(a) Applicability. (1) Unless otherwise exempted under the provisions of paragraph (d) of this section, CO2 fleet average exhaust emission standards of this subpart apply to:

(i) 2012 and later model year passenger automobiles and light trucks.

(ii) Heavy-duty vehicles subject to standards under § 86.1819.

(iii) Vehicles imported by ICIs as defined in 40 CFR 85.1502.

(2) The terms “passenger automobile” and “light truck” as used in this section have the meanings given in § 86.1818-12.

(b) Useful life requirements. Full useful life requirements for CO2 standards are defined in §§ 86.1818 and 86.1819. There is not an intermediate useful life standard for CO2 emissions.

(c) Altitude. Greenhouse gas emission standards apply for testing at both low-altitude conditions and at high-altitude conditions, as described in §§ 86.1818 and 86.1819.

(d) Small volume manufacturer certification procedures. (1) Passenger automobiles and light trucks. Certification procedures for small volume manufacturers are provided in § 86.1838. Small businesses meeting certain criteria may be exempted from the greenhouse gas emission standards in § 86.1818 according to the provisions of § 86.1801-12(j) or (k).

(2) Heavy-duty vehicles. HDV manufacturers that qualify as small businesses are not subject to the Phase 1 greenhouse gas standards of this subpart as specified in § 86.1819-14(k)(5).

(e) CO2 fleet average exhaust emission standards. The fleet average standards referred to in this section are the corporate fleet average CO2 standards for passenger automobiles and light trucks set forth in § 86.1818-12(c) and (e), and for HDV in § 86.1819. Each manufacturer must comply with the applicable CO2 fleet average standard on a production-weighted average basis, for each separate averaging set, at the end of each model year, using the procedure described in paragraph (j) of this section. The fleet average CO2 standards applicable in a given model year are calculated separately for passenger automobiles and light trucks for each manufacturer and each model year according to the provisions in § 86.1818. Calculate the HDV fleet average CO2 standard in a given model year as described in § 86.1819-14(a).

(f) In-use CO2 standards. In-use CO2 exhaust emission standards are provided in § 86.1818-12(d) for passenger automobiles and light trucks and in § 86.1819-14(b) for HDV.

(g) Durability procedures and method of determining deterioration factors (DFs). Deterioration factors for CO2 exhaust emission standards are provided in § 86.1823-08(m) for passenger automobiles and light trucks and in § 86.1819-14(d)(5) for HDV.

(h) Vehicle test procedures. (1) The test procedures for demonstrating compliance with CO2 exhaust emission standards are described at § 86.101 and 40 CFR part 600, subpart B. Note that these test procedures involve measurement of carbon-related exhaust emissions to demonstrate compliance with the fleet average CO2 standards in § 86.1818-12.

(2) Testing to determine compliance with CO2 exhaust emission standards must be on a loaded vehicle weight (LVW) basis for passenger automobiles and light trucks (including MDPV), and on an adjusted loaded vehicle weight (ALVW) basis for non-MDPV heavy-duty vehicles.

(3) Testing for the purpose of providing certification data is required only at low-altitude conditions. If hardware and software emission control strategies used during low-altitude condition testing are not used similarly across all altitudes for in-use operation, the manufacturer must include a statement in the application for certification, in accordance with § 86.1844-01(d)(11), stating what the different strategies are and why they are used.

(i) Calculating fleet average carbon-related exhaust emissions for passenger automobiles and light trucks. (1) Manufacturers must compute separate production-weighted fleet average carbon-related exhaust emissions at the end of the model year for passenger automobiles and light trucks, using actual production, where production means vehicles produced and delivered for sale, and certifying model types to standards as defined in § 86.1818-12. The model type carbon-related exhaust emission results determined according to 40 CFR part 600, subpart F (in units of grams per mile rounded to the nearest whole number) become the certification standard for each model type.

