DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

1

IV. NHTSA Proposal for Passenger Car and Light Truck CAFE Standards for 

MYs 2012-2016

 

 A. Executive Ooverview of NHTSA Pproposal 

1. Introduction

The National Highway Traffic Safety Administration (NHTSA) is proposing to 

establish corporate average fuel economy standards for passenger automobiles (passenger 

cars) and nonpassenger automobiles (light trucks) for model years (MY) 2012-2016. 

Improving vehicle fuel economy has been long and widely recognized as one of the key 

ways of achieving energy independence, energy security, and a low carbon economy.1 

NHTSA’s proposed standards will require passenger cars and light trucks to meet an 

estimated combined average of 34.1 mpg in MY 2016. This represents an average annual 

increase of 4.3 percent from the 27.3 mpg combined fuel economy level in MY 2011. 

NHTSA’s proposal projects total fuel savings of approximately 61.6 billion gallons over 

the lifetimes of the vehicles sold in model years 2012-2016, with corresponding net 

societal benefits of approximately $201.7 billion. 

The significance accorded improving fuel economy reflects several 

factors. Conserving energy, especially reducing the nation’s dependence on 

petroleum, benefits the U.S. in several ways. Improving energy efficiency has 

benefits for economic growth and the environment, as well as other benefits, such 

as reducing pollution and improving security of energy supply. More specifically, 

reducing total petroleum use decreases our economy’s vulnerability to oil price 

shocks. Reducing dependence on oil imports from regions with uncertain 

 

1

 Among the reports and studies noting this point are the following: 

John Podesta, Todd Stern and Kim Batten, “Capturing the Energy Opportunity; Creating a LowCarbon Economy,” Center for American Progress (November 2007), pp. 2, 6, 8, and 24-29, available at: 

http://www.americanprogress.org/issues/2007/11/pdf/energy_chapter.pdf (last accessed August 9, 2009). 

Sarah Ladislaw, Kathryn Zyla, Jonathan Pershing, Frank Verrastro, Jenna Goodward, David 

Pumphrey, and Britt Staley, “A Roadmap for a Secure, Low-Carbon Energy Economy; Balancing Energy 

Security and Climate Change,” World Resources Institute and Center for Strategic and International 

Studies (January 2009), pp. 21-22; available at: 

http://pdf.wri.org/secure_low_carbon_energy_economy_roadmap.pdf (last accessed August 9, 2009). 

Alliance to Save Energy et al., “Reducing the Cost of Addressing Climate Change Through 

Energy Efficiency (2009), available at: http://Aceee.org/energy/climate/leg.htm (last accessed August 9, 

2009). 

John DeCicco and Freda Fung, “Global Warming on the Road; The Climate Impact of America’s 

Automobiles,” Environmental Defense (2006) pp. iv-vii; available at: 

http://www.edf.org/documents/5301_Globalwarmingontheroad.pdf (last accessed August 9, 2009). 

“Why is Fuel Economy Important?,” a webpage maintained by the Department of Energy and 

Environmental Protection Agency, available at http://www.fueleconomy.gov/feg/why.shtml (last accessed 

August 9, 2009); 

Robert Socolow, Roberta Hotinski, Jeffery B. Greenblatt, and Stephen Pacala, “Solving The 

Climate Problem: Technologies Available to Curb CO2 Emissions,” Environment, volume 46, no. 10, 2004. 

pages 8–19, available at: 

http://www.princeton.edu/~cmi/resources/CMI_Resources_new_files/Environ_08-21a.pdf (last accessed 

August 9, 2009). 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

2

conditions enhances our energy security. Additionally, the emission of CO2 from 

the tailpipes of cars and light trucks is one of the largest sources of U.S. CO2

emissions.2

 Using vehicle technology to improve fuel economy, and thereby 

reducing tailpipe emissions of CO2, is one of the three main measures of reducing 

those tailpipe emissions of CO2.

3

 The two other measures for reducing the 

tailpipe emissions of CO2 are switching to vehicle fuels with lower carbon content 

and changing driver behavior, i.e., inducing people to drive less. 

While NHTSA has been setting fuel economy standards since the 1970s, today’s 

action represents the first-ever joint proposal by NHTSA with another agency, the 

Environmental Protection Agency. As discussed in Section I, NHTSA’s proposed MYs 

2012-2016 CAFE standards are part of a joint National Program, such that a large 

majority of the projected benefits are achieved jointly with EPA’s GHG rule, described in 

detail above in Section III of this preamble. These proposed CAFE standards are 

consistent with the President’s National Fuel Efficiency Policy announcement of May 19, 

2009, which calls for harmonized rules for all automakers, instead of three overlapping 

and potentially inconsistent requirements from DOT, EPA, and the California Air 

Resources Board. And finally, the proposed CAFE standards and the analysis supporting 

them also respond to President’s Obama’s January 26 memorandum regarding the setting 

of CAFE standards for model years 2011 and beyond. 

2. Role of Ffuel Eeconomy Iimprovements in Ppromoting Eenergy 

Iindependence, Eenergy Ssecurity, and a Llow Ccarbon Eeconomy

The need to reduce energy consumption is more crucial today than it was when 

EPCA was enacted in the mid-1970s. U.S. energy consumption has been outstripping 

U.S. energy production at an increasing rate. Net petroleum imports now account for 

approximately 57 percent of U.S. domestic petroleum consumption, and the share of U.S. 

oil consumption for transportation is approximately 71 percent.4

 Moreover, world crude 

oil production continues to be highly concentrated, exacerbating the risks of supply 

disruptions and their negative effects on both the U.S. and global economies. 

Gasoline consumption in the U.S. has historically been relatively insensitive to 

fluctuations in both price and consumer income, and people in most parts of the country 

tend to view gasoline consumption as a non-discretionary expense. Thus, when 

gasoline’s share in consumer expenditures rises, the public experiences fiscal distress. 

This fiscal distress can, in some cases, have macroeconomic consequences for the 

economy at large. Additionally, since U.S. oil production is only affected by fluctuations 

in prices over a period of years, any changes in petroleum consumption (as through 

 

2

 EPA Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990 – 2006 (April 2008), pp. ES-4, ES-8, 

and 2-24. Available at http://www.epa.gov/climatechange/emissions/usgginv_archive.html (last accessed 

August 9, 2009).

3

 Podesta et al., p. 25; Ladislaw et al. p. 21; DeCicco et al. p. vii; “Reduce Climate Change,” a webpage 

maintained by the Department of Energy and Environmental Protection Agency at 

http://www.fueleconomy.gov/feg/climate.shtml (last accessed August 9, 2009). 

4

 Energy Information Administration, Petroleum Basic Statistics, updated July 2009. Available at 

http://www.eia.doe.gov/basics/quickoil.html (last accessed August 9, 2009). 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

3

increased fuel economy) largely flow into changes in the quantity of imports. Although 

petroleum imports only account for about 2 percent of GDP, they are large enough to 

create a discernable fiscal drag. As a consequence, however, measures that reduce 

petroleum consumption, such as fuel economy standards, will flow directly into the 

balance-of-payments account, and strengthen the domestic economy to some degree. 

And finally, U.S. foreign policy has been affected for decades by rising U.S. and world 

dependency of crude oil as the basis for modern transportation systems, although fuel 

economy standards have only an indirect and general impact on U.S. foreign policy. 

The benefits of a low carbon economy are manifold. The U.S. transportation 

sector is a significant contributor to total U.S. and global anthropogenic emissions of 

greenhouse gases. Motor vehicles are the second largest greenhouse gas-emitting sector 

in the U.S., after electricity generation, and accounted for 24 percent of total U.S. 

greenhouse gas emissions in 2006. Concentrations of greenhouse gases are at 

unprecedented levels compared to the recent and distant past, which means that fuel 

economy improvements to reduce those emissions are a crucial step toward addressing 

the risks of global climate change. These risks are well documented in section III of this 

notice. 

3. The National Program

NHTSA and EPA are each announcing proposed rules that have the effect of 

addressing the urgent and closely intertwined challenges of energy independence and 

security and global warming. These proposed rules call for a strong and coordinated 

federal greenhouse gas and fuel economy program for passenger cars, light-duty-trucks, 

and medium-duty passenger vehicles (hereafter light-duty vehicles), referred to as the 

National Program. The proposed rules represent a coordinated program that can achieve 

substantial reductions of greenhouse gas (GHG) emissions and improvements in fuel 

economy from the light-duty vehicle part of the transportation sector, based on 

technology that will be commercially available and that can be incorporated at a 

reasonable cost. The agencies’ proposals will also provide regulatory certainty and 

consistency for the automobile industry by setting harmonized national standards. They 

were developed and are designed in ways that recognize and accommodate the serious 

current economic situation faced by this industry. 

This joint notice is consistent with the President’s announcement on May 19, 

2009 of a National Fuel Efficiency Policy that will reduce greenhouse gas emissions and 

improve fuel economy for all new cars and light-duty trucks sold in the United States,5

and with the Notice of Upcoming Joint Rulemaking signed by DOT and EPA on that 

date.6 This joint notice also responds to the President’s January 26, 2009 memorandum 

on CAFE standards for model years 2011 and beyond, the details of which can be found 

in Section IV of this joint notice. 

a. Building Bblocks of the National Program

 

5

 President Obama Announces National Fuel Efficiency Policy, The White House, May 19, 2009. 

6

 74 FR 24007 (May 22, 2009). 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

4

The National Program is both needed and possible because the relationship 

between improving fuel economy and reducing CO2 tailpipe emissions is a very direct 

and close one. CO2 is the natural by-product of the combustion of fuel in motor vehicle 

engines. The more fuel efficient a vehicle is, the less fuel it burns to travel a given 

distance. The less fuel it burns, the less CO2 it emits in traveling that distance.7 Since the 

amount of CO2 emissions is essentially constant per gallon combusted of a given type of 

fuel, the amount of fuel consumption per mile is directly related to the amount of CO2

emissions per mile. In the real world, there is a single pool of technologies for reducing 

fuel consumption and CO2 emissions. Using those technologies in the way that 

minimizes fuel consumption also minimizes CO2 emissions. While there are emission 

control technologies that can capture or destroy the pollutants (e.g., carbon monoxide) 

that are produced by imperfect combustion of fuel, there is at present no such technology 

for CO2. In fact, the only way at present to reduce tailpipe emissions of CO2 is by 

reducing fuel consumption. The National Program thus has dual benefits: it conserves 

energy by improving fuel economy, as required of NHTSA by EPCA and EISA; in the 

process, it necessarily reduces tailpipe CO2 emissions consonant with EPA’s purposes 

and responsibilities under the Clean Air Act. 

 i. DOT’s CAFE Program 

In 1975, Congress enacted the Energy Policy and Conservation Act (EPCA), 

mandating a regulatory program for motor vehicle fuel economy to meet the various 

facets of the need to conserve energy, including ones having energy independence and 

security, environmental and foreign policy implications. EPCA allocates the 

responsibility for implementing the program between NHTSA and EPA as follows: 

• NHTSA sets Corporate Average Fuel Economy (CAFE) standards for passenger 

cars and light trucks. 

• Because fuel economy performance is measured during emissions regulation 

testing, EPA establishes the procedures for testing, tests vehicles, collects and 

analyzes manufacturers’ test data, and calculates the average fuel economy of 

each manufacturer’s passenger cars and light trucks. EPA determines fuel 

economy by the simple expedient of measuring the amount of CO2 emitted from 

the tailpipe, not by attempting to measure directly the amount of fuel consumed 

during a vehicle test, a difficult task to accomplish with precision. EPA then uses 

the carbon content of the test fuel8 to calculate the amount of fuel that had to be 

consumed per mile in order to produce that amount of CO2. Finally, EPA converts 

that fuel consumption figure into a miles-per-gallon figure. 

• Based on EPA’s calculation, NHTSA enforces the CAFE standards 

The CAFE standards and compliance testing cannot capture all of the real world 

CO2 emissions, because EPCA requires EPA to use the 1975 passenger car test 

procedures under which vehicle air conditioners are not turned on during fuel economy 

 

7

 Panel on Policy Implications of Greenhouse Warming, National Academy of Sciences, National Academy 

of Engineering, Institute of Medicine, “Policy Implications of Greenhouse Warming: Mitigation, 

Adaptation, and the Science Base,” National Academies Press, 1992, at 287. 

8

 This is the method that EPA uses to determine compliance with NHTSA’s CAFE standards. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

5

testing.9 CAFE standards also do not address the 5-8 percent of GHG emissions that are 

not CO2, i.e., nitrous oxide (N2O), and methane (CH4) as well as emissions of CO2 and 

hydrofluorocarbons (HFCs) related to operation of the air conditioning system. 

NHTSA has been setting CAFE standards pursuant to EPCA since the enactment 

of the statute. Fuel economy gains since 1975, due both to the standards and market 

factors, have resulted in saving billions of barrels of oil and avoiding billions of metric 

tons of CO2 emissions. In December 2007, Congress enacted the Energy Independence 

and Securities Act (EISA), amending EPCA to require, among other things, attributebased standards for passenger cars and light trucks. The most recent CAFE rulemaking 

action was the issuance of standards governing model years 2011 cars and trucks. 

 

 ii. EPA’s Greenhouse Gas Program

On April 2, 2007, the U.S. Supreme Court issued its opinion in Massachusetts v. 

EPA,

10 a case involving a 2003 order of the Environmental Protection Agency (EPA) 

denying a petition for rulemaking to regulate greenhouse gas emissions from motor 

vehicles under the Clean Air Act.11 The Court ruled that greenhouse gases are 

“pollutants” under the CAA and that the Act therefore authorizes EPA to regulate 

greenhouse gas emissions from motor vehicles if that agency makes the necessary 

findings and determinations under section 202 of the Act. The Court considered EPCA 

only briefly, stating that the two obligations may overlap, but there is no reason to think 

the two agencies cannot both administer their obligations and yet avoid inconsistency. 

EPA has been working on appropriate responses that are consistent with the decision of 

the Supreme Court in Massachusetts v. EPA. 

12 As part of those responses, in July 2008, 

EPA issued an Advance Notice of Proposed Rulemaking seeking comments on the 

impact of greenhouse gases on the environment and on ways to reduce greenhouse gas 

emissions from motor vehicles. EPA recently also proposed to find that emissions of 

GHGs from new motor vehicles and motor vehicle engines cause or contribute to air 

pollution that may reasonably be anticipated to endanger public health and welfare.13

 

iii. California Air Resources Board’s Greenhouse Gas Program 

In 2004, the California Air Resources Board approved standards for new lightduty vehicles, which regulate the emission of not only CO2, but also other GHGs. Since 

then, thirteen states and the District of Columbia, comprising approximately 40 percent of 

the light-duty vehicle market, have adopted California’s standards. These standards 

apply to model years 2009 through 2016 and require reductions in CO2 emissions for 

 

9

See 49 U.S.C. §sec. 32904(c). 

10 127 S.Ct. 1438 (2007). 

11 68 FR 52922 (Sept. 8, 2003). 

12 549 U.S. 497 (2007). For further information on Massachusetts v. EPA see the July 30, 2008 Advance 

Notice of Proposed Rulemaking, “Regulating Greenhouse Gas Emissions under the Clean Air Act”, 73 FR 

44354 at 44397. There is a comprehensive discussion of the litigation’s history, the Supreme Court’s 

findings, and subsequent actions undertaken by the EPA from 2007-2008 in response to the Supreme Court

remand. 

13 74 FR 18886 (Apr. 24, 2009). 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

6

passenger cars and some light trucks of 323 g/mil in 2009 up to 205 g/mi in 2016, and 

439 g/mi for light trucks in 2009 up to 332 g/mi in 2016. In 2008, EPA denied a request 

by California for a waiver of preemption under the CAA for its GHG emissions 

standards. However, consistent with another Presidential Memorandum of January 26, 

2009, EPA reconsidered the prior denial of California’s request.14 EPA withdrew the 

prior denial and granted California’s request for a waiver on June 30, 2009.15 The 

granting of the waiver permits California’s emission standards to come into effect 

notwithstanding the general preemption of state emission standards for new motor 

vehicles that otherwise applies under the Clean Air Act. 

b. The President’s Announcement of National Fuel Efficiency Policy (May 

2009) 

The issue of three separate regulatory frameworks and overlapping requirements 

for reducing fuel consumption and CO2 emissions has been a subject of much 

controversy and legal disputes. On May 19, 2009 President Obama announced a 

National Fuel Efficiency Policy aimed at both increasing fuel economy and reducing 

greenhouse gas pollution for all new cars and trucks sold in the United States, while also 

providing a predictable regulatory framework for the automotive industry. The policy 

seeks to set harmonized federal standards to regulate both fuel economy and greenhouse 

gas emissions while preserving the legal authorities of the Department of Transportation, 

the Environmental Protection Agency and the State of California. The program covers 

model year 2012 to model year 2016 and ultimately requires the equivalent of an average 

fuel economy of 35.5 mpg in 2016, if all CO2 reduction were achieved through fuel 

economy improvements. Building on the MY 2011 standard that was set in March 2009, 

this represents an average of 5 percent increase in average fuel economy each year 

between 2012 and 2016. 

In conjunction with the President’s announcement, the Department of 

Transportation and the Environmental Protection Agency issued on May 19, 2009, a 

Notice of Upcoming Joint Rulemaking to propose a strong and coordinated fuel economy 

and greenhouse gas National Program for Model Year (MY) 2012-2016 light duty 

vehicles. Consistent, harmonized, and streamlined requirements under that program hold 

out the promise of delivering environmental and energy benefits, cost savings, and 

administrative efficiencies on a nationwide basis that might not be available under a less 

coordinated approach. The proposed National Program makes it possible for the 

standards of two different federal agencies and the standards of California and other 

states to act in a unified fashion in providing these benefits. Establishing a harmonized 

approach to regulating light-duty vehicle greenhouse gas (GHG) emissions and fuel 

economy is critically important given the interdependent goals of addressing climate 

change and ensuring energy independence and security. Additionally, establishing a 

harmonized approach may help to mitigate the cost to manufacturers of having to comply 

with multiple sets of federal and state standards 

 

14 74 FR 7040 (Feb. 12, 2009). 

15 74 FR 32744 (July 8, 2009). 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

7

4. Review of CAFE Sstandard Ssetting Mmethodology Pper the President’s 

January 26, 2009 Mmemorandum on CAFE Sstandards for MYs 2011 and 

Bbeyond

On May 2, 2008, NHTSA published a Notice of Proposed Rulemaking entitled 

Average Fuel Economy Standards, Passenger Cars and Light Trucks; Model Years 2011-

2015, 73 Fed. Reg. 24352. In mid-October, the agency completed and released a final 

environmental impact statement in anticipation of issuing standards for those years. 

Based on its consideration of the public comments and other available information, 

including information on the financial condition of the automotive industry, the agency 

adjusted its analysis and the standards and prepared a final rule for MYs 2011-2015. On 

November 14, the Office of Information and Regulatory Affairs (OIRA) of the Office of 

Management and Budget cleared concluded review of the rule as consistent with the 

Order.16 However, issuance of the final rule was held in abeyance. On January 7, 2009, 

the Department of Transportation announced that the final rule would not be issued, 

saying: 

The Bush Administration will not finalize its rulemaking on Corporate 

Fuel Economy Standards. The recent financial difficulties of the 

automobile industry will require the next administration to conduct a 

thorough review of matters affecting the industry, including how to 

effectively implement the Energy Independence and Security Act of 2007 

(EISA). The National Highway Traffic Safety Administration has done 

significant work that will position the next Transportation Secretary to 

finalize a rule before the April 1, 2009 deadline.17

a. Requests in the President’s Memorandum 

 In light of the requirement to prescribe standards for MY 2011 by March 30, 2009 

and in order to provide additional time to consider issues concerning the analysis used to 

determine the appropriate level of standards for MYs 2012 and beyond, the President 

issued a memorandum on January 26, 2009, requesting the Secretary of Transportation 

and Administrator18 of the National Highway Traffic Safety Administration NHTSA to 

divide the rulemaking into two parts: (1) MY 2011 standards, and (2) standards for MY 

2012 and beyond. 

i. CAFE Standards for Model Year 2011 

 The request that the final rule establishing CAFE standards for MY 2011 

passenger cars and light trucks be prescribed by March 30, 2009 was based on several 

factors. One was the requirement that the final rule regarding fuel economy standards for 

 

16 Record of OIRA’s action can be found at http://www.reginfo.gov/public/do/eoHistReviewSearch (last 

accessed August 9, 2009). To find the report on the clearance of the draft final rule, select “Department of 

Transportation” under “Economically Significant Reviews Completed” and select “2008” under “Select 

Calendar Year.”

17 The statement can be found at http://www.dot.gov/affairs/dot0109.htm (last accessed August 9, 2009).

18 Currently, the National Highway Traffic Safety Administration does not have an Administrator. Ronald 

L. Medford is the Acting Deputy Administrator. 

Comment [r1]: Change made at OMB’s request. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

8

a given model year must be adopted at least 18 months before the beginning of that 

model year (49 U.S.C. sec. 32902(g)(2)). The other was that the beginning of MY 2011 

is considered for the purposes of CAFE standard setting to be October 1, 2010. 

 ii. CAFE Standards for Model Years 2012 and Beyond 

 The President requested that, before promulgating a final rule concerning the 

model years after model year 2011, NHTSA

[C]onsider the appropriate legal factors under the EISA, the comments 

filed in response to the Notice of Proposed Rulemaking, the relevant 

technological and scientific considerations, and to the extent feasible, the 

forthcoming report by the National Academy of Sciences mandated under 

section 107 of EISA. 

In addition, the President requested that NHTSA consider whether any provisions 

regarding preemption are appropriate under applicable law and policy. 

b. Implementing the President’s Memorandum 

In keeping with the President’s remarks on January 26 for new national policies to 

address the closely intertwined issues of energy independence, energy security and 

climate change, and for the initiation of serious and sustained domestic and international 

action to address them, NHTSA has developed CAFE standards for MY 2012 and beyond 

after collecting new information, conducting a careful review of technical and economic 

inputs and assumptions, and standard setting methodology, and completing new analyses. 

The goal of the review and re-evaluation was to ensure that the approach used for 

MY 2012 and thereafter would produce standards that contribute, to the maximum extent 

possible under EPCA/EISA, to meeting the energy and environmental challenges and 

goals outlined by the President. We have sought to craft our program with the goal of 

creating the maximum incentives for innovation, providing flexibility to the regulated 

parties, and meeting the goal of making substantial and continuing reductions in the 

consumption of fuel. To that end, we have made every effort to ensure that the CAFE 

program for MYs 2012-2016 is based on the best scientific, technical, and economic 

information available, and that such information was developed in close coordination 

with other federal agencies and our stakeholders, including the states and the vehicle 

manufacturers. 

We have also re-examined EPCA, as amended by EISA, to consider whether 

additional opportunities exist to improve the effectiveness of the CAFE program. For 

example, EPCA authorizes increasing the amount of civil penalties for violating the 

CAFE standards.19 Further, if the test procedures used for light trucks were revised to 

provide for the operation of air conditioning during fuel economy testing, vehicle 

 

19 Under 49 U.S.C. sec.§ 32904(c), EPA must “use the same procedures for passenger automobiles that

the Administrator used for model year 1975 (weighted 55 percent urban cycle and 45 percent highway 

cycle), or procedures that give comparable results.”
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

9

manufacturers would have a regulatory incentive to increase the efficiency and reduce the 

weight of air conditioning systems, thereby reducing both fuel consumption and tailpipe 

emissions of CO2. 

With respect to the President’s request that NHTSA consider the issue of 

preemption, NHTSA is deferring further consideration of the preemption issue. The 

agency believes that it is unnecessary to address the issue further at this time because of 

the consistent and coordinated federal standards that would apply nationally under the 

proposed National Program. 

The following paragraphs provide a summary addressing how NHTSA has 

complied with the President’s requests in the January 26 memorandum. NHTSA has 

reviewed comments received on the MY 2011 rulemaking and revisited its assumptions 

and methodologies for purposes of developing the proposed MY 2012-2016 standards. 

For any given assumption or aspect of NHTSA’s analysis, comments rarely converged on 

a single position—and for many issues, NHTSA received diametrically-opposed 

comments from different parties—which makes it challenging to resolve the concerns of 

all parties in a single stroke. However, NHTSA has taken a fresh look at all the issues as 

part of its joint process with EPA, changing some assumptions and methodologies and 

validating others. The agency is confident that the assumptions and analysis used to 

develop these proposed standards represent the best possible approach that is consistent 

with NHTSA’s statutory requirements for setting the required fuel economy standards. 

 

 The paragraphs below describe generally how the agency has reviewed comments 

on different issues related to the setting of the standards, and how the agency has either 

revised or validated its approach for the MY 2012-2016 standards. Much more detail on 

how the agency addresses all of these issues is found below in the rest of NHTSA’s 

section of this preamble, in the joint TSD, and in NHTSA’s PRIA. 

How stringent should the standards be? How quickly should they increase? 

EPCA requires that NHTSA set its standards for each model year at the 

“maximum feasible average fuel economy level that the Secretary decides the 

manufacturers can achieve in that model year” considering four factors: technological 

feasibility, economic practicability, the effect of other standards of the Government on 

fuel economy, and the need of the nation to conserve energy. None of these factors is 

further defined in the statute, and “maximum feasible average fuel economy level” is 

itself defined, if at all, only by reference to those four factors and the Secretary’s 

consideration of them.20 In addition, the agency has the authority to and traditionally 

does consider other relevant factors, such as the effect of the CAFE standards on motor 

vehicle safety. 

In the previous CAFE rulemaking, NHTSA proposed to set standards at the point 

at which societal net benefits were maximized, which drew a number of comments from 

both manufacturers and environmental and public interest groups. Manufacturers 

generally commented that standards should be lower than the “maximizing net benefits” 

 

20 49 U.S.C. §sec. 32902(a). 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

10

alternative, due to lead time concerns and manufacturers’ difficulties in raising capital. 

Environmental and consumer groups, as well as a number of State Attorneys General, 

commented that NHTSA should set standards above that point, with some arguing in 

favor of standards as high as those at the point at which total costs equaled total benefits. 

Commenters also emphasized that NHTSA should ensure that standards increased 

ratably, as required by EISA. 

For this NPRM, NHTSA has analyzed the costs and benefits of the “maximizing 

net benefits” alternative and other alternatives, using inputs that diverge substantially 

from those used in the analyses in the previous rulemakings to establish attribute-based 

standards. But the agency has not sought to use “maximizing net benefits” as a 

governing principle to select the applicable fuel economy standard in this NPRM. 

NHTSA’s balancing of the statutory factors in these difficult financial times leads it to 

make a different conclusion this time: NHTSA is proposing to set standards at 34.1 mpg 

in MY 2016, below the point at which net benefits are maximized, due to economic 

practicability concerns. The results of the alternatives analysis for the “maximizing net 

benefits” alternative and the “total costs = total benefits” alternative may be found in the 

DEIS and in the PRIA. 

 Additionally, because today’s proposed standards cover five model years, as 

opposed to the single model year covered by the March final rule, NHTSA is better able 

in this rulemaking to confirm that the standards do, in fact, increase ratably, as required 

by EISA. 

What attribute should NHTSA use to set the standards?

 In the previous rulemaking, most commenters agreed with NHTSA’s use of 

footprint as the vehicle attribute for setting CAFE standards. Some manufacturers 

commented that NHTSA should consider multiple attributes—for example, sports car 

manufacturers suggested a mix of footprint and horsepower, while truck manufacturers 

suggested a mix of footprint and towing, hauling, or off-road capability. Several 

members of Congress also supported the latter comment. 

 For this NPRM, NHTSA and EPA together reconsidered the appropriate attribute 

for setting CAFE and CO2 standards, and conclude that footprint best provides the ability 

address safety concerns without creating undue risk that program benefits will be lost to 

induced mix shifting. More information about this decision may be found in Section 

IV.C.5 below, in the draft joint TSD, and in NHTSA’s PRIA. 

What data should NHTSA use to develop the baseline market forecast?

 In the previous rulemaking, the proposed standards were based on data from only 

the seven largest manufacturers. Several small and limited-line manufacturers 

commented that either the passenger car standards should be based on the plans of all 

manufacturers subject to the standards, or some alternative form of standard should be set 

for them. Ultimately, NHTSA set the MY 2011 standards based on the plans of all 

manufacturers subject to the standards. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

11

 However, a number of commenters also called for NHTSA to cease using 

manufacturer’s confidential product plans in any way for developing the standards. 

Because manufacturers request confidentiality when they submit their product plans to 

the agency out of competitive concerns, NHTSA is prohibited by regulation from 

releasing that information to the public. Thus, when NHTSA developed a baseline 

market forecast using information from the manufacturer’s product plans, NHTSA could 

not release that forecast intact for public review.

 For this NPRM, in response to these concerns, NHTSA and EPA are using a 

baseline market file developed almost entirely from publicly-available data. Relying on 

adjusted MY 2008 CAFE compliance data enables the agency to make the baseline 

public and helps to address transparency concerns. However, by virtue of not being 

based on product plans, some manufacturers’ concerns that the baseline does not 

represent their particular intentions for MYs 2012-2016 may not be addressed. These 

issues are explained in more detail in Section IV.C.1 below, in the draft joint TSD, and in 

NHTSA’s PRIA. 

Did commenters agree with NHTSA’s technology assumptions?

 In the previous rulemaking, manufacturers generally commented that NHTSA had 

underestimated the costs of technologies and overestimated their effectiveness, and that 

the rate of diesel and hybrid application required by the standards was too high, too 

quickly. Environmental and consumer groups, and the States Attorneys General who 

commented, largely argued the opposite. Environmental and consumer groups and the 

States Attorneys General also commented that NHTSA should include downweighting in 

its analysis for vehicles under 5,000 lbs GVWR, while the Insurance Institute for 

Highway Safety (IIHS) argued that NHTSA’s approach to restricting downweighting to 

only those vehicles was correct. 

 For this NPRM, NHTSA, with EPA, has revisited every one of its cost and 

effectiveness estimates for individual technologies. Many of the estimates used in the 

MY 2011 final rule have been validated, while some have changed, notably the estimates 

for turbocharging and downsizing, diesels, and hybrids. Overall, the individual 

technology costs are lower for purposes of this NPRM than in the MY 2011 final rule due 

to the Indirect Cost Markup methodology developed by EPA for this rulemaking, which 

results in a lower markup than the 1.5 Retail Price Equivalent (RPE) markup previously 

used. The considerable majority of estimates for individual technology effectiveness 

were validated; changes largely resulted from the redefinition of certain electrificationrelated technologies and mild hybrids. 

 Additionally, NHTSA is now applying downweighting/material substitution to 

vehicles below 5,000 lbs GVWR, albeit in a way that, we believe, mitigates the safety 

concerns to some extent. These issues are explained in more detail in Section IV.C.2 

below, in the draft joint TSD, and in NHTSA’s PRIA.

 With regard to the President’s request that NHTSA consider, “to the extent 

feasible, the forthcoming report by the National Academy of Sciences mandated under 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

12

section 107 of EISA,” we note that it was not feasible to consider this report for purposes 

of this NPRM because it is not scheduled to be completed until Fall 2009. However, 

NHTSA intends to make it available in the rulemaking docket as soon as the agency 

receives it, and will consider it for the final rule.

Did commenters agree with NHTSA’s economic assumptions?

 In the previous rulemaking, NHTSA primarily received comments regarding four 

particular economic assumptions. Regarding fuel prices, many commenters supported 

NHTSA’s use of the AEO 2008 Reference Case, while many commenters also argued, 

given high pump prices in summer 2008, that NHTSA should use at least the AEO High 

Price Case or possibly a higher estimate. Regarding the discount rate, some commenters 

supported NHTSA’s use of 7 percent, while others argued that NHTSA should use no 

higher than 3 percent. Regarding the magnitude of the rebound effect, some commenters 

supported NHTSA’s use of a 15 percent rebound effect, while some called for a higher 

number and some called for numbers as low as zero percent. And finally, for the social 

cost of carbon, some commenters supported NHTSA’s use of a domestic value and stated 

that the value should be $7/ton or lower, while other commenters argued that NHTSA 

should use a global value much higher than $7/ton, although there was little consensus as 

to what precise number. 

 For this NPRM, NHTSA, with EPA, has revisited every one of its economic 

assumptions. Many of the assumptions used in the MY 2011 final rule have been 

validated, while some have changed. For fuel prices, NHTSA used the AEO High Price 

Case in the MY 2011 final rule, but stated that its decision was based on its expectation 

that the Reference Case would soon be revised to reflect higher estimates of future fuel 

prices. EIA did, in fact, revise the Reference Case upward in AEO 2009 to levels higher 

than the 2008 High Price Case, and NHTSA has therefore elected to use the Reference 

Case for this NPRM. For the discount rate, NHTSA is continuing to conduct and present 

the results of analyses using both a 3 percent and a 7 percent rate, as is EPA in its 

analysis. For the rebound effect, NHTSA took a fresh look at the recent literature and 

developed new estimates for the rebound effect, and has used a value of 10 percent in its 

analysis. And for the social cost of carbon, based on the results of an interagency effort 

to develop an estimate that can be used by all government agencies in rulemakings that 

affect climate change, NHTSA has conducted analyses for this NPRM using a range of 

values from $5 to $56/ton, representing global SCC values. These issues are explained in 

Section II above, in more detail in Section IV.C.3 below, in the joint TSD, and in 

NHTSA’s PRIA. 

Did commenters agree with NHTSA’s analytical tools?

 In the previous rulemaking, although some commenters generally supported 

NHTSA’s use of the CAFE modeling system developed by DOT’s Volpe National 

Transportation Systems Center (Volpe Center), other commenters expressed concerns 

regarding the modeling system, the ways in which the system was applied, and 

accessibility of the system and its inputs and outputs. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

13

 Technical concerns regarding the model itself centered on the fact that it does not 

apply a direct and explicit representation of the physical processes connecting the 

engineering characteristics of a given vehicle to that vehicle’s fuel economy. As NHTSA 

explained in its March 2009 Federal Register notice establishing final MY 2011 CAFE 

standards, full vehicle simulation could useful in developing model inputs, but not, at 

least in the foreseeable future, in performing forward-looking analysis of the future 

fleet.21 Having again reconsidered this issue, NHTSA again concludes that with proper 

care in developing model inputs, the Volpe model is as “physics-based” as is practical or 

necessary for CAFE analysis. 

 Some commenters also questioned the model’s structural assumptions about 

manufacturers’ compliance strategies. NHTSA has reconsidered this question with 

respect to the potential for systematic underestimation or overestimation of compliance 

costs. As a result, the Volpe model has been modified to account for manufacturers’ 

ability to engage in “multi-year planning,” adding more technology than necessary for 

compliance in an early model year when a vehicle model is being redesigned in order to 

carry that technology forward and facilitate compliance in later model years. This major 

change to the Volpe model tends to produce greater costs (and benefits) in earlier model 

years in order to reduce costs in later model years. 

Some commenters also questioned the model’s use of externally-specified “phasein caps” to constrain the speed at which technologies can practicably be adopted. 

NHTSA has reconsidered these inputs in light of the fact that the model also assumes that 

most technologies can only be practicably applied during a vehicle redesign or (in some 

cases) freshening, and tentatively concludes that these inputs can be significantly relaxed. 

The analysis supporting today’s proposal therefore relies almost exclusively on the 

redesign- and refresh-related constraints to produce practicable estimates of potential 

technology adoption rates. We are seeking comment on this change to the model’s 

inputs, and note that further changes to these inputs would impact our analysis. 

Commenters had many other concerns regarding inputs to the model, such as 

economic inputs and technology-related estimates. Commenters often (and particularly 

in relation to the agency’s estimate of the social value of avoided CO2 emissions) 

mistakenly attributed these concerns to the model itself. In again reviewing commenters’ 

concerns regarding NHTSA’s analysis, the agency has carefully differentiated between 

(1) the model, (2) inputs to the model, and (3) ways in which the model is applied. We 

encourage commenters to do the same in reviewing the analysis supporting today’s 

proposal. 

 

 Finally, some commenters expressed concern regarding the model’s transparency. 

However, as NHTSA explained in in the MY 2011 final rule, these concerns appeared to 

have been mistakenly applied to the model itself, as the actual lack of transparency 

related only to the agency’s use of manufacturers’ product plans, which formed the basis 

for inputs to the model.22 The agency had previously made publicly available the model, 

 

21 74 FR 14371-72 (Mar. 30, 2009). 

22 74 FR 14372 (Mar. 30, 2009). 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

14

source code (i.e., computer programming instructions), model documentation, and sample 

input files. To make the model more easily accessible to the public, the agency began (in 

March 2009) placing all of this information on NHTSA’s web site.23 In connection with 

today’s proposal, the agency is placing the updated model, code, and documentation on 

the web site, along with inputs and outputs for agency’s current analysis. Among those 

inputs are those defining the agency’s baseline estimates of the MYs 2012-2016 U.S. 

market for passenger cars and light trucks, as these inputs do not, for today’s proposal, 

make use of manufacturers’ confidential product plans. 

How should NHTSA develop and fit the target curves?

 In the previous rulemaking, many commenters expressed concern about the 

steepness of the proposed curves for passenger cars, which occurred because of the way 

in which NHTSA fit the curves to the data. The more steep a curve is, the more rapidly 

mpg targets decrease as footprint increases. 

 For this NPRM, NHTSA reconsidered how to address this concern and decided to 

propose curves that are based on a constrained linear function rather than a constrained 

logistic function, that are considerably less steep than the curves proposed in the previous 

rulemaking. This issue is discussed in greater detail in Section IV.C.5 below, in the joint 

TSD, and in NHTSA’s PRIA. 

Should NHTSA set additional “backstop” standards besides the one established by 

Congress?

 In the previous rulemaking, several commenters argued that NHTSA must 

establish absolute backstop standards for imported passenger cars and light trucks, in 

addition to the one for domestically-manufactured passenger cars required by EISA. 

NHTSA examined its statutory authority and concluded that only a backstop for domestic 

passenger cars was permissible under the statute. 

 For this NPRM, NHTSA has re-examined its authority, and while the agency still 

tentatively concludes that Congress’ intent is clear from the text of the statute, we 

recognize commenters’ concerns that attribute-based standards may not absolutely 

guarantee the level of fuel savings currently anticipated if market forces cause 

manufacturers to build larger vehicles in MYs 2012-2016. Thus, we seek comment on on 

whether NHTSA should seek a change in its statutory authority. Thisthis issue, which

issue is discussed in greater detail below in Section IV.C.5. 

Should NHTSA classify more vehicles as passenger cars rather than as light trucks?

 In the previous rulemaking, many commenters agreed with NHTSA’s decision to 

move many 2WD SUVs from the light truck to the passenger car fleet, but some 

commenters argued that NHTSA should go further and reclassify more light trucks as 

passenger cars. 

 

23 See http://www.nhtsa.dot.gov (click on “Fuel Economy,” then “Related Links – CAFE Compliance and 

Effects Modeling System (Volpe Model)”) 

Comment [r2]: Change made at OMB’s request. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

15

 For this NPRM, NHTSA has reconsidered its vehicle classification system and 

has not included in the proposed regulatory text any changes to that system. However, 

NHTSA seeks comment on whether any changes should be adopted for that time period 

or whether changes, if any, should be deferred to MY 2017 and beyond. Classification 

issues are addressed in greater detail in Section IV.H below. 

 5. Summary of the Pproposed MY 2012-2016 CAFE Sstandards

 NHTSA is proposing CAFE standards that are, like the standards NHTSA 

promulgated in March 2009 for MY 2011, expressed as mathematical functions 

depending on vehicle footprint. Footprint is one measure of vehicle size, and is 

determined by multiplying the vehicle’s wheelbase by the vehicle’s average track 

width.24 Under the proposed CAFE standards, each light vehicle model produced for sale 

in the United States would have a fuel economy target. The CAFE levels that must be 

met by the fleet of each manufacturer would be determined by computing the salesweighted harmonic average of the targets applicable to each of the manufacturer’s 

passenger cars and light trucks. These targets, the mathematical form and coefficients of 

which are presented later in today’s notice, appear as follows when the values of the 

targets are plotted versus vehicle footprint: 

 

24 See 49 CFR § 523.2 for the exact definition of “footprint.” 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

16

Figure IV.A.5-1. Final MY 2011 and Proposed MY 2012-2016 

Passenger Car Fuel Economy Targets 

20

25

30

35

40

45

35 40 45 50 55 60 65 70

Footprint (sf)

Target (mpg)

2011

2016

2015

2014

2013

2012
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

17

Figure IV.A.5-2. Final MY 2011 and Proposed MY 2012-2016 

Light Truck Fuel Economy Targets 

20

25

30

35

40

45

35 40 45 50 55 60 65 70

Footprint (sf)

Target (mpg)

2011

2016

2015

2014

2013

2012

 Under these proposed footprint-based CAFE standards, the CAFE levels required 

of individual manufacturers depend, as noted above, on the mix of vehicles sold. It is 

important to note that NHTSA’s CAFE standards and EPA’s GHG standards will both be 

in effect, and each will lead to increases in average fuel economy and CO2 emissions 

reductions. The two agencies’ standards together comprise the National Program, and 

this discussion of costs and benefits of NHTSA’s CAFE standards does not change the 

fact that both the CAFE and GHG standards, jointly, are the source of the benefits and 

costs of the National Program. 

Based on the forecast developed for this NPRM of the MYs 2012-2016 vehicle 

fleet, NHTSA estimates that the targets shown above would result in the following 

average required CAFE levels: 

Formatted: Subscript
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

18

Table IV.A.5-1. Average Required Fuel Economy (mpg) 

under Proposed Standards 

2012 2013 2014 2015 2016

Passenger Cars 33.6 34.4 35.2 36.4 38.0

Light Trucks 25.0 25.6 26.2 27.1 28.3

Combined 29.8 30.6 31.4 32.6 34.1

201 2 20 13 2 014 2 015 201 6

Passenger C ars 33 .6 34 .4 3 5.2 36.4 38 .0 

Light Truck s 25 .0 25 .6 2 6.2 27.1 28 .3 

Co mbined 29 .8 30 .6 3 1.4 32.6 34 .1 

For the reader’s reference, these miles per gallon would be equivalent to the following 

gallons per 100 miles for passenger cars and light trucks:

2012 2013 2014 2015 2016

Passenger Cars 2.9762 2.907 2.8409 2.7473 2.6316

Light Trucks 4.0 3.9063 3.8168 3.8168 3.5336

 NHTSA estimates that average achieved fuel economy levels will 

correspondingly increase through MY 2016, but that manufacturers will, on average, 

undercomply25 in some model years and overcomply26 in others, reaching a combined 

average fuel economy of 33.7 mpg in MY 2016.27 Table IV.A.5-1 is the estimated 

required fuel economy for the proposed CAFE standards while Table IV.A.5-2 includes 

the effects of some manufacturers’ payment of CAFE fines. In addition, Section IV.G.4 

below contains an analysis of the achieved levels (and projected fuel savings, costs, and 

benefits) when the use of FFV credits is also assumed. 

Table IV.A.5-2. Average Achieved Fuel Economy (mpg) 

under Proposed Standards 

2012 2013 2014 2015 2016

Passenger Cars 32.9 34.2 35.2 36.5 37.6

 

25 In NHTSA’s analysis, “undercompliance” is mitigated either through use of FFV credits, use of existing 

or “banked” credits, or through fine payment. Because NHTSA cannot consider availability of credits in 

setting standards, the estimated achieved CAFE levels presented here do not account for their use. In

contrast, because NHTSA is not prohibited from considering fine payment, the estimated achieved CAFE 

levels presented here include the assumption that BMW, Daimler (i.e., Mercedes), Porsche, and, Tata (i.e., 

Jaguar and Rover) will only apply technology up to the point that it would be less expensive to pay civil 

penalties. 

26 In NHTSA’s analysis, “overcompliance” occurs through multi-year planning: manufacturers apply some 

“extra” technology in early model years (e.g., MY 2014) in order to carry that technology forward and 

thereby facilitate compliance in later model years (e.g., MY 2016) 

27 Consistent with EPCA, NHTSA has not accounted for manufacturers’ ability to earn CAFE credits for 

selling FFVs, carry credits forward and back between model years, and transfer credits between the 

passenger car and light truck fleets. 

Formatted Table

Comment [r3]: Added at OMB’s request 

Formatted Table

Formatted Table
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

19

Light Trucks 24.9 25.7 26.5 27.4 28.1

Combined 29.3 30.5 31.5 32.7 33.7

201 2 20 13 2 014 2 015 201 6

Passenger C ars 32 .9 34 .2 3 5.2 36.5 37 .6 

Light Truck s 24 .9 25 .7 2 6.5 27.4 28 .1 

Co mbined 29 .3 30 .5 3 1.5 32.7 33 .7 

For the reader’s reference, these miles per gallon would be equivalent to the following 

gallons per 100 miles for passenger cars and light trucks:

2012 2013 2014 2015 2016

Passenger Cars 3.0438 2.9267 2.8398 2.7434 2.6623

Light Trucks 4.0241 3.8952 3.7713 3.6495 3.5604

NHTSA estimates that these fuel economy increases will lead to fuel savings 

totaling 61.6 billion gallons during the useful lives of vehicles sold in MYs 2012-2016: 

Table IV.A.5-3. Fuel Saved (billion gallons) 

under Proposed Standards 

2012 2013 2014 2015 2016 Total

Passenger Cars 2.5 5.3 7.5 9.4 11.4 36.0

Light Trucks 1.8 3.7 5.4 6.8 7.8 25.6

Combined 4.3 9.1 12.9 16.1 19.2 61.6

201 2 20 13 2 014 2 015 201 6 T otal

Passenger C ars 2 .5 5 .3 7.5 9.4 11 .4 3 6.0 

Light Truck s 1 .8 3 .7 5.4 6.8 7 .8 2 5.6 

Co mbined 4 .3 9 .1 1 2.9 16.1 19 .2 6 1.6 

The agency also estimates that these new CAFE standards will lead to 

corresponding reductions of CO2 emissions totaling 656 million metric tons (mmt) during 

the useful lives of vehicles sold in MYs 2012-2016:

Table IV.A.5-4. Avoided Carbon Dioxide Emissions (mmt) 

under Proposed Standards 

2012 2013 2014 2015 2016 Total

Passenger Cars 25 56 79 99 121 381

Light Trucks 19 40 58 73 85 275

Combined 44 96 137 173 206 656

201 2 20 13 2 014 2 015 201 6 T otal

Passenger C ars 2 5 56 79 9 9 1 21 381 

Light Truck s 1 9 40 58 7 3 85 275 

Co mbined 4 4 96 137 17 3 2 06 656 

 

Formatted Table

Comment [r4]: Added at OMB’s request 

Formatted Table

Formatted Table
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

20

The agency estimates that these fuel economy increases would produce other 

benefits (e.g., reduced time spent refueling), as well as some disbenefits (e.g., increase 

traffic congestion) caused by drivers’ tendency to increase travel when the cost of driving 

declines (as it does when fuel economy increases). The agency has estimated the total 

monetary value to society of these benefits and disbenefits, and estimates that the 

proposed standards will produce significant benefits to society. NHTSA estimates that, 

in present value terms, these benefits would total $200 billion over the useful lives of 

vehicles sold during MYs 2012-2016: 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

21

Table IV.A.5-5. Present Value of Benefits ($billion) 

under Proposed CAFE Standards 

2012 2013 2014 2015 2016 Total

Passenger Cars 7.6 17.0 24.4 31.2 38.7 119.1

Light Trucks 5.5 11.6 17.3 22.2 26.0 82.6

Combined 13.1 28.7 41.8 53.4 64.7 201.7

201 2 20 13 2 014 2 015 201 6 T otal

Passenger C ars 7 .6 17 .0 2 4.4 31.2 38 .7 11 9.1 

Light Truck s 5 .5 11 .6 1 7.3 22.2 26 .0 8 2.6 

Co mbined 13 .1 28 .7 4 1.8 53.4 64 .7 20 1.7 

 NHTSA attributes most of these benefits—about $157 billion, as noted above—to 

reductions in fuel consumption, valuing fuel (for societal purposes) at future pretax prices 

in the Energy Information Administration’s (EIA’s) reference case forecast from Annual 

Energy Outlook (AEO) 2009. The Preliminary Regulatory Impact Analysis (PRIA) 

accompanying today’s proposed rule presents a detailed analysis of specific benefits of 

the proposed rule.

Amount $ Value 

Fuel savings 61.6 billion gallons $158.0 billion

CO2 emissions reductions 656 million metric tons (mmt) $16.4 billion 

NHTSA estimates that the necessary increases in technology application will 

involve considerable monetary outlays, totaling $62.5 billion in incremental outlays (i.e., 

beyond those attributable to the MY 2011 standards) by new vehicle purchasers during 

MYs 2012-2016: 

Table IV.A.5-6. Incremental Technology Outlays ($b) 

under Proposed CAFE Standards 

2012 2013 2014 2015 2016 Total

Passenger Cars 4.1 6.5 8.4 9.9 11.8 40.8

Light Trucks 1.5 2.8 4.0 5.2 5.9 19.4

Combined 5.7 9.3 12.5 15.1 17.6 60.2

201 2 20 13 2 014 2 015 201 6 T otal

Passenger C ars 4 .1 6 .5 8.4 9.9 11 .8 4 0.8 

Light Truck s 1 .5 2 .8 4.0 5.2 5 .9 1 9.4 

Co mbined 5 .7 9 .3 1 2.5 15.1 17 .6 6 0.2 

 Corresponding to these outlays and, to a much lesser extent, civil penalties that 

some companies are expected to pay for noncompliance, the agency estimates that the 

Formatted Table

Formatted Table

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted Table
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

22

proposed standards would lead to increases in average new vehicle prices, ranging from 

$476 per vehicle in MY 2012 to $1,091 per vehicle in MY 2016: 

 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

23

Table IV.A.5-7. Incremental Increases in Average New Vehicle Prices ($) 

under Proposed CAFE Standards 

2012 2013 2014 2015 2016

Passenger Cars 591 735 877 979 1,127

Light Trucks 283 460 678 882 1,020

Combined 476 635 806 945 1,091

201 2 20 13 2 014 2 015 201 6

Passenger C ars 59 1 7 35 877 97 9 1,1 27 

Light Truck s 28 3 4 60 678 88 2 1,0 20 

Co mbined 47 6 6 35 806 94 5 1,0 91 

Tables IV.A.5-8 and IV.A.5-9 below present itemized costs and benefits for a 3 

percent and a 7 percent discount rate, respectively, for the combined fleet (passenger cars 

and light trucks) in each model year and for all model years combined. Numbers in 

parentheses represent negative values.

Formatted Table

Formatted Table

Comment [r5]: Tables added at OMB’s request 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

24

Table IV.A.5-8. Itemized Cost and Benefit Estimates for the Combined Vehicle 

Fleet, 3% Discount Rate

MY 2012 MY 2013 MY 2014 MY 2015 MY 2016 Total

Costs

Technology 

Costs $5,695 $9,295 $12,454 $15,080 $17,633 $60,157 

Benefits

Lifetime Fuel 

Expenditures $10,197 $22,396 $32,715 $41,880 $50,823 $158,012 

Consumer 

Surplus from 

Additional 

Driving $751 $1,643 $2,389 $3,029 $3,639 $11,451 

Refueling Time 

Value $776 $1,551 $2,198 $2,749 $3,277 $10,550 

Petroleum 

Market 

Externalities $559 $1,194 $1,700 $2,129 $2,538 $8,121 

Congestion Costs ($460) ($934) ($1,332) ($1,657) ($1,991) ($6,376)

Noise Costs ($7) ($14) ($21) ($26) ($31) ($99)

Crash Costs ($217) ($437) ($625) ($776) ($930) ($2,985)

CO2 $1,028 $2,287 $3,382 $4,376 $5,372 $16,446 

CO $0 $0 $0 $0 $0 $0 

VOC $41 $80 $108 $131 $156 $518 

NOX $82 $132 $155 $174 $200 $744 

PM $220 $438 $621 $771 $904 $2,956 

SOX $161 $345 $490 $613 $731 $2,341 

Total $13,132 $28,680 $41,781 $53,394 $64,687 $201,676 

Net Benefits $7,044 $18,759 $27,090 $34,710 $41,386 $128,992 

Formatted: Left
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

25

Table IV.A.5-9. Itemized Cost and Benefit Estimates for the Combined Vehicle 

Fleet, 7% Discount Rate

MY 2012 MY 2013 MY 2014 MY 2015 MY 2016 Total

Costs

Technology Costs $5,695 $9,295 $12,454 $15,080 $17,633 $60,157 

Benefits

Lifetime Fuel 

Expenditures

$7,991 $17,671 $25,900 $33,264 $40,478 $125,305 

Consumer 

Surplus from 

Additional 

Driving

$590 $1,301 $1,896 $2,412 $2,904 $9,102 

Refueling Time 

Value

$624 $1,249 $1,770 $2,215 $2,642 $8,500 

Petroleum Market 

Externalities

$448 $960 $1,367 $1,712 $2,043 $6,531 

Congestion Costs ($371) ($753) ($1,074) ($1,335) ($1,606) ($5,138)

Noise Costs ($6) ($12) ($16) ($21) ($24) ($80)

Crash Costs ($173) ($352) ($503) ($626) ($749) ($2,403)

CO2 $797 $1,781 $2,634 $3,410 $4,189 $12,813 

CO $0 $0 $0 $0 $0 $0 

VOC $33 $65 $87 $106 $125 $416 

NOX $60 $99 $120 $135 $156 $570 

PM $170 $344 $492 $613 $721 $2,339 

SOX $129 $278 $394 $493 $588 $1,882 

Total $10,292 $22,631 $33,066 $42,380 $51,468 $159,837 

Net Benefits $4,281 $12,832 $18,818 $24,414 $29,293 $89,638 

Neither EPCA nor EISA requires that NHTSA conduct a cost-benefit analysis in 

determining average fuel economy standards, but too, neither precludes its use.28 EPCA 

does require that NHTSA consider economic practicability among other factors, and 

NHTSA has concluded, as discussed elsewhere herein, that the standards it proposes 

today are economically practicable. Further validating and supporting its conclusion that 

the standards it proposes today are reasonable, a comparison of the standards’ costs and 

 

28 Center for Biological Diversity v. NHTSA, 508 F.3d 508 (9th Cir. 2007) (rejecting argument that EPCA 

precludes the use of a marginal cost-benefit analysis that attempted to weigh all of the social benefits (i.e., 

externalities as well as direct benefits to consumers) of improved fuel savings in determining the stringency 

of the CAFE standards). See also Entergy Corp. v. Riverkeeper, Inc., 129 S.Ct. 1498, 1508 (2009) 

(“[U]nder Chevron, that an agency is not required to [conduct a cost-benefit analysis] does not mean that 

an agency is not permitted to do so.”) 

Formatted Table
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

26

benefits shows that the standards’ estimated benefits far outweigh its estimated costs. 

Based on the figures reported above, NHTSA estimates that the total benefits of today’s 

proposed standards would be more three times the magnitude of the corresponding costs, 

such that the proposed standards would produce net benefits of nearly $138 billion over 

the useful lives of vehicles sold during MYs 2012-2016. 

B. Background

1. Chronology of Eevents Ssince the National Academy of Sciences Ccalled 

for rReforming and Iincreasing CAFE Sstandards

a. National Academy of Sciences Iissues Rreport on Ffuture of CAFE 

Pprogram (February 2002) 

i. Significantly Increasing CAFE Standards Without Making them Attributebased Would Adversely Affect Safety 

In the 2002 congressionally-mandated report entitled “Effectiveness and Impact 

of Corporate Average Fuel Economy (CAFE) Standards,”

 29 a committee of the National 

Academy of Sciences (NAS) (“2002 NAS Report”) concluded that the then-existing form 

of passenger car and light truck CAFE standards permitted vehicle manufacturers to 

comply in part by downweighting and even downsizing their vehicles and that these 

actions had led to additional fatalities. The committee explained that this safety problem 

arose because, at that time, the CAFE standards were not attributed-based and thus 

subjected all passenger cars to the same fuel economy target and all light trucks to the 

same target, regardless of their weight, size, or load-carrying capacity.30 The committee 

said that this experience suggests that consideration should be given to developing a new 

system of fuel economy targets that reflects differences in such vehicle attributes. 

Without a thoughtful restructuring of the program, there would be the trade-offs that must 

be made if CAFE standards were increased by any significant amount.31

 In response to these conclusions, NHTSA issued attribute-based CAFE standards 

for light trucks and sought legislative authority to issue attribute-based CAFE standards 

for passenger cars before undertaking to raise the car standards. Congress went a step 

further in enacting EISA, not only authorizing the issuance of attribute-based standards, 

but also mandating them. 

ii. Climate Change and Other Eexternalities Justify Increasing the CAFE 

Standards 

 

29 National Research Council, “Effectiveness and Impact of Corporate Average Fuel Economy (CAFE) 

Standards,” National Academy Press, Washington, DC (2002). Available at

http://www.nap.edu/openbook.php?isbn=0309076013 (last accessed August 9, 2009). The conference 

committee report for the Department of Transportation and Related Agencies Appropriations Act for FY 

2001 (Pub. L. 106-346) directed NHTSA to fund a study by NAS to evaluate the effectiveness and impacts

of CAFE standards (H. Rep. No. 106-940, p. 117-118). In response to the direction from Congress, NAS 

published this lengthy report.

30 NHTSA formerly used this approach for CAFE standards. EISA prohibits its use after MY 2010. 

31 NAS, p. 9. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

27

The NAS committee said that there are two compelling concerns that justify a 

government-mandated increase in fuel economy, both relating to externalities. The first 

and most important concern, it argued, is the accumulation in the atmosphere of 

greenhouse gases, principally carbon dioxide.32 

 

 A second concern is that petroleum imports have been steadily rising because of 

the nation’s increasing demand for gasoline without a corresponding increase in domestic 

supply. The high cost of oil imports poses two risks: downward pressure on the strength 

of the dollar (which drives up the cost of goods that Americans import) and an increase in 

U.S. vulnerability to macroeconomic shocks that cost the economy considerable real 

output. 

 

 To determine how much the fuel economy standards should be increased, the 

committee urged that all social benefits be considered. That is, it urged not only that the 

dollar value of the saved fuel be considered, but also that the dollar value to society of the 

resulting reductions in greenhouse gas emissions and in dependence on imported oil 

should be calculated and considered. The committee said that if it is possible to assign 

dollar values to these favorable effects, it becomes possible to make at least crude 

comparisons between the socially beneficial effects of measures to improve fuel economy 

on the one hand, and the costs (both out-of-pocket and more subtle) on the other. 

iii. Reforming the CAFE Program Could Address Inequity Arising from the 

CAFE Structure

The 2002 NAS report expressed concerns about increasing the standards under 

the CAFE program as currently structured. While raising CAFE standards under the 

existing structure would reduce fuel consumption, doing so under alternative structures 

“could accomplish the same end at lower cost, provide more flexibility to manufacturers, 

or address inequities arising from the present” structure.33 

 To address those structural problems, the report suggested various possible 

reforms. The report found that the “CAFE program might be improved significantly by 

converting it to a system in which fuel targets depend on vehicle attributes.”34 The report 

noted further that under an attribute-based approach, the required CAFE levels could vary 

among the manufacturers based on the distribution of their product mix. NAS stated that 

targets could vary among passenger cars and among trucks, based on some attribute of 

these vehicles such as weight, size, or load-carrying capacity. The report explained that a 

particular manufacturer’s average target for passenger cars or for trucks would depend 

upon the fractions of vehicles it sold with particular levels of these attributes.35

 

2. NHTSA iIssues Ffinal Rrule Eestablishing Aattribute-Bbased CAFE 

Sstandards for MY 2008-2011 Llight Ttrucks (March 2006) 

 

32 NAS, pp. 2, 13, and 83. 

33 NAS, pp. 4-5 (Finding 10). 

34 NAS, p. 5 (Finding 12). 

35 NAS, p. 87. 

Formatted: Font: Not Bold, Underline
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

28

The 2006 final rule reformed the structure of the CAFE program for light trucks 

by introducing an attribute-based approach and using that approach to establish higher 

CAFE standards for MY 2008-2011 light trucks.36 Reforming the CAFE program 

enables it to achieve larger fuel savings, while enhancing safety and preventing adverse 

economic consequences. 

 As noted above, under Reformed CAFE, fuel economy standards were 

restructured so that they are based on a vehicle attribute, a measure of vehicle size called 

“footprint.” It is the product of multiplying a vehicle’s wheelbase by its track width. A 

target level of fuel economy was established for each increment in footprint (0.1 ft2

). 

Trucks with smaller footprints have higher fuel economy targets; conversely, larger ones 

have lower targets. A particular manufacturer’s compliance obligation for a model year 

is calculated as the harmonic average of the fuel economy targets for the manufacturer’s 

vehicles, weighted by the distribution of the manufacturer’s production volumes among 

the footprint increments. Thus, each manufacturer is required to comply with a single 

overall average fuel economy level for each model year of production.

Compared to Unreformed (non-attributed-based) CAFE, Reformed CAFE 

enhances overall fuel savings while providing vehicle manufacturers with the flexibility 

they need to respond to changing market conditions. Reformed CAFE also provides a 

more equitable regulatory framework by creating a level playing field for manufacturers, 

regardless of whether they are full-line or limited-line manufacturers. We were 

particularly encouraged that Reformed CAFE will confer no compliance advantage if 

vehicle makers choose to downsize some of their fleet as a CAFE compliance strategy, 

thereby reducing the adverse safety risks associated with the Unreformed CAFE program. 

3. Ninth Circuit Issues Ddecision re Final Rule for MY 2008-2011 Light 

Trucks (November 2007)

 On November 15, 2007, the United States Court of Appeals for the Ninth Circuit 

issued its decision in Center for Biological Diversity v. NHTSA,

37 the challenge to the 

MY 2008-11 light truck CAFE rule. The court held that EPCA permits, but does not 

require, the use of a marginal cost-benefit analysis. The court specifically emphasized 

NHTSA’s discretion to decide how to balance the statutory factors – as long as that 

balancing does not undermine the fundamental statutory purpose of energy conservation. 

However, the Court found that NHTSA had been arbitrary and capricious in the 

following respects: 

• NHTSA’s decision that it could not monetize the benefit of reducing CO2

emissions for the purpose of conducting its marginal benefit-cost analysis; 

• NHTSA’s lack, in the Court’s view, of a reasoned explanation for its 

decision not to establish a “backstop” (i.e., a fixed minimum CAFE standard applicable 

to manufacturers); 

 

36 71 FR 17566 (Apr. 6, 2006). 

37 508 F.3d 508. 

Field Code Changed
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

29

• NHTSA’s lack, again in the Court’s view, of a reasoned explanation for its 

decision not to revise the regulatory definitions for the passenger car and light truck 

categories of automobiles so that some vehicles currently classified as light trucks are 

instead classified as passenger cars; 

• NHTSA’s decision not to subject most medium- and heavy-duty pickups 

and most medium- and heavy-duty cargo vans (i.e., those between 8,500 and 10,000 

pounds gross vehicle weight rating (GVWR,) to the CAFE standards; 

• NHTSA’s decision to prepare and publish an Environmental Assessment 

(EA) and making a finding of no significant impact notwithstanding what the Court 

found to be an insufficiently broad range of alternatives, insufficient analysis of the 

climate change effects of the CO2 emissions, and limited assessment of cumulative 

impacts in its EA under the National Environmental Policy Act (NEPA). 

The Court did not vacate the standards, but instead said it would remand the rule 

to NHTSA to promulgate new standards consistent with its opinion “as expeditiously as 

possible and for the earliest model year practicable.38 Under the decision, the standards 

established by the April 2006 final rule would remain in effect unless and until amended 

by NHTSA. In addition, it directed the agency to prepare an Environmental Impact 

Statement. 

4. Congress Eenacts Energy Security and Independence Act of 2007 

(December 2007)

 As noted above in Section I.B., EISA significantly changed the provisions of 

EPCA governing the establishment of future CAFE standards. These changes made it 

necessary for NHTSA to pause in its efforts so that it could assess the implications of the 

amendments made by EISA and then, as required, revise some aspects of the proposals it 

had been developing (e.g., the model years covered and credit issues). 

5. NHTSA Proposes CAFE Standards for MYs 2011-2015 (April 2008)

The agency cannot set out the exact level of CAFE that each manufacturer would 

have been required to meet for each model year under the passenger car or light truck 

standards since the levels would depend on information that would not be available until 

the end of each of the model years, i.e., the final actual production figures for each of 

those years. The agency can, however, project what the industry-wide level of average 

fuel economy would have been for passenger cars and for light trucks if each 

 

38 The deadline in EPCA for issuing a final rule establishing, for the first time, a CAFE standard for a

model year is 18 months before the beginning of that model year. 49 U.S.C. sec. 32902(g)(2). The same 

deadline applies to issuing a final rule amending an existing CAFE standard so as to increase its stringency. 

Given that the agency has long regarded October 1 as the beginning of a model year, the statutory deadline 

for increasing the MY 2009 standard was March 30, 2007, and the deadline for increasing the MY 2010 

standard is March 30, 2008. Thus, the only model year for which there was sufficient time at the time of 

the Court’s decision to gather all of the necessary information, conduct the necessary analyses and 

complete a rulemaking was MY 2011. As noted earlier in this notice, however, EISA requires that a new

standard be established for that model year. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

30

manufacturer produced its expected mix of automobiles and just met its obligations under 

the proposed “optimized” standards for each model year. 

 

Passenger 

cars mpg 

Light trucks 

mpg 

MY 2011 31.2 25.0 

MY 2012 32.8 26.4 

MY 2013 34.0 27.8 

MY 2014 34.8 28.2

MY 2015 35.7 28.6

The combined industry-wide average fuel economy (in miles per gallon, or mpg) 

levels for both cars and light trucks, if each manufacturer just met its obligations under 

the proposed “optimized” standards for each model year, would have been as follows: 

 Combined mpg

MY 2011 27.8

MY 2012 29.2 

MY 2013 30.5 

MY 2014 31.0 

MY 2015 31.6 

The annual average increase during this five year period would have been 

approximately 4.5 percent. Due to the uneven distribution of new model introductions 

during this period and to the fact that significant technological changes could be most 

readily made in conjunction with those introductions, the annual percentage increases 

were greater in the early years in this period. 

6. Ninth Circuit Rrevises its Ddecision re Ffinal rRule for MY 2008-2011 

Llight tTrucks (August 2008) 

In response to the Government petition for rehearing, the Ninth Circuit modified 

its decision by replacing its direction to prepare an EIS with a direction to prepare either a 

new EA or, if necessary, an EIS.39

7. NHTSA rReleases Ffinal eEnvironmental iImpact sStatement (October 

2008)

 On October 17, 2008, EPA published a notice announcing the availability of 

NHTSA’s final environmental impact statement (FEIS) for this rulemaking.40

 

Throughout the FEIS, NHTSA relied extensively on findings of the United Nations 

Intergovernmental Panel on Climate Change (IPCC) and the U.S. Climate Change 

 

39

 See CBD v. NHTSA, 538 F.3d 1172 (9th Cir. 2008). 

40 73 FR 61859 (Oct. 18, 2008). 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

31

Science Program (USCCSP). In particular, the agency relied heavily on the most recent, 

thoroughly peer-reviewed, and credible assessments of global climate change and its 

impact on the United States: the IPCC Fourth Assessment Report Working Group I4 and 

II5 Reports, and reports by the USCCSP that include Scientific Assessments of the Effects 

of Global Climate Change on the United States and Synthesis and Assessment Products. 

In the FEIS, NHTSA compared the environmental impacts of its preferred 

alternative and those of reasonable alternatives. It considered direct, indirect, and 

cumulative impacts and describes these impacts to inform the decisionmaker and the 

public of the environmental impacts of the various alternatives. 

 Among other potential impacts, NHTSA analyzed the direct and indirect impacts 

related to fuel and energy use, emissions, including carbon dioxide and its effects on 

temperature and climate change, air quality, natural resources, and the human 

environment. Specifically, the FEIS used a climate model to estimate and report on four 

direct and indirect effects of climate change, driven by alternative scenarios of GHG 

emissions, including: 

 1. Changes in CO2 concentrations; 

2. Changes in global mean surface temperature; 

3. Changes in regional temperature and precipitation; and 

4. Changes in sea level. 

 NHTSA also considered the cumulative impacts of the proposed standards for 

MY 2011-2015 passenger cars and light trucks, together with estimated impacts of 

NHTSA’s implementation of the CAFE program through MY 2010 and NHTSA’s future 

CAFE rulemaking for MYs 2016-2020. 

8. Department of Transportation Decides not to Issue MY 2011-2015 final 

Rule (January 2009) 

On January 7, 2009, the Department of Transportation announced that the 

Bush Administration would not issue the final rule, notwithstanding the Office of 

Information and Regulatory Affairs’ completion of review of the rule under 

Executive Order 12866, Regulatory Planning and Review, on November 14, 

2008. 41

9. The President Requests NHTSA to Issue Final Rule for MY 2011 

Only (January 2009)

As explained above, in his memorandum of January 26, 2009, the President 

requested the agency to issue a final rule adopting CAFE standards for MY 2011 only. 

Further, the President requested NHTSA to establish standards for MY 2012 and later 

after considering the appropriate legal factors, the comments filed in response to the May 

2008 proposal, the relevant technological and scientific considerations, and, to the extent 

 

41 The statement can be found at http://www.dot.gov/affairs/dot0109.htm (last accessed August 9, 2009).
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

32

feasible, a forthcoming report by the National Academy of Sciences assessing automotive 

technologies that can practicably be used to improve fuel economy. 

10. NHTSA Issues Final Rule for MY 2011 (March 2009)

a. Introduction 

NHTSA’s review and analysis of comments on its proposal led the agency to 

make many changes to its methods for analyzing potential MY 2011 CAFE standards, as 

well as to the data and other information to which the agency has applied these methods. 

The following are some of the more prominent changes: 

• After receiving, reviewing, and integrating updated product plans from vehicle 

manufacturers, NHTSA revised its forecast of the future light vehicle market. 

• NHTSA changed the methods and inputs it used to represent the applicability, 

availability, cost, and effectiveness of future fuel-saving technologies. 

• NHTSA based its fuel price forecast on the AEO 2008 High Case price scenario 

instead of the AEO 2008 Reference Case. 

• NHTSA reduced mileage accumulation estimates (i.e., vehicle miles traveled) to 

levels consistent with this increased fuel price forecast. 

• NHTSA applied increased estimates for the value of oil import externalities. 

• NHTSA included all manufacturers—not just the largest seven—in the process 

used to fit the curve and estimate the stringency at which societal net benefits are 

maximized. 

• NHTSA tightened its application of the definition of “nonpassenger automobiles,” 

causing a reassigning of over one million vehicles from the light truck fleet to the 

passenger car fleet, and lowering the average fuel economy for cars due to the 

inclusion of vehicles previously categorized as trucks, as well as the average fuel 

economy for trucks because the truck category then had a larger proportion of 

heavier trucks. 

• NHTSA fitted the shape of the curve based on “exhaustion” of available 

technologies instead of on manufacturer-level optimization of CAFE levels. 

These changes affected both the shape and stringency of the attribute-based 

standards. Taken together, the last three of the above changes reduced the steepness of 

the curves defining fuel economy targets for passenger cars, and also less significantly 

reduced the steepness of the light truck curves. 

 b. Standards 

The final rule established footprint-based fuel economy standards for MY 2011 

passenger cars and light trucks, where each vehicle manufacturer’s required level of 

CAFE was based on target levels of average fuel economy set for vehicles of different 

sizes and on the distribution of that manufacturer’s vehicles among those sizes. The 

curves defining the performance target at each footprint reflect the technological and 

economic capabilities of the industry. The target for each footprint is the same for all 

manufacturers, regardless of differences in their overall fleet mix. Compliance would be 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

33

determined by comparing a manufacturer’s harmonically averaged fleet fuel economy 

levels in a model year with a required fuel economy level calculated using the 

manufacturer’s actual production levels and the targets for each footprint of the vehicles 

that it produces. 

