
[Federal Register Volume 78, Number 6 (Wednesday, January 9, 2013)]
[Notices]
[Pages 2111-2145]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-00181]



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Vol. 78

Wednesday,

No. 6

January 9, 2013

Part VI





Environmental Protection Agency





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California State Motor Vehicle Pollution Control Standards; Notice of 
Decision Granting a Waiver of Clean Air Act Preemption for California's 
Advanced Clean Car Program and a Within the Scope Confirmation for 
California's Zero Emission Vehicle Amendments for 2017 and Earlier 
Model Years; Notice

  Federal Register / Vol. 78 , No. 6 / Wednesday, January 9, 2013 / 
Notices  

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ENVIRONMENTAL PROTECTION AGENCY

[FRL-9768-1]


California State Motor Vehicle Pollution Control Standards; 
Notice of Decision Granting a Waiver of Clean Air Act Preemption for 
California's Advanced Clean Car Program and a Within the Scope 
Confirmation for California's Zero Emission Vehicle Amendments for 2017 
and Earlier Model Years

SUMMARY: The Environmental Protection Agency (EPA) is granting the 
California Air Resources Board's (CARB's) request for a waiver of Clean 
Air Act preemption to enforce its Advanced Clean Car (ACC) regulations. 
The ACC combines the control of smog and soot causing pollutants and 
greenhouse gas (GHG) emissions into a single coordinated package of 
requirements for passenger cars, light-duty trucks and medium-duty 
passenger vehicles (and limited requirements related to heavy-duty 
vehicles). The ACC program includes revisions to California's Low 
Emission Vehicle (LEV) program as well as its Zero Emission Vehicle 
(ZEV) program. By today's decision, EPA has also determined that CARB's 
amendments to the ZEV program as they affect 2017 and prior model years 
(MYs) are within the scope of previous waivers of preemption granted to 
California for its ZEV regulations. In the alternative, EPA's waiver of 
preemption for CARB's ACC regulations includes a waiver of preemption 
for CARB's ZEV amendments as they affect all MYs, including 2017 and 
prior MYs. In addition, EPA is including CARB's recently adopted 
``deemed to comply'' rule for GHG emissions in today's waiver decision. 
This decision is issued under section 209(b) of the Clean Air Act (the 
``Act''), as amended.

DATES: Petitions for review must be filed March 11, 2013.

ADDRESSES: EPA has established a docket for this action under Docket ID 
No. EPA-HQ-OAR-2012-0562. All documents and public comments in the 
docket are listed on the www.regulations.gov Web site. Publicly 
available docket materials are available either electronically through 
www.regulations.gov or in hard copy at the Air and Radiation Docket in 
the EPA Headquarters Library, EPA West Building, Room 3334, 1301 
Constitution Ave. NW., Washington, DC. The Public Reading Room is open 
from 8:30 a.m. to 4:30 p.m., Monday through Friday, excluding holidays. 
The telephone number for the Reading Room is (202) 566-1744. The Air 
and Radiation Docket and Information Center's Web site is http://www.epa.gov/oar/docket.html. The electronic mail (email) address for 
the Air and Radiation Docket is: a-and-r-Docket@epa.gov, the telephone 
number is (202) 566-1742 and the fax number is (202) 566-9744.

FOR FURTHER INFORMATION CONTACT: Specific questions may be addressed to 
David Dickinson, Office of Transportation and Air Quality, Compliance 
Division (6405J-NLD), EPA, 1200 Pennsylvania Ave. NW., Washington, DC 
20460, telephone: (202) 343-9256, email: Dickinson.David@epa.gov.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Executive Summary
II. Background
    A. California's Advanced Clean Cars Program for New Motor 
Vehicles
    B. EPA's Consideration of CARB's Request
III. Analysis of Preemption Under Section 209 of the Clean Air Act
    A. Clean Air Act Preemption Provisions
    B. Deference to California
    C. Burden of Proof
    D. Comments Received on EPA's Application of the Section 209(b) 
Criteria
IV. California's Within the Scope Request for Its Zero Emission 
Vehicle Amendments
    A. Chronology
    B. CARB's ZEV Amendments
    C. EPA's Determination Regarding the Appropriateness of CARB's 
Within the Scope Request for the 2012 ZEV Amendments
    D. Application of the Within the Scope Waiver Criteria to CARB's 
2012 ZEV Amendments Regarding 2017 and Earlier MYs
    1. Public Health and Welfare
    2. Consistency With Section 202(a)
    3. New Issues
V. Consideration of the Advance Clean Car Regulations Under the Full 
Waiver Criteria
    A. California's Protectiveness Determination
    1. Comments on CARB's Protectiveness Determination
    2. Is California's protectiveness determination arbitrary and 
capricious?
    3. Section 209(b)(1)(A) Conclusion
    B. Does California need its standards to meet compelling and 
extraordinary conditions?
    1. EPA's March 6, 2008 GHG Waiver Denial
    2. EPA's July 9, 2009 GHG Waiver
    3. Response to Comments Received
    4. CARB's GHG Emission Standards
    5. CARB's ZEV Emission Standards
    6. CARB's PM Emission Standards
    7. Section 209(b)(1)(B) Conclusion
    C. Are the California ACC standards consistent with section 
202(a) of the Clean Air Act?
    1. Historical Approach
    2. LEV III Criteria Pollutant Standards
    a. Particulate Matter Standards
    b. EPA's Response to Comments
    3. LEV III Greenhouse Gas Emission Standards
    a. Comments on CARB's 2017 Through 2025 GHG Emission Standards
    b. EPA's Response to Comments
    4. California's ZEV Amendments as They Affect 2018 Through 2025 
Model Years
    a. Comments on CARB's ZEV Amendments
    b. EPA's Response to Comments
    c. Conclusion on Technological Feasibility
    5. Consistency of Certification Test Procedures
    6. Relevance of the Energy Policy and Conservation Act (EPCA) to 
the Waiver Decision
VI. Decision
VII. Statutory and Executive Order Reviews

I. Executive Summary

    Today, as Assistant Administrator of the EPA's Office of Air and 
Radiation, I am granting California's request for a waiver of Clean Air 
Act preemption for California's ACC that combines the control of smog 
and soot causing pollutants and GHG emissions into a single coordinated 
package of requirements for MY 2015 through 2025 passenger cars (PCs), 
light-duty trucks (LDTs), medium-duty passenger vehicles (MDPVs), and 
limited requirements related to heavy-duty vehicles (HDVs). The ACC 
program regulations include revisions to both California's LEV and ZEV 
programs. By letter dated June 27, 2012, CARB submitted a request (CARB 
waiver request) that EPA grant a waiver of preemption under section 
209(b) of the Clean Air Act (CAA), 42 U.S.C. 7543(b) for the revisions 
to the LEV program (LEV III).\1\ CARB also sought confirmation that the 
amendments to the ZEV program are within the scope of prior waiver 
decisions issued by EPA, or in the alternative requested a waiver for 
these revisions (the LEV III and ZEV amendments, together known as the 
ACC, are considered as CARB's waiver request). By letter dated December 
7, 2012, CARB submitted additional information (CARB supplemental 
request) to EPA requesting that EPA consider as part of CARB's pending 
ACC waiver request the CARB's Executive Officer adopted ``deemed to 
comply'' regulation.\2\ CARB's ``deemed to comply'' regulation, adopted 
by CARB's Board on November 15, 2012 and final action taken by CARB's 
Executive Officer on December 6, 2012, allows automobile manufacturers 
to demonstrate compliance with CARB's GHG standards by complying with

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EPA's GHG standards which were published for those MYs.
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    \1\ CARB waiver request at EPA-HQ-OAR-2012-0562-0004. The cover 
letter to CARB's Waiver Request is at EPA-HQ-OAR-2012-0562-0004.
    \2\ CARB supplemental request at EPA-HQ-OAR-2012-0562-0374.
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    By today's decision we are confirming that CARB's ZEV amendments, 
as they affect 2017 and prior MYs are within the scope of previous ZEV 
waivers. EPA also finds that the entire ACC program meets the criteria 
for a waiver of Clean Air Act preemption and thus we are granting a 
waiver for CARB's ACC program. Included in EPA's full waiver are CARB's 
``deemed to comply'' regulations, and the ZEV regulations as they 
affect 2017 and prior MYs.
    The legal framework for this decision stems from the waiver 
provision first adopted by Congress in 1967, and later modified in 
1977. Congress established that there would be only two programs for 
control of emissions from new motor vehicles--EPA emission standards 
adopted under the Clean Air Act, and California emission standards 
adopted under state law. Congress accomplished this by preempting all 
state and local governments from adopting or enforcing emission 
standards for new motor vehicles, while at the same time providing that 
California could receive a waiver of preemption for its emission 
standards and enforcement procedures. Other states can only adopt 
standards that are identical to California's standards. This struck an 
important balance that protected manufacturers from multiple and 
different state emission standards, and preserved a pivotal role for 
California in the control of emissions from new motor vehicles. 
Congress recognized that California could serve as a pioneer and a 
laboratory for the nation in setting new motor vehicle emission 
standards. Congress intentionally structured this waiver provision to 
restrict and limit EPA's ability to deny a waiver. The provision was 
designed to ensure California's broad discretion to determine the best 
means to protect the health and welfare of its citizens.
    Section 209(b) specifies that EPA must grant California a waiver if 
California determines that its standards are, in the aggregate, at 
least as protective of the public health and welfare as applicable 
federal standards. EPA may deny a waiver only if it makes at least one 
of three findings specified under the Clean Air Act (including whether 
California's ``protectiveness finding'' noted above is arbitrary and 
capricious). Therefore, EPA's role upon receiving a request for waiver 
of preemption from California is to determine whether it is appropriate 
to make any of the three findings specified by the Clean Air Act and if 
the Agency cannot make at least one of the three findings then the 
waiver must be granted. The three waiver criteria are properly seen as 
criteria for a denial--EPA must grant the waiver unless at least one of 
three criteria for a denial is met. This is different from most waiver 
situations before the Agency, where EPA typically determines whether it 
is appropriate to make certain findings necessary for granting a 
waiver, and if the findings are not made then a waiver is denied. This 
reversal of the normal statutory structure embodies and is consistent 
with the congressional intent of providing deference to California to 
maintain its own new motor vehicle emissions program.
    The three criteria for denial of a waiver are: first, whether 
California's determination that its standards are, in the aggregate, at 
least as protective as applicable federal standards is arbitrary and 
capricious (Section 209(b)(1)(A)); second, whether California has a 
need for such standards to meet compelling and extraordinary conditions 
(Section 209(b)(1)(B)); and third, whether California's standards are 
consistent with Section 202(a) of the Clean Air Act (Section 
209(b)(1)(C)). EPA and the Court of Appeals for the District of 
Columbia Circuit have consistently interpreted section 209(b) as 
placing the burden on the opponents of a waiver to demonstrate that one 
of the criteria for a denial has been met.\3\
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    \3\ Motor and Equipment Manufacturers Ass'n v. EPA (MEMA I), 627 
F.2d 1095, 1120-1121 (D.C. Cir. 1979).
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    If California acts to amend a previously waived standard or 
accompanying enforcement procedure, the amendment may be considered 
within the scope of a previously granted waiver provided that it does 
not undermine California's determination that its standards in the 
aggregate are as protective of public health and welfare as applicable 
federal standards, does not affect its consistency with section 202(a) 
of the Clean Air Act, and raises no new issues affecting EPA's previous 
waiver decisions.\4\
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    \4\ Decision Documents accompanying within the scope of waiver 
determinations in 66 FR 7751 (January 25, 2001) at p. 5 and 51 FR 
12391 (April 10, 1986) at p. 2, see also, e.g., 46 FR 36742 (July 
15, 1981).
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    In this case, California is combining three sets of motor vehicle 
emission standards into a single ACC waiver request. The standards are 
complimentary in the way they address interrelated ambient air quality 
needs and climate change. EPA has previously granted a series of waiver 
and within the scope decisions regarding CARB's LEV, ZEV and GHG 
emission programs.\5\
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    \5\ EPA's LEV waiver decisions are found at 58 FR 4166 (January 
13, 1993); 64 FR 42689 (August 5, 1999); 68 FR 19811 (April 22, 
2003); 70 FR 22034 (April 28, 2005); and 75 FR 44951 (July 30, 
2010). EPA's GHG waiver decisions are found at 73 FR 12156 (March 6, 
2008) (GHG waiver denial); 74 FR 32744 (July 8, 2009) (GHG waiver); 
and 76 FR 34693 (June 14, 2011) (This prior within the scope 
decision included CARB's prior ``deemed to comply'' regulation for 
the 2012-2016 MYs). EPA's most recent ZEV waiver decisions are found 
at 71 FR 78190 (December 28, 2006); and 76 FR 61095 (October 3, 
2011).
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    As part of EPA's public comment process for CARB's ACC waiver 
request, we have received comments from: several states and 
organizations representing states; health and environmental 
organizations; industry; and other stakeholders.\6\ The vast majority 
of comments EPA received were in support of the waiver. EPA received 
opposition to certain elements of the waiver, including a joint comment 
submitted by the Association of Global Automakers and the Alliance of 
Automobile Manufacturers (Manufacturers or Manufacturers comment).\7\ 
We also received opposition to the ACC waiver request from the National 
Automobile Dealers Association (NADA or Dealers, or NADA comment).\8\
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    \6\ EPA received support for CARB's waiver request, in the form 
of oral testimony and/or written comment (all docket references are 
to EPA-HQ-OAR-2012-0562-XXXX, with the last four numbers associated 
with each comment) from: Environmental Defense Fund (EDF)--0025 and 
0353, the National Association of Clean Air Agencies (NACAA)--0028, 
American Lung Association--0029, Advanced Engine Systems Institute--
0030, Environment America--0031, Consumer Federation of America 
(CFA)--0032, Manufacturers of Emission Control (MECA)--0033, Natural 
Resources Defense Council (NRDC)--0347, South Coast Air Quality 
Management District (SCAQMD)--0346, Sierra Club--0348, Northeast 
States for Coordinated Air Uses Management (NESCAUM)--0350, New York 
State Department of Environmental Conservation--0351, Consumers 
Union--0354, and Union of Concerned Scientists--0355. EPA also 
received similar comment at the waiver public hearing, transcript 
found at EPA-HQ-OAR-2012-0562-0026.
    \7\ EPA-HQ-OAR-2012-0562-0349. EPA also received written comment 
from Toyota Motor North America (Toyota) at EPA-HQ-OAR-2012-0562-
0372 which notes that ``Toyota could be forced to employ a variety 
of costly marketing programs to ensure compliance if the market does 
not accept ZEV technology in the volumes anticipated by 
California.'' Toyota notes that its further concerns are expressed 
in detail in the Manufacturers comments.
    \8\ EPA-HQ-OAR-2012-0562-0352.
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    After a thorough evaluation of the record, we have determined that 
the waiver opponents have not met their burden of proof in order for us 
to deny the CARB's waiver request under any of the three criteria in 
section 209(b)(1). EPA also confirms that CARB's ZEV amendments, as 
they affect the 2017 and earlier MYs are within the scope of previous 
waivers of preemption. In the alternative, EPA's waiver of preemption 
for CARB's ACC regulations includes a

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waiver of preemption for CARB's ZEV amendments as they affect all MYs, 
including 2017 and prior MYs.

II. Background

A. California's Advanced Clean Car Program for New Motor Vehicles

    As further explained below, CARB has adopted amendments to title 
13, California Code of Regulations (CCR), and has established a single 
coordinated package that includes amendments to three sets of 
regulations regulating emissions from new PCs, LDTs, MDPVs, and certain 
HDVs: \9\ the LEV regulation which includes two components--standards 
relating to criteria pollutants and standards to regulate GHG 
emissions, and the ZEV program.
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    \9\ Medium-duty vehicles (MDVs) are vehicles in California's 
regulations between 8,500 and 114,000 lbs GVWR that are also called 
Class 2b/Class 3 vehicles. These vehicles are generally termed 
Heavy-duty vehicles under EPA's regulations.
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    This single ACC program combines the control of smog-causing 
pollutants and GHG emissions into a coordinated package of amendments 
and requirements for MY 2015 through 2025 in order to address near and 
long term smog issues within California and identified GHG emission 
reduction goals. The program also includes amended ZEV regulations and 
a Clean Fuels Outlet regulation. These additional program elements are 
designed to address these goals as well.\10\ The ACC program, together, 
provides the regulated manufacturers with the ability to plan and 
integrate their product designs in order to meet applicable CARB 
emission requirements.
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    \10\ CARB's Clean Fuel Outlet Regulation is not subject to 
preemption under section 209 of the Clean Air Act.
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    In order to achieve further emission reductions from the light- and 
medium-duty fleet, CARB adopted several amendments that represent a 
strengthening of its ongoing LEV regulations, including: a reduction of 
fleet average emissions of new PCs, LDTs, and MDPVs to super ultra-low-
emission vehicle (SULEV) levels by 2025; replacement of separate non-
methane organic gas (NMOG) and oxides of nitrogen (NOX) 
standards with combined NMOG plus NOX standards, which 
provides automobile manufacturers with additional flexibility in 
meeting the new stringent standards; an increase of full useful life 
durability requirements from 120,000 miles to 150,000 miles, which 
guarantees vehicles sustain these extremely low emission levels longer; 
a backstop to assure continued production of super-ultra-low-emission 
vehicles after partial-zero-emission vehicles (PZEVs) as a category are 
moved from the ZEV regulations to the LEV regulations in 2018; more 
stringent particulate matter (PM) standards for light- and medium-duty 
vehicles, which will reduce the health effects and premature deaths 
associated with these emissions; zero fuel evaporative emission 
standards for PCs and LDTs, and more stringent standards for medium- 
and heavy-duty vehicles (MDVs); and, more stringent supplemental 
federal test procedure (SFTP) standards for PC and LDTs, which reflect 
more aggressive real world driving and, for the first time, require 
MDVs to meet SFTP standards.
    The second component of CARB's LEV III regulations includes 
amendments to its GHG emission standards. CARB's GHG standards for the 
2017 through 2025 MYs are designed to respond to California's 
identified goals of reducing GHG emissions to 80 percent below 1990 
levels by 2050 and in the near term to reduce GHG levels to 1990 levels 
by 2020. As such, CARB's GHG amendments: reduce new light-duty 
CO2 emissions from new light-duty regulatory MY 2016 levels 
by approximately 34 percent by MY 2025, and from about 251 grams of 
CO2 per mile to 166 grams, based on the projected mix of 
vehicles sold in California; set emission standards for CO2, 
CH4, and N2O; establish footprint based 
CO2 emission standards, as distinguished from the current 
California GHG requirement of a fleet average GHG standard (this will 
allow manufacturers' new vehicle fleet CO2 emissions to 
fluctuate according to their car-truck composition and sales according 
to vehicle footprint and will align the requirement with current 
federal GHG requirements); provide credits toward the CO2 
standard if a manufacturer reduces refrigerant emissions from the 
vehicle's air conditioning system; provide credits toward the ZEV 
standards if a manufacturer over complies with the LEV III GHG fleet 
requirement; provide credits towards the CO2 standards if a 
manufacturer produces full size pickups with high efficiency drive 
trains; provide credits for deployment of technologies that reduce off-
cycle CO2 emissions; and require upstream emissions from 
zero-emission vehicles to be counted towards a manufacturer's light-
duty vehicle GHG emissions. CARB's GHG emission regulations also 
include an optional compliance path whereby manufacturers may 
demonstrate compliance with CARB's GHG emission regulations by 
complying with applicable EPA GHG emission requirements.
    Lastly, CARB's ACC regulations include amendments to its ZEV 
regulations that can be described within two timeframes: (1) MY 2012 
through 2017; and (2) MY 2018 and beyond. CARB's stated goal for 
amendments to the current ZEV regulation through MY 2017 is to make 
corrections and clarifications to its regulations and to enable 
manufacturers to successfully meet the 2018 and later MY requirements. 
These amendments include: A provision of compliance flexibility whereby 
carry forward credit limitations for ZEVs were removed, allowing 
manufacturers to bank ZEV credits indefinitely for use in later years 
(the flexibility also included slightly reducing the 2015 through 2017 
credit requirement for intermediate volume manufacturers (IVM, less 
than 60,000 vehicles produced each year), to allow them to better 
prepare for requirements in 2018, and included a provision that allows 
ZEVs placed in any state that has adopted the California ZEV regulation 
to count towards the ZEV requirement through 2017 (i.e. extending the 
``travel provision'' for BEVs through 2017); an adjustment of credits 
and allowances; and an addition of a new vehicle category (collectively 
``BEVx'' vehicles) as a compliance option for manufacturers to meet up 
to half of their minimum ZEV requirement.
    CARB's stated goal for its amendments affecting 2018 and subsequent 
MYs is the commercialization of ZEVs and ``transitional zero-emission 
vehicles (TZEV; commonly a plug-in hybrid electric vehicle--PHEV). 
California would achieve this objective by simplifying its regulation 
and pushing higher production volumes which in turn would achieve cost 
reductions. These amendments include: an increased ZEV requirement for 
2018 and subsequent MYs that pushes ZEVs and TZEVs to more than 15 
percent of new sales by 2025; the removal of PZEV (near-zero emitting 
conventional technologies) and advanced technology PZEV (AT PZEV, 
typically non-plug-in HEVs) credits as compliance options for 
manufacturers; an allowance for manufacturers to use banked PZEV and AT 
PZEV credits earned in 2017 and previous MYs, but discount the credits, 
and place a cap on usage in 2018 and subsequent MYs; amended 
manufacturer size definitions that bring all but the smallest 
manufacturers under the full ZEV requirements by MY 2018; a modified 
credit system that bases credits for ZEVs on range, with 50 mile

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BEVs earning 1 credit each and 350 Mile FCVs earning 4 credits each 
(the range of credit reflects the utility of the vehicle (i.e. the zero 
emitting miles it may travel) and its expected timing for 
commercialization) along with a simplified and streamlined TZEV credits 
system; a modified ``travel'' provision that ends the travel provision 
for BEVs after MY 2017and extends the travel provision for FCVs; and 
provisions allowing manufacturers who systematically over comply with 
the LEV III GHG fleet standard to offset a portion of their ZEV 
requirement in 2018 through 2021 MYs only.

B. EPA's Consideration of CARB's Request

    By letter dated June 27, 2012, CARB submitted a request (CARB 
waiver request) seeking a waiver of Section 209(a)'s prohibition for 
its ACC standards.\11\ On August 31, 2012, a Federal Register notice 
(FR Notice) was published announcing an opportunity for hearing and 
comment on CARB's request.\12\ EPA held a public hearing in Washington, 
DC on September 19, 2012. The written comment period closed on October 
19, 2012.
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    \11\ EPA-HQ-OAR-2012-0562-0004.
    \12\ 77 FR 53199 (August 31, 2012).
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    EPA's FR Notice on CARB's waiver request asked for comment on 
several matters. Since CARB had submitted a within the scope request 
for its ZEV amendments as they affect both the 2012-2017 MYs and 2018 
and subsequent MYs, EPA invited comment on the following issues: first, 
should California's ZEV amendments, as they affect the 2012-2017 MYs 
and/or the 2018 and later MYs, be considered under the within the scope 
criteria or should they be considered under the full waiver criteria?; 
second, to the extent part or all of those ZEV amendments should be 
considered as a within the scope request, do such amendments meet the 
criteria for EPA to confirm that they are within the scope of prior 
waivers? EPA also solicited comment in the event that EPA cannot 
confirm that some or all of CARB's ZEV amendments are within the scope 
of previous waivers. We also requested comment on all aspects of the 
full waiver analysis with regard to the ACC program (the LEV III 
criteria pollutant and GHG regulations, and the ZEV amendments to the 
extent EPA does not consider them under the within the scope analysis 
noted above). Therefore, we asked commenters to consider the following 
three criteria: whether (a) California's determination that its motor 
vehicle emission standards are, in the aggregate, at least as 
protective of public health and welfare as applicable Federal standards 
is arbitrary and capricious, (b) California needs such standards to 
meet compelling and extraordinary conditions, and (c) California's 
standards and accompanying enforcement procedures are consistent with 
section 202(a) of the Clean Air Act.
    Because CARB noted (in its waiver request and in its incorporated 
Board Resolution 12-11) its commitment to propose a ``deemed to 
comply'' rule for its GHG standards shortly after EPA finalized its 
light-duty vehicle GHG emission standards, EPA specifically invited 
comment on CARB's waiver request in light of CARB's explicit plans 
concerning adoption of a ``deemed to comply'' provision into its LEV 
III GHG standards.

III. Analysis of Preemption Under Section 209 of the Clean Air Act

A. Clean Air Act Preemption Provisions

    Section 209(a) of the Act provides:

    No State or any political subdivision thereof shall adopt or 
attempt to enforce any standard relating to the control of emissions 
from new motor vehicles or new motor vehicle engines subject to this 
part. No State shall require certification, inspection or any other 
approval relating to the control of emissions from any new motor 
vehicle or new motor vehicle engine as condition precedent to the 
initial retail sale, titling (if any), or registration of such motor 
vehicle, motor vehicle engine, or equipment.\13\
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    \13\ Clean Air Act (CAA) section 209(a), 42 U.S.C. Sec.  
7543(a).

    Section 209(b)(1) of the Clean Air Act requires the Administrator, 
after an opportunity for public hearing, to waive application of the 
prohibitions of section 209(a) for any State that has adopted standards 
(other than crankcase emission standards) for the control of emissions 
from new motor vehicles or new motor engines prior to March 30, 1966, 
if the State determines that its State standards will be, in the 
aggregate, at least as protective of public health and welfare as 
applicable Federal standards.\14\ However, no such waiver shall be 
granted by the Administrator if she finds that: (A) The protectiveness 
determination of the State is arbitrary and capricious; (B) the State 
does not need such State standards to meet compelling and extraordinary 
conditions; or (C) such State standards and accompanying enforcement 
procedures are not consistent with section 202(a) of the Act. In 
previous waiver decisions, EPA has stated that Congress intended EPA's 
review of California's decision-making be narrow. This has led EPA to 
reject arguments that are not specified in the statute as grounds for 
denying a waiver:
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    \14\ CAA section 209(b), 42 U.S.C. Sec.  7543(b). California is 
the only State which meets section 209(b)(1)'s requirement for 
obtaining a waiver. See S. Rep. No. 90-403 at 632 (1967).

    The law makes it clear that the waiver requests cannot be denied 
unless the specific findings designated in the statute can properly 
be made. The issue of whether a proposed California requirement is 
likely to result in only marginal improvement in air quality not 
commensurate with its cost or is otherwise an arguably unwise 
exercise of regulatory power is not legally pertinent to my decision 
under section 209, so long as the California requirement is 
consistent with section 202(a) and is more stringent than applicable 
Federal requirements in the sense that it may result in some further 
reduction in air pollution in California.\15\
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    \15\ 36 FR 17458 (Aug. 31, 1971). Note that the more stringent 
standard expressed here, in 1971, was superseded by the 1977 
amendments to section 209, which established that California must 
determine that its standards are, in the aggregate, at least as 
protective of public health and welfare as applicable Federal 
standards.

Thus, my consideration of all the evidence submitted concerning a 
waiver decision is circumscribed by its relevance to those questions 
that I may consider under section 209(b).

B. Deference to California

    In previous waiver decisions, EPA has recognized that the intent of 
Congress in creating a limited review based on the section 209(b)(1) 
criteria was to ensure that the federal government did not second-guess 
state policy choices. This has led EPA to state:

    It is worth noting * * * I would feel constrained to approve a 
California approach to the problem which I might also feel unable to 
adopt at the federal level in my own capacity as a regulator. The 
whole approach of the Clean Air Act is to force the development of 
new types of emission control technology where that is needed by 
compelling the industry to ``catch up'' to some degree with newly 
promulgated standards. Such an approach * * * may be attended with 
costs, in the shaped of reduced product offering, or price or fuel 
economy penalties, and by risks that a wider number of vehicle 
classes may not be able to complete their development work in time. 
Since a balancing of these risks and costs against the potential 
benefits from reduced emissions is a central policy decision for any 
regulatory agency under the statutory scheme outlined above, I 
believe I am required to give very substantial deference to 
California's judgments on this score.\16\
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    \16\ 40 FR 23103-23104; see also LEV I (58 FR 4166), January 13, 
1993)Decision Document at 64.

