From: "Achanta, Chandana L." <Chandana_L._Achanta@omb.eop.gov>

To: William Charmley/AA/USEPA/US@EPA, "Neil.Eisner@dot.gov" <Neil.Eisner@dot.gov>, "rebecca.yoon@dot.gov" <rebecca.yoon@dot.gov>, "james.tamm@dot.gov" <james.tamm@dot.gov>, "Steve.Wood@dot.gov" <Steve.Wood@dot.gov>, "Joanne.Petrie@dot.gov" <Joanne.Petrie@dot.g ov>, Maureen Delaney/DC/USEPA/US@EPA, Robin Moran/AA/USEPA/US@EPA Date: 09/28/2010 05:55 PM Subject: Summary of interagency working comments received on draft Notice and Technical Assessment under EO 12866 review



### Please find attached additional interagency working comments we received under EO 12866 review of the draft notice and technical assessment. They are for your consideration and subject to further policy review.Summary of Interagency Working Comments received on draft Notice of Intent under EO 12866 review

1 Below is a summary of interagency comments received during interagency review of the draft Notice of Intent and the draft Technical Assessment Report for MY 2017-2025 under EO 12866. They are for your consideration and subject to further policy review.

COMMENTS ON NOI:

1. Regarding tailpipe-only emissions of GHG: Some of the comments we received find that only looking at tailpipe emissions is problematic, since in a number of the more stringent scenarios, a sign ificant portion of the GHG re duction comes from EVs and PHEVs. The notice reports that manufacturers “expressed strong support for a tailpipe-only CO2 measurement.” That should not be surprising or informative. The commenters with this concern suggested that both environmental groups and economists would be in favor of counting upstream emissions.

The text in the “notice” (p.22) is unclear as to what EPA will do. The text in the technical assessment (p.7-3) promises to consider the issue.

Note: the notice reports that manufacturers actually wanted “bonus” credits for EVs and PHEVs, which seems like it would be an even more serious concern.

2. Under most scenarios, this rule pays for itself, in that the fuel savings more than offset the cost of the technologies used. This ra ises the whole issue of the energy paradox and lost consumer welfare. Please provide a discussion of this in the NOI and TAR.

3. The regulation and the analysis (eventually) will be organized by vehicle “footprint”, so all vehicles within certain size groupings have to meet the same fuel economy and GHG standards. Manufacturers with larger vehicle fleets would have lower fuel economy and GHG goals. This raises the question of whether manufacturers can adjust their vehicles’ footprints to game th e system. In economics jargon – “footprint” is endogenous to the regulation.

4. The fuel economy savings calculation assumes no baseline growth in the fuel efficiency of vehicles absent the regulation. Is this assumption backed by empirical evidence?

5. Many commenters suggest deleting 7.1.3 of the technical assessment. GDP doesn’t have anything to do with this ruling.

6. The agencies highlight the specific role of vehicle electrification, hydrogen fuel-cells, and flex fuel vehicles in the analysis. Wo uld this approach capture how the agenciesSummary of Interagency Working Comments received on draft Notice of Intent under EO 12866 review

2 would treat vehicles fueled exclusively by natural gas or bio-fuels? Specifying the approach for these vehicles would be a useful addition.

7. Pages 22-23/Other Key Issue—Duration of NHTSA CAFÉ Standards: The document provides: “EPCA/EISA states that ‘The S ecretary [of Transportation] shall . . . issue regulations under this title prescribing aver age fuel economy standards for at least 1, but not more than 5, model years.’ NHT SA is assessing how rulemaking will be structured to support the MYs 2017-2025 National Program.” This discussion might be expanded to more clearly seek comment on the concern that if EPA intends to issue greenhouse gas standards applicable to nine model years and NHTSA’s will be “harmonized” with EPA’s throughout, won’t that force NHTSA to somewhat prejudge what the standards should be for years following MY 2021? To do so, EPA and the National Highway Traffic Safety Administration may add a final sentence to this discussion: “In particular, we are examining how to ensure that CAFÉ standards for MY 2021 – MY 2025, while harmonized with final EPA greenhouse gas emissions standards, would still meet the independent standards development framework of the EPCA/EISA.”

8. Page 7/Background on the MY 2012-2016 National Program/First Paragraph/Fourth Line from the Bottom: The text refers to “reductions in the rate of global warming.” A commenter suggested that the term “climate change” is now the preferred Administration term as it more ac curately reflects the observed phenomenon.

9. Page 6: Recommend adding language from Presidential Memo: “On May 21, 2010, President Obama issued a Presidential Memorandum requesting that the Environmental Protection Agency (EPA) and the National Highway Traffic Safety Administration (NHTSA), on behalf of the Department of Transportation, take “...additional coordinated steps...to produce a new generation of clean vehicles

... ” noting that the “...success of our efforts to achieve enhanced energy security and to protect the environment ... depends upon the development of infrastructure and promotion of fuels, including biofuels, which will enable the development and widespread deployment of advanced technologies.” He specifically requested that the agencies develop “,..a coordinated national program under the CAA [Clean Air Act] and the EISA[Energy Independence and Security Act of 2007] to improve fuel efficiency and to reduce greenhouse gas emissions of passenger cars..”

10. Page 22: Recommend adding flexibility to conduct lifecycle assessment of biofuel

use: “...Some manufacturers encouraged EPA to continue to offer flexible fuel vehicle (FFV) credits. EPA finalized provisions in the MYs 2012-2016 Final Rule to treat MY 2016 and later FFVs similarly to conventional fueled vehicles, in that FFVSummary of Interagency Working Comments received on draft Notice of Intent under EO 12866 review

3 emissions would be based on actual CO2 results from emissions testing on the fuels on which it operates. 1 In calculating the emissions performance of an FFV, manufacturers may base FFV emissions in part on vehicle emissions test results on the alternative fuel, if they can demonstrate that the alternative fuel is actually being used in the vehicles. EPA will consider whether it is appropriate to retain this approach for FFVs or adopt another approach which accounts for upstream emissions and carbon sequestration in the MYs 2017-2025 rulemaking. NHTSA will continue to provide incentives for dual fueled vehi cles as define d in statute. 2 For all dual fueled vehicles, except for electric dual fu eled vehicles, the maximum increase in average fuel economy for a manufacturer will be 0.6 mpg in 2017, 0.4 mpg in 2018, 0.2 mpg in 2019, and there is no incentive in MY 2020 or after...”

COMMENTS ON TECHNICAL ASSESSMENT

1) The discussion in section 6.2, Analytical Approach, on pages 1 to 6 of Chapter 6 concerning the technical assessment evaluation as a single industry wide fleet, irrespective of individual manufacturer differences and not accounting for the more prescriptive CAFE statutory requirements under EPCA and EISA should also be highlighted (more briefly) in the executive summary before the “fundamental quantitative conclusions from the in itial assessment” are presented.