The agency analyzed seven regulatory alternatives, one of which maximizes net 

benefits within the limits of available information and was known at the time as the 

“optimized standards.” The optimized standards were set at levels, such that, considering 

all of the manufacturers together, no other alternative is estimated to produce greater net 

benefits to society. Upon a considered analysis of all information available, including all 

information submitted to NHTSA in comments, the agency adopted the “optimized 

standard” alternative as the final standards for MY 2011.42 By limiting the standards to 

levels that can be achieved using technologies each of which are estimated to provide 

benefits that at least equal its costs, the net benefit maximization approach helped, at the 

time, to assure the marketability of the manufacturers’ vehicles and thus economic 

practicability of the standards. Providing this assurance assumed increased importance in 

view of current and anticipated conditions in the industry in particular and the economy 

in general. As was widely reported in the public domain throughout that rulemaking, and 

as shown in public comments, the national and global economies raised serious 

concerns. Even before those recent developments, the automobile manufacturers were 

already facing substantial difficulties. Together, these problems made NHTSA’s 

economic practicability analysis particularly important and challenging in that 

rulemaking. 

The agency could not set out the exact level of CAFE that each manufacturer 

would be required to meet for MY 2011 under the passenger car or light truck standards 

because the levels will depend on information that will not be available until the end of 

that model year, i.e., the final actual production figures for that year. However, the 

following levels were projected for what the industry-wide level of average fuel economy 

will be for passenger cars and for light trucks if each manufacturer produced its expected 

mix of automobiles and just met its obligations under the “optimized” standards. 

 Passenger cars mpg Light trucks mpg 

MY 2011 30.2 24.1

The combined industry-wide average fuel economy (in miles per gallon, or mpg) 

levels for both cars and light trucks, if each manufacturer just met its obligations under 

the “optimized” standards, were projected as follows: 

Combined 

mpg 

mpg 

increase 

over prior 

year 

MY 2011 27.3 2.0

 

42 The agency notes, for NEPA purposes, that the “optimized standard” alternative adopted as the final 

standards corresponds to the “Optimized Mid-2” scenario described in Section 2.2.2 of the FEIS. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

34

In addition, per EISA, each manufacturer’s domestic passenger fleet is required in 

MY 2011 to achieve 27.5 mpg or 92 percent of the CAFE of the industry-wide combined 

fleet of domestic and non-domestic passenger cars43 for that model year, whichever is 

higher. This requirement resulted in the following projected alternative minimum 

standard (not attribute-based) for domestic passenger cars: 

 Domestic passenger cars mpg 

MY 2011 27.8

c. Credits 

NHTSA also adopted a new Part 536 on use of “credits” earned for exceeding 

applicable CAFE standards. Part 536 implements the provisions in EISA authorizing 

NHTSA to establish by regulation a credit trading program and directing it to establish by 

regulation a credit transfer program.44 Since its enactment, EPCA has permitted 

manufacturers to earn credits for exceeding the standards and to apply those credits to 

compliance obligations in years other than the model year in which it was earned. EISA 

extended the “carry-forward” period to five model years, and left the “carry-back” period 

at three model years. Under Part 536, credit holders (including, but not limited to, 

manufacturers) will have credit accounts with NHTSA, and will be able to hold credits, 

apply them to compliance with CAFE standards, transfer them to another “compliance 

category” for application to compliance there, or trade them. A credit may also be 

cancelled before its expiry date, if the credit holder so chooses. Traded and transferred 

credits will be subject to an “adjustment factor” to ensure total oil savings are preserved, 

as required by EISA. EISA also prohibits credits earned before MY 2011 from being 

transferred, so NHTSA has developed several regulatory restrictions on trading and 

transferring to facilitate Congress’ intent in this regard. 

11. Energy Policy and Conservation Act, as amended Amended by the Energy 

Independence and Security Act

 NHTSA’s statutory authority and obligations under the Energy Policy and 

Conservation Act of 1975 (EPCA), as amended by the Energy Independence and Security 

Act of 2007 (EISA), is discussed at length above in Section I.B.1. 

C. Development and fFeasibility of the pProposed sStandards 

1. How Wwas the Bbaseline Vvehicle Ffleet Ddeveloped?

 

43 Those numbers set out several paragraphs above. 

44 Congress required that DOT establish a credit “transferring” regulation, to allow individual 

manufacturers to move credits from one of their fleets to another (e.g., using a credit earned for exceeding 

the light truck standard for compliance with the domestic passenger car standard). Congress allowed DOT 

to establish a credit “trading” regulation, so that credits may be bought and sold between manufacturers and 

other parties. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

35

a. Why Ddo the Agencies Establish a Baseline Vehicle Fleet? 

In order to determine what levels of stringency are feasible in future model years, 

the agencies must project what vehicles will exist in those model years, and then evaluate 

what technologies can feasibly be applied to those vehicles in order to raise their fuel 

economy and lower their CO2 emissions. The agencies therefore establish a baseline 

vehicle fleet representing those vehicles, based on the best available information. Each 

agency then developed a separate reference fleet, accounting (via their respective models) 

for the effect that the MY 2011 CAFE standards have on the baseline fleet. This 

reference fleet is then used for comparisons of technologies’ incremental cost and 

effectiveness, as well as the other relevant comparisons in the rule. 

b. What Data Ddid the Agencies Uuse to Construct the Baseline, and Hhow 

Ddid tThey Ddo Sso? 

As explained in the Technical Support Document (TSD) prepared jointly by 

NHTSA and EPA, both agencies used a baseline vehicle fleet constructed beginning with 

EPA fuel economy certification data for the 2008 model year, the most recent for which 

final data is currently available from manufacturers. This data was used as the source for 

MY 2008 production volumes and some vehicle engineering characteristics, such fuel 

economy ratings, engine sizes, numbers of cylinders, and transmission types. 

Some information important for analyzing new CAFE standards is not contained 

in the EPA fuel economy certification data. EPA staff estimated vehicle wheelbase and 

track widths using data from Motortrend.com and Edmunds.com. This information is 

necessary for estimating vehicle footprint, which is required for the analysis of footprintbased standards. Considerable additional information regarding vehicle engineering 

characteristics is also important for estimating the potential to add new technologies in 

response to new CAFE standards. In general, such information helps to avoid “adding” 

technologies to vehicles that already have the same or a more advanced technology. 

Examples include valvetrain configuration (e.g., OHV, SOHC, DOHC), presence of 

cylinder deactivation, and fuel delivery (e.g., MPFI, SIDI). To the extent that such 

engineering characteristics were not available in certification data, EPA staff relied on 

data published by Ward’s Automotive, supplementing this with information from internet 

sites such as Motortrend.com and Edmunds.com. NHTSA staff also added some more 

detailed engineering characteristics (e.g, type of variable valve timing) using data 

available from ALLDATA® Online. Combined with the certification data, all of this 

information yielded a MY 2008 baseline vehicle fleet. 

After the baseline was created the next step was to project the sales volumes for 

2011-2016 model years. EPA used projected car and truck volumes for this period from 

Energy Information Administration’s (EIA’s) 2009 Annual Energy Outlook (AEO).45

 

 

45 Available at http://www.eia.doe.gov/oiaf/aeo/index.html. The agencies have also used fuel price 

forecasts from AEO2009. Both agencies regard AEO a credible source not only of such forecasts, but also 

of many underlying forecasts, including forecasts of the size the future light vehicle market. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

36

However, AEO projects sales only at the car and truck level, not at the manufacturer and 

model-specific level, which are needed in order to estimate the effects new standards will 

have on individual manufacturers. Therefore, EPA purchased data from CSMWorldwide and used their projections of the number of vehicles of each type predicted to 

be sold by manufacturers in 2011-2015.46 This provided the year-by-year percentages of 

cars and trucks sold by each manufacturer as well as the percentages of each vehicle 

segment. Although it was, therefore, necessary to assume the same manufacturer and 

segment shares in 2016 as in 2015, 2016 estimates from CSM should be available for the 

final rule. Using these percentages normalized to the AEO projected volumes then 

provided the manufacturer-specific market share and model-specific sales for model 

years 2011-2016. 

The processes for constructing the MY 2008 baseline vehicle fleet and 

subsequently adjusting sales volumes to construct the MY 2011-2016 baseline vehicle 

fleet are presented in detail in Chapter 1 of the draft Joint Technical Support Document 

accompanying today’s notice. 

c. How is Tthis Different Ffrom NHTSA’s Historical Approach and Why is 

tThis Approach Preferable? 

 As discussed above in Section II.B.3, NHTSA has historically based its analysis 

of potential new CAFE standards on detailed product plans the agency has requested 

from manufacturers planning to produce light vehicles for sale in the United States. In 

contrast, the current market forecast is based primarily on information sources which are 

all either in the public domain or available commercially. There are advantages to this 

approach, namely transparency and the potential to reduce some errors due to 

manufacturers’ misunderstanding of NHTSA’s request for information. There are also 

disadvantages, namely that the current market forecast does not represent certain changes 

likely to occur in the future vehicle fleet as opposed to the MY 2008 vehicle fleet, such as 

vehicles being discontinued and newly introduced. On balance, however, the agencies 

have carefully considered these advantages and disadvantages of using a market forecast 

derived from public and commercial sources rather than from manufacturers’ product 

plans, and conclude that the advantages outweigh the disadvantages. 

Nevertheless, the agencies are hopeful that manufacturers will, in the future, agree 

to make public their plans regarding model years that are very near, such as MY 2010 or 

perhaps MY 2011, so that this information can be incorporated into an analysis that is 

available for public review and comment. In any event, because NHTSA and EPA are 

releasing market inputs used in the agencies’ respective analyses, manufacturers, 

suppliers, and other automobile industry observers and participant can submit comments 

on how these inputs should be revised, as can all other reviewers. More information on 

the advantages and disadvantages of the current approach and the agencies’ decision to 

follow it is available in Section II.B.3. 

 

46 EPA also considered other sources of similar information, such as J.D. Powers, and concluded that CSM

was better able to provide forecasts at the requisite level of detail for most of the model years of interest. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

37

d. How is Tthis Baseline Different Quantitatively from the Baseline tThat 

NHTSA uUsed for the MY 2011 (March 2009) Final Rule? 

As discussed above, the current baseline was developed from adjusted MY 2008 

compliance data and covers MYs 2011-2016, while the baseline that NHTSA used for the 

MY 2011 CAFE rule was developed from confidential manufacturer product plans for 

MY 2011. This section describes, for the reader’s comparison, some of the differences 

between the current baseline and the MY 2011 CAFE rule baseline. 

 Estimated vehicle sales: 

The sales forecasts, based on the Energy Information Administration’s (EIA’s) 

Annual Energy Outlook 2009 (AEO 2009), used in the current baseline indicate that the 

total number of light vehicles expected to be sold during MYs 2011-2015 is 77 million, 

or about 15.4 million vehicles annually. NHTSA’s MY 2011 final rule forecast, based on 

AEO 2008, of the total number of light vehicles likely to be sold during MY 2011 

through MY 2015 was 83 million, or about 16.6 million vehicles annually. Light trucks 

are expected to make up 40 percent of the MY 2011 baseline market forecast in the 

current baseline, compared to 42 percent of the baseline market forecast in the MY 2011 

final rule. These changes in both the overall size of the light vehicle market and the 

relative market shares of passenger cars and light trucks reflect changes in the economic 

forecast underlying AEO, and changes in AEO’s forecast of future fuel prices.

 

 The figures below attempt to demonstrate graphically the difference between the 

variation of fuel economy with footprint for passenger cars under the current baseline and 

MY 2011 final rule, and for light trucks under the current baseline and MY 2011 final 

rule, respectively. Figures IV.C.1-1 and 1-2 show the variation of fuel economy with 

footprint for passenger car models in the current baseline and in the MY 2011 final rule, 

while Figures IV.C.1-3 and 1-4 show the variation of fuel economy with footprint for 

light truck models in the current baseline and in the MY 2011 final rule. However, it is 

difficult to draw meaningful conclusions by comparing figures from the current baseline 

with those of the MY 2011 final rule. In the current baseline the number of 

make/models, and their associated fuel economy and footprint, are fixed and do not vary 

over time—this is why the number of data points in the current baseline figures appears 

smaller as compared to the number of data points in the MY 2011 final rule baseline. In 

contrast, the baseline fleet used in the MY 2011 final rule varies over time as vehicles 

(with different fuel economy and footprint characteristics) are added to and dropped from 

the product mix. 

Figure IV.C.1-1. Planned Fuel Economy vs. Footprint, Passenger Cars in Current 

Baseline 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

38

10

15

20

25

30

35

40

45

50

55

60

65

70

35 40 45 50 55 60 65 70 75

Footprint (sf)

Fuel Economy(mpg)
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

39

Figure IV.C.1-2. Planned Fuel Economy vs. Footprint, Passenger Cars in MY 2011 

Final Rule

10

15

20

25

30

35

40

45

50

55

60

65

70

35 40 45 50 55 60 65 70 75 80

Footprint (sf)

Fuel Economy (mpg)
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

40

Figure IV.C.1-3. Planned Fuel Economy vs. Footprint, Light Trucks in Current 

Baseline 

10

15

20

25

30

35

40

45

50

55

60

65

70

35 40 45 50 55 60 65 70 75 80

Footprint (sf)

Fuel Economy (mpg)
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

41

Figure IV.C.1-4. Planned Fuel Economy vs. Footprint, Light Trucks in MY 2011 

Final Rule

10

15

20

25

30

35

40

45

50

55

60

65

70

35 40 45 50 55 60 65 70 75 80

Footprint (sf)

Fuel Economy (mpg)

Estimated manufacturer market shares: 

NHTSA’s expectations regarding manufacturers’ market shares (the basis for 

which is discussed below) have also changed since the MY 2011 final rule. These 

changes are reflected below in Table IV.C.1-1, which shows the agency’s sales forecasts 

for passenger cars and light trucks under the current baseline and the MY 2011 final 

rule.47

 

47 As explained below, although NHTSA normalized each manufacturer’s overall market share to produce a 

realistically-sized fleet, the product mix for each manufacturer that submitted product plans was preserved. 

The agency has reviewed manufacturers’ product plans in detail, and understands that manufacturers do not 

sell the same mix of vehicles in every model year. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

42

Table IV.C.1-1. Sales Forecasts (Production for U.S. Sale in MY 2011, Thousand 

Units) 

 Current Baseline MY 2011 Final Rule 

Manufacturer Passenger Nonpassenger Passenger Nonpassenger

Chrysler 194 403 707 1,216

Ford 1,230 944 1,615 1,144

General Motors 1,156 1,314 1,700 1,844

Honda 996 571 1,250 470

Hyundai 570 127 655 221

Kia48 302 98

Nissan 794 421 789 479

Toyota 1,474 1,059 1,405 1,094

Other Asian 631 212 441 191

European 888 399 724 190

Total 8,235 5,547 9,286 6,849

 Dual-fueled vehicles: 

Manufacturers have also, during and since MY 2008, indicated plans to sell more 

dual-fueled or flexible-fuel vehicles (FFVs) in MY 2011 than indicated in the current 

baseline of adjusted MY 2008 compliance data. FFVs create a potential market for 

alternatives to petroleum-based gasoline and diesel fuel. For purposes of determining 

compliance with CAFE standards, the fuel economy of a FFV is, subject to limitations, 

adjusted upward to account for this potential.49 However, NHTSA is precluded from 

“taking credit” for the compliance flexibility by accounting for manufacturers’ ability to 

earn and use credits in setting the level of the standards.”50 Some manufacturers plan to 

produce a considerably greater share of FFVs than can earn full credit under EPCA. The 

projected average FFV share of the market in MY 2011 is 6 percent for the current 

baseline, versus 17 percent for the MY 2011 final rule. 

Estimated achieved fuel economy levels: 

Because manufacturers’ product plans also reflect simultaneous changes in fleet 

mix and other vehicle characteristics, the relationship between increased technology 

utilization and increased fuel economy cannot be isolated with any certainty. To do so 

would require an apples-to-apples “counterfactual” fleet of vehicles that are, except for 

technology and fuel economy, identical—for example, in terms of fleet mix and vehicle 

performance and utility. The current baseline market forecast shows industry-wide 

average fuel economy levels somewhat higher in MY 2011 than shown in the MY 2011 

final rule. Under the current baseline, average fuel economy for MY 2011 is 26.7 mpg, 

versus 26.5 mpg under the baseline in the MY 2011 final rule. 

 

48 Kia is not listed in the table for the MY 2011 final rule because it was considered as part of Hyundai for 

purposes of that analysis (i.e., Hyundai-Kia). 

49 See 49 U.S.C. sec. §§ 32905 and 32906. 

50 49 U.S.C. sec.§ 32902(h). 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

43

These differences are shown in greater detail below in Table IV.C.1-2, which 

shows manufacturer-specific CAFE levels (not counting FFV credits that some 

manufacturers expect to earn) from the current baseline versus the MY 2011 final rule 

baseline (from manufacturers’ 2008 product plans) for passenger cars and light trucks. 

Table IV.C.1-3 shows the combined averages of these planned CAFE levels in the 

respective baseline fleets. These tables demonstrate that, while the difference at the 

industry level is not so large, there are significant differences in CAFE at the 

manufacturer level between the current baseline and the MY 2011 final rule baseline. 

For example, while Honda and Hyundai are essentially the same under both, Toyota and 

Nissan show increased combined CAFE levels under the current baseline (by 2.4 and 0.8 

mpg respectively), while Chrysler, Ford, and GM show decreased combined CAFE levels 

under the current baseline (by 1.1, 1.8, and 1.0 mpg, respectively) relative to the MY 

2011 final rule baseline. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

44

Table IV.C.1-2. Current Baseline Planned CAFE Levels in MY 2011 versus MY 

2011 Final Rule Planned CAFE Levels (Passenger and Nonpassenger) 

Current baseline CAFE 

levels 

MY 2011 planned CAFE 

levels 

Manufacturer Passenger Nonpassenger Passenger Nonpassenger

BMW 27.2 23.1 27.0 23.0

Chrysler 28.4 21.8 28.2 23.1

Ford 28.2 20.5 29.3 22.5

Subaru 29.1 25.6 28.6 28.6

General Motors 28.5 20.9 30.3 21.4

Honda 33.8 25.3 32.3 25.2

Hyundai 31.5 24.3 31.7 26.0

Tata 24.6 19.5 24.7 23.9

Kia51 31.7 23.7

Mazda52 31.0 26.7

Daimler 27.3 21.0 25.2 20.6

Mitsubishi 30.0 23.8 29.3 26.7

Nissan 31.9 21.5 31.3 21.4

Porsche 26.2 20.0 27.2 20.0

Ferrari53 16.2

Maserati54 18.2

Suzuki 30.5 23.3 28.7 24.0

Toyota 35.4 24.8 33.2 22.7

Volkswagen 28.6 20.2 28.5 20.1

Total/Average 30.8 22.3 30.4 22.6

 

51 Again, Kia is not listed in the table for the MY 2011 final rule because it was considered as part of

Hyundai for purposes of that analysis (i.e., Hyundai-Kia). 

52 Mazda is not listed in the table for the MY 2011 final rule because it was considered as part of Ford for 

purposes of that analysis. 

53 EPA did not include Ferrari in the current baseline based on the conclusion that including them would

not impact the results, and therefore Ferrari is not listed in the table for the current baseline. 

54 EPA did not include Maserati in the current baseline based on the conclusion that including them would 

not impact the results, and therefore Maserati is not listed in the table for the current baseline. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

45

Table IV.C.1-3. Current Baseline Planned CAFE Levels in MY 2011 versus MY 

2011 Final Rule Planned CAFE Levels (Combined) 

 

Manufacturer Current 

baseline 

MY 2011 Final 

Rule baseline 

BMW 25.6 26.0

Chrysler 23.6 24.7

Ford 24.2 26.0

Subaru 27.5 28.6

General Motors 23.9 24.9

Honda 30.1 30.0

Hyundai 29.9 30.0

Tata 21.1 24.4

Kia 29.3

Mazda 30.2

Daimler 24.7 23.6

Mitsubishi 29.1 29.1

Nissan 27.3 26.6

Porsche 23.2 22.0

Ferrari 16.2

Maserati 18.2

Suzuki 28.6 27.8

Toyota 30.0 27.6

Volkswagen 26.2 27.1

Total/Average 26.7 26.5

 Tables IV.C.1-4 through 1-6 summarize other differences between the current 

baseline and manufacturers’ product plans submitted to NHTSA in 2008 for the MY 

2011 final rule. These tables present average vehicle footprint, curb weight, and powerto-weight ratios for each manufacturer represented in the current baseline and of the 

seven largest manufacturers represented in the product plan data, and for the overall 

industry. The tables containing product plan data do not identify manufacturers by name, 

and do not present them in the same sequence. 

 

 Tables IV.C.1-4a and 1-4b show that the current baseline reflects a slight decrease 

in overall average passenger vehicle size relative to the manufacturers’ plans. This is a 

reflection of the market segment shifts underlying the sales forecasts of the current 

baseline. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

46

Table IV.C.1-4a. Current Baseline Average MY 2011 Vehicle Footprint 

(Square Feet) 

Manufacturer PC LT Avg. 

BMW 45.4 49.7 46.9

Chrysler 46.4 54.0 51.5

Ford 46.2 57.9 51.3

Subaru 43.1 46.3 44.4

General 

Motors 46.2 59.6 53.4

Honda 44.3 49.4 46.2

Hyundai 44.7 48.8 45.5

Tata 50.3 48.0 48.8

Kia 45.2 51.6 46.7

Mazda 44.3 46.9 44.7

Daimler 46.6 53.3 49.0

Mitsubishi 43.8 46.4 44.1

Nissan 45.2 55.4 48.8

Porsche 38.6 51.0 43.6

Suzuki 41.0 47.2 42.3

Toyota 44.0 51.1 47.0

Volkswagen 43.4 52.6 45.4

Industry 

Average 45.0 54.4 48.8

Table IV.C.1-4b. MY 2011 Final Rule Average Planned MY 2011 Vehicle Footprint 

(Square Feet) 

 

PC LT Avg.

Manufacturer 1 46.7 58.5 52.8

Manufacturer 2 46.0 5.4 47.1 

Manufacturer 3 44.9 52.8 48.4 

Manufacturer 4 45.4 55.8 49.3 

Manufacturer 5 45.2 57.5 50.3

Manufacturer 6 48.5 54.7 52.4

Manufacturer 7 45.1 49.9 46.4

Industry Average 45.6 55.1 49.7

Tables IV.C.1-5a and 1-5b show that the current baseline reflects a decrease in overall 

average vehicle weight relative to the manufacturers’ plans. As above, this is most likely 

a reflection of the market segment shifts underlying the sales forecasts of the current 

baseline. 

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

47

Table IV.C.1-5a. Current Baseline Average MY 2011 Vehicle Curb Weight 

(Pounds) 

Manufacturer PC LT Avg.

BMW 3,535 4,612 3,900

Chrysler 3,498 4,506 4,178

Ford 3,516 4,596 3,985

Subaru 3,155 3,801 3,435

General Motors 3,495 5,030 4,311

Honda 3,021 4,064 3,401

Hyundai 3,135 4,080 3,307

Tata 3,906 5,198 4,717

Kia 3,034 4,057 3,284

Mazda 3,236 3,744 3,316

Daimler 3,450 5,123 4,045

Mitsubishi 3,238 3,851 3,312

Nissan 3,242 4,535 3,690

Porsche 3,159 4,907 3,874

Suzuki 2,870 3,843 3,080

Toyota 3,112 4,186 3,561

Volkswagen 3,479 5,673 3,959

Industry 

Average 3,280 4,538 3,786

Table IV.C.1-5b. MY 2011 Final Rule Average Planned MY 2011 Vehicle Curb 

Weight (Pounds) 

PC LT Avg.

Manufacturer 1 3,197 4,329 3,692

Manufacturer 2 3,691 4,754 4,363 

Manufacturer 3 3,293 4,038 3,481 

Manufacturer 4 3,254 4,191 3,510 

Manufacturer 5 3,547 5,188 4,401

Manufacturer 6 3,314 4,641 3,815

Manufacturer 7 3,345 4,599 3,865

Industry Average 3,380 4,687 3,935 

 Tables IV.C.1-6a and IV.C.1-6b show that the current baseline reflects a decrease 

in average performance relative to that of the manufacturers’ product plans. This 

decreased performance is most likely a reflection of the market segment shifts underlying 

the sales forecasts of the current baseline, that is, an assumed shift away from higher 

performance vehicles. 

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

48

Table IV.C.1-6a. Current Baseline Average MY 2011 Vehicle Power-to-Weight 

Ratio (hp/lb) 

Manufacturer PC LT Avg. 

BMW 0.072 0.061 0.068

Chrysler 0.055 0.052 0.053

Ford 0.058 0.053 0.056

Subaru 0.062 0.057 0.059

General Motors 0.056 0.056 0.056

Honda 0.057 0.054 0.056

Hyundai 0.051 0.055 0.052

Tata 0.077 0.057 0.064

Kia 0.050 0.056 0.051

Mazda 0.051 0.053 0.052

Daimler 0.066 0.056 0.062

Mitsubishi 0.053 0.056 0.053

Nissan 0.058 0.057 0.058

Porsche 0.105 0.073 0.092

Suzuki 0.049 0.062 0.052

Toyota 0.052 0.062 0.056

Volkswagen 0.058 0.052 0.056

Industry Average 0.056 0.056 0.056

Table IV.C.1-6b. MY 2011 Final Rule Average Planned MY 2011 Vehicle Power-toWeight Ratio (hp/lb) 

PC LT Avg.

Manufacturer 1 0.065 0.058 0.060

Manufacturer 2 0.061 0.065 0.062

Manufacturer 3 0.053 0.059 0.056

Manufacturer 4 0.060 0.058 0.059

Manufacturer 5 0.060 0.057 0.059

Manufacturer 6 0.063 0.065 0.065

Manufacturer 7 0.053 0.055 0.053

Industry Average 0.060 0.059 0.060

 As discussed above, the agencies’ market forecast for MY 2012-2016 holds the 

performance and other characteristics of individual vehicle models constant, adjusting the 

size and composition of the fleet from one model year to the next. 

Refresh and redesign schedules (for application in NHTSA’s modeling): 

Expected model years in which each vehicle model will be redesigned or 

freshened constitute another important aspect of NHTSA’s market forecast. As discussed 

in Section IV.C.2.c below, NHTSA’s analysis supporting the current rulemaking times 

the addition of nearly all technologies to coincide with either a vehicle redesign or a 

Formatted ... [1]

Formatted ... [2]

Formatted ... [3]

Formatted ... [4]

Formatted ... [5]

Formatted ... [6]

Formatted ... [7]

Formatted ... [8]

Formatted ... [9]

Formatted ... [10]

Formatted ... [11]

Formatted ... [12]

Formatted ... [13]

Formatted ... [14]

Formatted ... [15]

Formatted ... [16]

Formatted ... [17]

Formatted ... [18]

Formatted ... [19]

Formatted ... [20]

Formatted ... [21]

Formatted ... [22]

Formatted ... [23]

Formatted ... [24]

Formatted ... [25]

Formatted ... [26]

Formatted ... [27]

Formatted ... [28]

Formatted ... [29]

Formatted ... [30]

Formatted ... [31]

Formatted ... [32]

Formatted ... [33]

Formatted ... [34]

Formatted ... [35]

Formatted ... [36]

Formatted ... [37]

Formatted ... [38]

Formatted ... [39]

Formatted ... [40]

Formatted ... [41]

Formatted ... [42]

Formatted ... [43]

Formatted ... [44]

Formatted ... [45]

Formatted ... [46]

Formatted ... [47]

Formatted ... [48]

Formatted ... [49]
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

49

vehicle freshening. Product plans submitted to NHTSA preceding the MY 2011 final 

rule contained manufacturers’ estimates of vehicle redesign and freshening schedules and 

NHTSA’s estimates of the timing of the five-year redesign cycle and the two- to threeyear refresh cycle were made with reference to those plans. In the current baseline, in 

contrast, estimates of the timing of the refresh and redesign cycles were based on 

historical dates—i.e., counting forward from known redesigns occurring in or prior to 

MY 2008 for each vehicle in the fleet and assigning refresh and redesign years 

accordingly. After applying these estimates, the shares of manufacturers’ passenger car 

and light truck estimated to be redesigned in MY 2011 were as summarized below for the 

current baseline and the MY 2011 final rule. Table IV.C.1-7 below shows the percentages 

of each manufacturer’s fleets expected to be redesigned in MY 2011 for the current 

baseline. Table IV.C.1-8 presents corresponding estimates from the market forecast used 

by NHTSA in the analysis supporting the MY 2011 final rule (again, to protect 

confidential information, manufacturers are not identified by name). 

Table IV.C.1-7. Current Baseline, Share of Fleet Redesigned in MY 2011 

Manufacturer PC LT Avg. 

BMW 32% 40% 34%

Chrysler 0% 11% 8%

Ford 12% 7% 10%

Subaru 0% 51% 22%

General Motors 20% 2% 11%

Honda 31% 33% 32%

Hyundai 20% 0% 16%

Tata 28% 100% 73%

Kia 35% 87% 48%

Mazda 0% 0% 0%

Daimler 0% 0% 0%

Mitsubishi 0% 56% 7%

Nissan 4% 18% 9%

Porsche 0% 100% 41%

Suzuki 8% 21% 11%

Toyota 4% 24% 12%

Volkswagen 23% 0% 18%

Industry Average 15% 17% 15%
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

50

Table IV.C.1-8. MY 2011 Final Rule, Share of Fleet Redesigned in MY 2011 

PC LT Avg.

Manufacturer 1 19% 0% 11%

Manufacturer 2 34% 27% 29%

Manufacturer 3 5% 0% 3%

Manufacturer 4 7% 0% 5%

Manufacturer 5 19% 0% 11%

Manufacturer 6 34% 28% 33%

Manufacturer 7 27% 28% 28%

Overall 20% 9% 15%

PC LT Ave.

Company 1 19% 0% 11%

Company 2 34% 27% 29%

Company 3 5% 0% 3%

Company 4 7% 0% 5%

Company 5 19% 0% 11%

Company 6 34% 28% 33%

Company 7 27% 28% 28%

Overall 20% 9% 15%

We continue, therefore, to estimate that manufacturers’ redesigns will not be 

uniformly distributed across model years. This is in keeping with standard industry 

practices, and reflects what manufacturers actually do–NHTSA has observed that 

manufacturers in fact do redesign more vehicles in some years than in others. NHTSA 

staff have closely examined manufacturers’ planned redesign schedules, contacting some 

manufacturers for clarification of some plans, and confirmed that these plans remain 

unevenly distributed over time. For example, although Table 8 shows that NHTSA 

expects Company 2 to redesign 34 percent of its passenger car models in MY 2011, 

current information indicates that this company will then redesign only (a different) 10 

percent of its passenger cars in MY 2012. Similarly, although Table 8 shows that 

NHTSA expects four of the largest seven light truck manufacturers to redesign virtually 

no light truck models in MY 2011, current information also indicates that these four 

manufacturers will redesign 21-49 percent of their light trucks in MY 2012. 

e. How does Manufacturer Product Plan Data Factor into the Baseline Used 

in this Proposal? 

As discussed in Section II.B.4 above, while the agencies received updated product 

plans in Spring 2009 in response to NHTSA’s request, the baseline data used in this 

proposal is not informed by these product plans, because they contain confidential 

business information the agencies are legally required to protect from disclosure, and 

because the agencies have concluded that, for purposes of this NPRM, a transparent 

baseline is preferable. 

Formatted Table
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

51

However, as also discussed above, NHTSA has conducted a separate analysis that 

does make use of these product plans, contained in NHTSA’s PRIA. NHTSA performed 

this separate analysis for purposes of comparison only. NHTSA used the publicly 

available baseline for all analysis related to the development and evaluation of the 

proposed new CAFE standards. 

 

2. How were the Technology Inputs Developed?

As discussed above in Section II.E, for developing the technology inputs for the 

MY 2012-2016 CAFE and GHG standards, the agencies primarily began with the 

technology inputs used in the MY 2011 CAFE final rule and in the July 2008 EPA 

ANPRM, and then reviewed, as requested by President Obama in his January 26 

memorandum, the technology assumptions that NHTSA used in setting the MY 2011 

standards and the comments that NHTSA received in response to its May 2008 Notice of 

Proposed Rulemaking. In addition, the agencies supplemented their review with updated 

information from more current literature, new product plans and from EPA certification 

testing. More detail is available regarding how the agencies developed the technology 

inputs for this NPRM above in Section II.E, in Chapter 3 of the Draft Joint TSD, and in 

Section V of NHTSA’s PRIA. 

 a. What Technologies does NHTSA Consider? 

Section II.E.1 above describes the fuel-saving technologies considered by the 

agencies that manufacturers could use to improve the fuel economy of their vehicles 

during MYs 2012-2016. The majority of the technologies described in this section are 

readily available, well known, and could be incorporated into vehicles once production 

decisions are made. As discussed, the technologies considered fall into five broad 

categories: engine technologies, transmission technologies, vehicle technologies, 

electrification/accessory technologies, and hybrid technologies. Table IV.C.2-1 below 

lists all the technologies considered and provides the abbreviations used for them in the 

Volpe model,55 as well as their year of availability, which for purposes of NHTSA’s 

analysis means the first model year in the rulemaking period that the Volpe model is 

allowed to apply a technology to a manufacturer’s fleet.56 Year of availability recognizes 

that technologies must achieve a level of technical viability before they can be 

implemented in the Volpe model, and are thus a means of constraining technology use 

until such time as it is considered to be technologically feasible. For a more detailed 

description of each technology and their costs and effectiveness, we refer the reader to 

Chapter 3 of the joint TSD and Section V of NHTSA’s PRIA. 

 

55 The abbreviations are used in this section both for brevity and for the reader’s reference if they wish to 

refer to the expanded decision trees and, the model input and output sheets, [etc.], which are available in 

Docket No. NHTSA-2009-0059 and on NHTSA’s website.[in the docket or on the website].

56

 A date of 2011 means the technology can be applied in all model years, while a date of 2014 means the 

technology can only be applied in model years 2014 through 2016. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

52

Table IV.C.2-1. List of technologies, abbreviations, and year of availability in 

NHTSA’s analysis 

Technology Model Abbreviation Year Available

Low Friction Lubricants LUB 2011

Engine Friction Reduction EFR 2011

VVT - Coupled Cam Phasing (CCP) on SOHC CCPS 2011

Discrete Variable Valve Lift (DVVL) on SOHC DVVLS 2011

Cylinder Deactivation on SOHC DEACS 2011

VVT - Intake Cam Phasing (ICP) ICP 2011

VVT – Dual Cam Phasing (DCP) DCP 2011

Discrete Variable Valve Lift (DVVL) on DOHC DVVLD 2011

Continuously Variable Valve Lift (CVVL) CVVL 2011

Cylinder Deactivation on DOHC DEADD 2011

Cylinder Deactivation on OHV DEACO 2011

VVT - Coupled Cam Phasing (CCP) on OHV CCPO 2011

Discrete Variable Valve Lift (DVVL) on OHV DVVLO 2011

Conversion to DOHC with DCP CDOHC 2011

Stoichiometric Gasoline Direct Injection (GDI) SGDI 2011

Combustion Restart CBRST 2014

Turbocharging and Downsizing TRBDS 2011

Exhaust Gas Recirculation (EGR) Boost EGRB 2013

Conversion to Diesel following CBRST DSLC 2011

Conversion to Diesel following TRBDS DSLT 2011

6-Speed Manual/Improved Internals 6MAN 2011

Improved Auto. Trans. Controls/Externals IATC 2011

Continuously Variable Transmission CVT 2011

6/7/8-Speed Auto. Trans with Improved Internals NAUTO 2011

Dual Clutch or Automated Manual Transmission DCTAM 2011

Electric Power Steering EPS 2011

Improved Accessories IACC 2011

12V Micro-Hybrid MHEV 2011

Belt Integrated Starter Generator BISG 2011

Crank Integrated Starter Generator CISG 2011

Power Split Hybrid PSHEV 2011

2-Mode Hybrid 2MHEV 2011

Plug-in Hybrid PHEV 2011

Mass Reduction 1 (1.5%) MS1 2011

Mass Reduction 2 (3.5% – 8.5%) MS2 2014

Low Rolling Resistance Tires ROLL 2011

Low Drag Brakes LDB 2011

Secondary Axle Disconnect 4WD SAX 2011

Aero Drag Reduction AERO 2011

Formatted: Font: 10 pt

Formatted Table
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

53

Technology

Model 

Abbreviation

Year 

Available

Low Friction Lubricants LUB 2011

Engine Friction Reduction EFR 2011

VVT - Coupled Cam Phasing (CCP) on SOHC CCPS 2011

Discrete Variable Valve Lift (DVVL) on SOHC DVVLS 2011

Cylinder Deactivation on SOHC DEACS 2011

VVT - Intake Cam Phasing (ICP) ICP 2011

VVT – Dual Cam Phasing (DCP) DCP 2011

Discrete Variable Valve Lift (DVVL) on DOHC DVVLD 2011

Continuously Variable Valve Lift (CVVL) CVVL 2011

Cylinder Deactivation on DOHC DEADD 2011

Cylinder Deactivation on OHV DEACO 2011

VVT - Coupled Cam Phasing (CCP) on OHV CCPO 2011

Discrete Variable Valve Lift (DVVL) on OHV DVVLO 2011

Conversion to DOHC with DCP CDOHC 2011

Stoichiometric Gasoline Direct Injection (GDI) SGDI 2011

Combustion Restart CBRST 2014

Turbocharging and Downsizing TRBDS 2011

Exhaust Gas Recirculation (EGR) Boost EGRB 2013

Conversion to Diesel following CBRST DSLC 2011

Conversion to Diesel following TRBDS DSLT 2011

6-Speed Manual/Improved Internals 6MAN 2011

Improved Auto. Trans. Controls/Externals IATC 2011

Continuously Variable Transmission CVT 2011

6/7/8-Speed Auto. Trans with Improved Internals NAUTO 2011

Dual Clutch or Automated Manual Transmission DCTAM 2011

Electric Power Steering EPS 2011

Improved Accessories IACC 2011

12V Micro-Hybrid MHEV 2011

Belt Integrated Starter Generator BISG 2011

Crank Integrated Starter Generator CISG 2011

Power Split Hybrid PSHEV 2011

2-Mode Hybrid 2MHEV 2011

Plug-in Hybrid PHEV 2011

Mass Reduction 1 (1.5%) MS1 2011

Mass Reduction 2 (3.5% – 8.5%) MS2 2014

Low Rolling Resistance Tires ROLL 2011

Low Drag Brakes LDB 2011

Secondary Axle Disconnect 4WD SAX 2011

Aero Drag Reduction AERO 2011

For purposes of this NPRM and as discussed in greater detail in the joint TSD, 

NHTSA and EPA carefully reviewed the list of technologies used in the agency’s 

analysis for the MY 2011 final rule. Given the relatively short amount of time, from a 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

54

technology-development perspective, that has elapsed since March 2009 and this NPRM, 

NHTSA and EPA concluded that the considerable majority of technologies were 

correctly defined and continued to be appropriate for use in the analysis supporting the 

proposed standards. However, some refinements were made as discussed below.

Specific to its modeling, NHTSA has revised eight of the technologies used in the 

current analysis from those considered in the MY 2011 final rule. Specifically, two 

technologies which were previously unavailable in the MY 2011 time frame are now 

available (in the extended MY 2012-2016 period); one technology has been combined 

with another; one is newly introduced; three have revised names and/or definitions; and 

one has been deleted entirely. These changes are discussed further below, and NHTSA 

seeks comment on both these changes and the validation of the unchanged technology 

assumptions and estimates. 

 

 Availability: In the MY 2011 final rule, two of the engine technologies—EGR 

boost and combustion restart—were unavailable because they were not considered 

technologically feasible until beyond that rulemaking time frame. While both were 

described and discussed in the MY 2011 final rule, neither was applied in the modeling 

process that supported those standards.57 In this analysis, EGR boost becomes available 

in MY 2013, and combustion restart in MY 2014, so both are being applied by the Volpe 

model, as needed, in this analysis. 

 Merging of technologies: In the MY 2011 final rule, higher voltage and improved 

alternator (HVIA) was used to represent changes in the design of the alternator, 

effectively optimizing it for higher efficiency (instead of for low cost as is typically 

done). For purposes of this analysis, the HVIA technology is no longer represented 

individually, but instead has been incorporated into a new-to-this-analysis technology 

called belt integrated starter generator, or BISG, as discussed next. 

 New technology: In the MY 2011 final rule, two levels of mild hybrid technology 

were defined: a 12 volt micro-hybrid (MHEV) system, which utilized a belt-driven 

starter generator operating at 12 volts, and the more capable integrated starter generator 

technology (ISG) operating at higher voltages (100 volts). ISG envisioned both belt and 

crank configured starter generator systems. In the current proposal, and in an effort to 

offer a broader spectrum of more diversified mild hybrid technologies for the modeling 

process to choose from, NHTSA has added the BISG technology to the electrification 

decision tree, and redefined the ISG technology to be a crank mounted version of ISG, 

accordingly renamed to CISG. 

 The BISG technology is a belt-coupled system like the 12 volt MHEV, but it 

operates at a higher voltage (e.g., 42 volts) and thus can make use of regenerative 

braking, as well as potentially adding some limited motive power. Since BISG is a 

higher voltage system, optimization of the alternator occurs as part of the BISG 

 

57 As an additional note, since combustion restart was unavailable in the MY 2011 time frame, the 

technology titled diesel following combustion restart (DSLC), which as the name indicates was only 

applied after combustion restart, was also unavailable. Accordingly, DSLC, which was described and 

discussed in the MY 2011 final rule, is now available in the current analysis. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

55

technology application; hence the HVIA technology is no longer needed as a separate 

technology. Additionally, the CISG technology is now defined as a crank mounted 

system that operates at higher voltages (100 volts) than BISG, yet at lower voltage than 

the strong hybrids (300 volts) that make greater use of regenerative braking and provide 

greater motive power capability. Thus, three levels of mild hybrid technology exist in the 

current proposal, as opposed to the two levels offered in the MY 2011 final rule. 

 Revisions and Deletions: The Mass Reduction/Material Substitution technologies 

have been revised for the current proposal. In the MY 2011 final rule, the Volpe model 

used three levels of material substitution technologies, referred to as MS1, MS2, and 

MS5, which were progressively applied to vehicles with curb weights in excess of 5,000 

pounds (2,268 kg) so as to reduce weight by up to a 5 percent maximum. In keeping with 

the agency’s desire to limit potential negative impacts to safety performance as a result of 

vehicle weight reduction, material substitution was not applied to vehicles with curb 

weights below 5,000 pounds. In contrast, in the current analysis, and in keeping with 

some manufacturer’s stated plans to decrease overall fleet weights regardless of subclass 

or curb weight, NHTSA now defines two Mass Reduction/Material Substitution 

technologies as follows. 

 The Mass Reduction 1.5 percent (MS1) represents a 1.5 percent weight decrease 

through material substitution applicable to all vehicle subclasses, regardless of curb 

weight, that can be applied throughout the rulemaking period (and at refresh or redesign 

cycle times). This technology is similar to the MS1 technology used in the prior analysis 

in terms of the scale of the weight reduction (1 versus 1.5 percent), the methods and 

techniques manufacturers are anticipated to use in achieving the reductions, and when in 

the product cycle the model applies it (at refresh or redesign). 

 A second technology, Mass Reduction 3.5 – 8.5 percent (MS2), has also been 

defined. The MS2 technology is unavailable until MY 2014, and can only be applied by 

the Volpe model at a product redesign cycle. MS2 assumes a 3.5 to 8.5 percent weight 

reduction dependent on subclass (with the smaller/lighter subclasses receiving the lowest 

amounts of reduction, 3.5 percent, and the larger/heavier vehicles the 8.5 percent) via the 

types of more intrusive and complex mass reduction associated with a complete vehicle 

redesign.58 MS2 is cumulative to MS1, as it is only applied after MS1, therefore the 

maximum weight reduction that can occur for smaller subclass vehicles is 5 percent, 

while large cars, truck, and SUVs could experience 10 percent weight reductions. 

Restricting weight reduction on smaller vehicle to lower limits, and vice versa for larger 

vehicles, is intended to mitigate or minimize the potential safety consequences from the 

modeled weight reductions. Postponing the availability of the technology until MY 2014 

recognizes the lead time required to implement platform redesigns that would be 

necessary for these levels of weight reduction and mass reduction. NHTSA seeks 

comment on the agency’s use of a two-step process, with the higher applications of MS in 

MYs 2014 and beyond, and the process of applying smaller mass reductions to lighter 

 

58 Examples of such weight savings associated with new platform introductions have been provided in 

confidential product plan information provided by some manufacturers. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

56

vehicles and higher reductions to heavier vehicles for the purpose of maintaining safety 

neutrality.

 The MS5 technology used in the MY 2011 final rule is deleted. 

Additionally, for purposes of this NPRM, NHTSA has revised the applicability of 

the diesel technologies to restrict it to vehicles with engines of 6 cylinders or more. 

NHTSA seeks comment on its decision not to apply diesel technologies to vehicles with 

4-cylinder engines. NHTSA also seeks comment on the revised costing methodology for 

diesel technologies.

Besides these eight, all other technologies considered in this analysis were also 

considered in the analysis for the MY 2011 final rule, and although the costs and 

effectiveness estimates may have been revised as discussed further below, the other 

technologies remain otherwise unchanged for the purposes of this analysis in terms of 

their definition, functionality, and configuration. Thus, with this catalog of technologies 

as a starting point, NHTSA could then review and consider effectiveness and cost 

estimates for each technology, and, through the Volpe model analysis, how a 

manufacturer might feasibly apply these technologies to their MY 2012-2016 vehicles in 

order to achieve compliance with the proposed standards. 

b. How Ddid NHTSA Determine the Costs and Effectiveness of Eeach of 

These Technologies for Uuse in its Modeling Analysis? 

Building on NHTSA’s estimates developed for the MY 2011 CAFE final rule and 

EPA’s Advanced Notice of Proposed Rulemaking, which relied on the 2008 Staff 

Technical Report,59 the agencies took a fresh look at technology cost and effectiveness 

values for purposes of the joint proposal under the National Program. This joint work is 

reflected in Chapter 3 of the Draft Joint TSD and in Section II of this preamble, which is 

summarized below. For more detailed information on the effectiveness and cost of fuelsaving technologies, please refer to Chapter 3 of the joint TSD and Section V of 

NHTSA’s PRIA. 

Generally speaking, while NHTSA and EPA found that much of the cost 

information used in NHTSA’s MY 2011 final rule and EPA’s 2008 staff report was 

consistent to a great extent, the agencies, in reconsidering information from many 

sources, revised several component costs of several major technologies: 

turbocharging/downsizing, mild and strong hybrids, diesels, SGDI, and Valve Train Lift 

Technologies. These are discussed at length in the joint TSD and in NHTSA’s PRIA. 

Additionally, most effectiveness estimates used in the both the MY 2011 final rule and 

the 2008 EPA staff report were determined to be accurate and were carried forward 

without significant change into this rulemaking. When NHTSA and EPA’s estimates for 

effectiveness diverged slightly due to differences in how agencies apply technologies to 

vehicles in their respective models, we report the ranges for the effectiveness values used 

 

59 EPA Staff Technical Report: Cost and Effectiveness Estimates of Technologies Used to Reduce LightDuty Vehicle Carbon Dioxide Emissions. EPA420-R-08-008, March 2008. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

57

in each model. For much more information on the costs and effectiveness of individual 

technologies, we refer the reader to Chapter 3 of the joint TSD and Section V of 

NHTSA’s PRIA. 

NHTSA notes that, in developing technology cost and effectiveness estimates, the 

agencies have made every effort to hold constant aspects of vehicle performance and 

utility typically valued by consumers, such as horsepower, carrying capacity, and towing 

and hauling capacity. For example, NHTSA includes in its analysis technology cost and 

effectiveness estimates that are specific to performance passenger cars (i.e., sports cars), 

as compared to non-performance passenger cars. When commenting on the agencies’ 

technology cost and effectiveness estimates, NHTSA urges commenters either to place 

any related comments within the same context, or explain any assumptions or estimates 

regarding increases or decreases in vehicle performance or utility. Additionally, NHTSA 

seeks comment on the extent to which commenters believe that the agencies have been 

successful in holding constant these elements of vehicle performance and utility in 

developing the technology cost and effectiveness estimates.

Additionally, NHTSA notes that the technology costs included in this NPRM take 

into account only those associated with the initial build of the vehicle. The agencies seek 

comments on the additional lifetime costs, if any, associated with the implementation of 

advanced technologies, including warranty, maintenance and replacement costs, such as 

the replacement costs for low rolling resistance tires, low friction lubricants, and hybrid 

batteries, and maintenance costs for diesel aftertreatment components.

While the agencies believe that the ideal estimates for the final rule would be 

based on tear down studies or BOM approach and subjected to a transparent peerreviewed process, NHTSA and EPA are confident that the thorough review conducted, 

led to the best available conclusion regarding technology costs and effectiveness 

estimates for the current rulemaking and resulted in excellent consistency between the 

agencies’ respective analyses for developing the CAFE and CO2 standards. 

NHTSA seeks comment on the incremental cost and effectiveness estimates employed by 

the agency in the Volpe modeling analysis for this NPRM, examples of which are 

provided in table form below. These example Tables present effectiveness and cost 

estimates which are incremental in nature, according to the decision trees used in the 

Volpe modeling analysis. Thus, the effectiveness and cost estimates are not absolute to a 

single baseline vehicle, but are incremental to the technology that precedes it.

Comment [r6]: Added in response to interagency 

comment. 

Comment [r7]: Added in response to interagency 

comment. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

58

Test entryTable IV.C.2-2. Technology Effectiveness Estimates Employed in the Volpe Model for Certain 

Technologies

Formatted: Font: 12 pt

Formatted: Font: 12 pt, Bold
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

59

Test entryTable IV.C.2-3. Technology Cost Estimates Employed in the Volpe Model for Certain Technologies

Formatted: Font: 12 pt, Bold
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

60

Formatted: Centered
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

61

c. How Ddoes NHTSA Uuse These Assumptions in its Modeling Analysis? 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

62

 NHTSA’s analysis, using the Volpe model, relies on several inputs and data files 

to conduct the compliance analysis, as discussed further below and in Section V of the 

PRIA. For the purposes of applying technologies, the Volpe model primarily uses three 

data files, one that contains data on the vehicles expected to be manufactured in the 

model years covered by the rulemaking, one that identifies the appropriate stage within 

the vehicle’s life-cycle for the technology to be applied, and one that contains 

data/parameters regarding the available technologies the model can apply. These inputs 

are discussed below. 

 As discussed above, the Volpe model begins with an initial state of the domestic 

vehicle market, which in this case is the market for passenger cars and light trucks to be 

sold during the period covered by the proposed standards. The vehicle market is defined 

on a model-by-model, engine-by-engine, and transmission-by-transmission basis, such 

that each defined vehicle model refers to a separately defined engine and a separately 

defined transmission. 

For the current proposal, which covers MYs 2012-2016, the light vehicle 

(passenger car and light truck) market forecast was developed jointly by NHTSA and 

EPA staff using MY 2008 CAFE compliance data. The MY 2008 compliance data 

includes about 1,100 vehicle models, about 400 specific engines, and about 200 specific 

transmissions, which is a somewhat lower level of detail in the representation of the 

vehicle market than that used by NHTSA in recent CAFE analyses.60 However, within 

the limitations of information that can be made available to the public, it provides the 

foundation for a realistic analysis of manufacturer-specific costs and the analysis of 

attribute-based CAFE standards, and is much greater than the level of detail used by 

many other models and analyses relevant to light vehicle fuel economy.61

In addition to containing data about each vehicle, engine, and transmission, this 

file contains information for each technology under consideration as it pertains to the 

specific vehicle (whether the vehicle is equipped with it or not), the model year the 

vehicle is undergoing redesign, and information about the vehicle’s subclass for purposes 

of technology application. In essence, the model considers whether it is appropriate to 

apply a technology to a vehicle. 

 

Is a vehicle already equipped, or can it not be equipped, with a particular 

technology?

 

60 The market file for the MY 2011 final rule, which included data for MYs 2011-2015, had 5500 records, 

or rows, about 5 times what we are using in this analysis of the MY 2008 certification data. However, both 

market files had the same number of fields, or rows. 

61 Because CAFE standards apply to the average performance of each manufacturer’s fleet of cars and light 

trucks, the impact of potential standards on individual manufacturers cannot be credibly estimated without 

analysis of fleets manufacturers can be expected to produce in the future. Furthermore, because required 

CAFE levels under an attribute-based CAFE standard depend on manufacturers’ fleet composition, the 

stringency of an attribute-based standard cannot be predicted without performing analysis at this level of 

detail. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

63

The market forecast file provides NHTSA the ability to identify, on a technology 

by technology basis, which technologies may already be present (manufactured) on a 

particular vehicle, engine, or transmission, or which technologies are not applicable (due 

to technical considerations) to a particular vehicle, engine, or transmission. These 

identifications are made on a model-by-model, engine-by-engine, and transmission-bytransmission basis. For example, if the market forecast file indicates that Manufacturer 

X’s Vehicle Y is manufactured with Technology Z, then for this vehicle Technology Z 

will be shown as used. Additionally, NHTSA has determined that some technologies are 

only suitable or unsuitable when certain vehicle, engine, or transmission conditions exist. 

For example, secondary axle disconnect is only suitable for 4WD vehicles, and cylinder 

deactivation is unsuitable for any engine with fewer than 6 cylinders, while CVTs can 

only be applied to unibody vehicles. Similarly, comments received to the 2008 NPRM 

indicated that cylinder deactivation could not be applied to vehicles equipped with 

manual transmissions, due primarily to driveability and NVH concerns. The Volpe 

model employs “engineering constraints” to address issues like these, which are a 

programmatic method of controlling technology application that is independent of other 

constraints. Thus, the market forecast file would indicate that the technology in question 

should not be applied to the particular vehicle/engine/transmission (i.e., is unavailable). 

Since multiple vehicle models may be equipped with an engine or transmission, this may 

affect multiple models. In using this aspect of the market forecast file, NHTSA ensures 

the Volpe model only applies technologies in an appropriate manner, since before any 

application of a technology can occur, the model checks the market forecast to see if it is 

either already present or unavailable. 

NHTSA seeks comment on whether this approach is reasonable and ensures that 

technologies are applied in an appropriate manner. 

Is a vehicle being redesigned or refreshed? 

Manufacturers typically plan vehicle changes to coincide with certain stages of a 

vehicle’s life cycle that are appropriate for the change, or in this case the technology 

being applied. In the automobile industry there are two terms that describe when

technology changes to vehicles occur: redesign and refresh (i.e., freshening). Vehicle 

redesign usually refers to significant changes to a vehicle’s appearance, shape, 

dimensions, and powertrain. Redesign is traditionally associated with the introduction of 

“new” vehicles into the market, often characterized as the “next generation” of a vehicle, 

or a new platform. Vehicle refresh usually refers to less extensive vehicle modifications, 

such as minor changes to a vehicle’s appearance, a moderate upgrade to a powertrain 

system, or small changes to the vehicle’s feature or safety equipment content. Refresh is 

traditionally associated with mid-cycle cosmetic changes to a vehicle, within its current 

generation, to make it appear “fresh.” Vehicle refresh generally occurs no earlier than 

two years after a vehicle redesign, or at least two years before a scheduled redesign. For 

the majority of technologies discussed today, manufacturers will only be able to apply 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

64

them at a refresh or redesign, because their application would be significant enough to 

involve some level of engineering, testing, and calibration work.62

 

Some technologies (e.g., those that require significant revision) are nearly always 

applied only when the vehicle is expected to be redesigned, like turbocharging and engine 

downsizing, or conversion to diesel or hybridization. Other technologies, like cylinder 

deactivation, electric power steering, and aerodynamic drag reduction can be applied 

either when the vehicle is expected to be refreshed or when it is expected to be 

redesigned, while a few others, like low friction lubricants, can be applied at any time, 

regardless of whether a refresh or redesign event is conducted. Accordingly, the model 

will only apply a technology at the particular point deemed suitable. These constraints 

are intended to produce results consistent with manufacturers’ technology application 

practices. For each technology under consideration, NHTSA stipulates whether it can be 

applied any time, at refresh/redesign, or only at redesign. The data forms another input to 

the Volpe model. NHTSA develops redesign and refresh schedules for each of a 

manufacturer’s vehicles included in the analysis, essentially based on the last known 

redesign year for each vehicle and projected forward in a 5-year redesign and a 2-3 year 

refresh cycle, and this data is also stored in the market forecast file. We note that this 

approach is different than NHTSA has employed previously for determining redesign and 

refresh schedules, where NHTSA included the redesign and refresh dates in the market 

forecast file as provided by manufacturers in confidential product plans. The new 

approach is necessary given the nature of the new baseline which as a single year of data 

does not contain its own refresh and redesign cycle cues for future model years, and to 

ensure the complete transparency of the agency’s analysis. Vehicle redesign/refresh 

assumptions are discussed in more detail in Section V of the PRIA and in Chapter 3 of 

the TSD. NHTSA seeks comment on the approach to refresh and redesign developed by 

the agency for this proposal.NHTSA seeks comment on its application for this proposal 

of refresh and redesign schedules to manufacturers’ vehicles counting from the last 

known redesign in or prior to the baseline fleet, as compared to its approach in the MY 

2011 final rule.

Once the model has concluded that a technology should be applied to a vehicle, 

the model must evaluate which technology should be applied. This will depend on the 

vehicle subclass to which the vehicle is assigned; what technologies have already been 

applied to the vehicle (i.e., where in the “decision tree” the vehicle is); when the 

technology is first available (i.e., year of availability); whether the technology is still 

available (i.e., “phase-in caps”); and the costs and effectiveness of the technologies being 

considered. Technology costs may be reduced, in turn, by learning effects, while 

technology effectiveness may be increased or reduced by synergistic effects between 

technologies. In the technology input file, NHTSA has developed a separate set of 

 

62 For example, applying material substitution through weight reduction, or even something as simple as 

low rolling-resistance tires, to a vehicle will likely require some level of validation and testing to ensure 

that the vehicle may continue to be certified as compliant with NHTSA’s Federal Motor Vehicle Safety 

Standards (FMVSS). Weight reduction might affect a vehicle’s crashworthiness; low rolling-resistance 

tires might change vehicle’s braking characteristics or how it performs in crash avoidance tests. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

65

technology data variables for each of the twelve vehicle subclasses. Each set of variables 

is referred to as an “input sheet,” so for example, the subcompact input sheet holds the 

technology data that is appropriate for the subcompact subclass. Each input sheet 

contains a list of technologies available for members of the particular vehicle subclass. 

The following items are provided for each technology: the name of the technology, its 

abbreviation, the decision tree with which it is associated, the (first) year in which it is 

available, the upper and lower cost and effectiveness (fuel consumption reduction) 

estimates, the learning type and rate, the cost basis, its applicability, and the phase-in 

values. 

To which vehicle subclass is the vehicle is assigned?

As part of its consideration of technological feasibility, the agency evaluates 

whether each technology could be implemented on all types and sizes of vehicles, and 

whether some differentiation is necessary in applying certain technologies to certain 

types and sizes of vehicles, and with respect to the cost incurred and fuel consumption 

and CO2 emissions reduction achieved when doing so. The 2002 NAS Report 

differentiated technology application using ten vehicle “classes” (4 cars classes and 6 

truck classes),63 but did not determine how cost and effectiveness values differ from class 

to class. NAS’s purpose in separating vehicles into these classes was to create groups of 

“like” vehicles, i.e., vehicles similar in size, powertrain configuration, weight, and 

consumer use, and for which similar technologies are applicable. NHTSA similarly 

differentiates vehicles by “subclass” for the purpose of applying technologies to vehicles 

and assessing their incremental costs and effectiveness. NHTSA assigns each vehicle 

manufactured in the rulemaking period to one of 12 subclasses: for passenger cars, 

Subcompact, Subcompact Performance, Compact, Compact Performance, Midsize, 

Midsize Performance, Large, and Large Performance; and for light trucks, Small 

SUV/Pickup/Van, Midsize SUV/Pickup/Van, Large SUV/Pickup/Van, and Minivan. 

For this NPRM as for the MY 2011 final rule, NHTSA divides the vehicle fleet 

into subclasses based on model inputs, and applies subclass-specific estimates, also from 

model inputs, of the applicability, cost, and effectiveness of each fuel-saving technology. 

Therefore, the model’s estimates of the cost to improve the fuel economy of each vehicle 

model depend upon the subclass to which the vehicle model is assigned. 

Each vehicle’s subclass is stored in the market forecast file. When conducting a 

compliance analysis, if the Volpe model seeks to apply technology to a particular vehicle, 

it checks the market forecast to see if the technology is available and if the 

refresh/redesign criteria are met. If these conditions are satisfied, the model determines 

the vehicle’s subclass from the market data file, which it then uses to reference another 

input called the technology input file. NHTSA reviewed its methodology for dividing 

vehicles into subclasses for purposes of technology application that it used in the MY 

2011 final rule, and concluded that the same methodology would be appropriate for this 

NPRM for MYs 2012-2016, but the agency invites comments on the method of assigning 

 

63 The NAS classes included subcompact cars, compact cars, midsize cars, large cars, small SUVs, midsize

SUVs, large SUVs, small pickups, large pickups, and minivans. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

66

vehicles to subclasses for the purposes of technology application in the CAFE model, and 

on the issue of technology-application subclasses generally. The subclasses and the 

methodology for dividing vehicles among them are discussed in more detail in Section V 

of the PRIA and in Chapter 3 of the TSD. 

For the reader’s reference, the subclasses and example vehicles from the market 

forecast file are provided in the tables below. 

Passenger Car Subclasses Example (MY 2008) Vehicles

Class Example vehicles 

Subcompact Chevy Aveo, Honda Civic

Subcompact Performance Mazda Miata, Saturn Sky

Compact Chevy Cobalt, Nissan Sentra and Altima

Compact Performance Audi S4 Quattro, Mazda RX8 

Midsize Chevy Camaro (V6), Toyota Camry, Honda 

Accord, Hyundai Azera 

Midsize Performance Chevy Corvette, Ford Mustang (V8), Nissan G37 

Coupe 

Large Audi A8, Cadillac CTS and DTS 

Large Performance Bentley Arnage, Daimler CL600

Light Truck Subclasses Example (MY 2008) Vehicles 

Class Example vehicles 

Minivans Dodge Caravan, Toyota Sienna

Small 

SUV/Pickup/Van 

Ford Escape & Ranger, Nissan Rogue, 

Midsize 

SUV/Pickup/Van 

Chevy Colorado, Jeep Wrangler 4-door, Volvo XC70, 

Toyota Tacoma 

Large 

SUV/Pickup/Van 

Chevy Silverado, Ford Econoline, Toyota Sequoia 

What technologies have already been applied to the vehicle (i.e., where in the 

“decision trees” is it)?

NHTSA’s methodology for technology application analysis developed out of the 

approach taken by NAS in the 2002 Report, and evaluates the application of individual 

technologies and their incremental costs and effectiveness. Incremental costs and 

effectiveness of individual technologies are relative to the prior technology state, which 

means that it is crucial to understand what technologies are already present on a vehicle 

in order to determine correct incremental cost and effectiveness values. The benefit of 

the incremental approach is transparency in accounting, insofar as when individual 

technologies are added incrementally to individual vehicles, it is clear and easy to 

determine how costs and effectiveness adds up as technology levels increase. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

67

To keep track of incremental costs and effectiveness and to know which 

technology to apply and in which order, the Volpe model’s architecture uses a logical 

sequence, which NHTSA refers to as “decision trees,” for applying fuel economyimproving technologies to individual vehicles. In the MY 2011 final rule, NHTSA 

worked with Ricardo to modify previously-employed decision trees in order to allow for 

a much more accurate application of technologies to vehicles. For purposes of the 

NPRM, NHTSA reviewed the technology sequencing architecture and updated, as 

appropriate, the decision trees used in the analysis reported in the final rule for MY 2011. 

In general, and as described in great detail in the MY 2011 final rule and in 

Section V of the current PRIA, each technology is assigned to one of the five following 

categories based on the system it affects or impacts: engine, transmission, 

electrification/accessory, hybrid or vehicle. Each of these categories has its own decision 

tree that the Volpe model uses to apply technologies sequentially during the compliance 

analysis. The decision trees were designed and configured to allow the Volpe model to 

apply technologies in a cost-effective, logical order that also considers ease of 

implementation. For example, software or control logic changes are implemented before 

replacing a component or system with a completely redesigned one, which is typically a 

much more expensive option. In some cases, and as appropriate, the model may combine 

the sequential technologies shown on a decision tree and apply them simultaneously, 

effectively developing dynamic technology packages on an as-needed basis. For 

example, if compliance demands indicate, the model may elect to apply LUB, EFR, and 

ICP on a dual overhead cam engine, if they are not already present, in one single step. 

An example simplified decision tree for engine technologies is provided below; the other 

simplified decision trees may be found in Chapter 3 of the joint TSD and in the PRIA. 

Expanded decision trees are available in the docket for this NPRM. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

68

Figure IV.C.2-1. Engine Technology (EngMod) Decision Tree 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

69
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

70

Each technology within the decision trees has an incremental cost and an 

incremental effectiveness estimate associated with it, and estimates are specific to a 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

71

particular vehicle subclass (see the tables in Section V of the PRIA). Each technology’s 

incremental estimate takes into account its position in the decision tree path. If a 

technology is located further down the decision tree, the estimates for the costs and 

effectiveness values attributed to that technology are influenced by the incremental 

estimates of costs and effectiveness values for prior technology applications. In essence, 

this approach accounts for “in-path” effectiveness synergies, as well as cost effects that 

occur between the technologies in the same path. When comparing cost and 

effectiveness estimates from various sources and those provided by commenters in the 

previous CAFE rulemakings, it is important that the estimates evaluated are analyzed in 

the proper context, especially as concerns their likely position in the decision trees and 

other technologies that may be present or missing. Not all estimates available in the 

public domain or offered for the agencies’ consideration during the comment period can 

be evaluated in an “apples-to-apples” comparison with those used by the Volpe model, 

since in some cases the order of application, or included technology content, is 

inconsistent with that assumed in the decision tree. 

The MY 2011 final rule discussed in detail the revisions and improvements made 

to the Volpe model and decision trees during that rulemaking process, including the 

improved handling and accuracy of valve train technology application and the 

development and implementation of a method for accounting path-dependent correction 

factors in order to ensure that technologies are evaluated within the proper context. The 

reader should consult the MY 2011 final rule documents for further information on these 

modeling techniques, all of which continued to be utilized in developing this proposal.64

 

To the extent that the decision trees have changed for purposes of this NPRM, it was due 

not to revisions in the order of technology application, but rather to redefinitions of 

technologies or addition or subtraction of technologies. NHTSA seeks comment on the 

decision trees described here and in the PRIA. 

Is the next technology available in this model year? 

As discussed above, the majority of technologies considered are available on 

vehicles today, and thus will be available for application in the rulemaking time frame. 

Some technologies, however, will not become available for purposes of NHTSA’s 

analysis until later in the rulemaking time frame. When the model is considering whether 

to add a technology to a vehicle, it checks its year of availability—if the technology is 

available, it may be added; if it is not available, the model will consider whether to switch 

to a different decision tree to look for another technology, or will skip to the next vehicle 

in a manufacturer’s fleet. The year of availability for each technology is provided above 

in Table IV.C.2-1. 

Has the technology reached the phase-in cap for this model year?

 

64 See, e.g., 74 FR 14238-46 (Mar. 30, 2009) for a full discussion of the decision trees in NHTSA’s MY 

2011 final rule, and Docket No. NHTSA-2009-0062-0003.1 for an expanded decision tree used in that 

rulemaking. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

72

Besides the refresh/redesign cycles used in the Volpe model, which constrain the 

rate of technology application at the vehicle level so as to ensure a period of stability 

following any modeled technology applications, the other constraint on technology 

application employed in NHTSA’s analysis is “phase-in caps.” Unlike vehicle-level 

cycle settings, phase-in caps constrain technology application at the vehicle manufacturer 

level.65 They are intended to reflect a manufacturer’s overall resource capacity available 

for implementing new technologies (such as engineering and development personnel and 

financial resources), thereby ensuring that resource capacity is accounted for in the 

modeling process. At a high level, phase-in caps and refresh/redesign cycles work in 

conjunction with one another to avoid the modeling process out-pacing an OEM’s limited 

pool of available resources during the rulemaking time frame, especially in years where 

many models may be scheduled for refresh or redesign. This helps to ensure 

technological feasibility and economic practicability in determining the stringency of the 

standards. 

NHTSA has been developing the concept of phase-in caps over the course of the 

last several CAFE rulemakings, as discussed in greater detail in the MY 2011 final rule,66

and in Section V of the PRIA and Chapter 3 of the joint TSD. The MY 2011 final rule 

employed non-linear phase-in caps (that is, caps that varied from year to year) that were 

designed to respond to comments raising lead-time concerns in reference to the agency’s 

proposed MY 2011-2015 standards, but because the final rule covered only one model 

year, many phase-in caps for that model year were lower than had originally been 

proposed. NHTSA emphasized that the MY 2011 phase-in caps were based on 

assumptions for the full five year period of the proposal (2011-2015), and stated that it 

would reconsider the phase-in settings for all years beyond 2011 in a future rulemaking 

analysis. 

For purposes of the current proposal for MYs 2012-2016, as in the MY 2011 final 

rule, NHTSA combines phase-in caps for some groups of similar technologies, such as 

valve phasing technologies that are applicable to different forms of engine design 

(SOHC, DOHC, OHV), since they are very similar from an engineering and 

implementation standpoint. When the phase-in caps for two technologies are combined, 

the maximum total application of either or both to any manufacturer’s fleet is limited to 

the value of the cap.67 In contrast to the phase-in caps used in the MY 2011 final rule, 

NHTSA has increased the phase-in caps for most of the technologies, as discussed below. 

 

65 While phase-in caps are expressed as specific percentages of a manufacturer’s fleet to which a 

technology may be applied in a given model year, phase-in caps cannot always be applied as precise limits, 

and the Volpe model in fact allows “override” of a cap in certain circumstances. When only a small 

portion of a phase-in cap limit remains, or when the cap is set to a very low value, or when a manufacturer 

has a very limited product line, the cap might prevent the technology from being applied at all since any 

application would cause the cap to be exceeded. Therefore, the Volpe model evaluates and enforces each 

phase-in cap constraint after it has been exceeded by the application of the technology (as opposed to

evaluating it before application), which can result in the described overriding of the cap. 

66 74 FR 14268–14271 (Mar. 30, 2009) 

67 See 74 FR 14270 (Mar 30, 2009) for further discussion and examples. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

73

In developing phase-in cap values for purposes of the current proposal, NHTSA 

initially considered the fact that many of the technologies commonly applied by the 

model, those placed near the top of the decision trees, such as low friction lubes, valve 

phasing, electric power steering, improved automatic transmission controls, and others, 

have been commonly available to manufacturers for several years now. Many 

technologies, in fact, precede the 2002 NAS Report, which estimated that such 

technologies would take 4 to 8 years to penetrate the fleet. Since the current proposal 

would take effect in MY 2012, nearly 10 years beyond the NAS report, and extends to 

MY 2016, and in the interest of harmonization with EPA’s proposal, NHTSA tentatively 

determined that higher phase-in caps were likely justified. Additionally, NHTSA 

considered the fact that manufacturers, as part of the agreements supporting the National 

Program, appear to be anticipating higher technology application rates than those used in 

the MY 2011 final rule. This also supported higher phase-in caps for purposes of the 

proposal. 

Thus, while phase-in caps for the MY 2011 final rule reached a maximum of 50 

percent for a couple of technologies and generally fell in the range between 0 and 20 

percent, phase-in caps for this NPRM for the majority of technologies are set to reach 85 

or 100 percent by MY 2016, although more advanced technologies like diesels and strong 

hybrids reach only 15 percent by MY 2016. 

