The Safer Affordable Fuel-Efficient (SAFE) Vehicles Rule III for Model Years 2022 to 2031 Passenger Cars and Light Trucks

NHTSA considers regulatory alternatives in rulemaking analyses as a way of evaluating the comparative effects of different potential ways of accomplishing its desired goal, which in this case is to fulfill the statutory mandate to set maximum feasible CAFE standards. E.O. 12866 and E.O. 13563, as well as OMB Circular A-4, encourage agencies to evaluate regulatory alternatives in their rulemaking analyses.

In the proposed rule, NHTSA developed separate alternatives for two distinct periods of time (MYs 2022-2026 and MYs 2027-2031) and two distinct fleets (passenger cars (PC) and light trucks (LT)). Alternatives analysis begins with a “No-Action” Alternative, typically described as the “baseline.” \534\ The baseline is the state that would occur in the absence of any regulatory action by the agency. Accordingly, NHTSA developed 16 total alternatives in the proposed rule: a No-Action and three action alternatives for PCs for MYs 2022-2026; a No-Action and three action alternatives for LTs for MYs 2022-2026; a No-Action and three action alternatives for PCs for MYs 2027-2031; and a No-Action and three action alternatives for LTs for MYs 2027-2031.

\534\ Circular A-4, General Issues, 2. Developing a Baseline.

In the NPRM, NHTSA proposed changes to its classification system starting in MY 2028. To accommodate this change, NHTSA proposed using a different set of target function coefficients that better captured the relationship between vehicle footprint and fuel consumption in each class

under the modified classification system. NHTSA also proposed a methodology for transitioning standards in the regulatory alternatives from MYs 2026-2028 to account for this change in the classification system. NHTSA described the methodology for developing these alternatives in the proposal and sought comment on the levels of stringency for each time period.

Although there have been updates since the NPRM, the overall curve methodology for the final rule has remained consistent with the NPRM approach. The changes that have taken place were based on updates to the reclassification start year and comments received on the NPRM analysis. The changes include the following: first, changing the year that reclassification takes effect (from MY 2028 in the NPRM to MY 2030 for the final rule); second, updating the target function transition analysis used to account for reclassification; and third, providing consistent year-to-year stringency increases for the rulemaking period using MY 2027-2031 stringency increases to project back to the MY 2022 selected standard, instead of having separate rates for MYs 2022-2026 and MYs 2028-2031 connected by a bridge year (MY 2027), as in the NPRM. The differences in required fuel economy between the proposal and this final rule for Alternative 3 are summarized in Figure III-1 and Figure III-2 for both PCs and LTs, for example vehicles with footprint sizes of 50 and 70 square feet. Together, the changes from the proposal to this final rule have a material impact on required fuel economy for some vehicles, like full-sized pickup trucks. These changes were made in response to comments as described in this section and are meant to smooth the overall rate of increase over time for both classes of vehicles during the transition between vehicle classification systems.

\535\ For the NPRM, the vehicle reclassification occurred in MY 2028; where for the final rule the reclassification occurs in MY 2030. [GRAPHIC] [TIFF OMITTED] TR30SE26.081

[GRAPHIC] [TIFF OMITTED] TR30SE26.082

AmFree and the Illinois, Missouri, and National Corn Growers Associations (AmFree and Corn Growers Associations) and PMI commented that NHTSA should set the stringency increase to zero percent.\537\ AmFree and Corn Growers Associations commented that while NHTSA's proposed stringency increases of 0.5 and 0.25 percent are an improvement upon the previous standards, they are based on flawed theories regarding consumer behavior. They also commented that the logic of the agency's safety analysis supports a zero percent increase in stringency, which will maximize economic practicability in addition to maximizing safety. PMI commented that NHTSA failing to consider the most natural result of its energy security, affordability, and technological feasibility findings--zero percent increase in stringency--is arbitrary. They commented that NHTSA's analyses concluded that fuel-efficient technologies are expensive, vehicle affordability is low, and American energy security is high, which demand standards that flatline or decrease.

\536\ For the NPRM, vehicle reclassification occurred in MY 2028. For the final rule, reclassification occurs in MY 2030.

\537\ AmFree and Corn Growers Associations, Docket No. NHTSA- 2025-0491-6000-A1, at 2; PMI, Docket No. NHTSA-2025-0491-5001-A1, at 3.

MEMA commented, “from a supplier perspective, the differences among the proposed alternatives are not merely differences in aggregate fuel economy outcomes, but differences in technology deployment signals, investment recoverability, and supply chain continuity.” \538\ MEMA stated that “the usability of credits under each alternative, including whether credits remain available, transferable, or durable over the investment cycle for technologies that suppliers are expected to develop and scale” \539\ is also an important factor. MEMA also commented that “alternatives that reduce uncertainty around deployment volumes, preserve credit usability, and maintain a stable and predictable compliance trajectory” \540\ are more feasible for suppliers than “alternatives that achieve similar nominal stringency through sharper curve inflections, credit removals, or late-cycle compliance compression.” \541\ While MEMA expressed support for year- over-year increases in the stringency of the standards for MYs 2022- 2031, it did not support the No-Action Alternative, Alternative 1, or Alternative 2 as proposed in the NPRM. MEMA did not support Alternative 1 because its “reduced stringency would slow demand for fuel-savings technologies that are already in the advanced stages of development.” \542\ MEMA expressed concern with the stringency levels of the No- Action Alternative, specifically highlighting its concerns with the level of infrastructure deployment required to support the transition to AFVs. MEMA commented that Alternative 2 would “weaken the market signal needed to sustain supplier investment in efficiency technologies.” \543\ MEMA expressed support for Alternative 3, stating that Alternative 3 would “better preserve continuity with prior planning assumptions[,] . . . provide a clearer demand signal for suppliers across powertrain systems[, and] . . . align more closely with current investment cycles.” \544\ MEMA also encouraged

NHTSA to consider developing a modified version of Alternative 3 that “maintains the overall stringency trajectory while incorporating targeted flexibility mechanisms.” \545\ MEMA stated its belief that such an alternative could “achieve a better balance between economic practicality and continued progress.” \546\

\538\ MEMA, Docket No. NHTSA-2025-0491-5989-A1, at 8.

\539\ MEMA, Docket No. NHTSA-2025-0491-5989-A1, at 8.

\540\ MEMA, Docket No. NHTSA-2025-0491-5989-A1, at 8.

\541\ MEMA, Docket No. NHTSA-2025-0491-5989-A1, at 8.

\542\ MEMA, Docket No. NHTSA-2025-0491-5989-A1, at 8.

\543\ MEMA, Docket No. NHTSA-2025-0491-5989-A1, at 8-9.

\544\ MEMA, Docket No. NHTSA-2025-0491-5989-A1, at 9.

\545\ MEMA, Docket No. NHTSA-2025-0491-5989-A1, at 9.

\546\ MEMA, Docket No. NHTSA-2025-0491-5989-A1, at 9.

NRDC and the UCS commented that the alternatives that NHTSA considered in its proposal are all very similar and do not constitute a reasonable range of alternatives.\547\ Similarly, NRDC commented that NHTSA did not provide reasonable explanation for its change from the No-Action Alternative and failed to explain its reasoning for rejecting the most stringent alternative it did consider.\548\

\547\ NRDC et al., Docket No. NHTSA-2025-0491-5928-A1, at 9; UCS, Docket No. NHTSA-2025-0491-6027-A1, at 49-50.

\548\ NRDC et al., Docket No. NHTSA-2025-0491-5928-A2, at 14-19 and -A2, at 50-51.

CPAC-CRF commented “NEPA also requires agencies to rigorously explore and objectively evaluate reasonable alternatives. The Draft SEIS does not adequately examine alternative regulatory approaches that could achieve efficiency gains with fewer environmental and security tradeoffs, such as more gradual standard increases, technology-neutral pathways, or policies that better align with infrastructure readiness. The absence of a meaningful alternatives analysis limits the usefulness of the environmental review.” \549\ NRDC also provided a similar comment that NHTSA, as part of the NEPA process, must provide a reasonable range of alternatives.\550\ Two individuals provided comments that generally opposed the proposed actions.\551\

\549\ CPAC-CRF, Docket No. NHTSA-2025-0491-5054, at 9.

\550\ NRDC, Docket No. NHTSA-2025-0490-0038, at 6-7.

\551\ Terrence Meier, Docket No. NHTSA-2025-0491-5650.

Regarding AmFree and the Corn Growers Associations and PMI's suggestions about a zero percent stringency increase, NHTSA is significantly resetting standards starting with MY 2022 because that is the earliest year that the agency has not administratively closed out, and which allows for proposer assessment of ICE only vehicles. To do this, NHTSA examined the degree to which manufacturers' gas-powered vehicles were able to comply with standards. For setting standards in MYs 2023-2031, NHTSA considered a wide range of rates of increase so that its analysis could consider the exact costs to which these commenters referred. NHTSA included alternatives that provide significant cost savings relative to prior standards. NHTSA also quantified the beneficial effects of lowering the price of new vehicles for the overall safety of the on-road fleet. Ultimately, after balancing four key factors: technological feasibility, economic practicability, the need of the United States to conserve energy, and the effect of other Federal regulations on fuel economy, NHTSA determined that the Preferred Alternative is the maximum feasible level that vehicle manufacturers can achieve in each model year.\552\ This is discussed more detail in Section V.

\552\ 49 U.S.C. 32902(a) and (f).

NHTSA appreciates MEMA's assessment of the alternatives presented in the proposal. As discussed in additional detail in Section V, NHTSA agrees with MEMA's assessment about the Alternative 3 standards.

In response to comments about the range of alternatives considered, for this final rule, NHTSA added two action alternatives to its analysis for each period of standard-setting years for both the passenger and non-passenger fleets. These new alternatives--referred to as Alternatives 4 and 5--fall between Alternative 3 and the No-Action Alternative. These Alternatives have stringency levels that are high enough above Alternative 3 to produce different effects and societal costs and benefits. With these additional alternatives, and the No- Action Alternative, NHTSA's analysis for this final rule provides detailed coverage of a wide range of potential stringency options.

In sum, as with the NPRM, NHTSA analyzes separate alternatives for two distinct time periods (MYs 2022-2026 and MYs 2027-2031) and two distinct fleets (passenger and non-passenger automobiles) in this final rule. The final rule also continues using the No-Action Alternative as the baseline. In response to comments received and in further consideration of the issues, NHTSA revised certain aspects of the alternatives considered in this final rule. As explained above, the final rule analyzes two additional alternatives for each period of standard-setting years for both the passenger and non-passenger fleets. NHTSA is also finalizing changes to the mathematical functions, or curves, that define the standards, based on comments and based on changing the effective year for the vehicle reclassification change from MY 2028 to MY 2030. The details of comments and responses regarding vehicle reclassification and the final decision are discussed in Section VI. The details of all the alternatives, in addition to comments and responses, are discussed below. NHTSA's decision to finalize Alternative 3 as the Preferred Alternative is discussed in more detail in Section V.

The finalized standards may, in places, be referred to as the “Preferred Alternative(s),” but NHTSA intends “final standards,” “finalized standards,” and “Preferred Alternative(s)” to be used interchangeably for purposes of this document. The Preferred Alternative(s) represent the maximum feasible fuel economy standards for each model year under consideration when viewed in context of the finalized structural changes (i.e., reclassification, elimination of FCIVs, and elimination of credit trading) and in light of statutory constraints (i.e., not considering dedicated vehicles, non-petroleum performance of dual-fueled vehicles, or the availability of regulatory credits).

Each action alternative sets fuel economy stringency levels for each model year that can be defined in terms of percentage changes in stringency from one model year to the next--with the exception of the transition between MY 2029 and MY 2030 standards, discussed in more detail below--which may be different for PCs and LTs.\553\ Although the stringency levels can be defined in terms of percentage changes in stringency from one model year to the next for ease of understanding, pursuant to the statute, they are actually defined as coefficients that define the following mathematical functions that relate fuel economy to footprint levels.

