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Proposed Rule2022-17924

Energy Conservation Program: Energy Conservation Standards for Microwave Ovens

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Published

August 24, 2022

Issuing agencies

Energy Department

Abstract

The Energy Policy and Conservation Act, as amended ("EPCA"), prescribes energy conservation standards for various consumer products and certain commercial and industrial equipment, including microwave ovens. EPCA also requires the U.S. Department of Energy ("DOE" or "the Department") to periodically determine whether more-stringent standards would be technologically feasible and economically justified, and would result in significant energy savings. In this supplemental notice of proposed rulemaking ("SNOPR"), DOE proposes amended energy conservation standards for microwave ovens, and requests comment on these proposed standards and associated analyses and results.

Full Text

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<title>Federal Register, Volume 87 Issue 163 (Wednesday, August 24, 2022)</title>
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[Federal Register Volume 87, Number 163 (Wednesday, August 24, 2022)]
[Proposed Rules]
[Pages 52282-52328]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-17924]

[[Page 52281]]

Vol. 87

Wednesday,

No. 163

August 24, 2022

Part V

Department of Energy

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10 CFR Part 430

Energy Conservation Program: Energy Conservation Standards for
Microwave Ovens; Proposed Rule

Federal Register / Vol. 87 , No. 163 / Wednesday, August 24, 2022 /
Proposed Rules

[[Page 52282]]

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DEPARTMENT OF ENERGY

10 CFR Part 430

[EERE-2017-BT-STD-0023]
RIN 1904-AE00

Energy Conservation Program: Energy Conservation Standards for
Microwave Ovens

AGENCY: Office of Energy Efficiency and Renewable Energy, Department of
Energy.

ACTION: Supplemental notice of proposed rulemaking and request for
comment.

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SUMMARY: The Energy Policy and Conservation Act, as amended (``EPCA''),
prescribes energy conservation standards for various consumer products
and certain commercial and industrial equipment, including microwave
ovens. EPCA also requires the U.S. Department of Energy (``DOE'' or
``the Department'') to periodically determine whether more-stringent
standards would be technologically feasible and economically justified,
and would result in significant energy savings. In this supplemental
notice of proposed rulemaking (``SNOPR''), DOE proposes amended energy
conservation standards for microwave ovens, and requests comment on
these proposed standards and associated analyses and results.

DATES: DOE will accept comments, data, and information regarding this
SNOPR no later than October 24, 2022. See section VII, ``Public
Participation,'' for details.
Comments regarding the likely competitive impact of the proposed
standard should be sent to the Department of Justice contact listed in
the ADDRESSES section on or before September 23, 2022.

ADDRESSES: Interested persons are encouraged to submit comments using
the Federal eRulemaking Portal at <a href="http://www.regulations.gov">www.regulations.gov</a> under docket
number EERE-2017-BT-STD-0023. Follow the instructions for submitting
comments. Alternatively, interested persons may submit comments,
identified by docket number EERE-2017-BT-STD-0023, by any of the
following methods:
(1) Email: <a href="/cdn-cgi/l/email-protection#3f7268700d0f0e086c6b7b0f0f0d0c7f5a5a115b505a11585049">[email&#160;protected]</a>. Include the docket number
EERE-2017-BT-STD-0023 in the subject line of the message.
(2) Postal Mail: Appliance and Equipment Standards Program, U.S.
Department of Energy, Building Technologies Office, Mailstop EE-5B,
1000 Independence Avenue SW, Washington, DC 20585-0121. Telephone:
(202) 287-1445. If possible, please submit all items on a compact disc
(``CD''), in which case it is not necessary to include printed copies.
(3) Hand Delivery/Courier: Appliance and Equipment Standards
Program, U.S. Department of Energy, Building Technologies Office, 950
L'Enfant Plaza SW, 6th Floor, Washington, DC 20024. Telephone: (202)
287-1445. If possible, please submit all items on a CD, in which case
it is not necessary to include printed copies.
No telefacsimiles (``faxes'') will be accepted. For detailed
instructions on submitting comments and additional information on this
process, see section VII of this document.
Docket: The docket for this activity, which includes Federal
Register notices, comments, and other supporting documents/materials,
is available for review at <a href="http://www.regulations.gov">www.regulations.gov</a>. All documents in the
docket are listed in the <a href="http://www.regulations.gov">www.regulations.gov</a> index. However, not all
documents listed in the index may be publicly available, such as
information that is exempt from public disclosure.
The docket web page can be found at <a href="http://www.regulations.gov/docket?D=EERE-2017-BT-STD-0023">www.regulations.gov/docket?D=EERE-2017-BT-STD-0023</a>. The docket web page contains
instructions on how to access all documents, including public comments,
in the docket. See section VII of this document for information on how
to submit comments through <a href="http://www.regulations.gov">www.regulations.gov</a>.
EPCA requires the Attorney General to provide DOE a written
determination of whether the proposed standard is likely to lessen
competition. The U.S. Department of Justice Antitrust Division invites
input from market participants and other interested persons with views
on the likely competitive impact of the proposed standard. Interested
persons may contact the Division at <a href="/cdn-cgi/l/email-protection#13767d7661746a3d6067727d7772617760536660777c793d747c65">[email&#160;protected]</a> on or
before the date specified in the DATES section. Please indicate in the
``Subject'' line of your email the title and Docket Number of this
SNOPR.

FOR FURTHER INFORMATION CONTACT:
Dr. Stephanie Johnson, U.S. Department of Energy, Office of Energy
Efficiency and Renewable Energy, Building Technologies Office, EE-5B,
1000 Independence Avenue SW, Washington, DC 20585-0121. Email:
<a href="/cdn-cgi/l/email-protection#f5b48585999c949b9690a681949b9194879186a4809086819c9a9b86b59090db919a90db929a83">[email&#160;protected]</a>.
Ms. Celia Sher, U.S. Department of Energy, Office of the General
Counsel, GC-33, 1000 Independence Avenue SW, Washington, DC 20585-0121.
Telephone: (202) 287-6122. Email: <a href="/cdn-cgi/l/email-protection#9cdff9f0f5fdb2cff4f9eedcf4edb2f8f3f9b2fbf3ea">[email&#160;protected]</a>.
For further information on how to submit a comment, review other
public comments and the docket, or participate in the public meeting,
contact the Appliance and Equipment Standards Program staff at (202)
287-1445 or by email: <a href="/cdn-cgi/l/email-protection#d998a9a9b5b0b8b7babc8aadb8b7bdb8abbdaa88acbcaaadb0b6b7aa99bcbcf7bdb6bcf7beb6af">[email&#160;protected]</a>.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Synopsis of the Proposed Rule
A. Benefits and Costs to Consumers
B. Impact on Manufacturers
C. National Benefits and Costs
D. Conclusion
II. Introduction
A. Authority
B. Background
1. Current Standards
2. History of Standards Rulemaking for Microwave Ovens
III. General Discussion
A. Product Classes and Scope of Coverage
B. Test Procedure
C. Technological Feasibility
1. General
2. Maximum Technologically Feasible Levels
D. Energy Savings
1. Determination of Savings
2. Significance of Savings
E. Economic Justification
1. Specific Criteria
a. Economic Impact on Manufacturers and Consumers
b. Savings in Operating Costs Compared to Increase in Price (LCC
and PBP)
c. Energy Savings
d. Lessening of Utility or Performance of Products
e. Impact of Any Lessening of Competition
f. Need for National Energy Conservation
g. Other Factors
2. Rebuttable Presumption
IV. Methodology and Discussion of Related Comments
A. Market and Technology Assessment
1. Scope of Coverage and Product Classes
2. Technology Options
B. Screening Analysis
1. Screened-Out Technologies
2. Remaining Technologies
C. Engineering Analysis
1. Efficiency Analysis
a. Baseline Efficiency
b. Higher Efficiency Levels
2. Cost Analysis
3. Cost-Efficiency Results
D. Markups Analysis
E. Energy Use Analysis

[[Page 52283]]

1. Product Cost
2. Installation Cost
3. Annual Energy Consumption
4. Energy Prices
5. Maintenance and Repair Costs
6. Product Lifetime
7. Discount Rates
8. Energy Efficiency Distribution in the No-New-Standards Case
9. Payback Period Analysis
G. Shipments Analysis
H. National Impact Analysis
1. Product Efficiency Trends
2. National Energy Savings
3. Net Present Value Analysis
I. Consumer Subgroup Analysis
J. Manufacturer Impact Analysis
1. Overview
2. Government Regulatory Impact Model and Key Inputs
a. Manufacturer Production Costs
b. Shipments Projections
c. Product and Capital Conversion Costs
d. Markup Scenarios
3. Discussion of MIA Comments
K. Emissions Analysis
1. Air Quality Regulations Incorporated in DOE's Analysis
L. Monetizing Emissions Impacts
1. Monetization of Greenhouse Gas Emissions
a. Social Cost of Carbon
b. Social Cost of Methane and Nitrous Oxide
2. Monetization of Other Emissions Impacts
M. Utility Impact Analysis
N. Employment Impact Analysis
V. Analytical Results and Conclusions
A. Trial Standard Levels
B. Economic Justification and Energy Savings
1. Economic Impacts on Individual Consumers
a. Life-Cycle Cost and Payback Period
b. Consumer Subgroup Analysis
c. Rebuttable Presumption Payback
2. Economic Impacts on Manufacturers
a. Industry Cash Flow Analysis Results
b. Direct Impacts on Employment
c. Impacts on Manufacturing Capacity
d. Impacts on Subgroups of Manufacturers
e. Cumulative Regulatory Burden
3. National Impact Analysis
a. Significance of Energy Savings
b. Net Present Value of Consumer Costs and Benefits
c. Indirect Impacts on Employment
4. Impact on Utility or Performance of Products
5. Impact of Any Lessening of Competition
6. Need of the Nation to Conserve Energy
7. Other Factors
8. Summary of Economic Impacts
C. Conclusion
1. Benefits and Burdens of TSLs Considered for Microwave Ovens
Standards
2. Annualized Benefits and Costs of the Proposed Standards
VI. Procedural Issues and Regulatory Review
A. Review Under Executive Orders 12866 and 13563
B. Review Under the Regulatory Flexibility Act
C. Review Under the Paperwork Reduction Act
D. Review Under the National Environmental Policy Act of 1969
E. Review Under Executive Order 13132
F. Review Under Executive Order 12988
G. Review Under the Unfunded Mandates Reform Act of 1995
H. Review Under the Treasury and General Government
Appropriations Act, 1999
I. Review Under Executive Order 12630
J. Review Under the Treasury and General Government
Appropriations Act, 2001
K. Review Under Executive Order 13211
L. Information Quality
VII. Public Participation
A. Participation in the Webinar
B. Submission of Comments
C. Issues on Which DOE Seeks Comment
VIII. Approval of the Office of the Secretary

I. Synopsis of the Proposed Rule

Title III, Part B \1\ of EPCA,\2\ established the Energy
Conservation Program for Consumer Products Other Than Automobiles. (42
U.S.C. 6291-6309) These products include kitchen ranges and ovens,
which encompass microwave ovens, the subject of this rulemaking. (42
U.S.C. 6292(a)(10))
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\1\ For editorial reasons, upon codification in the U.S. Code,
Part B was redesignated Part A.
\2\ All references to EPCA in this document refer to the statute
as amended through the Energy Act of 2020, Public Law 116-260 (Dec.
27, 2020), which reflect the last statutory amendments that impact
Parts A and A-1 of EPCA.
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Pursuant to EPCA, any new or amended energy conservation standard
must be designed to achieve the maximum improvement in energy
efficiency that DOE determines is technologically feasible and
economically justified. (42 U.S.C. 6295(o)(2)(A)) Furthermore, the new
or amended standard must result in a significant conservation of
energy. (42 U.S.C. 6295(o)(3)(B)) EPCA also provides that not later
than 6 years after issuance of any final rule establishing or amending
a standard, DOE must publish either a notice of determination that
standards for the product do not need to be amended, or a notice of
proposed rulemaking (``NOPR'') including new proposed energy
conservation standards (proceeding to a final rule, as appropriate).
(42 U.S.C. 6295(m))
In accordance with these and other statutory provisions discussed
in this document, DOE proposes amended energy conservation standards
for microwave ovens. The proposed standards, which are expressed in
maximum allowable average standby power, as expressed in watts (``W''),
are shown in Table I.1. These proposed standards, if adopted, would
apply to all microwave ovens listed in Table I.1 manufactured in, or
imported into, the United States starting on the date 3 years after the
publication of the final rule for this rulemaking.

Table I.1--Proposed Energy Conservation Standards for Microwave Ovens
------------------------------------------------------------------------
Maximum allowable
Product class average standby
power (Watts)
------------------------------------------------------------------------
PC 1: Microwave-Only Ovens and Countertop Convection 0.6 W
Microwave Ovens.....................................
PC 2: Built-In and Over-the-Range Convection 1.0 W
Microwave Ovens.....................................
------------------------------------------------------------------------

A. Benefits and Costs to Consumers

Table I.2 presents DOE's evaluation of the economic impacts of the
proposed standards on consumers of microwave ovens, as measured by the
average life-cycle cost (``LCC'') savings and the simple payback period
(``PBP'').\3\ The average LCC savings are positive for all product
classes, and the PBP is less than the average lifetime of microwave
ovens, which is estimated to be 10.6 years (see section IV.F.6 of this
document).
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\3\ The average LCC savings refer to consumers that are affected
by a standard and are measured relative to the efficiency
distribution in the no-new-standards case, which depicts the market
in the compliance year in the absence of new or amended standards
(see section IV.F.8 of this document). The simple PBP, which is
designed to compare specific efficiency levels, is measured relative
to the baseline product (see section IV.F.9 of this document).

[[Page 52284]]

Table I.2--Impacts of Proposed Energy Conservation Standards on
Consumers of Microwave Ovens
------------------------------------------------------------------------
Average LCC Simple payback
Product class savings period
(2021$) (years)
------------------------------------------------------------------------
Microwave-Only Ovens and Countertop 0.98 1.4
Convection Microwave Ovens.............
Built-In and Over-the-Range Convection 0.78 0.8
Microwave Ovens........................
------------------------------------------------------------------------

DOE's analysis of the impacts of the proposed standards on
consumers is described in section IV.F of this document.

B. Impact on Manufacturers

The industry net present value (``INPV'') is the sum of the
discounted cash flows to the industry from the base year through the
end of the analysis period (2022-2055). Using a real discount rate of
8.5 percent, DOE estimates that the INPV for manufacturers of microwave
ovens in the case without amended standards is $1.40 billion in 2021$.
Under the proposed standards, the change in INPV is estimated to range
from -$34.3 million, which represents a change of -2.5 percent, to no
change in INPV. To bring products into compliance with amended
standards, it is estimated that the industry would incur total
conversion costs of approximately $46.1 million.
DOE's analysis of the impacts of the proposed standards on
manufacturers is described in section IV.J of this document. The
analytic results of the manufacturer impact analysis (``MIA'') are
presented in section V.B.2 of this document.

C. National Benefits and Costs \4\
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\4\ All monetary values in this document are expressed in 2021
dollars.
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DOE's analyses indicate that the proposed energy conservation
standards for microwave ovens would save a significant amount of
energy. Relative to the case without amended standards, the lifetime
energy savings for microwave ovens purchased in the 30-year period that
begins in the anticipated year of compliance with the amended standards
(2026-2055) amount to 0.06 quadrillion British thermal units (``Btu''),
or quads.\5\ This represents a savings of 17.7 percent relative to the
energy use of these products in the case without amended standards
(referred to as the ``no-new-standards case'').
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\5\ The quantity refers to full-fuel-cycle (``FFC'') energy
savings. FFC energy savings includes the energy consumed in
extracting, processing, and transporting primary fuels (i.e., coal,
natural gas, petroleum fuels), and, thus, presents a more complete
picture of the impacts of energy efficiency standards. For more
information on the FFC metric, see section IV.H.2 of this document.
---------------------------------------------------------------------------

The cumulative net present value (``NPV'') of total consumer
benefits of the proposed standards for microwave ovens ranges from
$0.15 billion (at a 7-percent discount rate) to $0.33 (at a 3-percent
discount rate). This NPV expresses the estimated total value of future
operating-cost savings minus the estimated increased product costs for
microwave ovens purchased in 2026-2055.
In addition, the proposed standards for microwave ovens are
projected to yield significant environmental benefits. DOE estimates
that the proposed standards would result in cumulative emission
reductions (over the same period as for energy savings) of 1.86 million
metric tons (``Mt'') \6\ of carbon dioxide (``CO<INF>2</INF>''), 0.84
thousand tons of sulfur dioxide (``SO<INF>2</INF>''), 2.86 thousand
tons of nitrogen oxides (``NO<INF>X</INF>''), 12.54 thousand tons of
methane (``CH<INF>4</INF>''), 0.02 thousand tons of nitrous oxide
(``N<INF>2</INF>O''), and 0.005 tons of mercury (``Hg'').\7\
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\6\ A metric ton is equivalent to 1.1 short tons. Results for
emissions other than CO<INF>2</INF> are presented in short tons.
\7\ DOE calculated emissions reductions relative to the no-new-
standards case, which reflects key assumptions in the Annual Energy
Outlook 2022 (``AEO 2022''). AEO 2022 represents current Federal and
State legislation and final implementation of regulations as of the
time of its preparation. See section IV.K of this document for
further discussion of AEO 2022 assumptions that effect air pollutant
emissions.
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DOE estimates the value of climate benefits from a reduction in
greenhouse gases (``GHG'') using four different estimates of the social
cost of CO<INF>2</INF> (``SC-CO<INF>2</INF>''), the social cost of
methane (``SC-CH<INF>4</INF>''), and the social cost of nitrous oxide
(``SC-N<INF>2</INF>O''). Together these represent the social cost of
GHG (``SC-GHG''). DOE used interim SC-GHG values developed by an
Interagency Working Group on the Social Cost of Greenhouse Gases
(``IWG'').\8\ The derivation of these values is discussed in section
IV.L of this document. For presentational purposes, the climate
benefits associated with the average SC-GHG at a 3-percent discount
rate are estimated to be $0.09 billion. DOE does not have a single
central SC-GHG point estimate and it emphasizes the importance and
value of considering the benefits calculated using all four SC-GHG
estimates.\9\
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\8\ See Interagency Working Group on Social Cost of Greenhouse
Gases, Technical Support Document: Social Cost of Carbon, Methane,
and Nitrous Oxide. Interim Estimates Under Executive Order 13990,
Washington, DC, February 2021, available at <a href="http://www.whitehouse.gov/wp-content/uploads/2021/02/TechnicalSupportDocument_SocialCostofCarbonMethaneNitrousOxide.pdf">www.whitehouse.gov/wp-content/uploads/2021/02/TechnicalSupportDocument_SocialCostofCarbonMethaneNitrousOxide.pdf</a>.
\9\ On March 16, 2022, the Fifth Circuit Court of Appeals (No.
22-30087) granted the federal government's emergency motion for stay
pending appeal of the February 11, 2022, preliminary injunction
issued in Louisiana v. Biden, No. 21-cv-1074-JDC-KK (W.D. La.). As a
result of the Fifth Circuit's order, the preliminary injunction is
no longer in effect, pending resolution of the federal government's
appeal of that injunction or a further court order. Among other
things, the preliminary injunction enjoined the defendants in that
case from ``adopting, employing, treating as binding, or relying
upon'' the interim estimates of the social cost of greenhouse
gases--which were issued by the Interagency Working Group on the
Social Cost of Greenhouse Gases on February 26, 2021--to monetize
the benefits of reducing greenhouse gas emissions. In the absence of
further intervening court orders, DOE will revert to its approach
prior to the injunction and presents monetized benefits where
appropriate and permissible under law.
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DOE estimated the monetary health benefits of SO<INF>2</INF> and
NO<INF>X</INF> emissions reductions also discussed in section IV.L of
this document. DOE estimated the present value of the health benefits
would be $0.07 billion using a 7-percent discount rate, and $0.16
billion using a 3-percent discount rate.\10\ DOE is currently only
monetizing (for SO<INF>2</INF> and NO<INF>X</INF>) PM<INF>2.5</INF>
precursor health benefits and (for NO<INF>X</INF>) ozone precursor
health benefits, but will continue to assess the ability to monetize
other effects such as health benefits from reductions in direct
PM<INF>2.5</INF> emissions.
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\10\ DOE estimates the economic value of these emissions
reductions resulting from the considered TSLs for the purpose of
complying with the requirements of Executive Order 12866.
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Table I.3 summarizes the economic benefits and costs expected to
result from the proposed standards for microwave ovens. There are other
important unquantified effects, including certain unquantified climate
benefits, unquantified public health benefits from the reduction of
toxic air pollutants and other emissions, unquantified energy security
benefits, and distributional effects, among others.