Theoretically, significantly higher phase-in caps, such as those used in the current 

proposal as compared to those used in the MY 2011 final rule, should result in higher 

levels of technology penetration in the modeling results. Reviewing the modeling output 

does not, however, indicate unreasonable levels of technology penetration for the 

proposed standards.68 NHTSA believes that this is due to the interaction of the various 

changes in methodology for the current proposal—changes to phase-in caps are but one 

of a number of revisions to the Volpe model and its inputs that could potentially impact 

the rate at which technologies are applied in this proposal as compared to prior 

rulemakings. Other revisions that could impact application rates include the use of 

transparent CAFE certification data in baseline fleet formulation and the use of other data 

for projecting it forward,69 or the use of a multi-year planning programming technique to 

apply technology retroactively to earlier-MY vehicles, both of which may have a direct 

impact on the modeling process. Conversely the model and inputs remain unchanged in 

other areas that also could impact technology application, such as in the refresh/redesign 

cycle settings, estimates used for the technologies, both of which remain largely 

unchanged from the MY 2011 final rule. These changes together make it difficult to 

predict how phase-in caps should be expected to function in the new modeling process. 

Thus, after reviewing the output files, NHTSA tentatively concludes that the 

higher phase-in caps, and the resulting technology application rates produced by the 

Volpe model, at both the industry and manufacturer level, are appropriate for this 

proposal, achieving a suitable level of stringency without requiring unrealistic or 

 

68 [cite for public access to modeling output]

69 The baseline fleet sets the starting point, from a technology point of view, for where the model begins 

the technology application process, so changes have a direct impact on the net application of technology. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

74

unachievable penetration rates. However, the agency will consider comments received 

on this approach in determining what phase-in caps to employ in the analysis for the final 

rule, and may change the caps in response to comments and/or further analysis. One 

additional question the agency has, which may be primarily academic at this point, is 

what impact lower phase-in caps, such as those used in earlier rulemakings, would have 

on compliance costs (and whether they might counter-intuitively increase costs by 

forcing more expensive technologies). NHTSA seeks comment on the revised phase-in 

caps as compared to the MY 2011 final rule, and particularly on whether, combined with 

the refresh and redesign assumptions, they help to ensure sufficient lead time for 

manufacturers to make the technology changes required by the proposed standards. 

Readers are invited to review and assess the phase-in caps listed and described more fully 

in Section V of the PRIA, along with the application and penetration rates found in the 

Volpe model’s output files, and after making their own assessment, provide comment and 

recommendations to the agency as appropriate. 

Is the technology less expensive due to learning effects? 

Historically, NHTSA did not explicitly account for the cost reductions a 

manufacturer might realize through learning achieved from experience in actually 

applying a technology. Since working with EPA to develop the 2008 NPRM for MYs 

2011-2015, and with Ricardo to refine the concept for the March 2009 MY 2011 final 

rule, NHTSA has accounted for these cost reductions through two kinds of mutually 

exclusive learning, “volume-based” and “time-based” which it continues to use in this 

proposal, as discussed below. 

In the 2008 NPRM, NHTSA applied learning factors to technology costs for the 

first time. These learning factors were developed using the parameters of learning 

threshold, learning rate, and the initial cost, and were based on the “experience curve” 

concept which describes reductions in production costs as a function of accumulated 

production volume. The typical curve shows a relatively steep initial decline in cost 

which flattens out to a gentle downwardly sloping line as the volume increase to large 

values. In the NPRM, NHTSA applied a learning rate discount of 20 percent for each 

successive doubling of production volume (on a per manufacturer basis), and a learning 

threshold of 25,000 units was assumed (thus a technology was viewed as being fully 

learned out at 100,000 units). The factor was only applied to certain technologies that 

were considered emerging or newly implemented on the basis that significant cost 

improvements would be achieved as economies of scale were realized (i.e., the 

technologies were on the steep part of the curve). 

In the MY 2011 final rule, NHTSA continued to use this learning factor, referring 

to it as volume-based learning since the cost reductions were determined by production 

volume increases, and again only applied it to emerging technologies. However, and in 

response to comments, NHTSA revised its assumptions on learning threshold, basing 

them instead on an industry-wide production basis, and increasing the threshold to 

300,000 units annually. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

75

Commenters to the 2008 NPRM also described another type of learning factor 

which NHTSA decided to adopt and implement in the MY 2011 final rule. Commenters 

described a relatively small negotiated cost decrease that occurred on an annual basis 

through contractual agreements with first tier component and systems suppliers for 

readily available, high volume technologies commonly in use by multiple OEMs. Based 

on the same experience curve principal, however at production volumes that were on the 

flatter part of the curve (and thus the types of volumes that represent annual industry 

volumes), NHTSA adopted this type learning and referred to it as time-based learning. 

An annual cost reduction of 3 percent in the second and each subsequent year, which was 

consistent with estimates from commenters and supported by work Ricardo conducted for 

NHTSA, was used in the final rule. 

In developing this proposal, NHTSA and EPA have reviewed both types of 

learning factors, and the thresholds (300,000) and reduction rates (20 percent for 

volume,70 3 percent for time-based) they rely on, and as implemented in the MY 2011 

final rule, and agreed that both factors continue to be accurate and appropriate; each 

agency has thus implemented time- and volume-based learning in their analyses. Noting 

that only one type of learning can be applied to any single technology, if any learning is 

applied at all, the agencies reviewed each to determine which learning factor was 

appropriate. Volume-based learning is applied to the higher complexity hybrid 

technologies, while no learning is applied to technologies likely to be affected by 

commodity costs (LUB, ROLL) or that have loosely-defined BOMs (EFR, LDB), as was 

the case in the MY 2011 final rule. Chapter 3 of the joint TSD shows the specific 

learning factors that NHTSA has applied in this analysis for each technology, and 

discusses learning factors and each agencies’ use of them further. NHTSA seeks 

comment on its use of learning factors, including the types, the thresholds, and the 

reduction rates proposed, and particularly on .the revisions to the learning (time- and 

volume-based) logic as compared to the MY 2011 final rule. 

Is the technology more or less effective due to synergistic effects?

When two or more technologies are added to a particular vehicle model to 

improve its fuel efficiency and reduce CO2 emissions, the resultant fuel consumption 

reduction may sometimes be higher or lower than the product of the individual 

effectiveness values for those items.71 This may occur because one or more technologies 

applied to the same vehicle partially address the same source (or sources) of engine, 

drivetrain or vehicle losses. Alternately, this effect may be seen when one technology 

 

70 NHTSA will conduct a sensitivity analysis on the volume-based learning value of 20 percent for the final 

rule. [Added in response to interagency comment]

71 More specifically, the products of the differences between one and the technology-specific levels of 

effectiveness in reducing fuel consumption. For example, not accounting for interactions, if technologies A 

and B are estimated to reduce fuel consumption by 10% (i.e., 0.1) and 20% (i.e., 0.2) respectively, the 

“product of the individual effectiveness values” would be 1 – 0.1 times 1 – 0.2, or 0.9 times 0.8, which 

equals 0.72, corresponding to a combined effectiveness of 28% rather than the 30% obtained by adding 

10% to 20%. The “synergy factors” discussed in this section further adjust these multiplicatively combined 

effectiveness values. 

Formatted: Font: 10 pt, Highlight
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

76

shifts the engine operating points, and therefore increases or reduces the fuel 

consumption reduction achieved by another technology or set of technologies. The 

difference between the observed fuel consumption reduction associated with a set of 

technologies and the product of the individual effectiveness values in that set is referred 

to for purposes of this rulemaking as a “synergy.” Synergies may be positive (increased 

fuel consumption reduction compared to the product of the individual effects) or negative 

(decreased fuel consumption reduction). An example of a positive synergy might be a 

vehicle technology that reduces road loads at highway speeds (e.g., lower aerodynamic 

drag or low rolling resistance tires), that could extend the vehicle operating range over 

which cylinder deactivation may be employed. An example of a negative synergy might 

be a variable valvetrain system technology, which reduces pumping losses by altering the 

profile of the engine speed/load map, and a six-speed automatic transmission, which 

shifts the engine operating points to a portion of the engine speed/load map where 

pumping losses are less significant. As the complexity of the technology combinations is 

increased, and the number of interacting technologies grows accordingly, it becomes 

increasingly important to account for these synergies. 

NHTSA and EPA determined synergistic impacts for this rulemaking using 

EPA’s “lumped parameter” analysis tool, which EPA described at length in its March 

2008 Staff Technical Report.72 The lumped parameter tool is a spreadsheet model that 

represents energy consumption in terms of average performance over the fuel economy 

test procedure, rather than explicitly analyzing specific drive cycles. The tool begins 

with an apportionment of fuel consumption across several loss mechanisms and accounts 

for the average extent to which different technologies affect these loss mechanisms using 

estimates of engine, drivetrain and vehicle characteristics that are averaged over the EPA 

fuel economy drive cycle. Results of this analysis were generally consistent with those of 

full-scale vehicle simulation modeling performed in 2007 by Ricardo, Inc. 

For the current rulemaking, NHTSA used the lumped parameter tool as modified 

in the MY 2011 CAFE final rule. NHTSA modified the lumped parameter tool from the 

version described in the EPA Staff Technical Report in response to public comments 

received in its rulemaking. The modifications included updating the list of technologies 

and their associated effectiveness values to match the updated list of technologies used in 

the final rule. NHTSA also expanded the list of synergy pairings based on further 

consideration of the technologies for which a competition for losses would be expected. 

These losses are described in more detail in Section V of the PRIA. 

NHTSA and EPA incorporate synergistic impacts in their analyses in slightly 

different manners. Because NHTSA applies technologies individually in its modeling 

analysis, NHTSA incorporates synergistic effects between pairings of individual 

technologies. The use of discrete technology pair incremental synergies is similar to that 

in DOE’s National Energy Modeling System (NEMS).73 Inputs to the Volpe model 

 

72 EPA Staff Technical Report: Cost and Effectiveness Estimates of Technologies Used to Reduce Lightduty Vehicle Carbon Dioxide Emissions; EPA420-R-08-008, March 2008. 

73 U.S. Department of Energy, Energy Information Administration, Transportation Sector Module of the 

National Energy Modeling System: Model Documentation 2007, May 2007, Washington, DC, DOE/EIA-
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

77

incorporate NEMS-identified pairs, as well as additional pairs from the set of 

technologies considered in the Volpe model. 

NHTSA notes that synergies that occur within a decision tree are already 

addressed within the incremental values assigned and therefore do not require a synergy 

pair to address. For example, all engine technologies take into account incremental 

synergy factors of preceding engine technologies, and all transmission technologies take 

into account incremental synergy factors of preceding transmission technologies. These 

factors are expressed in the fuel consumption improvement factors in the input files used 

by the Volpe model. 

For applying incremental synergy factors in separate path technologies, the Volpe 

model uses an input table (see the tables in Chapter 3 of the TSD and in the PRIA) which 

lists technology pairings and incremental synergy factors associated with those pairings, 

most of which are between engine technologies and transmission/electrification/hybrid 

technologies. When a technology is applied to a vehicle by the Volpe model, all 

instances of that technology in the incremental synergy table which match technologies 

already applied to the vehicle (either pre-existing or previously applied by the Volpe 

model) are summed and applied to the fuel consumption improvement factor of the 

technology being applied. Synergies for the strong hybrid technology fuel consumption 

reductions are included in the incremental value for the specific hybrid technology block 

since the model applies technologies in the order of the most effectiveness for least cost 

and also applies all available electrification and transmission technologies before 

applying strong hybrid technologies. NHTSA seeks comment on whether the synergistic 

effects presented are accurate, and whether there are other synergies that the agency may 

have overlooked. 

d. Where Ccan Readers Ffind Mmore Detailed Information about NHTSA’s 

Technology Analysis? 

 Much more detailed information is provided in Section V of the PRIA, and a 

discussion of how NHTSA and EPA jointly reviewed and updated technology 

assumptions for purposes of this NPRM is available in Chapter 3 of the TSD. 

Additionally, all of NHTSA’s model input and output files are now public and available 

for the reader’s review and consideration. The technology input files can be found in the 

docket for this NPRM, Docket No. NHTSA-2009-0059, and on NHTSA’s website.[in 

the docket and on the website]. And finally, because much of NHTSA’s technology 

analysis for purposes of this NPRM builds on the work that was done for the MY 2011 

final rule, we refer readers to that document as well for background information 

concerning how NHTSA’s methodology for technology application analysis has evolved 

over the past several rulemakings, both in response to comments and as a result of the 

agency’s growing experience with this type of analysis.74

 

M070(2007), at 29-30. Available at http://tonto.eia.doe.gov/ftproot/modeldoc/m070(2007).pdf (last 

accessed Jul. 6, 2009). 

74 74 FR 14233-308 (Mar. 30, 2009). 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

78

3. How Ddid NHTSA Ddevelop the Eeconomic Aassumption Iinputs?

NHTSA’s preliminary analysis of alternative CAFE standards for the model years 

covered by this proposed rulemaking relies on a range of forecast variables, economic 

assumptions, and parameter values. This section describes the proposed sources of these 

forecasts, the rationale underlying each assumption, and the agency’s preliminary choices 

of specific parameter values These proposed economic values play a significant role in 

determining the benefits of alternative CAFE standards, as they have for the last several 

CAFE rulemakings. Under those alternatives where standards would be established by 

reference to their costs and benefits, these economic values also affect the levels of the 

CAFE standards themselves. Some of these variables have more important effects on the 

level of CAFE standards and the benefits from requiring alternative increases in fuel 

economy than do others. 

In reviewing these variables and the agency’s estimates of their values for 

purposes of this NPRM, NHTSA reconsidered previous comments it had received and 

reviewed newly available literature. As a consequence, the agency elected to revise some 

of its economic assumptions and parameter estimates, while retaining others. Some of 

the most important changes, which are discussed in greater detail below, as well as in 

Chapter 4 of the joint TSD and in Chapter VIII of the PRIA, include significant revisions 

to the markup factors for technology costs; reducing the rebound effect from 15 to 10 

percent; and revising the value of reducing CO2 emissions based on recent interagency 

efforts to develop estimates of this value for government-wide use. For the reader’s 

reference, Table IV.C.3-1 below summarizes the values used to calculate the economic 

benefits from each alternative. The agency seeks comment on the economic assumptions 

presented in the table and discussed below. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

79

Table IV.C.3-1. Economic Values for Benefits Computations (2007$) 

Fuel Economy Rebound Effect 10%

"Gap" between test and on-road MPG 20%

Value of refueling time per ($ per vehicle-hour) $ 24.64

Annual growth in average vehicle use 1.1%

Fuel Prices (2012-50 average, $/gallon) 

Retail gasoline price $3.77

Pre-tax gasoline price $3.40

Economic Benefits from Reducing Oil Imports ($/gallon) 

"Monopsony" Component $ 0.00

Price Shock Component $ 0.17

Military Security Component $ 0.00

Total Economic Costs ($/gallon) $ 0.17

Emission Damage Costs (2020, $/ton or $/metric ton)

Carbon monoxide $ 0

Volatile organic compounds (VOC) $ 1,283

Nitrogen oxides (NOx) – vehicle use $ 5,116

Nitrogen oxides (NOx) – fuel production and distribution $ 5,339

Particulate matter (PM2.5) – vehicle use $ 238,432

Particulate matter (PM2.5) – fuel production and distribution $ 292,180

Sulfur dioxide (SO

2) $ 30,896

Carbon dioxide (CO

2) $ 20

Annual Increase in CO

2 Damage Cost 3%

External Costs from Additional Automobile Use ($/vehiclemile) 

Congestion $ 0.054

Accidents $ 0.023

Noise $ 0.001

Total External Costs $ 0.078

External Costs from Additional Light Truck Use ($/vehiclemile) 

Congestion $0.048

Accidents $0.026

Noise $0.001

Total External Costs $0.075

Discount Rate Applied to Future Benefits 3%

a. Costs of Fuel Economyi

Improving Technologies 

We developed detailed estimates of the costs of applying fuel economy-improving 

technologies to vehicle models jointly with EPA for use in analyzing the impacts of 

alternative standards considered in this rulemaking. The estimates were based on those 

reported by the 2002 NAS Report analyzing costs for increasing fuel economy, but were 

Formatted ... [50]

Formatted ... [51]

Formatted ... [52]

Formatted ... [53]

Formatted ... [54]

Formatted ... [55]

Formatted ... [56]

Formatted ... [57]

Formatted ... [58]

Formatted ... [59]

Formatted ... [60]

Formatted ... [61]

Formatted ... [62]

Formatted ... [63]

Formatted ... [64]

Formatted ... [65]

Formatted ... [66]

Formatted ... [67]

Formatted ... [68]

Formatted ... [69]

Formatted ... [70]

Formatted ... [71]

Formatted ... [72]

Formatted ... [73]

Formatted ... [74]

Formatted ... [75]

Formatted ... [76]

Formatted ... [77]

Formatted ... [78]

Formatted ... [79]

Formatted ... [80]

Formatted ... [81]

Formatted ... [82]

Formatted ... [83]

Formatted ... [84]

Formatted ... [85]

Formatted ... [86]

Formatted ... [87]

Formatted ... [88]

Formatted ... [89]

Formatted ... [90]

Formatted ... [91]

Formatted ... [92]

Formatted ... [93]

Formatted ... [94]

Formatted ... [95]

Formatted ... [96]

Formatted ... [97]

Formatted ... [98]

Formatted ... [99]

Formatted ... [100]

Formatted ... [101]

Formatted ... [102]

Formatted ... [103]

Formatted ... [104]

Formatted ... [105]

Formatted ... [106]

Formatted 

[107]
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

80

modified for purposes of this analysis as a result of extensive consultations among 

engineers from NHTSA, EPA, and the Volpe Center. As part of this process, the agency 

also developed varying cost estimates for applying certain fuel economy technologies to 

vehicles of different sizes and body styles. We may adjust these cost estimates based on 

comments received to this NPRM. 

The technology cost estimates used in this analysis are intended to represent 

manufacturers’ direct costs for high-volume production of vehicles with these 

technologies and sufficient experience with their application so that all remaining cost 

reductions due to “learning curve” effects have been fully realized. However, NHTSA 

recognizes that manufacturers’ actual costs for employing these technologies include 

additional outlays for accompanying design or engineering changes to models that use 

them, development and testing of prototype versions, recalibrating engine operating 

parameters, and integrating the technology with other attributes of the vehicle. 

Manufacturers’ indirect costs for employing these technologies also include expenses for 

product development and integration, modifying assembly processes and training 

assembly workers to install them, increased expenses for operation and maintaining 

assembly lines, higher initial warranty costs for new technologies, any added expenses 

for selling and distributing vehicles that use these technologies, and manufacturer and 

dealer profit. In previous CAFE rulemakings and in NHTSA’s safety rulemakings, the 

agency has accounted for these additional costs by using a Retail Price Equivalent (RPE) 

multiplier of 1.5. For purposes of this rulemaking, based on recent work by EPA, 

NHTSA has applied indirect cost multipliers ranging from 1.11 to 1.64 to the estimates of 

vehicle manufacturers’ direct costs for producing or acquiring each technology to 

improve fuel economy.75 These multipliers vary with the complexity of each technology 

and the time frame over which costs are estimated. More complex technologies are 

associated with higher multipliers because of the larger increases in manufacturers’ 

indirect costs for developing, producing (or procuring), and deploying these more 

complex technologies. The appropriate multipliers decline over time for technologies of 

all complexity levels, since increased familiarity and experience with their application is 

assumed to reduce manufacturers’ indirect costs for employing them. NHTSA seeks 

comment regarding the new indirect cost multiplier approach to technology costs 

estimates. We note additionally that this issue will be addressed in the upcoming revised 

NAS report.

b. Potential Opportunity Costs of Improved Fuel Economy 

An important concern is whether achieving the fuel economy improvements 

required by alternative CAFE standards would require manufacturers to compromise the 

performance, carrying capacity, safety, or comfort of their vehicle models. To the extent 

that it does so, the resulting sacrifice in the value of these attributes to consumers 

represents an additional cost of achieving the required improvements in fuel economy. 

 

75 NHTSA notes that in addition to the technology cost analysis employing this “ICM” approach, the PRIA 

contains a sensitivity analysis using a technology cost multiplier of 1.5.
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

81

While exact dollar values of these attributes to consumers are difficult to infer, 

differences in vehicle purchase prices and buyers’ choices among competing models that 

feature different combinations of these characteristics clearly demonstrate that changing 

vehicle attributes clearly affect the utility and economic value that vehicles provide to 

potential buyers.76

NHTSA and EPA have approached this potential problem by developing cost 

estimates for fuel economy-improving technologies that include any additional 

manufacturing costs that would be necessary to maintain the originally planned levels of 

performance, comfort, carrying capacity, and safety of any light-duty vehicle model to 

which those technologies are applied. In doing so, the agencies followed the precedent 

established by the 2002 NAS Report, which estimated “constant performance and utility” 

costs for fuel economy technologies. NHTSA has used these as the basis for its 

continuing efforts to refine the technology costs it uses to analyze manufacturer’s costs 

for complying with alternative passenger car and light truck CAFE standards for MYs 

2012-2016. Although the agency has revised its estimates of manufacturers’ costs for 

some technologies significantly for use in this rulemaking, these revised estimates are 

still intended to represent costs that would allow manufacturers to maintain the 

performance, carrying capacity, and utility of vehicle models while improving their fuel 

economy. 

Although we believe that our tentative cost estimates for fuel economy-improving 

technologies should be generally sufficient to prevent significant reductions in consumer 

welfare provided by vehicle models to which manufacturers apply those technologies, it 

is possible that they do not include adequate allowance for the necessary efforts by 

manufacturers to prevent sacrifices in these attributes on all vehicle models. If this is the 

case, the true economic costs of achieving higher fuel economy should include the 

opportunity costs to vehicle owners of any sacrifices in vehicles’ performance, carrying 

capacity, and utility and the agency’s estimated technology costs would underestimate the 

true economic costs of improving fuel economy. 

Recognizing this possibility, it may be preferable for NHTSA to estimate 

explicitly the changes in vehicle buyers’ welfare from the combination of higher prices 

for new vehicle models, increases in their fuel economy, and any accompanying changes 

in vehicle attributes such as performance, passenger- and cargo-carrying capacity, or 

other dimensions of utility. The net change in buyer’s welfare that results from the 

combination of these changes would provide a more accurate estimate of the true 

economic costs for improving fuel economy. The agency seeks comment on this or other 

possible ways to deal with this extremely important issue. 

 

76 See, e.g., Kleit A.N., 1990. “The Effect of Annual Changes in Automobile Fuel Economy Standards.” 

Journal of Regulatory Economics 2: 151-172; Berry, Steven, James Levinsohn, and Ariel Pakes, 1995. 

“Automobile Prices in Market Equilibrium,” Econometrica 63(4): 841-940; McCarthy, Patrick S., 1996. 

“Market Price and Income Elasticities of New Vehicle Demands.” Review of Economics and Statistics 78: 

543-547; and Goldberg, Pinelopi K., 1998. “The Effects of the Corporate Average Fuel Efficiency 

Standards in the US,” Journal of Industrial Economics 46(1): 1-33. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

82

c. The On-Rroad Fuel Economy “Gap” 

Actual fuel economy levels achieved by light-duty vehicles in on-road driving fall 

somewhat short of their levels measured under the laboratory-like test conditions used by 

EPA to establish its published fuel economy ratings for different models. In analyzing 

the fuel savings from alternative CAFE standards, NHTSA has previously adjusted the 

actual fuel economy performance of each light truck model downward from its rated 

value to reflect the expected size of this on-road fuel economy “gap.” On December 27, 

2006, EPA adopted changes to its regulations on fuel economy labeling, which were 

intended to bring vehicles’ rated fuel economy levels closer to their actual on-road fuel 

economy levels.77

 

In its Final Rule, EPA estimated that actual on-road fuel economy for light-duty 

vehicles averages 20 percent lower than published fuel economy levels. For example, if 

the overall EPA fuel economy rating of a light truck is 20 mpg, the on-road fuel economy 

actually achieved by a typical driver of that vehicle is expected to be 16 mpg (20*.80). 

NHTSA employed EPA’s revised estimate of this on-road fuel economy gap in its 

analysis of the fuel savings resulting from alternative CAFE standards evaluated in the 

MY 2011 final rule. 

For purposes of this NPRM, NHTSA conducted additional analysis of this issue. 

The agency used data on the number of passenger cars and light trucks of each model 

year that were registered for use during calendar years 2000 through 2006, average fuel 

economy for passenger cars and light trucks produced during each model year, and 

estimates of average miles driven per year by cars and light trucks of different ages. 

These data were combined to develop estimates of the average fuel economy that the U.S. 

passenger car and light truck fleets would have achieved from 2000 through 2006 under 

test conditions. 

NHTSA compared these estimates to the Federal Highway Administration’s 

(FHWA) published values of actual on-road fuel economy for passenger cars and light 

trucks during each of those years.78 FHWA’s estimates of actual fuel economy for 

passenger cars averaged 22 percent lower than NHTSA’s estimates of its fleet-wide 

average value under test conditions over this period, while FHWA’s estimates for light 

trucks averaged 17 lower than NHTSA’s estimates of average light truck fuel economy 

under test conditions. These results appear to confirm that the 20 percent on-road fuel 

economy discount or gap represents a reasonable estimate for use in evaluating the fuel 

savings likely to result from alternative CAFE standards for MY 2012-2016 vehicles. 

d. Fuel Prices and the Value of Saving Fuel 

Projected future fuel prices are a critical input into the preliminary economic 

analysis of alternative CAFE standards, because they determine the value of fuel savings 

 

77 71 FR 77871 (Dec. 27, 2006). 

78 Federal Highway Administration, Highway Statistics, 2000 through 2006 editions, Table VM-1; see

http://www.fhwa.dot.gov/policy/ohpi/hss/hsspubs.cfm (last accessed July 27, 2009). 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

83

both to new vehicle buyers and to society. NHTSA relied on the most recent fuel price 

projections from the U.S. Energy Information Administration’s (EIA) Annual Energy 

Outlook (AEO) for this analysis. Specifically, we used the AEO 2009 (April 2009 

release) Reference Case forecasts of inflation-adjusted (constant-dollar) retail gasoline 

and diesel fuel prices, which represent the EIA’s most up-to-date estimate of the most 

likely course of future prices for petroleum products.79 

While NHTSA relied on the forecasts of fuel prices presented in AEO 2008 High 

Price Case in the MY 2011 final rule, we noted at the time that we were relying on that 

estimate primarily because volatility in the oil market appeared to have overtaken the 

Reference Case, and that we anticipated that the Reference Case forecast would be 

significantly higher in the next AEO. In fact, EIA’s AEO 2009 Reference Case forecast 

projects higher retail fuel prices in most future years than those forecast in the High Price 

Case from AEO 2008. NHTSA is thus confident that the AEO 2009 Reference Case is 

an appropriate forecast for projected future fuel prices. 

Measured in constant 2007 dollars, the Reference Case forecast of retail gasoline 

prices during calendar year 2020 is $3.62 per gallon, rising gradually to $3.82 by the year 

2030 (these values include federal, state and local taxes). To obtain fuel price forecasts 

for the years 2031 through 2050, the agency assumes that retail fuel prices will continue 

to increase after 2030 at the average annual rates projected for 2020-2030 in the AEO 

2009 Revised Reference Case.80 This assumption results in a projected retail price of 

gasoline that reaches $4.25 in 2007 dollars by the year 2050. 

The value of fuel savings resulting from improved fuel economy to buyers of 

light-duty vehicles is determined by the retail price of fuel, which includes federal, state, 

and any local taxes imposed on fuel sales. Total taxes on gasoline, including federal, 

state, and local levies averaged $0.42 per gallon during 2006, while those levied on diesel 

averaged $0.50. Because fuel taxes represent transfers of resources from fuel buyers to 

government agencies, however, rather than real resources that are consumed in the 

process of supplying or using fuel, their value must be deducted from retail fuel prices to 

determine the value of fuel savings resulting from more stringent CAFE standards to the 

U.S. economy as a whole. 

NHTSA follows the assumptions used by EIA in AEO 2009 that state and local 

gasoline taxes will keep pace with inflation in nominal terms, and thus remain constant 

when expressed in constant 2007 dollars. In contrast, EIA assumes that federal gasoline 

taxes will remain unchanged in nominal terms, and thus decline throughout the forecast 

 

79 Energy Information Administration, Annual Energy Outlook 2009, Revised Updated Reference Case 

(April 2009), Table 12. Available at

http://www.eia.doe.gov/oiaf/servicerpt/stimulus/excel/aeostimtab_12.xls (last accessed July 26, 2009). 

EIA’s Updated Reference Case reflects the effects of the American Reinvestment and Recovery Act of 

2009, as well as the most recent revisions to the U.S. and global economic outlook. 

80 This projection uses the rate of increase in fuel prices for 2020-2030 rather than that over the complete 

forecast period (2009-2030) because there is extreme volatility in the forecasts for the years 2009 through 

approximately 2020. Using the average rate of change over the complete 2009-2030 forecast period would 

result in projections of declining fuel prices after 2030. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

84

period when expressed in constant 2007 dollars. These differing assumptions about the 

likely future behavior of federal and state/local fuel taxes are consistent with recent 

historical experience, which reflects the fact that federal as well as most state motor fuel 

taxes are specified on a cents-per-gallon basis, and typically require legislation to change. 

The projected value of total taxes is deducted from each future year’s forecast of 

retail gasoline and diesel prices reported in AEO 2009 to determine the economic value 

of each gallon of fuel saved during that year as a result of improved fuel economy. 

Subtracting fuel taxes results in a projected value for saving gasoline of $3.22 per gallon 

during 2020, rising to $3.45 per gallon by the year 2030. 

EIA includes “High Price Case” and “Low Price Case” forecasts in each AEO, 

which reflect uncertainties regarding future levels of oil production and demand. These 

alternative scenarios project retail gasoline prices that range from a low of $2.02 to a high 

of $5.04 per gallon during 2020, and from $2.04 to $5.47 per gallon during 2030. In 

conjunction with our assumption that fuel taxes will remain constant in real or inflationadjusted terms over this period, these forecasts imply pre-tax values of saving fuel 

ranging from $1.63 to $4.65 per gallon during 2020, and from $1.67 to $5.10 per gallon 

in 2030. In conducting the preliminary analysis of uncertainty in benefits and costs from 

alternative CAFE standards required by OMB, NHTSA evaluated the sensitivity of its 

benefits estimates to these alternative forecasts of future fuel prices. The results of this 

sensitivity analysis can be found in the PRIA. 

e. Consumer Valuation of Fuel Economy and Payback Period 

In estimating the value of fuel economy improvements that would result from 

alternative CAFE standards to potential vehicle buyers, NHTSA assumes, as in the MY 

2011 final rule, that buyers value the resulting fuel savings over only part of the expected 

lifetime of the vehicles they purchase. Specifically, we assume that buyers value fuel 

savings over the first five years of a new vehicle’s lifetime, and discount the value of 

these future fuel savings at a 3 percent annual rate.

81

 The five-year figure represents 

approximately the current average term of consumer loans to finance the purchase of new 

vehicles. We recognize that the period over which individual buyers finance new vehicle 

purchases may not correspond exactly to the time horizons they apply in valuing fuel 

savings from higher fuel economy.

The agency deducts the discounted present value of fuel savings over the first five 

years of a vehicle model’s lifetime from the technology costs incurred by its 

manufacturer to improve that model’s fuel economy to determine the increase in its 

“effective price” to buyers.. The Volpe model uses these estimates of effective costs for 

increasing the fuel economy of each vehicle model to identify the order in which 

manufacturers would be likely to select models for the application of fuel economy-

 

81 The five-year figure represents approximately the current average term of consumer loans to finance the 

purchase of new vehicles. We recognize that the period over which individual buyers finance new vehicle 

purchases may not correspond exactly to the time horizons they apply in valuing fuel savings from higher 

fuel economy. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

85

improving technologies in order to comply with stricter standards. The average value of 

the resulting increase in effective cost from each manufacturer’s simulated compliance 

strategy is also used to estimate the impact of alternative standards on its total sales for 

future model years. 

However, it is important to recognize that NHTSA estimates the aggregate value 

to the U.S. economy of fuel savings resulting from alternative standards – or their 

“social” value – over the entire expected lifetimes of vehicles manufactured under those 

standards, rather than over this shorter “payback period” we assume for their buyers. The 

procedure the agency uses for doing so is discussed in detail in the following section.

f. Vehicle Survival and Use Assumptions 

NHTSA’s first step in estimating lifetime fuel consumption by vehicles produced 

during a model year is to calculate the number expected to remain in service during each 

year following their production and sale.82 This is calculated by multiplying the number 

of vehicles originally produced during a model year by the proportion typically expected 

to remain in service at their age during each later year, often referred to as a “survival 

rate.” 

To estimate production volumes of passenger cars and light trucks for individual 

manufacturers, NHTSA relied on a baseline market forecast constructed by EPA staff 

beginning with MY 2008 CAFE certification data. After constructing a MY 2008 

baseline, EPA used projected car and truck volumes for this period from Energy 

Information Administration’s (EIA’s) 2009 Annual Energy Outlook (AEO).83

 However, 

AEO projects sales only at the car and truck level, not at the manufacturer and modelspecific level, which are needed in order to estimate the effects new standards will have 

on individual manufacturers.84 Therefore, EPA purchased data from CSM-Worldwide 

and used their projections of the number of vehicles of each type predicted to be sold by 

 

82 Vehicles are defined to be of age 1 during the calendar year corresponding to the model year in which

they are produced; thus for example, model year 2000 vehicles are considered to be of age 1 during 

calendar year 2000, age 1 during calendar year 2001, and to reach their maximum age of 26 years during

calendar year 2025. NHTSA considers the maximum lifetime of vehicles to be the age after which less 

than 2 percent of the vehicles originally produced during a model year remain in service. Applying these 

conventions to vehicle registration data indicates that passenger cars have a maximum age of 26 years,

while light trucks have a maximum lifetime of 36 years. See Lu, S., NHTSA, Regulatory Analysis and 

Evaluation Division, “Vehicle Survivability and Travel Mileage Schedules,” DOT HS 809 952, 8-11 

(January 2006). Available at http://www-nrd.nhtsa.dot.gov/Pubs/809952.pdf (last accessed July 27, 2009).

83 Available at http://www.eia.doe.gov/oiaf/aeo/index.html. NHTSA and EPA made the simplifying 

assumption that projected sales of cars and light trucks during each calendar year from 2012 through 2016 

represented the likely production volumes for the corresponding model year. The agency did not attempt to 

establish the exact correspondence between projected sales during individual calendar years and production 

volumes for specific model years. 

84 Because AEO 2009’s “car” and “truck” classes did not reflect NHTSA’s recent reclassification (in March 

2009 for enforcement beginning MY 2011) of many two wheel drive SUVs from the nonpassenger (i.e., 

light truck) fleet to the passenger car fleet, EPA staff made adjustments to account for such vehicles in the 

baseline. 

Formatted: Indent: Left: 0"

Formatted: Font: 10 pt, Italic
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

86

manufacturers in 2011-2015.85 This provided the year-by-year percentages of cars and 

trucks sold by each manufacturer as well as the percentages of each vehicle segment. 

Although it was thus necessary to assume the same manufacturer and segment shares in 

2016 as in 2015, 2016 estimates from CSM should be available for the final rule. Using 

these percentages normalized to the AEO projected volumes then provided the 

manufacturer-specific market share and model-specific sales for model years 2011-2016.

To estimate the number of passenger cars and light trucks originally produced 

during model years 2012 through 2016 that will remain in use during each subsequent 

year the agency applied age-specific survival rates for cars and light trucks to these 

adjusted forecasts of passenger car and light truck sales. In 2008, NHTSA updated its 

previous estimates of car and light truck survival rates using the most current registration 

data for vehicles produced during recent model years, in order to ensure that they 

reflected recent increases in the durability and expected life spans of cars and light 

trucks.86

 

The next step in estimating fuel use is to calculate the total number of miles that 

model year 2012-2016 cars and light trucks remaining in use will be driven each year. 

To estimate total miles driven, the number projected to remain in use during each future 

year is multiplied by the average number of miles they are expected to be driven at the 

age they will reach in that year. The agency estimated annual usage of cars and light 

trucks of each age using data from the Federal Highway Administration’s 2001 National 

Household Transportation Survey (NHTS).87 Because these estimates reflect the 

historically low gasoline prices that prevailed at the time the 2001 NHTS was conducted, 

however, NHTSA adjusted them to account for the effect on vehicle use of subsequent 

increases in fuel prices. Details of this adjustment are provided in Chapter VIII of the 

PRIA and Chapter of the draft joint TSD. 

Increases in average annual use of cars and light trucks have been an important 

source of historical growth in the total number of miles they are driven each year. To 

estimate future growth in their average annual use for purposes of this rulemaking, 

NHTSA calculated the rate of growth in the adjusted mileage schedules derived from the 

2001 NHTS necessary for total car and light truck travel to increase at the rate forecast in 

the AEO 2009 Reference Case.88 This rate was calculated to be consistent with future 

changes in the overall size and age distributions of the U.S. passenger car and light truck 

fleets that result from the agency’s forecasts of total car and light truck sales and updated 

 

85 EPA also considered other sources of similar information, such as J.D. Powers, and concluded that CSM

was better able to provide forecasts at the requisite level of detail for most of the model years of interest. 

86 Lu, S., NHTSA, Regulatory Analysis and Evaluation Division, “Vehicle Survivability and Travel 

Mileage Schedules,” DOT HS 809 952, 8-11 (January 2006). Available at http://wwwnrd.nhtsa.dot.gov/Pubs/809952.pdf (last accessed August 9, 2009). These updated survival rates suggest 

that the expected lifetimes of recent-model passenger cars and light trucks are 13.8 and 14.5 years. 

87 For a description of the Survey, see http://nhts.ornl.gov/quickStart.shtml (last accessed August 9, 2009). 

88 This approach differs from that used in the MY 2011 final rule, where it was assumed that future growth 

in the total number of cars and light trucks in use resulting from projected sales of new vehicles was

adequate by itself to account for growth in total vehicle use, without assuming continuing growth in 

average vehicle use. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

87

survival rates. The resulting growth rate in average annual car and light truck use of 

approximately 1.1 percent per year was applied to the mileage figures derived from the 

2001 NHTS to estimate annual mileage during each year of the expected lifetimes of MY 

2012-2016 cars and light trucks.89 

Finally, the agency estimated total fuel consumption by passenger cars and light trucks 

remaining in use each year by dividing the total number of miles surviving vehicles are driven 

by the fuel economy they are expected to achieve under each alternative CAFE standard. Each 

model year’s total lifetime fuel consumption is the sum of fuel use by the cars or light trucks 

produced during that model year during each year of their life spans. In turn, the savings in a 

model year’s lifetime fuel use that will result from each alternative CAFE standard is the 

difference between its lifetime fuel use at the fuel economy level it attains under the Baseline 

alternative, and its lifetime fuel use at the higher fuel economy level it is projected to achieve 

under that alternative standard.90 

g. Accounting for the Rebound Effect of Higher Fuel Economy 

The fuel economy rebound effect refers to the fraction of fuel savings expected to 

result from an increase in vehicle fuel economy – particularly an increase required by the 

adoption of higher CAFE standards – that is offset by additional vehicle use. The 

increase in vehicle use occurs because higher fuel economy reduces the fuel cost of 

driving, typically the largest single component of the monetary cost of operating a 

vehicle, and vehicle owners respond to this reduction in operating costs by driving 

slightly more. By lowering the marginal cost of vehicle use, improved fuel economy may 

lead to an increase in the number of miles vehicles are driven each year and over their 

lifetimes. Even with their higher fuel economy, this additional driving consumes some 

fuel, so the rebound effect reduces the net fuel savings that result when new CAFE 

standards require manufacturers to improve fuel economy. 

The magnitude of the rebound effect is an important determinant of the actual fuel 

savings that are likely to result from adopting stricter CAFE standards. Research on the 

magnitude of the rebound effect in light-duty vehicle use dates to the early 1980s, and 

 

89 While the adjustment for future fuel prices reduces average mileage at each age from the values derived 

from the 2001 NHTS, the adjustment for expected future growth in average vehicle use increases it. The 

net effect of these two adjustments is to increase expected lifetime mileage by about 18 percent 

significantly for both passenger cars and about 16 percent for light trucks. 

90 To illustrate these calculations, the agency’s adjustment of the AEO 2009 Revised Reference Case 

forecast indicates that 9.26 million passenger cars will be produced during 2012, and the agency’s updated 

survival rates show that 83 percent of these vehicles, or 7.64 million, are projected to remain in service 

during the year 2022, when they will have reached an age of 10 years. At that age, passenger achieving the 

fuel economy level they are projected to achieve under the Baseline alternative are driven an average of 

about 800 miles, so surviving model year 2012 passenger cars will be driven a total of 82.5 billion miles (= 

7.64 million surviving vehicles x 10,800 miles per vehicle) during 2022. Summing the results of similar 

calculations for each year of their 26-year maximum lifetime, model year 2012 passenger cars will be 

driven a total of 1,395 billion miles under the Baseline alternative. Under that alternative, they are 

projected to achieve a test fuel economy level of 32.4 mpg, which corresponds to actual on-road fuel 

economy of 25.9 mpg (= 32.4 mpg x 80 percent). Thus their lifetime fuel use under the Baseline 

alternative is projected to be 53.9 billion gallons (= 1,395 billion miles divided by 25.9 miles per gallon). 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

88

generally concludes that a statistically significant rebound effect occurs when vehicle fuel 

efficiency improves.91 The agency reviewed studies of the rebound effect it had 

previously relied upon, considered more recently published estimates, and developed new 

estimates of its magnitude for purposes of this NPRM.92 Recent studies provide clear 

some evidence that the rebound effect has been declining over time, and mayis likely to

decline further over the immediate future if incomes rise faster than gasoline prices. This 

result appears plausible, because the responsiveness of vehicle use to variation in fuel 

costs is expected to decline as they account for a smaller proportion of the total monetary 

cost of driving, which has been the case until very recently. At the same time, rising 

personal incomes would be expected to reduce the sensitivity of vehicle use to fuel costs 

as the time component of driving costs – which is likely to be related to income levels – 

accounts for a larger fraction the total cost of automobile travel. NHTSA developed new 

estimates of the rebound effect by using national data on light-duty vehicle travel over the 

period from 1950 through 2006 to estimate various econometric models of the 

relationship between vehicle miles-traveled and factors likely to influence it, including 

household income, fuel prices, vehicle fuel efficiency, road supply, the number of 

vehicles in use, vehicle prices, and other factors.93 The results of NHTSA’s analysis are 

consistent with the findings from other recent research: the average long-run rebound 

effect ranged from 16 percent to 30 percent over the period from 1950 through 2007, 

while estimates of the rebound effect in 2007 range from 8 percent to 14 percent. 

Projected values of the rebound effect for the period from 2010 through 2030, which the 

agency developed using forecasts of personal income, fuel prices, and fuel efficiency 

from AEO 2009’s Reference Case, range from 4 percent to 16 percent, depending on the 

specific model used to generate them. 

In light of these results, the agency’s judgment is that the apparent decline over 

time in the magnitude of the rebound effect justifies using a value for future analysis that 

is lower than historical estimates, which average 15-25 percent. Because the lifetimes of 

vehicles affected by the alternative CAFE standards considered in this rulemaking will 

extend from 2012 until nearly 2050, a value that is significantly lower than historical 

estimates appears to be appropriate. Thus NHTSA has elected to use a 10 percent 

rebound effect in its analysis of fuel savings and other benefits from higher CAFE 

standards for this NPRM. 

 NHTSA also invites comment on other alternatives for estimating the rebound 

effect. As one illustration, variation in the price per gallon of gasoline directly affects the 

per-mile cost of driving, and drivers may respond just as they would to a change in the 

cost of driving resulting from a change in fuel economy, by varying the number of miles 

 

91 Some studies estimate that the long-run rebound effect is significantly larger than the immediate 

response to increased fuel efficiency. Although their estimates of the adjustment period required for the 

rebound effect to reach its long-run magnitude vary, this long-run effect is most appropriate for evaluating 

the fuel savings and emissions reductions resulting from stricter standards that would apply to future model 

years. 

92 For details of the agency’s analysis, see Chapter VIII of the PRIA and Chapter 4 of the draft joint TSD 

accompanying this proposed rule. 

93 The agency used several different model specifications and estimation procedures to control for the effect 

of fuel prices on fuel efficiency in order to obtain accurate estimates of the rebound effect. 

Comment [r8]: Revised at OMB’s request. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

89

they drive. Because vehicles’ fuel economy is fixed in the short run, variation in the 

number of miles driven in response to changes in fuel prices will be reflected in changes 

in gasoline consumption. Under the assumption that drivers respond similarly to changes 

in the cost of driving whether they are caused by variation in fuel prices or fuel economy, 

the short-run price elasticity of gasoline – which measures the sensitivity of gasoline 

consumption to changes in its price per gallon – may provide some indication about the 

magnitude of the rebound effect itself. NHTSA invites comment on the extent to which 

the short-run elasticity of demand for gasoline with respect to its price can provide useful 

information about the size of the rebound effect. Specifically, we seek comment on 

whether it would be appropriate to use the price elasticity of demand for gasoline, or 

other alternative approaches, to guide the choice of a value for the rebound effect.

Additionally, NHTSA recognizes that as the world price of oil falls in response to 

lower U.S. demand for oil, there is the potential for an increase in oil use and, in turn, 

greenhouse gas emissions outside the U.S. This so called international oil “take back” 

effect is difficult to estimate. Given that oil consumption patterns vary across countries, 

there will be different demand responses to a change in the world price of crude oil. In 

addition, many countries around the world subsidize their oil consumption. It is not clear 

how oil consumption would change due to changes in the market price of oil given the 

current pattern of demand and subsidies. Further, many countries, especially in the 

developed countries/regions (i.e., the European Union), already have or anticipate 

implementing policies to limit GHG emissions. Further out in the future, it is anticipated 

that developing countries would take actions to reduce their GHG emissions as well. 

Any increases in petroleum consumption and GHG emissions in other nations that occurs 

in response to a decline in world petroleum prices would be attributed to those nations, 

and recorded in their respective GHG emissions inventories. Thus, including the same 

increase in emissions as part of the impact of adopting CAFE standards in the U.S. would 

risk double-counting of global emissions totals. NHTSA seeks comment on how to 

estimate the international “take back” effect and its impact on fuel consumption and 

GHG emissions. See the Energy Security section of the TSD, 4.2.8, for more discussion 

of the impact of the proposed vehicle rule on oil markets.

h. Benefits from Increased Vehicle Use 

The increase in vehicle use from the rebound effect provides additional benefits to 

their owners, who may make more frequent trips or travel farther to reach more desirable 

destinations. This additional travel provides benefits to drivers and their passengers by 

improving their access to social and economic opportunities away from home. As 

evidenced by their decisions to make more frequent or longer trips when improved fuel 

economy reduces their costs for driving, the benefits from this additional travel exceed 

the costs drivers and passengers incur in making more frequent or longer trips. 

The agency’s analysis estimates the economic benefits from increased reboundeffect driving as the sum of fuel costs drivers incur plus the consumer surplus they 

Comment [r9]: Added at OMB’s request 

Comment [r10]: Added in response to 

interagency comment. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

90

receive from the additional accessibility it provides.

94 Because the increased in travel 

depend on the extent of improvement in fuel economy, the value of benefits it provides 

differs among model years and alternative CAFE standards. Under even those 

alternatives that would impose the highest standards, however, the magnitude of these 

benefits represents a small fraction of total benefits. 

i. The Value of Increased Driving Range 

Improving vehicles’ fuel economy may also increase their driving range before 

they require refueling. By reducing the frequency with which drivers typically refuel, 

and by extending the upper limit of the range they can travel before requiring refueling, 

improving fuel economy thus provides some additional benefits to their owners.95 

NHTSA re-examined this issue for purposes of this rulemaking, and found no 

information in comments or elsewhere that would cause the agency to revise its previous 

approach. Since no direct estimates of the value of extended vehicle range are available, 

NHTSA calculates directly the reduction in the annual number of required refueling 

cycles that results from improved fuel economy, and applies DOT-recommended values 

of travel time savings to convert the resulting time savings to their economic value.96 

As an illustration, a typical small light truck model has an average fuel tank size 

of approximately 20 gallons. Assuming that drivers typically refuel when their tanks are 

2055 percent full (i.e., 114 gallons in reserve), increasing this model’s actual on-road fuel 

economy from 24 to 25 mpg would extend its driving range from 384216 miles (= 169

gallons x 24 mpg) to 400 225 miles (= 916 gallons x 25 mpg). Assuming that it is driven 

12,000 miles/year, this reduces the number of times it needs to be refueled each year 

from 3155.36 (= 12,000 miles per year / 384216 miles per refueling) to 3053.03 (= 

12,000 miles per year / 400225 miles per refueling), or by 21.3 refuelings per year. 

Weighted by the nationwide mix of urban and rural driving, personal and 

business travel in urban and rural areas, and average vehicle occupancy for driving trips, 

the DOT-recommended values of travel time per vehicle-hour is $24.64 (in 2007 

dollars).97 Assuming that locating a station and filling up requires five minutes, the 

 

94 The consumer surplus provided by added travel is estimated as one-half of the product of the decline in 

fuel cost per mile and the resulting increase in the annual number of miles driven. 

95 If manufacturers respond to improved fuel economy by reducing the size of fuel tanks to maintain a 

constant driving range, the resulting cost saving will presumably be reflected in lower vehicle sales prices. 

96 See Department of Transportation, Guidance Memorandum, “The Value of Saving Travel Time: 

Departmental Guidance for Conducting Economic Evaluations,” Apr. 9, 1997. 

http://ostpxweb.dot.gov/policy/Data/VOT97guid.pdf (last accessed August 9, 2009); update available at

http://ostpxweb.dot.gov/policy/Data/VOTrevision1_2-11-03.pdf (last accessed August 9, 2009). 

97 The hourly wage rate during 2008 is estimated to average $25.50 when expressed in 2007 dollars. 

Personal travel in urban areas (which represents 94 percent of urban travel) is valued at 50 percent of the 

hourly wage rate, while business travel (the remaining 6 percent of urban travel) is valued at 100 percent of 

the hourly wage rate. For intercity travel, personal travel (87 percent of total intercity travel) is valued at 

70 percent of the wage rate, while business travel (13 percent) is valued at 100 percent of the wage rate. 

The resulting values of travel time are $12.67 for urban travel and $17.66 for intercity travel, and must be 

multiplied by vehicle occupancy (1.6) to obtain the estimated values of time per vehicle hour in urban and 

rural driving. Finally, about 66% of driving occurs in urban areas, while the remaining 34% takes place in 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

91

annual value of time saved as a result of less frequent refueling amounts to $24.6572

(calculated as 5/60 x 21.3 x $24.64). This calculation is repeated for each future year that 

model year 2012-2016 cars and light trucks would remain in service. Like fuel savings 

and other benefits, the value of this benefit declines over a model year’s lifetime, because 

a smaller number of vehicles originally produced during that model year remain in 

service each year, and those remaining in service are driven fewer miles. 

NHTSA recognizes that many assumptions made in its estimate for the value of 

increased driving range are subject to uncertainty. Please see Chapter 4 of the TSD and 

Chapter 8 of NHTSA’s PRIA for more information about the uncertainty regarding these 

assumptions.

j. Added Costs from Congestion, Crashes and Noise 

Increased vehicle use associated with the rebound effect also contributes to 

increased traffic congestion, motor vehicle accidents, and highway noise. NHTSA relies 

on estimates of per-mile congestion, accident, and noise costs caused by increased use of 

automobiles and light trucks developed by the Federal Highway Administration to 

estimate these increased costs.98 NHTSA employed these estimates previously in its 

analysis accompanying the MY 2011 final rule, and continues to find them appropriate 

for this NPRM after reviewing the procedures used by FHWA to develop them and 

considering other available estimates of these values. The agency multiplies FHWA’s 

estimates of per-mile costs by the annual increases in automobile and light truck use from 

the rebound effect to yield the estimated increases in congestion, accident, and noise 

externality costs during each future year. 

k. Petroleum Consumption and Import Externalities 

U.S. consumption and imports of petroleum products also impose costs on the 

domestic economy that are not reflected in the market price for crude petroleum, or in the 

prices paid by consumers of petroleum products such as gasoline. These costs include (1) 

higher prices for petroleum products resulting from the effect of U.S. oil import demand 

on the world oil price; (2) the risk of disruptions to the U.S. economy caused by sudden 

reductions in the supply of imported oil to the U.S.; and (3) expenses for maintaining a 

U.S. military presence to secure imported oil supplies from unstable regions, and for 

maintaining the strategic petroleum reserve (SPR) to cushion against resulting price 

increases.99

 

 

rural areas, and these percentages are used to calculate a weighted average of the value of time in all 

driving. 

98 These estimates were developed by FHWA for use in its 1997 Federal Highway Cost Allocation Study; 

see http://www.fhwa.dot.gov/policy/hcas/final/index.htm (last accessed August 9, 2009). 

99 See, e.g., Bohi, Douglas R. and W. David Montgomery (1982). Oil Prices, Energy Security, and Import 

Policy Washington, DC: Resources for the Future, Johns Hopkins University Press; Bohi, D. R., and M. A. 

Toman (1993). "Energy and Security: Externalities and Policies," Energy Policy 21:1093-1109; and 

Toman, M. A. (1993). "The Economics of Energy Security: Theory, Evidence, Policy," in A. V. Kneese 

and J. L. Sweeney, eds. (1993). Handbook of Natural Resource and Energy Economics, Vol. III. 

Amsterdam: North-Holland, pp. 1167-1218.

Comment [r11]: Added in response to 

interagency comment 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

92

Higher U.S. imports of crude oil or refined petroleum products increase the 

magnitude of these external economic costs, thus increasing the true economic cost of 

supplying transportation fuels above their market prices. Conversely, lowering U.S. 

imports of crude petroleum or refined fuels by reducing domestic fuel consumption can 

reduce these external costs, and any reduction in their total value that results from 

improved fuel economy represents an economic benefit of more stringent CAFE 

standards, in addition to the value of saving fuel itself.. 

NHTSA has carefully reviewed its assumptions regarding the appropriate value of 

these benefits for this proposed rule. In analyzing benefits from its recent actions to 

increase light truck CAFE standards for model years 2005-07 and 2008-11, NHTSA 

relied on a 1997 study by Oak Ridge National Laboratory (ORNL) to estimate the value 

of reduced economic externalities from petroleum consumption and imports.100 More 

recently, ORNL updated its estimates of the value of these externalities, using the 

analytic framework developed in its original 1997 study in conjunction with recent 

estimates of the variables and parameters that determine their value.101 The updated 

ORNL study was subjected to a detailed peer review by experts selected by EPA, and its 

estimates of the value of oil import externalities were subsequently revised to reflect their 

comments and recommendations.102

 

At the request of EPA, ORNL further revised its 2008 estimates of external costs 

from U.S. oil imports to reflect recent changes in the outlook for world petroleum prices 

and continuing changes in the structure and characteristics of global petroleum supply 

and demand. 

These most recent revisions increase ORNL’s estimates of the “monopsony 

premium” associated with U.S. oil imports, which measures the reduced value of 

payments from U.S. oil purchasers to foreign oil suppliers beyond the savings from 

reduced purchases of petroleum itself that results when lower U.S. import demand 

reduces the world price of petroleum..103 Consistency with NHTSA’s use of estimates of 

the global benefits from reducing emissions of CO2 and other greenhouse gases in this 

analysis, however, requires the use of a global perspective for assessing their net value. 

From this perspective, reducing these payments simply results in a transfer of resources 

from foreign oil suppliers to U.S. purchasers (or more properly, in a savings in the value 

of resources previously transferred from U.S. purchasers to foreign producers), and 

 

100 Leiby, Paul N., Donald W. Jones, T. Randall Curlee, and Russell Lee, Oil Imports: An Assessment of 

Benefits and Costs, ORNL-6851, Oak Ridge National Laboratory, November 1, 1997. Available at

http://pzl1.ed.ornl.gov/ORNL6851.pdf (last accessed August 9, 2009). 

101 Leiby, Paul N. "Estimating the Energy Security Benefits of Reduced U.S. Oil Imports," Oak Ridge 

National Laboratory, ORNL/TM-2007/028, Revised July 23, 2007. Available at

http://pzl1.ed.ornl.gov/energysecurity.html (click on link below “Oil Imports Costs and Benefits”) (last 

accessed August 9, 2009). 

102 Peer Review Report Summary: Estimating the Energy Security Benefits of Reduced U.S. Oil Imports, 

ICF, Inc., September 2007. 

103 The reduction in payments from U.S. oil purchasers to domestic petroleum producers is not included as 

a benefit, since it represents a transfer that occurs entirely within the U.S. economy.
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

93

provides no real savings in resources to the global economy. Thus NHTSA’s analysis of 

the benefits from adopting higher CAFE standards for MY 2012-2016 cars and light 

trucks excludes the reduced value of monopsony payments by U.S. oil consumers that 

might result from lower fuel consumption by these vehicles. 

 The literature on the energy security for the last two decades has routinely 

combined the monopsony and the macroeconomic disruption components when 

calculating the total value of the energy security premium. However, in the context of 

using a global value for the Social Cost of Carbon (SCC) the question arises: how should 

the energy security premium be used when some benefits from the proposed rule, such as 

the benefits of reducing greenhouse gas emissions, are calculated at a global level? 

Monopsony benefits represent avoided payments by the U.S. to oil producers in foreign 

countries that result from a decrease in the world oil price as the U.S. decreases its 

consumption of imported oil. Although there is clearly a benefit to the U.S. when 

considered from the domestic perspective, the decrease in price due to decreased demand 

in the U.S. also represents a loss of income to oil-producing countries. Given the 

redistributive nature of this effect, do the negative effects on other countries “net out” the 

positive impacts to the U.S.? If this is the case, then, the monopsony portion of the 

energy security premium should be excluded from the net benefits calculation for the 

rule.

 As the preceding discussion has indicated, the agencies omitted the reduction in 

monopsony payments that occurs when U.S. petroleum consumption and imports are 

reduced from their estimates of economic benefits for the proposed rules. Since the 

reduction in monopsony payments by U.S. oil consumers is exactly offset by a decline in 

income to suppliers of imported oil, this omission ensures consistency of the agencies’ 

analysis with the inclusion of global benefits from reducing emissions of greenhouse gas 

emissions. The agencies seek comment on whether, from other perspectives, it would be 

reasonable to include both the global value of reducing GHG emissions and the reduction 

in monopsony payments by U.S. consumers of petroleum products in their estimates of 

total economic benefits from reducing U.S. fuel consumption.

ORNL’s most recently revised estimates of the increase in the expected costs 

associated with potential disruptions in U.S. petroleum imports imply that each gallon of 

imported fuel or petroleum saved reduces the expected costs of oil supply disruptions to 

the U.S. economy by $0.16 per gallon (in 2007$). The reduction in expected disruption 

costs represents a real savings in resources, and thus contributes economic benefits in 

addition to the savings in fuel production costs that result from increasing fuel economy. 

NHTSA employs this value in its evaluation of the economic benefits from adopting 

higher CAFE standards for MY 2012-2016 cars and light trucks. 

NHTSA’s analysis does not include savings in budgetary outlays to support U.S. 

military activities among the benefits of higher fuel economy and the resulting fuel 

Comment [r12]: Added in response to 

interagency comment. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

94

savings.104 NHTSA’s analysis of benefits from alternative CAFE standards for MY 

2012-2016 also excludes any cost savings from maintaining a smaller SPR from its 

estimates of the external benefits of reducing gasoline consumption and petroleum 

imports. This view concurs with that of the recent ORNL study of economic costs from 

U.S. oil imports, which concludes that savings in government outlays for these purposes 

are unlikely to result form reductions in consumption of petroleum products and oil 

imports on the scale of those resulting from higher CAFE standards. 

Based on a detailed analysis of differences in fuel consumption, petroleum 

imports, and imports of refined petroleum products among the Reference Case, High 

Economic Growth, and Low Economic Growth Scenarios presented in AEO 2009, 

NHTSA estimates that approximately 50 percent of the reduction in fuel consumption 

resulting from adopting higher CAFE standards is likely to be reflected in reduced U.S. 

imports of refined fuel, while the remaining 50 percent would be reduce domestic fuel 

refining.105 Of this latter figure, 90 percent is anticipated to reduce U.S. imports of crude 

petroleum for use as a refinery feedstock, while the remaining 10 percent is expected to 

reduce U.S. domestic production of crude petroleum.106 Thus on balance, each 100 

gallons of fuel saved as a consequence of higher CAFE standards is anticipated to reduce 

total U.S. imports of crude petroleum or refined fuel by 95 gallons.107 

l. Air Ppollutant Eemissions 

i. Impacts on cCriteria aAir pPollutant eEmissions 

Criteria air pollutants emitted by vehicles and during fuel production include 

carbon monoxide (CO), hydrocarbon compounds (usually referred to as “volatile organic 

compounds,” or VOC), nitrogen oxides (NOx), fine particulate matter (PM2.5), and sulfur 

oxides (SOx). While reductions in domestic fuel refining and distribution that result from 

lower fuel consumption will reduce U.S. emissions of these pollutants, additional vehicle 

use associated with the rebound effect from higher fuel economy will increase their 

emissions. Thus the net effect of stricter CAFE standards on emissions of each criteria 

pollutant depends on the relative magnitudes of its reduced emissions in fuel refining and 

distribution, and increases in its emissions from vehicle use. Because the relationship 

between emissions in fuel refining and vehicle use is different for each criteria pollutant, 

the net effect of fuel savings from the proposed standards on total emissions of each 

pollutant is likely to differ. 

 

104 However, the agency conducted a sensitivity analysis of the potential effect of assuming that some 

reduction military spending would result from fuel savings and reduced petroleum imports in order to 

investigate its impacts on the standards and fuel savings. 

105 Differences between forecast annual U.S. imports of crude petroleum and refined products among these 

three scenarios range from 24-89 percent of differences in projected annual gasoline and diesel fuel 

consumption in the U.S. These differences average 49 percent over the forecast period spanned by AEO 

2009. 

106 Differences between forecast annual U.S. imports of crude petroleum among these three scenarios range

from 67-97 percent of differences in total U.S. refining of crude petroleum, and average 85 percent over the 

forecast period spanned by AEO 2009. 

107 This figure is calculated as 50 gallons + 50 gallons*90% = 50 gallons + 45 gallons = 95 gallons. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

95

With the exception of SO2, NHTSA calculated annual emissions of each criteria 

pollutant resulting from vehicle use by multiplying its estimates of car and light truck use 

during each year over their expected lifetimes by per-mile emission rates appropriate to 

each vehicle type, fuel, model year, and age. These emission rates were developed by 

U.S. EPA using its Motor Vehicle Emission Simulator (Draft MOVES 2009).

108

 

Emission rates for SO2 were calculated by NHTSA using average fuel sulfur content 

estimates supplied by EPA, together with the assumption that the entire sulfur content of 

fuel is emitted in the form of SO2.

109 Total SO2 emissions under each alternative CAFE 

standard were calculated by applying the resulting emission rates directly to estimated 

annual gasoline and diesel fuel use by cars and light trucks. 

As with other impacts, the changes in emissions of criteria air pollutants 

resulting from alternative increases in CAFE standards for MY 2012-2016 cars 

and light trucks were calculated from the differences between emissions under 

each alternative that would increase CAFE standards, and emissions under the 

baseline alternative. 

NHTSA estimated the reductions in criteria pollutant emissions from producing 

and distributing fuel that would occur under alternative CAFE standards using emission 

rates obtained by EPA from Argonne National Laboratories’ Greenhouse Gases and 

Regulated Emissions in Transportation (GREET) model.

110 The GREET model provides 

separate estimates of air pollutant emissions that occur in different phases of fuel 

production and distribution, including crude oil extraction, transportation, and storage, 

fuel refining, and fuel distribution and storage.111 EPA modified the GREET model to 

change certain assumptions about emissions during crude petroleum extraction and 

transportation, as well as to update its emission rates to reflect adopted and pending EPA 

emission standards. NHTSA converted these emission rates from the mass per fuel 

energy content basis on which GREET reports them to mass per gallon of fuel supplied 

using estimates of fuel energy content supplied by GREET. 

The resulting emission rates were applied to the agency’s estimates of fuel 

consumption under each alternative CAFE standard to develop estimates of total 

emissions of each criteria pollutant during fuel production and distribution. The 

assumptions about the effects of changes in fuel consumption on domestic and imported 

 

108 The MOVES model assumes that the per-mile rates at which these pollutants are emitted are determined 

by EPA regulations and the effectiveness of catalytic after-treatment of engine exhaust emissions, and are 

thus unaffected by changes in car and light truck fuel economy. 

109 These are 30 and 15 parts per million (ppm, measured on a mass basis) for gasoline and diesel 

respectively, which produces emission rates of 0.17 grams of SO2 per gallon of gasoline and 0.10 grams 

per gallon of diesel. 

110 Argonne National Laboratories, The Greenhouse Gas and Regulated Emissions from Transportation 

(GREET) Model, Version 1.8, June 2007, available at

http://www.transportation.anl.gov/modeling_simulation/GREET/index.html (last accessed August 9, 2009).

111 Emissions that occur during vehicle refueling at retail gasoline stations (primarily evaporative emissions 

of volatile organic compounds, or VOCs) are already accounted for in the “tailpipe” emission factors used 

to estimate the emissions generated by increased light truck use. GREET estimates emissions in each phase 

of gasoline production and distribution in mass per unit of gasoline energy content; these factors are then 

converted to mass per gallon of gasoline using the average energy content of gasoline. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

96

sources of fuel supply discussed above were then employed to calculate the effects of 

reductions in fuel use from alternative CAFE standards on changes in imports of refined 

fuel and domestic refining. NHTSA’s analysis assumes that reductions in imports of 

refined fuel would reduce criteria pollutant emissions during fuel storage and distribution 

only. Reductions in domestic fuel refining using imported crude oil as a feedstock are 

assumed to reduce emissions during fuel refining, storage, and distribution, because each 

of these activities would be reduced. Reduced domestic fuel refining using domesticallyproduced crude oil is assumed to reduce emissions during all four phases of fuel 

production and distribution.112

Finally, NHTSA calculated the net changes in domestic emissions of each criteria 

pollutant by summing the increases in emissions projected to result from increased 

vehicle use, and the reductions anticipated to result from lower domestic fuel refining and 

distribution.113 As indicated previously, the effect of adopting higher CAFE standards on 

total emissions of each criteria pollutant depends on the relative magnitudes of the 

resulting reduction in emissions from fuel refining and distribution, and the increase in 

emissions from additional vehicle use. Although these net changes vary significantly 

among individual criteria pollutants, the agency projects that on balance, adopting higher 

CAFE standards would reduce emissions of all criteria air pollutants except carbon 

monoxide (CO). 

The net changes in domestic emissions of fine particulates (PM2.5) and its 

chemical precursors (such as NOx, SOx, and VOCs) are converted to economic values 

using estimates of the reductions in health damage costs per ton of emissions of each 

pollutant that is avoided, which were developed and recently revised by EPA. These 

savings represent the estimated reductions in the value of damages to human health 

resulting from lower atmospheric concentrations and population exposure to air pollution 

that occur when emissions of each pollutant that contributes to atmospheric PM2.5

concentrations are reduced. The value of reductions in the risk of premature death due to 

exposure to fine particulate pollution (PM2.5) account for a majority of EPA’s estimated 

values of reducing criteria pollutant emissions, although the value of avoiding other 

health impacts is also included in these estimates. These values do not include a number 

of unquantified benefits, such as reduction in the welfare and environmental impacts of 

PM2.5 pollution, or reductions in health and welfare impacts related to other criteria 

pollutants (ozone, NO2, and SO2) and air toxics. EPA estimates different PM-related perton values for reducing emissions from vehicle use than for reductions in emissions of 

that occur during fuel production and distribution.114 NHTSA applies these separate 

values to its estimates of changes in emissions from vehicle use and fuel production and 

 

112 In effect, this assumes that the distances crude oil travels to U.S. refineries are approximately the same 

regardless of whether it travels from domestic oilfields or import terminals, and that the distances that 

gasoline travels from refineries to retail stations are approximately the same as those from import terminals 

to gasoline stations. 

113 All emissions from increased vehicle use are assumed to occur within the U.S., since CAFE standards 

would apply only to vehicles produced for sale in the U.S. 

114 These reflect differences in the typical geographic distributions of emissions of each pollutant, their 

contributions to ambient PM2.5 concentrations, pollution levels (predominantly those of PM2.5), and 

resulting changes in population exposure. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

97

distribution to determine the net change in total economic damages from emissions of 

these pollutants. 

EPA projects that the per-ton values for reducing emissions of criteria pollutants 

from both mobile sources (including motor vehicles) and stationary sources such as fuel 

refineries and storage facilities will increase over time. These projected increases reflect 

rising income levels, which are assumed to increase affected individuals’ willingness to 

pay for reduced exposure to health threats from air pollution, as well as future population 

growth, which increases population exposure to future levels of air pollution. 

ii. Reductions in CO2 eEmissions 

Emissions of carbon dioxide and other greenhouse gases (GHGs) occur 

throughout the process of producing and distributing transportation fuels, as well as from 

fuel combustion itself. By reducing the volume of fuel consumed by passenger cars and 

light trucks, higher CAFE standards will reduce GHG emissions generated by fuel use, as 

well as throughout the fuel supply cycle. Lowering these emissions is likely to slow the 

projected pace and reduce the ultimate extent of future changes in the global climate, thus 

reducing future economic damages that changes in the global climate are expected to 

cause. By reducing the probability that climate changes with potentially catastrophic 

economic or environmental impacts will occur, lowering GHG emissions may also result 

in economic benefits that exceed the resulting reduction in the expected future economic 

costs caused by gradual changes in the earth’s climatic systems. 

Quantifying and monetizing benefits from reducing GHG emissions is thus an 

important step in estimating the total economic benefits likely to result from establishing 

higher CAFE standards. The agency estimated emissions of CO2 from passenger car and 

light truck use by multiplying the number of gallons of each type of fuel (gasoline and 

diesel) they are projected to consume under alternative CAFE standards by the quantity 

or mass of CO2 emissions released per gallon of fuel consumed. This calculation 

assumes that the entire carbon content of each fuel is converted to CO2 emissions during 

the combustion process. Carbon dioxide emissions account for nearly 95 percent of total 

GHG emissions that result from fuel combustion during vehicle use. 

iii. Economic vValue of rReductions in CO2 eEmissions 

NHTSA has taken the economic benefits of reducing CO2 emission into account 

in this rulemaking, both in developing proposed CAFE standards and in assessing the 

economic benefits of each alternative that was considered. Since direct estimates of the 

economic benefits from reducing GHG emissions are generally not reported in published 

literature on the impacts of climate change, these benefits are typically assumed to be the 

“mirror image” of the estimated incremental costs resulting from an increase in those 

emissions. That is, the benefits from reducing emissions are usually measured by the 

savings in estimated economic damages that an equivalent increase in emissions would 

otherwise have caused. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

98

The “social cost of carbon” (SCC) is intended to be a monetary measure of the 

incremental damage resulting from carbon dioxide (CO2) emissions, including (but not 

limited to) net agricultural productivity loss, human health effects, property damages 

from sea level rise, and changes in ecosystem services. Any effort to quantify and to 

monetize the consequences associated with climate change will raise serious questions of 

science, economics, and ethics. But with full regard for the limits of both quantification 

and monetization, the SCC can be used to provide an estimate of the social benefits of 

reductions in GHG emissions. 

