[Federal Register Volume 85, Number 127 (Wednesday, July 1, 2020)]
[Notices]
[Pages 39561-39564]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-14099]


=======================================================================
-----------------------------------------------------------------------

ENVIRONMENTAL PROTECTION AGENCY

[EPA-HQ-OAR-2019-0210; FRL 10010-87-OAR]


Determinations of Light-Duty Vehicle Alternative Greenhouse Gas 
Emissions Standards for Small Volume Manufacturers

AGENCY: Environmental Protection Agency (EPA).

ACTION: Notice.

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

SUMMARY: The Environmental Protection Agency (EPA) is finalizing 
determinations of light-duty vehicle greenhouse gas emissions 
alternative standards for four small volume manufacturers: Aston 
Martin, Ferrari, Lotus and McLaren. The alternative standards in these 
determinations cover model years 2017-2021 and are established pursuant 
to small volume manufacturer provisions in EPA's light-duty vehicle 
greenhouse gas regulations.

ADDRESSES: The EPA has established a docket for this action under 
Docket ID No. EPA-HQ-OAR-2019-0210. All documents in the docket are 
listed on the https://www.regulations.gov website. Although listed in 
the index, some information is not publicly available, e.g., CBI or 
other information whose disclosure is restricted by statute. Certain 
other material, such as copyrighted material, is not placed on the 
internet and will be publicly available only in hard copy form. 
Publicly available docket materials are available electronically 
through https://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Christopher Lieske, Office of 
Transportation and Air Quality, Assessment and Standards Division, U.S. 
Environmental Protection Agency, 2000 Traverwood Drive, Ann Arbor, MI 
48105. Telephone: (734) 214-4584. Fax: (734) 214-4816. Email address: 
lieske.christopher@epa.gov.

SUPPLEMENTARY INFORMATION:

I. General Information

A. How can I get copies of this document and other related information?

    EPA has established a docket for this action under Docket ID No. 
EPA-HQ-OAR-2019-0210. Publicly available docket materials are available 
either electronically through www.regulations.gov. Out of an abundance 
of caution for members of the public and our staff, the EPA Docket 
Center and Reading Room was closed to public visitors on March 31, 
2020, to reduce the risk of transmitting COVID-19. Our Docket Center 
staff will continue to provide remote customer service via email, 
phone, and webform. For further information on EPA Docket Center 
services and the current status, please visit us online at https://www.epa.gov/dockets.

B. Electronic Access

    You may access this Federal Register document electronically from 
the Government Printing Office under the ``Federal Register'' listings 
at FDSys. (http://www.gpo.gov/fdsys/browse/collection.action?collectionCode=FR).

II. Background

    The EPA's light-duty vehicle greenhouse gas (GHG) program for model 
years (MYs) 2012-2016 provided a conditional exemption for small volume 
manufacturers (SVMs) with annual U.S. sales of less than 5,000 vehicles 
due to unique feasibility issues faced by these SVMs.\1\ The exemption 
was conditioned on the manufacturer making a good faith effort to 
obtain credits from larger volume manufacturers. For the MY 2017-2025 
light-duty vehicle GHG program, EPA proposed, took public comment on, 
and in 2012 finalized specific regulations allowing SVMs to petition 
EPA for alternative standards, again recognizing that the primary 
program standards may not be feasible for SVMs and could drive these 
manufacturers from the U.S. market.\2\ EPA acknowledged in the 2012 
final rule that SVMs may face a greater challenge in meeting 
CO2 standards compared to large manufacturers because they 
only produce a few vehicle models, mostly focused on high performance 
sports cars and luxury vehicles. SVMs have limited product lines across 
which to average emissions, and the few vehicles they produce often 
have very high CO2 levels on a per vehicle basis. EPA also 
noted that the total U.S. annual vehicle sales of SVMs are much less 
than 1 percent of total sales of all manufacturers and contribute 
minimally to total vehicular GHG emissions, and foregone GHG reductions 
from SVMs likewise are a small percentage of total industry-wide 
reductions. EPA received only supportive public comments on allowing 
alternative standards for SVMs, including from SVMs, their trade 
associations, and dealers.\3\ EPA adopted a regulatory pathway for SVMs 
to apply for alternative GHG emissions standards for MYs 2017 and 
later, based on information provided by each SVM on factors such as 
technical feasibility, cost, and lead time. \4\
---------------------------------------------------------------------------