[[Page 52285]]

Table I.3--Summary of Monetized Economic Benefits and Costs of Proposed
Energy Conservation Standards for Microwave Ovens (TSL 2)
------------------------------------------------------------------------
Billion $2021
------------------------------------------------------------------------
3% discount rate
------------------------------------------------------------------------
Consumer Operating Cost Savings...................... 0.42
Climate Benefits *................................... 0.09
Health Benefits **................................... 0.16
Total Benefits [dagger].............................. 0.67
Consumer Incremental Product Costs [Dagger].......... 0.09
Net Benefits......................................... 0.59
------------------------------------------------------------------------
7% discount rate
------------------------------------------------------------------------
Consumer Operating Cost Savings...................... 0.20
Climate Benefits * (3% discount rate)................ 0.09
Health Benefits **................................... 0.07
Total Benefits [dagger].............................. 0.36
Consumer Incremental Product Costs [Dagger].......... 0.05
Net Benefits......................................... 0.31
------------------------------------------------------------------------
Note: This table presents the costs and benefits associated with
microwave ovens shipped in 2026-2055. These results include benefits
to consumers which accrue after 2055 from the products shipped in 2026-
2055.
* Climate benefits are calculated using four different estimates of the
SC-CO2, SC-CH4 and SC-N2O. Together, these represent the global SC-
GHG. For presentational purposes of this table, the climate benefits
associated with the average SC-GHG at a 3 percent discount rate are
shown, but the Department does not have a single central SC-GHG point
estimate. On March 16, 2022, the Fifth Circuit Court of Appeals (No.
22-30087) granted the federal government's emergency motion for stay
pending appeal of the February 11, 2022, preliminary injunction issued
in Louisiana v. Biden, No. 21-cv-1074-JDC-KK (W.D. La.). As a result
of the Fifth Circuit's order, the preliminary injunction is no longer
in effect, pending resolution of the federal government's appeal of
that injunction or a further court order. Among other things, the
preliminary injunction enjoined the defendants in that case from
``adopting, employing, treating as binding, or relying upon'' the
interim estimates of the social cost of greenhouse gases--which were
issued by the Interagency Working Group on the Social Cost of
Greenhouse Gases on February 26, 2021--to monetize the benefits of
reducing greenhouse gas emissions. In the absence of further
intervening court orders, DOE will revert to its approach prior to the
injunction and presents monetized benefits where appropriate and
permissible under law.
** Health benefits are calculated using benefit-per-ton values for NOX
and SO2. DOE is currently only monetizing (for SO2 and NOX) PM2.5
precursor health benefits and (for NOX) ozone precursor health
benefits, but will continue to assess the ability to monetize other
effects such as health benefits from reductions in direct PM2.5
emissions. See section IV.L of this document for more details.
[dagger] Total and net benefits include those consumer, climate, and
health benefits that can be quantified and monetized. For presentation
purposes, total and net benefits for both the 3-percent and 7-percent
cases are presented using the average SC-GHG with 3-percent discount
rate, but the Department does not have a single central SC-GHG point
estimate. DOE emphasizes the importance and value of considering the
benefits calculated using all four SC-GHG estimates.
[Dagger] Costs include incremental equipment costs as well as
installation costs.

The benefits and costs of the proposed standards can also be
expressed in terms of annualized values. The monetary values for the
total annualized net benefits are (1) the reduced consumer operating
costs, minus (2) the increase in product purchase prices and
installation costs, plus (3) the value of of climate and health
benefits of emission reduction, all annualized.\11\
---------------------------------------------------------------------------

\11\ To convert the time-series of costs and benefits into
annualized values, DOE calculated a present value in 2021, the year
used for discounting the NPV of total consumer costs and savings.
For the benefits, DOE calculated a present value associated with
each year's shipments in the year in which the shipments occur
(e.g., 2030), and then discounted the present value from each year
to 2021. The calculation uses discount rates of 3 and 7 percent for
all costs and benefits. Using the present value, DOE then calculated
the fixed annual payment over a 30-year period, starting in the
compliance year, yielding the same present value.
---------------------------------------------------------------------------

The national operating savings are domestic private U.S. consumer
monetary savings that occur as a result of purchasing the covered
products and are measured for the lifetime of microwave ovens shipped
in 2026-2055. The benefits associated with reduced emissions achieved
as a result of the proposed standards are also calculated based on the
lifetime of microwave ovens shipped in 2026-2055. Total benefits for
both the 3-percent and 7-percent cases are presented using the average
GHG social costs with 3-percent discount rate. Estimates of SC-GHG
values are presented for all four discount rates in section V.B.8 of
this document.
Table I.4 presents the total estimated monetized benefits and costs
associated with the proposed standard, expressed in terms of annualized
values. The results under the primary estimate are as follows.
Using a 7-percent discount rate for consumer benefits and costs and
health benefits from reduced NO<INF>X</INF> and SO<INF>2</INF>
emissions, and the 3-percent discount rate case for climate benefits
from reduced GHG emissions, the estimated cost of the standards
proposed in this rule is $4.8 million per year in increased product
costs, while the estimated annual benefits are $19.3 million in reduced
product operating costs, $5.2 million in climate benefits, and $6.8
million in health benefits. In this case, the net benefit would amount
to $26.5 million per year.
Using a 3-percent discount rate for all benefits and costs, the
estimated cost of the proposed standards is $4.8 million per year in
increased product costs, while the estimated annual benefits are $23.3
million in reduced operating costs, $5.2 million in climate benefits,
and $9.1 million in health benefits. In this case, the net benefit
would amount to $32.7 million per year.

[[Page 52286]]

Table I.4--Annualized Monetized Benefits and Costs of Proposed Energy Conservation Standards for Microwave Ovens
(TSL 2)
----------------------------------------------------------------------------------------------------------------
Million 2021$/year
-----------------------------------------------
Low-net- High-net-
Primary benefits benefits
estimate estimate estimate
----------------------------------------------------------------------------------------------------------------
3% discount rate
----------------------------------------------------------------------------------------------------------------
Consumer Operating Cost Savings................................. 23.3 22.0 24.8
Climate Benefits *.............................................. 5.2 5.0 5.3
Health Benefits **.............................................. 9.1 8.9 9.3
Total Benefits [dagger]......................................... 37.6 36.0 39.4
Consumer Incremental Product Costs [Dagger]..................... 4.8 4.9 4.5
Net Benefits.................................................... 32.7 31.1 34.9
----------------------------------------------------------------------------------------------------------------
7% discount rate
----------------------------------------------------------------------------------------------------------------
Consumer Operating Cost Savings................................. 19.3 18.4 20.3
Climate Benefits * (3% discount rate)........................... 5.2 5.0 5.3
Health Benefits *............................................... 6.8 6.7 7.0
Total Benefits [dagger]......................................... 31.3 30.1 32.6
Consumer Incremental Product Costs [Dagger]..................... 4.8 4.8 4.5
Net Benefits.................................................... 26.5 25.3 28.1
----------------------------------------------------------------------------------------------------------------
Note: This table presents the costs and benefits associated with microwave ovens shipped in 2026-2055. These
results include benefits to consumers which accrue after 2055 from the products shipped in 2026-2055. The
Primary, Low Net Benefits, and High Net Benefits Estimates utilize projections of energy prices from the
AEO2022 Reference case, Low Economic Growth case, and High Economic Growth case, respectively. In addition,
incremental equipment costs reflect a medium decline rate in the Primary Estimate, a low decline rate in the
Low Net Benefits Estimate, and a high decline rate in the High Net Benefits Estimate. The methods used to
derive projected price trends are explained in sections IV.F.1 and IV.H.1of this document. Note that the
Benefits and Costs may not sum to the Net Benefits due to rounding.
* Climate benefits are calculated using four different estimates of the SC-CO2, SC-CH4 and SC-N2O. Together,
these represent the global SC-GHG. For presentational purposes of this table, the climate benefits associated
with the average SC-GHG at a 3 percent discount rate are shown, but the Department does not have a single
central SC-GHG point estimate. On March 16, 2022, the Fifth Circuit Court of Appeals (No. 22-30087) granted
the federal government's emergency motion for stay pending appeal of the February 11, 2022, preliminary
injunction issued in Louisiana v. Biden, No. 21-cv-1074-JDC-KK (W.D. La.). As a result of the Fifth Circuit's
order, the preliminary injunction is no longer in effect, pending resolution of the federal government's
appeal of that injunction or a further court order. Among other things, the preliminary injunction enjoined
the defendants in that case from ``adopting, employing, treating as binding, or relying upon'' the interim
estimates of the social cost of greenhouse gases--which were issued by the Interagency Working Group on the
Social Cost of Greenhouse Gases on February 26, 2021--to monetize the benefits of reducing greenhouse gas
emissions. In the absence of further intervening court orders, DOE will revert to its approach prior to the
injunction and presents monetized benefits where appropriate and permissible under law.
** Health benefits are calculated using benefit-per-ton values for NOX and SO2. DOE is currently only monetizing
(for SO2 and NOX) PM2.5 precursor health benefits and (for NOX) ozone precursor health benefits, but will
continue to assess the ability to monetize other effects such as health benefits from reductions in direct
PM2.5 emissions. The health benefits are presented at real discount rates of 3 and 7 percent. See section IV.L
of this document for more details.
[dagger] Total benefits for both the 3-percent and 7-percent cases are presented using the average SC-GHG with 3-
percent discount rate, but the Department does not have a single central SC-GHG point estimate.
[Dagger] Costs include incremental equipment costs as well as installation costs.

DOE's analysis of the national impacts of the proposed standards is
described in sections IV.H, IV.K, and IV.L of this document.

D. Conclusion

DOE has tentatively concluded that the proposed standards represent
the maximum improvement in energy efficiency that is technologically
feasible and economically justified, and would result in the
significant conservation of energy. Specifically, with regards to
technological feasibility, products achieving these standard levels are
already commercially available for all product classes covered by this
proposal. As for economic justification, DOE's analysis shows that the
benefits of the proposed standard exceed the burdens of the proposed
standards.
Using a 7-percent discount rate for consumer benefits and costs and
health benefits from NO<INF>X</INF> and SO<INF>2</INF> reduction, and a
3-percent discount rate case for climate benefits from reduced GHG
emissions, the estimated cost of the proposed standards for microwave
ovens is $4.8 million per year in increased microwave oven costs, while
the estimated annual benefits are $19.3 million in reduced equipment
operating costs, $5.2 million in climate benefits, and $6.8 million in
health benefits. The net benefit amounts to $26.5 million per year.
The significance of energy savings offered by a new or amended
energy conservation standard cannot be determined without knowledge of
the specific circumstances surrounding a given rulemaking.\12\ For
example, the United States rejoined the Paris Agreement on February 19,
2021. As part of that agreement, the United States has committed to
reducing GHG emissions in order to limit the rise in mean global
temperature. As such, energy savings that reduce GHG emissions have
taken on greater importance. Additionally, some covered products and
equipment have most of their energy consumption occur during periods of
peak energy demand. The impacts of these products on the energy
infrastructure can be more pronounced than products with relatively
constant demand. In evaluating the significance of energy savings, DOE
considers differences in primary energy and full-fuel cycle (``FFC'')
effects for different covered products and equipment when determining
whether energy savings are significant. Primary energy and FFC effects
include the energy consumed in electricity production (depending on
load shape), in distribution and

[[Page 52287]]

transmission, and in extracting, processing, and transporting primary
fuels (i.e., coal, natural gas, petroleum fuels), and thus present a
more complete picture of the impacts of energy conservation standards.
Accordingly, DOE evaluates the significance of energy savings on a
case-by-case basis.
---------------------------------------------------------------------------

\12\ Procedures, Interpretations, and Policies for Consideration
in New or Revised Energy Conservation Standards and Test Procedures
for Consumer Products and Commercial/Industrial Equipment, 86 FR
70892, 70901 (Dec. 13, 2021).
---------------------------------------------------------------------------

As previously mentioned, the proposed standards would result in
estimated national energy savings of 0.06 quads FFC, the equivalent of
the electricity use of 1.6 million homes in one year. In addition, they
are projected to reduce GHG emissions. Based on these findings, DOE has
initially determined the energy savings from the proposed standard
levels are ``significant'' within the meaning of 42 U.S.C.
6295(o)(3)(B).\13\ A more detailed discussion of the basis for these
tentative conclusions is contained in the remainder of this document
and the accompanying technical support document (``TSD'').
---------------------------------------------------------------------------

\13\ See section III.D.2 of this document for further discussion
of how DOE determines whether energy savings are ``significant''
within the context of the statute.
---------------------------------------------------------------------------

DOE also considered more-stringent energy efficiency levels as
potential standards, and is still considering them in this proposed
rulemaking. However, DOE has tentatively concluded that the potential
benefits of the more-stringent energy efficiency levels would outweigh
the projected burdens.
Based on consideration of the public comments DOE receives in
response to this document and related information collected and
analyzed during the course of this rulemaking effort, DOE may adopt
energy efficiency levels presented in this document that are either
higher or lower than the proposed standards, or some combination of
level(s) that incorporate the proposed standards in part.

II. Introduction

The following section briefly discusses the statutory authority
underlying this proposed rule, as well as some of the relevant
historical background related to the establishment of standards for
microwave ovens.

A. Authority

EPCA authorizes DOE to regulate the energy efficiency of a number
of consumer products and certain industrial equipment. Title III, Part
B of EPCA established the Energy Conservation Program for Consumer
Products Other Than Automobiles. These products include kitchen ranges
and ovens, which include microwave ovens, the subject of this document.
(42 U.S.C. 6292(a)(10)) EPCA prescribed energy conservation standards
for these products, and directs DOE to conduct future rulemakings to
determine whether to amend these standards. (42 U.S.C. 6295(h)(2)(A)-
(B)) EPCA further provides that, not later than 6 years after the
issuance of any final rule establishing or amending a standard, DOE
must publish either a notice of determination that standards for the
product do not need to be amended, or a NOPR including new proposed
energy conservation standards (proceeding to a final rule, as
appropriate). (42 U.S.C. 6295(m)(1))
The energy conservation program under EPCA consists essentially of
four parts: (1) testing, (2) labeling, (3) the establishment of Federal
energy conservation standards, and (4) certification and enforcement
procedures. Relevant provisions of EPCA specifically include
definitions (42 U.S.C. 6291), test procedures (42 U.S.C. 6293),
labeling provisions (42 U.S.C. 6294), energy conservation standards (42
U.S.C. 6295), and the authority to require information and reports from
manufacturers (42 U.S.C. 6296).
Federal energy efficiency requirements for covered products
established under EPCA generally supersede State laws and regulations
concerning energy conservation testing, labeling, and standards. (42
U.S.C. 6297(a)-(c)) DOE may, however, grant waivers of Federal
preemption for particular State laws or regulations, in accordance with
the procedures and other provisions set forth under EPCA. (See 42
U.S.C. 6297(d))
Subject to certain criteria and conditions, DOE is required to
develop test procedures to measure the energy efficiency, energy use,
or estimated annual operating cost of each covered product. (42 U.S.C.
6295(o)(3)(A) and 42 U.S.C. 6295(r)) Manufacturers of covered products
must use the prescribed DOE test procedure as the basis for certifying
to DOE that their products comply with the applicable energy
conservation standards adopted under EPCA and when making
representations to the public regarding the energy use or efficiency of
those products. (42 U.S.C. 6293(c) and 42 U.S.C. 6295(s)) Similarly,
DOE must use these test procedures to determine whether the products
comply with standards adopted pursuant to EPCA. (42 U.S.C. 6295(s)) The
DOE test procedures for microwave ovens appear at title 10 of the Code
of Federal Regulations (``CFR'') part 430.23(i) and 10 CFR part 430,
subpart B, appendix I (``appendix I'').
DOE must follow specific statutory criteria for prescribing new or
amended standards for covered products, including microwave ovens. Any
new or amended standard for a covered product must be designed to
achieve the maximum improvement in energy efficiency that the Secretary
of Energy determines is technologically feasible and economically
justified. (42 U.S.C. 6295(o)(2)(A) and 42 U.S.C. 6295(o)(3)(B))
Furthermore, DOE may not adopt any standard that would not result in
the significant conservation of energy. (42 U.S.C. 6295(o)(3))
Moreover, DOE may not prescribe a standard if DOE determines by
rule that the standard is not technologically feasible or economically
justified. (42 U.S.C. 6295(o)(3)(B)) In deciding whether a proposed
standard is economically justified, DOE must determine whether the
benefits of the standard exceed its burdens. (42 U.S.C.
6295(o)(2)(B)(i)) DOE must make this determination after receiving
comments on the proposed standard, and by considering, to the greatest
extent practicable, the following seven statutory factors:

(1) The economic impact of the standard on manufacturers and
consumers of the products subject to the standard;
(2) The savings in operating costs throughout the estimated
average life of the covered products in the type (or class) compared
to any increase in the price, initial charges, or maintenance
expenses for the covered products that are likely to result from the
standard;
(3) The total projected amount of energy (or as applicable,
water) savings likely to result directly from the standard;
(4) Any lessening of the utility or the performance of the
covered products likely to result from the standard;
(5) The impact of any lessening of competition, as determined in
writing by the Attorney General, that is likely to result from the
standard;
(6) The need for national energy and water conservation; and
(7) Other factors the Secretary of Energy (``Secretary'')
considers relevant.