\553\ Note that the percentage changes from one year to the next are applied to the footprint functions that define the standards, rather than to an average or summary mpg value corresponding to a given footprint function. The PC and LT target curve function coefficients are defined in Equation III-1 and Equation III-2, respectively. See Final TSD Chapter 1.2.1 for a complete discussion of the footprint curve functions and how they are calculated.

For PCs, NHTSA is defining final fuel economy targets as shown in Equation III-1.

[GRAPHIC] [TIFF OMITTED] TR30SE26.083

Where:

TARGETFE is the fuel economy target (in mpg) applicable to a specific vehicle model type with a unique footprint combination, and a is a maximum fuel economy target (in mpg), b is a minimum 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.

The resulting functional form is depicted in graphs displaying the PC target function in each model year for each regulatory alternative in Sections III.B.1 and III.B.3 below.

For LTs, NHTSA is defining fuel economy targets as shown in Equation III-2. Equation III-2: Light Truck Fuel Economy Footprint Target Curve [GRAPHIC] [TIFF OMITTED] TR30SE26.084

Where:

TARGETFE is the fuel economy target (in mpg) applicable to a specific vehicle model type with a unique footprint combination, and a, b, c, and d are as for PCs, but taking values specific to LTs.

For this final rule, NHTSA applies individual rates of change to the PC and the LT fleet standards in different model years in some of the action alternatives. NHTSA has discretion to set CAFE standards that increase at different rates for PCs and LTs because NHTSA, by law, must set maximum feasible CAFE standards separately for PCs and LTs. 1. MYs 2022-2026

NHTSA's analysis resets the passenger and non-passenger automobile fuel economy target functions in MY 2022 and increases them through MY 2026 at levels consistent with the available data for that timeframe and the context for those years, as discussed in more detail in Section V. Unlike past rules that set CAFE standards, in which the last model year for which standards are currently set serves as the base year for describing the regulatory alternatives considered in terms of annual percentage increases in standards, NHTSA analyzed reset standards using MY 2022 as the base year, consistent with the Secretary's memorandum titled “Fixing the CAFE Program” (Jan. 28, 2025).\554\ NHTSA considered several potential approaches for analyzing regulatory alternatives for that model year within a reasonable range of feasible average fuel economy standards.

\554\ See DOT, Fixing the CAFE Program, Memorandum (2025), available at: https://www.transportation.gov/briefing-room/memorandum-fixing-cafe-program (accessed: June 11, 2026).

For the proposal, the agency relied in large part on the observed capabilities of the gasoline- and diesel-powered vehicle fleets over the model years covered by the standards. Although NHTSA always examines manufacturer capabilities (also referred to as “achieved” fuel economy values for each manufacturer's fleet in each model year) relative to the standards under consideration as part of its evaluation of maximum feasible standards, this analysis is unique in that the data-based projections that NHTSA would generally rely on to estimate manufacturer behavior are not necessary because NHTSA can rely on observed data for MYs 2022-2026. That said, as discussed in Section V, NHTSA believes the appropriate qualitative context exists for giving meaning to the section 32902(f) factors related to manufacturer compliance for model years that have already passed or are currently underway.

NHTSA defined a potential standards range using the mean fit curve and the mean fit curve minus one standard deviation,\555\ and then selected three levels of standards that the agency believed represented reasonable low-, medium-, and high-level resetting functions for the MY 2022 PC and LT fleets, respectively. NHTSA then applied a 0.5 percent year-to-year rate of growth for the stringency of the standards for MYs 2023-2026. These three functions represented different ways that NHTSA could consider the available data for MY 2022, accounting for the removal of subsection 32902(h) technologies and compliance credits, and consistent with the agency's balancing of the four factors as described in more detail in Section V.

\555\ Mean fit level here refers to standards developed based on the relationship between fuel consumption and footprint using ordinary least-squares without any further adjustment. NHTSA examined fleetwide compliance and found that around half of the vehicles produced in the MY 2022 fleet complied with these standards. For the mean fit minus standard deviation, NHTSA reasoned that focusing on the central mass of the distribution of vehicles' fuel economy values would seem to be a good indicator that the finalized level was technologically feasible and economically practicable.

The lowest level function for MY 2022 that NHTSA considered represented standards that weighed economic practicability most heavily. The lowest level function did this by recognizing that the prior standards for MY 2022 were infeasible for the gasoline- and diesel-powered vehicle fleets (from the perspective of manufacturers reasonably being able to apply technology during the rulemaking timeframe). This function also recognized that prior standards were infeasible based on the fleet-average performance having been below the fleet-average standards for several years. A less stringent standard, in compliance with the statute, represents an opportunity for vehicle manufacturers to meet a standard that influences their obligations to improve fleet fuel economy without distorting typical design cycles or technology application

in a manner inconsistent with NHTSA's statutory authority.\556\ Under these standards, about 80 percent of PCs and LTs would have met or exceeded their target function values for MY 2022.

\556\ See “Resetting the Corporate Average Fuel Economy Program,” 90 FR 24518 (June 11, 2025).

At the time of the proposal, Alternative 3 was the high-level function considered for MY 2022. That alternative represented a balancing that weighed economic practicability but recognized that some manufacturers had been able to apply technology that improved the fuel economy levels of their gasoline- and diesel-powered fleets at a cadence that, if applicable to the rest of the fleet had the model year not already passed, would have pushed the fleet to higher average fuel economy levels. NHTSA tentatively concluded in the proposal that the fact that a number of manufacturers' gasoline- and diesel-based fleets could not comply with that standard is evidence that the baseline standard is beyond maximum feasible for the gasoline- and diesel- powered passenger and non-passenger automobile fleets for MY 2022. Under these standards, about 30 percent of PCs and 50 percent of LTs, by sales volume, failed to meet their target function values for MY 2022.

In the proposal, NHTSA presented Alternative 2, which utilized mid- level target functions for MY 2022, as its Preferred Alternative because the agency tentatively concluded it represented the maximum feasible average fuel economy. The agency explained that this alternative provided an appropriate, reformed starting point for future stringency increases by properly balancing the statutory maximum feasibility factors and excluding prohibited elements--namely, the consideration of EVs and compliance credits--to reflect the actual, measured performance of the gasoline- and diesel-based fleet. Under this proposed alternative, approximately 75 percent of PCs and 70 percent of LTs by sales volume would have successfully met or exceeded the requirements.

NHTSA also examined for the proposal real-world data to evaluate the capacity of gasoline- and diesel-powered fleets to achieve consistent efficiency improvements, excluding prohibited elements like alternative-fueled vehicles from the analysis. The agency observed that, while technologies to improve internal combustion engine efficiency exist, much of that technology has already been applied extensively over the past 15 years in response to increasing the stringency of standards. Data from the EPA's Automotive Trends Reports and input from Auto Innovators, demonstrated that average fuel consumption for non-electric vehicles generally improved by roughly one to two percent annually between MYs 2010 and 2022, but these improvements slowed to an average of just 0.7 percent for MYs 2020- 2023, and remained relatively flat into MY 2024. The agency highlighted in the NPRM that the market had already seen a sharp decrease in basic naturally aspirated engines--dropping from 37.9 percent of the fleet in MY 2022 to just 22.0 percent by MY 2024--while advanced, costly technologies like turbochargers and mild and strong hybrids correspondingly increased.

Based on this data NHTSA tentatively concluded that expecting manufacturers to apply advanced technologies continually across all vehicle types to meet aggressive standards using only gasoline- and diesel-based powertrain improvements would not be maximum feasible and would be unreasonable. Ultimately, in the proposal the agency determined that adopting the proposed rates of annual increase would better reflect these physical capabilities and allow fuel-saving technology to propagate across the fleet in a cost-effective manner.

As discussed above, NHTSA reevaluated its alternatives for this final rule and added two new alternatives, Alternatives 4 and 5, in response to additional analysis and comments. In MYs 2022-2026, Alternatives 1 and 2 increase at a rate close to 0.5 percent per year from each alternative's MY 2022 starting point. Alternative 3 increases at a rate of 0.9 percent per year for PCs and 0.51 percent for LTs. Alternative 4 increases at a rate of 1.32 percent per year for PCs and 1.5 percent for LTs. The highest action alternative, Alternative 5, increases at a rate of 2.81 percent per year for PCs and 3.03 percent for LTs.

NHTSA's determination to apply vehicle reclassification, starting in MY 2030 rather than MY 2028, required corresponding changes to the NPRM's alternatives. The final rule's revised Alternatives 1, 2, and 3 are generally consistent with the stringency of those proposed in the NPRM but also are compatible with maintaining the existing vehicle classification criteria for MYs 2028 and 2029 in the final rule. NHTSA applied a uniform rate of increase in the stringency of standards for MYs 2022-2029 to mirror changes in the overall stringency of the fleets used in the proposal over this time period. Because this time period includes MYs 2027-2029, the growth rates that are used in this final rule differ from those used for MYs 2022-2026 in the NPRM.\557\

\557\ To compensate for stringency changes associated with vehicle reclassification, NHTSA assumed in the NPRM different growth rates for the alternative standards for MYs 2027-2029.

Alternatives 4 and 5 were added to the analysis for this final rule. NHTSA analyzed CAFE Model simulations over a range of stringencies falling between Alternative 3 and the No-Action Alternative to determine ranges over which technology adoption substantially changed in each fleet in the later years in its analysis. NHTSA determined the stringencies for these simulations by evaluating different uniform growth rates from MYs 2022-2029. Alternatives 4 and 5 represent two levels of stringency that produced distinct solutions across a variety of manufacturers in each class, and thus significant variation in achieved compliance, and the costs and benefits to society. As a result, NHTSA chose to use these rates of increase for MYs 2022-2026 as additional alternatives which it evaluated in this final rule.

Accordingly, NHTSA has considered a range of stringency options that allowed the agency to analyze and select an alternative within that range. The range of alternatives represents different ways that the agency could balance the section 32902(f) factors for MYs 2022- 2026. In addition, this final range of alternatives is responsive to comments about the range and space between alternatives. 2. MYs 2027-2031

Consistent with NHTSA's approach for MYs 2022-2026, the agency endeavored to reset future model years' standards at levels that reflect the technological and economic capabilities of the gasoline- and diesel-powered vehicle fleets, but also in a manner that reflects how finalized compliance provisions (discussed in more detail in Section VI) would impact manufacturers' ability to comply. NHTSA performed an analysis, similar to its analysis of feasible per-year rates of stringency increase for gasoline- or diesel-powered vehicle improvements for MYs 2022-2026 discussed above to establish a range of regulatory alternatives that encompassed the ways the agency believes manufacturers could improve their fleet fuel economies year-over-year.

For the proposal, the agency began by using MY 2024 market data as a starting point for characterizing the technology and compliance levels of the vehicle

fleet, and then relied on the CAFE Model to simulate the fleet's expected evolution under the current regulatory fleet classifications in future years in the No-Action Alternative and using the proposed alternative classification regulations starting in MY 2028 in the action alternatives. In the proposal, NHTSA designed the standards through MY 2028 by projecting an average required fuel economy level using a particular growth rate (or as in the case of Alternative 2, pair of growth rates). For MYs 2028-2031, NHTSA then assumed that the stringency of standards would grow at a constant rate.

In the proposal NHTSA developed alternatives to produce class average target function values that reflected different rates of growth from MYs 2022-2028, with MY 2027 acting as a “bridge” year between MY 2026 and MY 2028, when NHTSA proposed to modify vehicle classification. NHTSA accounted for changes in the cutpoints, slope, and intercept in MY 2028, after the proposed updated classifications by rescaling coefficients such that their average level was equal to the level it would have been for MY 2028 without a change in classification. Because of changes in the slope of the standards after reclassification, this approach produced significant increases in required fuel economy levels for some vehicles even when they remained in the same class.