(2) Manufacturers must separately calculate production-weighted fleet average carbon-related exhaust emissions levels for the following averaging sets according to the provisions of 40 CFR part 600, subpart F:

(i) Passenger automobiles subject to the fleet average CO2 standards specified in § 86.1818-12(c)(2);

(ii) Light trucks subject to the fleet average CO2 standards specified in § 86.1818-12(c)(3);

(iii) Passenger automobiles subject to the Temporary Leadtime Allowance Alternative Standards specified in § 86.1818-12(e), if applicable; and

(iv) Light trucks subject to the Temporary Leadtime Allowance Alternative Standards specified in § 86.1818-12(e), if applicable.

(j) Certification compliance and enforcement requirements for CO2 exhaust emission standards. (1) Compliance and enforcement requirements are provided in this section and § 86.1848-10.

(2) The certificate issued for each test group requires all model types within that test group to meet the in-use emission standards to which each model type is certified. The in-use standards for passenger automobiles and light trucks (including MDPV) are described in § 86.1818-12(d). The in-use standards for medium-duty vehicles are described in § 86.1819-14(b).

(3) EPA will issue a notice of nonconformity as described in 40 CFR part 85, subpart S, if EPA or the manufacturer determines that a substantial number of a class or category of vehicles produced by that manufacturer, although properly maintained and used, do not conform to in-use CO2 emission standards, or do not conform to the monitor accuracy and battery durability requirements in § 86.1815-27. The manufacturer must submit a remedial plan in response to a notice of nonconformity as described in 40 CFR 85.1803. The manufacturer's remedial plan would generally be a recall intended to remedy repairable problems to bring nonconforming vehicles into compliance; however, if there is no demonstrable, repairable problem that could be remedied to bring the vehicles into compliance, the manufacturer must submit an alternative plan to address the noncompliance and notify owners. For example, manufacturers may need to calculate a correction to its emission credit balance based on the GHG emissions of the actual number of vehicles produced. Manufacturers may voluntarily recall vehicles to remedy a noncompliance and submit a voluntary recall report as described in 40 CFR part 85, subpart T. Manufacturers may also voluntarily pursue a credit-based or other alternative approach to remedy a noncompliance where appropriate.

(4) Any remedial plan under paragraph (j)(3) of this section, whether voluntary or in response to a notice of nonconformity, must fully correct the difference between the measured in-use CREE of the affected class or category of vehicles and the reported CREE used to calculate the manufacturer's fleet average and credit balances.

(5) The manufacturer may request a hearing under 40 CFR part 1068, subpart G, regarding any voiding of credits or adjustment of debits under paragraph (j)(3) of this section. Manufacturers must submit such a request in writing describing the objection and any supporting data within 30 days after we make a decision.

(6) Each manufacturer must comply with the applicable CO2 fleet average standard on a production-weighted average basis, at the end of each model year. Use the procedure described in paragraph (i) of this section for passenger automobiles and light trucks (including MDPV). Use the procedure described in § 86.1819-14(d)(9)(iv) for medium-duty vehicles.

(7) Each manufacturer must comply on an annual basis with the fleet average standards as follows:

(i) Manufacturers must report in their annual reports to the Agency that they met the relevant corporate average standard by showing that the applicable production-weighted average CO2 emission levels are at or below the applicable fleet average standards; or

(ii) If the production-weighted average is above the applicable fleet average standard, manufacturers must obtain and apply sufficient CO2 credits as authorized under paragraph (k)(8) of this section. A manufacturer must show that they have offset any exceedance of the corporate average standard via the use of credits. Manufacturers must also include their credit balances or deficits in their annual report to the Agency.

(iii) If a manufacturer fails to meet the corporate average CO2 standard for four consecutive years, the vehicles causing the corporate average exceedance will be considered not covered by the certificate of conformity (see paragraph (k)(8) of this section). A manufacturer will be subject to penalties on an individual-vehicle basis for sale of vehicles not covered by a certificate.