EPA has stated that the text, structure, and history of the California 
waiver provision clearly indicate both a congressional intent and 
appropriate EPA practice of leaving the decision on ``ambiguous and 
controversial matters of

[[Page 2116]]

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public policy'' to California's judgment.\17\

    \17\ 40 FR 23104; 58 FR 4166.
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    The House Committee Report explained as part of the 1977 amendments 
to the Clean Air Act, where Congress had the opportunity to restrict 
the waiver provision, it elected instead to explain California's 
flexibility to adopt a complete program of motor vehicle emission 
controls. The amendment is intended to ratify and strengthen the 
California waiver provision and to affirm the underlying intent of that 
provision, i.e., to afford California the broadest possible discretion 
in selecting the best means to protect the health of its citizens and 
the public welfare.\18\
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    \18\ MEMA I, 627 F.2d at 1110 (citing H.R.Rep. No 294, 95 Cong., 
1st Sess. 301-02 (1977).
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C. Burden of Proof

    In Motor and Equip. Mfrs Assoc. v. EPA, 627 F.2d 1095 (D.C. Cir. 
1979) (MEMA I), the U.S. Court of Appeals stated that the 
Administrator's role in a section 209 proceeding is to:

consider all evidence that passes the threshold test of materiality 
and * * * thereafter assess such material evidence against a 
standard of proof to determine whether the parties favoring a denial 
of the waiver have shown that the factual circumstances exist in 
which Congress intended a denial of the waiver.\19\
---------------------------------------------------------------------------

    \19\ MEMA I, 627 F.2d at 1122.

The court in MEMA I considered the standards of proof under section 209 
for the two findings necessary to grant a waiver for an ``accompanying 
enforcement procedure'' (as opposed to the standards themselves): (1) 
Protectiveness in the aggregate and (2) consistency with section 202(a) 
findings. The court instructed that ``the standard of proof must take 
account of the nature of the risk of error involved in any given 
decision, and it therefore varies with the finding involved. We need 
not decide how this standard operates in every waiver decision.'' \20\
---------------------------------------------------------------------------

    \20\ Id.
---------------------------------------------------------------------------

    The court upheld the Administrator's position that, to deny a 
waiver, there must be `clear and compelling evidence' to show that 
proposed procedures undermine the protectiveness of California's 
standards.\21\ The court noted that this standard of proof also accords 
with the congressional intent to provide California with the broadest 
possible discretion in setting regulations it finds protective of the 
public health and welfare.\22\
---------------------------------------------------------------------------

    \21\ Id.
    \22\ Id.
---------------------------------------------------------------------------

    With respect to the consistency finding, the court did not 
articulate a standard of proof applicable to all proceedings, but found 
that the opponents of the waiver were unable to meet their burden of 
proof even if the standard were a mere preponderance of the evidence. 
As we explained in the GHG waiver decision, although MEMA I did not 
explicitly consider the standards of proof under section 209 concerning 
a waiver request for ``standards,'' as compared to accompanying 
enforcement procedures, there is nothing in the opinion to suggest that 
the court's analysis would not apply with equal force to such 
determinations. \23\ EPA's past waiver decisions have consistently made 
clear that: ``[E]ven in the two areas concededly reserved for Federal 
judgment by this legislation--the existence of compelling and 
extraordinary' conditions and whether the standards are technologically 
feasible--Congress intended that the standards of EPA review of the 
State decision to be a narrow one.''\24\
---------------------------------------------------------------------------

    \23\ 74 FR 32748
    \24\ See, e.g., 40 FR 21102-103 (May 28, 1975).
---------------------------------------------------------------------------

    Finally, opponents of the waiver bear the burden of showing that 
the criteria for a denial of California's waiver request has been met. 
As found in MEMA I, this obligation rests firmly with opponents of the 
waiver in a section 209 proceeding, holding that: ``[t]he language of 
the statute and it's legislative history indicate that California's 
regulations, and California's determinations that they must comply with 
the statute, when presented to the Administrator are presumed to 
satisfy the waiver requirements and that the burden of proving 
otherwise is on whoever attacks them. California must present its 
regulations and findings at the hearing and thereafter the parties 
opposing the waiver request bear the burden of persuading the 
Administrator that the waiver request should be denied.'' \25\
---------------------------------------------------------------------------

    \25\ MEMA I, 627 F.2d at 1121.
---------------------------------------------------------------------------

    The Administrator's burden, on the other hand, is to make a 
reasonable evaluation of the information in the record in coming to the 
waiver decision. As the court in MEMA I stated, Ahere, too, if the 
Administrator ignores evidence demonstrating that the waiver should not 
be granted, or if he seeks to overcome that evidence with unsupported 
assumptions of his own, he runs the risk of having his waiver decision 
set aside as `arbitrary and capricious.'' \26\ Therefore, the 
Administrator's burden is to act ``reasonably.''\27\
---------------------------------------------------------------------------

    \26\ Id. at 1126.
    \27\ Id.
---------------------------------------------------------------------------

D. Comments Received on EPA's Application of the Section 209(b) 
Criteria

    The Dealers provided a series of suggestions on several threshold 
issues for how EPA should evaluate CARB's ACC waiver request. While the 
ACC regulatory components are interrelated, the Dealers state that EPA 
should evaluate them separately by applying each of the three waiver 
criteria under section 209(b).\28\
---------------------------------------------------------------------------

    \28\ NADA does not address the application of the three waiver 
criteria to CARB's LEV III criteria pollutant regulations .
---------------------------------------------------------------------------

    This commenter also suggests that it is CARB's burden to make a 
determination that its standards are at least as protective of the 
public health and welfare as any applicable federal standards, and to 
determine that the standards are technologically feasible.\29\ This 
commenter also suggests that Congress allowed for a limited waiver only 
if California is able to show that its standards are necessary to 
address ``the unique problems facing [the state] as a result of its 
climate and topography.'' \30\
---------------------------------------------------------------------------

    \29\ NADA comment at 3.
    \30\ Id.
---------------------------------------------------------------------------

    In addition, the Dealers suggest that a decision to deny a CARB 
waiver request only need meet a ``preponderance of the evidence'' 
standard. This commenter maintains that such a standard would preserve 
the traditional presumption in favor of CARB's protectiveness 
determination while affording EPA or those opposed to the waiver the 
ability to uphold section 209's general preemption. The commenter 
suggests that EPA mischaracterizes the MEMA decision within its prior 
GHG waiver decision when EPA stated ``there is nothing in the opinion 
to suggest that the court's analysis would not apply with equal force 
to such determinations.'' \31\ The commenter states that because the 
Court opined that the ``preponderance of the evidence standard governs 
the inquiry into technological feasibility,'' and the Court determined 
that the appropriate standard of proof ``must take into account the 
nature of risk of error involved in any given decision'' it is 
therefore appropriate that EPA must use its discretion to determine the 
appropriate standard when evaluating a waiver request under each 
element of

[[Page 2117]]

Section 209(b). To settle the question of the appropriate burden of 
proof the commenter cites International Harvester v. Ruckelshaus 
wherein the decision over burden of proof is informed by an analysis 
that balances the cost of a wrong decision on feasibility against the 
gains of a correct one: ``These costs include the risk of grave 
maladjustments * * * and the impact on jobs and the economy from a 
decision which is only partially accurate * * * against the 
environmental savings.''
---------------------------------------------------------------------------

    \31\ 74 FR 32748. EPA notes that the language following this 
statement, in the same paragraph of the GHG waiver decision, states 
``EPA's past waiver decisions have consistently made clear that: 
``[E]ven in the two area concededly reserved for Federal judgment by 
this legislation--the existence of compelling and extraordinary 
conditions and whether the standards are technologically feasible--
Congress intended that the standards of EPA review of the State 
decision to be a narrow one.''
---------------------------------------------------------------------------

    With regard to the Dealers' first suggestion that EPA should 
separately apply the waiver criteria to each of the ACC regulatory 
components (e.g., GHG emission standards and ZEV), EPA notes that each 
part of CARB's regulations are subject to EPA waiver review. As such, 
by today's decision we address any adverse comments in that regard. 
However (and as explained in further detail under EPA's analysis of 
each waiver criteria below), we believe the Dealers fundamentally 
misunderstand the specific language of the section 209(b), its 
congressional history, and EPA's past administrative waiver practice. 
For example, although EPA would typically examine whether CARB's 
regulation of each pollutant is as stringent as any applicable federal 
standard, we nevertheless recognize both the statutory language and 
legislative history that requires EPA to consider the protectiveness of 
a CARB standard ``in the aggregate'' of all emission standards covering 
that particular industry category (e.g., light-duty vehicles, etc). 
Furthermore, under the second waiver criterion of section 209(b), EPA 
continues to evaluate whether those opposed to a waiver have 
demonstrated that CARB no longer experiences compelling and 
extraordinary conditions. As such, for any standard or set of standards 
presented to EPA for waiver consideration, EPA's evaluation continues 
to be whether CARB has a need for its motor vehicle emission program to 
address the underlying compelling and extraordinary conditions. This is 
further explained in our discussion of this waiver criterion. 
Similarly, although the Dealers might suggest that EPA only be 
obligated to determine whether each of CARB's ACC regulatory 
components, in isolation, is consistent with section 202(a) we believe 
the better approach is to determine the technological feasibility of 
each standard in the context of the entire regulatory program for the 
particular industry category. In this case, we believe CARB has in fact 
recognized the interrelated, integrated approach the industry must take 
in order to address the regulatory components of the ACC program. As 
noted above, the House Committee Report explained as part of the 1977 
amendments to the Clean Air Act that California was to be afforded 
flexibility to adopt a complete program of motor vehicle emission 
controls (emphasis added). As such, EPA believes that Congress intended 
EPA to afford California the broadest possible discretion in selecting 
the best means to protect the health of its citizens and the public 
welfare.\32\ EPA believes this intent extends to CARB's flexibility in 
designing its motor vehicle emission program and evaluating the 
aggregate effect of regulations within the program.
---------------------------------------------------------------------------

    \32\ H.R. Rep No. 294, 95 Cong., 1st sess. 301-02 (1977).
---------------------------------------------------------------------------

    With regard to CARB's initial burden in submitting a waiver request 
to EPA, we believe this commenter misreads both section 209(b) along 
with the case law and legislative history it cites. California is only 
required to make a protectiveness finding as a threshold matter before 
submitting its waiver request to EPA. Section 209(b) of the Clean Air 
Act plainly states that ``The Administrator shall, * * *, waive 
application of this section* * *., if the State determines that the 
State standards will be, in the aggregate, at least as protective of 
public health and welfare as applicable Federal standards. No such 
waiver shall be granted if the Administrator finds that * * *.'' 
Nothing on the face of section 209(b) requires California to make 
affirmative findings or showings under section 209(b)(1)(B) or (C). The 
MEMA I decision cited to by the commenter does not support the 
suggestion that CARB must initially make an affirmative determination 
or showing beyond the protectiveness determination. Of course, whether 
or not CARB has such a burden, CARB has clearly provided in its initial 
waiver request considerable support for its view that its waiver 
request meets the requirements of section 209(b)(1)(B) and (C).\33\
---------------------------------------------------------------------------

    \33\ CARB waiver request and supporting attachments.
---------------------------------------------------------------------------

    EPA continues to believe that the burden of proof for each waiver 
criteria lies on the opposing party. As earlier explained, this is 
inherent in the statutory provision that requires EPA to grant a waiver 
unless it makes one of the specific negative findings listed in section 
209(b)(1).

The language of the statute and its legislative history indicate 
that California's regulations, and California's determination that 
they comply with the statute, when presented to the Administrator 
are presumed to satisfy the waiver requirements and that the burden 
of proving otherwise is on whoever attacks them. California must 
present its regulations and findings at the hearing, and thereafter 
the parties opposing the waiver request bear the burden of 
persuading the Administrator that the waiver request should be 
denied.\34\
---------------------------------------------------------------------------

    \34\ MEMA I, 627 F.2d at 1121.

    Further, pertinent legislative history evinces Congressional intent 
to place the burden of proof on the party opposing a waiver. This 
appears most dramatically from the debates on the floor of the House 
over two alternative versions of the statutory language. One, sponsored 
by the relevant legislative committee, would have permitted the federal 
government, upon application showing by California, to set special 
California standards if certain conditions were met. The second, which 
was sponsored by the entire California delegation, see 113 Cong. Rec. H 
14428 (Cong. Moss) (daily ed. Nov. 2, 1967), and eventually adopted on 
the floor, would have required the federal government to waive 
preemption of standards promulgated by California unless certain 
findings were made. Despite the understandable efforts of some sponsors 
of the committee language to portray the differences between the two 
versions as purely verbal the majority of the House clearly disagreed. 
113 Cong. Rec. H 14404 (Cong. Herlong); H 14432 (Cong. Rogers) (daily 
ed. Nov. 2, 1967). Sponsors of the language eventually adopted (the 
language sponsored by the California delegation) referred repeatedly to 
their intent to make sure that no ``Federal bureaucrat'' would be able 
to tell the people of California what auto emission standards were good 
for them, as long as they were stricter than Federal standards. 113 
Cong. Rec. H 14393 (Cong. Sess); H 14395 (Cong. Smith); H 14396 (Cong. 
Holffield); H 14399 (Cong. Hosmer); H 14408 (Cong. Roybal); H 14409 
(Cong. Reinicke); H 14429 (Cong. Wlson) (daily ed. Nov. 2, 1967). Thus, 
at the close of the debate, the House rejected language that would have 
imposed the burden of proof on California and instead accepted language 
that which places the burden on those who allege, in effect, that EPA's 
GHG emission standards are adequate to California's needs. They also 
viewed the change as necessary to their intent to preserve the 
California state auto emission control program in its original form, 
see HR. Rep. No. 728, 90th Cong. 1st Se. 96-97 (1967) (separate views 
of Congressmen Moss and Van Deerlin), 113 Cong. Rec. H 14415 (daily ed. 
Nov. 2, 1967) (Cong.

[[Page 2118]]

Van Deerlin) and to continuing the national benefits that might flow 
from allowing California to continue to act as a pioneer in this field. 
113 Cong. Rec. H 14407 (Cong. Moss) (daily ed. Nov. 2, 1967); S 16395 
(daily ed. Nov. 14, 1967) (Senator Murphy). These points had also 
previously been made by the Senate Public Works Committee in reporting 
out waiver language identical to that eventually adopted by the House. 
S. Rep. No. 403, 90th Cong. 1st Sess. 32-33 (1967).
    As also explained in MEMA I:

Legislative history makes clear that the burden of proof lies with 
the parties favoring denial of the waiver. Petitioners lost the 
battle they now wage twelve years ago when Congress specifically 
declined to adopt a provision which would have imposed on California 
the burden to demonstrate that it met the waiver requirements. As 
noted, the Senate version of the Air Quality Act of 1967 contained 
the language which was ultimately adopted by Congress. It vested the 
power to make the protectiveness determination in California and 
sharply restricted the Secretary's role in a waiver proceeding. The 
Senate Report explained that under the proposal the ``Secretary is 
required to waive application unless he finds'' one of the factual 
circumstances set out in section 209(b)(1)(A)-(C). S. Rep. No. 403, 
90th Cong., 1st Sess. 33 (1967).

    Finally, with regard to the Dealers' arguments about the burden of 
proof, we believe it necessary to differentiate between two separate 
questions: 1) who has the burden of proof; and 2) what is the 
appropriate level of proof? A discussion of who holds the burden of 
proof is addressed above. Below is a discussion regarding the 
appropriate ``level'' of proof. EPA agrees with the Dealers that EPA 
has the discretion to determine the appropriate level of proof, and we 
are guided by the language of the statute, relevant case law, and our 
prior administrative practice.
    With regard to the standard of proof applicable to CARB's 
protectiveness determination, EPA rejects any contention that the 
standard should be anything other than ``clear and compelling 
evidence.'' The language of section 209(b)(1)(A) requires that the 
Administrator find that CARB's protectiveness determination is 
``arbitrary and capricious'' suggesting that EPA or others that may 
oppose the waiver must demonstrate that CARB's factual findings lacked 
any acceptable reasoning. As noted above, the MEMA I court upheld the 
Administrator's position that, to deny a waiver, there must be `clear 
and compelling evidence' to show that proposed procedures undermine the 
protectiveness of California's standards.\35\ The court noted that this 
standard of proof also accords with the congressional intent to provide 
California with the broadest possible discretion in setting regulations 
it finds protective of the public health and welfare.\36\ EPA believes 
there is no reason to jettison the precedent along with its past 
administrative waiver practice merely because CARB seeks a waiver for 
``standards'' as opposed to ``accompanying enforcement procedures.''
---------------------------------------------------------------------------

    \35\ Id.
    \36\ Id.
---------------------------------------------------------------------------

    With respect to the second and third waiver criteria of section 
209(b); however, EPA is also guided by the principles of deference 
noted above and by case law, as explained below in EPA's examination of 
technological feasibility. As the commenter notes, in the GHG waiver 
EPA reasoned that MEMA I's holding on the applicable standard of proof 
should be extended to waiver of standards. EPA continues to believe 
that it is appropriate to impose a standard of preponderance of 
evidence on the proponent of denial of a waiver of standards, for the 
second and third waiver criteria. This standard would also be similar 
to the standard in civil matters. ``This view of the standard of proof 
dictates the standard normally adopted in civil matters, a 
preponderance of the evidence.'' \37\ EPA also believes that it should 
apply such a standard in a way that accords with congressional intent 
to provide California with the broadest possible discretion in setting 
regulations that it finds protective of the public health and welfare 
\38\ while limiting EPA's review to a narrow role that provides 
substantial deference to the State.\39\
---------------------------------------------------------------------------

    \37\ International Harvester v. Ruckelshaus, 478 F 2d 615, 643 
(D.C. Cir.) (International Harvester).
    \38\ MEMA I, 627 F. 2d at 1122.
    \39\ 40 FR 23103-104.
---------------------------------------------------------------------------

    Further, EPA agrees with the commenter that in making its 
determination, EPA should be mindful of the risk of error involved.\40\ 
But this does not change the burden of proof. ``The Administrator is 
not entitled to ignore the evidence adduced at the hearing. He must 
consider all evidence that passes the threshold test of materiality and 
he must thereafter assess such material evidence against a standard of 
proof to determine whether the parties favoring a denial of the waiver 
have shown that the factual circumstances exist in which Congress 
intended denial of the waiver.'' \41\
---------------------------------------------------------------------------

    \40\ MEMA I, 627 F.2d at 1122.
    \41\ Id.
---------------------------------------------------------------------------

    In sum, based on the statutory structure of section 209(b)(1) and 
legislative history, the burden of proof falls on those who wish EPA to 
deny the waiver.

IV. California's Within the Scope Request for its Zero Emission Vehicle 
Amendments

    CARB's waiver request sought confirmation from EPA that the ZEV 
amendments (2012 ZEV Amendments), as they relate to 2017 and prior MYs 
are within the scope of existing waivers. The ACC waiver request also 
sought confirmation that the 2012 ZEV amendments as they relate to 2018 
and later MYs are within the scope of existing waivers, or, in the 
alternative, meets the criteria for a full waiver.

A. Chronology

    California's initial ZEV program was included as part of its first 
low-emission vehicle program known as LEV I. The ZEV component of this 
program had a ZEV sales requirement starting with the 1998 MY and 
phasing in to a 10 percent sales requirement by the 2003 MY. EPA issued 
a waiver of preemption for these regulations on January 13, 1993.\42\ 
CARB subsequently amended the ZEV regulations in March, 1996, by 
eliminating the ZEV sales requirement for the 1998-2002 MYs and 
retaining the 10 percent sales requirement for the 2003 and later MYs. 
EPA issued a within the scope determination for these amendments on 
January 5, 2001.\43\ CARB again amended the ZEV regulations in 1999, 
2001, and 2003 and on December 21, 2006, EPA waived preemption for 
these amendments through the 2011 MY.\44\ The 2006 EPA action included 
a within the scope decision for certain components of the regulations 
and a full waiver authorization for other components. Specifically, EPA 
determined that certain provisions of the 1999-2003 amendments to the 
ZEV regulations affecting 2006 and prior MYs were within the scope of 
previous waivers of preemption. EPA's 2006 decision concurrently 
granted California's request for a waiver of preemption to enforce 
certain provisions of the ZEV regulations as they affected 2007 through 
2011 MY vehicles. EPA also stated that that although we believed it 
appropriate to grant a full waiver of preemption for the 2007 MY, we 
also believed it appropriate to consider the 2007 MY regulations (with 
one exception noted) as within the scope of previous waivers of 
preemption, as they applied to certain vehicles that were

[[Page 2119]]

already subject to the pre-existing ZEV regulations. The 2006 waiver 
decision did not make any findings or determinations with regard to 
CARB's ZEV regulations as they pertained to the 2012 and later MYs. On 
October 3, 2011, EPA determined that additional CARB amendments to the 
ZEV regulations, as they affected 2011 and prior MYs, were within the 
scope of previous waivers for the ZEV regulations (or in the 
alternative qualified for a new waiver). At that time EPA also granted 
a waiver allowing California to enforce the ZEV amendments as they 
affected 2012 and later MYs.\45\
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    \42\ 58 FR 4166 (January 13, 1993).
    \43\ 66 FR 7751 (January 25, 2001).
    \44\ 71 FR 78190 (December 28, 2006).
    \45\ 76 FR 61095 (October 3, 2011).
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B. CARB's ZEV Amendments

    CARB's stated goal for the 2012 ZEV amendments, as they affect the 
ZEV regulation through MY 2017, was to make minor corrections and 
clarifications and to enable manufacturers to successfully meet the 
2018 and later MY ZEV requirements. As such, the 2012 ZEV amendments 
included compliance flexibility provisions, adjustment of credits and 
allowances, and the addition of a new vehicle category that can earn 
credits to help manufacturers satisfy their sales requirement.
    The compliance flexibility provisions include several modifications 
to the ZEV program credit and travel provisions. The limitations on 
carry forward credits for ZEVs are removed, allowing for indefinite 
banking of ZEV credits. The travel provision for credits from ZEV sales 
in Section 177 states is extended through 2017. Travel provision 
credits limit the credits manufacturers need to generate to those 
necessary for California, no matter how many states adopt the ZEV 
program under Section 177. Vehicles sold in section 177 states generate 
credits for California and vice versa under the travel provisions. The 
travel provision amendments allow for the continued travel of ZEV 
credits through MY 2017. Carry forward credits for ZEVs were previously 
limited to two additional model years. This limitation is removed by 
the 2012 amendments, allowing manufacturers to bank credits for all 
future model years. This modification is a flexibility to enable 
automakers to comply with the 2018 and later provisions.
    In addition, the 2012 ZEV amendments provide for an adjustment of 
credits and allowances to incentivize longer-term technology. For 
example, the credits for Type V ZEVs (fuel cell vehicles with range of 
300 miles or greater) are increased. Finally, the 2012 ZEV amendments 
create the addition of a new vehicle category that includes two new 
near-ZEV vehicle types: Type I.5x and Type IIx. These vehicles are 
plug-in hybrid electric vehicles (PHEVs) with more capable electric 
drive systems, but smaller engines that are not expected to be used 
often and have diminished performance. These vehicles can be used to 
meet up to one half of a manufacturer's minimum ZEV credit requirement. 
These vehicles will be eligible for the same credits as current Type 
I.5 (2.5 credits) and Type II (3 credits) and will qualify for travel 
provision credits through 2017.
    Separately, CARB's stated goal for its 2012 ZEV amendments, as they 
affect 2018 and later MYs, is to achieve the commercialization of ZEVs 
and near-ZEVs such as PHEVs (with sales of approximately 15 percent of 
the new car market in California by 2025) by simplifying the regulation 
and pushing technology to higher volume production in order to achieve 
cost reductions. The amendments cover six major areas: increased ZEV 
requirements phased-in through 2025; the removal of ``commercialized'' 
technology from the ZEV program; amended manufacturer size definitions, 
ownership requirements and transitions; a modified credit system, a 
modified travel provision; and a new opportunity for manufacturers to 
generate additional ZEV credits via over compliance with applicable GHG 
emission standards during this time period.
    The increased ZEV credit requirements are equivalent to 
approximately 15 percent ZEV and near-ZEV sales by 2025. This sales 
level is deemed by CARB to be the threshold at which costs will 
decrease due to volume effects. The credit requirement is being ramped 
up from the current program's static level of 16 percent total, which 
includes PZEVs and AT PZEVs. The new requirement consists of a 2 
percent minimum ZEV and 2.5 percent minimum TZEV (4.5 percent total) 
requirement, ramping up to 16 percent minimum ZEV and 6 percent minimum 
TZEV (22 percent total) requirement in 2025 and beyond. The 2012 ZEV 
amendment revisions to credit calculations for ZEVs and TZEVs result in 
a projected market share of 15.4 percent of new sales in 2025.
    Under the previous ZEV mandate, credits were allowed for PZEV-
certified vehicles and HEVs which are not plugged in. CARB is removing 
these vehicle types from the credit scheme in MY 2018 and later. 
Remaining credits that are banked can continue to be used, but with 
discounts and caps applied.
    Manufacturer size definitions have been amended to apply full ZEV 
mandate to all but the smallest manufacturers. Manufacturer sales 
volumes will be combined if joint ownership exceeds 33.4 percent and 
the transition period for manufacturers changing size categories has 
been modified. Under this system, 97 percent of the light-duty market 
will be covered by the ZEV mandate.
    Currently, manufacturers with sales volumes exceeding 60,000 units 
in California are classified as large volume manufacturers (LVM). This 
modification reduces the threshold to 20,000 units, which will bring 
most manufacturers under the full ZEV mandate. This modification is 
being made because many of these current intermediate vehicle 
manufactures (IVMs) have a large market presence outside California. 
Remaining IVMs will be allowed to comply with the ZEV mandate with no 
restrictions on ZEV technology type, meaning an IVM can fully comply 
with TZEVs, but not PZEVs or AT PZEVs.
    Additionally, ownership thresholds for treatment of automakers as 
one entity are being modified to more closely align them with GHG fleet 
regulations and changes are being made to the lead time provisions as 
manufacturers move between size classes.
    CARB also modified its credit system. ZEV credits are based on 
range and technology reflecting utility of the vehicle and expected 
timing for commercialization. BEVs with a 50-mile range earn one credit 
and FCVs with 350 miles of range earn four credits each. Up to half a 
manufacturer's credit requirement may be met with more capable PHEVs 
which are meant to operate mainly as EVs, but are equipped with a small 
range-extending engine.
    TZEVs, which are essentially PHEVs of the type available today such 
as the Chevrolet Volt have simplified credits based on electric range 
and a minimum requirement of 10 miles all-electric on the US06 test 
cycle. The TZEV credit ranges from a minimum of 0.2 to a maximum of 1.3 
with a greater than 80 mile range.
    Excess credits earned and banked from PZEVs and AT PZEVs will be 
discounted in 2018 and later years. Their use will then be limited to 
25 percent of a manufacturer's TZEV requirement. No portion of the ZEV 
requirement may be met with banked credits. Smaller manufacturers 
(IVMs) will not have their credits capped for 2018 or 2019. In 2020 and 
later, the IVM cap will be 25 percent, but applied to their combined 
ZEV/TZEV requirement.

[[Page 2120]]

    CARB has also modified the credit levels for various ZEV types. The 
current tiered CARB system, which encouraged manufacturers to design 
vehicles to meet a given range threshold is replaced with an equation 
that calculates credits based on the UDDS electric driving range.
    In addition, CARB has modified its ``travel provisions.'' The 
travel provision, which allows for the sale of a qualifying vehicle in 
a Section 177 state to count towards a manufacturer's credit 
requirement in California, ends for BEVs after 2017. Since FCVs are far 
behind BEVs in development and market penetration, travel credits are 
extended for FCVs. California intends to extend travel credits until 
sufficient refueling infrastructure exists to support FCVs in the 
market.
    Lastly, the 2012 ZEV amendments provide that automakers who over 
comply with the LEVIII GHG standard may use the extra GHG reductions to 
offset a portion of their ZEV requirement in MYs 2018 through 2021. 
Manufacturers may offset 50 percent of their ZEV mandate in 2018, 
ramping down to 30 percent in 2021, subject to certain requirements.

C. EPA's Determination Regarding the Appropriateness of CARB's Within 
the Scope Request for the 2012 ZEV Amendments

    CARB primarily relies upon EPA's prior waiver and within the scope 
findings to demonstrate the appropriateness of applying the within the 
scope criteria to its 2012 ZEV amendments. In EPA's 2006 waiver 
determination, EPA stated that it will conduct a two-part inquiry when 
considering whether CARB amendments to a previously waived regulation 
fall within the scope of the previously granted waiver or whether the 
amendments require a new waiver:

    EPA believes it is important to distinguish between the 
threshold issue of whether CARB's amendments should be subjected to 
either the within-the-scope criteria or the full waiver, and 
separately determining whether the same amendments actually meet the 
applicable criteria for actually confirming the within-the-scope 
request or granting a full waiver of federal preemption.
    In determining the threshold question, EPA will consider whether 
the amendments make minor technical revisions or provide compliance 
flexibility on the one hand or whether the amendments add new or 
more stringent pollutant standards or new motor vehicle categories 
on the other.\46\
---------------------------------------------------------------------------

    \46\ Decision Document accompanying waiver determination in 71 
FR 78190 (December 28, 2006).