NHTSA described in the proposal that the projected levels of fuel economy under each of the three regulatory alternatives for MYs 2027- 2031 continually push manufacturers to improve real-world fuel economy, and even the least stringent option would exceed fuel efficiency merely driven by market demand.\558\ NHTSA treated market demand for fuel- economy improvements as a floor for determining action alternatives by rescaling its estimates such that they produced standards achievable for manufacturers when only market demanded technology was applied. Any standard less stringent than this floor would not be projected to change manufacturers' technology adoption decisions from those they would make in the absence of standards. In accordance with the purpose of the statutory scheme to increase fleet fuel economy of gasoline- and diesel-powered vehicles, NHTSA chose alternatives for the proposal above this floor.

\558\ As discussed in more detail in Section II, NHTSA's assumptions about market-driven fuel economy improvements in the absence of regulatory requirements involve manufacturer application of technology that pays for itself within 36 months. This assumption is based on manufacturer statements over successive CAFE rulemakings and is supported by the relevant literature.

NHTSA also recognized in the proposal that the process for creating regulatory alternatives for this set of standards was different in some ways from how the agency had created regulatory alternatives in past rules; however, the process used was necessary to bring the CAFE program into compliance with the law and to implement a significant reclassification of the PC and LT fleets to reflect better the intent of the CAFE program established by Congress. Previously, NHTSA evaluated regulatory alternatives based on varying levels of stringency increases from the last year of the previously established standards. Since NHTSA considered the fuel efficiency of EVs in establishing those previous standards, in contravention of the law, a stringency increase from the last year of those standards is on its face higher than the maximum feasible standards NHTSA could establish if only considering gasoline- and diesel-fueled vehicles. NHTSA also discussed that the agency was setting standards lower in MY 2022 than MY 2021, in part, because actual compliance data clearly demonstrated that manufacturers were unable to achieve the MY 2022 standards with their gasoline- and diesel-powered vehicle fleets.

In the proposal, for MYs 2027-2031, NHTSA designed standards using the proposed MY 2026 standards as a starting point for each alternative. In the proposal, NHTSA increased the stringency of Alternative 1, its lowest stringency alternative, at a rate of 0.1 percent for PCs and 0.8 percent for LTs in MY 2027. In MY 2028, when the classification system changed, NHTSA adjusted its coefficients and set standards such that the average required fuel economy in the PC fleet increased by 0.3 percent for PCs and 0.6 percent for LTs from MY 2027 averages. For MYs 2029-2031, the Alternative 1 standards increased at a rate of 0.25 percent per year. In Alternative 2, the proposed standards, NHTSA increased stringency at a rate of 0.35 percent for PCs and 0.7 percent for LTs in MY 2027. For MYs 2027-2028, the standards were set such that the average fleetwide required value for each class increased at a rate of 0.25 percent. For MYs 2029-2031, the Alternative 2 standards increased in stringency at a rate of 0.25 percent per year. Finally in Alternative 3, the most stringent alternative in the proposal, the standards increased at a rate of 1.4 percent for PCs and 0.4 percent for LTs in MY 2027. In MY 2028, the standards were set such that the average required fuel economy increased by 1.5 percent for PCs and 0.2 percent for LTs. For MYs 2029-2031, standards increased at a rate of 1 percent per year for both classes. NHTSA sought comment on the range of alternatives presented, in addition to any other alternatives that the agency should consider.

In addition to the general comments on the alternatives, discussed above, NHTSA also received comments regarding how the form of the standards accounted for the vehicle reclassification proposal. The Alliance noted that, for vehicles remaining in the LT fleet, stringency increased substantially in the proposal from MYs 2028-2029.\559\ The Alliance urged NHTSA to reconsider its methodology for the transition between these years. Ford commented that it supported Alternative 2 for MYs 2022-2031 as proposed in the NPRM. However, Ford expressed concern regarding the sharp increase between the MY 2027 and MY 2028 average fuel economy standards for LTs; specifically for vehicles with larger footprints. Ford urged NHTSA to re-examine its methodology for MYs 2027 and 2028 and adjust the stringency between those two model years to be consistent with other year-over-year changes in the NPRM. Stellantis expressed support for the overall direction of the proposed Preferred Alternative but recommended a delay in implementation of reclassification to MY 2030.

\559\ The Alliance, Docket No. NHTSA-2025-0491-5707-A1, at 11.

In response to the Alliance and Ford's concerns about the increase in stringency for LTs between MY 2027 and MY 2028, and Stellantis's concerns about the year of reclassification, NHTSA reconsidered its approach to transitioning standards to account for vehicle reclassification. First, NHTSA has determined that the update to classification will be applied beginning with MY 2030 rather than MY 2028. The agency recognizes that reclassification represents a dramatic change to the CAFE program, and, given product design and market planning lead times, a MY 2028 transition as MY 2027 approaches does not allow manufacturers a significant opportunity to reconsider their compliance strategies. This decision provides an additional two years for manufacturers to plan and make any necessary changes to their production plans. Second, NHTSA changed the rate of stringency increase for the MYs 2022-2029 to a single consistent value in each alternative. This makes the path to the MY 2030 standards and reclassification

smoother overall. Third, NHTSA changed its methodology for shifting from footprint curves designed for the years before reclassification to curves designed for the updated vehicle classification.

For this final rule, NHTSA developed standards for each alternative reflecting different rates of growth from MYs 2022-2029, and MYs 2029- 2031, with MY 2030 adjusted so that one of its constraints (low- footprint constraint for PCs and high-footprint constraint for LTs) was unchanged after adjusting the standards to account for different footprint cutpoints, and estimates of the footprint curve slope and intercept obtained using the updated classification. NHTSA's updated approach minimizes changes to the standards introduced as a result of reclassification at regions of the footprint curve where classification had less effect on the fleet. Changes to the functions governing the standards are appropriate because the achievable level of fuel efficiency at a given footprint level has changed as a result of changes to the composition of vehicles in a regulatory class at that footprint level. NHTSA's methodology in the proposal limited the effect of reclassification at the production-weighted average footprint in each fleet (around 48 and 61 sq. ft. for PCs and LTs respectively). Vehicles that changed regulatory classes are heavily concentrated at footprint levels of approximately 50 sq. ft. This means that the fleet of PCs up to 46 sq. ft. and the fleet of LTs larger than 74 sq. ft. are relatively unchanged, making these cutpoints more suitable locations for the finalized curves to be unaffected by reclassification. This change ensures that vehicles that are not reclassified will be required to meet standards that rise at a steady rate over time without the unintended and unreasonably sharp stringency increase identified by Ford.

NHTSA's updated approach is shown for Alternative 3 for both regulatory classes in Figure III-10 and Figure III-11. The dashed line represents a one percent increase in stringency from MY 2029 to MY 2030, while maintaining the same curve shape and cutpoints as the MY 2029 standards. The solid gray line adjusts these standards to maintain the same sales-weighted average standard value for each class but using the updated curve shape parameters and cutpoints, which is the methodology used in the NPRM. The solid black line shows NHTSA's approach for this final rule, which uses the updated curve shape parameters and cutpoints, and maintains upper or lower constraint value that would have existed without reclassification. BILLING CODE 4910-59-P [GRAPHIC] [TIFF OMITTED] TR30SE26.085

[GRAPHIC] [TIFF OMITTED] TR30SE26.086

BILLING CODE 4910-59-C

NHTSA performed additional analysis to define the target functions for the years where the fleet transitions regulatory classification definitions. Because NHTSA is using a different set of initial footprint curve parameters (i.e., slope, intercept, and cutpoints) for each fleet starting in MY 2030, the change in stringency from MYs 2029- 2030 cannot be defined using multiplication by a common factor. Instead, NHTSA first applied a year-over-year stringency adjustment to each finalized alternative for each regulatory class “m” in MY 2029 to generate initial target function parameters for MY 2030. NHTSA then determined the required level of fuel economy for these initial target functions at the upper and lower constraints (coefficients “a” and “b” respectively). Equation III-3: Scaling Equations for Initial MY 2030 Target Function Parameters [GRAPHIC] [TIFF OMITTED] TR30SE26.087

Here “[Delta]2030” equals the percentage year-to-year change in stringency from MYs 2029-2030 in a given alternative. Here “am2030,0” and “bm2028,0” denote the initial upper and lower constraint values for class m in MY 2030. For PCs, NHTSA rescaled its coefficient estimates for the updated PC fleet to be consistent with its initial value for coefficient a, and the cutpoint footprint levels it determined were appropriate for the updated PC fleet. Similarly for LTs, NHTSA then rescaled its coefficient estimates for the updated LT fleet to be consistent with this initial value for coefficient b, and the cutpoint footprint levels it determined were appropriate for the updated LT fleet. These calculations are shown in Equation III-4 and Equation III-5. Equation III-4: Determination of Final MY 2030 Coefficient Values for Passenger Cars [GRAPHIC] [TIFF OMITTED] TR30SE26.088

Equation III-5: Determination of Final MY 2030 Coefficient Values for Light Truck [GRAPHIC] [TIFF OMITTED] TR30SE26.089

Here “am2030,A”denotes the value of the upper constraint obtained using the updated coefficient estimates and footprint cutpoints for class m without any rescaling. “bm2030,A”likewise denotes the value of the lower constraint obtained using the updated coefficient estimates and footprint cutpoints for class m without any rescaling. “cm2030,A” and “dm2030,A”denote the updated estimates of slope and intercept for the mathematical functions.

Accordingly, for the final rule, the standards are defined as follows:

For Alternative 1, NHTSA assessed the standards for 2027-2029 by increasing stringency at a rate of 0.44 percent per year for PCs, and 0.54 percent per year for LTs. These rates of

increase were also used to consider the 2030 standards using the methodology described in Equation III-3 and Equation III-4. The regulatory class average standard value for PCs decreases by 1.1 percent from MY 2029 to MY 2030, while the average decreases by 15.1 percent for LTs. The standards for both classes increase in MY 2031 by 0.25 percent.

In Alternative 2 NHTSA assessed the standards for MYs 2027-2029 by increasing stringency at a rate of 0.47 percent per year for PCs, and 0.46 percent per year for LTs. While the rate of increase for LTs is slightly lower than in Alternative 1, since Alternative 2 starts from a higher initial level in MY 2022, the standards for LTs in MY 2027 are higher in Alternative 2. These rates of increase were also used to consider the 2030 standards using the methodology described in Equation III-3 and Equation III-4. The regulatory class average standard value for PCs decreases by 1.3 percent from MY 2029 to MY 2030, while the average decreases by 15.1 percent for LTs. The standards for both classes increase by 0.25 percent in MY 2031.

For Alternative 3, NHTSA assessed the standards for MYs 2027-2029 by increasing stringency at a rate of 0.9 percent per year for PCs, and 0.51 percent per year for LTs. These rates of increase were also used to consider the MY 2030 standards using the methodology described in Equation III-3 and Equation III-4. The regulatory class average standard value for PCs decreases by 0.5 percent from MYs 2029 to 2030, while the average decreases by 14.4 percent for LTs. The standards for both classes increase by one percent in 2031.

For Alternative 4, NHTSA assessed the standards for MYs 2027-2029 by increasing stringency at a rate of 1.32 percent per year for PCs, and 1.5 percent per year for LTs. These rates of increase were also used to consider the MY 2030 standards using the methodology described in Equation III-3 and Equation III-4. The regulatory class average standard value for PCs decreases by 0.7 percent from MY 2029 to MY 2030, while the average decreases by 14.9 percent for LTs. The standards for both classes increase in MY 2031 by 0.5 percent.

