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Federal Register / Vol. 86, No. 169 / Friday, September 3, 2021 / Proposed Rules the PIC site. Those calculation errors have been corrected and a new version of the template is available for download on the NHTSA PIC. Starting January 1, 2022, NHTSA will only accept its credit template as the sole source for executing CAFE credit transactions. Until that time, manufacturers can deviate from the generated language in the NHTSA credit trade confirmation by adding qualifications but, at a minimum, must include the core information generated by the template.
3 Monetary and Non-Monetary Credit Trade Information Credit trading became permissible in MY 2011.516 To date, NHTSA has received numerous credit trades from entities, but has only made limited information publicly available.517 As discussed earlier, NHTSA maintains an online CAFE database with manufacturer and fleetwide compliance information that includes year-by-year accounting of credit balances for each credit holder. While NHTSA maintains this database, the agencys regulations currently state that it will not publish information on individual transactions, and NHTSA has not previously required trading entities to submit information regarding the compensation whether financial, or other items of value exchanged for credits.518 519 Thus, NHTSAs PIC offers sparse information to those looking to determine the value of a credit.
The lack of information regarding credit transactions means entities wishing to trade credits have little, if any, information to determine the value of the credits they seek to buy or sell.
Historically we have assumed that the civil penalty for noncompliance with CAFE standards largely determines the upper value of a credit, because it is logical to assume that manufacturers would not purchase credits if it cost less to pay civil penalties instead, but it is unknown how other factors affect the value. For example, a credit nearing the end of its five-model-year lifespan would theoretically be worth less than a credit within its full five-model-year lifespan. In the latter case, the credit holder would likely value the credit 516 49

CFR 536.6c.
may generate credits, but nonmanufacturers may also hold or trade credits. Thus, the word entities is used to refer to those that may be a party to a credit transaction.
518 49 CFR 536.5e1.
519 NHTSA understands that not all credits are exchanged for monetary compensation. The proposal that NHTSA is adopting in this proposed rule requires entities to report compensation exchanged for credits and is not limited to reporting monetary compensation.

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more, as it can be used for compliance purposes for a longer period of time.
NHTSA adopted requirements in the 2020 final rule requiring manufacturers to submit all credit trade contracts, including cost and transactional information, to the agency starting January 1, 2021. NHTSA also adopted requirements allowing manufacturers to submit the information confidentially, in accordance with 49 CFR part 512.520
As stated in the final rule, NHTSA
intended to use this information to determine the true cost of compliance for all manufacturers. This information would allow NHTSA to better assess the impact of its regulations on the industry and provide more insightful information in developing future rulemakings. This confidential information would be held by secure electronic means in NHTSAs database systems. As for public information, NHTSA would include more information on the PIC on aggregated credit transactions, such as the combined flexibilities all manufacturers used for compliance as shown in Figure VII6, or information comparable to the credit information EPA makes available to the public. In the future, NHTSA will consider what information, if any, can be meaningfully shared with the public on credit transactional details or costs, while accounting for the concerns raised by the automotive industry for protecting manufacturers competitive sources of information.
However, manufacturers continue to argue that disclosing trading terms may not be as simple as a spot purchase at a given price. As stated in the 2020 final rule, manufacturers contend a number of transactions for both CAFE and CO2
credits involve a range of complexity due to numerous factors that are reflective of the marketplace, such as the volume of credits, compliance category, credit expiration date, a sellers compliance strategy, and even the CAFE penalty rate in effect at that time. In addition, automakers have a range of partnerships and cooperative agreements with their own competitors.
Credit transactions can be an offshoot of these broader relationships, and difficult to price separately and independently.
Since then, NHTSA has identified a series of non-monetary factors that it believes to be important to the costs associated with credit trading in the CAFE program.521 The agency believes this information will allow for a better 520 See
also 49 U.S.C. 32910c.
Detailed Comments, NHTSA2018
006712039; Jason Schwartz, Detailed Comments, NHTSA2018006712162.
521 UCS,
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assessment of the true costs of compliance. NHTSA further notes that greater government oversight is needed over the CAFE credit market and it needs to understand the full range of complexity in transactions, monetary and non-monetary, in addition to the range of partnerships and cooperative agreements between credit account holderswhich may impact the price of credit trades.522 Therefore, using the identified series of non-monetary factors, NHTSA has developed a new CAFE Credit Reporting Template Form 1621 for capturing the monetary and non-monetary terms of credit trading contracts. NHTSA proposes that manufacturers start using the new template starting September 1, 2022.
The draft template can be viewed and downloaded from the NHTSA PIC site.
3. What compliance flexibilities and incentives are currently available under the CAFE program and how do manufacturers use them?
Generating, trading, transferring, and applying CAFE credits is governed by statute.523 Program credits are generated when a vehicle manufacturers fleet over-complies with its standard for a given model year, meaning its vehicle fleet achieved a higher corporate average fuel economy value than the amount required by the CAFE program for that fleet in that model year.
Conversely, if the fleet average CAFE
level does not meet the standard, the fleet incurs debits also referred to as a shortfall or deficit. A manufacturer whose fleet generates a credit shortfall in a given model year can resolve its shortfall using any one or combination of several credits flexibilities, including credit carryback, credit carry-forward, credit transfers, and credit trades, and if all credit flexibilities have been exhausted, then the manufacturer must resolve its shortfall by making civil penalty payments.524
NHTSA has also promulgated compliance flexibilities and incentives consistent with EPCAs provisions regarding calculation of fuel economy levels for individual vehicles and for fleets.525 These compliance flexibilities and incentives, which were first adopted in the 2012 rule for MYs 2017
and later, include A/C efficiency improvement and off-cycle adjustments, 522 Honda, Detailed Comments, NHTSA2018
006711819.
523 49 U.S.C. 32903.
524 Manufacturers may elect to pay civil penalties rather than utilizing credit flexibilities at their discretion. For purposes of the analysis, we assume that manufacturers will only pay penalties when all flexibilities have been exhausted.
525 49 U.S.C. 32904.

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