    With regard to the 2017 and earlier MYs, following the precedent 
noted above, CARB maintains that the 2012 ZEV amendments create no new 
issues affecting the previous waiver determinations concerning the ZEV 
program and that the 2012 ZEV amendments do not undermine CARB's 
original protectiveness determination and the ZEV regulations remain 
consistent with section 202(a). With regard to the 2018 and later MYs, 
CARB maintains that the within the scope criteria are appropriate since 
the overall ZEV credit requirement for MYs 2018 through 2022 is less 
burdensome than the currently waived program.
    EPA received comment from the Manufacturers stating agreement that 
the amendments to the MYs 2009 through 2017 ZEV regulations qualify for 
a within the scope determination since the amendments increase the 
flexibility available to manufacturers to comply with those standards 
and otherwise lessen the burdens placed on manufacturers. However, the 
Manufacturers did not agree that the amendments to the ZEV regulation 
for 2018 and later MYs properly fall under the within the scope review. 
The commenter notes that in addition to the increase in the minimum ZEV 
credit requirements in 2018 MY and beyond, the CARB amendments also 
eliminate certain vehicle types (e.g., PZEVs and AT PZEVs) that were 
previously accepted towards compliance with the ZEV requirements during 
this time period. In addition, the Manufacturer notes that the changes 
to CARB's travel provisions are significant and raise serious 
compliance concerns.
    The Dealers commented generally that the ZEV waiver should be 
denied, but raised no specific concerns about a within-the-scope 
determination for MYs 2012-2017.
    Therefore, EPA has received no explicit comment suggesting that EPA 
reject CARB's request for confirmation that EPA evaluate the 2012 ZEV 
amendments as they affect the 2017 MY and earlier. EPA believes that it 
is appropriate to evaluate such amendments (which provide compliance 
flexibilities) under the within the scope criteria and applies such 
criteria below. However, with respect to the 2018 and later MYs, EPA 
agrees with the commenters that CARB's 2012 ZEV amendments have, in 
total, added to the level of stringency and compliance obligations. 
Therefore, EPA does not believe it is appropriate to apply within the 
scope analysis to the ZEV amendments as they apply in the 2018 and 
later MYs. As explained below, because EPA is applying the full waiver 
criteria for the 2012 ZEV amendments as they pertain to the 2018 and 
later MYS, EPA will in the alternative also examine the revisions for 
the 2017 and earlier MYs using the full waiver criteria.

D. Application of the Within the Scope Waiver Criteria to CARB's 2012 
ZEV Amendments Regarding 2017 and Earlier MYs

1. Public Health and Welfare
    Under section 209(b)(1)(A) of the Act, EPA cannot grant a waiver if 
the Agency finds that CARB was arbitrary and capricious in its 
determination that its State standards are, in the aggregate, at least 
as protective of public health and welfare as applicable federal 
standards. Similarly, under the criteria for a within the scope 
determination, the CARB amendments to an existing program may be 
considered within-the-scope of a previously granted waiver provided 
that the amendments do not undermine California's determination that 
its standards in the aggregate are as protective of public health and 
welfare as applicable Federal standards. Thus, in the within the scope 
context CARB may rely on the ``protectiveness determination'' that the 
Board made at the time of the initial regulations (the regulations 
which subsequently received a waiver of federal preemption from EPA) 
and then CARB must only demonstrate why the protectiveness 
determination has not been undermined by CARB's amendments or any other 
intervening events such as the adoption of EPA regulations since the 
initial waiver of federal preemption.
    CARB asserts that its 2012 ZEV amendments as applied to MYs 2009 to 
2017 are a critical component of the ACC package that will result in 
fleet standards that are at least as protective as would exist under 
federal standards. The Board resolved ``that the Board hereby 
determines that the proposed regulations approved for adoption herein 
will not cause the California motor vehicle emission standards, in the 
aggregate, to be less protective of public health and welfare than 
applicable federal standards.'' \47\
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    \47\ CARB Resolution 12-11 at EPA-HQ-OAR-2012-0562-0005.
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    EPA received no comments suggesting that CARB's request should be 
denied on the basis of CARB failing to meet its burden associated with 
the protectiveness findings under section 209(b)(1)(A) of the Clean Air 
Act.
    Therefore, based on the record before us, we cannot find that 
CARB's 2012 ZEV amendments, as the affect 2017 and earlier MYs, would 
undermine CARB's prior protectiveness determinations nor would it cause 
the California motor

[[Page 2121]]

vehicle emission standards, in the aggregate, to be less protective of 
public health and welfare than applicable federal standards.
2. Consistency With Section 202(a)
    Under section 209(b)(1)(C), EPA cannot grant California its waiver 
request if the Agency finds that California standards and accompanying 
enforcement procedures are not consistent with section 202(a) of the 
Clean Air Act. Previous waivers of federal preemption have stated that 
California's standards are not consistent with section 202(a) if there 
is inadequate lead time to permit the development of technology 
necessary to meet those requirements, given appropriate consideration 
to the cost of compliance within that time. California's accompanying 
enforcement procedures would also be inconsistent with section 202(a) 
if the federal and California test procedures were inconsistent.
    The scope of EPA's review of whether California's action is 
consistent with section 202(a) is narrow. EPA has previously found that 
the determination is limited to whether those opposed to the waiver 
have met their burden of establishing that California's standards are 
technologically infeasible, or that California's test procedures impose 
requirements inconsistent with the federal test procedure.\48\
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    \48\ See MEMA I, at 1126.
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    As previously noted, CARB maintains that the 2012 ZEV amendments, 
as they pertain to the 2017 and previous MYs, provide manufacturers 
with additional flexibility without increasing on balance the overall 
stringency of the preexisting ZEV requirements. EPA has received no 
comments explicitly questioning the feasibility of the amendments as 
they apply to these MYs. In the discussion below, EPA addresses the 
limited comments regarding the technological feasibility concerns with 
regard to 2018 and later MYs and EPA provides further analysis of the 
general technological feasibility concerns in the full waiver 
discussion. With regard to whether test procedures are consistent, CARB 
notes that the federal Tier 2 regulations require manufacturers to 
measure emissions from ZEVs in accordance with the California test 
procedures.\49\ In addition, EPA has not received comment suggesting 
the test procedures are inconsistent. Therefore, based on the record 
before us, we cannot deny CARB's within the scope request for 2017 and 
prior MYs based on an inconsistency with section 202(a).
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    \49\ CARB waiver request at 29, citing 40 CFR 86.1811-04(n).
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3. New Issues
    As noted above, included in the within the scope criteria, is a 
determination of whether the amendments raise new issues affecting the 
previous waiver decisions. As previously noted, EPA examines any new 
information when reviewing whether CARB's amendments affect the ZEV 
program's consistency with section 202(a). If the amendments had 
increased the stringency of the standards upon the manufacturers (for 
the specific model years being reviewed in the within the scope 
analysis), or if the amendments had regulated or subjected new types of 
vehicles to be included in the ZEV program (or in this instance 
regulated the same vehicle types but for model years not previously 
waived by EPA), or added additional pollutants to the program, then 
likely new issues would have been created. However, in this instance no 
party has presented evidence that new issues exist for MYs 2017 and 
earlier as a result of the 2012 ZEV amendments. Therefore, EPA cannot 
deny CARB's request for a within the scope determination for MYs 2017 
and earlier based on this criterion.
    Therefore, based on the record before us, we cannot deny CARB's 
request for confirmation that its 2012 ZEV amendments, as they affect 
the 2017 and earlier MYs, are within the scope of previous waiver 
determinations. As such, we confirm CARB's request regarding the 2012 
ZEV amendments as they affect 2017 and earlier MYs.

V. Consideration of Advanced Clean Car Regulations Under the Full 
Waiver Criteria

    CARB's ACC program regulations include revisions to both 
California's LEV and ZEV programs. CARB's request seeks a waiver of 
preemption under section 209(b) of the Clean Air Act (CAA), 42 U.S.C. 
7543(b) for the revisions to the LEV III program. CARB's request also 
seeks a waiver for the ZEV amendments included in the ACC program 
regulations. Subsequent to CARB's initial ACC waiver request, CARB's 
Executive Officer took action to formally adopt a ``deemed to comply'' 
regulation affecting the GHG component of the ACC package. CARB 
submitted this additional information to EPA and requested that EPA 
consider the ``deemed to comply'' regulation as part of CARB's pending 
ACC waiver request. EPA's application of the section 209(b) waiver 
request, including the ``deemed to comply'' regulation, is set forth 
below.

A. California's Protectiveness Determination

    Section 209(b)(1)(A) of the Clean Air Act requires EPA to deny a 
waiver if the Administrator finds that California was arbitrary and 
capricious in its determination that its State standards will be, in 
the aggregate, at least as protective of public health and welfare as 
applicable Federal standards. EPA recognizes that the phrase ``States 
standards'' means the entire California new motor vehicle emissions 
program. Therefore, as explained below, when evaluating California's 
protectiveness determination, EPA compares the California-to-Federal 
standards. That comparison is undertaken within the broader context of 
the previously waived California program, which relies upon 
protectiveness determinations that EPA have previously found were not 
arbitrary and capricious.\50\
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    \50\ In situations where there are no Federal standards directly 
comparable to the specific California standards under review, the 
analysis then occurs against the backdrop of previous waivers which 
determined that the California program was at least as protective of 
the federal program ((LEV II + ZEV) + GHG). See 71 FR 78190 
(December 28, 2006), Decision Document for Waiver of Federal 
Preemption for California Zero Emission Vehicle (ZEV) Standards 
(December 21, 2006).
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    Traditionally, EPA has evaluated the stringency of California's 
standards relative to comparable EPA emission standards.\51\ That 
evaluation follows the instruction of section 209(b)(2), which states: 
``If each State standard is at least as stringent as the comparable 
applicable Federal standard, such State standard shall be deemed to be 
at least as protective of health and welfare as such Federal standards 
for purposes of [209(b)(1)].''
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    \51\ 36 FR 17458 (Aug. 31, 1971). (``The law makes it clear that 
the waiver requests cannot be denied unless the specific finding 
designated in the statute can properly be made. The issue of whether 
a proposed California requirement is likely to result in only 
marginal improvement in air quality not commensurate with its cost 
or is otherwise an arguably unwise exercise of regulatory power is 
not legally pertinent to my decision under section 209, so long as 
the California requirement is consistent with section 202(a) and is 
more stringent than applicable Federal requirements in the sense 
that it may result in some further reduction in air pollution in 
California.''). The ``more stringent'' standard expressed here in 
1971 was superseded by the 1977 amendments to section 209, which 
established that California's standards must be, in the aggregate, 
at least as protective of public health and welfare as applicable 
Federal standards. The stringency standard remains, though, in 
section 209(b)(2).
---------------------------------------------------------------------------

    To review California's protectiveness determination in light of 
section 209(b)(2), EPA conducts its own analysis of the newly adopted 
California standards to comparable applicable Federal standards. The 
comparison quantitatively answers whether the new

[[Page 2122]]

standards are more or less protective than the Federal standards. That 
comparison of the newly adopted California standards to the applicable 
Federal standards is conducted in light of prior waiver determinations. 
That is, the California-to-Federal analysis is undertaken within the 
broader context of the previously waived California program, which 
relies upon protectiveness determinations that EPA has not found 
arbitrary and capricious.\52\
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    \52\ In situations where there are no Federal standards directly 
comparable to the specific California standards under review, the 
analysis then occurs against the backdrop of previous waivers which 
determined that the California program was at least as protective of 
the federal program ((LEV II + ZEV) + GHG). See 71 FR 78190 
(December 28, 2006), Decision Document for Waiver of Federal 
Preemption for California Zero Emission Vehicle (ZEV) Standards 
(December 21, 2006).
---------------------------------------------------------------------------

    A finding that California's determination was arbitrary and 
capricious under section 209(b)(1)(A) must be based upon ```clear and 
compelling evidence' to show that proposed [standards] undermine the 
protectiveness of California's standards.'' \53\ Even if EPA's own 
analysis of comparable protectiveness or that suggested by a commenter 
might diverge from California's protectiveness finding, that is not a 
sufficient basis on its own for EPA to make a section 209(b)(1)(A) 
finding that California's protectiveness finding is arbitrary and 
capricious.\54\
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    \53\ MEMA I, 627 F.2d at 1122.
    \54\ ``Once California has come forward with a finding that the 
procedures it seeks to adopt will not undermine the protectiveness 
of its standards, parties opposing the waiver request must show that 
this finding is unreasonable.'' MEMA I, 627 F.2d at 1124.
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    CARB has made a series of protectiveness determinations with regard 
to its ACC program. California made a protectiveness determination with 
regard to the 2012 ZEV and LEV amendments in CARB's Resolution 12-11, 
finding that the amendments would not cause the California motor 
vehicle emission standards, in the aggregate, to be less protective of 
public health and welfare than applicable federal standards.\55\ CARB 
noted that this protectiveness determination is the logical extension 
of the comparable findings that were found to be sufficient in the 
analyses of California's previous protectiveness determinations for its 
ZEV, LEV, and GHG regulations.\56\ As explained in CARB's waiver 
request, the ACC program will result in reductions of both criteria 
pollutants and GHG emissions that, in the aggregate, are more 
protective than the pre-existing federal standards. CARB's Resolution 
12-11 also sets forth the Board finding that ``It is appropriate to 
accept compliance with the 2017 through 2025 MY National Program as 
compliance with California's GHG emission standards up through the 2017 
through 2025 MYs, once U.S. EPA issues their Final Rule on or after its 
current July 2012 planned release, provided that the GHG reductions set 
forth in U.S. EPA's December 1, 2011 Notice of Proposed Rulemaking for 
2017 through 2025 model year passenger vehicles are maintained, except 
that California shall maintain its own reporting requirements.'' 
Further, CARB's Resolution 12-21 sets forth that the CARB staff 
``prepared three separate Regulatory Notices * * * for these amendments 
[LEV III/GHG and ZEV] and presented them to the Board with a single 
coordinated analysis of emissions, costs, and associated environmental 
impacts and benefits.\57\ CARB's Resolution 12-21 also resolves that 
the ``recitals and findings contained in Resolution 12-11, are 
incorporated by reference herein.'' \58\
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    \55\ See CARB's Resolution 12-11, EPA-HQ-OAR-2012-0562-0006 at 
22. EPA notes that the CARB Board also resolved that it found that 
separate California standards and test procedures are necessary to 
meet compelling and extraordinary conditions. Id. at 23.
    \56\ CARBS's waiver request at 13, citing 76 FR 61095 (October 
3, 2011), 68 FR 19811 (April 22, 2003), and 74 FR 32744 (July 8, 
2009), respectively.
    \57\ CARB Resolution 12-21 at 7.
    \58\ Id. at 10.
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    In addition, at the time CARB adopted the ``deemed to comply'' 
regulation, the CARB Board found that such amendments do not undermine 
the Board's previous determination that the regulation's emission 
standards, other emission related requirements, and associated 
enforcement procedures are, in the aggregate, at least as protective of 
public health and welfare as applicable federal standards and are 
consistent with section 209 of the Clean Air Act.\59\ Therefore, 
subsequent to the finalization of EPA's GHG regulation (August 31, 
2012), and as part of the CARB Board's adoption of the ``deemed to 
comply'' rule on November 15, 2012, the Board resolved and determined 
``that the proposed regulations approved for adoption herein will not 
cause California motor vehicle emission standards, in the aggregate, to 
be less protective of public health and welfare than applicable federal 
standards.'' \60\
---------------------------------------------------------------------------

    \59\ See CARB's Resolution 12-35; EPA-HQ-OAR-2012-0562-0374.
    \60\ Id. at p. 9.
---------------------------------------------------------------------------

    With regard to criteria pollutants, CARB notes that the primary 
fleet average emission requirement, beginning in 2015, declines every 
year to a fleet average NMOG plus NOX emission standard of 
0.030 g/mi in 2025. CARB notes that this is clearly more stringent than 
the current federal Tier 2 fleet average NOX emission 
requirement with its implied fleet average NMOG and plus NOX 
requirement. In addition, the LEV III PM standards 3 mg/mi and 1 mg/mi 
are also significantly more stringent than the federal Tier 2 p.m. 
standards. CARB also notes that while there is no criteria emissions 
benefit with its ZEV requirements in terms of vehicle (tank-to-wheel--
TTW) emissions since the LEV III criteria pollutant fleet standard is 
responsible for the emission reductions, but CARB notes that in terms 
of upstream emission impacts (well-to-wheel--WTW) there are emission 
reductions achieved from the ZEV requirements. There are no comparable 
federal standards.
    CARB also notes that with regard to GHG emissions, the ACC program 
as a whole would provide major reductions in GHG emissions (e.g., by 
2025 CO2 emissions would be reduced by almost 14 million 
metric tonnes (MMT) per year, which is 12 percent from baseline 
levels). CARB's ACC waiver request, notes that the federal GHG 
standards do not become more stringent in the 2017-2025 MYs, as CARB's 
do. However, CARB states that it understands more stringent standards 
will ``soon be finalized.''
    At the time the Board adopted the ``deemed to comply'' amendments 
it had before it the ``Staff Report: Initial Statement of Reasons 
demonstrating that if a National Program standard was theoretically 
applied only to California new vehicle sales alone, it might create a 
GHG deficit of roughly two million tons compared to the California 
standards.\61\ CARB notes that there might be a GHG emission deficit if 
the National Program applied in California, and thus CARB's GHG 
emission standards are at least as stringent as the EPA GHG emission 
standards.
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    \61\ EPA-HQ-OAR-2012-0562-0374 at 3. CARB also notes that to the 
extent a manufacturer chooses not to exercise their National Program 
compliance option in California this would actually provide 
additional GHG benefits in California, so compliance in California 
can never yield fewer cumulative greenhouse gas reductions from the 
industry wide fleet certified in California.
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1. Comments on CARB's Protectiveness Determination
    The Dealers commented on CARB's protectiveness determinations for 
both its GHG emission standards and its ZEV regulations. At the outset, 
NADA claims that EPA must conduct a separate preemption waiver 
evaluation for each set of standards in the ACC program

[[Page 2123]]

(e.g., LEV III criteria pollutants, GHG, and ZEV). EPA notes that NADA 
did not address the preemption waiver request for the CARB LEV III 
standards.
    In the context of considering the ACC standards individually, NADA 
states that EPA must reject CARB's GHG preemption waiver request 
because CARB's finding is premature. NADA maintains that CARB has not 
conducted the necessary investigation to support is protectiveness 
determination because EPA has now finalized its GHG emission standards. 
NADA claims that CARB's determination should measure the standards that 
exist at the time EPA makes its waiver decision. NADA contends that 
rather than allowing CARB to look at the program as a whole, CARB must 
be required to examine each standard before the Agency, including the 
GHG standards at issue. In the alternative, the commenter suggests that 
CARB's protectiveness determination is arbitrary and capricious since 
CARB itself cites the absence of the federal GHG standards as reason 
for its protectiveness determination. Finally, the commenter argues 
that CARB's conclusions are not backed by facts or analysis and 
contradict the actuality that emissions from other parts of the world 
and the United States affect global concentrations, and therefore 
concentrations in California. The Dealers state that it therefore 
follows that GHG concentrations in California will be reduced by a 
greater amount if reductions occur on a nationwide basis, rather than 
just statewide. Thus by definition, CARB standards for limiting GHG 
emissions from California cars are less protective than the applicable 
federal standards.
    CARB's supplemental comments, in response to NADA's claims, note 
that California demonstrated that it was reasonable for the Board to 
determine that the California standards ``as submitted'' are, in the 
aggregate, as or more stringent than the applicable federal 
standards.\62\ CARB suggests this was a relatively simple determination 
at the time of CARB's June 2012 waiver request because: (1) EPA's 
proposed 2017-2025 MY GHG standards were not finalized; (2) EPA had not 
proposed or finalized a 1 mg/mile PM standard and other criteria 
pollutant improvements for 2015 and later MYs; and (3) EPA has no ZEV 
program that may achieve an additional incremental wells-to-wheels 
criteria pollutant reduction. CARB states that this prior and timely 
Board determination remains sound despite the now finalized EPA GHG 
standards because (2) and (3) remain true and because EPA GHG 
standards: (1) do not account for upstream GHG emissions as does 
California's GHG program; (2) include vehicle multipliers for natural 
gas vehicles, effectively diluting federal standards vis a vis 
California's; and (3) contains relaxed criteria for GHG credits for 
mild hybrid-electric vehicle trucks, which also dilutes the federal 
standard. CARB also notes that to the extent manufacturers choose the 
EPA GHG standard compliance path to demonstrate compliance with 
California standards that results in essentially equal reductions (as 
stringent) of GHG emissions in California. Separately, CARB states that 
NADA's attempt to exclude CARB's LEV III standards from the ``in the 
aggregate'' protectiveness determination cannot be countenanced since 
this would render the phrase ``in the aggregate'' superfluous.
---------------------------------------------------------------------------

    \62\ CARB submitted comment on November 14, 2012 (CARB 
supplemental comment). EPA-HQ-OAR-2012-0562-0373.
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    In addition, within CARB's Resolution 12-35, adopted on November 
15, 2012, CARB addresses two issues raised by NADA's comments to EPA. 
CARB's Resolution 12-35 notes the question of whether the CARB Board 
failed to make a finding that California's passenger vehicle program 
remains as protective as applicable federal standards given the 
proposed ``deemed to comply'' rule on September 14, 2012 and also notes 
the question whether California's program is no longer as protective 
given the 2017 through 2025 MY National Program. First, it states that 
it sufficiently addressed NADA's protectiveness issues in its November 
14, 2012 supplemental submittal to EPA. Within this submission, CARB 
noted that it was reasonable for the Board to determine that the 
California standards as submitted are, in the aggregate, as or more 
stringent that the applicable federal standards. CARB maintains that at 
the time of its June 2012 waiver submittal its protectiveness 
determination was a fairly simple one since EPA's 2017-2025 GHG 
standards were not finalized, EPA had not proposed nor finalized a 1 
mg/mile PM standard and other criteria pollutant improvements for 2015 
and later MYs, and EPA has no ZEV program that may achieve an 
additional incremental wells-to-wheels criteria pollutant reduction. 
CARB notes that the Board's determination remains solid despite the now 
finalized National Program rule because EPA still has no LEV III 
criteria pollutant/PM equivalent requirements and because EPA's GHG 
standards do not account for upstream GHG emissions as do California's, 
and because the National Program includes vehicle multipliers for 
natural gas vehicles and relax criteria for GHG credits for mild hybrid 
electric vehicle trucks.
    EPA also received comment regarding CARB's protectiveness 
determination for its ZEV standards. The Dealers suggest that CARB 
failed to adequately provide a protectiveness determination, and such a 
determination is drawn into question given CARB's stated conclusions 
that there is no TTW emission benefits from ZEV and that the ZEV 
regulation does not provide any additional GHG emission reductions 
beyond the GHG standards. The Dealers claim that CARB's failure to make 
a protectiveness determination regarding its ZEV standard is inherently 
arbitrary and capricious.
    CARB states that contrary to NADA's assertion that it must make an 
individual protectiveness determination regarding its ZEV amendments 
CARB believes that requiring California to show that each standard 
(including the ZEV standard) is at least as protective in the aggregate 
would in effect ignore the phrase ``in the aggregate'' in section 
209(b). CARB states that is why it made one protectiveness 
determination. CARB notes that purpose of the ZEV regulation is to 
commercialize the technologies needed to meet long term goals even 
beyond the emission reductions anticipated by the LEV III program.\63\
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    \63\ CARB's supplemental comments at 3-4. CARB also references 
table 6.2 of its Initial Statement of Reasons (ISOR) that details 
the well to wheel emissions benefits of the ZEV program compared to 
the LEV III program. EPA-HQ-OAR-2012-0562-0008.
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2. Is California's protectiveness determination arbitrary and 
capricious?
    As described above, EPA's traditional analysis has been to evaluate 
California's protectiveness determination by comparing the new 
California standards, or amendments, to applicable EPA emission 
standards for the same pollutants. EPA notes that the ``more 
stringent'' standard expressed in 1971 was superseded by the 1977 
amendments to section 209, which established that California's 
standards must be, in the aggregate, at least as protective of public 
health and welfare as applicable Federal standards. As noted above, 
this was intended to afford California the broadest possible discretion 
in designing is motor vehicle emission program. The comparison is 
undertaken within the broader context of the previously waived 
California program, which relies upon protectiveness determinations 
that EPA have previously found were not arbitrary and capricious.