(42 U.S.C. 6295(o)(2)(B)(i)(I)-(VII))
Further, EPCA establishes a rebuttable presumption that a standard
is economically justified if the Secretary finds that the additional
cost to the consumer of purchasing a product complying with an energy
conservation standard level will be less than three times the value of
the energy savings during the first year that the consumer will receive
as a result of the standard, as calculated under the applicable test
procedure. (42 U.S.C. 6295(o)(2)(B)(iii))
EPCA also contains what is known as an ``anti-backsliding''
provision, which prevents the Secretary from prescribing

[[Page 52288]]

any amended standard that either increases the maximum allowable energy
use or decreases the minimum required energy efficiency of a covered
product. (42 U.S.C. 6295(o)(1)) Also, the Secretary may not prescribe
an amended or new standard if interested persons have established by a
preponderance of the evidence that the standard is likely to result in
the unavailability in the United States in any covered product type (or
class) of performance characteristics (including reliability),
features, sizes, capacities, and volumes that are substantially the
same as those generally available in the United States. (42 U.S.C.
6295(o)(4))
Additionally, EPCA specifies requirements when promulgating an
energy conservation standard for a covered product that has two or more
subcategories. DOE must specify a different standard level for a type
or class of product that has the same function or intended use, if DOE
determines that products within such group: (A) consume a different
kind of energy from that consumed by other covered products within such
type (or class); or (B) have a capacity or other performance-related
feature which other products within such type (or class) do not have
and such feature justifies a higher or lower standard. (42 U.S.C.
6295(q)(1)) In determining whether a performance-related feature
justifies a different standard for a group of products, DOE must
consider such factors as the utility to the consumer of the feature and
other factors DOE deems appropriate. Id. Any rule prescribing such a
standard must include an explanation of the basis on which such higher
or lower level was established. (42 U.S.C. 6295(q)(2))
Finally, pursuant to the amendments contained in the Energy
Independence and Security Act of 2007 (``EISA 2007''), Publish Law 110-
140, any final rule for new or amended energy conservation standards
promulgated after July 1, 2010, is required to address standby mode and
off mode energy use. (42 U.S.C. 6295(gg)(3)) Specifically, when DOE
adopts a standard for a covered product after that date, it must, if
justified by the criteria for adoption of standards under EPCA (42
U.S.C. 6295(o)), incorporate standby mode and off mode energy use into
a single standard, or, if that is not feasible, adopt a separate
standard for such energy use for that product. (42 U.S.C.
6295(gg)(3)(A)-(B)) DOE's current test procedures for microwave ovens
address standby mode and off mode energy use. In this rulemaking, DOE
intends to incorporate such energy use into any amended energy
conservation standards that it may adopt.

B. Background

1. Current Standards
In a final rule published on June 17, 2013 (``June 2013 Final
Rule''), DOE prescribed the current energy conservation standards for
microwave ovens manufactured on and after June 17, 2016. 78 FR 36316.
These standards are set forth in DOE's regulations at 10 CFR
430.32(j)(3) and are repeated in Table II.1.

Table II.1--Federal Energy Conservation Standards for Microwave Ovens
------------------------------------------------------------------------
Maximum allowable
Product class average standby
power
------------------------------------------------------------------------
Microwave-Only Ovens and Countertop Convection 1.0 W
Microwave Ovens.....................................
Built-In and Over-the-Range Convection Microwave 2.2 W
Ovens...............................................
------------------------------------------------------------------------

2. History of Standards Rulemaking for Microwave Ovens
EPCA prescribed an energy conservation standard for kitchen ranges
and ovens, and directed DOE to conduct two cycles of rulemakings to
determine whether to amend standards for these products. (42 U.S.C.
6295(h)(2)(A)-(B)) DOE completed the first of these rulemaking cycles
by publishing a final rule on September 8, 1998, that codified the
prescriptive design standard for gas cooking products established in
EPCA, but found that no standards were justified for electric cooking
products, including microwave ovens, at that time. 63 FR 48038, 48053-
48054. DOE completed the second rulemaking cycle and published a final
rule on April 8, 2009, in which it determined, among other things, that
standards for microwave oven active mode energy use were not
economically justified. 74 FR 16040 (``April 2009 Final Rule'').
Most recently, DOE published the June 2013 Final Rule, adopting
energy conservation standards for microwave ovens. 78 FR 36316. In the
June 2013 Final Rule, DOE maintained its prior determination that
active mode standards are not warranted for microwave ovens and
prescribed energy conservation standards that address the standby and
off mode energy use of microwave ovens. 78 FR 36316, 36317.
In support of the present review of the microwave oven energy
conservation standards, DOE published an early assessment request for
information (``RFI'') on August 13, 2019 (``August 2019 RFI''), which
identified various issues on which DOE sought comment to inform its
determination of whether the standards need to be amended. 84 FR 39980.
DOE subsequently published a notice of proposed determination
(``NOPD'') on August 12, 2021, in which DOE initially determined that
current standards for microwave ovens do not need to be amended. 86 FR
44298. (``August 2021 NOPD'') In the August 2021 NOPD, DOE tentatively
determined that there are technology options that would improve the
efficiency of microwave ovens. 86 FR 44298, 44310. Based on the
analysis conducted for the August 2021 NOPD, DOE estimated that amended
standards for microwave oven standby power at the maximum
technologically feasible (``max-tech'') level would result in 0.1 quads
of energy saved over a 30-year period (representing an estimated 8
percent reduction in site energy use of microwave ovens). 86 FR 44298,
44310.
After the publication of the NOPD, DOE conducted investigative
testing and manufacturer discussions, and updated the engineering
analysis accordingly for this SNOPR. As a result, DOE revised the
efficiency levels, manufacturer selling price (``MSP'')-efficiency
relationships, and LCC and PBP analyses to evaluate the economic
impacts of potential energy conservation standards for microwave ovens
on individual consumers. Updates to the shipments and NIA analyses from
the NOPD include the market shares of both product classes, historical
shipments, shipment projections, the standard year, no-new-standards
case efficiency distribution, and FFC conversion rates.
In evaluating the significance of the estimated energy savings for
the August 2021 NOPD, DOE applied a two-part numeric threshold test
that was then applicable under section 6(b) of appendix A to 10 CFR
part 430 subpart C (Jan. 1, 2021 edition). Specifically, the

[[Page 52289]]

threshold required that an energy conservation standard result in a
0.30 quads reduction in site energy use over a 30-year analysis period
or a 10-percent reduction in site energy use over that same period. See
85 FR 8626, 8670 (Feb. 14, 2020). In the August 2021 NOPD, DOE stated
that the estimated site energy savings at the max-tech level was under
the 0.3-quads/10-percent threshold and tentatively determined that
amended energy conservation standards for microwave oven standby power
would not result in significant conservation of energy. 86 FR 44298,
44310. DOE also noted that the two-part numeric threshold was under
reconsideration. 86 FR 44298, 44302.
DOE held a public meeting on September 13, 2021, to solicit
feedback from stakeholders concerning the August 2021 NOPD, and
received comments in response from the interested parties listed in
Table II.2.

Table II.2--August 2021 NOPD Written Comments for Microwave Ovens
----------------------------------------------------------------------------------------------------------------
Commenter(s) Reference in this SNOPR Commenter type
----------------------------------------------------------------------------------------------------------------
Association of Home Appliance Manufacturers.......... AHAM........................ Industry Association.
Institute for Policy Integrity (NYU School of Law)... IPI......................... Consumer Advocate.
Pacific Gas and Electric Company (``PG&E''), San CA IOUs..................... Investor Owned Utility
Diego Gas and Electric (``SDG&E''), and Southern Association.
California Edison (``SCE'').
Appliance Standards Awareness Project (ASAP), ASAP, ACEEE, CFA, NRDC, NEEA Efficiency Organizations.
American Council for an Energy-Efficiency Economy
(ACEEE), Consumer Federation of America (CFA),
Natural Resources Defense Council (NRDC), Northwest
Energy Efficiency Alliance (NEEA).
Natural Resources Defense Council (NRDC), Appliance NRDC, ASAP, CA IOUs......... Efficiency Organizations.
Standards Awareness Project (ASAP), Pacific Gas and
Electric Company (``PG&E''), San Diego Gas and
Electric (``SDG&E''), and Southern California Edison
(``SCE'').
----------------------------------------------------------------------------------------------------------------

A parenthetical reference at the end of a comment quotation or
paraphrase provides the location of the item in the public record.\14\
---------------------------------------------------------------------------

\14\ The parenthetical reference provides a reference for
information located in the docket of DOE's rulemaking to develop
energy conservation standards for microwave ovens. (Docket No. EERE-
2017-BT-STD-0023, which is maintained at <a href="http://www.regulations.gov">www.regulations.gov</a>). The
references are arranged as follows: (commenter name, comment docket
ID number, page of that document).
---------------------------------------------------------------------------

On December 13, 2021, DOE published in the Federal Register, a
final rule that amended appendix A to 10 CFR part 430 subpart C
(``appendix A''). 86 FR 70892 (the ``December 2021 Final Rule''). The
December 2021 Final Rule, in part, removed the numeric threshold in
section 6(b) of appendix A for determining when the significant energy
savings criterion is met, reverting to DOE's prior practice of making
such determinations on a case-by-case basis. 86 FR 70892.

C. Deviation From Appendix A

In accordance with section 3(a) of appendix A, DOE notes that it is
deviating from the provision in appendix A regarding the pre-NOPR
stages for an energy conservation standards rulemaking. Section 6(a)(2)
of appendix A states that if the Department determines it is
appropriate to proceed with a rulemaking (after initiating the
rulemaking process through an early assessment), the preliminary stages
of a rulemaking to issue or amend an energy conservation standard that
DOE will undertake will be a framework document and preliminary
analysis, or an advance notice of proposed rulemaking (``ANOPR'').
DOE is deviating from this provision by proposing amended standards
without first issuing a framework document and preliminary analysis or
an ANOPR. As discussed previously, DOE proposed in the August 2021 NOPD
that standards for microwave ovens did not need to be amended. 86 FR
44298. The August 2021 NOPD contained analyses that DOE generally
conducts as part of a preliminary analysis, including a market and
technology assessment, screening analysis, engineering analysis, and
national impacts analysis (``NIA''). DOE provided a 60-day comment
period for the August 2021 NOPD. As such, DOE believes it is
appropriate to proceed with this SNOPR without once again conducting
the pre-NOPR stages of a rulemaking.
Section 6(f)(2) of appendix A provides that the length of the
public comment period for a notice of proposed rulemaking to amend an
energy conservation standard will be at least 75 days. As stated
previously, DOE requested comment on the analytical approach taken in
the August 2021 NOPD and provided stakeholders with a 60-day comment
period. Given that this supplemental notice relies largely on the same
analytical approach taken in that NOPD, DOE believes a 60-day comment
period is appropriate and will provide interested parties with a
meaningful opportunity to comment on the proposed rule.

III. General Discussion

DOE developed this proposal after considering oral and written
comments, data, and information submitted by stakeholders. The
following discussion addresses issues raised by these commenters.

A. Product Classes and Scope of Coverage

When evaluating and establishing energy conservation standards, DOE
divides covered products into product classes by the type of energy
used or by capacity or other performance-related features that justify
differing standards. In making a determination whether a performance-
related feature justifies a different standard, DOE must consider such
factors as the utility of the feature to the consumer and other factors
DOE determines are appropriate. (42 U.S.C. 6295(q)) The microwave oven
product classes for this SNOPR are discussed in further detail in
section IV.A.1 of this document. This proposal covers microwave ovens
defined as household cooking appliances consisting of a compartment
designed to cook or heat food by means of microwave energy, including
microwave ovens with or without thermal elements designed for surface
browning of food and convection microwave ovens. This includes any
microwave oven components of a combined cooking product. 10 CFR 430.2.
The scope of coverage is discussed in further detail in section IV.A.1
of this document.

B. Test Procedure

EPCA sets forth generally applicable criteria and procedures for
DOE's adoption and amendment of test procedures. (42 U.S.C. 6293)
Manufacturers of covered products must use these test procedures to
certify to DOE that their product complies with energy conservation
standards and to

[[Page 52290]]

quantify the efficiency of their product. DOE's current energy
conservation standards for microwave ovens are expressed in terms of
average watts of standby mode power consumption. See 10 CFR
430.23(j)(3). DOE originally established test procedures for microwave
ovens in an October 3, 1997 final rule that addressed active mode
energy use only. 62 FR 51976. Those procedures were based on the
International Electrotechnical Commission (``IEC'') Standard 705-
Second Edition 1998 and Amendment 2-1993, ``Methods for Measuring the
Performance of Microwave Ovens for Households and Similar Purposes''
(``IEC Standard 705''). On July 22, 2010, DOE published in the Federal
Register a final rule for the microwave oven test procedures (``July
2010 Repeal Final Rule''), in which it repealed the regulatory test
procedures for measuring the cooking efficiency of microwave ovens. 75
FR 42579. In the July 2010 Repeal Final Rule, DOE determined that the
existing microwave oven test procedure did not produce representative
and repeatable test results. 75 FR 42579, 42580. DOE stated at that
time that it was unaware of any test procedures that had been developed
that address these concerns. 75 FR 42579, 42581.
In response to the August 2021 NOPD, AHAM stated that active mode
standards are not justified because the current test procedure does not
measure active mode power and an active mode measurement would be
unduly burdensome. (AHAM, No. 14 at p. 3) DOE is not currently
proposing active mode standards because it has not identified a method
for capturing active mode energy performance in a repeatable and
representative manner.
On March 9, 2011, DOE published an interim final rule establishing
test procedures for microwave ovens regarding the measurement of the
average standby mode and average off mode power consumption that
incorporated by reference specific clauses from the IEC Standard 62301,
``Household electrical appliances--Measurement of standby power,''
First Edition 2005-06. 76 FR 12825. On January 18, 2013, DOE published
a final rule amending the microwave oven test procedure to incorporate
by reference certain provisions of the revised IEC Standard 62301
Edition 2.0 2011-01, along with clarifying language for the measurement
of standby mode and off mode energy use. 78 FR 4015.
On December 16, 2016, DOE published a final rule (``December 2016
TP Final Rule'') amending the cooking products test procedure to, in
part, incorporate methods for calculating the annual standby mode and
off mode energy consumption of the microwave oven component of a
combined cooking product by allocating a portion of the combined low-
power mode energy consumption measured for the combined cooking product
to the microwave oven component using the estimated annual cooking
hours for the given components comprising the combined cooking product.
81 FR 91418, 91438-91439. That final rule, which resulted in the most
recent version of the microwave oven test procedure, was codified in
the CFR at appendix I.
On January 18, 2018, DOE published an RFI (``January 2018 RFI'')
initiating a data collection process to assist in its evaluation of the
test procedure for microwave ovens. 83 FR 2366. On November 14, 2019,
DOE published a NOPR (``November 2019 TP NOPR'') proposing amendments
to the existing test procedure with requirements for both the clock
display and network functionality when testing standby mode and off
mode power consumption and certain technical corrections. 84 FR 61836.
DOE subsequently published an SNOPR on August 3, 2021 (``the August
2021 TP SNOPR'') providing additional clarification on the requirements
for testing microwave ovens with network functionality. 86 FR 41759. On
March 30, 2022, DOE published a final rule amending the microwave oven
test procedure as proposed in the August 2021 TP SNOPR. 87 FR 18261.

C. Technological Feasibility

1. General
In each energy conservation standards rulemaking, DOE conducts a
screening analysis based on information gathered on all current
technology options and prototype designs that could improve the
efficiency of the products or product that are the subject of the
rulemaking. As the first step in such an analysis, DOE develops a list
of technology options for consideration in consultation with
manufacturers, design engineers, and other interested parties. DOE then
determines which of those means for improving efficiency are
technologically feasible. DOE considers technologies incorporated in
commercially-available products or in working prototypes to be
technologically feasible. Sections 6(b)(3)(i) and 7(b)(1) of appendix A
to 10 CFR part 430 subpart C.
After DOE has determined that particular technology options are
technologically feasible, it further evaluates each technology option
in light of the following additional screening criteria: (1)
practicability to manufacture, install, and service; (2) adverse
impacts on product utility or availability; (3) adverse impacts on
health or safety, and (4) unique-pathway proprietary technologies. 10
CFR part 430, subpart C, appendix A, sections 6(c)(3)(ii)-(v) and
7(b)(2)-(5). Section IV.B of this document discusses the results of the
screening analysis for microwave ovens, particularly the designs DOE
considered, those it screened out, and those that are the basis for the
standards considered in this rulemaking. For further details on the
screening analysis for this rulemaking, see chapter 4 of the SNOPR TSD.
2. Maximum Technologically Feasible Levels
When DOE proposes to adopt an amended standard for a type or class
of covered product, it must determine the maximum improvement in energy
efficiency or maximum reduction in energy use that is technologically
feasible for such product. (42 U.S.C. 6295(p)(1)) Accordingly, in the
engineering analysis, DOE determined the maximum technologically
feasible (max-tech) improvements in energy efficiency for microwave
ovens, using the design parameters for the most efficient products
available on the market or in working prototypes. The max-tech levels
that DOE determined for this rulemaking are described in section IV.C
of this proposed rule and in chapter 5 of the SNOPR TSD.

D. Energy Savings

1. Determination of Savings
For each trial standard level (``TSL''), DOE projected energy
savings from application of the TSL to microwave ovens purchased in the
30-year period that begins in the year of compliance with the proposed
standards (2026-2055).\15\ The savings are measured over the entire
lifetime of microwave ovens purchased in the 30-year period. DOE
quantified the energy savings attributable to each TSL as the
difference in energy consumption between each standards case and the
no-new-standards case. The no-new-standards case represents a
projection of energy consumption that reflects how the market for a
product would likely

[[Page 52291]]

evolve in the absence of amended energy conservation standards.
---------------------------------------------------------------------------

\15\ Each TSL is composed of specific efficiency levels for each
product class. The TSLs considered for this SNOPR are described in
section V.A of this document. DOE conducted a sensitivity analysis
that considers impacts for products shipped in a 9-year period.
---------------------------------------------------------------------------

DOE used its NIA spreadsheet model to estimate NES from potential
amended or new standards for microwave ovens. The NIA spreadsheet model
(described in section IV.H of this document) calculates energy savings
in terms of site energy, which is the energy directly consumed by
products at the locations where they are used. For electricity, DOE
reports national energy savings in terms of primary energy savings,
which is the savings in the energy that is used to generate and
transmit the site electricity. DOE also calculates NES in terms of FFC
energy savings. The FFC metric includes the energy consumed in
extracting, processing, and transporting primary fuels (i.e., coal,
natural gas, petroleum fuels), and thus presents a more complete
picture of the impacts of energy conservation standards.\16\ DOE's
approach is based on the calculation of an FFC multiplier for each of
the energy types used by covered products or product. For more
information on FFC energy savings, see section IV.H.2 of this document.
---------------------------------------------------------------------------

\16\ The FFC metric is discussed in DOE's statement of policy
and notice of policy amendment. 76 FR 51282 (Aug. 18, 2011), as
amended at 77 FR 49701 (Aug. 17, 2012).
---------------------------------------------------------------------------

2. Significance of Savings
To adopt any new or amended standards for a covered product, DOE
must determine that such action would result in significant energy
savings. (42 U.S.C. 6295(o)(3)(B))
In response to the August 2021 NOPD, IPI suggested that DOE re-
consider its tentative determination regarding the significance of
energy conservation in light of the amendments to appendix A that DOE
had recently proposed in a separate rulemaking, which included changes
to the definition of ``significant energy savings.'' (IPI, No. 15 at p.
1) CA IOUs requested DOE consider the proposed appendix A changes to
the quantitative significant savings of energy threshold, economic
justification, and technological feasibility of the proposed standard
levels. (CA IOUs, No. 17 at p. 2)
AHAM stated that amended standards are not justified for microwave
ovens regardless of whether DOE continues to use the then-current
appendix A's definition of ``significant conservation of energy'' or
relies on the previous definition of ``merely trivial.'' (AHAM, No. 14
at p. 2)
As discussed, the numeric threshold for determining the
significance of energy savings was subsequently eliminated in the
December 2021 Final Rule and DOE has reverted to its longstanding
practice of evaluating the significance of energy savings on a case-by-
case basis. 86 FR 70892.
The significance of energy savings offered by a new or amended
energy conservation standard cannot be determined without knowledge of
the specific circumstances surrounding a given rulemaking.\17\ For
example, the United States recently rejoined the Paris Agreement and
will exert leadership in confronting the climate crisis. These actions
have placed an increased emphasis on the importance of energy savings
that reduce greenhouse gas emissions and help mitigate the climate
crisis. Additionally, some covered products and equipment have most of
their energy consumption occur during periods of peak energy demand.
The impacts of these products on the energy infrastructure can be more
pronounced than products with relatively constant demand. Lastly, in
evaluating the significance of energy savings, DOE considers
differences in primary energy and FFC effects for different covered
products and equipment when determining whether energy savings are
significant. Primary energy and FFC effects include the energy consumed
in electricity production (depending on load shape), in distribution
and transmission, and in extracting, processing, and transporting
primary fuels (i.e., coal, natural gas, petroleum fuels), and thus
present a more complete picture of the impacts of energy conservation
standards.
---------------------------------------------------------------------------

\17\ The numeric threshold for determining the significance of
energy savings established in a final rule published on February 14,
2020 (85 FR 8626, 8670), was subsequently eliminated in a final rule
published on December 13, 2021 (86 FR 70892).
---------------------------------------------------------------------------

Accordingly, DOE evaluates the significance of energy savings on a
case-by-case basis. As stated, the proposed standards would result in
estimated national energy savings of 0.04 quads, the equivalent of the
electricity use of 1 million homes in one year. DOE has initially
determined the energy savings for the TSL proposed in this rulemaking
are ``significant'' within the meaning of 42 U.S.C. 6295(o)(3)(B).

