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

To: William Charmley/AA/USEPA/US@EPA, <james.tamm@dot.gov>, 

<Steve.Wood@dot.gov>, Robin Moran/AA/USEPA/US@EPA, <rebecca.yoon@dot.gov>, 

<Neil.Eisner@dot.gov>, Maureen Delaney/DC/USEPA/US@EPA, 

<Joanne.Petrie@dot.gov> 

Date: 03/19/2010 04:18 PM 

Subjec

t: 

Summary of Interagency working comments for draft rule under EO 12866 review 

Please find attached two documents summarizing interagency comments received on the 

draft final rule under EO 12866 review. They are subject to further policy review. 

Please provide responses to these initial interagency comments by COB Monday, 

March 22nd. 

 

Please note that these are initial comments, and we will be following-up with additional 

comments as we receive them from interagency reviewers. 

 

Thanks. 

 

Have a great weekend! 

Chandana 

[attachment "Summary of Interagency comments on draft rule under EO 12866 review

3.19.2010.pdf" deleted by Tad Wysor/AA/USEPA/US] [attachment "CONT Summary of

Interagency comments on draft rule under EO 12866 review 3.19.2010.pdf" deleted by Tad

Wysor/AA/USEPA/US]
Summary of Interagency Working Comments on Draft Rule under EO 12866

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Below is a summary of interagency comments received during EO 12866 review of the draft rule 

“Joint Rulemaking to Establish Light-Duty Vehicle Greenhouse Gas Emission Standards and 

Corporate Average Fuel Economy Standards”. They are subject to further policy review. 

General Comments 

• We suggest that EPA and DOT revise the Preamble and RIAs to clearly differentiate 

between benefits to society in reduced externalities and the value of private savings in 

fuel or time. Some suggestions are provided for Sections I and II below and they need to 

be followed-through for Sections III, IV and also the RIAs. 

• We previously commented on the possibility that the NHTSA/EPA analysis may omit 

significant economic costs associated with the proposed rule, and/or the baseline against 

which the rule’s impacts are measured is incorrectly characterized. The revised version of 

the preamble appears to address some of this concern. However, one remaining potential 

concern is that the NHTSA/EPA do not appear to consider the proposed standards may 

adversely affect the level of, or potential for, future improvements in any other vehicle 

attributes (apart from price and fuel economy) that consumers value. Both agencies 

indicate their modeling holds these other attributes constant while achieving fuel 

economy standards, however, this is different from allowing the other attributes to 

improve over time, which could have occurred in the counterfactual case of not 

tightening fuel economy standards. If that is the case, then the lack of improvement in 

other attributes would be an economic cost. While we do not know with certainty those 

attributes would have improved, it seems the possibility should be acknowledged as a 

potential cost. A related baseline issue is the assumption that absent the proposed 

rulemaking, manufacturers would continue building vehicles that only meet the 2011 fuel 

economy standards despite the substantial savings NHTSA/EPA believe could be offered 

to consumers by further improving fuel economy. This too would be a counterfactual 

case, and therefore unknowable, but it seems to warrant discussion. In particular, how 

sensitive are the net benefits estimates to this assumption? If more detailed discussion is 

not included, we suggest adding language along the lines of the following to the final 

paragraph p. 332. “To the extent that some degree of fuel economy improvements may 

have occurred due to market forces alone (absent the rule), the analysis overestimates 

private and social net benefits.” Similarly, the analysis omits economic valuation of 

potential safety impacts of the proposed rule. We hope the forthcoming section on safety 

impacts (sec. IV G 7) adequately addresses this concern, or explains why it is omitted and 

describes the potential estimation bias it creates. The last full paragraph on p. 570 lists 

several areas of climate change impacts that are said to not be quantified in cost of carbon 

estimates. Please double-check the list. It appears to include some impact areas that are 

considered by one or more of the models used to estimate the federal social cost of 

carbon by the USG. 

Agencies should use both 3% and 7% as the main discount rate (not one or the other as a 

sensitivity analysis). We recommend changes throughout the documents to make this 

clear including the economic assumptions table. 
Summary of Interagency Working Comments on Draft Rule under EO 12866

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• We recommend you add a discussion of the reference fleet in the Preamble and RIAs. 

The agencies calibrate the number of cars and trucks to match AEO 2010, but AEO 2010 

models CAFÉ and explicitly says that it causes a shift toward driving fewer trucks. So 

the agencies are building some of the reaction to CAFÉ into their reference. We 

recommend both agencies explicitly highlight and clarify this point. 

• We recommend both agencies discuss the potential for emissions leakage due to the rule. 

Reducing oil consumption will affect the world price. The agencies have some estimates 

of how it will change based on the energy security analysis. This means that there will be 

a demand response on the part of the world market as a result of US actions. With 

increased oil use comes addition GHG emissions. The agencies should discuss how big 

this effect will be. 