[[Page 2124]]

    EPA believes that the Dealers misapply our prior statement, made in 
EPA's 2009 GHG waiver decision, that the most straightforward reading 
of the comparison called for by the statute, between California and 
Federal standards, is an ``apples to apples'' comparison.\64\ The 
stated purpose of the ``apples to apples'' phrase was to determine what 
the ``applicable'' Federal standards are for purposes of evaluating a 
protectiveness determination, in response to comments that the federal 
CAFE standards adopted by NHTSA should be considered applicable federal 
standards for purposes of this wavier criterion. EPA explained in the 
GHG waiver decision that ``The term `applicable' has to refer to what 
Federal standards apply, and the most straightforward meaning is that 
they apply in the same way that the California standards apply, by 
setting limits on emissions of air pollutants.'' Therefore, given the 
uniqueness of a CARB waiver request that includes interrelated 
standards applicable to the same vehicle category EPA believes CARB's 
approach of making one protectiveness determination for its ACC program 
is a reasonable approach permitted under section 209(b).\65\ Although 
section 209(b)(2) informs EPA of the conclusion it must draw if each 
standard is at least as stringent as the comparable federal standard, 
EPA notes the protectiveness determination that CARB presents in a 
waiver request typically includes an implicit or explicit in the 
aggregate protectiveness determination since CARB typically examines 
whether its new standards (plural) undermine previous protectiveness 
determinations, which EPA evaluated in prior waiver decisions. In this 
context, once CARB presents an in the aggregate protectiveness 
determination EPA believes it appropriate to initially evaluate such 
standards in a side-by-side comparison with applicable Federal 
standards and then determine whether such standards are, in the 
aggregate, as protective as applicable Federal standards.
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    \64\ See 74 FR at 32750.
    \65\ EPA also notes that CARB has provided complete information 
and determinations that even in the context of comparing individual 
standards their standards are as protective of public health and 
welfare as applicable Federal standards.
---------------------------------------------------------------------------

    In the context of CARB's ACC standards this side-by-side analysis 
is simple. EPA has already determined that California was not arbitrary 
and capricious in its determination that the pre-existing California 
standards for light-duty vehicles and trucks, known as LEV II, is at 
least as protective as comparable federal standards, known as the Tier 
II standards.\66\ In this instance, CARB has finalized new and more 
stringent criteria pollutant standards (LEV III) while the Tier II 
standards remain in place at the federal level. In the absence of newer 
EPA standards since the time of its prior waiver for CARB's LEV II 
standards there is a clear rational basis for CARB's determination that 
its standards will be at least as protective of human health and 
welfare as applicable federal standards.
---------------------------------------------------------------------------

    \66\ 68 FR 19811 (April 22, 2003) and Decision Document for 
Waiver of Federal Preemption for Low Emission Vehicle Amendments 
(LEV II) (April 11, 2003).
---------------------------------------------------------------------------

    The Dealer's comments assert that CARB's protectiveness 
determination was premature because that assessment occurred before EPA 
finalized its own GHG emission standards. However, EPA believes that 
CARB's initial protectiveness determination (submitted to EPA in CARB's 
June 2012 waiver request) was not premature and was appropriate given 
the EPA standards in effect at that time. At the time CARB submitted 
its waiver request, EPA's GHG emission standards for the 2017 through 
2025 MYs were the same for those MYs as for MY 2016, while CARB's were 
becoming more and more stringent over that period; therefore, CARB's 
protectiveness finding was reasonable at that time.
    Subsequent to EPA's promulgation of its final GHG standards, in the 
context of CARB's ``deemed to comply'' regulation, CARB has provided an 
updated protectiveness determination (see Resolution 12-35) regarding 
the California GHG emission standards, in terms of the underlying 
benefits of CARB's program. EPA finds California to be correct in its 
determination that the ``deemed to comply'' regulation does not 
undermine CARB's determination that its regulations are in the 
aggregate as protective as EPA's standards. CARB's regulation will 
achieve, in the aggregate, equal or even additional GHG emission 
reductions in California relative to federal GHG standards, even if 
manufacturers choose to comply with the California regulations by 
complying with EPA's GHG emission standards. As noted above, EPA's 
National Program standards do not account for upstream GHG emissions as 
do California's and EPA's GHG standards includes vehicle multipliers 
for natural gas vehicles and relax criteria for GHG credits for mild 
hybrid electric vehicle trucks. EPA also believes that CARB correctly 
notes that even with the ``deemed to comply'' amendments, one or more 
manufacturers could still choose to continue demonstrating compliance 
in California under the existing California regulations. To the extent 
manufacturers choose EPA's GHG standards as the compliance path--in 
California--the California standard, by definition would yield at 
least, essentially equivalent GHG reductions, so California's standards 
cannot be less stringent.
    The Dealers seem to suggest that with EPA's GHG standards there 
will be a greater reduction of GHG emissions compared to the California 
GHG emission standards. California's protectiveness determination 
applies only to the protectiveness of CARB's emission standards, in 
California, compared to applicable federal standards. EPA believes that 
the Dealers ignore the obvious, that all stakeholders, including 
California, recognize the need for reductions of GHG emissions, as well 
as emissions of other pollutants, on a national basis. The federal GHG 
emission standards, applied in 50 states, will generally result in more 
emission reductions than CARB standards applied solely in California. 
If California were required to achieve equal emission results (with 
reductions counted only in California) to a federal program this would 
render 209(b) unusable. The relevant comparison is between the emission 
reductions achieved in California under the California program versus 
the emission reductions in California under the comparable federal 
program. Emissions reductions in other states are not considered, which 
is appropriate because the waiver decision affects only California's 
emission standards, not the federal standards that exist regardless of 
EPA's decision. EPA believes, and the record contains no evidence 
otherwise, that the reductions due to CARB's GHG emission standards in 
California versus the reductions of the comparable federal GHG emission 
standards in California, demonstrates that CARB's GHG emission 
standards are at least as protective as applicable federal standards. 
EPA notes that NADA raised similar arguments in the context of EPA's 
within the scope waiver decision, issued on June 14, 2011, for CARB's 
GHG emission amendments that included a ``deemed to comply'' provision 
for GHG emission standards during the 2012 through 2016 MYs. EPA noted 
``Thus, at the very least, compliance with California's GHG standards 
under the revised regulations will result in the same, if not more, 
emission reductions than would occur in the absence of the California 
standards. NADA provides no evidence that CARB's standards are less 
protective than the applicable Federal

[[Page 2125]]

standards. As such, NADA fails to present any evidence or make any 
showing that the amendments undermine California's previous 
determination that its standards, in the aggregate, are at least as 
protective of public health and welfare as applicable Federal 
standards.'' \67\
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    \67\ 76 FR 34693, 34696 (June 14, 2011).
---------------------------------------------------------------------------

    With regard to CARB's ZEV amendments EPA believes that CARB has 
provided a reasoned basis for their determination that the ZEV 
regulations are as protective or public health and welfare as 
comparable federal requirements, which for ZEV are nonexistent. In 
EPA's 2006 ZEV waiver proceeding, EPA conducted its traditional 
analysis to compare California's newly enacted ZEV standards to a 
similar lack of applicable federal standards. At that time California 
found, and EPA deemed reasonable, that the addition of the ZEV 
standards did not render California's LEV II program, for which a 
waiver had previously been granted, less protective than the federal 
Tier II program. In addressing the Alliance of Automobile 
Manufacturers' petition for reconsideration with respect to this issue, 
EPA stated that ``the words `standards' and `in the aggregate' in 
section 209(b)(1)(A) * * *, at minimum, include all the standards 
relating to the control of emissions for a category of vehicles (e.g., 
passenger cars, etc.) subject to CARB regulation, particularly where 
the standards are designed to respond to the same type of pollution.'' 
\68\ California's ZEV and GHG emission standards are an addition to its 
LEV program. EPA has not received any comment to suggest that the 
existence of either of these additional regulatory components 
undermines the protectiveness of CARB's LEV III emission standards. 
Although the Dealers suggest that ``consumers facing a CARB-constrained 
mix at their local dealership may elect to buy a CARB-exempted brand, 
to purchase a late-model used vehicle, or defer vehicle purchases 
altogether,'' EPA believes that the Dealers have failed to present any 
legal argument as to why EPA should take this into consideration within 
the waiver criteria. We also find that the Dealers have failed to 
provide evidence, under any standard of proof, as to whether such 
outcomes would ultimately impair the protectiveness of CARB's emission 
standards. EPA believes it is appropriate, and certainly reasonable, 
for CARB to evaluate its standards in the aggregate when the nature of 
its regulations are interrelated and the regulations are submitted to 
EPA as one ACC program. Although NADA suggests that CARB failed to make 
an individual protectiveness determination for its ZEV standards, EPA 
believes this is of no significance in light of the overall 
protectiveness of CARB's emission standards and the lack of an 
applicable federal ZEV program. The Dealers mere contentions, which 
CARB reasonably refutes in its supplement comments,\69\ that there is 
no criteria emission benefit from the ZEV proposal in terms of TTW 
emissions, and that the ZEV regulation does not provide GHG emission 
reductions in addition to the LEV III GHG regulation, suggest no reason 
to find that CARB's ACC program is any less protective of public health 
and welfare because of the existence of such ZEV standards.
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    \68\ Decision Document for Waiver of Federal Preemption for 
California's Zero Emission Vehicle (ZEV) Standards (December 21, 
2006) and EPA's August 13, 2008 Response to Petition for 
Administrative Reconsideration of EPA's ZEV Waiver Decision (through 
the 2011 Model Year) published on December 28, 2006.
    \69\ See CARB supplemental comments at 3-4.
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3. Section 209(b)(1)(A) Conclusion
    Based on the record before EPA, we cannot find that CARB was 
arbitrary and capricious in its finding that the California ACC program 
standards, including the LEV III criteria pollutant and GHG emission 
standards along with its ZEV amendments are, in the aggregate, at least 
as protective of public health and welfare as applicable federal 
standards.

B. Does California need its standards to meet compelling and 
extraordinary conditions?

    Under section 209(b)(1)(B) of the Act, EPA cannot grant a waiver if 
EPA finds that California ``does not need such State standards to meet 
compelling and extraordinary conditions.'' EPA has traditionally 
interpreted this provision as requiring a consideration of whether 
California needs a separate motor vehicle program to meet compelling 
and extraordinary conditions. However in EPA's March 6, 2008 denial of 
CARB's GHG waiver request (GHG waiver denial), EPA limited this 
interpretation to California's motor vehicle standards that are 
designed to address local or regional air pollution problems. EPA 
determined that the traditional interpretation was not appropriate for 
standards designed to address a global air pollution problem and its 
effects and that it was appropriate to address such standards 
separately from the remainder of the program. EPA then found that 
California did not need such standards to meet compelling and 
extraordinary conditions. The interpretation adopted in the March 6, 
2008 waiver denial was before EPA for reconsideration when CARB 
resubmitted its GHG waiver request and EPA announced a new opportunity 
for hearing and public comment on February 12, 2009.\70\
---------------------------------------------------------------------------

    \70\ 74 FR 7040 (February 12, 2009).
---------------------------------------------------------------------------

    Set forth below is a summary of EPA's departure from the 
traditional interpretation of section 209(b)(1)(B) in the GHG waiver 
denial along with EPA's return to the traditional interpretation 
(confirmed today) in EPA's waiver of preemption of CARB's GHG standards 
on July 8, 2009 (GHG waiver).\71\ Because EPA received comment 
suggesting that CARB's GHG and ZEV standards do not meet the 
requirements of section 209(b)(1)(B), EPA believes it useful to recount 
the interpretive history associated with both GHGs and traditional 
local and regional air pollutants to explain why EPA believes that 
section 209(b)(1)(B) should be applied in the same manner for all air 
pollutants.
---------------------------------------------------------------------------

    \71\ 74 FR 32744 (July 9, 2009).
---------------------------------------------------------------------------

    As explained below, EPA finds that the opponent of the ACC waiver 
has not met its burden of demonstrating why CARB no longer has a need 
for its motor vehicle emissions program under EPA's interpretation of 
section 209(b)(1)(B). Although EPA is not adopting the Dealers 
suggested interpretation, EPA also finds that the opponent of the 
waiver has not met its burden of demonstrating that CARB does not have 
the need for either its GHG or ZEV standards.
1. EPA's March 6, 2008 GHG Waiver Denial
    In the March 6, 2008 waiver denial, EPA provided its reasoning for 
changing its long-standing interpretation of this provision, as it 
pertains to California standards designed to address global air 
pollution. EPA described its longstanding interpretation in some 
detail, stating that:

    Under this approach EPA does not look at whether the specific 
standards at issue are needed to meet compelling and extraordinary 
conditions related to that air pollutant. For example, EPA reviewed 
this issue in detail with regard to particulate matter in a 1984 
waiver decision.\72\ In that waiver proceeding, California argued 
that EPA is restricted to considering whether California needs its 
own motor vehicle program to meet compelling and extraordinary 
conditions, and not whether any given standard is necessary to meet 
such conditions. Opponents of the waiver in that proceeding argued 
that EPA was to consider whether California needed

[[Page 2126]]

these PM standards to meet compelling and extraordinary conditions 
related to PM air pollution.
---------------------------------------------------------------------------

    \72\ 49 FR 18887 (May 3, 1984).
---------------------------------------------------------------------------

    The Administrator agreed with California that it was appropriate 
to look at the program as a whole in determining compliance with 
section 209(b)(1)(B). One justification of the Administrator was 
that many of the concerns with regard to having separate state 
standards were based on the manufacturers' worries about having to 
meet more than one motor vehicle program in the country, but that 
once a separate California program was permitted, it should not be a 
greater administrative hindrance to have to meet further standards 
in California. The Administrator also justified this decision by 
noting that the language of the statute referred to ``such state 
standards,'' which referred back to the use of the same phrase in 
the criterion looking at the protectiveness of the standards in the 
aggregate. He also noted that the phrase referred to standards in 
the plural, not individual standards. He considered this 
interpretation to be consistent with the ability of California to 
have some standards that are less stringent than the federal 
standards, as long as, per section 209(b)(1)(A), in the aggregate 
its standards were at least as protective as the federal standards.
    The Administrator further stated that in the legislative history 
of section 209, the phrase ``compelling and extraordinary 
circumstances'' refers to ``certain general circumstances, unique to 
California, primarily responsible for causing its air pollution 
problem,'' like the numerous thermal inversions caused by its local 
geography and wind patterns. The Administrator also noted that 
Congress recognized ``the presence and growth of California's 
vehicle population, whose emissions were thought to be responsible 
for ninety percent of the air pollution in certain parts of 
California.'' \73\ EPA reasoned that the term compelling and 
extraordinary conditions ``do not refer to the levels of pollution 
directly.'' Instead, the term refers primarily to the factors that 
tend to produce higher levels of pollution--``geographical and 
climatic conditions (like thermal inversions) that, when combined 
with large numbers and high concentrations of automobiles, create 
serious air pollution problems.'' \74\
---------------------------------------------------------------------------

    \73\ Id. at 18890.
    \74\ 73 FR 12156, 12159-60.

    The Administrator summarized that under this interpretation the 
question to be addressed in the second criterion is whether these 
``fundamental conditions'' (i.e. the geographical and climate 
conditions and large motor vehicle population) that cause air pollution 
continued to exist, not whether the air pollution levels for PM were 
compelling and extraordinary, or the extent to which these specific PM 
standards will address the PM air pollution problem.\75\
---------------------------------------------------------------------------

    \75\ 73 FR at 12159-60.
---------------------------------------------------------------------------

    However in the GHG waiver denial, EPA limited this interpretation 
to California's motor vehicle standards that are designed to address 
local or regional air pollution problems. EPA determined that the 
traditional interpretation was not appropriate for standards designed 
to address a global air pollution problem and its effects.\76\
---------------------------------------------------------------------------

    \76\ EPA recently reaffirmed that the traditional interpretation 
still applied for motor vehicle standards designed to address air 
pollution problems that are local or regional in nature. 71 FR 
78190, 78192 (December 28, 2008); see also 71 FR 78190 and Decision 
Document for Waiver of Federal Preemption for California Zero 
Emission Vehicle Standards, at 34.
---------------------------------------------------------------------------

    With respect to a global air pollution problem like elevated 
concentrations of GHGs, EPA's GHG waiver denial found that the text of 
section 209(b)(1)(B) was ambiguous and did not limit EPA to this prior 
interpretation. In addition, EPA noted that the legislative history 
supported a decision to ``examine the second criterion specifically in 
the context of global climate change.'' The legislative history:

    [I]ndicates that Congress was moved to allow waivers of 
preemption for California motor vehicle standards based on the 
particular effects of local conditions in California on the air 
pollution problems in California. Congress discussed ``the unique 
problems faced in California as a result of its climate and 
topography.'' H.R. Rep. No. 728, 90th Cong. 1st Sess., at 21 (1967). 
See also Statement of Cong. Holifield (CA), 113 Cong. Rec. 30942-43 
(1967). Congress also noted the large effect of local vehicle 
pollution on such local problems. See, e.g., Statement of Cong. Bell 
(CA) 113 Cong. Rec. 30946. In particular, Congress focused on 
California's smog problem, which is especially affected by local 
conditions and local pollution. See Statement of Cong. Smith (CA) 
113 Cong. Rec. 30940-41 (1967); Statement of Cong. Holifield (CA), 
id. at 30942. See also, MEMA I, 627 F. 2d 1095, 1109 (DC Cir., 1979) 
(noting the discussion of California's ``peculiar local conditions'' 
in the legislative history). Congress did not justify this provision 
based on pollution problems of a more national or global nature in 
justifying this provision.\77\
---------------------------------------------------------------------------

    \77\ 73 FR at 12161.

    Relying on this, and without any further significant discussion of 
either congressional intent or how this new approach properly furthered 
---------------------------------------------------------------------------
the goals of section 209(b), EPA determined that it was appropriate to:

    [R]eview California's GHG standards separately from the 
remainder of its motor vehicle emission control program for purposes 
of section 209(b)(1)(B). In this context it is appropriate to give 
meaning to this criterion by looking at whether the emissions from 
California motor vehicles, as well as the local climate and 
topography in California, are the fundamental causal factors for the 
air pollution problem--elevated concentrations of greenhouse gases--
apart from the other parts of California's motor vehicle program, 
which are intended to remediate different air pollution concerns.

    EPA then applied this interpretation to the GHG standards at issue 
in that waiver proceeding. Having limited the meaning of this provision 
to situations where the air pollution problem was local or regional in 
nature, EPA found that California's GHG standards do not meet this 
criterion. EPA also found that the elevated concentrations of GHGs in 
California are similar to concentrations elsewhere in the world, and 
that local conditions in California such as the local topography and 
climate and the number of motor vehicles in California are not the 
determinant factors causing the elevated GHG concentrations found in 
California and elsewhere. Thus, EPA found that California did not need 
its GHG standards to meet compelling and extraordinary conditions, and 
denied the GHG waiver.
    EPA also considered an alternative interpretation, where EPA would 
consider ``the effects in California of this global air pollution 
problem in California in comparison to the rest of the country, again 
addressing the GHG standards separately from the rest of California's 
motor vehicle program.'' Under this alternative interpretation, EPA 
considered whether the impacts of global climate change in California 
were significant enough and different enough from the rest of the 
country such that California could be considered to need its GHG 
standards to meet compelling and extraordinary conditions. EPA 
determined that the waiver should be denied under this alternative 
interpretation as well.
2. EPA's July 9, 2009 GHG Waiver
    In EPA's July 9, 2009 GHG waiver, the Agency determined that the 
better approach was to review California's need for its new motor 
vehicle emissions program as a whole to meet compelling and 
extraordinary conditions, and not to apply this criterion to specific 
standards, or to limit it to standards designed to address only local 
or regional air pollution problems. EPA reasoned that the traditional 
approach to interpreting this provision was the best approach for 
considering a waiver directed to GHG emission standards, as well as a 
waiver for standards directed to address local or regional air 
pollution problems.\78\

[[Page 2127]]

Therefore, EPA rejected the interpretation that was applied in the 
March 6, 2008 waiver denial and stated it should no longer be followed.
---------------------------------------------------------------------------

    \78\ The traditional interpretation of section 209(b)(1)(B) is 
certainly not ``unambiguous precluded'' by the language of the 
statute. See Entergy Corp. v. Riverkeeper, Inc., 129 S.Ct. 1498 
(2009) (``That view governs if it is a reasonable interpretation of 
the statute--not necessarily the only possible interpretation, nor 
even the interpretation deemed most reasonable by the courts. 
Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 
U.S. 837, 843-844 (1984).'') (``It seems to us, therefore, that the 
phrase ``best available,'' even with the added specification ``for 
minimizing adverse environmental impact,'' does not unambiguously 
preclude cost-benefit analysis.''). Carrow v. Merit Systems 
Protection Board, 564 F.3d 1359 (Fed. Cir. 2009) (``[W]e are 
obligated to give controlling effect to [agency's] interpretation if 
it is reasonable and is not contrary to the unambiguously expressed 
intent of Congress'', citing Entergy Corp.).
---------------------------------------------------------------------------

    EPA reasoned that the traditional interpretation was the most 
straightforward reading of the text and legislative history of section 
209(b). Congress decided in 1977 to allow California to promulgate 
individual standards that are not as stringent as comparable federal 
standards, as long as the standards are ``in the aggregate, at least as 
protective of public health and welfare as applicable federal 
standards.'' This decision by Congress requires EPA to allow California 
to promulgate individual standards that, in and of themselves, might 
not be considered needed to meet compelling and extraordinary 
circumstances, but are part of California's overall approach to 
reducing vehicle emissions to address air pollution problems.
    Further, we noted that EPA is to determine whether California's 
protectiveness determination is arbitrary and capricious under section 
209(b)(1)(A), and whether California does not need ``such State 
standards'' to meet compelling and extraordinary conditions under 
section 209(b)(1)(B). The natural reading of these provisions led EPA 
to consider the same group of standards that California considered in 
making its protectiveness determination. While the words ``in the 
aggregate'' are not specifically mentioned in section 209(b)(1)(B), EPA 
explained that it does refer to the need for ``such State standards,'' 
rather than ``each State standard'' or otherwise indicate a standard-
by-standard analysis.
    We also noted that EPA's GHG waiver denial had determined that this 
provision was appropriately interpreted to consider California's 
standards as a group for standards designed to address local or 
regional air pollution problems, but should be interpreted in the 
opposite fashion for standards designed to address global air pollution 
problems. The text of the provision, however, draws no such 
distinction, and provides no indication other than Congress intended a 
single interpretation for this provision, not one that varied based on 
the kind of air pollution problem at issue.
    EPA also explained that the GHG waiver denial had considered the 
legislative history, and determined that Congress was motivated by 
concern over local conditions in California that led to local or 
regional air pollution problems, and from this EPA determined that 
Congress intended to allow California to address these kinds of local 
or regional air pollution problems, but no others. However, upon a 
reexamination of the legislative history EPA found that the 
determination noted above ignores the main thrust of the text and 
legislative history of section 209(b), and improperly reads too much 
into an absence of discussion of global air pollution problems in the 
legislative history. The structure of section 209, both as adopted in 
1967 and as amended in 1977, is notable in its focus on limiting the 
ability of EPA to deny a waiver, and thereby preserves discretion for 
California to construct its motor vehicle program as it deems 
appropriate to protect the health and welfare of its citizens. The 
legislative history indicates Congress quite intentionally restricted 
and limited EPA's review of California's standards, and its express 
legislative intent was to ``provide the broadest possible discretion 
[to California] in selecting the best means to protect the health of 
its citizens and the public welfare.'' \79\ The DC Circuit recognized 
that ``[t]he history of the congressional consideration of the 
California waiver provision, from its original enactment up through 
1977, indicates that Congress intended the State to continue and expand 
its pioneering efforts at adopting and enforcing motor vehicle emission 
standards different from and in large measure more advanced than the 
corresponding federal program. In short, to act as a kind of laboratory 
for innovation. * * * For a court [to limit California's authority] 
despite the absence of such an indication would only frustrate the 
congressional intent.'' \80\
---------------------------------------------------------------------------

    \79\ H.R. Rep. No. 294, 95th Cong., 1st Sess. 301-302 (1977). 
See MEMA I, 627 F. 2d at 1110-11.
    \80\ MEMA I, 627 F. 2d at 1111.
---------------------------------------------------------------------------

    EPA also determined that it was fully consistent with the expressed 
intention of Congress to interpret section 209(b)(1)(B) the same way 
both for standards designed to address local and regional air pollution 
problems, and standards designed to address global air pollution 
problems. Congress intended to provide California the broadest possible 
discretion to develop its motor vehicle emissions program. Neither the 
text nor the legislative history of section 209(b) indicates that 
Congress intended to limit this broad discretion to a certain kind of 
air pollution problem, or to take away all discretion with respect to 
global air pollution problems.\81\ In addition, EPA reasoned that 
applying the traditional interpretation to GHG standards does not 
change the basic nature of the compromise established by Congress--
California could act as the laboratory for the nation with respect to 
motor vehicle emission control, and manufacturers would continue to 
face just two sets of emissions standards--California's and EPA's.
---------------------------------------------------------------------------

    \81\ This broad interpretation of section 209(b) is similar to 
the broad reading the Court provided to section 302(g) of the Clean 
Air Act when it held that the term ``air pollutant'' included 
greenhouse gases, rejecting among other things the argument that 
Congress limited the term to apply only to certain kinds of air 
pollution. Massachusetts v. EPA, 549 US 497, 532 (2007) (footnote 
26).
---------------------------------------------------------------------------

    EPA further explained that this interpretation was consistent with 
Congressional purpose, as compared to the interpretation adopted in the 
GHG waiver denial relied on the discussion in the legislative history 
of local conditions in California leading to air pollution problems 
like ozone. While this was properly read to support the view that 
section 209(b) should be interpreted to address California's need for a 
motor vehicle program as a whole, the GHG waiver denial went further 
and inferred that by discussing such local conditions, Congress also 
intended to limit California's discretion to only these kinds of local 
or regional air pollution problems. The GHG waiver denial pointed to no 
particular language in the legislative history or the text of section 
209(b) indicating such, instead, congressional intent to limit 
California's discretion was inferred from the discussion of local 
conditions. However, basing a limitation on such an inference is not 
appropriate given the express indication that Congress intended to 
provide California the ``broadest possible discretion'' in selecting 
the best means to protect the health of its citizens and the public 
welfare.
    Additionally, EPA explained that the text of section 209(b) and the 
legislative history, when viewed as a whole, led to the conclusion that 
the interpretation adopted in the GHG waiver denial should be rejected. 
The better way to interpret this provision is to apply the traditional 
interpretation to the evaluation of California's GHG standards for 
motor vehicles. If California needs a separate motor vehicle program to 
address the kinds of compelling and extraordinary conditions discussed 
in the traditional

[[Page 2128]]

interpretation, then Congress intended that California could have such 
a program. Congress also intentionally provided California the broadest 
possible discretion in adopting the kind of standards in its motor 
vehicle program that California determines are appropriate to address 
air pollution problems that exist in California, whether or not those 
problems are local or regional in nature, and to protect the health and 
welfare of its citizens. The better interpretation of the text and 
legislative history of this provision is that Congress did not intend 
this criterion to limit California's discretion to a certain category 
of air pollution problems, to the exclusion of others. In this context 
it is important to note that air pollution problems, including local or 
regional air pollution problems, do not occur in isolation. Ozone and 
PM air pollution, traditionally seen as local or regional air pollution 
problems, occur in a context that to some extent can involve long range 
transport of this air pollution or its precursors. This long-range or 
global aspect of ozone and PM can have an impact on local or regional 
levels, as part of the background in which the local or regional air 
pollution problem occurs.
    EPA further stated that this approach does not make section 
209(b)(1)(B) a nullity, as some had suggested. EPA must still determine 
whether California does not need its motor vehicle program to meet the 
compelling and extraordinary conditions discussed in the legislative 
history. If that is the case, then a waiver would be denied on those 
grounds, but that was not the case at that point. EPA observed that 
conditions in California may one day improve such that it no longer had 
the need for a separate motor vehicle program and that the statute 
contemplates that such improvement is possible. In addition, we noted 
that the opponents of a waiver always have the ability to raise their 
legal, policy, and other concerns in the State administrative process, 
or through judicial review in State courts. We concluded, however, that 
Congress provided EPA a much more limited role under section 209(b) in 
considering objections raised by opponents of a waiver.
3. Response to Comments Received
    CARB states in its Waiver Support Document that the relevant 
inquiry under section 209(b)(1)(B) is whether California needs it own 
motor vehicle pollution control program to meet compelling and 
extraordinary conditions and not whether any particular standard is 
needed to meet such conditions. CARB notes that EPA has consistently 
determined that the phrase ``compelling and extraordinary conditions'' 
refers to:

* * * Certain general circumstances, unique to California, primarily 
responsible for causing its air pollution [including] * * * 
geographical and climate factors [as well as] * * * the presence and 
growth of California's vehicle population, whose emissions were 
thought to be responsible for ninety percent of the air pollution 
problem in certain parts of California.

