given vehicle
                production platform often includes more than one vehicle model. These
                real product planning considerations are explained below.
                 Like earlier versions, the current CAFE model provides the
                capability for integrated analysis spanning different regulatory
                classes, accounting both for standards that apply separately to
                different classes and for interactions between regulatory classes.
                Light vehicle CAFE and CO2 standards are specified
                separately for passenger cars and light trucks. However, there is
                considerable sharing between these two regulatory classes, where a
                single engine, transmission, or platform can appear in both the
                passenger car and light truck regulatory class. For example, some
                sport-utility vehicles are offered in 2WD versions (classified as
                passenger cars for compliance purposes) and 4WD versions (classified as
                light trucks for compliance purposes). Integrated analysis of
                manufacturers' passenger car and light truck fleets provides the
                ability to account for such sharing and reduces the likelihood of
                finding solutions that could involve introducing impractical and
                unrealistic levels of complexity in manufacturers' product lines. In
                addition, integrated fleet analysis provides the ability to simulate
                the potential that manufacturers could earn CAFE and CO2
                credits by over complying with the standard in one fleet and use those
                credits toward compliance with the standard in another fleet (i.e., to
                simulate credit transfers between regulatory classes).\320\
                ---------------------------------------------------------------------------
                 \320\ Note, however, that EPCA prohibits NHTSA from considering
                the availability of such credit trading when setting maximum
                feasible fuel economy standards. 49 U.S.C. 32902(h)(3).
                ---------------------------------------------------------------------------
                 The CAFE model also accounts for EPCA's requirement that compliance
                be determined separately for fleets of domestic passenger cars and
                fleets of imported passenger cars. The model accounts for all three
                CAFE regulatory classes simultaneously (i.e., in an integrated way) yet
                separately: Domestic passenger cars, imported passenger cars, and light
                trucks. The model further accounts for two related specific statutory
                requirements specifically involving this distinction between domestic
                and imported passenger cars. First, EPCA/EISA requires that any given
                fleet of domestic passenger cars meet a minimum standard, irrespective
                of any available compliance credits. Second, EPCA/EISA requires
                compliance with the standards applicable to the domestic passenger car
                fleet without regard to traded or transferred credits.\321\
                ---------------------------------------------------------------------------
                 \321\ 49 U.S.C. 32903(f)(2) and (g)(4).
                ---------------------------------------------------------------------------
                 However, the CAA has no such limitation regarding compliance by
                domestic and imported vehicles; EPA did not adopt provisions similar to
                the aforementioned EPCA/EISA requirements and is not doing so today.
                Therefore, the CAFE model determines compliance for manufacturers'
                overall passenger car and light truck fleets for EPA's program.
                 Each manufacturer's regulatory requirement represents the
                production-weighted harmonic mean of their vehicle's targets in each
                regulated fleet. This means that no individual vehicle has a
                ``standard,'' merely a target, and each manufacturer is free to
                identify a compliance strategy that makes the most sense given its
                unique combination of vehicle models, consumers, and competitive
                position in the various market segments. As the CAFE model provides
                flexibility when defining a set of regulatory standards, each
                manufacturer's requirement is dynamically defined based on the
                specification of the standards for any simulation and the distribution
                of footprints within each fleet.
                 Given this information, the model attempts to apply technology to
                each manufacturer's fleet in a manner that, given product planning and
                engineering-related considerations, optimizes the selected cost-related
                metric. The metric supported by the NPRM version of the model is termed
                ``effective cost.'' The effective cost captures more than the
                incremental cost of a given technology; it represents the difference
                between their incremental cost and the value of fuel savings to a
                potential buyer over the first 30 months of ownership.\322\ In addition
                to the technology cost and fuel savings, the effective cost also
                includes the change in CAFE civil penalties from applying a given
                technology and any estimated welfare losses associated with the
                technology (e.g., earlier versions of the CAFE model simulated low-
                range electric vehicles that produced a welfare loss to buyers who
                valued standard operating ranges between re-fueling events). Comments
                on this metric are discussed below, as are model changes responding to
                these comments.
                ---------------------------------------------------------------------------
                 \322\ The length of time over which to value fuel savings in the
                effective cost calculation is a model input that can be modified by
                the user. This analysis uses 30 months' worth of fuel savings in the
                effective cost calculation, using the price of fuel at the time of
                vehicle purchase.
                ---------------------------------------------------------------------------
                 This construction allows the model to choose technologies that both
                improve a manufacturer's regulatory compliance position and are most
                likely to be attractive to its consumers. This also means that
                different assumptions about future fuel prices will produce different
                rankings of technologies when the model evaluates available
                technologies for application. For example, in a high fuel price regime,
                an expensive but very efficient technology may look attractive to
                manufacturers because the value of the fuel savings is sufficiently
                high both to counteract the higher cost of the technology and,
                implicitly, to satisfy consumer demand to balance price increases with
                reductions in operating cost.
                [[Page 24278]]
                 In general, the model adds technology for several reasons but
                checks these sequentially. The model then applies any ``forced''
                technologies. Currently, only variable valve timing (VVT) is forced to
                be applied to vehicles at redesign since it is the root of the engine
                path and the reference point for all future engine technology
                applications.\323\ The model next applies any inherited technologies
                that were applied to a leader vehicle on the same vehicle platform and
                carried forward into future model years where follower vehicles (on the
                shared system) are freshened or redesigned (and thus eligible to
                receive the updated version of the shared component). In practice, very
                few vehicle models enter without VVT, so inheritance is typically the
                first step in the compliance loop. Next, the model evaluates the
                manufacturer's compliance status, applying all cost-effective
                technologies regardless of compliance status.\324\ Then the model
                applies expiring overcompliance credits (if allowed to do so under the
                perspective of either the ``unconstrained'' or ``standard setting''
                analysis, for CAFE purposes).\325\ At this point, the model checks the
                manufacturer's compliance status again. If the manufacturer is still
                not compliant (and is unwilling to pay civil penalties, again for CAFE
                modeling), the model will add technologies that are not cost-effective
                until the manufacturer reaches compliance. If the manufacturer exhausts
                opportunities to comply with the standard by improving fuel economy/
                reducing emissions (typically due to a limited percentage of its fleet
                being redesigned in that year), the model will apply banked CAFE or
                CO2 credits to offset the remaining deficit. If no credits
                exist to offset the remaining deficit, the model will reach back in
                time to alter technology solutions in earlier model years.
                ---------------------------------------------------------------------------
                 \323\ As a practical matter, this affects very few vehicles.
                More than 95 percent of vehicles in the market file either already
                have VVT present or have surpassed the basic engine path through the
                application of hybrids or electric vehicles.
                 \324\ For further explanation of how the CAFE model considers
                the effective cost of applying different technologies see the CAFE
                Model Documentation for the final rule, at S5.3 Compliance
                Simulation Algorithm.
                 \325\ As mentioned above, EPCA prohibits consideration of
                available credits when setting maximum feasible fuel economy
                standards. 49 U.S.C. 32902(h)(3).
                ---------------------------------------------------------------------------
                 The CAFE model implements multi-year planning by looking back,
                rather than forward. When a manufacturer is unable to comply through
                cost-effective (i.e., producing effective cost values less than zero)
                technology improvements or credit application in a given year, the
                model will ``reach back'' to earlier years and apply the most cost-
                effective technologies that were not applied at that time and then
                carry those technologies forward into the future and re-evaluate the
                manufacturer's compliance position. The model repeats this process
                until compliance in the current year is achieved, dynamically
                rebuilding previous model year fleets and carrying them forward into
                the future, and accumulating CAFE or CO2 credits from over-
                compliance with the standard wherever appropriate.
                 In a given model year, the model determines applicability of each
                technology to each vehicle platform, model, engine, and transmission.
                The compliance simulation algorithm begins the process of applying
                technologies based on the CAFE or CO2 standards specified
                during the current model year. This involves repeatedly evaluating the
                degree of noncompliance, identifying the next ``best'' technology
                (ranked by the effective cost discussed earlier) available on each of
                the parallel technology paths described above and applying the best of
                these. The algorithm combines some of the pathways, evaluating them
                sequentially instead of in parallel, to ensure appropriate incremental
                progression of technologies.
                 The algorithm first finds the best next applicable technology in
                each of the technology pathways and then selects the best among these.
                For CAFE purposes, the model applies the technology to the affected
                vehicles if a manufacturer is either unwilling to pay penalties or if
                applying the technology is more cost-effective than paying penalties.
                Afterwards, the algorithm reevaluates the manufacturer's degree of
                noncompliance and continues application of technology. Once a
                manufacturer reaches compliance (i.e., the manufacturer would no longer
                need to pay penalties), the algorithm proceeds to apply any additional
                technology determined to be cost-effective (as discussed above).
                Conversely, if a manufacturer is assumed to prefer to pay penalties,
                the algorithm only applies technology up to the point where doing so is
                less costly than paying penalties. The algorithm stops applying
                additional technology to this manufacturer's products once no more
                cost-effective solutions are encountered. This process is repeated for
                each manufacturer present in the input fleet. It is then repeated for
                each model year. Once all model years have been processed, the
                compliance simulation algorithm concludes. The process for
                CO2 standard compliance simulation is similar, but without
                the option of penalty payment, such that technologies are applied until
                compliance (accounting for any modeled application of credits) is
                achieved. For both CAFE and CO2 standards, the model also
                applies any additional (i.e., beyond required for compliance)
                technology that ``pays back'' within a specified period (for the NPRM
                and today's analysis, 30 months).
                 Some commenters argued that the CAFE model applies constraints that
                excessively limit options manufacturers have to add technology, causing
                the model to overestimate costs to achieve a given level of
                improvement.\326\ Some of these commenters further argued that the
                agencies should assume greater potential to apply technologies that
                contribute to compliance by improving air conditioner efficiency or
                otherwise reducing ``off cycle'' fuel consumption and CO2
                emissions.\327\ Other commenters argued that such constraints, while
                warranting some refinements, help the model to simulate manufacturers'
                decision making realistically and to estimate technology effectiveness
                and costs reasonably.328 329
                ---------------------------------------------------------------------------
                 \326\ NHTSA-2018-0067-12057, CBD, et. al, p. 3.
                 \327\ NHTSA-2018-0067-11741, ICCT, Attachment 2, p. 4.
                 \328\ NHTSA-2018-0067-12073, Alliance of Automobile
                Manufacturers, pp. 134-36.
                 \329\ American Honda Motor Co., ``Honda Comments on the NPRM and
                various proposals contained therein--Prepared for NHTSA, EPA and
                ARB,'' October 17, 2018, pp. 12-16.
                ---------------------------------------------------------------------------
                 Some commenters questioned the ``effective cost'' metric the model
                uses to decide among available options, claiming that the metric also
                causes the model to avoid selection of pathways that are not always
                economically optimal.\330\ One of these commenters recommended the
                agencies modify the effective cost metric for CO2 compliance
                by removing the term placing a monetary value on progress toward
                compliance, and instead dividing the remaining net cost (i.e., the
                increase in technology costs minus a portion of the fuel outlays
                expected to be avoided) by the additional CO2 credits
                earned.\331\ Another of these commenters claimed on one hand, that the
                effective cost metric ``does not include a measurement of the
                technology's reduction in fuel consumption or CO2
                emissions'' and, on the other, that the metric inappropriately places a
                value on avoided fuel consumption.\332\
                ---------------------------------------------------------------------------
                 \330\ NHTSA-2018-0067-11741, ICCT, Attachment 3, p. I-62.
                 \331\ NHTSA-2018-0067-12039, UCS, Technical Appendix, pp. 28-32.
                 \332\ NHTSA-2018-0067-12108, EDF, Appendix B, p. 67.
                ---------------------------------------------------------------------------
                 One commenter claimed that the model inappropriately allows earned
                [[Page 24279]]
                credits (including CO2 program credits for which EPA has
                granted a one-time exemption from carry-forward limits) to expire while
                also showing undue degrees overcompliance with standards, and further
                proposed that the model be modified to simulate both credit ``carry
                back'' (aka ``borrowing'') and credit trading between
                manufacturers.\333\
                ---------------------------------------------------------------------------
                 \333\ NHTSA-2018-0067-12039, UCS, Technical Appendix, pp. 36-40.
                ---------------------------------------------------------------------------
                 In addition, some commenters indicated that the agencies' analysis
                (impliedly, its modeling) should account for some States' mandates that
                manufacturers sell minimum quantities of ``Zero Emission Vehicles''
                (ZEVs).334 335
                ---------------------------------------------------------------------------
                 \334\ NHTSA-2018-0067-12036, Volvo, p. 5.
                 \335\ NHTSA-2018-0067-11813, South Coast AQMD, Attachment 1, p.
                4 and EIS comments, p. 9.
                ---------------------------------------------------------------------------
                 Regarding the model's representation of engineering and product
                planning constraints, the agencies maintain that having such
                constraints produces more realistic potential (as mentioned above, not
                ``predicted'') pathways forward from manufacturers' current fleets than
                would be the case were these constraints removed. For example, while
                manufacturers' product plans are protected as confidential business
                information (CBI), some manufacturers' public comments demonstrate
                year-by-year balancing such as the CAFE model emulates.\336\ Also, even
                manufacturers that have invested in technologies such as hybrid
                electric powertrains and Atkinson cycle engines have commented that a
                manufacturers' past investments will constrain the pathways it can
                practicably take.\337\ Therefore, the agencies have retained the
                model's basic structural constraints, have updated and expanded the
                model's technology paths (and, as discussed, the model's logic for
                approaching these paths), and have updated inputs defining the range of
                manufacturer-, technology-, and product-specific constraints. These
                updates are discussed below at greater length.
                ---------------------------------------------------------------------------
                 \336\ See, e.g., FCA, pp. 5-6.
                 \337\ Toyota, Attachment 1, p. 10.
                ---------------------------------------------------------------------------
                 The agencies have also reconsidered opportunities manufacturers may
                have to expand the application of technologies that contribute to
                compliance by improving air conditioner efficiency or otherwise
                reducing ``off cycle'' fuel consumption and CO2 emissions,
                or to earn credit toward CO2 compliance by using
                refrigerants with lower global warming potential (GWP) or reducing the
                potential for refrigerant leaks. The version of the model used for the
                proposal accommodates inputs that, for each of these adjustments or
                credits, applies the same value to every model year. The agencies have
                revised the model to accommodate inputs that specify the degree of
                adjustment or credit separately for each model year, and have applied
                inputs that assume manufacturers will increase application of these
                improvements to the highest levels reported within the industry.
                 Regarding comments on the effective cost metric the model uses to
                compare and select among available options to add technology, the
                agencies have considered changes such as those mentioned above. Given
                the myriad of factors that manufacturers can consider, any weighing to
                be conducted using publicly-available information will constitute a
                simplified representation. Nevertheless, within the model's context, it
                is obvious that any weighing of options should, at a minimum, consider
                some measure of each option's costs and benefits. Since this aspect of
                the model involves simulating manufacturers' decisions, it is also
                clearly appropriate that these costs and benefits be considered from a
                manufacturer perspective rather than a social perspective.
                 The effective cost metric used for the NPRM version of the model
                represents the cost of a given option as the cost to apply a given
                technology to a given set of vehicles, and represents the benefit of
                the same option as the extent to which the manufacturer might expect
                buyers would be willing to pay for fuel economy (as represented by a
                portion of the projected fuel savings), combined with any reduction in
                CAFE civil penalties that the manufacturer might ultimately need to
                pass along to buyers. The reduction in CAFE civil penalties places a
                value on progress made toward compliance with CAFE standards. The CAA
                provides no direction regarding CO2 standards, so the model
                accepts inputs specifying an analogous basis for valuing changes in the
                quantity of CO2 credits earned from (or required by) a
                manufacturer's fleet. Because each of these three components
                (technology cost, fuel benefit, and compliance benefit) is expressed in
                dollars, subtracting benefits from costs produces a net cost, and after
                dividing net costs by the number of affected vehicles, it is logical
                to, at each step, select the option that produces the most negative net
                unit cost. This approach can be interpreted as maximizing net benefits
                (to the manufacturer).
                 As an alternative, the agencies considered a simpler metric that
                considers only the cost of the option and the extent to which the
                option increases the quantity of earned credits, and does not require
                input assumptions regarding how to value progress toward compliance.
                Such a metric is expressed in dollars per ton or dollars per gallon
                such that seeking options that produce the smallest (positive) values
                can be interpreted as maximizing cost effectiveness (of progress toward
                compliance). However, simply comparing technology costs to
                corresponding compliance improvements would implicitly assume that
                manufacturers do not respond at all to fuel prices. This assumption is
                clearly unrealistic. For example, if diesel fuel costs $5 per gallon
                and gasoline costs $2 per gallon, manufacturers will be reluctant to
                respond to stringent CAFE or CO2 standards by replacing
                gasoline engines with diesel engines. Manufacturers' comments credibly
                assert that fuel prices matter, and in the agencies' judgment,
                simulations of decisions between available options should continue to
                account for avoided fuel outlays.
                 On the other hand, while any metric should incorporate some measure
                of progress toward compliance, it is not obvious that this progress
                must be expressed in monetary terms. While the CAFE civil penalty
                provisions provide a logical basis for doing so with respect to CAFE,
                the recently-introduced (through EISA) option to trade credit between
                manufacturers adds an alternative basis that is undefined and
                uncertain, in part because terms of past trades are not known to the
                agencies. Also, as mentioned above, EPCA/EISA's civil penalty
                provisions are not applicable to noncompliance with CO2
                standards.
                 Therefore, for the purpose of selecting among available options to
                add technology, the agencies consider it reasonable to use the degree
                of compliance improvement in ``raw'' (i.e., not monetized) form, and to
                divide net costs (i.e., technology costs minus a portion of expected
                avoided fuel outlays) by this improvement. Under a range of side-by-
                side tests, this change to the effective cost metric most frequently
                produced lower overall estimates of compliance costs. However,
                differences vary among manufacturers, model years, and regulatory
                alternatives, and also depend on other model inputs. For example, at
                high fuel prices, the new metric tends to select more expensive
                pathways than the NPRM's metric, and with the new metric, a case
                simulating ``perfect trading'' of CO2 compliance credits
                tends to show such trading increasing compliance costs rather than, as
                expected, decreasing such costs.
                 The version of the model used for the proposal simulates the
                potential that, for
                [[Page 24280]]
                a given fleet in a given model year, a manufacturer might be able to
                use credits from an earlier model year or a different fleet. This
                version of the model did not explicitly simulate the potential that,
                for a given fleet in a given model year, a manufacturer might be to use
                credits from a future model year or a different manufacturer. However,
                the agencies did apply model inputs that reflected assumptions
                regarding possible trading of credits actually earned prior to model
                year 2016 (the earliest represented in detail in the agencies'
                analysis), and the agencies did examine a case (included in the
                sensitivity analysis) involving hypothetical ``perfect'' trading of
                CO2 credits among manufacturers by treating the industry as
                a single ``manufacturer.'' Although past versions of the CAFE Model had
                included code under development with a view toward eventually
                simulating one or both of these provisions, this code had never
                proceeded beyond preliminary experimentation, and had never been the
                focus of peer reviews or application in published analyses.
                 Nevertheless, the agencies considered expanding the model to
                simulate credit ``carry back'' (or ``borrowing'') and trading
                (explicitly, rather than in an idealized hypothetical way). The
                agencies closely examined the corresponding model revisions proposed by
                UCS and determined that such methods would not produce repeatable
                results. This is because the approach proposed by UCS ``randomly swaps
                items in list to minimize trading bias.'' \338\
                ---------------------------------------------------------------------------
                 \338\ UCS, NHTSA-2018-0067-12039, Technical Appendix, at 84-87.
                ---------------------------------------------------------------------------
                 Even if such revisions could be modified to produce non-random
                results, including credit banking and trading would introduce highly
                speculative elements into the agencies' analysis. While manufacturers
                have occasionally indicated plans to carry back credits from future
                model years, those plans have sometimes backfired when projected
                credits have failed to materialize, e.g., by misjudging consumer demand
                for more efficient vehicles. In the agencies' judgment, it would be
                inappropriate to set standards based on an analysis that relies on the
                type of borrowing that has been known to fail. To rely also on credit
                trading during the model years included in the analysis would compound
                this undue speculation. For example, including credit borrowing and
                trading throughout the analysis, as some commenters proposed, would
                lead to an analysis that depends on the potential that, in order to
                comply with the MY 2022 standard for light trucks, FCA could use
                credits it expects to be able to buy from another manufacturer in MY
                2025. Even if the agencies' analysis had knowledge of and made use of
                manufacturers' actual product plans, expectations about the ability to
                borrow others' unearned credits would necessarily be considered risky
                and unreliable. Within an analysis that, to provide for public
                disclosure, extrapolates forward many years from the most recent
                observed fleet, such transactions would add an unreasonable level of
                speculation. Therefore, the agencies have declined to introduce credit
                borrowing and trading into the model's logic.
                 The analysis presented in the proposal applied inputs reflecting
                potential application of credits earned earlier than the first year
                modeled explicitly. However, as observed by some commenters, those
                inputs did not fully account for the one-time exemption from the 5-year
                limit on the extent to which manufacturers may carry forward
                CO2 credits. The agencies have updated the analysis fleet to
                MY 2017 and, in doing so, have updated inputs specifying how credits
                earned to MY 2017 might be applied. These updates implement a
                reasonably full accounting of these ``legacy'' credits, including of
                the one-time exemption from the credit life limit.
                 As mentioned above, some commenters also indicated that the model
                is unrealistically ``reluctant'' to apply credits carried forward from
                early model years. As explained in the proposal and in the model
                documentation, the model's application of carried-forward credits is
                partially controlled by model inputs, which, for the proposal, were set
                to assume that manufacturers would tend to retain credits as long as
                possible. This assumption is entirely consistent with manufacturers'
                past practice and logical in a context wherein the stringency of
                standards is generally increasing over time. Even though using credits
                in some model years might seem initially advantageous, doing so means
                foregoing actual improvements likely to be needed in later model years.
                 Regarding the model's treatment of mandates and credits for the
                sale of ZEVs, as indicated in the model documentation accompanying the
                proposal, these capabilities were experimental in that version of the
                model. The reference case analysis for today's notice, like that for
                the proposal, does not simulate compliance with ZEV mandates.\339\
                ---------------------------------------------------------------------------
                 \339\ The agencies note their finalization of the One National
                Program Final Action, in which EPA partially withdrew a waiver of
                CAA preemption previously granted to the State of California
                relating to its ZEV mandate, and NHTSA finalized regulations
                providing that State ZEV mandates are impliedly and expressly
                preempted by EPCA. This joint action is available at 84 FR 51310.
                ---------------------------------------------------------------------------
                 For the NPRM, the CAFE model was exercised with inputs extending
                this explicit simulation of technology application through MY 2032, as
                the agencies anticipated this was sufficiently beyond MY 2026 that
                nearly all multiyear planning attributable to MY 2026 standards should
                be accounted for, and any compliance credits carried forward from MY
                2026 would have expired. The analysis met this expectation, and the
                agencies presented analysis of the resultant estimated impacts over the
                useful lives of vehicles produced prior to MY 2030. The agencies
                invited comment on all aspects of the analysis, and relevant to this
                aspect of the analysis--i.e., its perspective and temporal span--EDF
                stated that that these led the agencies to overstate the proposal's
                positive impacts on safety, in part because by explicitly representing
                vehicle model years only through 2032, the agencies had failed to
                account for the impact of distant model years prices and fuel economy
                levels on the retention and scrappage of vehicles produced through MY
                2029.\340\ For example, some vehicles produced in MY 2026 will likely
                still be on the road during calendar years (CY) 2033-2050 and the rates
                at which these MY 2026 vehicles will be scrapped during CYs 2033-2050
                will be impacted by the prices and fuel economy levels of vehicles
                produced during MYs 2033-2050.
                ---------------------------------------------------------------------------
                 \340\ EDF, NHTSA-2018-0067-12108, Attachment A at 11 and
                Attachment B at 11-28.
                ---------------------------------------------------------------------------
                 The agencies have addressed this comment by expanding model inputs
                to extend the explicit simulation of technology application through MY
                2050. Most of these expanded model inputs involve the analysis fleet
                and inputs defining the cost and availability of various fuel-saving
                technologies. These inputs are discussed below. The agencies also made
                minor modifications to the model in order to extend model outputs to
                cover this wider span and to carry forward each regulatory
                alternative's standards automatically through the last year to be
                modeled (e.g., extending standards without change from MY 2032 through
                MY 2050). The model documentation discusses these
                [[Page 24281]]
                minor changes.\341\ In addition, although the agencies published
                detailed model output files documenting all estimated annual impacts
                through calendar year 2089, the notice and PRIA both emphasized the
                above-mentioned ``model year'' perspective, as in past regulatory
                analyses supporting CAFE and CO2 standards. Recognizing that
                an alternative ``calendar year'' perspective is of interest to EDF and,
                perhaps other stakeholders, the agencies have expanded the presentation
                of results in today's notice and FRIA by presenting some physical
                impacts (e.g., fuel consumption and CO2 emissions) as well
                as monetized benefits, costs, and net benefits for each of CYs 2017-
                2050. All of these results appear in the model output files published
                with today's notice, as do corresponding results for more specific
                impacts (e.g., year-by-year components of monetized social costs).\342\
                ---------------------------------------------------------------------------
                 \341\ The model and documentation are available at https://www.nhtsa.gov/corporate-average-fuel-economy/compliance-and-effects-modeling-system.
                 \342\ Detailed model inputs and outputs are available at https://www.nhtsa.gov/corporate-average-fuel-economy/compliance-and-effects-modeling-system.
                ---------------------------------------------------------------------------
                5. Calculation of Physical Impacts
                 Once it has completed the simulation of manufacturers' potential
                application of technology in response to CAFE/CO2 standards
                and fuel prices, the CAFE Model calculates impacts of the resultant
                changes in new vehicle fuel economy levels and prices. This involves
                several steps.
                 The model calculates changes in the total quantity of new vehicles
                sold in each model year as well as the relative shares passenger cars
                and light trucks comprise of the overall new vehicle market. The
                agencies received many comments on the estimation of sales impacts, and
                as discussed below, today's analysis applies methods and corresponding
                estimates that reflect careful consideration of these comments. Related
                to these calculations, the model now operates in an iterated fashion
                with a view toward obtaining sales impacts that are balanced with
                changes in vehicle prices and fuel economy levels. This involves
                solving for compliance, calculating sales impacts, re-solving for
                compliance, and repeating these steps as many times as specified in
                model inputs. For today's analysis, the agencies operated the model
                with four iterations, as early testing suggested three iterations
                should be sufficient for fleetwide results to converge between
                iterations. The model documentation describes the procedures for
                iteration in detail.
                 The impacts on outlays for new vehicles occur coincident with the
                sale of these vehicles so the model can simply calculate and record
                these for each model year included in the analysis. However, virtually
                all other impacts result from vehicle operation that extends long after
                a vehicle is produced. Like other models (including, e.g., NEMS), the
                CAFE Model includes procedures (sometimes referred to as ``stock
                models'' or as models of fleet turnover) to estimate annual rates at
                which new vehicles are used and subsequently scrapped. The agencies
                received many comments on procedures for estimating vehicle scrappage
                and on procedures for estimating annual quantities of highway travel,
                accounting for the elasticity of travel demand with respect to per-mile
                costs for fuel. Below, Section VI.D.1 discusses these comments and
                reviews procedures and corresponding estimates that also reflect
                careful consideration of these comments.
                 For each vehicle model in each model year, these procedures result
                in estimates of the number of vehicles remaining in service in each
                calendar year, as well as the annual mileage accumulation (i.e.,
                vehicle miles traveled, or VMT) in each calendar year. As mentioned
                above, most of the physical impacts of interest derive from this
                vehicle operation. Also discussed above, the simulated application of
                technology results in ``initial'' and ``final'' estimates of the cost,
                fuel type, fuel economy, and fuel share (for, in particular, PHEVs that
                can run on gasoline or electricity) applicable to each vehicle model in
                each model year. Together with quantities of travel, and with estimates
                of the ``gap'' between ``laboratory'' and ``on-road'' fuel economy,
                these enable calculation of quantities of fuel consumed in each year
                during the useful life of each vehicle model produced in each model
                year.\343\ The model documentation provides specific procedures and
                formulas implementing these calculations.
                ---------------------------------------------------------------------------
                 \343\ The agencies have applied the same estimates of the ``on
                road gap'' as applied for the analysis supporting the NPRM. For
                operation on gasoline, diesel, E85, and CNG, this gap is 20 percent;
                for electricity and hydrogen, 30 percent.
                ---------------------------------------------------------------------------
                 As for the NPRM, the model calculates emissions of CO2
                and other air pollutants, reporting emissions both from vehicle
                tailpipes and from upstream processes (e.g., petroleum refining)
                involved in producing and supplying fuels. Section VI.D.3 below reviews
                methods, models, and estimates used in performing these calculations.
                The model also calculates impacts on highway safety, accounting for
                changes in travel demand, changes in vehicle mass, and continued past
                and expected progress in vehicle safety (through, e.g., the application
                of new crash avoidance systems). Section VI.D.2 discusses methods, data
                sources, and estimates involved in estimating safety impacts, comments
                on the same, and changes included in today's analysis. In response to
                the NPRM, some comments urged the agencies also to quantify different
                types of health impacts from changes in air pollution rather than only
                accounting for such impacts in aggregate estimates of the social costs
                of air pollution. Considering these comments, the agencies added such
                calculations to the model, as discussed in Section VI.D.3.
                6. Calculation of Benefits and Costs
                 Having estimated how technologies might be applied going forward,
                and having estimated the range of resultant physical impacts, the CAFE
                Model calculates a variety of private and social benefits and costs,
                reporting these from the consumer, manufacturer, and social
                perspectives, both in undiscounted and discounted present value form
                (given inputs specifying the corresponding discount rate and present
                year). Estimates of regulatory costs are among the direct outputs of
                the simulation of manufacturers' potential responses to new standards.
                Other benefits and costs are calculated based on the above-mentioned
                estimates of travel demand, fuel consumption, emissions, and safety
                impacts. The agencies received many comments on the NPRM's calculation
                of benefits and costs, and Section VI.D.1 discusses these comments and
                presents the methods, data sources, and estimates used in calculating
                benefits and costs reported here.
                7. Structure of Model Inputs and Outputs
                 All CAFE Model inputs and outputs described above are specified in
                Microsoft Excel format, and the user can define and edit all inputs to
                the system. Table VI-3 describes (non-exhaustively) which inputs are
                contained within each input file and Table VI-4 describes which outputs
                are contained in each output file. This is important for three reasons:
                (1) Each file is discussed throughout the following sections; (2)
                several commenters conflated aspects of the model with its inputs; and
                (3) several commenters seemed confused about where to find specific
                information in the output files. This information was described in
                detail in the NPRM CAFE Model Documentation, but is reproduced here for
                quick reference. When specifically referencing the input
                [[Page 24282]]
                or output file used for the NPRM or final rule in the following
                discussion, NPRM or FRM, respectively, will precede the file name.
                [GRAPHIC] [TIFF OMITTED] TR30AP20.080
                [GRAPHIC] [TIFF OMITTED] TR30AP20.081
                 A catalog of the Argonne National Laboratory Autonomie fuel economy
                technology effectiveness value output files are reproduced in the
                following Table VI-5 as well. The left column shows the terminology
                used in this text to refer to the file, while the right column
                describes each file. NPRM or FRM, respectively, may precede the
                terminology in the text as appropriate.
                [[Page 24283]]
                [GRAPHIC] [TIFF OMITTED] TR30AP20.082
                 Finally, Table VI-6 lists the terminologies used to refer to other
                model-related documents which are referred to frequently throughout the
                text. NPRM or FRM, respectively, may precede the terminology in the
                text as appropriate.
                [[Page 24284]]
                [GRAPHIC] [TIFF OMITTED] TR30AP20.083
                B. What inputs does the compliance analysis require?
                1. Analysis Fleet
                 The starting point for the evaluation of the potential feasibility
                of different stringency levels for future CAFE and CO2
                standards is the analysis fleet, which is a snapshot of the recent
                vehicle market. The analysis fleet provides a baseline from which to
                project what and how additional technologies could feasibly be applied
                to vehicles in a cost-effective manner to raise those vehicles' fuel
                economy and lower their CO2 emission levels.\344\ The fleet
                characterization also provides a reference point with data for other
                factors considered in the analysis, including environmental effects and
                effects estimated by the economic modules (i.e., sales, scrappage, and
                labor utilization). When the scope of the analysis widens, another
                piece of data must be included for each vehicle in the analysis fleet
                to map a given element of the fleet appropriately onto an analysis
                module.
                ---------------------------------------------------------------------------
                 \344\ The CAFE model does not generate compliance paths a
                manufacturer should, must, or will deploy. It is intended as a tool
                to demonstrate a compliance pathway a manufacturer could choose. It
                is almost certain all manufacturers will make compliance choices
                differing from those projected by the CAFE model.
                ---------------------------------------------------------------------------
                 For the analysis presented in this final rule, the analysis fleet
                includes information about vehicles that is essential for each analysis
                module. The first part of projecting how additional technologies could
                be applied to vehicles is knowing which vehicles are produced by which
                manufacturers, the fuel economies of those vehicles, how many of each
                are sold, whether they are passenger cars or light trucks, and their
                footprints. This is important because it improves understanding of the
                overall impacts of different levels of CAFE and CO2
                standards; overall impacts that result from industry's response to
                standards, and industry's response, is made up of individual
                manufacturer responses to the standards in light of the overall market
                and their individual assessment of consumer acceptance. Establishing an
                accurate representation of manufacturers' existing fleets (and the
                vehicle models in them) that will be subject to future standards helps
                in predicting potential individual manufacturer responses to those
                future standards in addition to potential changes in those standards.
                 Another part of projecting how additional fuel economy improving
                technologies could be applied to vehicles is knowing which fuel saving
                technologies manufacturers have equipped on which vehicles. In many
                cases, the agencies also collect and reference additional information
                on other vehicle attributes to help with this process.\345\ Accounting
                for technologies already applied to vehicles helps avoid ``double-
                counting'' the value of those technologies, by assuming they are still
                available to be applied to improve fuel economy and reduce
                CO2 emissions. It also promotes more realistic
                determinations of what additional technologies can feasibly be applied
                to those vehicles: If a manufacturer has already started down a
                technological path to fuel economy or performance improvements, the
                agencies do not assume it will completely abandon that path because
                doing so would be unrealistic and fails to represent accurately
                manufacturer responses to standards. Each vehicle model (and
                configurations of each model) in the analysis fleet, therefore, has a
                comprehensive list of its technologies, which is important because
                different configurations may have different technologies applied to
                them.\346\ In addition, to properly account for technology costs, the
                agencies assign each vehicle to a technology class and an engine class.
                Technology classes reference each vehicle to a set of full vehicle
                simulations, so that the agencies may project fuel efficiency with
                combinations of additional fuel saving equipment and hybrid and
                electric vehicle battery costs.
                ---------------------------------------------------------------------------
                 \345\ For instance, curb weight, horsepower, drive
                configuration, pickup bed length, oil type, body style, aerodynamic
                drag coefficients, and rolling resistance coefficients, and (if
                applicable) battery sizes are all required to assign technology
                content properly.
                 \346\ Considering each vehicle model/configuration also improves
                the ability to consider the differential impacts of different levels
                of potential standards on different manufacturers, since all vehicle
                model/configurations ``start'' at different places, in terms of
                technologies already used and how those technologies are used.
                ---------------------------------------------------------------------------
                 Yet another part of projecting which vehicles might exist in future
                model years is developing reasonable real-world assumptions about when
                and how manufacturers might apply certain technologies to vehicles. The
                analysis fleet accounts for links between vehicles, recognizing vehicle
                platforms will share technologies, and the vehicles that make up that
                platform should receive (or not receive) additional technological
                improvements together. Shared engines, shared transmissions, and shared
                vehicle platforms for mass reduction technology are considered. In
                addition, each vehicle model/configuration in the analysis fleet also
                has information about its redesign
                [[Page 24285]]
                schedule, i.e., the last year it was redesigned and when the agencies
                expect it to be redesigned again. Redesign schedules are a key part of
                manufacturers' business plans, as each new product can cost more than
                $1B, and involve a significant portion of a manufacturer's scarce
                research, development, and manufacturing and equipment budgets and
                resources.\347\ Manufacturers have repeatedly told the agencies that
                sustainable business plans require careful management of resources and
                capital spending, and that the length of time each product remains in
                production is crucial to recouping the upfront product development and
                plant/equipment costs, as well as the capital needed to fund the
                development and manufacturing equipment needed for future products.
                Because the production volume of any given vehicle model varies within
                a manufacturer's product line, and varies among different
                manufacturers, redesign schedules typically vary for each model and
                manufacturer. Some (relatively few) technological improvements are
                small enough that they can be applied in any model year; a few other
                technological improvements may be applied during a refreshening (when a
                few additional changes are made, but well short of a full redesign),
                but others are major enough that they can only be cost-effectively
                applied at a vehicle redesign, when many other things about the vehicle
                are already changing. Ensuring the CAFE model makes technological
                improvements to vehicles only when it is feasible to do so also helps
                the analysis better represent manufacturer responses to different
                levels of standards.
                ---------------------------------------------------------------------------
                 \347\ Shea, T., Why Does It Cost So Much For Automakers To
                Develop New Models? Autoblog (Jul. 27, 2010), https://www.autoblog.com/2010/07/27/why-does-it-cost-so-much-for-automakers-to-develop-new-models/.
                ---------------------------------------------------------------------------
                 Finally, the agencies restrict the applications of some
                technologies on some vehicles upon determining the technology is not
                compatible with the functional and performance requirements of the
                vehicle, or if the manufacturers are unlikely to apply a specific
                technology to a specific vehicle for reasons articulated with
                confidential business information that the agencies found credible.
                 Other data important for the analysis that are referenced to the
                analysis fleet include baseline economic, environmental, and safety
                information. Vehicle fuel tank size is required to estimate range and
                refueling benefit while curb weights and safety class assignments help
                the agencies consider how changes in vehicle mass may affect safety.
                The agencies identify the final assembly location for each vehicle,
                engine, and transmission, as well as the percent of U.S. content to
                support the labor impact analysis. In addition, the aforementioned
                accounting for first-year vehicle production volumes (i.e., the number
                of vehicles of each new model sold in MY 2017, for this analysis) is
                the foundation for estimating how future vehicle sales might change in
                response to different potential standards.
                 The input file for the CAFE model characterizing the analysis
                fleet, referred to as the ``market inputs'' file or ``market data''
                file, accordingly includes a large amount of data about vehicles, their
                technological characteristics, the manufacturers and fleets to which
                they belong, and initial prices and production volumes, which provide
                the starting points for projection (by the sales model) to ensuing
                model years. In the Draft TAR (which utilized a MY 2015 analysis fleet)
                and NPRM (which utilized a MY 2016 analysis fleet), the agencies needed
                to populate about 230,000 cells in the market data file to characterize
                the fleet. For this final rule (which utilized a MY 2017 analysis
                fleet), the agencies populated more than 400,000 cells to characterize
                the fleet. While the fleet is not actually much more heterogeneous in
                reality,\348\ the agencies have provided and collected more data to
                justify the characterization of the analysis fleet, and to support the
                functionality of modules in the CAFE model.
                ---------------------------------------------------------------------------
                 \348\ The expansion of cells is primarily due to (1) considering
                more technologies, and (2) listing trim levels separately, which
                often yields more precise curb weights and more accurate
                manufacturer suggested retail prices.
                ---------------------------------------------------------------------------
                 A solid characterization of a recent model year as an analytical
                starting point helps realistically estimate ways manufacturers could
                potentially respond to different levels of standards, and the modeling
                strives to simulate realistically how manufacturers could progress from
                that starting point. While manufacturers can respond in many ways
                beyond those represented in the analysis (e.g., applying other
                technologies, shifting production volumes, changing vehicle footprint),
                such that it is impossible to predict with any certainty exactly how
                each manufacturer will respond, it is still important to establish a
                solid foundation from which to estimate potential costs and benefits of
                potential future standards. The following sections discuss aspects of
                how the analysis fleet was built for this analysis, and includes
                discussion of the comments on fleet that the agencies received on the
                proposed rule.
                a) Principles on Data Sources Used To Populate the Analysis Fleet
                 The source data for vehicles in the analysis fleet and their
                technologies is a central input for the analysis. The sections below
                discuss pros and cons of different potential sources and what the
                agencies used for this analysis, and responds to comments the agencies
                received on data sources in the proposal.
