Summary of Interagency working comments received on draft rule under EO 12866 and EO 13563 review. Subject to further policy review.

1 Below is a summary of interagency comments received during EO 12866 and EO 13563 review of the draft final rule establishing GHG emissions standards and fuel efficiency standards for medium and heavy duty trucks. They are for your consideration and subject to further policy review.

Interagency comments on Alternative Fuels discussion in Preamble:

NHTSA recognizes that EPCA/EISA promotes ince ntives for alternative fueled vehicles for different purposes than does the CAA, and that th ere may be additional energy and national securitybenefits that could be achieved through increasing fleet percentages of natural gas and other alternativefueled vehicles. More alternative-fueled vehicles on road would arguably displace petroleum-fueled vehicles, and thereby increase both U.S. energy and na tional security by reducing the nation’s dependence on foreign oil. However, the agencies believe th at the benefits of harmonization would outweigh any potential gains in this area. In addition to reducing industry burden and creating regulatory efficiency, a harmonization rule both adheres to the President’s May 201 0 memorandum calling for a joint rulemaking, 1 and Executive Order 13563. 2

The agencies believe that a divergence of standards in this area would have significant negative

consequences. Dis

- harmonization would effectively make the NHTSA program irrelev ant, but would increase burdens for both manufacturers and the agencies in the areas of compliance and reporting. Further, dis

- harmonized standards would likely lead to credit excesses in NHTSA’s program for which
there would be no demand.

On the other hand, achieving harmonized standards has many benefits for the public, the regulated industries, and the agencies. By reducing regulatory inefficiency, harmonization decreases costs for all parties involved, including taxpayers

. Harmoniz ation also allows manufacturers to project clear benefits for the application
of GHG

- reduction and fuel efficiency technologies, thus spurring their adoption, and reduces incentives for gaming the regulatory system instead of achieving real GHG and fuel ef ficiency benefits.

This combined rulemaking by EPA and NHTSA is designed to regulate two separate characteristics of heavy duty vehicles: greenhouse gas emissions (GHG) and fuel consumption. In the case of diesel or gasoline powered vehicles, there is a one-to-one relationship between these two characteristics. Each gallon of gasoline combuste d by a truck engine generates approximately 8,887 grams of CO2; and each gallon of diesel fuel bur ned generates about 10,180 grams of CO2. Because no available technologies reduce CO2 emissions per gall on of fuel combusted, an y rule that limits CO2 emissions is effectively identical to a rule that limits fuel consumption. Compliance by a truck manufacturer with the NHTSA fuel economy rule assures compliance with the EPA rule, and vice versa.

For alternatively fueled vehicles, which use no petroleum, the situation is different. For example, a natural gas vehicle that achieves approximately the same fuel economy as a diesel powered vehicle would emit 20 percent less CO2; and a natural gas vehicle with the same fuel economy as a gasoline vehicle would emit 30 percent less CO2. Yet natural gas vehicles consume no petroleum. To the extent

1 Improving Energy Security, American Competitiveness a nd Job Creation, and Environmental Protection Through a
Transformation of Our Nation’s Fleet of Cars And Trucks

, ” Issued May 21, 2010, published at 75 FR 29399

, May 26, 2010

. 2 EO 13563 states that an agency shall “ tailor	its	regulations	to	impose the	least	burden	on	society,	c onsistent with	obtaining	regulatory	objectives,	taking	into	account,	amon g	other	things,	and	to	the	extent	practicable, the	costs	of	cumulative	regulations,”	and	“promote	such coo rdination,	simplification,	and	harmonization”	as will	reduce	redundancy,	inconsistency,	and	costs	of	multiple	re gulatory	requirements. Comment [A1]: Interagency commenter recommends agencies delete this sentence, for three

reasons..

(1) “Regulatory Efficiency” is not defined, and could easily mean “achieves objective at least cost. Since the objective of the NHTSA rule is reducing oil consumption, classifying vehicles according to their GHG emissions would not achieve “regulatory efficiency”.

(2) Joint rulemakings to not need to result in identical rules. See the Light Duty joint rulemaking.

(3) EO 13563 also calls for flexibility and costeffectiveness. Setting fuel standards according to
GHG emissions is not cost effective.

Comment [A2]: Interagency commenter recommends agencies delete this sentence. It was
discussed before:

(1) Allowing the standards to diverge, as in the light duty rule, would only make NHTSA irrelevant if the currently proposed fuel economy standards were maintained. The point is that those could be tightened, achieving even better fuel economy, at
lower cost due to the incentives for NGVs.