    CARB also submits that the 2012 ZEV and LEV amendments (the ACC 
program) meet the same compelling and extraordinary conditions 
justifying previous waivers (e.g., the South Coast and San Joaquin Air 
basins continue to experience some of the worst air quality in the 
nation and that California has an ongoing need for dramatic emission 
reductions generally and from passenger cars specifically). CARB also 
submits that as in 1967, EPA's previous waivers have noted that 
California continued to have geographic and climatic conditions that, 
when combined with the large numbers and high concentrations of 
automobiles, created a serious air pollution problem.
    EPA received only one comment requesting a denial of the waiver for 
the GHG and ZEV standards based on the grounds of section 
209(b)(1)(B)--that ``such State does not need such State standards to 
met compelling and extraordinary conditions.'' This commenter raised 
specific objections to both the GHG and ZEV elements of CARB's ACC 
program but none of them addressed whether California's geographic, 
climactic and air quality conditions remain the same as they were under 
prior waiver determinations.\82\
---------------------------------------------------------------------------

    \82\ NADA at 7-9, 12-14.
---------------------------------------------------------------------------

4. CARB's GHG Emission Standards
    With regard to CARB's GHG standards, the Dealers state there is no 
need and no discernible environmental benefit from such standards 
because of EPA's GHG regulations for motor vehicles that CARB has 
agreed to accept as compliance for its own program. According to the 
commenter, this amounts to a legal admission that CARB does not need 
its own GHG standards. In addition, because manufacturers are already 
under a legal obligation to comply with the NHTSA/EPA 2017-2025 GHG 
standards there is no environmental benefit associated with separate 
CARB GHG standards. This commenter cited 1967 legislative history as 
support that Congress decided that federal preemption of new vehicle 
emission standards would be available for California but only where 
California promulgated standards necessary to address ``the unique 
problems facing the state.'' \83\ Had Congress intended to give 
California discretion to adopt whatever standards it liked, without any 
consideration as to whether these standard are `needed,' Congress would 
have omitted Sec. 209(b)(1)(B) altogether.'' This commenter also 
suggests that the ``alternative arguments'' in the 2009 GHG waiver 
decision, wherein California's need for its GHG standards standing 
alone was evaluated, should also be applied here. As such, this 
commenter suggests that since CARB does not intend to rely on its own 
regulations to meet environmental goals there can be no ``rational 
connection'' between the CARB's regulation and the state's air quality 
issues. Finally, the commenter notes that CARB's statement that a 
waiver ``will remain an important backstop in the event the national 
program is weakened or terminated'' is an identified ``political need'' 
outside the scope of Section 209.
---------------------------------------------------------------------------

    \83\ H.R. Rep. No. 90-728 (1967), at 22.
---------------------------------------------------------------------------

    CARB, in response to NADA's comments referenced above, states that 
while there may not be binding precedent that requires EPA to treat 
California's program as a whole in reviewing the need for specific 
standards, it previously has demonstrated that EPA's longstanding 
administrative practice to review the need for separate standard 
standards in the context of the ongoing compelling and extraordinary 
conditions justifying California's motor vehicle program remains sound.
    CARB also notes that its commitment to accept compliance with the 
federal GHG emission standards is no different from the numerous times 
that EPA has followed California's lead--blazing a new trail as a 
laboratory for innovation--by catching up to or harmonizing with 
California's standards. In addition, rather than viewing CARB's actions 
an impermissible political backstop, CARB maintains that its actions 
are simply furthering the Congressional design of Section 209(b): to 
ensure that California can protect public health and welfare by 
ensuring its ability to separately implement and enforce necessary 
emission reductions through its own regulatory mechanisms. Therefore 
CARB can continue to set standards that in the first instance are more 
stringent, then may become as stringent and subsequently--under the 
NADA hypothetical--become more stringent should EPA lessen the 
stringency of the

[[Page 2129]]

federal GHG emission standards. In addition, CARB points to NADA's 
concession by acknowledging that CARB's standards must be as or more 
stringent--i.e., as protective as--the federal standards.
    As discussed above, EPA believes that the better interpretation of 
the section 209(b)(1)(B) criterion is the traditional approach of 
evaluating California's need for a separate motor vehicle emission 
program to meet compelling and extraordinary conditions. Applying this 
approach with the reasoning noted above, with due deference to 
California, I cannot deny the waiver.
    CARB has repeatedly demonstrated the need for its motor vehicle 
program to address compelling and extraordinary conditions in 
California. As discussed above, the term compelling and extraordinary 
conditions ``does not refer to the levels of pollution directly.'' 
Instead, the term refers primarily to the factors that tend to produce 
higher levels of pollution--geographical and climatic conditions (like 
thermal inversions) that, when combined with large numbers and high 
concentrations of automobiles, create serious air pollution problems. 
California still faces such conditions. For example, as stated in 
CARB's waiver request and additional written comment, California and 
particularly the South Coast and San Joaquin Valley Air Basins continue 
to experience some of the worst air quality in the nation and continue 
to be in non-attainment with national ambient air quality standards 
(NAAQS) for PM2.5 and ozone.\84\ In its recent announcement 
of new PM2.5 ambient air quality standards, EPA projected 
that only seven of approximately 3,000 counties in the country may 
require state or local action to reduce fine particle pollution in 
order to meet the new standards by 2020. All seven counties are in 
California.
---------------------------------------------------------------------------

    \84\ 76 FR 40652, 40654 (July 11, 2011).
---------------------------------------------------------------------------

    Further, EPA has not received any adverse comments suggesting that 
California no longer needs a separate motor vehicle emissions program 
to address the various conditions that lead to serious and unique air 
pollution problems in California.
    Based on the record, I am unable to identify any change in 
circumstances or any evidence to suggest that the conditions that 
Congress identified as giving rise to serious air quality problems in 
California no longer exist. Therefore, using the traditional approach 
of reviewing the need for a separate California program to meet 
compelling and extraordinary conditions, I cannot deny the ACC waiver 
request (including the GHG and ZEV components, along with LEV III 
criteria pollutants) based on this criterion.
    To the extent that it is appropriate to examine the need for CARB's 
GHG standards to meet compelling and extraordinary conditions, as EPA 
discussed at length in its 2009 GHG waiver decision, California does 
have compelling and extraordinary conditions directly related to 
regulations of GHG. EPA's prior GHG waiver contained extensive 
discussion regarding the impacts of climate change in California.\85\ 
In addition, CARB has submitted additional evidence in comment on the 
ACC waiver request that evidences sufficiently different circumstances 
in California.\86\ CARB notes that ``Record-setting fires, deadly heat 
waves, destructive storm surges, loss of winter snowpack--California 
has experienced all of these in the past decade and will experience 
more in the coming decades. California's climate--much of what makes 
the state so unique and prosperous--is already changing, and those 
changes will only accelerate and intensify in the future. Extreme 
weather will be increasingly common as a result of climate change. In 
California, extreme events such as floods, heat waves, droughts and 
severe storms will increase in frequency and intensity. Many of these 
extreme events have the potential to dramatically affect human health 
and well-being, critical infrastructure and natural systems.'' \87\ 
CARB provides a summary report on the third assessment from the 
California Climate Change Center (2012) \88\ which describes dramatic 
sea level rises and increases in temperatures. The Commenter does not 
take issue with that analysis, but instead relies on the existence of 
the federal GHG standards and the ``deemed to comply'' language to 
claim that there is no need for CARB's GHG standards. Separate from 
EPA's stated interpretation and determinations noted above, EPA 
believes that the commenter does not appropriately appreciate the role 
that Congress envisioned California to play as an innovative laboratory 
that may set standards that EPA may ultimately harmonize with or that 
California or EPA may otherwise accept compliance with the others 
emission program as compliance with their own. EPA's longstanding 
interpretation of section 209(b)(1)(B) is that EPA does not look at 
whether the specific standards at issue are needed to meet compelling 
and extraordinary conditions related to that air pollutant. As 
explained above, EPA reviewed this issue in some detail in both EPA's 
2008 GHG waiver denial and subsequent 2009 GHG waiver decision and EPA 
continues to believe that our traditional interpretation is 
appropriate. The structure of section 209, both as adopted in 1967 and 
as amended in 1977, is notable in its focus on limiting the ability of 
EPA to deny a waiver, and thereby preserves discretion for California 
to construct it motor vehicle program as it deems appropriate to 
protect the health and welfare of its citizens.\89\ EPA has previously 
considered NADA's argument that CARB no longer has a need for its GHG 
emission standards once CARB adopts a ``deemed to comply'' provision. 
In EPA's within the scope decision in 2011, where EPA considered CARB's 
previous ``deemed to comply'' provision applicable to the 2012 through 
2016 MYs, EPA stated:
---------------------------------------------------------------------------

    \85\ 74 FR 32744, 32764-7265.
    \86\ EPA-HQ-OAR-2012-0562-0371.
    \87\ Id.
    \88\ Our Changing Climate 2012 Vulnerability & Adaptation to the 
Increasing Risks from Climate Change in California. Publication 
 CEC-500-2012-007. Posted: July 31, 2012; available at 
http://www.climatechange.ca.gov/adaptation/third_assessment/.
    \89\ See H.R. Rep. No. 294, 95th Cong., 1st Sess. 301-302 
(1977).

    NADA's comments do not indicate that, as a result of the 
amendments, California no longer needs a separate motor vehicle 
emissions program to address compelling and extraordinary conditions 
in California, or provide any indication that EPA's prior 
determination on this issue is undermined in any way. Therefore, its 
comments do not show that California's amendments raise any new 
issues relevant to EPA's initial waiver decision.
    Moreover, although NADA's comments reference the words of the 
section 209(b)(1)(B), ``need * * * to meet compelling and 
extraordinary circumstances'' criterion, they do not appear to be 
directed towards the geographical or climatological conditions that 
are being referred to by the words ``compelling and extraordinary 
circumstances.'' Instead, NADA's comments appear to be directed at 
the stringency of the greenhouse gas standards. The stringency of 
California's standards is at issue in section 209(b)(1)(A), where 
Congress addressed the comparison of California standards to federal 
standards, but it is not an issue under section 209(b)(1)(B). As 
noted in EPA's underlying waiver decision, section 209(b)(1)(A) 
calls for a review of California standards ``in the aggregate,'' and 
EPA can only deny a waiver if it finds that California was arbitrary 
and capricious in its finding that ``its standards will be, in the 
aggregate, at least as protective of public health and welfare as 
applicable Federal standards.'' EPA notes that the language of 
section 209(b)(1)(A) clearly indicates Congress's determination that 
EPA review the effect of stringency on the protectiveness of 
California's standards ``in

[[Page 2130]]

the aggregate,'' and that EPA cannot deny a waiver on the grounds of 
protectiveness if California standards are at least equally 
protective as Federal standards. ``Redundancy'' is not the 
criterion; it is whether California's standards are, in the 
aggregate, at least as protective as applicable Federal standards. 
Furthermore, NADA does not address California's standards ``in the 
aggregate'' and, as noted above, does not provide any evidence to 
suggest, even with regard to California's greenhouse gas standards, 
that California was arbitrary and capricious in its finding that its 
standards are at least as protective as comparable federal 
standards. The stringency issue raised by NADA is not relevant under 
section 209(b)(1)(B), and it would be inconsistent with the intent 
of Congress to deny a waiver or a within-the-scope determination 
based on section 209(b)(1)(B) for reasons Congress clearly addressed 
and clearly determined should not be the basis for a denial under 
section 209(b)(1)(A). NADA's comments, therefore, do not raise any 
new issues regarding our preexisting waiver for California 
greenhouse gas emission standards.\90\
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    \90\ 76 FR 34693, 34697-34698 (June 14, 2011).

    EPA believes this interpretation of section 209(b)(1)(B) continues 
to be appropriate and therefore finds that CARB's GHG emission 
standards cannot be denied a waiver based on NADA's argument that there 
is no need for such standards given the existence of EPA GHG emission 
standards.
5. CARB's ZEV Emission Standards
    The Dealers also requested that EPA deny a waiver of CARB's ZEV 
standards for MY 2018 and beyond because they were not necessary to 
meet compelling and extraordinary circumstances, under the section 
209(b)(1)(B) criterion.\91\ According to the commenter, the 
``compelling and extraordinary conditions'' in California today are 
nothing like they were when Congress first enacted section 209. In 
addition, the commenter notes that CARB claims no criteria emissions 
benefit from the ZEV standards in terms of vehicle TTW emissions and 
subsequently notes several problems with CARB's upstream WTW emissions 
analysis and projected benefits. For example, the commenter disputes 
CARB's assumptions that reductions of fuel production by refineries 
will result from reductions in fuel consumption by the vehicle fleet in 
California. According to the commenter, refineries in California could 
simply shift fuel production to address either off-shore or out-of 
state needs. The commenter further states that CARB has not and cannot 
show that its ZEV standards will achieve any reductions in criteria 
pollutants. With respect to the relationship between the GHG and ZEV 
programs, the commenter also states that the ZEV standards do not 
provide any additional GHG emission benefits beyond the underlying GHG 
standards and the ZEV standards are therefore not necessary to meet any 
potential compelling and extraordinary conditions associated with GHG 
emissions from new motor vehicles. In addition, the commenter suggests 
that because CARB is providing a variety of compliance flexibilities, 
including over compliance with GHG standards producing ZEV credits and 
other alternative compliance path options, confirms that the underlying 
ZEV mandates are not ``necessary.''
---------------------------------------------------------------------------

    \91\ NADA at 13.
---------------------------------------------------------------------------

    CARB notes in its written response that to the extent commenters 
question California's need for additional criteria pollutant reductions 
from its new motor vehicle fleet, there remains no question that such 
reductions are essential to meet federal health-based ambient air 
quality standards. CARB notes that California and particularly the 
South Coast and San Joaquin Valley Air Basins continue to experience 
some of the worst air quality in the nation and continue to be in non-
attainment with national ambient air quality standards (NAAQS) for 
PM2.5 and ozone.\92\ California's unique geographical and 
climatic conditions, and the tremendous growth in its on- and off-road 
vehicle population, which moved Congress to authorize the state to 
establish separate on-road motor vehicle standards in 1967 and off-road 
engine standards in 1990, still exist today.\93\ In addition, CARB 
provides extensive evidence of its current and serious air quality 
problems and the increasingly stringent health-based air quality 
standards and federally required state planning efforts to meet those 
standards firmly in order to establish the need for the additional 
emission reductions from its motor vehicle emissions program.\94\
---------------------------------------------------------------------------

    \92\ 76 FR 40652, 40654 (July 11, 2011). CARB waiver request at 
17-18.
    \93\ 74 FR 32744, 32762 (July 8, 2009); 76 FR 77515, 77518 
(December 13, 2011).
    \94\ EPA-HQ-OAR-2012-0562-0371.
---------------------------------------------------------------------------

    As stated above, EPA believes that the better interpretation of the 
section 209(b)(1)(B) criterion is the traditional approach of 
evaluating California's need for a separate motor vehicle emission 
program to meet compelling and extraordinary conditions. The issue of 
whether any particular standard provides comparable emission reductions 
is not a relevant criterion under section 209(b)(1)(B). Applying this 
approach with the reasoning noted above, with due deference to 
California, I cannot deny the waiver.
    As discussed in their written comments, CARB has repeatedly 
demonstrated the need for its motor vehicle program to address 
compelling and extraordinary conditions in California. As discussed 
above, the term compelling and extraordinary conditions ``does not 
refer to the levels of pollution directly. Instead, the term refers 
primarily to the factors that tend to produce higher levels of 
pollution--geographical and climatic conditions (like thermal 
inversions) that, when combined with large numbers and high 
concentrations of automobiles, create serious air pollution problems. 
California still faces such conditions. For example, California and 
particularly the South Coast and San Joaquin Valley Air Basins continue 
to experience some of the worst air quality in the nation and continue 
to be in non-attainment with national ambient air quality standards 
(NAAQS) for PM2.5 and ozone.\95\ In addition, EPA believes, 
and the record does not otherwise indicate, the underlying geographical 
and climatic conditions continue to exist in California and continue to 
give rise to serious air quality problems.
---------------------------------------------------------------------------

    \95\ 76 FR 40652, 40654 (July 11, 2011).
---------------------------------------------------------------------------

    EPA has not received any adverse comments suggesting that 
California no longer needs a separate motor vehicle emissions program 
to address the various conditions that lead to serious and unique air 
pollution problems in California.
    Based on the record, I am unable to identify any change in 
circumstances or any evidence to suggest that the conditions that 
Congress identified as giving rise to serious air quality problems in 
California no longer exist. Therefore, using the traditional approach 
of reviewing the need for a separate California program to meet 
compelling and extraordinary conditions, I cannot deny the ACC waiver 
request (including the GHG and ZEV components, along with LEV III 
criteria pollutants) based on this criterion.
    As CARB notes in its waiver request, the goal of the CARB Board in 
directing CARB staff to redesign the ZEV regulation was to focus 
primarily on zero emission drive--that is BEV, FCV, and PHEVs in order 
to move advanced, low GHG vehicles from demonstration phase to 
commercialization. CARB also analyzed pathways to meeting California's 
long term 2050 GHG reduction targets in the light-duty vehicle sector 
and determined that ZEVs would need to reach nearly 100 percent

[[Page 2131]]

of new vehicle sales between 2040 and 2050. CARB also notes that the 
``critical nature of the LEV III regulation is also highlighted in the 
recent effort to take a coordinated look at strategies to meet 
California's multiple air quality and climate goals well into the 
future. This coordinated planning effort, Vision for Clean Air: A 
Framework for Air Quality and Climate Planning (Vision for Clean Air) 
\96\ demonstrates the magnitude of the technology and energy 
transformation needed from the transportation sector and associated 
energy production to meet federal standards and the goals set forth by 
California's climate change requirements. In addition to considering 
the level of change needed to implement the current SIP and reduce GHG 
emissions by 80 percent below 1990 levels by 2050, the 2032 attainment 
date for the 0.075 ppm standard set in 2008 was used as an interim 
target. Adopted or pending rules, such as the LEV III regulation, were 
considered essential as baseline reductions assumed for the future, yet 
California identified still more transformative changes to achieve the 
2032 and 2050 targets. The Vision for Clean Air effort illustrates that 
in addition to the cleanup of passenger vehicles (at issue here) as 
soon as possible as required in the LEV III regulation, transition to 
zero- and near-zero emission technologies in all on- and off-road 
engine categories is necessary to achieve the coordinated goals.
---------------------------------------------------------------------------

    \96\ EPA-HQ-OAR-2012-0562-0371 at 5-6, citing Vision for Clean 
Air: A Framework for Air Quality and Climate Planning, June 27, 
2012,
---------------------------------------------------------------------------

    Therefore, EPA believes that CARB's 2018 and later MY ZEV standards 
represent a reasonable pathway to reach these longer term goals. Under 
EPA's traditional practice of affording CARB the broadest discretion 
possible, and deferring to CARB on its policy choices, we believe there 
is a rational connection between California ZEV standards and its 
attainment of long term air quality goals. Whether or not the ZEV 
standards achieve additional reductions by themselves above and beyond 
the LEV III GHG and criteria pollutant standards, the LEV III program 
overall does achieve such reductions, and EPA defers to California's 
policy choice of the appropriate technology path to pursue to achieve 
these emissions reductions. The ZEV standards are a reasonable pathway 
to reach the LEV III goals, in the context of California's longer term 
goals.
6. CARB's PM Standards
    EPA received comments suggesting that the PM standards promulgated 
within California's LEV III regulation were infeasible. The 
Manufacturers in particular commented that the technological 
feasibility of the one milligram per mile PM standard, that commences 
its phase in starting with the 2025 MY, has not been demonstrated (this 
issue is discussed below in the Section VI). The Manufacturers appear 
to raise issue with whether additional PM emission reductions from 
light-duty vehicles are needed since they represent so small a fraction 
of the PM inventory in California. CARB's supplemental comments assert 
that ``while PM emission from LDVs are not a major contributor to the 
inventory, they are a significant contributor to urban pollution and 
human exposure, particularly near heavily travelled roadways, many of 
which are located in major urban centers in areas classified as non-
attainment for health based PM ambient air quality standards.'' CARB 
also notes that the exact amount of pollution reduced through any given 
emission standard and the cost-effectiveness of any particular 
California standards are not waiver criteria and therefore not relevant 
to EPA's determination.
    EPA does not believe that it is necessarily the Manufacturers' 
contention that the PM standards are not needed to meet compelling and 
extraordinary conditions. Nevertheless, EPA believes it appropriate to 
note, once again, that the compelling and extraordinary conditions 
Congress identified as giving rise to serious air quality problems 
continue to give rise to the need for a separate California new motor 
vehicle emissions program. EPA believes this includes CARB's serious PM 
air quality problems. EPA agrees that the PM standards will result in 
reductions in PM emissions, however small. It is not appropriate for 
EPA to second-guess CARB's policy choices, including how best to 
address their air quality concerns.
7. Section 209(b)(1)(B) Conclusion
    With respect to the need for California's state standards to meet 
compelling and extraordinary conditions, I continue to apply the 
traditional interpretation of the waiver provision. As stated in the 
GHG waiver decision,\97\ the best way to interpret this provision is to 
determine whether California continues to have compelling and 
extraordinary conditions giving rise to a need for its own new motor 
vehicle emission program. Congress did not use this criterion to limit 
California's discretion to a certain category of air pollution 
problems, nor does EPA believe this criterion limits California's 
discretion to adopt or retain emission standards that are similar to 
EPA's standards. In addition, it is inappropriate for EPA to second 
guess CARB's policy choices and objectives in adopting ZEV standards 
designed to achieve long term emission benefits as well as projected to 
reasonably achieve some reduction in criteria pollutant emissions.
---------------------------------------------------------------------------

    \97\ 74 FR 32766. EPA incorporates this prior GHG waiver 
decision, and associated reasoning and interpretations, into today's 
waiver decision.
---------------------------------------------------------------------------

    Under this interpretation and application of this criterion, EPA 
cannot find that the opponents of the waiver have demonstrated that 
California does not need its state standards to meet compelling and 
extraordinary conditions. The opponents of the waiver have not 
adequately demonstrated that California no longer has a need for its 
motor vehicle emission program. Therefore, I determine that I cannot 
deny CARB's ACC waiver request under section 209(b)(1)(B).

C. Are the California ACC standards consistent with Section 202(a) of 
the Clean Air Act?

    EPA has reviewed the information submitted to the record of this 
proceeding to determine whether the parties opposing, or seeking a 
deferral of, this waiver request have met their burden to demonstrate 
that the ACC standards are not consistent with section 202(a). In its 
initial Waiver Request, CARB submitted information and argument that 
the ACC standards are consistent with section 202(a). CARB notes that 
in developing the LEV III requirements it considered several factors 
(e.g., technical feasibility, lead time available to meet the 
requirements, and the cost of compliance and the technical and resource 
challenges manufacturers face in complying with the requirement to 
simultaneously reduce criteria and GHG emissions). CARB notes that that 
criteria emissions elements of LEV III occur over an 11-year period 
(2015 through 2025) while the GHG emission element is implemented over 
a 9-year period from 2017 through 2025. CARB sets forth its belief that 
both the stringency and implementation schedules for its PM standards 
are technologically feasible within the available lead time. With 
regard to LEV III GHG regulations, CARB noted that California 
coordinated with the EPA and NHTSA on technical and economic areas, and 
CARB has

[[Page 2132]]

moved in parallel with the federal rulemaking in terms of stringency of 
the standards and lead time for compliance. CARB maintains that the 
standards and lead time are technologically feasible ``even before CARB 
proposes to amend its LEV III GHG regulations to allow National Program 
compliance to serve as compliance in California. It will be undeniably 
true should California adopt its ``deemed to comply'' rule as 
planned.'' \98\ With regard to the ZEV amendments, CARB noted the lack 
of objections from the regulated parties during CARB's rulemaking and 
the regulated parties' announcements of their planned ability to 
comply.
---------------------------------------------------------------------------

    \98\ At the time of CARB's waiver request EPA's GHG emission 
rule had not yet been finalized. Subsequent to EPA's final rule CARB 
has adopted the deemed to comply and has provided the regulation for 
EPA's consideration. See also CARB Resolution 12-11 at 20.
---------------------------------------------------------------------------

    The Manufacturers have submitted information and argument that 
their members see no way to measure and meet the 1 mg/mile PM standard 
beginning in 2025 (as part of the LEV III standards) and ask EPA to 
withhold issuing a waiver for this standard at this time. The 
Manufactures have commented that they do not oppose California's GHG 
emission standards for the 2017 through 2025 MYs but suggests that EPA 
should grant California's waiver request after CARB has finalized its 
regulatory amendments to allow for a national compliance option.\99\ 
Finally, while the Manufacturers agree that CARB's ZEV amendments, as 
they affect 2017 and earlier MYs, are within the scope of existing 
waivers, they are opposed to granting the waiver for the ZEV program 
past the 2017 MY based on argument that those standards will not be 
feasible either in California or in the individual Section 177 States 
given the status of the infrastructure and the level of consumer demand 
for ZEVs.
---------------------------------------------------------------------------

    \99\ The Manufacturers note that both the federal and the 
California GHG emission standards provide for a comprehensive mid-
term evaluation of the MYs 2022-2025. Therefore, the Manufacturers 
clearly state that ``Any amendments to California's GHG emission 
standards made as a result of the mid-term evaluation will require 
analysis to determine whether the amendments fall within the scope 
of this waiver, or, if not, whether they qualify for a separate 
waiver under Section 209(b) of the Clean Air Act.
---------------------------------------------------------------------------

    EPA also received comment from the Dealers suggesting that EPA 
should not grant California a waiver for its GHG emission standards 
past MY 2021 since the technical capabilities after that time are 
uncertain. In addition, like the Manufacturers, NADA does not oppose 
CARB's ZEV amendments through the 2017 MY. However, NADA believes 
CARB's ZEV amendments, as they affect 2018 and later MYs, raise serious 
technological feasibility concerns including their economic feasibility 
(including their marketability when compared to non-ZEV vehicles). 
EPA's analysis of the consistency of the CARB standards with section 
202(a) of the Act follows.
1. Historical Approach
    Under section 209(b)(1)(C), EPA must deny California's waiver 
request if the Agency finds that California standards and accompanying 
enforcement procedures are not consistent with section 202(a) of the 
Act. The scope of EPA's review under this criterion is narrow. EPA has 
previously stated that the determination is limited to whether those 
opposed to the waiver have met their burden of establishing that 
California's standards are technologically infeasible, or that 
California's test procedures impose requirements inconsistent with the 
federal test procedure.\100\ Previous waivers of federal preemption 
have stated that California's standards are not consistent with section 
202(a) if there is inadequate lead time to permit the development of 
technology necessary to meet those requirements, giving appropriate 
consideration to the cost of compliance within that time.\101\ 
California's accompanying enforcement procedures would be inconsistent 
with section 202(a) if the federal and California test procedures 
conflict, i.e., if manufacturers would be unable to meet both the 
California and federal test requirements with the same test 
vehicle.\102\
---------------------------------------------------------------------------

    \100\ MEMA I, 627 F.2d at 1126.
    \101\ See e.g., 38 FR 30136 (November 1, 1973) and 40 FR 30311 
(July 18, 1975).
    \102\ To be consistent, the California certification test 
procedures need not be identical to the Federal test procedures. 
California procedures would be inconsistent, however, if 
manufacturers would be unable to meet both the state and Federal 
test requirements with the same test vehicle in the course of the 
same test. See, e.g., 43 FR 32182, (July 25, 1978).
---------------------------------------------------------------------------

    EPA does not believe that there is any reason to review these 
criteria any differently for EPA's evaluation of California's ACC 
program request. There is nothing inherently different about how ACC 
control technologies should be reviewed when making a determination 
about technological feasibility or consistency of test procedures.
    In the ACC waiver proceeding, opponents of the waiver have 
presented evidence for EPA's consideration which they believe will 
require EPA to make the finding of inconsistency with section 202(a), 
and therefore require EPA to deny or defer granting all or parts of the 
waiver request (e.g., a deferral on the 2025 and later MY phase-in of 
the 1 mg/mile PM standard of LEV III, a denial of the GHG emission 
standards for MY 2022 and later, and a denial of the 2018 through 2025 
MY ZEV requirements or a deferral on the 2021 and later MYs). As noted 
above, the commenters believe this finding should be made on one or 
more grounds, including: there exists either a lack of information or 
certainty of technological solutions based on the remoteness in time 
from the implementation of the standards; that there are questions of 
economic feasibility and marketability, including consumer demand; that 
technological consistency must include consideration of feasibility in 
section 177 states; and, that either the cost effectiveness of certain 
standards is unreasonable or that the standards are not needed for air 
quality purposes. EPA's process for evaluating lead time is discussed 
immediately below and in subsequent parts of this section. The industry 
opponents also raise arguments based on the cost of compliance with the 
standards (including cost-effectiveness), which will be discussed below 
and in other parts of this section. To the extent the commenters raise 
questions about the need for CARB's PM standards and that it could be 
the basis for EPA's waiver consideration, we address such concerns in 
the discussion above concerning section 209(b)(1)(B). EPA has already 
addressed the Dealers suggestions that CARB's ZEV requirements are not 
needed within the same discussion.
    Regarding lead time, EPA historically has relied on two decisions 
from the U.S. Court of Appeals for the D.C. Circuit for guidance 
regarding the lead time requirements of section 202(a). Section 202(a) 
provides that an emission standard shall take effect after such period 
as the Administrator finds necessary to permit the development and 
application of the requisite technology, giving appropriate 
consideration to the cost of compliance. In Natural Resources Defense 
Council v. EPA (NRDC), 655 F.2d 318 (DC Cir. 1981), the court reviewed 
claims that EPA's PM standards for diesel cars and light trucks were 
either too stringent or not stringent enough. In upholding the EPA 
standards, the court concluded:

    Given this time frame [a 1980 decision on 1985 model year 
standards]; we feel that there is substantial room for deference to 
the EPA's expertise in projecting the likely course of development. 
The essential question in this case is the pace of that development, 
and absent a revolution in the study of industry, defense of such a 
projection can never possess the inescapable

[[Page 2133]]

logic of a mathematical deduction. We think that the EPA will have 
demonstrated the reasonableness of its basis for projection if it 
answers any theoretical objections to the [projected control 
technology], identifies the major steps necessary in refinement of 
the technology, and offers plausible reasons for believing that each 
of those steps can be completed in the time available (emphasis 
added).\103\
---------------------------------------------------------------------------

    \103\ Natural Resources Defense Council v. EPA, 655 F.2d 318, 
331. (emphasis added)

    Another key case addressing the lead time requirements of section 
202(a) is International Harvester v. Ruckelshaus (International 
Harvester), 478 F 2.d 615 (DC Cir. 1979). In International Harvester, 
the court reviewed EPA's decision to deny applications by several 
automobile and truck manufacturers for a one-year suspension of the 
1975 emission standards for light-duty vehicles. In the suspension 
proceeding, the manufacturers presented data which, on its face, showed 
little chance of compliance with the 1975 standards, but which, at the 
same time, contained many uncertainties and inconsistencies regarding 
test procedures and parameters. In a May 1972 decision, the 
Administrator applied an EPA methodology to the submitted data, and 
concluded that ``compliance with the 1975 standards by application of 
present technology can probably be achieved,'' and so denied the 
suspension applications.\104\ In reviewing the Administrator's 
decision, the court found that the applicants had the burden of coming 
forward with data showing that they could not comply with the 
standards, and if they did, then EPA had the burden of demonstrating 
that the methodology it used to predict compliance was sufficiently 
reliable to permit a finding of technological feasibility. In that 
case, EPA failed to meet this burden.
---------------------------------------------------------------------------

    \104\ International Harvester v. Ruckelshaus, 478 F 2d. 615, 
626.
---------------------------------------------------------------------------

    With respect to lead time, the court in NRDC pointed out that the 
court in International Harvester ``probed deeply into the reliability 
of EPA's methodology'' because of the relatively short amount of lead 
time involved (a May 1972 decision regarding 1975 MY vehicles, which 
could be produced starting in early 1974), and because ``the hardship 
resulting if a suspension were mistakenly denied outweigh the risk of a 
suspension needlessly granted.'' \105\ The NRDC court compared the 
suspension proceedings with the circumstances concerning the diesel 
standards before it: ``The present case is quite different; `the base 
hour' for commencement of production is relatively distant, and until 
that time the probable effect of a relaxation of the standard would be 
to mitigate the consequences of any strictness in the final rule, not 
to create new hardships.'' \106\ The NRDC court further noted that 
International Harvester did not involve EPA's predictions of future 
technological advances, but an evaluation of presently available 
technology.
---------------------------------------------------------------------------

    \105\ NRDC, 655 F.2d 318, 330.
    \106\ Id. The ``hardships'' referred to are hardships that would 
be created for manufacturers able to comply with the more stringent 
standards being relaxed late in the process.
---------------------------------------------------------------------------

    EPA also evaluates CARB's request in light of congressional intent 
regarding the waiver program generally. This is consistent with the 
motivation behind section 209(b) to foster California's role as a 
laboratory for motor vehicle emission control, in order ``to continue 
the national benefits that might flow from allowing California to 
continue to act as a pioneer in this field.'' \107\
---------------------------------------------------------------------------

    \107\ 40 FR 23102, 23103 (waiver decision citing views of 
Congressman Moss and Senator Murphy) (May 28, 1975).
---------------------------------------------------------------------------

    For these reasons, EPA believes that California must be given 
substantial deference when adopting motor vehicle emission standards 
which may require new and/or improved technology to meet challenging 
levels of compliance. This deference was discussed in an early waiver 
decision when EPA approved the waiver request for California's 1977 MY 
standards:

    Even on this issue of technological feasibility I would feel 
constrained to approve a California approach to the problem which I 
might also feel unable to adopt at the Federal level in my own 
capacity as a regulator. The whole approach of the Clean Air Act is 
to force the development of new types of emission control technology 
where that is needed by compelling the industry to `catch up' to 
some degree with newly promulgated standards. Such an approach to 
automotive emission control might be attended with costs, in the 
shape of a reduced product offering, or price or fuel economy 
penalties, and by risks that a wider number of vehicle classes may 
not be able to complete their development work in time. Since a 
balancing of these risks and costs against the potential benefits 
from reduced emissions is a central policy decision for any 
regulatory agency, under the statutory scheme outlined above I 
believe I am required to give very substantial deference to 
California's judgment on that score.'' \108\
---------------------------------------------------------------------------

    \108\ Id. at 23103.