                (1) Use of Confidential Business Information Versus Publicly-Releasable
                Sources
                 Since 2001, CAFE analysis has used either confidential, forward-
                estimating product plans from manufacturers, or publicly available data
                on vehicles already sold as a starting point for determining what
                technologies can be applied to what vehicles in response to potential
                different levels of standards. The use of either data source requires
                certain tradeoffs. Confidential product plans comprehensively represent
                what vehicles a manufacturer expects to produce in coming years,
                accounting for plans to introduce new vehicles and fuel-saving
                technologies and, for example, plans to discontinue other vehicles and
                even brands. This information can be very thorough and can improve the
                accuracy of the analysis, but cannot be publicly released. This makes
                it difficult for public commenters to reproduce the analysis for
                themselves as they develop their comments. Some non-industry commenters
                have also expressed concern about manufacturers having an incentive in
                the submitted plans to underestimate (deliberately or not) their future
                fuel economy capabilities and overstate their expectations about, for
                example, the levels of performance of future vehicle models in order to
                affect the analysis. Accordingly, since 2010, EPA and NHTSA have based
                analysis fleets almost exclusively on information from commercial and
                public sources, starting with CAFE compliance data and adding
                information from other sources.
                 An analysis fleet based primarily on public sources can be released
                to the public, solving the issue of commenters being unable to
                reproduce the overall analysis. However, industry commenters have
                argued such an analysis fleet cannot accurately reflect manufacturers'
                actual plans to apply fuel-saving technologies (e.g., manufacturers may
                apply turbocharging to improve not just fuel economy, but also to
                improve vehicle performance) or manufacturers' plans to change product
                offerings by introducing some vehicles and brands and discontinuing
                other
                [[Page 24286]]
                vehicles and brands, precisely because that information is typically
                confidential business information (CBI). A fully-publicly-releasable
                analysis fleet holds vehicle characteristics unchanged over time and
                lacks some level of accuracy when projected into the future. For
                example, over time, manufacturers introduce new products and even
                entire brands. On the other hand, plans announced in press releases do
                not always ultimately bear out, nor do commercially available third-
                party forecasts. Assumptions could be made about these issues to
                improve the accuracy of a publicly releasable analysis fleet, but
                concerns include that this information would either be largely
                incorrect, or, if the assumptions were correct, information would be
                released that manufacturers would consider CBI.
                 Furthermore, some technologies considered in the rulemaking are
                difficult to observe in the analysis fleet without expensive teardown
                study and time-consuming benchmarking. Not giving credit for these
                technologies puts the analysis at significant risk of double-counting
                the effectiveness of these technologies, as manufacturers cannot equip
                technologies twice to the same vehicle for double the fuel economy
                benefit. As discussed in the Draft TAR, the agencies assigned little
                (if any) technology application in the baseline fleet for some of these
                technologies.\349\ For the NPRM MY 2016 fleet development process, the
                agencies again offered the manufacturers the opportunity to volunteer
                CBI to the agencies to help inform the technology content of the
                analysis fleet, and many manufacturers did. The agencies were able to
                confirm that many manufacturers had already included many hard-to-
                observe technologies in the MY 2016 fleet (which they were not properly
                given credit for in the characterization of the MY 2014 and MY 2015
                fleets presented in Draft TAR) so the agencies reflected this new
                information in the NPRM analysis and in the analysis presented today.
                ---------------------------------------------------------------------------
                 \349\ These technologies include low rolling resistance
                technology (incorrectly applied to zero baseline vehicles in Draft
                TAR), low-drag brakes (incorrectly applied to zero baseline vehicles
                in Draft TAR), electric power steering (incorrectly applied to too
                few vehicles in Draft TAR), accessory drive improvements
                (incorrectly applied to zero baseline vehicles in Draft TAR), engine
                friction reduction (previously named LUBEFR1, LUBEFR2, and LUBEFR3),
                secondary axle disconnect and transmission improvements.
                ---------------------------------------------------------------------------
                 In addition, many manufacturers provided confidential comment on
                the potential applicability of fuel-saving technologies to their fleet.
                In particular, many manufacturers confidentially identified specific
                engine technologies that they will not use in the near term, either on
                specific vehicles, or at all. Reasons varied: Some manufacturers cited
                intellectual property concerns, and others stated functional
                performance concerns for some engine types on some vehicles. Other
                manufacturers shared forward-looking product plans, and explained that
                it would be cost prohibitive to scrap significant investments in one
                technology in favor of another. This topic is discussed in more detail
                in Section VI.B.1.b)(6), below.
                 The agencies sought comment on how to address this issue going
                forward, recognizing both the competing interests involved and the
                typical timeframes for CAFE and CO2 standards rulemakings.
                 Many commenters expressed concern with the agencies using any CBI
                as part of the rulemaking process. Some commenters expressed concern
                that use of CBI would make the CAFE model subject to inaccuracies
                because manufacturers would only provide additional information in
                situations in which a correction to the agencies' baseline assumptions
                would favor the manufacturers.\350\ The agencies recognize this as a
                reasonable concern, but the analysis presented in the Draft TAR
                consistently assumed very little (if any) technology had been applied
                in the baseline. In addition, many manufacturers shared information on
                advanced technologies that were not yet in production in MY 2017, but
                could be used in the future; manufacturer contributions helped the
                agencies better model many advanced engine technologies and to include
                them in today's analysis, and inclusion of these technologies (and
                costs) in the analysis sometimes lowered the projected cost of
                compliance for stringent alternatives. Other commenters expressed
                concern that automakers would supply false or incomplete information
                that would unduly restrict what technologies can be deployed.\351\ When
                possible, the agencies sought independently to verify manufacturer CBI
                (or claims made by other stakeholders) through lab testing and
                benchmarking.\352\ The agencies found no evidence of misrepresentation
                of engineering specifications in the MY 2017 fleet in manufacturer CBI;
                instead, the agencies were able to verify independently many CBI
                submissions, and confirm the credibility of information provided from
                those sources.
                ---------------------------------------------------------------------------
                 \350\ NHTSA-2018-0067-12039, Union of Concerned Scientists.
                 \351\ NHTSA-2018-0067-11741, ICCT.
                 \352\ For instance, the agencies continue to evaluate tire
                rolling resistance on production vehicles via independent lab
                testing, and the agencies bench-marked the operating behavior and
                calibration of many engines and transmissions.
                ---------------------------------------------------------------------------
                 Some commenters requested that more CBI be used in the analysis.
                For instance, some commenters suggested that the agencies should return
                to the use of product plans and announcements regarding future fleets
                because manufacturers had already committed investments to bring
                announced products to market.\353\ However, if the agencies were to
                assume that these commitments were already in the baseline, the
                agencies would underestimate the cost of compliance for stringent
                alternatives. Moreover, while upfront investments to bring technologies
                to market are significant, the total marginal costs of components are
                typically large in comparison over the entire product life-cycle, and
                these costs have not yet been realized in vehicles not yet produced.
                ---------------------------------------------------------------------------
                 \353\ NHTSA-2018-0067-11956, PA Department of Environmental
                Protection.
                ---------------------------------------------------------------------------
                 The agencies did make use of some forward-looking CBI in the
                analysis. The agencies received many comments from manufacturers on the
                technological feasibility, or functional applicability of some fuel
                saving technologies to certain vehicles, or certain vehicle
                applications, and the agencies took this information into consideration
                when projecting compliance pathways. These cases are discussed
                generally in Section VI.B.1.b)(6), below, and specifically for each
                technology in those technology sections. Some commenters expressed that
                the use of CBI for future product plans would be acceptable, but only
                if the agencies disclosed the CBI affecting all vehicles through MY
                2025 at the time of publication.\354\ Functionally, this is not
                possible. Manufacturer's confidential product plans cannot be made
                public, as prohibited under NHTSA's regulations at 49 CFR part 512, and
                if the information meets the requirements of section 208(c) of the
                Clean Air Act. If the agencies disclosed confidential information, it
                would not only violate the terms on which the agencies obtained the
                CBI, but it is unlikely that manufacturers would continue to offer CBI,
                which in turn would likely degrade the quality of the analysis. The
                agencies believe that the use of CBI in the NPRM and final rule
                analysis--to confirm, reference, or to otherwise modify aspects of the
                analysis that can be made public--threads the needle between a more
                accurate but less transparent analysis (using more CBI) and a less
                accurate but more transparent analysis (using less CBI).
                ---------------------------------------------------------------------------
                 \354\ NHTSA-2018-0067-11741.
                ---------------------------------------------------------------------------
                [[Page 24287]]
                (2) Source Data and Vintage Used in the Analysis
                 Based on the assumption that a publicly-available analysis fleet
                continued to be desirable, manufacturer compliance submissions to EPA
                and NHTSA were used as a starting point for the NPRM and final rule
                analysis fleets. Generally, manufacturer compliance submissions break
                down vehicle fuel economy and production volume by regulatory class,
                and include some very basic product information (typically including
                vehicle nameplate, engine displacement, basic transmission information,
                and drive configuration). Many different trim levels of a product are
                typically rolled up and reported in an aggregated fashion, and these
                groupings can make decomposition of different fuel-saving, road load
                reducing technologies extremely difficult. For instance, vehicles in
                different test weight classes, with different tires or aerodynamic
                profiles may be aggregated and reported together.\355\ A second portion
                of the compliance submission summarizes production volume by vehicle
                footprints (a key compliance measure for standard setting) by
                nameplate, and includes some basic information about engine
                displacement, transmission, and drive configuration. Often these
                production volumes by footprint do not fit seamlessly together with the
                production volumes for fuel economy, so the agencies must reconcile
                this information.
                ---------------------------------------------------------------------------
                 \355\ Some fuel-economy compliance information for pickup trucks
                span multiple cab and box configurations, but manufacturers reported
                these disparate vehicles together.
                ---------------------------------------------------------------------------
                 Information from the MY 2016 fleet was chosen as the foundation for
                the NPRM analysis fleet because, at the time the rulemaking analysis
                was initiated, the 2016 fleet represented the most up-to-date
                information available in terms of individual vehicle models and
                configurations, production technology levels, and production volumes.
                If MY 2017 data had been used while this analysis was being developed,
                the agencies would have needed to use product planning information that
                could not be made available to the public until a later date.
                 The NPRM analysis fleet was initially developed with 2016 mid-model
                year compliance data because final compliance data was not available at
                that time, and the timing provided manufacturers the opportunity to
                review and comment on the characterization of their vehicles in the
                fleet. With a view toward developing an accurate characterization of
                the 2016 fleet to serve as an analytical starting point, corrections
                and updates to mid-year data (e.g., to production estimates) were
                sought, in addition to corroboration or correction of technical
                information obtained from commercial and other sources (to the extent
                that information was not included in compliance data), although future
                product planning information from manufacturers (e.g., future product
                offerings, products to be discontinued) was not requested, as most
                manufacturers view such information as CBI. Manufacturers offered a
                range of corrections to indicate engineering characteristics (e.g.,
                footprint, curb weight, transmission type) of specific vehicle model/
                configurations, as well as updates to fuel economy and production
                volume estimates in mid-year reporting. After following up on a case-
                by-case basis to investigate significant differences, the analysis
                fleet was updated.
                 Sales, footprint, and fuel economy values with final compliance
                data were also updated if that data was available. In a few cases,
                final production and fuel economy values were slightly different for
                specific MY 2016 vehicle models and configurations than were indicated
                in the NPRM analysis; however, other vehicle characteristics (e.g.,
                footprint, curb weight, technology content) important to the analysis
                were reasonably accurate. While some commenters have, in the past,
                raised concerns that non-final CAFE compliance data is subject to
                change, the potential for change is likely not significant enough to
                merit using final data from an earlier model year reflecting a more
                outdated fleet. Moreover, even ostensibly final CAFE compliance data is
                frequently subject to later revision (e.g., if errors in fuel economy
                tests are discovered), and the purpose of the analysis was not to
                support enforcement actions but rather to provide a realistic
                assessment of manufacturers' potential responses to future standards.
                 Manufacturers integrated a significant amount of new technology in
                the MY 2016 fleet, and this was especially true for newly-designed
                vehicles launched in MY 2016. While subsequent fleets will involve even
                further application of technology, using available data for MY 2016
                provided the most realistic detailed foundation for analysis that could
                be made available publicly in full detail, allowing stakeholders to
                reproduce the analysis presented in the proposal independently. Insofar
                as future product offerings are likely to be more similar to vehicles
                produced in 2016 than to vehicles produced in earlier model years,
                using available data regarding the 2016 model year provided the most
                realistic, publicly releasable foundation for constructing a forecast
                of the future vehicle market for this proposal. Many comments
                responding to the Draft TAR, EPA's Proposed Determination, EPA's 2017
                Request for Comment, and the NPRM preceding today's notice stated that
                the most up-to-date analysis fleet possible should be used, because a
                more up-to-date analysis fleet will better capture how manufacturers
                apply technology and will account better for vehicle model/
                configuration introductions and deletions.356 357
                ---------------------------------------------------------------------------
                 \356\ 82 FR 39551 (Aug. 21, 2017).
                 \357\ For example, in 2016 comments to dockets EPA-HQ-OAR-2015-
                0827 and NHTSA-2016-0068, the Alliance of Automobile Manufacturers
                commented that ``the Alliance supports the use of the most recent
                data available in establishing the baseline fleet, and therefore
                believes that NHTSA's selection [of, at the time, model year 2015]
                was more appropriate for the Draft TAR.'' Alliance at 82, Docket ID.
                EPA-HQ-OAR-2015-0827-4089. Global Automakers commented that ``a one-
                year difference constitutes a technology change-over for up to 20%
                of a manufacturer's fleet. It was also generally understood by
                industry and the agencies that several new, and potentially
                significant, technologies would be implemented in MY 2015. The use
                of an older, outdated baseline can have significant impacts on the
                modeling of subsequent Reference Case and Control Case
                technologies.'' Global Automakers at A-10, Docket ID EPA-HQ-OAR-
                2015-0827-4009.
                ---------------------------------------------------------------------------
                 On the other hand, some commenters suggested that because
                manufacturers continue improving vehicle performance and utility over
                time, an older analysis fleet should be used to estimate how the fleet
                could have evolved had manufacturers applied all technological
                potential to fuel economy rather than continuing to improve vehicle
                performance and utility.\358\ Because manufacturers change and improve
                product offerings over time, conducting analysis with an older analysis
                fleet (or with a fleet using fuel economy levels and CO2
                emissions rates that have been adjusted to reflect an assumed return to
                levels of performance and utility typical of some past model year)
                would miss this real-world trend. While such an analysis could project
                what industry could do if, for example, manufacturers devoted all
                technological improvements toward raising fuel economy and reducing
                CO2 emissions (and if consumers decided to purchase these
                vehicles), the agencies do not believe it would be consistent with a
                transparent examination of what effects different levels of standards
                would have
                [[Page 24288]]
                on individual manufacturers and the fleet as a whole.
                ---------------------------------------------------------------------------
                 \358\ For example, in 2016 comments to dockets EPA-HQ-OAR-2015-
                0827 and NHTSA-2016-0068, UCS stated ``in modeling technology
                effectiveness and use, the agencies should use 2010 levels of
                performance as the baseline.'' UCS at 4, Docket ID. EPA-HQ-OAR-2015-
                0827-4016.
                ---------------------------------------------------------------------------
                 All else being equal, using a newer analysis fleet will produce
                more realistic estimates of impacts of potential new standards than
                using an outdated analysis fleet. However, among relatively current
                options, a balance must be struck between input freshness, and input
                completeness and accuracy.\359\ During assembly of the inputs for the
                NPRM analysis, final compliance data was available for the MY 2015
                model year but not, in a few cases, for MY 2016. However, between mid-
                year compliance information and manufacturers' specific updates
                discussed above, a robust and detailed characterization of the MY 2016
                fleet was developed. While information continued to develop regarding
                the MY 2017 and, to a lesser extent MY 2018 and even MY 2019 fleets,
                this information was--even in mid-2017--too incomplete and inconsistent
                to be assembled with confidence into an analysis fleet for modeling
                supporting deliberations regarding the NPRM analysis.
                ---------------------------------------------------------------------------
                 \359\ Comments provided through a recent peer review of the CAFE
                model recognize the competing interests behind this balance. For
                example, referring to NHTSA's 2016 Draft TAR analysis, one of the
                peer reviewers commented as follows: ``The NHTSA decision to use MY
                2015 data is wise. In the TAR they point out that a MY 2016
                foundation would require the use of confidential data, which is less
                desirable. Clearly they would also have a qualitative vision of the
                MY 2016 landscape while employing MY 2015 as a foundation. Although
                MY 2015 data may still be subject to minor revision, this is
                unlikely to impact the predictive ability of the model . . . A more
                complex alternative approach might be to employ some 2016 changes in
                technology, and attempt a blend of MY 2015 and MY 2016, while
                relying of estimation gained from only MY 2015 for sales. This
                approach may add some relevancy in terms of technology, but might
                introduce substantial error in terms of sales.''
                ---------------------------------------------------------------------------
                 Manufacturers requested that the baseline fleet supporting the
                final rule incorporate the MY 2018 or most recent information
                available.\360\ Other commenters expressed desire for multiple fleets
                of various vintages to compare the updated model outputs with those of
                previous rule-makings. Specifically, some commenters requested that
                older fleet vintages (MY 2010, for instance) be developed in parallel
                with the MY 2017 fleet so that those too may be used as inputs for the
                model.\361\
                ---------------------------------------------------------------------------
                 \360\ NHTSA-2018-0067-12150, Toyota North America.
                 \361\ NHTSA-2018-0067-11741, ICCT.
                ---------------------------------------------------------------------------
                 Between the NPRM and this final rule, manufacturers submitted final
                compliance data for the MY 2017 fleet. When the agencies pulled
                together information for the fleet for the final rule, the agencies
                decided to use the highest-quality, most up-to-date information
                available. Given that pulling this information together takes some
                time, and given that ``final'' compliance submissions often lag
                production by a few years, the agencies decided to use 2017 model year
                as the base year for the analysis fleet, as the agencies stated in the
                NPRM.\362\ While the agencies could have used preliminary 2018 data or
                even very early 2019 data, this information was not available in time
                to support the final rulemaking. Likewise, the agencies chose not to
                revert to a previous model year (for instance 2016 or 2012) because
                many manufacturers have incorporated fuel savings technologies over the
                last few years, realized some benefits for fuel economy, and adjusted
                the performance or sales mix of vehicles to remain competitive in the
                market. Also, using an earlier model year would provide less accurate
                projections because the analysis would be based on what manufacturers
                could have done in past model years and would have estimated the fuel
                economy improvements instead of using known information on the
                technologies that were employed and the actual fuel economy that
                resulted from applying those technologies.
                ---------------------------------------------------------------------------
                 \362\ 83 FR 43006 (``If newer compliance data (i.e., MY 2017)
                becomes available and can be analyzed during the pendency of this
                rulemaking, and if all other necessary steps can be performed, the
                analysis fleet will be updated, as feasible, and made publicly
                available.'').
                ---------------------------------------------------------------------------
                 Some additional information (about off-cycle technologies, for
                instance) was often not reported by manufacturers in MY 2017 formal
                compliance submissions in a way that provided clear information on
                which technologies were included on which products. As part of the
                formal compliance submission, some manufacturers voluntarily submitted
                additional information (about engine technologies, for instance). While
                this data was generally of very high quality, there were some mistakes
                or inconsistencies with publicly available information, causing the
                agencies to contact the manufacturers to understand and correct
                identified issues. In most cases, however, the formal compliance data
                was very limited in nature, and the agencies collected additional
                information necessary to characterize fully the fleet from other
                sources, and scrutinized additional information submitted by
                manufacturers carefully, independently verifying when possible.
                 Specifically, the agencies downloaded and reviewed numerous
                marketing brochures and product launch press releases to confirm
                information submitted by manufacturers and to fill in information
                necessary for the analysis fleet that was not provided in the
                compliance data. Product brochures often served as the basis for the
                curb weights used in the analysis. This publicly available manufacturer
                information sometimes also included aerodynamic drag coefficients,
                information about steering architecture, start-stop systems, pickup bed
                lengths, fuel tank capacities, and high-voltage battery capacities. The
                agencies recorded vehicle horsepower, compression ratio, fuel-type, and
                recommended oil weight rating from a combination of manufacturer
                product brochures and owner's manuals. The product brochures, as well
                as online references such as Autobytel, informed which combinations of
                fuel saving technologies were available on which trim levels, and what
                the manufacturer suggested retail price was for many products. Overall
                this information proved helpful for assigning technologies to vehicles,
                and for getting data (such as fuel tank size \363\) necessary for the
                analysis. These reference materials have been included in the
                rulemaking documentation.\364\
                ---------------------------------------------------------------------------
                 \363\ The quality of data for today's analysis fleet is notably
                improved for fuel tank capacity, which factors into the calculation
                of refueling time benefits. In many previous analyses, fuel tank
                sizes were often stated as estimates or proxies, and not sourced so
                carefully.
                 \364\ Publicly available data used to supplement analysis fleet
                information is available in the docket.
                ---------------------------------------------------------------------------
                 The agencies elected not to develop fleets of previous model year
                vintages that could be used in parallel as an input to the CAFE model.
                Developing a detailed characterization of the fleet of any vintage
                would be a huge undertaking with few benefits. As the scope has
                increased, and as additional modules are added, going back in time to
                re-characterize a previous fleet in a format that works with CAFE model
                updates can be time- and resource-prohibitive for the agencies, even if
                that work is adapting a fleet that was used in previous rule-making
                analysis. Doing so also offers little value in determining what
                potential fuel saving technology can be added to a more recent fleet
                during the rulemaking timeframe.
                 The MY 2017 manufacturer-submitted data, verified and supplemented
                by the agencies with publicly-available information, therefore
                presented the fullest, most up-to-date data set that the agencies could
                have used to support this analysis.
                [[Page 24289]]
                b) Characterizing Vehicles and Their Technology Content
                 The starting point for projecting what additional fuel economy
                improving technologies could feasibly be applied to vehicles is knowing
                what vehicles are produced by which manufacturers and what technologies
                exist on those vehicles. Rows in the market data file are the smallest
                portion of the fleet to which technology may be applied as part of a
                projected compliance pathway. For the analysis presented in this final
                rule, the agencies, when possible, attempted to include vehicle trim
                level information in discrete rows. A manufacturer, for example GM, may
                produce one or more vehicle makes (or brands), for example Chevrolet,
                Buick and others. Each vehicle make may offer one or more vehicle
                models, for example Malibu, Traverse and others. And each vehicle model
                may be available in one or more trim levels (or standard option
                levels), for example ``RS,'' ``Premier'' and others, which have
                different levels of standard options, and in some cases, different
                engines and transmissions.
                 Manufacturer compliance submissions, discussed above, were used as
                a starting point to define working rows in the market data file;
                however, often the rows needed to be further disaggregated to correctly
                characterize vehicle information covered in the scope of the analysis,
                and analysis fleet. Manufacturers often grouped vehicles with multiple
                trim levels together because they often included the same fuel-saving
                technologies and may be aggregated to simplify reporting. However, the
                manufacturer suggested retail prices of different trim levels are
                certainly different, and other features relevant to the analysis are
                occasionally different.
                 As a result of further disaggregating compliance information, the
                number of rows in the market data file increased from 1,667 rows used
                in the NPRM to 2,952 rows for this final rule analysis. The agencies do
                not have data on sales volumes for each nameplate by trim level, and
                used an approach that evenly distributed volume across offered trim
                levels, within the defined constraints of the compliance data.\365\
                Evenly distributing the volume across trim levels is a simplification,
                but this action should (1) highlight some difficulties that could be
                encountered when acquiring data for a full-vehicle consumer choice
                model should the agencies pursue developing one in the future
                (discussed further, below), and (2) lower the average sales volume per
                row in the market data file, thereby allowing the application of very
                advanced electrification technologies in smaller lumps. The latter
                effect is responsive to comments (discussed below) that suggested
                electrification technologies could be more cost-effectively deployed in
                lower volumes, and that the CAFE model artificially constrains cost
                effective technologies that may be deployed, resulting in higher costs
                and large over-compliance.
                ---------------------------------------------------------------------------
                 \365\ The sum of volumes by nameplate configuration, for fuel
                economy value, and for footprint value remains the same.
                ---------------------------------------------------------------------------
                (1) Assigning Vehicle Technology Classes
                 While each vehicle in the analysis fleet has its list of observed
                technologies and equipment, the ways in which manufacturers apply
                technologies and equipment do not always coincide perfectly with how
                the analysis characterizes the various technologies that improve fuel
                economy and reduce CO2 emissions. To improve how the
                observed vehicle fleet ``fits into'' the analysis, each vehicle model/
                configuration is ``mapped'' to the full-vehicle simulation modeling by
                Argonne National Laboratory that is used to estimate the effectiveness
                of the fuel economy-improving/CO2 emissions-reducing
                technologies considered. Argonne produces full-vehicle simulation
                modeling for many combinations of technologies, on many types of
                vehicles, but it did not simulate literally every single manufacturer's
                vehicle model/configuration in the analysis fleet because it would be
                impractical to assemble the requisite detailed information--much of
                which would likely only be provided on a confidential basis--specific
                to each vehicle model/configuration and because the scale of the
                simulation effort would correspondingly increase by at least two orders
                of magnitude. Instead, Argonne simulated 10 different vehicle types
                corresponding to the ``technology classes'' generally used in CAFE
                analysis over the past several rulemakings (e.g., small car, small
                performance car, pickup truck, etc.). Each of those 10 different
                vehicle types was assigned a set of ``baseline characteristics'' to
                which Argonne added combinations of fuel-saving technologies and then
                ran simulations to determine the fuel economy achieved when applying
                each combination of technologies to that vehicle type given its
                baseline characteristics.
                BILLING CODE 4910-59-P
                [[Page 24290]]
                [GRAPHIC] [TIFF OMITTED] TR30AP20.089
                BILLING CODE 4910-59-C
                 In the analysis fleet, inputs assign each specific vehicle model/
                configuration to a technology class, and once there, map to the
                simulation within that technology class most closely matching the
                combination of observed technologies and equipment on that vehicle.
                This mapping to a specific simulation result most closely representing
                a given vehicle model/configuration's initial technology ``state''
                enables the CAFE model to estimate the same vehicle model/
                configuration's fuel economy after application of some other
                combination of technologies, leading to an alternative technology
                state.
                (2) Assigning Vehicle Technology Content
                 As explained above, the analysis fleet is defined not only by the
                vehicles it contains, but also by the technologies on those vehicles.
                Each vehicle in the analysis fleet has an associated list of observed
                technologies and equipment that can improve fuel economy and reduce
                CO2 emissions.\366\ With a portfolio of descriptive
                technologies arranged by manufacturer and model, the analysis fleet can
                be summarized and project how vehicles in that fleet may increase fuel
                economy over time via the application of additional technology.
                ---------------------------------------------------------------------------
                 \366\ These technologies are generally grouped into the
                following categories: Vehicle technologies include mass reduction,
                aerodynamic drag reduction, low rolling resistance tires, and
                others. Engine technologies include engine attributes describing
                fuel type, engine aspiration, valvetrain configuration, compression
                ratio, number of cylinders, size of displacement, and others.
                Transmission technologies include different transmission
                arrangements like manual, 6-speed automatic, 10-speed automatic,
                continuously variable transmission, and dual-clutch transmissions.
                Hybrid and electric powertrains may complement traditional engine
                and transmission designs or replace them entirely.
                ---------------------------------------------------------------------------
                 In many cases, vehicle technology is clearly observable from the
                2017 compliance data (e.g., compliance data indicates clearly which
                vehicles have turbochargers and which have continuously variable
                transmissions), but in some cases technology levels are less
                observable. For the latter, like levels of mass reduction, the analysis
                categorized levels of technology already used in a given vehicle.
                Similarly, engineering judgment was used to determine if higher mass
                reduction levels may be used practicably and safely for a given
                vehicle.
                 Either in mid-year compliance data for MY 2016, final compliance
                data for MY 2017, or separately and at the agencies' invitation prior
                to the NPRM or in comments in responses to the NPRM, most manufacturers
                provided guidance on the technology already present in each of their
                vehicle model/configurations. This information was not as complete for
                all manufacturers' products as needed for the analysis, so, in some
                cases, information was supplemented with publicly available data,
                typically from manufacturer media sites. In limited cases,
                manufacturers did not supply information, and
                [[Page 24291]]
                information from commercial and publicly available sources was used.
                 The agencies continued to evaluate emerging technologies in the
                analysis. In response to comments,\367\ and given recent product
                launches for MY 2020, and some very recently announced future product
                offerings, the agencies elevated some technologies that were discussed
                in the NPRM to the compliance simulation. As a result, several
                additional engine technologies, expanded levels of mass reduction
                technology, and some additional combinations of engines with plug-in
                hybrid, or strong hybrid technology are available in the compliance
                pathways for the final rule analysis.
                ---------------------------------------------------------------------------
                 \367\ NHTSA-2018-0067-11741.
                ---------------------------------------------------------------------------
                 In addition, some redundant technologies, or technologies that were
                inadvertently represented on the technology tree as being available to
                be applied twice, have been consolidated. For instance, previous basic
                versions of engine friction reduction were layered on top of basic
                engine maps, but the efficiency in many modern engine maps already
                include the benefits of that engine friction reduction technology. The
                following Table VI-8 lists the technologies considered in the final
                rule analysis, with the data sources used to map those technologies to
                vehicles in the analysis fleet.
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                [GRAPHIC] [TIFF OMITTED] TR30AP20.091
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                [GRAPHIC] [TIFF OMITTED] TR30AP20.092
                BILLING CODE 4910-59-C
                 Industry commenters generally stated the MY 2016 baseline
                technology content presented in the NPRM as an improvement over
                previous analyses because it more accurately accounted for technology
                already used in the fleet.368 369 In contrast, some
                commenters expressed preference for EPA's baseline technology
                assignment assumptions presented in the Draft TAR for mass reduction,
                tire rolling resistance, and aerodynamic drag because those assumptions
                projected very few technology improvements were present in the baseline
                fleet. In assessing the comments, the agencies found that
                [[Page 24295]]
                using the EPA Draft TAR approach would lead to projected compliance
                pathways with overestimated fuel economy improvements and
                underestimated costs.\370\
                ---------------------------------------------------------------------------
                 \368\ NHTSA-2018-0067-12073, Alliance of Automobile
                Manufacturers.
                 \369\ NHTSA-2018-0067-12150, Toyota North America.
                 \370\ NHTSA-2018-0067-11741, ICCT.
                ---------------------------------------------------------------------------
                 Many of those assumptions were neither scientifically meritorious,
                nor isolated examples. For instance, for the EPA Draft TAR and Proposed
                Determination analyses, the BMW i3, a vehicle with full carbon fiber
                bodysides and downsized, mass-reduced wheels and tires (some of the
                most advanced mass reducing technologies commercialized in the
                automotive industry), was assumed to have 1.0 percent mass reduction (a
                very minor level of mass reduction). Similarly, previous analyses
                assigned the Chevrolet Corvette, a performance vehicle that has long
                been a platform for commercializing advanced weight saving
                technologies,\371\ with zero mass reduction. For aerodynamic drag,
                previous EPA analysis assumed that pickup trucks could achieve the
                aerodynamic drag profile typical of a sedan, with little regard for
                form drag constraints or frontal area (and headroom, or ground
                clearance) considerations. These assumptions commonly led to
                projections of a 20 percent improvement in mass, aerodynamic drag, and
                tire rolling resistance, even when a large portion of those
                improvements had either already been implemented, or were not
                technologically feasible. On the other hand, in the Draft TAR, NHTSA
                presented methodologies to evaluate content for mass reduction
                technology, aerodynamic drag improvements, and rolling resistance
                technologies that better accounted for the actual level of technologies
                in the analysis fleet. Throughout the rulemaking process, the agencies
                reconciled these differences, jointly presented improved approaches in
                the NPRM similar to what NHTSA presented in the Draft TAR, and again
                used those reconciled approaches in today's analysis.\372\
                ---------------------------------------------------------------------------
                 \371\ See, e.g., Fiberglass to Carbon Fiber: Corvette's
                Lightweight Legacy, GM (August 2012), https://media.gm.com/media/us/en/gm/news.detail.html/content/Pages/news/us/en/2012/Aug/0816_corvette.html.
                 \372\ Because these road load technologies are no longer double
                counted, the projected compliance pathway in the NPRM, and in
                today's analysis for stringent alternatives, often requires more
                advanced fuel saving technologies than previously projected,
                including higher projected penetration rates of hybrid and electric
                vehicle technologies.
                ---------------------------------------------------------------------------
                 Many commenters correctly observed that the analysis fleet in the
                NPRM recognized more technology content in the baseline than in the
                Draft TAR (with higher penetration rates of tire rolling resistance and
                aerodynamic drag improvements, for instance), but also that the fuel
                economy values of the fleet had not improved all that much from the
                previous year. Some commenters concluded that the NPRM baseline
                technology assignment process was arbitrary and overstated the
                technology content already present in the baseline
                fleet.373 374 The agencies agree that there was a large
                increase in the amount of road load technology credited in the baseline
                fleet between EPA's Draft TAR and the jointly produced NPRM, and
                clarify that this change was largely due to a recognition of
                technologies that were actually present in the fleet, but not properly
                accounted for in previous analyses. The change in penetration rates of
                road load technologies (after accounting for glider share updates,
                which is discussed in more detail in the mass reduction technology
                section) between the NPRM and today's analysis is relatively small.
                ---------------------------------------------------------------------------
                 \373\ NHTSA-2018-0067-11741, ICCT.
                 \374\ NHTSA-2018-0067-12039, Union of Concerned Scientists.
                ---------------------------------------------------------------------------
                 Many commenters noted that the different baseline road load
                assumptions (and other technology modeling) materially affect
                compliance pathways, and projected costs.\375\ ICCT commented that the
                agencies should conduct sensitivity analyses assuming every vehicle in
                the analysis fleet is set to zero percent road load technology
                improvement, to demonstrate how the technology content of the analysis
                fleet affected the compliance scenarios.\376\
                ---------------------------------------------------------------------------
                 \375\ NHTSA-2018-0067-11928, Ford Motor Company.
                 \376\ NHTSA-2018-0067-11741, ICCT.
                ---------------------------------------------------------------------------
                 While the agencies have clearly described the methods by which
                initial road load technologies are assigned in Section VI.C.4 Mass
                Reduction, Section VI.C.5 Aerodynamics, and Section VI.C.6 Tire Rolling
                Resistance below, the agencies considered a sensitivity case that
                assumed no mass reduction, rolling resistance, or aerodynamic
                improvements had been made to the MY 2017 fleet (i.e., setting all
                vehicle road levels to zero--MRO, AERO and ROLL0). While this is an
                unrealistic characterization of the initial fleet, the agencies
                conducted a sensitivity analysis to understand any affect it may have
                on technology penetration along other paths (e.g. engine and hybrid
                technology). Under the CAFE program, the sensitivity analysis shows a
                slight decrease in reliance on engine technologies (HCR engines,
                turbocharge engines, and engines utilizing cylinder deactivation) and
                hybridization (strong hybrids and plug-in hybrids) in the baseline
                (relative to the central analysis). The consequence of this shift to
                reliance on lower-level road load technologies is a reduction in
                compliance cost in the baseline of about $300 per vehicle (in MY 2026).
                As a result, cost savings in the preferred alternative are reduced by
                about $200 per vehicle. Under the CO2 program, the general
                trend in technology shift is less dramatic (though the change in BEVs
                is larger) than the CAFE results. The cost change is also comparable,
                but slightly smaller ($200 per vehicle in the baseline) than the CAFE
                program results. Cost savings under the preferred alternative are
                further reduced by about $100. With the lower technology costs in all
                cases, the consumer payback periods decreased as well. These results
                are consistent with the approach taken by manufacturers who have
                already deployed many of the low-level road load reduction
                opportunities to improve fuel economy.
                 Some commenters preferred that the agencies develop a different
                methodology based on reported road load coefficients (``A,'' ``B'' and
                ``C'' coastdown coefficients) to estimate levels of aerodynamic drag
                improvement and rolling resistance in the baseline fleet that did not
                rely on CBI.\377\ The agencies considered this, but determined that
                using CBI to assign baseline aerodynamic drag levels and rolling
                resistance values was more accurate and appropriate. Estimating
                aerodynamic drag levels and rolling resistance levels from coastdown
                coefficients is not straightforward, and to do it well would require
                information the agencies do not have (much of which is also CBI). For
                instance, rotational inertias of wheel, tire, and brake packages can
                affect coastdown, so mass of the vehicle is not sufficient. The frontal
                area of the vehicles, a key component for calculating aerodynamic drag,
                is rarely known, and often requires manufacturer input to get an
                accurate value. Other important vehicle features like all-wheel-drive
                should also be accounted for, and the agencies would struggle to
                correctly identify improvements in rolling resistance, low-drag brakes,
                and secondary axle disconnect, because all of these technologies would
                present similar signature on a coast down test. All of these
                technologies are represented as technology pathways in today's
                analysis. Manufacturers acknowledged the possibility of using road load
                coefficients to estimate rolling resistance and aerodynamic features,
                but warned that the process ``required
                [[Page 24296]]
                various assumptions and is not very accurate,'' and stated that the use
                of CBI to assess aerodynamic and rolling resistance technologies is an
                ``accurate and practical solution'' to assign these difficult to
                observe technologies.\378\
                ---------------------------------------------------------------------------
                 \377\ NHTSA-2018-0067-11741, ICCT.
                 \378\ NHTSA-2018-0067-12073, Alliance of Automobile
                Manufacturers.
                ---------------------------------------------------------------------------
                (3) Assigning Engine Configurations
                 Engine technology costs can vary significantly by the configuration
                of the engine. For instance, adding variable valve lift to each
                cylinder on an engine would cost more for an engine with eight
                cylinders than an engine with four cylinders. Similarly, the cost of
                adding a turbocharger to an engine and downsizing the engine would be
                different going from a naturally aspirated V8 to a turbocharged V6 than
                going from a naturally aspirated V6 to a turbocharged I4. As discussed
                in detail in the engine technology section of this document, the cost
                files for the CAFE model account for instances such as these examples.
                 Information in the analysis fleet enables the CAFE model to
                reference the intended engine costs. The ``Engine Technology Class
                (Observed)'' lists the architecture of the observed engine. Notably,
                the analysis assumes that nearly all turbo charged engines take
                advantage of downsizing to optimize fuel efficiency, minimize the cost
                of turbo charging, and to maintain performance (to the extent
                practicable) with the naturally aspirated counterpart engine.
                Therefore, engines observed in the fleet that have already been down-
                sized must reference costs for a larger basic engine, which assumes
                down-sizing with the application of turbo technology. In these cases,
                the ``Engine Technology Class'' which is used to reference costs will
                be larger than the ``Engine Technology Class (Observed).''
                 This is the same process agencies used in the NPRM, and it corrects
                a previous error in the Draft TAR analysis, which incorrectly
                underestimated turbocharged engine costs.\379\ Some commenters
                expressed confusion and disagreement with this correction, with some
                even commenting that the analysis baselessly inflated costs of
                turbocharging technologies between the Draft TAR and the NPRM.\380\ To
                be clear, this was a correction so that the costs used to calculate
                turbocharged engine costs accurately reflected the total costs for a
                turbocharged engine.
                ---------------------------------------------------------------------------
                 \379\ For instance, the Draft TAR engine costs would map an
                observed V6 Turbo engine to I4 Turbo engine costs, by referencing a
                4C1B engine cost.
                 \380\ NHTSA-2018-0067-11741, ICCT.
                ---------------------------------------------------------------------------
                (4) Characterizing Shared Vehicle Platforms, Engines, and Transmissions
                 Another aspect of characterizing vehicle model/configurations in
                the analysis fleet is based on whether they share a ``platform'' with
                other vehicle model/configurations. A ``platform'' refers to engineered
                underpinnings shared on several differentiated products. Manufacturers
                share and standardize components, systems, tooling, and assembly
                processes within their products (and occasionally with the products of
                another manufacturer) to manage complexity and costs for development,
                manufacturing, and assembly.