2) Page 12 in Chapter 2, last sentence: “Finally, the UAW raised some concerns with the future projections contained in the Energy Information Administration’s Annual Energy Outlook reports and the accuracy of those reports projections regarding future improvements in fuel economy absent new standards.” The description of the UAW comment on EIA’s AEO projec tions should be more informative. Is the UAW concerned with the level of EIA’s AEO assumptions on future fuel economy improvement absent new standards, or are they concerned with past AEOs not accurately predicting ve hicle fuel economy improvements absent such new standards? Some additional description of why this comment is pertinent to the technical assessment would be useful.

3) Page 9 in Chapter 3, second paragraph. This paragraph should include additional description of the mass reduction cost curve used in the technical assessment given the significant impact these assumptions have on the preliminary assessment results, and because of the significant change in the mass reduction cost assumptions from the

1 See 75 FR at 25434.

2 See 49 U.S.C. 32905 and 49 U.S.C. 32906Summary of Interagency Working Comments received on draft Notice of Intent under EO 12866 review

4 2012-2016 FRM. The discussion of the costs for HEV, PHEV, EV includes a discussion of battery manufacturing costs that are quite detailed in this chapter. For the reasons described above, the mass reduction cost assumptions should be presented in a similar manner.

4) Page 6 in Chapter 6, last two sentences of the first paragraph should be revised from: “As discussed in Chapter 3, NHTSA and EPA have undertaken a number of important, new safety-focused analyses to inform the future joint Federal rulemaking. The two agencies will include a detailed assessment of safety impacts at that time.” To: “As discussed in Chapter 3, NHTSA, EPA, and DOE have undertaken a number of important, new safety-focused anal yses to inform the future joint Federal rulemaking. The NHTSA and EPA will in clude a detailed assessment of safety impacts at that time.”

5) Page 10 in Chapter 6, last sentences of the first paragraph should be revised from: “As discussed in Chapter 3, NHTSA and EPA have a number of on-going projects in this area which will inform the futu re joint federal rulemaking.”To: “As discussed in Chapter 3, NHTSA, EPA, and DOE have a number of ongoing projects in this area which will info rm the future joint federal rulemaking.”

6) Section 4 pg. 23. Comment recommends that further explanation be provided that the chart showing hydrogen fuel cell government support options is just illustrative and does not necessarily reflect a recommendati on that specific policies should be adopted at this time. The current language about how “other policies or requirements may be necessary as shown in the three scenario table above” might be read to suggest that the table represents some kind of Administration position or proposal.

7) Page 73: Add FFVs “...EPA will be fully evaluating this issue for the MY 2017-2025 light-duty vehicle GHG emissions proposal based on the status of commercialization of EVs, PHEVs, and FCVs, and FFVs the potential of these technologi es to provide long-term GHG emissions savings, the status of and outlo ok for upstream GHG control programs, and other relevant factors...”

8) A1 Appendix A: The Baseline and Reference Vehicle Fleet Are these assumptions the same as in the RFS11 RIA regarding sales of FFV’s? If not please explain why not.Summary of Interagency Working Comments received on draft Notice of Intent under EO 12866 review

5 Please find below a few suggested edits to the draft NOI.

I. Introduction

This joint Notice announces plans by the E nvironmental Protection Agency (EPA) and the National Highway Traffic Safety Administration (NHTSA), on behalf of the Department of Transportation, to propose stringent federal greenhouse gas and fuel economy standards for light-duty vehicles for the 2017-2025 model years (MY) as part of a coordinated National Program. This rulemaking will build on the first phase of the National Program for fuel economy and greenhouse gas (GHG) emissions st andards, for MY 2012- 2016 vehicles, which was issued in April 2010. 3 This Notice of Intent does not propose specific standards, but along with the accompanying Interim Joint Technical Assessment Report (TAR) discussed later in this Notice, is an important step in the process that will lead to a formal proposal.

NHTSA and EPA welcome comment on all aspects of this Notice and the accompanying TAR. Although this Notice discusses important initial assessments performed by the agencies, it also discusses the significant additional work that must be done to provide the agencies with information to support a joint Notice of Proposed Rulemaking (NPRM). EPA and NHTSA will continue to seek input from a broad range of stakeholders over the coming months, and we will continue to work closely with the California Air Resources Board (CARB) in order to ensure the continuation of a National Program. In an effort to guide the eventual development of the NPRM, over the next two months, EPA and NHTSA, working closely with CARB, will co ntinue to analyze potential GHG and fuel economy standards for MYs 2017-2025 by developing and reviewing additional technical data and information and by considering additional stakehol der input. Based on this additional work, EPA and NHTSA expect to issue, by November 30, 2010, a Supplemental Notice of Intent that will describe further design elements for the National Program and present an updated analysis of potential stringencies for model years 2017-2025 standards for GHGs and fuel economy. A principle principal goal of the Supplemental Notice will be to narrow the range of potential stringencies for the future proposed standards, as well as to reflect new technical data and information and, as appropriate, further analysis supplementing the Interim Joint TAR. In recent months, the agencies have had important discussions with many individual automobile manufacturers and other stakeholders, and our intention is to continue such discussions. In order for comments to be most helpful to this ongoing process, the agencies encourage parties wishing to comment at this stage of the process to submit their comments by the end of October, 2010. The May 21, 2010 Presidential Memorandum discussed below called for EPA and NHTSA to in clude in this Notice of Intent a “schedule for setting those standards as expeditiously as possible, consistent with providing sufficient

3 See 75 FR 25324 (May 7, 2010).Summary of Interagency Working Comments received on draft Notice of Intent under EO 12866 review

6 leadtime to vehicle manufacturers.” The agencies plan to issue a joint Notice of Proposed Rulemaking (NPRM) by September 30, 2011 and a Final Rule by July 31, 2012.

As with any notice-and-comment rulemaking process, the agencies will provide full opportunity for the public to participate in the rulemaking process, consistent with the Administrative Procedure Act, other applicable law, and Administration policies on openness and transparency in government. 4 EPA and NHTSA have established dockets to receive such information: EPA’s Docket is located at Docket ID No. EPA-HQ-OAR-2010-0799 and NHTSA’s docket is located at Docket ID No. NHTSA-2010-0131. The “Addresses” section at the beginning of this Notice provides several methods for submitting information into these dockets.