(iv) EPA will review each manufacturer's production to designate the vehicles that caused the exceedance of the corporate average standard. EPA will designate as nonconforming those vehicles in test groups with the highest certification emission values first, continuing until reaching a number of vehicles equal to the calculated number of noncomplying vehicles as determined in paragraph (k)(8) of this section. In a group where only a portion of vehicles would be deemed nonconforming, EPA will determine the actual nonconforming vehicles by counting backwards from the last vehicle produced in that test group. Manufacturers will be liable for penalties for each vehicle sold that is not covered by a certificate.

(k) Requirements for the CO2 averaging, banking and trading (ABT) program. (1) A manufacturer whose CO2 fleet average emissions exceed the applicable standard must complete the calculation in paragraph (k)(4) of this section to determine the size of its CO2 deficit. A manufacturer whose CO2 fleet average emissions are less than the applicable standard may complete the calculation in paragraph (k)(4) of this section to generate CO2 credits. In either case, the number of credits or debits must be rounded to the nearest whole number.

(2) There are no property rights associated with CO2 credits generated under this subpart. Credits are a limited authorization to emit the designated amount of emissions. Nothing in this part or any other provision of law shall be construed to limit EPA's authority to terminate or limit this authorization through a rulemaking.

(3) Each manufacturer must comply with the reporting and recordkeeping requirements of paragraph (l) of this section for CO2 credits, including early credits. The averaging, banking and trading program is enforceable as provided in paragraphs (k)(7)(ii), (k)(9)(iii), and (l)(1)(vi) of this section through the certificate of conformity that allows the manufacturer to introduce any regulated vehicles into U.S. commerce.

(4) Credits are earned on the last day of the model year. Manufacturers must calculate, for a given model year and separately for passenger automobiles, light trucks, and heavy-duty vehicles, the number of credits or debits it has generated according to the following equation rounded to the nearest megagram:

CO2 Credits or Debits (Mg) = [(CO2 Standard − Manufacturer's Production-Weighted Fleet Average CO2 Emissions) × (Total Number of Vehicles Produced) × (Mileage)] ÷ 1,000,000 Where: CO2 Standard = the applicable standard for the model year as determined in § 86.1818 or § 86.1819; Manufacturer's Production-Weighted Fleet Average CO2 Emissions = average calculated according to paragraph (i) of this section; Total Number of Vehicles Produced = the number of vehicles domestically produced plus those imported as defined in § 600.511-08 of this chapter; and Mileage = useful life value (in miles) for HDV, and vehicle lifetime miles of 195,264 for passenger automobiles and 225,865 for light trucks.

(5) Determine total HDV debits and credits for a model year as described in § 86.1819-14(d)(6). Determine total passenger car and light truck debits and credits for a model year as described in this paragraph (k)(5). Total credits or debits generated in a model year, maintained and reported separately for passenger automobiles and light trucks, shall be the sum of the credits or debits calculated in paragraph (k)(4) of this section and any of the following credits, if applicable, minus any CO2-equivalent debits for N2O and/or CH4 calculated according to the provisions of § 86.1818-12(f)(4):

(i) Air conditioning leakage credits earned according to the provisions of § 86.1867-12(b).

(ii) Air conditioning efficiency credits earned according to the provisions of § 86.1868-12(c).

(iii) Off-cycle technology credits earned according to the provisions of § 86.1869-12(d).

(iv) Full size pickup truck credits earned according to the provisions of § 86.1870-12(c).

(v) Advanced technology vehicle credits earned according to the provisions of § 86.1866-12(b)(3).

(vi) CO2-equivalent debits for N2O and/or CH4 accumulated according to the provisions of § 86.1818-12(f)(4).

(6) Unused CO2 credits generally retain their full value through five model years after the model year in which they were generated; credits remaining at the end of the fifth model year after the model year in which they were generated may not be used to demonstrate compliance for later model years. However, in the case of model year 2017 and 2018 passenger cars and light trucks, unused CO2 credits retain their full value through six model years after the year in which they were generated.