                 The concept of platform sharing has evolved over time. Years ago,
                manufacturers rebadged vehicles and offered luxury options only on
                premium nameplates (and manufacturers shared some vehicle platforms in
                limited cases). Today, manufacturers share parts across highly
                differentiated vehicles with different body styles, sizes, and
                capabilities that may share the same platform. For instance, the Honda
                Civic and Honda CR-V share many parts and are built on the same
                platform. Engineers design chassis platforms with the ability to vary
                wheelbase, ride height, and even driveline configuration. Assembly
                lines can produce hatchbacks and sedans to cost-effectively utilize
                manufacturing capacity and respond to shifts in market demand. Engines
                made on the same line may power small cars or mid-size sport utility
                vehicles. In addition, although the agencies' analysis, like past CAFE
                analyses, considers vehicles produced for sale in the U.S., the agency
                notes these platforms are not constrained to vehicle models built for
                sale in the U.S.; many manufacturers have developed, and use, global
                platforms, and the total number of platforms is decreasing across the
                industry. Several automakers (for example, General Motors and Ford)
                either plan to, or already have, reduced their number of platforms to
                less than 10 and account for the overwhelming majority of their
                production volumes on that small number of platforms.
                 Vehicle model/configurations derived from the same platform are so
                identified in the analysis fleet. Many manufacturers' use of vehicle
                platforms is well documented in the public record and widely recognized
                among the vehicle engineering community. Engineering knowledge,
                information from trade publications, and feedback from manufacturers
                and suppliers was also used to assign vehicle platforms in the analysis
                fleet.
                 When the CAFE model is deciding where and how to add technology to
                vehicles, if one vehicle on the platform receives new technology, other
                vehicles on the platform also receive the technology as part of their
                next major redesign or refresh.\381\ Similar to vehicle platforms,
                manufacturers create engines that share parts. For instance,
                manufacturers may use different piston strokes on a common engine
                block, or bore out common engine block castings with different
                diameters to create engines with an array of displacements. Head
                assemblies for different displacement engines may share many components
                and manufacturing processes across the engine family. Manufacturers may
                finish crankshafts with the same tools to similar tolerances. Engines
                on the same architecture may share pistons, connecting rods, and the
                same engine architecture may include both six and eight cylinder
                engines. One engine family may appear on many vehicles on a platform,
                and changes to that engine may or may not carry through to all the
                vehicles. Some engines are shared across a range of different vehicle
                platforms. Vehicle model/configurations in the analysis fleet that
                share engines belonging to the same platform are also identified as
                such.
                ---------------------------------------------------------------------------
                 \381\ The CAFE model assigns mass reduction technology at a
                platform level, but many other technologies may be assigned and
                shared at a vehicle nameplate or vehicle model level.
                ---------------------------------------------------------------------------
                 It is important to note that manufacturers define common engines
                differently. Some manufacturers consider engines as ``common'' if the
                engines shared an architecture, components, or manufacturing processes.
                Other manufacturers take a narrower definition, and only assume
                ``common'' engines if the parts in the engine assembly are the same. In
                some cases, manufacturers designate each engine in each application as
                a unique powertrain. For example, a manufacturer may have listed two
                engines separately for a pair that share designs for the engine block,
                the crank shaft, and the head because the accessory drive components,
                oil pans, and engine calibrations differ between the two. In practice,
                many engines share parts, tooling, and assembly resources, and
                manufacturers often coordinate design updates between two similar
                engines. Engine families, designated in the analysis using ``engine
                codes,'' for each manufacturer were tabulated and assigned based on
                data-driven criteria. If engines shared a common cylinder count and
                configuration, displacement, valvetrain, and fuel type, those engines
                [[Page 24297]]
                may have been considered together. In addition, if the compression
                ratio, horsepower, and displacement of engines were only slightly
                different, those engines were considered the same for the purposes of
                redesign and sharing.
                 Vehicles in the analysis fleet with the same engine family will,
                therefore, adopt engine technology in a coordinated fashion.
                Specifically, if such vehicles have different design schedules (i.e.,
                refresh and redesign schedules), and a subset of vehicles using a given
                engine add engine technologies during of a redesign or refresh that
                occurs in an early model year (e.g., 2018), other vehicles using the
                same engine ``inherit'' these technologies at the soonest ensuing
                refresh or redesign. This is consistent with a view that, over time,
                most manufacturers are likely to find it more practicable to shift
                production to a new version of an engine than to continue production of
                both the new engine and a ``legacy'' engine indefinitely. By grouping
                engines together, the CAFE model controls future engine families to
                ensure reasonable powertrain complexity. This means, however, that for
                manufacturers that submitted highly atomized engine and transmission
                portfolios, there is a practical cap on powertrain complexity and the
                ability of the manufacturer to optimize the displacement of (i.e.,
                ``right size'') engines perfectly for each vehicle configuration. This
                concept is discussed further in Section VI.B.4.a), below.
                 Like with engines, manufacturers often use transmissions that are
                the same or similar on multiple vehicles. Manufacturers may produce
                transmissions that have nominally different machining to castings, or
                manufacturers may produce transmissions that are internally identical,
                except for the final gear ratio. In some cases, manufacturers sub-
                contract with suppliers that deliver whole transmissions. In other
                cases, manufacturers form joint ventures to develop shared
                transmissions, and these transmission platforms may be offered in many
                vehicles across manufacturers. Manufacturers use supplier and joint-
                venture transmissions to a greater extent than they do with engines. To
                reflect this reality, shared transmissions were considered for
                manufacturers as appropriate. Transmission configurations are referred
                to in the analysis as ``transmission codes.'' Like the inheritance
                approach outlined for engines, if one vehicle application of a shared
                transmission family upgraded the transmission, other vehicle
                applications also upgraded the transmission at the next refresh or
                redesign year. To define common transmissions, the agencies considered
                transmission type (manual, automatic, dual-clutch, continuously
                variable), number of gears, and vehicle architecture (front-wheel-
                drive, rear-wheel-drive, all-wheel-drive based on a front-wheel drive
                platform, or all-wheel-drive based on a rear-wheel-drive platform). If
                vehicles shared these attributes, these transmissions were grouped for
                the analysis. Vehicles in the analysis fleet with the same transmission
                configuration will adopt transmission technology together, as described
                above.
                 Having all vehicles that share a platform (or engines that are part
                of a family) adopt fuel economy-improving/CO2 emissions-
                reducing technologies together, subject to refresh/redesign
                constraints, reflects the real-world considerations described above,
                but also overlooks some decisions manufacturers might make in the real
                world in response to market pull. Accordingly, even though the analysis
                fleet is incredibly complex, it is also over-simplified in some
                respects compared to the real world. For example, the CAFE model does
                not currently attempt to simulate the potential for a manufacturer to
                shift the application of technologies to improve performance rather
                than fuel economy. Therefore, the model's representation of the
                ``inheritance'' of technology can lead to estimates a manufacturer
                might eventually exceed fuel economy standards as technology continues
                to propagate across shared platforms and engines. While the agencies
                have previously seen examples of extended periods during which some
                manufacturers exceeded one or both CAFE and/or CO2
                standards, in plenty of other examples, manufacturers chose to
                introduce (or even reintroduce) technological complexity into their
                vehicle lineups in response to buyer preferences. Going forward, and
                recognizing the recent trend for consolidating platforms, it seems
                likely manufacturers will be more likely to choose efficiency over
                complexity in this regard; therefore, the potential should be lower
                that today's analysis turns out to be oversimplified compared to the
                real world.
                 Manufacturers described shared engines, transmissions, and vehicle
                platforms as ``standard business practice'' and they were encouraged
                that the NHTSA analysis in the Draft TAR, and the jointly issued NPRM
                placed realistic limits on the number of unique engines and
                transmissions in a powertrain portfolio.\382\ In previous rulemakings,
                stakeholders pointed out that shared parts and portfolio complexity
                should be considered (but were not), and that the proliferation of
                unique technology combinations resulting from unconstrained compliance
                pathways would jeopardize economies of scale in the real world.\383\
                ---------------------------------------------------------------------------
                 \382\ NHTSA-2018-0067-12150, Toyota North America.
                 \383\ Alliance of Automobile Manufacturers, EPA-HQ-OAR-0827 and
                NHTSA-2016-0068.
                ---------------------------------------------------------------------------
                 HD Systems acknowledged that previous rulemakings did not
                appropriately consider part sharing, but contended that in today's
                global marketplace, manufacturers have flexibility to compete in new
                ways that break old part sharing rules.\384\ The agencies acknowledge
                that some transmissions are now sourced through suppliers, and that
                economies of scale could, in the future be achieved at an industry
                level instead of a manufacturer level; however, even when manufacturers
                outsource a transmission, recent history suggests they apply that
                transmission to multiple vehicles to control assembly plant and service
                parts complexity, as they would if they were making the transmission
                themselves. Similarly, even for global platforms, or global
                powertrains, there is little evidence that manufacturers fragment
                powertrain line-ups for a vehicle, or a set of vehicles that have
                typically used the same engine. The agencies will continue to consider
                how to capture more accurately the ways vehicles share engines,
                transmissions, and platforms in future rulemakings, but the part-
                sharing and modeling approach presented in the NPRM and this final rule
                represents a marked improvement over previous analysis.
                ---------------------------------------------------------------------------
                 \384\ NHTSA-2018-0067-11985, HD Systems.
                ---------------------------------------------------------------------------
                (5) Characterizing Production Design Cycles
                 Another aspect of characterizing vehicles in the analysis fleet is
                based on when they can next be refreshed or redesigned. Redesign
                schedules play an important role in determining when new technologies
                may be applied. Many technologies that improve fuel economy and reduce
                CO2 emissions may be difficult to incorporate without a
                major product redesign. Therefore, each vehicle model in the analysis
                fleet has an associated redesign schedule, and the CAFE model uses that
                schedule to implement significant advances in some technologies (like
                major mass reduction) to redesign years, while allowing manufacturers
                to include minor advances (such as improved tire rolling
                [[Page 24298]]
                resistance) during a vehicle ``refresh,'' or a smaller update made to a
                vehicle, which can happen between redesigns. In addition to refresh and
                redesign schedules associated with vehicle model/configurations,
                vehicles that share a platform subsequently have platform-wide refresh
                and redesign schedules for mass reduction technologies.
                 To develop the refresh/redesign cycles used for the NPRM vehicles
                in the analysis fleet, information from commercially available sources
                was used to project redesign cycles through MY 2022, as was done for
                NHTSA's analysis for the 2016 Draft TAR.\385\ Commercially available
                sources' estimates through MY 2022 are generally supported by detailed
                consideration of public announcements plus related intelligence from
                suppliers and other sources, and recognize that uncertainty increases
                considerably as the forecasting horizon is extended. For MYs 2023-2035,
                in recognition of that uncertainty, redesign schedules were extended
                considering past pacing for each product, estimated schedules through
                MY 2022, and schedules for other products in the same technology
                classes. As mentioned above, potentially confidential forward-looking
                information was not requested from manufacturers; nevertheless, all
                manufacturers had an opportunity to review the estimates of product-
                specific redesign schedules. A few manufacturers provided related
                forecasts and, for the most part, that information corroborated the
                estimates.
                ---------------------------------------------------------------------------
                 \385\ In some cases, data from commercially available sources
                was found to be incomplete or inconsistent with other available
                information. For instance, commercially available sources identified
                some newly imported vehicles as new platforms, but the international
                platform was midway through the product lifecycle. While new to the
                U.S. market, treating these vehicles as new entrants would have
                resulted in artificially short redesign cycles if carried forward,
                in some cases. Similarly, commercially available sources labeled
                some product refreshes as redesigns, and vice versa. In these
                limited cases, the data was revised to be consistent with other
                available information or typical redesign and refresh schedules for
                CAFE modeling. In these limited cases, the forecast time between
                redesigns and refreshes was updated to match the observed past
                product timing.
                ---------------------------------------------------------------------------
                 Some commenters suggested supplanting these estimated redesign
                schedules with estimates applying faster cycles (e.g., four to five
                years), and this approach was considered for the analysis. Some
                manufacturers tend to operate with faster redesign cycles and may
                continue to do so, and manufacturers tend to redesign some products
                more frequently than others. However, especially considering that
                information presented by manufacturers largely supports estimates
                discussed above, applying a ``one size fits all'' acceleration of
                redesign cycles would not improve the analysis; instead, assuming a
                fixed, shortened redesign schedule across the industry would likely
                reduce consistency with the real world, especially for light trucks,
                which are redesigned, on average, no less than every six years (see
                Table VI-9, below). Moreover, if some manufacturers accelerate
                redesigns in response to new standards, doing so would likely involve
                costs (greater levels of stranded capital, reduced opportunity to
                benefit from ``learning''-related cost reductions) greater than
                reflected in other inputs to the analysis.
                 As discussed in the NPRM, manufacturers use diverse strategies with
                respect to when, and how often they update vehicle designs. While most
                vehicles have been redesigned sometime in the last five years, many
                vehicles have not. In particular, vehicles with lower annual sales
                volumes tend to be redesigned less frequently, perhaps giving
                manufacturers more time to recoup the investment needed to bring the
                product to market. In some cases, manufacturers continue to produce and
                sell vehicles designed more than a decade ago.
                BILLING CODE 4910-59-P
                [GRAPHIC] [TIFF OMITTED] TR30AP20.093
                [[Page 24299]]
                 Each manufacturer may use different strategies throughout their
                product portfolio, and a component of each strategy may include the
                timing of refresh and redesign cycles. Table VI-10 summarizes the
                average time between redesigns, by manufacturer, by vehicle technology
                class. Dashes mean the manufacturer has no volume in that vehicle
                technology class in the MY 2017 analysis fleet. Across the industry,
                manufacturers average 6.6 years between product redesigns.
                [GRAPHIC] [TIFF OMITTED] TR30AP20.094
                 Trends on redesign schedules identified in the NPRM remain in place
                for today's analysis. Pick-up trucks have much longer redesign
                schedules than small cars. Some manufacturers redesign vehicles often,
                while other manufacturers redesign vehicles less often. Even if two
                manufacturers have similar redesign cadence, the model years in which
                the redesigns occur may still be different and dependent on where each
                of the manufacturer's products are in their life cycle.
                 Table VI-11 summarizes the average age of manufacturers' offering
                by vehicle technology class. A value of ``0.0'' means that every
                vehicle for a manufacturer in the vehicle technology class, represented
                by the MY 2017 analysis fleet was new in MY 2017. Across the industry
                manufacturers redesigned MY 2017 vehicles an average of 3.5 years
                earlier, meaning the average MY 2017 vehicle was last redesigned in
                approximately MY 2013, also on average near a midpoint in their product
                lifecycle.
                [[Page 24300]]
                [GRAPHIC] [TIFF OMITTED] TR30AP20.095
                BILLING CODE 4910-59-C
                 Some commenters cited examples of vehicles in the NPRM analysis
                fleet where the redesign years were off by a year here or there in the
                2017-2022 timeframe relative to the most recent public announcements,
                or that the extended forecasts were too rigid.\386\ The CAFE model
                structurally requires an input for the redesign years, and the agencies
                worked to make these generally representative without disclosing
                precise CBI product plans. Many of the redesign schedules were carried
                over from the NPRM, with a few minor updates.
                ---------------------------------------------------------------------------
                 \386\ NHTSA-2018-0067-11723, Natural Resources Defense Council.
                ---------------------------------------------------------------------------
                 Some commenters contended that the agencies should not look at the
                historical data to project the timing between redesigns (``business as
                usual''), but should instead adopt a ``policy case'' with an
                accelerated pace of redesigns and refreshes.\387\ Some commenters
                suggested that the agencies use a standard 5 or 6 year redesign
                schedule for all manufacturers and all products as a way to lower
                projected costs.\388\ Other stakeholders commented that the entire
                industry should be modeled with the ability to redesign everything at
                one time in the near term because that would not presuppose precisely
                how manufacturers may adjust their fleet.\389\
                ---------------------------------------------------------------------------
                 \387\ NHTSA-2018-0067-11723, Natural Resources Defense Council.
                 \388\ NHTSA-2018-0067-11985, HD Systems.
                 \389\ NHTSA-2018-0067-12039, Union of Concerned Scientists.
                ---------------------------------------------------------------------------
                 If the agencies were to implement any such approaches, the agencies
                would need to more precisely account for tooling costs, research and
                development costs, and product lifecycle marketing costs, or risk
                missing ``hidden costs'' of a shortened cadence. To account properly
                for these, the CAFE model would require major changes, and would
                require specific inputs that are currently covered generically under
                the retail price equivalency (RPE) factor.\390\ The agencies considered
                these comments, and decided the process for refresh and redesign
                outlined in the NPRM was a reasonable and realistic approach to
                characterize product changes. The agencies conducted sensitivity
                analysis with compressed redesign and refresh schedules, though these
                ignore the resulting compressed amortization schedules, missing
                important costs that are incorporated in the current RPE assumptions.
                ---------------------------------------------------------------------------
                 \390\ Shorter redesign schedules are likely to put upward
                pressure on RPE, as the manufacturers would have less time to recoup
                investments.
                ---------------------------------------------------------------------------
                 Some commenters claimed that the agency had extraordinarily
                extended redesign schedule of 17.7 years for FCA between 2021-2025, and
                an average redesign time of 25.8 years for Ford between 2022-2025.\391\
                The agencies found these claims inaccurate and without basis. Table VI-
                10, ``Summary of Sales Weighted Average Time
                [[Page 24301]]
                between Engineering Redesigns, by Manufacturer, by Vehicle Technology
                Class'' summarizes the data used in today's analysis (which is very
                similar to the information used in the NPRM, with some minor
                adjustments and updates to the fleet), and the detailed information
                vehicle-by-vehicle is reported in the ``market data'' file. The
                agencies recognize that the natural sequence of redesigns for some
                manufacturers and some products is not ideal to meet stringent
                alternatives, which is part of the consideration for economic
                practicability and technological feasibility. Manufacturers commented
                supportively on the idea of vehicle specific redesign schedules, and
                the redesign cadence used in the NPRM, as these contribute to realistic
                assessments of new technology penetration within the fleet, and
                acknowledge the heterogeneity in the product development approaches and
                business practices for each manufacturer.\392\ One commenter recognized
                that redesign and refresh schedules represented a vast improvement over
                phase-in caps to model the adoption of mature technologies.\393\
                ---------------------------------------------------------------------------
                 \391\ NHTSA-2018-0067-11723, Natural Resources Defense Council.
                 \392\ NHTSA-2018-0067-11928, Ford Motor Company.
                 \393\ NHTSA-2018-0067-0444, Walter Kreucher.
                ---------------------------------------------------------------------------
                 Other commenters argued that the structural construct of
                technologies only being available at redesign or at refresh (via
                inheritance) did not reflect real world actions and was not supported
                by any actual data.\394\ Other commenters acknowledged the inheritance
                of engine and transmission technologies at refresh as an important,
                positive feature of the CAFE model.\395\ HD Systems argued that an
                engine or transmission package available in other markets on a global
                platform could be imported to the U.S. market during refresh, and did
                not require a ``leader'' at redesign in the U.S. market to seed
                adoption. HDS cited a few examples where manufacturers have introduced
                strong hybrid powertrains on an existing vehicle a year or two after
                the product launch, not associated with any particular vehicle redesign
                or refresh.
                ---------------------------------------------------------------------------
                 \394\ NHTSA-2018-0067-11985, HD Systems.
                 \395\ NHTSA-2018-0067-11723, Natural Resources Defense Council.
                ---------------------------------------------------------------------------
                 The agencies carefully considered these comments, and observed that
                some relatively low volume hybrid options may appear after launch, or
                that some transmissions were quickly replaced shortly after a major
                redesign. In many of these cases, launch delays, warranty claims, or
                other external factors contributed to, at least in part, an atypically
                timed introduction of fuel saving technology to the fleet.\396\ At this
                point, this does not appear to be a mainstream, or preferred industry
                practice. However, the agencies will continue to evaluate this. For
                future rulemaking, the agencies may consider engine refresh and
                redesign cycles for engines and transmissions. These may be separate
                from vehicle redesign and refresh schedules because the powertrain
                product lifecycles may be longer on average than the typical vehicle
                redesign schedules. This approach, if researched and implemented in
                future analysis, could provide some opportunity for manufacturers to
                introduce new powertrain technologies independent of the vehicle
                redesign schedules, in addition to inheriting advanced powertrain
                technology as refresh as already modeled in the NPRM and today's
                analysis.
                ---------------------------------------------------------------------------
                 \396\ Such instances are observable in detailed CAFE and
                CO2 compliance data submitted to EPA and NHTSA.
                ---------------------------------------------------------------------------
                 For today's analysis, the agencies, with a few exceptions based on
                updated publicly available information, carried over redesign cadences
                for each vehicle nameplate as presented in the NPRM. The agencies do
                not claim that the projected redesign years will perfectly match what
                industry does--notably because refresh and redesign information is CBI
                and the agencies have applied more generalized schedules to protect the
                CBI. Also, what any individual manufacturer may choose to do today
                could be completely different than what it chooses to do tomorrow due
                to changing business circumstances and plans--but the agencies have
                worked to ensure the timing of redesigns will be roughly correct
                (especially in the near term), and that the time between redesigns will
                continue forward for each manufacturer as it has based on recent
                history. The agencies have also increased the frequency of refreshes in
                response to comments about the proliferation of some engine and
                transmission families through manufacturers' product portfolios.
                 Also for today's analysis, the agencies now explicitly model CAFE
                compliance pathways out through 2050. For the model to work as
                intended, the agencies must project refresh and redesign schedules out
                through 2050. The agencies recognize that the accuracy of predictions
                about the distant future, particularly about refresh and redesign
                cycles through the 2030-2050 timeframe, are likely to be poor. If
                historical evolution of the industry continues, many of the nameplates
                carried forward in the fleet are likely to be out of production, and
                new nameplates not considered in the analysis are sure to emerge.
                Still, carrying forward the MY 2017 fleet with the current refresh and
                redesign cadences is consistent with the current analysis, and imposing
                an alternative schedule on the fleet, or making up new nameplates and
                retiring older nameplates without a clear basis, would lack proper
                foundation.
                BILLING CODE 4910-59-P
                [[Page 24302]]
                [GRAPHIC] [TIFF OMITTED] TR30AP20.096
                BILLING CODE 4910-59-C
                (6) Defining Technology Adoption Features
                 In some circumstances, the agencies may reference full vehicle
                simulation effectiveness data for technology combinations that are not
                able to be, or are not likely to be applied to all vehicles. In some
                cases, a specific technology as modeled only exists on paper, and
                questions remain about the technological feasibility of the efficiency
                characterization.\397\ Or, a technology may perform admirably on the
                test cycle, but fail to meet all functional, or performance
                requirements for certain vehicles.\398\ In other cases, the
                intellectual property landscape may make commercialization of one
                technology risky for a manufacturer without the consent of the
                intellectual property owner.\399\ In such cases, the agencies may not
                allow a technology to be applied to a certain vehicle. The agencies
                designate this in the ``market data'' file with a ``SKIP'' for the
                technology and vehicle. The logic is explained technology by technology
                in this document, as the logic was explained in the PRIA for this rule.
                ---------------------------------------------------------------------------
                 \397\ High levels of aerodynamic drag reduction for some body
                styles, or EPA's previous, speculative characterization of ``HCR2''
                engines, for example.
                 \398\ Examples of applications that are unsuitable for certain
                technologies include low end torque requirements for HCR engines on
                high load vehicles, or towing and trailering applications,
                continuously variable transmissions in high torque applications, and
                low rolling resistance tires on vehicles built for precision
                cornering and high lateral forces, or instant acceleration from a
                stand still.
                 \399\ Variable compression ratio engines, for example.
                ---------------------------------------------------------------------------
                 Some commenters argued that the restrictions of technologies on a
                case-by-case basis required case-by-case explanation (and not objective
                specification defined cut-offs), and that the use of CBI for
                performance considerations was unacceptable unless fully
                disclosed.\400\ As discussed above, the agencies are not able to
                disclose CBI. Stakeholders have had plenty of opportunities to comment
                on the applicability of technologies, including the few that have used
                SKIP logic restrictions for a portion of the fleet.
                ---------------------------------------------------------------------------
                 \400\ NHTSA-2018-0067-11741, ICCT.
                ---------------------------------------------------------------------------
                 Other commenters suggested an optimistic and wholly unfounded
                approach to manufacturer innovation, arguing that costs would continue
                to come down (beyond what is currently modeled with cost learning), and
                the list of fuel-saving technologies would continually regenerate
                itself (even if the technological mechanism for fuel saving
                technologies was not yet identified).\401\ Therefore, the argument goes
                that people will figure out new ways to improve fuel saving
                technologies to increase their applicability, and the current
                technology characterization should be enabled for selection with no
                restriction--not because the commenter knows how the technology will be
                adapted, but that the commenter believes the technology could,
                eventually, within the timeline of the rulemaking, be adapted, brought
                to market, and be accepted by consumers. While the agencies recognize
                the improvements that many manufacturers
                [[Page 24303]]
                have achieved in fuel saving technologies, some of which were difficult
                to foresee, the agencies have an obligation under the law to be
                judicious and specific about technological feasibility, and to avoid
                speculative conclusions about technologies to justify the rulemaking.
                ---------------------------------------------------------------------------
                 \401\ NHTSA-208-0067-12122-33, American Council for an Energy-
                Efficient Economy.
                ---------------------------------------------------------------------------
                c) Other Analysis Fleet Data
                (1) Safety Classes
                 The agencies referenced the mass-size-safety analysis to project
                the effects changes in weight may have on crash fatalities. That
                analysis, discussed in more detail in Section VI.D.2, considers how
                weight changes may affect safety for cars, crossover utility vehicles
                and sport utility vehicles, and pick-up trucks. To consider these
                effects, the agencies mapped each vehicle in the analysis fleet to the
                appropriate ``Safety Class.''
                (2) Labor Utilization
                 The analysis fleet summarizes components of direct labor for each
                vehicle considered in the analysis. The labor is split into three
                components: (1) Dealership hours worked on sales functions per vehicle,
                (2) direct assembly labor for final assembly, engine, and transmission,
                and (3) percent U.S. content.
                 In the MY 2016 fleet for the NPRM, the agencies catalogued
                production locations and plant employment, reviewed annual reports from
                the North American Dealership Association to estimate dealership
                employment (27.8 hours per vehicle sold), and estimated the industry
                average labor hours for final assembly of vehicles (30 hours per
                vehicle produced), engine machining and assembly (4 hours per engine
                produced), and transmission production (5 hours per transmission
                produced).
                 Today's analysis fleet carries over the estimated labor
                coefficients for sales and production, but references the most recent
                Part 583 American Automobile Labeling Act Report for percent U.S.
                content and for the location of vehicle assembly, engine assembly, and
                transmission assembly.\402\
                ---------------------------------------------------------------------------
                 \402\ Part 583 American Automobile Labeling Act Report,
                available at https://www.nhtsa.gov/part-583-american-automobile-labeling-act-reports.
                ---------------------------------------------------------------------------
                (3) Production Volumes for Sales Analysis
                 A final important aspect of projecting what vehicles will exist in
                future model years and potential manufacturer responses to standards is
                estimating how future sales might change in response to different
                potential standards. If potential future standards appear likely to
                have major effects in terms of shifting production from cars to trucks
                (or vice versa), or in terms of shifting sales between manufacturers or
                groups of manufacturers, that is important for the agencies to
                consider. For previous analyses, the CAFE model used a static forecast
                contained in the analysis fleet input file, which specified changes in
                production volumes over time for each vehicle model/configuration. This
                approach yielded results that, in terms of production volumes, did not
                change between scenarios or with changes in important model inputs. For
                example, very stringent standards with very high technology costs would
                result in the same estimated production volumes as less stringent
                standards with very low technology costs. For this analysis, as in the
                proposal, the CAFE model begins with the first-year production volumes
                (i.e., MY 2017 for today's analysis) and adjusts ensuing sales mix year
                by year (between cars and trucks, and between manufacturers)
                endogenously as part of the analysis, rather than using external
                forecasts of future car/truck split and future manufacturer sales
                volumes. This leads the model to produce different estimates of future
                production volumes under different standards and in response to
                different inputs, reflecting the expectation that regulatory standards
                and other external factors will, in fact, impact the market.
                (4) Comments on Other Analysis Fleet Data
                 Some commenters suggest that the CAFE model should run as a full
                consumer choice model (and this idea is discussed in more detail in
                Section VI.D.1). While this sounds like a reasonable request on the
                surface, such an approach would place enormous new demands on the data
                characterized in the fleet (and preceding fleets, which may be needed
                to calibrate a model properly). For instance, some model concepts may
                depend on a bevy of product features, such as interior cargo room,
                artistic appeal of the design, and perceived quality of the vehicle.
                But product features alone may not be sufficient. Additional
                information about dealership channels, product awareness and
                advertising effectiveness, and financing terms also may be required.
                Such information could dramatically increase the scope of work needed
                to characterize the analysis fleet for future rulemakings. As described
                in Section VI.D.1.b)(2)(d) Using Vehicle Choice Models in Rulemaking
                Analysis. Accordingly, the agencies decided not to develop such a model
                for this rulemaking.
                2. Treatment of Compliance Credit Provisions
                 Today's final rule involves a variety of provisions regarding
                ``credits'' and other compliance flexibilities. Some recently
                introduced regulatory provisions allow a manufacturer to earn
                ``credits'' that will be counted toward a vehicle's rated
                CO2 emissions level, or toward a fleet's rated average
                CO2 or CAFE level, without reference to required levels for
                these average levels of performance. Such flexibilities effectively
                modify emissions and fuel economy test procedures, or methods for
                calculating fleets' CAFE and average CO2 levels. Such
                provisions are discussed below in Section VI.B.2. Other provisions (for
                CAFE, statutory provisions) allow manufacturers to earn credits by
                achieving CAFE or average CO2 levels beyond required levels;
                these provisions may hence more appropriately be termed ``compliance
                credits.''
                 EPCA has long provided that, by exceeding the CAFE standard
                applicable to a given fleet in a given model year, a manufacturer may
                earn corresponding ``credits'' that the same manufacturer may, within
                the same regulatory class, apply toward compliance in a different model
                year. EISA amended these provisions by providing that manufacturers
                may, subject to specific statutory limitations, transfer compliance
                credits between regulatory classes, and trade compliance credits with
                other manufacturers. The CAA provides EPA with broad standard-setting
                authority for the CO2 program, with no specific directives
                regarding either CO2 standards or CO2 compliance
                credits.
                 EPCA also specifies that NHTSA may not consider the availability of
                CAFE credits (for transfer, trade, or direct application) toward
                compliance with new standards when establishing the standards
                themselves.\403\ Therefore, this analysis, like that presented in the
                NPRM, considers 2020 to be the last model year in which carried-forward
                or transferred credits can be applied for the CAFE program. Beginning
                in model year 2021, today's ``standard setting'' analysis for NHTSA's
                program is conducted assuming each fleet must comply with the CAFE
                standard separately in every model year.
                ---------------------------------------------------------------------------
                 \403\ 49 U.S.C. 32902(h)(3).
                ---------------------------------------------------------------------------
                 The ``unconstrained'' perspective acknowledges that these
                flexibilities exist as part of the program, and, while not considered
                by NHTSA in setting standards, are nevertheless important to consider
                when attempting to estimate the real impact of any alternative. Under
                [[Page 24304]]
                the ``unconstrained'' perspective, credits may be earned, transferred,
                and applied to deficits in the CAFE program throughout the full range
                of model years in the analysis. The Final Environmental Impact Analysis
                (FEIS) accompanying today's final rule, like the corresponding Draft
                EIS analysis, presents results of ``unconstrained'' modeling. Also,
                because the CAA provides no direction regarding consideration of any
                CO2 credit provisions, today's analysis, like the NPRM
                analysis, includes simulation of carried-forward and transferred
                CO2 credits in all model years.
                 Some commenters took issue broadly with this treatment of
                compliance credits. Michalek and Whitefoot wrote that ``we find this
                requirement problematic because the automakers use these flexibilities
                as a common means of complying with the regulation, and ignoring them
                will bias the cost-benefit analysis to overestimate costs.'' \404\
                ---------------------------------------------------------------------------
                 \404\ Michalek, J. and Whitefoot, K., NHTSA-2018-0067-11903, at
                10-11.
                ---------------------------------------------------------------------------
                 Counter to the above general claim, the CAFE model does provide
                means to simulate manufacturers' potential application of some
                compliance credits, and both the analysis of CO2 standards
                and the NEPA analysis of CAFE standards do make use of this aspect of
                the model. As discussed above, NHTSA does not have the discretion to
                consider the credit program--in fact, the agency is prohibited by
                statute from doing so--in establishing maximum feasible standards.
                Further, as discussed below, the agencies also continue to find it
                appropriate for the analysis largely to refrain from simulating two of
                the mechanisms allowing the use of compliance credits.
                 The model's approach to simulating compliance decisions accounts
                for the potential to earn and use CAFE credits as provided by EPCA/
                EISA. The model similarly accumulates and applies CO2
                credits when simulating compliance with EPA's standards. Like past
                versions, the current CAFE model can be used to simulate credit carry-
                forward (a.k.a. banking) between model years and transfers between the
                passenger car and light truck fleets but not credit carry-back (a.k.a.
                borrowing) from future model years or trading between manufacturers.
                 Regarding the potential to carry back compliance credits, UCS
                commented that, although past versions of the CAFE model had
                ``considered this flexibility in its approach to multiyear modeling,''
                NHTSA had, without explanation, ``abruptly discontinued support of this
                method of compliance,'' such that ``manufacturers are generally
                incentivized to over comply, regardless of whether carrying forward a
                deficit to be compensated by later overcompliance would be a more cost-
                effective method of compliance.'' \405\ Citing the potential that
                manufacturers could make use of carried back credits in the future, UCS
                also stated that ``NHTSA's decision to constrain it in the model is
                unreasonable and arbitrary.'' \406\ UCS effectively implies that the
                agencies should base standards on analysis that presumes manufacturers
                will take full theoretical advantage of provisions allowing credits to
                be borrowed.
                ---------------------------------------------------------------------------
                 \405\ UCS, NHTSA-2018-0067-12039, Technical Appendix, at 44.
                 \406\ UCS, op. cit., at 77.
                ---------------------------------------------------------------------------
                 The agencies have carefully considered these comments, and while
                EPA's decisions regarding CO2 standards can consider the
                potential to carry back compliance credits from later to earlier model
                years, and NHTSA's ``unconstrained'' evaluation could also do so, past
                examples of failed attempts to carry back CAFE credits (e.g., a MY2014
                carry back default leading to a civil penalty payment) underscore the
                riskiness of such ``borrowing.'' Recent evidence indicates
                manufacturers are disinclined to take such risks,\407\ and both
                agencies find it reasonable and prudent to refrain from attempting to
                simulate such ``borrowing'' in rulemaking analysis.
                ---------------------------------------------------------------------------
                 \407\ Section IX, below, reviews data regarding manufacturers'
                use of CAFE compliance credit mechanism during MYs 2011-2016, and
                shows that the use of ``carry back'' credits is, relative to the use
                of other compliance credit mechanisms, too small to discern.
                ---------------------------------------------------------------------------
                 Unlike past versions, the NPRM and current versions of CAFE model
                provide a basis to specify (in model inputs) CAFE credits available
                from model years earlier than those being explicitly simulated. For
                example, with this analysis representing model years 2017-2050
                explicitly, credits earned in model year 2012 are made available for
                use through model year 2017 (given the current five-year limit on
                carry-forward of credits). The banked credits are specific to both the
                model year and fleet in which they were earned.
                 In addition to the above-mentioned comments, UCS also cited as
                ``errors'' that ``the model does not accurately reflect the one-time
                exemption from the EPA 5-year credit life for credits earned in the MY
                2010-2015 timeframe'' and ``NHTSA assumes that there will be absolutely
                no credit trading between manufacturers.''
                 As discussed below, in the course of updating the analysis fleet
                from MY 2016 to MY 2017, the agencies have updated and expanded the
                manner in which the model accounts for credits earned prior to MY 2017,
                including credits earned as early as MY 2009. In order to increase the
                realism with which the model transitions between the early model year
                (MYs 2017-2020) and the later years that are the subject of this
                action, the agencies have accounted for the potential that some
                manufacturers might trade some of these pre-MY 2017 credits to other
                manufacturers. However, as with the NPRM, the analysis refrains from
                simulating the potential that manufacturers might continue to trade
                credits during and beyond the model years covered by today's action.
                The agencies remain concerned that any realistic simulation of such
                trading would require assumptions regarding which specific pairs of
                manufacturers might actually trade compliance credits, and the evidence
                to date makes it clear that the credit market is far from fully
                ``open.'' With respect to the FCA comment cited above, the agencies
                also remain concerned that to set standards based on an analysis that
                presumes the use of program flexibilities risks making the
                corresponding actions mandatory. Some flexibilities--credit carry-
                forward (banking) and transfers between fleets in particular--involve
                little risk, because they are internal to a manufacturer and known in
                advance. As discussed above, credit carry-back involves significant
                risk, because it amounts to borrowing against future improvements,
                standards, and production volume and mix--and anticipated market demand
                for fuel efficient vehicles often fail to materialize. Similarly,
                credit trading also involves significant risk, because the ability of
                manufacturer A to acquire credits from manufacturer B depends not just
                on manufacturer B actually earning the expected amount of credit, but
                also on manufacturer B being willing to trade with manufacturer A, and
                on potential interest by other manufacturers. Manufacturers' compliance
                plans have already evidenced cases of compliance credit trades that
                were planned and subsequently aborted, reinforcing the agencies'
                judgment that, like credit banking, credit trading involves too much
                risk to be included in an analysis that informs decisions about the
                stringency of future standards. Nevertheless, recognizing that some
                manufacturers have actually been trading credits, the agencies have, as
                in the NPRM, included in the sensitivity analysis a case that simulates
                ``perfect'' trading of compliance credits, focusing
                [[Page 24305]]
                on CO2 standards to illustrate the hypothetical maximum
                potential impact of trading. The FRIA summarizes results of this and
                other cases included in the sensitivity analysis.
                 As discussed in the CAFE model documentation, the model's default
                logic attempts to maximize credit carry-forward--that is, to ``hold
                on'' to credits for as long as possible. If a manufacturer needs to
                cover a shortfall that occurs when insufficient opportunities exist to
                add technology in order to achieve compliance with a standard, the
                model will apply credits. Otherwise the manufacturer carries forward
                credits until they are about to expire, at which point it will use them
                before adding technology that is not considered cost-effective. The
                model attempts to use credits that will expire within the next three
                years as a means to smooth out technology application over time to
                avoid both compliance shortfalls and high levels of over-compliance
                that can result in a surplus of credits. Although it remains impossible
                precisely to predict manufacturer's actual earning and use of
                compliance credits, and this aspect of the model may benefit from
                future refinement as manufacturers and regulators continue to gain
                experience with these provisions, this approach is generally consistent
                with manufacturers' observed practices.
                 NHTSA introduced the CAFE Public Information Center to provide
                public access to a range of information regarding the CAFE
                program,\408\ including manufacturers' credit balances. However, there
                is a data lag in the information presented on the CAFE PIC that may not
                capture credit actions across the industry for as much as several
                months. Furthermore, CAFE credits that are traded between manufacturers
                are adjusted to preserve the gallons saved that each credit
                represents.\409\ The adjustment occurs at the time of application
                rather than at the time the credits are traded. This means that a
                manufacturer who has acquired credits through trade, but has not yet
                applied them, may show a credit balance that is either considerably
                higher or lower than the real value of the credits when they are
                applied. For example, a manufacturer that buys 40 million credits from
                Tesla may show a credit balance in excess of 40 million. However, when
                those credits are applied, they may be worth only 1/10 as much--making
                that manufacturer's true credit balance closer to 4 million than 40
                million.
                ---------------------------------------------------------------------------
                 \408\ CAFE Public Information Center, http://www.nhtsa.gov/CAFE_PIC/CAFE_PIC_Home.htm (last visited June 22, 2018).
                 \409\ CO2 credits for EPA's program are denominated
                in metric tons of CO2 rather than gram/mile compliance
                credits and require no adjustment when traded between manufacturers
                or fleets.
                ---------------------------------------------------------------------------
                 For the NPRM, the agencies reviewed then-recent credit balances,
                estimated the potential that some manufacturers could trade credits,
                and developed inputs that make carried-forward credits available in
                each of model years 2011-2015, after subtracting credits assumed to be
                traded to other manufacturers, adding credits assumed to be acquired
                from other manufacturers through such trades, and adjusting any traded
                credits (up or down) to reflect their true value for the fleet and
                model year into which they were traded.\410\ For today's analysis, an
                additional model year's data was available in mid-2019, and the
                agencies updated these inputs, as summarized in Table VI-12, Table VI-
                13, and Table VI-14. While the CAFE model will transfer expiring
                credits into another fleet (e.g., moving expiring credits from the
                domestic car credit bank into the light truck fleet), some of these
                credits were moved into the initial banks to improve the efficiency of
                application and both to reflect better the projected shortfalls of each
                manufacturer's regulated fleets and to represent observed behavior. For
                context, a manufacturer that produces one million vehicles in a given
                fleet, and experiences a shortfall of 2 mpg, would need 20 million
                credits, adjusted for fuel savings, to offset the shortfall completely.