A. President’s May 21, 2010 Memorandum

On May 21, 2010, President Obama issued a Presidential Memorandum requesting that the Environmental Protection Agency (E PA) and the National Highway Traffic Safety Administration (NHTSA), on behalf of the Department of Transportation, take “...additional coordinated steps...to produce a new generation of clean vehicles.” He specifically requested that the agencies develop “,..a coordinated nati onal program under the CAA [Clean Air Act] and the EISA[Energy Independence and Security Act of 2007] to improve fuel efficiency and to reduce greenhouse gas emissions of passenger cars and light-duty trucks of model years 2017-2025.” 5 The President recognized that by acting expeditiously, our country could take a leadership role in addressing the global challenges of improving energy security , promoting economic growth, and reducing greenhouse gas pollution, stating that “America has the opportunity to lead the world in the development of a new generation of clean cars and trucks through innovative technologies and manufacturing that will spur economic growth and create high-quality domestic jobs, enhance our energy security, and improve our environment.”

As a first step in the process, the President requested EPA and NHTSA to “[t]ake all measures consistent with law to issue by September 30, 2010, a Notice of Intent to Issue a Proposed Rule that announces plans for setting stringent fuel economy and greenhouse gas emissions standards for light-duty vehicles of model year 2017 and beyond, including plans for initiating joint rulemaking and gathering any additional information needed to support regulatory action. The Notice should describe the key elements of the program that the EPA

4 Upon publication of the NPRM, the agencies will open a public comment period for receiving written comments and will hold at least one joint public heari ng to receive oral comments. We will announce all of these avenues for public involvement in the Federal Register notice announcing the NPRM and we will post this information on each agency’s website associated with this rulemaking.

5 The Presidential Memorandum is found at: http:// www.whitehouse.gov/the-press-office/presidentialmemorandum-regarding-fuel-efficiency-standards.Summary of Interagency Working Comments received on draft Notice of Intent under EO 12866 review

7 and the NHTSA intend jointly to propose, un der their respective statutory authorities, including potential standards that could be practicably implemented nationally for the 2017- 2025 model years and a schedule for setting t hose standards as expeditiously as possible, consistent with providing sufficient lead time to vehicle manufacturers.”

The Presidential Memorandum also called on the agencies, working with the State of California, to develop a technical assessment to inform a potential rulemaking. The EPA, NHTSA, and CARB have completed this assess ment, which is discu ssed in Section I.E below.

B. Background on the MY 2012-2016 National Program

On April 1, 2010, NHTSA and EPA issued joint final rules establishing standards for GHG emissions and fuel economy for MYs 2012-2016 passenger cars, light-duty-trucks, and medium-duty passenger vehicles (“light-duty vehicles”), collectively referred to as the National Program. 6 The agencies concluded that the automobile industry will achieve the substantial benefits of that first phase of the National Program based on technology that is already being commercially applied in many cases and that can be incorporated in these future model year vehicles at a reasonable expense and with social benefits far in excess of social

costs cost . This initial phase of the Nati onal Program will result in large fuel savings and large reductions in GHG emissions and oil use, and thus in increased energy s ecurity and reductions in the rate of global warming. This joint ru lemaking was consistent with the President’s announcement on May 19, 2009 of a National Fuel Efficiency Policy for establishing consistent, harmonized, and streamlined requir ements that would reduce GHG emissions and improve fuel economy for new cars and light trucks sold in the United States.

In this recent rulemaking, EPA and NHTSA established two separate but harmonized sets of standards, each under it s respective statutory authorities. 7 The standards for both agencies begin with model year 2012, with standards increasing in stringency through model year 2016. EPA set national CO 2 emissions standards for light-duty vehicles under section 202(a) of the Clean Air Act (CAA), and NHTSA set corporate average fuel economy (CAFE) standards in accordance with the Energy Policy and Conservation Act (EPCA), as amended by the Energy Independence and Security Act of 2007 (EISA). The EPA standards will require light-duty vehicles to meet an estimated combined average emissions level of 250 grams/mile of CO 2 in model year 2016,equivalent to a fuel economy level of 35.5 miles per gallon if all the reductions were achieved through improvements in fuel economy. The CO 2 standards also allow manufacturers to earn cred its for air conditioning system improvements that reduce GHGs other than CO 2
.

6 The joint final rules were published at 75 Fed. Reg. 25324 (May 7, 2010).

7 For a detailed discussion of NHTSA’s and EPA’s respective statutory authorities, see 75 Fed. Reg. 25324, 25348 (May 7, 2010) and 74 Fed. Reg. 49454, 49460 (September 28, 2009).Summary of Interagency Working Comments received on draft Notice of Intent under EO 12866 review

8 The NHTSA CAFE standards are only based on technologies that improve fuel economy and are not based on consideration of air conditioning improvements (which NHTSA cannot consider given that the federal test procedures used to calculate fuel economy for passenger cars may not include air conditioning usage). The maximum feasible CAFE standards should require manufacturers of passenger cars and light trucks to meet an estimated combined average fuel economy level of 34.1 mpg in model year 2016. These standards represent a harmonized approach that will allow industry to build a single national fleet that will satisfy both the GHG requirem ents under the CAA and CAFE requirements under EPCA/EISA.

The NHTSA and EPA standards were informed in part by state regulatory action. In 2004, the California Air Resources Board (CARB) adopted GHG standards for new light-duty vehicles covering MYs 2009-2016. Subsequently, thirteen states and the District of Columbia, comprising approximately 40 percent of the light-duty vehicle market, have adopted California’s standards. On June 30, 2009, EPA granted California’s request for a waiver of preemption under section 209 (b) of the CAA. 8 The granting of the waiver allows California and the other states to proceed with implementing the California emission standards. To promote the National Program for MYs 2012-2016 vehicles, in April 2010 California revised its GHG emissions program for MYs 2012-2016 vehicles such that compliance with EPA’s GHG standards will be de emed to be compliance with California’s GHG emission standards. 9 This action makes it possible for automakers to produce a single fleet of vehicles nationwide that meets all the requirements of the two federal programs as well as those of the California program.

As described in the recent final rule, EPA and NHTSA expect that automobile manufacturers will meet the MYs 2012-2016 CAFE and GHG standards primarily by using currently-available technologies, and simply incorporating these technologies more broadly across the light-duty vehicle fleet. These tech nologies include improvements to engines, transmissions, and vehicles, including increased use of start-stop technology, improvements in air conditioning systems, and increased use of hybrid and other advanced technologies. The program also provides incentives for the in itial commercialization of electric vehicles and plug-in hybrids. NHTSA’s and EPA’s assessment of likely vehicle technologies that manufacturers could employ to meet the MYs 2012-2016 standards provides an important foundation for the agencies’ consideration of potential 2017-2025 standards.

The MY 2012-2016 standards also provide a number of compliance flexibilities to manufacturers. These flexibilities are di scussed further in Section III.B below. As noted, the benefits of these standards far exceed the costs.