(7) Credits may be used as follows:

(i) Credits generated and calculated according to the method in paragraphs (k)(4) and (5) of this section may not be used to offset deficits other than those deficits accrued within the respective averaging set, except that credits may be transferred between the passenger automobile and light truck fleets of a given manufacturer. Credits may be banked and used in a future model year in which a manufacturer's average CO2 level exceeds the applicable standard. Credits may also be traded to another manufacturer according to the provisions in paragraph (k)(8) of this section. Before trading or carrying over credits to the next model year, a manufacturer must apply available credits to offset any deficit, where the deadline to offset that credit deficit has not yet passed. This paragraph (k)(7)(i) applies for MDPV, but not for other HDV.

(ii) The use of credits shall not change Selective Enforcement Auditing or in-use testing failures from a failure to a non-failure. The enforcement of the averaging standard occurs through the vehicle's certificate of conformity as described in paragraph (k)(8) of this section. A manufacturer's certificate of conformity is conditioned upon compliance with the averaging provisions. The certificate will be void ab initio if a manufacturer fails to meet the corporate average standard and does not obtain appropriate credits to cover its shortfalls in that model year or subsequent model years (see deficit carry-forward provisions in paragraph (k)(8) of this section).

(iii) [Reserved]

(iv) Credits generated in the 2017 through 2020 model years under the provisions of § 86.1818-12(e)(3)(ii) may not be traded or otherwise provided to another manufacturer.

(v) Credits generated under any alternative fleet average standards approved under § 86.1818-12(g) may not be traded or otherwise provided to another manufacturer.

(8) The following provisions apply if a manufacturer calculates that it has negative credits (also called “debits” or a “credit deficit”) for a given model year:

(i) The manufacturer may carry the credit deficit forward into the next three model years. Such a carry-forward may only occur after the manufacturer exhausts any supply of banked credits. The deficit must be covered with an appropriate number of credits that the manufacturer generates or purchases by the end of the third model year. Any remaining deficit is subject to a voiding of the certificate ab initio, as described in this paragraph (k)(8). Manufacturers are not permitted to have a credit deficit for four consecutive years.

(ii) If the credit deficit is not offset within the specified time period, the number of vehicles not meeting the fleet average CO2 standards (and therefore not covered by the certificate) must be calculated.

(A) Determine the negative credits for the noncompliant vehicle category by multiplying the total megagram deficit by 1,000,000 and then dividing by the mileage specified in paragraph (k)(4) of this section.

(B) Divide the result by the fleet average standard applicable to the model year in which the debits were first incurred and round to the nearest whole number to determine the number of vehicles not meeting the fleet average CO2 standards.

(iii) EPA will determine the vehicles not covered by a certificate because the condition on the certificate was not satisfied by designating vehicles in those test groups with the highest carbon-related exhaust emission values first and continuing until reaching a number of vehicles equal to the calculated number of non-complying vehicles as determined in this paragraph (k)(8). The same approach applies for HDV, except that EPA will make these designations by ranking test groups based on CO2 emission values. If these calculations determines that only a portion of vehicles in a test group contribute to the debit situation, then EPA will designate actual vehicles in that test group as not covered by the certificate, starting with the last vehicle produced and counting backwards.

(iv)(A) If a manufacturer ceases production of passenger automobiles, light trucks, or heavy-duty vehicles, the manufacturer continues to be responsible for offsetting any debits outstanding within the required time period. Any failure to offset the debits will be considered a violation of paragraph (k)(8)(i) of this section and may subject the manufacturer to an enforcement action for sale of vehicles not covered by a certificate, pursuant to paragraphs (k)(8)(ii) and (iii) of this section.

(B) If a manufacturer is purchased by, merges with, or otherwise combines with another manufacturer, the controlling entity is responsible for offsetting any debits outstanding within the required time period. Any failure to offset the debits will be considered a violation of paragraph (k)(8)(i) of this section and may subject the manufacturer to an enforcement action for sale of vehicles not covered by a certificate, pursuant to paragraphs (k)(8)(ii) and (iii) of this section.