• The vehicle sales section uses a five year payback period, but given that there is evidence 

that consumers will not buy a vehicle unless it pays back in less than three years (Kubik 

survey from 2006), we recommend EPA also present an alternate analysis showing how 

the result change when this value is used instead. It will likely be close to zero. We 

recommend you also note that the sales analysis hinges on how the agencies treat 

consumer welfare loss and the assumed consumer discount rate (it isn’t driven by a social 

rate but a private one.) evidence points to potentially much higher private discount rates. 

• The revised energy security benefits include two categories associated with supply 

disruption – one is a transfer and should probably be excluded. While EPA and NHTSA 

discuss this issue, the agencies continue to include it and say they will examine the issue 

for future rulemaking. NYU School of Law argued the agencies should exclude wealth 

transfers from the supply disruption component. We recommend that the agencies 

evaluate this point and show what the benefits would look like if this piece is excluded. 

• We found no uncertainty analysis or sensitivity analysis in the documents. Please conduct 

uncertainty analysis or sensitivity analysis in the RIAs. Did the agencies already do 

them, but did not include the documents? 

• Please also conduct distributional analysis (e.g., variability in effects as a function of gas 

price and miles driven by particular individuals). 

• The standard for vehicles smaller than 41 sq. ft. is flat. Thus there would appear to be 

some incentive to downsize passenger cars and trucks in this size category. In light of 

NAS 2002 study “Effectiveness and Impact of CAFÉ Standards,” the preamble needs to 

explain clearly and in detail why the agencies do not expect any downsizing of vehicles 

in this footprint category, either by vehicle re-design or by increased sales of vehicles 

with footprints under 41 sq. ft (such as the smart car, Yaris with 39.1, Fit 39.9, Aveo 

38.4, Fiesta 39.3 etc). If there is downsizing, please include an estimate of safety effects 

of downsizing in this category (for both passenger cars and trucks). 

• The TSD discusses uncertainties regarding the refueling benefit, but the preamble makes 

no mention of it. We recommend both agencies to clearly indicate all of the uncertainty 
Summary of Interagency Working Comments on Draft Rule under EO 12866

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regarding the refueling benefit estimate. Otherwise, the preamble presents the estimate as 

a best estimate when in reality the agencies acknowledge that it is not a best estimate. We 

also recommend that the economic assumptions table not just include the time value. The 

$24.64 is only one part of the refueling benefit estimate. We recommend adding the 

average number of fewer refueling stops. And since the agencies acknowledge that there 

are uncertainties in how they’re calculated, we recommend that the economic 

assumptions table include a footnote clarifying that the refueling estimate (or any other 

economic assumption that the agencies want to include) is biased and is not a best 

estimate. You can clarify that the agencies used what limited information was available 

and that further studies are underway, but we strongly recommend that the caveat be 

included in the table itself and discussed in the preamble. 

• Consumer Welfare: The preamble contains much discussion of the potential failings of 

consumers in the market for fuel economy. Yet there is no indication that the agencies’ 

forecasts are anything less than certain. We recommend that both EPA and DOT indicate 

clearly in this section that the agency predictions of future costs or fuel prices could 

possibly be less than accurate predictions of the market outcomes. 

• Is the OMEGA model publically available for downloading as well similar to the VOLPE 

model? 

Preamble Section I 

• Page 35 Line 18: In the discussion of electric vehicle potential, it is written, “In the 

future, if there were a program to control upstream emissions of GHGs, then the tailpipe 

level of zero gram/mile from these vehicles has the potential to produce very large 

reductions in GHG emissions, and to transform the transportation sector’s contribution to 

the country’s GHG emissions.” Would it be helpful to revise this to read “In the future, 

vehicle fleet electrification combined with advances in low-carbon technology in the 

electricity sector have the potential to transform the transportation sector’s contribution to 

the country’s GHG emissions”? This revision might be helpful because under economywide cap-and-trade, GHG emissions across the electricity and transportation sectors 

would both be covered, so it’s not clear that a transition of the vehicle fleet to 

electrification would lead to higher total GHG reductions. 

• Page 39 Summary of the costs and benefits of NHTSA’s CAFÉ standard: The first 

paragraph of this section includes an economic benefits estimate calculated using a 3% 

discount rate. Would it be beneficial to estimate using the 7% discount rate, consistent 

with OMB guidance? Additionally, would it be helpful to frame the discussion of private 

versus social benefits and costs separately, and also present the quantitative estimates 

separately? In Table I.C.1-3, I.C.1-4, I.C.1-5a, and I.C.1-5b, having separate, not 

summed up, private and social benefits estimates in separate tables might make the 

benefits and costs easier to understand. 

• Page 43 Summary of the costs and benefits of EPA’s GHG standards: Similarly, would it 

be beneficial to discuss the private and social benefits and costs separately, and separate 
Summary of Interagency Working Comments on Draft Rule under EO 12866

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the quantitative estimates as well? It may make sense to drop Table I.C.2-2 or include 

the benefits disaggregated by category (or at least private vs. social). 