E. Economic Justification

1. Specific Criteria
As noted previously, EPCA provides seven factors to be evaluated in
determining whether a potential energy conservation standard is
economically justified. (42 U.S.C. 6295(o)(2)(B)(i)(I)-(VII)) The
following sections discuss how DOE has addressed each of those seven
factors in this SNOPR.
a. Economic Impact on Manufacturers and Consumers
In determining the impacts of a potential amended standard on
manufacturers, DOE conducts an MIA, as discussed in section IV.J of
this document. DOE first uses an annual cash-flow approach to determine
the quantitative impacts. This step includes both a short-term
assessment--based on the cost and capital requirements during the
period between when a regulation is issued and when entities must
comply with the regulation--and a long-term assessment over a 30-year
period. The industry-wide impacts analyzed include (1) INPV, which
values the industry on the basis of expected future cash flows, (2)
cash flows by year, (3) changes in revenue and income, and (4) other
measures of impact, as appropriate. Second, DOE analyzes and reports
the impacts on different types of manufacturers, including impacts on
small manufacturers. Third, DOE considers the impact of standards on
domestic manufacturer employment and manufacturing capacity, as well as
the potential for standards to result in plant closures and loss of
capital investment. Finally, DOE takes into account cumulative impacts
of various DOE regulations and other regulatory requirements on
manufacturers.
For individual consumers, measures of economic impact include the
changes in LCC and PBP associated with new or amended standards. These
measures are discussed further in the following section. For consumers
in the aggregate, DOE also calculates the national net present value of
the consumer costs and benefits expected to result from particular
standards. DOE also evaluates the impacts of potential standards on
identifiable subgroups of consumers that may be affected
disproportionately by a standard.
b. Savings in Operating Costs Compared To Increase in Price (LCC and
PBP)
EPCA requires DOE to consider the savings in operating costs
throughout the estimated average life of the covered product in the
type (or class) compared to any increase in the price of, or in the
initial charges for, or maintenance expenses of, the covered product
that are likely to result from a standard. (42 U.S.C.
6295(o)(2)(B)(i)(II)) DOE conducts this comparison in its LCC and PBP
analysis.
The LCC is the sum of the purchase price of a product (including
its installation) and the operating expense (including energy,
maintenance, and repair expenditures) discounted over the lifetime of
the product. The LCC

[[Page 52292]]

analysis requires a variety of inputs, such as product prices, product
energy consumption, energy prices, maintenance and repair costs,
product lifetime, and discount rates appropriate for consumers. To
account for uncertainty and variability in specific inputs, such as
product lifetime and discount rate, DOE uses a distribution of values,
with probabilities attached to each value.
The PBP is the estimated amount of time (in years) it takes
consumers to recover the increased purchase cost (including
installation) of a more-efficient product through lower operating
costs. DOE calculates the PBP by dividing the change in purchase cost
due to a more-stringent standard by the change in annual operating cost
for the year that standards are assumed to take effect.
For its LCC and PBP analysis, DOE assumes that consumers will
purchase the covered products in the first year of compliance with new
or amended standards. The LCC savings for the considered efficiency
levels are calculated relative to the case that reflects projected
market trends in the absence of new or amended standards. DOE's LCC and
PBP analysis is discussed in further detail in section IV.F of this
document.
c. Energy Savings
Although significant conservation of energy is a separate statutory
requirement for adopting an energy conservation standard, EPCA requires
DOE, in determining the economic justification of a standard, to
consider the total projected energy savings that are expected to result
directly from the standard. (42 U.S.C. 6295(o)(2)(B)(i)(III)) As
discussed in section III.D of this document, DOE uses the NIA
spreadsheet models to project national energy savings.
d. Lessening of Utility or Performance of Products
In establishing product classes and in evaluating design options
and the impact of potential standard levels, DOE evaluates potential
standards that would not lessen the utility or performance of the
considered products. (42 U.S.C. 6295(o)(2)(B)(i)(IV)) Based on data
available to DOE, the standards proposed in this document would not
reduce the utility or performance of the products under consideration
in this rulemaking.
e. Impact of Any Lessening of Competition
EPCA directs DOE to consider the impact of any lessening of
competition, as determined in writing by the Attorney General, that is
likely to result from a proposed standard. (42 U.S.C.
6295(o)(2)(B)(i)(V)) It also directs the Attorney General to determine
the impact, if any, of any lessening of competition likely to result
from a proposed standard and to transmit such determination to the
Secretary within 60 days of the publication of a proposed rule,
together with an analysis of the nature and extent of the impact. (42
U.S.C. 6295(o)(2)(B)(ii)) DOE will transmit a copy of this proposed
rule to the Attorney General with a request that the Department of
Justice (``DOJ'') provide its determination on this issue. DOE will
publish and respond to the Attorney General's determination in the
final rule. DOE invites comment from the public regarding the
competitive impacts that are likely to result from this proposed rule.
In addition, stakeholders may also provide comments separately to DOJ
regarding these potential impacts. See the ADDRESSES section for
information to send comments to DOJ.
f. Need for National Energy Conservation
DOE also considers the need for national energy and water
conservation in determining whether a new or amended standard is
economically justified. (42 U.S.C. 6295(o)(2)(B)(i)(VI)) The energy
savings from the proposed standards are likely to provide improvements
to the security and reliability of the Nation's energy system.
Reductions in the demand for electricity also may result in reduced
costs for maintaining the reliability of the Nation's electricity
system. DOE conducts a utility impact analysis to estimate how
standards may affect the Nation's needed power generation capacity, as
discussed in section IV.M of this document.
DOE maintains that environmental and public health benefits
associated with the more efficient use of energy are important to take
into account when considering the need for national energy
conservation. The proposed standards are likely to result in
environmental benefits in the form of reduced emissions of air
pollutants and GHGs associated with energy production and use. As part
of the analysis of the need for national energy and water conservation,
DOE conducts an emissions analysis to estimate how potential standards
may affect these emissions, as discussed in section IV.K of this
document; the estimated emissions impacts are reported in section V.B.6
of this document. DOE also estimates the economic value of emissions
reductions resulting from the considered TSLs, as discussed in section
IV.L of this document.
g. Other Factors
In determining whether an energy conservation standard is
economically justified, DOE may consider other factors that the
Secretary deems to be relevant. (42 U.S.C. 6295(o)(2)(B)(i)(VII)) To
the extent DOE identifies any relevant information regarding economic
justification that does not fit into the other categories described
previously, DOE could consider such information under ``other
factors.''
2. Rebuttable Presumption
As set forth in 42 U.S.C. 6295(o)(2)(B)(iii), EPCA creates a
rebuttable presumption that an energy conservation standard is
economically justified if the additional cost to the consumer of a
product that meets the standard is less than three times the value of
the first year's energy savings resulting from the standard, as
calculated under the applicable DOE test procedure. DOE's LCC and PBP
analyses generate values used to calculate the effects that proposed
energy conservation standards would have on the payback period for
consumers. These analyses include, but are not limited to, the 3-year
payback period contemplated under the rebuttable-presumption test. In
addition, DOE routinely conducts an economic analysis that considers
the full range of impacts to consumers, manufacturers, the Nation, and
the environment, as required under 42 U.S.C. 6295(o)(2)(B)(i). The
results of this analysis serve as the basis for DOE's evaluation of the
economic justification for a potential standard level (thereby
supporting or rebutting the results of any preliminary determination of
economic justification). The rebuttable presumption payback calculation
is discussed in section IV.F.9 of this proposed rule.

IV. Methodology and Discussion of Related Comments

This section addresses the analyses DOE has performed for this
rulemaking regarding microwave ovens. Separate subsections address each
component of DOE's analyses.
DOE used several analytical tools to estimate the impact of the
standards proposed in this document. The first tool is a spreadsheet
that calculates the LCC savings and PBP of potential amended or new
energy conservation standards. The national impacts analysis uses a
second spreadsheet set that provides shipments projections.

[[Page 52293]]

Additionally, this second spreadsheet calculates national energy
savings and net present value of total consumer costs and savings
expected to result from potential energy conservation standards. DOE
uses the third spreadsheet tool, the Government Regulatory Impact Model
(``GRIM''), to assess manufacturer impacts of potential standards.
These three spreadsheet tools are available on the DOE website for this
rulemaking: <a href="http://www1.eere.energy.gov/buildings/appliance_standards/product.aspx/productid/48">www1.eere.energy.gov/buildings/appliance_standards/product.aspx/productid/48</a>. Additionally, DOE used output from the
latest version of the Energy Information Administration's (``EIA's'')
Annual Energy Outlook (``AEO''), a widely known energy projection for
the United States, for the emissions and utility impact analyses.
Stakeholders asked that DOE publish the analysis used in the NOPD.
(ASAP, NRDC, CA IOUs, No. 14 at p. 1; CA IOUs, No. 17 at p. 1)
DOE has provided spreadsheet models in the docket to support the
SNOPR analyses. The LCC spreadsheet model used to support the SNOPR
analysis had not been developed for the NOPD analyses. The shipments
and NIA spreadsheet models used in the NOPD analyses now have updated
values. Primary and FFC energy savings in the NOPD Table V.2 Cumulative
National Energy Savings for Microwave Ovens can be found in the NIA's
Input and Summary worksheet.

A. Market and Technology Assessment

DOE develops information in the market and technology assessment
that provides an overall picture of the market for the products
concerned, including the purpose of the products, the industry
structure, manufacturers, market characteristics, and technologies used
in the products. This activity includes both quantitative and
qualitative assessments, based primarily on publicly-available
information. The subjects addressed in the market and technology
assessment for this rulemaking include (1) a determination of the scope
of the rulemaking and product classes, (2) manufacturers and industry
structure, (3) existing efficiency programs, (4) shipments information,
(5) market and industry trends, and (6) technologies or design options
that could improve the energy efficiency of microwave ovens. The key
findings of DOE's market assessment are summarized in the following
sections. See chapter 3 of the SNOPR TSD for further discussion of the
market and technology assessment.
1. Scope of Coverage and Product Classes
In this analysis, DOE relies on the definition of microwave ovens
in 10 CFR 430.2, which defines ``microwave oven'' as a category of
cooking products which is a household cooking appliance consisting of a
compartment designed to cook or heat food by means of microwave energy,
including microwave ovens with or without thermal elements designed for
surface browning of food and convection microwave ovens. This includes
any microwave oven(s) component of a combined cooking product. Any
product meeting the definition of microwave oven is included in DOE's
scope of coverage.
For this proposal, DOE considered the two product classes of
microwave ovens prescribed in the current energy conservation
standards: (1) Microwave-Only Ovens and Countertop Convection Microwave
Ovens, and (2) Built-In and Over-the-Range Convection Microwave Ovens.
For these two classes of microwave ovens, DOE's current test
procedure measures the energy consumption in standby mode and off mode
only. Consequently, DOE's current energy conservation standards for
microwave ovens are also expressed in terms of standby mode and off
mode power. There are currently no active mode energy conservation
standards nor a prescribed test procedure for measuring the active mode
energy use or efficiency (e.g., cooking efficiency) of microwave ovens.
2. Technology Options
In the preliminary market analysis and technology assessment, DOE
identified four technology options that would be expected to improve
the efficiency of microwave ovens, as measured by the DOE test
procedure:

Table IV.1--Microwave Oven Technology Options
------------------------------------------------------------------------
Mode Technology option
------------------------------------------------------------------------
Standby........................... Lower-power display technologies.
Standby........................... Cooking sensors with no standby
power requirement.
Standby........................... More efficient power supply and
control board options.
Standby........................... Automatic power-down of most power-
consuming components, including the
clock display.
------------------------------------------------------------------------

CA IOUs stated that microwave ovens are available on the market
that do not appear to use automatic power-down functionality, but
achieve lower standby power than the DOE-stated max-tech standby power
levels. They requested that DOE review and revise the max-tech levels
based on the knowledge of market-ready models. (CA IOUs, No. 17 at p.
4) ASAP stated that there are additional potential efficiency levels
between the level associated with automatic power down and the current
baseline standards (1.0 W for microwave-only ovens and countertop
convection microwave ovens and 2.2 W for built-in and over-the-range
convection microwave ovens). ASAP further stated DOE's Compliance
Certification (``CCMS'') database lists microwave oven models with
standby power levels significantly below 0.84 W without automatic
power-down. (ASAP, ACEEE, CFA, NRDC, NEEA, No. 16 at p. 1) For the
SNOPR, DOE purchased and tested 33 microwave ovens representing the two
product classes, and the results confirm that microwave oven models
currently on the market are able to achieve standby power consumption
values between that of automatic power-down and the proposed levels.
Further, DOE's testing suggested that microwave ovens are frequently
rated conservatively, such that their certified standby power level is
higher than actual values obtained when tested in accordance with
appendix I. Therefore, DOE was unable to accurately assess the
relationship between specific standby power levels and utilized
technology options based on data from the CCMS database. Instead, DOE
used the measured standby power levels of microwave oven models in its
test sample as a proxy to determine the representative distribution of
standby power levels among microwave ovens on the market, as shown in
Table IV.2. Details of the methodology and results from DOE's
investigative testing are included in chapter 3 and chapter 5 of the
SNOPR TSD.

[[Page 52294]]

Table IV.2--Estimated Market Distribution of Microwave Ovens
------------------------------------------------------------------------
Market share
Standby power (W) (%)
------------------------------------------------------------------------
Microwave-Only Ovens and Countertop Convection Microwave Ovens
------------------------------------------------------------------------
1....................................................... 15
0.8..................................................... 45
0.6..................................................... 29
0.4..................................................... 11
------------------------------------------------------------------------
Built-in and Over-The-Range Convection Microwave Ovens
------------------------------------------------------------------------
2.2..................................................... 0
1.5..................................................... 36
1....................................................... 59
0.5..................................................... 5
------------------------------------------------------------------------

DOE subsequently tore down all 33 microwave ovens but was unable to
isolate a unique set of technology options associated with each standby
power level. As such, DOE tentatively concludes that models
demonstrating lower standby power consumption than the current energy
conservation standards are not implementing specific technology
options, but rather incorporate a comprehensive system-level control
board redesign that prioritizes standby power performance from the
ground up. Examples of possible redesign strategies include the use of
modern microcontrollers that demonstrate significantly lower quiescent
current comsumption and firmware that emphasizes the shutting down of
all subassemblies that are not in use while idle. DOE tentatively
estimates that while these improvements would not contribute to the
incremental manufacturer production cost (``MPC'') of a control board,
the redesign would result in significant conversion costs for
manufacturers as they attempt to bring their microwave oven models into
compliance with any proposed standards. See section IV.J.2.a of this
document.
DOE requests feedback on its tentative conclusion that reducing the
standby power consumption of microwave ovens would require full
redesigns of control boards, and that while such redesigns would not
result in increased MPCs, manufacturers would incur significant one-
time conversation costs.

B. Screening Analysis

DOE uses the following five screening criteria to determine which
technology options are suitable for further consideration in an energy
conservation standards rulemaking:

(1) Technological feasibility. Technologies that are not
incorporated in commercial products or in working prototypes will
not be considered further.
(2) Practicability to manufacture, install, and service. If it
is determined that mass production and reliable installation and
servicing of a technology in commercial products could not be
achieved on the scale necessary to serve the relevant market at the
time of the projected compliance date of the standard, then that
technology will not be considered further.
(3) Impacts on product utility or product availability. If it is
determined that a technology would have a significant adverse impact
on the utility of the product for significant subgroups of consumers
or would result in the unavailability of any covered product type
with performance characteristics (including reliability), features,
sizes, capacities, and volumes that are substantially the same as
products generally available in the United States at the time, it
will not be considered further.
(4) Adverse impacts on health or safety. If it is determined
that a technology would have significant adverse impacts on health
or safety, it will not be considered further.
(5) Unique-Pathway Proprietary Technologies. If a design option
utilizes proprietary technology that represents a unique pathway to
achieving a given efficiency level, that technology will not be
considered further due to the potential for monopolistic concerns.

10 CFR part 430, subpart C, appendix A, sections 6(b)(3) and 7(b).
In summary, if DOE determines that a technology, or a combination
of technologies, fails to meet one or more of the listed five criteria,
it will be excluded from further consideration in the engineering
analysis. The reasons for eliminating any technology are discussed in
the following sections.
The subsequent sections include comments from interested parties
pertinent to the screening criteria, DOE's evaluation of each
technology option against the screening analysis criteria, and whether
DOE determined that a technology option should be excluded (``screened
out'') based on the screening criteria.
In response to the August 2021 NOPD, AHAM stated that there are no
available technology options to improve standby power energy
consumption without impacting functionality for consumers. (AHAM, No.
14 at p. 2)
As discussed in section IV.A.2 of this document, DOE has identified
microwave ovens on the market that have standby energy consumption
lower than the maximum currently required, indicating that there are
potential technology options to improve standby power consumption.
DOE's initial testing results and review of the CCMS database show that
the majority of microwave ovens in both product classes are performing
better than the current standards.
1. Screened-Out Technologies
As discussed, DOE considers whether a technology option will
adversely impact consumer utility and product availability. In response
to the August 2021 NOPD, IPI stated that DOE should reconsider all
technology options (e.g., auto power-down), since allowing an undefined
loss of consumer utility to bar consideration of an otherwise feasible
technology option distorts the statute's careful balancing of factors.
(IPI, No. 15 at p. 1)
DOE has previously stated it is uncertain the extent to which
consumers value the function of a continuous display clock, but that
loss of such function may result in significant loss of consumer
utility. 78 FR 36316, 36362. Consistent with this prior concern, DOE
has screened out ``automatic power-down'' as a technology option due to
its impact on consumer utility.
2. Remaining Technologies
Through a review of each technology, DOE tentatively concludes that
all of the other identified technologies listed in section IV.A.2 of
this document meet all five screening criteria to be examined further
as design options in DOE's SNOPR analysis. In summary, DOE did not
screen out the following technology options:
(1) Lower-power display technologies;
(2) Cooking sensors with no standby power requirement; and
(3) More efficient power supply and control board options
DOE has initially determined that these technology options are
technologically feasible because they are being used or have previously
been used in commercially-available products or working prototypes. DOE
also finds that all of the remaining technology options meet the other
screening criteria (i.e., practicable to manufacture, install, and
service and do not result in adverse impacts on consumer utility,
product availability, health, or safety, unique-pathway proprietary
technologies). For additional details, see chapter 4 of the SNOPR TSD.