(v) For purposes of calculating the statute of limitations, a violation of the requirements of paragraph (k)(8)(i) of this section, a failure to satisfy the conditions upon which a certificate(s) was issued and hence a sale of vehicles not covered by the certificate, all occur upon the expiration of the deadline for offsetting debits specified in paragraph (k)(8)(i) of this section.

(9) The following provisions apply to CO2 credit trading:

(i) EPA may reject CO2 credit trades if the involved manufacturers fail to submit the credit trade notification in the annual report.

(ii) A manufacturer may not sell credits that are no longer valid for demonstrating compliance based on the model years of the subject vehicles, as specified in paragraph (k)(6) of this section.

(iii) In the event of a negative credit balance resulting from a transaction, both the buyer and seller are liable for the credit shortfall. EPA may void ab initio the certificates of conformity of all test groups that generate or use credits in such a trade.

(iv)(A) If a manufacturer trades a credit that it has not generated pursuant to this paragraph (k) or acquired from another party, the manufacturer will be considered to have generated a debit in the model year that the manufacturer traded the credit. The manufacturer must offset such debits by the deadline for the annual report for that same model year.

(B) Failure to offset the debits within the required time period will be considered a failure to satisfy the conditions upon which the certificate(s) was issued and will be addressed pursuant to paragraph (k)(8) of this section.

(v) A manufacturer may only trade credits that it has generated pursuant to paragraphs (k)(4) and (5) of this section or acquired from another party.

(10) A manufacturer may generate CO2 credits from model year 2027 through 2032 electric vehicles that qualify as MDPV and use those credits for certifying medium-duty vehicles, as follows:

(i) Determine the emission standards from § 86.1818-12 for qualifying vehicles based on the CO2 target values for light trucks and the footprint for each vehicle.

(ii) Calculate generated credits separately for qualifying vehicles as described in paragraph (k)(4) of this section based on the emission standards from paragraph (k)(10)(i) of this section, the mileage values for light trucks, and the total number of qualifying vehicles produced, with fleet average CO2 emissions set to 0.

(iii) Apply generated credits to eliminate any deficit for light trucks before using them to certify medium-duty vehicles.

(iv) Apply the credit provisions of this section as specified, except that you may not buy or sell credits generated under this paragraph (k)(10).

(v) Describe in the annual credit reports how you are generating certain credit quantities under this paragraph (k)(10). Also describe in your end of year credit report how you will use those credits for certifying light trucks or medium-duty vehicles in a given model year.

(l) Maintenance of records and submittal of information relevant to compliance with fleet average CO2 standards—(1) Maintenance of records. (i) Manufacturers producing any light-duty vehicles, light-duty trucks, medium-duty passenger vehicles, or other heavy-duty vehicles subject to the provisions in this subpart must establish, maintain, and retain all the following information in adequately organized records for each model year:

(A) Model year.

(B) Applicable fleet average CO2 standards for each averaging set as defined in paragraph (i) of this section.

(C) The calculated fleet average CO2 value for each averaging set as defined in paragraph (i) of this section.

(D) All values used in calculating the fleet average CO2 values.

(ii) Manufacturers must establish, maintain, and retain all the following information in adequately organized records for each vehicle produced that is subject to the provisions in this subpart:

(A) Model year.

(B) Applicable fleet average CO2 standard.

(C) EPA test group.

(D) Assembly plant.

(E) Vehicle identification number.

(F) Carbon-related exhaust emission standard (automobile and light truck only), N2O emission standard, and CH4 emission standard to which the vehicle is certified.

(G) In-use carbon-related exhaust emission standard for passenger automobiles and light truck, and in-use CO2 standard for HDV.

(H) Information on the point of first sale, including the purchaser, city, and state.

(iii) Manufacturers must retain all required records for a period of eight years from the due date for the annual report. Records may be stored in any format and on any media, as long as manufacturers can promptly send EPA organized written records in English if requested by the Administrator. Manufacturers must keep records readily available as EPA may review them at any time.

(iv) The Administrator may require the manufacturer to retain additional records or submit information not specifically required by this section.

(v) Pursuant to a request made by the Administrator, the manufacturer must submit to the Administrator the information that the manufacturer is required to retain.