Preamble Section II 

• Page 101 Joint economic assumptions: In the summary of the economic assumptions, a 

short discussion of the potential for a small global offsetting increase in GHG emissions 

resulting from the CAFÉ/GHG standards resulting from the anticipated decrease in 

petroleum prices might be beneficial. This impact could be discussed in the section on 

petroleum consumption and import externalities or in its own section. 

Preamble Section III 

• Page 329 top: Should the summary of the final program costs include mention of the 

welfare costs to the consumer? The discussion in the paper suggests that welfare costs 

exist but are likely small, not that they do not exist. In that same paragraph it seems odd 

to list as part of the program benefits noise, congestion and accidents, since later on the 

preamble notes that café is likely to increase vehicle miles traveled. So is it more 

accurate to list noise, congestion and accidents as a cost? 

• Page 329 ¶ 2: Should the total monetized benefits assume both a three and a 7% discount 

rate, consistent with OMB guidelines? 

• Is there an inconsistency between claiming consumer welfare gains because consumers 

currently don't optimize, and also claiming that vehicle sales will increase because 

consumers will perceive a decrease in lifetime operating costs? 

• Page 332 line 14: Does the use of the term loss aversion to mean giving more attention to 

upfront costs than future fuel savings, on page 332, conflate concerns about loss aversion 

and high personal discount rates)? Some consumers may be more averse than others to 

high upfront costs for the latter reason. Is it worth specifically mentioning heterogeneity 

of discount rates in the discussion of the energy paradox? 

• Page 334 line 12: Does the sentence that “Increasing fuel economy would have to lead to 

other changes in vehicles that consumers find undesirable for there to be additional losses 

not included in the technology costs" ignore other factors aside from vehicle 

characteristics that may lead to welfare loss, such as high discount rates, uncertainty 

about future oil prices, heterogeneity in vehicle miles traveled, or deferred purchase of a 

new vehicle? 

• Page 347: Should the discussion of the benefits of reducing greenhouse gas emissions, 

starting on page 347, included discussion about the offsetting increase in emissions 

globally from a reduction in world oil prices that will result from a significant decline in 

US oil consumption? 
Summary of Interagency Working Comments on Draft Rule under EO 12866

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• Should the discussion of energy security impacts focus on oil consumption rather than oil 

imports, given that oil is priced on a global market so supply and demand shocks 

anywhere would have adverse economic impacts in the United States? 

Both RIAs General Comments 

• Please include an executive summary that outlines the key findings of the regulatory 

analysis, including key assumptions and uncertainties. It should have a table of costs and 

benefits at the front. 

• The RIAs must have a statement of the need for regulatory action and an explanation of 

how the regulatory action will meet that need. This may be elsewhere in the document, 

but it should be in the RIA 

• RIA identifies two alternative stringencies—4%/year and 6%/year and provides some 

data on costs and GHG reductions, but does not present the net benefits of these 

alternatives for comparison with the alternative chosen. It looks unfinished. 

• What does the analysis assume about the future mix of cars in the absence new CAFÉ 

rules? If gas prices rise as the analysis predicts, there will undoubtedly be a shift to more 

fuel efficient vehicles. 

NHTSA RIA 

• The Executive Summary is pretty good, but instead of the multiple tables should include 

a bottom line summary of costs and benefits of the standard chosen and the alternatives, 

perhaps along with Table 9. 

• There’s no discussion in the Summary of the lost consumer surplus due to higher prices 

and/or consumer’s preferred vehicle not being available. Please include consumer 

welfare loss discussion prominently in the Summary. 

• Manufacturers will eventually redesign their cars to try to loosen the constraint of the 

standards. This is happened with the advent of SUVs in response to the original CAFÉ 

standards. Is it possible to discuss the likely effects of the new standards on model 

design—e.g. manufacturers will have an incentive (to the extent possible) to expand the 

footprint of the vehicle relative to its size (move the wheels closer to the corners) in a 

way that may result in a non-optimally designed vehicle. 

• The discussion of the effect that the reduction in gas use will have on militaryspending 

(pg. 414) seem speculative. What is this based on? 

• DOT talks about the rule’s impact on oil imports. Has DOT considered discussing that 

the increase in standards may lead to an increase in auto imports? 

• DOT should acknowledge that the refueling time savings is not a best estimate similar to 

the TSD chapter 4. 
Summary of Interagency Working Comments on Draft Rule under EO 12866

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• We recommend that net benefits tables (e.g. Table 9) include a line for Consumer Surplus 

Loss due to Higher Vehicle Prices with entries that say “not estimated.” 

TSD Chapter 1 

• We are concerned that the calibration to the reference vehicle fleet is based on AEO 2010

without first subtracting out the influence of the CAFE‐tailpipe standards on these estimates.  It

therefore incorrectly includes the effect of the regulation in its baseline.  In particular, the early

release of AEO 2010 notes that:a

AEO2010 assumes the adoption of CAFE standards jointly proposed by the EPA and NHTSA for LDVs in 

model years 2012 through 2016. The proposed fuel economy standards for model year 2016 then modestly 

increase through the 2020 model year to meet the requirements of EISA2007. CAFE standards beyond 

2020 are similar to those used in the updated AEO2009 reference case. To attain the mandated fuel 

economy levels, the AEO2010 reference case includes a rapid increase in sales of unconventional vehicle 

technologies, such as flex-fuel, hybrid, and diesel vehicles, as well as slower growth in sales of new light 

trucks. 