For Alternative 5, NHTSA assessed the standards for MYs 2027-2029 by increasing stringency at a rate of 2.81 percent per year for PCs, and 3.03 percent per year for LTs. These rates of increase were also used to consider the MY 2030 standards using the methodology described in Equation III-3 and Equation III-4. The regulatory class average standard value for PCs decreases by 0.8 percent from MY 2029 to MY 2030, while the average decreases by 14.7 percent for LTs. The standards for PCs and LTs increase in MY 2031 by 0.5 percent. 3. Minimum Domestic Passenger Car Standard Analysis Update

EPCA, requires that any manufacturer's domestically manufactured PC 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 United States by all manufacturers in the model year. Along with calculating each regulatory alternative, NHTSA must calculate a minimum standard for domestically manufactured passenger automobiles in accordance with 49 U.S.C. 32902(b)(4)(B). Since the 2020 final rule, NHTSA has calculated the “minimum domestic passenger car standard” (MDPCS) using an offset to account for the fact that the agency's model cannot predict any shift in vehicle designs (as opposed to technology application) that manufacturers might make in response to CAFE standards. Additional information about the origin of the MDPCS and the related offset calculation can be found in Section V.

In its 2020 final rule, NHTSA developed the MDPCS offset, a scalar that accounts for differences between the PC standards the agency forecasts in its rulemaking analyses and the actual PC standards EPA calculates for CAFE final compliance in accordance with 49 U.S.C. 32904(a). NHTSA used forecasted data from its 2009, 2010, and 2012 final rule analyses and actual CAFE final compliance data for MYs 2011- 2018 to develop the initial MDPCS offset of -1.9 percent. NHTSA developed the original offset value for use in its 2020 final rule; however, the agency continued to use that same offset value in its 2022 and 2024 final rules without updating the underlying analysis. In addition to promulgating two final rules since it developed the initial MDPCS offset, NHTSA has also collected five additional model years of final compliance data--with two of those model years having been verified by EPA in accordance with 49 U.S.C. 32904(a).

For the NPRM, NHTSA updated the analysis it uses to calculate the MDPCS by supplementing the original analysis with additional data, such as estimated PC standards from subsequent rulemaking analyses and calculated PC standards from more recent CAFE compliance data. NHTSA began with the Market Data Input File containing the MY 2017 baseline fleet, which the agency used in the 2020 final rule analysis, covering MYs 2021-2026. The agency then identified and removed all the model types of dedicated AFVs from the Market Data Input File, consistent with the section 49 U.S.C. 32902(h) prohibition on considering the fuel economy of dedicated and dual-fueled vehicles when setting maximum feasible standards. Next, NHTSA ran the 2020 final rule version of the CAFE Model with the modified Market Data Input File to produce an analysis devoid of dedicated AFVs. The agency then extracted the PC standard from the resulting Compliance Output Report for MYs 2017-2050.

Next, NHTSA added the following CAFE compliance data for additional model years to the analysis: MYs 2012-2021, which have been verified by EPA in accordance with 49 U.S.C. 32904(a), and MYs 2022-2023, which have yet to be verified. As a proxy for individual model types of dedicated AFVs, NHTSA identified and removed the manufacturers that produce only dedicated AFVs from the compliance data and calculated the PC standard for MYs 2012-2023.\560\

\560\ Because NHTSA does not receive final model year data in the same format from EPA as manufacturers submit their pre-model year data and final model year data to the agency, NHTSA cannot simply remove Excel rows with dedicated vehicles as the agency did to create its MY 2022 and MY 2024 Market Data Input Files. For purposes of this analysis, NHTSA believes that final model year data are the appropriate source to use.

Next, NHTSA modified the methodology it uses to calculate the offset. In the original offset analysis, NHTSA included comparisons between actual PC standards calculated from final model year compliance data to PC standards projected in proposed rules, in addition to those projected in final rules. For CAFE compliance, manufacturers are required to meet only those standards estimated and published in final rules, not those estimated and published in proposed rules. Consequently, NHTSA included comparisons to PC standards forecasted only in final rules in the updated analysis.

NHTSA compared the MDPCSs estimated from CAFE Model outputs from MYs 2017-2050 to the MDPCSs calculated from actual compliance data from MYs 2012-2023 and calculated the relative change (in percent) between them for each model year. NHTSA then calculated the offset by taking the average of the relative changes in

MDPCS for MYs 2017-2023, which are those model years where the CAFE Model outputs (excluding all individual model types of dedicated AFVs) overlapped with CAFE compliance data that excluded manufacturers that produced only dedicated AFVs. The updated MDPCS offset analysis shows that the PC standards projected with the MY 2017 baseline fleet and the 2020 final rule version of the CAFE Model were more stringent than the actual PC standards calculated for CAFE final compliance by an average of -0.7 percent, less than half of the offset calculated previously.

In the NPRM, NHTSA proposed to use the new -0.7 percent offset to adjust the MYs 2027-2031 MDPCSs. NHTSA stated that the basis for the offset, which is tied to the agency's inability to project the precise mix of vehicles sold in the future, is inapplicable to the MYs 2022- 2026 MDPCSs because they are based on average fuel economy standards that incorporate the most up-to-date data available to the agency for vehicle sales volume and footprint sizes in MY 2022. The agency proposed to use the new -0.7 percent offset to adjust the MDPCSs for MYs 2027-2031 to ensure that they are reflective of industry capabilities.

Several manufacturers, advocacy groups, and a government entity commented on NHTSA's use of an MDPCS offset. The Alliance, Hyundai, and Kia Corporation (Kia) supported NHTSA's continued use of an MDPCS offset. The Alliance and Stellantis supported NHTSA factoring the impact of changes to vehicle classification into the MDPCS offset calculation methodology.\561\ Specifically, Stellantis recommended that the MDPCS offset methodology should reflect the uncertainties associated with the contents of the rule, including the significant change in the PC fleet composition due to the vehicle classification changes.

\561\ The Alliance, Docket No. NHTSA-2025-0491-5707-A2, at 38; Stellantis, Docket No. NHTSA-2025-0491-5968-A1, at 10-11.

Regarding the level of the offset, the Alliance, Ford, Kia, Nissan, and Stellantis commented in support of NHTSA's continued use of the existing -1.9 percent MDPCS offset. The Alliance recommended NHTSA retain its current -1.9 percent offset and defer amending the offset as a bulwark against unforeseen changes in the makeup of the fleet resulting from changes to vehicle classification.\562\ Ford requested that NHTSA retain its current -1.9 percent offset to provide flexibility against unforeseen changes in the makeup of the fleet resulting from changes to vehicle classification.\563\ Kia supported NHTSA's retention of its current -1.9 percent offset as protection against unintended consequences that may result from changes to vehicle classification.\564\ Kia argued that implementing the -0.7 percent offset in conjunction with changes to vehicle classification could penalize domestic passenger automobiles and ultimately discourage domestic manufacturing, increase costs, and reduce consumer choice. Nissan recommended that NHTSA retain its current -1.9 percent offset to account for differences between forecasted and real-world PC footprints.\565\ Stellantis stated that NHTSA should retain its current -1.9 percent offset to account for the uncertainty regarding changes to vehicle classification.\566\ Stellantis also stated that NHTSA should delay amending the offset until the impact of changing vehicle classification is better understood and no earlier than MY 2030.

\562\ The Alliance, Docket No. NHTSA-2025-0491-5707-A2, at 38.

\563\ Ford, Docket No. NHTSA-2025-0491-5821-A1, at 3.

\564\ Kia, Docket No. NHTSA-2025-0491-5123-A1, at 3-4.

\565\ Nissan, Docket No. NHTSA-2025-0491-5857-A1, at 4.

\566\ Stellantis, Docket No. NHTSA-2025-0491-5968-A1, at 10-11.

Conversely, UCS and Attorneys General \567\ opposed NHTSA's use of an MDPCS offset. UCS stated that NHTSA's use of an MDPCS offset is arbitrary and inconsistent with its legal authority, and suggested that NHTSA to use a set of projections to establish the CAFE standards, but then state that those same set of projections are not sufficient when setting the MDPCS in the same rulemaking. UCS concluded that NHTSA should finalize a MDPCS without an offset that is inconsistent with its legal authority. The States and Cities similarly stated that the statute does not make any provision for an MDPCS offset to account for shifts in vehicle mix. They stated that NHTSA's use of an offset is arbitrary and contrary to statute.

\567\ UCS, Docket No. NHTSA-2025-0491-6027-A1, at 53-54; Attorneys General, Docket No. NHTSA-2025-0491-6064-A2, at 101-103.

UCS commented that the MDPCS offset is based on an ad hoc calculation methodology that lacks any underlying scientific or technical basis and confuses correlation with causation.\568\ UCS stated that NHTSA's central analysis takes into consideration many of the factors that NHTSA identifies as responsible for a potential shift in fleet mix,\569\ and further commented that, if NHTSA does not think its model is good enough at projecting the fleet, it must say so as part of that central analysis and should seek to remedy such concerns by correcting that underlying model. In addition, UCS commented that NHTSA used incorrect assumptions for its fleet projections when it calculated the MDPCS offset.\570\ UCS stated that NHTSA incorrectly assumed that its fleet projections can only be wrong in one direction, which is responsive to manufacturer compliance strategy. UCS further commented that part of NHTSA's reason for the offset stems from concerns about fuel prices that could alter the market; however, NHTSA's primary analysis includes a steady increase in fuel prices. In addition, UCS stated that the EIA has predicted that proposed policy changes would lead to higher gasoline prices, if finalized. UCS further stated that higher oil prices could shift consumer demand away from crossovers and towards PCs.

\568\ UCS, Docket No. NHTSA-2025-0491-6027-A1, at 55-56.

\569\ Id.

\570\ Id.

NHTSA disagrees with the Alliance, Ford, Kia, and Stellantis that it should continue to use the -1.9 percent offset until the impact of changes to vehicle classification and other uncertainties are better understood. The MDPCS offset is not a forward-looking value; it is based on comparing the projected average fuel economy standard as absolute MPG in prior rulemakings to the final compliance data of model years that have been completed. The analysis that NHTSA used to calculate the new -0.7 percent offset is based on the most recent and complete data available to the agency. Furthermore, the -0.7 percent offset compared to the -1.9 percent offset is a reduction of 1.2 percent, demonstrating NHTSA's efforts to minimize uncertainty in its projection of future CAFE standards. NHTSA disagrees with commenters requesting that NHTSA maintain the -1.9 percent offset because of uncertainty in vehicle reclassification. As previously mentioned in Sections II.A, II.B and III, the impact of the changes to vehicle classification in this final rulemaking has been accounted for in the final average fuel economy standards for the combined domestic and non- domestic passenger automobile fleet in both the curve fitting analysis and the Alternatives themselves.

NHTSA also disagrees with the Alliance and Stellantis that the agency should modify its MDPCS offset calculation methodology to incorporate impacts from the vehicle classification

changes that have been finalized in this rulemaking. Significant modifications to improve and clarify vehicle reclassification, like replacing gross combined weight rating (GCWR) with Trailer Weight Rating (TWR) and delaying the implementation date from MY 2028 to MY 2030, have mitigated most of the uncertainties raised by the Alliance and other manufacturers. As stated earlier, the projected MDPCSs in the analysis have accounted for much of the concerns raised by manufacturers, such as vehicles moving from the non-passenger automobile to the passenger automobile regulatory class. The MDPCSs are based on average fuel economy standards that have been developed from footprint curves and estimated during compliance simulations in the CAFE Model. The vehicle classification changes will cause some vehicle models from the non-passenger automobile compliance fleet to move to the passenger automobile compliance fleet for MY 2030 and beyond. These changes were captured in the Market Data Input File and synthesized in the CAFE Model during its compliance simulation. In addition, for this final rule, NHTSA is finalizing adjustments to the footprint curves that define CAFE standards for MYs 2027-2031. In addition to other modifications, these adjustments incorporate the aforementioned changes to vehicle classification. While the effects of the changes to vehicle classification will not be factored into the MDPCS offset calculation methodology, they are adequately represented in the projected average fuel economy standards and consequently the MDPCSs themselves. As such, there is no need to further modify the MDPCS offset calculation methodology to account for changes to vehicle classification.