    \1\ 75 FR 25419-25421, May 7, 2010.
    \2\ 77 FR 62789-62795, October 15, 2012.
    \3\ Docket No. EPA-HQ-OAR-2010-0799
    \4\ 40 CFR 86.1818-12(g).
---------------------------------------------------------------------------

    The regulations established in the 2012 rule outline eligibility 
criteria and a framework for establishing SVM alternative standards. 
Manufacturer average annual U.S. sales must remain below 5,000 vehicles 
to be eligible for SVM alternative standards.\5\ The regulations 
specify the requirements for supporting technical data and information 
that a manufacturer must submit to EPA as part of its application.\6\ 
The regulations specify that an SVM applying for an alternative 
standard provide the following technical information:
---------------------------------------------------------------------------

    \5\ 40 CFR 86.1818-12(g)(1).
    \6\ 40 CFR 86.1818-12(g)(4).
---------------------------------------------------------------------------

     The CO2 reduction technologies employed by the 
manufacturer on each vehicle model, or projected to be employed, 
including information regarding the cost and CO2-reducing 
effectiveness. Include technologies that improve air conditioning 
efficiency and reduce air conditioning system leakage, and any ``off-
cycle'' technologies that potentially provide benefits outside the 
operation represented by the Federal Test Procedure (FTP) and the 
Highway Fuel Economy Test (HFET).
     An evaluation of comparable models from other 
manufacturers, including CO2 results and air conditioning 
credits generated by the models.
     A discussion of the CO2-reducing technologies 
employed on vehicles offered outside of the U.S. market but not 
available in the U.S., including a discussion as to why those vehicles 
and/or technologies are not being used to achieve CO2 
reductions for vehicles in the U.S. market.
     An evaluation, at a minimum, of the technologies projected 
by the EPA in a final rulemaking as those technologies likely to be 
used to meet greenhouse gas emission standards and the extent to which 
those technologies are employed or projected to be employed by the 
manufacturer.
     The most stringent CO2 level estimated to be 
feasible for each model, in each model year, and the technological 
basis for this estimate.
     For each model year, a projection of the lowest feasible 
sales-weighted fleet

[[Page 39562]]

average CO2 value, separately for passenger automobiles and 
light trucks, and an explanation demonstrating that these projections 
are reasonable.
     A copy of any application, data, and related information 
submitted to the National Highway Traffic Safety Administration (NHTSA) 
in support of a request for alternative Corporate Average Fuel Economy 
standards filed under 49 CFR part 525.
    SVMs may apply for alternative standards for up to five model years 
at a time. The GHG standards that EPA establishes for MY 2017 may 
optionally be met by the manufacturers in MYs 2015-2016.\7\ SVMs may 
use the averaging, banking, and trading provisions to meet the 
alternative standards, but may not trade credits to another 
manufacturer.\8\ The process for approving an SVM application includes 
a public comment period of 30 days after which EPA will issue a final 
determination establishing alternative standards for the manufacturer, 
as appropriate.\9\
---------------------------------------------------------------------------

    \7\ See 40 CFR 86.1818-12(g). Manufacturers may opt to comply 
with their MY 2017 standard in MYs 2015 and 2016 retroactively in 
lieu of the Temporary Leadtime Alternative Allowance Standards used 
in these model years.
    \8\ 40 CFR 86.1818-12(g)(6).
    \9\ 40 CFR 86.1818-12(g)(5).
---------------------------------------------------------------------------