The slower growth of new light trucks would produce the observed shift toward cars that is captured in the 

NHTSA-EPA baseline. The portion of this shift that is due to the proposed standard/EISA should be 

subtracted out to attain a more accurate depiction of the fleet absent regulation. 

TSD Chapter 2 

• The description of how attribute-standards affect safety should be modified to 

acknowledge that to the extent a standard results in an increased spread of the distribution 

of vehicles by size on the road it would harm safety. To the extent it leaves this 

unchanged or reduces the spread it would not be expected to have a detrimental effect. 

The description on p. 2 only focuses on the way the standard affects downsizing, but 

upsizing of vehicles would also be detrimental to safety. 

• The explanation for why a backstop for light-duty trucks and imported cars has not been 

adopted is a little odd. It notes that there is no need for a backstop because NHTSA and 

EPA feel there projections of future fleet mix are reliable (p. 3-4). However, we know 

that many factors that are inherently uncertain affect these projections, including fuel 

prices. It seems more accurate to say that there are many factors unrelated to the standard 

being finalized that significantly affect consumer preferences and are difficult to predict. 

At this time, NHTSA and EPA have decided against a backstop based on available 

information. If circumstances change in future years in unanticipated ways, they may 

want to revisit this decision. 

• The explanation for why the attribute curve for cars has not been adjusted very unsettling. 

NHTSA and EPA acknowledge that there are mistakes in the underlying data that were 

 

a

  This is also true in AEO 2009, though the proposed rule was not modeled precisely– instead it modeled EISA.  EIA

has said that the difference in the forecast from modeling and the proposed standards instead of just EISA is small.
Summary of Interagency Working Comments on Draft Rule under EO 12866

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used to generate the proposed curves. However, because they do not like the resulting 

steepness of the curve once those mistakes are corrected, they have decided not to adjust 

the curve. P. 19 claims that the data support the original slop as much as the refitted 

curve, but this claim is not clearly demonstrated and makes the curve appear somewhat 

arbitrary. 

TSD Chapter 3 

• Table 3-1A shows changes to the relative costs of five technologies. Most look like 

relatively small changes, except for the last two technologies which experience an 85 and 

109 percent reduction in costs, respectively. And the last technology has actually become 

cheaper than the comparison technology when it was previously more expensive. I trust 

these cost updates are accurate, but given some of the large changes, further explanation 

for the changes in costs seems warranted. 

• Please further explain how NHTSA and EPA applied the 20 percent learning curve in 

different ways. While the TSD says this only results in small differences, it would be 

helpful to have a table that shows the implication for costs using the EPA and the 

NHTSA approach for the six technologies to which volume-based learning curves were 

applied. This will make any differences between the way in which it has been applied 

more transparent. 

TSD Chapter 4 

• Consumer valuation of fuel economy and payback period: Is this chapter missing a 

discussion of how consumers value fuel savings? Could this section be the place for a 

discussion of consumer welfare issues relevant to fuel savings, including issues such as 

myopic decision making, imperfect information, heterogeneity in driving behavior and 

other consumer attributes, and heterogeneity in discount rates? In particular, a discussion 

of the five year payback period assumption for calculating fuel savings benefits might 

make sense here. 

• Baseline fuel price and consumption assumption: The chapter mentions that AEO 2009 

(and now 2010 early release) was used in the analysis. The AEO projections from these 

years already incorporate the impact of the proposed fuel economy increase on prices and 

consumption. How does this impact the analysis? What type of bias may be expected? 

Could a sentence or footnote acknowledging potential difficulties from relying on AEO 

data that already incorporate the new standard be a helpful explanation? 

• Valuation of non-CO2 GHG reduction benefits: Section 4.9.2.1 notes that CH4 and N20 

reductions are translated into CO2 equivalents using GWP to calculate total GHG 

reductions. Were these non-C O2 GHG reductions also monetized using the new 

interagency social cost of carbon estimates? As the new SCC guidance notes, the 

interagency group determined that it is not appropriate to apply the SCC estimate to 

reductions in non-CO2 gases using GWP because these gases have different radiative 
Summary of Interagency Working Comments on Draft Rule under EO 12866

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forcings and atmospheric lifetimes. Thus, could it be appropriate to present quantified 

CO2e estimates that incorporate these gases but not include the non-CO2 gases in the 

monetized CO2 benefit estimates? Based on the description in Ch. 4, it is not clear 

whether this was the approach taken by NHTSA and EPA. 