8 See 74 Fed Reg 32744, July 8, 2009.

9 See CARB April 1, 2010 action at http ://www.arb.ca.gov/regact/2010/ghgpv10/ghgpv10.htm.Summary of Interagency Working Comments received on draft Notice of Intent under EO 12866 review

9 C. Stakeholder Support for Continuing the National Program in 2017 and Beyond

During the public comment period for the MY 2012-2016 proposed rulemaking, many stakeholders strongly encouraged EPA and NHTSA to begin working toward standards for MY 2017 and beyond that would maintain a single nationwide program. Following the President’s May announcement, several major automobile manufacturers and the CARB sent letters to EPA and NHTSA in support of the 20 17 to 2025 MY rulemaking initiative outlined in the President’s Memorandum. 10

D. Presidential Memorandum’s Request for EP A, NHTSA, and Califo rnia to Develop a Technical Assessment

In addition to the President’s request for EPA and NHTSA to issue this Notice announcing plans “ for setting stringent fuel economy and greenhouse gas emissions standards for light-duty vehicles of model year 2017 and beyond ,” the May 21, 2010 Presidential Memorandum also requested that the agencies work with the State of California to develop a technical assessment to inform the rulemaking process. The memorandum states that the report should reflect input from an array of stakeholders on relevant factors, including “ viable technologies, costs, benefits, lead time to develo p and deploy new and em erging technologies, incentives and other flexibilities to encourage development and deployment of new and emerging technologies, impacts on jobs and the automotive manufacturing base in the United States, and infrastructure for advanced vehicle technologies.” 11

EPA and NHTSA have worked collaborativel y with CARB to develop this technical assessment based on currently available data, co nsistent with the President’s request. The agencies are releasing an Interim Joint Technical Assessment Report (TAR) in conjunction with this Notice. 12 The TAR provides an initial technical assessment for this Notice and discusses the significant additional technical information and analysis that will be needed to support the rulemaking development process. While the TAR is an important step in a continuation of the Nationa l Program, significant work remains to be done to support a future federal rulemaking, as discussed below in Section I.E.4. The key elements and findings of the TAR are discussed further in this Notice.

10 These commitment letters are posted at http://www.epa.gov/otaq/climate/regulations.htm and at http://www.nhtsa.gov/Laws+&+Regulations/CAFE+-+Fuel+Economy/Stakeholder+Committment+Letters

. 11 Presidential Memorandum, section 2(a).

12 “Interim Joint Technical Assessment Report: Li ght-Duty Vehicle Greenhouse Gas Emission Standards and Corporate Average Fuel Economy Standards for Model Years 2017-2025,” issued jointly by EPA, NHTSA and CARB, September 2010. Available at [add web site links].Summary of Interagency Working Comments received on draft Notice of Intent under EO 12866 review

10 1. Stakeholder Outreach Conducted to Inform the Technical Assessment

During June through August 2010, EPA, NHTSA, and CARB held numerous meetings with a wide variety of stakeholders to gather input to consider in developing the TAR, and to ensure that the agencies had available to them the most recent technical information. These stakeholders included the automobile original equipment manufacturers (OEMs), automotive suppliers, non-governmental organizations, states and state organizations, infrastructure providers, and labor unions. The agencies sought these stakeholders’ technical input and perspectives, co nsistent with the President’s request, on the key issues that should be considered in assessing a continued National Program to reduce greenhouse gas emissions and improve fuel economy for light-duty vehicles in model years 2017-2025. The input from these stakeholders is discussed in detail in Chapter 2 of the TAR.

In response to the agencies’ request, OEMs provided detailed and confidential input regarding several key areas including technology development, key regulatory design elements, infrastructure issues, perspective on the impacts on the U.S. manufacturing base and jobs, costs, and potential regulatory incentives and flexibilities. A common theme across the auto firms is that they are all heavily investing in advanced technologies including hybrids (HEVs), plug-in hybrid electric vehicles (PHEVs), electric vehicles (EVs), next generation internal combustion engines, and mass reduction technologies, and companies expect to increase their offerings and sales of these technologies significantly in the future. The companies generally stated, however, that the degree to which these advanced technologies will penetrate the U.S. market in the MYs 2017-2025 timeframe cannot be foreseen in advance and is dependent upon a number of challenges and factors, including future gasoline fuel prices, future decrease s in battery costs, future regulatory fuel economy/GHG requirements, and government incentives for vehicle purchasers and owners such as the existing tax credits for EVs and PHEVs. EP A, NHTSA and CARB also met with a cross section of automotive suppliers as well as advanced technology infrastructure providers.

The agencies also requested input from numerous non-governmental organizations, including environmental organizations and labor organizations, and from state and local governments and their organizations. All of t T hese stakeholders strongly supported the President’s call for continuing the National Program approach and setting new fuel economy and greenhouse gas standards for light-duty vehicles for the 2017-2025 model years. Chapter 2 of the TAR provides an overview of the input we received during discussions with these organizations.

2. Overview of Initial Assessment of Available Technologies, Costs, Technology Effectiveness, and Lead-time

EPA and NHTSA, working with CARB, have conducted an initial assessment of the expected technology costs, effectiveness, and lead-time for potential MYs 2017-2025 GHG emission standards and the equivalent fuel ec onomy. The agencies and CARB assessed overSummary of Interagency Working Comments received on draft Notice of Intent under EO 12866 review

11 30 vehicle technologies that manufacturers could use to improve the fuel economy and reduce the CO 2 emissions of their vehicles during MYs 2017-2025. The technologies considered fall into five broad categories: engine techno logies, transmission technologies, vehicle technologies (including mass reduction), electrification/accessory technologies, and hybrid/vehicle electrification technologies. Th e agencies and CARB considered not only technologies that are readily available today, but also other technologies that may not currently be in production but are beyond the research phase and under development, and which are expected to be in production in the MYs 2017-2025 timeframe. Although the prediction of the impacts of new technology up to 15 years in the future is inherently uncertain, t T he agencies and CARB have initially determined that there are a wide range of technologies capable of achieving significant reductions in CO 2 emissions and significant improvements in fuel economy and available at reasonable costs in the 2017 to 2025 MY timeframe.

Consistent with stakeholder input obtained over the summer, we believe that in addition to advanced gasoline and diesel vehicles, electric dr ive vehicles can be an important part of the vehicle mix that will likely be used to meet future fuel economy and GHG emission standards. Electric drive vehicles including HEVs, PHEVs, EVs, and hydrogen fuel cell vehicles (FCVs), can dramatically reduce petroleum consumption and tailpipe GHG emissions compared to conventional technologies.

The initial assessment by EPA, NHTSA, and CARB of technology

, costs, effectiveness

, and lead-time issues is presented in Chapter 3 of the TAR. The TAR introduces a number of new studies that are in progress and several that have been completed since the 2012-2016 MY light duty vehicle rule was issued. These studies have resulted in new estimates for costs and effectiveness for a number of technologies including engines, transmissions, batteries, and mass reduction. All of these are critical technologies in the 2017-2025 MY timeframe. The agencies and CARB expect to update these estimates going forward as more information becomes available from on-going studies of technology, effectiveness, and costs, as well as mass reduction and safety, as discussed in Section I.E.4 below.