NHTSA does not agree with UCS and the States and Cities' assertion that NHTSA's use of an offset is arbitrary and inconsistent with its legal authority. This is discussed in more detail in Section V.

NHTSA also disagrees with UCS' assertion that the agency assumes its fleet projections can only be wrong in one direction. The agency does not presume or predict how the final compliance standards will compare to the predicted standards. As discussed above, the methodology that NHTSA uses to calculate the final MDPCS offset is a simple percentage change equation that can produce a positive or negative offset. In establishing the MDPCS, the agency is simply acknowledging the difference between the historic projected and achieved fuel economy, which is a function of vehicle footprints and sales volumes. Based on both MDPCS offset analyses, the offset shows that NHTSA has over predicted the static MPG of the MDPCS. However, NHTSA has improved the analysis that projects the MDPCS, which is reflected in this final rule.

NHTSA also disagrees with UCS' assertion that the MDPCS offset is based on an ad hoc calculation methodology that lacks any underlying scientific or technical basis. As previously discussed, NHTSA developed the offset to account retroactively for the differences between projected and achieved domestic and non-domestic passenger automobile fuel economy, which is a static MPG value. NHTSA uses a simple percentage change equation to determine the value of the offset to show this offset based on actual final CAFE compliance data. NHTSA also does not agree with UCS' assertion that, in establishing the offset, the agency is confusing causation with correlation. NHTSA has identified some potential causes of the historic differences but has not proclaimed an exact cause. The CAFE standards are coefficients that define a curve based on vehicle footprint, which accounts for variability in the vehicle offerings within a manufacturer's fleet; however, the MDPCS by statute is a static MPG, which does not account for the same variability. In addition, NHTSA does not agree with UCS's comment that NHTSA must modify the CAFE model in response to the historic differences between the projected and actual fuel economy standards. During compliance modeling, the CAFE model maintains a vehicle's initial footprint and does not adjust it when the platform component is upgraded. However, NHTSA does update the inputs and the CAFE model to continuously improve its projections. The decrease in the offset from -1.9 percent to -0.7 percent is indicative of this. As such, it is reasonable for projected standards to differ from those standards established during final compliance.

NHTSA also received comments on its use of the fleet average fuel economy standard rather than the fleet average fuel economy performance to develop the MDPCS and its application of the 49 U.S.C. 32902(h) restrictions to its MDPCS and MDPCS offset calculation methodologies, which the agency addresses in Section V.

For this final rule, NHTSA developed separate alternatives for two distinct periods of time (MYs 2022-2026 and MYs 2027-2031) and two distinct fleets (PCs and LTs). NHTSA developed a No-Action and five action alternatives for PCs for MYs 2022-2026; a No-Action and five action alternatives for LTs for MYs 2022-2026; a No-Action and five action alternatives for PCs for MYs 2027-2031; and a No-Action and five action alternatives for LTs for MYs 2027-2031. In total NHTSA developed twenty-four separate alternatives. The final standards may, in places, be referred to as the “Preferred Alternative(s),” but NHTSA intends “final standards” and “Preferred Alternative(s)” to be used interchangeably for purposes of this document.

Table III-1 below shows the specific change year over year for each of the 24 alternatives NHTSA analyzed for this final rule. Each row in the table contains four alternatives, one for each time period and regulatory class. For example, Alternative 3 consists of PC stringencies for MYs 2022-2026, PCs stringencies for MYs 2027-2031, LT stringencies for MYs 2022-2026, and LT stringencies for MYs 2027-2031. Throughout the analysis NHTSA refers to this group of alternatives collectively as “Alternative 3” for simplicity.

The regulatory alternatives considered by the agency in this final rule are presented in Table III-1 as percentage changes in stringency over the preceding model year. In the sections that follow, NHTSA presents the coefficients that define the standards in each model year for each alternative that corresponds to these percentage rates.

[GRAPHIC] [TIFF OMITTED] TR30SE26.090

The following subchapters define the regulatory alternatives (including the No-Action Alternative) by time period and provide details on how NHTSA developed them. 1. No-Action Alternatives for PCs and LTs a. No-Action Alternative for the MYs 2022-2026 Amendment

The analysis of the No-Action Alternative assumes that the following CAFE standards remain in place: the CAFE standards for MYs 2022-2023 that were finalized in the 2020 final rule,\571\ and the CAFE standards for MYs 2024-2026 that were finalized in the 2022 final rule.\572\ The analysis also applies the statutory limitations in 49 U.S.C. 32902(h) in all model years in the analysis; specifically, the fuel economy of dedicated automobiles is not considered, dual-fueled automobiles are considered only when operated on gasoline or diesel fuel, and the trading, transferring, or availability of credits is not considered.

\571\ 85 FR 24174 (Apr. 30, 2020).

\572\ 87 FR 25710 (May 2, 2022).

The No-Action Alternative standards for the existing MYs 2022-2026 PC and LT fleets are defined by the following coefficients:

[GRAPHIC] [TIFF OMITTED] TR30SE26.091

[GRAPHIC] [TIFF OMITTED] TR30SE26.092

These equations are represented graphically below, where the x-axis represents vehicle footprint and the y-axis represents fuel economy. BILLING CODE 4910-59-P [GRAPHIC] [TIFF OMITTED] TR30SE26.093

[GRAPHIC] [TIFF OMITTED] TR30SE26.094

For the No-Action Alternative for MYs 2022-2026, the MDPCS is applied as it was established in the 2020 and 2022 final rules, including the offset originally calculated in those rules to account for recent projection errors as part of estimating the total PC fleet fuel economy standard. [GRAPHIC] [TIFF OMITTED] TR30SE26.095

The analysis of the No-Action Alternative assumes the following CAFE standards remain in place: the CAFE standards for MYs 2024-2026 that were finalized in the 2022 final rule \573\ and the CAFE standards for MYs 2027-2031 that were finalized in the 2024 final rule.\574\ The analysis also applies the statutory limitations in 49 U.S.C. 32902(h) in all model years in the analysis; specifically, the fuel economy of dedicated automobiles is not considered, dual-fueled automobiles are considered only as operated on gasoline or diesel fuel, and the trading, transferring, or availability of credits is not considered.

\573\ 87 FR 25710 (May 2, 2022).

\574\ 89 FR 52540 (June 24, 2024).

The No-Action Alternative standards for the existing MYs 2027-2031 PC and LT fleets are defined by the following coefficients, which (for the purposes of this analysis) are assumed to persist without change in subsequent model years:

[GRAPHIC] [TIFF OMITTED] TR30SE26.096

[GRAPHIC] [TIFF OMITTED] TR30SE26.097

[GRAPHIC] [TIFF OMITTED] TR30SE26.098

[GRAPHIC] [TIFF OMITTED] TR30SE26.099

For the No-Action Alternative for MYs 2027-2031, the MDPCS is applied as it was established in the 2024 final rule.

\575\ The LT CAFE target function coefficients established in the 2024 final rule are identical for MY 2027 and MY 2028. As a result, the MY 2027 and MY 2028 lines overlap with each other. [GRAPHIC] [TIFF OMITTED] TR30SE26.100

BILLING CODE 4910-59-C 2. Action Alternatives for Passenger Cars and Light Trucks

In addition to the No-Action Alternative, NHTSA has considered five action alternatives for PCs and LTs. These action alternatives are specified below and demonstrate different possible approaches to balancing the statutory factors applicable for setting fuel economy standards for PCs and LTs, as discussed in more detail in Section V. a. Action Alternatives for MYs 2022-2026 Amendment (1) Alternative 1

Alternative 1 begins with a MY 2022 set of target function parameters with which 80 percent of the PC fleet complied in MY 2022, and with which 80 percent of LTs complied in MY 2022. From there, Alternative 1 would increase CAFE stringency by 0.44 percent per year for MYs 2022-2026 for PCs and by 0.54 percent per year for MYs 2022- 2026 for LTs.

[GRAPHIC] [TIFF OMITTED] TR30SE26.101

[GRAPHIC] [TIFF OMITTED] TR30SE26.102

BILLING CODE 4910-59-P

These equations are represented graphically below:

[GRAPHIC] [TIFF OMITTED] TR30SE26.103

[GRAPHIC] [TIFF OMITTED] TR30SE26.104

Under this alternative, the MDPCS is as follows:

[GRAPHIC] [TIFF OMITTED] TR30SE26.105

(2) Alternative 2

Alternative 2 begins with a MY 2022 set of target function parameters with which 75 percent of the PC fleet complied in MY 2022, and with which 70 percent of LTs complied in MY 2022. From there, Alternative 2 would increase CAFE stringency by 0.47 percent per year for MYs 2022-2026 for PCs and by 0.46 percent per year for MYs 2022- 2026 for LTs. [GRAPHIC] [TIFF OMITTED] TR30SE26.106

[GRAPHIC] [TIFF OMITTED] TR30SE26.107

These equations are represented graphically below:

[GRAPHIC] [TIFF OMITTED] TR30SE26.108

[GRAPHIC] [TIFF OMITTED] TR30SE26.109

Under this alternative, the MDPCS is as follows:

[GRAPHIC] [TIFF OMITTED] TR30SE26.110

(3) Alternative 3--Preferred Alternative

The Preferred Alternative begins with a MY 2022 set of target function parameters with which 70 percent of the PC fleet complied in MY 2022, and with which 50 percent of LTs complied in MY 2022. From there, Alternative 3 would increase CAFE stringency by 0.90 percent per year for MYs 2022-2026 for PCs and by 0.51 percent per year for MYs 2022-2026 for LTs. [GRAPHIC] [TIFF OMITTED] TR30SE26.111

[GRAPHIC] [TIFF OMITTED] TR30SE26.112

These equations are represented graphically below:

[GRAPHIC] [TIFF OMITTED] TR30SE26.113

[GRAPHIC] [TIFF OMITTED] TR30SE26.114

Under this alternative, the MDPCS is as follows:

[GRAPHIC] [TIFF OMITTED] TR30SE26.115

(4) Alternative 4

Alternative 4 begins with a MY 2022 set of target function parameters with which 55 percent of the PC fleet complied in MY 2022, and with which 40 percent of LTs complied in MY 2022. From there, Alternative 4 would increase CAFE stringency by 1.32 percent per year for MYs 2022-2026 for PCs and by 1.50 percent per year for MYs 2022- 2026 for LTs. [GRAPHIC] [TIFF OMITTED] TR30SE26.116

[GRAPHIC] [TIFF OMITTED] TR30SE26.117

These equations are represented graphically below:

[GRAPHIC] [TIFF OMITTED] TR30SE26.118

[GRAPHIC] [TIFF OMITTED] TR30SE26.119

Under this alternative, the MDPCS is as follows:

[GRAPHIC] [TIFF OMITTED] TR30SE26.120

(5) Alternative 5

Alternative 5 begins with a MY 2022 set of target function parameters with which 55 percent of the PC fleet complied in MY 2022, and with which 40 percent of LTs complied in MY 2022. From there, Alternative 5 would increase CAFE stringency by 2.81 percent per year for MYs 2022-2026 for PCs and by 3.03 percent per year for MYs 2022- 2026 for LTs. [GRAPHIC] [TIFF OMITTED] TR30SE26.121

[GRAPHIC] [TIFF OMITTED] TR30SE26.122

These equations are represented graphically below:

[GRAPHIC] [TIFF OMITTED] TR30SE26.123

[GRAPHIC] [TIFF OMITTED] TR30SE26.124

Under this alternative, the MDPCS is as follows:

[GRAPHIC] [TIFF OMITTED] TR30SE26.125

Alternative 1 would increase CAFE stringency for PCs by 0.44 percent per year from MYs 2026-2029, change by -1.1 percent from MYs 2029-2030, and by 0.25 percent for MYs 2030-2031. Alternative 1 would increase CAFE stringency for LTs by 0.54 percent per year from MYs 2026-2029, change by -15.10 percent from MYs 2029-2030, and by 0.25 percent for MYs 2030-2031. [GRAPHIC] [TIFF OMITTED] TR30SE26.126

[GRAPHIC] [TIFF OMITTED] TR30SE26.127

These equations are represented graphically below. Note that the shapes of the curves for MYs 2027-2029 are also different from the shapes of the curves for MYs 2030-2031 due to the finalized reclassification in MY 2030. [GRAPHIC] [TIFF OMITTED] TR30SE26.128

[GRAPHIC] [TIFF OMITTED] TR30SE26.129

For this rulemaking, NHTSA has updated the analysis it uses to estimate the offset and calculated an offset of 0.7 percent, which will be applicable to the MDPCS for each action alternative in MYs 2027- 2031. Under this alternative, the MDPCS is as follows: [GRAPHIC] [TIFF OMITTED] TR30SE26.130

(2) Alternative 2

Alternative 2 would increase CAFE stringency for PCs by 0.47 percent per year from MYs 2026-2029, change by -1.1 percent from MYs 2029-2030, and by 0.25 percent for MYs 2030-2031. Alternative 2 would increase CAFE stringency for LTs by 0.46 percent per year from MYs 2026-2029, change by -15.1 percent from MYs 2029-2030, and by 0.25 percent for MYs 2030-2031.