C. Engineering Analysis

The purpose of the engineering analysis is to establish the
relationship between the efficiency and cost of microwave ovens. There
are two elements to consider in the engineering analysis; the selection
of efficiency levels to analyze (i.e., the ``efficiency analysis'') and
the determination of product cost at each efficiency level (i.e., the
``cost analysis''). In determining the performance of higher-efficiency

[[Page 52295]]

microwave ovens, DOE considers technologies and design option
combinations not eliminated by the screening analysis. For each product
class, DOE estimates the baseline cost, as well as the incremental cost
for the product at efficiency levels above the baseline. The output of
the engineering analysis is a set of cost-efficiency ``curves'' that
are used in downstream analyses (i.e., the LCC and PBP analyses and the
NIA).
1. Efficiency Analysis
DOE typically uses one of two approaches to develop energy
efficiency levels for the engineering analysis: (1) relying on observed
efficiency levels in the market (i.e., the efficiency-level approach),
or (2) determining the incremental efficiency improvements associated
with incorporating specific design options to a baseline model (i.e.,
the design-option approach). Using the efficiency-level approach, the
efficiency levels established for the analysis are determined based on
the market distribution of existing products (in other words, based on
the range of efficiencies and efficiency level ``clusters'' that
already exist on the market). Using the design-option approach, the
efficiency levels established for the analysis are determined through
detailed engineering calculations and/or computer simulations of the
efficiency improvements from implementing specific design options that
have been identified in the technology assessment. DOE may also rely on
a combination of these two approaches. For example, the efficiency-
level approach (based on actual products on the market) may be extended
using the design option approach to ``gap fill'' levels (to bridge
large gaps between other identified efficiency levels) and/or to
extrapolate to the max-tech level (particularly in cases where the max-
tech level exceeds the maximum efficiency level currently available on
the market).
In this rulemaking, DOE applied the efficiency-level approach. As
discussed, DOE was unable to use the design-option approach because it
did not identify specific design options associated with each standby
power level.
a. Baseline Efficiency
For each product/product class, DOE generally selects a baseline
model as a reference point for each class, and measures changes
resulting from potential energy conservation standards against the
baseline. The baseline model in each product/product class represents
the characteristics of a product/product typical of that class (e.g.,
capacity, physical size). Generally, a baseline model is one that just
meets current energy conservation standards, or, if no standards are in
place, the baseline is typically the most common or least efficient
unit on the market.
For microwave-only ovens and countertop convection microwave ovens
(``Product Class 1''), the baseline standby power level, EL 0, is equal
to the current standard of 1.0 W. For the built-in and over-the-range
convection microwave ovens product class (``Product Class 2''), the
baseline standby power consumption used for the analysis at EL 0 is
equal to the current standard of 2.2 W. This maximum allowable average
standby power consumption for Product Class 2 microwave ovens is higher
than that allowed for Product Class 1 microwave ovens because, in the
June 2013 Final Rule, DOE had concluded that built-in and over-the-
range convection microwave ovens require a larger power supply to
support additional features such as an exhaust fan, additional relays,
and additional lights, and that the larger power supply contributes to
a higher standby power consumption. 78 FR 36316, 36328. Nonetheless,
DOE expects that certain available design options for reducing standby
power consumption for Product Class 2 microwave ovens would be similar
to those for Product Class 1 microwave ovens.
b. Higher Efficiency Levels
Using the efficiency-level approach, the higher efficiency levels
established for the analysis are determined based on the market
distribution of existing products (in other words, based on the range
of efficiencies and efficiency level ``clusters'' that already exist on
the market). As noted in section IV.A.2 of this document, DOE's testing
suggests that microwave ovens are frequently rated conservatively, such
that their certified standby power level is higher than actual values
obtained when tested in accordance with appendix I. DOE therefore used
the measured standby power levels of microwave oven models in its test
sample as a proxy to determine the representative distribution of
standby power levels among microwave ovens currently on the market, as
shown in Table IV.2 of this document.
According to this efficiency distribution, 85 percent of Product
Class 1 microwave ovens achieve a standby power consumption lower than
the current standard of 1.0 W, with 45 percent of the market estimated
to be achieving 0.8 W, 29 percent achieving 0.6 W, and 11 percent
achieving 0.4 W, all without the use of automatic powerdown. For
Product Class 1, therefore, DOE analyzed three efficiency levels
(``ELs'') above the baseline which correspond to these three standby
power levels, as shown in Table IV.3 of this document.
The test results also showed that all of the Product Class 2 test
units achieved a standby power consumption in the range of 0.5 W to 1.5
W, lower than the current standard of 2.2 W. As such, DOE analyzed
higher efficiency levels for this product class at standby power values
evenly distributed within that range: EL 1 at 1.5 W, EL 2 at 1.0 W and
EL 3 (max-tech) at 0.5 W. DOE estimates that there are currently no
built-in and over-the-range convection microwave ovens in the market at
the baseline standby power consumption of 2.2 W.
DOE requests feedback on the efficiency levels analyzed for each
product class in this proposal.
In summary, DOE analyzed the following efficiency levels for this
proposal:

Table IV.3--Analyzed Efficiency Levels for Microwave-Only Ovens and
Countertop Convection Microwave Ovens
------------------------------------------------------------------------
Standby
Efficiency level power (W)
------------------------------------------------------------------------
Baseline.................................................... 1.00
1........................................................... 0.8
2........................................................... 0.6
3 (Max-Tech)................................................ 0.4
------------------------------------------------------------------------

Table IV.4--Analyzed Efficiency Levels for Built-In and Over-the-Range
Convection Microwave Ovens
------------------------------------------------------------------------
Standby
Efficiency level power (W)
------------------------------------------------------------------------
Baseline.................................................... 2.2
1........................................................... 1.5
2........................................................... 1.0
3 (Max-Tech)................................................ 0.5
------------------------------------------------------------------------

2. Manufacturer Production Cost Analysis
The cost analysis portion of the engineering analysis is conducted
using one or a combination of cost approaches. The selection of cost
approach depends on a suite of factors, including the availability and
reliability of public information, characteristics of the regulated
product, the availability and timeliness of purchasing the

[[Page 52296]]

product on the market. The cost approaches are summarized as follows:
<bullet> Physical teardowns: Under this approach, DOE physically
dismantles a commercially available product, component-by-component, to
develop a detailed bill of materials for the product.
<bullet> Catalog teardowns: In lieu of physically deconstructing a
product, DOE identifies each component using parts diagrams (available
from manufacturer websites or appliance repair websites, for example)
to develop the bill of materials for the product.
<bullet> Price surveys: If neither a physical nor catalog teardown
is feasible (for example, for tightly integrated products such as
fluorescent lamps, which are infeasible to disassemble and for which
parts diagrams are unavailable) or cost-prohibitive and otherwise
impractical (e.g., large commercial boilers), DOE conducts price
surveys using publicly available pricing data published on major online
retailer websites and/or by soliciting prices from distributors and
other commercial channels.
For microwave ovens, DOE attempted to estimate the MPC of attaining
each efficiency level using the physical teardowns approach described
previously. As stated in section IV.A.2 of this document, DOE tore down
all 33 microwave ovens in its test sample but was unable to isolate a
unique set of technology options associated with each standby power
level. As such, DOE tentatively concluded that models demonstrating
lower standby power consumption than the current energy conservation
standards are not implementing specific technology options, but rather
incorporate a comprehensive system-level control board redesign that
prioritizes standby power performance from the ground up. Examples of
possible redesign strategies include the replacement of
microcontrollers and switch mode controllers with modern ones that
demonstrate significantly lower quiescent current comsumption at no
additional cost compared to those found in inefficient systems and
firmware that emphasizes the shutting down of all subassemblies that
are not in use while idle. DOE tentatively estimates that while these
improvements would not contribute to an increase in the MPC of a
control board (i.e. incremental MPC of $0), the redesign would result
in conversion costs for manufacturers as they attempt to bring their
microwave oven models into compliance with any proposed standards. See
section IV.J.2.a of this document.
DOE requests comment on its tentative conclusion that improvements
in standby performance are the result of system-level control board
redesigns that require conversion costs but would not result in
increases to the manufacturing product cost compared to a control board
at baseline.
3. Manufacturer Production Cost-Efficiency Results
The results of the engineering analysis are reported as cost-
efficiency data (or ``curves'') in the form of MPC (in dollars) versus
standby power consumption (in W). For the reasons discussed in sections
IV.A.2 and IV.C.2 of this document, DOE estimated an incremental MPC of
$0 at all higher efficiency levels, compared to the baseline MPC, for
both of the the product classes, as shown in Table IV.5 and Table IV.6
of this document. See chapter 5 of the SNOPR TSD for additional detail
on the engineering analysis.
DOE requests comment on the incremental MPCs from the SNOPR
engineering analysis.

Table IV.5--Analyzed Efficiency Levels and Incremental Manufacturer
Production Costs for Microwave-Only Ovens and Countertop Convection
Microwave Ovens
------------------------------------------------------------------------
Incremental
Efficiency level Standby power (W) MPC (2021$)
------------------------------------------------------------------------
Baseline....................... 1.00................... ..............
1.............................. 0.8.................... $0.0
2.............................. 0.6.................... 0.0
3.............................. 0.4.................... 0.0
------------------------------------------------------------------------

Table IV.6--Analyzed Efficiency Levels and Incremental Manufacturer
Production Costs for Built-In and Over-the-Range Convection Microwave
Ovens
------------------------------------------------------------------------
Incremental
Efficiency level Standby power (W) MPC (2021$)
------------------------------------------------------------------------
Baseline....................... 2.20................... ..............
1.............................. 1.5.................... $0.0
2.............................. 1.00................... 0.0
3.............................. 0.5.................... 0.0
------------------------------------------------------------------------

4. Manufacturer Selling Price
DOE developed a manufacturer markup to convert MPCs to MSPs. The
MSP includes direct manufacturing production costs (i.e., labor,
materials, and overhead estimated in DOE's MPCs) and all non-production
costs (i.e., selling, general, and administrative expenses (``SG&A''),
research and development (``R&D''), and interest), along with profit.
To calculate the MSPs, DOE applied the manufacturer markup to the MPCs
estimated in section IV.C.3 of this document for each product class and
efficiency level.
DOE estimated the manufacturer markup based on publicly available
information from publicly traded microwave oven manufacturers and the
manufacturer markup that was used in the June 2013 Final Rule.\18\ DOE
continued to use a manufacturer markup value of 1.298, the same
manufacturer markup that was used in the June 2013 Final Rule, for this
SNOPR analysis.
---------------------------------------------------------------------------

\18\ 78 FR 36316.
---------------------------------------------------------------------------

Typically, DOE uses the same manufacturer markups in the consumer
analyses (e.g., LCC analysis, PBP analysis, and NIA) in both the no-
new-standards case and the standards cases. However, given that the
engineering

[[Page 52297]]

analysis estimated an incremental MPC of $0 at all efficiency levels,
compared to the baseline MPC, DOE developed higher manufacturer markups
in the standards cases as DOE expects microwave oven manufacturers to
recover at least some of the conversion costs that manufacturers would
incur as a result of the analyzed energy conservation standards.
Depending on the competitive environment for microwave ovens, some or
all of the increased conversion costs may be passed from manufacturers
to retailers and then eventually to consumers in the form of higher
purchase prices. DOE conservatively used a manufacturer markup in the
standards cases that would allow microwave oven manufacturers to fully
recover the conversion cost they incur to redesign non-compliant models
into compliant models. This increased manufacturer markup was applied
to the models that microwave oven manufacturers would need to redesign
due to energy conservation standards.
DOE first estimated the conversion costs associated with
redesigning non-compliant microwave oven models at each efficiency
level for both product classes. These conversion costs include capital
conversion costs (i.e., investments in property, plant, equipment, and
tooling necessary to adapt or change existing production facilities
such that new product designs can be fabricated and assembled) and
product conversion costs (i.e., investments in R&D, testing, marketing,
and other non-capitalized costs necessary to make product designs
comply with amended energy conservation standards). See section
IV.J.2.c of this document for a complete description of the conversion
cost estimates.
DOE then calibrated the manufacturer markups for each product class
at each TSL to result in microwave oven manufacturers to be able to
fully recover these conversion costs. DOE conservatively calibrated
these increased manufacturer markups to result in the INPV in the
standards cases to be equal to the INPV in the no-new-standards case.
INPV is the sum of the microwave oven manufacturers' industry annual
cash flows over the analysis period, discounted using the industry-
weighted average cost of capital. Therefore, DOE estimates that if
manufacturers were able to increase their manufacturer markups by the
values shown in Table IV.7, microwave oven manufacturers would not be
any worse off, as measured by INPV, due to standards compared to the
no-new-standards case (i.e., if DOE did not amend energy conservation
standards for microwave ovens).
The increase in manufacturer markups in the standards cases results
in an increase in the MSP, despite no incremental increase in MPC.
Table IV.7 displays the increase in manufacturer markups and the
incremental increase in MSP applied to non-compliant models that are
redesigned due to the analyzed energy conservation standards.

Table IV.7--Manufacturer Markup and Incremental Manufacturer Selling Price by Product Class and Efficiency Level
----------------------------------------------------------------------------------------------------------------
PC 1: Microwave-only ovens and PC 2: Built-in and over-the-range
countertop convection microwave convection microwave ovens
ovens -------------------------------------
Efficiency level --------------------------------------
Manufacturer Manufacturer Incremental MSP
markup Incremental MSP markup
----------------------------------------------------------------------------------------------------------------
Baseline............................ 1.2980 ................. 1.2980 .................
EL 1................................ 1.3007 $0.34 1.2980 $0.00
EL 2................................ 1.3035 0.70 1.3058 2.14
EL 3................................ 1.3061 1.04 1.3112 3.63
----------------------------------------------------------------------------------------------------------------

DOE requests comment on the estimated increased manufacturer
markups and incremental MSPs that result from the analyzed energy
conservation standards from the SNOPR engineering analysis.

D. Markups Analysis

The markups analysis develops appropriate markups (e.g., retailer
markups, distributor markups, contractor markups) in the distribution
chain and sales taxes to convert the MSP estimates derived in the
engineering analysis to consumer prices which are then used in the LCC
and PBP analysis. At each step in the distribution channel, companies
mark up the price of the product to cover business costs and profit
margin.
For microwave ovens, DOE further developed baseline and incremental
markups for each link in the distribution chain (after the product
leaves the manufacturer). Baseline markups are applied to the price of
products with baseline efficiency, while incremental markups are
applied to the difference in price between baseline and higher-
efficiency models (the incremental cost increase). The incremental
markup is typically less than the baseline markup and is designed to
maintain similar per-unit operating profit before and after new or
amended standards.\19\
---------------------------------------------------------------------------

\19\ Because the projected price of standards-compliant products
is typically higher than the price of baseline products, using the
same markup for the incremental cost and the baseline cost would
result in higher per-unit operating profit. While such an outcome is
possible, DOE maintains that in markets that are reasonably
competitive it is unlikely that standards would lead to a
sustainable increase in profitability in the long run.
---------------------------------------------------------------------------

DOE relied on economic data from the U.S. Census Bureau to estimate
average baseline and incremental markups. Specifically, DOE used the
2017 Annual Retail Trade Survey for the ``electronics and appliance
stores'' sector to develop retailer markups.\20\
---------------------------------------------------------------------------

\20\ U.S. Census Bureau, Annual Retail Trade Survey. 2017.
<a href="http://www.census.gov/programs-surveys/arts.html">www.census.gov/programs-surveys/arts.html</a>.
---------------------------------------------------------------------------

Chapter 6 of the SNOPR TSD provides additional detail on DOE's
development of the baseline and incremental retail markups.

E. Energy Use Analysis

The purpose of the energy use analysis is to determine the annual
energy consumption of microwave ovens at different efficiencies in
representative U.S. single-family homes, multi-family residences, and
mobile homes, and to assess the energy savings potential of increased
microwave ovens efficiency. The energy use analysis estimates the range
of energy use of microwave ovens in the field (i.e., as they are
actually used by consumers). The energy use analysis provides the basis
for other analyses DOE performed,

[[Page 52298]]

particularly assessments of the energy savings and the savings in
consumer operating costs that could result from adoption of amended or
new standards.
For this SNOPR, DOE used the same methodology as that described in
section IV.D of the August 2021 NOPD. In the June 2013 Final Rule, DOE
determined the average hours of operation for microwaves to be 44.9
hours per year.\21\ \22\ To calibrate the average annual operating
hours, DOE primarily used data from the Energy Information
Administration (``EIA'')'s Residential Energy Consumption Survey
(``RECS'') 2015.\23\ RECS 2015 provides information on the frequency of
microwave oven usage per week for each household. DOE calculated the
RECS microwave oven usage factor for each household in the sample by
dividing the weighted-average usage based on the entire RECS samples.
DOE then multiplied usage factor by the annual operating hours (i.e.,
44.9 hours) for each household in the RECS. DOE subtracted field
microwave ovens operating hours from the total number of hours in a
year and multiplied that difference by the standby mode power usage at
each efficiency level to determine annual standby mode and off mode
energy consumption.
---------------------------------------------------------------------------

\21\ Uniform Test Method for Measuring the Energy Consumption of
Cooking Products. 10 CFR part 430, subpart B, appendix I,
<a href="http://www.law.cornell.edu/cfr/text/10/appendix-I_to_subpart_B_of_part_430">www.law.cornell.edu/cfr/text/10/appendix-I_to_subpart_B_of_part_430</a>.
\22\ Williams, et al. 2012. Surveys of Microwave Ovens in U.S.
Homes. LBNL-5947E <a href="http://www.osti.gov/biblio/1172657">www.osti.gov/biblio/1172657</a>.
\23\ U.S. Department of Energy-Energy Information
Administration, Residential Energy Consumption Survey, 2015 Public
Use Microdata Files, 2015. Washington, DC. Available online at:
<a href="http://www.eia.doe.gov/emeu/recs/recspubuse15/pubuse15.html">www.eia.doe.gov/emeu/recs/recspubuse15/pubuse15.html</a>. DOE will
update all the 2015 RECS data to 2020 RECS if it is available prior
to the final rule.
---------------------------------------------------------------------------

Chapter 7 of the SNOPR TSD provides details on DOE's energy use
analysis for microwave ovens.