 

 For at least four reasons, any particular figure will be contestable. First, scientific 

and economic knowledge about the impacts of climate change continues to grow. With 

new and better information about relevant questions, including the cost, burdens, and 

possibility of adaptation, current estimates will inevitably change over time. Second, 

some of the likely and potential damages from climate change—for example, the loss of 

endangered species—are generally not included in current SCC estimates. These 

omissions may turn out to be significant; in the sense that they may mean that the best 

current estimates are too low. As noted by the IPCC Fourth Assessment Report, “It is 

very likely that globally aggregated figures underestimate the damage costs because they 

cannot include many non-quantifiable impacts.” Third, it is unlikely that the damage 

estimates account for the directed technological change that will lead to innovations that 

reduce the costs of responding to climate change—for example, it is likely that scientists 

will develop crops that are better able to withstand high temperatures. In this respect, the 

current estimates may overstate the likely damages. Fourth, controversial ethical 

judgments, including those involving the treatment of future generations, play a role in 

judgments about the SCC (see in particular the discussion of the discount rate, below). 

 

 To date, SCC estimates presented in recent regulatory documents have varied 

within and among agencies, including DOT, DOE, and EPA. For example, a regulation 

proposed by DOT in 2008 assumed a value of $7 per ton CO2

115 (2006$) for 2011 

emission reductions (with a range of $0-14 for sensitivity analysis). A regulation 

finalized by DOE used a range of $0-$20 (2007$). Both of these ranges were designed to 

reflect the value of damages to the United States resulting from carbon emissions, or the 

“domestic” SCC. In the final MY 2011 CAFE EIS, DOT used both a domestic SCC 

value of $2/tCO2 and a global SCC value of $33/tCO2 (with sensitivity analysis at 

$80/tCO2), increasing at 2.4 percent per year thereafter. The final MY 2011 CAFE rule 

also presented a range from $2 to $80/tCO2. EPA’s Advance Notice of Proposed 

Rulemaking for Greenhouse Gases discussed the benefits of reducing GHG emissions 

and identified what it described as “very preliminary” SCC estimates “subject to 

revision” that spanned three orders of magnitude. EPA’s global mean values were $68 

 

115 For the purposes of this discussion, we present all values of the SCC as the cost per ton of CO2

emissions. Some discussions of the SCC in the literature use an alternative presentation of a dollar per ton 

of Carbon. The standard adjustment factor is 3.67, which means, for example, that a SCC of $10 per ton of 

CO2 would be equivalent to a cost of $36.70 for a ton of carbon emitted. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

99

and $40/tCO2 for discount rates of 2 percent and 3 percent respectively (in 2006 real 

dollars for 2007 emissions).116

 

 

 The current Administration has worked to develop a transparent methodology for 

selecting a set of interim SCC estimates to use in regulatory analyses until a more 

comprehensive characterization of the distribution of SCC is developed. This discussion 

proposes a set of values for the interim social cost of carbon. It should be emphasized that 

the analysis here is preliminary. Today’s proposed joint rulemaking presents SCC 

estimates that reflect the Administration’s current understanding of the relevant literature. 

These interim estimates are being used for the short-term while an interagency group 

develops a more comprehensive characterization of the distribution of SCC values for 

future economic and regulatory analyses. The interim values should not be viewed as a 

statement about the results of the longer-term process. The Administration will be 

evaluating and seeking comment in the preamble to today’s proposed rule on all of the 

scientific, economic, and ethical issues before establishing final estimates for use in 

future rulemakings. 

 

 The outcomes of the Administration’s process to develop interim values are 

judgments in favor of a) global rather than domestic values, b) an annual growth rate of 

3%, and c) interim global SCC estimates for 2007 (in 2006 dollars) of $55, $33, $19, $10, 

and $5 per ton of CO2. Notably, we have centered our current attention on a SCC of $19. 

The proposed figures are based on the following judgments. 

•1. Global and domestic measures. Because of the distinctive nature of the climate 

change problem, we present both a global SCC and a fraction of that value that 

represents impacts that may occur within the borders of the U.S. alone, or a 

“domestic” SCC, but center our current attention on the global measure. This 

approach represents a departure from past practices, which relied, for the most 

part, on domestic measures. As a matter of law, both global and domestic values 

are permissible; the relevant statutory provisions are ambiguous and allow 

selection of either measure.117

 

It is true that under OMB guidance, analysis from the domestic perspective is 

required, while analysis from the international perspective is optional. The 

domestic decisions of one nation are not typically based on a judgment about the 

effects of those decisions on other nations. But the climate change problem is 

highly unusual in the sense that it involves (a) a global public good in which (b) 

the emissions of one nation may inflict significant damages on other nations and 

(c) the United States is actively engaged in promoting an international agreement 

to reduce worldwide emissions. 

 

116 73 FR 44416 (July 30, 2008). EPA, “Advance Notice of Proposed Rulemaking for Greenhouse Gases 

Under the Clean Air Act, Technical Support Document on Benefits of Reducing GHG Emissions,” June 

2008. www.regulations.gov. Search for ID “EPA-HQ-OAR-2008-0318-0078. 

117 It is true that federal statutes are presumed not to have extraterritorial effect, in part to ensure that the 

laws of the United States respect the interests of foreign sovereigns. But use of a global measure for the 

SCC does not give extraterritorial effect to federal law and hence does not intrude on such interests.

Formatted: Indent: Left: 0.25", Numbered +

Level: 1 + Numbering Style: 1, 2, 3, ... + Start

at: 1 + Alignment: Left + Aligned at: 0.38" +

Indent at: 0.63"
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

100

In these circumstances, we believe the global measure is preferred. Use of a 

global measure reflects the reality of the problem and is expected to contribute to 

the continuing efforts of the United States to ensure that emissions reductions 

occur in many nations. 

Domestic SCC values are also presented. The development of a domestic SCC is 

greatly complicated by the relatively few region- or country-specific estimates of 

the SCC in the literature. One potential domestic estimate comes from the DICE 

models. In an unpublished paper, Nordhaus (2007) produced disaggregated SCC 

estimates using a regional version of the DICE model. He reported a U.S. 

estimate of $1/tCO2 (2007 value, 2007$), which is roughly 11 percent of the 

global value.118

An alternative source of estimates comes from a recent unpublished EPA 

modeling effort using the FUND model. The resulting estimates suggest that the 

ratio of domestic to global benefits varies with key parameter assumptions. With 

a 3 percent discount rate, for example, the U.S. benefit is about 6 percent of the 

global benefit for the “central” (mean) FUND results, while, for the 

corresponding “high” estimates associated with a higher climate sensitivity and 

lower global economic growth, the U.S. benefit is less than 4 percent of the global 

benefit. With a 2 percent discount rate, the U.S. share is about 2-5 percent of the 

global estimate. 

Based on this available evidence, an interim domestic SCC value equal to 6 

percent of the global damages is proposed. This figure is in the middle of the 

range of available estimates from the literature. It is recognized that the 6 percent 

figure is approximate and highly speculative and alternative approaches will be 

explored before establishing final values for future rulemakings. 

•2. Filtering existing analyses. There are numerous SCC estimates in the existing

literature, and it is reasonable to make use of those estimates in order to produce a 

figure for current use. A starting point is provided by the meta-analysis in 

Richard Tol, 2008.119 With that starting point, the Administration proposes to 

“filter” existing SCC estimates by using those that (1) are derived from peerreviewed studies; (2) do not weight the monetized damages to one country more 

than those in other countries; (3) use a “business as usual” climate scenario; and 

(4) are based on the most recent published version of each of the three major 

integrated assessment models (IAMs): FUND, PAGE, and DICE. 

Proposal (1) is based on the view that those studies that have been subject to peer 

review are more likely to be reliable than those that have not been. Proposal (2) is 

 

118 Personal communication (add cite to unpublished 2007 Nordhaus paper) 

119 Richard Tol, The Social Cost of Carbon: Trends, Outliers, and Catastrophes, Economics: The OpenAccess, Open-Assessment E-Journal, Vol. 2, 2008-25. http://www.economicsejournal.org/economics/journalarticles/2008-25 (2008). 

Formatted: Indent: Left: 0.25", Numbered +

Level: 1 + Numbering Style: 1, 2, 3, ... + Start

at: 1 + Alignment: Left + Aligned at: 0.38" +

Indent at: 0.63"
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

101

based on a principle of neutrality and simplicity; it does not treat the citizens of 

one nation (or different citizens within the U.S.) differently on the basis of 

speculative or controversial considerations. Further, it is consistent with the 

potential compensation tests of Kaldor (1939) and Hicks (1940), which use 

unweighted sums of willingness to pay. Finally, this is the approach used in 

rulemakings across a variety of settings and consequently keeps U.S. government 

policy consistent across contexts. 

Proposal (3) stems from the judgment that as a general rule, the proper way to 

assess a policy decision is by comparing the implementation of the policy against 

a counterfactual state where the policy is not implemented. In addition, our 

expectation is that most policies to be evaluated using these interim SCC 

estimates will constitute small enough changes to the larger economy to safely 

assume that the marginal benefits of emissions reductions will not change 

between the baseline and policy scenarios. A departure from this approach would 

be to consider a more dynamic setting in which other countries might implement 

policies to reduce GHG emissions at an unknown future date and the U.S. could 

choose to implement such a policy now or at a future date. 

Proposal (4) is based on four complementary judgments. First, the FUND, 

PAGE, and DICE models now stand as the most comprehensive and reliable 

efforts to measure the economic damages from climate change. Second, the latest 

versions of the three IAMs are likely to reflect the most recent evidence and 

learning, and hence they are presumed to be superior to those that preceded them. 

Third, any effort to choose among them, or to reject one in favor of the others, 

would be difficult to defend at the present time. In the absence of a clear reason 

to choose among them, it is reasonable to base the SCC on all of them. Fourth, in 

light of the uncertainties associated with the SCC, the additional information 

offered by different models is important. 

3. Use a model-weighted average of the estimates at each discount rate. At this 

time, a scientifically valid reason to prefer any of the three major IAMs (FUND, 

PAGE, and DICE) has not been identified. Accordingly, to address the concern 

that certain models not be given unequal weight relative to the other models, the 

estimates are based on an equal weighting of the means of the estimates from each 

of the models. Among estimates that remain after applying the filter, we begin by 

taking the average of all estimates within a model. The estimated SCC is then 

calculated as the average of the three model-specific averages. This approach is 

used to ensure that models with a greater number of published results do not exert 

unequal weight on the interim SCC estimates. 

4. Apply a 3 percent annual growth rate to the chosen SCC values. SCC is 

assumed to increase over time, because future emissions are expected to produce 

larger incremental damages as physical and economic systems become more 

stressed as the magnitude of climate change increases. Indeed, an implied growth 

rate in the SCC can be produced by most of the models that estimate economic 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

102

damages caused by increased GHG emissions in future years. But neither the rate 

itself nor the information necessary to derive its implied value is commonly 

reported. In light of the limited amount of debate thus far about the appropriate 

growth rate of the SCC, applying a rate of 3 percent per year seems appropriate at 

this stage. This value is consistent with the range recommended by IPCC (2007) 

and close to the latest published estimate (Hope 2008). 

(1) Discount Rates 

 For estimation of the benefits associated with the mitigation of climate change, 

one of the most complex issues involves the appropriate discount rate. OMB’s current 

guidance offers a detailed discussion of the relevant issues and calls for discount rates of 

3 percent and 7 percent. It also permits a sensitivity analysis with low rates (1 – 3 

percent) for intergenerational problems: “If your rule will have important 

intergenerational benefits or costs you might consider a further sensitivity analysis using 

a lower but positive discount rate in addition to calculating net benefits using discount 

rates of 3 and 7 percent.”120

 The choice of a discount rate, especially over long periods of time, raises highly 

contested and exceedingly difficult questions of science, economics, philosophy, and law. 

See, e.g., William Nordhaus, The Challenge of Global Warming (2008); Nicholas Stern, 

The Economics of Climate Change (2007); Discounting and Intergenerational Equity 

(Paul Portney and John Weyant eds. 1999). It is not clear that future generations would 

be willing to trade environmental quality for consumption at the same rate as the current 

generations. Under imaginable assumptions, decisions based on cost-benefit analysis 

with high discount rates might harm future generations – at least if investments are not 

made for the benefit of those generations. See Robert Lind, Analysis for 

Intergenerational Discounting, id. at 173, 176-177. It is also possible that the use of low 

discount rates for particular projects might itself harm future generations, by ensuring 

that resources are not used in a way that would greatly benefit them. In the context of 

climate change, questions of intergenerational equity are especially important. 

 Reasonable arguments support the use of a 3 percent discount rate. First, that rate 

is among the two figures suggested by OMB guidance, and hence it fits with existing 

national policy. Second, it is standard to base the discount rate on the compensation that 

people receive for delaying consumption, and the 3 percent is close to the risk-free rate of 

return, proxied by the return on long term inflation-adjusted U.S. Treasury Bonds, as of 

this writing. Although these rates are currently closer to 2.5 percent, the use of 3 percent 

provides an adjustment for the liquidity premium that is reflected in these bonds’ returns. 

 At the same time, others would argue that a 5 percent discount rate can be 

supported. The argument relies on several assumptions. First, that rate can also be 

justified by reference to the level of compensation for delaying consumption, because it 

fits with market behavior with respect to individuals’ willingness to trade-off 

 

120 See OMB Circular A-4, pp. 35-36, citing Portney and Weyant, eds. (1999), Discounting and 

Intergenerational Equity, Resources for the Future, Washington, DC. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

103

consumption across periods as measured by the estimated post-tax average real returns to 

risky private investments (e.g., the S&P 500). In the climate setting, the 5 percent 

discount rate may be preferable to the riskless rate because it is based on risky 

investments and the return to projects to mitigate climate change is also risky. In 

contrast, the 3 percent riskless rate may be a more appropriate discount rate for projects 

where the return is known with a high degree of confidence (e.g., highway guardrails). In 

principal, the correct discount rate would reflect the variance in payoff from climate 

mitigation policy and the correlation between the payoffs of the policy and the broader 

economy.

121

 Second, 5 percent, and not 3 percent, is roughly consistent with estimates implied 

by reasonable inputs to the theoretically derived Ramsey equation, which specifies the 

optimal time path for consumption. That equation specifies the optimal discount rate as 

the sum of two components. The first term (the product of the elasticity of the marginal 

utility of consumption and the growth rate of consumption) reflects the fact that 

consumption in the future is likely to be higher than consumption today, so diminishing 

marginal utility implies that the same monetary damage will cause a smaller reduction of 

utility in the future. Standard estimates of this term from the economics literature are in 

the range of 3 percent - 5 percent [cite sources here]. The second component reflects the 

possibility that a lower weight should be placed on utility in the future, to account for 

social impatience or extinction risk, which is specified by a pure rate of time preference 

(PRTP). A common estimate of the PRTP is 2 percent, though some observers believe 

that a principle of intergenerational equity suggests that the PRTP should be close to 

zero. It follows that discount rate of 5 percent is near the middle of the range of values 

that are able to be derived from the Ramsey equation. 

 It is recognized that the arguments above – for use of market behavior and the 

Ramsey equation – face objections in the context of climate change, and of course there 

are alternative approaches. In light of climate change, it is possible that consumption in 

the future will not be higher than consumption today, and if so, the Ramsey equation will 

suggest a lower figure. However, the historical evidence is consistent with rising 

consumption over time. 

 Some critics note that using observed interest rates for inter-generational 

decisions imposes current preferences on future generations, which some economists say 

may not be appropriate. For generational equity, they argue that the discount rate should 

be below market rates to correct for market distortions and inefficiencies in 

intergenerational transfers of wealth (which are presumed to compensate future 

generations for damage), and to treat generations equitably based on ethical principles 

(see Broome 2008).122 

 

121 Specifically, if the benefits of the policy are highly correlated with the returns from broader economy, 

then the market rate should be used to discount the benefits. If the benefits are uncorrelated with the 

broader economy the long term government bond rate should be applied. Furthermore, if the benefits are 

negatively correlated with the broader economy a rate less than that on long term government bonds should 

be used (Lind, 1982 pp. 89-90). 

122 See Arrow, K.J., W.R. Cline, K-G Maler, M. Munasinghe, R. Squiteri, J.E.Stiglitz, 1996. 

"Intertemporal equity, discounting and economic efficiency," in Climate Change 1995: Economic and 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

104

 Additionally, some analyses attempt to deal with uncertainty with respect to 

interest rates over time. We explore below how this might be done.123 

 (2) Proposed Interim Estimates 

 The application of the methodology outlined above yields interim estimates of the 

SCC that are reported in Table IV.C.3-2. These estimates are reported separately using 3 

percent and 5 percent discount rates. The cells are empty in rows 10 and 11, because 

these studies did not report estimates of the SCC at a 3 percent discount rate. The modelweighted means are reported in the final or summary row; they are $33 per tCO2 at a 3 

percent discount rate and $5 per tCO2 with a 5 percent discount rate. 

 

Social Dimensions of Climate Change, Contribution of Working Group III to the Second Assessment 

Report of the Intergovernmental Panel on Climate Change. See also Weitzman, M.L., 1999. In Portney 

P.R. and Weyant J.P. (eds.), Discounting and Intergenerational Equity, resources for the Future, 

Washington, D.C. 

123 Richard Newell and William Pizer, Discounting the distant future: how much do uncertain rates increase 

valuations? J. Environ. Econ. Manage. 46 (2003) 52-71. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

105

Table IV.C.3-2: Global Social Cost of Carbon (SCC) Estimates ($/tCO2 in 2007 

(2006$)), Based on 3% and 5% Discount Rates * 

 Model Study Climate Scenario 3% 5% 

1 FUND Anthoff et al. 2009 FUND default 6 -1 

2 FUND Anthoff et al. 2009 SRES A1b 1 -1 

3 FUND Anthoff et al. 2009 SRES A2 9 -1 

4 FUND Link and Tol 2004 No THC 12 3

5 FUND Link and Tol 2004 THC continues 12 2

6 FUND Guo et al. 2006 Constant PRTP 5 -1 

7 FUND Guo et al. 2006 Gollier discount 1 14 0 

8 FUND Guo et al. 2006 Gollier discount 2 7 -1 

 FUND Mean 8.25 0 

9 PAGE Wahba & Hope 2006 A2-scen 57 7

10 PAGE Hope 2006 7

11 DICE Nordhaus 2008 8

Summary Model-weighted Mean 33 5 

*The sample includes all peer reviewed, non-equity-weighted estimates included in Tol (2008), Nordhaus

(2008), Hope (2008), and Anthoff et al. (2009), that are based on the most recent published version of

FUND, PAGE, or DICE and use business-as-usual climate scenarios.124125 All values are based on the best 

available information from the underlying studies about the base year and year dollars, rather than the Tol 

(2008) assumption that all estimates included in his review are 1995 values in 1995$. All values were

updated to 2007 using a 3 percent annual growth rate in the SCC, and adjusted for inflation using GDP 

deflator. 

Analyses have been conducted at $33 and $5 as these represent the estimates 

associated with the 3 percent and 5 percent discount rates, respectively.126 The 3 percent 

and 5 percent estimates have independent appeal and at this time a clear preference for 

 

124 Most of the estimates in Table 1 rely on climate scenarios developed by the Intergovernmental Panel on 

Climate Change (IPCC). The IPCC published a new set of scenarios in 2000 for use in the Third 

Assessment Report (Special Report on Emissions Scenarios - SRES). The SRES scenarios define four 

narrative storylines: A1, A2, B1 and B2, describing the relationships between the forces driving 

greenhouse gas and aerosol emissions and their evolution during the 21st century for large world regions 

and globally. Each storyline represents different demographic, social, economic, technological, and 

environmental developments that diverge in increasingly irreversible ways. The storylines are summarized 

in Nakicenovic et al., 2000 (see also http://sedac.ciesin.columbia.edu/ddc/sres/ ). Because the B1 and B2 

storylines represent policy cases rather than business-as-usual projections, estimates derived from these 

scenarios to be less appropriate for use in benefit-cost analysis. They are therefore excluded.

125 Guo et al. (2006) report estimates based on two Gollier discounting schemes. The Gollier discounting

assumes complex specifications about individual utility functions and risk preferences. After various 

conditions are satisfied, declining social discount rates emerge. Gollier Discounting Scheme 1 employs a 

certainty-equivalent social rate of time preference (SRTP) derived by assuming the regional growth rate is 

equally likely to be 1% above or below the original forecast growth rate. Gollier Discounting Scheme 2 

calculates a certainty-equivalent social rate of time preference (SRTP) using five possible growth rates, and 

applies the new SRTP instead of the original. Hope (2008) conducts Monte Carlo analysis on the PRTP 

component of the discount rate. The PRTP is modeled as a triangular distribution with a min value of 

1%/yr, a most likely value of 2 %/yr, and a max value of 3 %/yr.

126 It should be noted that reported discount rates may not be consistently derived across models or specific 

applications of models: while the discount rate may be identical, it may reflect different assumptions about 

the individual components of the Ramsey equation identified earlier. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

106

one over the other is not warranted. Thus, we have also included – and centered our 

current attention on – the average of the estimates associated with these discount rates, 

which is $19. (Based on the $19 global value, the approximate domestic fraction of these 

benefits would be $1.14 per ton of CO2 assuming that domestic benefits are 6 percent of 

the global benefits. 

It is true that there is uncertainty about interest rates over long time horizons. 

Recognizing that point, Newell and Pizer (2003) have made a careful effort to adjust for 

that uncertainty. The Newell-Pizer approach models discount rate uncertainty as 

something that evolves over time.127 This is a relatively recent contribution to the 

literature and estimates based on this method are included with the aim of soliciting 

comment. 

 

 There are several concerns with using this approach in this context. First, it 

would be a departure from current OMB guidance. Second, an approach that would 

average what emerges from discount rates of 3 percent and 5 percent reflects uncertainty 

about the discount rate, but based on a different model of uncertainty. The Newell-Pizer 

approach models discount rate uncertainty as something that evolves over time; in 

contrast, the preferred approach (outlined above) assumes that there is a single discount 

rate with equal probability of 3 percent and 5 percent. 

 

 Table IV.C.3-3 reports on the application of the Newell-Pizer adjustments. The 

precise numbers depend on the assumptions about the data generating process that 

governs interest rates. Columns (1a) and (1b) assume that “random walk” model best 

describes the data and uses 3 percent and 5 percent discount rates, respectively. Columns 

(2a) and (2b) repeat this, except that it assumes a “mean-reverting” process. While the 

empirical evidence does not rule out a mean-reverting model, Newell and Pizer find 

stronger empirical support for the random walk model. 

 

127 In contrast, an alternative approach based on Weitzman (2001) would assume that there is a constant 

discount rate that is uncertain and represented by a probability distribution. The Newell and Pizer, and 

Weitzman approaches are relatively recent contributions and we invite comment on the advantages and 

disadvantages of each. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

107

Table IV.C.3-3: Global Social Cost of Carbon (SCC) Estimates ($/tCO2 in 2007 

(2006$))*, 

Using Newell & Pizer (2003) Adjustment for Future Discount Rate Uncertainty**

 

Mode

l Study Climate Scenario 

Randomwalk model 

Meanreverting 

model 

3% 5% 3% 5% 

 (1a) (1b) (2a) (2b) 

1 FUND Anthoff et al. 2009 FUND default 10 0 7 -1 

2 FUND Anthoff et al. 2009 SRES A1b 2 0 1 -1 

3 FUND Anthoff et al. 2009 SRES A2 15 0 10 -1 

4 FUND Link and Tol 2004 No THC 20 6 13 4 

5 FUND Link and Tol 2004 THC continues 20 4 13 2

6 FUND Guo et al. 2006 Constant PRTP 9 0 6 -1 

7 FUND Guo et al. 2006 Gollier discount 1 14 0 14 0

8 FUND Guo et al. 2006 Gollier discount 2 7 -1 7 -1

 FUND Mean 12 1 9 0 

9 

PAGE 

Wahba & Hope 

2006 A2-scen 97 13 63 8 

10 PAGE Hope 2006 13 8 

11 DICE Nordhaus 2008 15 9 

Summary 

Model-weighted 

Mean 55 10 36 6 

*The sample includes all peer reviewed, non-equity-weighted estimates included in Tol (2008), Nordhaus

(2008), Hope (2008), and Anthoff et al. (2009), that are based on the most recent published version of

FUND, PAGE, or DICE and use business-as-usual climate scenarios. All values are based on the best 

available information from the underlying studies about the base year and year dollars, rather than the Tol 

(2008) assumption that all estimates included in his review are 1995 values in 1995$. All values were

updated to 2007 using a 3 percent annual growth rate in the SCC, and adjusted for inflation using GDP 

deflator. See the Notes to Table 1 for further details. 

**Assumes a starting discount rate of 3 percent or 5 percent. Newell and Pizer (2003) based adjustment 

factors are not applied to estimates from Guo et al. (2006) that use a different approach to account for 

discount rate uncertainty (rows 7-8). 

Note that the correction factor from Newell and Pizer is based on the DICE model. The proper adjustment 

may differ for other integrated assessment models that produce different time schedules of marginal 

damages. We would expect this difference to be minor. 

The resulting estimates of the social cost of carbon are necessarily greater. When 

the adjustments from the random walk model are applied, the estimates of the social cost 

of carbon are $10 and $55 per ton of CO2, with the 5 percent and 3 percent discount rates, 

respectively. The application of the mean-reverting adjustment yields estimates of $6 

and $36. Relying on the random walk model, analyses are also conducted with the value 

of the SCC set at $10 and $55. 

(3) Caveats 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

108

 There are at least four caveats to the approach outlined above. 

 

First, the impacts of climate change are expected to be widespread, diverse, and 

heterogeneous. In addition, the exact magnitude of these impacts is uncertain, because of 

the inherent randomness in the Earth’s atmospheric processes, the U.S. and global 

economies, and the behaviors of current and future populations. Current IAM do not 

currently individually account for and assign value to all of the important physical and 

other impacts of climate change that are recognized in the climate change literature. 

Although it is likely that our capability to quantify and monetize impacts will improve 

with time, it is also likely that even in future applications, there are a number of 

potentially significant benefits categories that will remain unmonetized. 

Second, in the opposite direction, it is unlikely that the damage estimates 

adequately account for the directed technological change that climate change will cause. 

In particular, climate change will increase the return on investment to develop 

technologies that allow individuals to better cope with climate change. For example, it is 

likely that scientists will develop crops that are better able to withstand high 

temperatures. In this respect, the current estimates may overstate the likely damages 

Third, there has been considerable recent discussion of the risk of catastrophic 

impacts and of how best to account for worst-case scenarios. Recent research by 

Weitzman (2009) specifies some conditions under which the possibility of catastrophe 

would undermine the use of IAMs and conventional cost-benefit analysis. This research 

requires further exploration before its generality is known and the optimal way to 

incorporate it into regulatory reviews is understood. 

 

 Fourth, it is also worth noting that the SCC estimates are only relevant for 

incremental policies relative to the projected baselines, which capture business-as-usual 

scenarios. To evaluate non-marginal changes, such as might occur if the U.S. acts in 

tandem with other nations, then it might be necessary to go beyond the simple expedient 

of using the SCC along the BAU path. In particular, it would be correct to calculate the 

aggregate WTP to move from the BAU scenario to the policy scenario, without imposing 

the restriction that the marginal benefit remains constant over this range. 

All of the values derived from this process are expressed in 2006 dollars. 

NHTSA has adjusted them to their equivalent values in 2007 dollars for consistency with 

other values used in its analysis of benefits from adopting higher CAFE standards for MY 

2012-2016 passenger cars and light trucks. The resulting value upon which we have 

centered our analysis, which is derived from the figures reported in the tables above, is 

equivalent to $20 per metric ton of CO2 emissions avoided when expressed in 2007$, and 

the agency has relied on this value in its analysis. NHTSA has also analyzed the 

sensitivity of its benefit estimates to alternative values of $5, $10, $34, and $56 per 

metric ton of CO2 emissions avoided, with all figures again in 2007$. Each of these 

values applies to emissions during 2007, and are assumed to grow in real terms by 3 

percent annually beginning in 2007. NHTSA seeks comments on these values and the 

approach used to derive them. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

109

m. Discounting Future Benefits and Costs 

 Discounting future fuel savings and other benefits is intended to account for the 

reduction in their value to society when they are deferred until some future date, rather 

than received immediately. The discount rate expresses the percent decline in the value 

of these benefits—as viewed from today’s perspective—for each year they are deferred 

into the future. In evaluating the benefits from alternative increases in CAFE standards 

for MY 2012-2016 passenger cars and light trucks, NHTSA has employed a discount rate 

of 3 percent per year. The agency has also tested the sensitivity of these benefit and cost 

estimates to the use of a 7 percent discount rate. Although these are the same discount 

rates analyzed in the MY 2011 final rule, NHTSA has chosen to use 3 percent as the basis 

for the Reference Case in this proposed rule rather than the 7 percent rate it employed 

previously, for the reasons discussed below. 

The primary reason that NHTSA has selected 3 percent as the appropriate rate for 

discounting future benefits from increased CAFE standards is that most or all of vehicle 

manufacturers’ costs for complying with higher CAFE standards are likely to be reflected 

in higher sales prices for their new vehicle models. By increasing sales prices for new 

cars and light trucks, CAFE regulation will thus primarily affect vehicle purchases and 

other private consumption decisions. Both economic theory and OMB guidance on 

discounting indicate that the future benefits and costs of regulations that mainly affect 

private consumption should be discounted at the social rate of time preference.128

 

OMB guidance also indicates that savers appear to discount future consumption at 

an average real (that is, adjusted to remove the effect of inflation) rate of about 3 percent 

when they face little risk about its likely level. Since the real rate that savers use to 

discount future consumption represents a reasonable estimate of the social rate of time 

preference, NHTSA has employed the 3 percent rate to discount projected future benefits 

and costs resulting from higher CAFE standards for MY 2012-2016 passenger cars and 

light trucks. 129

 

Because there is some uncertainty about the extent to which vehicle 

manufacturers will be able to recover their costs for complying with higher CAFE 

standards by increasing vehicle sales prices, however, NHTSA has also tested the 

sensitivity of these benefit and cost estimates to the use of a higher percent discount rate. 

OMB guidance indicates that the real economy-wide opportunity cost of capital is the 

appropriate discount rate to apply to future benefits and costs when the primary effect of 

a regulation is “...to displace or alter the use of capital in the private sector,” and 

estimates that this rate currently averages about 7 percent.130 Thus the agency has also 

testing the sensitivity of its benefit and cost estimates for alternative MY 2012-2016 

CAFE standards to the use of a 7 percent real discount rate. NHTSA seeks comment on 

 

128 Id.

129 Office of Management and Budget, Circular A-4, “Regulatory Analysis,” September 17, 2003, 33. 

Available at http://www.whitehouse.gov/omb/circulars/a004/a-4.pdf (last accessed August 9, 2009). 

130 Id.
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

110

whether it should evaluate CAFE standards using a discount rate of 3 percent, 7 percent, 

or an alternative value. 

n. Accounting for Uncertainty in Bbenefits and Costs 

In analyzing the uncertainty surrounding its estimates of benefits and costs from 

alternative CAFE standards, NHTSA has considered alternative estimates of those 

assumptions and parameters likely to have the largest effect. These include the projected 

costs of fuel economy-improving technologies and their expected effectiveness in 

reducing vehicle fuel consumption, forecasts of future fuel prices, the magnitude of the 

rebound effect, the reduction in external economic costs resulting from lower U.S. oil 

imports, the value to the U.S. economy of reducing carbon dioxide emissions, and the 

discount rate applied to future benefits and costs. The range for each of these variables 

employed in the uncertainty analysis is presented in the section of this notice discussing 

each variable. 

The uncertainty analysis was conducted by assuming independent normal 

probability distributions for each of these variables, using the low and high estimates for 

each variable as the values below which 5 percent and 95 percent of observed values are 

believed to fall. Each trial of the uncertainty analysis employed a set of values randomly 

drawn from each of these probability distributions, assuming that the value of each 

variable is independent of the others. Benefits and costs of each alternative standard 

were estimated using each combination of variables. A total of 1,000 trials were used to 

establish the likely probability distributions of estimated benefits and costs for each 

alternative standard. 

o. Where Ccan Readers Find Mmore Information About the Economic 

Assumptions? 

 Much more detailed information is provided in Chapter VIII of the PRIA, and a 

discussion of how NHTSA and EPA jointly reviewed and updated economic assumptions 

for purposes of this NPRM is available in Chapter 4 of the TSD. In addition, all of 

NHTSA’s model input and output files are now public and available for the reader’s 

review and consideration. The economic input files can be found in the docket for this 

NPRM, NHTSA-2009-0059, and on NHTSA’s website [in the docket and on the 

website]. Finally, because much of NHTSA’s economic analysis for purposes of this 

NPRM builds on the work that was done for the MY 2011 final rule, we refer readers to 

that document as well for background information concerning how NHTSA’s 

assumptions regarding economic inputs for CAFE analysis have evolved over the past 

several rulemakings, both in response to comments and as a result of the agency’s 

growing experience with this type of analysis.131

4. How Ddoes NHTSA Uuse the Aassumptions in its Mmodeling Aanalysis?

 

131 74 FR 14308-14358 (Mar. 30, 2009). 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

111

In developing today’s proposed CAFE standards, NHTSA has made significant 

use of results produced by the CAFE Compliance and Effects Model (commonly referred 

to as “the CAFE model” or “the Volpe model”), which DOT’s Volpe National 

Transportation Systems Center developed specifically to support NHTSA’s CAFE 

rulemakings. The model, which has been constructed specifically for the purpose of 

analyzing potential CAFE standards, integrates the following core capabilities: 

(1) estimating how manufacturers could apply technologies in response to 

new fuel economy standards, 

(2) estimating the costs that would be incurred in applying these technologies, 

(3) estimating the physical effects resulting from the application of these 

technologies, such as changes in travel demand, fuel consumption, and 

emissions of carbon dioxide and criteria pollutants, and 

(4) estimating the monetized societal benefits of these physical effects. 

An overview of the model follows below. Separate model documentation 

provides a detailed explanation of the functions the model performs, the calculations it 

performs in doing so, and how to install the model, construct inputs to the model, and 

interpret the model’s outputs. Documentation of the model, along with model installation 

files, source code, and sample inputs are available at NHTSA’s web site. The model 

documentation is also available in the docket for today’s proposed rule, as are inputs for 

and outputs from analysis of today’s proposed CAFE standards. 

a. How Does the Model Operate? 

As discussed above, the agency uses the Volpe model to estimate the extent to 

which manufacturers could attempt to comply with a given CAFE standard by adding 

technology to fleets that the agency anticipates they will produce in future model years. 

This exercise constitutes a simulation of manufacturers’ decisions regarding compliance 

with CAFE standards. 

This compliance simulation begins with the following inputs: (a) the baseline 

market forecast discussed above in Section IV.C.1, (b) technology-related estimates 

discussed above in Section IV.C.2, (c) economic inputs discussed above in Section 

IV.C.3, and (d) inputs defining the characteristics of potential new CAFE standards. For 

each manufacturer, the model applies technologies in a sequence that follows a defined 

engineering logic (“decision trees” discussed in the MY 2011 final rule and in the model 

documentation) and a cost-minimizing strategy in order identify a set of technologies the 

manufacturer could apply in response to new CAFE standards. The model applies 

technologies to each of the projected individual vehicles in a manufacturer’s fleet, until 

one of three things occurs: 

(1) the manufacturer’s fleet achieves compliance with the applicable standard; 

(2) the manufacturer “exhausts”132 available technologies; or 

 

132 In a given model year, the model makes additional technologies available to each vehicle model within

several constraints, including (a) whether or not the technology is applicable to the vehicle model’s 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

112

(3) for manufacturers estimated to be willing to pay civil penalties, the 

manufacturer reaches the point at which doing so would be more costeffective (from the manufacturer’s perspective) than adding further 

technology.133

As discussed below, the model has also been modified in order to apply additional 

technology in early model years if doing so will facilitate compliance in later model 

years. 

The model accounts explicitly for each model year, applying most technologies 

when vehicles are scheduled to be redesigned or freshened, and carrying forward 

technologies between model years. The CAFE model accounts explicitly for each model 

year because EPCA requires that NHTSA make a year-by-year determination of the 

appropriate level of stringency and then set the standard at that level, while ensuring 

ratable increases in average fuel economy.134

The model also calculates the costs, effects, and benefits of technologies that it 

estimates could be added in response to a given CAFE standard.135 It calculates costs by 

applying the cost estimation techniques discussed above in Section IV.C.2, and by 

accounting for the number of affected vehicles. It accounts for effects such as changes in 

vehicle travel, changes in fuel consumption, and changes in greenhouse gas and criteria 

pollutant emissions. It does so by applying the fuel consumption estimation techniques 

also discussed in Section IV.C.2, and the vehicle survival and mileage accumulation 

forecasts, the rebound effect estimate and the fuel properties and emission factors 

discussed in Section IV.C.3. Considering changes in travel demand and fuel 

 

technology class, (b) whether the vehicle is undergoing a redesign or freshening in the given model year, 

(c) whether engineering aspects of the vehicle make the technology unavailable (e.g., secondary axle 

disconnect cannot be applied to two-wheel drive vehicles), and (d) whether technology application remains 

within “phase in caps” constraining the overall share of a manufacturer’s fleet to which the technology can 

be added in a given model year. Once enough technology is added to a given manufacturer’s fleet in a 

given model year that these constraints make further technology application unavailable, technologies are 

exhausted for that manufacturer in that model year.

133 This possibility was added to the model to account for the fact that under EPCA/EISA, manufacturers 

must pay fines if they do not achieve compliance with applicable CAFE standards. 49 U.S.C. sec.§

32912(b). NHTSA recognizes that some manufacturers will find it more cost-effective to pay fines than to 

achieve compliance, and believes that to assume these manufacturers would exhaust available technologies 

before paying fines would cause unrealistically high estimates of market penetration of expensive 

technologies such as diesel engines and strong hybrid electric vehicles, as well as correspondingly inflated 

estimates of both the costs and benefits of any potential CAFE standards. 

134 49 U.S.C. sec.§ 32902(a) states that “Aat least 18 months before the beginning of each model year, the 

Secretary of Transportation shall prescribe by regulation average fuel economy standards for automobiles 

manufactured by a manufacturer in that model year., and that Eeach standard shall be the maximum 

feasible average fuel economy level that the Secretary decides the manufacturers can achieve in that year.” 

NHTSA has long interpreted this statutory language to require year-by-year assessment of manufacturer 

capabilities. 49 U.S.C. sec.§ 32902(b)(2)(C) also requires that standards increase ratably between MY

2011 and MY 2020. 

135 As for all of its other rulemakings, NHTSA is required by Executive Order 12866 and DOT regulations 

to analyze the costs and benefits of CAFE standards. Executive Order 12866, 58 FR 51735 (Oct. 4, 1993); 

DOT Order 2100.5, “Regulatory Policies and Procedures,” 1979, available at

http://regs.dot.gov/rulemakingrequirements.htm (last accessed August 21, 2009). 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

113

consumption, the model estimates the monetized value of accompanying benefits to 

society, as discussed in Section IV.C.3. The model calculates both the undiscounted and 

discounted value of benefits that accrue over time in the future. 

The Volpe model has other capabilities that facilitate the development of a CAFE 

standard. It can be used to fit a mathematical function forming the basis for an attributebased CAFE standard, following the steps described below. It can also be used to 

evaluate many (e.g., 200 per model year) potential levels of stringency sequentially, and 

identify the stringency at which specific criteria are met. For example, it can identify the 

stringency at which net benefits to society are maximized, the stringency at which a 

specified total cost is reached, or the stringency at which a given average required fuel 

economy level is attained. This allows the agency to compare more easily the impacts in 

terms of fuel savings, emissions reductions, and costs and benefits of achieving different 

levels of stringency according to different criteria. The model can also be used to 

perform uncertainty analysis (i.e., Monte Carlo simulation), in which input estimates are 

varied randomly according to specified probability distributions, such that the uncertainty 

of key measures (e.g., fuel consumption, costs, benefits) can be evaluated. 

b. Has NHTSA Cconsidered Other Models? 

Nothing in EPCA requires NHTSA to use the Volpe model. In principle, NHTSA 

could perform all of these tasks through other means. For example, in developing the 

standards proposed today, the agency did not use the Volpe model’s curve fitting 

routines, because they could not be modified in time to reflect the change in the 

mathematical function defining the proposed CAFE standards. The Volpe model may be 

modified to do so for the final rule, although the agency can also continue to fit the 

mathematical function outside the model. In general, though, these model capabilities 

have greatly increased the agency’s ability to rapidly, systematically, and reproducibly 

conduct key analyses relevant to the formulation and evaluation of new CAFE standards. 

During its previous rulemaking, which led to the final MY 2011 standards 

promulgated earlier this year, NHTSA received comments from the Alliance and CARB 

encouraging NHTSA to examine the usefulness of other models. As discussed in that 

final rule, NHTSA, having undertaken such consideration, concluded that the Volpe 

model is a sound and reliable tool for the development and evaluation of potential CAFE 

standards.136

In reconsidering and reaffirming this conclusion for purposes of this NPRM, 

NHTSA notes that the Volpe model not only has been formally peer-reviewed and tested 

through three rulemakings, but also has some features especially important for the 

analysis of CAFE standards under EPCA/EISA. Among these are the ability to perform 

year-by-year analysis, and the ability to account for engineering differences between 

specific vehicle models. 

 

136 74 FR 14372 (Mar. 30, 2009). 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

114

EPCA requires that NHTSA set CAFE standards for each model year at the level 

appropriate for that year.137 Doing so requires the ability to analyze each model year and, 

when developing regulations covering multiple model years, to account for the 

interdependency of model years in terms of the appropriate levels of stringency for each 

one. Also, as part of the evaluation of the economic practicability of the standards, as 

required by EPCA, NHTSA has traditionally assessed the annual costs and benefits of the 

standards as it is permitted to do so. The first (2002) version of DOT’s model treated 

each model year separately, and did not perform this type of explicit accounting. 

Manufacturers took strong exception to these shortcomings. For example, GM 

commented in 2002 that “although the table suggests that the proposed standard for MY 

2007, considered in isolation, promises benefits exceeding costs, that anomalous outcome 

is merely an artifact of the peculiar Volpe methodology, which treats each year 

independently of any other...” In 2002, GM also criticized DOT’s analysis for, in some 

cases, adding a technology in MY 2006 and then replacing it with another technology in 

MY 2007. GM (and other manufacturers) argued that this completely failed to represent 

true manufacturer product-development cycles, and therefore could not be 

technologically feasible or economically practicable. 

In response to these concerns, and related concerns expressed by other 

manufacturers, DOT modified the CAFE model in order to account for dependencies 

between model years and to better represent manufacturers’ planning cycles, in a way 

that still allowed NHTSA to comply with the statutory requirement to determine the 

appropriate level of the standards for each model year. This was accomplished by 

limiting the application of many technologies to model years in which vehicle models are 

scheduled to be redesigned (or, for some technologies, “freshened”), and by causing the 

model to “carry forward” applied technologies from one model year to the next. 

During the recent rulemaking for MY 2011 passenger cars and light trucks, DOT 

further modified the CAFE model to account for cost reductions attributable to “learning 

effects” related to volume (i.e., economies of scale) and the passage of time (i.e., timebased learning), both of which evolve on year-by-year basis. These changes were 

implemented in response to comments by environmental groups and other stakeholders. 

The Volpe model is also able to account for important engineering differences 

between specific vehicle models, and to thereby reduce the risk of applying technologies 

that may be incompatible with or already present on a given vehicle model. Some 

commenters have previously suggested that manufacturers are most likely to broadly 

apply generic technology “packages,” and the Volpe model does tend to form “packages” 

dynamically, based on vehicle characteristics, redesign schedules, and schedules for 

increases in CAFE standards. For example, under the proposed CAFE standards for 

passenger cars, the CAFE model estimated that manufacturers could apply turbocharged 

SGDI engines mated with dual-clutch AMTs to 1.8 million passenger cars in MY 2016, 

about 16 percent of the MY 2016 passenger car fleet. Recent modifications to the model, 

discussed below, to represent multi-year planning, increase the model’s tendency to add 

 

137 49 U.S.C. sec.§ 32902(a). 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

115

relatively cost-effective technologies when vehicles are estimated to be redesigned, and 

thereby increase the model’s tendency to form such packages. 

On the other hand, some manufacturers have indicated that especially when faced 

with significant progressive increases in the stringency of new CAFE standards, they are 

likely to also look for narrower opportunities to apply specific technologies. By 

progressively applying specific technologies to specific vehicle models, the CAFE model 

also produces such outcomes. For example, under the proposed CAFE standards for 

passenger cars, the CAFE model estimated that in MY 2012, some manufacturers could 

find it advantageous to apply SIDI to some vehicle models without also adding 

turbochargers. 

By following this approach of combining technologies incrementally and on a 

model-by-model basis, the CAFE model is able to account for important engineering 

differences between vehicle models and avoid unlikely technology combinations. For 

example, the model does not apply dual-clutch AMTs (or strong hybrid systems) to 

vehicle models with 6-speed manual transmissions. Some vehicle buyers prefer a manual 

transmission; this preference cannot be assumed away. The model’s accounting for 

manual transmissions is also important for vehicles with larger engines: for example, 

cylinder deactivation cannot be applied to vehicles with manual transmissions, because 

there is no reliable means of predicting when the driver will change gears. By retaining 

cylinder deactivation as a specific technology rather than part of a pre-determined 

package and by retaining differentiation between vehicles with different transmissions, 

DOT’s model is able to target cylinder deactivation only to vehicle models for which it is 

technologically feasible. 

The Volpe model also produces a single vehicle-level output file that, for each 

vehicle model, shows which technologies were present at the outset of modeling, which 

technologies were superseded by other technologies, and which technologies were 

ultimately present at the conclusion of modeling. For each vehicle, the same file shows 

resultant changes in vehicle weight, fuel economy, and cost. This provides for efficient 

identification, analysis, and correction of errors, a task with which the public can now 

assist the agency, since all inputs and outputs are public. 

Such considerations, as well as those related to the efficiency with which the 

Volpe model is able to analyze attribute-based CAFE standards and changes in vehicle 

classification, and to perform higher-level analysis such as stringency estimation (to meet 

predetermined criteria), sensitivity analysis, and uncertainty analysis, lead the agency to 

conclude that the model remains the best available to the agency for the purposes of 

analyzing potential new CAFE standards. 

c. What Changes Hhas DOT Made to the Model? 

Prior to being used for analysis supporting today’s proposal, the Volpe model was 

revised to make some minor improvements, and to add one significant new capability: 

the ability to simulate manufacturers’ ability to engage in “multi-year planning.” Multi-
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

116

year planning refers to the fact that when redesigning or freshening vehicles, 

manufacturers can anticipate future fuel economy or CO2 standards, and add technologies 

accounting for these standards. For example, a manufacturer might choose to overcomply in a given model year when many vehicle models are scheduled for redesign, in 

order to facilitate compliance in a later model year when standards will be more stringent 

yet few vehicle models are scheduled for redesign.138 Prior comments have indicated that 

the Volpe model, by not representing such manufacturer choices, tended to overestimate 

compliance costs. However, because of the technical complexity involved in 

representing these choices when, as in the Volpe model, each model year is accounted for 

separately and explicitly, the model could not be modified to add this capability prior to 

the statutory deadline for the MY 2011 final standards. 

The model now includes this capability, and NHTSA has applied it in analyzing 

the standards proposed today. Consequently, this often produces results indicating that 

manufacturers could over-comply in some model years (with corresponding increases in 

costs and benefits in those model years) and thereby “carry forward” technology into 

later model years in order to reduce compliance costs in those later model years. NHTSA 

believes this better represents how manufacturers would actually respond to new CAFE 

standards, and thereby produces more realistic estimates of the costs and benefits of such 

standards. 

The Volpe model has also been modified to accommodate inputs specifying the 

amount of CAFE credit to be applied to each manufacturer’s fleet. Although the model is 

not currently capable of estimating manufacturers’ decisions regarding the generation and 

use of CAFE credits, and EPCA does not allow NHTSA, in setting CAFE standards, to 

take into account manufacturers’ potential use of credits, this additional capability in the 

Volpe model provides a basis for more accurately estimating costs, effects, and benefits 

that may actually result from new CAFE standards. Insofar as some manufacturers 

actually do earn and use CAFE credits, this provides NHTSA with some ability to 

examine outcomes more realistically than EPCA allows for purposes of setting new 

CAFE standards. 

In comments on recent NHTSA rulemakings, some reviewers have suggested that 

the Volpe model should be modified to estimate the extent to which new CAFE standards 

would induce changes in the mix of vehicles in the new vehicle fleet. NHTSA, like EPA, 

agrees that a “market shift” model, also called a consumer vehicle choice model, could 

provide useful information regarding the possible effects of potential new CAFE 

standards. An earlier experimental version of the Volpe model included a multinomial 

logit model that estimated changes in sales resulting from CAFE-induced increases in 

new vehicle fuel economy and prices. A fuller description of this attempt can be found in 

Section V of the PRIA. However, NHTSA has thus far been unable to develop credible 

coefficients specifying such a model. In addition, as discussed in Section II.H.4, such a 

model is sensitive to the coefficients used in it, and there is great variation over some key 

 

138 Although a manufacturer may, in addition, generate CAFE credits in early model years for use in later

model years (or, less likely, in later years for use in early years), EPCA does not allow NHTSA, when 

setting CAFE standards, to account for manufacturers’ use of CAFE credits. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

117

values of these coefficients in published studies. NHTSA seeks comment on ways to 

improve on this earlier work and develop this capability effectively. If the agency is able 

to do so prior to conducting analysis supporting decisions regarding final CAFE 

standards, it will attempt to reintegrate this capability in the Volpe model and include 

these effects in its analysis of final standards. If not, NHTSA will continue efforts to 

develop and make use of this capability in future rulemakings. 

d. Does the Model Set the Standards? 

 Although NHTSA currently uses the Volpe model as a tool to inform its 

consideration of potential CAFE standards, the Volpe model does not determine the 

CAFE standards that NHTSA proposes or promulgates as final regulations. The results it 

produces are completely dependent on inputs selected by NHTSA, based on the best 

available information and data available in the agency’s estimation at the time standards 

are set. Although the model has been programmed in previous rulemakings to estimate at 

what stringency net benefits are maximized, NHTSA has not done so here and has 

instead used the Volpe model to estimate stringency levels that produce roughly constant 

rates of increase in the combined average required fuel economy. In addition to 

identifying the input assumptions underlying its decisions, NHTSA provides the rationale 

and justification for selecting those inputs as described in Sections ? through ? of this 

notice. Ultimately, NHTSA’s selection of a CAFE standard is governed and guided by 

the statutory requirements of EPCA, as amended by EISA: NHTSA sets the standard at 

the maximum feasible average fuel economy level that it determines is achievable during 

a particular model year, considering technological feasibility, economic practicability, the 

effect of other standards of the Government on fuel economy, and the need of the nation 

to conserve energy. 

 

 NHTSA considers the results of analyses conducted by the Volpe model and 

analyses conducted outside of the Volpe model, including analysis of the impacts of 

carbon dioxide and criteria pollutant emissions, analysis of technologies that may be 

available in the long term and whether NHTSA could expedite their entry into the market 

through these standards, and analysis of the extent to which changes in vehicle prices and 

fuel economy might affect vehicle production and sales. Using all of this information—

not solely that from the Volpe model—the agency considers the governing statutory 

factors, along with environmental issues and other relevant societal issues such as safety, 

and promulgates the standards based on its best judgment on how to balance these 

factors. 

 

 This is why the agency considered eight regulatory alternatives, only one of 

which reflects the agency’s proposed standards, based on the agency’s determinations 

and assumptions. Others assess alternative standards, some of which exceed the 

proposed standards and/or the point at which net benefits are maximized. These 

comprehensive analyses, which also included scenarios with different economic input 

assumptions as presented in the FEIS and FRIA, are intended to inform and contribute to 

the agency’s consideration of the “need of the United States to conserve energy,” as well 

as the other statutory factors. 49 U.S.C. sec.§ 32902(f). Additionally, the agency’s 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

118

analysis considers the need of the nation to conserve energy by accounting for economic 

externalities of petroleum consumption and monetizing the economic costs of 

incremental CO2 emissions in the social cost of carbon. NHTSA uses information from 

the model when considering what standards to propose and finalize, but the model does 

not determine the standards. 

 e. How Ddoes NHTSA Make the Model Available and Transparent?

Model documentation, which is publicly available in the rulemaking docket and 

on NHTSA’s web site, explains how the model is installed, how the model inputs (all of 

which are available to the public)139 and outputs are structured, and how the model is 

used. The model can be used on any Windows-based personal computer with Microsoft 

Office 2003 and the Microsoft .NET framework installed (the latter available without 

charge from Microsoft). The executable version of the model and the underlying source 

code are also available at NHTSA’s web site. The input files used to conduct the core 

analysis documented in this proposed rule are available in the public docket. With the 

model and these input files, anyone is capable of independently running the model to 

repeat, evaluate, and/or modify the agency’s analysis. 

5. How Ddid NHTSA Develop the Shape of the Target Curves for the 

Proposed Standards?

 In developing the shape of the target curves for today’s proposed standards, 

NHTSA took a new approach, primarily in response to comments received in the MY 

2011 rulemaking. NHTSA’s authority under EISA allows consideration of any “attribute 

related to fuel economy” and any “mathematical function.” While the attribute, footprint, 

is the same for these proposed standards as the attribute used for the MY 2011 standards, 

the mathematical function is new. 

 Both vehicle manufacturers and public interest groups expressed concern in the 

MY 2011 rulemaking process that the constrained logistic function, particularly the 

function for the passenger car standards, was overly steep and could lead, on the one 

hand, to fuel economy targets that were overly stringent for small footprint vehicles, and 

on the other hand, to a greater incentive for manufacturers to upsize vehicles in order to 

reduce their compliance obligation (because larger-footprint vehicles have less stringent 

targets) in ways that could compromise energy and environmental benefits. We 

tentatively believe that the constrained linear function developed here significantly 

mitigates steepness concerns, but we seek comment on whether readers agree, and 

whether there are any other issues relating to the new approach that NHTSA should 

consider in developing the curves for the final rule. 

a. Standards are Attribute-Bbased and Ddefined by a Mathematical Function 

 

139 We note, however, that files from any supplemental analysis conducted that relied in part on confidential 

manufacturer product plans cannot be made public, as prohibited under 49 CFR Part 512. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

119

EPCA, as amended by EISA, expressly requires that CAFE standards for 

passenger cars and light trucks be based on one or more vehicle attributes related to fuel 

economy, and be expressed in the form of a mathematical function.140 Like the MY 2011 

standards, the MY 2012-2016 passenger car and light truck standards are attribute-based 

and defined by a mathematical function.141 Also like the MY 2011 standards, the MY 

2012-2016 standards are based on the footprint attribute. However, unlike the MY 2011 

standards, the MY 2012-2016 standards are defined by a constrained linear rather than a 

constrained logistic function. The reasons for these similarities and differences are 

explained below. 

As discussed above in Section II, under attribute-based standards, the fleet-wide 

average fuel economy that a particular manufacturer must achieve in a given model year 

depends on the mix of vehicles that it produces for sale. Until NHTSA began to set 

“Reformed” attribute-based standards for light trucks in MYs 2008-2011, and until EISA 

gave NHTSA authority to set attribute-based standards for passenger cars beginning in 

MY 2011, NHTSA set “universal” or “flat” industry-wide average CAFE standards. 

Attribute-based standards are preferable to universal industry-wide average standards for 

several reasons. First, attribute-based standards increase fuel savings and reduce 

emissions when compared to an equivalent universal industry-wide standard under which 

each manufacturer is subject to the same numerical requirement. Absent a policy to 

require all full-line manufacturers to produce and sell essentially the same mix of 

vehicles, the stringency of the universal industry-wide standards is constrained by the 

capability of those full-line manufacturers whose product mix includes a relatively high 

proportion of larger and heavier vehicles. In effect, the standards are based on the mix of 

those manufacturers. As a result, the standards are generally set below the capabilities of 

full-line and limited-line manufacturers that sell predominantly lighter and smaller 

vehicles. 

Under an attribute-based system, in contrast, every manufacturer is more likely to 

be required to continue adding more fuel-saving technology each year because the level 

of the compliance obligation of each manufacturer is based on its own particular product 

mix. Thus, the compliance obligation of a manufacturer with a higher percentage of 

lighter and smaller vehicles will have a higher compliance obligation than a manufacturer 

with a lower percentage of such vehicles. As a result, all manufacturers must use 

technologies to enhance the fuel economy levels of the vehicles they sell. Therefore, fuel 

savings and CO2 emissions reductions should be higher under an attribute-based system 

than under a comparable industry-wide standard. 

 

140 49 U.S.C. sec.§ 32902(a)(3)(A). 

141 As discussed in Chapter 2 of the TSD, EPA is also proposing to set attribute-based CO2 standards that 

are defined by a mathematical function, given the advantages of using attribute-based standards and given 

the goal of coordinating and harmonizing the CAFE and CO2 standards as expressed by President Obama in 

his announcement of the new National Program and in the joint NOI. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

120

Second, attribute-based standards minimize the incentive for manufacturers to 

respond to CAFE in ways harmful to safety.142 Because each vehicle model has its own 

target (based on the attribute chosen), attribute-based standards provide no incentive to 

build smaller vehicles simply to meet a fleet-wide average. Since smaller vehicles are 

subject to more stringent fuel economy targets, a manufacturer’s increasing its proportion 

of smaller vehicles would simply cause its compliance obligation to increase. 

Third, attribute-based standards provide a more equitable regulatory framework 

for different vehicle manufacturers.143 A universal industry-wide average standard 

imposes disproportionate cost burdens and compliance difficulties on the manufacturers 

that need to change their product plans and no obligation on those manufacturers that 

have no need to change their plans. Attribute-based standards spread the regulatory cost 

burden for fuel economy more broadly across all of the vehicle manufacturers within the 

industry. 

And fourth, attribute-based standards respect economic conditions and consumer 

choice, instead of having the government mandate a certain fleet mix. Manufacturers are 

required to invest in technologies that improve the fuel economy of their fleets, regardless 

of vehicle mix. Additionally, attribute-based standards help to avoid the need to conduct 

rulemakings to amend standards if economic conditions change, causing a shift in the mix 

of vehicles demanded by the public. NHTSA conducted three rulemakings during the 

1980s to amend passenger car standards for MYs 1986-1989 in response to unexpected 

drops in fuel prices and resulting shifts in consumer demand that made the passenger car 

standard of 27.5 mpg infeasible for several years following the change in fuel prices. 

As discussed above in Section II, for purposes of the CAFE standards proposed in 

this NPRM, NHTSA recognizes that the risk, even if small, does exist that low fuel prices 

in MYs 2012-2016 might lead indirectly to less than currently anticipated fuel savings 

and emissions reductions. Thus, we seek comment on whether backstop standards, or 

any other method within the agencies’ statutory authority, should and can be 

implemented for the import and light truck fleets in order to achieve the fuel savings that 

attribute-based standards might not absolutely guarantee. Commenters are encouraged, 

but not required, to review and respond to NHTSA’s discussion of this issue in the MY 

2011 final rule as a starting point.144

b., What Aattribute Does NHTSA Use, and Why? 

Consistent with the MY 2011 CAFE standards, NHTSA is proposing to use 

footprint as the attribute for the MY 2012-2016 CAFE standards. There are several 

policy reasons why NHTSA and EPA both believe that footprint is the most appropriate 

attribute on which to base the standards, as discussed below. 

 

142 The 2002 NAS Report described at length and quantified the potential safety problem with average fuel

economy standards that specify a single numerical requirement for the entire industry. See NAS Report at 

5, finding 12. 

143 Id. at 4-5, finding 10. 

144 74 FR 14409-14412 (Mar. 30, 2009). 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

121

As discussed in the PRIA, in NHTSA’s judgment, from the standpoint of vehicle 

safety, it is important that the CAFE standards be set in a way that does not encourage 

manufacturers to respond by selling vehicles that are in any way less safe. While 

NHTSA’s research also indicates that reductions in vehicle mass tend to compromise 

vehicle safety, footprint-based standards provide an incentive to use advanced 

lightweight materials and structures that would be discouraged by weight-based 

standards, because manufacturers can use them to improve a vehicle’s fuel economy 

without their use necessarily resulting in a change in the vehicle’s target level of fuel 

economy. 

Further, although we recognize that weight is better correlated with fuel economy 

than is footprint, we continue to believe that there is less risk of “gaming” (artificial 

manipulation of the attribute(s) to achieve a more favorable target) by increasing 

footprint under footprint-based standards than by increasing vehicle mass under weightbased standards—it is relatively easy for a manufacturer to add enough weight to a 

vehicle to decrease its applicable fuel economy target a significant amount, as compared 

to increasing vehicle footprint. We also agree with concerns raised in 2008 by some 

commenters in the MY 2011 CAFE rulemaking that there would be greater potential for 

gaming under multi-attribute standards, such as standards under which targets would also 

depend on attributes such as weight, torque, power, towing capability, and/or off-road 

capability. Standards that incorporate such attributes in conjunction with footprint would 

not only be significantly more complex, but by providing degrees of freedom with respect 

to more easily-adjusted attributes, they would make it less certain that the future fleet 

would actually achieve the projected average fuel economy and CO2 reduction levels. 

 However, while NHTSA tentatively concludes that footprint is the most 

appropriate attribute upon which to base the proposed standards, recognizing strong 

public interest in this issue, we seek comment on whether the agency should consider 

setting standards for the final rule based on another attribute or another combination of 

attributes. If commenters suggest that the agency should consider another attribute or 

another combination of attributes, the agency specifically requests that the commenters 

address the concerns raised in the paragraphs above regarding the use of other attributes, 

and explain how standards should be developed using the other attribute(s) in a way that 

contributes more to fuel savings and CO2 reductions than the footprint-based standards, 

without compromising safety. 

c. What Mathematical Function Ddid NHTSA Use for the RecentlyPromulgated MY 2011 CAFE Standards? 

The MY 2011 CAFE standards are defined by a continuous, constrained logistic 

function, which takes the form of an S-curve, and is defined according to the following 

formula:
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

122

( )

( )

1

1 1 1

1

FOOTPRINT c d

FOOTPRINT c d

TARGET

e

a b a e

−

−

=

 

+ −     +

Here, TARGET is the fuel economy target (in mpg) applicable to vehicles of a given 

footprint (FOOTPRINT, in square feet), b and a are the function’s lower and upper 

asymptotes (also in mpg), e is approximately equal to 2.718,145c is the footprint (in 

square feet) at which the inverse of the fuel economy target falls halfway between the 

inverses of the lower and upper asymptotes, and d is a parameter (in square feet) that 

determines how gradually the fuel economy target transitions from the upper toward the 

lower asymptote as the footprint increases. 

 After fitting this mathematical form (separately) to the passenger car and light 

truck fleets and determining the stringency of the standards (i.e., the vertical positions of 

the curves), NHTSA arrived at the following curves to define the MY 2011 standards: 

 

145

e is the irrational number for which the slope of the function y = numberx is equal to 1 when x is equal to 

zero. The first 8 digits of e are 2.7182818. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

123

Figure IV.C.5-2. MY 2011 CAFE Standards for Passenger Cars and Light Trucks 

20

25

30

35

40

45

35 40 45 50 55 60 65 70

Footprint (sf)

Target (mpg)

Passenger Cars

Light Trucks

d. What Mathematical Function is NHTSA Proposing to Use for New CAFE 

Standards, and Wwhy? 

In finalizing the MY 2011 standards, NHTSA noted that the agency is not 

required to use a constrained logistic function and indicated that the agency may consider 

defining future CAFE standards in terms of a different mathematical function. NHTSA 

has done so in preparation for the proposed CAFE standards. 

In revisiting this question, NHTSA found that the final MY 2011 CAFE standard 

for passenger cars, though less steep than the MY 2011 standard NHTSA proposed in 

2008, continues to concentrate the sloped portion of the curve (from a compliance 

perspective, the area in which upsizing results in a slightly lower applicable target) within 

a relatively narrow footprint range (approximately 47-55 square feet). Further, most 

passenger car models have footprints smaller than the curve’s 51.4 square foot inflection 

point, and many passenger car models have footprints at which the curve is relatively flat. 

For both passenger cars and light trucks, a mathematical function that has some 

slope at most footprints where vehicles are produced is advantageous in terms of fairly 

balancing regulatory burdens among manufacturers, and in terms of providing a 

Formatted: Centered
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

124

disincentive to respond to new standards by downsizing vehicles in ways that 

compromise vehicle safety. For example, a flat standard may be very difficult for a fullline manufacturer to meet, while requiring very little of a manufacturer concentrating on 

small vehicles, and a flat standard may provide an incentive to manufacturers to downsize 

certain vehicles, in order to “balance out” other vehicles subject to the same standard. 

As a potential alternative to the constrained logistic function, NHTSA had, in 

proposing MY 2011 standards, presented information regarding a constrained linear 

function. As shown in the 2008 NPRM, a constrained linear function has the potential to 

avoid creating a localized region (in terms of vehicle footprint) over which the slope of 

the function is relatively steep. Although NHTSA did not receive public comments on 

this option, the agency indicated that it still believed a linear function constrained by 

upper (on a gpm basis) and possibly lower limits could merit reconsideration in future 

CAFE rulemakings. 

Having re-examined a constrained linear function for purposes of the proposed 

standards, NHTSA tentatively concludes that for both passenger cars and light trucks, it 

remains meaningfully sloped over a wide footprint range, thereby providing a welldistributed disincentive to downsize vehicles in ways that could compromise highway 

safety. Further, the constrained linear function proposed today is not so steeply sloped 

that it would provide a strong incentive to increase vehicle size in order to obtain a lower 

CAFE requirement and higher CO2 limit, thereby compromising energy and 

environmental benefits. Therefore, the CAFE standards proposed today are defined by 

constrained linear functions. 

The constrained linear function is defined according to the following formula:

1

1 1

, ,

TARGET

MIN MAX c FOOTPRINT d

a b

=

      × +      

Here, TARGET is the fuel economy target (in mpg) applicable to vehicles of a 

given footprint (FOOTPRINT, in square feet), b and a are the function’s lower and upper 

asymptotes (also in mpg), respectively, c is the slope (in gpm per square foot) of the 

sloped portion of the function, and d is the intercept (in gpm) of the sloped portion of the 

function (that is, the value the sloped portion would take if extended to a footprint of 0 

square feet. The MIN and MAX functions take the minimum and maximum, respectively 

of the included values; for example, MIN(1,2) = 1, MAX(1,2) = 2, and 

MIN[MAX(1,2),3)]=2. The following chart shows an example of a linear target function, 

where a = 0.0241 gpm (41.6 mpg), b = 0.032 gpm (31.2 mpg), c = 0.000531 gpm per 

square foot, and d = 0.002292 gpm (436 mpg). Because the function is linear on a gpm 

basis, not an mpg basis, it is plotted on this basis. 

e. How dDid NHTSA Fit the Coefficients that Determine the Shape of the 

Proposed Curves? 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

125

For purposes of this NPRM, and for EPA’s use in developing new CO2 emissions 

standards, the basic curve shapes were developed using methods similar to those applied 

by NHTSA in fitting the curves defining the MY 2011 standards. We began with the 

market inputs discussed above, but because the baseline fleet is technologically 

heterogeneous, NHTSA used the CAFE model to develop a fleet to which nearly all the 

technologies discussed in Section [XX]V of the PRIA and Chapter 3 of the joint TSD146

were applied, by taking the following steps: (1) treating all manufacturers as unwilling to 

pay civil penalties rather than applying technology, (2) applying any technology at any 

time, irrespective of scheduled vehicle redesigns or freshening, and (3) ignoring “phasein caps” that constrain the overall amount of technology that can be applied by the model 

to a given manufacturer’s fleet. These steps helped to increase technological parity 

among vehicle models, thereby providing a better basis (than the baseline fleet) for 

estimating the statistical relationship between vehicle size and fuel economy. 

More information on the process for fitting the passenger car and light truck 

curves for MYs 2012-2016 is available above in Section II.C, and NHTSA refers the 

reader to that section and to Chapter 2 of the joint TSD. NHTSA seeks comment on this 

approach to fitting the curves. We note that final decisions on this issue will play an 

important role in determining the form and stringency of the final CAFE and CO2

standards, the incentives those standards will provide (e.g., with respect to downsizing 

small vehicles), and the relative compliance burden faced by each manufacturer. 

D. Statutory requirements 

1. EPCA, as Amended by EISA

a. Standard Setting 

NHTSA must establish separate standards for MY 2011-2020 passenger cars and 

light trucks, subject to two principal requirements.

147 First, the standards are subject to a 

minimum requirement regarding stringency: they must be set at levels high enough to 

ensure that the combined U.S. passenger car and light truck fleet achieves an average fuel 

economy level of not less than 35 mpg not later than MY 2020.148 Second, as discussed 

above and at length in the March 2009 final rule establishing the MY 2011 CAFE 

standards, EPCA requires that the agency establish standards for all new passenger cars 

 

146 The agencies excluded diesel engines and strong hybrid vehicle technologies from this exercise (and 

only this exercise) because the agencies expect that manufacturers would not need to rely heavily on these 

technologies in order to comply with the proposed standards. NHTSA and EPA did include diesel engines

and strong hybrid vehicle technologies in all other portions of their analyses. 

147 EISA added the following additional requirements-- 

1.• Standards must be attribute-based and expressed in the form of a mathematical function. 49 

U.S.C. sec.§ 32902(b)(3)(A). 

2.• Standards for MYs 2011-2020 must “increase ratably” in each model year. 49 U.S.C. sec.§

32902(b)(2)(C). NHTSA interprets this requirement, in combination with the requirement to 

set the standards for each model year at the level determined to be the maximum feasible level 

for that model year, to mean that the annual increases should not be disproportionately large 

or small in relation to each other.

148 49 U.S.C. sec.§ 32902(b)(2)(A). 

Formatted: Indent: Left: 0.5", Bulleted +

Level: 1 + Aligned at: 0.25" + Tab after: 0.5"

+ Indent at: 0.5", Tab stops: 0.75", List tab +

Not at 0.5"
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

126

and light trucks at the maximum feasible average fuel economy level that the Secretary 

decides the manufacturers can achieve in that model year.149 The implication of this 

second requirement is that it calls for exceeding the minimum requirement if the agency 

determines that the manufacturers can achieve a higher level. When determining the 

level achievable by the manufacturers, EPCA requires that the agency consider the four 

statutory factors of technological feasibility, economic practicability, the effect of other 

motor vehicle standards of the Government on fuel economy, and the need of the United 

States to conserve energy. In addition, the agency has the authority to and traditionally 

does consider other relevant factors, such as the effect of the CAFE standards on motor 

vehicle safety. 

i. Statutory Factors Cconsidered in Determining the Achievable Level of 

Average Fuel Economy 

As none of the four factors is defined in EPCA and each remains interpreted only 

to a limited degree by case law, NHTSA has considerable latitude in interpreting them. 

NHTSA interprets the four statutory factors as set forth below. 

(1) Technological Ffeasibiilty 

“Technological feasibility” refers to whether a particular technology for 

improving fuel economy is available or can become available for commercial application 

in the model year for which a standard is being established. Thus, the agency is not 

limited in determining the level of new standards to technology that is already being 

commercially applied at the time of the rulemaking. It can, instead, set technologyforcing standards, i.e., ones that make it necessary for manufacturers to engage in 

research and development in order to bring a new technology to market. 

(2) Economic pPracticability 

“Economic practicability” refers to whether a standard is one “within the financial 

capability of the industry, but not so stringent as to” lead to “adverse economic 

consequences, such as a significant loss of jobs or the unreasonable elimination of 

consumer choice.”150 In an attempt to ensure the economic practicability, the agency 

considers a variety of factors, including the annual rate at which manufacturers can 

increase the percentage of its fleet that has a particular type of fuel saving technology, 

and cost to consumers. Consumer acceptability is also an element of economic 

practicability. 

At the same time, the law does not preclude a CAFE standard that poses 

considerable challenges to any individual manufacturer. The Conference Report for 

EPCA, as enacted in 1975, makes clear, and the case law affirms, “(A) determination of 

maximum feasible average fuel economy should not be keyed to the single manufacturer 

which might have the most difficulty achieving a given level of average fuel 

 

149 49 U.S.C. sec.§ 32902(a). 