    SVMs applied for alternative standards due to continued concern 
regarding their abilities to meet the primary program GHG standards. 
Given that the current production MY for manufacturers is 2020, with MY 
2021 starting soon, these alternative standards will provide immediate 
relief for SVMs as authorized under the regulation. The GHG program 
also allows for a 3-year carry-back provision, which is within the 
timeframe of this notice and the MYs under consideration.
    The Energy Policy and Conservation Act (EPCA), governing the 
establishment of Corporate Average Fuel Economy (CAFE) standards, 
contains separate small volume manufacturer alternative standards 
provisions that are administered by the National Highway Traffic Safety 
Administration (NHTSA) independent of EPA's SVM alternative standards 
provisions.\10\ Under EPCA's CAFE provisions, SVMs meeting the CAFE 
eligibility criteria may petition NHTSA for less stringent alternative 
CAFE standards. Manufacturers generally are also able to pay fines in 
lieu of meeting the CAFE standards, which is not an option in EPA's GHG 
program under the Clean Air Act. While eligible SVMs may apply for 
alternative standards under the CAFE program, and some of the SVMs 
covered by this decision document have applied for alternative CAFE 
standards, as of May 4, 2020, none of those SVMs have been granted 
alternative CAFE standards for MYs 2017-2021.\11\
---------------------------------------------------------------------------

    \10\ 49 U.S.C. 32902(d). Implementing regulations may be found 
in 49 CFR part 525. EISA limits eligibility to manufacturers with 
worldwide production of fewer than 10,000 passenger cars.
    \11\ See https://one.nhtsa.gov/cafe_pic/CAFE_PIC_Mfr_LIVE.html
---------------------------------------------------------------------------

III. Manufacturer Requested GHG Standards

    The EPA received applications for SVM alternative standards from 
four manufacturers: Aston Martin, Ferrari, Lotus and McLaren.\12\ Each 
manufacturer provided an application to EPA that contained confidential 
business information (CBI). Each manufacturer also provided a public 
version of its application with the CBI removed, which EPA placed in 
the public docket established for this proceeding. As part of their 
applications, the SVMs requested specific alternative GHG standards for 
five model years starting with MY 2017 based on their unique projected 
product mix. Table 1 below provides the standards requested by the 
manufacturers.
---------------------------------------------------------------------------

    \12\ Ferrari was previously owned by Fiat Chrysler Automobiles 
(FCA) and petitioned EPA for operationally independent status under 
40 CFR 86.1838-01(d). In a separate decision EPA granted this status 
to Ferrari starting with the 2012 model year, allowing Ferrari to be 
treated as an SVM under EPA's GHG program. Ferrari has since become 
an independent company and is no longer owned by FCA.

                             Table 1--Manufacturer Requested GHG Standards (g/mile)
----------------------------------------------------------------------------------------------------------------
          Manufacturer               MY 2017 *        MY 2018         MY 2019         MY 2020         MY 2021
----------------------------------------------------------------------------------------------------------------
Aston Martin....................             431             396             380             374             376
Ferrari.........................             421             408             395             386             377
Lotus...........................             361             361             344             341             308
McLaren.........................             372             372             368             360             334
----------------------------------------------------------------------------------------------------------------
*Manufacturers may optionally meet MY 2017 standards in MYs 2015-2016 (40 CFR 86.1818-12(g).

    In November 2017, subsequent to submitting a request for SVM 
alternative standards, Lotus was acquired by Zhejiang Geely Holding 
Group (Geely) which also owns Volvo Car Company. Under the SVM 
regulations regarding eligibility,\13\ Lotus remains eligible for 
alternative standards for MY 2017. However, it is possible that Lotus 
will no longer be eligible for SVM standards starting in MY 2018 as 
Lotus may exceed the 5,000 vehicles eligibility threshold under the 
aggregation provisions of the regulations, based upon sales volume 
figures and other information provided by the manufacturer. While EPA 
is establishing alternative standards for Lotus through MY 2021, in 
order to use the alternative standards for MYs 2018-2021 Lotus would 
need to either demonstrate that they remain eligible for SVM 
alternative standards under the aggregation provisions or apply and be 
granted operational independence status.\14\ EPA is not including any 
determination of SVM eligibility for Lotus for MY 2018 and beyond in 
this SVM alternative standards determination notice.
---------------------------------------------------------------------------

    \13\ 40 CFR 86.1818-12(g)(1)(i).
    \14\ 40 CFR 86.1838-01(d).
---------------------------------------------------------------------------