F. Life-Cycle Cost and Payback Period Analysis

DOE conducted LCC and PBP analyses to evaluate the economic impacts
on individual consumers of potential energy conservation standards for
microwave ovens. The effect of new or amended energy conservation
standards on individual consumers usually involves a reduction in
operating cost and an increase in purchase cost. DOE used the following
two metrics to measure consumer impacts:
(1) The LCC is the total consumer expense of an appliance or
product over the life of that product, consisting of total installed
cost (manufacturer selling price, distribution chain markups, sales
tax, and installation costs) plus operating costs (expenses for energy
use, maintenance, and repair). To compute the operating costs, DOE
discounts future operating costs to the time of purchase and sums them
over the lifetime of the product.
(2) The PBP is the estimated amount of time (in years) it takes
consumers to recover the increased purchase cost (including
installation) of a more-efficient product through lower operating
costs. DOE calculates the PBP by dividing the change in purchase cost
at higher efficiency levels by the change in annual operating cost for
the year that amended or new standards are assumed to take effect.
For any given efficiency level, DOE measures the change in LCC
relative to the LCC in the no-new-standards case, which reflects the
estimated efficiency distribution of microwave ovens in the absence of
new or amended energy conservation standards. In contrast, the PBP for
a given efficiency level is measured relative to the baseline product.
For each considered efficiency level in each product class, DOE
calculated the LCC and PBP for a nationally representative set of
housing units. As stated previously, DOE developed household samples
from the RECS 2015.\24\ For each sample household, DOE determined the
energy consumption for the microwave ovens and the appropriate energy
price. By developing a representative sample of households, the
analysis captured the variability in energy consumption and energy
prices associated with the use of microwave ovens.
---------------------------------------------------------------------------

\24\ DOE will update all the RECS 2015 data to RECS 2020 if they
are available prior to the final rule.
---------------------------------------------------------------------------

Inputs to the calculation of total installed cost include the cost
of the product--which includes MPCs, manufacturer markups, retailer and
distributor markups, and sales taxes--and installation costs. Inputs to
the calculation of operating expenses include annual energy
consumption, energy prices and price projections, repair and
maintenance costs, product lifetimes, and discount rates. DOE created
distributions of values for product lifetime, discount rates, and sales
taxes, with probabilities attached to each value, to account for their
uncertainty and variability.
The computer model DOE uses to calculate the LCC and PBP relies on
a Monte Carlo simulation to incorporate uncertainty and variability
into the analysis. The Monte Carlo simulations randomly sample input
values from the probability distributions and microwave ovens user
samples. For this rulemaking, the Monte Carlo approach is implemented
in MS Excel together with the Crystal Ball\TM\ add-on.\25\ The model
calculated the LCC and PBP for products at each efficiency level for
10,000 housing units per simulation run. The analytical results include
a distribution of 10,000 data points showing the range of LCC savings
for a given efficiency level relative to the no-new-standards case
efficiency distribution. In performing an iteration of the Monte Carlo
simulation for a given consumer, product efficiency is chosen based on
its probability. If the chosen product efficiency is greater than or
equal to the efficiency of the standard level under consideration, the
LCC and PBP calculation reveals that a consumer is not impacted by the
standard level. By accounting for consumers who already purchase more-
efficient products, DOE avoids overstating the potential benefits from
increasing product efficiency.
---------------------------------------------------------------------------

\25\ Crystal Ball\TM\ is commercially-available software tool to
facilitate the creation of these types of models by generating
probability distributions and summarizing results within Excel,
available at <a href="http://www.oracle.com/technetwork/middleware/crystalball/overview/index.html">www.oracle.com/technetwork/middleware/crystalball/overview/index.html</a> (last accessed October 22, 2021).
---------------------------------------------------------------------------

DOE calculated the LCC and PBP for all consumers of microwave ovens
as if each were to purchase a new product in the expected year of
compliance with new or amended standards. Amended standards would apply
to microwave ovens manufactured 3 years after the date on which any new
or amended standard is published. (42 U.S.C. 6295(g)(10)(B)) At this
time, DOE estimates publication of a final rule in 2022. Therefore, for
purposes of its analysis, DOE used 2026 as the first year of compliance
with any amended standards for microwave ovens.
Table IV.8 summarizes the approach and data DOE used to derive
inputs to the LCC and PBP calculations. The subsections that follow
provide further discussion. Details of the spreadsheet model, and of
all the inputs to the LCC and PBP analyses, are contained in chapter 8
of the SNOPR TSD and its appendices.

[[Page 52299]]

Table IV.8--Summary of Inputs and Methods for the LCC and PBP Analysis *
------------------------------------------------------------------------
Inputs Source/method
------------------------------------------------------------------------
Product Cost................. Derived by multiplying MPCs by
manufacturer and retailer markups and
sales tax, as appropriate. Used
historical data to derive a price
scaling index to project product costs.
Installation Costs........... Assumed no change in installation costs
with efficiency level.
Annual Energy Use............ The standby wattage multiplied by the
hours per year in standby mode.
Average number of hours based on RECS
2015 data and the Cooking Test
Procedure.
Variability: Based on the RECS 2015.
Energy Prices................ Electricity: Based on EEI 2021.
Variability: Regional energy prices
determined for 9 regions.
Energy Price Trends.......... Based on AEO 2022 price projections.
Repair and Maintenance Costs. Assumed no change with efficiency level.
Product Lifetime............. Average: 10.65 years.
Discount Rates............... Approach involves identifying all
possible debt or asset classes that
might be used to purchase the considered
appliances, or might be affected
indirectly. Primary data source was the
Federal Reserve Board's Survey of
Consumer Finances.
Compliance Date.............. 2026.
------------------------------------------------------------------------
* References for the data sources mentioned in this table are provided
in the sections following the table or in chapter 8 of the SNOPR TSD.

1. Product Cost
To calculate consumer product costs, DOE multiplied the MPCs
developed in the engineering analysis by the markups described
previously (along with sales taxes). DOE used different markups for
baseline products and higher-efficiency products because DOE applied an
incremental markup to the increase in MSP associated with higher-
efficiency products.
Economic literature and historical data suggest that the real costs
of many products may trend downward over time according to ``learning''
or ``experience'' curves. An experience curve analysis implicitly
includes factors such as efficiencies in labor, capital investment,
automation, materials prices, distribution, and economies of scale at
an industry-wide level. To derive the learning rate parameter for
microwave ovens, DOE obtained historical Producer Price Index (``PPI'')
data for microwave ovens from the Bureau of Labor Statistics (``BLS'').
A PPI for ``Household Cooking Appliance Manufacturing: Electric
(Including Microwave) Household Ranges, Ovens, Surface Cooking Units,
and Equipment'' was available for the time period between 1972 and
2020.\26\ Inflation-adjusted price indices were calculated by dividing
the PPI series by the gross domestic product index from Bureau of
Economic Analysis for the same years. Using data from 1972-2020, the
estimated learning rate (defined as the fractional reduction in price
expected from each doubling of cumulative production) is 10.7 percent.
---------------------------------------------------------------------------

\26\ U.S. Bureau of Labor Statistics, PPI Industry Data, Major
household appliance manufacturers, Product series ID: PCU
33522033522011. Data series available at: <a href="http://www.bls.gov/ppi/">www.bls.gov/ppi/</a>.
---------------------------------------------------------------------------

2. Installation Cost
Installation cost includes labor, overhead, and any miscellaneous
materials and parts needed to install the product. DOE found no
evidence that installation costs would be impacted with increased
efficiency levels.
3. Annual Energy Consumption
For each sampled household, DOE determined the energy consumption
for a microwave ovens at different efficiency levels using the approach
described previously in section IV.E of this document.
4. Energy Prices
Because it captures the incremental savings associated with a
change in energy use from higher efficiency, a marginal electricity
price more accurately represents an incremental change in consumer
costs than would average electricity prices. Therefore, DOE applied
average electricity prices for the energy use of the product purchased
in the no-new-standards case, and marginal electricity prices for the
incremental change in energy use associated with the other efficiency
levels considered.
DOE derived electricity prices in 2021 using data from Edison
Electric Institute (``EEI'') Typical Bills and Average Rates
reports.\27\ DOE used the EEI data to define a marginal price as the
ratio of the change in the bill to the change in energy consumption.
---------------------------------------------------------------------------

\27\ Edison Electric Institute. Typical Bills and Average Rates
Report. 2020. Winter 2020, Summer 2020: Washington, DC.
---------------------------------------------------------------------------

To estimate energy prices in future years, DOE multiplied the 2021
energy prices by a projection of annual average price changes for each
of the nine census divisions from the Reference case in AEO 2022. AEO
2022 has an end year of 2050.\28\ To estimate price trends after 2050,
DOE used the average annual rate of change in prices from 2035 through
2050.
---------------------------------------------------------------------------

\28\ EIA. Annual Energy Outlook 2021 with Projections to 2050.
Washington, DC. Available at <a href="http://www.eia.gov/forecasts/aeo/">www.eia.gov/forecasts/aeo/</a> (last
accessed October 28, 2021).
---------------------------------------------------------------------------

5. Maintenance and Repair Costs
Maintenance costs are associated with maintaining the operation of
the product; repair costs are associated with repairing or replacing
product components that have failed in an appliance. Typically, small
incremental increases in product efficiency produce no, or only minor,
changes in maintenance and repair costs compared to baseline efficiency
products. In this SNOPR analysis, DOE included no changes in
maintenance or repair costs for microwave ovens that exceed baseline
efficiency.
6. Product Lifetime
For microwave ovens, DOE developed a distribution of lifetimes from
which specific values are assigned to the appliances in the samples.
DOE conducted an analysis of actual lifetime in the field using a
combination of historical shipments data, the stock of the considered
appliances in the American Housing Survey, and responses in RECS on the
age of the appliances in the homes. The data allowed DOE to estimate a
survival function, which provides an average appliance lifetime. This
analysis yielded a lifetime probability distribution with an average
lifetime for microwave ovens of approximately 10.6 years. See chapter 8
of the SNOPR TSD for further details.

[[Page 52300]]

7. Discount Rates
In the calculation of LCC, DOE applies discount rates appropriate
to households to estimate the present value of future operating cost
savings. DOE estimated a distribution of discount rates for microwave
ovens based on the opportunity cost of consumer funds.
DOE applies weighted-average discount rates calculated from
consumer debt and asset data, rather than marginal or implicit discount
rates.\29\ DOE notes that the LCC does not analyze the appliance
purchase decision, so the implicit discount rate is not relevant in
this model. The LCC estimates net present value over the lifetime of
the product, so the appropriate discount rate will reflect the general
opportunity cost of household funds, taking this lifetime scale into
account. Given the 30-year analysis period modeled in the LCC analysis,
the application of a marginal interest rate associated with an initial
source of funds is inaccurate. Regardless of the method of purchase,
consumers are expected to continue to rebalance their debt and asset
holdings over the LCC analysis period, based on the restrictions
consumers face in their debt payment requirements and the relative size
of the interest rates available on debts and assets. DOE estimates the
aggregate impact of this rebalancing using the historical distribution
of debts and assets.
---------------------------------------------------------------------------

\29\ The implicit discount rate is inferred from a consumer
purchase decision between two otherwise identical goods with
different first cost and operating cost. It is the interest rate
that equates the increment of first cost to the difference in net
present value of lifetime operating cost, incorporating the
influence of several factors: transaction costs; risk premiums and
response to uncertainty; time preferences; interest rates at which a
consumer is able to borrow or lend. The implicit discount rate is
not appropriate for the LCC analysis because it reflects a range of
factors that influence consumer purchase decisions, rather than the
opportunity cost of the funds that are used in purchases.
---------------------------------------------------------------------------

To establish residential discount rates for the LCC analysis, DOE
identified all relevant household debt or asset classes in order to
approximate a consumer's opportunity cost of funds related to appliance
energy cost savings. It estimated the average percentage shares of the
various types of debt and equity by household income group using data
from the Federal Reserve Board's Survey of Consumer Finances \30\
(``SCF'') for 1995, 1998, 2001, 2004, 2007, 2010, 2013, 2016, and 2019.
Using the SCF and other sources, DOE developed a distribution of rates
for each type of debt and asset by income group to represent the rates
that may apply in the year in which amended standards would take
effect. DOE assigned each sample household a specific discount rate
drawn from one of the distributions. The average rate across all types
of household debt and equity and income groups, weighted by the shares
of each type, is 4.3 percent. See chapter 8 of the SNOPR TSD for
further details on the development of consumer discount rates.
---------------------------------------------------------------------------

\30\ U.S. Board of Governors of the Federal Reserve System.
Survey of Consumer Finances. 1995, 1998, 2001, 2004, 2007, 2010,
2013, 2016, and 2019. (Last accessed August 20, 2021.)
<a href="http://www.federalreserve.gov/econresdata/scf/scfindex.htm">www.federalreserve.gov/econresdata/scf/scfindex.htm</a>.
---------------------------------------------------------------------------

8. Energy Efficiency Distribution in the No-New-Standards Case
To accurately estimate the share of consumers that would be
affected by a potential energy conservation standard at a particular
efficiency level, DOE's LCC analysis considered the projected
distribution (market shares) of product efficiencies under the no-new-
standards case (i.e., the case without amended or new energy
conservation standards).
To estimate the energy efficiency distribution of microwave ovens
for 2026, DOE used data from the engineering analysis. The estimated
market shares for the no-new-standards case for microwave ovens are
shown in Table IV.9 and reflect no efficiency shift. See chapter 8 of
the SNOPR TSD for further information.

Table IV.9--No-New-Standards Case Efficiency Distribution for Microwave Ovens in 2026
----------------------------------------------------------------------------------------------------------------
Product class 1: microwave-only and Product class 2: built-in and over-
countertop convection microwave the-range convection microwave ovens
TSL ovens -------------------------------------
--------------------------------------
Standby power (W) Market share (%) Standby power (W) Market share (%)
----------------------------------------------------------------------------------------------------------------
Baseline............................ 1.00 15 2.20 0
1................................... 0.8 45 1.5 36
2................................... 0.6 29 1.0 59
3................................... 0.4 11 0.5 5
----------------------------------------------------------------------------------------------------------------

DOE requests feedback on its approach to projecting the efficiency
distribution in 2026.
9. Payback Period Analysis
The payback period is the amount of time it takes the consumer to
recover the additional installed cost of more-efficient products,
compared to baseline products, through energy cost savings. Payback
periods are expressed in years. Payback periods that exceed the life of
the product signify that the increased total installed cost is not
recovered in reduced operating expenses.
The inputs to the PBP calculation for each efficiency level are the
change in total installed cost of the product and the change in the
first-year annual operating expenditures relative to the baseline. The
PBP calculation uses the same inputs as the LCC analysis, except that
discount rates are not needed.
ASAP, ACEEE, and the CA IOUs commented that efficiency levels
presented in the NOPD have payback periods below the average lifetime
of the product, which shows economic justification for amended
standards. (ASAP, ACEEE, No. 15 at p. 1 and CA IOUs, No. 17 at p. 1)
As noted previously, EPCA establishes a rebuttable presumption that
a standard is economically justified if the Secretary finds that the
additional cost to the consumer of purchasing a product complying with
an energy conservation standard level will be less than three times the
value of the first year's energy savings resulting from the standard,
as calculated under the applicable test procedure. (42 U.S.C.
6295(o)(2)(B)(iii)) For each considered efficiency level, DOE
determined the value of the first year's energy savings by calculating
the energy savings in accordance with the applicable DOE test
procedure, and multiplying those savings by the average energy price
projection for the year in which compliance with the amended standards
would be required.

[[Page 52301]]

G. Shipments Analysis

DOE uses projections of annual product shipments to calculate the
national impacts of potential amended or new energy conservation
standards on energy use, NPV, and future manufacturer cash flows.\31\
The shipments model takes an accounting approach, tracking market
shares of each product class and the vintage of units in the stock.
Stock accounting uses product shipments as inputs to estimate the age
distribution of in-service product stocks for all years. The age
distribution of in-service product stocks is a key input to
calculations of both the NES and NPV, because operating costs for any
year depend on the age distribution of the stock.
---------------------------------------------------------------------------

\31\ DOE uses data on manufacturer shipments as a proxy for
national sales, as aggregate data on sales are lacking. In general
one would expect a close correspondence between shipments and sales.
---------------------------------------------------------------------------

Total shipments for microwave ovens are developed by considering
the demand from replacements for units in stock that fail and the
demand from new installations in newly constructed homes. DOE
calculated shipments due to replacements using the retirement function
developed for the LCC analysis and historical data from AHAM. DOE
calculated shipments due to new installations using estimates from
microwave oven saturation rate in new homes in RECS 2015 and
projections of new housing starts from AEO 2022. See chapter 9 of the
SNOPR TSD for details.
For this SNOPR analysis, DOE used data from a market research
report and estimated the market share for built-in and over-the-range
convection microwave ovens at 4 percent.\32\
---------------------------------------------------------------------------

\32\ Euromonitor International. 2021. Air treatment products in
the U.S. December.
---------------------------------------------------------------------------

DOE considers the impacts on shipments from changes in product
purchase price and operating cost associated with higher energy
efficiency levels using a price elasticity and an efficiency
elasticity. DOE employs a 0.2-percent efficiency elasticity rate and a
price elasticity of -0.45 in its shipments model.\33\ The market impact
is defined as the difference between the product of price elasticity of
demand and the change in price due to a standard level, and the product
of the efficiency elasticity and the change in operating costs due to a
standard level.
---------------------------------------------------------------------------

\33\ Fujita, K. (2015) Estimating Price Elasticity using Market-
Level Appliance Data. Lawrence Berkeley National Laboratory, LBNL-
188289.
---------------------------------------------------------------------------

DOE requests comment on its methodology for estimating shipments.
DOE also requests comment on its approach to estimate the market share
for built-in and over-the-range convection microwave ovens.

H. National Impact Analysis

The NIA assesses the NES and the NPV from a national perspective of
total consumer costs and savings that would be expected to result from
new or amended standards at specific efficiency levels.\34\
(``Consumer'' in this context refers to consumers of the product being
regulated.) DOE calculates the NES and NPV for the TSLs considered
based on projections of annual product shipments, along with the annual
energy consumption and total installed cost data from the energy use
and LCC analyses. For the present analysis, DOE projected the energy
savings, operating cost savings, product costs, and NPV of consumer
benefits over the lifetime of microwave ovens sold from 2026 through
2055.
---------------------------------------------------------------------------

\34\ The NIA accounts for impacts in the 50 states.
---------------------------------------------------------------------------

DOE evaluates the impacts of new or amended standards by comparing
a case without such standards with standards-case projections. The no-
new-standards case characterizes energy use and consumer costs for each
product class in the absence of new or amended energy conservation
standards. For this projection, DOE considers historical trends in
efficiency and various forces that are likely to affect the mix of
efficiencies over time. DOE compares the no-new-standards case with
projections characterizing the market for each product class if DOE
adopted new or amended standards at specific energy efficiency levels
(i.e., the TSLs or standards cases) for that class. For the standards
cases, DOE considers how a given standard would likely affect the
market shares of products with efficiencies greater than the standard.
DOE uses a spreadsheet model to calculate the energy savings and
the national consumer costs and savings from each TSL. Interested
parties can review DOE's analyses by changing various input quantities
within the spreadsheet. The NIA spreadsheet model uses point values (as
opposed to probability distributions) as inputs.
Table IV.10 summarizes the inputs and methods DOE used for the NIA
analysis for the SNOPR. Discussion of these inputs and methods follows
the table. See chapter 10 of the SNOPR TSD for further details.

