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Federal Register / Vol. 86, No. 159 / Friday, August 20, 2021 / Proposed Rules FONSI regarding the agencys decision to increase the CAFE civil penalty rate for inflation beginning with Model Year 2022. However, it sought comment on the environmental impacts of a longer delay to Model Year 2023. Two commenters alleged that the interim final rule violated NEPA because the agency did not consider the effect of CAFE penalties assessed in one year on manufacturers compliance decisions in future years.49 Like NHTSAs approach in the interim final rule, this section may serve as NHTSAs Draft Environmental Assessment Draft EA.
The issue raised by commenters on the EA presented in the interim final rule is addressed below. NHTSA invites public comments on the applicability of NEPA
to this action and the contents and tentative conclusions of this Draft EA.
I. Purpose and Need This SNPRM sets forth the purpose of and need for this action. Pursuant to the Inflation Adjustment Act and the Second Circuits decision, NHTSA is required to make an initial catch-up adjustment to the civil monetary penalties it administers for the CAFE
program. The purpose of this SNPRM is to consider the timing of the application of the adjustment to the CAFE civil penalty rate, consistent with the statutory requirements.

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II. Alternatives The first alternative is to restore the status quo ante prior to the interim final rule, which is adjusting the CAFE civil penalty rate from $5.50 to $14 beginning in Model Year 2019. This timing was originally established by the December 2016 final rule and was twice made effective by decisions of the Second Circuit. The second alternative is applying the adjustment beginning in Model Year 2022, which reflects the action taken in the interim final rule.
NHTSA is no longer considering the alternative of applying the adjustment beginning in Model Year 2023. NHTSA
is accepting comments on whether it should consider other alternatives of the inflation adjustment applying beginning with a model year later than Model Year 2019. Commenters arguing for such a position should explain how it is consistent with the 2015 Act and the Second Circuits decisions.
49 Comment from Natural Resources Defense Council and Sierra Club, NHTSA202100010013;
Comment from the New York University School of Law Institute of Policy Integrity, NHTSA2021
00010011.

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III. Environmental Impacts of the Action and Alternatives In the interim final rule, NHTSA
asserted that it anticipated no differences in environmental impacts associated with the alternatives of applying the adjustment beginning in Model Years 2019, 2020, 2021, or 2022.
NHTSA based this conclusion on the fact that vehicles for Model Years 2019
and 2020 had largely if not entirely been produced already, and many manufacturers were already selling Model Year 2021 vehicles.
After reviewing the comments received in response to the interim final rule, NHTSA has reconsidered whether this assessment is complete.
Commenters have argued that, regardless of the impact of this rulemaking action on Model Year 2019
through 2021 vehicles, longer-term impacts may vary as a result of manufacturer multi-year planning, the transfer of credits across model years and between manufacturers, and the changing value of credits over time. If this is correct, applying the adjustment earlier could result in manufacturers applying credit balances to Model Year 2019 through 2021 vehicles and being incentivized to make fuel economy improvements in their fleet beyond that timeframe, rather than paying civil penalties at the $5.50 rate for Model Years 2019 through 2021 and saving the credits for future model years when they could be valued more due to the inflation adjustment. Additionally, for manufacturers without credit balances, the potential application of a significantly higher civil penalty for Model Years 2019 through 2021 may spur more rapid implementation of fuelsaving technology in order to allow the manufacturer to accrue credits that may be carried back to cover the shortfall in Model Years 2019 through 2021.
Overall, NHTSA anticipates that applying the adjustment beginning with Model Year 2019 may lead to the eventual application of more fuel-saving technology, resulting in fewer greenhouse gas emissions and reductions in many criteria and toxic air pollutants compared to applying the adjustment beginning in Model Year 2022.50 Although Model Years 2019 and 2020 are already completed, and Model Year 2021 is underway, the civil penalty 50 See NHTSAs Final Environmental Impact Statements for the CAFE rulemaking for MYs 2017
and beyond Docket No. NHTSA20110056 and for MYs 20212026 Docket No. NHTSA2017
0069, both of which illustrate these trends as fuel economy standard stringency increases across alternatives. Both EISs are also available on the agencys fuel economy website: https
www.nhtsa.gov/fuel-economy.

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assessment process is not yet complete for any of them.51 As a result, NHTSA
does not yet know the anticipated manufacturer compliance shortfall for these model years. Because manufacturers can apply credits across a multi-year window, their decisions about how to apply credits in earlier model years will affect the availability of credits and the application of fuelsaving technology in later model years.
However, NHTSA does not know whether and to what degree manufacturers will choose to pay fines in lieu of applying accrued credits, trade credits with other manufacturers, or rely on multi-year planning and credit carryforward and carry-back to address shortfalls. NHTSA invites comments, information, and analyses from the public on the degree to which this may occur as a result of changes to the civil penalty rate in Model Year 2019 versus Model Year 2022.
At this time, however, NHTSA
anticipates the impacts to be small. The difference between the alternatives contemplated in this action is only whether or not the civil penalty rate increase applies to three Model Years:
2019, 2020, and 2021. NHTSA
continues to believe the impacts on those Model Years alone is expected to be de minimis, as Model Years 2019 and 2020 have largely if not entirely been produced already, and manufacturers are already selling Model Year 2021
vehicles. Further, as NHTSA has addressed in its CAFE rulemakings, many manufacturers have been unwilling to pay civil penalties historically. Those manufacturers may continue to opt to apply credits even if a lower civil penalty rate applied, rather than hold credits for future model years when the civil penalty rate would be higher. NHTSA also seeks comments on these conclusions.
IV. Agencies and Persons Consulted NHTSA and DOT have consulted with OMB and the U.S. Department of Justice and provided other Federal agencies with the opportunity to review and provide feedback on this rulemaking.
V. Conclusion NHTSA has reviewed the information presented in this Draft EA and tentatively concludes that adjusting the CAFE civil penalty rate beginning with Model Year 2019, as compared to Model Year 2022, would have, at most, a more positive impact on the quality of the 51 Because NHTSA does not have final model year performance data verified by EPA for these model years, any quantitative projections of the environmental impact across multiple model years would be too speculative to rely upon at this time.

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