    The regulations require SVMs to submit information, including cost 
information, to EPA as part of their applications, as detailed above. 
Each SVM provided its technical basis for the requested standards 
including a discussion of technologies that could and could not be 
feasibly applied to their vehicles in the time frame of the standards. 
As noted above, the non-CBI information provided by the SVMs is 
included in the docket for this proceeding. However, much of the data 
and information provided by the manufacturers regarding future vehicles 
and technology projections is claimed as CBI and not included in the 
public versions of the applications.\15\
---------------------------------------------------------------------------

    \15\ For more information about how EPA addresses claims of 
Confidential Business Information, see 40 CFR part 2, subpart B.
---------------------------------------------------------------------------

IV. EPA Determinations of SVM Alternative Standards

    On July 31, 2019, EPA issued proposed determinations of SVM 
alternative standards, including background information and EPA's

[[Page 39563]]

assessment of the proposed standards, and requested public comment.\16\ 
As discussed below, EPA is finalizing the SVM alternative standard 
determinations as proposed. EPA received only supportive comments 
concerning the proposed alternative standards and no commenter 
suggested any adjustment to the proposed standard levels. EPA has also 
placed a Response to Comments document in the docket for this 
proceeding.\17\
---------------------------------------------------------------------------

    \16\ 84 FR 37277.
    \17\ ``Determinations of Light-duty Vehicle Alternative 
Greenhouse Gas Emissions Standards for Small Volume Manufacturers: 
Response to Comments,'' EPA-420-R-20-009, June 2020.
---------------------------------------------------------------------------

    For the first four model years of the program, MYs 2017-2020, EPA 
proposed and is adopting the alternative standards requested by the 
SVMs. These model years are completed or underway and therefore lead-
time is a primary consideration. Based on the lack of lead-time 
available for these model years and EPA's review of the manufacturers' 
submissions and assessment of the capability of each product and its 
associated technology adoption, EPA believes this approach is 
appropriate for MYs 2017-2020.
    For MY 2021, EPA considered the levels requested by the 
manufacturers and compared them to levels each SVM would achieve under 
an approach where the manufacturers achieved year-over-year reductions 
from their MY 2017 baseline through MY 2021, analogous to the overall 
declining fleetwide standards in the primary program. The primary 
program standards for passenger cars are equivalent to approximately 
five percent year-over-year improvements. Although the regulations do 
not mandate a specific year-over-year percent reduction for SVMs, EPA 
considered an approach based on a minimum level of steady improvement 
of three percent year-over-year emissions reduction from each SVM's 
baseline CO2 levels. This pace of change is not as 
aggressive as the annual improvement in the passenger car standards in 
the primary program for these model years, but EPA believes it 
represents a reasonable minimum pace of meaningful improvements for 
SVMs under the SVM alternative standards regulatory provisions, given 
the SVMs' limited product lines and limited ability to average among 
high and low emitting vehicle models. Historically, EPA has set 
standards designed to reduce emissions while providing vehicle 
manufacturers compliance flexibility through averaging. Table 2 below 
provides the projected CO2 levels for each manufacturer 
based on three percent annual improvements, using MY 2017 as the 
baseline or starting model year.

                    Table 2--Three Percent Annual Improvement from MY 2017 Baseline (g/mile)
----------------------------------------------------------------------------------------------------------------
                   Model year                      Aston Martin       Ferrari          Lotus          McLaren
----------------------------------------------------------------------------------------------------------------
2017 Baseline...................................             431             421             361             372
2018............................................             418             408             350             361
2019............................................             406             396             340             350
2020............................................             393             384             329             340
2021............................................             382             373             320             329
----------------------------------------------------------------------------------------------------------------