Table IV.10--Summary of Inputs and Methods for the National Impact
Analysis
------------------------------------------------------------------------
Inputs Method
------------------------------------------------------------------------
Shipments.............................. Annual shipments from shipments
model.
Compliance Date of Standard............ 2026.
Efficiency Trends...................... Standards cases: ``Roll up''
equipment to meet potential
efficiency level.
Annual Energy Consumption per Unit..... Calculated for no-new-standards
case and each TSL based on
inputs from energy use
analysis.
Total Installed Cost per Unit.......... Calculated for no-new-standards
case and each TSL based on
inputs from the LCC analysis.
Repair and Maintenance Cost per Unit... Annual values do not change
with efficiency level.
Energy Price Trends.................... AEO 2022 projections (to 2050)
and extrapolation using a
fixed annual rate of price
change between 2035 and 2050
thereafter.
Energy Site-to-Primary and FFC A time-series conversion factor
Conversion. based on AEO 2022.
Discount Rate.......................... 3 percent and 7 percent.
Present Year........................... 2022.
------------------------------------------------------------------------

1. Product Efficiency Trends
A key component of the NIA is the trend in energy efficiency
projected for the no-new-standards case and each of the standards
cases. Section IV.F.8 of this document describes how DOE developed an
energy efficiency distribution for the no-new-standards case (which
yields a shipment-weighted average efficiency) for each of the
considered product classes for the year

[[Page 52302]]

of anticipated compliance with an amended or new standard.
ASAP, NRDC, and the CA IOUs commented that in the public meeting
held on September 13, 2021, DOE included an assumption that unit
efficiencies will improve by 0.25 percent between 2019 and 2053 and
requested how the assumption is derived and how it is integrated into
the energy savings evaluation. (ASAP, NRDC, CA IOUs, No. 12 at p. 1)
To project the trend in efficiency absent amended standards for
microwave ovens over the entire shipments projection period, DOE used
the shipments-weighted standby power (``SWSP'') as a starting point.
DOE assumed that the shipment-weighted efficiency would not increase
annually for the microwave oven product classes.
For the standards cases, DOE used a ``roll-up'' scenario to
establish the shipment-weighted efficiency for the year that standards
are assumed to become effective in 2026. In the year of compliance, the
market shares of products in the no-new-standards case that do not meet
the standard under consideration would ``roll up'' to meet the new
standard level, and the market share of products above the standard
would remain unchanged.
2. National Energy Savings
The national energy savings analysis involves a comparison of
national energy consumption of the considered products between each TSL
and the case with no new or amended energy conservation standards. DOE
calculated the national energy consumption by multiplying the number of
units (stock) of each product (by vintage or age) by the unit energy
consumption (also by vintage). DOE calculated annual NES based on the
difference in national energy consumption for the no-new standards case
and for each higher efficiency standard case. DOE estimated energy
consumption and savings based on site energy and converted the
electricity consumption and savings to primary energy (i.e., the energy
consumed by power plants to generate site electricity) using annual
conversion factors derived from AEO 2022. Cumulative energy savings are
the sum of the NES for each year over the timeframe of the analysis.
Use of higher-efficiency products is occasionally associated with a
direct rebound effect, which refers to an increase in utilization of
the product due to the increase in efficiency. DOE did not find any
data on the rebound effect specific to microwave ovens.
In 2011, in response to the recommendations of a committee on
``Point-of-Use and Full-Fuel-Cycle Measurement Approaches to Energy
Efficiency Standards'' appointed by the National Academy of Sciences,
DOE announced its intention to use FFC measures of energy use and
greenhouse gas and other emissions in the national impact analyses and
emissions analyses included in future energy conservation standards
rulemakings. 76 FR 51281 (Aug. 18, 2011). After evaluating the
approaches discussed in the August 18, 2011 notice, DOE published a
statement of amended policy in which DOE explained its determination
that EIA's National Energy Modeling System (``NEMS'') is the most
appropriate tool for its FFC analysis and its intention to use NEMS for
that purpose. 77 FR 49701 (Aug. 17, 2012). NEMS is a public domain,
multi-sector, partial equilibrium model of the U.S. energy sector \35\
that EIA uses to prepare its Annual Energy Outlook. The FFC factors
incorporate losses in production and delivery in the case of natural
gas (including fugitive emissions) and additional energy used to
produce and deliver the various fuels used by power plants. The
approach used for deriving FFC measures of energy use and emissions is
described in appendix 10B of the SNOPR TSD.
---------------------------------------------------------------------------

\35\ For more information on NEMS, refer to The National Energy
Modeling System: An Overview 2009, DOE/EIA-0581(2009), October 2009.
Available at <a href="http://www.eia.gov/forecasts/aeo/">www.eia.gov/forecasts/aeo/</a> (last accessed October 22,
2021).
---------------------------------------------------------------------------

3. Net Present Value Analysis
The inputs for determining the NPV of the total costs and benefits
experienced by consumers are (1) total annual installed cost, (2) total
annual operating costs (energy costs and repair and maintenance costs),
and (3) a discount factor to calculate the present value of costs and
savings. DOE calculates net savings each year as the difference between
the no-new-standards case and each standards case in terms of total
savings in operating costs versus total increases in installed costs.
DOE calculates operating cost savings over the lifetime of each product
shipped during the projection period.
As discussed in section IV.F.1 of this document, DOE developed
microwave oven price trends based on historical PPI data. DOE applied
the same trends to project prices for each product class at each
considered efficiency level. By 2055, which is the end date of the
projection period, the average microwave oven price is projected to
drop 11 percent relative to 2021. DOE's projection of product prices is
described in appendix 10C of the SNOPR TSD.
To evaluate the effect of uncertainty regarding the price trend
estimates, DOE investigated the impact of different product price
projections on the consumer NPV for the considered TSLs for microwave
ovens. In addition to the default price trend, DOE considered two
product price sensitivity cases: (1) a low price decline case based on
the ``electric household cooking products'' PPI series from 1972 to
1992 and (2) a high price decline scenario based on the same PPI series
from 1993 to 2021, which shows a faster price decline than the full
time series between 1972-2021. The derivation of these price trends and
the results of these sensitivity cases are described in appendix 10C of
the SNOPR TSD.
The operating cost savings are energy cost savings, which are
calculated using the estimated energy savings in each year and the
projected price of the appropriate form of energy. To estimate energy
prices in future years, DOE multiplied the average regional energy
prices by the projection of annual national-average residential energy
price changes in the Reference case from AEO 2022, which has an end
year of 2050. To estimate price trends after 2050, DOE used the average
annual rate of change in prices from 2035 through 2050. As part of the
NIA, DOE also analyzed scenarios that used inputs from variants of the
AEO 2022 Reference case that have lower and higher economic growth.
Those cases have lower and higher energy price trends compared to the
Reference case. NIA results based on these cases are presented in
appendix 10D of the SNOPR TSD.
In calculating the NPV, DOE multiplies the net savings in future
years by a discount factor to determine their present value. For this
SNOPR, DOE estimated the NPV of consumer benefits using both a 3-
percent and a 7-percent real discount rate. DOE uses these discount
rates in accordance with guidance provided by the Office of Management
and Budget (``OMB'') to Federal agencies on the development of
regulatory analysis.\36\ The discount rates for the determination of
NPV are in contrast to the discount rates used in the LCC analysis,
which are designed to reflect a consumer's perspective. The 7-percent
real value is an estimate of the average before-tax rate of return to
private capital in the U.S. economy. The 3-percent real value
represents the ``social rate of time preference,'' which is the rate at
which society discounts

[[Page 52303]]

future consumption flows to their present value.
---------------------------------------------------------------------------

\36\ United States Office of Management and Budget. Circular A-
4: Regulatory Analysis. September 17, 2003. Section E. Available at
<a href="http://www.whitehouse.gov/omb/memoranda/m03-21.html">www.whitehouse.gov/omb/memoranda/m03-21.html</a> (last accessed October
15, 2021).
---------------------------------------------------------------------------

I. Consumer Subgroup Analysis

In analyzing the potential impact of new or amended energy
conservation standards on consumers, DOE evaluates the impact on
identifiable subgroups of consumers that may be disproportionately
affected by a new or amended national standard. The purpose of a
subgroup analysis is to determine the extent of any such
disproportional impacts. DOE evaluates impacts on particular subgroups
of consumers by analyzing the LCC impacts and PBP for those particular
consumers from alternative standard levels. For this SNOPR, DOE
analyzed the impacts of the considered standard levels on two
subgroups: (1) low-income households and (2) senior-only households.
The analysis used subsets of the RECS 2015 sample composed of
households that meet the criteria for the two subgroups and shows the
percentages of those both negatively and positively impacted. DOE used
the LCC and PBP spreadsheet model to estimate the impacts of the
considered efficiency levels on these subgroups. Chapter 11 in the
SNOPR TSD describes the consumer subgroup analysis.

J. Manufacturer Impact Analysis

1. Overview
DOE performed an MIA to estimate the financial impacts of amended
energy conservation standards on manufacturers of microwave ovens and
to estimate the potential impacts of such standards on employment and
manufacturing capacity. The MIA has both quantitative and qualitative
aspects and includes analyses of projected industry cash flows; the
INPV; investments in R&D and manufacturing capital; and domestic
manufacturing employment. Additionally, the MIA seeks to determine how
amended energy conservation standards might affect manufacturing
employment, capacity, and competition, as well as how standards
contribute to overall regulatory burden. Finally, the MIA serves to
identify any disproportionate impacts on manufacturer subgroups,
including small business manufacturers.
The quantitative part of the MIA primarily relies on the GRIM, an
industry cash flow model with inputs specific to this rulemaking. The
key GRIM inputs include data on the industry cost structure, MPCs,
product shipments, manufacturer markups, and investments in R&D and
manufacturing capital required to produce compliant products. The key
GRIM output is the INPV, which is the sum of industry annual cash flows
over the analysis period, discounted using the industry-weighted
average cost of capital. The model uses standard accounting principles
to estimate the impacts of more-stringent energy conservation standards
on a given industry by comparing changes in INPV between a no-new-
standards case and the various standards cases (TSLs). To capture the
uncertainty relating to manufacturer pricing strategies following
amended standards, the GRIM estimates a range of possible impacts under
different manufacturer markup scenarios.
The qualitative part of the MIA addresses manufacturer
characteristics and market trends. Specifically, the MIA considers such
factors as a potential standard's impact on manufacturing capacity,
competition within the industry, the cumulative impact of other DOE and
non-DOE regulations, and impacts on manufacturer subgroups. The
complete MIA is outlined in chapter 12 of the SNOPR TSD.
DOE prepared a profile of the microwave oven manufacturing industry
based on the market and technology assessment and information from the
June 2013 Final Rule.\37\ This included a top-down analysis of
microwave oven manufacturers that DOE used to derive preliminary
financial inputs for the GRIM (e.g., revenues; materials, labor,
overhead, and depreciation expenses; SG&A; and R&D expenses).
---------------------------------------------------------------------------

\37\ 78 FR 36316.
---------------------------------------------------------------------------

Additionally, DOE prepared a framework industry cash-flow analysis
to quantify the potential impacts of amended energy conservation
standards. The GRIM uses several factors to determine a series of
annual cash flows starting with the announcement of the standard and
extending over a 30-year period following the compliance date of the
standard. These factors include annual expected revenues, costs of
sales, SG&A and R&D expenses, taxes, and capital expenditures. In
general, energy conservation standards can affect manufacturer cash
flow in three distinct ways: (1) creating a need for increased
investment, (2) raising production costs per unit, and (3) altering
revenue due to higher per-unit prices and changes in sales volumes.
DOE also evaluated subgroups of manufacturers that may be
disproportionately impacted by amended standards or that may not be
accurately represented by the average cost assumptions used to develop
the industry cash flow analysis. Such manufacturer subgroups may
include small business manufacturers, low-volume manufacturers, niche
players, and/or manufacturers exhibiting a cost structure that largely
differs from the industry average. DOE identified one subgroup for a
separate impact analysis: small business manufacturers. The small
business subgroup is discussed in section VI.B of this document,
``Review under the Regulatory Flexibility Act,'' and in chapter 12 of
the SNOPR TSD.
2. Government Regulatory Impact Model and Key Inputs
DOE uses the GRIM to quantify the changes in cash flow due to
amended standards that result in a higher or lower industry value. The
GRIM uses a standard, annual discounted cash-flow analysis that
incorporates manufacturer costs, manufacturer markups, shipments, and
industry financial information as inputs. The GRIM models changes in
costs, distribution of shipments, investments, and manufacturer margins
that could result from amended energy conservation standards. The GRIM
spreadsheet uses the inputs to arrive at a series of annual cash flows,
beginning in 2022 (the reference year of the analysis) and continuing
to 2055. DOE calculated INPVs by summing the stream of annual
discounted cash flows during this period. For manufacturers of
microwave ovens, DOE used a real discount rate of 8.5 percent, which
was the same real discount rate used in the June 2013 Final Rule and
that was verified during manufacturer interviews for that rulemakings
analysis.
The GRIM calculates cash flows using standard accounting principles
and compares changes in INPV between the no-new-standards case and each
standards case. The difference in INPV between the no-new-standards
case and a standards case represents the financial impact of the
amended energy conservation standard on manufacturers. As discussed
previously, DOE developed critical GRIM inputs using a number of
sources, including publicly available data, results of the engineering
analysis, and information used in the June 2013 Final Rule. The GRIM
results are presented in section V.B.2 of this document. Additional
details about the GRIM, the discount rate, and other financial
parameters can be found in chapter 12 of the SNOPR TSD.
a. Manufacturer Production Costs
Manufacturing a more efficient product is typically more expensive
than manufacturing a baseline product due to the use of more complex

[[Page 52304]]

components, which are typically more costly than baseline components.
The changes in the MPCs of covered products can affect the revenues,
gross margins, and cash flow of the industry. As previously stated in
the engineering analysis in section IV.C.3 of this document, DOE
estimated an incremental MPC of $0 at all efficiency levels, compared
to the baseline MPC.
b. Shipments Projections
The GRIM estimates manufacturer revenues based on total unit
shipment projections and the distribution of those shipments by
efficiency level. Changes in sales volumes and efficiency mix over time
can significantly affect manufacturer finances. For this analysis, the
GRIM uses the NIA's annual shipment projections derived from the
shipments analysis from 2022 (the reference year) to 2055 (the end year
of the analysis period). See chapter 9 of the SNOPR TSD for additional
details.
c. Product and Capital Conversion Costs
Amended energy conservation standards could cause manufacturers to
incur conversion costs to bring their production facilities and product
designs into compliance. DOE evaluated the level of conversion-related
expenditures that would be needed to comply with each considered
efficiency level in each product class. For the MIA, DOE classified
these conversion costs into two major groups: (1) product conversion
costs and (2) capital conversion costs. Product conversion costs are
investments in research, development, testing, marketing, and other
non-capitalized costs necessary to make product designs comply with
amended energy conservation standards. Capital conversion costs are
investments in property, plant, and product necessary to adapt or
change existing production facilities such that new compliant product
designs can be fabricated and assembled.
DOE used a bottom-up cost estimate to arrive at a total industry
conversion cost at each EL for both product classes. First DOE
estimated the investments manufacturers are likely to incur to
resdesign a single microwave oven control board to be able to meet the
analyzed energy conservation standards. These per-board conversion
costs were based on manufacturer interviews and include both a per-
board capital conversion costs (e.g., investments in machinery and
tooling) as well as product conversion costs (e.g., investments in R&D
and testing). Based on manufacturer feedback, DOE assigned a smaller
level of investments necessary to achieve lower ELs and a larger level
of investment to achieve higher ELs.
Next, based on engineering teardowns and market research, DOE
estimated the total number of unique control boards used across all
covered microwave ovens. DOE used the percent of unique microwave oven
models for each product class that were certified in DOE's publicly
available Compliance Certification Database (``CCD'') \38\ to estimate
the number of unique control boards for each product class. Then DOE
used the efficiency distribution from the shipments analysis to
estimate the number of unique control boards specific to each
efficiency level, for each product class. Once DOE estimated the number
of unique control boards, DOE used the per-board redesign costs
specific to achieve each analyzed efficiency level to arrive at the
total industry conversion costs.
---------------------------------------------------------------------------

\38\ <a href="http://www.regulations.doe.gov/certification-data">www.regulations.doe.gov/certification-data</a>.
---------------------------------------------------------------------------

d. Markup Scenarios
MSPs include direct manufacturing production costs (i.e., labor,
materials, and overhead estimated in DOE's MPCs) and all non-production
costs (i.e., SG&A, R&D, and interest), along with profit. To calculate
the MSPs in the GRIM, DOE applied non-production cost markups to the
MPCs estimated in the engineering analysis for each product class and
efficiency level. Modifying these markups in the standards case yields
different sets of impacts on manufacturers. In the no-new-standards
case, DOE used a manufacturer markup of 1.298 for both product classes.
This is the same manufacturer markup that was used in the June 2013
Final Rule.\39\
---------------------------------------------------------------------------

\39\ 78 FR 36316.
---------------------------------------------------------------------------

For the MIA, DOE modeled two standards case manufacturer markup
scenarios to represent uncertainty regarding the potential impacts on
prices and profitability for manufacturers following the implementation
of amended energy conservation standards: (1) a conversion cost
recovery markup scenario and (2) a constant price scenario. These
scenarios lead to different manufacturer markup values at each TSL
that, when applied to the MPCs, result in varying revenue and cash flow
impacts.
Under the conversion cost recovery markup scenario, DOE modeled a
scenario where manufacturers increase their manufacturer markups in
response to amended energy conservation standards. Because DOE's
engineering analysis assumed there were no increases in the MPCs at
higher ELs, compared to the baseline MPCs, and that microwave oven
manufacturers would incur conversion costs to redesign non-compliant
models, DOE modeled a manufacturer markup scenario where microwave oven
manufacturers attempt to recover these investment through an increase
in their manufacturer markup. Therefore, in the standards cases the
manufacturer markup of models that would need to be re-designed is a
value larger than the 1.298 manufacturer markup used in the no-new-
standards case. DOE calibrated these manufacturer markups for each
product class at each EL to cause manufacturer INPV in the standards
cases to be equal to the INPV in the no-new-standards case. This
represents the upper-bound of manufacturer profitability, as in this
manufacturer markup scenario, microwave oven manufacturers are no worse
off, as measured by INPV, with energy conservation standards than in
the no-new-standards case (i.e., if DOE did not amend energy
conservation standards).
Under the constant price scenario, DOE applied the same
manufacturer markup, 1.298, for all efficiency levels in the no-new-
standards case and the standards cases. Because DOE's engineering
analysis assumed there were no increases in the MPCs at higher ELs and
that microwave oven manufacturers would incur conversion costs to
redesign non-compliant models, microwave oven manufacturers do not earn
any additional revenue in the standards cases than in the no-new-
standards case, despite incurring conversion costs to redesign non-
compliant microwave oven models. This represents the lower-bound of
manufacturer profitability, as microwave oven manufacturers incur
conversion costs but do not receive any additional revenue from these
redesign efforts.
A comparison of industry financial impacts under the two
manufacturer markup scenarios is presented in section V.B.2.a of this
document.
3. Discussion of MIA Comments
In response to the August 2021 NOPD, AHAM stated that if DOE
decides to amend the microwave oven standards, it should conduct
manufacturer interviews to better understand the challenges with
existing technology options and what the costs associated with energy
efficiency improvements would be. (AHAM, No. 14 at p. 2) In response to
AHAM's comment, DOE conducted interviews with manufacturers to discuss
the potential impacts of energy conservation standards for microwave
ovens to manufacturers. DOE included

[[Page 52305]]

conversion cost estimates associated with redesigning microwave ovens
to be able to achieve energy efficiency improvements as part of the MIA
conducted for this SNOPR.