                ---------------------------------------------------------------------------
                 \410\ The adjustments, which are based upon the CAFE standard
                and model year of both the party originally earning the credits and
                the party applying them, were implemented assuming the credits would
                be applied to the model year in which they were set to expire. For
                example, credits traded into a domestic passenger car fleet for MY
                2014 were adjusted assuming they would be applied in the domestic
                passenger car fleet for MY 2019.
                ---------------------------------------------------------------------------
                BILLING CODE 4910-59-P
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                [GRAPHIC] [TIFF OMITTED] TR30AP20.099
                BILLING CODE 4910-59-C
                 In addition to the inclusion of these existing credit banks, the
                CAFE model also updated its treatment of credits in the rulemaking
                analysis. EPCA requires that NHTSA set CAFE standards at maximum
                feasible levels for each model year without consideration of the
                program's credit mechanisms. However, as recent NHTSA CAFE/EPA tailpipe
                CO2 emissions rulemakings have evaluated effects of
                standards over longer time periods, the early actions taken by
                manufacturers required more nuanced representation. Accordingly, the
                CAFE model now provides for a setting to establish a ``last year to
                consider credits.'' This adjustment is set at the last year for which
                new standards are not being considered (MY 2020 in this analysis). This
                allows the model to replicate the practical application of existing
                credits toward compliance in early years but also to examine the impact
                of proposed standards based solely on fuel economy improvements in all
                years for which new standards are being considered.
                 Regarding the model's simulation of manufacturers' potential
                earning and application of compliance credits, UCS commented that the
                model ``inexplicably lets credits expire'' because ``all technologies
                which pay for themselves within the assumed payback period are applied
                to all manufacturers, regardless of credit status.'' UCS also claimed
                that ``NHTSA did not accurately reflect unique attributes of EPA's
                credit bank,'' that ``credits are not traded between manufacturers,''
                and that ``NHTSA does not model credit carryback for compliance.''
                \411\ Relatedly, as discussed above, UCS attributes modeling outcomes
                to the ``effective cost'' metric used to select from among available
                fuel-saving technologies.\412\ As discussed in Section VI.B.1, the
                agencies expect that manufacturers are likely to improve fuel economy
                voluntarily insofar as doing so ``pays back'' economically within a
                short period (30 months), and the agencies note that periods of
                regulatory stability have, in fact, been marked by CAFE levels
                exceeding requirements. As discussed above, the agencies have excluded
                simulation of credit trading (except in MYs prior to those under
                consideration, aside from an idealized case presented in the
                sensitivity analysis) and likewise excluded simulation of potential
                ``carryback'' provisions. The agencies have excluded modeling these
                scenarios not just because of the analytical complexities involved (and
                rejecting, for example, the random number generator analysis suggested
                by UCS), but also because the agencies agree that the actual provisions
                regarding trading and borrowing of compliance credits create too much
                risk to be used in the analysis underlying consideration of standards.
                However, as discussed above, the agencies have revised the ``metric''
                used to prioritize available options to apply fuel-saving technologies.
                As discussed below, the agencies have revised model inputs to include
                the large quantity of ``legacy'' compliance credits EPA has made
                available under its CO2 standards.
                ---------------------------------------------------------------------------
                 \411\ UCS, NHTSA-2018-0067-12039, Technical Appendix, at 35-46.
                 \412\ UCS, NHTSA-2018-0067-12039, Technical Appendix, at 28-30.
                ---------------------------------------------------------------------------
                 The CAFE model has also been modified to include a similar
                representation of existing credit banks in EPA's CO2
                program. While the life of a CO2 credit, denominated in
                metric tons of CO2, has a five-year life, matching the
                lifespan of CAFE credits, such credits earned in the early MY 2009-2011
                years of the EPA program, may be used through MY 2021.\413\ The CAFE
                model was not modified to allow
                [[Page 24308]]
                exceptions to the life-span of compliance credits, and, to reflect
                statutory requirements, treated them as if they may be carried forward
                for no more than five years, so the initial credit banks were modified
                to anticipate the years in which those credits might be needed. MY 2016
                was simulated explicitly in the NPRM analysis to prohibit the inclusion
                of banked credits in MY 2016 (which could be carried forward from MY
                2016 to MY 2021), and thus underestimated the extent to which
                individual manufacturers, and the industry as a whole, could rely on
                these early credits to comply with EPA standards between MY 2016 and MY
                2021. However, as indicated in the NPRM, the final rule's model inputs
                updated the analysis fleet's basis to MY 2017, such that these
                additional banked credits can be included. The credit banks with which
                the simulations in this analysis were conducted are presented in the
                following Tables:
                ---------------------------------------------------------------------------
                 \413\ In the 2010 rule, EPA placed limits on credits earned in
                MY 2009, which expired prior to this rule. However, credits
                generated in MYs 2010-2011 may be carried forward, or traded, and
                applied to deficits generated through MY 2021.
                ---------------------------------------------------------------------------
                BILLING CODE 4910-59-P
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                [[Page 24309]]
                [GRAPHIC] [TIFF OMITTED] TR30AP20.101
                BILLING CODE 4910-59-C
                 While the CAFE model does not simulate the ability to trade credits
                between manufacturers, it does simulate the strategic accumulation and
                application of compliance credits, as well as the ability to transfer
                credits between fleets to improve the compliance position of a less
                efficient fleet by leveraging credits earned by a more efficient fleet.
                The model prefers to hold on to earned compliance credits within a
                given fleet, carrying them forward into the future to offset potential
                future deficits. This assumption is consistent with observed strategic
                manufacturer behavior dating back to 2009.
                 From 2009 to present, no manufacturer has transferred CAFE credits
                into a fleet to offset a deficit in the same year in which they were
                earned. This has occurred with credits acquired from other
                manufacturers via trade but not with a manufacturer's own credits.
                Therefore, the current representation of credit transfers between
                fleets--where the model prefers to transfer expiring, or soon-to-be-
                expiring credits rather than newly earned credits--is both appropriate
                and consistent with observed industry behavior.
                 This may not be the case for CO2 standards, though it is
                difficult to be certain at this point. The CO2 program
                seeded the industry with a large quantity of early compliance credits
                (earned in MYs 2009-2011) \414\ prior to the existence formal
                CO2 standards. Early credits from MYs 2010 and 2011,
                however, do not expire until 2021. Thus, for manufacturers looking to
                offset deficits, it is more sensible to exhaust credits that were
                generated during later model years (which are set to expire within the
                next five years), rather than relying on the initial bank of credits
                from MYs 2010 and 2011. The first model year for which earned credits
                outlive the initial bank is MY 2017, for which final manufacturer
                CO2 performance data (and hence, banked credits) has not yet
                been released. However, considering that under the CO2
                program manufacturers simultaneously comply with passenger car and
                light truck fleets, to more accurately represent the CO2
                credit system the CAFE model allows (and encourages) intra-year
                transfers between regulated fleets for the purpose of simulating
                compliance with the CO2 standards.
                ---------------------------------------------------------------------------
                 \414\ In response to public comment, EPA eliminated the possible
                use of credits earned in MY 2009 for future model years. However,
                credits earned in MY 2010 and MY 2011 remain available for use.
                ---------------------------------------------------------------------------
                a) Off-Cycle and A/C Efficiency Adjustments to CAFE and Average
                CO2 Levels
                 In addition to more rigorous accounting of CAFE and CO2
                credits, the model now also accounts for air conditioning efficiency
                and off-cycle adjustments. NHTSA's program considers those adjustments
                in a manufacturer's compliance calculation starting in MY 2017, and the
                NPRM version of the model used the adjustments claimed by each
                manufacturer in MY 2016 as the starting point for all future years.
                Because air conditioning efficiency and off-cycle adjustments are not
                credits in NHTSA's program, but rather adjustments to compliance fuel
                economy (much like the Flexible Fuel Vehicle adjustments due to phase
                out in MY 2019), they may be included under either a ``standard
                setting'' or ``unconstrained'' analysis perspective.
                 The manner in which the CAFE model treats the EPA and CAFE A/C
                efficiency and off-cycle credit programs is similar, but the model also
                accounts for A/C leakage (which is not part of NHTSA's program). When
                determining the compliance status of a
                [[Page 24310]]
                manufacturer's fleet (in the case of EPA's program, PC and LT are the
                only fleet distinctions), the CAFE model weighs future compliance
                actions against the presence of existing (and expiring) CO2
                credits resulting from over-compliance with earlier years' standards,
                A/C efficiency credits, A/C leakage credits, and off-cycle credits.
                 Another aspect of credit accounting, implemented in the NPRM
                version of the CAFE model, involved credits related to the application
                of off-cycle and A/C efficiency adjustments, which manufacturers earn
                by taking actions such as special window glazing or using reflective
                paints that provide fuel economy improvements in real-world operation
                but do not produce measurable improvements in fuel consumption on the
                2-cycle test.
                 NHTSA's inclusion of off-cycle and A/C efficiency adjustments began
                in MY 2017, while EPA has collected several years' worth of submissions
                from manufacturers about off-cycle and A/C efficiency technology
                deployment. Currently, the level of deployment can vary considerably by
                manufacturer, with several claiming extensive Fuel Consumption
                Improvement Values (FCIV) for off-cycle and A/C efficiency
                technologies, and others almost none. The analysis of alternatives
                presented here (and in the NPRM) does not attempt to project how future
                off-cycle and A/C efficiency technology use will evolve or speculate
                about the potential proliferation of FCIV proposals submitted to the
                agencies. Rather, this analysis uses the off-cycle credits submitted by
                each manufacturer for MY 2017 compliance, and, with a few exceptions,
                carries these forward to future years. Several of the technologies
                described below are associated with A/C efficiency and off-cycle FCIVs.
                In particular, stop-start systems, integrated starter generators, and
                full hybrids are assumed to generate off-cycle adjustments when applied
                to vehicles to improve their fuel economy. Similarly, higher levels of
                aerodynamic improvements are assumed to include active grille shutters
                on the vehicle, which also qualify for off-cycle FCIVs.
                 The NPRM analysis assumed that any off-cycle FCIVs that are
                associated with actions outside of the technologies discussed in
                Section VI.C (either chosen from the pre-approved ``pick list,'' or
                granted in response to individual manufacturer petitions) remained at
                the levels claimed by manufacturers in MY 2017. Any additional A/C
                efficiency and off-cycle adjustments that accrued as the result of
                explicit technology application calculated dynamically in each model
                year for each alternative. The NPRM version of the CAFE model also
                represented manufacturers' credits for off-cycle improvements, A/C
                efficiency improvements, and A/C leakage reduction in terms of values
                applicable across all model years.
                 Recognizing that application of these improvements thus far varies
                considerably among manufacturers, such that some manufacturers have
                opportunities to earn significantly more of the corresponding
                adjustments over time, the agencies have expanded the CAFE model's
                representation of these credits to provide for year-by-year
                specification of the amounts of each type of adjustment for each
                manufacturer, denominated in grams CO2 per mile,\415\ as
                summarized in the following table:
                ---------------------------------------------------------------------------
                 \415\ For estimating their contribution to CAFE compliance, the
                grams CO2/mile values in Table VI-1711 are converted to
                gallons/mile and applied to a manufacturer's 2-cycle CAFE
                performance. When calculating compliance with EPA's CO2
                program, there is no conversion necessary (as standards are also
                denominated in grams/mile).
                 \416\ These values are specified in the ``market_ref.xlsx''
                input file's ``Credits and Adjustments'' worksheet. The file is
                available with the archive of model inputs and outputs posted at
                https://www.nhtsa.gov/corporate-average-fuel-economy/compliance-and-effects-modeling-system.
                ---------------------------------------------------------------------------
                BILLING CODE 4910-59-P
                [[Page 24311]]
                [GRAPHIC] [TIFF OMITTED] TR30AP20.102
                [[Page 24312]]
                [GRAPHIC] [TIFF OMITTED] TR30AP20.103
                [[Page 24313]]
                [GRAPHIC] [TIFF OMITTED] TR30AP20.104
                BILLING CODE 4910-59-C
                 In addition to these refinements to the estimation of the
                quantities of adjustments earned over time by each manufacturer, the
                agencies revised the
                [[Page 24314]]
                CAFE model to apply estimates of the corresponding costs. For today's
                analysis, the agencies applied estimates developed previously by EPA,
                adjusting these values to 2019 dollars. The following table summarizes
                inputs through model year 2030:
                [GRAPHIC] [TIFF OMITTED] TR30AP20.105
                 The model currently accounts for any off-cycle adjustments
                associated with technologies that are included in the set of fuel-
                saving technologies explicitly simulated as part of this proposal (for
                example, start-stop systems that reduce fuel consumption during idle or
                active grille shutters that improve aerodynamic drag at highway speeds)
                and accumulates these adjustments up to the 10 g/mi cap. As a practical
                matter, most of the adjustments for which manufacturers are claiming
                off-cycle FCIV exist outside of the technology tree, so the cap is
                rarely reached during compliance simulation. The agencies have
                considered the potential to model their application explicitly.
                However, doing so would require data regarding which vehicle models
                already possess these improvements as well as the cost and expected
                value of applying them to other models in the future. Such data is
                currently too limited to support explicit modeling of these
                technologies and adjustments.
                b) Alternative Fuel Vehicles
                 When establishing maximum feasible fuel economy standards, NHTSA is
                prohibited from considering the availability of alternatively fueled
                vehicles,\417\ and credit provisions related to AFVs that significantly
                increase their fuel economy for CAFE compliance purposes. Under the
                ``standard setting'' perspective, these technologies (pure battery
                electric vehicles and fuel cell vehicles) \418\ are not available in
                the compliance simulation to improve fuel economy. Under the
                ``unconstrained'' perspective, such as is documented in the DEIS and
                FEIS, the CAFE model considers these technologies in the same manner as
                other available technologies, and may apply them if they represent
                cost-effective compliance pathways. However, under both perspectives,
                the analysis continues to include dedicated AFVs that already exist in
                the MY 2017 fleet (and their projected future volumes). Also, because
                the CAA provides no direction regarding consideration of alternative
                fuels, the final rule's analysis includes simulation of the potential
                that some manufacturers might introduce new AFVs in response to
                CO2 standards. To represent the compliance benefit from such
                a response fully, NHTSA modified the CAFE model to include the specific
                provisions related to AFVs under the CO2 standards. In
                particular, the CAFE model now carries a full representation of the
                production multipliers related to electric vehicles, fuel cell
                vehicles, plug-in hybrids, and CNG vehicles, all of which vary by year
                through MY 2021.
                ---------------------------------------------------------------------------
                 \417\ 49 U.S.C. 32902(h).
                 \418\ Dedicated compressed natural gas (CNG) vehicles should
                also be excluded in this perspective but are not considered as a
                compliance strategy under any perspective in this analysis.
                ---------------------------------------------------------------------------
                 EPCA also provides that CAFE levels may, subject to limitations, be
                adjusted upward to reflect the sale of flexible fuel vehicles (FFVs).
                Although these adjustments end after model year 2020, the final rule's
                analysis, like the NPRM's, includes estimated potential use through MY
                2019, as summarized below:
                [[Page 24315]]
                [GRAPHIC] [TIFF OMITTED] TR30AP20.106
                 For its part, EPA has provided that manufacturers selling
                sufficient numbers of PHEVs, BEVs, and FCVs may, when calculating fleet
                average CO2 levels, ``count'' each unit of production as
                more than a single unit. The CAFE model accounts for these
                ``multipliers.'' As for the NPRM, the final rule's analysis applies the
                following multipliers:
                [GRAPHIC] [TIFF OMITTED] TR30AP20.107
                 For example, under EPA's current regulation, when calculating the
                average CO2 level achieved by its MY 2019 passenger car
                fleet, a manufacturer may treat each 1,000 BEVs as 2,000 BEVs. When
                calculating the average level required of this fleet, the manufacturer
                must use the actual production volume (in this example, 1,000 units).
                Similarly, the manufacturer must use the actual production volume when
                calculating compliance credit balances.
                 There were no natural gas vehicles in the baseline fleet, and the
                analysis did not apply natural gas technology due to cost
                effectiveness. The application of a 2.0 multiplier for natural gas
                vehicles for MYs 2022-2026 would have no impact on the analysis because
                given the state of natural gas vehicle refueling infrastructure, the
                cost to equip vehicles with natural gas tanks, the outlook for
                petroleum prices, and the outlook for battery prices, we have little
                basis to project more than an inconsequential response to this
                incentive in the foreseeable future.
                 For the final rule's analysis, the CAFE model can be exercised in a
                manner that simulates these current EPA requirements, or that simulates
                two alternative approaches. The first includes the above-mentioned
                multipliers in the calculation of average requirements, and the second
                also includes the multipliers in the calculation of credit balances.
                The central analysis reflects current regulations. The sensitivity
                analysis presented in the FRIA includes a case
                [[Page 24316]]
                applying multipliers to the calculation of achieved and required
                average CO2 levels, and calculation of credit balances.
                c) Civil Penalties
                 Throughout the history of the CAFE program, some manufacturers have
                consistently achieved fuel economy levels below applicable standards,
                electing instead to pay civil penalties as specified by EPCA. As in
                previous versions of the CAFE model, the current version allows the
                user to specify inputs identifying such manufacturers and to consider
                their compliance decisions as if they are willing to pay civil
                penalties for non-compliance with the CAFE program. As with the NPRM,
                the civil penalty rate in the current analysis is $5.50 per 1/10 of a
                mile per gallon, per vehicle manufactured for sale.
                 NHTSA notes that treating a manufacturer as if it is willing to pay
                civil penalties does not necessarily mean that it is expected to pay
                penalties in reality. Doing so merely implies that the manufacturer
                will only apply fuel economy technology up to a point, and then stop,
                regardless of whether or not its corporate average fuel economy is
                above its standard. In practice, the agencies expect that many of these
                manufacturers will continue to be active in the credit market, using
                trades with other manufacturers to transfer credits into specific
                fleets that are challenged in any given year, rather than paying
                penalties to resolve CAFE deficits. The CAFE model calculates the
                amount of penalties paid by each manufacturer, but it does not simulate
                trades between manufacturers. In practice, some (possibly most) of the
                total estimated penalties may be a transfer from one OEM to another.
                 Although EPCA, as amended in 2007 by the Energy Independence and
                Security Act (EISA), prescribes these specific civil penalty provisions
                for CAFE standards, the Clean Air Act (CAA) does not contain similar
                provisions. Rather, the CAA's provisions regarding noncompliance
                prohibit sale of a new motor vehicle that is not covered by an EPA
                certificate of conformity, and in order to receive such a certificate
                the new motor vehicle must meet EPA's Section 202 regulations,
                including applicable emissions standards. Therefore, inputs regarding
                civil penalties--including inputs regarding manufacturers' potential
                willingness to treat civil penalty payment as an economic choice--apply
                only to simulation of CAFE standards. On the other hand, some of the
                same manufacturers recently opting to pay civil penalties instead of
                complying with CAFE standards have also recently led adoption of lower-
                GWP refrigerants, and the ``A/C leakage'' credits count toward
                compliance only with CO2 standards, not CAFE standards. The
                model accounts for this difference between the programs.
                 When considering technology applications to improve fleet fuel
                economy, the model will add technology up to the point at which the
                effective cost of the technology (which includes technology cost,
                consumer fuel savings, consumer welfare changes, and the cost of
                penalties for non-compliance with the standard) is less costly than
                paying civil penalties or purchasing credits. Unlike previous versions
                of the model, the current implementation further acknowledges that some
                manufacturers experience transitions between product lines where they
                rely heavily on credits (either carried forward from earlier model
                years or acquired from other manufacturers) or simply pay penalties in
                one or more fleets for some number of years. The model now allows the
                user to specify, when appropriate for the regulatory program being
                simulated, on a year-by-year basis, whether each manufacturer should be
                considered as willing to pay penalties for non-compliance. This
                provides additional flexibility, particularly in the early years of the
                simulation. As discussed above, this assumption is best considered as a
                method to allow a manufacturer to under-comply with its standard in
                some model years--treating the civil penalty rate and payment option as
                a proxy for other actions it may take that are not represented in the
                CAFE model (e.g., purchasing credits from another manufacturer, carry-
                back from future model years, or negotiated settlements with NHTSA to
                resolve deficits).
                 For the NPRM, NHTSA relied on past compliance behavior and
                certified transactions in the credit market to designate some
                manufacturers as willing to pay CAFE penalties in some model years. The
                full set of NPRM assumptions regarding manufacturer behavior with
                respect to civil penalties is presented in Table VI-21, which shows all
                manufacturers were assumed to be willing to pay civil penalties prior
                to MY 2020. This was largely a reflection of either existing credit
                balances (which manufacturers will use to offset CAFE deficits until
                the credits reach their expiration dates) or inter-manufacturer trades
                assumed likely to happen in the near future, based on previous
                behavior. The manufacturers in the table whose names appear in bold all
                had at least one regulated fleet (of three) whose CAFE was below its
                standard in MY 2016. Because the NPRM analysis began with the MY 2016
                fleet, and no technology could be added to vehicles that are already
                designed and built, all manufacturers could generate civil penalties in
                MY 2016. However, once a manufacturer is designated as unwilling to pay
                penalties, the CAFE model will attempt to add technology to the
                respective fleets to avoid shortfalls.
                [[Page 24317]]
                [GRAPHIC] [TIFF OMITTED] TR30AP20.108
                 Several of the manufacturers in Table VI-21 that were presumed to
                be willing to pay civil penalties in the early years of the program
                have no history of paying civil penalties. However, several of those
                manufacturers have either bought or sold credits--or transferred
                credits from one fleet to another to offset a shortfall in the
                underperforming fleet. As the CAFE model does not simulate credit
                trades between manufacturers, providing this additional flexibility in
                the modeling avoids the outcome where the CAFE model applies more
                technology than needed in the context of the full set of compliance
                flexibilities at the industry level. By statute, NHTSA cannot consider
                credit flexibilities when setting standards, so most manufacturers
                (those without a history of civil penalty payment) are assumed to
                comply with their standards through fuel economy improvements for the
                model years being considered in this analysis. The notable exception to
                this assumption is Fiat Chrysler Automobiles (FCA), which could still
                satisfy the requirements of the program through a combination of credit
                application and civil penalties through MY 2025 before eventually
                complying exclusively through fuel economy improvements in MY 2026.
                 As mentioned above, the CAA does not provide civil penalty
                provisions similar to those provisions specified in EPCA/EISA, and the
                above-mentioned corresponding inputs apply only to simulation of
                compliance with CAFE standards.
                 Some stakeholders offering comments related to the analytical
                treatment of civil penalties indicated that NHTSA should tend toward
                assuming manufacturers will take advantage of this EPCA provision as an
                economically attractive alternative to compliance. Other commenters
                implied that NHTSA should tend toward not relying on compliance
                flexibilities in the analysis used to determine the maximum feasible
                stringency of CAFE standards. For example, New York University's
                Institute for Policy Integrity (IPI) offered the following comments:
                 NHTSA assumes that most manufacturers will be unwilling to pay
                penalties based in part on the fact that most manufacturers have not
                paid penalties in recent years. The Proposed Rule cites the
                statutory prohibition on NHTSA considering credit trading as a
                reason to assume manufacturers without a history of paying penalties
                will comply through technology alone, whatever the cost. But this is
                an arbitrary assumption and is in no way dictated by the statute.
                NHTSA knows as much, since elsewhere in the proposed rollback, the
                agency explains ``EPCA is very clear as to which flexibilities are
                not to be considered'' and NHTSA is allowed to consider off-cycle
                adjustments because they are not specifically mentioned. But
                considering penalties are not mentioned as off-limits for NHTSA in
                setting the standards either. Instead, the prohibition focuses on
                credit trading and transferring. The penalty safety valve has
                existed in EPCA for decades, and Congress clearly would have known
                how to add penalties to the list of trading and transferring. The
                fact that Congress did not bar NHTSA from considering penalties as a
                safety valve means that NHTSA must consider manufacturer's efficient
                use of penalties as a cost minimizing compliance option. Besides,
                NHTSA does consider penalties for some of the manufacturers making
                its statutory justification even less rational.\419\
                ---------------------------------------------------------------------------
                 \419\ Institute for Policy Integrity, NHTSA-2018-0067-12213, at
                24.
                 On the other hand, in more general comments about NHTSA's
                analytical treatment of program flexibilities, FCA stated that ``when
                flexibilities are considered while setting targets, they cease to be
                flexibilities and become simply additional technology mandates.'' \420\
                ---------------------------------------------------------------------------
                 \420\ FCA, Docket #NHTSA-2018-0067-11943, at 6.
                ---------------------------------------------------------------------------
                 NHTSA agrees with IPI that EPCA does not expressly prohibit NHTSA,
                when conducting analysis supporting determinations of the maximum
                feasible stringency of future CAFE standards, from including
                manufacturers' potential tendency to pay civil penalties rather than
                complying with those standards. However, EPCA also does not require
                NHTSA to include this tendency in its analysis. NHTSA also notes, as
                does IPI, that EPCA does prohibit NHTSA from including credit trading,
                transferring, or the availability of credits in such
                [[Page 24318]]
                analysis (although NHTSA interprets this prohibition to apply only to
                the model years for which standards are being set). This statutory
                difference is logical based on the way credits and penalties function
                differently under EPCA. Because credits help manufacturers achieve
                compliance with CAFE standards, absent the statutory prohibition,
                credits would be relevant to the feasibility of a standard.\421\
                Penalties, on the other hand, do not enable a manufacturer to comply
                with an applicable standard; penalties are for noncompliance.\422\ When
                Congress added credit trading provisions to EPCA in 2007, NHTSA
                anticipated that competitive considerations would make manufacturers
                reluctant to engage in such trades. Since that time, manufacturers
                actually have demonstrated otherwise, although the reliance on
                trading--especially between specific pairs of OEMs--appears to vary
                widely. At this time, NHTSA considers it most likely that manufacturers
                will shift away from paying civil penalties and toward compliance
                credit trading. Consequently, for NHTSA to include civil penalty
                payment in its analysis would increasingly amount to using civil
                penalty payment as an analytical proxy for credit trading. Having
                further considered the question, NHTSA's current view is, therefore,
                that including civil penalty payment beyond MY 2020 would effectively
                subvert EPCA's prohibition against considering credit trading.
                Therefore, for today's announcement, NHTSA has modified its analysis to
                assume that BMW, Daimler, FCA, JLR, and Volvo would consider paying
                civil penalties through MY 2020, and that all manufacturers would apply
                as much technology as would be needed in order to avoid paying civil
                penalties after MY 2020.
                ---------------------------------------------------------------------------
                 \421\ See 49 U.S.C. 32911(b) (``Compliance is determined after
                considering credits available to the manufacturer . . . . '').
                 \422\ See id.
                ---------------------------------------------------------------------------
                3. Technology Effectiveness Values
                 The next input required to simulate manufacturers' decision-making
                processes for the year-by-year application of technologies to specific
                vehicles is estimates of how effective each technology would be at
                reducing fuel consumption. In the NPRM, the agencies used full-vehicle
                modeling and simulation to estimate the fuel economy improvements
                manufacturers could make to a fleet of vehicles, considering those
                vehicles' technical specifications and how combinations of technologies
                interact. Full-vehicle modeling and simulation uses computer software
                and physics-based models to predict how combinations of technologies
                perform as a full system under defined conditions.
                 A model is a mathematical representation of a system, and
                simulation is the behavior of that mathematical representation over
                time. In this analysis, the model is a mathematical representation of
                an entire vehicle,\423\ including its individual components such as the
                engine and transmission, overall vehicle characteristics such as mass
                and aerodynamic drag, and the environmental conditions, such as ambient
                temperature and barometric pressure. The agencies simulated the model's
                behavior over test cycles, including the 2-cycle laboratory compliance
                tests (or 2-cycle tests),\424\ to determine how the individual
                components interact. 2-cycle tests are test cycles that are used to
                measure fuel economy and emissions for CAFE and CO2
                compliance, and therefore are the relevant test cycles for determining
                technology effectiveness when establishing standards. In the
                laboratory, 2-cycle testing involves sophisticated test and measurement
                equipment, carefully controlled environmental conditions, and precise
                procedures to provide the most repeatable results possible with human
                drivers. Measurements using these structured procedures serve as a
                yardstick for fuel economy and CO2 emissions.
                ---------------------------------------------------------------------------
                 \423\ Our full vehicle model was composed of sub-models, which
                is why the full vehicle model could also be referred to as a full
                system model, composed of sub-system models.
                 \424\ EPA's compliance test cycles are used to measure the fuel
                economy of a vehicle. For readers unfamiliar with this process, it
                is like running a car on a treadmill following a program--or more
                specifically, two programs. The ``programs'' are the ``urban
                cycle,'' or Federal Test Procedure (abbreviated as ``FTP''), and the
                ``highway cycle,'' or Highway Fuel Economy Test (abbreviated as
                ``HFET''), and they have not changed substantively since 1975. Each
                cycle is a designated speed trace (of vehicle speed versus time)
                that all certified vehicles must follow during testing. The FTP is
                meant roughly to simulate stop and go city driving, and the HFET is
                meant roughly to simulate steady flowing highway driving at about 50
                mph. For further details on compliance testing, see the discussion
                in Section VI.B.3.a)(7).
                ---------------------------------------------------------------------------
                 Full-vehicle modeling and simulation was initially developed to
                avoid the costs of designing and testing prototype parts for every new
                type of technology. For example, if a truck manufacturer has a concept
                for a lightweight tailgate and wants to determine the fuel economy
                impact for the weight reduction, the manufacturer can use physics-based
                computer modeling to estimate the impact. The vehicle, modeled with the
                proposed change, can be simulated on a defined test route and under a
                defined test condition, such as city or highway driving in warm ambient
                temperature conditions, and compared against the baseline reference
                vehicle. Full-vehicle modeling and simulation allows the consideration
                and evaluation of different designs and concepts before building a
                single prototype. In addition, full vehicle modeling and simulation is
                beneficial when considering technologies that provide small incremental
                improvements. These improvements are difficult to measure in laboratory
                tests due to variations in how vehicles are driven over the test cycle
                by human drivers, variations in emissions measurement equipment, and
                variations in environmental conditions.\425\
                ---------------------------------------------------------------------------
                 \425\ Difficulty with controlling for such variability is
                reflected, for example, in 40 CFR 1065.210, Work input and output
                sensors, which describes complicated instructions and
                recommendations to help control for variability in real world (non-
                simulated) test instrumentation set up.
                ---------------------------------------------------------------------------
                 Full-vehicle modeling and simulation requires detailed data
                describing the individual technologies and performance-related
                characteristics. Those specifications generally come from design
                specifications, laboratory measurements, and other subsystem
                simulations or modeling. One example of data used as an input to the
                full vehicle simulation are engine maps for each engine technology that
                define how much fuel is consumed by the engine technology across its
                operating range.
                 Using full-vehicle modeling and simulation to estimate technology
                efficiency improvements has two primary advantages over using single or
                limited point estimates. An analysis using single or limited point
                estimates may assume that, for example, one fuel economy improving
                technology with an effectiveness value of 5 percent by itself and
                another technology with an effectiveness value of 10 percent by itself,
                when applied together achieve an additive improvement of 15 percent.
                Single point estimates generally do not provide accurate effectiveness
                values because they do not capture complex relationships among
                technologies. Technology effectiveness often differs significantly
                depending on the vehicle type (e.g., sedan versus pickup truck) and how
                the technology interacts with other technologies on the vehicle, as
                different technologies may provide different incremental levels of fuel
                economy improvement if implemented alone or in tandem with other
                technologies. Any oversimplification of these complex interactions
                leads to less accurate and often overestimated effectiveness estimates.
                 In addition, because manufacturers often implement several fuel-
                saving
                [[Page 24319]]
                technologies simultaneously when redesigning a vehicle, it is difficult
                to isolate the effect of individual technologies using laboratory
                measurement of production vehicles alone. Modeling and simulation
                offers the opportunity to isolate the effects of individual
                technologies by using a single or small number of baseline vehicle
                configurations and incrementally adding technologies to those baseline
                configurations. This provides a consistent reference point for the
                incremental effectiveness estimates for each technology and for
                combinations of technologies for each vehicle type. Vehicle modeling
                also reduces the potential for overcounting or undercounting technology
                effectiveness.
                 An important feature of this analysis is that the incremental
                effectiveness of each technology and combinations of technologies be
                accurate and relative to a consistent baseline vehicle. The absolute
                fuel economy values of the full vehicle simulations are used only to
                determine incremental effectiveness and are never used directly to
                assign an absolute fuel economy value to any vehicle model or
                configuration for the rulemaking analysis.
                 For this analysis, absolute fuel economy levels are based on the
                individual fuel economy values from CAFE compliance data for each
                vehicle in the baseline fleet. The incremental effectiveness from the
                full vehicle simulations performed in Autonomie, a physics-based full-
                vehicle modeling and simulation software developed and maintained by
                the U.S. Department of Energy's Argonne National Laboratory, are
                applied to baseline fuel economy to determine the absolute fuel economy
                of applying the first technology change. For subsequent technology
                changes, incremental effectiveness is applied to the absolute fuel
                economy level of the previous technology configuration.
                 For example, if a Ford F150 2-wheel drive crew cab and short bed in
                the baseline fleet has a fuel economy value of 30 mpg for CAFE
                compliance, 30 mpg will be considered the reference absolute fuel
                economy value. A similar full vehicle model in the Autonomie simulation
                may begin with an average fuel economy value of 32 mpg, and with
                incremental addition of a specific technology X its fuel economy
                improves to 35 mpg, a 9.3 percent improvement. In this example, the
                incremental fuel economy improvement (9.3 percent) from technology X
                would be applied to the F150's 30 mpg absolute value.
                 For this analysis, the agencies determined the incremental
                effectiveness of technologies as applied to the 2,952 unique vehicle
                models in the analysis fleet. Although, as mentioned above, full-
                vehicle modeling and simulation reduces the work and time required to
                assess the impact of moving a vehicle from one technology state to
                another, it would be impractical--if not impossible--to build a unique
                vehicle model for every individual vehicle in the analysis fleet.
                Therefore, as explained further below, vehicle models are built in a
                way that maintains similar attributes to the analysis fleet vehicles,
                which ensures key components are reasonably represented.
                 We received a wide array of comments regarding the full-vehicle
                modeling and simulation performed for the NPRM, but there was general
                agreement that full-vehicle modeling and simulation was the appropriate
                method to determine technology effectiveness.\426\ Stakeholders
                commented on other areas, such as full vehicle simulation tools,
                inputs, and assumptions, and these comments will be discussed in the
                following sections. For this final rule, the agencies continued to use
                the same full-vehicle simulation approach to estimate technology
                effectiveness for technology adoption in the rulemaking timeframe. The
                next sections will discuss the details of the explicit input
                specifications and assumptions used for the final rule analysis.
                ---------------------------------------------------------------------------
                 \426\ See NHTSA-2018-0067-12039; NHTSA-2018-0067-12073. UCS and
                AAM both agreed that full vehicle simulation can significantly
                improve the estimates of technology effectiveness.
                ---------------------------------------------------------------------------
                a) Why This Rulemaking Used Autonomie Full-Vehicle Modeling and
                Simulation To Determine Technology Effectiveness
                 The NPRM and final rule analysis use effectiveness estimates for
                technologies developed using Autonomie, a physics-based full-vehicle
                modeling and simulation software developed and maintained by the U.S.
                Department of Energy's Argonne National Laboratory.\427\ Autonomie was
                designed to serve as a single tool to meet requirements of automotive
                engineering throughout the vehicle development process, and has been
                under continuous improvement by Argonne for over 20 years. Autonomie is
                commercially available and widely used in the automotive industry by
                suppliers, automakers, and academic researchers (who publish findings
                in peer reviewed academic journals).\428\ DOE and manufacturers have
                used Autonomie and its ability to simulate a large number of powertrain
                configurations, component technologies, and vehicle-level controls over
                numerous drive cycles to support studies on fuel efficiency, cost-
                benefit analysis, and carbon dioxide emissions,\429\ and other topics.
                ---------------------------------------------------------------------------
                 \427\ More information about Autonomie is available at https://www.anl.gov/technology/project/autonomie-automotive-system-design
                (last accessed June 21, 2018). As mentioned in the preliminary
                regulatory impact analysis (PRIA) for this rule, the agencies used
                Autonomie version R15SP1, the same version used for the 2016 Draft
                TAR.
                 \428\ Rousseau, A. Shidore, N. Karbowski, D. Sharer, ``Autonomie
                Vehicle Validation Summary.'' https://www.nhtsa.gov/sites/nhtsa.dot.gov/files/anl-autonomie-vehicle-model-validation-1509.pdf.
                 \429\ Delorme et al. 2008, Rousseau, A, Sharer, P, Pagerit, S.,
                & Das, S. ``Trade-off between Fuel Economy and Cost for Advanced
                Vehicle Configurations,'' 20th International Electric Vehicle
                Symposium (EVS20), Monaco (April 2005); Elgowainy, A., Burnham, A.,
                Wang, M., Molburg, J., & Rousseau, A. ``Well-To-Wheels Energy Use
                and Greenhouse Gas Emissions of Plug-in Hybrid Electric Vehicles,''
                SAE 2009-01-1309, SAE World Congress, Detroit, April 2009.
                ---------------------------------------------------------------------------
                 Autonomie has also been used to provide the U.S. government with
                data to make decisions about future research, and is used by DOE for
                analysis supporting budget priorities and plans for programs managed by
                its Vehicle Technologies Office (VTO), and to support decision making
                among competing vehicle technology research and development
                projects.\430\ In addition, Autonomie is the primary vehicle simulation
                tool used by DOE to support its U.S. DRIVE program, a government-
                industry partnership focused on advanced automotive and related energy
                infrastructure technology research and development.\431\
                ---------------------------------------------------------------------------
                 \430\ U.S. DOE Benefits & Scenario Analysis publications is
                available at https://www.autonomie.net/publications/fuel_economy_report.html (last accessed September 11, 2019).
                 \431\ For more information on U.S. Drive, see https://www.energy.gov/eere/vehicles/us-drive.
                ---------------------------------------------------------------------------
                 Autonomie is a MathWorks-based software environment and framework
                for automotive control-system design, simulation, and analysis.\432\ It
                is designed for rapid and easy integration of models with varying
                levels of detail (low to high fidelity), abstraction (from subsystems
                to systems and entire architectures), and processes (e.g., calibration,
                validation). By building models automatically, Autonomie allows the
                quick simulation of many component technologies and powertrain
                configurations, and, in this case, to assess the energy consumption of
                advanced powertrain technologies. Autonomie simulates subsystems,
                [[Page 24320]]
                systems, or entire vehicles; evaluates and analyzes fuel efficiency and
                performance; performs analyses and tests for virtual calibration,
                verification, and validation of hardware models and algorithms;
                supports system hardware and software requirements; links to
                optimization algorithms; and supplies libraries of models for
                propulsion architectures of conventional powertrains as well as hybrid
                and electric vehicles.
                ---------------------------------------------------------------------------
                 \432\ Halbach, S. Sharer, P. Pagerit, P., Folkerts, C. &
                Rousseau, A. ``Model Architecture, Methods, and Interfaces for
                Efficient Math-Based design and Simulation of Automotive Control
                Systems,'' SAE 2010-01-0241, SAE World Congress, Detroit, April,
                2010.
                ---------------------------------------------------------------------------
                 With hundreds of pre-defined powertrain configurations along with
                vehicle level control strategies developed from dynamometer test data,
                Autonomie is a highly capable tool for analyzing advantages and
                drawbacks of applying different technology options within each
                technology family, including conventional, parallel hybrid, power-split
                hybrid electric vehicles (HEVs), plug-in hybrid electric vehicles
                (PHEVs), battery electric vehicles (BEV) and fuel cell vehicles (FCVs).