3. Other Issues Addressed in the Technical Assessment

Beyond the issues of the technology

, cost, effectiveness, and lead time for potential MYs 2017-2025 standards, the Presidential Memorandum requested that the technical assessment include input on some other areas, including impacts on jobs and the automotive manufacturing sector, and infrastructure for advanced vehicle technologies.

In the TAR, the agencies and CARB include a discussion of input from stakeholders, including the OEMs and labor unions, on the potential impacts of standards on jobs and the automotive sector. Several OEMs and the labor unions noted that Federal government Recovery Act investments, as well as incentives provided by some state and local governments, were an important factor in locating manufacturing operations for advanced Formatted: Indent: First line: 0.25"Summary of Interagency Working Comments received on draft Notice of Intent under EO 12866 review

12 battery, electric motor, and vehicl e assembly plants in the U.S., and that continuation of this type of investment would be an important consideration to in the decision whether to locat e ing future facilities in the U.S. Chapter 7 of the TAR also includes a discussion of the key issues surrounding the potential employment impacts of more stringent light duty vehicle GHG and fuel economy standards. With the global drivers of competitiveness and increased importance of clean and efficient technologies, auto companies have already begun to invest in new technologies that can help meet fu ture GHG/fuel economy standards. These investments will help the U.S. auto sector to st ay on the cutting edge of auto technology. The agencies expect that the new standards will have effects on vehicle sales. For the forthcoming rulemaking, EPA and NHTSA will further investig ate the impacts of the proposed standards on the auto industry, including employment , and the domestic economy in general

. The TAR also includes a discussion of the electric charging and infrastructure development needed to support successful deployment of certain types of advanced technology vehicles. In the case of EVs and PHEVs, electric charging systems are needed to facilitate market penetration of these vehicle technologies. Based on On the basis of stakeholder input, the agencies expect that these charging systems are will be located most often at homes. In addition, charging systems at workplaces and potentially also at public facilities such as parking lots or retail stores could become important enablers for significant market penetration of these vehicles. In the case of fuel cell vehicles, hydrogen fueling stations are needed to support commercialization. Chapter 4 of the TAR provides an assessment of current charging systems and infr astructure technologies and costs, prospects for technology improvement, infrastructure deployment programs underway, and further infrastructure needs. The agencies and CARB worked closely with the Department of Energy (DOE) in our assessment of infrastructure issu es, as well as other aspects of the TAR.

The TAR also includes an initial assessment of the costs, benefits, and technology that could be used to achieve a range of potential future stringencies, as discussed in section II.A below. SHOULDN’T WE HAVE A BRIEF SUMM ART OF THAT ASSESSMENT HERE?

4. Future Technical Work and Analysis for the Joint Federal Rulemaking

The two agencies have a number of significant, on-going projects which that will inform the joint proposed rule for MYs 2017-2025 vehicles. These include new technical assessments of advanced gasoline, diesel, an d hybrid vehicle technology effectiveness; several new projects to evaluate the cost, feasibility, and safety impacts of mass reduction from vehicles; and an ongoing project to improve our cost estimates for advanced technologies. 13 For the MYs 2017-2025 rulemaking, NHTSA and EPA will conduct an analysis of the effects of the proposed standards on vehicle safety, including societal effects.

13 This ongoing work is discussed in Chapter 3 of the TAR.Summary of Interagency Working Comments received on draft Notice of Intent under EO 12866 review

13 EPA and NHTSA are coordinating with CARB on their study of the safety effects of a future vehicle designed for high levels of mass reduction. In addition, EPA and NHTSA will continue to meet with and consider input from the full range of stakeholders as we develop the joint Federal rulemaking. All of this futu re information will enhance the accuracy of our technological assessment.

II. Key Elements of the MY 2017-2025 National Program

A. Initial Assessment of a Range of Potential MY 2017-2025 GHG and CAFE Scenarios

1. Overview of Scenarios Analyzed and the Agencies’ Approach to the Analysis

In the technical assessment, the agencies and CARB conducted an initial fleet-level analysis of improvements in overall average GHG emissions and fuel economy levels. We analyzed a range of potential stringencies for model years 2020 and 2025. Specifically, we analyzed four potential GHG targets, representing a 3, 4, 5, and 6 percent per year decrease in GHG levels from the MY 2016 fleet-wide average of 250 gram/mile (g/mi). Thus, the MY 2025 targets analyzed range from 190 g/mi (equivalent to 47 mpg) under the 3 percent per year reduction scenario to 143 g/mi (equivalent to 62 mpg) under the 6 percent per year scenario. 14 For purposes of an initial assessment, this range represents a reasonably broad range of stringency increases for potential future GHG emissi ons standards and is also consistent with the increases suggested by CARB in its letter of commitment in response to the President’s memorandum.

The specific averag e required GHG and MPG equivalent levels analyzed are shown in Table 1:

Table 1: GHG and MPG Equivalent Levels Analyzed for Scenarios 1

Scenario Level in MY 2025 (gram CO 2 /mile MPGequivalent

3% per year 190 47

4% per year 173 51

14 The modeled stringencies, like the EPA’s MY 2012-20 16 standards, include the potential use of air conditioning emission reductions, estimated at 15 gram s (compared to a 2008 baseline) in 2025 for all four technology paths. The estimates for further air conditioning reductions are largely due to an anticipated increase in the use of alternative refrigerants.Summary of Interagency Working Comments received on draft Notice of Intent under EO 12866 review

14 5% per year 158 56

6% per year 143 62

1. Real-world CO 2 is typically 25 percent higher and real-wor ld fuel economy is typically 20 percent lower. Thus the 3% to 6% range evaluated in this assessment would span a range of real-world fuel economy values of approximately 37 to 50 mpg, wh ich correspond to the regulatory test procedure values of 47 to 62, respectively.

For each of these levels of stringency, we also analyzed four “technological pathways” by which they could be met. We chose this “technological pathway” approach to capture both the diversity in strategies expressed by OEMs in this summer’s stakeholder meetings, and uncertainties in forecasting 10-15 years into the future the potential costs and use of various advanced technologies in the light-duty vehicl e fleet. We defined each of these technology pathways to emphasize a different mix of advanced technologies, by assuming various degrees of penetration of advanced gasoline technologies, mass reduction, hybrids, plug-in hybrids, and electric vehicles. For purposes of the assessment, the agencies denominated the pathways as Pathway A, Pathway B, Pa thway C and Pathway D, respectively.

 Pathway A represents an approach where the industry focuses on HEVs, with less reliance on advanced gasoline vehicles and mass reduction, relative to Pathways B and C.

 Pathway C represents an approach where the industry focuses most on advanced gasoline vehicles and mass reduction, and to a lesser extent on HEVs.