    CARB, while maintaining that the NRDC approach is the correct 
measurement here, commented that the technological sophistication of 
ZEVs currently being produced is anticipated to continue to advance, 
making commercial production and compliance of these vehicles by MY 
2018 and later more feasible. CARB also notes that the only relevance 
of costs in a section 209(b) waiver proceeding is in the context of 
technological feasibility. ``Past waiver determinations have made clear 
that for the cost of compliance to be found excessive it would need to 
be ``very high'' such that the cost to customers who purchased a 
complying vehicle would be doubled or tripled.\109\ Additionally, the 
relevance of the cost of compliance analysis is limited to the question 
of whether such costs will adversely affect the timing of an emission 
standard.'' \110\
---------------------------------------------------------------------------

    \109\ 74 FR 32744, 32774 (July 8, 2009).
    \110\ CARB's waiver request at 25-26. MEMA I, 627 F.2d at 1105, 
1114 n. 40 (``[T]he `cost of compliance' consideration relates to 
the timing of standards and procedures.'') CARB notes that EPA has 
recognized that the only relevance of costs is their impact on 
timing, e.g. ``Manufacturers do not contend that the cost of 
compliance will be significantly reduced by extending lead time 
beyond the minimal period required for compliance.'' (36 FR 17459 
(August 31, 1971)).
---------------------------------------------------------------------------

    Under NRDC, when compliance with CARB standards is phased-in over a 
lengthy time period, the reasonableness of a projection of 
technological feasibility can be based on answering any theoretical 
objections to the projected control technology; identifying the major 
steps necessary in refinement of the technology; and offering plausible 
reasons for believing that each of those steps can be completed in the 
time available.\111\ EPA's review of the evidence on the technological 
feasibility of CARB's ACC standards, in particular the standards which 
EPA received comment, follows.
---------------------------------------------------------------------------

    \111\ NRDC, 655 F.2d 318, 331.
---------------------------------------------------------------------------

    Congress has stated that the consistency requirement of section 
202(a) relates to technological feasibility.\112\ Section 202(a)(2) 
states, in part, that any regulation promulgated under its authority 
``shall take effect after such period as the Administrator finds 
necessary to permit the development and application of the relevant 
technology, considering the cost of compliance within that time.'' 
Section 202(a) thus requires the Administrator to first review whether 
adequate technology already exists, or if it does not, whether there is 
adequate time to develop and apply the technology before the standards 
go into effect.
---------------------------------------------------------------------------

    \112\ H.R. Rep. No. 95-294, 95th Cong., 1st Sess. 301 (1977).
---------------------------------------------------------------------------

    In MEMA I, the court addressed the cost of compliance issue at some 
length in reviewing a waiver decision. According to the court:

    Section 202's cost of compliance concern, juxtaposed as it is 
with the requirement that the Administrator provide the requisite 
lead

[[Page 2134]]

time to allow technological developments, refers to the economic 
costs of motor vehicle emission standards and accompanying 
enforcement procedures. See S. Rep. No. 192, 89th Cong., 1st Sass. 
5-8 (1965); H.R. Rep. No. 728 90th Cong., 1st Sass. 23 (1967), 
reprinted in U.S. Code Cong. & Admin. News 1967, p. 1938. It relates 
to the timing of a particular emission control regulation rather 
than to its social implications. Congress wanted to avoid undue 
economic disruption in the automotive manufacturing industry and 
also sought to avoid doubling or tripling the cost of motor vehicles 
to purchasers. It, therefore, requires that the emission control 
regulations be technologically feasible within economic parameters. 
Therein lies the intent of the cost of compliance requirement 
(emphasis added).\113\

    \113\ MEMA I at 1118 (emphasis added). See also id. at 1114 n. 
40 (A[T]he `cost of compliance' criterion relates to the timing of 
standards and procedures.).
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    Previous waiver decisions are fully consistent with MEMA I, which 
indicates that the cost of compliance must reach a very high level 
before the EPA can deny a waiver. Therefore, past decisions indicate 
that the costs must be excessive to find that California's standards 
are inconsistent with section 202(a).\114\ It should be noted that, as 
with other issues related to the determination of consistency with 
section 202(a), the burden of proof regarding the cost issue falls upon 
the opponents of the grant of the waiver.
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    \114\ See, e.g., 47 FR 7306, 7309 (Feb. 18, 1982), 43 FR 25735 
(Jun. 14, 1978), and 46 FR 26371, 26373 (May 12, 1981).
---------------------------------------------------------------------------

    Consistent with MEMA I, the Agency has evaluated costs in the 
waiver context by looking at the actual cost of compliance in the time 
provided by the regulation, not the regulation's cost-effectiveness. 
The appropriate level of cost-effectiveness is a policy decision of 
California that is considered and made when California adopts the 
regulations, and EPA, historically, has deferred to these policy 
decisions. EPA has stated in this regard, ``the law makes it clear that 
the waiver request cannot be denied unless the specific findings 
designated in the statute can be made. The issue of whether a proposed 
California requirement is likely to result in only marginal improvement 
in air quality not commensurate with its cost or is otherwise an 
arguably unwise exercise of regulatory power is not legally pertinent 
to my decision under section 209 * * *.'' \115\ Thus, EPA will look at 
the compliance costs for manufacturers in developing and applying the 
technology and not at cost effectiveness when making a waiver decision.
---------------------------------------------------------------------------

    \115\ 36 FR 17158 (August 31, 1971). See also 40 FR 23102, 
23104; 58 FR 4166 (January 7, 1993), LEV Waiver Decision Document at 
20.
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2. LEV III Criteria Pollutant Standards
    California has adopted new standards for exhaust emissions of non-
methane organic gases (NMOG), NOX, and PM, as well as 
evaporative emissions standards. These standards phase in beginning 
with MY 2015. The LEV III standards are similar, in many respects, in 
structure to those in the existing federal Tier 2 program. As with the 
Tier 2 program, the proposed standards would apply to all light-duty 
vehicles (LDVs, or passenger cars, light-duty trucks (LDT1s, LDT2s, 
LDT3s, and LDT4s)) below 8,500 pounds GVWR (Gross Vehicle Weight 
Rating), and Medium-Duty Passenger Vehicles, or MDPVs (8,500 to 10,000 
lbs GVWR). Based on our review of the LEV III criteria pollutant 
standards, and because EPA did not receive any comments objecting to 
CARB's LEV III criteria pollutant standards, with the exception of the 
PM standard issue discussed below, we find it unnecessary to provide a 
full written review whether such standards are consistent with section 
202(a), as those opposing the waiver have clearly not met their burden 
regarding the issue, and we otherwise cannot make a finding that such 
standards are inconsistent with section 202(a).
a. Particulate Matter Standards
    The Manufacturers generally note that testing for and complying 
with the revised particulate matter standards will present significant 
burdens on the industry. In short, the Manufacturers recommend that EPA 
withhold issuing a waiver for the MY 2025 PM standard. While noting 
that the phase in of the 3 mg/mile FTP PM standard beginning in MY 2017 
will be very challenging, they nevertheless state that the 
Manufacturers are optimistic that vehicles will achieve this level with 
time. Recognizing that there are long lead time changes, the 
Manufacturers appear to be agreeing with CARB's planned phased-in 
approach starting in the 2017 MY. Also, the Manufacturers are not 
objecting to EPA issuing a waiver for the 3 mg/mile PM standards based 
on their stated testing concerns.
    However, the Manufacturers believe the 1 mg/mile PM standard, which 
begins its phase-in starting in the 2025 MY, raises further feasibility 
issues. Based on their knowledge of PM measurement and vehicle PM 
control technology, the Manufacturers state that their members ``see no 
way to both measure and meet this standard.'' The Manufacturers believe 
that setting a standard that is unachievable today is inappropriate, 
and they do not believe EPA should issue a waiver for these standards 
at this time.
    Finally, the Manufacturers note that there is ample time to revisit 
the waiver request without interfering with CARB's implementation of 
standards should they be deemed feasible (during CARB's planned review 
of the standard).
    CARB's supplemental comments note that the LEV III PM standards are 
based on a particular concern for their impact on public health and 
safety. As noted in their LEV III Technical Support Document, CARB 
acknowledges that while PM emissions from LDVs are not a major 
contributor to the inventory, they are a significant contributor to 
urban pollution and human exposure. CARB also notes that the exact 
amount of pollution reduced and the cost-effectiveness of particular 
California standards is not relevant to EPA's waiver determination.
    What is relevant, CARB maintains, is that thirteen years of lead 
time (from the date of its adopted regulations to the first model year 
of the phase-in standards in 2025) are provided to improve the test 
procedure and for industry to incorporate needed improvements to their 
engines and fuel systems. CARB maintains that it has consistently 
demonstrated PM measurement capability at 1 mg/mi using new test 
procedures under development by EPA under 40 CFR Part 1066.\116\ CARB 
suggests that EPA apply the rationale of NRDC and find that CARB has 
identified barriers to implementation of needed technologies and a 
viable path to overcome these barriers. For example, CARB states test 
data that they have presented demonstrates PM levels from current port 
fuel injected (PFI) engines below 1 mg/mi and from late model gasoline 
direct injection engines (GDI) approaching 1 mg/mi. CARB expects 
further technical improvements over the extensive lead time 
provided.\117\ CARB has also identified that some of the low carbon 
technologies with proven track records that are most likely to be used 
(to meet GHG emission requirements) are: Advanced port fuel injection 
engines, GDI engines, boosted and downsized engines, clean diesel 
engines, hybrid, and plug-in hybrid technology among others. CARB notes

[[Page 2135]]

that each of these technologies will have a particular impact on PM 
emissions. CARB notes that many of these technologies may be able to 
currently meet 2025 MY PM standards and that further improvements are 
reasonable. For example: (1) CARB's Technical Support Document states 
``Some current, well-maintained PFI-equipped LDVs emit PM mass levels 
below 1 mg/mi. For example, published research reports PM emissions 
rates for both PFI ULEV and SULEV vehicles of approximately 0.7 mg/mi 
or much less over the Federal Test Procedure (FTP or FTP-75) cycle'' 
and (2) ``Car makers who choose to pursue gasoline-fueled, 
CO2 friendlier GDI internal combustion engines for their 
future vehicles will have two principal technical solutions for further 
reduction of PM mass emissions. One solution can utilize next 
generation state-of-the-art engines (e.g., start-stop system where the 
ICE automatically shuts down and starts up at idle) with optimized fuel 
injection strategies (e.g., spray-guided central injector) at nearly no 
net cost increase. The second solution employs post-combustion control 
in the form of the gasoline particle filter (GPF) at an additional 
cost.'' \118\
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    \116\ CARB notes that EPA has identified areas of improvement to 
Part 1066 it intends to evaluate in cooperation with CARB and 
industry (see pp. 54-59 of CARB's Technical Support Document at: 
http://www.arb.ca.gov/regact/2012/leviiighg2012/levappp.pdf).
    \117\ Id. at P-8 through P-20. CARB's Board has provided 
direction to its staff (Resolution 12-11 at 21) to conduct a review 
of the 1 mg/mi PM standard in the 2015 timeframe and report back to 
the Board its results.
    \118\ Id.
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b. EPA's Response to Comments
    As explained below, EPA believes CARB presents a proper view of how 
lead time should be evaluated, for purposes of waiver review by EPA, 
and that CARB has provided reasonable responses to any theoretical 
objections to the projected control technology; identified the major 
steps necessary in refinement of the technology; and offered plausible 
reasons for believing that each of those steps can be completed in the 
time available.
    We also believe that CARB has properly set forth the role of EPA in 
reviewing California standards which require new and/or improved 
technology to meet challenging levels of compliance. EPA is not setting 
its own standards under section 202(a) of the Clean Air Act, rather 
EPA's role within its waiver review is more limited and takes place in 
the context of deference that Congress envisioned for California. This 
deference was discussed in an early waiver decision when EPA approved 
the waiver request for California's 1977 model year standards:

    Even on this issue of technological feasibility I would feel 
constrained to approve a California approach to the problem which I 
might also feel unable to adopt at the Federal level in my own 
capacity as a regulator. The whole approach of the Clean Air Act is 
to force the development of new types of emission control technology 
where that is needed by compelling the industry to `catch up' to 
some degree with newly promulgated standards. Such an approach to 
automotive emission control might be attended with costs, in the 
shape of a reduced product offering, or price or fuel economy 
penalties, and by risks that a wider number of vehicle classes may 
not be able to complete their development work in time. Since a 
balancing of these risks and costs against the potential benefits 
from reduced emissions is a central policy decision for any 
regulatory agency, under the statutory scheme outlined above I 
believe I am required to give very substantial deference to 
California's judgment on that score.\119\
---------------------------------------------------------------------------

    \119\ 40 FR 23102, 23103 (May 28, 1975).

    Regarding the feasibility of the CARB 1 mg/mile PM standard that 
commences its phase-in starting with the 2025 MY, EPA believes that it 
is proper to review this through the NRDC prism. In other words, EPA 
believes it appropriate to provide substantial room for deference to 
CARB's projections. Although the Manufacturers have raised a variety of 
concerns they have not provided any data or other information to 
demonstrate why the pathways and steps identified by CARB are 
unreasonable. EPA believes having given appropriate deference that CARB 
has reasonably projected possible pathways to address the theoretical 
concerns with the 2025 phased-in PM standard, including concerns 
relating to testing capability. The Manufacturers have provided no data 
or other information to demonstrate why CARB's identified path of 
improvements in testing technology and procedures is not feasible in 
the lead time provided. Similarly, the Manufacturers have provided no 
data or other information to demonstrate why CARB's identified 
technology solutions and possible refinements are infeasible, 
especially given the amount of lead time provided. Given the amount of 
lead time provided by CARB and their identified paths for improvements, 
EPA believes the opponents to the waiver have not met their burden of 
proof in regards to the PM standards commencing in MY 2025.
    Therefore, based on the record before us, EPA cannot find that the 
opponents of the PM standard in 2025 have met their requisite burden of 
proof to demonstrate that such standards are inconsistent with section 
202(a). Thus EPA cannot deny CARB's ACC waiver request on this basis.
3. LEV III GHG Emission Standards
    CARB has worked closely with EPA and NHTSA throughout the 
development of the MY 2017-2025 GHG emission standards and has moved in 
parallel with the agencies in setting standards that are essentially 
equivalent in terms of lead time and stringency. CARB projects that its 
GHG emissions standards for MYs 2017-2025 will reduce fleet average 
CO2 levels by about 34 percent from MY 2016 levels of 251 g/
mile down to about 166 g/mile, based on the projected mix of vehicles 
sold in California. The basic structure of the GHG standards is 
consistent with that of EPA's GHG standards. CARB uses two vehicle 
categories, passenger cars and light trucks. CARB projects that the 
standards will reduce car CO2 emissions by approximately 
4.9%/year, reduce truck CO2 emissions by approximately 4.1%/
year (the truck CO2 standard target curves move downward at 
approximately 3.5%/year through the 2016-2021 period and about 5%/year 
from 2021-2025), and reduce combined light-duty CO2 
emissions by approximately 4.5%/year from 2016 through 2025.
    CARB notes that the CO2 emission reduction estimates are 
approximate because the required emission level to achieve compliance 
with the standards for each vehicle manufacturer depends on each 
manufacturer's ultimate sales mix of vehicles.\120\ Within the two 
categories, the CO2 standard targets for vehicle models sold 
by each automaker are indexed to the vehicles' footprint, which is 
calculated as each vehicle model`s wheelbase times its average track 
width. As a result of this regulatory structure, the precise 
CO2 emission rates that will result from the standards in 
each year from 2017 through 2025 will depend on the ultimate sales-
weighted mix of vehicles (i.e., according to vehicle sales in each 
category and the footprint of the models) sold in each year.
---------------------------------------------------------------------------

    \120\ EPA-HQ-OAR-2012-0562-0011 at ES-6.
---------------------------------------------------------------------------

    CARB also adopted separate nitrous oxide (N2O) and 
methane (CH4) standards that are harmonized with the 
standards EPA first adopted in the MY 2012-2016 rulemaking. As with the 
EPA program, manufacturers may use CO2 credits to meet the 
N2O and CH4 standards on a CO2-
equivelent basis.
    CARB includes most of the flexibilities established by EPA for MYs 
2017-2025. CARB includes averaging, banking, and trading provisions 
which allow for 5-year credit carry-forward and 3-year credit carry-
back and credit trading between manufacturers. Manufacturers may 
generate air conditioning system credits through system efficiency 
improvements, low refrigerant leakage designs, and use of low global 
warming potential

[[Page 2136]]

refrigerants. Manufacturers may generate up to 18.8 g/mile 
CO2-equivalent credit for cars and 24.4 g/mile 
CO2-equivelent credits for trucks from air conditioning 
system improvements. CARB also moved to harmonize air conditioning 
system test procedures with EPA, replacing the A/C idle test 
requirement with the AC17 test procedure.
    In addition CARB adopted off-cycle credits provisions similar to 
those adopted by EPA, which provide credits to manufacturers based on 
real world improvements in CO2 emissions not captured on the 
2-cycle test procedure. CARB adopted a list of pre-approved credits 
that manufacturers may claim by using pre-approved technologies. As 
with the EPA program, off-cycle credits based on the pre-approved 
credits list is capped at 10 g/mile. CARB also provides full-size 
pickup truck technology credits of 10 or 20 g/mile per vehicle 
depending on the level of technology employed, similar to the EPA 
program. Manufacturers may generate technology incentive credits by 
using hybrid technologies or by meeting performance-based criteria over 
a specified minimum percentage of full size pickup truck production.
    The EPA and CARB programs differ in their treatment of advanced 
technology vehicles, specifically plug-in hybrids, battery electric 
vehicles, and fuel cell vehicles. EPA's program encourages the 
production of these advanced technology vehicles in two ways; by 
providing incentive multipliers for these technologies and by not 
counting the upstream emissions associated with electric operation for 
the first several model years of the program.\121\ CARB does not 
provide a multiplier incentive or allow for the use of a 0 g/mile 
compliance value. CARB explains that incentives are not needed for 
plug-in hybrids, battery electric vehicles, and fuel cell vehicles 
under their GHG program because the California ZEV program requires 
manufacturers to produce vehicles using these technologies.
---------------------------------------------------------------------------

    \121\ EPA allows a 0 g/mile compliance value to be used for 
vehicles sold in MY2017-2021 and caps the cumulative number of 
vehicles that a manufacturer may use the 0 g/mile compliance value 
for in MYs 2022-2025.
---------------------------------------------------------------------------

    In its Final Statement of Reasons, CARB reiterated its commitment, 
as directed by Board Resolution 12-11, to accept compliance with EPA's 
GHG emission standards for MY 2017-2025 as compliance with California's 
GHG standards if CARB determines that EPA's final rule preserves the 
GHG reduction benefits set forth in EPA's proposed rule.\122\ CARB also 
notes their plan to adopt a ``deemed to comply'' rule within their 
waiver request to EPA. EPA stated in the Federal Register notice 
announcing the opportunity for hearing and comment on CARB's June 27, 
2012 ACC waiver request that ``EPA invites comment on all aspects of 
CARB's waiver request, and specifically invites comment on CARB's 
waiver request in light of CARB's plans concerning adoption of a 
``deemed to comply'' provision into its LEV III GHG standards. This 
will allow EPA to consider any ``deemed to comply'' provision and 
comments on it when taking action on CARB's request for a waiver.'' 
\123\
---------------------------------------------------------------------------

    \122\ California Air Resources Board, EPA-HQ-OAR-2012-0562-0021, 
at 16.
    \123\ 77 FR 53199, 53200 (August 31, 2012).
---------------------------------------------------------------------------

    On September 14, 2012, CARB proposed amendments to their program to 
permit compliance based on compliance with EPA's GHG standards. In its 
discussion of the differences between the EPA and CARB programs with 
regard to the treatment of advanced technology vehicles, CARB notes 
that manufacturers will have the option to comply with the federal 
program and utilize the EPA accounting provisions for these 
vehicles.\124\ On November 15, 2012, the Air Resources Board agreed to 
accept compliance with federal standards as equivalent to compliance 
with California's, approving the amendment for ``deemed to comply.'' 
\125\ On December 7, 2012, CARB submitted additional information to EPA 
noting that CARB had approved further amendments to the ACC program, 
including the ``deemed to comply'' regulation, and therefore California 
has met its commitment to the National Program. CARB requested that EPA 
consider and take action on these amendments concurrent with the 
request set forth in CARB's June 27, 2012 ACC waiver request.\126\
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    \124\ Air Resources Board, EPA-HQ-OAR-2012-0562-0011, at 135.
    \125\ CARB Resolution 12-35 (November 15, 2012).
    \126\ EPA-HQ-OAR-2012-0562-0374.
---------------------------------------------------------------------------

a. Comments on CARB's 2017 Through 2025 GHG Emission Standards
    CARB's waiver request notes that in 2010, President Barack Obama 
directed EPA and NHTSA to work with California to develop GHG fleet 
standards for MY 2017 through 2025 light-duty vehicles. In response, 
the three agencies developed the Interim Joint Technical Assessment 
Report (TAR), released in September 2010. The TAR was major milestone 
in the technical work done collaboratively by EPA, NHTSA, and CARB. 
CARB held four public technical workshops covering topics of 
efficiency, mass-reduction, and safety technology; collaborative 
technical contract work (e.g., with FEV, Ricardo, Lotus); and extensive 
meetings with a wide range of stakeholders to gather input. This 
collaboration ensured that the three agencies had a common set of 
technical information on which to inform their proposals, allowing the 
agencies to develop standards that are harmonized in terms of their 
stringency.
    CARB further notes that the feasibility analysis underlying its 
standards is based on several existing and emerging technologies that 
increase engine and transmission efficiency, reduce vehicle energy 
loads, improve auxiliary and accessory efficiency, and that would 
increasingly electrify vehicle subsystems with hybrid and electric 
drivetrains. The technology assessment conducted by CARB for the MY 
2017-2025 standards builds on the original technical basis established 
in the previous rulemakings for California's MY 2009-2016 and federal 
MY 2012-2016 standards. CARB notes that several individual technologies 
offer substantial CO2 reduction potential and that many of 
the technologies have only seen limited deployment in new vehicle 
models.\127\
---------------------------------------------------------------------------

    \127\ California Air Resources Board, EPA-HQ-OAR-2012-0562-0011, 
at 102-103.
---------------------------------------------------------------------------

    In its Initial Statement of Reasons staff report, CARB highlights 
several CO2 reduction technologies that manufacturers can 
employ to meet the standards.\128\ The list of technologies cited by 
CARB is very similar to the list of technologies considered by EPA and 
NHTSA in evaluating standards for MYs 2017-2025.\129\ Vehicle road load 
and accessory energy loads can be improved, for example, through mass 
reduction, improved accessories, electric power steering, improved 
aerodynamics, and low rolling resistance tires. CARB notes several 
considerable opportunities for engine efficiency improvements. Engine 
efficiency technologies include turbo charging and downsizing, gasoline 
direct injection, continuously variable valve lift, cylinder 
deactivation, and diesel-fueled engines. CARB also describes 
transmission efficiency improvements important in allowing the 
operation of the engine in its lowest fuel consumption operating points 
more frequently. These include more gears

[[Page 2137]]

(e.g., 8 speed transmissions), closer gear ratio spacing, optimized 
controls, and dual clutch transmissions that allow essentially the same 
efficiency as manual transmissions.
---------------------------------------------------------------------------

    \128\ California Air Resources Board, EPA-HQ-OAR-2012-0562-0011, 
at 103-108.
    \129\ Joint Technical Support Document: Final Rulemaking for 
2017-2025 Light-duty Vehicle Greenhouse Gas Emission Standards and 
Corporate Average Fuel Economy Standards, Chapter 3, EPA-420-R-12-
901, August 2012.
---------------------------------------------------------------------------

    CARB's analysis also includes various hybrid systems that offer 
significant potential CO2 reductions through the elimination 
of engine idling, reduction in fuel consumption during deceleration, 
reduction of acceleration power requirement through launch assist, and 
the recovery of vehicle energy losses through regenerative braking 
during deceleration. Finally, CARB also includes emerging electric 
drive technologies including plug-in hybrids, electric, and hydrogen 
fuel cell vehicles.
    EPA received several comments on CARB's waiver request generally 
supporting the California GHG standards as feasible and consistent with 
CAA section 202(a). The Environmental Defense Fund (EDF) and the 
Natural Resources Defense Council (NRDC) commented that CARB 
coordinated with EPA and NHTSA in the development of the GHG standards 
and the California GHG standards are aligned with the federal GHG 
standards in terms of stringency and lead time. EDF further commented 
that EPA received letters from 13 automakers supporting the federal GHG 
standards, and based on this coordination and support EPA can only 
determine that the CARB GHG standards are feasible.\130\
---------------------------------------------------------------------------

    \130\ EDF's comment at EPA-HQ-OAR-2012-0562-0025 and 0353; and 
NRDC's comment at EPA-HQ-OAR-2012-0562-0347.
---------------------------------------------------------------------------