• Global petroleum consumption impacts: Section 4.2.7 covers petroleum and energy 

security impacts, including a discussion of the monopsony impact on global petroleum 

prices from the reduction in U.S. imports attributable to the rule. However, the chapter is 

missing a discussion of the increase in global fuel consumption resulting from the drop in 

global fuel prices. The CAFÉ rule would be expected to have a non-trivial impact on 

global fuel prices, and if global fuel consumption experiences a corresponding increase, 

some of the benefits of reduced fuel consumption in the U.S. will be partially offset. A 

qualitative discussion of this issue, and if possible, a quantitative estimate of the CO2 

increase due to increased global petroleum consumption in both the TSD and the RIA (if 

not already included in the RIA) may be helpful. Language that NHTSA included in the 

EIS on this issue might be appropriate here: 

o “The reductions in U.S. gasoline consumption and demand for crude petroleum 

projected to result from alternative increases in CAFE standards could lead to 

reductions in global petroleum prices, and thus to lower gasoline prices 

throughout the world. One result would be increases in gasoline consumption 

outside the U.S., which would lead to increased emissions of greenhouse gases, 

criteria air pollutants, and airborne toxics from global fuel production and use. 

These increases have the potential to offset a modest share of the reductions in 

emissions projected to occur as a consequence of lower fuel production and 

consumption within the United States. A numerical example using Leiby’s (2008) 

mean estimate of the sensitivity of global petroleum prices to changes in U.S. 

import demand suggests that increases in fuel consumption outside the U.S. could 

offset about 8 percent of the emissions reductions projected to result from the 

alternative increases in CAFE standards analyzed in this FEIS.b

 Given the 

various uncertainties in our analyses, we consider 8 percent to be at the noise 

level.” 

• Discount rate for fuel savings: Section 4.2.11 states that EPA and NHTSA use 3% as the 

primary discount rate for estimating fuel savings benefits, with 7% as a sensitivity. 

Should EPA and NHTSA use the 7% discount rate as a co-equal assumption, consistent 

with OMB guidance? To the extent that costs are largely passed onto consumers, making 

the consumption rate of interest the appropriate discount rate, EPA and NHTSA note in 

the preamble that many consumers finance new vehicle purchases using credit. Data 

 

b Using Leiby’s reported range of uncertainty surrounding his mean estimate of the sensitivity of global petroleum

prices to U.S. import demand, increases in fuel consumption outside the U.S. could offset from 3 percent (under

Alternative 2) to 15 percent (under Alternative 9) of the emissions reductions projected to result from alternative

increases in CAFE standards.  See Leiby, Paul N., Estimating the Energy Security Benefits of Reduced U.S. Oil

Imports, Report ORNL/TM‐2007/028, Oak Ridge National Laboratory, March 14, 2008, pp. 19‐20.
Summary of Interagency Working Comments on Draft Rule under EO 12866

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from the Bureau of Labor Statistics’ Consumer Expenditure Survey (cited in Attanasio, 

Goldberg, and Kyriazidou 2008, International Economic Review) suggest that over 40% 

of consumers take out a loan to help finance their vehicle purchases, with new vehicle 

loan interest rates averaging 7.6%. Thus, an interest rate closer to 7% than 3% may be 

justified even if all costs are passed onto consumers due to the prevailing interest rates 

facing buyers of new vehicles. 

CHAPTER 4:Economic Assumptions Used in the Agencies’ Analysis 

4.1 How the agencies use the economic assumptions in their analyses 

The reduction in fuel use that results from requiring higher fuel economy results in a number of 

social benefits. Specifically, it reduces greenhouse gas (GHG) and other emissions while also 

lowering the cost of economic externalities associated with U.S. petroleum consumption and 

imports. Reducing fuel consumption and GHGs lowers the economic costs of environmental 

externalities resulting from fuel production and use, including reducing the impacts on human 

health from emissions of criteria air pollutants, and reducing future economic damages from 

potential changes in the global climate caused by greenhouse gas emissions. It also , lows the 

potential costs from disruption in the flow of oil imports, and possibly reducing federal outlays to 

secure imported oil supplies and cushion the U.S. economy against their potential interruption. 

Improving new vehicles’ fuel efficiency also provides direct benefits to their buyers and users by 

reducing fuel consumption and fuel costs throughout those vehicles’ lifetimes, stimulating 

increased vehicle use through the fuel economy rebound effect, and increasing vehicles’ driving 

range so that they require less frequent refueling. 

These benefits are partly offset by an increase in the upfront cost of the vehicle as well as the 

increase in fuel use that results from added vehicle use due to the fuel economy rebound effect, 

as well as by added costs from the increased congestion, crashes, and noise caused by increased 

vehicle use. They might also be offset by any loss in the utility that new vehicles provide to their 

buyers (and subsequent owners) if manufacturers include reductions in vehicles’ performance, 

carrying capacity, or comfort as part of their strategies to comply with higher fuel economy 

requirements and GHG standards. Nevertheless, the total economic benefits from requiring 

higher fuel economy and reducing GHGs are likely to be substantial, and the EPA and NHTSA 

have attempted to develop detailed estimates of the economic benefits from adopting more 

stringent standards. 