 Pathway B represents an approach where the industry utilizes advanced gasoline vehicles and mass reduction at a more moderate level, higher than in Pathway A but less than in Pathway C.

 Pathway D represents an approach where the industry focuses on the use of PHEV, EV, and HEV technology, and relies less on advanced gasoline vehicles and mass reduction. 15

All four of these technology pathways include significant amounts of mass reduction, relative to 2008 model year vehicles, ranging from 15 to 30 percent in 2025. The ability of the industry to reduce mass at the higher end of this range, while not adversely affecting safety and other vehicle attributes, is an open technical issue which the agencies are carefully evaluating and will continue to as we move fo rward. The agencies and CARB note that these

15 Further information on the four technology pathways is provided in Section II.A.3. below and Section 6.3 of the TAR.Summary of Interagency Working Comments received on draft Notice of Intent under EO 12866 review

15 pathways are meant to represent ways that manufacturers could respond to eventual standards, and do not represent ways that they must or necessarily will respond to those standards. We further believe it is appropriate to consider more than one potential technology pathway, since technology is difficult to pr edict in advance, and since NHTSA, EPA, and CARB have ongoing technology cost, effectiveness, and safety work which has not been completed, as discussed further in Section I.E.4 above.

For this initial assessment, we analyzed the vehicle fleet as one single industry-wide fleet, irrespective of individual manufacturer differences. This analysis focuses on the technology itself, independent of the individual manufacturer, and produces results that indicate how the single fleet could hypothetically achieve greater GHG reductions and improved fuel economy in the most efficient mann er. Treating the entire fleet as a single fleet assumes, for example, averaging GHG performance across all vehicle platforms is possible irrespective of who the individual manufacturer is for a particular vehicle platform. This can be thought of as analyzing the fleet as if th ere was a single large manufacturer, instead of multiple individual manufacturers. In addition, this analysis assumes there are no statutory or other limits on manufacturers’ ability to transfer credits between passenger car and light truck fleets, no limits on the ability to trade credits between manufacturers, and that all manufacturers fully utilize such flexibilities with no transfer costs in doing so. This approach also allows an assessment to be performed without consideration of the particular shapes of the passenger car and light truck attribute-based curves.

These analyses build upon methods and information applied for the final rule for MY 2012-2016 vehicles, as well as updated forecasts of the future light-duty vehicle fleet, updated projections of technology costs and effectiveness, and updates to several key inputs such as fuel prices 16 and vehicle miles traveled projections. 17 We did not explicitly model any crediting schemes in this analysis. However the assumption of full car-truck credit transfer and inter-manufacturer trading is inherent in analyzing a single industry-wide fleet. Air conditioning emission reductions were also accounted for, as a fundamental component of EPA’s MYs 2012-2016 program. The agencies used the OMEGA model, developed by EPA for the MY 2012-2016 light-duty vehicle rulemaking. 18 The key inputs for this analysis ( e.g. , the technology costs and effectiveness) are a result of the joint technical assessment of EPA, CARB, and NHTSA, as described in Chapter 3 of the TAR.

16 The fuel prices used are based on the Energy Information Administration’s Annual Energy Outlook 2010, which includes an estimated gasoline price in 2025 of approximately $3.50 per gallon.

17 See the TAR, Chapter 3 for a full discussion of technology costs and effectiveness, Chapter 6 for a full description of the modeling methods, Appendix A for a de scription of the future vehicle fleet projections, and Appendix E for the key inputs used in the modeling analysis.

18 See 75 Fed. Reg. at 25446 (May 7, 2010). Comment [A1]: Explain what attributes standards and curves mean? This precedes the discussion of attribute-based standards, so this will confuse anyone not intimately familiar with the previous rulemaking. Please expand here what this means.Summary of Interagency Working Comments received on draft Notice of Intent under EO 12866 review

16 EPA and NHTSA believe that the approach used for these analyses permits a n tentative, initial

, and highly approximate evaluation of the potential costs and benefits of the fleetwide stringency levels modeled. This approach incorporates significant simplifying assumptions that are useful for this initial assessment. However, the simplified analyses would not be appropriate in the context of the future joint federal rulemaking, taking into account each agency’s respective statutory requirements. Consequently, in the full rulemaking analysis, both EPA and NHTSA w ill perform additional analyses before proposing standards. These simplifying assumptions and their relationship to the future federal rulemaking are discussed in detail in Section II.A.4 below and in Chapter 6 of the TAR.

2. Summary of Preliminary Costs and Benefits for Potential Scenarios

The agencies and CARB assessed four scenarios for potential fleet-wide average GHG levels, with annual CO 2 reductions in the range of 3 to 6 percent per year, which would be equivalent to 47 to 62 mpg if all improvements were due to fuel-economy improving technologies, for MY 2025 light-duty vehicles, and four potential technology pathways, as described above, for each of these stringency levels. We evaluated the costs and benefits of these scenarios based on five broad metrics: increased cost per vehicle, lifetime fuel reductions, lifetime greenhouse gas reductions, consumer net lifetime savings, and payback period.

The results presented in Tables 2 and 3 indicate that substantial reductions in fuel consumption and GHGs can be achieved with the use of ad vanced technologies. The preliminary estimated per-vehicle cost increases for a MY 2025 vehicle ranged from $770 to $3,500 across the range of stringency targets and technology pathways. Due to the fuel savings consumers experience by purchasing vehicles with improved fuel economy, the net lifetime owner savings would be $5,000 to $7,400, or a payback period of 1.4 to 4.2 years, for these same scenarios. 19 The aggregate fuel reductions achieved by these scenarios would range from 0.7 to 1.3 billion barrels over the lifetime of MY 2025 vehicles

. 20

. Total greenhouse gas reductions would range from 340 to 590 million metric tons (MMT) over the lifetime of MY 2025 vehicles, depending on the stringency target and technology pathway. 21 (It is important to recognize that the preliminar y estimates in Tables 2 and 3 do not include all relevant costs, which will be analyzed in detail in connection with the rulemaking.)

19 The gasoline price used for this estimate is $3.49/ gallon in 2025 and increases over time to a maximum of $4.34/gallon in 2050

20 For comparison, the MY 2016 standards by themselves are projected to result in fuel reductions of 0.6 billion barrels and CO2-e reductions of 325 million metric tons (MMT) over the lifetime of MY 2016 vehicles.