    EPA received comments from the Dealers that EPA should not provide 
a waiver to California for the MY 2022-2025 GHG standards because the 
standards for these years are not consistent with CAA section 202(a). 
The commenter states that by committing to a mid-term evaluation in its 
own GHG program, EPA has already determined that ``technological 
capabilities after MY 2022 are too remote to be accurately predicted.'' 
The commenter argues that it is inappropriate for CARB to obtain a 
waiver for years where it cannot demonstrate technological feasibility 
regardless of the fact that California has agreed to participate in the 
mid-term review. The Dealers assert that by agreeing to participate in 
the mid-term evaluation, CARB ``has admitted that the technological 
feasibility of its GHG standards for MYs 2022-2025 is not knowable at 
this time.''
    As part of the waiver decision process, CARB's supplemental 
comments provided a response to comments submitted by NADA, including a 
response to NADA's comments regarding the feasibility of the MY 2022-
2025 standards.\131\ CARB comments that NADA concerns are not supported 
by relevant case law and should be dismissed. CARB comments that NADA 
is disregarding decades of precedent that clearly sets out the 
appropriate ``technological feasibility'' analysis under section 
202(a). Citing Natural Resources Defense Council v. U.S. Environmental 
Protection Agency, (1981) 655 F.2d 318, 331, CARB notes CAA section 
202(a) has historically been interpreted to allow for projections of 
likely future technological development. Such projections do not need 
to ``possess the inescapable logic of a mathematical deduction.'' 
Instead, such a projection is considered sufficient if it ``answers any 
theoretical objections to the [projected technology], identifies the 
major steps necessary in refinement of the technology, and offers 
plausible reasons for believing that each of those steps can be 
completed in the time available.'' Moreover, where the requirements of 
a standard are phased in over a lengthy period of time it bears on the 
likelihood of a proper finding of technological feasibility. CARB notes 
that the great length of time provided--until after MY 2022--supports a 
finding of technological feasibility under NRDC, and would be in line 
with past EPA waiver decisions.
---------------------------------------------------------------------------

    \131\ EPA-HQ-OAR-2012-0562-0373 at 8.
---------------------------------------------------------------------------

b. EPA Response to Comments
    EPA disagrees with NADA's characterization of the mid-term review 
as it relates to the technological feasibility of the standards for MYs 
2022-2025. As discussed in the final rule for the EPA's GHG emission 
standards, EPA has found that its standards are technologically 
feasible under CAA section 202(a), based on available information 
regarding technology and costs.\132\ EPA could not have adopted the 
standards for MYs 2022-2025 if it did not find the standards to be 
consistent with CAA section 202(a) which requires EPA to consider 
issues of technological feasibility, cost, and available lead-
time.\133\ As EPA discusses in the final rule in response to comments, 
``EPA does not agree that the mid-term evaluation is legally required, 
or that the standards adopted today would be arbitrary and capricious 
or without substantial evidence to support them absent such a mid-term 
evaluation. The final rule and supporting information and analysis 
amply justify the reasonableness and appropriateness of the final GHG 
standards adopted by EPA, irrespective of the provisions for a mid-term 
evaluation.'' \134\ EPA is committed to conducting a mid-term 
evaluation for MYs 2022-2025 in close coordination with NHTSA and CARB 
given the long time frame in implementing standards out to MY 2025 and 
given NHTSA's obligation to conduct a separate rulemaking in order to 
establish final standards for vehicles for those years.\135\ With 
respect to the waiver, however, EPA believes that NADA's reference to 
the mid-term review does not demonstrate technological infeasibility 
(or any requisite level of uncertainty) or that the CARB standards are 
inconsistent with section 202(a), particularly given that the CARB 
standards are closely aligned to those adopted by EPA. In addition, 
compliance with EPA's GHG standards will be deemed to be compliance 
with CARB's GHG standards. EPA agrees with CARB's response to the NADA 
concerns and believes that a reasonable technology path forward has 
been projected in support of the MY 2022-2025 standards, which is 
further supported by the substantial amount of lead-time provided for 
these standards. EPA believes that the substantial amount of lead-time 
provided also accords with a finding of technological feasibility under 
NRDC, and would be in line with past EPA waiver decisions.
---------------------------------------------------------------------------

    \132\ 77 FR 62880-62882 and 62777.
    \133\ See 77 FR 62671-62673 for discussion on EPA statutory 
authority.
    \134\ 77 FR 62786.
    \135\ 77 FR 62784-62788.
---------------------------------------------------------------------------

    EPA did not receive any additional comments on the waiver decision 
regarding the technology assessment or cost analysis done by CARB in 
support of their GHG standards. CARB has adopted GHG standards that are 
closely aligned to those adopted by EPA for MYs 2017-2025. In EPA's 
final rule establishing the MY 2017-2025 standards, EPA concluded that 
the standards are feasible in the lead time provided and the costs are 
reasonable, as required under Section 202(a) of the CAA.\136\ The 
technical basis for the standards was developed jointly by EPA, NHTSA, 
and CARB. The methodology and underlying data used by CARB to assess 
technologies and costs, as summarized above, are very similar and in 
many cases the same as those used by EPA to assess the standards.\137\ 
The extended lead time

[[Page 2138]]

provides the necessary time for manufacturers to combine individual 
technologies, many of which are currently available, into optimized 
packages and apply them across their vehicle fleets.
---------------------------------------------------------------------------

    \136\ 77 FR 62624.
    \137\ See 77 FR 62702-62713 for a description of the EPA and 
NHTSA joint technology and cost assessment. More detail is provided 
in the joint Technical Support Document for the rule.
---------------------------------------------------------------------------

    It is also important to note that the EPA and CARB GHG programs are 
very similar in terms of the structure of the programs and 
flexibilities contained in the programs. The CO2 standards 
are attribute-based fleet average standards, based on vehicle footprint 
curves that are identical. The programs include averaging, banking, and 
trading provisions. Both GHG programs offer credits for air 
conditioning system improvements, off-cycle CO2 reductions, 
and full-size pickup truck technology incentives. Both GHG programs 
contain the same N2O and CH4 standards and 
essentially the same provisions for small volume manufacturer and small 
businesses.
    There are some aspects of the CARB program that differ from the EPA 
program but, as discussed below, EPA does not believe that these 
differences change the feasibility of the standards in any significant 
way. CARB has explained in detail how these standards can be met using 
technologies that are reasonably expected to be available in the 
regulatory timeframe. NADA does not substantially undermine this 
explanation.
    CARB estimated an average per vehicle cost in MY 2025 of $1,340 
without the new ZEV requirements and $1,840 with the new ZEV 
requirements. In its final rule, EPA estimated an average per vehicle 
cost of about $1,800 in MY 2025 for the EPA GHG standards. Both 
agencies conclude that these up-front per vehicle costs will be more 
than offset by consumer fuel savings over the life of the vehicles.
    Perhaps the most significant differences between the CARB and EPA 
vehicle programs involve the new California ZEV requirements which 
mandate use of ZEV-type technologies for a portion of a manufacturer's 
fleet, and therefore may alter the technology pathways that 
manufacturers might otherwise choose to meet the GHG standards. EPA has 
reviewed the consistency of the ZEV requirements with section 202(a) 
separately below
    The CARB and EPA programs also differ in the treatment of vehicles 
capable of electric operation. EPA provides an advanced technology 
incentive multiplier through MY 2021 to encourage the increased sales 
of plug-in hybrids (PHEVs), electric vehicles (BEVs), and fuel cell 
vehicles (FCVs). CARB does not provide advanced technology incentive 
credits for these vehicles because these types of vehicles are required 
under the ZEV program and an incentive is not necessary. CARB also 
accounts for upstream emissions from electric operation starting in MY 
2017 while EPA phases in upstream accounting for MY 2022-2025 vehicles 
after vehicle sales thresholds are exceeded. These differences mean 
that PHEVs, BEVs, and FCVs do not receive as much credit in the CARB 
program compared to the EPA program. However, these vehicles still 
offer significantly lower CO2 levels in the CARB program 
compared to more conventional technologies, lowering a manufacturer's 
CO2 fleet average.
    There are other minor differences between the CARB and EPA programs 
but EPA does not believe the differences have a significant impact on 
feasibility. Many of the differences in the programs arise from changes 
EPA made to various provisions between the proposal and final rules in 
response to comments. CARB delineates these minor differences in the 
Initial Statement of Reasons for their proposal to accept compliance 
with EPA's GHG emission standards as compliance with California's GHG 
emission standards (aka ``deemed to comply'').\138\ These include 
revisions to the off-cycle credits, air conditioning system credits, 
and full-size pick-up credits. While most of the changes made by EPA in 
its final rule directionally provide somewhat more flexibility to 
manufacturers, the changes do not ultimately change the level of 
credits potentially available. CARB concludes and EPA agrees that the 
programs remain sufficiently comparable.
---------------------------------------------------------------------------

    \138\ EPA-HQ-OAR-2012-0562-0374 at 6-13.
---------------------------------------------------------------------------

    Finally, as discussed below, most if not all manufacturers will 
very likely opt to comply with the California program by complying with 
the EPA GHG emission standards, as permitted by the ``deemed to 
comply'' regulation. Therefore, the small differences between the 
programs will not in such cases have any practical implications for 
manufacturers. As CARB notes in its waiver request, ``Throughout the 
development of the LEV III GHG regulations, California coordinated with 
the EPA and NHTSA on technical and economic areas, and CARB has moved 
in parallel with the federal rulemaking in terms of stringency of the 
standards and lead time for compliance.'' Given this coordination, 
commenters have not shown that the LEV III GHG regulations are 
technologically infeasible or that the lead time provided is 
inadequate.
    The Manufacturers note that they do not oppose California's request 
for a Section 209(b) waiver for its GHG emission standards but state 
that it would not be appropriate for the waiver to be granted until 
after California has finalized its regulatory amendments to allow for a 
national compliance option.\139\ ``This national compliance option is 
integral to the commitment letters the industry and California signed 
in July 2011 and to the single national GHG/fuel economy program all 
stakeholders sought to achieve.''
---------------------------------------------------------------------------

    \139\ The Manufacturers note that California does not believe 
that another waiver request is necessary once the amendments are 
finalized, further supporting its request to wait until after CARB 
finalizes its rule.
---------------------------------------------------------------------------

    As noted above, CARB notified EPA by letter dated December 7, 2012 
that CARB has approved further amendments to its ACC program, including 
the ``deemed to comply'' regulation.\140\ Included in CARB's December 
7, 2012 letter to EPA is CARB's ``Final `Clean' Version of California's 
2017-2025 Advanced Clean CAR Program, including its Passenger Vehicle 
Greenhouse Gas Regulations and LEV/GHG Test Procedures, and its ZEV 
regulations and Test Procedures'' all as amended December 6, 2012.\141\
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    \140\ See CARB's Resolution 12-35 (November 15, 2012) at EPA-HQ-
OAR-2012-0562-0374 (attachment 64), Executive Order R-12-016 
(December 6, 2012) at EPA-HQ-OAR-2012-0562-0374 (attachment 66).
    \141\ See EPA-HQ-OAR-2012-0562-0374 (attachment 65).
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    EPA has not received any comment, based on its August 31, 2012 
Federal Register Notice, that CARB's ``deemed to comply'' regulation 
raises any issues regarding technological feasibility. EPA did receive 
comment from the Manufacturers requesting that EPA not grant CARB a 
waiver for its GHG emission standards until after CARB has finalized 
their ``deemed to comply'' regulations. Today's waiver applies to 
CARB's final regulation as adopted on December 6, 2012.
    After review of the information in this proceeding, EPA believes 
that those opposing the waiver have not met their burden of showing 
that compliance with California's GHG standards is infeasible, even 
without the deemed to comply provision, based upon the current and 
future availability of the described technologies in the lead-time 
provided and considering the cost of compliance. The CARB technical 
information presented in this record clearly indicates that these 
requirements are feasible. In addition, California's regulations 
include a ``deemed to comply'' provision which provides further strong 
support for this view. EPA therefore determines that those opposing the 
waiver have not met the

[[Page 2139]]

burden of producing the evidence necessary for EPA to find that 
California's GHG standards, including the ``deemed to comply'' 
provision, are not consistent with Section 202(a).
4. California's ZEV Amendments as They Affect 2018 Through 2025 Model 
Years
    As noted above, after a thorough review of CARB's ZEV amendments, 
we have determined that such amendments, as they affect 2017 and 
earlier MYs, are within the scope of previous waivers of preemption. 
However, EPA recognizes that such amendments add significant new 
requirements, as they affect 2018 and later MYs, and therefore such 
amendments are reviewed under the full waiver criteria.
a. Comments on CARB's ZEV Amendments
    CARB notes in its waiver request that to date, all vehicle 
manufacturers operating in California are in full compliance with the 
ZEV mandate. Nearly 5,600 ZEVs (BEVs and FCVs) are in operation 
statewide and 380,000 AT PZEVs are also in operation. Fuel cell vehicle 
and infrastructure is progressing with several automakers moving toward 
commercialization sometime after 2015. Cumulatively, automakers plan to 
have 50,000 FCVs operational in California by 2017, according to 
CARB.\142\ CARB also notes that most manufacturers have near-term 
production plans to meet or over comply with the regulatory 
requirements through MY 2017. In addition, recently a number of 
manufacturers have announced aggressive production plans for PHEVs and 
BEVs for the next three MYs. CARB maintains that these announcements 
reflect technological advancement in lithium-ion battery technology and 
a general shift in customer demand and concern about environmental 
stewardship. CARB provides a table in its waiver request that 
summarizes manufacturers' current ZEV and TZEV program commitments, by 
technology category and as publicly stated.\143\ CARB suggests that the 
table reveals that nearly every manufacturer will be introducing BEV 
and PHEV products within the next one to three years, and five 
manufacturers will commercially introduce FCVs by 2015. CARB states 
that the technological sophistication of ZEVs currently being produced 
is anticipated to advance, making commercial production and compliance 
of these vehicles by MY 2018 and later more feasible. A new feature of 
the ZEV amendments is that manufacturers will be allowed to use a 
variety of battery and fuel cell vehicle technologies to comply with 
the ZEV requirement, making compliance still more feasible. Finally, 
CARB notes that during its rulemaking proceedings for the adopting of 
the 2012 ZEV amendments they did not receive any comments questioning 
the overall technological feasibility of the amended standards.
---------------------------------------------------------------------------

    \142\ See CARB's Initial Statement of Reasons (ISOR), EPA-HQ-
OAR-2012-0562-0008 at 11.
    \143\ CARB waiver request at 27-28.
---------------------------------------------------------------------------

    With regard to the manufacturer costs associated with the ZEV 
emission requirements CARB states that the ``ZEV regulation must be 
considered in conjunction with the proposed LEV III amendments. 
Vehicles produced as a result of the ZEV regulation are part of a 
manufacturer's light-duty fleet and are therefore included when 
calculating fleet averages for compliance with the LEV III GHG 
amendments. Because the ZEVs have ultra-low GHG emission levels that 
are far lower than non-ZEV technology, they are a critical component of 
automakers' LEV III GHG standard compliance strategies. As such the ZEV 
program cost is considered as the difference in complying with the LEV 
III GHG fleet standard without the proposed amendments to the ZEV 
regulation versus with the proposed amendments to the ZEV regulation. 
Assuming that all of the associated direct manufacturing and ICMs are 
passed on to consumers, the average incremental price increase that 
results from the proposed LEV III GHG fleet standards and proposed ZEV 
regulation over the 2017 through 2025 timeframe will differ from the 
average increase resulting from compliance with only the LEV III GHG 
amendments. The average incremental vehicle price due to proposed LEV 
III GHG standards, but with no amendments to the current ZEV 
regulation, in 2025 is expected to be $1,340. The average incremental 
vehicle price considering the proposed LEV III GHG fleet standards and 
the proposed ZEV requirements in 2025 MY increases to $1,840, a $500 
incremental increase. * * * In the broader context of the overall 
fleet, the ultra-low GHG ZEV technology is a major component of 
compliance with the LEV III GHG fleet standards for the overall light 
duty fleet. In that fleet context, the overall cost of the ZEV program 
is the difference in costs between the ``GHG-plus-ZEV'' and the ``GHG 
only'' scenarios.'' \144\
---------------------------------------------------------------------------

    \144\ CARB's ISOR at pp. 62-63.
---------------------------------------------------------------------------

    EPA has also received comment from several consumer and 
environmental groups that support CARB's ZEV amendments. The Consumer 
Federation of America (CFA) provided comment that ``California's 
ability to set these strong standards is vitally important to the 
advancement of the auto industry and for meeting consumer demand for 
cleaner and more efficient cares in states across the nation. Consumers 
understand the benefits and have consistently voiced support for 
California's leadership on clean car standards. In fact, CFA's latest 
poll on the subject found that ``more than 70% of Americans support 
states being allowed to continue setting tailpipe emission standards 
that, as a result, increase fuel economy for motor vehicles.'' This 
commenter also provides the latest from a Consumer Reports poll on the 
subject, including ``Seventy-five percent of California consumers think 
California should require automakers to build fleets that include 
increasing numbers of zero emission vehicles including electric and 
hydrogen fuel cell cars.'' \145\ EPA received comment from Consumer 
Reports/Consumers Union (Consumer Reports) in support of CARB's ACC 
program and notes the survey above. In addition, Consumer Reports notes 
that vehicle manufacturers are already offering plug-in hybrids and 
BEVs, with new models appearing all the time. ``Consumers, particularly 
in California, are very open to buying alt-fuel vehicles. Importantly, 
some of the cleanest vehicles or alt-fuel vehicles are also proving 
very satisfying to vehicle owners.'' \146\ EPA also received oral 
testimony from Calvert Investments noting that CARB's ACC program will 
help drive innovation, investment, and job creation and thus they 
strongly support both the LEV III (including GHG standards) and ZEV 
requirements in the ACC program. ``Customers want and in an increasing 
number of countries require cleaner cars and trucks, to go further on 
every gallon of gas, while cutting back on GHG emissions that 
contribute to climate change. Companies that fail to embrace relevant 
new technologies, from improving mileage for conventional internal 
combustion engines to developing hybrid, electric, and fuel cell 
vehicles, are putting themselves at risk.'' \147\
---------------------------------------------------------------------------

    \145\ EPA-HQ-OAR-2012-0562-0032.
    \146\ EPA-HQ-OAR-2012-0562-0354.
    \147\ EPA Hearing Transcript at 83. EPA-HQ-OAR-2012-0562-0026.
---------------------------------------------------------------------------

    In addition, EPA received comment from NRDC that provided specific 
input on the criterion for consistency with CAA Section 202(a). NRDC 
states that the forecasted ZEV sales in California exceed ZEV 
requirements. In a report jointly published with NRDC, auto industry 
analysts Baum and Associates

[[Page 2140]]

projected potential ZEV sales from 2015 to 2020. The 2012 ZEV 
amendments expect ZEV sales of about 75,000 vehicles in MY 2018 and 
130,000 vehicles in 2020. The Baum Associates assessment, conducted 
before the ZEV amendments were proposed, projected ZEV sales of as much 
as 160,000 in MY 2018 and 180,000 in MY 2020. Baum and Associates also 
forecasts on an ongoing basis for the introduction of new ZEV models 
into the marketplace in the next few years, demonstrating the technical 
feasibility of ZEV technologies today. The Baum and Associates 
forecasts are based on detailed information about supplier and OEM 
production plans. NRDC compared the Baum and Associates forecast for 
BEVs, PHEVs, and FCVs to the ZEV and TZEV production announcements 
included by CARB in their waiver request. NRDC found that there are 
even more models that will be introduced than identified by CARB.\148\
---------------------------------------------------------------------------

    \148\ EPA-HQ-OAR-2012-0562-0347. See Baum and Mui, ``The Zero 
Emission Vehicle Program: An Analysis of Industry's Ability to Meet 
the Standards'', May 2010. Available at http://docs.nrdc.org/energy/files/ene_10070701a.pdf.
---------------------------------------------------------------------------

    EPA received comment both from the Manufacturers and the Dealers 
stating their objections to CARB's ZEV amendments as they affect 2018 
and later MYs. The Manufacturers provide essentially three arguments 
for their assertion that the ZEV regulations are infeasible, 
particularly when applied individually in section 177 States. (The 
Manufacturers state that the amendments before EPA require an 
increasing number of ZEVs in California and each of the section 177 
States.) \149\ The Manufacturers claim that: 1) the infrastructure for 
BEVs will not be sufficient by MY 2018 to support increased sales of 
BEVS and that CARB has not explained how it determined that the 
infrastructure and the level of consumer demand in the Section 177 
States will be sufficient to justify the ending of the travel 
provisions for ZEVs after MY 2017; 2) the cost of the ZEV program far 
exceeds its environmental benefits, especially when compared to the LEV 
III and GHG programs in terms of cost per ton of CO2 
removed: and 3) the current data on consumer demand for ZEVs indicates 
that it will not be feasible to meet the sales requirements for 2018 MY 
and beyond. In conjunction with this third argument the Manufacturers 
contend that the market for these types of vehicles has not developed 
as quickly as anticipated and therefore there is no basis to conclude 
that BEV sales will reach required levels by 2025. (The Manufacturers 
also state that it is ``highly unlikely that the required 
infrastructure and level of consumer demand for ZEVs will be sufficient 
by MY 2018 in either California or in the individual Section 177 States 
to support the ZEV sales requirements mandated by CARB.) Because of 
these concerns the Manufacturers suggest that EPA deny the ZEV waiver 
for 2018 and later MYs, or at least defer the program for MY 2021 and 
later, until California, EPA, and the auto industry have conducted a 
mid-term review of ZEV similar to the GHG program.
---------------------------------------------------------------------------

    \149\ EPA believes the Manufacturers have mischaracterized the 
nature of CARB's waiver request. CARB has only submitted its own ACC 
regulations to EPA and it has not submitted, nor has any other State 
submitted, section 177 state regulations.
---------------------------------------------------------------------------

    As noted above, the Manufacturers provide EPA with current vehicle 
sales and registration data. These data include current sales figures 
for hybrids (approximately 3% of annual sales nationally and 
approximately 6.1% in California according to registration data). The 
Manufacturers note that registration of hybrids in section 177 states 
is far lower. The Manufacturers maintain that the low sales numbers are 
due substantially to the increased cost relative to traditional 
vehicles, and that the demand for BEVs in section 177 States is 
particularly ``sluggish.'' However, the comments EPA received did not 
include forecasts, projections, data, or other evidence to support the 
Manufacturer's conclusions about future ZEV sales, or in particular, to 
demonstrate that the CARB ZEV requirements are infeasible.
    The Dealers maintain that technological feasibility requires that 
not only certain technologies be possible, but they also be 
``economically achievable.'' \150\ The Dealers maintain that in order 
for ZEV vehicles to be marketable they must: (1) Be at least as safe as 
comparable conventionally-fueled vehicles, (2) offer a range comparable 
to conventionally-fueled vehicles, (3) offer a refueling time 
comparable to conventionally-fueled vehicles, (4) offer similar 
performance and capacities, and (5) come to market at a cost comparable 
to conventionally-fueled vehicles. The Dealers maintain that CARB's 
estimates that ZEVs and TZEVs that will cost approximately $10,000 more 
than comparable traditional vehicles, with at best no performance 
advantages, are by definition not feasible as they will be unable to 
compete in the marketplace.
---------------------------------------------------------------------------

    \150\ NADA points to CARB's waiver request at 25 wherein CARB 
states ``It is well established that EPA will find a regulation to 
be technically feasible if `a reasonable basis [exists] that a new 
technology will be available and economically achievable.'' However, 
NADA fails to reference CARB's subsequent (and EPA believe the 
appropriate view of cost) statement on the same page: ``The only 
relevance of costs in a Section 209(b) waiver proceeding is in the 
context of technological feasibility. Past waiver determinations 
have made clear that for the cost of compliance to be found 
excessive it would need to be `very high' such that the cost to 
consumers when purchased a complying vehicle would be doubled or 
tripled.''
---------------------------------------------------------------------------

    CARB provides several responses to the comments submitted by the 
Manufacturers. In terms of the applicability of section 177 within 
EPA's section 209 waiver deliberations, and consideration of the 
technological feasibility of CARB's amendments adopted in such states, 
CARB notes that the proper scope of EPA's inquiry is limited by the 
express terms of section 209(b). This is well illustrated both in past 
waiver determinations and in case law.\151\ While CARB discredits the 
view that EPA should consider the feasibility of ZEV in other states, 
it also notes that charging infrastructure in states other than 
California does not seem to be a concern as both Nissan and General 
Motors are currently marketing advanced technology vehicles nationally, 
and Ford will begin 50-state marketing in early 2013. EPA notes that 
although it is unclear whether the Manufacturers are contesting the 
current or future adequacy of infrastructure in California (other than 
a sentence that states it is ``highly unlikely''), CARB nevertheless 
sets forth that there is much activity in the field of electric vehicle 
charging infrastructure, and that public charging programs are being 
funded by the California Energy Commission, U.S. DOE EV Everywhere 
program, the U.S. DOE EV Project, and other programs to address the 
needs of plug in vehicles. CARB also states that it appears that 
charging infrastructure is sufficient and efforts underway to address 
infrastructure needs (through the programs noted above and CARB's own 
ZEV Executive Order) are focused on highest priority charging 
locations, namely multi-family dwellings and workplace charging.
---------------------------------------------------------------------------

    \151\ CARB's supplemental comments at 6. See 49 FR 18887, 18889 
(May 3, 1984) and 58 FR 4166 (January 7, 1993). See also MEMA I 627 
F.2d 1095, 1114-20 (Administrator properly declined to review 
potential anti-trust and constitutional implications of CARB 
regulations under 209(b)).
---------------------------------------------------------------------------

    CARB also responds to concerns expressed about the feasibility of 
ZEV vehicles in terms of consumer demand. They note that current sales 
data for plug in vehicles show sales growing rapidly--faster than 
conventional hybrids grew when they were first launched. CARB states 
that these early sales data, aggressive programs for community 
readiness, public education, infrastructure development and

[[Page 2141]]

incentives are in place to support as much as possible consumer 
acceptance and adoption of ZEV technologies. CARB also notes that the 
Dealers comments in this regard can be addressed by examining relevant 
case law and EPA's past application of the law. CARB notes that the 
Dealers' statement that it is inappropriate for EPA to grant a waiver 
unless the Agency can ``demonstrate technological feasibility for all 
the years in which those standards would be in effect'' is disregarding 
decades of waiver precedent that clearly sets out the appropriate 
``technological feasibility'' analysis under section 202(a).'' Section 
202(a) has historically been interpreted to allow for projections of 
likely future technological development. Such projections do not need 
to `possess the inescapable logic of a mathematical deduction.' 
Instead, such a projection is considered sufficient if it ``answers any 
theoretical objections to the [projected technology], identifies the 
major steps necessary in refinement of the technology, and offers 
plausible reasons for believing that each of those steps can be 
completed in the time available.'' \152\
---------------------------------------------------------------------------

    \152\ CARB supplemental comments at 8, citing NRDC v EPA, 655 
F.2d 318, 331.
---------------------------------------------------------------------------

    CARB also addresses the Dealers' stated concerns about the 
marketability of ZEVs.\153\ CARB notes that a more appropriate measure 
of ZEV market success and growth potential is to examine the recent 
years when ZEVs have actually been available to consumers. In the last 
two years, with the introduction of Nissan Leaf, Ford Focus EV, Honda 
Fit EV, Mitsubishi IMiEV, and others, BEV sales have grown 228 
percent.\154\ As discussed below, CARB also points to the Joint 
Technical Assessment Report (TAR), which was developed by EPA, NHTSA, 
and CARB, and released in September 2010.
---------------------------------------------------------------------------

    \153\ CARB notes that it is important to recognize that the ZEV 
regulations do not place requirements on dealers to offer for sale 
or sell ZEVs; rather the requirement is on the automakers. Since the 
obligation to sell and place ZEVs in service falls to the 
automakers, it is the automakers' responsibility to make the subject 
cars marketable and sellable by the dealers.
    \154\ CARB supplemental comments at 11, citing Natural Resources 
Defense Council post (October 31, 2012) attached as item 52 to 
supplemental comments.
---------------------------------------------------------------------------

    CARB states that the Dealers disregard well established law and 
create their own definition of ``technological feasibility'' in 
suggesting that EPA consider in its assessment a comparison of ZEVs and 
conventional vehicles on cost, safety, and performance features such as 
range and refueling time. CARB relies upon cost (MEMA I at 1118), 
performance (International Harvester at 641-647), and durability (NRDC 
at 333-335). CARB states:

    The ZEVs produced for the regulation will meet the same safety 
requirements that conventionally fueled vehicles meet. They already 
achieve acceleration and power characteristics expected on 
traditional vehicles and have demonstrated adequate durability. 
Range and refueling times are characteristics not traditionally 
taken into consideration. The automakers are targeting range for 
battery electric vehicles that match up with the vast majority of 
daily driving needs or most consumers (typical trips and typical 
daily needs are under 30 miles). For fuel cell vehicles, automakers 
have demonstrated range capability equal to or greater than 
conventionally fueled vehicles. With regard to refueling time, BEV 
drivers look at refueling differently; 30 seconds a day at home to 
plug in (with charging occurring overnight or while at work) and 
have a full range daily instead of visiting a gasoline station 
weekly is characterized as much more convenient. Fuel cell vehicles 
refuel in about the same amount of time as a gasoline car. By all of 
these measures ZEVs are more than technologically feasible for 
commercialization, certainly so with the abundant nine to 12 years 
of lead time for the 2022-2025 model years that are the focus of the 
comments.\155\
---------------------------------------------------------------------------

    \155\ CARB's supplemental comments at 12.