[GRAPHIC] [TIFF OMITTED] TR30SE26.131

[GRAPHIC] [TIFF OMITTED] TR30SE26.132

These equations are represented graphically below. Note that the shapes of the curves for MYs 2027-2029 are also different from the shapes of the curves for MYs 2030-2031 due to the finalized reclassification in MY 2030. [GRAPHIC] [TIFF OMITTED] TR30SE26.133

[GRAPHIC] [TIFF OMITTED] TR30SE26.134

For this rulemaking, NHTSA has updated the analysis it uses to estimate the offset applied to the MDPCS, which is now calculated at 0.7 percent and is applied to each action alternative in MYs 2027-2031. Under this alternative, the MDPCS is as follows: [GRAPHIC] [TIFF OMITTED] TR30SE26.135

(3) Alternative 3--Preferred Alternative

The Preferred Alternative would increase CAFE stringency for PCs by 0.90 percent per year from MYs 2026-2029, change by -0.3 percent from MYs 2029-2030, and by 1.0 percent for MYs 2030-2031. The Preferred Alternative would increase CAFE stringency for LTs by 0.51 percent per year from MYs 2026-2029, change by -14.4 percent from MYs 2029-2030, and by 1.0 percent for MYs 2030-2031.

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These equations are represented graphically below. Note that the shapes of the curves for MYs 2027-2029 are also different from the shapes of the curves for MYs 2030-2031 due to the finalized reclassification in MY 2030. [GRAPHIC] [TIFF OMITTED] TR30SE26.138

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Under this alternative, the MDPCS is as follows:

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(4) Alternative 4

\576\ The final offset values for the MDPCS are presented in the regulatory text update for part 531 below.

Alternative 4 would increase CAFE stringency for PCs by 1.32 percent per year from MYs 2026-2029, change by -0.7 percent from MYs 2029-2030, and by 0.5 percent for MYs 2030-2031. Alternative 4 would increase CAFE stringency for LTs by 1.5 percent per year from MYs 2026- 2029, change by -14.9 percent from MYs 2029-2030, and by 0.5 percent for MYs 2030-2031.

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These equations are represented graphically below. Note that the shapes of the curves for MYs 2027-2029 are also different from the shapes of the curves for MYs 2030-2031 due to the finalized reclassification in MY 2030.

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For this rulemaking, NHTSA has updated the analysis it uses to estimate the offset and calculated an offset of 0.7 percent, which will be applicable to the MDPCS for each action alternative in MYs 2027- 2031. Under this alternative, the MDPCS is as follows: [GRAPHIC] [TIFF OMITTED] TR30SE26.145

(5) Alternative 5

Alternative 5 would increase CAFE stringency for PCs by 2.81 percent per year from MYs 2026-2029, change by -0.8 percent from MYs 2029-2030, and by 0.5 percent for MYs 2030-2031. Alternative 5 would increase CAFE stringency for LTs by 3.03 percent per year from MYs 2026-2029, change by -14.7 percent from MYs 2029-2030, and by 0.5 percent for MYs 2030-2031.

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These equations are represented graphically below. Note that the shapes of the curves for MYs 2027-2029 are also different from the shapes of the curves for MYs 2030-2031 due to the finalized reclassification in MY 2030. [GRAPHIC] [TIFF OMITTED] TR30SE26.148

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For this rulemaking, NHTSA has updated the analysis it uses to estimate the offset and calculated an offset of 0.7 percent, which will be applicable to the MDPCS for each action alternative in MYs 2027- 2031. Under this alternative, the MDPCS is as follows: [GRAPHIC] [TIFF OMITTED] TR30SE26.150

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NHTSA does not estimate any impacts from changes to the MY 2022- 2026 standards other than the difference between the estimated achieved compliance value and the finalized standard for each manufacturer's fleet. At the time of the final rule, manufacturers have already produced fleets for MYs 2022-2026, either partially or completely. As a result, NHTSA's finalized standards are expected to have no impact on manufacturers' production decisions. Similarly, new vehicles produced for MYs 2022-2025 have already been purchased, as have, at the time of this final rule, most new vehicles produced for MY 2026.

Table IV-1 through Table IV-9 present compliance gaps for domestic passenger cars, imported passenger cars, and non-passenger automobile fleets for MYs 2022-2024, comparing the fuel economy levels that have been achieved to those that would have been achieved under the standards contemplated by NHTSA.

\577\ Domestic passenger car standard equals the larger of two values: the value computed based on the manufacturer's domestic passenger car fleet, and the minimum domestic passenger car standard for the model year. The minimum domestic passenger car standard is set equal to 92 percent of the average fuel economy for the entire passenger car fleet in the model year as projected by NHTSA when the standards are promulgated.

\578\ Calculated achieved fuel economy does not include the effects of AC/OC adjustments.

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\579\ Calculated achieved fuel economy does not include the effects of AC/OC adjustments.

\580\ Calculated achieved fuel economy does not include the effects of AC/OC adjustments.

\581\ Domestic passenger car standard equals the larger of two values: the value computed based on the manufacturer's domestic passenger car fleet, and the minimum domestic passenger car standard for the model year. The minimum domestic passenger car standard is set equal to 92 percent of the average fuel economy for the entire passenger car fleet in the model year as projected by NHTSA when the standards are promulgated.

\582\ Calculated achieved fuel economy does not include the effects of AC/OC adjustments.

\583\ Calculated achieved fuel economy does not include the effects of AC/OC adjustments. [GRAPHIC] [TIFF OMITTED] TR30SE26.153

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\584\ Calculated achieved fuel economy does not include the effects of AC/OC adjustments.

\585\ Domestic passenger car standard equals the larger of two values: the value computed based on the manufacturer's domestic passenger car fleet, and the minimum domestic passenger car standard for the model year. The minimum domestic passenger car standard is set equal to 92 percent of the average fuel economy for the entire passenger car fleet in the model year as projected by NHTSA when the standards are promulgated.

\586\ Calculated achieved fuel economy does not include the effects of AC/OC adjustments.

\587\ Calculated achieved fuel economy does not include the effects of AC/OC adjustments. [GRAPHIC] [TIFF OMITTED] TR30SE26.157

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Unlike MYs 2022-2024, NHTSA is not yet in possession of complete pre- or mid-model year manufacturer data for MYs 2025-2026 from which to generate estimates of fuel economy standards and values. As a reminder, a manufacturer's fleet fuel economy standard is generated based on a calculation of sales-weighted volumes of vehicles by footprint and fuel economy in a particular regulatory fleet. The fuel economy in mpg values are not the standards; instead, the coefficients that go into the mathematical functions that create the footprint-to- fuel-economy relationship curves define the standards. Accordingly, without data for MYs 2025-2026 in hand, NHTSA performed side cases using the CAFE Model to generate estimated fleet average CAFE standards for MYs 2025-2026.

\588\ Calculated achieved fuel economy does not include the effects of AC/OC adjustments.

Table IV-10 through Table IV-13 show the estimated required CAFE level for MYs 2025-2026. Table IV-10 shows these values for passenger cars, light trucks, and the fleet as a whole for the Preferred Alternative. Table IV-11 through Table IV-13 show these values by regulatory class (domestic passenger cars, imported passenger cars, and non-passenger automobiles) for each manufacturer in each alternative. It is important to note that these values are projections of the average mpg that the fleets will need to achieve. The actual level of performance that each manufacturer would need to meet varies and is calculated for each manufacturer's compliance fleet based on the footprint of each vehicle in the fleet and the corresponding footprint curve. [GRAPHIC] [TIFF OMITTED] TR30SE26.160

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Each regulatory alternative considered in this final rule, aside from the No-Action Alternative, would change the stringency of both passenger car and light truck CAFE standards during MYs 2027-2031. To estimate the potential effects of each of these alternatives, including effects beyond these years, NHTSA has, as with all recent CAFE rulemakings, assumed that standards would continue unchanged after the last model year to be covered by CAFE targets (in this case, after MY 2031).

The estimated required average fuel economy values for the passenger car, light truck, and total fleets for each action alternative NHTSA considered alongside values for the No-Action Alternative are presented in Table IV-14 below. NHTSA recognizes that the size and composition of the fleet (i.e., in terms of distribution across the range of vehicle footprints) can change over time, affecting the average fuel-economy requirements under both the passenger car and light truck standards, and for the overall fleet. To the extent the fleet differs from NHTSA's projections, average requirements also would differ from NHTSA's projections.

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Manufacturers' achieved average fuel economy, as projected by the CAFE Model, does not always exactly match each CAFE standard in each model year, and some manufacturers have tended to exceed at least one requirement.\589\ NHTSA uses the CAFE Model to approximate compliance solutions of manufacturers, while observing statutory constraints on the factors NHTSA may consider in setting standards (and thus its analysis of alternative standards).\590\ As discussed in the accompanying FRIA and Final TSD, NHTSA simulates manufacturers' responses to each alternative given a wide range of input estimates (e.g., technology cost and efficacy and fuel prices), each of which is subject to uncertainty. NHTSA's analysis simply illustrates one potential way manufacturers could respond to each regulatory alternative; actual manufacturer responses may differ from NHTSA's simulations, and therefore the achieved compliance levels will likely differ from the estimated achieved fuel economy for each regulatory alternative shown in these tables.

\589\ Over-compliance can be the result of multiple factors including projected “inheritance” of technologies (e.g., changes to engines shared across multiple vehicle model/configurations) applied in earlier model years, future technology cost reductions (e.g., decreased technology costs due to learning), and changes in fuel prices that affect technology cost effectiveness. As in all past rulemakings over the last decade, NHTSA assumes that, beyond fuel economy changes in response to CAFE standards, manufacturers may also improve fuel economy via technologies that would pay for themselves within the first 36 months of vehicle operation (this rule assumes 36 months, prior rules assumed 30 months).

\590\ NHTSA's standard-setting analysis does not consider factors prohibited under 49 U.S.C. 32902(h), including the application of compliance credits and consideration of fuel economy attributable to alternative fuel sources. For plug-in hybrid vehicles, this means only the gasoline-powered operation (i.e., non- electric fuel economy, or charge sustaining mode operation only) is considered when selecting technology to meet the standards.