This section discusses the common economic values used by both NHTSA and EPA. These 

economic inputs incorporate a range of forecast information, economic estimates, and input 

parameters. This section describes the sources that EPA and NHTSA have relied upon for this 

information, the rationale underlying each assumption, and the agencies’ estimates of specific 

parameter values. These common economic values are then used as inputs into each Agencies’ 

respective modeling and other analyses of the economic benefits and costs of the EPA and 

NHTSA programs. While the underlying economic input values are common to both Agencies, 

Comment [A1]: The ordering of this description 

is odd. It emphasizes the private benefits of the rule 

before discussing the social benefits, which are 

ostensibly the reason why EISA authorized an 

increase in standards. We recommend reordering/rewriting and have made suggestions to the 

text. 

Comment [A2]: This is a transfer, not a benefit. 
Summary of Interagency Working Comments on Draft Rule under EO 12866

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it is the differences in the way each Agency assesses its program that result in differing benefits 

estimates. This issue is discussed further in Section I.C of the preamble to the joint rulemaking. 

4.2 What economic assumptions do the agencies use? 

4.2.1 The on-road fuel economy “gap” 

Actual fuel economy levels achieved by vehicles in on-road driving fall significantly short of 

their levels measured under the laboratory-like test conditions used under the CAFE program to 

establish its published fuel economy ratings for different models. The fuel economy achieved on 

the road is affected by a variety of conditions not replicable in the laboratory setting including 

consumer driving behavior. In analyzing the fuel savings from passenger car and light truck fuel 

efficiency and GHG standards, the agency adjusts the actual fuel economy performance of each 

passenger car and light truck model downward from its rated value to reflect the expected size of 

this on-road fuel economy “gap.” EPA and NHTSA acknowledge that this approach cannot 

account for the potentially large heterogeneity in consumer dirving behavior that may lead some 

drivers to achieve greater or less fuel economy than what is reflected in the average. That said, in 

December 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.1 

Comparisons of on-road and CAFE fuel economy levels developed by EPA as part of its Final 

Rule implementing new fuel economy labeling requirements for new vehicles indicate that actual 

on-road fuel economy for light-duty vehicles averages 20 percent lower than published fuel 

economy levels.2 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). In its analysis supporting the Final Rule establishing CAFE standards for 

MY 2011, NHTSA employed EPA’s revised estimate of this on-road fuel economy gap in its 

analysis of the fuel savings resulting from alternative fuel efficiency standards. 

An analysis conducted by NHTSA confirmed that EPA’s estimate of a 20 percent gap between 

test and on-road fuel economy is well-founded. The agency used data on the number of 

passenger cars and light trucks of each model year that were in service (registered for use) during 

each calendar year from 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 during each calendar year over that period. These data were 

combined to develop estimates of the usage-weighted average fuel economy that the U.S. 

passenger car and light truck fleets would have achieved during each year from 2000 through 

2006 under test conditions. 

Table 4-1 compares NHTSA’s estimates of fleet-wide average fuel economy under test 

conditions for 2000 through 2006 to the Federal Highway Administration’s (FHWA) published 

estimates of actual on-road fuel economy achieved by passenger cars and light trucks during 

each of those years. As it shows, FHWA’s estimates of actual fuel economy for passenger cars 

ranged from 21 percent to 23 percent lower than NHTSA’s estimates of its fleet-wide average 

value under test conditions over this period. Similarly, FHWA’s estimates of actual fuel 

economy for light trucks ranged from 16 percent to 18 percent lower than NHTSA’s estimates of 

average light truck fuel economy under test conditions. Thus, these results appear to confirm 

that the 20 percent on-road fuel economy discount or gap represents a reasonable estimate for 

Comment [A3]: We find it odd that this section is 

focused entirely on the gap on average without also 

discusses that there is great heterogeneity among 

consumers with regard to their driving behavior. We 

would suggest adding a sentence acknowledging 

this. 
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use in evaluating the fuel savings likely to result from alternative fuel efficiency standards for 

MY 2012-2016 vehicles. 

We are aware of two potential issues involved in these estimates. One, the estimates of total 

annual car and truck VMT are developed by the states and submitted to FHWA. Each state uses 

its own definition of a car and a truck. For example, some states classify minivans as cars and 

some as trucks. Thus, there are known inconsistencies with these estimates when evaluated 

separately for cars and trucks. Also, total gasoline consumption can be reasonably estimated 

from excise tax receipts, but separate estimates for cars and trucks are not available. We are not 

aware of the precise methodology used to develop the distinct on-road fuel economy estimates 

for cars and trucks developed by FHWA. We do not believe that they are based on direct 

measurements from substantial numbers of vehicles, as no such test programs were found by 

EPA during its fuel economy labeling rule in 2006. Also, the year-to-year consistency for both 

car and truck fuel economy implies some methodology other than direct measurement. For this 

reason, NHTSA and EPA are not using distinct on-road fuel economy gaps for cars and trucks, 

but one common value of 20 percent for both vehicle classes for purposes of estimating the fuel 

savings of the standards. 