150 67 FR 77015, 77021 (Dec. 16, 2002). 

Formatted: Font: Italic
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

127

economy.”151 Instead, the agency is compelled “to weigh the benefits to the nation of a 

higher fuel economy standard against the difficulties of individual automobile 

manufacturers.” Id. The law permits CAFE standards exceeding the projected capability 

of any particular manufacturer as long as the standard is economically practicable for the 

industry as a whole. Thus, while a particular CAFE standard may pose difficulties for 

one manufacturer, it may also present opportunities for another. The CAFE program is 

not necessarily intended to maintain the competitive positioning of each particular 

company. Rather, it is intended to enhance fuel economy of the vehicle fleet on 

American roads, while protecting motor vehicle safety and being mindful of the risk of 

harm to the overall United States economy. 

Thus, NHTSA believes that this term must be applied in the context of the 

competing concerns associated with different levels of standards. Prior to switching to 

attribute-based standards in the MY 2008-2011 rulemaking, the agency sought to ensure 

the economy practicability of standards in part by setting them at or near the capability of 

the “least capable manufacturer” with a significant share of the market, i.e., typically the 

manufacturer whose vehicles are, on average, the heaviest and largest. In the first several 

rulemakings to establish attribute based standards, the agency applied marginal cost 

benefit analysis. This ensured that the agency’s application of technologies was limited 

to those that would pay for themselves and thus would have significant appeal to 

consumers. However, the agency can and has limited its application of technologies to 

those technologies, with or without the use of such analysis. 

(3) The eEffect of oOther Mmotor Vvehicle Sstandards of the Government on 

Ffuel eEconomy 

“The effect of other motor vehicle standards of the Government on fuel 

economy,” involves an analysis of the effects of compliance with emission,152 safety, 

noise, or damageability standards on fuel economy capability and thus on average fuel 

economy. In previous CAFE rulemakings, the agency has said that pursuant to this 

provision, it considers the adverse effects of other motor vehicle standards on fuel 

economy. It said so because, from the CAFE program’s earliest years 153 until present, 

the effects of such compliance on fuel economy capability over the history of the CAFE 

program have been negative ones. In those instances in which the effects are negative, 

NHTSA is called upon to “mak[e] a straightforward adjustment to the fuel economy 

improvement projections to account for the impacts of other Federal standards, 

principally those in the areas of emission control, occupant safety, vehicle damageability, 

and vehicle noise. However, only the unavoidable consequences should be accounted 

for. The automobile manufacturers must be expected to adopt those feasible methods of 

achieving compliance with other Federal standards which minimize any adverse fuel 

 

151 CEI-I, 793 F.2d 1322, 1352 (D.C. Cir. 1986). 

152 In the case of emission standards, this includes standards adopted by the Federal government and can 

include standards adopted by the States as well, since in certain circumstances the Clean Air Act allows 

States to adopt and enforce State standards different from the Federal ones. 

153 42 FR 63184, 63188 (Dec. 15, 1977). See also 42 FR 33534, 33537 (Jun. 30, 1977).
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

128

economy effects of those standards.” 154 For example, safety standards that have the 

effect of increasing vehicle weight lower vehicle fuel economy capability and thus 

decrease the level of average fuel economy that the agency can determine to be feasible. 

The “other motor vehicle standards” consideration has thus in practice functioned 

in a fashion similar to the provision in EPCA, as originally enacted, for adjusting the 

statutorily-specified CAFE standards for MY 1978-1980 passengers cars.155 EPCA did 

not permit NHTSA to amend those standards based on a finding that the maximum 

feasible level of average fuel economy for any of those three years was greater or less 

than the standard specified for that year. Instead, it provided that the agency could only 

reduce the standards and only on one basis: if the agency found that there had been a 

federal standards fuel economy reduction, i.e., a reduction in fuel economy due to 

changes in the Federal vehicle standards, e.g., emissions and safety, relative to the year of 

enactment, 1975. 

The “other motor vehicle standards” provision is broader than the federal 

standards fuel economy reduction provision. Although the effects analyzed to date under 

the “other motor vehicle standards” provision have been negative, there could be 

circumstances in which the effects are positive. In the event that the agency encountered 

such circumstances, it would be required to consider those positive effects. For example, 

if changes in vehicle safety technology led to NHTSA’s amending a safety standard in a 

way that permits manufacturers to reduce the weight added in complying with that 

standard, that weight reduction would increase vehicle fuel economy capability and thus 

increase the level of average fuel economy that could be determined to be feasible. 

 

In the wake of Massachusetts v. EPA and of EPA’s proposed endangerment 

finding, granting of a waiver to California for its motor vehicle GHG standards, and its 

own proposal of GHG standards, the agency is confronted with the issue of how to treat 

those standards under the “other motor vehicle standards” provision. To the extent the 

GHG standards result in increases in fuel economy, they would do so almost exclusively 

as a result of inducing manufacturers to install the same types of technologies used by 

manufacturers in complying with the CAFE standards. The primary exception would 

involve increases in the efficiency of air conditioners. 

Thus, NHTSA tentatively concludes that the effects of the EPA and California 

standards are neither positive nor negative because the proposed rule results in consistent 

standards among all components of the National Program. Comment is requested on 

whether and in what way the effects of the California and EPA standards should be 

considered under the “other motor vehicle standards” provision or other provisions of 

EPCA in 49 U.S.C. sec.§ 32902, consistent with NHTSA’s independent obligation under 

EPCA/EISA to issue CAFE standards? The agency has already considered EPA’s 

proposal and the harmonization benefits of the National Program in developing its own 

proposal. 

 

154 42 FR 33534, 33537 (Jun. 30, 1977). 

155 That provision was deleted as obsolete when EPCA was codified in 1994. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

129

(4) The Nneed of the United States to Cconserve Eenergy 

 “The need of the United States to conserve energy” means “the consumer cost, 

national balance of payments, environmental, and foreign policy implications of our need 

for large quantities of petroleum, especially imported petroleum.”156 Environmental 

implications principally include those associated with reductions in emissions of criteria 

pollutants and CO2. A prime example of foreign policy implications are energy 

independence and security concerns. 

ii. Other Factors Considered by NHTSA 

The agency historically has considered the potential for adverse safety 

consequences in setting CAFE standards. This practice is recognized approvingly in case 

law. As the courts have recognized, “NHTSA has always examined the safety 

consequences of the CAFE standards in its overall consideration of relevant factors since 

its earliest rulemaking under the CAFE program.” Competitive Enterprise Institute v. 

NHTSA, 901 F.2d 107, 120 n. 11 (DC Cir. 1990) (“CEI I”) (citing 42 Fed. Reg. 33534, 

33551 (June 30, 1977)). The courts have consistently upheld NHTSA’s implementation 

of EPCA in this manner. See, e.g., Competitive Enterprise Institute v. NHTSA, 956 F.2d 

321, 322 (D.C. Cir. 1992) (“CEI II”) (in determining the maximum feasible fuel economy 

standard, “NHTSA has always taken passenger safety into account.”) (citing CEI I, 901 

F.2d at 120 n. 11); Competitive Enterprise Institute v. NHTSA, 45 F.3d 481, 482-83 (D.C. 

Cir. 1995) (“CEI III”) (same); Center for Biological Diversity v. NHTSA, 538 F.3d 1172, 

1203-04 (9th Cir. 2008) (upholding NHTSA’s analysis of vehicle safety issues associated 

with weight in connection with the MY 2008-11 light truck CAFE rule). Thus, in 

evaluating what levels of stringency would result in maximum feasible standards, 

NHTSA assesses the potential safety impacts and considers them in balancing the 

statutory considerations and to determine the appropriate level of the standards. 

Under the universal or “flat” CAFE standards that NHTSA was previously 

authorized to establish, the primary risk to safety came from the possibility that 

manufacturers would respond to higher standards by building smaller, less safe vehicles 

in order to “balance out” the larger, safer vehicles that the public generally preferred to 

buy. Under the attribute-based standards being proposed today, that risk is reduced 

because building smaller vehicles would tend to raise a manufacturer’s overall CAFE 

obligation, rather than only raising its fleet average CAFE. However, even if the 

manufacturers did not engage in any downsizing under attribute-based standards, there is 

still the possibility that manufacturers would rely on downweighting to improve their fuel 

economy (for a given vehicle at a given footprint target) in ways that may reduce safety 

to a greater or lesser extent. While NHTSA recognizes that manufacturers may 

nonetheless choose this option for raising their CAFE levels, in prior rulemakings we 

have limited the application of downweighting/material substitution in our modeling 

analysis to vehicles over 5,000 lbs GVWR.157

 

156 42 FR 63184, 63188 (1977). 

157 See 74 FR 14396-14407 (Mar. 30, 2009). 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

130

For purposes of today’s proposed standards, however, NHTSA has revised its 

modeling analysis to allow some application of downweighting/material substitution for 

all vehicles, including those under 5,000 lbs GVWR, because we believe that this is more 

consistent with how manufacturers will actually respond to the standards. However, as 

discussed above, NHTSA does not mandate the use of any particular technology by 

manufacturers in meeting the standards. More information on the new approach to 

modeling manufacturer use of downweighting/material substitution is available in 

Chapter 3 of the draft joint TSD and in Section V of the PRIA; and the estimated safety 

impacts that may be due to the proposed standards are described below. 

iii. Factors that NHTSA is Prohibited From Considering 

 EPCA also provides that in determining the level at which it should set CAFE 

standards for a particular model year, NHTSA may not consider the ability of 

manufacturers to take advantage of several EPCA provisions that facilitate compliance 

with the CAFE standards and thereby reduce the costs of compliance.158 As discussed 

further below, manufacturers can earn compliance credits by exceeding the CAFE 

standards and then use those credits to achieve compliance in years in which their 

measured average fuel economy falls below the standards. Manufacturers can also 

increase their CAFE levels through MY 2019 by producing alternative fuel vehicles. 

EPCA provides an incentive for producing these vehicles by specifying that their fuel 

economy is to be determined using a special calculation procedure that results in those 

vehicles being assigned a high fuel economy level. 

The effect of the prohibitions against considering these flexibilities in setting the 

CAFE standards is that the flexibilities remain voluntarily-employed measures. If the 

agency were instead to assume manufacturer use of those flexibilities in setting new 

standards, that assumption would result in higher standards and thus tend to require 

manufacturers to use those flexibilities. 

iv. Determining the Level of the Standards by Balancing the Factors 

NHTSA has broad discretion in balancing the above factors in determining the 

appropriate levels of average fuel economy at which to set the CAFE standards for each 

model year. Congress “specifically delegated the process of setting ... fuel economy 

standards with broad guidelines concerning the factors that the agency must consider.”159 

The breadth of those guidelines, the absence of any statutorily prescribed formula for 

balancing the factors, the fact that the relative weight to be given to the various factors 

may change from rulemaking to rulemaking as the underlying facts change, and the fact 

that the factors may often be conflicting with respect to whether they militate toward 

higher or lower standards give NHTSA discretion to decide what weight to give each of 

the competing policies and concerns and then determine how to balance them. The 

exercise of that discretion is subject to the necessity of ensuring that NHTSA's balancing 

 

158 49 U.S.C. § 32902(h). 

159 Center for Auto Safety v. NHTSA, 793 F.2d 1322, 1341 (C.A.D.C. 1986). 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

131

does not undermine the fundamental purpose of the EPCA: energy conservation160, and 

as long as that balancing reasonably accommodates “conflicting policies that were 

committed to the agency's care by the statute.”161 The balancing of the factors in any 

given rulemaking is highly dependent on the factual and policy context of that 

rulemaking. Given the changes over time in facts bearing on assessment of the various 

factors, such as those relating to the economic conditions, fuel prices and the state of 

climate change science, the agency recognizes that what was a reasonable balancing of 

competing statutory priorities in one rulemaking may not be a reasonable balancing of 

those priorities in another rulemaking.162 Nevertheless, the agency retains substantial 

discretion under EPCA to choose among reasonable alternatives. 

EPCA neither requires nor precludes the use of any type of cost-benefit analysis 

as a tool to help inform the balancing process. While NHTSA used marginal cost-benefit 

analysis in the first two rulemakings to establish attribute-based CAFE standards, it was 

not required to do so and is not required to continue to do so. Regardless of what type of 

analysis is or is not used, considerations relating to costs and benefits remain an 

important part of CAFE standard setting. 

Because the relevant considerations and factors can reasonably be balanced in a 

variety of ways under EPCA, and because of uncertainties associated with the many 

technological and cost inputs, NHTSA considers a wide variety of alternative sets of 

standards, each reflecting different balancing of those policies and concerns, to aid it in 

discerning reasonable outcomes. Among the alternatives providing for an increase in the 

standards in this rulemaking, the alternatives range in stringency from a set of standards 

that increase, on average, 3 percent annually to a set of standards that increase, on 

average, 7 percent annually. 

2. Administrative Procedure Act

To be upheld under the “arbitrary and capricious” standard of judicial review in 

the APA, an agency rule must be rational, based on consideration of the relevant factors, 

and within the scope of the authority delegated to the agency by the statute. The agency 

must examine the relevant data and articulate a satisfactory explanation for its action 

including a “rational connection between the facts found and the choice made.” 

Burlington Truck Lines, Inc. v. United States, 371 U.S. 156, 168 (1962). 

Statutory interpretations included in an agency’s rule are subjected to the two-step 

analysis of Chevron, U.S.A., Inc. v. Natural Resources Defense Council, 467 U.S. 837, 

104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). Under step one, where a statute “has directly 

spoken to the precise question at issue,” id. at 842, 104 S.Ct. 2778, the court and the 

agency “must give effect to the unambiguously expressed intent of Congress,” id. at 843, 

104 S.Ct. 2778. If the statute is silent or ambiguous regarding the specific question, the 

 

160

 Center for Biological Diversity v. NHTSA, 538 F.3d 1172, 1195 (9th Cir. 2008) 

161

 CAS., 1338 (quoting Chevron U.S.A., Inc. v. Natural Resources Defense Council , Inc., 467 U.S. 837, 

845) 

162

 CBD v. NHTSA, 538 F.3d 1172, 1198 (9th Cir. 2008) 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

132

court proceeds to step two and asks “whether the agency's answer is based on a 

permissible construction of the statute.” Id. 

If an agency’s interpretation differs from the one that it has previously adopted, 

the agency need not demonstrate that the prior position was wrong or even less desirable. 

Rather, the agency would need only to demonstrate that its new position is consistent 

with the statute and supported by the record, and acknowledge that this is a departure 

from past positions. The Supreme Court emphasized this recently in FCC v. Fox 

Television, 129 S.Ct. 1800 (2009). When an agency changes course from earlier 

regulations, “the requirement that an agency provide reasoned explanation for its action 

would ordinarily demand that it display awareness that it is changing position,” but “need 

not demonstrate to a court's satisfaction that the reasons for the new policy are better than 

the reasons for the old one; it suffices that the new policy is permissible under the statute, 

that there are good reasons for it, and that the agency believes it to be better, which the 

conscious change of course adequately indicates.”163 

3. National Environmental Policy Act

As discussed above, EPCA requires the agency to determine what level at which 

to set the CAFE standards for each model year by considering the four factors of 

technological feasibility, economic practicability, the effect of other motor vehicle 

standards of the Government on fuel economy, and the need of the United States to 

conserve energy. NEPA directs that environmental considerations be integrated into that 

process. To accomplish that purpose, NEPA requires an agency to compare the potential 

environmental impacts of its proposed action to those of a reasonable range of 

alternatives. 

To explore the environmental consequences in depth, NHTSA has prepared a 

draft environmental impact statement. The purpose of an EIS is to “provide full and fair 

discussion of significant environmental impacts and [to] inform decisionmakers and the 

public of the reasonable alternatives which would avoid or minimize adverse impacts or 

enhance the quality of the human environment.” 40 C.F.R. § 1502.1. 

NEPA is “a procedural statute that mandates a process rather than a particular 

result.” Stewart Park & Reserve Coal., Inc. v. Slater, 352 F.3d at 557. The agency's 

overall EIS-related obligation is to “take a ‘hard look’ at the environmental consequences 

before taking a major action.” Baltimore Gas & Elec. Co. v. Natural Res. Def. Council, 

Inc., 462 U.S. 87, 97, 103 S.Ct. 2246, 76 L.Ed.2d 437 (1983). Significantly, “[i]f the 

adverse environmental effects of the proposed action are adequately identified and 

evaluated, the agency is not constrained by NEPA from deciding that other values 

outweigh the environmental costs.” Robertson v. Methow Valley Citizens Council, 490 

U.S. 332, 350, 109 S.Ct. 1835, 104 L.Ed.2d 351 (1989). 

The agency must identify the “environmentally preferable” alternative, but need 

not adopt it. “Congress in enacting NEPA . . . did not require agencies to elevate 

 

163

 Ibid., 1181. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

133

environmental concerns over other appropriate considerations.” Baltimore Gas and Elec. 

Co. v. Natural Resources Defense Council, Inc., 462 U.S. 87, 97 (1983). Instead, NEPA 

requires an agency to develop “alternatives to the proposed action” in preparing an EIS. 

42 U.S.C. sec.§ 4332(2)(C)(iii). The statute does not command the agency to favor an 

environmentally preferable course of action, only that it make its decision to proceed with 

the action after taking a hard look at environmental consequences. 

E. What are the Proposed CAFE Standards? 

1. Form of the Standards

Each of the CAFE standards that NHTSA is proposing today for passenger cars 

and light trucks is expressed as a mathematical function that defines a fuel economy 

target applicable to each vehicle model and, for each fleet, establishes a required CAFE 

level determined by computing the sales-weighted harmonic average of those targets.164

As discussed above in Section II.C, NHTSA is proposing to determine fuel 

economy targets using a constrained linear function defined according to the following 

formula: 

1

1 1

, ,

TARGET

MIN MAX c FOOTPRINT d

a b

=

      × +      

Here, TARGET is the fuel economy target (in mpg) applicable to vehicles of a 

given footprint (FOOTPRINT, in square feet), b and a are the function’s lower and upper 

asymptotes (also in mpg), respectively, c is the slope (in gpm per square foot) of the 

sloped portion of the function, and d is the intercept (in gpm) of the sloped portion of the 

function (that is, the value the sloped portion would take if extended to a footprint of 0 

square feet. The MIN and MAX functions take the minimum and maximum, respectively 

of the included values. 

As also discussed in Section II.C, under the proposed standards (as under the 

recently-promulgated MY 2011 standards), the CAFE level required of any given 

manufacturer will be determined by calculating the production-weighted harmonic 

average of the fuel economy targets applicable to each vehicle model:

i

i

required

i

i i

SALES

CAFE SALES

TARGET

=

∑

∑

 

164 Required CAFE levels shown here are estimated required levels based on NHTSA’s current projection 

of manufacturers’ vehicle fleets in MYs 2012-2016. Actual required levels are not determined until the end 

of each model year, when all of the vehicles produced by a manufacturer in that model year are known and 

their compliance obligation can be determined with certainty. The target curves, as defined by the 

constrained linear function, and as embedded in the function for the sales-weighted harmonic average, are 

the real “standards” being proposed today. 

Formatted: Font: Not Bold, Underline
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

134

Here, CAFErequired is the required level for a given fleet, SALESi is the number of 

units of model i produced for sale in the United States, TARGETi

 is the fuel economy 

target applicable to model i (according to the equation shown in Chapter II and based on 

the footprint of model i), and the summations in the numerator and denominator are both 

performed over all models in the fleet in question.

 The proposed standards are, therefore, specified by the four coefficients defining 

fuel economy targets: 

a = upper limit (mpg) 

b = lower limit (mpg) 

c = slope (gpm per square foot) 

d = intercept (gpm) 

The values of the coefficients are different for the passenger car standards and the light 

truck standards. 

2. Passenger Car Standards for MYs 2012-2016

For passenger cars, NHTSA is proposing CAFE standards defined by the 

following coefficients during MY 2012-2016: 

Table IV.E.2-1. Coefficients Defining Proposed MY 2012-2016 Fuel Economy 

Targets for Passenger Cars 

Coefficient 2012 2013 2014 2015 2016 

a (mpg) 36.23 37.15 38.08 39.55 41.38 

b (mpg) 28.12 28.67 29.22 30.08 31.12 

c (gpm/sf) 0.0005308 0.0005308 0.0005308 0.0005308 0.0005308 

d (gpm) 0.005842 0.005153 0.004498 0.003520 0.002406

These coefficients result in footprint-dependent target curves shown graphically 

below. The MY 2011 final standard, which is specified by a constrained logistic function 

rather than a constrained linear function, is shown for comparison. 

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

135

Figure IV.E.2-1. Final MY 2011 and Proposed MY 2012-2016 Fuel Economy Target 

Curves for Passenger Cars 

20

25

30

35

40

45

35 40 45 50 55 60 65 70

Footprint (sf)

Target (mpg)

2011

2016

2015

2014

2013

2012

As discussed, the CAFE levels required of individual manufacturers will depend 

on the mix of vehicles they produce for sale in the United States. Based on the market 

forecast of future sales that NHTSA has used to examine today’s proposed CAFE 

standards, the agency estimates that the targets shown above will result in the following 

average required fuel economy levels for individual manufacturers during MYs 2012-

2016 (an updated estimate of the average required fuel economy level under the final MY 

2011 standard is shown for comparison)165: 

 

165 In the March 2009 final rule establishing MY 2011 standards for passenger cars and light trucks, 

NHTSA estimated that the required fuel economy levels for passenger cars would average 30.2 mpg under 

the MY 2011 passenger car standard. Based on the agency’s current forecast of the MY 2011 passenger car 

market, which anticipates greater numbers of passenger cars than the forecast used in the MY 2011 final 

rule, NHTSA now estimates that the average required fuel economy level for passenger cars will be 30.5

mpg in MY 2011. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

136

Table IV.E.2-2. Estimated Average Fuel Economy Required under Final MY 2011 

and Proposed MY 2012-2016 CAFE Standards for Passenger Cars 

Manufacturer MY 2011 MY 2012 MY 2013 MY 2014 MY 2015 MY 2016

BMW 30.2 33.2 34.0 34.8 36.0 37.5

Chrysler 29.6 33.0 33.7 34.5 35.3 36.8

Daimler 29.4 32.6 33.1 33.8 35.0 36.4

Ford 29.8 33.0 33.7 34.5 35.8 37.3

General Motors 30.3 33.0 33.8 34.6 35.8 37.3

Honda 30.8 33.9 34.7 35.5 36.8 38.4

Hyundai 30.8 33.8 34.6 35.5 36.8 38.3

Kia 30.6 33.6 34.4 35.2 36.5 38.0

Mazda 30.7 34.1 34.8 35.7 37.0 38.6

Mitsubishi 31.0 34.4 35.3 36.1 37.4 39.2

Nissan 30.7 33.5 34.2 35.0 36.2 37.8

Porsche 31.2 36.2 37.2 38.1 39.6 41.4

Subaru 31.0 34.8 35.7 36.5 37.9 39.6

Suzuki 31.2 35.9 36.8 37.7 39.2 41.0

Tata 27.8 30.7 31.4 32.1 33.1 34.4

Toyota 30.8 34.1 34.9 35.7 37.0 38.6

Volkswagen 30.8 34.6 35.4 36.2 37.5 39.1

Average 30.5 33.6 34.4 35.2 36.4 38.0

Manufacturer MY 2011 MY 2012 MY 2013 MY 2014 MY 2015 MY 2016

BMW 30.2 33.2 34.0 34.8 36.0 37.5 

Chrysler 29.6 33.0 33.7 34.5 35.3 36.8 

Daimler 29.4 32.6 33.1 33.8 35.0 36.4 

Ford 29.8 33.0 33.7 34.5 35.8 37.3 

General Motors 30.3 33.0 33.8 34.6 35.8 37.3 

Honda 30.8 33.9 34.7 35.5 36.8 38.4 

Hyundai 30.8 33.8 34.6 35.5 36.8 38.3 

Kia 30.6 33.6 34.4 35.2 36.5 38.0 

Mazda 30.7 34.1 34.8 35.7 37.0 38.6 

Mitsubishi 31.0 34.4 35.3 36.1 37.4 39.1 

Nissan 30.7 33.5 34.2 35.0 36.2 37.8 

Porsche 31.2 36.2 37.2 38.1 39.6 41.4 

Subaru 31.0 34.8 35.7 36.5 37.9 39.6 

Suzuki 31.2 35.9 36.8 37.7 39.2 41.0 

Tata 27.8 30.7 31.4 32.1 33.1 34.4 

Toyota 30.8 34.1 34.9 35.7 37.0 38.6 

Volkswagen 30.8 34.6 35.4 36.2 37.5 39.1 

Average 30.5 33.6 34.4 35.2 36.4 38.0 

We note that a manufacturer’s required average fuel economy level for a model 

year under the proposed standards would be based on its actual production numbers in 

that model year. Therefore, its official required fuel economy level would not be known 

Formatted Table
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

137

until the end of that model year. However, because the targets for each vehicle footprint 

would be established in advance of the model year, a manufacturer should be able to 

estimate its required level accurately. 

3. Minimum Domestic Passenger Car standards

EISA expressly requires each manufacturer to meet a minimum fuel economy 

standard for domestically manufactured passenger cars in addition to meeting the 

standards set by NHTSA. According to the statute (49 U.S.C. sec. 32902(b)(4)) Tthe 

minimum standard “shall be the greater of (A) 27.5 miles per gallon; or (B) 92 percent of 

the average fuel economy projected by the Secretary for the combined domestic and nondomestic passenger automobile fleets manufactured for sale in the United States by all 

manufacturers in the model year....”166. The agency must publish the projected minimum 

standards in the Federal Register when the passenger car standards for the model year in 

question are promulgated. 

Based on NHTSA’s current market forecast, the agency’s estimates of these 

minimum standards under the proposed MY 2012-2016 CAFE standards (and, for 

comparison, the final MY 2011 standard) are summarized below in Table IV.E.2-1.167

 

For eventual compliance calculations, the final calculated minimum standards will be 

updated to reflect any changes in the average fuel economy level required under the final 

standards. 

Table IV.E.3-1. Estimated Minimum Standard for Domestically Manufactured 

Passenger Cars under Final MY 2011 and Proposed MY 2012-2016 CAFE 

Standards for Passenger Cars 

2011 2012 2013 2014 2015 2016

28.0 30.9 31.6 32.4 33.5 34.9

4. Light Truck Standards

For light trucks, NHTSA is proposing CAFE standards defined by the following 

coefficients during MYs 2012-2016: 

 

166 49 U.S.C. sec.§ 32902(b)(4). 

167 In the March 2009 final rule establishing MY 2011 standards for passenger cars and light trucks, 

NHTSA estimated that the minimum required CAFE standard for domestically manufactured passenger 

cars would be 27.8 mpg under the MY 2011 passenger car standard. Based on the agency’s current 

forecast of the MY 2011 passenger car market, NHTSA now estimates that the minimum required CAFE 

standard will be 28.0 mpg in MY 2011. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

138

Table IV.E.4-1. Coefficients Defining Proposed MY 2012-2016 Fuel Economy 

Targets for Light Trucks 

Coefficient 2012 2013 2014 2015 2016 

a (mpg) 29.44 30.32 31.30 32.70 34.38

b (mpg) 22.06 22.55 23.09 23.84 24.72

c (gpm/sf) 0.0004546 0.0004546 0.0004546 0.0004546 0.0004546

d (gpm) 0.01533 0.01434 0.01331 0.01194 0.01045

These coefficients result in footprint-dependent targets shown graphically below. 

The MY 2011 final standard, which is specified by a constrained logistic function rather 

than a constrained linear function, is shown for comparison. 

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

139

Figure IV.E.4-1. Final MY 2011 and Proposed MY 2012-2016 Fuel Economy 

Targets for Light Trucks 

20

25

30

35

40

45

35 40 45 50 55 60 65 70

Footprint (sf)

Target (mpg)

2011

2016

2015

2014

2013

2012

Given these targets, the CAFE levels required of individual manufacturers will 

depend on the mix of vehicles they produce for sale in the United States. Based on the 

market forecast NHTSA has used to examine today’s proposed CAFE standards, the 

agency estimates that the targets shown above will result in the following average 

required fuel economy levels for individual manufacturers during MYs 2012-2016 (an 

updated estimate of the average required fuel economy level under the final MY 2011 

standard is shown for comparison)168: 

 

168 In the March 2009 final rule establishing MY 2011 standards for passenger cars and light trucks, 

NHTSA estimated that the required fuel economy levels for light trucks would average 24.1 mpg under the 

MY 2011 light truck standard. Based on the agency’s current forecast of the MY 2011 light truck market, 

NHTSA now estimates that the required fuel economy levels will average 24.2 mpg in MY 2011. The 

increase in the estimate reflects a slight decrease in the size of the average light truck. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

140

Table IV.E.4-2. Estimated Average Fuel Economy Required under Final MY 2011 

and Proposed MY 2012-2016 CAFE Standards for Light Trucks 

Manufacturer MY 2011 MY 2012 MY 2013 MY 2014 MY 2015 MY 2016

BMW 25.7 26.3 27.0 27.7 28.8 30.1

Chrysler 24.2 25.2 25.8 26.4 27.3 28.5

Daimler 24.7 25.4 26.1 26.9 27.9 29.1

Ford 23.3 24.3 24.9 25.3 26.2 27.3

General Motors 22.9 23.6 24.2 24.8 25.6 26.6

Honda 25.6 26.4 27.1 27.9 29.0 30.4

Hyundai 25.9 26.6 27.3 28.1 29.3 30.6

Kia 25.1 25.8 26.4 27.2 28.3 29.6

Mazda 26.3 27.4 28.1 28.8 29.9 31.4

Mitsubishi 26.4 27.4 28.1 28.9 30.1 31.6

Nissan 24.1 25.0 25.6 26.1 27.0 28.2

Porsche 25.5 26.0 26.7 27.4 28.5 29.8

Subaru 26.5 27.5 28.3 29.2 30.4 31.8

Suzuki 26.3 27.2 27.9 28.7 29.9 31.3

Tata 26.1 26.9 27.6 28.4 29.6 31.0

Toyota 25.2 25.7 26.3 27.1 28.1 29.3

Volkswagen 25.0 25.6 26.2 26.9 27.9 29.2

Average 24.2 25.0 25.6 26.2 27.1 28.3

Manufacturer MY 2011 MY 2012 MY 2013 MY 2014 MY 2015 MY 2016

BMW 25.7 26.3 27.0 27.7 28.8 30.1 

Chrysler 24.2 25.2 25.8 26.4 27.3 28.5 

Daimler 24.7 25.4 26.1 26.9 27.9 29.1 

Ford 23.3 24.3 24.9 25.3 26.2 27.3 

General Motors 22.9 23.6 24.2 24.8 25.6 26.6 

Honda 25.6 26.4 27.1 27.9 29.0 30.4 

Hyundai 25.9 26.6 27.3 28.1 29.3 30.6 

Kia 25.1 25.8 26.4 27.2 28.3 29.6 

Mazda 26.3 27.4 28.1 28.8 29.9 31.4 

Mitsubishi 26.4 27.4 28.1 28.9 30.1 31.6 

Nissan 24.1 25.0 25.6 26.1 27.0 28.2 

Porsche 25.5 26.0 26.7 27.4 28.5 29.8 

Subaru 26.5 27.5 28.3 29.2 30.4 31.8 

Suzuki 26.3 27.2 27.9 28.7 29.9 31.3 

Tata 26.1 26.9 27.6 28.4 29.6 31.0 

Toyota 25.2 25.7 26.3 27.1 28.1 29.3 

Volkswagen 25.0 25.6 26.2 26.9 27.9 29.2 

Average 24.2 25.0 25.6 26.2 27.1 28.3 

As discussed above with respect to the proposed passenger cars standards, we 

note that a manufacturer’s required fuel economy level for a model year under the 

proposed standards would be based on its actual production numbers in that model year. 

Formatted Table
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

141

F. How Ddo the Proposed Sstandards Fulfill NHTSA’s Statutory 

Obligations? 

In developing the proposed MY 2012-16 standards, the agency developed and 

considered a wide variety of alternatives. NHTSA took a new approach to defining 

alternatives as compared to the most recent prior CAFE rulemaking. In response to 

comments received in the last round of rulemaking, in our March 2009 notice of intent to 

prepare an environmental impact statement, the agency selected a range of candidate 

stringencies that increased annually, on average, 3% to 7%.169 That same approach has 

been carried over to this NPRM and to the accompanying DEIS and PRIA. The majority 

of the alternatives considered in this rulemaking are defined as average percentage 

increases in stringency—3 percent per year, 4 percent per year, 5 percent per year, and so 

on. NHTSA believes that this approach more clearly communicates the level of 

stringency of each alternative and is more intuitive than alternatives defined in terms of 

different cost-benefit ratios, and still allows us to identify alternatives that represent 

different ways to balance NHTSA’s statutory requirements under EPCA/EISA. 

In the notice of intent, we noted that each of the listed alternatives represents, in 

part, a different way in which NHTSA could conceivably balance conflicting policies and 

considerations in setting the standards. We were mindful that the agency would need to 

weigh and balance many factors, such as the technological feasibility, economic 

practicability, including leadtime considerations for the introduction of technologies and 

impacts on the auto industry, the impacts of the standards on fuel savings and CO2

emissions, fuel savings by consumers; as well as other relevant factors such as safety. 

For example, the 7% Alternative, the most stringent alternative, weighs energy 

conservation and climate change considerations more heavily and technological 

feasibility and economic practicability less heavily. In contrast, the 3% Alternative, the 

least stringent alternative, places more weight on technological feasibility and economic 

practicability. We recognized that the “feasibility” of the alternatives also may reflect 

differences and uncertainties in the way in which key economic (e.g., the price of fuel 

and the social cost of carbon) and technological inputs could be assessed and estimated or 

valued. 

In subsequently developing the NPRM and the associated analytical documents, 

the agency expanded the list of alternatives to provide a degree of analytical continuity 

between the old and new approach to defining alternatives in an effort help the agency 

and the public understand the similarities and dissimilarities between the two approaches 

and to make the transition to the new approach. To that end, we included and analyzed 

two additional alternatives, one that sets standards at the point where net benefits are 

maximized, and another that sets standards at the point at which total costs are equal to 

total benefits.170 With respect to the first of those alternatives, we note that Executive 

 

169 Notice of intent to prepare an EIS, 74 FR 14857, 14859-60, April 1, 2009.

170 The stringency indicated by each of these alternatives depends on the value of inputs to NHTSA’s 

analysis. Results presented here for these two alternatives are based on NHTSA’s reference case inputs, 

which underlie the central analysis of the proposed standards. In the accompanying PRIA, the agency 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

142

Order 12866 focuses attention on an approach that maximizes net benefits. Further, since 

NHTSA has thus far set attribute-based CAFE standards at the point at which net benefits 

are maximized, we believed it would be useful and informative to consider the potential 

impacts of that approach as compared to the new approach for MYs 2012-2016. 

After working with EPA in thoroughly reviewing and in some cases reassessing 

the effectiveness and costs of technologies, most of which are already being incorporated 

in at least some vehicles, market forecasts and economic assumptions, we used the Volpe 

model extensively to assess the technologies that the manufacturers could apply in order 

to comply with each of the alternatives. This permitted us to assess the variety, amount 

and cost of the technologies that could be needed to enable the manufacturers to comply 

with each of the alternatives. NHTSA estimated how the application of these and other 

technologies could increase vehicle costs. The following five figures show industry-wide 

average incremental (i.e., relative to the reference fleet) per-vehicle costs, for each model 

year, each fleet, and the combined fleet. Estimates specific to each manufacturer are 

shown in the accompanying PRIA. 

Figure IV.F.1. Average Incremental Per-Vehicle Costs (MY 2012) 

-

500

1,000

1,500

2,000

2,500

3,000

3,500

3%/y 4%/y 5%/y 6%/y 7%/y Max NB TC=TB

Average Technology Cost ($/Vehicle)

Industry Ave. Cost (PC, 2012)

Industry Ave. Cost (LT, 2012)

Industry Ave. Cost (Comb., 2012)

 

presents the results of that analysis to explore the sensitivity of results to changes in key economic inputs. 

Because of numerous changes in model inputs (e.g., discount rate, rebound effect, CO2 value, technology 

cost estimates), our analysis often exhausts all available technologies before reaching the point at which 

total costs equal total benefits. In these cases, the stringency that exhausts all available technologies is 

considered. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

143

Figure IV.F.2. Average Incremental Per-Vehicle Costs (MY 2013) 

-

500

1,000

1,500

2,000

2,500

3,000

3,500

3%/y 4%/y 5%/y 6%/y 7%/y Max NB TC=TB

Average Technology Cost ($/Vehicle)

Industry Ave. Cost (PC, 2013)

Industry Ave. Cost (LT, 2013)

Industry Ave. Cost (Comb., 2013)

Figure IV.F.3. Average Incremental Per-Vehicle Costs (MY 2014) 

-

500

1,000

1,500

2,000

2,500

3,000

3,500

3%/y 4%/y 5%/y 6%/y 7%/y Max NB TC=TB

Average Technology Cost ($/Vehicle)

Industry Ave. Cost (PC, 2014)

Industry Ave. Cost (LT, 2014)

Industry Ave. Cost (Comb., 2014)
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

144

Figure IV.F.4. Average Incremental Per-Vehicle Costs (MY 2015) 

-

500

1,000

1,500

2,000

2,500

3,000

3,500

3%/y 4%/y 5%/y 6%/y 7%/y Max NB TC=TB

Average Technology Cost ($/Vehicle)

Industry Ave. Cost (PC, 2015)

Industry Ave. Cost (LT, 2015)

Industry Ave. Cost (Comb., 2015)

Figure IV.F.5. Average Incremental Per-Vehicle Costs (MY 2016) 

-

500

1,000

1,500

2,000

2,500

3,000

3,500

3%/y 4%/y 5%/y 6%/y 7%/y Max NB TC=TB

Average Technology Cost ($/Vehicle)

Industry Ave. Cost (PC, 2016)

Industry Ave. Cost (LT, 2016)

Industry Ave. Cost (Comb., 2016)
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

145

Corresponding to these per-vehicle cost increases, NHTSA estimated total 

incremental outlays for additional technology in each model year. The following figure 

shows cumulative results for MY 2012-2016 for industry and Chrysler, Ford, General 

Motors, Honda, Nissan, and Toyota. This figure focuses on these manufacturers as they 

currently (in MY 2008) represent three large U.S.-headquartered and three large foreignheadquartered full-line manufacturers. 

Figure IV.F.6. Incremental Technology Outlays (MY 2012-2016) 

0

5

10

15

20

25

30

3%/y 4%/y 5%/y 6%/y 7%/y Max NB TC=TB

Manufacturers' Incremental Outlays ($b)

0

20

40

60

80

100

120

140

Industry-Wide Incremental Outlays ($b)

Chrysler Outlays (2012-2016)

Ford Outlays (2012-2016)

GM Outlays (2012-2016)

Honda Outlays (2012-2016)

Nissan Outlays (2012-2016)

Toyota Outlays (2012-2016)

Industry Outlays (2012-2016)

 For each alternative, NHTSA has also estimated all corresponding effects for each 

model year, including fuel savings, CO2 reductions, and other effects, as well as the 

estimated societal benefits of these effects. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

146

Table IV.F.1. Fuel Savings, CO2 Reductions, and Technology Costs for Regulatory 

Alternatives 

Regulatory Alternative Fuel Savings

(b. gal)

CO2 Reductions

(mmt)

Cost

($b)

3% per Year 37 404 29 

4% per Year 54 582 46 

5% per Year 69 718 74 

6% per Year 83 846 103

Maximum Net Benefit 90 923 111

7% per Year 91 934 116

Total Cost = Total Benefit 95 977 122 

The accompanying PRIA presents a detailed analysis of these results. Relevant to 

EPCA’s requirement that NHTSA consider, among other factors, economic practicability 

and the need of the nation to conserve energy, the following figure compares the 

incremental technology outlays presented above to the corresponding cumulative fuel 

savings. 

Figure IV.F.7. Incremental Technology Outlays and Fuel Savings (MY 2012-2016) 

0

10

20

30

40

50

60

70

80

90

100

110

120

130

3%/y 4%/y 5%/y 6%/y 7%/y Max NB TC=TB

Technology Outlays ($b)

0

10

20

30

40

50

60

70

80

90

100

Fuel Savings (b. gal.)

Industry Outlays (2012-2016)

Fuel Savings (b. gal., 2012-2016)

The agency then assessed which alternative would represent a reasonable 

balancing of the statutory criteria, given the difficulties confronting the industry and the 

economy, and the priorities and policy goals of the President. Those priorities and goals 

include achieving nationally harmonized and coordinated program for regulating fuel 

economy and GHG emissions. 

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

147

Part of that assessment entailed an evaluation of the stringencies necessary to 

achieve both Federal and State GHG emission reduction goals, especially those of 

California and the States that have adopted its GHG emission standard for motor 

vehicles. Given that EPCA requires attribute-based standards, NHTSA and EPA 

determined the level at which an attribute-based GHG emissions standard would need to 

be set to achieve the goals of California. This was done by evaluating a nationwide CAA 

standard for MY 2016 that would require the levels of technology upgrade, across the 

country, which California standards would require for the subset of vehicles sold in 

California under the California standards for MY 2009-2016 (known as “Pavley 1”). In 

essence, the stringency of the California Pavley 1 program was evaluated, but for a 

national standard. For a number of reasons discussed in section III.D., an assessment 

was developed of an equivalent national new vehicle fleet-wide CO2 performance 

standards for model year 2016 which would result in the new vehicle fleet in the State of 

California having CO2 performance equal to the performance from the California Pavley 

1 standards. That level, 250 g/mi, is equivalent to 35.5 mpg if the GHG standard is met 

exclusively by fuel economy improvements. 

To obtain the counterpart CAFE standard, we then adjusted that level downward 

to account for differences between the more prescriptive EPCA and the more flexible 

CAA. These differences give EPA greater ability under the CAA to provide compliance 

flexibilities that would enable manufacturers to achieve compliance with a given level of 

requirement under the CAA at less cost than with the same level of requirement under 

EPCA. Principal among those greater flexibilities are the credits that EPA can provide 

for improving the efficiency of air conditioners and reducing the leakage of refrigerants 

from them. The adjustments result in a figure of 34.1 mpg as the appropriate counterpart 

CAFE standard. This differential gives manufacturers the opportunity to reach 35.5 mpg 

under the CAA in ways that would significantly reduce their costs. Were NHTSA 

instead to establish its standard at the same level, manufacturers would need to make 

substantially greater expenditures on fuel-saving technologies to reach 35.5 mpg under 

EPCA. 

 Given the importance to this rulemaking of achieving a harmonized National 

Program, we created a new alternative whose annual percentage increases would achieve 

34.1 mpg by MY 2016. That alternative is one which increases on average at 4.3% 

annually. 

 This new alternative, like the seven alternative presented above, represents a 

unique balancing of the statutory factors and other relevant considerations. We have 

added that alternative to the table below. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

148

Table IV.F.2. Fuel Savings, CO2 Reductions, and Technology Costs for Regulatory 

Alternatives

Regulatory Alternative Fuel 

Savings 

(b. gal)

CO2

Reductions 

(mmt)

Cost

($b)

3% per Year 37 404 29

4% per Year 54 582 46 

Proposed (4.3% per Year) 62 656 60 

5% per Year 69 718 74 

6% per Year 83 846 103 

Maximum Net Benefit 90 923 111 

7% per Year 91 934 116 

Total Cost = Total Benefit 95 977 122

As noted earlier, NHTSA has used the Volpe model to analyze each of these 

alternatives based on analytical inputs determined jointly with EPA. For a given 

regulatory alternative, the Volpe model estimates how each manufacturer could apply 

technology in response to the MY 2012 standard (separately for cars and trucks), carries 

technologies applied in MY 2012 forward to MY 2013, and then estimates how each 

manufacturer could apply technology in response to the MY 2013 standard. When 

analyzing MY 2013, the model considers the potential to add “extra” technology in MY 

2012 in order to carry that technology into MY 2013, thereby avoiding the use of more 

expensive technologies in MY 2013. The model continues in this fashion through MY 

2016, and then performs calculations to estimate the costs, effects, and benefits of the 

applied technologies, and to estimate any civil penalties owed based on projected 

noncompliance. For each regulatory alternative, the model calculates incremental costs, 

effects, and benefits relative to the regulatory baseline (i.e., the no-action alternative), 

under which the MY 2011 CAFE standards continue through MY 2016. The model 

calculates results for each model year, because EPCA requires that NHTSA set its 

standards for each model year at the “maximum feasible average fuel economy level that 

the Secretary decides the manufacturers can achieve in that model year” considering four 

statutory factors. Pursuant to EPCA’s directive notice not to consider statutory credits in 

establishing CAFE standards, NHTSA did not FFV credits, credits carried forward and 

backward, and transferred credit.171, 172 In addition, the analysis reflects the ability of 

manufacturers to pay fines in lieu of compliance. 

Because it entails year-by-year examination of eight regulatory alternatives for, 

separately, passenger cars and light trucks, NHTSA’s analysis involves a large amount of 

information. Detailed results of this analysis are presented separately in the PRIA 

 

171 Separately, NHTSA has conducted analysis that accounts for EPCA’s provisions regarding FFVs. 

172 Because NHTSA’s modeling represents every model year explicitly, accounts for estimates of when 

vehicle model redesigns will occur, and sets aside these compliance flexibilities, the agency’s modeling 

produces results that differ varyingly from EPA’s for specific manufacturers, fleets, and model years.

Formatted: Font: 12 pt

Formatted Table

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted: Font: 12 pt
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

149

accompanying today’s notice. The remainder of this section discusses a combination of 

aggregated and illustrative results of this analysis. 

The following figure compares average fuel economy levels required of 

manufacturers under the eight regulatory alternatives in MYs 2012, 2014, and 2016. 

Required levels for MY 2013 and MY 2015 fall between those for MYs 2012 and 2014 

and MYs 2014 and 2016, respectively. Although required levels for these interim years 

are not presented in the following figure to limit the complexity of the figure, they do 

appear in the accompanying PRIA.173

Figure IV.F.8. Average Required Fuel Economy (MYs 2012, 2014, and 2016) 

24

25

26

27

28

29

30

31

32

33

34

35

36

37

38

39

40

41

42

43

44

3%/y 4%/y Proposed 5%/y 6%/y 7%/y Max NB TC=TB

Average Required FE (mpg)

PC, 2012

Comb., 2012

LT, 2012

PC, 2014

Comb., 2014

LT, 2014

PC, 2016

Comb., 2016

LT, 2016

 As this figure illustrates, the proposed standards involve a “faster start” toward 

increased stringency than do any of the alternatives that increase steadily (i.e., the 3%/y, 

4%/y, 5%/y, 6%/y, and 7%/y alternatives). However, by MY 2016, the stringency of the 

proposed standards reflects an average annual increase of 4.3%/y. The proposed 

 

173 Also, the “Max NB” and the “TC = TB” alternatives depend on the inputs to the agencies’ analysis. The 

sensitivity analysis presented in the PRIA documents the response of these alternatives to changes in key 

economic inputs. For example, the combined average required fuel economy under the “Max NB” 

alternative is 36.8 mpg under the reference case economic inputs presented here, and ranges from 32.8 mpg 

to 37.2 mpg under the alternative economic inputs presented in the PRIA. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

150

standards, therefore, represent an alternative that could be referred to as “4.3% per year 

with a fast start” or a “front-loaded 4.3% average annual increase.” 

 In NHTSA’s analysis, these achieved average fuel economy levels result from the 

application of technology rather than changes in the mix of vehicles produced for sale in 

the U.S. The accompanying PRIA presents detailed estimates of additional technology 

penetration into the NHTSA reference fleet associated with each regulatory alternative. 

The following four charts illustrate the results of this analysis, considering the application 

of four technologies by six manufacturers and the industry as a whole. Technologies 

include gasoline direct injection (GDI), engine turbocharging and downsizing, diesel 

engines, and strong HEV systems (including CISG systems). GDI and turbocharging are 

among the technologies that play an important role in achieving the fuel economy 

improvements shown in NHTSA’s analysis, and diesels and strong HEVs represent 

technologies involving significant challenges for widespread use through MY 2016. 

These figures focus on Chrysler, Ford, General Motors, Honda, Nissan, and Toyota, as 

these manufacturers currently (in MY 2008) represent three large U.S.-headquartered and 

three large foreign-headquartered full-line manufacturers. For each alternative, the 

figures show additional application of technology by MY 2016. The PRIA presents 

results for all model years, technologies, and manufacturers, and NHTSA has considered 

these broader results when considering the eight regulatory alternatives. 

Figure IV.F.9. Additional Application of GDI (MY 2016) 

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

3%/y 4%/y Proposed 5%/y 6%/y 7%/y Max NB TC=TB

Additional Application (%)

Chrysler Add'l SGDI (2016)

Ford Add'l SGDI (2016)

GM Add'l SGDI (2016)

Honda Add'l SGDI (2016)

Nissan Add'l SGDI (2016)

Toyota Add'l SGDI (2016)

Industry Add'l SGDI (2016)
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

151

Figure IV.F.10. Additional Application of Engine Turbocharging & Downsizing 

(MY 2016) 

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

3%/y 4%/y Proposed 5%/y 6%/y 7%/y Max NB TC=TB

Additional Application (%)

Chrysler Add'l Turbo (2016)

Ford Add'l Turbo (2016)

GM Add'l Turbo (2016)

Honda Add'l Turbo (2016)

Nissan Add'l Turbo (2016)

Toyota Add'l Turbo (2016)

Industry Add'l Turbo (2016)
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

152

Figure IV.F.11. Additional Application of Diesel Engines (MY 2016) 

0%

5%

10%

15%

20%

25%

30%

3%/y 4%/y Proposed 5%/y 6%/y 7%/y Max NB TC=TB

Additional Application (%)

Chrysler Add'l Diesels (2016)

Ford Add'l Diesels (2016)

GM Add'l Diesels (2016)

Honda Add'l Diesels (2016)

Nissan Add'l Diesels (2016)

Toyota Add'l Diesels (2016)

Industry Add'l Diesels (2016)

Figure IV.F.12. Additional Application of CISG and Strong HEV Systems (MY 

2016) 

0%

5%

10%

15%

20%

25%

30%

35%

3%/y 4%/y Proposed 5%/y 6%/y 7%/y Max NB TC=TB

Additional Application (%)

Chrysler Add'l Strong HEVs (2016)

Ford Add'l Strong HEVs (2016)

GM Add'l Strong HEVs (2016)

Honda Add'l Strong HEVs (2016)

Nissan Add'l Strong HEVs (2016)

Toyota Add'l Strong HEVs (2016)

Industry Add'l Strong HEVs (2016)

`
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

153

 

The agency began the process of winnowing the alternatives by determining 

whether any of the lower stringency alternatives should be eliminated from consideration. 

To begin with, the agency needs to ensure that its standards are high enough to enable the 

combined fleet of passenger cars and light trucks to achieve at least 35 mpg not later than 

MY 2020, as required by EISA. Achieving that level makes it necessary for the chosen 

alternative to increase at over 3 percent annually. 

NHTSA has concluded that it must reject the 3%/y and 4%/y alternatives. Given 

that CO2 and fuel savings are very closely correlated, the above chart reveals that the 

3%/y and 4%/y alternative would not produce the reductions in fuel savings and CO2

emissions that the Nation needs at this time. Picking either of those alternatives would 

unnecessarily result in foregoing substantial benefits, in terms of fuel savings and 

reduced CO2 emissions, which would be achievable at reasonable cost. Further, NHTSA 

has tentatively concluded that it must reject the 3%/y and 4%/y alternatives, as neither 

would lead to the regulatory harmonization that forms a vital core principle of the 

National Program that EPA and NHTSA are jointly striving to implement. In order to 

achieve a harmonized National Program, an average annual increase of 4.3% is 

necessary. 

In contrast, at the upper end of the range of alternatives, the agency was 

concerned that the increased benefits offered by those alternatives were available only at 

excessive cost and might not be practicable in all cases within the available leadtime. 

 

NHTSA first considered the environmentally-preferable alternative. Based on the 

information provided in the DEIS, the environmentally-preferable alternative would be 

that involving stringencies at which total costs most nearly equal total benefits. NHTSA 

notes that NEPA does not require that agencies choose the environmentally-preferable 

alternative if doing so would be contrary to the choice that the agency would otherwise 

make under its governing statute. Given the levels of stringency required by the 

environmentally-preferable alternative and the lack of lead time to achieve such levels 

between now and MY 2016, NHTSA tentatively concludes that the environmentallypreferable alternative would not be economically practicable or technologically feasible, 

and thus tentatively concludes that it would result in standards that would be beyond the 

level achievable for MYs 2012-2016. 

NHTSA determined that it would be inappropriate to propose any of the other 

more stringent alternatives due to concerns over lead time and economic practicability. 

At a time when the entire industry remains in an economically critical state, the agencies 

believe that it would be unreasonable to propose more stringent standards. Even in a case 

where economic factors were not a consideration, there are real-world time constraints 

which must be considered due to the short lead time available for the early years of this 

program, in particular for MYs 2012 and 2013. 

As revealed by the figures shown above, the proposed standards already require 

aggressive application of technologies, and more stringent standards which would require 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

154

more widespread use (including more substantial implementation of advanced 

technologies such as stoichiometric gasoline direct injection engines and strong hybrids) 

raise serious issues of adequacy of lead time, not only to meet the standards but to 

coordinate such significant changes with manufacturers’ redesign cycles. 

NHTSA does not believe that more stringent standards would meet EPCA’s 

requirement that CAFE standards be economically practicable. The figures presented 

above reveal that increasing stringency beyond the proposed standards would entail 

significant additional application of technology—technology that, though perhaps 

feasible for individual vehicle models, would not be economically practicable for the 

industry at the scales involved. Among the more stringent alternatives, the one closest in 

stringency to the standards proposed today is the alternative under which combined 

CAFE stringency increases at 5% annually. As indicated above, this alternative would 

yield fuel savings and CO2 reductions about 12% and 9% higher, respectively, than the 

proposed standards. However, compared to the proposed standards, this alternative 

would increase outlays for new technologies during MY 2012-2016 by about 24%, or 

$14b. Average MY 2016 cost increases would, in turn, rise from $1,076 under the 

proposed standards to $1,409 when stringency increases at 5% annually. This represents 

a 30% increase in per-vehicle cost for only a 3% increase in average performance (on a 

gallon-per-mile basis to which fuel savings are proportional). The following three tables 

summarize estimated manufacturer-level average incremental costs for the 5%/y 

alternative and the average of the passenger and light truck fleets: 

Table IV.F.3. Average Incremental Costs ($/vehicle) under the 5%/y Alternative 

CAFE Standards for Passenger Cars

Manufacturer MY 2012 MY 2013 MY 2014 MY 2015 MY 2016

BMW 474 541 667 883 1,190

Chrysler 726 1,464 1,832 1,928 1,913

Daimler 132 209 814 1,094 1,467

Ford 979 1,556 1,572 1,918 2,181

General Motors 94 934 1,242 1,541 1,808

Honda 55 263 408 451 671

Hyundai 518 531 943 1,007 1,152

Kia 180 344 440 612 796

Mazda 603 919 1,294 1,569 1,863

Mitsubishi 1,106 1,141 2,594 2,962 2,913

Nissan 298 587 1,344 1,402 1,517

Porsche 209 240 350 465 581

Subaru 353 454 1,828 2,258 2,201

Suzuki 204 1,453 2,444 2,580 2,624

Tata 202 239 428 632 1,350

Toyota 133 127 194 285 446

Volkswagen 231 550 688 828 1,202

Average 337 664 916 1,079 1,291

Formatted Table
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

155

Manufacturer MY 2012 MY 2013 MY 2014 MY 2015 MY 2016

BMW 474 541 667 883 1,190 

Chrysler 726 1,464 1,832 1,928 1,913 

Daimler 132 209 814 1,094 1,467 

Ford 979 1,556 1,572 1,918 2,181 

General Motors 94 934 1,242 1,541 1,808 

Honda 55 263 408 451 671 

Hyundai 518 531 943 1,007 1,152 

Kia 180 344 440 612 796 

Mazda 603 919 1,294 1,569 1,863 

Mitsubishi 1,106 1,141 2,594 2,962 2,913 

Nissan 298 587 1,344 1,402 1,517 

Porsche 209 240 350 465 581 

Subaru 353 454 1,828 2,258 2,201 

Suzuki 204 1,453 2,444 2,580 2,624 

Tata 202 239 428 632 1,350 

Toyota 133 127 194 285 446 

Volkswagen 231 550 688 828 1,202 

Total/Average 337 664 916 1,079 1,291 

Table IV.F.4. Average Incremental Costs ($/vehicle) under the 5%/y Alternative 

CAFE Standards for Light Trucks 

Manufacturer MY 2012 MY 2013 MY 2014 MY 2015 MY 2016

BMW 297 306 403 753 935

Chrysler 113 475 1,058 1,271 1,538

Daimler 172 198 227 459 528

Ford 732 1,201 1,685 2,345 2,380

General Motors - 786 1,121 1,275 1,457

Honda 646 614 1,139 1,265 1,624

Hyundai 990 1,009 2,106 2,206 2,148

Kia - 309 713 1,181 1,692

Mazda 434 608 612 722 953

Mitsubishi 11 88 2,102 2,081 2,817

Nissan 793 891 1,419 1,535 1,907

Porsche (17) 55 117 962 1,009

Subaru 1,398 1,370 1,501 1,441 1,486

Suzuki 6 2,169 2,093 2,028 2,155

Tata - 77 160 242 695

Toyota 113 427 906 1,065 1,291

Volkswagen (11) 55 127 209 286

Average 373 742 1,179 1,449 1,641

Formatted Table
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

156

Manufacturer MY 2012 MY 2013 MY 2014 MY 2015 MY 2016

BMW 297 306 403 753 935 

Chrysler 113 475 1,058 1,271 1,538 

Daimler 172 198 227 459 528 

Ford 732 1,201 1,685 2,345 2,380 

General Motors - 786 1,121 1,275 1,457 

Honda 646 614 1,139 1,265 1,624 

Hyundai 990 1,009 2,106 2,206 2,148 

Kia - 309 713 1,181 1,692 

Mazda 434 608 612 722 953 

Mitsubishi 11 88 2,102 2,081 2,817 

Nissan 793 891 1,419 1,535 1,907 

Porsche (17) 55 117 962 1,009 

Subaru 1,398 1,370 1,501 1,441 1,486 

Suzuki 6 2,169 2,093 2,028 2,155 

Tata - 77 160 242 695 

Toyota 113 427 906 1,065 1,291 

Volkswagen (11) 55 127 209 286 

Total/Average 373 742 1,179 1,449 1,641 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

157

Table IV.F.5. Average Incremental Costs ($/vehicle) under the 5%/y Alternative 

CAFE Standards

Manufacturer MY 2012 MY 2013 MY 2014 MY 2015 MY 2016

BMW 415 469 590 848 1,123

Chrysler 351 888 1,392 1,632 1,747

Daimler 148 205 591 884 1,167

Ford 872 1,401 1,623 2,110 2,269

General Motors 52 868 1,189 1,426 1,660

Honda 272 386 638 701 955

Hyundai 610 625 1,167 1,228 1,330

Kia 143 337 489 707 942

Mazda 571 862 1,181 1,443 1,732

Mitsubishi 959 975 2,525 2,854 2,902

Nissan 462 683 1,367 1,441 1,627

Porsche 120 172 272 623 717

Subaru 743 787 1,709 1,964 1,942

Suzuki 152 1,637 2,349 2,434 2,504

Tata 71 144 267 420 1,001

Toyota 125 233 440 549 724

Volkswagen 182 460 586 716 1,043

Average 350 692 1,010 1,207 1,409

Manufacturer MY 2012 MY 2013 MY 2014 MY 2015 MY 2016

BMW 415 469 590 848 1,123 

Chrysler 351 888 1,392 1,632 1,747 

Daimler 148 205 591 884 1,167 

Ford 872 1,401 1,623 2,110 2,269 

General Motors 52 868 1,189 1,426 1,660 

Honda 272 386 638 701 955 

Hyundai 610 625 1,167 1,228 1,330 

Kia 143 337 489 707 942 

Mazda 571 862 1,181 1,443 1,732 

Mitsubishi 959 975 2,525 2,854 2,902 

Nissan 462 683 1,367 1,441 1,627 

Porsche 120 172 272 623 717 

Subaru 743 787 1,709 1,964 1,942 

Suzuki 152 1,637 2,349 2,434 2,504 

Tata 71 144 267 420 1,001 

Toyota 125 233 440 549 724 

Volkswagen 182 460 586 716 1,043 

Total/Average 350 692 1,010 1,207 1,409 

These cost increases derive from accelerated application of advanced technologies 

as stringency increases past the levels in the proposed standards. For example, under the 

proposed standards, additional diesel application rates average 2% for the industry and 

range from 0% to 7% among Chrysler, Ford, GM, Honda, Nissan, and Toyota. Under 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

158

standards increasing in combined stringency at 5% annually, these rates more than 

double, averaging 5% for the industry and ranging from 2% to 13% for the same six 

manufacturers. The agency tentatively concludes that the levels of technology 

penetration required by the proposed standards are reasonable. Increasing the standards 

beyond those levels would lead to rapidly increasing dependence on advanced 

technologies with higher costs, particularly in the early years of the rulemaking time 

frame, according to the agency’s analysis, and potentially pose too great an economic 

burden given the state of the industry. 

In contrast, through analysis of the illustrative results shown above, as well as the 

more complete and detailed results presented in the accompanying PRIA, NHTSA has 

concluded that the proposed standards are technologically feasible and economically 

practicable. The proposed standards will require manufacturers to apply considerable 

additional technology. Although NHTSA cannot predict how manufacturers will respond 

to the proposed standards, the agency’s analysis indicates that the standards could lead to 

significantly greater use of advanced engine and transmission technologies. As shown 

above, the agency’s analysis shows considerable increases in the application of SGDI 

systems and engine turbocharging and downsizing. Though not presented above, the 

agency’s analysis also shows similarly large increases in the use of dual-clutch automated 

manual transmissions (AMTs). However, the agency’s analysis does not suggest that the 

additional application of these technologies in response to the proposed standards would 

extend beyond levels achievable by the industry. These technologies are likely to be 

applied to at least some extent even in the absence of new CAFE standards. In addition, 

the agency’s analysis indicates that most manufacturers would rely only to a limited 

extent on the most expensive and advanced technologies, including diesel engines and 

strong HEVs. 

As shown above, NHTSA estimates that the proposed standards could lead to 

average incremental costs ranging from $291 per vehicle (for light trucks in MY 2011) to 

$1,085 per vehicle (for passenger cars in MY 2016), increasing steadily from $421 per 

vehicle in for all light vehicles in MY 2011 $1,076 for all light vehicle in MY 2016. 

NHTSA estimates that these costs would vary considerably among manufacturers, but 

would rarely exceed $2,000 per vehicle. The following three tables summarize estimated 

manufacturer-level average incremental costs for the proposed standards and the average 

of the passenger and light truck fleets: 

Table IV.F.6. Average Incremental Costs ($/vehicle) under Proposed Passenger Car 

CAFE Standards
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

159

Manufacturer MY 2012 MY 2013 MY 2014 MY 2015 MY 2016

BMW 524 552 634 828 1,124 

Chrysler 775 1,304 1,473 1,583 1,582 

Daimler 182 215 781 1,039 1,401 

Ford 1,746 1,719 1,735 1,880 2,078 

General Motors 143 990 1,189 1,387 1,553 

Honda 31 122 205 287 494 

Hyundai 418 452 643 726 868 

Kia 319 359 387 473 647 

Mazda 658 735 965 991 1,263 

Mitsubishi 1,156 1,076 1,715 2,076 2,035 

Nissan 653 712 1,155 1,153 1,275 

Porsche 270 256 306 399 498 

Subaru 408 465 1,493 1,877 1,838 

Suzuki 259 1,001 1,445 1,494 1,675 

Tata 246 244 395 577 1,284 

Toyota 133 127 155 257 267 

Volkswagen 286 561 650 767 1,125 

Total/Average 498 674 820 930 1,085 

Manufacturer MY 2012 MY 2013 MY 2014 MY 2015 MY 2016

BMW 524 552 634 828 1,124

Chrysler 775 1,304 1,473 1,583 1,582

Daimler 182 215 781 1,039 1,401

Ford 1,746 1,719 1,735 1,880 2,078

General Motors 143 990 1,189 1,387 1,553

Honda 31 122 205 287 494

Hyundai 418 452 643 726 868

Kia 319 359 387 473 647

Mazda 658 735 965 991 1,26

Mitsubishi 1,156 1,076 1,715 2,076 2,035

Nissan 653 712 1,155 1,153 1,275

Porsche 270 256 306 399 498

Subaru 408 465 1,493 1,877 1,838

Suzuki 259 1,001 1,445 1,494 1,675

Tata 246 244 395 577 1,284

Toyota 133 127 155 257 267

Volkswagen 286 561 650 767 1,125

Average 498 674 820 930 1,085
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

160

Table IV.F.7. Average Incremental Costs ($/vehicle) under Proposed Light Truck 

CAFE Standards 

Manufacturer MY 2012 MY 2013 MY 2014 MY 2015 MY 2016

BMW 325 327 380 708 884

Chrysler 152 399 749 892 1,188

Daimler 322 289 316 420 478

Ford 471 629 693 1,323 1,365

General Motors 33 533 752 792 962

Honda 390 380 616 749 1,006

Hyundai 774 744 1,301 1,322 1,292

Kia 228 373 547 843 1,218

Mazda 340 608 610 679 776

Mitsubishi 55 94 1,546 1,732 2,123

Nissan 541 608 903 1,022 1,312

Porsche 28 46 84 913 954

Subaru 1,203 1,140 1,213 1,197 1,184

Suzuki 50 1,451 1,404 1,358 1,373

Tata 44 83 127 193 635

Toyota 172 309 665 764 877

Volkswagen 28 61 99 160 231

Average 291 485 701 911 1,058

Manufacturer MY 2012 MY 2013 MY 2014 MY 2015 MY 2016

BMW 325 327 380 708 884 

Chrysler 152 399 749 892 1,188 

Daimler 322 289 316 420 478 

Ford 471 629 693 1,323 1,365 

General Motors 33 533 752 792 962 

Honda 390 380 616 749 1,006 

Hyundai 774 744 1,301 1,322 1,292 

Kia 228 373 547 843 1,218 

Mazda 340 608 610 679 776 

Mitsubishi 55 94 1,546 1,732 2,123 

Nissan 541 608 903 1,022 1,312 

Porsche 28 46 84 913 954 

Subaru 1,203 1,140 1,213 1,197 1,184 

Suzuki 50 1,451 1,404 1,358 1,373 

Tata 44 83 127 193 635 

Toyota 172 309 665 764 877 

Volkswagen 28 61 99 160 231 

Total/Average 291 485 701 911 1,058 

Table IV.F.8. Average Incremental Costs ($/vehicle) under Proposed CAFE 

Standards

Manufacturer MY 2012 MY 2013 MY 2014 MY 2015 MY 2016

BMW 457 483 560 796 1,061
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

161

Chrysler 393 777 1,061 1,271 1,408

Daimler 236 243 604 834 1,106

Ford 1,195 1,242 1,262 1,629 1,762

General Motors 94 785 997 1,131 1,304

Honda 162 212 335 429 647

Hyundai 488 509 769 835 944

Kia 300 362 416 535 740

Mazda 598 712 907 944 1,193

Mitsubishi 1,007 921 1,692 2,033 2,045

Nissan 616 679 1,078 1,115 1,286

Porsche 174 179 231 562 643

Subaru 705 711 1,392 1,632 1,602

Suzuki 204 1,117 1,434 1,458 1,598

Tata 115 150 234 368 938

Toyota 147 191 331 429 468

Volkswagen 233 470 550 657 970

Average 421 605 777 924 1,076

Manufacturer MY 2012 MY 2013 MY 2014 MY 2015 MY 2016

BMW 457 483 560 796 1,061 

Chrysler 393 777 1,061 1,271 1,408 

Daimler 236 243 604 834 1,106 

Ford 1,195 1,242 1,262 1,629 1,762 

General Motors 94 785 997 1,131 1,304 

Honda 162 212 335 429 647 

Hyundai 488 509 769 835 944 

Kia 300 362 416 535 740 

Mazda 598 712 907 944 1,193 

Mitsubishi 1,007 921 1,692 2,033 2,045 

Nissan 616 679 1,078 1,115 1,286 

Porsche 174 179 231 562 643 

Subaru 705 711 1,392 1,632 1,602 

Suzuki 204 1,117 1,434 1,458 1,598 

Tata 115 150 234 368 938 

Toyota 147 191 331 429 468 

Volkswagen 233 470 550 657 970 

Total/Average 421 605 777 924 1,076 

In summary, NHTSA has considered eight regulatory alternatives, including the 

proposed standards, examining technologies that could be applied in response to each 

alternative, as well as corresponding costs, effects, and benefits. The agency has 

concluded that alternatives less stringent than the proposed standards would not produce 

the fuel savings and CO2 reductions necessary at this time to achieve either the 

overarching purpose of EPCA, i.e., energy conservation, or an important part of the 

regulatory harmonization underpinning the National Program. Conversely, the agency 

has concluded that more stringent standards would involve levels of additional 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

162

technology and cost that, considering the fragile state of the automotive industry, would 

not be economically practicable. Therefore, having considered these eight regulatory 

alternatives, and the statutorily-relevant factors of technological feasibility, economic 

practicability, the effect of other motor vehicle standards of the Government on fuel 

economy, and the need of the United States to conserve energy, along with other relevant 

factors such as the safety impacts of the proposed standards,174 NHTSA tentatively 

concludes that the proposed standards represent a reasonable balancing of all of these 

concerns, and are the maximum feasible average fuel economy levels that the 

manufacturers can achieve in MYs 2012-2016. 

G. Impacts of the Proposed CAFE Standards 

1. How Would These Proposed Standards Improve Fuel Economy and 

Reduce GHG Emissions for MY 2012-2016 Vehicles?

 As discussed above, the CAFE level required under an attribute-based standard 

depends on the mix of vehicles produced for sale in the U.S. Based on the market 

forecast that NHTSA and EPA have used to develop and analyze new CAFE and CO2

emissions standards, NHTSA estimates that the new CAFE standards will require CAFE 

levels to increase by an average of 4.3 percent annually through MY 2016, reaching a 

combined average fuel economy requirement of 34.1 mpg in that model year: 

Table IV.G.1-1. Average Required Fuel Economy (mpg) 

under Proposed Standards 

2012 2013 2014 2015 2016

Passenger Cars 33.6 34.4 35.2 36.4 38.0

Light Trucks 25.0 25.6 26.2 27.1 28.3

Combined 29.8 30.6 31.4 32.6 34.1

201 2 20 13 2 014 2 015 201 6

Passenger C ars 33 .6 34 .4 3 5.2 36.4 38 .0 

Light Truck s 25 .0 25 .6 2 6.2 27.1 28 .3 

Co mbined 29 .8 30 .6 3 1.4 32.6 34 .1 

 NHTSA estimates that average achieved fuel economy levels will 

correspondingly increase through MY 2016, but that manufacturers will, on average, 

undercomply175 in some model years and overcomply176 in others, reaching a combined 

average fuel economy of 33.7 mpg in MY 2016:177

 

174 See Section IV.G.6 below. 

175 In NHTSA’s analysis, “undercompliance” is mitigated either through use of FFV credits, use of existing 

or “banked” credits, or through fine payment. Because NHTSA cannot consider availability of credits in 

setting standards, the estimated achieved CAFE levels presented here do not account for their use. In

contrast, because NHTSA is not prohibited from considering fine payment, the estimated achieved CAFE 

levels presented here include the assumption that BMW, Daimler (i.e., Mercedes), Porsche, and, Tata (i.e., 

Jaguar and Rover) will only apply technology up to the point that it would be less expensive to pay civil 

penalties. 