Again, see the light duty rule. Are the NHTSA standards irrelevant there? The point is, some manufacturers would be bound by the NHTSA rule and others by the EPA rule.

(2)Under the current framework, isn’t the NHTSA standard irrelevant, in the sense that it is redundant. No manufacturer would be in compliance with one rule and not the other. Complying with the EPA rule means automatic compliance with the NHTSA rule. Therefore, it is the current framework under
which NHTSA is irrelevant.

Comment [A3]: Interagency commenter recommends that the agencies delete this sentence, or define regulatory efficiency and explain how taxpayers benefit from identical rather than individual rulemakings.

Comment [A4]: Interagency commenters recommend that agencies delete this sentence.
Commenters have asked numerous times for an explanation of how this system could be “gamed.”
What does it mean that harmonization “allows manufacturers to project clear benefits”?Summary of Interagency working comments received on draft rule under EO 12866 and EO 13563 review. Subject to further policy review.

2 that the goal of the NHTSA fuel economy portion of this rulemaking is to curb petroleum use, then natural gas vehicles should be credited with zero fuel consumption per mile. Similar differences between oil consumption and GHG would apply to electric vehicles, hybrid electric vehicles, and biofuel-powered
vehicles.

NHTSA notes that the purpose of EPCA/EISA is not merely to curb petroleum use

– it is more generally to secure energy independence, which can be achieved by reducing petroleum use. The value of incentivizing natural gas, electric vehicles, biofuels, hydrogen, or other alt fuel vehicles for energy independence is limited to the extent that the alternative fuels may be imported.

In recent rulemakings for light-duty vehicles, EPA and NHTSA have followed the light-duty specific statutory provision that treats one gallon of alternative fuel as equivalent to 0.15 gallons of gasoline. Following that precedent in this heavy duty rule would mean that, for example, a natural gas powered truck would have attributed to it 20 percent less CO2 emissions than a comparable diesel powered truck, but 85 percent less fuel consumption. Engine manufacturers with a relatively large share of alternative-fuel products would likely have an easier time complying with NHTSAs average fuel economy standard than EPAs GHG standard. Similarl y, engine manufacturers with a relatively small share of alternative-fuel products would have a relatively easier time complying with EPA’s CO2 standard than with NHTSA’s fuel economy standard. In that way, the rule would not differ from the light duty vehicle rules.

Instead, in this rule, EPA and NHTSA are finalizing identical rules. Fuel consumption for alternatively-powered vehicles will be calculated according to their CO2 emissions. In that way, there will be a one-to-one relationship between fu el economy and GHG emissions for all vehicles

. To the extent that this rule relies upon reduced petroleum consumption specifically to promote the goals of EPCA/EISA, there will be a one

- to

- one relationship between this reduction and greenhouse gas
emissions , by design, whether or not that relationship accurately reflects those vehicles’ reduced petroleum consumption and GHG emissions for all vehicles . In addition to the significant harmonization benefits noted above, this has the advantage of re ducing some of the paperwork and compliance burden this rule will impose on the truck manufacturers. On the other hand, it has the disadvantage of discouraging some cost-effective means of reduc ing petroleum consumption by trucks, and the accompanying energy security costs. By attributing to natural gas engines only 20 percent less fuel consumption than comparable diesel engines, because they emit 20 percent less CO2, rather than attributing to them a much larger percentage reduction in fuel consumption, because they use no petroleum, this uniform rulemaking does not ince ntivize technologies that reduce consumption of petroleum-based fuels.

Agencies are considering for future rulemakings writing harmonized standards in a way that also accurately reflect the true fuel consumption a nd greenhouse gas emissions. Under such standards, any given vehicle might “over comply” with the fuel economy standard, but might “under comply” with the CO2 standard. Therefore, in meeting the fleet-wide requirements, a manufacturer would need to meet both standards using all available options, such as credit trading and technology mix. Allowing for two distinct standards may enable manufacturers to achieve the twin goals of reducing greenhouse gas emissions and decreasing consumption of petroleum-based fuels in the most cost-effective manner. Comment [A5]: Commenters note that The Energy Blueprint and the President’s Energy Speech at Georgetown in March both call for NGVs as a means of promoting energy security. The Blueprint also calls for encouraging development of NG production in other countries, to increase our energy security by reducing global petroleum demand.

Commenters also note that Natural gas imports from
countries other than Canada and Mexico account for less than 2% of consumption.

Comment [A6]: Interagency commenters believe
this edit is incorrect. There will be a one-to-one relationship between GHG and fuel economy. The
“To the extent that ...” modifier is incorrect. The relationship is one-to-one regardless of the goals of the legislation or the agencies.