Summary of working interagency draft comments on EO 12866 and EO 13653 review of EPA/DOT Heavy Duty GHG/fuel efficiency NPRM. Subject to further policy review.



### I **nteragency Working**  **Comments on U.S. Environmental Protection Agency (EPA) and National Highway Traffic Safety Administration (NHTSA) draft proposed**  **rule titled, “Greenhouse Gas Emissions and Fuel Efficiency Standards for Medium**

  ** and Heavy**

**- Duty Engines and Vehicles** 

**- Phase 2**  **.” RIN 2060**

**- AS16; RIN 2127** 

**- AL52** 

Reference Case/ Baseline text in Chapter 1:

***

The agencies chose to analyze these two different baselines in the central or policy case because the agencies recognize that there are a number of factors that create uncertainty in projecting a baseline against which to compare the future effects of the proposed action and the remaining any alternatives. The chosen baselines range from assuming zero improvements across all vehicle categor ies ( except for trailers ) to assuming that for certain truck categories manufacturers will adopt technologies that have a payback of 6 months or less

. The discussion below provides the agencies’ reasons for selecting these baselines. The agencies note tha t the reasons represent their hypotheses about the baseline and these hypotheses are based o n anecdotes rather than empirical evidence from the specific categories

. We seek comment and data on whether there is any empirical evidence on the appropriate baseline to use for the final rule. Due to a current lack of empirical evidence supporting the chosen baselines, the agencies consider alternative baseline scenarios in the sensitivity analysis presented on page X of the Preamble and page Y of the RIA. However, owing to time constraints, the agencies only analyzed payback periods of 12 months, 18 months, and 24 months , and they only applied the alternative payback periods to HD pickup s and van s

— that is, they maintained the 6

- month payback period for other classes of trucks included in this regulation

. These alternative cases are

more consistent with payback periods discussed in meetings with manufacturer s and in focus
groups for those classes

. The agencies seek comment on whether there is empirical evidence supporting the use of the alternative

, more dynamic baselines

, for the final rule stage

— and not only for HD pickups and vans, but also for other vehicle categories

. The agencies also seek

co mment on other factors that may not be included in calculations of payback periods, and which

w ould affect the baseline such as unaccounted benefits, costs and operational complexities and risks borne by vehicle builders, purchasers, and/or operators . The agencies specifically seek comment on how to account for these additional factors when developing the regulatory baseline for the final rule.

Agency Hypotheses To Support the Central or Main Policy Case Analytical Baseline:

The composition of the futur e fleet

— such as the relative position of individual manufacturers and the mix of products they each offer

— cannot be predicted with certainty at this time. Additionally, the heavy

- duty vehicle market is diverse, as is the range of vehicle purchasers. Heav y

- duty vehicle manufacturers have reported that their customers’ purchasing decisions are influenced by their customers’ own determinations of minimum total cost of ownership, which can be unique to a particular customer’s circumstances. For example, some customers (e.g., less

- than

- truckload or package delivery operators) operate their vehicles within aSummary of working interagency draft comments on EO 12866 and EO 13653 review of EPA/DOT Heavy Duty GHG/fuel efficiency NPRM. Subject to further policy review.

limited geographic region and typically own their own vehicle maintenance and repair centers within that region. These operators tend to own their vehicle s for long time periods, and sometimes for the entire service life of the vehicle. Their total cost of ownership is influenced by their ability to better control their own maintenance costs, and thus they can afford to consider fuel efficiency technologies that have longer payback periods, outside of the vehicle manufacturer’s warranty period. Other customers (e.g. truckload or long

- haul operators) tend to operate cross

- country, and thus must depend upon truck dealer service centers for repair and maintenance. Some of t hese customers tend to own their vehicles for about four to seven years, so that they typically do not have to pay for repair and maintenance costs outside of either the manufacturer’s warranty period or some other extended warranty period

. Many of these customers tend to require s eeing evidence of fuel efficiency technology payback periods on the order of 18 to 24 months before seriously considering evaluating a new technology for potential adoption within their fleet (NAS 2010, Roeth et al. 2013, Klemick et al. 2014) . Purchasers of HD pickups and vans wanting better fuel efficiency tend to demand that fuel consumption improvements pay back within approximately one to three years . Payback periods vary across purchasers of HD pickups and vans for a variety of reasons, including the fact that , but some HD pickup and van owners accrue relatively few vehicle miles traveled per year, such that they may be less likely to adopt new fuel efficiency technologies , while other owners who use their vehicle(s) with greater intensity may be even more willing to pay for fuel efficiency improvements . Regardless of the type of customer, their determination of minimum total cost of ownership involves the customer balancing their own unique circumstances with a heavy

- duty vehicle’s initial purchase pr ice, availability of credit and lease options, expectations of vehicle reliability, resale value and fuel efficiency technology payback periods. The degree of the incentive to adopt additional fuel efficiency technologies also depends on customer expectat ions of future fuel prices, which directly impacts customer payback periods. There is anecdotal evidence that p P urchasing decisions are not based exclusively on payback period, but also include the considerations discussed above and in Section X.A.1. For the baseline analysis, the agencies use payback period as a proxy for all of these considerations, and therefore the payback period for the baseline analysis is shorter than the payback period industry uses as a threshold for the further consideration of a technology. The agencies request comment on the appropriateness of these reference cases. See Section X.A.1 of this Preamble and Chapter 11 of the draft RIA for a more detailed discussion of baselines.

A s mentioned above, a s part of a sensitivity analysi s, additional baseline scenarios were also evaluated for HD pickups and vans. See Section VI of this Preamble and Chapter 10 of the draft RIA for a detailed discussion of these additional scenarios.