                Autonomie also allows users to evaluate the effect of component sizing
                on fuel consumption for different powertrain technologies as well as to
                define component requirements (e.g., power, energy) to maximize fuel
                displacement for a specific application.\433\ To evaluate properly any
                powertrain-configuration or component-sizing influence, vehicle-level
                control models are critical, especially for electric drive vehicles
                like hybrids and plug-in hybrids. Argonne has extensive expertise in
                developing vehicle-level control models based on different approaches,
                from global optimization to instantaneous optimization, rule-based
                optimization, and heuristic optimization.\434\
                ---------------------------------------------------------------------------
                 \433\ Nelson, P., Amine, K., Rousseau, A., & Yomoto, H. (EnerDel
                Corp.), ``Advanced Lithium-ion Batteries for Plug-in Hybrid-electric
                Vehicles,'' 23rd International Electric Vehicle Symposium (EVS23),
                Anaheim, CA, (Dec. 2007); Karbowski, D., Haliburton, C., & Rousseau,
                A. ``Impact of Component Size on Plug-in Hybrid Vehicles Energy
                Consumption using Global Optimization,'' 23rd International Electric
                Vehicle Symposium (EVS23), Anaheim, CA, (Dec. 2007).
                 \434\ Karbowski, D., Kwon, J., Kim, N., & Rousseau, A.,
                ``Instantaneously Optimized Controller for a Multimode Hybrid
                Electric Vehicle,'' SAE paper 2010-01-0816, SAE World Congress,
                Detroit, April 2010; Sharer, P., Rousseau, A., Karbowski, D., &
                Pagerit, S. ``Plug-in Hybrid Electric Vehicle Control Strategy--
                Comparison between EV and Charge-Depleting Options,'' SAE paper
                2008-01-0460, SAE World Congress, Detroit (April 2008); and
                Rousseau, A., Shidore, N., Carlson, R., & Karbowski, D. ``Impact of
                Battery Characteristics on PHEV Fuel Economy,'' AABC08.
                ---------------------------------------------------------------------------
                 Autonomie has been developed to consider real-world vehicle metrics
                like performance, hardware limitations, utility, and drivability
                metrics (e.g., towing capability, shift busyness, frequency of engine
                on/off transitions), which are important to producing realistic
                estimates of fuel economy and CO2 emission rates. This
                increasing realism has, in turn, steadily increased confidence in the
                appropriateness of using Autonomie to make significant investment
                decisions. Autonomie has also been validated for a number of powertrain
                configurations and vehicle classes using Argonne's Advanced Mobility
                Technology Laboratory (AMTL) (formerly Advanced Powertrain Research
                Facility, or APRF) vehicle test data.\435\
                ---------------------------------------------------------------------------
                 \435\ Jeong, J., Kim, N., Stutenberg, K., Rousseau, A.,
                ``Analysis and Model Validation of the Toyota Prius Prime.'' SAE
                2019-01-0369, SAE World Congress, Detroit, April 2019; Kim, N,
                Jeong, J. Rousseau, A. & Lohse-Busch, H. ``Control Analysis and
                Thermal Model Development of PHEV,'' SAE 2015-01-1157, SAE World
                Congress, Detroit, April 2015; Kim, N., Rousseau, A. & Lohse-Busch,
                H. ``Advanced Automatic Transmission Model Validation Using
                Dynamometer Test Data,'' SAE 2014-01-1778, SAE World Congress,
                Detroit, Apr. 14; Lee, D. Rousseau, A. & Rask, E. ``Development and
                Validation of the Ford Focus BEV Vehicle Model,'' 2014-01-1809, SAE
                World Congress, Detroit, Apr. 14; Kim, N., Kim, N., Rousseau, A., &
                Duoba, M. ``Validating Volt PHEV Model with Dynamometer Test Data
                using Autonomie,'' SAE 2013-01-1458, SAE World Congress, Detroit,
                Apr. 13; Kim, N., Rousseau, A., & Rask, E. ``Autonomie Model
                Validation with Test Data for 2010 Toyota Prius,'' SAE 2012-01-1040,
                SAE World Congress, Detroit, Apr. 12; Karbowski, D., Rousseau, A,
                Pagerit, S., & Sharer, P. ``Plug-in Vehicle Control Strategy--From
                Global Optimization to Real Time Application,'' 22th International
                Electric Vehicle Symposium (EVS22), Yokohama, (October 2006).
                ---------------------------------------------------------------------------
                 Argonne has spent several years developing, applying, and expanding
                the means to use distributed computing to exercise its Autonomie full-
                vehicle simulation tool over the scale necessary for realistic analysis
                to provide data for CAFE and CO2 standards rulemaking. The
                NPRM and PRIA detailed how Argonne used Autonomie to estimate the fuel
                economy impacts for roughly a million combinations of technologies and
                vehicle types.436 437 Argonne developed input parameters for
                Autonomie to represent every combination of vehicle, powertrain, and
                component technologies considered in this rulemaking. The sequential
                addition of more than 50 fuel economy-improving technologies to ten
                vehicle types generated more than 140,000 unique technology and vehicle
                combinations. Running the Autonomie powertrain sizing algorithms to
                determine the appropriate amount of engine downsizing needed to
                maintain overall vehicle performance when vehicle mass reduction is
                applied and for certain engine technology changes (discussed further,
                below) increased the total number of simulations to more than one
                million. The result of these simulations is a useful dataset
                identifying the impacts of combinations of vehicle technologies on
                energy consumption--a dataset that can be referenced as an input to the
                CAFE model for assessing regulatory compliance alternatives.
                ---------------------------------------------------------------------------
                 \436\ As part of the Argonne simulation effort, individual
                technology combinations simulated in Autonomie were paired with
                Argonne's BatPAC model to estimate the battery cost associated with
                each technology combination based on characteristics of the
                simulated vehicle and its level of electrification. Information
                regarding Argonne's BatPAC model is available at http://www.cse.anl.gov/batpac/.
                 \437\ Additionally, the impact of engine technologies on fuel
                consumption, torque, and other metrics was characterized using GT
                POWER simulation modeling in combination with other engine modeling
                that was conducted by IAV Automotive Engineering, Inc. (IAV). The
                engine characterization ``maps'' resulting from this analysis were
                used as inputs for the Autonomie full-vehicle simulation modeling.
                Information regarding GT Power is available at https://www.gtisoft.com/gt-suite-applications/propulsion-systems/gt-power-engine-simulation-software.
                ---------------------------------------------------------------------------
                 The following sections discuss the full-vehicle modeling and
                simulation inputs and data assumptions, and comments received on the
                NPRM analysis. The discussion is necessarily technical, but also
                important to understand the agencies' decisions to modify (or not) the
                Autonomie analysis for the final rule.
                (1) Full-Vehicle Modeling, Simulation Inputs and Data Assumptions
                 The agencies provided extensive documentation that quantitatively
                and qualitatively described the over 50 technologies considered as
                inputs to the Autonomie modeling.438 439 These inputs
                consisted of engine technologies, transmission technologies, powertrain
                electrification, light-weighting, aerodynamic improvements, and tire
                rolling resistance improvements.\440\ The PRIA provided an overview of
                the sub-models for each technology, including the internal combustion
                engine model, automatic transmission model, and others.\441\ The
                Argonne NPRM model documentation expanded on these sub-models in detail
                to show the interaction of each sub-model input and output.\442\
                [[Page 24321]]
                For example, as shown in Figure VI-2, the input for Autonomie's driver
                model (i.e., the model used to approximate the driving behavior of a
                real driver) is vehicle speed, and outputs are accelerator pedal, brake
                pedal, and torque demand.
                ---------------------------------------------------------------------------
                 \438\ NHTSA-2018-0067-12299. Preliminary Regulatory Impact
                Analysis (July 2018).
                 \439\ NHTSA-2018-0067-0007. Islam, E., S, Moawad, A., Kim, N,
                Rousseau, A. ``A Detailed Vehicle Simulation Process To Support CAFE
                Standards 04262018--Report'' ANL Autonomie Documentation. Aug 21,
                2018. NHTSA-2018-0067-0004. ANL Autonomie Data Dictionary. Aug 21,
                2018. NHTSA-2018-0067-0003. ANL Autonomie Summary of Main Component
                Assumptions. Aug 21, 2018. NHTSA-2018-0067-0005. ANL Autonomie Model
                Assumptions Summary. Aug 21, 2018. NHTSA-2018-0067-1692. ANL BatPac
                Model 12 55. Aug 21, 2018.
                 \440\ SAFE Rule for MY2021-2026 PRIA Chapter 6.2.3 Technology
                groups in Autonomie simulations and CAFE model.
                 \441\ PRIA at 189.
                 \442\ NHTSA-2018-0067-0007. Islam, E., S, Moawad, A., Kim, N,
                Rousseau, A. ``A Detailed Vehicle Simulation Process To Support CAFE
                Standards 04262018--Report'' ANL Autonomie Documentation. Aug 21,
                2018.
                [GRAPHIC] [TIFF OMITTED] TR30AP20.109
                 Effectiveness inputs for the NPRM and the final rule analysis were
                specifically developed to consider many real world and compliance test
                cycle constraints, to the extent a computer model could capture them.
                Examples include the advanced engine knock model discussed below, in
                addition to other constraints like allowing cylinder deactivation to
                occur in ways that would not negatively impact noise-vibration-
                harshness (NVH), and similarly optimizing the number of engine on/off
                events (e.g., from start/stop 12V micro hybrid systems) to balance
                between effectiveness and NVH.
                 One major input used in the effectiveness modeling that the
                agencies provided key specifications for in the PRIA are engine fuel
                maps that define how an engine equipped with specific technologies
                operates over a variety of engine load (torque) and engine speed
                conditions. The engine maps used as inputs to the Autonomie modeling
                portion of the analysis were developed by starting with a base map and
                then modifying that base map, incrementally, to model the addition of
                engine technologies. These engine maps, developed using the GT-Power
                modeling tool by IAV, were based off real-world engine designs.
                Simulated operation of these engines included the application of an IAV
                knock model, also developed from real-world engine
                data.443 444 Using this process, which incorporated real-
                world data, ensured that real-world constraints were considered for
                each vehicle type. Although the same type of engine map is used for all
                technology classes, the effectiveness varies based on the
                characteristics of each vehicle type. For example, a compact car with a
                turbocharged engine will have different fuel economy and performance
                values than a pickup truck with the same engine technology type. The
                engine map specifications are discussed further in Section VI.C.1 of
                this preamble and Section VI of FRIA.
                ---------------------------------------------------------------------------
                 \443\ Engine knock in spark ignition engines occurs when
                combustion of some of the air/fuel mixture in the cylinder does not
                result from propagation of the flame front ignited by the spark
                plug, but one or more pockets of air/fuel mixture explodes outside
                of the envelope of the normal combustion front.
                 \444\ See IAV material submitted to the docket; IAV_20190430_Eng
                22-26 Updated_Docket.pdf,
                IAV_Engine_tech_study_Sept_2016_Docket.pdf, IAV_Study for 4 Cylinder
                Gas Engines_Docket.pdf.
                ---------------------------------------------------------------------------
                 The agencies also provided key details about input assumptions for
                various vehicle specifications like transmission gear ratios, tire
                size, final drive ratios, and individual component weights.\445\ Each
                of these assumptions, to some extent, varied between the ten technology
                classes to capture appropriately real-world vehicle specifications like
                wheel mass or fuel tank mass. These specific input assumptions were
                developed based on the latest test data and current market fleet
                information.\446\ The agencies relied on default assumptions developed
                by the Autonomie team, based on test data and technical publication
                review, for other model inputs required by Autonomie, such as throttle
                time response and shifting strategies for different transmission
                technologies. The Autonomie modeling tool did not simulate vehicle
                attributes determined to have minimal impacts, like whether a vehicle
                had a sun roof or hood scoops, as those attributes would have trivial
                impact in the overall analysis.
                ---------------------------------------------------------------------------
                 \445\ ANL Autonomie Model Assumptions Summary. Aug 21, 2018,
                NHTSA-2018-0067-0005. ANL--Summary of Main Component Performance and
                Assumptions NPRM. Aug 21, 2018, NHTSA-2018-0067-0003.
                 \446\ See further details in Section VI.B.1 Analysis Fleet.
                ---------------------------------------------------------------------------
                 Because the agencies model ten different vehicle types to represent
                the 2,952 vehicles in the baseline fleet, improper assumptions about an
                advanced technology could lead to errors in estimating effectiveness.
                Autonomie is a sophisticated full-vehicle modeling tool that requires
                extensive technology characteristics based on both physical and
                intangible data, like proprietary software. With a few technologies,
                the agencies did not have publicly available data, but had received
                confidential business information confirming such technologies
                potential availability in the market during the rulemaking time frame.
                For such technologies, including advanced cylinder deactivation, the
                agencies adopted a method in the CAFE model to represent the
                effectiveness of the technology, and did not explicitly simulate the
                technologies in the Autonomie model. For this limited set of
                technologies, the agencies determined that effectiveness could
                reasonably be represented as a fixed value.\447\ Effectiveness values
                for technologies not explicitly simulated in Autonomie are discussed
                further in the individual technology sections of this preamble.
                ---------------------------------------------------------------------------
                 \447\ For final rule, 9 out of 50 plus technologies use fixed
                offset effectiveness values. The total effectiveness of these
                technologies cannot be captured on the 2-cycle test or, like ADEAC,
                they are a new technology where robust data that could be used as an
                input to the technology effectiveness modeling does not yet exist.
                Specifically, these nine technologies are LDB, SAX, EPS, IACC, EFR,
                ADEAC, DSLI, DSLIAD and TURBOAD.
                ---------------------------------------------------------------------------
                 The agencies sought comments on all effectiveness inputs and input
                assumptions, including the specific data used to characterize the
                technologies,
                [[Page 24322]]
                such as data to build the technology input, data representing operating
                range of technologies, and data for variation among technology inputs.
                The agencies also sought comment on the effectiveness values used for
                technologies not explicitly defined in Autonomie.
                 Meszler Engineering Services, commenting on behalf of the Natural
                Resources Defense Council, and ICCT questioned the accuracy of the
                effectiveness estimates in the Argonne database, and as an example
                Meszler analyzed the fuel economy impacts of a 10-speed automatic
                transmission relative to a baseline 8-speed automatic transmission,
                concluding that the widely ranging effectiveness estimates were
                unexpected. ICCT questioned the accuracy of the IAV engine maps that
                serve as an input to the Autonomie effectiveness modeling, and asked
                whether those could ``reasonably stand as a foundation for automotive
                developments and technology combinations'' discussed elsewhere in their
                comments. ICCT also questioned whether Autonomie realistically and
                validly modeled synergies between technologies, using the effectiveness
                values from CEGR and transmissions as an example. Meszler stated that
                the agencies have an obligation to validate the Autonomie estimates
                before using them to support the NPRM or any other rulemaking. The
                agencies also received comments on the specific effectiveness estimates
                generated by Autonomie; however, those comments will be discussed in
                each individual technology section, below.
                 Despite these criticisms, Meszler stated that the critiques of the
                Autonomie technology database were not meant to imply that the
                Autonomie vehicle simulation model used to develop the database was
                fundamentally flawed, or that the model could not be used to derive
                accurate fuel economy impact estimates. Meszler noted that, as with any
                model, estimates derived with Autonomie are only valid for a given set
                of modeling parameters and if those parameters are well defined, the
                estimates should be accurate and reliable. Conversely, if those
                parameters are not well defined, the estimates would be inaccurate and
                unreliable. Meszler stated that the agencies must make the full set of
                modeling assumptions used for the Autonomie database available for
                review and comment.
                 We agree with Meszler that, in general, when inputs to a model are
                inaccurate, output effectiveness results may be too high or too low.
                The technology effectiveness estimates from modeling results often vary
                with the type of vehicle and the other technologies that are on that
                vehicle.\448\ The Autonomie output database consists of permutations of
                over 50 technologies for each of the ten technology classes simulated
                by the CAFE model. A wide range of effectiveness is expected when going
                from a baseline technology to an advanced technology across different
                technology classes because there are significant differences in how
                much power is required from the powertrain during 2-cycle testing
                across the ten vehicle types. This impacts powertrain operating
                conditions (e.g., engine speed and load) during 2-cycle testing. Fuel
                economy improving technologies have different effectiveness at each of
                those operating conditions so vehicles that have higher average power
                demands will have different effectiveness than vehicles with lower
                average power demands. Further, the differences in effectiveness at
                higher power and lower power vary by technology so the overall
                relationship is complex. Large-scale full-vehicle modeling and
                simulation account for these interactions and complexities.
                ---------------------------------------------------------------------------
                 \448\ The PRIA Chapter 6.2.2.1, Table 6-2 and Table 6-3 defined
                the characteristics of the reference technology classes that
                representative of the analysis fleet.
                ---------------------------------------------------------------------------
                 Before conducting any full-vehicle modeling and simulation, the
                agencies spent a considerable amount of time and effort developing the
                specific inputs used for the Autonomie analysis. The agencies believe
                that these technology inputs provide reasonable estimates for the
                light-duty vehicle technologies the agencies expect to be available in
                the market in the rulemaking timeframe. As discussed earlier, these
                inputs vary in effectiveness due to how different vehicles, like
                compact cars and pickup trucks, operate on the 2-cycle test and in the
                real world. Some technologies, such as 10-speed automatic transmissions
                (AT10) relative to 8-speed automatic transmissions (AT8), can and
                should have different effectiveness results in the analysis between two
                different technology classes.\449\ These unique synergistic effects can
                only be taken into account through conducting full-vehicle modeling and
                simulation, which the agencies did here.
                ---------------------------------------------------------------------------
                 \449\ Separately, the agencies modified specific transmission
                modeling parameters for the final rule after additional review,
                including a thorough review of public comments, and this review is
                discussed in detail in Section VI.C.2.
                ---------------------------------------------------------------------------
                 With regards to Meszler's comment that the agencies have an
                obligation to validate the Autonomie estimates before using them to
                support the NPRM or any other rulemaking, the agencies would like to
                point Meszler to the description of the Argonne Autonomie team's robust
                process for vehicle model validation that was contained in the
                PRIA.\450\ To summarize, the NPRM and final rule analysis leveraged
                extensive vehicle test data collected by Argonne National
                Laboratory.\451\ Over the past 20 years, the Argonne team has developed
                specific instrumentation lists and test procedures for collecting
                sufficient information to develop and validate full vehicle models. In
                addition, the agencies described the Argonne team's efforts to validate
                specific component models as well, such as the advanced automatic
                transmission and dual clutch transmission models.\452\
                ---------------------------------------------------------------------------
                 \450\ PRIA at 216-7. See also N. Kim, A. Rousseau, E. Rask,
                ``Autonomie Model Validation with Test Data for 2010 Toyota Prius,''
                SAE 2012-01-1040, SAE World Congress, Detroit, Apr12. https://www.autonomie.net/docs/5%20-%20Presentations/Validation/SAE%202012-01-1040.pdf; Vehicle Validation Status, February 2010 https://www.autonomie.net/docs/5%20-%20Presentations/Validation/vehicle_validation_status.pdf; Tahoe HEV Model Development in PSAT,
                SAE paper 2009-01-1307, April 2009 https://www.autonomie.net/docs/5%20-%20Presentations/Validation/tahoe_hev.pdf; PHEV Model
                Validation, U.S.DOE Merit Review 2008 https://www.autonomie.net/docs/5%20-%20Presentations/Validation/phev_model_validation.pdf ;
                PHEV HyMotion Prius model validation and control improvements, 23rd
                International Electric Vehicle Symposium (EVS23), Dec. 2007 https://www.autonomie.net/docs/5%20-%20Presentations/Validation/phev_hymotion_prius.pdf; Integrating Data, Performing Quality
                Assurance, and Validating the Vehicle Model for the 2004 Prius Using
                PSAT, SAE paper 2006-01-0667, April 2006; https://www.autonomie.net/docs/5%20-%20Presentations/Validation/integrating_data.pdf.
                 \451\ A list of the vehicles that have been tested at the APRF
                can be found under http://www.anl.gov/energy-systems/group/downloadable-dynamometer-database.
                 \452\ Kim, N., Rousseau, N., Lohse-Bush, H. ``Advanced Automatic
                Transmission Model Validation Using Dynamometer Test Data,'' SAE
                2014-01-1778, SAE World Congress, Detroit, April 2014; Kim, N.,
                Lohse-Bush, H., Rousseau, A. ``Development of a model of the dual
                clutch transmission in Autonomie and validation with dynamometer
                test data,'' International Journal of Automotive Technologies, March
                2014, Volume 15, Issue 2, pp 263-71.
                ---------------------------------------------------------------------------
                 The agencies also described the process for validating inputs used
                to develop the IAV engine maps,453 454 another input to the
                Autonomie simulations. As discussed in the PRIA, IAV's engine model
                development relied on a collection of sub-models that controlled
                independent combustion characteristics such as heat release, combustion
                knock, friction, heat flow, and other combustion optimization tools.
                These sub-models and other
                [[Page 24323]]
                computational fluid dynamics models were utilized to convert test data
                for use in the IAV engine map development. Specific combustion
                parameters, like from test data for the coefficient of variation for
                the indicated mean effective pressure (COV of IMEP), which is a common
                variable for combustion stability in a spark ignited engine, was used
                to assure final engine models were reasonable. The assumptions and
                inputs used in the modeling and validation of engine model results
                leveraged IAV's global engine database, which included benchmarking
                data, engine test data, single cylinder test data and prior modeling
                studies, and also technical publications and information presented at
                conferences. The agencies referenced in the PRIA that engine maps were
                validated with engine dynamometer test data to the maximum extent
                possible.\455\ Because the NPRM and the final rule analysis considered
                some technologies not yet in production, the agencies relied on
                technical publications and engine modeling by IAV to develop and
                corroborate inputs and input assumptions where engine dynamometer test
                data was not available.
                ---------------------------------------------------------------------------
                 \453\ See PRIA at 251.
                 \454\ See IAV material submitted to the docket; IAV_20190430_Eng
                22-26 Updated_Docket.pdf,
                IAV_Engine_tech_study_Sept_2016_Docket.pdf, IAV_Study for 4 Cylinder
                Gas Engines_Docket.pdf.
                 \455\ See PRIA at 288.
                ---------------------------------------------------------------------------
                 In addition, as described earlier in this section, the full set of
                NPRM modeling assumptions used for the Autonomie database were
                available for review and comment in the docket for this
                rulemaking.\456\ The full set of modeling assumptions used for the
                final rule are also available in the docket.\457\
                ---------------------------------------------------------------------------
                 \456\ NHTSA-2018-0067-0007. Islam, E., S, Moawad, A., Kim, N,
                Rousseau, A., ``A Detailed Vehicle Simulation Process To Support
                CAFE Standards 04262018--Report'' ANL Autonomie Documentation. Aug
                21, 2018. NHTSA-2018-0067-0004. ANL Autonomie Data Dictionary. Aug
                21, 2018. NHTSA-2018-0067-0003. ANL Autonomie Summary of Main
                Component Assumptions. Aug 21, 2018. NHTSA-2018-0067-0005. ANL
                Autonomie Model Assumptions Summary. Aug 21, 2018. NHTSA-2018-0067-
                1692. ANL BatPac Model 12 55. Aug 21, 2018. Preliminary Regulatory
                Impact Analysis (July 2018). Posted July 2018 and updated August 23
                and October 16, 2018.
                 \457\ The CAFE Model is available at https://www.nhtsa.gov/corporate-average-fuel-economy/compliance-and-effects-modeling-system with documentation and all inputs and outputs supporting
                today's notice.
                ---------------------------------------------------------------------------
                 Both ICCT and Meszler also commented on the availability of
                technologies within the Autonomie database, with Meszler stating that
                with limited exceptions, technologies were not included in the NPRM
                CAFE model if they were not included in the simulation modeling that
                underlay the Argonne database, and accordingly if a combination of
                technologies was not modeled during the development of the Argonne
                database, that package (or combination) of technologies was not
                available for adoption in the CAFE model. Meszler stated that these
                constraints limited the slate of technologies available to respond to
                fuel economy standards, and independently expanding the model to
                include additional technologies or technology combinations is not
                trivial.
                 ICCT gave specific examples of key efficiency technologies that it
                stated Autonomie did not include, like advanced DEAC, VCR, Miller
                Cycle, e-boost, and HCCI. ICCT argued that this was especially
                problematic as the agencies appeared to have available engine maps from
                IAV on advanced DEAC, VCR, Miller Cycle, E-boost (and from advanced
                DEAC, VCR, Miller Cycle, E-boost, HCCI from EPA) that Argonne or the
                agencies have been unable to or opted not to include in their modeling.
                ICCT stated that the agencies must disclose how Autonomie had been
                updated to incorporate ``cutting edge'' 2020-2025 automotive
                technologies to ensure they reflect available improvements.\458\
                ---------------------------------------------------------------------------
                 \458\ ICCT also made the same request of EPA's ALPHA model, and
                the agencies' response to that comment is discussed in Section
                VI.C.1 Engine Paths, below.
                ---------------------------------------------------------------------------
                 The agencies have updated the final rule analysis to include
                additional technologies. In the NPRM, the agencies presented the engine
                maps for all of the technologies that ICCT listed, except HCCI, and
                sought comment on the engine maps, technical assumptions and the
                potential use of the technologies for the final rule analysis. Based on
                the available technical information and the ICCT and Meszler comments,
                for the final rule analysis, VCR, Miller Cycle (VTG), and e-boost (VTGe
                with 48V BISG) technologies have been added and included in the
                Autonomie modeling and simulations, and advanced DEAC technology has
                been added using fixed point effectiveness estimates in the CAFE model
                analysis. The agencies disagree with ICCT's assessment of HCCI and do
                not believe it will be available for wide-scale application in the
                rulemaking timeframe, and therefore have not included it as a
                technology. HCCI technology has been in the research phase for several
                decades, and the only production applications to date use a highly-
                limited version that restricts HCCI combustion to a very narrow range
                of engine operating conditions.459 460 461 Additional
                discussion of how Autonomie-modeled and non-modeled technologies are
                incorporated into the CAFE Model is located in Section VI.B.3.c),
                below.
                ---------------------------------------------------------------------------
                 \459\ Mazda introduced Skyactiv-X in Europe with a mild hybrid
                technology to assist the engine.
                 \460\ Mazda News. ``Revolutionary Mazda Skyactiv-X engine
                details confirmed as sales start,'' May 6, 2019. https://www.mazda-press.com/eu/news/2019/revolutionary-mazda-skyactiv-x-engine-details-confirmed-as-sales-start/. Last accessed Dec. 2, 2019.
                 \461\ Confer. K. Kirwan, J. ``Ultra Efficient Light-Duty
                Powertrain with Gasoline Low-Temperature Combustion.'' DOE Merit
                Review. June 9, 2017. https://www.energy.gov/sites/prod/files/2017/06/f34/acs094_confer_2017_o.pdf. Last accessed Dec. 2, 2019.
                ---------------------------------------------------------------------------
                 ICCT and Meszler also commented that the agencies overly limited
                the availability of several technologies in the NPRM analysis. In
                response, the agencies reconsidered the restrictions that were applied
                in the NPRM analysis, and agree with the commenters for several
                technologies and technology classes. Many technologies identified by
                the commenters are now in production for the MY2017 as well as MY2018
                and MY2019. The agencies also think that the baseline fleet compliance
                data reflects adoption of many of these technologies. For the final
                rule analysis, the agencies have expanded the availability of several
                technologies. In the CAFE model, the agencies are now allowing parallel
                hybrids (SHEVP2) to be adopted with high compression Atkinson mode
                engines (HCR0 and HCR1). In addition, as mentioned above, the Autonomie
                full-vehicle modeling included Variable Compression Ratio engine (VCR),
                Miller Cycle Engine (VTG), E-boost (VTGe) technologies, and cylinder
                deactivation technologies (DEAC) to be applied to turbocharged engines
                (TURBO1). As these changes relate to the technology effectiveness
                modeling, the CAFE model analysis now includes effectiveness estimates
                based on full vehicle simulations for all of these technology
                combinations.
                 We disagree with comments stating the agencies should allow every
                technology to be available to every vehicle class.\462\ Discussed
                earlier in this section, Autonomie models key aspects of vehicle
                operation that are most relevant to assessing fuel economy, vehicle
                performance and certain aspects of drivability (like EPA 2-cycle tests,
                EPA US06 cycle tests, gradability, low speed acceleration time from 0-
                to-60 mph, passing acceleration time from 50 to 80 mph, and number of
                transmission shifts). However, there are other critical aspects of
                vehicle functionality and operation that the agencies considered beyond
                those criteria, that cannot necessarily be reflected in the Autonomie
                modeling. For example, a pickup truck can be modeled with a
                [[Page 24324]]
                continuously variable transmission (CVT) and show improvements on the
                2-cycle tests. However, pickup trucks are designed to provide high load
                towing utility.\463\ CVTs lack the torque levels needed to provide that
                towing utility, and would fail mechanically if subject to high load
                towing.\464\ The agencies provided discussions of some of these
                technical considerations in the PRIA, and explained why the agencies
                had limited technologies for certain vehicle classes, such as limiting
                CVTs on pickups as in the example above. These and other limitations
                are discussed further in the individual technology sections.
                ---------------------------------------------------------------------------
                 \462\ NHTSA-2018-0067-11723. NRDC Attachment2 at p. 4.
                 \463\ SAE J2807. ``Performance Requirements for Determining Tow-
                Vehicle Gross Combination Weight Rating and Trailer Weight Rating.''
                Feb. 4, 2016.
                 \464\ PRIA at p. 223 and 340.
                ---------------------------------------------------------------------------
                 The agencies also received a variety of comments that conflated
                aspects of the Autonomie models with technology inputs and input
                assumptions. For example, commenters expressed concern about the
                transmission gear set and final drive values used for the NPRM
                analysis, or more specifically, that the gear ratios were held constant
                across applications.\465\ In this case, both the inputs (gear set and
                final drive ratio) and input assumption (ratios held constant) were
                discussed by the commenters. Because these comments are actually about
                technology inputs to the Autonomie model, for these and similar cases,
                the agencies are addressing the comments in the individual technology
                sections which discuss the technology inputs and input assumptions that
                impact the effectiveness values for those technologies.
                ---------------------------------------------------------------------------
                 \465\ NHTSA-2018-0067-11873. Comments from Roush Industries,
                Attachment 1, at p. 14-15. NHTSA-2018-0067-11873. Comments from
                CARB, at p.110.
                ---------------------------------------------------------------------------
                 For the NPRM analysis, the agencies prioritized using inputs that
                were based on data for identifiable technology configurations and that
                reflected practical real world constraints. The agencies provided
                detailed information on the NPRM analysis inputs and input assumptions
                in the NPRM Preamble, PRIA and Argonne model documentation for engine
                technologies, transmission technologies, powertrain electrification,
                light-weighting, aerodynamic improvements, tire rolling resistance
                improvements, and other vehicle technologies. Comments and the
                agencies' assessment of comments for each technology are discussed in
                the individual technology sections below. Through careful consideration
                of the comments, the agencies have updated analytical inputs associated
                with several technologies, and as discussed above, have included
                several advanced technologies for which technical information was
                included in the NPRM. However, for most technologies, the agencies have
                determined that the technology inputs and input assumptions that were
                used in the NPRM analysis remain reasonable and the best available for
                the final rule analysis.
                (2) How The Agencies Defined Different Vehicle Types in Autonomie
                 As described in the NPRM, Argonne produced full-vehicle models and
                ran simulations for many combinations of technologies, on many types of
                vehicles, but it did not simulate literally every single vehicle model/
                configuration in the analysis fleet because it would be impractical to
                assemble the requisite detailed information--much of which would likely
                only be provided on a confidential basis--specific to each vehicle
                model/configuration and because the scale of the simulation effort
                would correspondingly increase by orders of magnitude. Instead, Argonne
                simulated 10 different vehicle types, corresponding to the five
                ``technology classes'' generally used in CAFE analysis over the past
                several rulemakings, each with two performance levels and corresponding
                vehicle technical specifications (e.g., small car, small performance
                car, pickup truck, performance pickup truck, etc.).
                 Technology classes are a means of specifying common technology
                input assumptions for vehicles that share similar characteristics.
                Because each vehicle technology class has unique characteristics, the
                effectiveness of technologies and combinations of technologies is
                different for each technology class. Conducting Autonomie simulations
                uniquely for each technology class provides a specific set of
                simulations and effectiveness data for each technology class. Like the
                Draft TAR analysis, there are separate technology classes for compact
                cars, midsize cars, small SUVs, large SUVs, and pickup trucks. However,
                new for the NPRM analysis and carried into this final rule analysis,
                each of those vehicle types has been split into ``low'' (or
                ``standard'') performance and a ``high'' performance versions, which
                represent two classes with similar body styles but different levels of
                performance attributes (for a total of 10 technology classes). The
                separate technology classes for high performance and low performance
                vehicles better account for performance diversity across the fleet.
                 NHTSA directed Argonne to develop a vehicle assumptions database to
                capture vehicle attributes that would comprise the full vehicle models.
                For each vehicle technology class, representative vehicle attributes
                and characteristics were identified from publicly available information
                and automotive benchmarking databases like A2Mac1,\466\ Argonne's
                Downloadable Dynamometer Database (D\3\),\467\ and EPA compliance and
                fuel economy data,\468\ EPA's guidance on the cold start penalty on 2-
                cycle tests.\469\ The resulting vehicle assumptions database consists
                of over 100 different attributes like vehicle frontal area, drag
                coefficient, fuel tank weight, transmission housing weight,
                transmission clutch weight, hybrid vehicle component weights, and
                weights for components that comprise engines and electric machines,
                tire rolling resistance, transmission gear ratios and final drive
                ratio. Each of the 10 different vehicle types was assigned a set of
                these baseline attributes and characteristics, to which combinations of
                fuel-saving technologies were added as inputs for the Autonomie
                simulations. For example, the characteristics of the MY 2016 Honda Fit
                were considered along with a wide range of other compact cars to
                identify representative characteristics for the Autonomie simulations
                for the base compact car technology class. The simulations determined
                the fuel economy achieved when applying each combination of
                technologies to that vehicle type, given its baseline characteristics.
                ---------------------------------------------------------------------------
                 \466\ A2Mac1: Automotive Benchmarking. (Proprietary data).
                Retrieved from https://a2mac1.com.
                 \467\ Downloadable Dynamometer Database (D\3\). ANL Energy
                Systems Division. https://www.anl.gov/es/downloadable-dynamometer-database. Last accessed Oct. 31, 2019.
                 \468\ Data on Cars used for Testing Fuel Economy. EPA Compliance
                and Fuel Economy Data. https://www.epa.gov/compliance-and-fuel-economy-data/data-cars-used-testing-fuel-economy. Last accessed Oct.
                31, 2019.
                 \469\ EPA PD TSD at p.2-265--2-266.
                ---------------------------------------------------------------------------
                 For each vehicle technology class and for each vehicle attribute,
                Argonne estimated the attribute value using statistical distribution
                analysis of publicly available data and data obtained from the A2Mac1
                benchmarking database.\470\ Some
                [[Page 24325]]
                vehicle attributes were also based on test data and vehicle
                benchmarking, like the cold-start penalty for the FTP test cycle and
                vehicle electrical accessories load. The analysis of vehicle attributes
                used in the NPRM was discussed in the Argonne model documentation,\471\
                and values for each vehicle technology class were provided with the
                NPRM for public review.\472\
                ---------------------------------------------------------------------------
                 \470\ A2Mac1 is subscription-based benchmarking service that
                conducts vehicle and component teardown analyses. Annually, A2Mac1
                removes individual components from production vehicles such as oil
                pans, electric machines, engines, transmissions, among the many
                other components. These components are weighed and documented for
                key specifications which is then available to their subscribers.
                 \471\ NHTSA-2018-0067-0007, at 131. Islam, E., S, Moawad, A.,
                Kim, N, Rousseau, A., ``A Detailed Vehicle Simulation Process To
                Support CAFE Standards 04262018--Report'' ANL Autonomie
                Documentation. Aug 21, 2018.
                 \472\ NHTSA-2018-0067-0003. ANL Autonomie Summary of Main
                Component Assumptions. Aug 21, 2018.
                ---------------------------------------------------------------------------
                 The agencies did not believe it was appropriate to assign one
                single engine mass for each vehicle technology class in the NPRM
                analysis. To account for the difference in weight for different engine
                types, Argonne performed a regression analysis of engine peak power
                versus weight, based on attribute data taken from the A2Mac1
                benchmarking database. For example, to account for weight of different
                engine sizes like 4-cylinder versus 8-cylinder, Argonne developed a
                relationship curve between peak power and engine weight based on the
                A2Mac1 benchmarking data. For the NPRM analysis, this relationship was
                used to estimate mass for all engine types regardless of technology
                type (e.g., variable valve lift and direct injection). Secondary weight
                reduction associated with changes in engine technology was applied by
                using this linear relationship between engine power and engine weight
                from the A2Mac1 benchmarking database. When a vehicle in the analysis
                fleet with an 8-cylinder engine adopted a more fuel efficient 6-
                cylinder engine, the total vehicle weight would reflect the updated
                engine weight with two less cylinders based on the peak power versus
                engine weight relationship. The impact of engine mass reduction on
                effectiveness is accounted for directly in the Autonomie simulation
                data through the application of the above relationship. Engine mass
                reduction through downsizing is, therefore, appropriately not included
                as part of vehicle mass reduction technology that is discussed in
                Section VI.C.4 because doing so would result in double counting the
                impacts. As discussed further below, for the final rule the agencies
                improved upon the precision of engine weights by creating two curves to
                separately represent naturally aspirated engine designs and
                turbocharged engine designs.
                 In addition, certain attributes were held at constant levels within
                each technology class to maintain vehicle functionality, performance
                and utility including noise, vibration, and harshness (NVH), safety,
                performance and other utilities important for customer satisfaction.
                For example, in addition to the vehicle performance constraints
                discussed in Section VI.B.3.a)(6), the analysis does not allow the
                frontal area of the vehicle to change, in order to maintain utility
                like ground clearance, head-room space, and cargo space, and a cold-
                start penalty is used to account for fuel economy degradation for
                heater performance and emissions system catalyst light-off.\473\ This
                allows us to capture the discrete improvement in technology
                effectiveness while maintaining vehicle attributes that are important
                vehicle utility, consumer acceptance and compliance with criteria
                emission standards, and considering these constraints similar to how
                manufacturers do in the real world.
                ---------------------------------------------------------------------------
                 \473\ The catalyst light-off is the temperature necessary to
                initiate the catalytic reaction and this energy is generated from
                engine.
                ---------------------------------------------------------------------------
                 The agencies sought comment on the analytical approach used to
                determine vehicle attributes and characteristics for the Autonomie
                modeling. In response, the agencies received a wide variety of comments
                on vehicle attributes ranging from discussions of performance increase
                from technology adoption (e.g., if a vehicle adopting an electrified
                powertrain improved its time to accelerate from 0-60 mph), to comments
                on vehicle attributes not modeled in Autonomie, like heated seats and
                cargo space.
                 Toyota and the Alliance commented that the inclusion of performance
                vehicle classes addressed the market reality that some consumers will
                purchase vehicles for their performance attributes and will accept the
                corresponding reduction in fuel economy. Furthermore, Toyota commented
                that some gain in performance is more realistic, and that ``dedicating
                all powertrain improvements to fuel efficiency is inconsistent with
                market reality.'' Toyota ``supports the agencies' inclusion of
                performance classes in compliance modeling where a subset of certain
                models is defined to have higher performance and a commensurate
                reduction in fuel efficiency.'' \474\ Also, in support of the addition
                of performance vehicle classes, the Alliance commented that ``vehicle
                categories have been increased to 10 to better recognize the range of
                0-60 performance characteristics within each of the 5 previous
                categories, in recognition of the fact that many vehicles in the
                baseline fleet significantly exceeded the previously assumed 0-60
                performance metrics. This provides better resolution of the baseline
                fleet and more accurate estimates of the benefits of technology.''
                \475\
                ---------------------------------------------------------------------------
                 \474\ Toyota, Attachment 1, Docket No. NHTSA-2018-0067-12098, at
                p. 6.
                 \475\ Alliance of Automobile Manufacturers, Attachment ``Full
                Comment Set,'' Docket No. NHTSA-2018-0067-12073, at p.135.
                ---------------------------------------------------------------------------
                 UCS commented that the CAFE model incorporates technology
                improvements to each vehicle by applying the effectiveness improvement
                of the average vehicle in the technology class, leading to discrete
                ``stepped'' effectiveness levels for technologies across the different
                vehicle types. UCS stated that in contrast, the OMEGA model takes into
                account a vehicle's performance characteristics through response-
                surface modeling based on relative deviation from the class average
                modeled in ALPHA.\476\
                ---------------------------------------------------------------------------
                 \476\ NHTSA-2018-0067-12039, at p.24.