Formatted Table

Formatted Table
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

163

Table IV.G.1-2. Average Achieved Fuel Economy (mpg) 

under Proposed Standards 

2012 2013 2014 2015 2016

Passenger Cars 32.9 34.2 35.2 36.5 37.6

Light Trucks 24.9 25.7 26.5 27.4 28.1

Combined 29.3 30.5 31.5 32.7 33.7

201 2 20 13 2 014 2 015 201 6

Passenger C ars 32 .9 34 .2 3 5.2 36.5 37 .6 

Light Truck s 24 .9 25 .7 2 6.5 27.4 28 .1 

Co mbined 29 .3 30 .5 3 1.5 32.7 33 .7 

 NHTSA estimates that these fuel economy increases will lead to fuel savings 

totaling 61.6 billion gallons during the useful lives of vehicles sold in MYs 2012-2016: 

Table IV.G.1-3. Fuel Saved (billion gallons) 

under Proposed Standards 

2012 2013 2014 2015 2016 Total

Passenger Cars 2.5 5.3 7.5 9.4 11.4 36.0

Light Trucks 1.8 3.7 5.4 6.8 7.8 25.6

Combined 4.3 9.1 12.9 16.1 19.2 61.6

201 2 20 13 2 014 2 015 201 6 T otal

Passenger C ars 2 .5 5 .3 7.5 9.4 11 .4 3 6.0 

Light Truck s 1 .8 3 .7 5.4 6.8 7 .8 2 5.6 

Co mbined 4 .3 9 .1 1 2.9 16.1 19 .2 6 1.6 

 The agency also estimates that these new CAFE standards will lead to 

corresponding reductions of CO2 emissions totaling 656 million metric tons (mmt) during 

the useful lives of vehicles sold in MYs 2012-2016:

Table IV.G.1-4. Avoided Carbon Dioxide Emissions (mmt) 

under Proposed Standards 

2012 2013 2014 2015 2016 Total

Passenger Cars 25 56 79 99 121 381

Light Trucks 19 40 58 73 85 275

Combined 44 96 137 173 206 656

 

176 In NHTSA’s analysis, “overcompliance” occurs through multi-year planning: manufacturers apply 

some “extra” technology in early model years (e.g., MY 2014) in order to carry that technology forward 

and thereby facilitate compliance in later model years (e.g., MY 2016) 

177 Consistent with EPCA, NHTSA has not accounted for manufacturers’ ability to earn CAFE credits for 

selling FFVs, carry credits forward and back between model years, and transfer credits between the 

passenger car and light truck fleets. 

Formatted Table

Formatted Table

Formatted Table

Formatted Table
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

164

201 2 20 13 2 014 2 015 201 6 T otal

Passenger C ars 2 5 56 79 9 9 1 21 381 

Light Truck s 1 9 40 58 7 3 85 275 

Co mbined 4 4 96 137 17 3 2 06 656 

2. How Would These Proposed Standards Improve Fleet-wide Fuel Economy 

and Reduce GHG Emissions Beyond MY 2016?

 Under the assumption that CAFE standards at least as stringent as those proposed 

for MY 2016 would be established for subsequent model years, the effects of the 

proposed standards on fuel consumption and GHG emissions will continue to increase for 

many years. This will occur because over time, a growing fraction of the U.S. light-duty 

vehicle fleet will be comprised of cars and light trucks that meet the MY 2016 standard. 

The impact of the proposed standards on fuel use and GHG emissions will continue to 

grow through approximately 2050, when virtually all cars and light trucks in service will 

have met the MY 2016 standard. 

As Table IV.G.2-1 shows, NHTSA estimates that the fuel economy increases 

resulting from the proposed standards will lead to reductions in total fuel consumption by 

cars and light trucks of 9 billion gallons during 2020, increasing to 30 billion gallons by 

2050. Over the period from 2012–when the proposed standards would begin to take 

effect–through 2050, cumulative fuel savings would total 693 billion gallons, as Table 

IV.G.2-1 also indicates. 

Table IV.G.2-1. Reduction in Fleet-Wide Fuel Use (billion gallons) 

under Proposed Standards 

Calendar Year 2020 2030 2040 2050 Total, 2012-

2050

Passenger Cars 5 12 16 19 431

Light Trucks 4 7 9 11 262

Combined 9 19 25 30 693

Calendar Year 2020 2030 2040 2050 Total, 2012-

2050

Passenger Cars 5 12 16 19 431

Light Trucks 4 7 9 11 262

Total 9 19 25 30 693

 As a consequence of these reductions in fleet-wide fuel consumption, the agency 

also estimates that the proposed CAFE standards for MYs 2012-2016 will lead to 

corresponding reductions in CO2 emissions from the U.S. light-duty vehicle fleet. 

Specifically, NHTSA estimates that total CO2 emissions associated with passenger car 

and light truck use in the U.S. use will decline by 111 million metric tons (mmt) during 

2020 as a consequence of the proposed standards, as Table IV.G.2-2reports. The table 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

165

also shows that the this reduction is estimated to grow to 355 million metric tons by the 

year 2050, and will total 8,247 million metric tons over the period from 2012, when the 

proposed standards would take effect, through 2050. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

166

Table IV.G.2-2. Reduction in Fleet-Wide Carbon Dioxide Emissions (mmt) 

From Passenger Car and Light Truck Use under Proposed Standards 

Calendar Year 2020 2030 2040 2050 Total, 2012-

2050

Passenger Cars 64 144 186 222 5,117

Light Trucks 47 87 110 132 3,130

Combined 111 231 295 355 8,247

Calendar Year 2020 2030 2040 2050 Total, 2012-

2050

Passenger Cars 64 144 186 222 5,117

Light Trucks 47 87 110 132 3,130

Total 111 231 295 355 8,247

 These reductions in fleet-wide CO2 emissions, together with corresponding 

reductions in other GHG emissions from fuel production and use, would lead to small but 

significant reductions in projected changes in the future global climate. These changes 

are summarized in Table IV.G.2-3 below. 

Table IV.G.2-3. Effects of Reductions in Fleet-Wide Carbon Dioxide Emissions 

(mmt) On Projected Changes in Global Climate 

Measure Units Date

Projected Change in Measure

No 

Action

With 

Proposed 

Standards

Difference

Atmospheric CO2

Concentration ppm 2100 783.0 780.3 -2.7

Increase in Global Mean 

Surface Temperature o C 2100 3.136 3.126 -0.010

Sea Level Rise cm 2100 38.00 37.91 -0.09

Global Mean Precipitation % change 

from 1980-

1999 avg.

2090 4.59% 4.57% -0.02%

No Action with Proposed 

Standards Difference

Atmospheric CO2 Concentration ppm 2100 783.0 780.3 -2.7

Increase in Global Mean Surface 

Temperature ° C 2100 3.136 3.126 -0.010

Sea Level Rise cm 2100 38.00 37.91 -0.09

Global Mean Precipitation

% change 

from 1980-

1999 avg.

2090 4.59% 4.57% -0.02%

Measure Units Date

Projected Change in Measure:
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

167

3. How Would These Proposed standards Impact Non-GHG emissions and 

Their Associated Effects?

Under the assumption that CAFE standards at least as stringent as those proposed 

for MY 2016 would be established for subsequent model years, the effects of the 

proposed standards on air quality and its associated health effects will continue to be felt 

over the foreseeable future. This will occur because over time a growing fraction of the 

U.S. light-duty vehicle fleet will be comprised of cars and light trucks that meet the MY 

2016 standard, and this growth will continue until approximately 2050. 

Increases in the fuel economy of light-duty vehicles required by the proposed 

CAFE standards will cause a slight increase in the number of miles they are driven, 

through the fuel economy “rebound effect.” In turn, this increase in vehicle use will lead 

to increases in emissions of criteria air pollutants and some airborne toxics, since these 

are products of the number of miles vehicles are driven. 

At the same time, however, the projected reductions in fuel production and use 

reported in Table IV.G.2-1 above will lead to corresponding reductions in emissions of 

these pollutants that occur during fuel production and distribution (“upstream” 

emissions). For most of these pollutants, the reduction in upstream emissions resulting 

from lower fuel production and distribution will outweigh the increase in emissions from 

vehicle use, resulting in a net decline in their total emissions. 

Tables IV.G.3-1a and 3-1b report estimated reductions in emissions of selected 

criteria air pollutants (or their chemical precursors) and airborne toxics expected to result 

from the proposed standards during calendar year 2030. By that date, the majority of 

light-duty vehicles in use will have met the proposed MY 2016 CAFE standards, so these 

reductions provide a useful index of the long-term impact of the proposed standards on 

air pollution and its consequences for human health. 

Table IV.G.3-1a. Projected Changes in Emissions of Criteria Air Pollutants from 

Car and Light Truck Use (calendar year 2030; tons) 

Vehicle Class Source of 

Emissions

Criteria Air Pollutant

Nitrogen 

Oxides 

(NOx)

Particulate 

Matter 

(PM2.5)

Sulfur 

Oxides 

(SOx)

Volatile 

Organic 

Compounds 

(VOC)

Passenger Cars

Vehicle use 1,791 630 -2,375 2,157

Fuel production 

and distribution -19,022 -2,539 -11,363 -75,031

All sources -17,231 -1,909 -13,738 -72,874

Light Trucks

Vehicle use 1,137 257 -1,401 1,094

Fuel production 

and distribution -11,677 -1,569 -7,031 -43,667
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

168

All sources -10,540 -1,312 -8,432 -42,573

Total

Vehicle use 2,928 887 -3,776 3,251

Fuel production 

and distribution -30,699 -4,108 -18,394 -118,698

All sources -27,771 -3,221 -22,170 -115,447

Nitrogen 

Oxides 

(NOx)

Particulate 

Matter 

(PM2.5)

Sulfur 

Oxides 

(SOx)

Volatile 

Organic 

Compounds 

(VOC)

Vehicle use 1,791 630 -2,375 2,157

Fuel production 

and distribution -19,022 -2,539 -11,363 -75,031

All sources -17,231 -1,909 -13,738 -72,874

Vehicle use 1,137 257 -1,401 1,094

Fuel production 

and distribution

-11,677 -1,569 -7,031 -43,667

All sources -10,540 -1,312 -8,432 -42,573

Vehicle use 2,928 887 -3,776 3,251

Fuel production 

and distribution -30,699 -4,108 -18,394 -118,698

All sources -27,771 -3,221 -22,170 -115,447

Vehicle Class Source of 

Emisisons

Criteria Air Pollutant

Passenger Cars

Light Trucks

Total
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

169

Table IV.F.3-1b. Projected Changes in Emissions of Airborne Toxics from Car and 

Light Truck Use (calendar year 2030; tons) 

Vehicle Class Source of 

Emissions

Toxic Air Pollutant

Benzene 1,3-

Butadiene Formaldehyde

Passenger Cars

Vehicle use 67 19 72

Fuel production 

and distribution -158 -1 -54

All sources -91 18 18

Light Trucks

Vehicle use 45 9 32

Fuel production 

and distribution -93 -1 -33

All sources -48 8 -1

Total

Vehicle use 112 28 104

Fuel production 

and distribution -251 -2 -87

All sources -139 26 17

Benzene 1,3-

Butadiene

Formaldehyde 

Vehicle use 67 19 72

Fuel production 

and distribution -158 -1 -54

All sources -91 18 18

Vehicle use 45 9 32

Fuel production 

and distribution -93 -1 -33

All sources -48 8 -1

Vehicle use 112 28 104

Fuel production 

and distribution -251 -2 -87

All sources -139 26 17

Source of 

Emisisons

Toxic Air Pollutant

Passenger Cars

Light Trucks

Total

Vehicle Class

Note: positive values indicate increases in emissions; negative values indicate reductions. 

In turn, the reductions in emissions reported in Tables IV.G.3-1a and 3-1b are 

projected to result in significant declines in the health effects that result from population 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

170

exposure to these pollutants. Table IV.G.3-2 reports the estimated reductions in selected 

PM2.5-related human health impacts that are expected to result from reduced population 

exposure to unhealthful atmospheric concentrations of PM2.5. The estimates reported in 

Table IV.G.3-2 are derived from PM2.5-related dollar-per-ton estimates that include only

quantifiable reductions in health impacts likely to result from reduced population 

exposure to particular matter (PM). They do not include all health impacts related to 

reduced exposure to PM, nor do they include any reductions in health impacts resulting 

from lower population exposure to other criteria air pollutants (particularly ozone) and air 

toxics. NHTSA and EPA are using PM-related benefits-per-ton values as an interim 

approach to estimating the PM-related benefits of the proposal. To model the ozone and 

PM air quality benefit sof the final rule, the analysis will utilize ambient concentration 

data derived from full-scale photochemical air quality modeling. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

171

Table IV.G.3-2. Projected Reductions in Health Impacts of Exposure to Criteria Air 

Pollutants from Proposed Standards (calendar year 2030) 

Health Impact Measure Projected 

Reduction 

(2030)

Mortality (ages 30 and older) premature deaths per year 217 to 554

Chronic Bronchitis cases per year 142

Emergency Room Visits for Asthma number per year 198

Work Loss workdays per year 25,522

M ortality (ages 30 and o lder) prematu re d eaths p er year 5 45 to 1,394

Chro nic Bronchitis cases per year 359

Em ergency Ro om Visits fo r Asthm a num ber per year 495

W ork L oss workdays per year 64,4 83

H ealt h Im pact M easure P ro jected 

Reduction (2 030)

4. What are the Estimated Costs and Benefits of These Proposed 

Standards?

 NHTSA estimates that the proposed standards could entail significant additional 

technology beyond the levels reflected in the baseline market forecast used by NHTSA. 

This additional technology will lead to increases in costs to manufacturers and vehicle 

buyers, as well as fuel savings to vehicle buyers. The following three tables summarize 

the extent to which the agency estimates technologies could be added to the passenger 

car, light truck, and overall fleets in each model year in response to the proposed 

standards. Percentages reflect the technology’s additional application in the market, and 

are negative in cases where one technology is superseded (i.e., displaced) by another. For 

example, the agency estimates that many automatic transmissions used in light trucks 

could be displaced by dual clutch transmissions. 

Formatted Table
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

172

Table IV.G.4-1. Addition of Technologies to Passenger Car Fleet 

under Proposed Standards 

Technology MY 2012 MY 2013 MY 2014 MY 2015 MY 2016

Low Friction Lubricants 21% 20% 21% 37% 36%

Engine Friction Reduction 10% 21% 24% 29% 40%

VVT - Coupled Cam Phasing (CCP) on SOHC 1% 1% 1% 4% 9%

Discrete Variable Valve Lift (DVVL) on SOHC 0% 1% 2% 2% 2%

Cylinder Deactivation on SOHC 0% 0% 0% 0% 1%

VVT - Intake Cam Phasing (ICP) 0% 0% 0% 0% 0%

VVT - Dual Cam Phasing (DCP) 13% 19% 26% 28% 29%

Discrete Variable Valve Lift (DVVL) on DOHC 13% 18% 21% 23% 29%

Continuously Variable Valve Lift (CVVL) 0% 0% 0% 0% 0%

Cylinder Deactivation on DOHC 0% 0% 0% 0% 0%

Cylinder Deactivation on OHV 0% 1% 1% 1% 1%

VVT - Coupled Cam Phasing (CCP) on OHV 0% 1% 1% 1% 1%

Discrete Variable Valve Lift (DVVL) on OHV 0% 2% 2% 3% 4%

Conversion to DOHC with DCP 0% 0% 0% 0% 0%

Stoichiometric Gasoline Direct Injection (GDI) 14% 22% 26% 30% 36%

Combustion Restart 0% 0% 2% 5% 9%

Turbocharging and Downsizing 10% 15% 16% 17% 20%

Exhaust Gas Recirculation (EGR) Boost 0% 7% 9% 10% 15%

Conversion to Diesel following TRBDS 1% 2% 2% 2% 2%

Conversion to Diesel following CBRST 0% 0% 0% 0% 1%

6-Speed Manual/Improved Internals 0% 0% 0% 0% 0%

Improved Auto. Trans. Controls/Externals 2% 8% 12% 10% 11%

Continuously Variable Transmission 0% 0% 0% 0% 0%

6/7/8-Speed Auto. Trans with Improved Internals 0% 0% 1% 1% 2%

Dual Clutch or Automated Manual Transmission 14% 24% 31% 41% 47%

Electric Power Steering 8% 24% 34% 42% 55%

Improved Accessories 14% 26% 31% 38% 50%

12V Micro-Hybrid 0% 0% 0% 0% 0%

Belt mounted Integrated Starter Generator 8% 18% 27% 30% 33%

Crank mounted Integrated Starter Generator 3% 3% 3% 3% 3%

Power Split Hybrid 1% 2% 2% 2% 2%

2-Mode Hybrid 0% 0% 0% 0% 0%

Plug-in Hybrid 0% 0% 0% 0% 0%

Material Substitution (1.5%) 18% 29% 32% 40% 62%

Material Substitution (5% to 10%) 0% 0% 14% 21% 32%

Material Substitution (NA) 0% 0% 0% 0% 0%

Low Rolling Resistance Tires 5% 26% 38% 45% 50%

Low Drag Brakes 2% 4% 5% 5% 9%

Secondary Axle Disconnect - Unibody 0% 0% 0% 0% 0%

Secondary Axle Disconnect - Ladder Frame 1% 2% 2% 2% 3%

Aero Drag Reduction 8% 21% 32% 37% 45%
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

173

 

Table IV.G.4-2. Addition of Technologies to Light Truck Fleet 

under Proposed Standards 

Technology MY 2012 MY 2013 MY 2014 MY 2015 MY 2016

Low Friction Lubricants 19% 19% 19% 20% 21%

Engine Friction Reduction 2% 4% 12% 21% 21%

VVT - Coupled Cam Phasing (CCP) on SOHC 0% 0% 6% 8% 8%

Discrete Variable Valve Lift (DVVL) on SOHC 1% 1% 3% 12% 12%

Cylinder Deactivation on SOHC 0% 1% 1% 3% 6%

VVT - Intake Cam Phasing (ICP) 0% 0% 0% 0% 0%

VVT - Dual Cam Phasing (DCP) 2% 3% 7% 8% 10%

Discrete Variable Valve Lift (DVVL) on DOHC 12% 17% 21% 22% 27%

Continuously Variable Valve Lift (CVVL) 0% 0% 0% 0% 0%

Cylinder Deactivation on DOHC -2% -2% -2% 1% 1%

Cylinder Deactivation on OHV 1% 6% 8% 7% 12%

VVT - Coupled Cam Phasing (CCP) on OHV 0% 1% 2% 4% 17%

Discrete Variable Valve Lift (DVVL) on OHV 0% 14% 17% 19% 19%

Conversion to DOHC with DCP 0% 0% 0% 0% 0%

Stoichiometric Gasoline Direct Injection (GDI) 17% 34% 41% 43% 47%

Combustion Restart 0% 0% 1% 6% 11%

Turbocharging and Downsizing 5% 8% 8% 8% 9%

Exhaust Gas Recirculation (EGR) Boost 0% 3% 3% 3% 6%

Conversion to Diesel following TRBDS 0% 0% 0% 0% 0%

Conversion to Diesel following CBRST 1% 1% 1% 1% 1%

6-Speed Manual/Improved Internals 0% 0% 0% 0% 0%

Improved Auto. Trans. Controls/Externals -1% -10% -14% -30% -40%

Continuously Variable Transmission 0% 0% 0% 0% 0%

6/7/8-Speed Auto. Trans with Improved Internals -3% -4% -4% -4% -3%

Dual Clutch or Automated Manual Transmission 19% 39% 54% 71% 80%

Electric Power Steering 9% 31% 39% 45% 50%

Improved Accessories 6% 13% 20% 27% 32%

12V Micro-Hybrid 0% 0% 0% 0% 0%

Belt mounted Integrated Starter Generator 8% 11% 20% 22% 24%

Crank mounted Integrated Starter Generator 0% 0% 0% 0% 0%

Power Split Hybrid 0% 0% 0% 0% 0%

2-Mode Hybrid 0% 0% 0% 0% 0%

Plug-in Hybrid 0% 0% 0% 0% 0%

Material Substitution (1.5%) 14% 15% 20% 31% 52%

Material Substitution (5% to 10%) 0% 0% 9% 22% 29%

Material Substitution (NA) 0% 0% 0% 0% 0%

Low Rolling Resistance Tires 15% 20% 22% 24% 24%

Low Drag Brakes 12% 15% 23% 30% 51%

Secondary Axle Disconnect - Unibody 0% 0% 0% 0% 0%

Secondary Axle Disconnect - Ladder Frame 8% 8% 12% 18% 19%

Aero Drag Reduction 10% 11% 16% 13% 16%
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

174

 

Table IV.G.4-3. Addition of Technologies to Overall Fleet 

under Proposed Standards 

Technology MY 2012 MY 2013 MY 2014 MY 2015 MY 2016

Low Friction Lubricants 20% 19% 20% 31% 31%

Engine Friction Reduction 7% 15% 20% 26% 33%

VVT - Coupled Cam Phasing (CCP) on SOHC 1% 1% 3% 5% 9%

Discrete Variable Valve Lift (DVVL) on SOHC 1% 1% 2% 6% 6%

Cylinder Deactivation on SOHC 0% 0% 1% 1% 3%

VVT - Intake Cam Phasing (ICP) 0% 0% 0% 0% 0%

VVT - Dual Cam Phasing (DCP) 9% 13% 19% 21% 23%

Discrete Variable Valve Lift (DVVL) on DOHC 12% 17% 21% 22% 28%

Continuously Variable Valve Lift (CVVL) 0% 0% 0% 0% 0%

Cylinder Deactivation on DOHC -1% -1% -1% 0% 0%

Cylinder Deactivation on OHV 0% 3% 3% 3% 4%

VVT - Coupled Cam Phasing (CCP) on OHV 0% 1% 2% 2% 7%

Discrete Variable Valve Lift (DVVL) on OHV 0% 7% 8% 9% 9%

Conversion to DOHC with DCP 0% 0% 0% 0% 0%

Stoichiometric Gasoline Direct Injection (GDI) 15% 27% 32% 34% 40%

Combustion Restart 0% 0% 2% 6% 10%

Turbocharging and Downsizing 8% 12% 13% 14% 16%

Exhaust Gas Recirculation (EGR) Boost 0% 5% 7% 8% 12%

Conversion to Diesel following TRBDS 1% 1% 1% 1% 1%

Conversion to Diesel following CBRST 0% 0% 0% 1% 1%

6-Speed Manual/Improved Internals 0% 0% 0% 0% 0%

Improved Auto. Trans. Controls/Externals 1% 1% 3% -4% -6%

Continuously Variable Transmission 0% 0% 0% 0% 0%

6/7/8-Speed Auto. Trans with Improved Internals -1% -1% -1% -1% 0%

Dual Clutch or Automated Manual Transmission 16% 29% 39% 52% 58%

Electric Power Steering 9% 27% 36% 43% 53%

Improved Accessories 11% 21% 27% 34% 44%

12V Micro-Hybrid 0% 0% 0% 0% 0%

Belt mounted Integrated Starter Generator 8% 16% 25% 27% 30%

Crank mounted Integrated Starter Generator 2% 2% 2% 2% 2%

Power Split Hybrid 1% 1% 1% 1% 1%

2-Mode Hybrid 0% 0% 0% 0% 0%

Plug-in Hybrid 0% 0% 0% 0% 0%

Material Substitution (1.5%) 17% 24% 28% 37% 59%

Material Substitution (5% to 10%) 0% 0% 12% 21% 31%

Material Substitution (NA) 0% 0% 0% 0% 0%

Low Rolling Resistance Tires 8% 23% 32% 38% 41%

Low Drag Brakes 5% 8% 11% 14% 23%

Secondary Axle Disconnect - Unibody 0% 0% 0% 0% 0%

Secondary Axle Disconnect - Ladder Frame 4% 4% 5% 7% 8%

Aero Drag Reduction 8% 17% 26% 29% 36%
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

175

 In order to pay for this additional technology (and, for some manufacturers, civil 

penalties), NHTSA estimates that average passenger car and light truck prices will, 

relative to levels resulting from compliance with baseline (MY 2011) standards, increase 

by $591-$1,127 and $283-$1,020, respectively, during MYs 2011-2016. The following 

tables summarize the agency’s estimates of average price increases for each 

manufacturer’s passenger car, light truck, and overall fleets (with corresponding averages 

for the industry): 

Table IV.G.4-4. Average Passenger Car Incremental Price Increases ($) 

under Proposed Standards 

Manufacturer MY 2012 MY 2013 MY 2014 MY 2015 MY 2016

BMW 524 552 634 828 1,124

Chrysler 775 1,304 1,473 1,583 1,582

Daimler 182 215 781 1,039 1,401

Ford 1,746 1,719 1,735 1,880 2,078

General Motors 143 990 1,189 1,387 1,553

Honda 31 122 205 287 494

Hyundai 418 452 643 726 868

Kia 319 359 387 473 647

Mazda 658 735 965 991 1,263

Mitsubishi 1,156 1,076 1,715 2,076 2,035

Nissan 653 712 1,155 1,153 1,275

Porsche 270 256 306 399 498

Subaru 408 465 1,493 1,877 1,838

Suzuki 259 1,001 1,445 1,494 1,675

Tata 246 244 395 577 1,284

Toyota 133 127 155 257 267

Volkswagen 286 561 650 767 1,125

Total/Average 498 674 820 930 1,085
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

176

Manufacturer MY 2012 MY 2013 MY 2014 MY 2015 MY 2016

BMW 552 524 634 828 1,124 

Chrysler 1,304 775 1,473 1,583 1,582 

Daimler 215 182 781 1,039 1,401 

Ford 1,719 1,746 1,735 1,880 2,078 

General Motors 990 143 1,189 1,387 1,553 

Honda 122 31 205 287 494 

Hyundai 452 418 643 726 868 

Kia 359 319 387 473 647 

Mazda 735 658 965 991 1,263 

Mitsubishi 1,076 1,156 1,715 2,076 2,035 

Nissan 712 653 1,155 1,153 1,275 

Porsche 256 270 306 399 498 

Subaru 465 408 1,493 1,877 1,838 

Suzuki 1,001 259 1,445 1,494 1,675 

Tata 244 246 395 577 1,284 

Toyota 127 133 155 257 267 

Volkswagen 561 286 650 767 1,125 

Total/Average 674 498 820 930 1,085 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

177

Table IV.G.4-5. Average Light Truck Incremental Price Increases ($) 

under Proposed Standards 

Manufacturer MY 2012 MY 2013 MY 2014 MY 2015 MY 2016

BMW 325 327 380 708 884

Chrysler 152 399 749 892 1,188

Daimler 322 289 316 420 478

Ford 471 629 693 1,323 1,365

General Motors 33 533 752 792 962

Honda 390 380 616 749 1,006

Hyundai 774 744 1,301 1,322 1,292

Kia 228 373 547 843 1,218

Mazda 340 608 610 679 776

Mitsubishi 55 94 1,546 1,732 2,123

Nissan 541 608 903 1,022 1,312

Porsche 28 46 84 913 954

Subaru 1,203 1,140 1,213 1,197 1,184

Suzuki 50 1,451 1,404 1,358 1,373

Tata 44 83 127 193 635

Toyota 172 309 665 764 877

Volkswagen 28 61 99 160 231

Total/Average 291 485 701 911 1,058

Manufacturer MY 2012 MY 2013 MY 2014 MY 2015 MY 2016

BMW 327 325 380 708 884 

Chrysler 399 152 749 892 1,188 

Daimler 289 322 316 420 478 

Ford 629 471 693 1,323 1,365 

General Motors 533 33 752 792 962 

Honda 380 390 616 749 1,006 

Hyundai 744 774 1,301 1,322 1,292 

Kia 373 228 547 843 1,218 

Mazda 608 340 610 679 776 

Mitsubishi 94 55 1,546 1,732 2,123 

Nissan 608 541 903 1,022 1,312 

Porsche 46 28 84 913 954 

Subaru 1,140 1,203 1,213 1,197 1,184 

Suzuki 1,451 50 1,404 1,358 1,373 

Tata 83 44 127 193 635 

Toyota 309 172 665 764 877 

Volkswagen 61 28 99 160 231 

Total/Average 485 291 701 911 1,058 

Table IV.G.4-6. Average Incremental Price Increases ($) 

By Manufacturer under Proposed Standards 

Manufacturer MY 2012 MY 2013 MY 2014 MY 2015 MY 2016

BMW 457 483 560 796 1,061

Chrysler 393 777 1,061 1,271 1,408

Daimler 236 243 604 834 1,106

Ford 1,195 1,242 1,262 1,629 1,762
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

178

General Motors 94 785 997 1,131 1,304

Honda 162 212 335 429 647

Hyundai 488 509 769 835 944

Kia 300 362 416 535 740

Mazda 598 712 907 944 1,193

Mitsubishi 1,007 921 1,692 2,033 2,045

Nissan 616 679 1,078 1,115 1,286

Porsche 174 179 231 562 643

Subaru 705 711 1,392 1,632 1,602

Suzuki 204 1,117 1,434 1,458 1,598

Tata 115 150 234 368 938

Toyota 147 191 331 429 468

Volkswagen 233 470 550 657 970

Total/Average 421 605 777 924 1,076

Manufacturer MY 2012 MY 2013 MY 2014 MY 2015 MY 2016

BMW 483 457 560 796 1,061 

Chrysler 777 393 1,061 1,271 1,408 

Daimler 243 236 604 834 1,106 

Ford 1,242 1,195 1,262 1,629 1,762 

General Motors 785 94 997 1,131 1,304 

Honda 212 162 335 429 647 

Hyundai 509 488 769 835 944 

Kia 362 300 416 535 740 

Mazda 712 598 907 944 1,193 

Mitsubishi 921 1,007 1,692 2,033 2,045 

Nissan 679 616 1,078 1,115 1,286 

Porsche 179 174 231 562 643 

Subaru 711 705 1,392 1,632 1,602 

Suzuki 1,117 204 1,434 1,458 1,598 

Tata 150 115 234 368 938 

Toyota 191 147 331 429 468 

Volkswagen 470 233 550 657 970 

Total/Average 605 421 777 924 1,076 

Based on the agencies’ estimates of manufacturers’ future sales volumes, these 

price increases will lead to a total of $60.2 billion in incremental outlays during MYs 

2012-2016 for additional technology attributable to the proposed standards: 

Table IV.G.4-7. Incremental Technology Outlays ($b) 

under Proposed Standards

201 2 20 13 2 014 2 015 201 6 T otal

Passenger C ars 4 .1 6 .5 8.4 9.9 11 .8 4 0.8 

Light Truck s 1 .5 2 .8 4.0 5.2 5 .9 1 9.4 

Co mbined 5 .7 9 .3 1 2.5 15.1 17 .6 6 0.2 

2012 2013 2014 2015 2016 Total

Passenger Cars 4.1 6.5 8.4 9.9 11.8 40.8

Light Trucks 1.5 2.8 4.0 5.2 5.9 19.4

Combined 5.7 9.3 12.5 15.1 17.6 60.2

Formatted: Centered
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

179

NHTSA notes that these estimates of the economic costs for meeting higher 

CAFE standards omit certain potentially important categories of costs, and may also 

reflect underestimation (or possibly overestimation) of some costs that are included. For 

example, although the agency’s analysis attempts to hold vehicle performance, capacity, 

and utility constant in estimating the costs of applying fuel-saving technologies to 

vehicles, the analysis imputes no cost to any actual reductions in vehicle performance, 

capacity, and utility that may result from manufacturers’ efforts to comply with the 

proposed CAFE standards. Although these costs are difficult to estimate accurately, they 

nonetheless represent a potentially significant category of omitted costs. Similarly, the 

agency’s estimates of costs for meeting higher CAFE standards does not estimate the 

economic value of potential increases in motor vehicle fatalities and injuries that could 

result from reductions in the size or weight of vehicles. While NHTSA reports worstcase estimates of these increases in fatalities and injuries, no estimate of their economic 

value is included in the agency’s estimates of the net benefits resulting from the proposed

standards due to ongoing discussion regarding these potential impacts.

Finally, it is possible that the agency may have underestimated or overestimated 

manufacturers’ direct costs for applying some fuel economy technologies, or the 

increases in manufacturer’s indirect costs associated with higher vehicle manufacturing 

costs. In either case, the technology outlays reported here will not correctly represent the 

costs of meeting higher CAFE standards. Similarly, NHTSA’s estimates of increased 

costs of congestion, accidents, and noise associated with added vehicle use are drawn 

from a 1997 study, and the correct magnitude of these values may have changed since 

they were developed.178 If this is the case, the costs of increased vehicle use associated 

with the fuel economy rebound effect will differ from the agency’s estimates in this 

analysis. Thus, like the agency’s estimates of economic benefits, estimates of total 

compliance costs reported here may underestimate or overestimate the true economic 

costs of the proposed standards. 

NHTSA notes that these estimates of the economic costs for meeting higher 

CAFE standards omit certain potentially important categories of costs, and may also 

reflect significant underestimation of some costs that are included. For example, the 

agency’s estimates of costs for meeting higher CAFE standards does not estimate the 

economic value of potential increases in motor vehicle fatalities and injuries that could 

result from reductions in the size or weight of vehicles. While NHTSA reports 

provisional estimates of these increases in fatalities and injuries, no estimate of their 

economic value is included in the agency’s estimates of the costs of meeting higher 

CAFE standards. Similarly, NHTSA’s estimates of increased costs of congestion, 

accidents, and noise associated with added vehicle use are drawn from a 1997 study, and 

the correct magnitude of these values may have increased since they were developed. If 

this is the case, the costs of increased vehicle use associated with the fuel economy 

rebound effect will have been underestimated. Thus like the agency’s estimates of 

economic benefits reported previously, estimates of total compliance costs reported here 

are likely to underestimate the true economic costs of the proposed standards. 

 

178 The agency seeks comment above on appropriate values for these costs.

Comment [r13]: Added in response to 

interagency comment. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

180

 However, offsetting these costs, the achieved increases in fuel economy will also 

produce significant benefits to society. NHTSA estimates that, in present value terms (at 

a discount rate of 3 percent), these benefits will total $201.7 billion over the useful lives 

of light vehicles sold during MYs 2012-2016: 

Table IV.G.4-8. Present Value of Benefits ($billion) 

under Proposed Standards 

201 2 20 13 2 014 2 015 201 6 T otal

Passenger C ars 7 .6 17 .0 2 4.4 31.2 38 .7 11 9.1 

Light Truck s 5 .5 11 .6 1 7.3 22.2 26 .0 8 2.6 

Co mbined 13 .1 28 .7 4 1.8 53.4 64 .7 20 1.7 

2012 2013 2014 2015 2016 Total

Passenger Cars 7.6 17.0 24.4 31.2 38.7 119.1

Light Trucks 5.5 11.6 17.3 22.2 26.0 82.6

Combined 13.1 28.7 41.8 53.4 64.7 201.7

 NHTSA attributes most of these benefits to reductions in fuel consumption, 

valuing fuel at future pretax prices in EIA’s reference case forecast from AEO 2009. The 

total benefits shown in the above table also include other benefits and disbenefits, 

examples of which include the social values of reductions in CO2 and criteria pollutant 

emissions, the value of additional travel (induced by the rebound effect), and the social 

cost of additional congestion, accidents, and noise attributable to that additional travel. 

The PRIA accompanying today’s proposed rule presents a detailed analysis of specific 

benefits of the proposed rule. 

 For both the passenger car and light truck fleets, NHTSA estimates that the 

benefits of today’s proposed standards will exceed the corresponding costs in every 

model year. Over the useful lives of the affected (MY 2012-2016) vehicles, the agency 

estimates that the benefits of the proposed standards will exceed the costs of the proposed 

standards by $141.5 billion: 

Table IV.G.4-9. Present Value of Net Benefits ($billion) 

under Proposed Standards 

2012 2013 2014 2015 2016 Total

Passenger Cars 3.5 10.5 16.0 21.3 26.9 78.3

Light Trucks 3.9 8.9 13.3 17.0 20.1 63.2

Combined 7.4 19.4 29.3 38.3 47.1 141.5

201 2 20 13 2 014 2 015 201 6 T otal

Passenger C ars 3 .5 10 .5 1 6.0 21.3 26 .9 7 8.3 

Light Truck s 3 .9 8 .9 1 3.3 17.0 20 .1 6 3.2 

Co mbined 7 .4 19 .4 2 9.3 38.3 47 .1 14 1.5 

NHTSA’s estimates of economic benefits from establishing higher CAFE are also 

subject to considerable uncertainty. Most important, the agency’s estimates of the fuel 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

181

savings likely to result from adopting higher CAFE standards depend critically on the 

accuracy of the estimated fuel economy levels that will be achieved under both the 

baseline scenario, which assumes that manufacturers will continue to comply with the 

MY 2011 CAFE standards, and under alternative increases in the standards that apply to 

MY 2012-16 passenger cars and light trucks. Specifically, if the agency has 

underestimated the fuel economy levels that manufacturers will achieve under the 

baseline scenario, its estimates of fuel savings and the resulting economic benefits will be 

too large. As another example, the agency’s estimate of benefits from reducing the threat 

of economic damages from disruptions in the supply of imported petroleum to the U.S. 

applies to calendar year 2015. If the magnitude of this estimate would be expected to 

grow after 2015 in response to increases in U.S. petroleum imports, growth in the level of 

U.S. economic activity, or increases in the likelihood of disruptions in the supply of 

imported petroleum, the agency may have underestimated the benefits from the reduction 

in petroleum imports expected to result from adopting higher CAFE standards. 

Similar to our estimates for costsHowever, it is also possible likely that NHTSA’s 

estimates of economic benefits from establishing higher CAFE standards underestimate 

the true economic benefits of the fuel savings those standards would produce. This is 

partly because the agency has been unable to develop monetized estimates of the 

economic value of certain potentially significant categories of benefits from reducing fuel 

consumption. Specifically, the agency’s estimate of the economic value of reduced 

damages to human health resulting from lower exposure to criteria air pollutants includes 

only the effects of reducing population exposure to PM2.5 emissions. Although this is 

likely to be the most significant component of health benefits from reduced emissions of 

criteria air pollutants, it excludes the value of reduced damages to human health and other 

impacts resulting from lower emissions and reduced population exposure to other criteria 

air pollutants, including ozone and nitrous oxide (N2O), as well as airborne toxics. The 

agency’s analysis excludes these benefits because no reliable estimates of the health 

impacts of criteria pollutants other than PM2.5 or of the health impacts of airborne toxics 

were available to use in developing estimates of these benefits. 

In addition, the agency’s estimate of the value of reduced climate-related 

economic damages from lower emissions of GHGs excludes many sources of potential 

benefits from reducing the pace and extent of global climate change. These include 

reductions in the risk of catastrophic changes in the global climate, lower costs for 

necessary adaptations to changes in climate, reduced water supply within specific global 

sub-regions, reductions in damages caused by severe storms, lower population exposure 

to harmful air pollution levels, reductions in ecosystem impacts and risks to natural 

resources of global significance, and reduced threats from widespread social or political 

unrest. Including monetized estimates of benefits from reducing the extent of climate 

change and these associated impacts would increase the agency’s estimates of benefits 

from adopting higher CAFE standards. 

Finally, the value of some economic benefits that have been monetized in 

NHTSA’s analysis may have been underestimated. For example, the agency’s estimate 

of benefits from reducing the threat of economic damages from disruptions in the supply 

Comment [r14]: Added in response to 

interagency comment 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

182

of imported petroleum to the U.S. applies to calendar year 2015. If the magnitude of this 

estimate would be expected to grow after 2015 in response to increases in U.S. petroleum 

imports, growth in the level of U.S. economic activity, or increases in the likelihood of 

disruptions in the supply of imported petroleum, the agency may have underestimated the 

benefits from the reduction in petroleum imports expected to result from adopting higher 

CAFE standards. 

The benefits, costs, and net benefits shown above are all based on a discount rate 

of 3 percent. As documented in the accompanying DPRIA, the agency examined the 

sensitivity of results to changes in many economic inputs. With an alternative discount 

rate of 7 percent, incremental technology outlays were virtually identical to those 

estimated at a 3 percent discount rate:179

Table IV.G.4-10. Incremental Technology Outlays ($b) 

under Proposed Standards (using 7 percent Discount Rate) 

2012 2013 2014 2015 2016 Total

Passenger Cars 4.1 6.5 8.4 9.9 11.8 40.8

Light Trucks 1.5 2.8 4.0 5.2 5.9 19.4

Combined 5.7 9.3 12.5 15.1 17.6 60.2

2012 2013 2014 2015 2016 Total

Passenger Cars 4.1 6.5 8.4 9.9 11.8 40.8 

Light T rucks 1.5 2.8 4.0 5.2 5.9 19.4 

Combined 5.7 9.3 12.5 15.1 17.6 60.2 

 However, the present value of the benefits accrued over the lifetime of the 

vehicles covered by the proposal is about 20 percent smaller when discounted at a 7 

percent annual rate than when discounted at a 3 percent annual rate: 

Table IV.G.4-11. Present Value of Benefits ($billion) 

under Proposed Standards (using 7 percent Discount Rate) 

2012 2013 2014 2015 2016 Total

Passenger Cars 6.0 13.6 19.5 25.0 31.1 95.3

Light Trucks 4.3 9.1 13.5 17.4 20.4 64.6

Combined 10.3 22.6 33.1 42.4 51.5 159.8

2012 2013 2014 2015 2016 Total

Passenger Cars 6.0 13.6 19.5 25.0 31.1 95.3 

Light T rucks 4.3 9.1 13.5 17.4 20.4 64.6 

Combined 10.3 22.6 33.1 42.4 51.5 159.8 

 As a result, net benefits are 38 percent lower when total benefits are discounted at 

a 7 percent annual rate: 

 

179 Because some economic inputs change the effective cost of some technologies, and NHTSA assumes 

some manufacturers will be willing to pay civil penalties based on economic considerations, this outcome 

is not assured. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

183
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

184

Table IV.G.4-12. Present Value of Net Benefits ($billion) 

under Proposed Standards (using 7 percent Discount Rate) 

2012 2013 2014 2015 2016 Total

Passenger Cars 1.9 7.0 11.1 15.1 19.3 54.5

Light Trucks 2.7 6.3 9.5 12.2 14.5 45.2

Combined 4.6 13.3 20.6 27.3 33.8 99.7

2012 2013 2014 2015 2016 Total

Passenger Cars 1.9 7.0 11.1 15.1 19.3 54.5 

Light T rucks 2.7 6.3 9.5 12.2 14.5 45.2 

Combined 4.6 13.3 20.6 27.3 33.8 99.7 

The following tables also present itemized costs and benefits for the combined 

fleet for each year of the proposed standards and for all the years combined, at 3 and 7 

percent discount rates, respectively. Numbers in parentheses represent negative values.
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

185

Table IV.G.4-13. Itemized Cost and Benefit Estimates for the Combined Vehicle 

Fleet, 3% Discount Rate

MY 2012 MY 2013 MY 2014 MY 2015 MY 2016 Total

Costs

Technology 

Costs $5,695 $9,295 $12,454 $15,080 $17,633 $60,157 

Benefits

Lifetime Fuel 

Expenditures $10,197 $22,396 $32,715 $41,880 $50,823 $158,012 

Consumer 

Surplus from 

Additional 

Driving $751 $1,643 $2,389 $3,029 $3,639 $11,451 

Refueling Time 

Value $776 $1,551 $2,198 $2,749 $3,277 $10,550 

Petroleum 

Market 

Externalities $559 $1,194 $1,700 $2,129 $2,538 $8,121 

Congestion Costs ($460) ($934) ($1,332) ($1,657) ($1,991) ($6,376)

Noise Costs ($7) ($14) ($21) ($26) ($31) ($99)

Crash Costs ($217) ($437) ($625) ($776) ($930) ($2,985)

CO2 $1,028 $2,287 $3,382 $4,376 $5,372 $16,446 

CO $0 $0 $0 $0 $0 $0 

VOC $41 $80 $108 $131 $156 $518 

NOX $82 $132 $155 $174 $200 $744 

PM $220 $438 $621 $771 $904 $2,956 

SOX $161 $345 $490 $613 $731 $2,341 

Total $13,132 $28,680 $41,781 $53,394 $64,687 $201,676 

Net Benefits $7,044 $18,759 $27,090 $34,710 $41,386 $128,992 

Formatted: Left
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

186

Table IV.G.4-14. Itemized Cost and Benefit Estimates for the Combined Vehicle 

Fleet, 7% Discount Rate

MY 2012 MY 2013 MY 2014 MY 2015 MY 2016 Total

Costs

Technology Costs $5,695 $9,295 $12,454 $15,080 $17,633 $60,157 

Benefits

Lifetime Fuel 

Expenditures

$7,991 $17,671 $25,900 $33,264 $40,478 $125,305 

Consumer 

Surplus from 

Additional 

Driving

$590 $1,301 $1,896 $2,412 $2,904 $9,102 

Refueling Time 

Value

$624 $1,249 $1,770 $2,215 $2,642 $8,500 

Petroleum Market 

Externalities

$448 $960 $1,367 $1,712 $2,043 $6,531 

Congestion Costs ($371) ($753) ($1,074) ($1,335) ($1,606) ($5,138)

Noise Costs ($6) ($12) ($16) ($21) ($24) ($80)

Crash Costs ($173) ($352) ($503) ($626) ($749) ($2,403)

CO2 $797 $1,781 $2,634 $3,410 $4,189 $12,813 

CO $0 $0 $0 $0 $0 $0 

VOC $33 $65 $87 $106 $125 $416 

NOX $60 $99 $120 $135 $156 $570 

PM $170 $344 $492 $613 $721 $2,339 

SOX $129 $278 $394 $493 $588 $1,882 

Total $10,292 $22,631 $33,066 $42,380 $51,468 $159,837 

Net Benefits $4,281 $12,832 $18,818 $24,414 $29,293 $89,638 

The above benefit and cost estimates did not reflect the availability and use of 

flexibility mechanisms, such as compliance credits and credit trading, because EPCA 

prohibits NHTSA from considering the effects of those mechanisms in setting CAFE 

standards. However, the agency noted that, in reality, manufacturers were likely to rely 

to some extent on flexibility mechanisms provided by EPCA and would thereby reduce 

the cost of complying with the proposed standards to a meaningful extent. 

As discussed in the PRIA, NHTSA has performed an analysis to estimate the 

costs and benefits if EPCA’s provisions regarding FFVs are accounted for. The agency 

considered also attempting to account for other EPCA flexibility mechanisms, in 

particular credit transfers between the passenger and nonpassenger fleets, but has 

concluded that, at least within a context in which each model year is represented 

Formatted Table
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

187

explicitly, technologies carry forward between model years, and multiyear planning 

effects are represented, there is no basis to reliably estimate how manufacturers might use 

these mechanisms. Accounting for the FFV provisions indicates that achieved fuel 

economies would be 0.6-1.1 mpg lower than when these provisions are not considered 

(for comparison see Table IV.G.1-2 above): 

Table IV.G.4-153. Average Achieved Fuel Economy (mpg) 

under Proposed Standards (with FFV Credits) 

2012 2013 2014 2015 2016

Passenger Cars 32.5 33.4 34.3 35.3 36.5

Light Trucks 24.1 24.6 25.3 26.3 27.0

Combined 28.7 29.6 30.4 31.6 32.7

2012 2013 2014 2015 2016

Passenger Cars 32.5 33.4 34.3 35.3 36.5 

Light T rucks 24.1 24.6 25.3 26.3 27.0 

Combined 28.7 29.6 30.4 31.6 32.7 

 As a result, NHTSA estimates that, when FFV credits are taken into account, fuel 

savings will total 58.8 billion gallons—about 4.5 percent less than the 61.6 billion gallons 

estimated when these credits are not considered: 

Formatted Table

Formatted Table
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

188

Table IV.G.4-164. Fuel Saved (billion gallons) 

under Proposed Standards (with FFV Credits) 

2012 2013 2014 2015 2016 Total

Passenger Cars 2.5 5.0 6.9 8.6 10.9 33.9

Light Trucks 2.0 3.3 5.0 6.8 7.9 24.9

Combined 4.5 8.2 11.8 15.4 18.8 58.8

2012 2013 2014 2015 2016 Total

Passenger Cars 2.5 5.0 6.9 8.6 10.9 33.9 

Light T rucks 2.0 3.3 5.0 6.8 7.9 24.9 

Combined 4.5 8.2 11.8 15.4 18.8 58.8 

 The agency similarly estimates CO2 emissions reductions would total 639 million 

metric tons (mmt), about 2.6 percent less than the 656 mmt estimated when these credits 

are not considered:180

Table IV.G.4-175. Avoided Carbon Dioxide Emissions (mmt) 

under Proposed Standards (with FFV Credits) 

2012 2013 2014 2015 2016 Total

Passenger Cars 27 54 75 93 118 368

Light Trucks 22 36 54 74 86 272

Combined 49 90 129 167 204 639

2012 2013 2014 2015 2016 Total

Passenger Cars 27 54 75 93 118 368 

Light T rucks 22 36 54 74 86 272 

Combined 49 90 129 167 204 639 

 This analysis further indicates significant reductions in outlays for additional 

technology when FFV provisions are taken into account—about $45b, or about 25 

percent less than the $60b estimated when excluding these provisions: 

Table IV.G.4-186. Incremental Technology Outlays ($b) 

under Proposed Standards (with FFV Credits) 

2012 2013 2014 2015 2016 Total

Passenger Cars 2.5 4.4 6.1 7.4 9.3 29.6

Light Trucks 1.3 2.0 3.1 4.3 5.0 15.6

Combined 3.7 6.3 9.2 11.7 14.2 45.2

2012 2013 2014 2015 2016 Total

Passenger Cars 2.5 4.4 6.1 7.4 9.3 29.6 

Light T rucks 1.3 2.0 3.1 4.3 5.0 15.6 

Combined 3.7 6.3 9.2 11.7 14.2 45.2 

 

180 Differences in the application of diesel engines lead to differences in the incremental percentage 

changes in fuel consumption and carbon dioxide emissions. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

189

 Because NHTSA’s analysis indicated that FFV provisions would not significantly 

reduce fuel savings, the agency’s estimate of discounted benefits when including these 

provisions, $192.5b, is only about 4.5 percent lower than the $201.7b shown above for 

the analysis that excluded these provisions: 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

190

Table IV.G.4-197. Present Value of Benefits ($billion) 

under Proposed Standards (with FFV Credits) 

2012 2013 2014 2015 2016 Total

Passenger Cars 7.8 15.9 22.5 28.6 37.1 111.9

Light Trucks 6.1 10.2 15.9 22.1 26.3 80.5

Combined 13.9 26.1 38.4 50.7 63.3 192.5

2012 2013 2014 2015 2016 Total

Passenger Cars 7.8 15.9 22.5 28.6 37.1 111.9 

Light T rucks 6.1 10.2 15.9 22.1 26.3 80.5 

Combined 13.9 26.1 38.4 50.7 63.3 192.5 

 However, although the agency estimates lower discounted benefits when FFV 

provisions are taken into account, the agency estimates that these provisions slightly 

increase net benefits (by about 4 percent, from $141.5b to $147.2b) because costs 

decrease by more than discounted benefits: 

Table IV.G.4-2018. Present Value of Net Benefits ($billion) 

under Proposed Standards (with FFV Credits) 

2012 2013 2014 2015 2016 Total

Passenger Cars 5.3 11.5 16.4 21.2 27.8 82.3

Light Trucks 4.8 8.2 12.8 17.8 21.3 64.9

Combined 10.2 19.7 29.2 39.0 49.1 147.2

2012 2013 2014 2015 2016 Total

Passenger Cars 5.3 11.5 16.4 21.2 27.8 82.3 

Light T rucks 4.8 8.2 12.8 17.8 21.3 64.9 

Combined 10.2 19.7 29.2 39.0 49.1 147.2 

The agency has performed several sensitivity analyses to examine important 

assumptions. We examine sensitivity with respect to the following five economic

parameters:

1) The price of gasoline: The Reference Case uses the AEO 2009 reference case 

estimate for the price of gasoline. In this sensitivity analysis we examine the 

effect of using the AEO high or low forecast estimates instead. 

2) The discount rate: The Reference Case uses a discount rate of 3 percent to 

discount future benefits. In the sensitivity analysis, we equally examine the effect 

of using a 7 percent discount rate instead. 

3) The rebound effect: The Reference Case uses a rebound effect of 10 percent to 

project increased miles traveled as the cost per mile driven decreases. In the 

sensitivity analysis, we examine the effect of using a 5 percent or 15 percent 

rebound effect instead. 

Comment [r15]: Section added in response to 

interagency comment. 

Formatted: Bullets and Numbering

Formatted: Bullets and Numbering

Formatted: Bullets and Numbering
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

191

4) The values of CO2 benefits and monopsony: The Reference Case uses $20 per 

ton to quantify the benefits of reducing CO2 emissions and $0.178 per gallon to 

quantify the benefits of reducing fuel consumption. In the sensitivity analysis, we 

examine the effect of using values of $5, $10, $34, or $56 per ton instead to value 

CO2 benefits. These values can be translated into cents per gallon by multiplying 

by 0.0089,181 giving the following values:

($5 per ton CO2) x 0.0089 = $0.0445 per gallon

($10 per ton CO2) x 0.0089 = $0.089 per gallon

($20 per ton CO2) x 0.0089 = $0.178 per gallon

($34 per ton CO2) x 0.0089 = $0.3026 per gallon

($56 per ton CO2) x 0.0089 = $0.4984 per gallon

The $5 per ton value reflects the domestic impacts of CO2 emissions and so we 

use a nonzero monopsony cost, namely $0.30 cents per gallon, when valuing CO2

emissions at $5 per ton. The higher per-ton values of CO2 emissions reflect the 

global impacts of CO2 emissions and we so use $0 per gallon for monopsony in 

these cases. 

5) Military security: The Reference Case uses $0 per gallon to quantify the military 

security benefits of reducing fuel consumption. In the sensitivity analysis, we 

examine the impact of using a value of 5 cents per gallon instead. 

Varying each of the above 5 parameters in isolation results in 10 economic scenarios, not 

including the Reference case. These are listed in Table IV.G.4-21 below, together with 

two additional scenarios that use values for these parameters that produce the lowest and 

highest valued benefits. 

 

181 The molecular weight of Carbon (C) is 12, the molecular weight of Oxygen (O) is 16, thus the molecular weight of 

CO2 is 44. One ton of C = 44/12 tons CO2 = 3.67 tons CO2. 1 gallon of gas weighs 2,819 grams, of that 2,433 grams 

are carbon. $1.00 CO2 = $3.67 C and $3.67/ton * ton/1000kg * kg/1000g * 2433g/gallon = (3.67 * 2433) / 1000 * 

1000 = $0.0089/gallon 

Formatted: Bullets and Numbering

Formatted: Bullets and Numbering
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

192

Table IV.G.4-21. Sensitivity Analyses Evaluated in NHTSA’s PRIA

Name Fuel 

Price

Discount 

Rate

Rebound 

Effect SCC Monopsony Effect

Military 

Security

Reference Reference 3% 10% $20 0¢/gal 0¢/gal

High Fuel Price High 3% 10% $20 0¢/gal 0¢/gal

Low Fuel Price Low 3% 10% $20 0¢/gal 0¢/gal

7% Discount Rate Reference 7% 10% $20 0¢/gal 0¢/gal

5% Rebound Effect Reference 3% 5% $20 0¢/gal 0¢/gal

15% Rebound Effect Reference 3% 15% $20 0¢/gal 0¢/gal

$56/ton CO2 Value Reference 3% 10% $56 0¢/gal 0¢/gal

$34/ton CO2 Reference 3% 10% $34 0¢/gal 0¢/gal

$10/ton CO2 Reference 3% 10% $10 0¢/gal 0¢/gal

$5/ton CO2 Reference 3% 10% $5 30¢/gal 0¢/gal

5¢/gal Military Security 

Value Reference 3% 10% $20 0¢/gal 5¢/gal

Lowest Discounted 

Benefits Low 7% 15% $5 0¢/gal 0¢/gal

Highest Discounted 

Benefits High 3% 5% $56 0¢/gal 5¢/gal

The basic results of the sensitivity analyses were as follows:

1) The various economic assumptions have similar effects on the passenger car and 

light truck standards.

2) Varying the economic assumptions has virtually no impact on achieved fuel 

economy.

3) The economic parameter with the greatest impact is fuel price. Changing the fuel 

price forecast to AEO’s High or Low forecasts impacts benefits by about +/- 37

percent. However, the impact of fuel price on other quantities, such as cost, is 

much smaller, resulting in increases or decreases of 3-8 percent. 

4) Economic parameters other than fuel price and the rebound effect had no effect on 

per-vehicle cost, total cost, fuel savings, or CO2 reductions. Their impacts on 

benefits were 6 percent or less, with the exception of the 7 percent discount rate, 

which decreased benefits by 20 percent, and the $56/ton CO2 value, which raised 

benefits by 14 percent. 

5) Changing all economic parameters simultaneously (among the considered values) 

changes benefits by at most about 60 percent. However impacts to other 

quantities, such as cost, are much smaller, resulting in increases or decreases of 6

percent or less.

6) Impacts other than those discussed in 1) through 5) were small (5 percent or less). 

For more detailed information regarding NHTSA’s sensitivity analyses for this NPRM, 

please see Chapter X of NHTSA’s PRIA.

Formatted: Bullets and Numbering

Formatted: Indent: First line: 0"
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

193

5. How Would These Proposed Standards Impact Vehicle Sales?

 Higher fuel economy standards are expected to increase the price of passenger 

cars and light trucks, because manufacturers will have to add technology to vehicles to 

increase their fuel economy, the cost for which they will likely pass on in some fashion to 

consumers. NHTSA examined the potential impact of higher vehicle prices on sales on 

an industry-wide basis for passenger cars and light trucks separately. We note that the 

analysis conducted for this rule does not have the precision to examine effects on 

individual manufacturers or different vehicle classes. 

There is a broad consensus in the economic literature that the price elasticity for 

demand for automobiles is approximately –1.0.182 Thus, every one percent increase in 

the price of the vehicle would reduce sales by one percent. Elasticity estimates assume 

no perceived change in the quality of the product. However, in this case, vehicle price 

increases result from adding technologies that improve fuel economy. If consumers did 

not value improved fuel economy at all, and considered nothing but the increase in price 

in their purchase decisions, then the estimated impact on sales from price elasticity could 

be applied directly. However, NHTSA believes that consumers do value improved fuel 

economy, because it reduces the operating cost of the vehicles. NHTSA also believes 

that consumers consider other factors that affect their costs and have included these in the 

analysis. 

 The main question, however, is how much of the retail price needed to cover the 

technology investments to meet higher fuel economy standards will manufacturers be 

able to pass on to consumers. The ability of manufacturers to pass the compliance costs 

on to consumers depends upon how consumers value the fuel economy improvements.183

 

Consumer valuation of fuel economy improvements often depends upon the price of 

gasoline, which has recently been very volatile. The estimates reported below as part of 

NHTSA’s analysis on sales impacts assume that manufacturers will be able to pass all of 

their costs to improve fuel economy on to consumers. To the extent that NHTSA has 

accurately predicted the price of gasoline and consumers reactions, and manufacturers 

can pass on all of the costs to consumers, then the sales and employment impact analyses 

are reasonable. On the other hand, if manufacturers only increase retail prices to the 

extent that consumers value these fuel economy improvements (i.e., to the extent that 

they value fuel savings), then there would be no impact on sales, although manufacturers’ 

profit levels would fall. Sales losses are predicted to occur only if consumers fail to 

value fuel economy improvements at least as much as they pay in higher vehicle prices. 

Likewise, if fuel prices rise beyond levels used in this analysis, consumer valuation of 

 

182 Kleit, A.N. (1990). “The Effect of Annual Changes in Automobile Fuel Economy Standards,” Journal 

of Regulatory Economics, vol. 2, pp 151-172; Bordley, R. (1994). “An Overlapping Choice Set Model of 

Automotive Price Elasticities,” Transportation Research B, vol 28B, no 6, pp 401-408; McCarthy , P.S. 

(1996). “Market Price and Income Elasticities of New Vehicle Demands,” The Review of Economics and 

Statistics, vol. LXXVII, no. 3, pp. 543-547. 

183 Gron, Ann and Swenson, Deborah, 2000, “Cost Pass-Through in the U.S. Automobile Market,” The 

Review of Economics and Statistics, 82: 316-324. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

194

improved fuel economy could increase to match or exceed their initial investment, 

resulting in no impact or even an increase in sales levels. 

 To estimate the average value consumers place on fuel savings at the time of 

purchase, NHTSA assumes that the average purchaser considers the fuel savings they 

would receive over a 5 year time frame. NHTSA chose 5 years because this is the 

average length of time of a financing agreement.184 The present values of these savings 

were calculated using a 3 percent discount rate. NHTSA used a fuel price forecast that 

included taxes, because this is what consumers must pay. Fuel savings were calculated 

over the first 5 years and discounted back to a present value. 

 NHTSA believes that consumers may consider several other factors over the 5 

year horizon when contemplating the purchase of a new vehicle. NHTSA added these 

factors into the calculation to represent how an increase in technology costs might affect 

consumers’ buying considerations. 

 First, consumers might consider the sales taxes they have to pay at the time of 

purchasing the vehicle. NHTSA took sales taxes in 2007 by state and weighted them by 

population by state to determine a national weighted-average sales tax of 5.5 percent. 

 Second, NHTSA considered insurance costs over the 5 year period. More 

expensive vehicles will require more expensive collision and comprehensive (e.g., theft) 

car insurance. The increase in insurance costs is estimated from the average value of 

collision plus comprehensive insurance as a proportion of average new vehicle price. 

Collision plus comprehensive insurance is the portion of insurance costs that depend on 

vehicle value. The Insurance Information Institute provides the average value of 

collision plus comprehensive insurance in 2006 as $448.185 This is compared to an 

average price for light vehicles of $24,033 for 2006.186 Average prices and estimated 

sales volumes are needed because price elasticity is an estimate of how a percent increase 

in price affects the percent decrease in sales. 

Dividing the insurance cost by the average price of a new vehicle gives the 

proportion of comprehensive plus collision insurance as 1.86 percent of the price of a 

vehicle. If we assume that this premium is proportional to the new vehicle price, it 

represents about 1.86 percent of the new vehicle price and insurance is paid each year for 

the five year period we are considering for payback. Discounting that stream of 

insurance costs back to present value indicates that the present value of the component of 

insurance costs that vary with vehicle price is equal to 8.5 percent of the vehicle’s price at 

a 3 percent discount rate. 

 

184 National average financing terms for automobile loans are available from the Board of Governors of the

Federal Reserve System G.19 “Consumer Finance” release. See

http://www.federalreserve.gov/releases/g19/ (last accessed August 9, 2009). 

185 Insurance Information Institute, 2008, “Average Expenditures for Auto Insurance By State, 2005-2006.” 

Available at http://www.iii.org/media/facts/statsbyissue/auto/ (last accessed August 9, 2009). 

186 $29,678/$26,201 = 1.1327 * $22,651 = $25,657 average price for light trucks. In 2006, passenger cars

were 54 percent of the on-road fleet and light trucks were 46 percent of the on-road fleet, resulting in an 

average light vehicle price for 2006 of $24,033. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

195

 Third, NHTSA considered that 70 percent of new vehicle purchasers take out 

loans to finance their purchase. The average new vehicle loan is for 5 years at a 6 percent 

rate.187 At these terms, the average person taking a loan will pay 16 percent more for 

their vehicle over the 5 years than a consumer paying cash for the vehicle at the time of 

purchase.188 Discounting the additional 3.2 percent (16 percent / 5 years) per year over 

the 5 years using a 3 percent mid-year discount rate

189 results in a discounted present 

value of 14.87 percent higher for those taking a loan. Multiplying that by the 70 percent 

of consumers who take out a loan means that the average consumer would pay 10.2 

percent more than the retail price for loans the consumer discounted at a 3 percent 

discount rate. 

 Fourth, NHTSA considered the residual value (or resale value) of the vehicle after 

5 years and expressed this as a percentage of the new vehicle price. In other words, if the 

price of the vehicle increases due to fuel economy technologies, the resale value of the 

vehicle will go up proportionately. The average resale price of a vehicle after 5 years is 

about 35 percent of the original purchase price.190 Discounting the residual value back 5 

years using a 3 percent discount rate (35 percent * .8755) gives an effective residual 

value at new of 30.6 percent. 

 NHTSA then adds these four factors together. At a 3 percent discount rate, the 

consumer considers she could get 30.6 percent back upon resale in 5 years, but will pay 

5.5 percent more for taxes, 8.5 percent more in insurance, and 10.2 percent more for 

loans, results in a 6.48 percent return on the increase in price for fuel economy 

technology. Thus, the increase in price per vehicle is multiplied by 0.9352 (1 – 0.0648) 

before subtracting the fuel savings to determine the overall net consumer valuation of the 

increase of costs on her purchase decision. 

The following table shows the estimated impact on sales for passenger cars and 

light trucks combined for the proposed alternative. For all model years except MY 2012, 

NHTSA anticipates an increase in sales, based on consumers valuing the improvement in 

fuel economy more than the increase in price. 

 

Table IV.G.5-1. Potential Impact on Sales, Passenger Cars and Light Trucks 

Combined 

MY 2012 MY 2013 MY 2014 MY 2015 MY 2016

-58,058 52,719 178,470 342,628 454,520

 

187 New car loan rates in 2007 averaged about 7.8 percent at commercial banks and 4.5 percent at auto 

finance companies, so their average is close to 7 percent. 

188 Based on www.bankrate.com auto loan calculator for a 5 year loan at 6 percent. 

189 For a 3 percent discount rate, the summation of 3.2 percent x 0.9853 in year one, 3.2 x 0.9566 in year

two, 3.2 x 0.9288 in year three, 3.2 x 0.9017 in year 4, and 3.2 x 0.8755 in year five. 

190 Consumer Reports, August 2008, “What That Car Really Costs to Own.” Available at

http://www.consumerreports.org/cro/cars/pricing/what-that-car-really-costs-to-own-4-08/overview/whatthat-car-really-costs-to-own-ov.htm (last accessed August 9, 2009). 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

196

6. What are the Estimated Safety Impacts of These Proposed Standards?

As discussed above, in evaluating the appropriate levels at which to establish new 

CAFE standards, NHTSA must assess any potential safety trade-offs. The question of 

the effect of changes in vehicle weight on safety in the context of fuel economy is a 

complex question that poses serious analytic challenges and has been a contentious issue 

for many years. This contentiousness arises, at least in part, from the difficulty of 

isolating vehicle weight from other confounding factors (e.g., driver factors, such as age 

and gender, other vehicle factors, such as engine size and wheelbase, and environmental 

factors, such as rural/urban). In addition, at least in the past several vehicle factors have 

been closely related, such as vehicle mass, wheelbase, track width, and structural 

integrity. The issue has been addressed in the literature for more than two decades. For 

the reader’s reference, much more information about safety in the CAFE context is 

available in the MY 2011 final rule191 and in Section IX of the PRIA. 

In general, it is unclear to what extent the higher fatality risk of smaller and 

lighter vehicles is associated with their reduced mass as compared to their reduced 

physical dimensions. That is because, historically, the safest vehicles have been heavy 

and large, while the vehicles with the highest fatal-crash rates have been light and small, 

both because the crash rate is higher for small/light vehicles and because the fatality rate 

is higher for small/light vehicle crashes.192 Intuitively, a reduction in mass while 

maintaining physical dimensions is likely to be less harmful than a reduction in both mass 

and physical dimensions. Setting CAFE standards based on vehicle footprint size helps 

to minimize the incentive to reduce a vehicle’s physical dimensions, since the 

corresponding fuel economy target is higher for smaller-footprint vehicles. 

However, footprint-based CAFE standards do not discourage manufacturers from 

reducing mass while maintaining size in order to improve fuel economy. Neither the 

CAFE standards nor our analysis of the feasibility of fuel economy improvements 

mandates mass reduction or any other specific technology application. In addition, 

considering NHTSA’s analysis of the observed relationship between vehicle mass and the 

prevalence of fatalities, NHTSA has, except for vehicles with baseline curb weight over 

5,000 pounds, excluded weight reduction from its analysis of potential CAFE standards 

in past rulemakings. The agency followed this analytical approach in order to ensure that 

its consideration of new standards was not dependent on weight reduction that could 

potentially compromise highway safety, recognizing, though, that the structure of CAFE 

standards does not prohibit manufacturers from making such responses to new CAFE 

standards. The agency implemented this approach by setting the Volpe model to apply 

this exclusion when estimating how manufacturers could apply technology in response to 

new CAFE standards. 

 

191 74 FR 14396-14407 (Mar. 30, 2009). 

192 Kahane, Charles J., Ph.D., “Vehicle Weight, Fatality Risk and Crash Compatibility of Model Year 1991-

99 Passenger Cars and Light Trucks,” DOT HS 809 662, October 2003, Executive Summary. Available at

http://www.nhtsa.dot.gov/cars/rules/regrev/evaluate/809662.html (last accessed August 12, 2009). 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

197

In its rulemakings on MY 2008-2011 light truck CAFE standards and MY 2011 

car and light truck CAFE standards, NHTSA received comments suggesting that NHTSA 

expand the applicability of weight reduction technologies in its modeling to vehicles 

under 5,000 pounds, because, according to the commenters, weight reduction can be 

accompanied by proper vehicle design to assure vehicle safety is not compromised. In 

the final rules in those rulemakings, the agency said that there may be great possibilities 

in the use of material substitution and other processes to reduce weight without reducing 

vehicle safety. The agency further noted that this should be explored as more and more 

data becomes available. After reviewing its assumptions and methodologies per the 

President’s January 26 memorandum and working with EPA in this rulemaking, NHTSA 

revised its approach to include weight reduction of up to 5-10 percent of baseline curb 

weight, depending on vehicle type. Recently-submitted manufacturer product plans as 

well as public statements from a number of the manufacturers suggest some of them 

expect that by MY 2016, they will be able to reduce the weight of some specific vehicle 

models by similar levels. However, NHTSA does not believe that, except where already 

planned, such significant weight reductions can be achieved in MY 2012 or MY 2013 

because there is not enough lead time for the necessary design, engineering, and tooling. 

NHTSA estimates that weight reductions of 1.5 percent can be achieved during redesigns 

occurring prior to MY 2014, and that weight reductions of 5-10 percent can be achieved 

in redesigns occurring in MY 2014 or later. For purposes of analyzing CAFE standards, 

NHTSA has further assumed that weight reductions would be limited to 5 percent for 

small vehicles (e.g., subcompact passenger cars), and that reductions of 10 percent would 

only be applied to the larger vehicle types (e.g., large light trucks). 

 

NHTSA’s modeling approach is similar to EPA’s in terms of maximum available 

weight reduction for any vehicle model, sensitive to highway safety in terms of when and 

to which vehicle types significant weight reduction can be achieved safely, and supported 

by information in some manufacturers’ product plans. Some manufacturers have 

indicated that, in later model years, they plan to reduce significantly the weight of some 

specific vehicle models, and that they plan to do so without reducing vehicle size. 

NHTSA’s analysis results in similar degrees of weight reduction, applied more widely to 

some manufacturers. NHTSA notes, though, that some manufacturers are also planning 

considerable changes in product mix, and some of these changes could mean reduced 

average size along with reduced average weight. In NHTSA’s (and EPA’s) analysis, 

such changes in product mix are not counted, because they are either in the baseline 

market forecast, or are not estimated. 