(vi) EPA may void ab initio a certificate of conformity for vehicles certified to emission standards as set forth or otherwise referenced in this subpart for which the manufacturer fails to retain the records required in this section or to provide such information to the Administrator upon request, or to submit the reports required in this section in the specified time period.

(2) Reporting. (i) Each manufacturer must submit an annual report. The annual report must contain for each applicable CO2 standard, the calculated fleet average CO2 value, all values required to calculate the CO2 emissions value, the number of credits generated or debits incurred, all the values required to calculate the credits or debits, and the resulting balance of credits or debits. For each applicable alternative N2O and/or CH4 standard selected under the provisions of § 86.1818-12(f)(3) for passenger automobiles and light trucks (or § 86.1819-14(c) for HDV), the report must contain the CO2-equivalent debits for N2O and/or CH4 calculated according to § 86.1818-12(f)(4) (or § 86.1819-14(c) for HDV) for each test group and all values required to calculate the number of debits incurred.

(ii) For each applicable fleet average CO2 standard, the annual report must also include documentation on all credit transactions the manufacturer has engaged in since those included in the last report. Information for each transaction must include all of the following:

(A) Name of credit provider.

(B) Name of credit recipient.

(C) Date the trade occurred.

(D) Quantity of credits traded in megagrams.

(E) Model year in which the credits were earned.

(iii) Manufacturers calculating air conditioning leakage and/or efficiency credits under paragraph § 86.1871-12(b) shall include the following information for each model year and separately for passenger automobiles and light trucks and for each air conditioning system used to generate credits:

(A) A description of the air conditioning system.

(B) The leakage credit value and all the information required to determine this value.

(C) The total credits earned for each averaging set, model year, and region, as applicable.

(iv) Manufacturers calculating advanced technology vehicle credits under paragraph § 86.1871-12(c) shall include the following information for each model year and separately for passenger automobiles and light trucks:

(A) The number of each model type of eligible vehicle sold.

(B) The cumulative model year production of eligible vehicles starting with the 2009 model year.

(C) The carbon-related exhaust emission value by model type and model year.

(v) Manufacturers calculating off-cycle technology credits under paragraph § 86.1871-12(d) shall include, for each model year and separately for passenger automobiles and light trucks, all test results and data required for calculating such credits.

(vi) Unless a manufacturer reports the data required by this section in the annual production report required under § 86.1844-01(e) or the annual report required under § 600.512-12 of this chapter, a manufacturer must submit an annual report for each model year after production ends for all affected vehicles produced by the manufacturer subject to the provisions of this subpart and no later than May 1 of the calendar year following the given model year. Annual reports must be submitted to: Director, Compliance Division, U.S. Environmental Protection Agency, 2000 Traverwood Dr., Ann Arbor, Michigan 48105.

(vii) Failure by a manufacturer to submit the annual report in the specified time period for all vehicles subject to the provisions in this section is a violation of section 203(a)(1) of the Clean Air Act (42 U.S.C. 7522 (a)(1)) for each applicable vehicle produced by that manufacturer.

(viii) If EPA or the manufacturer determines that a reporting error occurred on an annual report previously submitted to EPA, the manufacturer's credit or debit calculations will be recalculated. EPA may void erroneous credits, unless traded, and will adjust erroneous debits. In the case of traded erroneous credits, EPA must adjust the selling manufacturer's credit balance to reflect the sale of such credits and any resulting credit deficit.

(3) Notice of opportunity for hearing. Any voiding of the certificate under paragraph (l)(1)(vi) of this section will be made only after EPA has offered the affected manufacturer an opportunity for a hearing conducted in accordance with 40 CFR part 1068, subpart G, and, if a manufacturer requests such a hearing, will be made only after an initial decision by the Presiding Officer.

[81 FR 73992, Oct. 25, 2016, as amended at 85 FR 22620, Apr. 23, 2020; 86 FR 74524, Dec. 30, 2021; 89 FR 28193, Apr. 18, 2024]