                ---------------------------------------------------------------------------
                 Although differences between the ALPHA and Autonomie models are
                discussed in more detail below, for the NPRM vehicle simulation
                analysis the agencies expanded the number of vehicle classes from the
                five classes used in the Draft TAR to ten classes, to represent better
                the diversity of vehicle characteristics across the fleet. Each of
                these ten vehicle technology classes are empirically built from
                benchmarking data and other information from various sources, amounting
                to hundreds of vehicle characteristics data points to develop each
                vehicle class. The agencies expand on these vehicle classes and
                characteristics in Section VI.B.3.(a)(2) Vehicle Types in Autonomie and
                Section VI.B.3.(a)(3) How Vehicle Models are Built in Autonomie and
                Optimized for Simulation. The agencies believe that the real-world data
                used to define vehicle characteristics for each of the ten vehicle
                classes, in addition to the ten vehicle technology classes themselves,
                ensures the analysis reasonably accounts for the diversity in vehicle
                characteristics across the fleet.
                 The agencies believe that UCS's characterization of how technology
                improvements are applied in the analysis is a misleading
                oversimplification. While the analysis approach in the final rule uses
                a representative effectiveness value, the value is not linked solely to
                the vehicle technology class, as the UCS implies. The entire technology
                combination, or technology key, which includes the vehicle technology
                class, is used to
                [[Page 24326]]
                determine the value for the platform being considered. Within each
                vehicle class, the interactions between the added technology and the
                full vehicle system (including other technologies and substantial road
                load characteristics) are considered in the effectiveness values
                calculated for each technology during compliance modeling. As discussed
                under each of the technology pathways sections, the effectiveness for
                most technologies is reported as a range rather than a single value.
                The range exists because the effectiveness for each technology is
                adjusted based on the technologies it is coupled with and the major
                road load characteristics of the full vehicle system. This approach, in
                combination with using the baseline vehicle's initial performance
                values as a starting point for performance improvement, results in a
                widely variable level of improvement for the system, dependent on
                individual vehicle platform characteristics. As a result, the
                application of a response-surface approach would likely result in
                minimal improvement in accuracy for the Autonomie and CAFE model
                analysis approach.
                 For the final rule analysis, the agencies used the same process to
                obtain the vehicle attributes and characteristics for the vehicle
                technology classes. Data was acquired from publicly available sources,
                Argonne D\3\, EPA compliance and fuel economy data, and A2mac1
                benchmarking data. Accordingly, the attributes and characteristics of
                the modeled vehicles reflect actual vehicles that meet customer
                expectations and automakers' capabilities to manufacture the vehicles.
                In addition, for the final rule, the agencies improved the NPRM
                analysis by updating some of the attribute values to account for
                changes in the fleet. For example, the agencies have updated vehicle
                electrical accessory load on the test cycle to reflect higher
                electrical loads associated with contemporary vehicle features.
                (3) How This Rulemaking Builds Vehicle Models for Autonomie and
                Optimize Them for Simulation
                 Before any simulation is initiated in Autonomie, Argonne must
                ``build'' a vehicle by assigning reference technologies and initial
                attributes to the components of the vehicle model representing each
                technology class.\477\ The reference technologies are baseline
                technologies that represent the first step on each technology pathway
                used in the analysis. For example, a compact car is built by assigning
                it a baseline engine, a baseline 6-speed automatic transmission (AT6),
                a baseline level of aerodynamic improvement (AERO0), a baseline level
                of rolling resistance improvement (ROLL0), a baseline level of mass
                reduction technology (MR0), and corresponding attributes from the
                Argonne vehicle assumptions database like individual component
                weights.\478\ A baseline vehicle will have a unique starting point for
                the simulation and a unique set of assigned inputs and attributes,
                based on its technology class.
                ---------------------------------------------------------------------------
                 \477\ For the NPRM analysis, Chapter 8 Vehicle-Sizing Process in
                the ANL Model Documentation had discussed this process in detail.
                Further discussion of this process is located in Chapter 8 of the
                ANL Model Documentation for this final rule.
                 \478\ See Section VI.A.7.
                ---------------------------------------------------------------------------
                 The next step in the process is to run a powertrain sizing
                algorithm that ensures the built vehicle meets or exceeds defined
                performance metrics, including low-speed acceleration (i.e., time
                required to accelerate from 0-60 mph), high-speed passing acceleration
                (time required to accelerate from 50-80 mph), gradeability (e.g. the
                ability of the vehicle to maintain constant 65 miles per hour speed on
                a six percent upgrade), and towing capacity. Together, these
                performance criteria are widely used by industry as metrics to quantify
                vehicle performance attributes that consumers observe and that are
                important for vehicle utility and customer satisfaction.
                 In the compact car example used above, the agencies assigned an
                initial specific engine design and engine power, transmission, AERO,
                ROLL, and MR technologies, and other attributes like vehicle weight. If
                the built vehicle does not meet all the performance criteria in the
                first iteration, then the engine power is increased to meet the
                performance requirement. This increase in power is from higher engine
                displacement, which could involve an increase in number of cylinders,
                leading to an increase in the engine weight. The iterative process
                continues to check whether the compact car with updated engine power,
                and corresponding updated engine weight, meets its defined performance
                metrics. The loop stops once all the metrics are met, and at this
                point, a compact car technology class vehicle model becomes ready for
                simulation. For further discussion of the vehicle performance metrics,
                see Section VI.B.3.(a).
                 Autonomie then adopts a single fuel saving technology to the
                baseline vehicle model, keeping everything else the same except for
                that one technology and the attributes associated with it. For example,
                the model would apply an 8-speed automatic transmission in place of the
                baseline 6-speed automatic transmission, which would lead to either an
                increase or decrease in the total weight of the vehicle based on the
                technology class assumptions. At this point, Autonomie confirms whether
                performance metrics are met for this new vehicle model through the
                previously discussed sizing algorithm. Once a technology has been
                assigned to the vehicle model and the resulting vehicle meets its
                performance metrics, those vehicle models will be used as inputs to the
                full vehicle simulations. So, in the example of the 6-speed to 8-speed
                automatic transmission technology update, the agencies now have the
                initial ten vehicle models (one for each technology class), plus the
                ten new vehicle models with the updated 8-speed automatic transmission,
                which adds up to 20 different vehicle models for simulation. This
                permutation process is conducted for each of the over 50 technologies
                considered, and for all ten technology classes, which results in more
                than one million optimized vehicle models.
                 Figure VI-3 shows the process for building vehicles in Autonomie
                for simulation.
                [[Page 24327]]
                [GRAPHIC] [TIFF OMITTED] TR30AP20.110
                 Some of the technologies require extra steps for optimization
                before the vehicle models are built for simulation; for example, the
                sizing and optimization process is more complex for the electrified
                vehicles (i.e., HEVs, PHEVs) compared to vehicles with internal
                combustion engines, as discussed further, below. Throughout the vehicle
                building process, the following items are considered for optimization:
                 Vehicle weight is decreased or increased in response to
                switching from one type of technology to another for the technologies
                for which the agencies consider weight, such as different engine and
                transmission types;
                 Vehicle performance is decreased or increased in response
                to the addition of mass reduction technologies when switching from one
                vehicle model to another vehicle model for the same engine;
                 Vehicle performance is decreased or increased in response
                to the addition of a new technology when switching from one vehicle
                model to another vehicle model for the same hybrid electric machine;
                and
                 Electric vehicle battery size is decreased or increased in
                response to the addition of mass, aero and/or tire rolling resistance
                technologies when switching from one vehicle model to another vehicle
                model.
                 Every time a vehicle adopts a new technology, the vehicle weight is
                updated to reflect the new component weight. For some technologies, the
                direct weight change is easy to assess. For example, in the NPRM the
                agencies designated weights for transmissions so, when a vehicle is
                updated to a higher geared transmission, the weight of the original
                transmission is replaced with the corresponding transmission weight
                (e.g., the weight of a vehicle moving from a 5-speed automatic
                transmission to an 8-speed automatic transmission will be updated based
                on the 8-speed transmission weight).
                 For other technologies, like engine technologies, assessing the
                updated vehicle weight is much more complex. Discussed earlier,
                modeling a change in engine technology involves both the new technology
                adoption and a change in power (because the reduction in vehicle weight
                leads to lower engine loads, and a resized engine). When a new engine
                technology is adopted on a vehicle the agencies account for the
                associated weight change to the vehicle based on the earlier discussed
                regression analysis of weight versus power. For the NPRM engine weight
                regression analysis, the agencies considered 19 different engine
                technologies that consisted of unique components to achieve fuel
                economy improvements. This regression analysis is technology agnostic
                by taking the approach of using engine peak power versus engine weight
                because it removed biases to any specific engine technology in the
                analysis. Although the agencies do not estimate the specific weight for
                each individual engine technology, such as VVT and SGDI, this process
                provides a reasonable estimate of the weight differences among engine
                technologies.
                [[Page 24328]]
                [GRAPHIC] [TIFF OMITTED] TR30AP20.111
                 For the final rule analysis, the agencies used the same process to
                assign initial weights to the original 19 engines, plus the added
                engines. However, the agencies improved upon precision of the weights
                by creating two separate curves separately to represent naturally
                aspirated engine designs and turbocharged engine designs.\479\ This
                update resulted in two benefits. First, small naturally aspirated 4-
                cylinder engines that adopted turbocharging technology reflected the
                increased weight of associated components like ducting, clamps, the
                turbocharger itself, a charged air cooler, wiring, fasteners, and a
                modified exhaust manifold. Second, larger cylinder count engines like
                naturally aspirated 8-cylinder and 6-cylinder engines that adopted
                turbocharging and downsized technologies would have lower weight due to
                having fewer engine cylinders. For example, a naturally aspirated 8-
                cylinder engine that adopts turbocharging technology when downsized to
                a 6-cylinder turbocharged engine appropriately reflects the added
                weight of turbocharging components, and the lower weight of fewer
                cylinders.
                ---------------------------------------------------------------------------
                 \479\ ANL Model Documentation for the final rule analysis,
                Chapter 5.2.9 Engine Weight Determination.
                ---------------------------------------------------------------------------
                 As with conventional vehicle models, electrified vehicle models
                were built from the ground up. For the NPRM analysis, Argonne used data
                from the A2mac1 database and vehicle test data to define different
                attributes like weights and power. Argonne used one electric motor
                specific power for each type of hybrid and electric vehicle.\480\ For
                MY2017, the U.S. market has an expanded number of available hybrid and
                electric vehicle models. To capture appropriately the improvements for
                electrified vehicles for the final rule analysis, the agencies applied
                the same regression analysis process that considers electric motor
                weight versus electric motor power for vehicle models that have adopted
                electric motors. Benchmarking data for hybrid and electric vehicles
                from the A2Mac1 database was analyzed to develop a regression curve of
                electric motor peak power versus electric motor weight.\481\
                ---------------------------------------------------------------------------
                 \480\ NHTSA-2018-0067-0005. ANL Autonomie Model Assumptions
                Summary. Aug 21, 2018. Non_Vehicle_Attributes tab. Specific power
                for PS and P2 HEVs was set to 2750 watts/kg, plug-in HEVs were set
                to 375 watts/kg, and electric vehicles were set to 1400 watts/kg.
                 \481\ ANL Model Documentation for the final rule analysis,
                Chapter 5.2.10 Electric Machines System Weight.
                ---------------------------------------------------------------------------
                (4) How Autonomie Sizes Powertrains for Full Vehicle Simulation
                 The agencies maintain performance neutrality of the full vehicle
                simulation analysis by resizing engines, electric machines, and hybrid
                electric vehicle battery packs at specific incremental technology
                steps. To address product complexity and economies of scale, engine
                resizing is limited to specific incremental technology changes that
                would typically be associated with a major vehicle or engine
                redesign.\482\ Manufacturers have repeatedly told the agencies that the
                high costs for redesign and the increased manufacturing complexity that
                would result from resizing engines for small technology changes
                preclude them from doing so. It would be unreasonable and unaffordable
                to resize powertrains for every unique combination of technologies, and
                exceedingly so for every unique combination of technologies across
                every vehicle model due to the extreme manufacturing complexity that
                would be required to do so. The agencies reiterated in the NPRM that
                the analysis should not include engine resizing with the application of
                every technology or for combinations of technologies that drive small
                performance changes so that the analysis better reflects what is
                feasible for manufacturers.\483\
                ---------------------------------------------------------------------------
                 \482\ See 83 FR 43027 (Aug. 24, 2018).
                 \483\ For instance, a vehicle would not get a modestly bigger
                engine if the vehicle comes with floor mats, nor would the vehicle
                get a modestly smaller engine without floor mats. This example
                demonstrates small levels of mass reduction. If manufacturers
                resized engines for small changes, manufacturers would have
                dramatically more part complexity, potentially losing economies of
                scale.
                ---------------------------------------------------------------------------
                 When a powertrain does need to be resized, Autonomie attempts to
                mimic manufacturers' development approaches to the extent possible.
                Discussed earlier, the Autonomie vehicle building process is initiated
                by building a baseline vehicle model with a baseline engine,
                transmission, and other baseline vehicle technologies. This baseline
                vehicle model (for each technology class) is sized to meet a specific
                set of
                [[Page 24329]]
                performance criteria, including acceleration and gradeability.
                 The modeling also accounts for the industry practice of platform,
                engine, and transmission sharing to manage component complexity and the
                associated costs.\484\ At a vehicle refresh cycle, a vehicle may
                inherit an already resized powertrain from another vehicle within the
                same engine-sharing platform that adopted the powertrain in an earlier
                model year. In the Autonomie modeling, when a new vehicle adopts fuel
                saving technologies that are inherited, the engine is not resized (the
                properties from the baseline reference vehicle are used directly and
                unchanged) and there may be a small change in vehicle performance. For
                example, in Figure VI-3, Vehicle 2 inherits Eng01 from Vehicle 1 while
                updating the transmission. Inheritance of the engine with new
                transmission may change performance. This example illustrates how
                manufacturers generally manage manufacturing complexity for engines,
                transmissions, and electrification technologies.
                ---------------------------------------------------------------------------
                 \484\ Ford EcoBoost Engines are shared across ten different
                models in MY2019. https://www.ford.com/powertrains/ecoboost/. Last
                accessed Nov. 05, 2019.
                ---------------------------------------------------------------------------
                 Autonomie implements different powertrain sizing algorithms
                depending on the type of powertrain being considered because different
                types of powertrains contain different components that must be
                optimized.\485\ For example, the conventional powertrain resizing
                considers the reference power of the conventional engine (e.g., Eng01,
                a basic VVT engine, is rated at 108 kilowatts and this is the starting
                reference power for all technology classes) against the power-split
                hybrid (SHEVPS) resizing algorithm that must separately optimize engine
                power, battery size (energy and power), and electric motor power. An
                engine's reference power rating can either increase or decrease
                depending on the architecture, vehicle technology class, and whether it
                includes other advanced technologies.
                ---------------------------------------------------------------------------
                 \485\ ANL Model Documentation for the final rule Analysis,
                Chapter 8.3.1 Conventional-Vehicle Sizing Algorithm; Chapter 8.3.2
                Split-HEV Sizing Algorithm; 8.3.4 Blended PHEV sizing Algorithm;
                8.3.5 Voltec PHEV (Extended Range) Vehicle Sizing Algorithm; Chapter
                8.3.6 BEV Sizing Algorithm.
                ---------------------------------------------------------------------------
                 Performance requirements also differ depending on the type of
                powertrain because vehicles with different powertrain types may need to
                meet different criteria. For example, a plug-in hybrid electric vehicle
                (PHEV) powertrain that is capable of traveling a certain number of
                miles on its battery energy alone (referred to as all-electric range,
                or AER, or as performing in electric-only mode) is also sized to ensure
                that it can meet the performance requirements of a US06 cycle in
                electric-only mode.
                 The powertrain sizing algorithm is an iterative process that
                attempts to optimize individual powertrain components at each step. For
                example, the sizing algorithm for conventional powertrains estimates
                required power to meet gradeability and acceleration performance and
                compares it to the reference engine power for the technology class. If
                the power required to meet gradeability and acceleration performance
                exceeds the reference engine power, the engine power is updated to the
                new value. Similarly, if the reference engine power exceeds the
                gradeability and acceleration performance power, it will be decreased
                to the lower power rating. As the change in power requires a change
                design of the engine, like increasing displacement (e.g., going from a
                5.2-liter to 5.6-liter engine, or vice versa) or increasing cylinder
                count (e.g., going from an I4 to a V6 or vice versa), the engine weight
                will also change. The new engine power is used to update the weight of
                the engine.
                 Next, the conventional powertrain sizing algorithm enters an
                acceleration algorithm loop to verify low-speed acceleration
                performance (time it takes to go from 0 mph to 60 mph). In this step,
                Autonomie adjusts engine power to maintain a performance attribute for
                the given technology class and updates engine weight accordingly. Once
                the performance criteria are met, Autonomie ends the low-speed
                acceleration performance algorithm loop and enters a high-speed
                acceleration (time it takes to go from 50 mph to 80 mph) algorithm
                loop. Again, Autonomie might need to adjust engine power to maintain a
                performance attribute for the given technology, and it exits this loop
                once the performance criteria have been met. At this point, the sizing
                algorithm is complete for the conventional powertrain based on the
                designation for engine type, transmissions type, aero type, mass
                reduction technology and low rolling resistance technology.
                 Figure VI-5 below shows the sizing algorithm for conventional
                powertrains.
                [[Page 24330]]
                [GRAPHIC] [TIFF OMITTED] TR30AP20.112
                 Depending on the type of powertrain considered, the sizing
                algorithms may also size to meet different performance criteria in
                different order. The powertrain sizing algorithms for electrified
                vehicles are considerably more complex, and are discussed in further
                detail in Section VI.C.3, below.
                (5) How the Agencies Considered Maintaining Vehicle Attributes
                 For this rulemaking analysis, consistent with past CAFE and
                CO2 rulemakings, the agencies have analyzed technology
                pathways manufacturers could use for compliance that attempt to
                maintain vehicle attributes, utility, and performance. Using this
                approach allows the agencies to assess costs and benefits of potential
                standards under a scenario where consumers continue to get the similar
                vehicle attributes and features, other than changes in fuel economy.
                The purpose of constraining vehicle attributes is to simplify the
                analysis and reduce variance in other attributes that consumers value
                across the analyzed regulatory alternatives. This allows for a more
                streamlined accounting of costs and benefits by not requiring the
                values of other vehicle attributes that trade off with fuel economy.
                 Several examples of vehicle attributes, utility and performance
                that could be impacted by adoption of fuel economy improving technology
                include the following.
                [[Page 24331]]
                [GRAPHIC] [TIFF OMITTED] TR30AP20.113
                 Consequences for the agencies not fully considering or accounting
                for potential changes in vehicle attributes, utility, and performance
                are degradation in vehicle attributes, utility, and performance that
                lead to consumer acceptance issues without accounting for the
                corresponding costs and/or not accounting for the costs of technology
                designs that maintain vehicle attributes, utility, and performance. The
                agencies incorporated changes in the NPRM analysis and that are carried
                into this final rule that address deficiencies in past analyses,
                including the Draft TAR and Proposed Determination analyses. These
                changes were discussed in the NPRM and are repeated in the discussion
                of individual technologies in this Preamble, the FRIA, and supporting
                documents. The following are several examples of technologies that did
                not maintain vehicle attributes, utility, and performance in the Draft
                TAR and Proposed Determination analyses.
                 For the EPA Draft TAR and Proposed Determination analyses, HCR
                engine and downsized and turbocharged engine technologies effectiveness
                was estimated using Tier 2 certification fuel, which has a higher
                octane rating compared to regular octane fuel.486 487 This
                does not maintain functionality because consumers would incur higher
                costs for using premium fuel in order to achieve the modeled fuel
                economy improvements, compared to baseline engines that were replaced,
                which operated on lower cost regular octane fuel. By not maintaining
                the fuel octane functionality and vehicle attributes, the EPA Draft TAR
                and Proposed Determination analyses applied higher effectiveness for
                these technologies than could be achieved had regular octane fuel been
                assumed for the HCR and downsized turbocharged engines. The Draft TAR
                and Proposed Determination analyses also did not account for the higher
                costs that would be incurred by consumers to pay for high octane fuel.
                These issues were addressed in the
                [[Page 24332]]
                NPRM and this final rule analysis, and account for some of the
                effectiveness and cost differences between the Draft TAR/Proposed
                Determination and the NPRM/final rule.\488\
                ---------------------------------------------------------------------------
                 \486\ Tier 2 fuel has an octane rating of 93. Typical regular
                grade fuel has an octane rating of 87 ((R+M)/2 octane.
                 \487\ EPA Proposed Determination at 2-209 to 2-212.
                 \488\ For more details, see Section VI.C.1 Engine Paths.
                ---------------------------------------------------------------------------
                 Another example is mass reduction technology. As background, the
                agencies characterize mass reduction as either primary mass reduction
                or secondary mass reduction. Primary mass reduction involves reducing
                mass of components that can be done independently of the mass of other
                components. For example, the mass of a hood (e.g., replacing a steel
                hood with an aluminum hood) or reducing the mass of a seat are examples
                of primary mass reduction because each can be implemented
                independently. When there is a significant level of primary mass
                reduction, other components that are designed based on the mass of
                primary components, may be redesigned and have lower mass. An example
                of secondary mass reduction is the brake system. If the mass of primary
                components is reduced sufficiently, the resulting lighter weight
                vehicle could maintain braking performance and attributes, and safety
                with a lighter weight brake system. Mass reduction in the brake system
                is secondary mass reduction because it requires primary mass reduction
                before it can be incorporated. For the EPA Draft TAR and Proposed
                Determination analyses, secondary mass reduction was applied
                exclusively based on cost, with no regard to whether sufficient primary
                mass reduction was applied concurrently. The analyses did not account
                for the degraded functionality of the secondary components and systems
                and also understated the costs for lower levels of mass reduction.\489\
                These issues were addressed in the NPRM and this final rule analysis,
                and account for some of the cost differences between the Draft TAR/
                Proposed Determination and the NPRM/final rule.
                ---------------------------------------------------------------------------
                 \489\ For more details, see Section VI.C.4 Mass Reduction.
                ---------------------------------------------------------------------------
                 The agencies note that for some technologies it is not reasonable
                or practicable to match exactly the baseline vehicle's attributes,
                utility, and performance. For example, when engines are resized to
                maintain acceleration performance, if the agencies applied a criterion
                that allowed no shift in performance whatsoever, there would be an
                extreme proliferation of unique engine displacements. Manufacturers
                have repeatedly and consistently told the agencies that the high costs
                for redesign and the increased manufacturing complexity that would
                result from resizing engines for small technology changes preclude them
                from doing so. It would be unreasonable and unaffordable to resize
                powertrains for every unique combination of technologies, and
                exceedingly so for every unique combination technologies across every
                vehicle model due to the extreme manufacturing complexity that would be
                required to do so.\490\ For the NPRM and final rule analyses, engine
                resizing is limited to specific incremental technology changes that
                would typically be associated with a major vehicle or engine redesign
                to address product complexity and economies of scale considerations.
                The EPA Draft TAR and Proposed Determination analyses adjusted the
                effectiveness of every technology combination assuming performance
                could be held constant for every combination, and the analysis did not
                recognize or account for the extreme complexity nor the associated
                costs for that impractical assumption. The NPRM and final rule analyses
                account for these real-world practicalities and constraints, and doing
                so explains some of the effectiveness and cost differences between the
                Draft TAR/Proposed Determination and the NPRM/final rule.
                ---------------------------------------------------------------------------
                 \490\ For more details, see Section VI.B.3.a)(6) Performance
                Neutrality.
                ---------------------------------------------------------------------------
                 The subsections for individual technologies discuss the technology
                assumptions and constraints that were considered to maintain vehicle
                attributes, utility, and performance as closely as possible. The
                agencies believe that any minimal remaining differences, which may
                directionally either improve or degrade vehicle attributes, utility and
                performance are small enough to have de minimis impact on the analysis.
                (6) How the Agencies Considered Performance Neutrality
                 The CAFE model examines technologies that can improve fuel economy
                and reduce CO2 emissions. An improvement in efficiency can
                be realized by improving the powertrain that propels the vehicle (e.g.,
                replacing a 6-cylinder engine with a smaller, turbocharged 4-cylinder
                engine), or by reducing the vehicle's loads or burdens (e.g., lowering
                aerodynamic drag, reducing vehicle mass and/or rolling resistance).
                Either way, these changes reduce energy consumption and create a range
                of choices for automobile manufacturers. At the two ends of the range,
                the manufacturer can choose either:
                 (A) To design a vehicle that does same the amount of work as before
                but uses less fuel.
                 For example, a redesigned pickup truck would receive a turbocharged
                V6 engine in place of the outgoing V8. The pickup would offer no
                additional towing capacity, acceleration, larger wheels and tires,
                expanded infotainment packages, or customer convenience features, but
                would achieve a higher fuel economy rating (and correspondingly lower
                CO2 emissions).
                 (B) To design a vehicle that does more work and uses the same
                amount of fuel as before.
                 For example, a redesigned pickup truck would receive a turbocharged
                V6 engine in place of the outgoing V8, but with engine efficiency
                improvements that allow the same amount of fuel to do more work. The
                pickup would offer improved towing capacity, improved acceleration,
                larger wheels and tires, an expanded (heavier) infotainment package,
                and more convenience features, while maintaining (not improving) the
                fuel economy rating of the previous year's model.
                 In other words, automakers weigh the trade-offs between vehicle
                performance/utility and fuel economy, and they choose a blend of these
                attributes to balance meeting fuel economy and emissions standards and
                suiting the demands of their customers.
                 Historically, vehicle performance has improved over the years. The
                average horsepower is the highest that it has ever been; all vehicle
                types have improved horsepower by at least 49 percent compared to the
                1975 model year, and pickup trucks have improved by 141 percent.\491\
                Since 1978, the 0-60 acceleration time of vehicles has improved by 39-
                47 percent depending on vehicle type.\492\ Also, to gain consumer
                acceptance of downsized turbocharged engines, manufacturers have stated
                they often offer an increase in performance.\493\ Fuel economy has also
                improved, but the horsepower and acceleration trends show that not 100
                percent of technological improvements have been applied to fuel
                savings. While future trends are uncertain, the past trends suggest
                vehicle performance is unlikely to decrease, as it seems reasonable to
                assume that customers
                [[Page 24333]]
                will at a minimum demand vehicles that offer the same utility as
                today's fleet.
                ---------------------------------------------------------------------------
                 \491\ The 2018 EPA Automotive Trends Report (EPA-420-R-19-002
                March 2019) https://www.epa.gov/automotive-trends/download-automotive-trends-report.
                 \492\ The 2018 EPA Automotive Trends Report (EPA-420-R-19-002
                March 2019) https://www.epa.gov/automotive-trends/download-automotive-trends-report.
                 \493\ Alliance of Automobile Manufacturers, Attachment
                ``Comment,'' Docket No. EPA-HQ-OAR-2015-0827-4089, at p. 122.
                ---------------------------------------------------------------------------
                 For this rulemaking analysis, consistent with past CAFE and
                CO2 rulemakings, the agencies have analyzed technology
                pathways manufacturers could use for compliance that attempt to
                maintain vehicle attributes, utility and performance. NHTSA's analysis
                in the Draft TAR used the same approach for performance neutrality as
                was used for the NPRM and is being carried into this final rule. This
                approach is described throughout this section and further in FRIA
                Section VI. For the Draft TAR and Proposed Determination, the EPA
                analyses used an approach that maintained 0-60 mph acceleration time
                for every technology package. However, that approach did not account
                for the added development, manufacturing, assembly and service parts
                complexity and associated costs that would be incurred by manufacturers
                to produce the substantial number of engine variants that would be
                required to achieve those CO2 improvements.\494\ Using the
                NPRM approach, which is carried into this final rule, allows the
                agencies to assess costs and benefits of potential standards under a
                scenario where consumers continue to get the same vehicle attributes
                and features, other than changes in fuel economy (approaching the
                scenario in example ``A'' above). This approach also eliminates the
                need to assess the value of changes in vehicle attributes and features.
                As discussed later in this section, while some small level of
                performance increase is unavoidable when conducting this type of
                analysis, the added technology results almost exclusively in improved
                fuel economy. This allows the cost of these technologies to reflect
                almost entirely the cost of compliance with standards with nearly
                neutral vehicle performance.
                ---------------------------------------------------------------------------
                 \494\ Each variant would require a unique engine displacement,
                requiring unique internal engine components, such as crankshaft,
                connecting rods and others.
                ---------------------------------------------------------------------------
                 The CAFE model maintains the initial performance and utility levels
                of the analysis vehicle fleet, while considering real world constraints
                faced by manufacturers.
                 To maintain performance neutrality when applying fuel economy
                technologies, it is first necessary to characterize the performance
                levels of each of the nearly 3000 vehicle models in the MY 2017
                baseline fleet. As discussed in Section VI.B.1.b) Assigning Vehicle
                Technology Classes, above, each individual vehicle model in the
                analysis fleet was assigned to one of ten vehicle ``technology
                classes''--the class that is most similar to the vehicle model. The
                technology classes include five standard class vehicles (compact car,
                midsize car, small SUV, midsize SUV, pickup) plus five ``performance''
                versions of these same body styles.\495\ Each vehicle class has a
                unique set of attributes and characteristics, including vehicle
                performance metrics, that describe the typical characteristics of the
                vehicles in that class.
                ---------------------------------------------------------------------------
                 \495\ Separate technology classes were created for high
                performance and low performance vehicles to better account for
                performance diversity across the fleet.
                ---------------------------------------------------------------------------
                 The analysis used four criteria to characterize vehicle performance
                attributes and utility:
                 Low-speed acceleration (time required to accelerate from 0-60
                mph)
                 High-speed acceleration (time required to accelerate from 50-
                80 mph)
                 Gradeability (the ability of the vehicle to maintain constant
                65 miles per hour speed on a six percent upgrade)
                 Towing capacity
                 Low-speed and high-speed acceleration target times are typical of
                current production vehicles and range from 6 to 10 seconds depending on
                the vehicle class; for example, the midsize SUV performance class has a
                low- and high-speed acceleration target of 7 seconds.\496\ The
                gradeability criterion requires that the vehicle, given its attributes
                of weight, engine power, and transmission gearing, be capable of
                maintaining a minimum of 65 mph while going up a six percent grade. The
                towing criterion, which is applicable only to the pickup truck and
                performance pickup truck vehicle technology classes, is the same as the
                gradeability requirement but adds an additional payload/towing mass
                (3,000 lbs. for pickups, or 4,350 lbs for performance pickups) to the
                vehicle, essentially making the vehicle heavier.
                ---------------------------------------------------------------------------
                 \496\ Note, for all vehicle classes, the low and high-speed
                acceleration targets use the same value. See section VI.B.1.b)(1)
                Assigning Vehicle Technology Classes for a list of low-speed
                acceleration target by vehicle technology class.
                ---------------------------------------------------------------------------
                 In addition, to maintain the capabilities of certain electrified
                vehicles in the 2017 baseline fleet, the analysis required that those
                vehicles be capable of achieving the accelerations and speeds of
                certain standard driving cycles. The agencies use the US06 ``aggressive
                driving'' cycle and the UDDS ``city driving'' cycle to ensure that core
                capabilities of BEVs and PHEVs, such as driving certain speeds and/or
                distances in electric-only mode, are maintained. In addition to the
                four criteria discussed above, the following performance criteria are
                applied to these electrified vehicles:
                 Battery electric vehicles (BEV) are sized to be capable of
                completing the US06 ``aggressive driving'' cycle.
                 Plug-in hybrid vehicles with 50 mile all-electric range
                (PHEV50) are sized to be capable of completing the US06 ``aggressive
                driving'' cycle in electric-only mode.
                 Plug-in hybrid vehicles with 20 mile all-electric range
                (PHEV20) are sized to be capable of completing the UDDS ``city
                driving'' cycle in electric-only (charge depleting) mode.\497\
                ---------------------------------------------------------------------------
                 \497\ PHEV20's are blended-type plug-in hybrid vehicles, which
                are capable of completing the UDDS cycle in charge depleting mode
                without assistance from the engine. However, under higher loads,
                this charge depleting mode may use supplemental power from the
                engine.
                ---------------------------------------------------------------------------
                 Together, these performance criteria are widely used by industry as
                metrics to quantify vehicle performance attributes that consumers
                observe and that are important for vehicle utility and customer
                satisfaction.\498\
                ---------------------------------------------------------------------------
                 \498\ Conlon, B., Blohm, T., Harpster, M., Holmes, A. et al.,
                ``The Next Generation ``Voltec'' Extended Range EV Propulsion
                System,'' SAE Int. J. Alt. Power. 4(2):2015, doi:10.4271/2015-01-
                1152. Kapadia, J., Kok, D., Jennings, M., Kuang, M., et al.,
                ``Powersplit or Parallel--Selecting the Right Hybrid Architecture,''
                SAE Int. J. Alt. Power. 6(1):2017, doi:10.4271/2017-01-1154. Islam,
                E., A. Moawad, N. Kim, and A. Rousseau, 2018a, An Extensive Study on
                Vehicle Sizing, Energy Consumption and Cost of Advance Vehicle
                Technologies, Report No. ANL/ESD-17/17, Argonne National Laboratory,
                Lemont, Ill., Oct 2018.
                ---------------------------------------------------------------------------
                 When certain fuel-saving technologies are applied that affect
                vehicle performance to a significant extent, such as replacing a pickup
                truck's V8 engine with a turbocharged V6 engine, iterative resizing of
                the vehicle powertrain (engine, electric motors, and/or battery) is
                performed in the Autonomie simulation such that the above performance
                criteria is maintained. For example, if the aforementioned engine
                replacement caused an improvement in acceleration, the engine may be
                iteratively resized until vehicle acceleration performance is shifted
                back to the initial target time for that vehicle technology class. For
                the low and high-speed acceleration criteria, engine resizing
                iterations continued until the acceleration time was within plus or
                minus 0.2 seconds of the target time,499 500 which is judged
                to balance
                [[Page 24334]]
                reasonably the precision of engine resizing with the number of
                simulation iterations needed to achieve performance within the 0.2
                second window, and the associated computer resources and time required
                to perform the iterative simulations. Engine resizing is explained
                further in Section VI.B.3.a)(4) How Autonomie Sizes Powertrains for
                Full Vehicle Simulation and the Argonne Model Documentation for the
                final rule analysis.
                ---------------------------------------------------------------------------
                 \499\ For example, if a vehicle has a target 0-60 acceleration
                time of 6 seconds, a time within 5.8-6.2 seconds was accepted.
                 \500\ With the exception of a few performance electrified
                vehicle types which, based on observations in the marketplace, use
                different criteria to maintain vehicle performance without battery
                assist. Performance PHEV20, and Performance PHEV50 resize to the
                performance of a conventional six-speed automatic (CONV 6AU).
                Performance SHEVP2, engines/electric-motors were resized if the 0-60
                acceleration time was worse than the target, but not resized if the
                acceleration time was better than the target time.
                ---------------------------------------------------------------------------
                 The Autonomie simulation resizes until the least capable of the
                performance criteria is met, to ensure the pathways do not degrade any
                of the vehicle performance metrics. It is possible that as one
                criterion target is reached after the application of a specific
                technology or technology package, other criteria may be better than
                their target values. For example, if the engine size is decreased until
                the low speed acceleration target is just met, it is possible that the
                resulting engine size would cause high speed acceleration performance
                to be better than its target.\501\ Or, a PHEV50 may have an electric
                motor and battery appropriately sized to operate in all electric mode
                through the repeated accelerations and high speeds in the US06 driving
                cycle, but the resulting motor and battery size enables the PHEV50
                slightly to over-perform in 0-60 acceleration, which utilizes the power
                of both the electric motor and combustion engine.
                ---------------------------------------------------------------------------
                 \501\ The Autonomie simulation databases include all of the
                estimated performance metrics for each combination of technology as
                modeled.
                ---------------------------------------------------------------------------
                 To address product complexity and economies of scale, engine
                resizing is limited to specific incremental technology changes that
                would typically be associated with a major vehicle or engine
                redesign.\502\ Manufacturers have repeatedly and consistently told the
                agencies that the high costs for redesign and the increased
                manufacturing complexity that would result from resizing engines for
                small technology changes preclude them from doing so. It would be
                unreasonable and unaffordable to resize powertrains for every unique
                combination of technologies, and exceedingly so for every unique
                combination technologies across every vehicle model due to the extreme
                manufacturing complexity that would be required to do so. Engine
                displacements are further described in Section VI.C.1 Engine Paths.
                ---------------------------------------------------------------------------
                 \502\ See 83 FR 43027 (Aug. 24, 2018).
                ---------------------------------------------------------------------------
                 To address this issue, and consistent with past rulemakings, the
                NPRM simulation allowed engine resizing when mass reductions of 7.1
                percent, 10.7 percent, 14.2 percent (and 20 percent for the final rule
                analysis) were applied to the vehicle curb weight,\503\ and when one
                powertrain architecture was replaced with another architecture during a
                redesign cycle.\504\ At its refresh cycle, a vehicle may also inherit
                an already resized powertrain from another vehicle within the same
                engine-sharing platform. The analysis did not re-size the engine in
                response to adding technologies that have smaller effects on vehicle
                performance. For instance, if a vehicle's curb weight is reduced by 3.6
                percent (MR1), causing the 0-60 mile per hour time to improve slightly,
                the analysis would not resize the engine. The criteria for resizing
                used for the analysis better reflects what is feasible for
                manufacturers to do.\505\
                ---------------------------------------------------------------------------
                 \503\ These correspond, respectively, to reductions of 10%, 15%,
                20%, and 28.2% of the vehicle glider mass. For more detail on glider
                mass calculation, see section VI.C.4 Mass Reduction.
                 \504\ Some engine and accessory technologies may be added to an
                engine without an engine architecture change. For instance,
                manufacturers may adapt, but not replace engine architectures to
                include cylinder deactivation, variable valve lift, belt-integrated
                starter generators, and other basic technologies. However, switching
                from a naturally aspirated engine to a turbo-downsized engine is an
                engine architecture change typically associated with a major
                redesign and radical change in engine displacement.
                 \505\ For instance, a vehicle would not get a modestly bigger
                engine if the vehicle comes with floor mats, nor would the vehicle
                get a modestly smaller engine without floor mats. This example
                demonstrates small levels of mass reduction. If manufacturers
                resized engines for small changes, manufacturers would have
                dramatically more part complexity, potentially losing economies of
                scale.
                ---------------------------------------------------------------------------
                 Automotive manufacturers have commented that the CAFE model's
                consideration of the constraints faced in relation to vehicle
                performance and economies of scale are realistic.
                 Industry associations and individual manufacturers widely supported
                the use of the performance metrics used in the NPRM analysis, the use
                of standard and higher performance technology classes, and the
                representation in the analysis of the real-world manufacturing
                complexity constraints and criteria for powertrain redesign.
                 The Alliance of Automobile Manufacturers (Alliance), Ford, and
                Toyota stated that the inclusion of additional performance metrics such
                as gradeability are appropriate. Specifically in support of the
                gradeability performance criteria, the Alliance commented that
                ``performance metrics related to vehicle operation in top gear are just
                as critical to customer acceptance as are performance metrics such as
                0-60 mph times that focus on performance in low-gear ranges.'' \506\
                The Alliance also commented specifically on the relationship between
                gradeability and downsized engines, stating that as ``engine downsizing
                levels increase, top-gear gradeability becomes more and more
                important,'' and further that the consideration of gradeability ``helps
                prevent the inclusion of small displacement engines that are not
                commercially viable and that would artificially inflate fuel savings.''
                \507\
                ---------------------------------------------------------------------------
                 \506\ Alliance of Automobile Manufacturers, Attachment ``Full
                Comment Set,'' Docket No. NHTSA-2018-0067-12073, at 139.
                 \507\ Alliance of Automobile Manufacturers, Attachment ``Full
                Comment Set,'' Docket No. NHTSA-2018-0067-12073, at 135.
                ---------------------------------------------------------------------------
                 Ford and Toyota similarly commented in support of the CAFE model's
                consideration of multiple performance criteria. Ford stated that this
                model ``takes a more realistic approach to performance modeling'' and
                ``better replicates OEM attribute-balancing practices.'' Ford stated
                furthermore that ``OEMs must ensure that each individual performance
                measure--and not an overall average--meets its customer's
                requirements,'' and that, in contrast, previous analyses did ``not
                align with product planning realities.'' \508\ Toyota commented in
                support of including gradeability as a performance metric ``to avoid
                underpowered engines and overestimated fuel savings.'' \509\
                ---------------------------------------------------------------------------
                 \508\ Ford, Attachment 1, Docket No. NHTSA-2018-0067-11928, at
                8.