    Table 3 below compares the levels projected for MY 2021 under the 
three percent per year reductions with the levels requested by the 
manufacturers. For Aston Martin and Lotus, their requested standards 
for MY 2021 are more stringent than the levels represented by the three 
percent year-over-year reductions, as shown in Table 3. EPA believes 
that the requested MY 2021 standards for Aston Martin and Lotus are 
appropriate, and, as proposed, is finalizing the requested alternative 
standards with no adjustment.
    For Ferrari and McLaren, EPA proposed and is finalizing MY 2021 
standards reflecting the 3 percent year-over-year reductions shown in 
Table 3 below. This approach requires Ferrari and McLaren to achieve a 
MY 2021 standard that is minimally more stringent than that requested 
by the manufacturers. The differences are small, 5 g/mile or less, and 
based on EPA's review of the information provided by the manufacturers, 
EPA believes this additional emissions reduction can be achieved 
through the use of credits, including air conditioning and off-cycle 
credits, and the use of program flexibilities including credit carry-
forward and credit carry-back within the lead-time available. As 
discussed above and in the proposal, EPA believes that MY 2021 
standards based on 3 percent year-over-year reductions represent 
reasonable progress over time for SVMs and a reasonable balance between 
the program goal of GHG reductions and the degree of challenge the 
standards pose to SVMs, based on EPA's assessment of the information, 
including cost information, provided to the agency.

                          Table 3--Comparison of Three Percent per Year Reductions with SVM's Projections for MY 2021 (g/mile)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                    Aston Martin   Aston Martin 3%      Ferrari                                                             McLaren
   Model year        requested         per year        requested      Ferrari 3% per  Lotus requested    Lotus 3% per      requested      McLaren 3% per
                     standards        reduction        standards      year reduction     standards      year reduction     standards      year reduction
--------------------------------------------------------------------------------------------------------------------------------------------------------
          2021             * 376              382              377            * 373            * 308              320              334            * 329
--------------------------------------------------------------------------------------------------------------------------------------------------------
*Indicates final standard.

    As discussed in the notice of proposed determinations, EPA 
recognizes that the three percent annual improvement approach for SVM 
alternative standards for MY 2021 described above differs from the 
approach for the primary program for MY 2021 in the Safer Affordable 
Fuel-Efficient (SAFE) Vehicles Rule for Model Years 2021-2026 Passenger 
Cars and Light Trucks rulemaking.\18\ However, the SVM alternative 
standards for MY 2021 remain significantly less stringent than the 
primary program standards as revised by the SAFE

[[Page 39564]]

Vehicles rulemaking and represent significant relief for the SVMs.
---------------------------------------------------------------------------

    \18\ Proposed rulemaking, 83 FR 42986 (August 24, 2018); Final 
rule, 85 FR 24174 (April 30, 2020).
---------------------------------------------------------------------------

V. Summary of Final Alternative SVM Standards

    A summary of the case-by-case alternative SVM standards and 
associated per-manufacturer GHG reductions is provided in Table 4 of 
this document. As discussed above, the MY 2017-2020 standards for all 
four SVMs are the manufacturers' requested alternative standards due to 
lead time concerns. For Aston Martin and Lotus, the MY 2021 standards 
also are their requested standards. For Lotus, the MY 2018-2021 
standards are conditional based on its ability to either demonstrate 
that it remains eligible for SVM alternative standards under the 
program's aggregation provisions or apply and be granted operational 
independence status, as discussed in Section III above. For Ferrari and 
McLaren, the MY 2021 standards are based on three percent year-over-
year reductions from their respective MY 2017 baselines.

                   Table 4--Summary of Standards and Per-Manufacturer GHG Reductions (g/mile)
----------------------------------------------------------------------------------------------------------------
                                                   Aston Martin       Ferrari          Lotus          McLaren
----------------------------------------------------------------------------------------------------------------
MY 2017.........................................             431             421             361             372
MY 2018.........................................             396             408             361             372
MY 2019.........................................             380             395             344             368
MY 2020.........................................             374             386             341             360
MY 2021.........................................             376             373             308             329
g/mile Reduction................................              55              48              53              43
% Reduction (MY2017 to MY2021)..................           12.8%           11.4%           14.7%           11.6%
----------------------------------------------------------------------------------------------------------------


Andrew Wheeler,
Administrator.
[FR Doc. 2020-14099 Filed 6-30-20; 8:45 am]
BILLING CODE 6560-50-P