Table 4-1 Estimated Fleet-Wide Fuel Economy of Passenger Cars and Light Trucks 

Compared to Reported Fuel Economy

YEAR 

PASSENGER CARS LIGHT-DUTY TRUCKS 

NHTSA 

Estimated 

Test MPG 

FHWA 

Reported 

Actual MPG 

Percent 

Difference 

NHTSA 

Estimated 

Test MPG 

FHWA 

Reported 

Actual MPG

Percent 

Difference 

2000 28.2 21.9 -22.2% 20.8 17.4 -16.3% 

2001 28.2 22.1 -21.7% 20.8 17.6 -15.5% 

2002 28.3 22.0 -22.3% 20.9 17.5 -16.2% 

2003 28.4 22.2 -21.9% 21.0 17.2 -18.0% 

2004 28.5 22.5 -21.1% 21.0 17.2 -18.3% 

2005 28.6 22.1 -22.8% 21.1 17.7 -16.3% 

2006 28.8 22.5 -21.8% 21.2 17.8 -16.2% 

Avg., 

2000-

2006 

28.4 22.2 -22.0% 21.0 17.5 -16.7% 

4.2.2 Fuel prices and the value of saving fuel 

Projected future fuel prices are a critical input into the preliminary economic analysis of 

alternative fuel efficiency and GHG standards, because they determine the value of fuel savings 

both to new vehicle buyers and to society. As in the proposal, EPA and 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. In the proposal, we used the AEO 2009 (April 

2009 release). For the final rulemaking presented here, we updated to the more recent AEO 

2010 Early Release.3 The Reference Case forecasts inflation-adjusted (constant-dollar) retail 

gasoline and diesel fuel prices and represents the EIA’s most up-to-date estimate of the most 

likely course of future prices for petroleum products.4

 

Comment [A4]: We know that AEO included 

EISA and now, in 2010, the proposed rule in its 

reference case. We recommend EPA and NHTSA 

follow up with EIA on what effect this has on 

projected world fuel prices (probably a small 

decline). A paragraph could be inserted 

acknowledging the extent of this affect and any bias 

introduced as a result. 
Summary of Interagency Working Comments on Draft Rule under EO 12866

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As compared to the gasoline prices used in the proposal, AEO 2010 Early Release fuel prices are 

generally lower (in absolute 2007 dollars). A comparison table is presented below, Table 4-2. In 

broad strokes, future projections of fuel price are generally lower in AEO 2010 than in AEO 

2009. 

Table 4-2 Gasoline Prices for Selected Years in AEO 2009 and 2010 

(Presented in constant 2007$ and including all taxes)

2015 2020 2030 

AEO 2010 $3.00 $3.27 $3.60 

AEO 2009 $3.16 $3.62 $3.82 

Federal government agencies generally use EIA’s projections in their assessments of future 

energy-related policies. The retail fuel price forecasts presented in AEO 2010 span the period 

from 2007 through 2035. Measured in constant 2007 dollars, the AEO 2010 Reference Case 

forecast of retail gasoline prices during calendar year 2020 is $3.27 per gallon, rising gradually 

to $3.83 by the year 2035 (these values include federal, state and local taxes). However, valuing 

fuel savings over the maximum lifetimes of passenger cars and light trucks used in this analysis 

requires fuel price forecasts that extend through 2050, approximately the last year during which a 

significant number of MY 2016 vehicles will remain in service.c

 To obtain fuel price forecasts 

for the years 2036 through 2050, the agency assumes that retail fuel prices will continue to 

increase after 2035 at the average annual rates projected for 2020-2035 in the AEO 2010 

Reference Case.d

 This assumption results in a projected retail price of gasoline that reaches 

$4.49 in 2050. 

The value of fuel savings resulting from improved fuel economy and GHG emissions 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 2008, 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 fuel efficiency and GHG standards to the U.S. economy as a 

whole. 

In estimating the economy-wide value of fuel savings from improved fuel efficiency standards 

and GHG emission standards, EPA and NHTSA follow the assumptions used by EIA in AEO 

2010 that state and local gasoline taxes will keep pace with inflation in nominal terms, and thus 

remain constant when expressed in constant 2007 dollars.e

 In contrast, EIA assumes that federal 

 

c The agency defines the maximum lifetime of vehicles as the highest age at which more than 2 percent of those

originally produced during a model year remain in service.  In the case of light‐duty trucks, for example, this age

has typically been 36 years for recent model years.

d 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.

e To calculate economy‐wide impacts, the agencies value fuel savings at pre‐tax prices, since this measures the

value of the resources that are saved when less fuel is produced and consumed.  The economy‐wide value of
Summary of Interagency Working Comments on Draft Rule under EO 12866

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gasoline taxes will remain unchanged in nominal terms, and thus decline throughout the forecast 

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 2010 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 $2.89 per gallon during 2020, rising to $3.48 per gallon by the year 2035. 