21 While fuel savings are the same for each technology pa thway at a given stringency level, CO2 reductions vary as a function of the penetration of PHEVs and EVs projected for a given technology pathway, due to an increase in upstream CO2 emissions.Summary of Interagency Working Comments received on draft Notice of Intent under EO 12866 review

17 Table 2: Projections for MY 2025 Preliminary Per-Vehicle Cost Estimates, Vehicle Owner Payback, and Net Owner Lifetime Savings 1

Scenario Technology Path Preliminary Per-Vehicle Cost Estimates ($) Payback Period (years) Net Lifetime Owner Savings ($)

3%/year A $930 1.6 $5,000 B $850 1.5 $5,100 C $770 1.4 $5,200 D $1,050 1.9 $4,900

4%/year A $1,700 2.5 $5,900 B $1,500 2.2 $6,000 C $1,400 1.9 $6,200 D $1,900 2.9 $5,300

5%/year A $2,500 3.1 $6,500 B $2,300 2.8 $6,700 C $2,100 2.5 $7,000 D $2,600 3.6 $5,500

6%/year A $3,500 4.1 $6,200 B $3,200 3.7 $6,600 C $2,800 3.1 $7,400 D $3,400 4.2 $5,700

1. Per-vehicle costs represent the increase in costs to consumers from the MY 2016 standards. Payback period and lifetime owner savings use a 3% discount rate and AEO 2010 reference case energy prices. The gasoline price used for this estimate is $3.49/gallon in 2025 and increases over time to a maximum of $4.34/gallon in 2050.

Table 3: Estimated Total CO2e and Fuel Reductions for the Lifetime of MY 2025 Vehicles 1,2

Scenario Lifetime CO2e Reduction (million metric tons, MMT) Lifetime Fuel Reduction (Billion Barrels) 3%/year 340 0.7

4%/year 440 0.9

5%/year 520-530 1.1

6%/year 530-590 1.3 Comment [A2]: What about including the MY 2020 estimates in this NOI for those technology paths (A-C) where it’s available? Wouldn’t this dampen the criticism that EPA/DOT’s analysis focuses on a model year 15 years in the future that many of the car companies say they have trouble predicting?

Comment [A3]: Suggest noting that the total CO2 and fuel reductions that will be achieved by the program are significantly greater than the MY 2025 vehicle lifetime reductions alone.Summary of Interagency Working Comments received on draft Notice of Intent under EO 12866 review

18 1. Fuel reductions are the same for each of the fo ur technology pathways, but CO2e reductions vary as a function of the penetration of EVs and PHEVs in each of the four technology pathways evaluated (due to an increase in upstream emissions). 2. For reference, the National Program in MY 2016 is projected to reduce 0.6 billion barrels of fuel and 325 MMT CO2e over the lifetime of MY2016 vehicles.

The results presented for this initial assessm ent represent what the agencies expect a hypothetical full-line vehicle manufacturer could achieve, if the composition of the manufacturer’s fleet has the same vehicle type s and sales mix as the aggregate fleet and the availability, cost, and effectiveness of various technologies are the same as estimated in this assessment. Note that the results presented he re assume trading between auto firms, which may or may not occur in the future. The results also assume that the transfer of credits between car and light truck fleets are unlimited, whereas there are statutory limits for CAFE. Among actual full-line vehicle manufacturers, we expect that a manufacturer-specific assessment based on footprint-attribute standard curves will result in costs which are in aggregate higher than those pr esented here and will be higher for some manufacturers and lower for others due to the differences among their offerings. With respect to smaller volumemanufacturers and very low volume manufacturers (many of whom only produce highperformance luxury vehicles), the agencies would expect that, in general, the level of technology they would require and the costs they would incur would generally be higher than for full line manufacturers.

In the full analysis for the rulemaking, as required by EPCA/EISA and as permitted by the CAA, the agencies will make more refined asse ssments, including separate analyses for carand light truck vehicle fleets, year-by-year attribute-based standards, and manufacturerspecific estimates of potential attribute-based standard targets and costs, and other statutory requirements. NHTSA and EPA also will perform a more thorough assessment of the impacts of proposed standards, as was done for the MY 2012-2016 rulemaking, including analysis of improved energy security, monetized benefits of CO 2 reductions, co-pollutant impacts, an assessment of the societal costs and benefits of potential standards, an assessment of potential safety impacts, an assessment of impacts on automobile sales and related employment, and other relevant impacts.

3. Potential Technology Penetrati on Estimates for Various Pathways

As described above, the agencies and CARB analyzed four potential technology pathways to achieve more stringent targets, recognizing there are a wide range of pathways manufacturers could pursue. To illustrate several alternative ways that the industry as a whole could achieve a given level of stringency, each of these four technology pathways was applied to each of the four stringency targets. As noted above, Pathway A focuses on HEVs, Pathway C focuses most on advanced gasoline vehicles and mass reduction, Pathway B represents a more moderate level of advanced gasoline vehicles, between Pathway A and Pathway C, and Comment [A4]: Same comment as above.Without full explanation of attribute- or footprintbased standards, this will confuse some people. Possible to simplify?
Comment [A5]: Suggest being as specific as possible about why (and in what way) we think costs would be higher on aggregate than shown here. For example, it seems from this sentence that we think our cost assessment for the rulemaking will be higher, but isn’t it possible that technology costs estimates will come down and counteract the effect of constraints on trading, etc? Can we instead say more specifically that incorporating constraints on transfers/trading (or transaction costs, etc.) would increase our cost estimates slightly?Summary of Interagency Working Comments received on draft Notice of Intent under EO 12866 review

19 Pathway D focuses most on PHEV, EV, and HEV technology. 22 The results of the assessment presented in the TAR are presented in Table 4.

Table 4: Technology Penetration Estimates for MY 2025 Vehicle Fleet

Scenario Technology Path New Vehicle Fleet Technology Penetration Mass Reduction 1 Gasoline & Diesel Vehicles HEVs PHEVs 2 EVs

3%/year Path A 15% 89% 11% 0% 0% Path B 18% 97% 3% 0% 0% Path C 18% 97% 3% 0% 0% Path D 15% 75% 25% 0% 0%

4%/year Path A 15% 65% 34% 0% 0% Path B 20% 82% 18% 0% 0% Path C 25% 97% 3% 0% 0% Path D 15% 55% 41% 0% 4%

5%/year Path A 15% 35% 65% 0% 1% Path B 20% 56% 43% 0% 1% Path C 25% 74% 25% 0% 0% Path D 15% 41% 49% 0% 10%

6%/year Path A 14% 23% 68% 2% 7% Path B 19% 48% 43% 2% 7% Path C 26% 53% 44% 0% 4% Path D 14% 29% 55% 2% 14%
1. Mass reduction is the overall reduction of the 2025 fleet relative to MY 2008 vehicles. 2. Our assessment considered both PHEVs and EVs. These initial results indicate a higher relative percent of EVs compared to PHEVs. The agencies do believe that PHEV technology may be used more broadly than what this analysis indicates.