K. Emissions Analysis

The emissions analysis consists of two components. The first
component estimates the effect of potential energy conservation
standards on power sector and site (where applicable) combustion
emissions of CO<INF>2</INF>, NO<INF>X</INF>, SO<INF>2</INF>, and Hg.
The second component estimates the impacts of potential standards on
emissions of two additional greenhouse gases, CH<INF>4</INF> and
N<INF>2</INF>O, as well as the reductions to emissions of other gases
due to ``upstream'' activities in the fuel production chain. These
upstream activities comprise extraction, processing, and transporting
fuels to the site of combustion.
The analysis of power sector emissions of CO<INF>2</INF>,
NO<INF>X</INF>, SO<INF>2</INF>, and Hg uses marginal emissions factors
that were derived from data in AEO 2022, as described in section IV.K
of this document. Details of the methodology are described in the
appendices to chapters 13 and 15 of the SNOPR TSD.
Power sector emissions of CO<INF>2</INF>, CH<INF>4</INF>, and
N<INF>2</INF>O are estimated using Emission Factors for Greenhouse Gas
Inventories published by the Environmental Protection Agency
(``EPA'').\40\ The FFC upstream emissions are estimated based on the
methodology described in chapter 15 of the SNOPR TSD. The upstream
emissions include both emissions from extraction, processing, and
transportation of fuel, and ``fugitive'' emissions (direct leakage to
the atmosphere) of CH<INF>4</INF> and CO<INF>2</INF>.
---------------------------------------------------------------------------

\40\ Available at <a href="http://www.epa.gov/sites/production/files/2021-04/documents/emission-factors_apr2021.pdf">www.epa.gov/sites/production/files/2021-04/documents/emission-factors_apr2021.pdf</a> (last accessed July 12,
2021).
---------------------------------------------------------------------------

The emissions intensity factors are expressed in terms of physical
units per megawatt-hours (``MWh'') or million British thermal units
(``MMBtu'') of site energy savings. For power sector emissions,
specific emissions intensity factors are calculated by sector and end
use. Total emissions reductions are estimated using the energy savings
calculated in the national impact analysis.
1. Air Quality Regulations Incorporated in DOE's Analysis
DOE's no-new-standards case for the electric power sector reflects
the AEO 2022, which incorporates the projected impacts of existing air
quality regulations on emissions. AEO 2022 generally represents current
legislation and environmental regulations, including recent government
actions that were in place at the time of preparation of AEO 2022,
including the emissions control programs discussed in the following
paragraphs.\41\
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\41\ For further information, see the Assumptions to AEO 2022
report that sets forth the major assumptions used to generate the
projections in the Annual Energy Outlook. Available at <a href="http://www.eia.gov/outlooks/aeo/assumptions/">www.eia.gov/outlooks/aeo/assumptions/</a> (last accessed October 15, 2021).
---------------------------------------------------------------------------

SO<INF>2</INF> emissions from affected electric generating units
(``EGUs'') are subject to nationwide and regional emissions cap-and-
trade programs. Title IV of the Clean Air Act sets an annual emissions
cap on SO<INF>2</INF> for affected EGUs in the 48 contiguous States and
the District of Columbia (D.C.). (42 U.S.C. 7651 et seq.)
SO<INF>2</INF> emissions from numerous States in the eastern half of
the United States are also limited under the Cross-State Air Pollution
Rule (``CSAPR''). 76 FR 48208 (Aug. 8, 2011). CSAPR requires these
States to reduce certain emissions, including annual SO<INF>2</INF>
emissions; it went into effect in 2015 and has been subsequently
updated.\42\ AEO 2022 incorporates implementation of CSAPR, including
the Revised CSAPR Update issued in 2021. Compliance with CSAPR is
flexible among EGUs and is enforced through the use of tradable
emissions allowances. Under existing EPA regulations, for states
subject to SO<INF>2</INF> emissions limits under CSAPR, any excess
SO<INF>2</INF> emissions allowances resulting from the lower
electricity demand caused by the adoption of an efficiency standard
could be used to permit offsetting increases in SO<INF>2</INF>
emissions by another regulated EGU.
---------------------------------------------------------------------------

\42\ CSAPR requires states to address annual emissions of
SO<INF>2</INF> and NO<INF>X</INF>, precursors to the formation of
fine particulate matter (PM<INF>2.5</INF>) pollution, in order to
address the interstate transport of pollution by attaining and
maintaining compliance with he 1997 and 2006 PM<INF>2.5</INF>
National Ambient Air Quality Standards (``NAAQS''). CSAPR also
requires certain states to address the ozone season (May-September)
emissions of NO<INF>X</INF>, a precursor to the formation of ozone
pollution, in order to address the interstate transport of ozone
pollution with respect to the 1997 ozone NAAQS. 76 FR 48208 (Aug. 8,
2011). EPA subsequently issued a supplemental rule that included an
additional five states in the CSAPR ozone season program; 76 FR
80760 (Dec. 27, 2011) (Supplemental Rule). In 2021, EPA finalized a
Revised CSAPR Update to address emissions reductions of
NO<INF>X</INF> from power plants in 12 states. 86 FR 23054 (April
30, 2021). A Petition for Review was filed in the Court of Appeals
for the D.C. Circuit calling for the Revised CSAPR Update to be
vacated; oral arguments are scheduled for September 2022. Midwest
Ozone Group v. EPA, No. 21-1146 (D.C. Cir. 2021).
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Beginning in 2016, SO<INF>2</INF> emissions began to fall as a
result of implementation of the Mercury and Air Toxics Standards
(``MATS'') for power plants. 77 FR 9304 (Feb. 16, 2012). In the MATS
final rule, EPA established a standard for hydrogen chloride as a
surrogate for acid gas hazardous air pollutants (``HAP''), and also
established a standard for SO<INF>2</INF> (a non-HAP acid gas) as an
alternative equivalent surrogate standard for acid gas HAP. The same
controls are used to reduce HAP and non-HAP acid gas; thus,
SO<INF>2</INF> emissions are being reduced as a result of the control
technologies installed on coal-fired power plants to comply with the
MATS requirements for acid gas. In order to continue operating, coal
power plants must have either flue gas desulfurization or dry sorbent
injection systems installed. Both technologies, which are used to
reduce acid gas emissions, also reduce SO<INF>2</INF> emissions.
Because of the emissions reductions under the MATS, it is unlikely that
excess SO<INF>2</INF> emissions allowances resulting from the lower
electricity demand would be needed or used to permit offsetting
increases in SO<INF>2</INF> emissions by another regulated EGU.
Therefore, energy conservation standards that decrease electricity
generation would generally reduce SO<INF>2</INF> emissions. DOE
estimated SO<INF>2</INF> emissions reduction using emissions factors
based on AEO 2022.
CSAPR also established limits on NO<INF>X</INF> emissions for
numerous States in the eastern half of the United States. Energy
conservation standards would have little effect on NO<INF>X</INF>
emissions in those States covered by CSAPR emissions limits if excess
NO<INF>X</INF> emissions allowances resulting from the lower
electricity demand could be used to permit offsetting increases in
NO<INF>X</INF> emissions from other EGUs. In such case, NO<INF>X</INF>
emissions would remain near the limit even if electricity generation
goes down. A different case could possibly result, depending on the
configuration of the power sector in the different regions and the need
for allowances, such that NO<INF>X</INF> emissions might not remain at
the limit in the case of lower electricity demand. In this case, energy
conservation standards might reduce NO<INF>X</INF> emissions in covered
States. Despite this possibility, DOE has chosen to be conservative in
its analysis and has maintained the assumption that standards will not
reduce NO<INF>X</INF> emissions in States covered by CSAPR. Energy
conservation standards would be expected to reduce NO<INF>X</INF>
emissions in the States not covered by CSAPR.
The MATS limit mercury emissions from power plants, but they do not
include emissions caps and, as such, DOE's energy conservation
standards would be expected to slightly reduce Hg emissions. DOE
estimated mercury emissions reduction using emissions factors based on
AEO 2022, which incorporates the MATS.

[[Page 52306]]

L. Monetizing Emissions Impacts

As part of the development of this proposed rule, for the purpose
of complying with the requirements of Executive Order 12866, DOE
considered the estimated monetary benefits from the reduced emissions
of CO<INF>2,</INF> CH<INF>4</INF>, N<INF>2</INF>O, NO<INF>X</INF>, and
SO<INF>2</INF> that are expected to result from each of the TSLs
considered. In order to make this calculation analogous to the
calculation of the NPV of consumer benefit, DOE considered the reduced
emissions expected to result over the lifetime of products shipped in
the projection period for each TSL. This section summarizes the basis
for the values used for monetizing the emissions benefits and presents
the values considered in this SNOPR.
On March 16, 2022, the Fifth Circuit Court of Appeals (No. 22-
30087) granted the federal government's emergency motion for stay
pending appeal of the February 11, 2022, preliminary injunction issued
in Louisiana v. Biden, No. 21-cv-1074-JDC-KK (W.D. La.). As a result of
the Fifth Circuit's order, the preliminary injunction is no longer in
effect, pending resolution of the federal government's appeal of that
injunction or a further court order. Among other things, the
preliminary injunction enjoined the defendants in that case from
``adopting, employing, treating as binding, or relying upon'' the
interim estimates of the social cost of greenhouse gases--which were
issued by the Interagency Working Group on the Social Cost of
Greenhouse Gases on February 26, 2021--to monetize the benefits of
reducing greenhouse gas emissions. In the absence of further
intervening court orders, DOE will revert to its approach prior to the
injunction and present monetized benefits where appropriate and
permissible under law. DOE requests comment on how to address the
climate benefits and other non-monetized effects of the proposal.
1. Monetization of Greenhouse Gas Emissions
DOE estimated the monetized benefits of the reductions in emissions
of CO<INF>2</INF>, CH<INF>4</INF>, and N<INF>2</INF>O by using a
measure of the social cost (``SC'') of each pollutant (e.g., SC-
CO<INF>2</INF>). These estimates represent the monetary value of the
net harm to society associated with a marginal increase in emissions of
these pollutants in a given year, or the benefit of avoiding that
increase. These estimates are intended to include (but are not limited
to) climate-change-related changes in net agricultural productivity,
human health, property damages from increased flood risk, disruption of
energy systems, risk of conflict, environmental migration, and the
value of ecosystem services.
DOE exercises its own judgment in presenting monetized climate
benefits as recommended by applicable Executive Orders, and DOE would
reach the same conclusion presented in this proposed rulemaking in the
absence of the social cost of greenhouse gases, including the February
2021 Interim Estimates presented by the Interagency Working Group on
the Social Cost of Greenhouse Gases.
DOE estimated the global social benefits of CO<INF>2</INF>,
CH<INF>4</INF>, and N<INF>2</INF>O reductions (i.e., SC-GHGs) using the
estimates presented in the Technical Support Document: Social Cost of
Carbon, Methane, and Nitrous Oxide Interim Estimates under Executive
Order 13990 published in February 2021 by the IWG. The SC-GHGs is the
monetary value of the net harm to society associated with a marginal
increase in emissions in a given year, or the benefit of avoiding that
increase. In principle, SC-GHGs includes the value of all climate
change impacts, including (but not limited to) changes in net
agricultural productivity, human health effects, property damage from
increased flood risk and natural disasters, disruption of energy
systems, risk of conflict, environmental migration, and the value of
ecosystem services. The SC-GHGs therefore, reflects the societal value
of reducing emissions of the gas in question by one metric ton. The SC-
GHGs is the theoretically appropriate value to use in conducting
benefit-cost analyses of policies that affect CO<INF>2</INF>,
N<INF>2</INF>O and CH4 emissions. As a member of the IWG involved in
the development of the February 2021 SC-GHG TSD, DOE agrees that the
interim SC-GHG estimates represent the most appropriate estimate of the
SC-GHG until revised estimates have been developed reflecting the
latest, peer-reviewed science.
The SC-GHGs estimates presented here were developed over many
years, using a transparent process, peer-reviewed methodologies, the
best science available at the time of that process, and with input from
the public. Specifically, in 2009, the IWG, that included DOE and other
executive branch agencies and offices, was established to ensure that
agencies were using the best available science and to promote
consistency in the SC-CO<INF>2</INF> values used across agencies. The
IWG published SC-CO<INF>2</INF> estimates in 2010 that were developed
from an ensemble of three widely cited integrated assessment models
(``IAMs'') that estimate global climate damages using highly aggregated
representations of climate processes and the global economy combined
into a single modeling framework. The three IAMs were run using a
common set of input assumptions in each model for future population,
economic, and CO<INF>2</INF> emissions growth, as well as equilibrium
climate sensitivity--a measure of the globally averaged temperature
response to increased atmospheric CO<INF>2</INF> concentrations. These
estimates were updated in 2013 based on new versions of each IAM. In
August 2016 the IWG published estimates of the SC-CH<INF>4</INF> and
SC-N<INF>2</INF>O using methodologies that are consistent with the
methodology underlying the SC-CO<INF>2</INF> estimates. The modeling
approach that extends the IWG SC-CO2 methodology to non-CO<INF>2</INF>
GHGs has undergone multiple stages of peer review. The SC-
CH<INF>4</INF> and SC-N<INF>2</INF>O estimates were developed by Marten
et al.\43\ and underwent a standard double-blind peer review process
prior to journal publication. In 2015, as part of the response to
public comments received to a 2013 solicitation for comments on the SC-
CO<INF>2</INF> estimates, the IWG announced a National Academies of
Sciences, Engineering, and Medicine review of the SC-CO<INF>2</INF>
estimates to offer advice on how to approach future updates to ensure
that the estimates continue to reflect the best available science and
methodologies. In January 2017, the National Academies released their
final report, Valuing Climate Damages: Updating Estimation of the
Social Cost of Carbon Dioxide, and recommended specific criteria for
future updates to the SC-CO<INF>2</INF> estimates, a modeling framework
to satisfy the specified criteria, and both near-term updates and
longer-term research needs pertaining to various components of the
estimation process (National Academies, 2017).\44\ Shortly thereafter,
in March 2017, President Trump issued Executive Order 13783, which
disbanded the IWG, withdrew the previous TSDs, and directed agencies to
ensure SC-CO<INF>2</INF> estimates used in regulatory analyses are
consistent with the guidance contained in OMB's Circular A-4,
``including with respect to the consideration of domestic versus

[[Page 52307]]

international impacts and the consideration of appropriate discount
rates'' (E.O. 13783, Section 5(c)). Benefit-cost analyses following
E.O. 13783 used SC-GHG estimates that attempted to focus on the U.S.-
specific share of climate change damages as estimated by the models and
were calculated using two discount rates recommended by Circular A-4, 3
percent and 7 percent. All other methodological decisions and model
versions used in SC-GHG calculations remained the same as those used by
the IWG in 2010 and 2013, respectively.
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\43\ Marten, A.L., E.A. Kopits, C.W. Griffiths, S.C. Newbold,
and A. Wolverton. Incremental CH4 and N2O mitigation benefits
consistent with the US Government's SC-CO2 estimates. Climate
Policy. 2015. 15(2): pp. 272-298.
\44\ National Academies of Sciences, Engineering, and Medicine.
Valuing Climate Damages: Updating Estimation of the Social Cost of
Carbon Dioxide. 2017. The National Academies Press: Washington, DC.
---------------------------------------------------------------------------

On January 20, 2021, President Biden issued Executive Order 13990,
which re-established the IWG and directed it to ensure that the U.S.
Government's estimates of the social cost of carbon and other
greenhouse gases reflect the best available science and the
recommendations of the National Academies (2017). The IWG was tasked
with first reviewing the SC-GHG estimates currently used in Federal
analyses and publishing interim estimates within 30 days of the E.O.
that reflect the full impact of GHG emissions, including by taking
global damages into account. The interim SC-GHG estimates published in
February 2021, specifically the SC-CH<INF>4</INF> estimates, are used
here to estimate the climate benefits for this proposed rulemaking. The
E.O. instructs the IWG to undertake a fuller update of the SC-GHG
estimates by January 2022 that takes into consideration the advice of
the National Academies (2017) and other recent scientific literature.
The February 2021 SC-GHG TSD provides a complete discussion of the
IWG's initial review conducted under E.O. 13990. In particular, the IWG
found that the SC-GHG estimates used under E.O. 13783 fail to reflect
the full impact of GHG emissions in multiple ways.
First, the IWG found that the SC-GHG estimates used under E.O.
13783 fail to fully capture many climate impacts that affect the
welfare of U.S. citizens and residents, and those impacts are better
reflected by global measures of the SC-GHG. Examples of omitted effects
from the E.O. 13783 estimates include direct effects on U.S. citizens,
assets, and investments located abroad, supply chains, U.S. military
assets and interests abroad, and tourism, and spillover pathways such
as economic and political destabilization and global migration that can
lead to adverse impacts on U.S. national security, public health, and
humanitarian concerns. In addition, assessing the benefits of U.S. GHG
mitigation activities requires consideration of how those actions may
affect mitigation activities by other countries, as those international
mitigation actions will provide a benefit to U.S. citizens and
residents by mitigating climate impacts that affect U.S. citizens and
residents. A wide range of scientific and economic experts have
emphasized the issue of reciprocity as support for considering global
damages of GHG emissions. If the United States does not consider
impacts on other countries, it is difficult to convince other countries
to consider the impacts of their emissions on the United States. The
only way to achieve an efficient allocation of resources for emissions
reduction on a global basis--and so benefit the United States and its
citizens--is for all countries to base their policies on global
estimates of damages. As a member of the IWG involved in the
development of the February 2021 SC-GHG TSD, DOE agrees with this
assessment and, therefore, in this proposed rule DOE centers attention
on a global measure of SC-GHG. This approach is the same as that taken
in DOE regulatory analyses from 2012 through 2016. A robust estimate of
climate damages to U.S. citizens and residents does not currently exist
in the literature. As explained in the February 2021 TSD, existing
estimates are both incomplete and an underestimate of total damages
that accrue to the citizens and residents of the United States because
they do not fully capture the regional interactions and spillovers
discussed above, nor do they include all of the important physical,
ecological, and economic impacts of climate change recognized in the
climate change literature. As noted in the February 2021 SC-GHG TSD,
the IWG will continue to review developments in the literature,
including more robust methodologies for estimating a U.S.-specific SC-
GHG value, and explore ways to better inform the public of the full
range of carbon impacts. As a member of the IWG, DOE will continue to
follow developments in the literature pertaining to this issue.
Second, the IWG found that the use of the social rate of return on
capital (7 percent under current OMB Circular A-4 guidance) to discount
the future benefits of reducing GHG emissions inappropriately
underestimates the impacts of climate change for the purposes of
estimating the SC-GHG. Consistent with the findings of the National
Academies (2017) and the economic literature, the IWG continued to
conclude that the consumption rate of interest is the theoretically
appropriate discount rate in an intergenerational context,\45\ and
recommended that discount rate uncertainty and relevant aspects of
intergenerational ethical considerations be accounted for in selecting
future discount rates.
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\45\ Interagency Working Group on Social Cost of Carbon. Social
Cost of Carbon for Regulatory Impact Analysis under Executive Order
12866. 2010. United States Government. (Last accessed April 15,
2022.) <a href="http://www.epa.gov/sites/default/files/2016-12/documents/scc_tsd_2010.pdf">www.epa.gov/sites/default/files/2016-12/documents/scc_tsd_2010.pdf</a>; Interagency Working Group on Social Cost of
Carbon. Technical Update of the Social Cost of Carbon for Regulatory
Impact Analysis Under Executive Order 12866. 2013. (Last accessed
April 15, 2022.) <a href="http://www.federalregister.gov/documents/2013/11/26/2013-28242/technical-support-document-technical-update-of-the-social-cost-of-carbon-for-regulatory-impact">www.federalregister.gov/documents/2013/11/26/2013-28242/technical-support-document-technical-update-of-the-social-cost-of-carbon-for-regulatory-impact</a>; Interagency Working Group on
Social Cost of Greenhouse Gases, United States Government. Technical
Support Document: Technical Update on the Social Cost of Carbon for
Regulatory Impact Analysis-Under Executive Order 12866. August 2016.
(Last accessed January 18, 2022.) <a href="http://www.epa.gov/sites/default/files/2016-12/documents/sc_co2_tsd_august_2016.pdf">www.epa.gov/sites/default/files/2016-12/documents/sc_co2_tsd_august_2016.pdf</a> ; Interagency Working
Group on Social

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