                 \509\ Toyota, Attachment 1, Docket No. NHTSA-2018-0067-12098, at
                6.
                ---------------------------------------------------------------------------
                 Toyota and the Alliance commented that the inclusion of performance
                vehicle classes addressed the market reality that some consumers will
                purchase vehicles for their performance attributes and will accept the
                corresponding reduction in fuel economy. Furthermore, Toyota commented
                that most consumers consider more than just fuel economy when
                purchasing a vehicle, and that ``dedicating all powertrain improvements
                to fuel efficiency is inconsistent with market reality.'' Toyota
                ``supports the agencies' inclusion of performance classes in compliance
                modeling where a subset of certain models is defined to have higher
                performance and a commensurate reduction in fuel efficiency.'' \510\
                Also in support of the addition of performance vehicle classes, the
                Alliance commented that ``vehicle categories have been increased to 10
                to better recognize the range of 0-60 performance
                [[Page 24335]]
                characteristics within each of the 5 previous categories, in
                recognition of the fact that many vehicles in the baseline fleet
                significantly exceeded the previously assumed 0-60 performance metrics.
                This provides better resolution of the baseline fleet and more accurate
                estimates of the benefits of technology.'' \511\
                ---------------------------------------------------------------------------
                 \510\ Toyota, Attachment 1, Docket No. NHTSA-2018-0067-12098, at
                6.
                 \511\ Alliance of Automobile Manufacturers, Attachment ``Full
                Comment Set,'' Docket No. NHTSA-2018-0067-12073, at 135.
                ---------------------------------------------------------------------------
                 Toyota also commented in support of various real-world
                manufacturing complexity constraints employed in the analysis for
                powertrain redesigns. Toyota commented that model parameters such as
                redesign cycles and engine sharing across vehicle models place a more
                realistic limit on the number of engines and transmissions that a
                manufacturer is capable of introducing. Toyota also commented in
                support of the constraints that the CAFE model placed on engine
                resizing, stating that ``there are now more realistic limits placed on
                the number of engines and transmissions in a powertrain portfolio which
                better recognizes [how] manufacturers must manage limited engineering
                resources and control supplier, production, and service costs.
                Technology sharing and inheritance between vehicle models tends to
                limit the rate of improvement in a manufacturer's fleet.'' Toyota
                pointed out that this is in contrast to previous analyses in which
                resizing was too unconstrained, which created an ``unmanageable number
                of engine configurations within a vehicle platform'' and spawned cases
                where ``engine downsizing and power reduction sometimes exceeded limits
                beyond basic acceleration requirements needed for vehicle safety and
                customer satisfaction.'' \512\
                ---------------------------------------------------------------------------
                 \512\ Toyota, Attachment 1, Docket No. NHTSA-2018-0067-12098, at
                6.
                ---------------------------------------------------------------------------
                 The above comments from the Alliance, Ford, and Toyota support the
                methodologies the agencies employed to conduct a performance neutral
                analysis. These methodologies helped to ensure that multiple
                performance criteria, including gradeability, are all individually
                accounted for and maintained when a vehicle powertrain is resized, and
                that real-world manufacturing complexity constraints are factored in to
                the agencies' analysis of feasible pathways manufacturers could take to
                achieve compliance with CAFE standards. The agencies continue to
                believe this is a reasonable approach for the aforementioned reasons.
                 Environmental advocacy groups and CARB criticized the CAFE model's
                engine resizing constraints and how they affected the acceleration
                performance criteria.
                 CARB, The International Council on Clean Transportation (ICCT), the
                Union of Concerned Scientists (UCS), and the American Council for an
                Energy-Efficient Economy (ACEEE) commented that the CAFE model was not
                performance neutral, allowing an improvement in performance which
                reduced the effectiveness of applied fuel-saving technologies and/or
                increased the cost of compliance. Specifically, ACEEE stated that there
                appeared to be a shortfall in the fuel economy effectiveness of
                technology packages, potentially resulting from the effectiveness being
                ``consumed'' by additional vehicle performance rather than improvement
                of fuel economy. Several of these same commenters conducted analyses
                attempting to quantify the magnitude of these changes in vehicle
                performance for various vehicle technology classes.
                 CARB commented on the performance shift of several vehicle types.
                Analyzing the 0-60 acceleration for the medium car non-performance
                technology class and looking at all cases with resized engines, CARB
                claimed that ``effectively half of the simulations resulted in improved
                performance.'' \513\ Focusing on electrified vehicles in that same
                technology class, CARB stated that ``the data from the Argonne
                simulations shows that 76 of the 88 strong electrified packages
                (including P2HPV, SHEVPS, BEV, FCEV, PHEV), where Argonne purposely
                resized the system to maintain performance neutrality, resulted in
                notably faster 0 to 60 mph acceleration times and passing times.''
                Specifically regarding parallel hybrid electric vehicles (SHEVP2), CARB
                stated that all modeled packages resulted in improved performance.\514\
                UCS commented that the NPRM analysis allowed too much change in vehicle
                performance, stating that ``while some performance creep may be
                reasonable'' many performance values show ``an overlap between
                performance and non-performance vehicles'' within the compact car
                technology class.\515\
                ---------------------------------------------------------------------------
                 \513\ California Air Resources Board, Attachment 2, Docket No.
                NHTSA-2018-0067-11873, at 180. Note that the target acceleration
                time for medium car non-performance is in fact 9.0 seconds, as
                indicated in ANL documentation, but was incorrectly reported as 9.4s
                in NPRM table II-7 in the NPRM.
                 \514\ California Air Resources Board, Attachment 2, Docket No.
                NHTSA-2018-0067-11873, at 186.
                 \515\ Union of Concerned Scientists, Attachment 2, Docket No.
                NHTSA-2018-0067-12039, at 24.
                ---------------------------------------------------------------------------
                 The agencies carefully considered these comments. For the NPRM
                analysis, the SHEVP2 engines/electric-motors were resized if the 0-60
                acceleration time was worse than the target, but not resized if the
                acceleration time was better than the target. This approach maintained
                vehicle performance with a depleted battery (without electric assist)
                in order to maintain fully the performance and utility characteristics
                under all conditions, and improved performance when electric assist was
                available (when the battery is not depleted), such as during the 0-60
                mph acceleration. The agencies found that this resulted in some
                parallel hybrid vehicles having improved 0-60 acceleration times. This
                approach was initially chosen for the NPRM because the resulting level
                of improved performance was consistent with observations of how
                industry had applied SHEVP2 technology. However, in assessing the CARB
                comment, the agencies balanced the NPRM approach for SHEVP2 performance
                with the agencies' criteria of maintaining vehicle functionality and
                performance when technology is applied. Both could not be fully
                achieved under all conditions for the case of the SHEVP2.
                 The agencies concluded it is reasonable to maintain performance
                including electric assist when SHEVP2 technology is applied to a
                standard (non-performance) vehicle, and therefore the analysis for the
                final rule allows upsizing and downsizing of the parallel hybrid
                powertrain (SHEVP2) using the 0.2 seconds window around the
                target.\516\ For performance vehicles, the agencies concluded that it
                remains reasonable to maintain vehicle performance with a depleted
                battery (without electric assist) in order to maintain fully the
                performance characteristics under all conditions, and continued to use
                the NPRM methodology.
                ---------------------------------------------------------------------------
                 \516\ To represent marketplace trends better, the performance
                class of SHEVP2's allow acceleration time below 0.2 seconds less
                than the target, and PHEV20's and PHEV50's inherit combustion engine
                size from the conventional powertrain they are replacing. Further
                discussion of resizing targets can be found in Chapter 8 of the ANL
                Model Documentation for the final rule analysis.
                ---------------------------------------------------------------------------
                 The refinement for the standard performance SHEVP2 resolved the
                electrified packages issue identified by CARB, and also addressed most
                of the change in performance in the overall fleet, including with
                compact cars as mentioned by UCS. As explained further below, the
                agencies assessed performance among the alternatives for the final rule
                analysis. That assessment showed that, with the final rule refinements,
                245 out of 255 total resized vehicles (96 percent of vehicles) in the
                medium non-performance class (same
                [[Page 24336]]
                class focused on by CARB), had 0-60 mph acceleration times within the
                plus-or-minus 0.2 second window (8.8 to 9.2 seconds).\517\ The only
                vehicles outside the window were certain strong electrified vehicles
                which exceeded 0-60 the acceleration target as a result of achieving
                other performance criteria, such as the US06 driving cycles in all-
                electric-mode.\518\
                ---------------------------------------------------------------------------
                 \517\ This includes 135 strong electrified vehicles.
                 \518\ As noted earlier, electrified vehicles had to be capable
                of successfully completing UDDS or US06 driving cycles in all-
                electric mode, and in some cases the resulting motor size produced
                improved acceleration times.
                ---------------------------------------------------------------------------
                 The assessment also showed that for the small car class (mentioned
                by UCS) the acceleration times of performance and non-performance
                vehicles do not go beyond each other's targets. For example, the
                vehicle in the small car class with the very best 0-60 mph time and a
                conventional powertrain achieves an 8.38 second 0-60 mph time, which is
                slower than the performance small car baseline of 8 seconds. This
                vehicle had multiple incremental technologies applied, including for
                example aerodynamic improvements, and has not reached the threshold for
                engine resizing.\519\ After engine resizing, the ``fastest''
                conventional small car has a 0-60 mph time of 9.9 seconds, only 0.1
                seconds from the target of 10 seconds.\520\
                ---------------------------------------------------------------------------
                 \519\ Discussion of engine resizing can be found in Section
                VI.B.3.a)(5).
                 \520\ See NPRM Autonomie simulation database for Small cars,
                Docket ID NHTSA-2018-0067-1855.
                ---------------------------------------------------------------------------
                 CARB also commented on the improvement of ``passing times,'' or 50-
                80 mph high-speed acceleration times. As stated above, an improvement
                in one or more of the performance criteria is an expected outcome when
                using the rulemaking analysis methodology that resizes powertrains such
                that there is no degradation in any of the performance metrics.
                Consistent with past rulemakings, the agencies do not believe it is
                appropriate for the rulemaking analysis to show pathways that degrade
                vehicle performance or utility for one or more of the performance
                criteria, as doing so would adversely impact functional capability of
                the vehicle and could lead to customer dissatisfaction. The agencies
                agree there is very small increase in passing performance for some
                technology combinations, and believe this is an appropriate outcome.
                High-speed acceleration is rarely the least-capable performance
                criteria.
                 CARB, ICCT, UCS, and H-D Systems (HDS), in an attempt to identify a
                potential cause for changes in performance, commented that the CAFE
                model should have placed fewer constraints on engine resizing. CARB and
                ICCT commented that engine resizing should have been allowed even at
                low levels of mass reduction. Comments from CARB, UCS, HDS, and ICCT
                stated that engine resizing should also have been allowed for other
                incremental technologies, and within their comments they conducted
                performance analysis of non-resized cases.
                 CARB claimed that requiring a minimum of 7.1 percent curb weight
                reduction before engine resizing is a constraint that ``limits the
                optimization of the technologies being applied.'' \521\ UCS stated that
                ``a significant share of the benefit of a few percent reduction in mass
                has gone towards improved performance rather than improved fuel
                economy, leaving a substantial benefit of mass reduction underutilized
                and/or uncounted.'' \522\ ICCT also commented that ``when vehicle
                lightweighting is deployed at up to a 7 percent mass reduction, the
                engine is not resized even though less power would be needed for the
                lighter vehicle, meaning any such vehicles inherently are higher
                performance.'' \523\
                ---------------------------------------------------------------------------
                 \521\ California Air Resources Board, Attachment 2, Docket No.
                NHTSA-2018-0067-11873, at 178. Note, a 7.1% curb weight reduction
                equates to the agencies' third level of mass reduction (MR3);
                additional discussion of engine resizing for mass reduction can be
                found in Section VI.B.3.a)(4) Autonomie Sizes Powertrains for Full
                Vehicle Simulation] and in the ANL Model Documentation for the final
                rule analysis.
                 \522\ Union of Concerned Scientists, Attachment 2, Docket No.
                NHTSA-2018-0067-12039, at 11.
                 \523\ International Council on Clean Transportation, Attachment
                3, Docket No. NHTSA-2018-0067-11741, at I-50.
                ---------------------------------------------------------------------------
                 UCS and HDS commented on the lack of resizing for technologies
                other than mass reduction, with HDS stating that ``the Agencies
                incorrectly limited the efficacy of technologies that reduce tractive
                load because their modeling does not re-optimize engine performance
                after applying these technologies.'' \524\ CARB also commented that the
                lack of resizing when a BISG or CISG system is added ``results in a
                less than optimized system that does not take full advantage of the
                mild hybrid system.'' Similarly, ICCT noted a case in which a Dodge RAM
                ``did not apply engine downsizing with the BISG system on that truck,
                so there are also significant performance benefits that should be
                accounted for, meaning that for constant-performance the fuel
                consumption reduction would be even greater.'' \525\
                ---------------------------------------------------------------------------
                 \524\ H-D Systems, Attachment 1, Docket No. NHTSA-2018-0067-
                12395, at 4. For reference, technologies that reduce tractive road
                load include mass reduction, aerodynamic drag reduction, and tire
                rolling resistance reduction.
                 \525\ International Council on Clean Transportation, Attachment
                3, Docket No. NHTSA-2018-0067-11741, at I-24.
                ---------------------------------------------------------------------------
                 CARB further commented on the performance improvement in cases
                without engine resizing by stating that ``94 percent of the packages
                modeled result in improved performance,'' and that for these non-
                resized cases that were actually adopted by a vehicle in the
                simulation, ``fewer than 20 percent maintained baseline performance
                with gains of 2 percent or less in acceleration time.'' \526\ Referring
                specifically to non-resized electrified vehicles, CARB also stated that
                ``44,878 of the 53,818 packages, or greater than 83 percent, result in
                improved performance.'' \527\ CARB also commented that engine sharing
                across different vehicles within a platform, which in some cases may
                constrain resizing for a member of that platform, should not dictate
                that these engines must remain identical in all aspects, and that
                ``this overly restrictive sharing of identical engines newly imposed in
                the CAFE Model is not consistent with today's industry practices and
                results in less optimal engine sizing and causes a systematic
                overestimation of technology costs to meet the existing standards.''
                \528\
                ---------------------------------------------------------------------------
                 \526\ California Air Resources Board, Attachment 2, Docket No.
                NHTSA-2018-0067-11873, at 183.
                 \527\ California Air Resources Board, Attachment 2, Docket No.
                NHTSA-2018-0067-11873, at 187.
                 \528\ California Air Resources Board, Attachment 2, Docket No.
                NHTSA-2018-0067-11873, at 185.
                ---------------------------------------------------------------------------
                 The agencies note broadly, in response to these comments, that when
                conducting an analysis which balances performance neutrality against
                the realities faced by manufacturers, such as manufacturing complexity,
                economies of scale, and maintaining the full range of performance
                criteria, it is inevitable to observe at least some minor shift in
                vehicle performance. For example, if a new transmission is applied to a
                vehicle, the greater number of gear ratios helps the engine run in its
                most efficient range which improves fuel economy, but also helps the
                engine to run in the optimal ``power band'' which improves performance.
                Thus, the technology can provide both improved fuel economy and
                performance. Another example is applying a small amount of mass
                reduction that improves both fuel economy and performance by a small
                amount. Resizing the engine to maintain performance in these examples
                would require a unique engine displacement that is only slightly
                different than the baseline engine. While engine resizing in these
                incremental cases could have some small benefit to fuel economy, the
                [[Page 24337]]
                gains may not justify the costs of producing unique niche engines for
                each combination of technologies. If manufacturers were to produce
                marginally downsized engines to complement every small increment of
                mass reduction or technology, the resulting large number of engine
                variants that would need to be manufactured would cause a substantial
                increase in manufacturing complexity, and require significant changes
                to manufacturing and assembly plants and equipment.\529\ The high costs
                would be economically infeasible.
                ---------------------------------------------------------------------------
                 \529\ For example, each unique engine would require unique
                internal components such as crankshafts, pistons, and connecting
                rods, as well as unique engine calibrations for each displacement.
                Assembly plants would need to stock and feed additional unique
                engines to the stations where engines are dressed and inserted into
                vehicles.
                ---------------------------------------------------------------------------
                 Also, as noted in the NPRM, the 2015 NAS report stated that ``[f]or
                small (under 5 percent [of curb weight]) changes in mass, resizing the
                engine may not be justified, but as the reduction in mass increases
                (greater than 10 percent [of curb weight]), it becomes more important
                for certain vehicles to resize the engine and seek secondary mass
                reduction opportunities.'' \530\ In consideration of both the NAS
                report and comments received from manufacturers, the agencies
                determined it would be reasonable to allow allows engine resizing upon
                adoption of 7.1 percent, 10.7 percent, 14.2 percent, and 20 percent
                curb weight reduction, but not at 3.6 percent and 5.3 percent.\531\
                Resizing is also allowed upon changes in powertrain type or the
                inheritance of a powertrain from another vehicle in the same platform.
                The increments of these higher levels of mass reduction, or complete
                powertrain changes, more appropriately match the typical engine
                displacement increments that are available in a manufacturer's engine
                portfolio.
                ---------------------------------------------------------------------------
                 \530\ National Research Council. 2011. Assessment of Fuel
                Economy Technologies for Light-Duty Vehicles. Washington, DC--The
                National Academies Press. http://nap.edu/12924.
                 \531\ These curb weight reductions equate to the following
                levels of mass reduction as defined in the analysis: MR3, MR4, MR5
                and MR6, but not MR1 and MR2; additional discussion of engine
                resizing for mass reduction can be found in Section VI.B.3.a)(6)
                Autonomie Sizes Powertrains for Full Vehicle Simulation.
                ---------------------------------------------------------------------------
                 The agencies point to the comments from manufacturers, discussed
                further above, which support the agencies' assertion that the CAFE
                model's resizing constraints are appropriate. As discussed previously,
                Toyota commented that this approach better considers the constraints of
                engineering resources and manufacturing costs and results in a more
                realistic number of engines and transmissions.\532\ The Alliance also
                commented on the benefit of constraining engine resizing, stating that
                ``the platform and engine sharing methodology in the model better
                replicates reality by making available to each manufacturer only a
                finite number of engine displacements, helping to prevent
                unrealistically `over-optimized' engine sizing.'' \533\
                ---------------------------------------------------------------------------
                 \532\ Toyota, Attachment 1, Docket No. NHTSA-2018-0067-12098, at
                6.
                 \533\ Alliance of Automobile Manufacturers, Attachment ``Full
                Comment Set,'' Docket No. NHTSA-2018-0067-12073, at 140.
                ---------------------------------------------------------------------------
                 Another comment from CARB stated that engine resizing ``was only
                simulated for cases where those levels of mass reduction were applied,
                in the absence of virtually all other technology or efficiency
                improvements.'' \534\ The agencies do not agree that resizing should be
                simulated in all cases which involve small incremental technologies. In
                the final rule analysis, vehicles can have engines resized at four (out
                of six) levels of mass reduction technology, during a vehicle redesign
                cycle which changes powertrain architecture, and by inheritance during
                a vehicle refresh cycle. As discussed previously, the application of
                small incremental technologies such as reductions in aerodynamic drag
                or rolling resistance does not justify the high cost and complexity of
                producing additional varieties of engine sizes. Accordingly, for each
                curb weight reduction level of 7.1 percent or above and for each
                vehicle technology class, Autonomie sized a baseline engine by running
                a simulation of a vehicle without incremental technologies applied;
                then, those baseline engines were inherited by all other simulations
                using the same levels of curb weight reduction, which also added any
                variety of incremental technologies.\535\ For further clarification, in
                any case in which a vehicle adopts a 7.1 percent or more curb weight
                reduction, no matter what other technologies were already present or
                are added to the vehicle in conjunction with the mass reduction, that
                vehicle will receive an engine which has been appropriately sized for
                the newly applied mass reduction level.\536\ This can be observed in
                the Autonomie simulation databases by tracking the ``EngineMaxPower''
                column (not the ``VehicleSized'' column).
                ---------------------------------------------------------------------------
                 \534\ California Air Resources Board, Attachment 2, Docket No.
                NHTSA-2018-0067-11873, at 178.
                 \535\ In the Autonomie simulation database files, the
                simulations which establish baseline sized engines are marked
                ``yes'' in the ``VehicleSized'' column, and the subsequent
                simulations which use this engine and add other incremental
                technologies are marked ``inherited.'' For a list of Autonomie
                simulation database files, see Table VI-4 Autonomie Simulation
                Database Output Files in Section VI.A.7 Structure of Model Inputs
                and Outputs.
                 \536\ For example, if a vehicle possesses MR2, AERO1, and ROLL1
                and subsequently adopts MR3, AERO1, ROLL2, the vehicle will adopt
                the lower engine power level associated with MR3. As a counter
                example, if a vehicle possesses MR3, ROLL1, and AERO1 and
                subsequently adopts MR3, ROLL1, AERO2, the engine will not be
                resized and it will retain the power level associated with MR3.
                ---------------------------------------------------------------------------
                 Finally, ICCT claimed that the agencies did not sufficiently report
                performance-related vehicle information. ICCT commented that the output
                files did not show data on ``engine displacement, the maximum power of
                each engine, the maximum torque of each engine, the initial and final
                curb weight of each vehicle (in absolute terms), and estimated 0-60 mph
                acceleration.'' ICCT claimed that because this data was not found, the
                agencies are ``showing that they have not even attempted to analyze
                accurately the future year fleet for their performance'' and that ``the
                agencies are intentionally burying a critical assumption, whereby their
                future fleet has not been appropriately downsized, and it therefore has
                greatly increased utility and performance characteristics.'' \537\
                ---------------------------------------------------------------------------
                 \537\ International Council on Clean Transportation, Attachment
                3, Docket No. NHTSA-2018-0067-11741, at I-74.
                ---------------------------------------------------------------------------
                 In fact, for the NPRM, and again for this final rule, the agencies
                did analyze vehicle performance and have made the data available to the
                public. An indication of the actual engine displacement change is
                available by noting the displacements used in Automonie simulation
                database for each of the technology states. The displacements reported
                in Autonomie are used by the full-vehicle-simulation within the
                Autonomie model, and while they do not directly represent each specific
                vehicle's actual engine sizes, they do fully reflect the relative
                change in engine size that is applied to each vehicle. It is the
                relative change in engine size that is relevant for the analysis.
                Similarly, the vehicle power and torque used by the full vehicle
                simulations are reported in the Autonomie simulation databases; their
                values and relative change across an engine resizing event can be
                observed. Initial and final curb weights for the analysis fleet are
                reported in Vehicles Report output file column titled ``CW Initial''
                and ``CW,'' respectively. The time required for 0-60 mph acceleration
                is reported in the Autonomie simulation database files. A detailed
                description of the engine resizing methodology is available in the
                Argonne Model
                [[Page 24338]]
                Documentation, which explains how vehicle characteristics are used to
                calculate powertrain size.\538\ These data and information that are
                available in the Autonomie and CAFE model documentation provide the
                information needed to analyze performance, and in fact, this is
                evidenced by the statements of numerous commenters discussed in this
                section. The agencies have conducted their own performance analysis,
                which is discussed further below, using the same data documentation
                mentioned here.
                ---------------------------------------------------------------------------
                 \538\ See Chapter 8 of the ANL Model documentation for the final
                rule analysis.
                ---------------------------------------------------------------------------
                 Updates to the CAFE model have minimized performance shift over the
                simulated model years, and have eliminated performance differences
                between simulated standards.
                 The Autonomie simulation updates, discussed previously, were
                included in the final rule analysis, and have resulted in average
                performance that is similar across the regulatory alternatives. Because
                the regulatory analysis compares differences in impacts among the
                alternatives, the agencies believe that having consistent performance
                across the alternatives is an important aspect of performance
                neutrality. If the vehicle fleet had performance gains which varied
                significantly depending on the alternative, performance differences
                would impact the comparability of the simulations. Using the NPRM CAFE
                model data, the agencies analyzed the sales-weighted average 0-60
                performance of the entire simulated vehicle fleet for MYs 2016 and
                2029, and identified that the Augural standards had 4.7 percent better
                0-60 mph acceleration time compared to the NPRM preferred alternative,
                which had no changes in standards in MYs 2021-2026.\539\ This
                assessment confirmed the observations of the various commenters. With
                the refinements that were incorporated for the final rule, similar
                analysis showed that the Augural standards had a negligible 0.1 percent
                difference in 0-60 mph acceleration time compared to the NPRM preferred
                alternative.\540\
                ---------------------------------------------------------------------------
                 \539\ The agencies' analysis matched all MY 2016 and MY 2029
                vehicles in the NPRM Vehicles Report output file, under both the
                Augural standards and preferred alternative, with the appropriate 0-
                60 mph acceleration time from the NPRM Autonomie simulation
                databases. This was done by examining each vehicle's assigned
                technologies, finding the Autonomie simulation with the
                corresponding set of technologies, and extracting that simulation's
                0-60 mph acceleration time. This process effectively assigned a 0-60
                time to every vehicle in the fleet for four scenarios: (1) MY 2016
                under augural standards, (2) MY 2016 under the preferred
                alternative, (3) MY 2029 under augural standards, and (4) MY 2029
                under the preferred alternative. For each scenario, an overall
                fleet-wide weighted average 0-60 time was calculated, using each
                vehicle's MY2016 sales volumes as the weight. For more information,
                see the FRIA Section VI.
                 \540\ This updated analysis used the FRM CAFE Model Vehicles
                Report output file and the FRM Autonomie simulation databases. The
                final rule analysis introduced an updated MY 2017 fleet as a
                starting point, replacing the NPRM 2016MY fleet. For more
                information, see the FRIA Chapter VI.
                ---------------------------------------------------------------------------
                 The updates applied to the final rule Autonomie simulations also
                resulted in further minimizing the performance change across model
                years. As the agencies attempted to minimize this performance shift
                occurring ``over time,'' it was also acknowledged that a small increase
                would be expected and would be reasonable. This increase is attributed
                to the analysis recognizing the practical constraints on the number of
                unique engine displacements manufacturers can implement, and therefore
                not resizing powertrains for every individual technology and every
                combination of technologies when the performance impacts are small.
                Perfectly equal performance with 0 percent change would not be
                achievable while accounting for these real world resizing constraints.
                The performance analysis in the 2011 NAS report shared a similar view
                on performance changes, stating that ``truly equal performance involves
                nearly equal values . . . within 5 percent.'' \541\ In response to
                comments, using NPRM CAFE model data, the agencies analyzed the sales-
                weighted average 0-60 performance of the entire simulated vehicle
                fleet, and identified that the performance increase from MYs 2016 and
                2029 was 7.5 percent under Augural Standards and 3.1 percent under the
                NPRM preferred alternative standards. The agencies conducted a similar
                analysis using final rule data and found the performance increase over
                time from MYs 2017 to 2029 was 3.9 percent for Augural Standards and
                4.0 percent for the NPRM preferred alternative standards. The agencies
                determined this change in performance is reasonable and note it is
                within the 5 percent bound in discussed by NAS in its 2011 report.
                ---------------------------------------------------------------------------
                 \541\ National Research Council. 2011. Assessment of Fuel
                Economy Technologies for Light-Duty Vehicles. Washington, DC--The
                National Academies Press, at 62. http://nap.edu/12924.
                ---------------------------------------------------------------------------
                 This assessment shows that for the final rule analysis, performance
                is neutral across regulatory alternatives and across the simulated
                model years allowing for fair, direct comparison among the
                alternatives.
                (7) How the Agencies Simulated Vehicle Models on Test Cycles
                 After vehicle models are built for every combination of
                technologies and vehicle classes represented in the analysis, Autonomie
                simulates their performance on test cycles to calculate the
                effectiveness improvement of the fuel-economy-improving technologies
                that have been added to the vehicle. Discussed earlier, the agencies
                minimize the impact of potential variation in determining effectiveness
                by using a series of tests and procedures specified by federal law and
                regulations under controlled conditions.
                 Autonomie simulates vehicles in a very similar process as the test
                procedures and energy consumption calculations that manufacturers must
                use for CAFE and CO2 compliance.542 543 544
                Argonne simulated each vehicle model on several test procedures to
                evaluate effectiveness. For vehicles with conventional powertrains and
                micro hybrids, Autonomie simulates the vehicles on EPA 2-cycle test
                procedures and guidelines.\545\ For mild and full hybrid electric
                vehicles and FCVs, Autonomie simulates the vehicles using the same EPA
                2-cycle test procedure and guidelines, and the drive cycles are
                repeated until the initial and final state of charge are within a SAE
                J1711 tolerance. For PHEVs, Autonomie simulates vehicles in similar
                procedures and guidelines as SAE J1711.\546\ For BEVs Autonomie
                simulates vehicles in similar procedures and guidelines as SAE
                J1634.\547\
                ---------------------------------------------------------------------------
                 \542\ EPA, ``How Vehicles are Tested.'' https://www.fueleconomy.gov/feg/how_tested.shtml. Last accessed Nov 14,
                2019.
                 \543\ ANL model documentation for final rule Chapter 6. Test
                Procedures and Energy Consumption Calculations.
                 \544\ EPA Guidance Letter. ``EPA Test Procedures for Electric
                Vehicles and Plug-in Hybrids.'' Nov. 14, 2017. https://www.fueleconomy.gov/feg/pdfs/EPA%20test%20procedure%20for%20EVs-PHEVs-11-14-2017.pdf. Last accessed Nov. 7, 2019.
                 \545\ 40 CFR part 600.
                 \546\ PHEV testing is broken into several phased based on SAE
                J1711. Charge-Sustaining on the City cycle, Charge-Sustaining on the
                HWFET cycle, Charge-Depleting on the City and HWFET cycles.
                 \547\ SAE J1634. ``Battery Electric Vehicle Energy Consumption
                and Range Test Procedure.'' July 12, 2017.
                ---------------------------------------------------------------------------
                b) Selection of One Full-Vehicle Modeling and Simulation Tool
                 The NPRM described tools that the agencies previously used to
                estimate technology effectiveness. For the analysis supporting the 2012
                final rule for MYs 2017 and beyond, the agencies used technology
                effectiveness estimates from EPA's lumped parameter model (LPM). The
                LPM was calibrated using data from vehicle simulation work performed by
                Ricardo Engineering.\548\
                [[Page 24339]]
                The agencies also used full vehicle simulation modeling data from
                Autonomie vehicle simulations performed by Argonne for mild hybrid and
                advanced transmission effectiveness estimates.549 550
                ---------------------------------------------------------------------------
                 \548\ Response to Peer Review of: Ricardo Computer Simulation of
                Light-Duty Vehicle Technologies for Greenhouse Gas Emission
                Reduction in the 2020-2025 Timeframe, EPA-420-R-11-021 (December
                2011), available at https://nepis.epa.gov/Exe/ZyPDF.cgi/P100D5BX.PDF?Dockey=P100D5BX.PDF.
                 \549\ Joint TSD: Final Rulemaking for 2017-2025 Light-Duty
                Vehicle Greenhouse Emission Standards and Corporate Average Fuel
                Economy Standards. August 2012. EPA-420-R-12-901.3.3.1.3 Argonne
                National Laboratory Simulation Study p. 3-69.
                 \550\ Moawad, A. and Rousseau, A., ``Impact of Electric Drive
                Vehicle Technologies on Fuel Efficiency,'' Energy Systems Division,
                Argonne National Laboratory, ANL/ESD/12-7, August 2012.
                ---------------------------------------------------------------------------
                 For the 2016 Draft TAR analysis, EPA and NHTSA used two different
                full system simulation programs for complementary but separate
                analyses. NHTSA used Argonne's Autonomie tool, described in detail
                above, with engine map inputs developed by IAV using GT-Power in 2014,
                and updated in 2016.551 552 553 Argonne, in coordination
                with NHTSA, developed a methodology for large scale simulation using
                Autonomie and distributed computing, thus overcoming one of the
                challenges to full vehicle simulation that the NAS committee outlined
                in its 2015 report and implementing a recommendation that the agencies
                use full-vehicle simulation to improve the analysis method of
                estimating technology effectiveness.\554\ EPA used a limited number of
                full-vehicle simulations performed using its ALPHA model, an EPA-
                developed full-vehicle simulation model,\555\ to calibrate the LPM,
                used to estimate technology effectiveness. EPA also used the same
                modeling approach for its Proposed Determination analysis.\556\
                ---------------------------------------------------------------------------
                 \551\ GT-Power Engine Simulation Software. https://www.gtisoft.com/gt-suite-applications/propulsion-systems/gt-power-engine-simulation-software/. Last accessed Oct. 10, 2019.
                 \552\ 2016 Draft TAR Engine Maps by IAV Automotive Engineering
                using GT-Power. https://www.nhtsa.gov/staticfiles/rulemaking/pdf/cafe/IAV_EngineMaps_Details.xlsx. Lass accessed Oct. 10, 2019.
                 \553\ NHTSA-2018-0067-0003. ANL--Summary of Main Component
                Performance Assumptions NPRM.
                 \554\ See National Research Council. 2015. Cost, Effectiveness,
                and Deployment of Fuel Economy Technologies for Light-Duty Vehicles.
                Washington, DC: The National Academies Press [hereinafter ``2015 NAS
                Report''] at p. 263, available at https://www.nap.edu/catalog/21744/cost-effectiveness-and-deployment-of-fuel-economy-technologies-for-light-duty-vehicles (last accessed June 21, 2018). See also A.
                Moawad, A. Rousseau, P. Balaprakash, S. Wild, ``Novel Large Scale
                Simulation Process to Support DOT's CAFE Modeling System,''
                International Journal of Automotive Technology (IJAT), Paper No.
                220150349, Nov 2015; Pagerit, S., Sharper, P., Rousseau, A., Sun, Q.
                Kropinski, M. Clark, N., Torossian, J., Hellestrand, G., ``Rapid
                Partitioning, Automatic Assembly and Multicore Simulation of
                Distributed Vehicle Systems.'' ANL, General Motors, EST Embedded
                Systems Technology. 2015. https://www.autonomie.net/docs/5%20-%20Presentations/VPPC2015_ppt.pdf. Last accessed Dec. 9, 2019.
                 \555\ See Lee, B., S. Lee, J. Cherry, A. Neam, J. Sanchez, and
                E. Nam. 2013. Development of Advanced Light-Duty Powertrain and
                Hybrid Analysis Tool. SAE Technical Paper 2013-01-0808. doi:
                10.4271/2013-01-0808.
                 \556\ Proposed Determination on the Appropriateness of the Model
                Year 2022-2025 Light-Duty Vehicle Greenhouse Gas Emissions Standards
                under the Midterm Evaluation, EPA-420-R-16-020 (November 2016),
                available at https://nepis.epa.gov/Exe/ZyPDF.cgi?Dockey=P100Q3DO.pdf; 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), available at https://nepis.epa.gov/Exe/ZyPDF.cgi?Dockey=P100QQ91.pdf.
                ---------------------------------------------------------------------------
                 In the subsequent August 2017 Request for Comment on
                Reconsideration of the Final Determination of the Mid-Term Evaluation
                of Greenhouse Gas Emissions Standards for MY 2022-2025 Light-Duty
                Vehicles, the agencies requested comments on whether EPA should use
                alternative methodologies and modeling, including the Autonomie full-
                vehicle simulation tool and DOT's CAFE model, for the analysis that
                would accompany its revised Final Determination.\557\ As discussed in
                the NPRM, stakeholders questioned the efficacy of the combined outputs
                and assumptions of the LPM and ALPHA,\558\ especially as the tools were
                used to evaluate increasingly heterogeneous combinations of
                technologies in the vehicle fleet.\559\
                ---------------------------------------------------------------------------
                 \557\ 82 FR 39551 (Aug. 21, 2017).
                 \558\ 83 FR 43022 (``At NHTSA-2016-0068-0082, p. 49, FCA
                provided the following comments, ``FCA believes EPA is
                overestimating the benefits of technology. As the LPM is calibrated
                to those projections, so too is the LPM too optimistic.'' FCA also
                shared the chart, `LPM vs. Actual for 8 Speed Transmissions.' '').
                 \559\ 83 FR 43022 (referencing Automotive News ``CAFE math gets
                trickier as industry innovates'' (Kulisch), March 26, 2018.).
                ---------------------------------------------------------------------------
                 More specifically, the Auto Alliance noted that their previous
                comments to the midterm evaluation, in addition to comments from
                individual manufacturers, highlighted multiple concerns with EPA's
                ALPHA model that were unresolved, but addressed in Autonomie.\560\
                First, the Alliance expressed concern over ALPHA modeling errors
                related to road load reductions, stating that an error derived from how
                mass and coast-down coefficients were updated when mass, tire and aero
                improvements were made resulted in benefits overstated by 3 percent to
                11 percent for all vehicle types. Next, the Alliance repeated its
                concern that EPA should consider top-gear gradeability as one of its
                performance metrics to maintain functionality, noting that EPA had
                acknowledged the industry's comments in the Proposed Determination,
                ``but generally dismissed the auto industry concerns.'' Additional
                analysis by EPA in its Response to Comments document did not allay the
                Alliance's concerns,\561\ as the Alliance concluded that ``[c]onsistent
                with the National Academy of Sciences recommendation from 2011, EPA
                should monitor gradeability to ensure minimum performance.''
                ---------------------------------------------------------------------------
                 \560\ EPA-HQ-OAR-2015-0827-9194, at p. 36-44.
                 \561\ The Alliance noted that in higher-gear-count
                transmissions, like 8-speed automatics, modeled by ALPHA with an
                expanded ratio spread to achieve fuel economy, are concerning for
                gradeability. Additionally, infinite engine downsizing along with
                expanded ratio spread transmission, in real world gradeability may
                cause further deteriorate as modeled in ALPHA, which leads to
                inflated effectiveness values for powertrains that would not meet
                customer demands.
                ---------------------------------------------------------------------------
                 Furthermore, the Alliance stated that ALPHA vehicle technology
                walks provided in response to manufacturer comments on the Proposed
                Determination did not correctly predict cumulative effectiveness when
                compared to technologies in real world applications. The Alliance
                stated that many of the individual technologies and assumptions used by
                ALPHA overestimated technology effectiveness and were derived from
                questionable sources. As an example, the Alliance referenced an engine
                map used by EPA to represent the Honda L15B7 engine, where the engine
                map data was collected by ``(1) taking a picture of an SAE document
                containing an image of the engine map, and then (2) `digitizing' the
                image by `tracing image contours' '' (citing EPA's ALPHA
                documentation). The Alliance could not definitively state whether the
                ``digitization'' process, lack of detail in the source image, or
                another factor were the reasons that some regions of overestimated
                efficiency were observed in the engine map, but concluded that ``the
                use of this map should be discontinued within ALPHA,'' and ``any
                analysis conducted with it is highly questionable.'' Based on these
                concerns and others, the Alliance recommended that Autonomie be used to
                inform the downstream cost optimization models (i.e., the CAFE model
                and/or OMEGA).
                 Global Automakers argued that NHTSA's CAFE model, which
                incorporates data from Autonomie simulations, provided a more
                transparent and discrete step through each of the modeling
                scenarios.\562\ Global pointed out that the LPM is ``of particular
                concern due to its simplified technology projection processes,'' and it
                ``propagates fundamentally flawed
                [[Page 24340]]
                content into the ALPHA and OMEGA models and therefore cannot accurately
                assess the efficacy of fuel economy technologies.'' Global did note
                that EPA ``plans to abandon its reliance on LPM in favor of another
                modeling approach,'' referring to the RSE,\563\ but stated that ``EPA
                must provide stakeholders with adequate time to evaluate the updated
                modeling approach, ensure it is analytically robust, and provide
                meaningful feedback.'' Global Automakers concluded that EPA's engine
                mapping and tear-down analyses have played an important role in
                generating publicly-available information, and stated that the data
                should be integrated into the Autonomie model.
                ---------------------------------------------------------------------------
                 \562\ EPA-HQ-OAR-2015-0827-9728, at 14.
                 \563\ See Moskalik, A., Bolon, K., Newman, K., and Cherry, J.
                ``Representing GHG Reduction Technologies in the Future Fleet with
                Full Vehicle Simulation,'' SAE Technical Paper 2018-01-1273, 2018,
                doi:10.4271/2018-01-1273. Since 2018, EPA has employed vehicle-
                class-specific response surface equations automatically generated
                from a large number of ALPHA runs to more readily apply large-scale
                simulation results, which eliminated the need for manual calibration
                of effectiveness values between ALPHA and the LPM.