As stated above, neither the CAFE standards nor our analysis mandates mass 

reduction, or mandates that mass reduction occur in any specific manner. However, mass 

reduction is one of the technology applications available to the manufacturers and a 

degree of mass reduction is used by the Volpe model in determining the capabilities of 

manufacturers and in predicting both cost and fuel consumption impacts of improved 

CAFE standards. In this section, we briefly summarize our analysis of the potential 

impacts of these mass reductions on vehicle safety. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

198

NHTSA’s quantified analysis is based on the 2003 Kahane study,193 which 

estimates the effect of 100-pound reductions in MYs 1991-1999 heavy light trucks and 

vans (LTVs), light LTVs, heavy passenger cars, and light passenger cars. The study 

compares the fatality rates of LTVs and cars to quantify differences between vehicle 

types, given drivers of the same age/gender, etc. In this analysis, the effect of “weight 

reduction” is not limited to the effect of mass per se, but includes all the factors, such as 

length, width, structural strength, and size of the occupant compartment, that were 

naturally or historically confounded with mass in MYs 1991-1999 vehicles. The 

rationale is that adding length, width, or strength to a vehicle will also make it heavier. 

The agency utilized the relationships between weight and safety from Kahane 

(2003), expressed as percentage increases in fatalities per 100-pound weight reduction, 

and examined the weight impacts assumed in this CAFE analysis. However, there are 

several identifiable safety trends that are already in place or expected to occur in the 

foreseeable future that are not accounted for in the study. For example, two important 

new safety standards that have already been issued and will be phasing in during the 

rulemaking time frame. Federal Motor Vehicle Safety Standard No. 126 (49 CFR § 

571.126) will require electronic stability control in all new vehicles by MY 2012, and the 

upgrade to Federal Motor Vehicle Safety Standard No. 214 (Side Impact Protection, 49 

CFR § 571.214) will likely result in all new vehicles being equipped with head-curtain air 

bags by MY 2014.194 Additionally, we anticipate continued improvements in driver (and 

passenger) behavior, such as higher safety belt use rates. All of these will tend to reduce 

the absolute number of fatalities resulting from weight reductions. Table IV.G.6-4 below 

shows the overall change in calculated fatalities by calendar year, after adjusting for the 

impacts of ESC, Side Impact Protection, and other Federal safety standards and 

behavioral changes projected through this time period. Thus, while the percentage 

increases in Kahane (2003) was applied, the reduced base has resulted in smaller absolute 

increases than those that were predicted in the 2003 report. 

The agency examined the impacts of identifiable safety trends over the lifetime of 

the vehicles produced in each model year. An estimate of these impacts was contained in 

a previous agency report.195 The impacts were estimated on a year-by-year basis, but 

could be examined in a combined fashion. The agency assumed that the safety trends 

will result in a reduction in the target population of fatalities from which the weight 

impacts are derived. Using this method, we found a 12.6 percent reduction in fatality 

levels between 2007 and 2020. The estimates derived from applying Kahane’s 

 

193 Id.

194 We note that the Volpe model currently does not account for the weight of safety standards that will be 

added compared to the MY 2008 baseline, nor does it account for the societal cost of reductions in weight. 

However, both of these items will be added to the model for the final rule; doing so will raise the weight of 

every vehicle by roughly 17 pounds in MY 2016 (slightly less in earlier years), which will likely require 

manufacturers to add slightly more technology to reach the final standards than they were estimated to need 

to reach the proposed standards. However, NHTSA does not expect the impact of these roughly 17 pounds

per vehicle to have a significant impact on the safety analysis.

195 Blincoe, L. and Shankar, U, “The Impact of Safety Standards and Behavioral Trends on Motor Vehicle 

Fatality Rates,” DOT HS 810 777, January 2007. See Table 4 comparing 2020 to 2007 (37,906/43,363 = 

12.6% reduction (1-.126 = .874) 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

199

percentages to a baseline of 2007 fatalities were thus multiplied by 0.874 to account for 

changes that the agency believes will take place in passenger car and light truck safety 

between the 2007 baseline on-road fleet used for this particular analysis and year 2020. 

 We note that because these new analyses are based on the method shown in

Kahane (2003), which predicts the safety effect of 100-pound mass reductions in MY 

1991-1999 light trucks and vans (LTVs) and passenger cars, the new analyses need to be 

understood in the context of that study. Specifically, the numbers in the new analyses 

represent an upper bound (or worst case) estimate—that is, the estimate would only apply 

if all weight reductions come from reducing both weight and footprint. Kahane’s 

conclusions are based upon a cross-sectional analysis of the actual on-road safety 

experience of 1991-1999 vehicles. For those vehicles, heavier usually also meant largerfootprint. Hence, the numbers in the new analyses predict the safety consequences that 

would occur in the unlikely event that weight reduction for MYs 2012-2016 is 

accomplished entirely by making the vehicles smaller—that is, again, reducing mass and

reducing footprint. 

Exclusive reliance on downsizing for the model years covered by this rulemaking 

is unlikely for the following reasons. The flat CAFE standards in effect when those 

MY1991-1999 vehicles were produced had no penalty for such a strategy for improving 

fuel economy. In contrast, as discussed above, the current attribute-based CAFE 

standards do not encourage vehicle downsizing by reducing footprint. This structural 

change to the CAFE program means that the CAFE standards now favor the use of 

weight reduction strategies that do not involve simply making the vehicle smaller. These 

other strategies include downsizing the engine and adding turbocharging, as well as 

materials substitution. 

 Given this structural change to the CAFE program, it is likely that a significant 

portion of the weight reduction in the MY 2012-2016 vehicles will be accomplished by 

strategies that have a lesser safety impact than the prevalent 1990s strategy of simply 

making the vehicles smaller, although NHTSA is unable to predict how large a portion. 

For example, a manufacturer could conceivably add length, width, or strength to a vehicle 

by replacing existing materials with light, high-strength components. 

To the extent that future weight reductions could be achieved by substituting 

light, high-strength materials for existing materials—without any accompanying 

reduction in the footprint size or structural strength of the vehicle—then NHTSA believes 

that the fatality increases associated with the weight reductions anticipated by the model 

as a result of the proposed standards could be significantly smaller than those in the 

worst-case scenario. However, NHTSA does not currently have information (on-road 

data) to calibrate and predict how much smaller those increases would be for any given 

mixture of material substitution and downsizing, since the data on the safety effects of 

mass reduction alone is not available due to the low numbers of vehicles in the current 

on-road fleet that have utilized this technology extensively. Further, to the extent that 

weight reductions were accomplished through use of light, high-strength materials, there 

would be significant additional costs that would need to be determined and accounted for. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

200

Nevertheless, even though NHTSA cannot quantify these safety effects, we can 

project that they would be significantly less than those that would result from simple 

downsizing. However, we are also convinced that the safety effects are larger than zero 

for the following reasons:

• We have seen that lighter vehicles are driven in a manner that results in a higher 

involvement rate in fatal crashes – even after controlling for the driver’s age, 

gender, urbanization, and region of the country. This appears to be a drivervehicle interface issue. Importantly, in our response in the MY 2011 final rule to 

the DRI analyses, we were unable to attribute this effect to any obvious “size” 

parameter such as track width or wheelbase. In non-rollover crashes, weight 

continued to be the most important parameter, even when track width and 

wheelbase were included as independent variables. Until we understand the 

phenomenon better, we should assume that weight reduction is likely to be 

associated with higher fatal-crash rates, no matter how the weight reduction is 

achieved. 

• The following effects of mass per se (laws of physics) will persist whether mass is 

reduced by material substitution, downsizing, or any other method: 

1.oThe increased weight disadvantage in collisions with vehicles not covered 

by the regulation, such as medium-sized trucks (GVWR somewhat larger 

than 10,000 pounds). 

2.oIn collisions with partially movable objects such as not-so-large trees. 

3.oWhen center of gravity and track width are held constant, lighter vehicles 

are easier to roll over. Thus, unless weight is removed in a way that 

sufficiently lowers the center of gravity and/or unless track width is 

sufficiently widened, removing weight from vehicles will make them 

easier to roll over. 

• Our attribute-based standards have the excellent feature that they can avoid 

encouraging reductions in footprint. However, weight can be removed by 

downsizing, rather than material substitution, even while maintaining footprint: 

4.oBy reducing the overhang in front of the front wheels and behind the rear 

wheels. These are protective structures whose removal would increase 

risk to occupants by reducing vehicle crush space. 

5.oBy thinning or removing structures within the vehicle. 

Table IV.G.6-1 below shows the results of NHTSA’s safety analysis separately 

for each model year. Additionally, the societal impacts of increasing fatalities can be 

monetized using DOT’s estimated comprehensive cost per life of $6.1 million. This 

consists of a value of a statistical life of $5.8 million plus external economic costs 

Formatted: Outline numbered + Level: 2 +

Numbering Style: Bullet + Aligned at: 0.75" +

Tab after: 1" + Indent at: 1"

Formatted: Outline numbered + Level: 2 +

Numbering Style: Bullet + Aligned at: 0.75" +

Tab after: 1" + Indent at: 1"
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

201

associated with fatalities such as medical care, insurance administration costs and legal 

costs.196 Typically, NHTSA would also estimate the impact on injuries and add that to 

the societal costs of fatalities, but in this case NHTSA does not have a model estimating 

the impact of weight on injuries. However, based on past studies, fatalities account for 

roughly 44 percent of total comprehensive costs due to injury.197 If weight impacts nonfatal injuries roughly proportional to its impact on fatalities, then total costs would be 

roughly 2.3 times those noted in Table IV.G.6-2. The potential societal costs for just 

fatalities are shown in Table IV.G.6-2. 

Looking at the results on a calendar year basis, we also note that the safety 

impacts of the Kahane analysis based weight reduction have a slow onset. Passenger cars 

typically have a 10-25 year lifetime, and light trucks somewhat longer. Thus, some of the 

fatalities for MY 2016 light trucks will not occur until after 2050. Moreover, the weight 

reductions are small in the early model years 2012 and 2013. The vehicles with reduced 

weight will only be a small proportion of the entire on-road fleet in the initial calendar 

years of these proposed CAFE standards. The influence of these factors is illustrated in 

Table IV.G.6-3 below. 

The slow onset of the safety impact of weight reduction will provide time to 

monitor the situation, to quantify those impacts more precisely, and to make changes as 

necessary in future rulemakings. If lighter vehicles are introduced into the fleet, NHTSA 

would continue to monitor how any weight reductions are accomplished. After there is a 

sufficient number of vehicles that have used weight reduction techniques other than 

downsizing, and they have been on road long enough to generate sufficient data, NHTSA 

would update the 2003 Kahane study. NHTSA would also conduct tests of the 

performance of the new vehicles compared to that of the older designs of the vehicles. If 

the safety effects of any weight reduction are substantial, NHTSA would take corrective 

actions. However, we note that the slow onset and the time necessary to gain sufficient 

on-road experience to generate the data needed for the updated study are important 

considerations, because they mean that NHTSA cannot act before the MY 2012-2016 

vehicles have been produced. 

Additionally, there will be significant fuel-saving benefits from these proposed 

standards, up to 61.6 billion gallons during the lifetime of MYs 2012-2016 vehicles. 

There will also be significant reductions in CO2 emissions, up to 656 million metric tons 

during that same time period. 

Improved fuel economy will also result in a decrease in harmful criteria 

pollutants, which will decrease premature deaths due to a number of diseases related to 

environmental pollution. The literature strongly supports the causal relationship between 

health and exposure to criteria pollutants. However, as with vehicle safety impacts, there 

 

196 Blincoe et al, The Economic Impact of Motor Vehicle Crashes 2000, May 2002, DOT HS 809 446. 

Data from this report were updated for inflation and combined with the current DOT guidance on value of a 

statistical life to estimate the comprehensive value of a statistical life. 

197 Based on data in Blincoe et al updated for inflation and reflecting the Department’s current VSL of $5.8 

million. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

202

is much uncertainty regarding the exact level of health impacts that might be achieved 

with this rule. A detailed discussion of these impacts is included in NHTSA’s DEIS, 

which documents a selection of health outcomes from improved air quality.198 NHTSA 

approximated some PM2.5-related health benefits using screening-level estimates in the 

form of cases per ton of criteria emissions reduced.

199 Due to analytical limitations, the 

estimated values do not include comparable benefits related to reductions in other criteria 

pollutants (such as ozone, NO2 or SO2) or toxic air pollutants, nor do they monetize all of 

the potential health and welfare effects associated with PM2.5 or the other criteria 

pollutants. 

As illustrative examples, the number of PM2.5-related premature deaths prevented 

in calendar year 2016 due to reduced PM2.5 as a result of the MY 2012-2016 standards is 

estimated to range from XX-XX; while in 2030, we estimate up to XX-XX premature 

deaths prevented. However, by 2030, most, but not all of the on-road fleet will already 

meet the CAFE requirements established for MY 2016, so some further growth in these 

impacts is possible. Other PM2.5-related health impacts estimated to occur during this 

period include XX fewer cases of chronic bronchitis and XX fewer emergency room 

visits for asthma by 2030. These benefits will partially offset any negative safety impacts 

that may occur from vehicle mass reduction associated with higher CAFE standards. 

Thus, there are potentially both positive and negative impacts that could result from this 

rulemaking, and the overall impact on health and safety is uncertain. We have not 

attempted to quantify other beneficial health impacts that are expected to result from the 

proposed standards, including the results of a decrease in the rate of global warming, and 

increased energy security resulting from a lesser dependence on oil imported volatile 

regions of the world, but they, too, could be significant. 

In summary, the agency recognizes the balancing inherent in achieving higher 

levels of fuel economy through reduction of vehicle weight. We emphasize that these 

safety-related fatality estimates represent an upper bound of the potential effects of this 

rulemaking, and that actual fatalities will be less than these estimates, possibly 

significantly less, based on the qualitative discussion above of the various factors that 

could reduce the estimates. At the same time, however, the agency cannot specify a 

lower-bound estimate. It is possible that the impact could be fairly small, but the agency 

is unable to specify a lower-bound at this time due to a lack of studies that address the 

safety risk associated with weight reduction that is not also accompanied by size 

reduction. Additionally, the estimates presented here do not include estimates for 

injuries. Nevertheless, we believe that the balancing is reasonable. 

 

198 Chapter 7 of EPA’s DRIA also contains information on the health impacts of reducing criteria 

pollutants. 

199 Ideally, the human health benefits would be estimated based on changes in ambient PM2.5 concentrations 

and population exposure, as determined by full-scale air quality and exposure modeling. Such detailed

modeling was not possible within the timeframe for this proposal, but for the final rule, a national-scale air 

quality modeling analysis will be performed to analyze the impacts of the standards on PM2.5, ozone, and 

selected air toxics. 

 

Formatted: Subscript

Formatted: Subscript

Formatted: Subscript

Formatted: Subscript

Formatted: Font: 10 pt, Not Superscript/

Subscript
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

203

The tables below contain NHTSA’s estimates of the safety impacts of the 

proposed standards, the costs associated with those impacts, and the overall change in 

impacts given other anticipated mitigating effects during the next several years. Again, 

we emphasize that the safety impacts presented below represent an upper bound, and that 

NHTSA believes that the fatality increases associated with the anticipated weight 

reductions could be significantly smaller than those shown, because manufacturers are 

unlikely to respond to this rulemaking by decreasing footprint or reducing the structural 

integrity of the vehicle. Additionally, the safety impacts of the rule may and even be 

offset, given due to the following factors:

Manufacturers are unlikely to respond to this rulemaking by decreasing 

footprint or reducing the structural integrity of the vehicle;

Tthe GHG-reducing benefits expected for the proposed standards, and ;

Tthe benefits due to reduced fatalities and health impacts related to improved air 

quality as a result of the proposed standards.; and

•The slow onset of the estimated safety impacts, which, if detected early enough, may 

give NHTSA time to respond and mitigate longer-term effects.

In addition, we note that the implementation of new Federal Motor Vehicle Safety 

Standards, combined with behavioral changes (e.g., further increases in safety belt use), 

will produce important reductions in the number of deaths and injuries that would 

otherwise occur in the vehicles subject to this rulemaking over their lifetime. 

NHTSA seeks comments on its analysis of the safety impacts of the proposed 

standards. 

To aid the agency in refining its analysis for the final rule, NHTSA requests that 

each vehicle manufacturer provide, for inclusion in the record of this rulemaking, detailed 

information concerning the extent to which and manner in which it plans to reduce the 

weight of each of its models for the period covered by this rulemaking, and the cost of 

each method used. Include in those plans whether there will be any size reduction, 

whether through reducing the size of an existing model, mix shifting or other means. 

Please also submit the analysis, including engineering or computer simulation analysis, 

performed to assess the possible safety impacts of such planned weight reduction. In 

addition, please submit the results of any vehicle or component tests that would aid in 

assessing those impacts. 

Table IV.G.6-1. Comparison of the Calculated Worst Case Weight Safety Impacts 

of the Pending Proposed Standards over the Lifetime of the Vehicles Produced in 

each Model Year 

(Increase in Fatalities compared to the Calendar Year 2007 Fatality Level) 

 Baseline MY 2011 standards continued for lifetime of vehicles 

MY 2012 MY 2013 MY 2014 MY 2015 MY 2016 

Passenger cars 13 15 18 18 19

Light trucks 13 15 17 17 18

Combined 26 30 35 35 37

Formatted: Bullets and Numbering
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

204

Proposed standards 

MY 2012 MY 2013 MY 2014 MY 2015 MY 2016 

Passenger cars 42 64 165 242 379

Light trucks 18 20 64 106 150

Combined 60 84 229 348 530

 Difference between proposed standards and baseline continued 

MY 2012 MY 2013 MY 2014 MY 2015 MY 2016 

Passenger cars 29 49 147 224 360

Light trucks 5 5 47 89 132

Combined 34 54 194 313 493

Note – all estimates in this table are worst-case. Actual values could be significantly less. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

205

Table IV.G.6-2. Calculated Worst Case Weight Safety Impacts on Societal Costs for 

the Proposed Standards over the Lifetime of the Vehicles Produced in each Model 

Year 

($ millions)

MY 

2012 

MY 

2013 

MY 

2014 

MY 

2015 

MY 

2016 

Total 

Passenger cars 177 299 897 1,366 2,916 4,935

Light trucks 31 31 287 543 805 1,696

Combined 207 329 1,183 1,909 3,001 6,637

Note – all estimates in this table are worst-case. Actual values could be significantly less. 

Table IV.G.6-3. Estimated Worst Case Impact of Weight Safety on 

Calculated Fatalities by Calendar Year 

(Additional fatalities by model year and calendar year) 

MY 

2012 

MY 

2013 

MY 

2014 

MY 

2015 

MY 

2016 

MY 

2017 

MY 

2018 

MY 

2019 

MY 

2020 

Totals

2012 3 3

2013 3 5 8

2014 3 5 19 27

2015 3 5 19 30 57

2016 3 5 18 29 47 102

2017 3 5 17 28 46 47 146

2018 3 5 16 27 44 46 47 187

2019 3 4 16 26 42 44 46 47 226

2020 2 4 15 24 40 42 44 46 47 264

Note – all estimates in this table are worst-case. Actual values could be significantly less. 

Table IV.G.6-4. Overall Change in Calculated Fatalities by Calendar Year

Calendar 

year 

totals

Estimated 

Worst Case 

CAFE weight 

safety 

impacts*

Safety and 

behavioral

impacts

Net change in 

fatalities

2012 3 -647 -644

2013 9 -1,278 -1,269

2014 28 -1,899 -1,871

2015 57 -2,495 -2,438

2016 102 -3,041 -2,939

2017 146 -3,521 -3,375

2018 187 -3,961 -3,774

2019 226 -4,359 -4,133

2020 264 -4,717 -4,453
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

206

* Note – weight safety impact estimates in this table are worst-case. Actual values could be 

significantly less.

7. What Other Impacts (Quantitative and Unquantifiable) will These 

Proposed Standards Have?

In addition to the quantified benefits and costs of fuel economy standards, the 

standards we are proposing will have other impacts that we have not quantified in 

monetary terms. The decision on whether or not to quantify a particular impact depends 

on several considerations: 

• Does the impact exist, and can the magnitude of the impact reasonably be 

attributed to the outcome of this rulemaking? 

• Would quantification help NHTSA and the public evaluate standards that may be 

set in rulemaking? 

• Is the impact readily quantifiable in monetary terms? Do we know how to 

quantify a particular impact? 

• If quantified, would the monetary impact likely be material? 

• Can a quantification be derived with a sufficiently narrow range of uncertainty so 

that the estimate is useful? 

NHTSA expects that this rulemaking will have a number of genuine, material 

impacts that have not been quantified due to one or more of the considerations listed 

above. In some cases, further research may yield estimates for future rulemakings. 

Technology Forcing

The proposed rule will improve the fuel economy of the U.S. new vehicle fleet, 

but it will also increase the cost (and presumably, the price) of new passenger cars and 

light trucks built during MYs 2012-2016. We anticipate that the cost, scope, and 

duration of this rule, as well as the steadily rising standards it requires, will cause 

automakers and suppliers to devote increased attention to methods of improving vehicle 

fuel economy. 

 This increased attention will stimulate additional research and engineering, and 

we anticipate that, over time, innovative approaches to reducing the fuel consumption of 

light duty vehicles will emerge. These innovative approaches may reduce the cost of the 

proposed rule in its later years, and also increase the set of feasible technologies in future 

years. 

 We have attempted to estimate the effect of learning on known technologies 

within the period of the proposed rulemaking. We have not attempted to estimate the 

extent to which not-yet-invented technologies will appear, either within the time period 

of the current rulemaking or that might be available after MY 2016. 

Effects on Vehicle Maintenance, Operation, and Insurance Costs
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

207

Any action that increases the cost of new vehicles will subsequently make such 

vehicles more costly to maintain, repair, and insure. In general, this effect can be 

expected to be a positive linear function of vehicle costs. The proposed rulemaking, 

however, raises vehicle costs by only a few percent at most, and hence the change in 

maintenance and operation costs, distributed over the expected life of regulated vehicles 

and discounted back to the present, is probably de minimus in terms of the full analysis. 

 One of the common consequences of using more complex or innovative 

technologies is a decline in vehicle reliability and an increase in maintenance costs, 

borne, in part, by the manufacturer (through warranty costs, which are included in the 

indirect costs of production) and, in part by the vehicle owner. NHTSA believes that this 

effect is difficult to quantify, but likely to be de minimus as well. 

Effects on Vehicle Miles Traveled (VMT)

 While NHTSA has estimated the impact of the rebound effect on VMT, we have 

not estimated how a change in vehicle sales could impact VMT. Since the value of the 

fuel savings to consumers outweighs the technology costs, new vehicle sales are 

predicted to increase. A change in vehicle sales will have complicated and a hard-toquantify effect on vehicle miles traveled given the rebound effect, the trade-in of older 

vehicles, etc. In general, overall VMT should not be significantly affected. 

Effect on Composition of Passenger Car and Light Truck Sales

In addition, manufacturers, to the extent that they pass on costs to customers, may 

distribute these costs across their motor vehicle fleets in ways that affect the composition 

of sales by model. To the extent that changes in the composition of sales occur, this 

could affect fuel savings to some degree. However, NHTSA’s view is that the scope for 

compositional effects is relatively small, since the total effect of the regulation itself will 

be to increase costs by only a few percent. Compositional effects might be important 

with respect to compliance costs for individual manufacturers, but are unlikely to be 

material for the rule as a whole. 

NHTSA is continuing to study methods of estimating compositional 

effects and may be able to develop methods for use in future rulemakings. 

Effects on the Used Vehicle Market

In general, changes in prices or other characteristics of the new vehicles market 

will also have consequences for the used vehicle market. Specifically, any action that 

raises prices for new vehicles will also tend to increase prices of used vehicles, and in 

turn cause owners of existing vehicles to keep them in service for slightly longer. In the 

case of the proposed rule, however, the agency estimates that the value of fuel savings 

over the lifetimes of the new vehicles will exceed the increase in their prices, prompting 

an increase in sales of new vehicles during most model years that the rule affects. As a 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

208

consequence, prices for used vehicles are also likely to decline, leading to slight increases 

in the rate at which used vehicles are retired from service (“scrapped”) and replaced with 

new models. In turn, this will accentuate the effects of the proposed standards on fuel 

consumption and GHG emissions; at the same time, total criteria pollutant emissions 

from the entire vehicle fleet may also decrease, as newer, lower-polluting vehicles 

replace used vehicles.

 NHTSA believes these secondary effects of the proposed standards are de 

minimus, because the primary effect on new vehicle prices is likely to be small, and 

consequently the impact on used vehicle markets would be similarly modest.

In general, any change in the new vehicle market will also have consequences for 

the used vehicle market. In general, any action that raises the price of new vehicles will 

tend to raise the price of used vehicles, and to persuade owners of existing vehicles to 

keep them on the road a bit longer. However, because the fuel savings in new vehicles 

exceeds the increased cost, consumers may substitute new vehicles for used vehicles. In 

this situation, fuel consumption and greenhouse gas emissions are expected to decrease; 

criteria pollutant emissions from existing vehicles may also decrease as fewer used 

vehicles continue to be used.

NHTSA believes these secondary effects of the new vehicle standard are de 

minimus because the primary effect on new vehicle prices is small, and that consequently 

the impact on used vehicle markets would be even smaller.

Impacts of Changing Fuel Composition on Costs, Benefits, and Emissions

EPAct, as amended by EISA, creates a Renewable Fuels Standard that sets targets 

for greatly increased usage of renewable fuels over the next decade. The law requires 

fixed volumes of renewable fuels to be used—volumes that are not linked to actual usage 

of transportation fuels. 

 Ethanol and biodiesel (in the required volumes) may increase the cost of gasoline 

and diesel depending on crude oil prices and tax subsidies. The extra cost of renewable 

fuels will be borne through a cross-subsidy: the price of every gallon of gasoline will rise 

sufficiently to pay for the extra cost of renewable fuels. The proposed CAFE rule, by 

reducing total fuel consumption, would tend to increase any necessary cross-subsidy per 

gallon of fuel, and hence raise the market price of transportation fuels, while there would 

be no change in the volume or cost of renewable fuels used. 

 Some of these effects are indirectly incorporated in NHTSA’s analysis of the 

proposed CAFE rule because they are directly incorporated in EIA’s projections of future 

gasoline and diesel prices in the Annual Energy Outlook, which incorporates in its 

baseline both a Renewable Fuel Standard and an increasing CAFE standard. 

The net effect of incorporating an RFS then might be to slightly reduce the 

benefits of the rule because affected vehicles might be driven slightly less, and because 

they emit slightly fewer greenhouse gas emissions per gallon. In addition there might be 

Comment [r16]: Changes made in response to 

interagency comment. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

209

deadweight losses from the induced reduction in VMT. All of these effects are difficult 

to estimate, because of uncertainty in future crude oil prices, uncertainty in future tax 

policy, and uncertainty about how petroleum marketers will actually comply with the 

RFS, but they are likely to be small, because the cumulative deviation from baseline fuel 

consumption induced by the proposed rule will itself be small. 

Macroeconomic Impacts of this Rule

The proposed rule will have a number of consequences that may have short-run 

and longer-run macroeconomic effects. It is important to recognize, however, that these 

effects do not represent benefits in addition to those resulting directly from reduced fuel 

consumption and emissions. Instead, they represent the economic effects that occur as 

these direct impacts filter through the interconnected markets comprising the U.S. 

economy. 

• Increasing the cost and quality (in the form of better fuel economy) of new light 

duty vehicles will have ripple effects through the rest of the economy. Depending 

on the assumptions made, the rule could generate very small increases or declines 

in output. 

• Reducing consumption of imported petroleum should induce an increase in longrun output. 

• Decreasing the world price of oil should induce an increase in long-run output. 

NHTSA has not studied the macroeconomic effects of the proposal, however a discussion 

of the economy-wide impacts of this rule conducted by EPA is included in Section 

III.H.5. Although economy-wide models do not capture all of the potential impacts of this 

rule (e.g., improvements in product quality), these models can provide valuable insights 

on how this proposal would impact the U.S. economy in ways that extend beyond the 

transportation sector. 

Military Expenditures

This analysis contains quantified estimates for the social cost of petroleum 

imports based on monopsony effects and the risk of oil market disruption. We have not 

included estimates of the cost of military expenditures associated with petroleum imports. 

H. Vehicle Classification 

 Vehicle classification, for purposes of the CAFE program, refers to whether 

NHTSA considers a vehicle to be a passenger automobile or a light truck, and thus 

subject to either the passenger automobile or the light truck standards. As NHTSA 

explained in the MY 2011 rulemaking, EPCA categorizes some light 4-wheeled vehicles 

as passenger automobiles (cars) and the balance as non-passenger automobiles (light 

trucks). EPCA defines Ppassenger automobiles are defined in EPCA as “any automobile 

(other than an automobile capable of off-highway operation) which the Secretary [i.e., 

NHTSA] decides by rule is manufactured primarily for use in the transportation of not 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

210

more than 10 individuals.” EPCA sec.§ 501(2), 89 Stat. 901. NHTSA created regulatory 

definitions for passenger automobiles and light trucks, found at 49 CFR Part 523, to 

guide the agency and manufacturers in classifying vehicles. 

Under EPCA, there are two general groups of automobiles that qualify as nonpassenger automobiles or light trucks: (1) those defined by NHTSA in its regulations as 

other than passenger automobiles due to their having design features that indicate they 

were not manufactured “primarily” for transporting up to ten individuals; and (2) those 

expressly excluded from the passenger category by statute due to their capability for offhighway operation, regardless of whether they might have been manufactured primarily 

for passenger transportation. NHTSA’s classification rule directly tracks those two broad 

groups of non-passenger automobiles in subsections (a) and (b), respectively, of 49 CFR 

§ 523.5. 

 For the purpose of this NPRM for the MYs 2012-2016 standards, EPA agreed to 

use NHTSA’s regulatory definitions for determining which vehicles would be subject to 

which CO2 standards. 

 In the MY 2011 rulemaking, NHTSA took a fresh look at the regulatory 

definitions in light of several factors and developments: its desire to ensure clarity in 

how vehicles are classified, the passage of EISA, and the Ninth Circuit’s decision in CBD 

v. NHTSA.

200 NHTSA explained the origin of the current definitions of passenger 

automobiles and light trucks by tracing them back through the history of the CAFE 

program, and did not propose to change the definitions themselves at that time, because 

the agency concluded that the definitions were largely consistent with Congress’ intent in 

separating passenger automobiles and light trucks, but also in part because the agency 

tentatively concluded that doing so would not lead to increased fuel savings. However, 

the agency tightened the definitions in § 523.5 to ensure that only vehicles that actually 

have 4WD will be classified as off-highway vehicles by reason of having 4WD (to 

prevent 2WD SUVs that also come in a 4WD “version” from qualifying automatically as 

“off-road capable” simply by reason of the existence of the 4WD version). It also took 

this action to ensure that manufacturers may only use the “greater cargo-carrying 

capacity” criterion of 523.5(a)(4) for cargo van-type vehicles, rather than for SUVs with 

removable second-row seats unless they truly have greater cargo-carrying than passengercarrying capacity “as sold” to the first retail purchaser. NHTSA concluded that these 

changes increased clarity, were consistent with EPCA and EISA, and responded to the 

Ninth Circuit’s decision with regard to vehicle classification. 

However, manufacturers currently have an incentive to classify vehicles as light 

trucks because, generally speaking, the fuel economy target for light trucks with a given 

footprint is less stringent than the target for passenger cars with the same footprint. This 

is due to the fact that the curves are based on actual fuel economy capabilities of the 

vehicles to which they apply. Because of characteristics like 4WD, towing and hauling 

capacity, and heavy weight, the vehicles in the current light truck fleet are generally less 

capable of achieving higher fuel economy levels as compared to the vehicles in the 

 

200 538 F.3d 1172 (9th Cir. 2008). 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

211

passenger car fleet. 2WD SUVs are the vehicles that could be most readily redesigned so 

that they can be “moved” from the passenger car to the light truck fleet. A manufacturer 

could do this by adding a third row of seats, for example, or boosting GVWR over 6,000 

lbs for a 2WD SUV that already meets the ground clearance requirements for “off-road 

capability.” A change like this may only be possible during a vehicle redesign, but since 

vehicles are redesigned, on average, every 5 years, at least some manufacturers may 

make such changes before or during the model years covered by this rulemaking. 

In looking forward to model years beyond 2011 and considering how CAFE 

should operate in the context of the National Program and previously-received comments 

as requested by President Obama, NHTSA seeks comment on the following potential 

changes to NHTSA’s vehicle classification system. We request comment also on 

whether, if any of the changes were to be adopted, they should be applied to any of the 

model years covered by this rulemaking or whether, due to lead time concerns, they 

should apply only to MY 2017 and thereafter. 

(1) Reclassifying minivans and other “3-row” light trucks as passenger cars (i.e., 

removing 

49 CFR § 523.5(a)(5)): 

NHTSA has received repeated comments over the course of the last several 

rulemakings from environmental and consumer groups regarding the classification of 

minivans as light trucks instead of as passenger cars. Commenters have argued that 

because minivans generally have three rows of seats, are built on unibody chassis, and are 

used primarily for transporting passengers, they should be classified as passenger cars. 

NHTSA did not accept these arguments in the MY 2011 final rule, due to concerns that 

moving minivans to the passenger car fleet would lower the fuel economy targets for 

those passenger cars having essentially the same footprint as the minivans, and thus lower 

the overall fuel average fuel economy level that the manufacturers would need to meet. 

However, due to the new methodology for setting standards, the as-yet-unknown fueleconomy capabilities of future minivans and 3-row 2WD SUVs, and the unknown state 

of the vehicle market (particularly for MYs 2017 and beyond), NHTSA can no longer say 

with certainty that moving these vehicles could negatively affect potential stringency 

levels for either passenger cars or light trucks. 

Although such a change would not be made applicable during the MY 2012-2016 

time frame, we seek comment on why NHTSA should or should not consider, as part of 

this rulemaking, reclassifying minivans (and other current light trucks that qualify as such 

because they have three rows of designated seating positions as standard equipment) for 

MYs 2017 and after. 

(2) Classifying “like” vehicles together: 

Many commenters objected in the rulemaking for the MY 2011 standards to 

NHTSA’s regulatory separation of “like” vehicles. Industry commenters argued that it 

was technologically inappropriate for NHTSA to place 4WD and 2WD versions of the 

Formatted: Indent: Left: 0"
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

212

same SUV in separate classes. They argued that the vehicles are the same, except for 

their drivetrain features, thus giving them similar fuel economy improvement potential. 

They further argued that all SUVs should be classified as light trucks. Environmental 

and consumer group commenters, on the other hand, argued that 4WD SUVs and 2WD 

SUVs that are “off-highway capable” by virtue of a GVWR above 6,000 pounds should 

be classified as passenger cars, since they are primarily used to transport passengers. In 

the MY 2011 rulemaking, NHTSA rejected both of these sets of arguments. NHTSA 

concluded that 2WD SUVs that were neither “off-highway capable” nor possessed 

“truck-like” functional characteristics were appropriately classified as passenger cars. At 

the same time, NHTSA also concluded that because Congress explicitly designated 

vehicles with GVWRs over 6,000 pounds as “off-highway capable” (if they meet the 

ground clearance requirements established by the agency), NHTSA did not have 

authority to move these vehicles to the passenger car fleet. 

 With regard to the first argument, that “like” vehicles should be classified 

similarly (i.e., that 2WD SUVs should be classified as light trucks because, besides their 

drivetrain, they are “like” the 4WD version that qualifies as a light truck), NHTSA 

continues to believe that 2WD SUVs that do not meet any part of the existing regulatory 

definition for light trucks should be classified as passenger cars. However, NHTSA 

recognizes the additional point raised by industry commenters in the MY 2011 

rulemaking that manufacturers may respond to this tighter classification by ceasing to 

build 2WD versions of SUVs, which could reduce fuel savings. In response to that point, 

NHTSA stated in the MY 2011 final rule that it expects that manufacturer decisions about 

whether to continue building 2WD SUVs will be driven in much greater measure by 

consumer demand than by NHTSA’s regulatory definitions. If it appears, in the course of 

the next several model years, that manufacturers are indeed responding to the CAFE 

regulatory definitions in a way that reduces overall fuel savings from expected levels, it 

may be appropriate for NHTSA to review this question again. NHTSA seeks comment 

on how the agency might go about reviewing this question as more information about 

manufacturer behavior is accumulated. 

 With regard to the second argument, that NHTSA should move vehicles that 

qualify as “off-highway capable” from the light truck to the passenger car fleet because 

they are primarily used to transport passengers, NHTSA reiterates that EPCA is clear that 

certain vehicles are non-passenger automobiles (i.e., light trucks) because of their offhighway capabilities, regardless of how they may be used day-to-day. 

However, NHTSA could explore additional approaches, although not all could be 

pursued on current law. Possible alternative legal regimes might include: a) classifying 

vehicles as passenger cars or light trucks based on use alone (rather than characteristics); 

b) removing the regulatory distinction altogether and setting standards for the entire fleet 

of vehicles instead of for separate passenger car and light truck fleets; or c) dividing the 

fleet into multiple categories more consistent with current vehicle fleets (i.e., sedans, 

minivans, SUVs, pickup trucks, etc.). NHTSA seeks comment on whether and why it 

should pursue any of these courses of action. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

213

I. Compliance and Enforcement 

1. Overview

 

 NHTSA’s CAFE enforcement program and the compliance flexibilities available 

to manufacturers are largely established by statute – unlike the CAA, EPCA and EISA 

are very prescriptive and leave the agency limited authority to increase the flexibilities 

available to manufacturers. This was intentional, however. Congress balanced the 

energy saving purposes of the statute against the benefits of the various flexibilities and 

incentives it provided and placed precise limits on those flexibilities and incentives. For 

example, while the Department sought authority for unlimited transfer of credits between 

a manufacturer’s car and light truck fleets, Congress limited the extent to which a 

manufacturer could raise its average fuel economy for one of its classes of vehicles 

through credit transfer in lieu of adding more fuel saving technologies. It did not want 

these provisions to slow progress toward achieving greater energy conservation or other 

policy goals. In keeping with EPCA’s focus on energy conservation, NHTSA has done 

its best, for example, in crafting the credit transfer and trading regulations authorized by 

EISA, to ensure that total fuel savings are preserved when manufacturers exercise their 

compliance flexibilities. 

 The following sections explain how NHTSA determines whether manufacturers 

are in compliance with the CAFE standards for each model year, and how manufacturers 

may address potential non-compliance situations through the use of compliance 

flexibilities or fine payment. 

2. How Ddoes NHTSA Determine Compliance?

a. Manufacturer Submission of Data and CAFE Testing by EPA 

 

 NHTSA begins to determine CAFE compliance by considering pre- and midmodel year reports submitted by manufacturers pursuant to 49 CFR Part 537, Automotive 

Fuel Economy Reports.201 The reports for the current model year are submitted to 

NHTSA every December and July. As of the time of this NPRM, NHTSA has received 

mid-model year reports from manufacturers for MY 2009, and anticipates receiving premodel year reports for MY 2010 at the end of this year. Although the reports are used for 

NHTSA’s reference only, they help the agency, and the manufacturers who prepare them, 

anticipate potential compliance issues as early as possible, and help manufacturers plan 

compliance strategies. Currently, NHTSA receives these reports in paper form. In order 

to facilitate submission by manufacturers and consistent with the President’s electronic 

government initiatives, NHTSA proposes to amend Part 537 to allow for electronic 

submission of the pre- and mid-model year CAFE reports. 

 

201 49 CFR Part 537 is authorized by 49 U.S.C. sec.§ 32907. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

214

NHTSA makes its ultimate determination of manufacturers’ CAFE compliance 

upon receiving EPA’s official certified and reported CAFE data. The EPA certified data 

is based on vehicle testing and on final model year data submitted by manufacturers to 

EPA pursuant to 40 CFR § 600.512, Model Year Report, no later than 90 days after the 

end of the calendar year. Pursuant to 49 U.S.C. sec.§ 32904(e), EPA is responsible for 

calculating automobile manufacturers’ CAFE values so that NHTSA can determine 

compliance with the CAFE standards. In measuring the fuel economy of passenger cars, 

EPA is required by EPCA202 to use the EPA test procedures in place as of 1975 (or 

procedures that give comparable results), which are the city and highway tests of today, 

with adjustments for procedural changes that have occurred since 1975. EPA uses 

similar procedures for light trucks, although, as noted above, EPCA does not require it to 

do so. One notable shortcoming of the 1975 test procedure is that it does not include a 

provision for air conditioner usage during the test cycle. As discussed extensively in 

Section [XX—in EPA’s section] of the preamble, air conditioner usage increases the 

load on a vehicle’s engine, reducing fuel efficiency and increasing CO2 emissions. Since 

the air conditioner is not turned on during testing, equipping a vehicle model with a 

relatively inefficient air conditioner will not adversely affect that model’s measured fuel 

economy, while quipping a vehicle model with a relatively efficient air conditioner will 

not raise that model’s measured fuel economy. The fuel economy test procedures for 

light trucks could be amended through rulemaking to provide for air conditioner 

operation during testing and to take other steps for improving the accuracy and 

representativeness of fuel economy measurements. Comment is sought in section I.D.2 

regarding implementing such amendments beginning in MY 2017 and also on the more 

immediate interim step of providing credits under 49 U.S.C. sec.§ 32904(c) for light 

trucks equipped with relatively efficient air conditioners for MYs 2012-2016. 

Modernizing the passenger car test procedures as well would not be possible under EPCA 

as currently written. 

b. NHTSA Then Analyzes EPA-Ccertified CAFE Values for Compliance 

 Determining CAFE compliance is fairly straightforward. After testing, EPA 

verifies the data submitted by manufacturers and issues final CAFE reports to 

manufacturers and to NHTSA between April and October of each year (for the previous 

model year). NHTSA then identifies the manufacturers’ compliance categories (fleets) 

that do not meet the applicable CAFE fleet standards. 

To determine if manufacturers have earned credits that would offset those 

shortfalls, NHTSA calculates a cumulative credit status for each of a manufacturer’s 

vehicle compliance categories according to 49 U.S.C. sec.§ 32903. If a manufacturer’s 

compliance category exceeds the applicable fuel economy standard, NHTSA adds credits 

to the account for that compliance category. If a manufacturer’s vehicles in a particular 

compliance category fall below the standard fuel economy value, NHTSA will provide 

written notification to the manufacturer that it has not met a particular fleet standard. The 

manufacturer will be required to confirm the shortfall and must either: submit a plan 

indicating it will allocate existing credits, and/or for MY 2011 and later, how it will earn, 

 

202 49 U.S.C. sec.§ 32904(c). 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

215

transfer and/or acquire credits; or pay the appropriate civil penalty. The manufacturer 

must submit a plan or payment within 60 days of receiving agency notification. The 

amount of credits are determined by multiplying the number of tenths of a mpg by which 

a manufacturer exceeds, or falls short of, a standard for a particular category of 

automobiles by the total volume of automobiles of that category manufactured by the 

manufacturer for a given model year. Credits used to offset shortfalls are subject to the 

three and five year limitations as described in 49 U.S.C. sec.§ 32903(a). Transferred 

credits are subject to the limitations specified by 49 U.S.C. sec.§ 32903(g)(3). The value 

of each credit, when used for compliance, received via trade or transfer is adjusted, using 

the adjustment factor described in 49 CFR Part 536.4, pursuant to 49 U.S.C. sec.§

32903(f)(1). Credit allocation plans received from the manufacturer will be reviewed and 

approved by NHTSA. NHTSA will approve a credit allocation plan unless it finds the 

proposed credits are unavailable or that it is unlikely that the plan will result in the 

manufacturer earning sufficient credits to offset the subject credit shortfall. If a plan is 

approved, NHTSA will revise the respective manufacturer’s credit account accordingly. 

If a plan is rejected, NHTSA will notify the respective manufacturer and request a revised 

plan or payment of the appropriate fine. 

In the event that a manufacturer does not comply with a CAFE standard, even 

after the consideration of credits, EPCA provides for the assessing of civil penalties. The 

Act specifies a precise formula for determining the amount of civil penalties for such a 

noncompliance. The penalty, as adjusted for inflation by law, is $5.50 for each tenth of a 

mpg that a manufacturer’s average fuel economy falls short of the standard for a given 

model year multiplied by the total volume of those vehicles in the affected fleet (i.e.,

import or domestic passenger car, or light truck), manufactured for that model year. The 

amount of the penalty may not be reduced except under the unusual or extreme 

circumstances specified in the statute. All penalties are paid to the U.S. Treasury and not 

to NHTSA itself. 

 Unlike the National Traffic and Motor Vehicle Safety Act, EPCA does not 

provide for recall and remedy in the event of a noncompliance. The presence of recall 

and remedy provisions203 in the Safety Act and their absence in EPCA is believed to arise 

from the difference in the application of the safety standards and CAFE standards. A 

safety standard applies to individual vehicles; that is, each vehicle must possess the 

requisite equipment or feature which must provide the requisite type and level of 

performance. If a vehicle does not, it is noncompliant. Typically, a vehicle does not 

entirely lack an item or equipment or feature. Instead, the equipment or features fails to 

perform adequately. Recalling the vehicle to repair or replace the noncompliant 

equipment or feature can usually be readily accomplished. 

In contrast, a CAFE standard applies to a manufacturer’s entire fleet for a model 

year. It does not require that a particular individual vehicle be equipped with any 

particular equipment or feature or meet a particular level of fuel economy. It does require 

that the manufacturer’s fleet, as a whole, comply. Further, although under the attributebased approach to setting CAFE standards fuel economy targets are established for 

 

203 49 U.S.C. § sec. 30120, Remedies for defects and noncompliance. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

216

individual vehicles based on their footprints, the vehicles are not required to comply with 

those targets on a model-by-model or vehicle-by-vehicle basis. However, as a practical 

matter, if a manufacturer chooses to design some vehicles so they fall below their target 

levels of fuel economy, it will need to design other vehicles so they exceed their targets if 

the manufacturer’s overall fleet average is to meet the applicable standard. 

Thus, under EPCA, there is no such thing as a noncompliant vehicle, only a 

noncompliant fleet. No particular vehicle in a noncompliant fleet is any more, or less, 

noncompliant than any other vehicle in the fleet. 

After enforcement letters are sent, NHTSA continues to monitor receipt of credit 

allocation plans or civil penalty payments that are due within 60 days from the date of 

receipt of the letter by the vehicle manufacturer, and takes further action if the 

manufacturer is delinquent in responding. 

3. What Ccompliance Flexibilities Aare Available uUnder the CAFE 

Program and Hhow Ddo Manufacturers Uuse Tthem?

 There are three basic flexibilities permitted by EPCA/EISA that manufacturers 

can use to achieve compliance with CAFE standards beyond applying fuel economyimproving technologies: (1) building dual- and alternative-fueled vehicles; (2) banking, 

trading, and transferring credits earned for exceeding fuel economy standards; and (3) 

paying fines. We note again that while these flexibility mechanisms will reduce 

compliance costs to some degree for most manufacturers, 49 U.S.C. sec.§ 32902(h) 

expressly prohibits NHTSA from considering the availability of credits (either for 

building dual- or alternative-fueled vehicles or from accumulated transfers or trades) in 

determining the level of the standards. Thus, NHTSA may not raise CAFE standards 

because manufacturers have enough credits to meet higher standards. This is an 

important difference from EPA’s authority under the CAA, which does not contain such a 

restriction, and which allows EPA to set higher standards as a result. 

 a. Dual- and Alternative-Ffueled Vehicles 

As discussed at length in prior rulemakings, EPCA encourages manufacturers to 

build alternative-fueled and dual- (or flexible-) fueled vehicles by providing special fuel 

economy calculations for “dedicated” (that is, 100 percent) alternative fueled vehicles 

and “dual-fueled” (that is, capable of running on either the alternative fuel or gasoline) 

vehicles. The fuel economy of a dedicated alternative fuel vehicle is determined by 

dividing its fuel economy in equivalent miles per gallon of gasoline or diesel fuel by 

0.15.204 Thus, a 15 mpg dedicated alternative fuel vehicle would be rated as 100 mpg. 

For dual-fueled vehicles, the rating is the average of the fuel economy on gasoline or 

diesel and the fuel economy on the alternative fuel vehicle divided by 0.15.205

 

204 49 U.S.C. §sec. 32905(a). 

205 49 U.S.C. sec.§ 32905(b) 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

217

 For example, this calculation procedure turns a dual-fueled vehicle that averages 

25 mpg on gasoline or diesel into a 40 mpg vehicle for CAFE purposes. This assumes 

that (1) the vehicle operates on gasoline or diesel 50 percent of the time and on 

alternative fuel 50 percent of the time; (2) fuel economy while operating on alternative 

fuel is 15 mpg (15/.15 = 100 mpg); and (3) fuel economy while operating on gas or diesel 

is 25 mpg. Thus: 

 CAFE FE = 1/{0.5/(mpg gas) + 0.5/(mpg alt fuel)} = 1/{0.5/25 + 0.5/100) = 40 mpg 

 In the case of natural gas, the calculation is performed in a similar manner. The 

fuel economy is the weighted average while operating on natural gas and operating on 

gas or diesel. The statute specifies that 100 cubic feet (ft3) of natural gas is equivalent to 

0.823 gallons of gasoline. The gallon equivalency of natural gas is equal to 0.15 (as for 

other alternative fuels).206 Thus, if a vehicle averages 25 miles per 100 ft3of natural gas, 

then: 

 

 CAFE FE = (25/100) * (100/.823)*(1/0.15) = 203 mpg 

Congress extended the incentive in EISA for dual-fueled automobiles through 

MY 2019, but provided for its phase out between MYs 2015 and 2019.207 The maximum 

fuel economy increase which may be attributed to the incentive is thus as follows: 

Model Year mpg 

increase

MYs 1993-2014........... 1.2 

MY 2015................... 1.0 

MY 2016................... 0.8 

MY 2017................... 0.6 

MY 2018................... 0.4 

MY 2019................... 0.2 

After MY 2019............ 0 

 49 CFR Part 538 implements the statutory alternative-fueled and dual-fueled 

automobile manufacturing incentive. NHTSA is proposing to update Part 538 as part of 

this NPRM to reflect the EISA changes, but to the extent that 49 U.S.C. sec.§ 32906(a) 

differs from the current version of 49 CFR § 538.9, the statute supersedes the regulation, 

and regulated parties may rely on the text of the statute. 

 A major difference between EPA’s statutory authority and NHTSA’s statutory 

authority is that the CAA contains no specific prescriptions with regard to credits for 

dual- and alternative-fueled vehicles comparable to those found in EPCA/EISA. As an 

exercise of that authority, and as discussed in Section [XX], EPA is offering similar 

 

206 49 U.S.C. sec.§ 32905(c). 

207 49 U.S.C. sec.§ 32906(a). NHTSA notes that the incentive for dedicated alternative-fuel automobiles, 

automobiles that run exclusively on an alternative fuel, at 49 U.S.C. sec.§ 32905(a), was not phased-out by 

EISA. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

218

credits for dual- and alternative-fueled vehicles through MY 2015 for compliance with its 

CO2 standards, but for MY 2016 and beyond EPA will establish CO2 emission levels for 

alternative fuel vehicles based on measurement of actual CO2 emissions during testing, 

plus a manufacturer demonstration that the vehicles are actually being run on the 

alternative fuel. NHTSA has no such authority under EPCA/EISA to require that 

vehicles manufactured for the purpose of obtaining the credit actually be run on the 

alternative fuel, but requests comment on whether it should seek legislative changes to 

revise its authority to address this issue. 

 b. Credit Trading and Transfer 

In the MY 2011 final rule, NHTSA established Part 536 for credit trading and 

transfer. Part 536 implements the provisions in EISA authorizing NHTSA to establish by 

regulation a credit trading program and directing it to establish by regulation a credit 

transfer program.208 Since its enactment, EPCA has permitted manufacturers to earn 

credits for exceeding the standards and to carry those credits backward or forward. EISA 

extended the “carry-forward” period from three to five model years, and left the “carryback” period at three model years. Under Part 536, credit holders (including, but not 

limited to, manufacturers) will have credit accounts with NHTSA, and will be able to 

hold credits, use them to achieve compliance with CAFE standards, transfer them 

between compliance categories, or trade them. A credit may also be cancelled before its 

expiry date, if the credit holder so chooses. Traded and transferred credits are subject to 

an “adjustment factor” to ensure total oil savings are preserved, as required by EISA. 

EISA also prohibits credits earned before MY 2011 from being transferred, so NHTSA 

has developed several regulatory restrictions on trading and transferring to facilitate 

Congress’ intent in this regard. EISA also establishes a “cap” for the maximum increase 

in any compliance category attributable to transferred credits: for MYs 2011-2013, 

transferred credits can only be used to increase a manufacturer’s CAFE level in a given 

compliance category by 1.0 mpg; for MYs 2014-2017, by 1.5 mpg; and for MYs 2018 

and beyond, by 2.0 mpg. 

NHTSA recognizes that some manufacturers may have to rely on credit 

transferring for compliance in MYs 2012-2017.209 As a way to improve the transferring 

flexibility mechanism for manufacturers, NHTSA interprets EISA not to prohibit the 

banking of transferred credits for use in later model years. Thus, NHTSA believes that 

the language of EISA may be read to allow manufacturers to transfer credits from one 

fleet that has an excess number of credits, within the limits specified, to another fleet that 

may also have excess credits instead of transferring only to a fleet that has a credit 

 

208 Congress required that DOT establish a credit “transferring” regulation, to allow individual 

manufacturers to move credits from one of their fleets to another (e.g., using a credit earned for exceeding 

the light truck standard for compliance with the domestic passenger car standard). Congress allowed DOT 

to establish a credit “trading” regulation, so that credits may be bought and sold between manufacturers and 

other parties. 

209 In contrast, manufacturers stated in comments in NHTSA’s MY 2011 rulemaking that they did not 

anticipate a robust market for credit trading, due to competitive concerns. NHTSA does not yet know 

whether those concerns will continue to deter manufacturers from exercising the trading flexibility during 

MYs 2012-2016. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

219

shortfall. This would mean that a manufacturer could transfer a certain number of credits 

each year and bank them, and then the credits could be carried forward or back “without 

limit” later if and when a shortfall ever occurred in that same fleet. NHTSA bases this 

interpretation on 49 U.S.C. sec.§ 32903(g)(2), which states that transferred credits “are 

available to be used in the same model years that the manufacturer could have applied 

such credits under subsections (a), (b), (d), and (e), as well as for the model year in which 

the manufacturer earned such credits.” The EISA limitation applies only to the 

application of such credits for compliance in particular model years, and not their transfer 

per se. If transferred credits have the same lifespan and may be used in carry-back and 

carry-forward plans, it seems reasonable that they should be allowed to be stored in any 

fleet, rather than only in the fleet in which they were earned. Of course, manufacturers 

could not transfer and bank credits for purposes of achieving the minimum standard for 

domestically-manufactured passenger cars, as prohibited by 49 U.S.C. sec.§ 32903(g)(4). 

Transferred and banked credits would additionally still be subject to the adjustment factor 

when actually used, which would help to ensure that total oil savings are preserved while 

still offering greater flexibility to manufacturers. This interpretation of EISA also helps 

NHTSA, to some extent, to harmonize better with EPA’s CO2 program, which allows 

unlimited banking and transfer of credits. NHTSA seeks comment on this interpretation 

of EISA. 

 c. Payment of Fines 

 If a manufacturer’s average miles per gallon for a given compliance category 

(domestic passenger car, imported passenger car, light truck) falls below the applicable 

standard, and the manufacturer cannot make up the difference by using credits earned or 

acquired , the manufacturer is subject to penalties. The penalty, as mentioned, is $5.50 

for each tenth of a mpg that a manufacturer’s average fuel economy falls short of the 

standard for a given model year, multiplied by the total volume of those vehicles in the 

affected fleet, manufactured for that model year. NHTSA has collected $772,850,459.00 

to date in CAFE penalties, the largest ever being paid by DaimlerChrysler for its MY 

2006 import passenger car fleet, $30,257,920.00. For their MY 2007 fleets, five 

manufacturers paid CAFE fines for not meeting an applicable standard—Ferrari, 

Maserati, Mercedes-Benz, Porsche, and Volkswagen—for a total of $37,385,941.00 

NHTSA recognizes that some manufacturers may use the option to pay fines as a 

CAFE compliance flexibility—presumably, when paying fines is deemed more costeffective than applying additional fuel economy-improving technology, or when adding 

fuel economy-improving technology would fundamentally change the characteristics of 

the vehicle in ways that the manufacturer believes its target consumers would not accept. 

NHTSA has no authority under EPCA/EISA to prevent manufacturers from turning to 

fine-payment if they choose to do so. This is another important difference from EPA’s 

authority under the CAA, which allows EPA to revoke a manufacturer’s certificate of 

compliance that permits it to sell vehicles if EPA determines that the manufacturer is in 

non-compliance, and does not permit manufacturers to pay fines in lieu of compliance 

with applicable standards. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

220

 NHTSA has grappled repeatedly with the issue of whether fines are motivational 

for manufacturers, and whether raising fines would increase manufacturers’ compliance 

with the standards. EPCA authorizes increasing the civil penalty very slightly up to 

$10.00, exclusive of inflationary adjustments, if NHTSA decides that the increase in the 

penalty “—

(i) Wwill result in, or substantially further, substantial energy conservation for 

automobiles in the model years in which the increased penalty may be imposed; and 

(ii) Wwill not have a substantial deleterious impact on the economy of the United States, 

a State, or a region of a State.” 49 U.S.C. sec. 32912(c).210

To support a decision that increasing the penalty would result in “substantial 

energy conservation” without having “a substantial deleterious impact on the economy,” 

NHTSA would likely need to provide some reasonably certain quantitative estimates of 

the fuel that would be saved, and the impact on the economy, if the penalty were raised. 

Comments received on this issue in the past have not explained in clear quantitative terms 

what the benefits and drawbacks to raising the penalty might be. Additionally, it may be 

that the range of possible increase that the statute provides, i.e., up to $10 per tenth of a 

mpg, is insufficient to result in substantial energy conservation, although changing this 

would require an amendment to the statute by Congress. While NHTSA continues to 

seek to gain information on this issue to inform a future rulemaking decision, we request 

that commenters wishing to address this issue please provide, as specifically as possible, 

estimates of how raising or not raising the penalty amount will or will not substantially 

raise energy conservation and impact the economy. 

 4. Other CAFE Enforcement Issues—Variations in Footprint

NHTSA has a standardized test procedure for determining vehicle footprint,211

which is defined by regulation as follows:

Footprint is defined as the product of track width (measured in inches, calculated 

as the average of front and rear track widths, and rounded to the nearest tenth of 

an inch) times wheelbase (measured in inches and rounded to the nearest tenth of 

an inch), divided by 144 and then rounded to the nearest tenth of a square foot.212

“Track width,” in turn, is defined as “the lateral distance between the centerlines of the 

base tires at ground, including the camber angle.”213 “Wheelbase” is defined as “the 

longitudinal distance between front and rear wheel centerlines.”214

NHTSA began requiring manufacturers to submit this information as part of their 

pre-model year reports in MY 2008 for light trucks, and will require manufacturers to 

 

210 49 U.S.C. sec.§ 32912(c). 

211 NHTSA TP-537-01, March 30, 2009. Available at

http://www.nhtsa.gov/portal/site/nhtsa/menuitem.b166d5602714f9a73baf3210dba046a0/, scroll down to 

“537” (last accessed July 18, 2009). 

212 49 CFR § 523.2. 

213 Id.

214 Id.
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

221

submit this information for passenger cars as well beginning in MY 2011. Manufacturers 

have submitted the required information for their light trucks, but NHTSA has identified 

several issues with regard to footprint measurement, that could affect how required fuel 

economy levels are calculated for a manufacturer. The paragraphs that follow explain 

NHTSA’s views regarding these issues, and solicit public input on what NHTSA should 

do to address them in the future. 

a. Variations in Track Width 

By definition, wheelbase measurement should be very consistent from one vehicle 

to another of the same model. Track width, in contrast, may vary in two respects: wheel 

offset,215 and camber. Most current vehicles have wheels with positive offset, with 

technical specifications for offset typically expressed in millimeters. Additionally, for 

most vehicles, the camber angle of each of a vehicle’s wheels is specified as a range, i.e., 

front axle, left and right within minus 0.9 to plus 0.3 degree and rear axle, left and right 

within minus 0.9 to plus 0.1 degree. Given the small variations in offset and camber 

angle dimensions, the potential effects of components (wheels) and vehicle specifications 

(camber) within existing designs on vehicle footprints are considered insignificant. 

 However, NHTSA recognizes that manufacturers may change the specifications 

of and the equipment on vehicles, even those that are not redesigned or refreshed, during 

a model year and from year to year. There may be opportunity for manufacturers to 

change specifications for wheel offset and camber to increase a vehicle’s track width and 

footprint, and thus decrease their required fuel economy level. NHTSA believes that this 

is likely easiest on vehicles that already have sufficient space to accommodate changes 

without accompanying changes to the body profile and/or suspension component 

locations. 

There may be drawbacks to such a decision, however. Changing from positive 

offset wheels to wheels with zero or negative offset will move tires and wheels outward 

toward the fenders. Increasing the negative upper limit of camber will tilt the top of the 

tire and wheel inward and move the bottom outward, placing the upper portion of the 

rotating tires and wheels in closer proximity to suspension components. In addition, 

higher negative camber can adversely affect tire life and the on-road fuel economy of the 

vehicle. Furthermore, it is likely that most vehicle designs have already used the 

available space in wheel areas since, by doing so, the vehicle’s handling performance is 

improved. Therefore, it seems unlikely that manufacturers will make significant changes 

to wheel offset and camber. 

 b. How Manufacturers Ddesignate “Bbase Tires” and Wheels 

 

215 Offset of a wheel is the distance from its hub mounting surface to the centerline of the wheel, i.e., 

measured laterally inboard or outboard. 

 Zero offset – the hub mounting surface is even with the centerline of the wheel 

Positive offset – the hub mounting surface is outboard of the centerline of the wheel (toward street 

side) 

Negative offset – the hub mounting surface is inboard of the centerline of the wheel (away from 

street side) 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

222

According to the definition of “track width” in 49 CFR § 523.2, manufacturers 

must determine track width when the vehicle is equipped with “base tires.” Section§

523.2 defines “base tire,” in turn, as “the tire specified as standard equipment by a 

manufacturer on each configuration of a model type.” NHTSA did not define “standard 

equipment.” 

In their pre-model year reports required by 49 CFR Part 537, manufacturers have 

the option of either (A) reporting a base tire for each model type, or (B) reporting a base 

tire for each vehicle configuration within a model type, which represents an additional 

level of specificity. If different vehicle configurations have different footprint values, 

then reporting the number of vehicles for each footprint will improve the accuracy of the 

required fuel economy level for the fleet, since the pre-model year report data is part of 

what manufacturers use to determine their CAFE obligations. 

For example, assume a manufacturer’s pre-model year report listed five vehicle 

configurations that comprise one model type. If the manufacturer provides only one 

vehicle configuration’s front and rear track widths, wheelbase, footprint and base tire size 

to represent the model type, and the other vehicle configurations all have a different tire 

size specified as standard equipment, the footprint value represented by the manufacturer 

may not capture the full spectrum of footprint values for that model type. Similarly, the 

base tires of a model type may be mounted on two or more wheels with different offset 

dimensions for different vehicle configurations. Of course, if the footprint value for all 

vehicle configurations is essentially the same, there would be no need to report by vehicle 

configuration. However, if footprints are different—larger or smaller—reporting for each 

group with similar footprints or for each vehicle configuration would produce a more 

accurate result. 

 c. Vehicle “Design” Values Reported by Manufacturers 

NHTSA understands that the track widths and wheelbase values and the 

calculated footprint calculated values, as provided in pre-model year reports, are based on 

vehicle designs. This can lead to inaccurate calculations of required fuel economy level. 

For example, if the values reported by manufacturers are within an expected range of 

values, but are skewed to the higher end of the ranges, the required fuel economy level 

for the fleet will be artificially lower, an inaccurate attribute based value. Likewise, it 

would be inaccurate for manufacturers to submit values on the lower end of the ranges, 

but would decrease the likelihood that measured values would be less than the values 

reported and reduce the likelihood of an agency inquiry. Since not every vehicle is 

identical, it is also probable that variations between vehicles exist that can affect track 

width, wheelbase and footprint. As with other self-certifications, each manufacturer must 

decide how it will report, by model type, vehicle configuration, or a combination, and 

whether the reported values have sufficient margin to account for variations. 

 To address this, the agency will be monitoring the track widths, wheelbases and 

footprints reported by manufacturers, and anticipates measuring vehicles to determine if 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

223

the reported and measured values are consistent. We will look for year-to-year changes 

in the reported values. We can compare MY 2008 light truck information and MY 2010 

passenger car information to the information reported in subsequent model years. 

Moreover, under 49 CFR § 537.8, manufacturers may make separate reports to explain 

why changes have occurred or they may be contacted by the agency to explain them. 

d. How Manufacturers rReport this Information in tTheir Pre-Mmodel Year 

Reports 

49 CFR § 537.7(c) requires that manufacturers’ pre-model year reports include 

“model type and configuration fuel economy and technical information.” The fuel 

economy of a “model type” is, for many manufacturers, comprised of a number of 

vehicle configurations. 49 CFR § 537.4 states that “model type” and “vehicle 

configuration” are defined in 40 CFR Part 600. Under that Part, “model type” includes 

engine, transmission, and drive configuration (2WD, 4WD, or all-wheel drive), while 

“vehicle configuration” includes those parameters plus test weight. Model type is 

important for calculating fuel economy in the new attribute-based system—the required 

fuel economy level for each of a manufacturer’s fleets is calculated using the number of 

vehicles within each model type and the applicable fuel economy target for each model 

type. 

 In MY 2008 and 2009 pre-model year reports for light trucks, manufacturers have 

expressed information in different ways. Some manufacturers that have many vehicle 

configurations within a model type have included information for each vehicle 

configuration’s track width, wheelbase and footprint. Other manufacturers reported 

vehicle configuration information per § 537.7(c)(4), but provided only model type track 

width, wheelbase and footprint information for subsections § 537.7(c)(4)(xvi)(B)(3), (4) 

and (5). NHTSA believes that these manufacturers may have reported the information 

this way because the track widths, wheelbase and footprint are essentially the same for 

each vehicle configuration within each model type. A third group of manufacturers 

submitted model type information only, presumably because each model type contains 

only one vehicle configuration. 

 NHTSA does not believe that this variation in reporting methodology presents an 

inherent problem, as long as manufacturers follow the specifications in Part 537 for 

reporting format, and as long as pre-model year reports provide information that is 

accurate and represents each vehicle configuration within a model type. The report may, 

but need not, be similar to what manufacturers submit to EPA as their end-of-model year 

report. However, NHTSA seeks comment on any potential benefits or drawbacks to 

requiring a more standardized reporting methodology. If commenters recommend 

increasing standardization, NHTSA requests that they provide specific examples of what 

information should be required and how NHTSA should require it to be provided. 

J. Other nNear-tTerm rRulemakings mMandated by EISA
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

224

1. Commercial Medium- and Heavy-Dduty On-Hhighway Vehicles and 

Work Trucks

EISA added a new provision to 49 U.S.C. sec. § 32902 requiring DOT, in 

consultation with DOE and EPA, to examine the fuel efficiency of commercial mediumand heavy-duty on-highway vehicles216 and work trucks217 and determine the appropriate 

test procedures and methodologies for measuring their fuel efficiency, as well as the 

appropriate metric for measuring and expressing their fuel efficiency performance and 

the range of factors that affect their fuel efficiency. Work on developing these standards 

is on-going. 

 

 2. Consumer Iinformation

EISA also added a new provision to 49 U.S.C. sec. § 32908 requiring DOT, in 

consultation with DOE and EPA, to develop and implement by rule a program to require 

manufacturers —

(A) to label new automobiles sold in the United States with: 

1) --

(i) information reflecting an automobile’s performance on the basis of criteria that 

[EPA] shall develop, not later than 18 months after the date of the enactment of [EISA], 

to reflect fuel economy and greenhouse gas and other emissions over the useful life of the 

automobile; and 

2) ;

(ii) a rating system that would make it easy for consumers to compare the fuel 

economy and greenhouse gas and other emissions of automobiles at the point of 

purchase, including a designation of automobiles —

(I) with the lowest greenhouse gas emissions over the useful life of the vehicles; 

and 

(II) with the highest fuel economy;.

DOT must also develop and implement by rule a program to require 

manufacturers to and

(B) to include in the owner’s manual for vehicles capable of operating on 

alternative fuels information that describes that capability and the benefits of using 

alternative fuels, including the renewable nature and environmental benefits of using 

alternative fuels. 

 EISA further requires DOT, in consultation with DOE and EPA, to 

• “develop and implement by rule a consumer education program to improve 

consumer understanding of automobile performance described [by the label to be 

developed] and to inform consumers of the benefits of using alternative fuel in 

automobiles and the location of stations with alternative fuel capacity;”

 

216 Defined as “an on-highway vehicle with a gross vehicle weight rating of 10,000 pounds or more.”

217 Defined as “a vehicle that is both —

(A) is rated at between 8,500 and 10,000 pounds gross vehicle weight; and also 

(B) is not a medium-duty passenger vehicle (as defined in 40 CFR 86.1803-01, as in effect on the 

date of EISA’s enactment.”

Formatted: Indent: Left: 0"

Formatted: Indent: Left: 0"

Formatted: Indent: Left: 0"
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

225

• “establish a consumer education campaign on the fuel savings that would be 

recognized from the purchase of vehicles equipped with thermal management 

technologies, including energy efficient air conditioning systems and glass;” and 

• “by rule require a label to be attached to the fuel compartment of vehicles capable 

of operating on alternative fuels, with the form of alternative fuel stated on the 

label.”



49 U.S.C. sec. § 32908(g)(2) and (3). DOT has 42 months from the date of EISA’s 

enactment (by the end of 2011) to issue final rules under this subsection. Work on 

developing these standards is also on-going.

Additionally, in preparation for this rulemaking, NHTSA will consider

appropriate metrics for presenting fuel economy-related information on labels. Based on 

the non-linear relationship between mpg and fuel costs as well as emissions, inclusion of 

the “gallons per 100 miles” metric on fuel economy labels may be appropriate going 

forward, although the mpg information is currently required by law. A cost/distance 

metric may also be useful, as could a CO2e grams per mile metric to facilitate 

comparisons between conventional vehicles and alternative fuel vehicles and to 

incorporate information about air conditioning-related emissions. NHTSA seeks 

comment on these options.

K. Public Participation

How do I prepare and submit comments?

Your comments must be written and in English. To ensure that your comments 

are correctly filed in the Docket, please include the docket number of this document in 

your comments. Your comments must not be more than 15 pages long.218 We 

established this limit to encourage you to write your primary comments in a concise 

fashion. However, you may attach necessary additional documents to your comments. 

There is no limit on the length of the attachments.

Please submit your comments by any of the following methods:

•Federal eRulemaking Portal: Go to http://www.regulations.gov. Follow the online 

instructions for submitting comments.

•Mail: Docket Management Facility, M-30, U.S. Department of Transportation, 

West Building, Ground Floor, Rm. W12-140, 1200 New Jersey Avenue, SE, 

Washington, DC 20590.

•Hand delivery or courier: West Building Ground Floor, Rm. W12-140, 1200 New 

Jersey Avenue, SE, between the hours of 9 a.m and 5 p.m. Eastern Time, Monday 

through Friday, except Federal holidays.

 

218 See 49 CFR § 553.21. 

Formatted: Indent: Left: 0.25"

Formatted: Bullets and Numbering

Formatted: Subscript

Comment [r17]: Added in response to 

interagency comment. 

Formatted: Bullets and Numbering
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

226

•Fax: (202) 493-2251.

If you are submitting comments electronically as a PDF (Adobe) file, we ask that 

the documents submitted be scanned using the Optical Character Recognition (OCR) 

process, thus allowing the agency and other commenters to search and copy certain 

portions of your submissions.219

Please note that pursuant to the Data Quality Act, in order for substantive data to 

be relied upon and used by the agency, it must meet the information quality standards set 

forth in the OMB and DOT Data Quality Act guidelines. Accordingly, we encourage you 

to consult the guidelines in preparing your comments. OMB’s guidelines may be 

accessed at http://www.whitehouse.gov/omb/fedreg/reproducible.html. DOT’s 

guidelines may be accessed at http://www.dot.gov/dataquality.htm. 

How can I be sure that my comments were received?