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The SHEV share of the fleet initially (i.e., in MY 2024) is around 10.4 percent. By the end of the regulatory period (MYs 2027-2031), SHEV penetration rates reach 48-50 percent for the action alternatives and 81 percent for the No-Action Alternative (including both the passenger car and light truck fleets). For both light truck and passenger car fleets, each regulatory alternative produces a similar portion of SHEVs in each model year across MYs 2027-2031.

The PHEV share of the fleet in MY 2024 is 3.4 percent for light trucks and 1.7 percent for passenger cars. Although their market shares do not increase to the levels seen for SHEVs, in the light truck fleet, PHEVs are estimated to make up 4.3 percent of the fleet for all the regulatory alternatives by MY 2031, and 9.6 percent for the No-Action Alternative. In the passenger car fleet, PHEV penetration stays under two percent through MY 2029 and under three percent through MY 2031 for all regulatory alternatives, and reaches 1.8 percent by MY 2031 for the No-Action Alternative.\591\

\591\ Due to the statutory constraints imposed on the analysis by EPCA that exclude consideration of AFVs, BEVs are not considered as a compliance option within the CAFE Model in any model year. Similarly, PHEVs can be introduced by the CAFE Model, but only their charge-sustaining fuel economy value (as opposed to their charge- depleting fuel economy value) is considered in this analysis.

Variation in penetration rates across regulatory alternatives generally results from differences in the number of vehicles or models to which a manufacturer would need to add technology to comply with each alternative. For example, a certain technology pathway could be the most cost-effective pathway if a manufacturer is just shy of its fuel-economy target, but the pathway likely becomes ineffective if there is a larger gap, which may necessitate pursuing broader changes in powertrain technology across the manufacturer's fleet. For more details on the technology application by regulatory fleet, see FRIA Chapter 8.2.2.1.

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The FRIA also presents NHTSA's estimates of manufacturers' potential application of fuel-saving technologies, including advanced transmissions, aerodynamic improvements, and reduced vehicle mass, in response to each regulatory alternative. The accompanying FRIA Appendix provides more detailed and comprehensive results, and the underlying CAFE Model Output File provides all the information used to construct these estimates, including the specific combination of technologies estimated to be applied to every vehicle model/configuration in each of MYs 2024-2050.

NHTSA's analysis estimates the regulatory costs to manufacturers for compliance with the CAFE standards. As summarized in Table IV-22, NHTSA estimates the present discounted value of manufacturers' cumulative regulatory costs across MYs 2027-2031 would total $116 billion under the No-Action Alternative and between approximately $53 billion to $90 billion under regulatory alternatives 1 through 5 considered in this final rule. These regulatory costs account for fuel- saving technologies added in the simulation (and AC improvements and other OC technologies through MY 2027). Table IV-22 below shows estimated costs by manufacturer. Values for the regulatory alternatives are presented as incremental relative to the No-Action Alternative. The variation in aggregate costs among manufacturers is a function of both differences in the quantities of vehicles produced for sale in the United States and differences in technology application and compliance pathways. Technology costs for each model year are defined on an incremental basis, with costs equal to the relevant technology applied minus the costs of the initial technology state in a reference fleet (i.e., MY 2024).\592\ The accompanying FRIA Appendix presents results separately for each manufacturer's compliance fleets (i.e.,

domestic passenger car, imported passenger car, and light truck) under each regulatory alternative and model year, and the underlying CAFE Model Output File also show results for each manufacturer's combined passenger car fleet (i.e., domestic and imported cars).

\592\ As discussed in the Final TSD, the technology costs considered in the CAFE Model reflect a markup factor to account for manufacturer profits and other retail costs. For more detail regarding the calculation of technology costs, see the CAFE Model Documentation. [GRAPHIC] [TIFF OMITTED] TR30SE26.172

NHTSA assumes that technology costs are reflected in vehicle prices. NHTSA's estimates of the average costs to new vehicle purchasers from MYs 2027-2031 are summarized in Table IV-23 and Table IV-24. [GRAPHIC] [TIFF OMITTED] TR30SE26.173

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Table IV-25 shows how these costs could vary among manufacturers. See Chapter 8.2.2 of the FRIA for more details of the effects on vehicle manufacturers, including regulatory costs. [GRAPHIC] [TIFF OMITTED] TR30SE26.175

Fuel savings and regulatory costs act as countervailing forces on new vehicle sales. All else being equal, as fuel savings increase, the CAFE Model projects higher new vehicle sales, but as regulatory costs increase, the CAFE Model projects lower new vehicle sales. Both fuel savings and regulatory costs increase with stringency. The magnitude of these fuel savings and vehicle price increases depends on manufacturer compliance decisions, especially technology application. Final TSD Chapter 4.2.1.2 discusses NHTSA's approach to estimating new vehicle sales. Starting in MY 2027, the CAFE Model begins applying technology differently in response to the standards

that would be set under the various regulatory alternatives. All regulatory alternatives result in more vehicle sales compared to the No-Action Alternative, which has higher projected regulatory costs starting in MY 2027. Regulatory alternatives 1 through 4 result in very similar vehicle sales for all model years; in comparison to the No- Action Alternative, they all have 0.3 percent more sales in MY 2027 and approximately 0.6 percent more by MY 2031. Regulatory alternative 5, in comparison to the No-Action Alternative, has 0.2 percent more sales in MY 2027 and approximately 0.3 percent more by MY 2031. Figure IV-1 shows the estimated annual light-duty industry sales by regulatory alternative. [GRAPHIC] [TIFF OMITTED] TR30SE26.176

Differences in sales and the cost of technology applied to vehicles in turn tend to affect projected automobile industry labor utilizations. All regulatory alternatives result in lower levels of labor utilization, measured in person years, compared to the No-Action Alternative. Because the action alternatives 1 through 4 produce similar levels of technology costs and sales volumes, the related changes in labor predicted by the CAFE Model across these alternatives are also negligible; in comparison to the No-Action Alternative, Alternatives 1 through 4 all have approximately 0.2 percent lower labor in MY 2027 and approximately 1.2 percent lower by MY 2031. Regulatory Alternative 5, in comparison to the No-Action Alternative, has 0.3 percent less labor utilization in MY 2027 and 0.6 percent less by MY 2031. Figure IV-2 shows the estimated number of person years under each alternative.

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The accompanying Final TSD Chapter 6.2.5 discusses NHTSA's approach to estimating automobile industry employment, and the accompanying FRIA Chapter 8 (and its Appendix I) and CAFE Model Output File provide more detailed results of NHTSA's light-duty analysis. 2. Effects on Society

NHTSA accounts for the effects of the standards on society using a benefit-cost framework. The categories considered include private costs borne by manufacturers and passed on to consumers; external costs, which include government costs and costs pertaining to emissions, congestion, noise, and energy security; and costs associated with safety impacts. In this accounting framework, the CAFE Model records costs and benefits related to vehicles in the fleet throughout the lifetime of a particular model year and allows for the accounting of costs and benefits by calendar years. Examining program effects through this lens illustrates the temporal differences in major cost and benefit components and allows NHTSA to examine costs and benefits tied only to those vehicles directly impacted by this final rule.

NHTSA splits effects on society into private costs, external costs, private benefits, and external benefits. Table IV-26 and Table IV-28 present NHTSA's estimates of the present discounted values of the costs and benefits of changing CAFE standards in each alternative considered in this final rule, as well as the party (private interests or society as a whole) to which they accrue. Manufacturers are regulated directly under the program and incur additional production costs when they apply technology to their vehicle offerings to improve fuel economy. NHTSA assumes that those costs are passed through to new car and truck buyers in the form of higher prices (and conversely, that decreases in technology costs pass through as lower prices for consumers).

While incremental maintenance and repair costs and benefits would change for buyers of new cars and trucks affected by modified CAFE standards, NHTSA does not include these impacts in the analysis because they are difficult to estimate, and NHTSA does not currently have sufficient data to estimate them accurately. NHTSA may include estimates of the impact that CAFE standards have on lifetime maintenance and repair costs in future analyses if sufficient data become available.

The analysis estimates also take into account the rebound effect, in which vehicles are driven more as increased fuel economy reduces the cost of driving. NHTSA also assumes that drivers of new vehicles internalize 90 percent of the risk associated with increased exposure to crashes when they engage in additional travel.

\593\ Fuel savings are valued in NHTSA's analysis at retail fuel prices (inclusive of Federal and State taxes).

The value of fuel savings,\593\ which accrue to new car and truck buyers, is the largest component of the estimated private benefits associated with each of the regulatory alternatives. For this final rule, the estimates reflect forgone fuel savings for consumers. NHTSA considered options for the final rule to present the value of fuel savings as those savings accrue to multiple buyers over the life of the vehicle; currently,

the value of fuel savings is presented as one value attached to the entire life of the vehicle. In contrast, in the real world, a vehicle may have multiple owners that experience different benefits between the up-front savings from reduced technology application under lower fuel economy standards and the forgone fuel savings for the first owner for the time that they own the vehicle. NHTSA sought comment on such alternative presentations of fuel savings that the agency could include for informational purposes in the final rule, in addition to its traditional presentation of fuel savings as shown below. IPI commented that NHTSA should maintain its societal perspective and value the full fuel savings in its analysis.\594\ IPI argued that any change to NHTSA's presentation that accounted for the distribution of fuel savings between first and subsequent owners should also account for any additional residual value of vehicles captured by initial owners at resale. NHTSA maintains that the societal value of fuel savings should be considered in order to capture the full effect over the vehicle's lifetime and is not changing its presentation of fuel savings. NHTSA is still weighing alternative approaches and how best to separate costs and benefits between different owners and will consider changes for future CAFE rulemakings.

\594\ IPI, Docket No. NHTSA-2025-0491-6015-A2, at 58.

The regulatory alternatives also increase the cost of driving relative to the No-Action Alternative (i.e., lower fuel economy increases the per-mile cost of travel) and results in more frequent refueling and a rebound-related reduction in the mobility benefits of travel.

By reducing standards, NHTSA enables manufacturers to provide a mix of vehicles and invest in other attributes such as safety. When standards increase in stringency, NHTSA accounts for forgone improvements in attributes other than fuel economy due to CAFE standards through the IOC in its analysis; however, the agency does not account for changes in the fleet mix offered by manufacturers in an effort to comply with standards, which could include eliminating some models entirely. Because the finalized standards would prevent these distortionary effects, they would increase the range of choices available to Americans and provide additional benefits to new car and truck buyers.

In addition to private benefits and costs--those borne by manufacturers, buyers, and owners of cars and light trucks--there are other benefits and costs from resetting CAFE standards that are borne more broadly throughout the economy or society, which NHTSA refers to as external benefits and costs.\595\ In the case of the finalized standards, the increase in per-mile fuel costs would lead to a reduction in congestion, fatalities, and road noise costs, due to reduced rebound travel.\596\ The external benefits of health outcomes related to exposure of criteria pollutants and of improved energy security also would decrease slightly relative to the No-Action Alternative under each of the regulatory alternatives considered in this final rule.

\595\ Some of these external benefits and costs result from changes in economic and environmental externalities from supplying or consuming fuel, while others do not involve changes in such externalities but are similar in that they are borne by parties other than those whose actions impose them.

\596\ NHTSA also accounts for changes in fuel tax revenue that occur as a result of changes in fuel consumption. Changes in tax revenues are considered a transfer and not an economic externality as defined traditionally, but NHTSA groups these with social costs instead of private costs because that loss in revenue affects society as a whole as opposed to impacting only consumers or manufacturers. The offsetting changes in costs to consumers are accounted for in the estimates of fuel cost savings, which are valued at retail prices inclusive of taxes.