The penetration of HEVs, EVs, and PHEV in MY 2025 varies considerably depending on the technology pathway and scenario, as can be seen in Table 4. As discussed in Chapter 6.3 of the TAR, Pathway A is intended to portray a technology path focused on HEV technology, with less reliance on advanced gasoline vehicles mass reduction, relative to Pathways B and C. Thus, in the 3%/year scenario, Pathway A results in 11% HEV penetration, and the most stringent 6% scenario increases HEV penetration to 68% for Path A, all with approximately a 15% reduction in mass for the new vehicle fleet. Pathway C represents an approach where the industry focuses most on advanced gasoline vehicles and mass reduction, and to a lesser extent on HEVs, resulting in a penetration of HEVs that ranges from 3% up to 44% of the new vehicle fleet. Given the approach that Pathway C represents,

22 Further description of these technology pathways can be found in Chapter 6 of the TAR.Summary of Interagency Working Comments received on draft Notice of Intent under EO 12866 review

20 the penetration of gasoline and diesel vehicles for each of the stringency scenarios is highest for Pathway C, as is the degree of mass reduction. Pathway B represents an approach where advanced gasoline vehicles and mass reduction are utilized at a more moderate level, higher than for Pathway A but less than for Pathway C. Pathway D represents an approach focused on the use of PHEV, EV, and HEV technology, and less reliance on advanced gasoline vehicle and mass reduction.

4. Future Analysis of Potential Standards for MY 2017-2025

The agencies emphasize that the analysis presented in this notice, while reasonable for conducting an initial assessment, is a first step. Much more work must be completed for the upcoming NPRM. As noted above, we expect to issue updated assessments by November 30 of this year. The upcoming rulemaking to develop the next phase of the National Program will be based on a full analysis that is consis tent with both the statutory framework that NHTSA must account for, and the flexibilities that EPA may account for, just as the detailed analysis for the MYs 2012-2016 was conducted. 23 While the single fleet analysis approach simplifies some aspects of the analysis and offers some advantages, there are also important limitations which will be addressed during the rulemaking process.

For the same reasons discussed in detail in the MYs 2012-2016 rulemaking, NHTSA and EPA expect to develop new standards for CAFE and GHG emissions that are consistent with each other and can be met by each auto manufacturer through the production of one single fleet. NHTSA and EPA believe the TAR provides a useful means of comparing the scenarios discussed above.

As the agencies proceed to develop a joint proposed rulemaking for light-duty vehicle GHG emissions and fuel economy, we will continue technical and policy discussions with a broad range of stakeholders. We expect to gain information through these conversations, as well as from ongoing technical assessments by the agencies and other parties, that will build on the work presented in this Notice and the TA R as we continue to respond to the May 21, 2010 Presidential Memorandum.

B. Form of the Standards, Compliance and Flexibilities, and Other Key Elements

EPA and NHTSA sought initial input about the appropriate design of a MYs 2017- 2025 National Program from a range of stakeholders. Most of the program design input that we have received to date has come from OEMs, although many of their suggestions relate to specific potential compliance strategies that the companies consider confidential. However, there was consensus among all stakeholders that a National Program should continue, and that

23 For further information on the kinds of compre hensive analyses performed for the MYs 2012-2016 rulemaking, see 75 Fed. Reg. at 25348-396.Summary of Interagency Working Comments received on draft Notice of Intent under EO 12866 review

21 the program’s design should allow a single national fleet to comply with federal GHG standards, federal CAFE standards, and California GHG standards.

1. Form of the Standards

In the future rulemaking, the agencies plan to continue an attribute-based approach to setting the MYs 2017-2025 standa rds, as was done for the MY s 2012-2016 program and as required for CAFE standards per EPCA/EISA. In our outreach with stakeholders, we heard general support for continuing an attribute-based approach and for continuing to use vehicle footprint as the attribute. Under an attribute-based standard, each manufacturer has a required GHG and CAFE fleet average unique to its fleet, depending on the attributes and production levels of the vehicle models that a manufacturer produces. The MYs 2012-2016 rule was based on vehicle footprint, which is essentially the area enclosed by the points at which the four wheels meet the ground. In developing a proposed rule, we plan to consider continuing the footprint-based attribute, for which most stakeholders generally offered support.

A key consideration for the MYs 2017-2025 standards that has not yet been addressed will be development of the separate attribute-ba sed standards, or “curves,” for passenger cars and light trucks. The attribute-based curves fo r passenger cars and li ght trucks essentially assign a GHG/fuel economy level or “target” to an individual vehicle’s footprint value. For each manufacturer, the CO 2 /mpg values are then weighted, based on that manufacturer’s production mix to determine that manufacturer’s fleet average standard for its cars and trucks. Compliance is determined by comparing the actual CO 2 or mpg values for the vehicles, production-weighted, to this fleet average standard.

In developing the MYs 2012-2016 footprint-based curves, the agencies considered many key issues, including the steepness of the slopes of the curves and the difference between the car and truck curves for vehicles of the same footprint. We expect that these issues will again be key considerations in developing the methodology and the shape of the curves for the MYs 2017-2025 standards. Several OEMs expressed support for the continuation of separate attribute-based standards for cars and trucks, which is required for CAFE standards under EPCA/EISA and which the agencies will also evaluate further for the rulemaking.

2. Potential Regulatory Flexibilities

During the agencies’ outreach discussions with stakeholders, manufacturers provided early input that several of the flexibility provisions in place for MYs 2012-2016 should be retained for MY 2017 and later. Environmental groups also provided early input, as discussed below. As EPA and NHTSA develop the proposal for the MYs 2017-2025 program, the agencies will continue to consider the potent ial need for and benefi ts of incentives and flexibility provisions beyond those mandated by statute. The agencies will consider whether and how some of the flexibility provisions included in the MYs 2012-2016 program might beSummary of Interagency Working Comments received on draft Notice of Intent under EO 12866 review

22 applied to the new program and if appropriate expanded , consistent with each agency’s statutory authority.

Some manufacturers encouraged EPA to continue to offer flexible fuel vehicle (FFV) credits. EPA finalized provisions in the MY s 2012-2016 Final Rule to treat MY 2016 and later FFVs similarly to conventional fueled vehi cles, in that FFV emissions would be based on actual CO2 results from emissions testing on the fuels on which it operates. 24 In calculating the emissions performance of an FFV, manufacturers may base FFV emissions in part on vehicle emissions test results on the alte rnative fuel, if they can demonstrate that the alternative fuel is actually being used in th e vehicles. EPA will consider whether it is appropriate to retain this approach in the MYs 2017-2025 rulemaking. NHTSA will continue to provide incentives for dual fuel ed vehicles as de fined in statute. 25 For all dual fueled vehicles, except for electric dual fueled vehicles, the maximum increase in average fuel economy for a manufacturer will be 0.6 mpg in 2017, 0.4 mpg in 2018, 0.2 mpg in 2019, and there is no incentive in MY 2020 or after.

24 See 75 FR at 25434.
25 See 49 U.S.C. 3290 5 and 49 U.S.C. 32906 Comment [A6]: This incentive probably needs better explanation.