If you submit your comments by mail and wish Docket Management to notify you 

upon its receipt of your comments, enclose a self-addressed, stamped postcard in the 

envelope containing your comments. Upon receiving your comments, Docket 

Management will return the postcard by mail.

How do I submit confidential business information (CBI)?

If you wish to submit any information under a claim of confidentiality, you should 

submit three copies of your complete submission, including the information you claim to 

be confidential business information, to the Chief Counsel, NHTSA, at the address given 

above under FOR FURTHER INFORMATION CONTACT. When you send a 

comment containing information claimed to be confidential business information, you 

should include a cover letter setting forth the information specified in our confidential 

business information regulation.220

In addition, you should submit a copy from which you have deleted the claimed 

confidential business information to the Docket by one of the methods set forth above.

Will the agency consider late comments?

We will consider all comments received before the close of business on the 

comment closing date indicated above under DATES. To the extent possible, we will 

also consider comments received after that date. If interested persons believe that any 

new information the agency places in the docket affects their comments, they may submit 

comments after the closing date concerning how the agency should consider that 

information for the final rule. However, the agency’s ability to consider late comments in 

this rulemaking will be limited given the time frame of this rulemaking.

If a comment is received too late for us to consider in developing a final rule 

(assuming that one is issued), we will consider that comment as an informal suggestion 

for future rulemaking action.

 

219 Optical character recognition (OCR) is the process of converting an image of text, such as a scanned 

paper document or electronic fax file, into computer-editable text. 

220 See 49 CFR Part 512. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

227

How can I read the comments submitted by other people?

You may read the materials placed in the docket for this document (e.g., the 

comments submitted in response to this document by other interested persons) at any 

time by going to http://www.regulations.gov. Follow the online instructions for 

accessing the dockets. You may also read the materials at the Docket Management 

Facility by going to the street address given above. The Docket Management Facility is 

open between 9 a.m. and 5 p.m. Eastern Time, Monday through Friday, except Federal 

holidays.

Will there be a public hearing?

[To be filled in later]

LK. Regulatory Notices and Analyses

1. Executive Order 12866 and DOT Regulatory Policies and 

Procedures

 Executive Order 12866, “Regulatory Planning and Review” (58 FR 51735, Oct. 4, 

1993), provides for making determinations whether a regulatory action is “significant” 

and therefore subject to OMB review and to the requirements of the Executive Order. 

The Order defines a “significant regulatory action” as one that is likely to result in a rule 

that may: 

 (1) Have an annual effect on the economy of $100 million or more or adversely 

affect in a material way the economy, a sector of the economy, productivity, competition, 

jobs, the environment, public health or safety, or State, local or Tribal governments or 

communities; 

 (2) Create a serious inconsistency or otherwise interfere with an action taken or 

planned by another agency; 

 (3) Materially alter the budgetary impact of entitlements, grants, user fees, or loan 

programs or the rights and obligations of recipients thereof; or 

 (4) Raise novel legal or policy issues arising out of legal mandates, the President’s 

priorities, or the principles set forth in the Executive Order. 

 The rulemaking proposed in this NPRM will be economically significant if 

adopted. Accordingly, OMB reviewed it under Executive Order 12866. The rule, if 

adopted, would also be significant within the meaning of the Department of 

Transportation’s Regulatory Policies and Procedures. 

 The benefits and costs of this proposal are described above. Because the 

proposed rule would, if adopted, be economically significant under both the Department 

of Transportation’s procedures and OMB guidelines, the agency has prepared a 

Preliminary Regulatory Impact Analysis (PRIA) and placed it in the docket and on the 

agency’s website. Further, pursuant to OMB Circular A-4, we have prepared a formal 

probabilistic uncertainty analysis for this proposal. The circular requires such an analysis 

for complex rules where there are large, multiple uncertainties whose analysis raises 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

228

technical challenges or where effects cascade and where the impacts of the rule exceed $1 

billion. This proposal meets these criteria on all counts. 

 2. National Environmental Policy Act

 NHTSA has initiated the Environmental Impact Statement (EIS) process under 

the National Environmental Policy Act (NEPA), 42 U.S.C. sec.§§ 4321-4347, and 

implementing regulations issued by the Council on Environmental Quality (CEQ), 40 

CFR part 1500, and NHTSA, 49 CFR part 520. On April 1, 2009, NHTSA published a 

notice of intent to prepare an EIS for this rulemaking and requested scoping comments. 

(74 FR 14857) The notice invites Federal, State, and local agencies, Indian tribes, and 

the public to participate in the scoping process and to help identify the environmental 

issues and reasonable alternatives to be examined in the EIS. The scoping notice also 

provides information about the proposed standards, the alternatives NHTSA expects to 

consider in its NEPA analysis, and the scoping process. 

 Concurrently with this NPRM, NHTSA is releasing a Draft Environmental Impact 

Statement (DEIS). NHTSA prepared the DEIS to analyze and disclose the potential 

environmental impacts of the proposed MY 2012-2016 CAFE standards for the total fleet 

of passenger cars and light trucks and reasonable alternative standards for the NHTSA 

CAFE Program pursuant to the Council on Environmental Quality (CEQ) regulations 

implementing NEPA, DOT Order 5610.1C, and NHTSA regulations.221 The DEIS 

compares the potential environmental impacts of alternative mile per gallon (mpg) levels 

that will be considered by NHTSA for the final rule. It also analyzes direct, indirect, and 

cumulative impacts and analyzes impacts in proportion to their significance. 

The DEIS also describes potential environmental impacts to a variety of 

resources. Resources that may be affected by the proposed action and alternatives 

include water resources, biological resources, land use and development, safety, 

hazardous materials and regulated wastes, noise, socioeconomics, and environmental 

justice. These resource areas were assessed qualitatively in the DEIS. 

Throughout the DEIS, NHTSA has relied extensively on findings of the United 

Nations Intergovernmental Panel on Climate Change (IPCC), the U.S. Climate Change 

Science Program (CCSP), and EPA. Our discussion relies heavily on the most recent, 

thoroughly peer-reviewed, and credible assessments of global and U.S. climate change: 

the IPCC Fourth Assessment Report (Climate Change 2007), EPA’s proposed 

Endangerment and Cause or Contribute Findings for Greenhouse Gases under Section 

202(a) of the Clean Air Act and the accompanying Technical Support Document (TSD), 

and CCSP and National Science and Technology Council reports that include the 

Scientific Assessment of the Effects of Global Change on the United States and Synthesis 

and Assessment Products. The DEIS cites these sources and the studies they review 

frequently. 

 

221 NEPA is codified at 42 U.S.C. sec.§§ 4321-4347. CEQ NEPA implementing regulations are codified at 

40 Code of Federal Regulations (CFR) Parts 1500-1508. NHTSA NEPA implementing regulations are 

codified at 49 CFR Part 520. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

229

Because of the link between the transportation sector and GHG emissions, 

NHTSA recognizes the need to consider the possible impacts on climate and global 

climate change in the analysis of the effects of these fuel economy standards. NHTSA 

also recognizes the difficulties and uncertainties involved in such an impact analysis. 

Accordingly, consistent with CEQ regulations on addressing incomplete or unavailable 

information in environmental impact analyses, NHTSA has reviewed existing credible 

scientific evidence that is relevant to this analysis and summarized it in the DEIS. 

NHTSA has also employed and summarized the results of research models generally 

accepted in the scientific community. 

Although the alternatives have the potential to decrease GHG emissions 

substantially, they do not prevent climate change, but only result in reductions in the 

anticipated increases in CO2 concentrations, temperature, precipitation, and sea level. 

They would also, to a small degree, delay the point at which certain temperature increases 

and other physical effects stemming from increased GHG emissions would occur. As 

discussed below, NHTSA presumes that these reductions in climate effects will be 

reflected in reduced impacts on affected resources.

NHTSA consulted with various federal agencies in the development of the DEIS, 

including EPA, Bureau of Land Management, Centers for Disease Control and 

Prevention, Minerals Management Service, National Park Service, U.S. Army Corps of 

Engineers, U.S. Forest Service, and Advisory Council on Historic Preservation. NHTSA 

is also exploring its obligations under Section 7 of the Endangered Species Act with the 

U.S. Fish and Wildlife Service and the National Oceanic and Atmospheric 

Administration Fisheries Service. 

The main direct and indirect effects resulting from the different alternatives 

analyzed in the DEIS are as follows: 

 Fuel consumption: For passenger cars, fuel consumption under the No Action 

Alternative is 171 billion gallons in 2060. Fuel consumption ranges from 156.1 billion 

gallons under Alternative 2 (3-Percent Alternative) to 133.7 billion gallons under 

Alternative 9 (TCTB). Fuel consumption is 149.3 billion gallons under the Preferred 

Alternative. For light trucks, fuel consumption under the No Action Alternative is 105.4 

billion gallons in 2060. Fuel consumption ranges from 97.1 billion gallons under 

Alternative 2 (3-Percent Alternative) to 83.8 billion gallons under Alternative 9 (TCTB). 

Fuel consumption is 92.2 billion gallons under the Preferred Alternative (Alternative 4). 

 Air quality: Emissions of criteria pollutants change very little between the No 

Action Alternative and Alternatives 2 through 4. In the case of particulate matter (PM2.5), 

sulfur oxides (SOx), nitrogen oxides (NOx), and volatile organic compounds (VOCs), the 

No Action Alternative results in the highest emissions, and emissions generally decline as 

fuel economy standards increase across alternatives. There are some increases from 

Alternative 6 through Alternative 9, but emissions remain below the levels under the No 

Action Alternative. In the case of carbon monoxide (CO), emissions under Alternatives 2 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

230

through 4 are slightly higher than under the No Action Alternative. Emissions of CO 

decline as fuel economy standards increase across Alternatives 5 through 9. 

The trend for toxic air pollutant emissions across the alternatives is mixed. 

Emissions of nearly all toxic air pollutants are highest under the No Action Alternative, 

except for those of acrolein, which increases with each successive alternative and are 

highest under Alternative 9. The acrolein emissions are an upper-bound estimate and 

actual emissions might be less. Emissions of acetaldehyde, benzene, and DPM in 2030 

decrease with successive alternatives from Alternative 1 to Alternative 9. Emissions of 

1,3-butadiene increase slightly from Alternative 3 (4-Percent Alternative) to Alternative 4 

(Preferred), and emissions of formaldehyde increase slightly from Alternative 8 (7-

Percent Alternative) to Alternative 9 (TCTB) in 2030. 

The reductions in emissions are expected to lead to reductions in adverse health 

effects. There would be reductions in adverse health effects nationwide under 

Alternatives 2 (3-Percent Alternative) through 9 (TCTB) compared to the No Action 

Alternative. These reductions primarily reflect the projected PM2.5 reductions, and 

secondarily the reductions in SO2. The economic value of health impacts would vary 

proportionally with changes in health outcomes. 

Climate: The DEIS uses a climate model to estimate the changes in CO2

concentrations, global mean surface temperature, and changes in sea level for each 

alternative CAFE standard. NHTSA used the publicly available modeling software, 

Model for Assessment of Greenhouse Gas-induced Climate Change (MAGICC) version 

5.3.v2 to estimate changes in key direct and indirect effects. The application of 

MAGICC version 5.3.v2 uses the emissions estimates for CO2, CH4, N2O, CO, NOx, SO2, 

and VOCs from the Volpe model. A sensitivity analysis was completed to examine the 

relationship among selected CAFE alternatives and likely climate sensitivities, and the 

associated direct and indirect effects for each combination. These relationships can be 

used to infer the effect of emissions associated with the regulatory alternatives on direct 

and indirect climate effects. 

For the analysis using MAGICC, NHTSA has assumed that global emissions 

consistent with the No Action Alternative (Alternative 1) follow the trajectory provided 

by the Representative Concentration Pathway (RCP) 4.5 MiniCAM (Mini Climate 

Assessment Model) reference scenario.222 The SAP 2.1 global emissions scenarios were 

created as part of CCSP’s effort to develop a set of long-term (2000 to 2100) global 

emissions scenarios that incorporate an update of economic and technology data and 

utilize improved scenario development tools compared to the IPCC Special Report on 

Emissions Scenarios (SRES) developed more than a decade ago. 

 

222 The reference scenario for global emissions assumes the absence of significant global GHG control 

policies. It is based on the Climate Change Science Program’s (CCSP) Synthesis and Assessment Product

(SAP) 2.1 MiniCAM reference scenario, and has been revised by the Joint Global Change Research 

Institute to update emission estimates of non-CO2 gases. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

231

The results rely primarily on the RCP 4.5 MiniCAM reference scenario to 

represent an emissions scenario, that is, future global emissions assuming no additional 

climate policy. Each alternative was simulated by calculating the difference in annual 

GHG emissions in relation to the No Action Alternative and subtracting this change from 

the RCP 4.5 MiniCAM reference scenario to generate modified global-scale emissions 

scenarios, which each show the effect of the various regulatory alternatives on the global 

emissions path. 

To estimate changes in global precipitation, this EIS uses increases in global 

mean surface temperature combined with a scaling approach and coefficients from the 

IPCC Fourth Assessment Report. 

For all of the climate change analysis, the approaches focus on marginal changes 

in emissions that affect climate. Thus, the approaches result in a reasonable 

characterization of climate change for a given set of emissions reductions, regardless of 

the underlying details associated with those emissions reductions. The climate sensitivity 

analysis provides a basis for determining climate responses to varying climate 

sensitivities under the No Action Alternative (Alternative 1) and the Preferred Alternative 

(Alternative 4). Some responses of the climate system are believed to be non-linear; by 

using a range of emissions cases and climate sensitivities, the effects of the alternatives in 

relation to different scenarios and sensitivities can be estimated. 

GHG emissions: Although GHG emissions from new passenger cars and light 

trucks will continue to rise over 2012 through 2100 (absent other reduction efforts), the 

effect of the alternatives is to slow this increase by varying amounts. Emissions for the 

period range from 196,341 million metric tons of CO2 (MMTCO2) for the TCTB 

Alternative (Alternative 9) to 244,821 MMTCO2 for the No Action Alternative 

(Alternative 1). Compared to the No Action Alternative, projections of emissions 

reductions over the period 2012 to 2100 due to the MY 2012-2016 CAFE standards range 

from 19,169 to 48,480 MMTCO2. Compared to cumulative global emissions of 

5,293,896 MMTCO2 over this period (projected by the RCP 4.5 MiniCAM reference 

scenario), this rulemaking is expected to reduce global CO2 emissions by about 0.4 to 0.9 

percent. 

To get a sense of the relative impact of these reductions, it can be helpful to 

consider the relative importance of emissions from passenger cars and light trucks as a 

whole and to compare them against emissions projections from the transportation sector. 

As mentioned earlier, U.S. passenger cars and light trucks currently account for 

significant CO2 emissions in the United States. With the action alternatives reducing 

U.S. passenger car and light truck CO2 emissions by 7.8 to 19.8 percent, the CAFE 

alternatives would have a noticeable impact on total U.S. CO2 emissions. Compared to 

total U.S. CO2 emissions in 2100 projected by the MiniCAM reference scenario of 7,886 

MMTCO2 , the action alternatives would reduce annual U.S. CO2 emissions by 3.5 to 8.9 

percent in 2100. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

232

CO2 concentration, global mean surface temperature, sea-level rise, and 

precipitation: Estimated CO2 concentrations for 2100 range from 778.4 ppm under the 

most stringent alternative (TCTB) to 783.0 ppm under the No Action Alternative. For 

2030 and 2050, the range is even smaller. Because CO2 concentration is the key driver of 

other climate effects (which in turn act as drivers on resource impacts), this leads to small 

differences in these effects. For the No Action alternative, the temperature increase from 

1990 is 0.92 °C for 2030, 1.56 °C for 2050, and 3.14 °C for 2100. The differences 

among alternatives are small. For 2100, the reduction in temperature increase, in relation 

to the No Action Alternative, ranges from 0.007 °C to 0.018 °C. Given that all the action 

alternatives reduce temperature increases slightly in relation to the No Action Alternative, 

they also slightly reduce predicted increases in precipitation. 

In summary, the impacts of the proposed action and alternatives on global mean 

surface temperature, precipitation, or sea-level rise are small in absolute terms. This is 

because the action alternatives have a small proportional change in the emissions 

trajectories in the RCP 4.5 MiniCAM reference scenario.223 This is due primarily to the 

global and multi-sectoral nature of the climate change issues. 

Under CEQ regulations, NHTSA must also analyze cumulative impacts, defined 

as “the impact on the environment which results from the incremental impact of the 

action when added to other past, present, and reasonably foreseeable future actions 

regardless of what agency or person undertakes such other actions.” 40 CFR § 1508.7. 

Following is a description of the cumulative effects of the proposed action and 

alternatives on energy, air quality, and climate. 

The methodology for evaluating cumulative effects includes the reasonably 

foreseeable future actions of projected average annual passenger-car and light-truck mpg 

estimates from 2016 through 2030 that differ from mpg estimates reflected in the analysis 

of the direct and indirect impacts of MY 2012 through MY 2016 fuel economy 

requirements under each of the action alternatives, assuming no further increases in 

average new passenger-car or light-truck mpg after 2016. The evaluation of cumulative 

effects projects ongoing gains in average new passenger-car and light-truck mpg 

consistent with further increases in CAFE standards to an EISA-mandated minimum 

level of 35 mpg combined for passenger car and light trucks by the year 2020, along with 

AEO April 2009 (updated) Reference Case projections of annual percentage gains of 0.51 

percent in passenger-car mpg and 0.86 percent in light-truck mpg through 2030.224 AEO 

 

223 These conclusions are not meant to be interpreted as expressing NHTSA’s views that impacts on global 

mean surface temperature, precipitation, or sea-level rise are not areas of concern for policymakers. Under 

NEPA, the agency is obligated to discuss “the environmental impact[s] of the proposed action.” 42 U.S.C. 

sec.§ 4332(2)(C)(i) (emphasis added). This analysis fulfills NHTSA’s obligations in this regard. 

224 NHTSA considers these AEO projected mpg increases to be reasonably foreseeable future action under 

NEPA because the AEO projections reflect future consumer and industry actions that result in ongoing mpg 

gains through 2030. The AEO projections of fuel economy gains beyond the EISA requirement of 

combined achieved 35 mpg by 2020 result from a future forecasted increase in consumer demand for fuel 

economy resulting from projected fuel price increases. Since the AEO forecasts do not extend beyond the 

year 2030, the mpg estimates for MY 2030 through MY 2060 remain constant. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

233

Reference Case projections are regarded as the official U.S. government energy 

projections by both the public and private sector. 

The assumption that all action alternatives reach the EISA 35 mpg target by 2020, 

with mpg growth at the AEO forecast rate from 2020 to 2030, results in estimated 

cumulative impacts for Alternatives 2, 3, and 4 that are substantially equivalent, with any 

minor variation in cumulative impacts across these Alternatives due to the specific 

modeling assumptions used to ensure that each Alternative achieves at least 35 mpg by 

2020. Therefore, the cumulative impacts analysis adds substantively to the analysis of 

direct and indirect impacts when comparing cumulative impacts between Alternatives 4 

through 9, but not when comparing cumulative impacts between Alternatives 2 through 4. 

Another important difference in the methodology for evaluating cumulative effects is that 

the No Action Alternative (Alternative 1) also reflects the AEO Reference Case projected 

annual percentage gains of 0.51 percent in car mpg and 0.86 percent in light truck mpg 

for the period 2016 through 2030, whereas the direct and indirect impacts analysis 

assumed no increases in average new passenger-car or light-truck mpg after 2016 under 

any alternative, including the No Action Alternative. NHTSA also considered other 

reasonably foreseeable actions that would affect greenhouse gas emissions, such as 

regional, national, and international initiatives and programs to reduce GHG emissions. 

Fuel consumption: The nine alternatives examined in the DEIS will result in 

different future levels of fuel use, total energy, and petroleum consumption, which will in 

turn have an impact on emissions of GHG and criteria air pollutants. For passenger cars, 

by 2060, fuel consumption reaches 160.4 billion gallons under the No Action Alternative 

(Alternative 1). Consumption falls across the alternatives, from 139.4 billion gallons 

under the Preferred Alternative (Alternative 4) to 125.7 billion gallons under the TCTB 

Alternative (Alternative 9) representing a fuel savings of 21.0 to 34.7 billion gallons in 

2060, as compared to fuel consumption projected under the No Action Alternative. For 

light trucks, fuel consumption by 2060 reaches 94.8 billion gallons under the No Action 

Alternative (Alternative 1). Consumption declines across the alternatives, from 83.3 

billion gallons under the 3-Percent Alternative (Alternative 2) to 75.7 billion gallons 

under the TCTB Alternative (Alternative 9). This represents a fuel savings of 11.5 to 

19.1 billion gallons in 2060, as compared to fuel consumption projected under the No 

Action Alternative. 

Air quality: In the case of PM2.5, SOx, NOx, and VOCs, the No Action 

Alternative results in the highest emissions, and emissions generally decline as fuel 

economy standards increase across alternatives. Exceptions to this declining trend are 

NOx under the Preferred Alternative (Alternative 4); PM2.5 under Alternatives 3 and 4, 

and Alternatives 8 and 9; SOx under Alternatives 3 (4-Percent Alternative) and 4

(Preferred Alternative); and VOCs under Alternative 4. Despite these individual 

increases, emissions of PM2.5, SOx, NOx, and VOCs remain below the levels under the 

No Action Alternative (Alternative 1). In the case of CO, emissions under Alternatives 2 

through 4 are slightly higher than under the No Action Alternative. Emissions of CO 

decline as fuel economy standards increase across Alternatives 5 through 9. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

234

As with criteria pollutants, emissions of most toxic air pollutants would decrease 

from one alternative to the next more stringent alternative. The exceptions are 

acetaldehyde emissions, which would increase under Alternative 4; acrolein emissions, 

which increase under each of the alternatives; benzene emissions, which would increase 

under Alternative 4; 1,3-butadiene, which would increase under Alternatives 2 and 4; 

diesel particulate matter (DPM), which would increase under Alternatives 3 and 4; and 

formaldehyde, which would increase under Alternatives 3, 5, 6, 8, and 9. The changes in 

toxic air pollutant emissions, whether positive or negative, generally would be small 

relative to Alternative 1 emissions levels.225 The exceptions are acetaldehyde emissions, 

which would decrease by more than 10 percent under Alternative 9; acrolein emissions, 

which would increase across successive alternatives (as noted above, the acrolein 

emissions are an upper-bound estimate and actual emissions might be less); benzene 

emissions, which would decrease by more than 10 percent under Alternatives 8 and 9; 

and DPM emissions, which would decrease by more than 10 percent under all action 

alternatives. 

Cumulative emissions generally would be less than noncumulative emissions for 

the same combination of pollutant, year, and alternative because of differing changes in 

VMT and fuel consumption under the cumulative case compared to the noncumulative 

case. The exceptions are acrolein for all alternatives except Alternative 9, and 1,3-

butadiene for all alternatives except Alternative 2 (3-Percent Alternative). 

The reductions in emissions are expected to lead to reductions in cumulative 

adverse health effects. There would be reductions in adverse health effects nationwide 

under Alternatives 2 (3-Percent Alternative) through 9 (TCTB) compared to the No 

Action Alternative. Reductions in adverse health effects decrease from Alternative 2 (3-

Percent Alternative) through Alternative 4 (Preferred Alternative), and then increase 

under Alternatives 5 (5-Percent Alternative through Alternative 9 (TCTB). These 

reductions primarily reflect the projected PM2.5 reductions, and secondarily the 

reductions in SO2. The economic value of health impacts would vary proportionally with 

changes in health outcomes. 

Climate change: As with the analysis of the direct and indirect effects of the 

proposed action and alternatives on climate change, for the cumulative impacts analysis 

this EIS uses MAGICC version 5.3.v2 to estimate the changes in CO2 concentrations, 

global mean surface temperature, and changes in sea level for each alternative CAFE 

standard. To estimate changes in global precipitation, NHTSA uses increases in global 

mean surface temperature combined with a scaling approach and coefficients from the 

IPCC Fourth Assessment Report. A sensitivity analysis was completed to examine the 

relationship among the alternatives and likely climate sensitivities, and the associated 

direct and indirect effects for each combination. These relationships can be used to infer 

 

225 These conclusions are not meant to be interpreted as expressing NHTSA’s views that impacts on air 

quality is not an area of concern for policymakers. Under NEPA, the agency is obligated to discuss “the 

environmental impact[s] of the proposed action.” 42 U.S.C. sec.§ 4332(2)(C)(i) (emphasis added). This 

analysis fulfills NHTSA’s obligations in this regard. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

235

the effect of emissions associated with the regulatory alternatives on direct and indirect 

climate effects. 

One of the key categories of inputs to MAGICC is a time series of global GHG 

emissions. In assessing the cumulative effects on climate, NHTSA used the CCSP SAP 

2.1 MiniCAM Level 3 scenario to represent a Reference Case global emission scenario, 

that is, future global emissions assuming significant global actions to address climate 

change. This Reference Case global emission scenario serves as a baseline against which 

the climate benefits of the various alternatives can be measured. 

The Reference Case global emissions scenario used in the cumulative impacts 

analysis (and described in Chapter 4 of this EIS) differs from the global emissions 

scenario used for the climate change modeling presented in Chapter 3. In Chapter 4, the 

Reference Case global emission scenario reflects reasonably foreseeable actions in global 

climate change policy; in Chapter 3, the global emissions scenario used for the analysis 

assumes that there are no significant global controls. Given that the climate system is 

non-linear, the choice of a global emissions scenario could produce different estimates of 

the benefits of the proposed action and alternatives, if the emission reductions of the 

alternatives were held constant. 

The SAP 2.1 MiniCAM Level 3 scenario assumes a moderate level of global 

GHG reductions, resulting in a global atmospheric CO2 concentration of roughly 650 

parts per million by volume (ppmv) as of 2100. The following regional, national, and 

international initiatives and programs are reasonably foreseeable actions to reduce GHG 

emissions: Regional Greenhouse Gas Initiative (RGGI); Western Climate Initiative 

(WCI); Midwestern Greenhouse Gas Reduction Accord; EPA’s Proposed GHG 

Emissions Standards; H.R. 2454: American Clean Energy and Security Act (“WaxmanMarkey Bill”); Renewable Fuel Standard (RFS2); Program Activities of DOE’s Office of 

Fossil Energy; Program Activities of DOE’s Office of Nuclear Energy; United Nation’s 

Framework Convention on Climate Change (UNFCCC) – The Kyoto Protocol and 

upcoming Conference of the Parties (COP) 15 in Copenhagen, Denmark; G8 Declaration 

– Summit 2009; and the Asia Pacific Partnership on Clean Development and Climate.226

 

The SAP 2.1 MiniCAM Level 3 scenario provides a global context for emissions of a full 

suite of GHGs and ozone precursors for a Reference Case harmonious with 

implementation of the above policies and initiatives. Each of the action alternatives was 

simulated by calculating the difference in annual GHG emissions in relation to the No 

Action Alternative, and subtracting this change in the MiniCAM Level 3 scenario to 

generate modified global-scale emissions scenarios, which each show the effect of the 

various regulatory alternatives on the global emissions path. 

 

226 The regional, national, and international initiatives and programs discussed above are those which 

NHTSA has tentatively concluded are reasonably foreseeable past, current, or future actions to reduce 

GHG emissions. Although some of the actions, policies, or programs listed are not associated with precise 

GHG reduction commitments, collectively they illustrate a current and continuing trend of U.S. and global 

awareness, emphasis, and efforts towards significant GHG reductions. Together they imply that future 

commitments for reductions are probable and, therefore, reasonably foreseeable under NEPA. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

236

NHTSA used the MiniCAM Level 3 scenario as the primary global emissions 

scenario for evaluating climate effects, and used the MiniCAM Level 2 scenario and the 

RCP 4.5 MiniCAM reference emissions scenario to evaluate the sensitivity of the results 

to alternative emission scenarios. The sensitivity analysis provides a basis for 

determining climate responses to varying levels of climate sensitivities and global 

emissions and under the No Action Alternative (Alternative 1) and the Preferred 

Alternative (Alternative 4). Some responses of the climate system are believed to be 

non-linear; by using a range of emissions cases and climate sensitivities, it is possible to 

estimate the effects of the alternatives in relation to different reference cases. 

Cumulative GHG emissions: Projections of GHG emissions reductions over the

2012 to 2100 period due to the MY 2012-2016 CAFE standards and other reasonably 

foreseeable future actions ranged from 27,164 to 44,626 MMTCO2. Compared to global 

emissions of 3,919,462 MMTCO2 over this period (projected by the SAP 2.1 MiniCAM

Level 3 scenario), the incremental impact of this rulemaking is expected to reduce global 

CO2 emissions by about 0.7 to 1.1 percent from their projected levels under the No 

Action Alternative. 

CO2 concentration, global mean surface temperature, sea-level rise, and 

precipitation: For the mid-range results of MAGICC model simulations for the No 

Action Alternative and the eight action alternatives in terms of CO2 concentrations and 

increase in global mean surface temperature in 2030, 2050, and 2100, the impact on the 

growth in CO2 concentrations and temperature is just a fraction of the total growth in CO2

concentrations and global mean surface temperature. However, the relative impact of the 

action alternatives is illustrated by the reduction in growth of both CO2 concentrations 

and temperature in the TCTB Alternative (Alternative 9). 

There is a fairly narrow band of estimated CO2 concentrations as of 2100, from 

653.5 ppm for the TCTB Alternative (Alternative 9) to 657.5 ppm for the No Action 

Alternative (Alternative 1). For 2030 and 2050, the range is even smaller. Because CO2

concentrations are the key driver of all other climate effects, this leads to small 

differences in these effects. 

The MAGICC simulations of mean global surface air temperature increases are 

also shown in Table S-18. For all alternatives, the cumulative global mean surface 

temperature increase is about 0.80 °C to 0.81 °C as of 2030; 1.32 to 1.33 °C as of 2050; 

and 2.59 to 2.61 °C as of 2100.227 The differences among alternatives are small. For 

2100, the reduction in temperature increase for the action alternatives in relation to the 

No Action Alternative is about 0.01 to 0.02 °C. 

The impact on sea-level rise in 2100 ranges from 32.84 centimeters under the No 

Action Alternative (Alternative 1) to 32.68 centimeters under the TCTB Alternative 

(Alternative 9), for a maximum reduction of 0.16 centimeter by 2100 from the action 

alternatives. 

 

227 Because the actual increase in global mean surface temperature lags the commitment to warming, the 

impact on global mean surface temperature increase is less than the long-term commitment to warming. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

237

Given that the action alternatives would reduce temperature increases slightly in 

relation to the No Action Alternative (Alternative 1), they also would reduce predicted 

increases in precipitation slightly. In summary, the impacts of the proposed action and 

alternatives and other reasonably foreseeable future actions on global mean surface 

temperature, sea-level rise, and precipitation are relatively small in the context of the 

expected changes associated with the emissions trajectories in the SRES scenarios.228 

This is due primarily to the global and multi-sectoral nature of the climate problem. 

 

NHTSA examined the sensitivity of climate effects on key assumptions used in 

the analysis. The two variables for which assumptions were varied were climate 

sensitivity and global emissions. 

Climate sensitivities used included 2.0, 3.0, and 4.5 °C for a doubling of CO2

concentrations in the atmosphere. Global emissions scenarios used included the SAP 2.1 

MiniCAM Level 3 (650 ppm as of 2100), the SAP 2.1 MiniCAM Level 2 (550 ppm as of 

2100), and RCP 4.5 MiniCAM reference scenario (783 ppm as of 2100). The sensitivity 

analysis is based on the results provided for two alternatives – the No Action Alternative 

(Alternative 1) and the Preferred Alternative (Alternative 4). The sensitivity analysis was 

conducted only for two alternatives, as this was deemed sufficient to assess the effect of 

various climate sensitivities on the results. 

The results of these simulations illustrate the uncertainty due to factors 

influencing future global emissions of GHGs (factors other than the CAFE rulemaking). 

The use of different climate sensitivities229 (the equilibrium warming that occurs at a 

doubling of CO2 from pre-industrial levels) can affect not only warming but also 

indirectly affect sea-level rise and CO2 concentration. The use of alternative global 

emissions scenarios can influence the results in several ways. Emissions reductions can 

lead to larger reductions in the CO2 concentrations in later years because more 

anthropogenic emissions can be expected to stay in the atmosphere. 

NHTSA’s analysis indicates that the sensitivity of the simulated CO2 emissions in 

2030, 2050, and 2100 to assumptions of global emissions and climate sensitivity is low; 

stated simply, CO2 emissions do not change much with changes in global emissions and 

climate sensitivity. For 2030 and 2050, the choice of global emissions scenario has little 

impact on the results. By 2100, the Preferred Alternative (Alternative 4) has the greatest 

 

228 These conclusions are not meant to be interpreted as expressing NHTSA’s views that impacts on global 

mean surface temperature, precipitation, or sea-level rise are not areas of concern for policymakers. Under 

NEPA, the agency is obligated to discuss “the environmental impact[s] of the proposed action.” 42 U.S.C. 

sec.§ 4332(2)(C)(i) (emphasis added). This analysis fulfills NHTSA’s obligations in this regard. 

229 Equilibrium climate sensitivity (or climate sensitivity) is the projected responsiveness of Earth’s global 

climate system to forcing from GHG drivers, and is often expressed in terms of changes to global surface 

temperature resulting from a doubling of CO2 in relation to pre-industrial atmospheric concentrations. 

According to IPCC, using a likely emissions scenario that results in a doubling of the concentration of 

atmospheric CO2, there is a 66- to 90-percent probability of an increase in surface warming of 2.5 to 4.0 °C 

by the end of the century (relative to 1990 average global temperatures), with 3 °C as the single most likely 

surface temperature increase. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

238

impact in the global emissions scenario with the highest CO2 emissions (MiniCAM 

Reference) and the least impact in the scenario with the lowest CO2 emissions 

(MiniCAM Level 2). The total range of the impact of the Preferred Alternative on CO2

concentrations in 2100 is from 2.2 to 2.6 ppm. The Reference Case using the MiniCAM 

Level 3 scenario and a 3.0 °C climate sensitivity has an impact of 2.4 ppm. 

The sensitivity of the simulated global mean surface temperatures for 2030 is also 

low due primarily to the slow rate at which the global mean surface temperature increases 

in response to increases in radiative forcing. The relatively slow response in the climate 

system explains the observation that even by 2100, when CO2 concentrations more than 

double in comparison to pre-industrial levels, the temperature increase is below the 

equilibrium sensitivity levels, i.e., the climate system has not had enough time to 

equilibrate to the new CO2 concentrations. Nonetheless, as of 2100 there is a larger range 

in temperatures across the different values of climate sensitivity: the reduction in global 

mean surface temperature from the No Action Alternative to the Preferred Alternative 

ranges from 0.008 °C for the 2.0 °C climate sensitivity to 0.012 °C for the 4.5 °C climate 

sensitivity, for the MiniCAM Level 3 emissions scenario. 

The impact on global mean surface temperature due to assumptions concerning 

global emissions of GHGs is also important. The scenario with the higher global 

emissions of GHGs (viz., the MiniCAM Reference) has a slightly lower reduction in 

global mean surface temperature, and the scenario with lower global emissions (viz., the 

MiniCAM Level 2) has a slightly higher reduction. This is in large part due to the nonlinear and near-logarithmic relationship between radiative forcing and CO2

concentrations. At high emissions levels, CO2 concentrations are higher and, as a result, 

a fixed reduction in emissions yields a lower reduction in radiative forcing and global 

mean surface temperature. 

The sensitivity of the simulated sea-level rise to changes in climate sensitivity and 

global GHG emissions mirrors that of global temperature. Scenarios with lower climate 

sensitivities have lower increases in sea-level rise. The greater the climate sensitivity, the 

greater the decrement in sea-level rise for the Preferred Alternative as compared to the 

No Action Alternative. 

Resource impacts of climate change: The effects of the alternatives on climate – 

CO2 concentrations, temperature, precipitation, and sea-level rise – can translate into 

impacts on key resources including terrestrial and freshwater ecosystems; marine, coastal 

systems, and low-lying areas; food, fiber, and forest products; industries, settlements, and 

society; and human health. Although the alternatives have the potential to substantially 

decrease GHG emissions, they would not alone prevent climate change from occurring. 

The magnitude of the changes in climate effects that the alternatives would produce – two 

to five parts per million of CO2, a few hundredths of a degree Celsius difference in 

temperature, a small percentage change in the rate of precipitation increase, and 1 or 2 

millimeters of sea-level rise – are too small to address quantitatively in terms of their 

impacts on resources. Given the enormous resource values at stake, these distinctions 

could be important – very small percentages of huge numbers can still yield substantial 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

239

results – but they are too small for current quantitative techniques to resolve. 

Consequently, the discussion of resource impacts does not distinguish among the CAFE 

alternatives; rather, it provides a qualitative review of the benefits of reducing GHG 

emissions and the magnitude of the risks involved in climate change.230 

NHTSA examined the impacts resulting from global climate change due to all 

global emissions on the U.S. and global scale. Impacts to freshwater resources could 

include changes in precipitation patterns, decreasing aquifer recharge in some locations, 

changes in snowpack and timing of snowmelt, salt-water intrusion from sea-level 

changes, changes in weather patterns resulting in flooding or drought in certain regions, 

increased water temperature, and numerous other changes to freshwater systems that 

disrupt human use and natural aquatic habitats. Impacts to terrestrial ecosystems could 

include shifts in species range and migration patterns, potential extinctions of sensitive 

species unable to adapt to changing conditions, increases in the occurrence of forest fires 

and pest infestation, and changes in habitat productivity because of increased atmospheric 

CO2. Impacts to coastal ecosystems, primarily from predicted sea-level rise, could 

include the loss of coastal areas due to submersion and erosion, additional impacts from 

severe weather and storm surges, and increased salinization of estuaries and freshwater 

aquifers. Impacts to land use and several key economic sectors could include flooding 

and severe-weather impacts to coastal, floodplain, and island settlements; extreme heat 

and cold waves; increases in drought in some locations; and weather- or sea-level related 

disruptions of the service, agricultural, and transportation sectors. Impacts to human 

health could include increased mortality and morbidity due to excessive heat, increases in 

respiratory conditions due to poor air quality, increases in water and food-borne diseases, 

changes to the seasonal patterns of vector-borne diseases, and increases in malnutrition. 

Non-climate cumulative impacts of CO2 emissions: In addition to its role as a 

GHG in the atmosphere, CO2 is transferred from the atmosphere to water, plants, and 

soil. In water, CO2 combines with water molecules to form carbonic acid. When CO2 

dissolves in seawater, a series of well-known chemical reactions begin that increase the 

concentration of hydrogen ions and make seawater more acidic, which has adverse 

effects on corals and some other marine life. 

Increased concentrations of CO2 in the atmosphere can also stimulate plant 

growth to some degree, a phenomenon known as the CO2 fertilization effect. This effect 

could have positive ramifications for agricultural productivity and forest growth. The 

available evidence indicates that different plants respond in different ways to enhanced 

CO2 concentrations. 

 

230 See 42 U.S.C. sec.§ 4332 (requiring federal agencies to “identify and develop methods and procedures 

... which will insure that presently unquantified environmental amenities and values may be given 

appropriate consideration”); 40 CFR § 1502.23 (requiring an EIS to discuss the relationship between a costbenefit analysis and any analyses of unquantified environmental impacts, values, and amenities); CEQ, 

Considering Cumulative Effects Under the National Environmental Policy Act (1984), available at

http://ceq.hss.doe.gov/nepa/ccenepa/ccenepa.htm (recognizing that agencies are sometimes “limited to 

qualitative evaluations of effects because cause-and-effect relationships are poorly understood” or cannot 

be quantified).
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

240

As with the climate effects of CO2, the changes in non-climate impacts associated 

with the alternatives are difficult to assess quantitatively. Whether the distinction in 

concentrations is substantial across alternatives is not clear because the damage functions 

and potential existence of thresholds for CO2 concentration are not known. However, 

what is clear is that a reduction in the rate of increase in atmospheric CO2, which all the 

action alternatives would provide to some extent, would reduce the ocean acidification 

effect and the CO2 fertilization effect. 

 For much more information on NHTSA’s NEPA analysis, please see the DEIS. 

 3. Regulatory Flexibility Act

 Pursuant to the Regulatory Flexibility Act (5 U.S.C. sec.§ 601 et seq., as amended 

by the Small Business Regulatory Enforcement Fairness Act (SBREFA) of 1996), 

whenever an agency is required to publish a notice of rulemaking for any proposed or 

final rule, it must prepare and make available for public comment a regulatory flexibility 

analysis that describes the effect of the rule on small entities (i.e., small businesses, small 

organizations, and small governmental jurisdictions). The Small Business 

Administration’s regulations at 13 CFR part 121 define a small business, in part, as a 

business entity “which operates primarily within the United States.” 13 CFR §

121.105(a). No regulatory flexibility analysis is required if the head of an agency 

certifies the rule will not have a significant economic impact on a substantial number of 

small entities. 

 I certify that the proposed rule would not have a significant economic impact on a 

substantial number of small entities. The following is NHTSA’s statement providing the 

factual basis for the certification (5 U.S.C. sec.§ 605(b)). 

If adopted, the proposal would directly affect twenty-one large single stage motor 

vehicle manufacturers.231 The proposal would also affect two small domestic single stage 

motor vehicle manufacturers, Saleen and Tesla.232 According to the Small Business 

Administration’s small business size standards (see 13 CFR § 121.201), a single stage 

automobile or light truck manufacturer (NAICS code 336111, Automobile 

Manufacturing; 336112, Light Truck and Utility Vehicle Manufacturing) must have 

1,000 or fewer employees to qualify as a small business. Both Saleen and Tesla have less 

than 1,000 employees and make less than 1,000 vehicles per year. We believe that the 

rulemaking would not have a significant economic impact on these small vehicle 

manufacturers because under Part 525, passenger car manufacturers making less than 

10,000 vehicles per year can petition NHTSA to have alternative standards set for those 

manufacturers. Tesla produces only electric vehicles with fuel economy values far 

beyond those proposed today, so we would not expect them to need to petition for relief. 

Saleen modifies a very small number of vehicles produced by one of the 21 large single-

 

231 BMW, Daimler (Mercedes), Chrysler, Ferrari, Ford, Subaru, General Motors, Honda, Hyundai, Kia, 

Lotus, Maserati, Mazda, Mitsubishi, Nissan, Porsche, Subaru, Suzuki, Tata, Toyota, and Volkswagen. 

232 The Regulatory Flexibility Act only requires analysis of small domestic manufacturers. There are two

passenger car manufacturers that we know of, Saleen and Tesla, and no light truck manufacturers. 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

241

stage manufacturers, and currently does not meet the 27.5 mpg passenger car standard, 

nor is it anticipated to be able to meet the standards proposed today. However, Saleen 

already petitions the agency for relief. If the standard is raised, it has no meaningful 

impact on Saleen, because it must still go through the same process to petition for relief. 

Given that there already is a mechanism for handling small businesses, which is the 

purpose of the Regulatory Flexibility Act, a regulatory flexibility analysis was not 

prepared. 

 

 4. Executive Order 13132 (Federalism)

Executive Order 13132 requires NHTSA to develop an accountable process to

ensure “meaningful and timely input by State and local officials in the 

development of 

regulatory policies that have federalism implications.” The Order defines the term 

“Policies that have federalism implications” to include regulations that have 

“substantial 

direct effects on the States, on the relationship between the national government 

and the 

States, or on the distribution of power and responsibilities among the various 

levels of 

government.” Under the Order, NHTSA may not issue a regulation that has 

federalism 

implications, that imposes substantial direct compliance costs, and that is not 

required by 

statute, unless the Federal government provides the funds necessary to pay the 

direct 

compliance costs incurred by State and local governments, or NHTSA consults 

with State 

and local officials early in the process of developing the proposed regulation. 

NHTSA solicits comment on this proposed action from State and local officials. 

In his January 26 memorandum, the President requested NHTSA to “consider whether 

any provisions regarding preemption are consistent with the EISA, the Supreme Court's 

decision in Massachusetts v. EPA and other relevant provisions of law and the policies 

underlying them.” NHTSA is deferring consideration of the preemption issue. The 

agency believes that it is unnecessary to address the issue further at this time because of 

the consistent and coordinated federal standards that would apply nationally under the 

proposed National Program. 

 5. Executive Order 12988 (Civil Justice Reform)

Formatted: Don't adjust space between Latin

and Asian text, Don't adjust space between

Asian text and numbers
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

242

 Pursuant to Executive Order 12988, “Civil Justice Reform,”233 NHTSA has 

considered whether this rulemaking would have any retroactive effect. This proposed 

rule does not have any retroactive effect. 

 6. Unfunded Mandates Reform Act

 Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) requires 

Federal agencies to prepare a written assessment of the costs, benefits, and other effects 

of a proposed or final rule that includes a Federal mandate likely to result in the 

expenditure by State, local, or tribal governments, in the aggregate, or by the private 

sector, of more than $100 million in any one year (adjusted for inflation with base year of 

1995). Adjusting this amount by the implicit gross domestic product price deflator for 

2006 results in $126 million (116.043/92.106 = 1.26). Before promulgating a rule for 

which a written statement is needed, section 205 of UMRA generally requires NHTSA to 

identify and consider a reasonable number of regulatory alternatives and adopt the least 

costly, most cost-effective, or least burdensome alternative that achieves the objectives of 

the rule. The provisions of section 205 do not apply when they are inconsistent with 

applicable law. Moreover, section 205 allows NHTSA to adopt an alternative other than 

the least costly, most cost-effective, or least burdensome alternative if the agency 

publishes with the final rule an explanation why that alternative was not adopted. 

 This proposed rule will not result in the expenditure by State, local, or tribal 

governments, in the aggregate, of more than $126 million annually, but it will result in 

the expenditure of that magnitude by vehicle manufacturers and/or their suppliers. In 

promulgating this proposal, NHTSA considered a variety of alternative average fuel 

economy standards lower and higher than those proposed. NHTSA is statutorily required 

to set standards at the maximum feasible level achievable by manufacturers based on its 

consideration and balancing of relevant factors and has tentatively concluded that the 

proposed fuel economy standards are the maximum feasible standards for the passenger 

car and light truck fleets for MYs 2012-2016 in light of the statutory considerations. 

 7. Paperwork Reduction Act

Under the procedures established by the Paperwork Reduction Act of 1995, a

person is not required to respond to a collection of information by a Federal agency

unless the collection displays a valid OMB control number. This section describes a 

request for clearance for a collection of information associated with product plan 

information to assist the agency in developing final corporate average fuel economy 

standards for MY 2012 through 2016 passenger cars and light trucks. The establishment 

of those standards is required by the Energy Policy and Conservation Act, as amended by 

the Energy Independence and Security Act (EISA) of 2007, P.L. 110-140. In compliance 

with the PRA, this notice requests comment on the Information Collection Request (ICR) 

abstracted below. The ICR describes the nature of the information collection and its 

expected burden. This is a request for an extension of an existing collection.

 

233 61 FR 4729 (Feb. 7, 1996). 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

243

Agency: National Highway Traffic Safety Administration (NHTSA).

Title: 49 CFR Parts 531 and 533 Passenger Car Average Fuel Economy 

Standards -- Model Years 2008-2020; Light Truck Average Fuel Economy Standards –

Model Years 2008-2020; Production Plan Data 

Type of Request: Extension of existing collection.

OMB Clearance Number: 2127-0655.

Form Number: This collection of information will not use any standard forms.

Summary of the Collection of Information

In this collection of information, NHTSA is requesting any updates to 

previously-submitted future product plans from vehicle manufacturers, as well as 

production data through the recent past, including data about engines and transmissions 

for model year (MY) 2008 through MY 2020 passenger cars and light trucks and the 

assumptions underlying those plans. If manufacturers have not previously submitted 

product plan information to NHTSA and wish to do so, NHTSA also requests such 

information from them.

NHTSA requests information for MYs 2008-2020 to supplement other 

information used by NHTSA in developing a realistic forecast of the MY 2012-2016 

vehicle market, and in evaluating what technologies may feasibly be applied by 

manufacturers to achieve compliance with the MY 2012-2016 standards. Information 

regarding earlier model years may help the agency to better account for cumulative 

effects such as volume-and time-based reductions in costs, and also may help to reveal 

product mix and technology application trends during model years for which the agency 

is currently receiving actual corporate average fuel economy (CAFE) compliance data. 

Information regarding later model years may help the agency gain a better understanding 

of how manufacturers’ plans through MY 2016 relate to their longer-term expectations 

regarding Energy Independence and Security Act requirements, market trends, and 

prospects for more advanced technologies.

NHTSA will also consider information from model years before and after MYs 

2012-2016 when reviewing manufacturers’ planned schedules for redesigning and 

freshening their products, in order to examine how manufacturers anticipate tying 

technology introduction to product design schedules and to consider how the agency 

should account for those schedules in its analysis for the final rule. In addition, the 

agency is requesting information regarding manufacturers’ estimates of the future vehicle 

population, and fuel economy improvements and incremental costs attributed to this 

notice.

Description of the Need for the Information and Use of the Information

Formatted: Indent: First line: 0.5", No

bullets or numbering
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

244

NHTSA needs the information described above to aid in assessing what CAFE 

standards should be established for MY 2012 through 2016 passenger cars and light 

trucks. 

Description of the Likely Respondents (Including Estimated Number, and Proposed

Frequency of Response to the Collection of Information)

It is estimated that this collection affects approximately 22 motor vehicle 

manufacturers. The information that is the subject of this collection of information is 

collected whenever NHTSA publishes a notice of proposed rulemaking for the purpose of 

setting CAFE standards. 

Estimate of the Total Annual Reporting and Recordkeeping Burden Resulting from 

the Collection of Information

It is estimated that this collection affects approximately 22 vehicle manufacturers. 

One major manufacturer (General Motors) estimated their burden to be approximately 

4,300 hours. The burden to other manufacturers was estimated using sales weights 

relative to General Motor’s total sales (e.g., if a manufacturer produces 50 percent as 

many vehicles as General Motors, their burden is estimated to be 4,300 * 0.5 = 2150 

hours). Therefore the burden to each manufacturer depends on the number of vehicles 

that manufacturer produces. The total estimated burden is 16,000 hours annually.

Formatted: Indent: Left: 0"
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

245

Number of Affected Vehicle Manufacturers................ 22

Annual Labor Hours for Each Manufacturer to Prepare

and Submit Required Information............................ Variable

Total Annual Information Collection Burden............... 16,000 Hours

The monetized cost associated with this information collection is determined by 

multiplying the total labor hours by an appropriate labor rate. For this information 

collection, we believe vehicle manufacturers will use mechanical engineers to prepare 

and submit the data. Therefore, we are applying a labor rate of $36.02 per hour which is 

the median national wage for mechanical engineers.234 Thus, the estimated monetized 

annual cost is 16,000 hours x $36.02 per hour = $576,320.

Comments are specifically sought on the following issues:

• Whether the collection of information is necessary for the proper performance of 

the functions of the Department, including whether the information will have 

practical utility.

• Whether the Department’s estimate for the burden of the information collection is 

accurate.

• Ways to minimize the burden of the collection of information on respondents, 

including the use of automated collection techniques or other forms of 

information technology.

Please send comments to the docket number cited in the heading of this notice. 

PRA comments are due within 60 days following publication of this document in the 

FEDERAL REGISTER. The agency recognizes that the amendment to the existing 

collection of information may be subject to revision in response to public comments and 

the OMB review.

For further information on this proposal to extend the collection of information, 

please contact Ken Katz, Fuel Economy Division, Office of International Policy, Fuel 

Economy, and Consumer Programs, National Highway Traffic Safety Administration, 

1200 New Jersey Avenue, SE, Washington, DC 20590. You may also contact him by 

phone at (202) 366-0846 or by fax at (202) 493-2290.

[Does anything in the reg text trigger this? Confirm.]

 8. Regulation Identifier Number

 

234 The national median hourly rate for mechanical engineers, May 2008, according to the Bureau of Labor 

Statistics, is $36.02. See http://www.bls.gov/oes/2008/may/oes_nat.htm#b17-0000 (last accessed August 

26, 2009). 

Formatted: Bullets and Numbering
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

246

 The Department of Transportation assigns a regulation identifier number (RIN) to 

each regulatory action listed in the Unified Agenda of Federal Regulations. The 

Regulatory Information Service Center publishes the Unified Agenda in April and 

October of each year. You may use the RIN contained in the heading at the beginning of 

this document to find this action in the Unified Agenda. 

 9. Executive Order 13045

 Executive Order 13045235 applies to any rule that: (1) Is determined to be

economically significant as defined under E.O. 12866, and (2) concerns an 

environmental, health, or safety risk that NHTSA has reason to believe may have a 

disproportionate effect on children. If the regulatory action meets both criteria, we must 

evaluate the environmental health or safety effects of the proposed rule on children, and 

explain why the proposed regulation is preferable to other potentially effective and 

reasonably foreseeable alternatives considered by us. 

Chapter 4 of NHTSA’s DEIS notes that breathing PM can cause respiratory 

ailments, heart attack, and arrhythmias (Dockery et al. 1993, Samet et al. 2000, Pope et 

al. 1995, 2002, 2004, Pope and Dockery 2006, Dominici et al. 2006, Laden et al. 2006, 

all in Ebi et al. 2008). Populations at greatest risk could include children, the elderly, and 

those with heart and lung disease, diabetes (Ebi et al. 2008), and high blood pressure 

(Künzli et al. 2005, in Ebi et al. 2008). Chronic exposure to PM could decrease lifespan 

by 1 to 3 years (Pope 2000, in American Lung Association 2008). Increasing PM 

concentrations are expected to have a measurable adverse impact on human health 

(Confalonieri et al. 2007). 

Additionally, the DEIS notes that substantial morbidity and childhood mortality 

has been linked to water- and food-borne diseases. Climate change is projected to alter 

temperature and the hydrologic cycle through changes in precipitation, evaporation, 

transpiration, and water storage. These changes, in turn, potentially affect water-borne 

and food-borne diseases, such as salmonellosis, campylobacter, leptospirosis, and 

pathogenic species of vibrio. They also have a direct impact on surface water availability 

and water quality. It has been estimated that more than 1 billion people in 2002 did not 

have access to adequate clean water (McMichael et al. 2003, in Epstein et al. 2006). 

Increased temperatures, greater evaporation, and heavy rain events have been associated 

with adverse impacts on drinking water through increased waterborne diseases, algal 

blooms, and toxins (Chorus and Bartram 1999, Levin et al. 2002, Johnson and Murphy 

2004, all in Epstein et al. 2006). A seasonal signature has been associated with 

waterborne disease outbreaks (EPA 2009b). In the United States, 68 percent of all 

waterborne diseases between 1948 and 1994 were observed after heavy rainfall events 

(Curriero et al. 2001a, in Epstein et al. 2006). 

Climate change could further impact a pathogen by directly affecting its life cycle 

(Ebi et al. 2008). The global increase in the frequency, intensity, and duration of red 

tides could be linked to local impacts already associated with climate change (Harvell et 

 

235 62 FR 19885 (Apr. 23, 1997). 
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

247

al. 1999, in Epstein et al. 2006); toxins associated with red tide directly affect the nervous 

system (Epstein et al. 2006). 

Many people do not report or seek medical attention for their ailments of waterborne or food-borne diseases; hence, the number of actual cases with these diseases is 

greater than clinical records demonstrate (Mead et al. 1999, in Ebi et al. 2008). Many of 

the gastrointestinal diseases associated with water-borne and food-borne diseases can be 

self-limiting; however, vulnerable populations include young children, those with a 

compromised immune system, and the elderly. 

Thus, as detailed in the DEIS, NHTSA has evaluated the environmental health 

and safety effects of the proposed rule on children. The DEIS also explains why the 

proposed regulation is preferable to other potentially effective and reasonably foreseeable 

alternatives considered by the agency. 

 10. National Technology Transfer and Advancement Act

 Section 12(d) of the National Technology Transfer and Advancement Act 

(NTTAA) requires NHTA to evaluate and use existing voluntary consensus standards in 

its regulatory activities unless doing so would be inconsistent with applicable law (e.g., 

the statutory provisions regarding NHTSA’s vehicle safety authority) or otherwise 

impractical. 

 Voluntary consensus standards are technical standards developed or adopted by 

voluntary consensus standards bodies. Technical standards are defined by the NTTAA as 

“performance-base or design-specific technical specification and related management 

systems practices.” They pertain to “products and processes, such as size, strength, or 

technical performance of a product, process or material.” 

 Examples of organizations generally regarded as voluntary consensus standards 

bodies include the American Society for Testing and Materials (ASTM), the Society of 

Automotive Engineers (SAE), and the American National Standards Institute (ANSI). If 

NHTSA does not use available and potentially applicable voluntary consensus standards, 

we are required by the Act to provide Congress, through OMB, an explanation of the 

reasons for not using such standards. 

 There are currently no voluntary consensus standards relevant to today’s proposed 

CAFE standards. 

 11. Executive Order 13211
DRAFT – DELIBERATIVE – PRIVILEGED AND CONFIDENTIAL 

248

 Executive Order 13211236 applies to any rule that: (1) Is determined to be

economically significant as defined under E.O. 12866, and is likely to have a significant 

adverse effect on the supply, distribution, or use of energy; or (2) that is designated by the 

Administrator of the Office of Information and Regulatory Affairs as a significant energy 

action. If the regulatory action meets either criterion, we must evaluate the adverse 

energy effects of the proposed rule and explain why the proposed regulation is preferable 

to other potentially effective and reasonably feasible alternatives considered by us. 

 The proposed rule seeks to establish passenger car and light truck fuel economy 

standards that will reduce the consumption of petroleum and will not have any adverse 

energy effects. Accordingly, this proposed rulemaking action is not designated as a 

significant energy action. 

 12. Department of Energy Review

 In accordance with 49 U.S.C. sec. § 32902(j)(1), we submitted this proposed rule 

to the Department of Energy for review. That Department did not make any comments 

that we have not addressed. [Confirm before publishing] 

13. Plain Language

 Executive Order 12866 requires each agency to write all rules in plain language. 

Application of the principles of plain language includes consideration of the following 

questions: 

• Have we organized the material to suit the public’s needs? 

• Are the requirements in the rule clearly stated? 

• Does the rule contain technical language or jargon that isn’t clear? 

• Would a different format (grouping and order of sections, use of headings, 

paragraphing) make the rule easier to understand? 

• Would more (but shorter) sections be better? 

• Could we improve clarity by adding tables, lists, or diagrams? 

• What else could we do to make the rule easier to understand? 

 If you have any responses to these questions, please include them in your 

comments on this proposal. 

 

 14. Privacy Act

 Anyone is able to search the electronic form of all comments received into any of 

our dockets by the name of the individual submitting the comment (or signing the 

comment, if submitted on behalf of an organization, business, labor union, etc.). You 

may review DOT’s complete Privacy Act statement in the Federal Register (65 FR 

19477-78, April 11, 2000) or you may visit http://www.dot.gov/privacy.html. 

 

236 66 FR 28355 (May 18, 2001). 
Page 48: [1] Formatted rebecca.yoon 8/31/2009 5:02:00 PM 

Font: 12 pt 

Page 48: [2] Formatted rebecca.yoon 8/31/2009 5:02:00 PM 

Font: 12 pt 

Page 48: [3] Formatted rebecca.yoon 8/31/2009 5:02:00 PM 

Font: 12 pt 

Page 48: [4] Formatted rebecca.yoon 8/31/2009 5:02:00 PM 

Font: 12 pt 

Page 48: [5] Formatted rebecca.yoon 8/31/2009 5:02:00 PM 

Font: 12 pt 

Page 48: [6] Formatted rebecca.yoon 8/31/2009 5:02:00 PM 

Font: 12 pt 

Page 48: [7] Formatted rebecca.yoon 8/31/2009 5:02:00 PM 

Font: 12 pt 

Page 48: [8] Formatted rebecca.yoon 8/31/2009 5:02:00 PM 

Font: 12 pt 

Page 48: [9] Formatted rebecca.yoon 8/31/2009 5:02:00 PM 

Font: 12 pt 

Page 48: [10] Formatted rebecca.yoon 8/31/2009 5:02:00 PM 

Font: 12 pt 

Page 48: [11] Formatted rebecca.yoon 8/31/2009 5:02:00 PM 

Font: 12 pt 

Page 48: [12] Formatted rebecca.yoon 8/31/2009 5:02:00 PM 

Font: 12 pt 

Page 48: [13] Formatted rebecca.yoon 8/31/2009 5:02:00 PM 

Font: 12 pt 

Page 48: [14] Formatted rebecca.yoon 8/31/2009 5:02:00 PM 

Font: 12 pt 

Page 48: [15] Formatted rebecca.yoon 8/31/2009 5:02:00 PM 

Font: 12 pt 

Page 48: [16] Formatted rebecca.yoon 8/31/2009 5:02:00 PM 

Font: 12 pt 

Page 48: [17] Formatted rebecca.yoon 8/31/2009 5:02:00 PM 

Font: 12 pt 

Page 48: [18] Formatted rebecca.yoon 8/31/2009 5:02:00 PM 

Font: 12 pt 

Page 48: [19] Formatted rebecca.yoon 8/31/2009 5:02:00 PM 

Font: 12 pt 
Font: 12 pt 

Page 48: [21] Formatted rebecca.yoon 8/31/2009 5:02:00 PM 

Font: 12 pt 

Page 48: [22] Formatted rebecca.yoon 8/31/2009 5:02:00 PM 

Font: 12 pt 

Page 48: [23] Formatted rebecca.yoon 8/31/2009 5:02:00 PM 

Font: 12 pt 

Page 48: [24] Formatted rebecca.yoon 8/31/2009 5:02:00 PM 

Font: 12 pt 

Page 48: [25] Formatted rebecca.yoon 8/31/2009 5:02:00 PM 

Font: 12 pt 

Page 48: [26] Formatted rebecca.yoon 8/31/2009 5:02:00 PM 

Font: 12 pt 

Page 48: [27] Formatted rebecca.yoon 8/31/2009 5:02:00 PM 

Font: 12 pt 

Page 48: [28] Formatted rebecca.yoon 8/31/2009 5:02:00 PM 

Font: 12 pt 

Page 48: [29] Formatted rebecca.yoon 8/31/2009 5:02:00 PM 

Font: 12 pt 

Page 48: [30] Formatted rebecca.yoon 8/31/2009 5:02:00 PM 

Font: 12 pt 

Page 48: [31] Formatted rebecca.yoon 8/31/2009 5:02:00 PM 

Font: 12 pt 

Page 48: [32] Formatted rebecca.yoon 8/31/2009 5:02:00 PM 

Font: 12 pt 

Page 48: [33] Formatted rebecca.yoon 8/31/2009 5:02:00 PM 

Font: 12 pt 

Page 48: [34] Formatted rebecca.yoon 8/31/2009 5:02:00 PM 

Font: 12 pt 

Page 48: [35] Formatted rebecca.yoon 8/31/2009 5:02:00 PM 

Font: 12 pt 

Page 48: [36] Formatted rebecca.yoon 8/31/2009 5:02:00 PM 

Font: 12 pt 

Page 48: [37] Formatted rebecca.yoon 8/31/2009 5:02:00 PM 

Font: 12 pt 

Page 48: [38] Formatted rebecca.yoon 8/31/2009 5:02:00 PM 

Font: 12 pt 

Page 48: [39] Formatted rebecca.yoon 8/31/2009 5:02:00 PM 

F12 
Page 48: [40] Formatted rebecca.yoon 8/31/2009 5:02:00 PM 

Font: 12 pt 

Page 48: [41] Formatted rebecca.yoon 8/31/2009 5:02:00 PM 

Font: 12 pt 

Page 48: [42] Formatted rebecca.yoon 8/31/2009 5:02:00 PM 

Font: 12 pt 

Page 48: [43] Formatted rebecca.yoon 8/31/2009 5:02:00 PM 

Font: 12 pt 

Page 48: [44] Formatted rebecca.yoon 8/31/2009 5:02:00 PM 

Font: 12 pt 

Page 48: [45] Formatted rebecca.yoon 8/31/2009 5:02:00 PM 

Font: 12 pt 

Page 48: [46] Formatted rebecca.yoon 8/31/2009 5:02:00 PM 

Font: 12 pt 

Page 48: [47] Formatted rebecca.yoon 8/31/2009 5:02:00 PM 

Font: 12 pt 

Page 48: [48] Formatted rebecca.yoon 8/31/2009 5:02:00 PM 

Font: 12 pt 

Page 48: [49] Formatted rebecca.yoon 8/31/2009 5:02:00 PM 

Font: 12 pt 

Page 79: [50] Formatted rebecca.yoon 8/31/2009 5:10:00 PM 

Font: 12 pt 

Page 79: [51] Formatted rebecca.yoon 8/31/2009 5:10:00 PM 

Font: 12 pt 

Page 79: [52] Formatted rebecca.yoon 8/31/2009 5:10:00 PM 

Font: 12 pt 

Page 79: [53] Formatted rebecca.yoon 8/31/2009 5:10:00 PM 

Font: 12 pt 

Page 79: [54] Formatted rebecca.yoon 8/31/2009 5:10:00 PM 

Font: 12 pt 

Page 79: [55] Formatted rebecca.yoon 8/31/2009 5:10:00 PM 

Font: 12 pt 

Page 79: [56] Formatted rebecca.yoon 8/31/2009 5:10:00 PM 

Font: 12 pt 

Page 79: [57] Formatted rebecca.yoon 8/31/2009 5:10:00 PM 

Font: 12 pt 

Page 79: [58] Formatted rebecca.yoon 8/31/2009 5:10:00 PM 

Font: 12 pt 
Font: 12 pt 

Page 79: [60] Formatted rebecca.yoon 8/31/2009 5:10:00 PM 

Font: 12 pt 

Page 79: [61] Formatted rebecca.yoon 8/31/2009 5:10:00 PM 

Font: 12 pt 

Page 79: [62] Formatted rebecca.yoon 8/31/2009 5:10:00 PM 

Font: 12 pt 

Page 79: [63] Formatted rebecca.yoon 8/31/2009 5:10:00 PM 

Font: 12 pt 

Page 79: [64] Formatted rebecca.yoon 8/31/2009 5:10:00 PM 

Font: 12 pt 

Page 79: [65] Formatted rebecca.yoon 8/31/2009 5:10:00 PM 

Font: 12 pt 

Page 79: [66] Formatted rebecca.yoon 8/31/2009 5:10:00 PM 

Font: 12 pt 

Page 79: [67] Formatted rebecca.yoon 8/31/2009 5:10:00 PM 

Font: 12 pt 

Page 79: [68] Formatted rebecca.yoon 8/31/2009 5:10:00 PM 

Font: 12 pt 

Page 79: [69] Formatted rebecca.yoon 8/31/2009 5:10:00 PM 

Font: 12 pt 

Page 79: [70] Formatted rebecca.yoon 8/31/2009 5:10:00 PM 

Font: 12 pt 

Page 79: [71] Formatted rebecca.yoon 8/31/2009 5:10:00 PM 

Font: 12 pt 

Page 79: [72] Formatted rebecca.yoon 8/31/2009 5:10:00 PM 

Font: 12 pt 

Page 79: [73] Formatted rebecca.yoon 8/31/2009 5:10:00 PM 

Font: 12 pt 

Page 79: [74] Formatted rebecca.yoon 8/31/2009 5:10:00 PM 

Font: 12 pt 

Page 79: [74] Formatted rebecca.yoon 8/31/2009 5:10:00 PM 

Font: 12 pt 

Page 79: [75] Formatted rebecca.yoon 8/31/2009 5:10:00 PM 

Font: 12 pt 

Page 79: [76] Formatted rebecca.yoon 8/31/2009 5:10:00 PM 

Font: 12 pt 

Page 79: [77] Formatted rebecca.yoon 8/31/2009 5:10:00 PM 

F12 
Page 79: [77] Formatted rebecca.yoon 8/31/2009 5:10:00 PM 

Font: 12 pt 

Page 79: [78] Formatted rebecca.yoon 8/31/2009 5:10:00 PM 

Font: 12 pt 

Page 79: [79] Formatted rebecca.yoon 8/31/2009 5:10:00 PM 

Font: 12 pt 

Page 79: [79] Formatted rebecca.yoon 8/31/2009 5:10:00 PM 

Font: 12 pt 

Page 79: [80] Formatted rebecca.yoon 8/31/2009 5:10:00 PM 

Font: 12 pt 

Page 79: [81] Formatted rebecca.yoon 8/31/2009 5:10:00 PM 

Font: 12 pt 

Page 79: [81] Formatted rebecca.yoon 8/31/2009 5:10:00 PM 

Font: 12 pt 

Page 79: [82] Formatted rebecca.yoon 8/31/2009 5:10:00 PM 

Font: 12 pt 

Page 79: [83] Formatted rebecca.yoon 8/31/2009 5:10:00 PM 

Font: 12 pt 

Page 79: [83] Formatted rebecca.yoon 8/31/2009 5:10:00 PM 

Font: 12 pt 

Page 79: [84] Formatted rebecca.yoon 8/31/2009 5:10:00 PM 

Font: 12 pt 

Page 79: [85] Formatted rebecca.yoon 8/31/2009 5:10:00 PM 

Font: 12 pt 

Page 79: [86] Formatted rebecca.yoon 8/31/2009 5:10:00 PM 

Font: 12 pt 

Page 79: [87] Formatted rebecca.yoon 8/31/2009 5:10:00 PM 

Font: 12 pt 

Page 79: [88] Formatted rebecca.yoon 8/31/2009 5:10:00 PM 

Font: 12 pt 

Page 79: [89] Formatted rebecca.yoon 8/31/2009 5:10:00 PM 

Font: 12 pt 

Page 79: [90] Formatted rebecca.yoon 8/31/2009 5:10:00 PM 

Font: 12 pt 

Page 79: [91] Formatted rebecca.yoon 8/31/2009 5:10:00 PM 

Font: 12 pt 

Page 79: [92] Formatted rebecca.yoon 8/31/2009 5:10:00 PM 

Font: 12 pt 
Font: 12 pt 

Page 79: [94] Formatted rebecca.yoon 8/31/2009 5:10:00 PM 

Font: 12 pt 

Page 79: [95] Formatted rebecca.yoon 8/31/2009 5:10:00 PM 

Font: 12 pt 

Page 79: [96] Formatted rebecca.yoon 8/31/2009 5:10:00 PM 

Font: 12 pt 

Page 79: [97] Formatted rebecca.yoon 8/31/2009 5:10:00 PM 

Font: 12 pt 

Page 79: [98] Formatted rebecca.yoon 8/31/2009 5:10:00 PM 

Font: 12 pt 

Page 79: [99] Formatted rebecca.yoon 8/31/2009 5:10:00 PM 

Font: 12 pt 

Page 79: [100] Formatted rebecca.yoon 8/31/2009 5:10:00 PM 

Font: 12 pt 

Page 79: [101] Formatted rebecca.yoon 8/31/2009 5:10:00 PM 

Font: 12 pt 

Page 79: [102] Formatted rebecca.yoon 8/31/2009 5:10:00 PM 

Font: 12 pt 

Page 79: [103] Formatted rebecca.yoon 8/31/2009 5:10:00 PM 

Font: 12 pt 

Page 79: [104] Formatted rebecca.yoon 8/31/2009 5:10:00 PM 

Font: 12 pt 

Page 79: [105] Formatted rebecca.yoon 8/31/2009 5:10:00 PM 

Font: 12 pt 

Page 79: [106] Formatted rebecca.yoon 8/31/2009 5:10:00 PM 

Font: 12 pt 

Page 79: [107] Formatted rebecca.yoon 8/31/2009 5:10:00 PM 

Font: 12 pt 

Page 79: [108] Formatted rebecca.yoon 8/31/2009 5:10:00 PM 

Font: 12 pt 

Page 79: [109] Formatted rebecca.yoon 8/31/2009 5:10:00 PM 

Font: 12 pt 

Page 79: [110] Formatted rebecca.yoon 8/31/2009 5:10:00 PM 

Font: 12 pt