                ---------------------------------------------------------------------------
                 On the other hand, other stakeholders commented that EPA's ALPHA
                modeling should continue to be used, for procedural reasons like,
                ``[i]t would appear arbitrary for EPA now, after five years of modeling
                based on ALPHA, to declare it can no longer use its internally
                developed modeling tools and must rely solely on the Autonomie model,''
                and ``[t]he ALPHA model is inextricably built into the regulatory and
                technical process. It will require years of new analysis to replace the
                many ALPHA and OMEGA modeling inputs and outputs that permeate the
                entire rulemaking process, should EPA suddenly decide to change its
                models.'' \564\ Commenters also cited technical reasons to use ALPHA,
                like EPA's progress benchmarking and validating the ALPHA model to over
                fifteen various MY 2013-2015 vehicles,\565\ and that technologies like
                the ``Atkinson 2'' engine technology were not considered in NHTSA's
                compliance modeling.\566\ Commenters also cited that ALPHA was created
                to be publicly available, open-sourced, and peer-reviewed, ``to allow
                for transparency to both automakers and public stakeholders, without
                hidden and proprietary aspects that are present in commercial modeling
                products.'' \567\
                ---------------------------------------------------------------------------
                 \564\ EPA-HQ-OAR-2015-9826, at 39-40.
                 \565\ EPA-HQ-OAR-2015-9826, at 40.
                 \566\ EPA-HQ-OAR-2015-9197, at 28.
                 \567\ EPA-HQ-OAR-2015-9826, at 38.
                ---------------------------------------------------------------------------
                 The agencies described in the NPRM that after having reviewed
                comments about whether EPA should use alternative methodologies and
                modeling, and after having considered the matter fully, the agencies
                determined it was reasonable and appropriate to use Autonomie for full-
                vehicle simulation.\568\ The agencies stated that nothing in Section
                202(a) of the Clean Air Act (CAA) mandated that EPA use any specific
                model or set of models for analysis of potential CO2
                standards for light duty vehicles. The agencies also distinguished the
                models and the inputs used to populate them; specifically, comments
                presented as criticisms of the models, such as ``Atkinson 2'' engine
                technology not considered in the compliance modeling, actually
                concerned model inputs.\569\
                ---------------------------------------------------------------------------
                 \568\ 83 FR 43001.
                 \569\ 83 FR 43002.
                ---------------------------------------------------------------------------
                 With regards to modeling technology effectiveness, the agencies
                concluded that, although the CAFE model requires no specific approach
                to developing effectiveness inputs, the National Academy of Sciences
                recommended, and stakeholders have commented, that full-vehicle
                simulation provides the best balance between realism and practicality.
                As stated above, Argonne has spent several years developing, applying,
                and expanding means to use distributed computing to exercise its
                Autonomie full-vehicle simulation tool at the scale necessary for
                realistic analysis of technologies that could be used to comply with
                CAFE and CO2 standards, and this scalability and related
                flexibility (in terms of expanding the set of technologies to be
                simulated) makes Autonomie well-suited for developing inputs to the
                CAFE model.
                 In response to the NPRM, the Auto Alliance commented that NHTSA's
                modeling and analysis tools are superior to EPA's, noting that NHTSA's
                tools have had a significant lead in their development.\570\ The
                Alliance pointed out that Autonomie was developed from the beginning to
                address the complex task of combining two power sources in a hybrid
                powertrain, while EPA's ALPHA model had not been validated or used to
                simulate hybrid powertrains. While both models are physics-based
                forward looking vehicle simulators, the Alliance commented that
                Autonomie is fully documented with available training, while ALPHA
                ``has not been documented with any instructions making it difficult for
                users outside of EPA to run and interpret the model.'' The Alliance
                also mentioned specific improvements in the Autonomie simulations since
                the Draft TAR, including expanded performance classes to better
                consider vehicle performance characteristics, the inclusion of
                gradeability as a performance metric, as recommended by the NAS, the
                inclusion of new fuel economy technologies, and the removal of unproven
                technologies.
                ---------------------------------------------------------------------------
                 \570\ NHTSA-2018-0067-12073.
                ---------------------------------------------------------------------------
                 The Alliance, Global Automakers, and other automakers writing
                separately all stated that the agencies should use one simulation and
                modeling tool for analysis.571 572 The Alliance stated that
                since both the Autonomie and ALPHA modeling systems answer essentially
                the same questions, using both systems leads to inconsistencies and
                conflicts, and is inefficient and counterproductive.
                ---------------------------------------------------------------------------
                 \571\ NHTSA-2018-0067-12073; NHTSA-2018-0067-12032. Comments of
                the Association of Global Automakers, Inc. on the Safer Affordable
                Fuel-Efficient Vehicles Rule Docket ID Numbers: NHTSA-2018-0067 and
                EPA-HQ-OAR-2018-0283 October 26, 2018.
                 \572\ NHTSA-2018-0067-11943. FCA Comments on The Safer
                Affordable Fuel-Efficient (SAFE) Vehicles Rule for Model Years 2021-
                2026 Passenger Cars and Light Trucks Notice of Proposed Rulemaking.
                ---------------------------------------------------------------------------
                 The agencies agree with the Alliance that the fully developed and
                validated Autonomie model fulfills the agencies' analytical needs for
                full-vehicle modeling and simulation. The agencies also agree that it
                is counterintuitive to have two separate models conducting the same
                work.
                 Some commenters stated that broadly, EPA was required to conduct
                its own technical analysis and rely on its own models to do so.\573\
                Those comments are addressed in Section IV.
                ---------------------------------------------------------------------------
                 \573\ NHTSA-2018-0067-12000; NHTSA-2018-0067-12039.
                ---------------------------------------------------------------------------
                 Regarding the merits of EPA's models, and based on previous inputs
                and assumptions used to populate those models, ICCT commented that
                ``[b]ased on the ICCT's global analysis of vehicle regulations, the
                EPA's physics-based ALPHA modeling offers the most sophisticated and
                thorough modeling of the applicable technologies that has ever been
                conducted.'' ICCT listed several reasons for this, including that the
                EPA modeling is based on systematic modeling of technologies and their
                synergies; it was built and improved upon by extensive modeling by and
                with Ricardo (an engineering consulting firm); it incorporated National
                Academies input at multiple stages; it has included many peer reviews
                at many stages of the modeling and the associated technical reports
                published by engineers in many technical journal articles and
                conference proceedings; and EPA's Draft TAR analysis, which used ALPHA,
                used state-of-the-art engine maps based on benchmarked high-efficiency
                engines. ICCT concluded
                [[Page 24341]]
                that ``[d]espite these rigorous advances in vehicle simulation
                modeling, it appears that the agencies have inexplicably abandoned this
                approach, expressly disregarding the EPA benchmarked engines, ALPHA
                modeling, and all its enhancements since the last rulemaking.''
                 The hallmarks ICCT lists regarding the ALPHA modeling are equally
                applicable to Autonomie.\574\ Autonomie is also based on systematic
                modeling of technologies and their synergies when combined as packages.
                The U.S. Department of Energy created Autonomie, and over the past two
                decades, helped to develop and mature the processes and inputs used to
                represent real-world vehicles using continuous feedback from the tool's
                worldwide user base of vehicle manufacturers, suppliers, government
                agencies, and other organizations. Moreover, using Autonomie brings the
                agencies closer to the NAS Committee's stated goal of ``full system
                simulation modeling for every important technology pathway and for
                every vehicle class.'' \575\ While the NAS Committee originally thought
                that full vehicle simulation modeling would not be feasible for the
                thousands of vehicles in the analysis fleets because the technologies
                present on the vehicles might differ from the configurations used in
                the simulation modeling,\576\ Argonne has developed a process to
                simulate explicitly every important technology pathway for every
                vehicle class. Moreover, although separate from the Autonomie model
                itself, the Autonomie modeling for this rulemaking incorporated other
                NAS committee recommendations regarding full vehicle simulation inputs
                and input assumptions, including using engine-model-generated maps
                derived from a validated baseline map in which all parameters except
                the new technology of interest are held constant.\577\
                ---------------------------------------------------------------------------
                 \574\ See Theo LeSieg, Ten Apples Up On Top! (1961), at 4-32.
                 \575\ 2015 NAS Report at 358.
                 \576\ 2015 NAS Report at 359.
                 \577\ NAS Recommendation 2.1.
                ---------------------------------------------------------------------------
                 As discussed further below and in VI.C.1 Engine Paths, this is one
                reason why the IAV maps were used instead of the EPA maps, and the
                agencies instead referenced EPA's engine maps to corroborate the
                Autonomie effectiveness results. The IAV maps are engine-model-
                generated maps derived from a validated baseline map in which all
                parameters except the new technology of interest are held constant.
                While EPA's engine maps benchmarking specific vehicles' engines
                incorporate multiple technologies, for example including improvements
                in engine friction and reduction in accessory parasitic loads,
                comparisons presented in Section VI.C.1 showed that engine maps
                developed by IAV, while not exactly the same, are representative of
                EPA's engine benchmarking data.
                 In addition, both ALPHA and Autonomie have been used to support
                analyses that have been published in technical journal articles and
                conference proceedings, but those analyses differ fundamentally because
                of the nature of the tools. ALPHA was developed as a tool to be used by
                EPA's in-house experts.\578\ As EPA stated in the ALPHA model peer
                review,\579\ ``ALPHA is not intended to be a commercial product or
                supported for wide external usage as a development tool.'' \580\
                Accordingly, EPA experts have published several peer-reviewed journal
                articles using ALPHA and have presented the results of those papers at
                conference proceedings.\581\
                ---------------------------------------------------------------------------
                 \578\ ALPHA Peer Review, at 4-1.
                 \579\ ICCT's comments intimate that ALPHA has been peer reviewed
                at many stages of the modeling; although EPA has published several
                peer-reviewed technical papers, the ALPHA model itself has been
                subject to one peer review. See Peer Review of ALPHA Full Vehicle
                Simulation Model, available at https://nepis.epa.gov/Exe/ZyPdf.cgi?Dockey=P100PUKT.pdf.
                 \580\ ALPHA Peer Review, at 4-2.
                 \581\ See, e.g., Dekraker, P., Kargul, J., Moskalik, A., Newman,
                K. et al., ``Fleet-Level Modeling of Real World Factors Influencing
                Greenhouse Gas Emission Simulation in ALPHA,'' SAE Int. J. Fuels
                Lubr. 10(1):2017, doi:10.4271/2017-01-0899.
                ---------------------------------------------------------------------------
                 To explore ICCT's comments on the importance of peer review
                further, it is important to take the actual substantive content of the
                ALPHA peer review into account.\582\ One reviewer raised significant
                questions over the availability of ALPHA documentation, stating
                ``[t]here is an overall lack of detail on key technical features that
                are new in the model,'' and ``[w]e were not able to find any
                information on how the model handles component weight changes.''
                Reviewers also raised questions related to model readiness, stating
                ``[a]ccording to the documentation review, ALPHA's stop/start modeling
                appears to be very simplistic.'' Moreover, when running ALPHA
                simulations, the reviewer noted the results ``strongly suggest that the
                model has errors in the underlying equations or coding with respect to
                all of the load reductions.'' Also, one reviewer said the following of
                ALPHA: ``A specific simulation runtime is significantly high, more than
                10 mins. without providing any indication to the user progress made so
                far. A fairly more complicated model such as Autonomie available even
                with enhanced capabilities is significantly faster today.'' \583\
                ---------------------------------------------------------------------------
                 \582\ EPA. ``Peer Review of ALPHA Full Vehicle Simulation
                Model.'' EPA-420-R-16-013. October 2016. https://nepis.epa.gov/Exe/ZyPdf.cgi?Dockey=P100PUKT.pdf. Last accessed Nov 18, 2019.
                 \583\ Peer Review of ALPHA Full Vehicle Simulation Model, at C-
                4, available at https://nepis.epa.gov/Exe/ZyPdf.cgi?Dockey=P100PUKT.pdf.
                ---------------------------------------------------------------------------
                 The peer reviewer's assessment of Autonomie as a more complicated
                model with enhanced capabilities is not surprising, given Autonomie's
                history of development. Autonomie is a commercial tool with more than
                275 worldwide organizational users, including vehicle manufacturers,
                suppliers, government agencies, and nonprofit organizations having
                licensed and used Autonomie. Both Autonomie's creators and user base
                unaffiliated with Argonne have published over 100 papers, including
                peer-reviewed papers in journals, related to Autonomie validation and
                other studies.584 585 One could even argue that the tool has
                been continuously peer reviewed by these thousands of experts over the
                past two decades.
                ---------------------------------------------------------------------------
                 \584\ At least 15 peer-reviewed papers authored by ANL experts
                have been referenced throughout this Section, and others can be
                found at SAE International's website, https://www.sae.org/, using
                the search bar for ``Autonomie.''
                 \585\ See, e.g., Haupt, T., Henley, G., Card, A., Mazzola, M. et
                al., ``Near Automatic Translation of Autonomie-Based Power Train
                Architectures for Multi-Physics Simulations Using High Performance
                Computing,'' SAE Int. J. Commer. Veh. 10(2):483-488, 2017, https://doi.org/10.4271/2017-01-0267; Samadani, E., Lo, J., Fowler, M.,
                Fraser, R. et al., ``Impact of Temperature on the A123 Li-Ion
                Battery Performance and Hybrid Electric Vehicle Range,'' SAE
                Technical Paper 2013-01-1521, 2013, https://doi.org/10.4271/2013-01-1521.
                ---------------------------------------------------------------------------
                 In fact, in responding to a peer review comment on the ALPHA
                model's underlying equations and coding with respect to road load
                reductions, EPA noted that Autonomie had been used as a reference
                system simulation tool to validate ALPHA model results.\586\
                ---------------------------------------------------------------------------
                 \586\ Peer Review of ALPHA Full Vehicle Simulation Model, at 4-
                14 and 4-15, available at https://nepis.epa.gov/Exe/ZyPdf.cgi?Dockey=P100PUKT.pdf.
                ---------------------------------------------------------------------------
                 Outside of formal peer-reviewed studies, Autonomie has been used by
                organizations like ICCT to support policy documents, position briefs,
                and white papers assessing the potential of future efficiency
                technologies to meet potential regulatory requirements,\587\
                [[Page 24342]]
                just as the agencies did in this rulemaking.
                ---------------------------------------------------------------------------
                 \587\ See, e.g., Oscar Delgado and Nic Lutsey, Advanced Tractor-
                Trailer Efficiency Technology Potential in the 2020-2030 Timeframe
                (April 2015), available at https://theicct.org/sites/default/files/publications/ICCT_ATTEST_20150420.pdf; Ben Sharpe, Cost-
                Effectiveness of Engine Technologies for a Potential Heavy-Duty
                Vehicle Fuel Efficiency Regulation in India (June 2015), available
                at https://theicct.org/sites/default/files/publications/ICCT_position-brief_HDVenginetech-India_jun2015.pdf; Ben Sharpe and
                Oscar Delgado, Engines and tires as technology areas for efficiency
                improvements for trucks and buses in India (working paper published
                March 2016), available at https://theicct.org/sites/default/files/publications/ICCT_HDV-engines-tires_India_20160314.pdf.
                ---------------------------------------------------------------------------
                 Similarly to ICCT, UCS stated that in contrast to Autonomie, ALPHA
                had been thoroughly peer-reviewed and is constantly being updated to
                reflect the latest technology developments based on work performed by
                the National Vehicle and Fuel Emissions Laboratory.\588\ UCS also
                stated that because EPA has direct control over the model and its
                interface to OMEGA, EPA can better ensure that the inputs into OMEGA
                reflect the most up-to-date data, unlike the Autonomie work, which
                effectively has to be ``locked in'' before it can be deployed in the
                CAFE model. UCS also stated that ALPHA is based on the GEM model (used
                to simulate compliance with heavy-duty vehicle regulations) which was
                been updated with feedback from heavy-duty vehicle manufacturers and
                suppliers, and in fact, ``NHTSA has such confidence in the GEM model
                that they accept its simulation-based results as compliance with the
                heavy-duty fuel economy regulations.''
                ---------------------------------------------------------------------------
                 \588\ NHTSA-2018-0067-12039 (UCS).
                ---------------------------------------------------------------------------
                 Again, the agencies believe that it is important to note that
                Autonomie not only meets, but also exceeds, UCS' listed metrics.
                Autonomie's models, sub-models, and controls are constantly being
                updated to reflect the latest technology developments based on work
                performed by Argonne National Laboratory's Advanced Mobility Technology
                Laboratory (AMTL) (formerly Advanced Powertrain Research Facility, or
                ARPF).589 590 The Autonomie validation has included nine
                validation studies with accompanying reports for software, six
                validation studies and reports for powertrains, nine validation studies
                and reports for advanced components, ten validation studies and reports
                for advanced controls, and overall model validation using test data
                from over 50 vehicles.\591\
                ---------------------------------------------------------------------------
                 \589\ See NPRM PRIA. The agencies cited a succinctly-summarized
                presentation of Autonomie vehicle validation procedures based on
                AMTL test data in the NPRM ANL modeling documentation and PRIA
                docket for stakeholders to review at NHTSA-2018-0067-1972 and NHTSA-
                2018-0067-0007.
                 \590\ Jeong, J., Kim, N., Stutenberg, K., Rousseau, A.,
                ``Analysis and Model Validation of the Toyota Prius Prime,'' SAE
                2019-01-0369, SAE World Congress, Detroit, April 2019; Kim, N,
                Jeong, J., Rousseau, A. & Lohse-Busch, H. ``Control Analysis and
                Thermal Model Development of PHEV,'' SAE 2015-01-1157, SAE World
                Congress, Detroit, April 15; Kim, N., Rousseau, A. & Lohse-Busch, H.
                ``Advanced Automatic Transmission Model Validation Using Dynamometer
                Test Data,'' SAE 2014-01-1778, SAE World Congress, Detroit, Apr.
                14.; Lee, D. Rousseau, A. & Rask, E. ``Development and Validation of
                the Ford Focus BEV Vehicle Model,'' 2014-01-1809, SAE World
                Congress, Detroit, Apr. 14; Kim, N., Kim, N., Rousseau, A., & Duoba,
                M. ``Validating Volt PHEV Model with Dynamometer Test Data using
                Autonomie,'' SAE 2013-01-1458, SAE World Congress, Detroit, Apr.
                13.; Kim, N., Rousseau, A., & Rask, E. ``Autonomie Model Validation
                with Test Data for 2010 Toyota Prius,'' SAE 2012-01-1040, SAE World
                Congress, Detroit, Apr. 12; Karbowski, D., Rousseau, A, Pagerit, S.,
                & Sharer, P. ``Plug-in Vehicle Control Strategy--From Global
                Optimization to Real Time Application,'' 22th International Electric
                Vehicle Symposium (EVS22), Yokohama, (October 2006).
                 \591\ Rousseau, A. Moawad, A. Kim, Namdoo. ``Vehicle System
                Simulation to Support NHTSA CAFE standards for the Draft Tar.''
                https://www.nhtsa.gov/sites/nhtsa.dot.gov/files/anl-nhtsa-workshop-vehicle-system-simulation.pdf. Last accessed Nov 20, 2019.
                ---------------------------------------------------------------------------
                 In fact, using Autonomie, which has validated data based on test
                data from over 50 vehicles, alleviates other stakeholder concerns about
                the level of model validation in past analyses. For example, Global
                Automakers expressed concerns about whether the effectiveness values
                used in past EPA analysis, generated from ALPHA full-vehicle model
                simulations, were properly validated, stating that ``[a]lthough EPA
                claims that the LPM was calibrated based on thorough testing and
                modeling with the ALPHA model, the materials provided with the Proposed
                and Final Determination only cover 18 percent of the projected vehicle
                fleet with regards to specific combinations of powertrain technology
                presented by EPA in the MY 2025 OMEGA pathway. It is unclear how EPA
                calibrated the LPM for the remaining 82 percent of the projected
                vehicles. EPA's failure to publicly share the data for such a large
                percentage of vehicles raises questions about the quality of data.''
                \592\ While simple modeled parameters like single dimensional linear
                systems, such as engine dynamometer torque measurements can be
                validated through other models,\593\ full vehicle systems are complex
                multi-dimensional non-linear systems that need to be developed with
                multiple data sets, and validated with other fully independent data
                sets. Autonomie's models and sub-models have undergone extensive
                validation that has proven the models' agreement with empirical data
                and the principles of physics.
                ---------------------------------------------------------------------------
                 \592\ Docket ID EPA-HQ-OAR-2015-0827-9728. Global later repeated
                that ``only 18% of all vehicle data used as inputs to the ALPHA
                modeling was made available in the EPA's public sources. Additional
                data had to be specifically requested subsequent to the publication
                of the Draft TAR and Proposed Determination. This lack of publicly
                available data highlights transparency concerns, which Global
                Automakers has raised on several previous occasions.''
                 \593\ Section 89.307 Dynamometer calibration.
                ---------------------------------------------------------------------------
                 In addition, the agencies disagree with UCS' comment that EPA's
                direct control over its effectiveness modeling and interface to OMEGA
                results in a more up-to-date analysis. Argonne's participation in
                developing inputs for the rulemaking analysis allowed the agencies
                access to vehicle benchmarking data from more vehicles than if the
                agencies were limited by their own resources, and access to the Argonne
                staff's extensive experience based on direct coordination with vehicle
                manufacturers, suppliers, and researchers that all actively use
                Autonomie for their own work. In addition to Autonomie's continuous
                updates to incorporate the latest fuel-economy-improving technologies,
                discussed throughout this section, the data supplied to and generated
                by Autonomie for use in the CAFE model was continuously updated during
                the analysis process. This is just one part of the iterative quality
                assurance (QA) and quality check (QC) process that the agencies
                developed when Argonne's large-scale simulation modeling based in
                Autonomie was first used for the Draft TAR.
                 In addition to Argonne's team constantly updating Autonomie,
                Argonne's use of high performance computing (HPC) allowed for constant
                update of the analysis during the rulemaking process. Argonne's HPC
                platform allows a full set of simulations--over 750,000 modeled
                vehicles that incorporate over 50 different fuel-economy-improving
                technologies--to be simulated in one week. Subsets of the simulations
                can be re-run should issues come up during QA/QC in a day or less.
                Tools like the internet and high performance computers have allowed the
                agencies to evaluate technology effectiveness with up-to-date inputs
                without the proximity of the computers and the people running them
                working as a detriment the analysis.
                 Finally, GEM, ALPHA, and Autonomie were all developed in the MATLAB
                computational environment as forward-looking physics-based vehicle
                models. Just as ALPHA has roots in GEM, created in 2010 to accompany
                the agencies' heavy-duty vehicle CO2 emissions and fuel
                consumption standards, Autonomie has its origins in the software PSAT,
                developed over 20 years ago. While this information is useful, as
                implied by UCS' comment, the origin of the software was less important
                than the capabilities the software could provide for today's analysis.
                NHTSA's acceptance of GEM
                [[Page 24343]]
                results for compliance with heavy-duty fuel economy regulations had no
                bearing on the decision to use Autonomie to assess the effectiveness of
                light-duty fuel economy and CO2 improving technologies. GEM
                was developed to serve as the compliance model for heavy-duty
                vehicles,\594\ and GEM serves that limited scope very well.
                ---------------------------------------------------------------------------
                 \594\ Newman, K., Dekraker, P., Zhang, H., Sanchez, J. et al.,
                ``Development of Greenhouse Gas Emissions Model (GEM) for Heavy- and
                Medium-Duty Vehicle Compliance,'' SAE Int. J. Commer. Veh.
                8(2):2015, doi:10.4271/2015-01-2771.
                ---------------------------------------------------------------------------
                 UCS did comment that full vehicle simulation could significantly
                improve the estimates of technology effectiveness, but thought it
                critical that the process be as open and transparent as possible. UCS
                pointed to ALPHA results published in peer-reviewed journals as an
                example of how transparency has provided the ALPHA modeling effort with
                significant and valuable feedback, and contrasted what they
                characterized as Autonomie's ``black box'' approach, which they stated
                ``does not lend itself to similar dialog, nor does it make it easy to
                assess the validity of the results.'' Specifically, UCS stated that it
                is ``impossible to verify, replicate, or alter the work done by
                Autonomie due to the expensive nature of the tools used and lack of
                open source or peer-reviewed output.'' In contrast, UCS stated that
                EPA's ALPHA model has been thoroughly peer reviewed, and is readily
                ``downloadable, editable, and accessible to anyone with a MATLAB
                license.''
                 The agencies responses on the merits of how ALPHA and Autonomie
                were peer-reviewed are discussed above. Regarding UCS' comment that it
                is impossible to verify, replicate, or alter the work done by
                Autonomie, the agencies disagree. All inputs, assumptions, model
                documentation--including of component models and individual control
                algorithms--and outputs for the NPRM Autonomie modeling were submitted
                to the docket for review.\595\ Commenters were able to provide a robust
                analysis of Autonomie's technology effectiveness inputs, input
                assumptions, and outputs, as shown by their comments on specific
                vehicle technology effectiveness assumptions, discussed throughout this
                section and in the individual technology sections below.
                ---------------------------------------------------------------------------
                 \595\ NHTSA-2018-0067-1855. ANL Autonomie Compact Car Vehicle
                Class Results. Aug 21, 2018. NHTSA-2018-0067-1856. ANL Autonomie
                Performance Compact Car Vehicle Class Results. Aug 21, 2018. NHTSA-
                2018-0067-1494. ANL Autonomie Midsize Car Vehicle Class Results. Aug
                21, 2018. NHTSA-2018-0067-1487. ANL Autonomie Performance Pick-Up
                Truck Vehicle Class Results. Aug 21, 2018. NHTSA-2018-0067-1663. ANL
                Autonomie Performance Midsize Car Vehicle Class Results. Aug 21,
                2018. NHTSA-2018-0067-1486. ANL Autonomie Small SUV Vehicle Class
                Results. Aug 21, 2018 NHTSA-2018-0067-1662. ANL Autonomie
                Performance Midsize SUV Vehicle Class Results. Aug 21, 2018. NHTSA-
                2018-0067-1661. ANL Autonomie Pickup Truck Vehicle Class Results.
                Aug 21, 2018. NHTSA-2018-0067-1485. ANL Autonomie Small Performance
                SUV Vehicle Class Results. Aug 21, 2018 NHTSA-2018-0067-1492. ANL
                Autonomie Midsize SUV Vehicle Class Results. Aug. 21, 2018. NHTSA-
                2018-0067-0005. ANL Autonomie Model Assumptions Summary. Aug 21,
                2018. NHTSA-2018-0067-0003. ANL Autonomie Summary of Main Component
                Assumptions. Aug 21, 2018. NHTSA-2018-0067-0007. Islam, E. S,
                Moawad, A., Kim, N, Rousseau, A. ``A Detailed Vehicle Simulation
                Process To Support CAFE Standards 04262018--Report'' ANL Autonomie
                Documentation. Aug 21, 2018. NHTSA-2018-0067-0004. ANL Autonomie
                Data Dictionary. Aug 21, 2018. NHTSA-2018-0067-1692. ANL BatPac
                Model 12 55. Aug 21, 2018. NHTSA-2018-0067-12299. Preliminary
                Regulatory Impact Analysis (July 2018). Posted July 2018 and updated
                August 23 and October 16, 2018.
                ---------------------------------------------------------------------------
                 The agencies also disagree with UCS' assessment of Autonomie as
                ``expensive.'' While Autonomie is a commercial product, the biggest
                financial barrier to entry for both ALPHA and Autonomie is the same: A
                MathWorks license.596 597 Regardless, Argonne has made the
                version of Autonomie used for this final rule analysis available upon
                request, including the individual runs used to generate each technology
                effectiveness estimate.\598\
                ---------------------------------------------------------------------------
                 \596\ Autonomie. Frequently Asked Questions. ``Which version of
                matlab can I use?'' https://www.autonomie.net/faq.html#faq2. Last
                accessed Nov. 19, 2019.
                 \597\ EPA ALPHA v2.2 Technology Walk Samples. ``Running this
                version of ALPHA requires Matlab/Simulink with StateFlow 2016b.''
                https://www.epa.gov/regulations-emissions-vehicles-and-engines/advanced-light-duty-powertrain-and-hybrid-analysis-alpha.
                 \598\ Argonne Nationally Laboratory. Autonomie License
                Information. https://www.autonomie.net/asp/LicenseRequest.aspx. Last
                accessed Nov, 18, 2019.
                ---------------------------------------------------------------------------
                 Next, ICCT supplanted its statement that the agencies
                ``inexplicably'' abandoned ALPHA, commenting that the agencies'
                explanation and justification for relying on Autonomie rather than
                ALPHA failed to discuss ALPHA in detail, and the agencies did not
                compare and contrast the two models. ICCT continued, ``the EPA cannot
                select its modeling tool arbitrarily, yet it appeared that the EPA has
                whimsically shifted from an extremely well-vetted, up-to-date,
                industry-grade modeling tool to a less-vetted, academic-grade framework
                with outdated inputs without even attempt to scrutinize the change.''
                ICCT also stated that the agencies are legally obligated to acknowledge
                and explain when they change position, and ``cannot simply ignore that
                EPA previously concluded that the ALPHA modeling accurately projected
                real-world effects of technologies and technology packages.''
                 The agencies disagree that a more in-depth discussion of ALPHA was
                required in the NPRM. In acknowledging the transition to using
                Autonomie for effectiveness modeling and the CAFE model for analysis of
                regulatory alternatives,\599\ the agencies described several analytical
                needs that using a single analysis from the CAFE model--with inputs
                from the Autonomie tool--addressed. These included that Autonomie
                produced realistic estimates of fuel economy levels and CO2
                emission rates through consideration of real-world constraints, such as
                the estimation and consideration of performance, utility, and
                drivability metrics (e.g., towing capability, shift busyness, frequency
                of engine on/off transitions).\600\ That EPA previously concluded the
                ALPHA modeling accurately projected real-world effects of technologies
                and technology packages has no bearing on Autonomie's ability to
                fulfill the analytical needs that the agencies articulated in the NPRM,
                including that Autonomie also accurately projects real-world effects of
                technologies and technology packages.
                ---------------------------------------------------------------------------
                 \599\ 83 FR 43000 (Aug. 24, 2018).
                 \600\ 83 FR 43001 (Aug. 24, 2018).
                ---------------------------------------------------------------------------
                 The agencies also disagree with ICCT's characterization of ALPHA as
                ``an extremely well-vetted, up-to-date, industry-grade modeling tool''
                and Autonomie as a ``less-vetted, academic-grade framework with
                outdated inputs.'' Again, Autonomie has been used by government
                agencies, vehicle manufacturers (and by agencies and manufacturers
                together in the collaborative government-industry partnership U.S.
                DRIVE program), suppliers, and other organizations because of its
                ability to simulate many powertrain configurations, component
                technologies, and vehicle-level controls over numerous drive cycles.
                Characterizing ALPHA as an ``industry-grade modeling tool'' contravenes
                EPA's own description of its tool--an in-house vehicle simulation model
                used by EPA, not intended to be a commercial product.\601\
                ---------------------------------------------------------------------------
                 \601\ See, e.g., Overview of ALPHA Model, https://www.epa.gov/regulations-emissions-vehicles-and-engines/advanced-light-duty-powertrain-and-hybrid-analysis-alpha; ALPHA Effectiveness Modeling:
                Current and Future Light-Duty Vehicle & Powertrain Technologies
                (Jan. 20, 2016), available at https://www.epa.gov/sites/production/files/2016-10/documents/alpha-model-sae-govt-ind-mtg-2016-01-20.pdf
                (``ALPHA is not a commercial product (e.g. there are no user
                manuals, tech support hotlines, graphical user interfaces, or full
                libraries of components).''). See also Peer Review of ALPHA Full
                Vehicle Simulation Model, available at https://nepis.epa.gov/Exe/ZyPdf.cgi?Dockey=P100PUKT.pdf. While ALPHA peer reviewers found the
                model to be a ``fairly simple transparent model . . . [t]he model
                execution requires an expert MatLab/Simulink user since no user-
                friendly interface currently exists.'' Indeed, EPA noted in response
                to this comment that ``[a]s with any internal tool, EPA does not
                have the need for a ``user-friendly interface'' like one that would
                normally accompany a commercial product which is available for
                purchase and fully supported for wide external usage.''
                ---------------------------------------------------------------------------
                [[Page 24344]]
                 That characterization also contravenes documentation from the
                automotive industry indicating that manufacturers consider ALPHA to
                generate overly optimistic effectiveness values, to be unrepresentative
                of real-world constraints, and a difficult tool to
                use.602 603 The Alliance commented to the MTE
                reconsideration that ``[p]revious comments from the Alliance and
                individual manufacturers to the MTE docket have highlighted multiple
                concerns with EPA's ALPHA model. Many of these concerns remain
                unresolved.'' \604\ Furthermore, the Alliance commented that ALPHA
                ``has not been documented with any instructions making it difficult for
                users outside of EPA to run and interpret the model.'' \605\ Global
                Automakers further stated that the ``lack of publicly available data
                [related to inputs used in the ALPHA modeling] highlights transparency
                concerns, which Global Automakers has raised on several previous
                occasions.'' \606\ In fact, both the Alliance of Automobile
                Manufacturers and Global Automakers, the two trade organizations that
                represent the automotive industry, concluded that Autonomie should be
                used to generate effectiveness inputs for the CAFE model.\607\
                ---------------------------------------------------------------------------
                 \602\ See EPA-HQ-OAR-2015-0827-10125, at 7. As part of their
                assessment that known technologies could not meet the original MY
                2022-2025 standards, Toyota noted that the ALPHA conversion of
                Toyota's MY 2015 to MY 2025 performance ``appears to yield overly
                optimistic results because the powertrain efficiency curves
                represent best-case targets and not the average vehicle, the imposed
                performance constraints are unmarketable, and the generated credits
                are out of sync with product cadence and design cycles.'' See also
                NHTSA-2018-0067-12431, at 7. More recently, Toyota stated in their
                comments to the NPRM that ``Toyota's position [on the efficacy of
                the OMEGA and LPM models] has been clearly represented by comments
                previously submitted by the Alliance of Automobile Manufacturers,
                Global Automakers, and Novation Analytics. Those comments identify
                the LPM and OMEGA models as sources of inaccuracy in EPA technology
                evaluations and provide suggested improvements. Neither model is
                transparent, intuitive, or user friendly.''
                 \603\ EPA-HQ-OAR-2015-0827-9194.
                 \604\ EPA-HQ-OAR-2015-0827-9194, at 33.
                 \605\ EPA-HQ-OAR-2015-0827-9194.
                 \606\ EPA-HQ-OAR-2015-0827-9728.
                 \607\ EPA-HQ-OAR-2015-0827-9163 at 5. (``EPA should abandon the
                lumped-parameter model and instead use NHTSA's Autonomie and Volpe
                models to support the Revised Final Determination.''). See also EPA-
                HQ-OAR-2015-0827-9728 at 15 (stating the EPA's engine mapping and
                tear down analyses ``should be integrated into the Autonomie model,
                which then feeds into the Volpe modeling process.''); EPA-HQ-OAR-
                2015-0827-9194 at 33.
                ---------------------------------------------------------------------------
                 In addition, Autonomie contains up-to-date sub-models to represent
                the latest electrification and advanced transmission and advanced
                engine technologies. As summarized by the Alliance, ``Autonomie was
                developed from the start to address the complex task of combining 2
                power sources in a hybrid powertrain.'' \608\ Autonomie has
                continuously improved over the years by adopting new technologies into
                its modeling framework. Even a small sampling of SAE papers shows how
                Autonomie has been validated to simulate the latest fuel-economy-
                improving technologies like hybrid vehicles and PHEVs.\609\
                ---------------------------------------------------------------------------
                 \608\ Alliance, Docket ID NHTSA-2018-0067-12073 at 135.
                 \609\ Jeong, J., Kim, N., Stutenberg, K., Rousseau, A.,
                ``Analysis and Model Validation of the Toyota Prius Prime,'' SAE
                2019-01-0369, SAE World Congress, Detroit, April 2019; Kim, N,
                Jeong, J. Rousseau, A. & Lohse-Busch, H. ``Control Analysis and
                Thermal Model Development of PHEV,'' SAE 2015-01-1157.
                ---------------------------------------------------------------------------
                 Moreover, Autonomie effectively considers other real-world
                constraints faced by the automotive industry. Vehicle manufacturers and
                suppliers spend significant time and effort to ensure technologies are
                incorporated into vehicles in ways that will balance consumer
                acceptance for attributes such as driving quality,\610\ noise-
                vibration-harshness (NVH), and meeting other regulatory mandates, like
                EPA's and CARB's On-Board Diagnostics (OBD) requirements,\611\ and
                EPA's and CARB's criteria exhaust emissions standards.\612\ The
                implementation of new fuel economy improving technologies have at times
                raised consumer acceptance issues.\613\ As discussed earlier, there are
                diminishing returns for modeling every vehicle attribute and tradeoff,
                as each takes time and incurs cost; however, Autonomie sub-models are
                designed to account for a number of the key attributes and tradeoffs,
                so the resulting effectiveness estimates reflect these real world
                constraints.
                ---------------------------------------------------------------------------
                 \610\ An example of a design requirement is accommodating the
                ``lag'' in torque delivery due to the spooling of a turbine in a
                turbocharged downsized engine. This affects real-world vehicle
                performance, as well as the vehicle's ability to shift during normal
                driving and test cycles.
                 \611\ EPA adopted and incorporated by reference current OBD
                regulations by the California ARB, effective for MY 2017, that cover
                all vehicles except those in the heavier fraction of the heavy-duty
                vehicle class.
                 \612\ Tier 3 emission standards for light-duty vehicles were
                proposed in March 2013 78 FR 29815 (May 21, 2013) and signed into
                law on March 3, 2014 79 FR 23413 (June 27, 2014). The Tier 3
                standards--closely aligned with California LEV III standards--are
                phased-in over the period from MY2017 through MY2025. The regulation
                also tightens sulfur limits for gasoline.
                 \613\ Atiyeh, C. ``What you need to know about Ford's PowerShift
                Transmission Problems'' Car and Driver. July 11, 2019. https://www.caranddriver.com/news/a27438193/ford-powershift-transmission-problems/.
                ---------------------------------------------------------------------------
                 Furthermore, aside from the fact that Autonomie represents the
                structural state-of-the-art in full-vehicle modeling and simulation,
                Autonomie can be populated with any inputs that could be populated in
                the ALPHA model.\614\ The agencies chose to use specific inputs for
                this rulemaking because, as discussed further in Sections VI.C below,
                they best represent the technologies that manufacturers could
                incorporate in the rulemaking timeframe, in a way that balanced
                important concerns like consumer acceptance. Some other examples of how
                Autonomie inputs have been updated with the latest vehicle technology
                data specifically for this analysis include test data incorporated from
                both Argonne and NHTSA-sponsored vehicle benchmarking, including an
                updated automatic transmission skip-shifting feature,\615\ additional
                application of cylinder deactivation for turbocharged downsized
                engines, and as discussed above, new modeling and simulation that
                includes variable compression ratio and Miller Cycle engines.
                ---------------------------------------------------------------------------
                 \614\ For example, Autonomie used the HCR1 and HCR2 engine maps
                used as inputs to ALHPA in the Draft TAR and Proposed Determination.
                 \615\ NHTSA Benchmarking, ``Laboratory Testing of a 2017 Ford F-
                150 3.5 V6 EcoBoost with a 10-speed transmission.'' DOT HS 812 520.
                ---------------------------------------------------------------------------
                 Finally, ICCT commented that the agencies must conduct a systematic
                comparison of the Autonomie modeling system and ALPHA modeling in
                several respects, including the differences in technical inputs and
                resulting efficiency estimates, to explain how the choice of model
                altered the regulatory technology penetration and compliance cost
                estimations, and the differences in modeling methodologies, including
                regarding the relative level of experience of the teams conducting the
                effectiveness modeling, to demonstrate that the choice to use Autonomie
                was not ``due to convenience and easier access by the NHTSA research
                team, rather than for any technical improvement.'' ICCT stated that
                without performing this comparison, ``it otherwise appears that the
                agencies switched from a better-vetted model and system of inputs with
                more recent input data to a less-vetted model and system of inputs as a
                way to bury many dozens of changes without transparency or expert
                assessment (as illustrated in the
                [[Page 24345]]
                above errors and invalidated data on individual technologies).'' Each
                issue is discussed below in turn.
                 First, regarding technical inputs, technology pathways, and
                resulting outputs, ICCT stated that the agencies must compare (1)
                whether the models have been routinely strengthened by incorporating
                cutting edge 2020-2025 au