Table IV-26 through Table IV-29 below present NHTSA's estimates of the benefits and costs of each regulatory alternative at different discount rates and from both model year and calendar year perspectives. Estimated net benefits are positive for all regulatory alternatives at both the three and seven percent discount rates and for each perspective, with higher costs and benefits estimated in the calendar year analysis. BILLING CODE 4910-59-P

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BILLING CODE 4910-59-C 3. Physical and Environmental Effects

NHTSA estimates various physical and environmental effects associated with the standards. These include quantities of fuel consumed, non-criteria and criteria pollutant emissions, and health and safety impacts. Table IV-30 shows the average annual impacts, including the on-road fleet sizes, vehicle miles traveled (VMT), fuel consumption, and CO2 emissions, across alternatives and grouped by decade. The overall size of the on-road ICE fleet decreases in later decades regardless of alternative due to declining ICE sales, with the lowest on-road fleet size projected under the No-Action Alternative.\597\ All five regulatory alternatives result in larger fleets by CY 2050 compared to the No-Action Alternative. Increased sales during the standard-setting years increases the existing vehicle stock, thereby expanding the size of the overall fleet.

\597\ NHTSA's projection of total sales excludes BEVs and FCEVs.

In the No-Action Alternative, the decreasing size of the overall ICE fleet results in ICE VMT decreases in later decades, with the lowest average VMT per year occurring between CY 2041 and CY 2050. Similarly, on an annual basis, fuel consumption (measured in gallons of gasoline gallon equivalents (GGEs)) and non-criteria emissions decline in the later decades due to reduced VMT and new, more efficient vehicles replacing older, less efficient vehicles in the fleet. Relative to the No-Action Alternative, all regulatory alternatives considered result in lower VMT but increase fuel consumption and non- criteria emissions due to a larger ICE fleet, with the largest increases observed in Alternative 1.

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NHTSA's analysis estimates total annual consumption of fuel by the ICE on-road fleet on a calendar basis for 2024 through 2050, as shown in Figure IV-3 for the No-Action Alternative, Alternative 1, Alternative 2, Alternative 3, Alternative 4, and Alternative 5. Gasoline consumption decreases over time, with smaller decreases seen under the regulatory alternatives compared to the No-Action Alternative. Note that in many of the figures presented, the lines representing different regulatory alternatives lay nearly on top of each other, indicating that estimated impacts are very similar.

\598\ These rows report total vehicle units observed during the period. For example, about 1,765 million units are modeled in the on-road fleet for CYs 2024-2030. On average, this represents approximately 252 million vehicles in the on-road fleet for each calendar year in this calendar year cohort; this is the highest average across all cohorts.

\599\ These rows report total miles traveled during the period. For example, 21,570 billion miles traveled in CYs 2024-2030. On average, this represents approximately 3.08 trillion annual miles traveled for each calendar year in this calendar year cohort. [GRAPHIC] [TIFF OMITTED] TR30SE26.183

NHTSA estimates the non-criteria emissions attributable to the light-duty on-road fleet, from both vehicles and upstream energy sector processes (e.g., petroleum refining, or fuel transportation and distribution) as shown in Figure IV-4, Figure IV-5, and Figure IV- 6.\600\ All three non-criteria emissions follow similar trends of decline in the years between CYs 2024-2050, with smaller declines for the regulatory alternatives compared to the No-Action Alternative.\601\

\600\ While NHTSA considers the impacts of this rulemaking on the levels of CO2, CH4, and N2O emissions, the analysis does not include a monetization of any changes.

\601\ Note that CO2 emissions are expressed in units of million metric tons (mmt) while emissions from other pollutants are expressed in metric tons. [GRAPHIC] [TIFF OMITTED] TR30SE26.184

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Using the CAFE model, NHTSA estimates criteria pollutant emissions attributable to the light-duty on-road fleet from both vehicles and upstream energy sector processes (e.g., petroleum refining, or fuel transportation and distribution) as shown in Figure IV-8, Figure IV-9, and Figure IV-10. Changes in criteria pollutant emissions in turn

lead to changes in health outcomes described in later sections. The CAFE Model computes select health impacts resulting from population exposure to PM2.5 associated with emissions from directly emitted PM and two precursors to PM2.5 (NOX and SOX). Under the No-Action Alternative and each regulatory alternative, NHTSA projects a decrease in emissions of all criteria pollutants attributable to the light-duty on-road ICE fleet between CY 2024 and CY 2050 due to the decrease in VMT and retirement of older less efficient vehicles. These criteria pollutant emissions increase relative to the baseline as the stringencies of the alternatives decrease. [GRAPHIC] [TIFF OMITTED] TR30SE26.187

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Health impacts quantified by the CAFE Model include various instances of hospital visits due to respiratory problems, minor restricted activity days, non-fatal heart attacks, acute bronchitis, premature mortality,\602\ and other effects of criteria pollutant emissions on health. Table IV-31 shows changes in select health outcomes relative to the No-Action Alternative, across all action alternatives. The magnitude of the differences relates directly to the changes in the volumes of criteria pollutants emitted. See Chapter 5.4 of the Final TSD for information regarding how the CAFE Model calculates these health impacts.\603\

\602\ Premature mortality includes deaths that are estimated to occur before the normally expected life span of persons within a group defined by specific demographic characteristics.

\603\ The CAFE Model estimates overall health costs, which includes all the mortality and morbidity impacts outlined in Table IV-31. For further discussion of the calculation of monetized health impacts, see Final TSD Chapter 6.2.2. [GRAPHIC] [TIFF OMITTED] TR30SE26.190

NHTSA also quantifies safety impacts in its analysis. These include the estimated numbers of fatalities, non-fatal injuries, and property damage crashes occurring over the lifetimes of the light-duty vehicles considered in the analysis. The following table shows the changes in these projected outcomes under the action alternatives relative to the reference baseline.

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Decreasing fuel economy stringency impacts safety outcomes from rebound-related reductions in VMT (motorists choosing to drive less as driving becomes more expensive), and the increase in scrappage causing newer vehicles with more safety features to enter the fleet sooner. The impacts of mass changes are non-linear and depend on the specific fleet receiving those changes, with larger mass disparities between passenger cars and light trucks causing an increase in adverse safety outcomes. Though the point estimates applied suggest a decrease under the regulatory alternatives, NHTSA notes that none of these safety outcomes due to mass changes can be distinguished statistically from zero. Chapter 7.1.5 of the FRIA accompanying this document contains an in- depth discussion of the effects of the various alternatives on these safety measures, and Chapter 7 of the Final TSD contains information regarding the construction of the safety estimates. 4. Sensitivity Analysis

The FRIA that supports this rulemaking relies on many different inputs, parameters, and other analytical assumptions that reflect the agency's best judgments regarding a variety of factors relevant to the anticipated outcomes of the finalized CAFE standards reset, which are all applied within an analytical framework using the CAFE Model. NHTSA recognizes that the values of many analytical inputs are uncertain, and some to a significant degree, which in turn results in uncertainty for some estimates of the benefits, costs, and other outcomes. Some of the uncertain input parameters have a considerable influence on specific types of estimated impacts, while others may affect the results of the analysis more broadly. To understand the effect that particular assumptions have on the estimated outcomes, NHTSA conducted a sensitivity analysis by running the CAFE Model using alternative assumptions (referred to as “sensitivity cases”). The results allow

NHTSA to explore a range of potential analytical inputs and to understand the sensitivity of estimated impacts to changes in these specified model inputs. The sensitivity cases developed for this analysis span assumptions related to technology applicability and cost, economic conditions, consumer response, externality values, and safety assumptions, among others.\604\

\604\ In contrast to an uncertainty analysis, where many assumptions are varied simultaneously, the sensitivity analyses included here vary a single assumption and provide information about the influence of each individual factor, rather than suggesting that an alternative assumption would have justified a different Preferred Alternative.

A sensitivity analysis can identify two critical pieces of information: how big an influence does each parameter exert on the analysis, and how sensitive the model results are to that assumption. NHTSA acknowledges, however, that influence is different from likelihood. NHTSA does not mean to suggest that any one of the sensitivity cases presented here is inherently more likely than the collection of assumptions that represent the analysis NHTSA conducted to support this rulemaking (referred to as the “central analysis”). The sensitivity analysis simply provides an indication of which assumptions have the greatest impact and the extent to which future deviations from the central analysis assumptions could affect the actual future costs and future benefits of the rule.

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Chapter 9 of the accompanying FRIA summarizes results for each of the sensitivity cases, and detailed model inputs and outputs are available on NHTSA's website.\607\ The figures in Section IV.B.1 illustrate the relative changes produced by the sensitivity effects of selected inputs on the costs and benefits estimated for this final rule. Each collection of figures groups sensitivity cases by the category of input assumption (e.g., macroeconomic assumptions, technology, and safety assumptions). The figures provide a sense of which inputs are ones for which a different assumption would have a much different effect on analytical findings, and which ones would not. For example, assuming a different oil price trajectory would have

a relatively large effect, as would changing the assumptions about the effects of changes in vehicle mass on safety outcomes. Chapter 9 of the FRIA provides an extended discussion of these findings and presents net benefits estimated under each of the cases included in the sensitivity analysis. The results presented in the earlier subsections of Section IV and discussed in Section V are drawn from the central analysis and reflect NHTSA's best judgments regarding many different factors; the sensitivity analysis discussed here is simply to illustrate how differences in assumptions can lead to differences in analytical outcomes, some of which can be large and some of which may be smaller.

\605\ NHTSA's sensitivity cases applying a monetized value to changes in Non-Criteria Emissions (NCEs) use NCE values derived from the 2019 EPA Regulatory Impact Analysis for the Repeal of the Clean Power Plan. EPA, Regulatory Impact Analysis for the Repeal of the Clean Power Plan, and the Emission Guidelines for Greenhouse Gas Emissions From Existing Electric Utility Generating Units, EPA-452/ R-19-003 EPA: Washington, D.C. (2019), available at: https://www.epa.gov/sites/default/files/2019-06/documents/utilities_ria_final_cpp_repeal_and_ace_2019-06.pdf (accessed: June 5, 2026). These values (per metric ton) range from $8.98 (2024) to $13.98 (2050) for CO2.The specific values used for this sensitivity at both three percent and seven percent discount rates can be found in the Parameters Input ile associated with these sensitivity cases.

\606\ Estimates for CH4 and N2O are the same as those used in the 2020 SAFE rule, updated to 2024$. These estimates are based on those prepared by the EPA, including a 2017 update to the analysis of the 2016 Rule, “Oil and Natural Gas Sector: Emission Standards for New, Reconstructed, and Modified Sources” (81 FR 35824). See EPA, Estimated Cost Savings and Forgone Benefits Associated with the Proposed Rule, “Oil and Natural Gas: Emission Standards for New, Reconstructed, and Modified Sources: Stay of Certain Requirements,” Memorandum (2017), available at: https://www.epa.gov/sites/default/files/2017-11/documents/oilgas_memo_proposed-stay_2017-10.pdf (accessed: July 23, 2026). These values (per metric ton) range from $268.58 to $474.37 for CH4, and $3144.65 to $5033.59 for N20 (3% discount rate, 2024 dollars). The specific values used for this sensitivity at both three percent and seven percent discount rates can be found in the Parameters Input File associated with these sensitivity cases.

\607\ NHTSA, Corporate Average Fuel Economy, available at: https://www.nhtsa.gov/laws-regulations/corporate-average-fuel-economy (accessed: May 28, 2026).

Overall, NHTSA finds that, for light-duty vehicles, the Preferred Alternative in this final rule, Alternative 3, produces positive estimated net benefits under all sensitivity cases, at both three and seven percent discount rates. In cases that assume the central analysis treatment of MYs 2022-2026, societal net benefits are highest in the “Mass-size-safety (high)” case ($70 billion) and lowest in the “Mass-size-safety (low)” case ($13.6 billion), when applying a three percent social discount rate. BILLING CODE 4910-59-P [GRAPHIC] [TIFF OMITTED] TR30SE26.194

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