    CARB also relies upon the projections and explanations submitted 
with its initial waiver request and notes that the Dealers are taking 
issue with standards that do not come into effect until after a lengthy 
lead time. In addition to CARB's waiver request projections and 
explanations noted at the outset of this section CARB also provides an 
explanation of the Joint Technical Assessment Report (TAR), which was 
developed by EPA, NHTSA, and CARB, and released in September 2010. The 
report concluded ``electric drive vehicles including hybrid(s) * * * 
battery electric vehicles * * * plug-in hybrid(s) * * * and hydrogen 
fuel cell vehicles * * * can dramatically reduce petroleum consumption 
and GHG emissions compared to conventional technologies * * *. The 
future rate of penetration of these technologies into the vehicle fleet 
is not only related to future GHG and corporate average fuel economy 
(CAFE) standards, but also to future reductions in HEV/PHEV/EV battery 
costs, [and] the overall performance and consumer demand for the 
advance technologies * * *.'' \156\ CARB notes that the TAR stated that 
``* * * [A] number of the firms suggested that in the 2020 timeframe 
their U.S. sales of HEVs, PHEVs, and EVs combined could be on the order 
of 15-20 percent of their production.'' \157\
---------------------------------------------------------------------------

    \156\ EPA, 2010. United States Environmental Protection Agency, 
National Highway Safety and Traffic Administration and California 
Air Resources Board. September 2010. ``Interim Joint Technical 
Assessment Report: Light-Duty Vehicle Greenhouse Gas Emission 
Standards and Corporate Average Fuel Economy Standards for Model 
Years 2017-2025'' (p. vii). http://www.epa.gov/otaq/climate/regulations/ldv-ghg-tar.pdf.
    \157\ Id. at 2-5.
---------------------------------------------------------------------------

    Lastly, CARB addresses the Manufacturers' comments regarding the 
cost-effectiveness of CARB ZEV amendments, in terms of cost per ton of 
CO2 removal, in a manner similar to its response to the 
section 177 arguments--that such comments are irrelevant to EPA's 
209(b) waiver consideration. CARB notes EPA's 2009 GHG waiver decision 
wherein EPA described the appropriate cost of compliance analysis under 
section 202(a): ``Consistent with MEMA I, the Agency has to evaluate 
costs in the waiver context by looking at the actual cost of compliance 
in the time provided by the regulation, not the regulation's cost 
effectiveness. Cost effectiveness is a policy decision of California 
that is considered and made when California adopts the regulations, and 
EPA, historically, has deferred to these policy decision * * *.The 
issue of whether a proposed California requirement is likely to result 
in only marginal improvement in air quality not commensurate with its 
cost or is otherwise an arguably unwise exercise of regulatory power is 
not legally pertinent to my decision under section 209.''\158\
---------------------------------------------------------------------------

    \158\ CARB's supplemental comments at 9, citing 74 FR 32744, 
32775 (July 8, 2009). CARB provides additional information 
explaining how the ZEV program was considered in conjunction with 
the LEV program and that the ZEV regulation remains an important 
part of California's plans to reach attainment of health based air 
quality standards.
---------------------------------------------------------------------------

    In addition to the above facts, we believe additional information 
can help inform our review of the required increases in the sale of 
PHEVs, BEVS, and FCVs in California during the 2018 through 2025 
timeframe.
    EPA reviewed two additional studies of the market potential of ZEVs 
from the Electric Power Research Institute (EPRI) and the U.S. Energy 
Information Administration's Annual Energy Outlook (AEO) that are 
relevant to CARB's ZEV mandate. EPRI, a leading electric utility 
research organization published a July 2011 technical report, 
Transportation Electrification, A Technology Overview,\159\ which 
presents three market projection scenarios for EVs and PHEVs. The 
scenarios project a range of Low, Medium, and High sales volumes. The

[[Page 2142]]

EPRI projection for national EV and PHEV sales in 2018 ranges from a 
low of 500,000 vehicles to a high of 1,920,000 vehicles. In 2025, the 
EPRI projections range from a low of 1,144,000 to a high of 5,073,000 
vehicles. The Low projection mimics the historical market penetration 
of HEVs from 2000 through 2008, applying their rate of sales growth to 
PHEVs and EVs. The Medium projection is based on a ``ground up'' 
analysis of sales projections derived from PHEV and EV product 
announcements and production estimates. These projections are 
extrapolated past 2015 based on the aforementioned product 
announcements and the past sales performance of HEVs. The High 
projection is based on the average of the top third (more optimistic) 
of publicly available sales projections from several sources. In each 
of EPRI's three cases, projected PHEV and EV national sales far exceed 
CARB's ZEV mandate. EPA acknowledges that the EPRI study did not 
specifically project California sales but we believe it reasonable to 
assume that the supply of and demand for such vehicles will be 
significantly greater in California (and to some extent in section 177 
states with ZEV programs) than it will be in states without a ZEV 
mandate. The EPRI study indicates that it would take less than 25 
percent of the total national sales of ZEV in the Low scenario in order 
to exceed the necessary ZEV sales percentages during the 2018 through 
2025 timeframe in California.
---------------------------------------------------------------------------

    \159\ EPRI, Transportation Electrification, A Technology 
Overview, 2011 Technical Report, EPRI 1021334, July 2011. Http://www.epri.com/abstracts/pages/productabstract.aspx?ProductID=000000000001021334.
---------------------------------------------------------------------------

    The U.S. Energy Information Administration (AEO) also analyzed two 
scenarios of market penetration for PHEVs and EVs in their Annual 
Energy Outlook 2012 (AEO2012).\160\ AEO's reference case indicates a 
national market potential of around 165,000 EVs and PHEVs in 2018 which 
is more than twice the CARB ZEV requirement. In 2025, the AEO reference 
case indicates a national market potential of 283,000 ZEVs, which still 
exceeds CARB's proposed ZEV requirement of nearly 271,000. AEO's 
reference case assumes EV technology cost, especially batteries, 
remains high through 2030. AEO's High Technology Battery case, assumes 
the Department of Energy's (DOE) battery cost goals are met in 2015. 
Generally, these battery costs are more comparable to battery costs 
used by CARB and EPA in the 2010 Joint Technical Assessment Report 
(TAR) \161\ than those used in the reference case. The AEO High 
Technology Battery case indicates a market potential of ZEVs in 2018 as 
805,000 units, increasing to 1,394,000 in 2025. As with the EPRI study 
above, using the projections of the AEO High Technology Battery case, 
it would take less than 25 percent of the total national sales of ZEV 
to exceed the necessary ZEV sales percentages during the 2018 through 
2025 timeframe in California.
---------------------------------------------------------------------------

    \160\ U.S. Energy Information Administration, Annual Energy 
Outlook 2012, Data Tables, Table 57 accessed 12/13/12 at http://www.eia.gov/oiaf/aeo/tablebrowser/#release=AEO2012&subject=0-AEO2012&table=48-AEO2012®ion=1-0&cases=hp2012-d022112a.
    \161\ ``Interim Joint Technical Assessment Report: Light-Duty 
Vehicle Greenhouse Gas Emission Standards and Corporate Average Fuel 
Economy Standards for Model Years 2017-2025,'' September 2010.
---------------------------------------------------------------------------

    While both the EPRI and AEO market projections are for national 
sales, EPA believes it is reasonable to assume that a significant 
percentage of these vehicles will be sold in California as has been the 
past practice with HEVs and EVs.
b. EPA's Response to Comments
    After a review of the information in this proceeding, EPA has 
determined that the opponents of the ZEV standards have not 
demonstrated that the necessary increase in PHEV and ZEV sales 
necessary to meet the ZEV standards in the 2018 through 2025 MYs is 
infeasible. A review of the record, indicates that compliance with the 
ZEV standards, as they affect the 2018 through 2025 MYs, is feasible 
giving consideration to cost and lead time available. CARB has answered 
any theoretical objections to the projected technology, identified the 
major steps necessary in refinement of the technology, and offers 
plausible reasons for believing that each of those steps can be 
completed in the time available. This assessment is based upon the 
current technology available along with projected improvements in 
technology and expected cost reductions (in addition to continuing 
increases in consumer demand in response to preferences for advance 
technologies, fuel savings, available and improved infrastructure, 
incentives, regulatory mandates, etc) and given the significant lead 
time provided. As discussed in detail below, EPA cannot find that those 
opposing the waiver request have met their burden of showing that 
California's regulations are inconsistent with section 202(a). 
Therefore, we cannot deny the waiver on that ground.
Basic Feasibility of ZEV Technology
    At the outset we note that manufacturers are meeting the ZEV 
requirements today. As CARB noted in its waiver request, most 
manufacturers have near-term production plans to meet or over comply 
with regulatory requirements through 2017. More importantly, a number 
of manufacturers have clearly demonstrated the feasibility of ZEV 
technology with in-production or planned PHEV, BEV and FCV models 
within the next few years. Manufacturers are also afforded the 
flexibility to determine the appropriate mix between BEVs and FCVs. We 
note that no commenter suggested that the underlying technology is not 
available today nor is there any evidence in the record that 
contradicts CARB's assertions that improvements and technology path 
moving forward will continue in the ZEV area in regards to range and 
other capabilities. The objections raised by those opposing the waiver 
on this point have to do less with the basic feasibility of ZEVs than 
with their acceptability/marketability, supporting infrastructure, and 
cost.
    Regarding the lead time provided by California to meet the ZEV 
phase-in requirements, the commenters have not met their burden to show 
that the lead time is insufficient. While the commenters noted general 
concerns about marketability, infrastructure and cost they made no 
claims that inadequate lead time exists or that CARB's requirements 
would be feasible if more lead time were provided.
    Regarding the cost component of the technological feasibility test, 
EPA believes that the opponents of the waiver have not met their burden 
to show that the ZEV standards are not technologically feasible because 
of excessive cost. As noted above, EPA has traditionally examined 
whether the necessary technology exists today, and if not, what is the 
cost of developing and implementing such technology. To the extent it 
is appropriate for EPA to continue to examine the cost of implementing 
ZEV technology, CARB estimates that by 2025 the incremental cost of a 
ZEV or TZEV is expected to rapidly decline, yet remain approximately 
$10,000 (high end estimate) higher than a conventional vehicle.\162\ 
The Manufacturers note that CARB's analysis provides an incremental 
cost of $12,900 in MY 2020.\163\ Under EPA's traditional analysis of 
cost in the waiver context, because such cost does not represent a 
``doubling or tripling'' of the vehicle cost, such cost is not 
excessive nor does it represent an infeasible standard.\164\ Moreover, 
though EPA believes that it is not necessary or appropriate for EPA to 
evaluate how manufacturers choose to

[[Page 2143]]

allocate the incremental costs of ZEVs over their respective California 
fleets. CARB has identified one methodology of speeding the cost over 
the entire fleet with a resulting incremental cost of approximately 
$500, which is well within acceptable cost levels. EPA notes that 
manufacturers and dealers have many possible strategies available to 
spread the cost of the ZEV requirement beyond ZEV purchasers, but that 
such strategies are within the market choices of the manufacturers and 
dealers. Although EPA received comment that a manufacturer may have to 
employ costly marketing strategies if consumers do not otherwise accept 
ZEV vehicles, we do not believe such statements evidence standards that 
are infeasible. EPA also notes the likely existence of additional 
incentive programs that will further enable the marketability of ZEV 
vehicles from a cost perspective.
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    \162\ CARB waiver request at 6.
    \163\ Manufacturers' comments at 16.
    \164\ MEMA I at 1118.
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Relevance of Section 177 States on Consistency Analysis
    The opponents of CARB's ZEV amendments, as they affect 2018 and 
later MYs, rely upon the implications of the adoption of CARB's ZEV 
amendments in section 177 states and resulting feasibility concerns. 
EPA's longstanding interpretation of section 209(b) and its 
relationship with section 177, is that it is not appropriate under 
section 209(b)(1)(C) to review California regulations, submitted by 
CARB, through the prism of adopted or potentially adopted regulations 
by section 177 states. EPA believes the language of section 209(b) is 
intended to apply solely to whether California's regulations can be 
denied a waiver under the criteria of section 209(b). State regulations 
promulgated under section 177, which are promulgated by separate state 
agencies under their own authority, and which have not been submitted 
to EPA for waiver review, are not a proper focus of review for our 
determination regarding whether California's state regulations meet the 
requirements under section 209(b). Section 177, and the state statutes 
authorizing state action under section 177, is separate provisions with 
their own requirements, and those opposed to state regulations 
promulgated under section 177 would need to take action under those 
provisions in those states.
    An issue that arose during EPA's consideration of California's 
waiver request for its 1990 LEV standards was whether EPA could 
consider in its waiver decision the impact and implications of other 
states adopting the California standards under section 177. EPA 
concluded that section 209(b) does not authorize the agency to consider 
the impacts of actions or potential actions taken by other states under 
section 177 in reviewing a waiver request by California for its state 
standards.\165\ EPA also received comment, during a 1978 waiver review 
that EPA must consider each of the criteria of section 209(b) of the 
Act in light of the possibility that eligible States may impose the 
emission control requirements, for which a waiver has been granted, 
under section 177. A commenter further argued that EPA could not grant 
a waiver unless and until we could make an affirmative finding that the 
basic market demand could be satisfied in all States eligible to adopt 
and enforce the California standards under section 177. We did not 
agree with the commenters' interpretation of EPA's responsibilities 
under section 209(b). ``That section authorizes me to deny California a 
waiver only if I have determined that California does not meet the 
given criteria; it does not require me in granting a waiver to consider 
the impacts of actions taken by other States under section 177* * *'' 
EPA continued ``The legislative history behind the Clean Air Act 
Amendments of 1977 [the amendments that added section 177] contains no 
statement to the contrary.'' \166\ More significantly, the legislative 
history behind the amendments to section 209(b) specifically states 
that the intent of these amendments was * * * ``to ratify and 
strengthen the California waiver provision and to affirm the underlying 
intent of that provision, i.e. to afford California the broadest 
possible discretion in selecting the best means to protect the health 
of its citizens and the public welfare.'' \167\ EPA also determined 
that Congress already had balanced the burdens on manufacturers by 
selecting the language they did for section 177 and believed that such 
authority should not place an undue burden on the vehicle 
manufacturers. EPA is also guided by the District of Columbia Circuit's 
discussion of section 177 and section 209: ``Rather than being faced 
with 51 different standards, as they had feared, or with only one as 
they had sought, manufacturers must cope with two regulatory standards 
under the legislative compromise embodied in section 209(a).\168\
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    \165\ 58 FR 4166 (January 13, 1993), and LEV Decision Document 
at pp. 185-186. See ``State and Federal Standards of Mobile Source 
Emissions: Published by the National Research Council, 2006 at 81, 
83. ``In contrast to section 209(b) in which Congress explicitly 
assigned EPA the role of approving waiver of federal preemption for 
California standards, in section 177, Congress did not assign EPA 
any role in approving adoption of California by other states. As EPA 
itself stated, `language requiring that other States request and 
receive authorization from EPA is noticeable absent.''
    \166\ See H.R. Rep. No. 95-294, 95th Cong. 1st Sess. 14, 23, 26, 
207-217, 301-302, 209-311 (1977); H.R. Rep. No. 95-564, 95th Cong., 
1st Sess. 156, 158, 170 (1977).
    \167\ 43 FR 1829 (January 12, 1978), citing H.R. Rep No. 95-294, 
95th Cong., 1st Sess. 301-302 (1977).
    \168\ Engine Manufacturers Association v EPA, 88 F3d 1075, 1080 
(DC Cir. 1996).
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    EPA also believes it important to clarify that the record and the 
comments do not indicate that the CARB Board based its technological 
feasibility analysis, in order to determine the ability of 
manufacturers to meet CARB's standards within California, on the 
existence of any travel provisions or other regulatory provisions which 
may allow a manufacturer to take credit for certain ZEV sales outside 
of California.
Manufacturer Contentions Regarding Cost-Effectiveness
    With regard to the Manufacturers' contention that CARB's ZEV 
regulation is not cost-effective in terms of the cost per ton of 
removing CO2, EPA agrees with California's argument that 
case law clearly precludes EPA's consideration of this issue within the 
waiver context. Consistent with the court in MEMA I, the Agency has 
previously evaluated costs in the waiver context by looking at the 
actual cost of compliance in the lead time provided by the regulation, 
not the regulation's cost effectiveness.\169\ As noted previously, EPA 
has clearly stated that ``The issue of whether a proposed California 
requirement is likely to result in only marginal improvement in air 
quality not commensurate with its cost or is otherwise an arguably 
unwise exercise of regulatory power is not legally pertinent to my 
decision under section 209 * * *.'' \170\ EPA has consistently afforded 
deference to CARB's policy judgments and has recognized that ``The 
structure and history of the California waiver provision clearly 
indicate both a Congressional intent and an EPA practice of leaving the 
decision on ambiguous and controversial matters of public policy to 
California's judgment.'' \171\ To the extent the Manufacturers are 
raising general concerns regarding the cost associated with the ZEV 
technology and meeting applicable ZEV requirements, EPA has addressed 
this above.
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    \169\ 36 FR 17158 (August 31, 1971). See also 74 FR 3232744, 
32775 (July 8, 2009).
    \170\ Id.
    \171\ 40 FR 23102, 23104 (May 18, 1975). See also Decision 
Document accompanying waiver determination in 58 FR 4166 (January 
13, 1993).

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[[Page 2144]]

Consumer Demand
    With respect to the consumer demand issues raised, we note that the 
record, based on comment from the Manufacturers and the Dealers, is 
insufficient to meet the burden of proof to counter the current and 
projected consumer demand evidence supplied by CARB and the other 
commenters supporting the waiver. EPA did not receive any evidence or 
data from commenters to refute the projections made by CARB or other 
commenters. Although the Dealers maintain that CARB's point that BEV 
and even FCVs are being marketed today is not sufficient to demonstrate 
the demand for hundreds of thousands of ZEVs that will be required to 
be produced by 2025, the Dealers only turn to the history of the ZEV 
program. We believe such history is instructive. However, it does not 
meet the burden of proof required to demonstrate that the ZEV 
requirements are technologically infeasible looking forward, given the 
substantial amount of lead time before the standards take effect and 
the steps that manufacturers and dealers can take to facilitate 
compliance with these standards (e.g. rebates and other incentives). In 
addition, we note that PHEV and ZEV costs are projected to decrease as 
demand increases and regulatory floors are established. EPA believes 
CARB easily meets the historical test of whether their emission 
standards result in ``doubling or tripling'' of costs as applied in 
MEMA I noted above. EPA has heard directly from consumer groups that 
express confidence that demand for advance technology vehicles exists 
today and continues to grow. In addition to this evidence, EPA also 
believes that the analyses of future ZEV market potential, noted above, 
provide additional evidence that CARB's projections are supportable. 
Moreover, while marketability is an important issue for Manufacturers 
and Dealers, it is questionable how relevant it is to basic 
technological feasibility. As discussed above, there is no real 
question about the basic feasibility of this technology, and that the 
cost of each vehicle, if carried across a Manufacturer's entire sales 
line, is not as high as to implicate basic feasibility. That matter of 
how Manufacturers and Dealers choose to market these vehicles is one of 
market choice, as Manufacturers and Dealers attempt to maximize sales 
at the expense of other Manufacturers and Dealers. That the industry as 
a whole will experience increased costs, and that such increased costs 
will create marketability issues, is clear. But these are not so 
significant to implicate the technological feasibility of the vehicles 
for purposes of a waiver determination.
Infrastructure
    The Manufacturers' recommendation that EPA deny a waiver for the 
2018 and later ZEV amendments is based largely on an argument 
surrounding lack of market demand (discussed above) and infrastructure 
in the section 177 states. The comments state, ``* * * while 
California's infrastructure and consumer market may be developing to 
the point where at some time in the future the introduction of the 
number of ZEVs required under the California regulations may be 
feasible in that State, the same is not true of all the Section 177 
States that have adopted ZEV.'' \172\
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    \172\ Manufacturers comment at 13.
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    However, as explained above, EPA has determined in previous waiver 
actions that section 209(b) does not authorize the Agency to consider 
the impacts of actions or potential actions taken by other states under 
section 177 in reviewing a waiver request. CARB provided considerable 
evidence of state and federal efforts and programs underway to ensure 
that the infrastructure needed for the ZEV program in California is 
available. The Manufacturers and Dealers do not take issue specifically 
with CARB's assertions regarding the infrastructure that has been, and 
will be, put in place to meet these requirements in California. 
Therefore, based on the record before me those opposing the waiver on 
this basis have not met their burden of proof.
Dealers' List of Feasibility Criteria
    Lastly, EPA responds to the laundry list of requirements that the 
Dealers maintain is required in order for ZEVs to be marketable and 
thus for the ZEV regulations to be technologically feasible. The 
Dealers fail to provide any evidence to support their assertions nor do 
they refute the legal arguments and evidence otherwise in the record. 
For example, the Dealers fail to provide any evidence that ZEV vehicles 
are not as safe as the conventionally-fueled (conventional) vehicles of 
the same size. EPA agrees with CARB's statements that ZEV vehicles will 
meet the same safety requirements that conventional vehicles must meet. 
In any case, while EPA takes safety into consideration when examining 
the feasibility of emission standards, this basic feasibility does not 
require an examination of the relative safety of each vehicle.
    With regard to performance--many ZEVs already achieve acceleration 
and power characteristics expected on conventional vehicles. In 
addition, the Dealers provide no evidence that ZEVs lack performance 
characteristics that are essential for basic feasibility of the 
vehicle. ZEVs on the market today span a wide range of performance 
capability. The Mitsubishi iMiEV is a small four seat electric city 
car.\173\ Nissan's Leaf offers 5 seats and a size comparable to a 
Nissan Versa.\174\ Tesla's Model S is a larger sedan with luxury and 
performance comparable to other luxury sedans. Tesla's Roadster is a 
high performance two-seater EV.\175\ Finally, Toyota's RAV4 EV is an 
electric version of their popular RAV4 SUV.\176\ All these vehicles are 
designed to compete favorably on a performance basis with conventional 
cars in the same class.
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    \173\ http://www.mitsubishicars.com/MMNA/jsp/imiev/12/trims.do.
    \174\ http://www.nissanusa.com/leaf-electric-car/key-features.
    \175\ http://www.teslamotors.com/goelectric#.
    \176\ http://www.toyota.com/rav4ev/specs.html.
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    EPA has not historically taken into consideration the range and 
refueling times. Moreover, NADA does not present any evidence or data 
to suggest necessary ranges and refueling times deemed essential by 
consumers. Nor do the Dealers provide evidence that BEVs are not now, 
and cannot be in the lead time permitted, be manufactured in a manner 
to be above these necessary ranges and times. Evidence in the record 
suggests that many consumers average drive trips and refueling 
expectations are well within the capacity of current ZEV technology. 
EPRI analyzed a ``National Household Travel Survey'' that found: about 
95% of daily driving is under 90 total miles; about 80% of daily 
driving is under 40 total miles; about 65% of daily driving is under 20 
miles; and, there seems to be little variation in daily driving habits 
between many factors such as weekday/weekend, seasons, rural/urban, 
income, etc.\177\
---------------------------------------------------------------------------

    \177\ EPRI: Transportation Statistics Analysis for Electric 
Transportation, Technical Update EPRI 1021848, Dec 2011.
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    EPA also notes that additional lead time is abundant, from nine to 
twelve years for the 2022-2025 timeframe for further developments to 
technology that can reasonably be expected.
c. Conclusion on Technological Feasibility
    After its review of the information in this proceeding, EPA has 
determined that the industry opponents have not met the burden of 
producing the evidence necessary for EPA to find that California's LEV 
III/GHG standards and ZEV emission standards (as finalized on

[[Page 2145]]

December 6, 2012) are not consistent with Section 202(a).
5. Consistency of Certification Test Procedures
    CARB notes that the test procedures for certifying ZEVs, AT PZEVs, 
and PZEVs are contained in the ZEV and LEV Standards and Test 
Procedures incorporated by reference in section 1962.1(h) and 1962.2(h) 
and are largely un-amended by the 2012 ZEV rulemaking. The federal Tier 
2 regulations require manufacturers to measure emissions from ZEVs in 
accordance with the California test procedures. Accordingly there are 
no inconsistencies between the federal and California test procedures 
that would preclude a manufacturer from conducting one set of tests to 
demonstrate compliance with federal and California certification 
requirements. EPA has received no adverse comment or evidence of test 
procedure inconsistency and therefore we cannot deny the waiver on this 
basis.
6. Relevance of the Energy Policy and Conservation Act (EPCA) to the 
Waiver Decision
    EPA received comment from the Dealers that CARB's waiver request 
for its GHG emission standards should be denied because CARB's 
standards are in direct conflict with EPCA. The Dealers note ``EPCA 
expressly preempts state GHG emission standards because such laws 
relate to fuel economy standards.'' \178\
---------------------------------------------------------------------------

    \178\ Dealers at 10.
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    As EPA has stated on numerous occasions, section 209(b) of the 
Clean Air Act limits our authority to deny California's requests for 
waivers to the three criteria therein, and EPA has refrained from 
denying California's requests for waivers based on any other criteria. 
Where the Court of Appeals for the District of Columbia Circuit has 
reviewed EPA decisions declining to deny waiver requests based on 
criteria not found in section 209(b), the court has upheld and agreed 
with EPA's determination.\179\
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    \179\ See Motor and Equipment Manufacturers Ass'n v. Nichols, 
142 F.3d 449, 462-63, 466-67 (DC Cir. 1998), MEMA I at 1111, 1114-
20.
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    Evaluation of whether California's GHG standards are preempted, 
either explicitly or implicitly, under EPCA, is not among the criteria 
listed under section 209(b). EPA may only deny waiver requests based on 
the criteria in section 209(b), and inconsistency with EPCA is not one 
of those criteria. In considering California's request for a waiver, I 
therefore have not considered whether California's standards are 
preempted under EPCA. As in previous waiver decisions, the decision on 
whether to grant the waiver is based solely on the criteria in section 
209(b) of the Clean Air Act and this decision does not attempt to 
interpret or apply EPCA or any other statutory provision.

VI. Decision

    The Administrator has delegated the authority to grant California 
section 209(b) waivers of preemption to the Assistant Administrator for 
Air and Radiation. After review of the information submitted by CARB 
and other parties to this Docket, I find that those opposing the waiver 
request have not met the burden of demonstrating that California's 
regulations do not satisfy one or more of the three statutory criteria 
of section 209(b). For this reason, I am granting California's waiver 
request to enforce its ACC emission regulations, including the ``deemed 
to comply'' rule for GHG emissions. EPA also determines that CARB's 
amendments to the ZEV program as they affect 2017 and prior MYs are 
within the scope of previous waivers of preemption granted to 
California for its ZEV regulations. In the alternative, EPA's waiver of 
preemption for CARB's ACC regulations includes a waiver of preemption 
for CARB's ZEV amendments as they affect all MYs, including 2017 and 
prior MYs.
    My decision will affect not only persons in California but also 
persons outside the State who would need to comply with California's 
GHG emission regulations. For this reason, I hereby determine and find 
that this is a final action of national applicability.
    Under section 307(b)(1) of the Act, judicial review of this final 
action may be sought only in the United States Court of Appeals for the 
District of Columbia Circuit. Petitions for review must be filed by 
March 11, 2013. Under section 307(b)(2) of the Act, judicial review of 
this final action may not be obtained in subsequent enforcement 
proceedings.

VII. Statutory and Executive Order Reviews

    As with past waiver decisions, this action is not a rule as defined 
by Executive Order 12866. Therefore, it is exempt from review by the 
Office of Management and Budget as required for rules and regulations 
by Executive Order 12866.
    In addition, this action is not a rule as defined in the Regulatory 
Flexibility Act, 5 U.S.C. 601(2). Therefore, EPA has not prepared a 
supporting regulatory flexibility analysis addressing the impact of 
this action on small business entities.
    Further, the Congressional Review Act, 5 U.S.C. 801 et seq., as 
added by the Small Business Regulatory Enforcement Fairness Act of 
1996, does not apply because this action is not a rule, for purposes of 
5 U.S.C. 804(3).

    Dated: December 27, 2012.
Gina McCarthy,
Assistant Administrator, Office of Air and Radiation.
[FR Doc. 2013-00181 Filed 1-8-13; 8:45 am]
BILLING CODE 6560-50-P