EIA is widely-recognized as an impartial and authoritative source of analysis and forecasts of 

U.S. energy production, consumption, and prices. The agency has published annual forecasts of 

energy prices and consumption levels for the U.S. economy since 1982 in its AEOs. These 

forecasts have been widely relied upon by federal agencies for use in regulatory analysis and for 

other purposes. Since 1994, EIA’s annual forecasts have been based upon the agency’s National 

Energy Modeling System (NEMS), which includes detailed representation of supply pathways, 

sources of demand, and their interaction to determine prices for different forms of energy. 

From 1982 through 1993, EIA’s forecasts of world oil prices – the primary determinant of prices 

for gasoline, diesel, and other transportation fuels derived from petroleum – consistently 

overestimated actual prices during future years, often very significantly. Of the total of 119 

forecasts of future world oil prices for the years 1985 through 2005 that EIA reported in its 1982-

1993 editions of AEO, 109 overestimated the subsequent actual values for those years, on 

average exceeding their corresponding actual values by 75 percent. 

Since that time, however, EIA’s forecasts of future world oil prices show a more mixed record 

for accuracy. The 1994-2005 editions of AEO reported 91 separate forecasts of world oil prices 

for the years 1995-2005, of which 33 have subsequently proven too high while the remaining 58 

have underestimated actual prices. The average absolute error (i.e., regardless of its direction) of 

these forecasts has been 21 percent, but over- and underestimates have tended to offset one 

another, so that on average EIA’s more recent forecasts have underestimated actual world oil 

prices by 7 percent. Although both its overestimates and underestimates of future world oil 

prices for recent years have often been large, the most recent editions of AEO have significantly 

underestimated petroleum prices during those years for which actual prices are now available. 

However, EPA and NHTSA does not regard EIA’s recent tendency to underestimate future 

prices for petroleum and refined products or the high level of current fuel prices as adequate 

justification to employ forecasts that differ from the Reference Case forecast presented in the 

AEO 2010 Reference Case. This is particularly the case because both the AEO 2009 and AEO 

2010 Reference Cases forecast significantly higher future prices than those projected in the 

initial release of AEO 2008, which in turn represented a major upward revision from EIA’s fuel 

price forecast reported previously in AEO 2007. Comparing recent forecasts of world oil prices 

also shows that EIA’s Reference Case forecast reported in AEO 2009 is among the highest of all 

six publicly-available forecasts of world oil prices over the 2010-30 time horizon.5

 Because 

world petroleum prices are the primary determinant of retail prices for refined petroleum 

products such as transportation fuels, this suggests that the Reference Case forecast of U.S. fuel 

 

saving fuel includes this plus the reductions in economic and environmental externalities that result from

consuming less fuel, importing less petroleum, and so on.
Summary of Interagency Working Comments on Draft Rule under EO 12866

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prices reported in AEO 2010 is likely to be the highest of those projected by major forecasting 

services. 

4.2.3 Vehicle survival and use assumptions 

The agencies’ analyses of fuel savings and related benefits from adopting higher fuel efficiency 

standards and establishing GHG emission standards for MY 2012-2016 passenger cars and light 

trucks begin by estimating the resulting changes in fuel use over the entire lifetimes of these 

vehicles. The change in total fuel consumption by vehicles produced during each of these model 

years is calculated as the difference in their lifetime fuel use under the baseline assumption that 

the CAFE standard previously established for model year 2011 remains in effect, and under the 

alternative assumption that CAFE and GHG emissions standards improve for each model year 

from 2012-2016. 

The first step in estimating lifetime fuel consumption by vehicles produced during a model year 

is to calculate the number of those vehicles that is expected to remain in service during each 

future calendar year after they are produced and sold.f

 This number is calculated by multiplying 

the number of vehicles originally produced during a model year by the proportion expected to 

remain in service at the age they will have reached during each subsequent calendar year, often 

referred to as a “survival rate.” 

NHTSA previously updated its estimates of car and light truck survival rates using 2008 

registration data (the most recent available) for passenger cars and light trucks produced during 

recent model years, in order to ensure that its forecasts of age-specific survival rates reflect 

recent increases in the durability and expected life spans of cars and light trucks.6

 Both agencies 

used these updated survival estimates in their analyses of fuel savings and other benefits from 

adopting improved fuel efficiency and GHG standards for MY 2012-2106 cars and light trucks. 

The proportions of passenger cars and light trucks expected to remain in service at each age up to 

their maximum lifetimes (26 and 36 years, respectively) are shown in Table 4-3 and Table 4-4.g

 

The next step in estimating lifetime fuel use by the cars or light trucks produced during a future 

model year is to calculate the total number of miles that they will be driven during each year of 

their expected lifetimes. To estimate total miles driven, the number of cars and light trucks 

projected to remain in use during each future calendar year calculated in the previous step is 

 

f

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

Feb. 15, 2010).

g The maximum age of cars and light trucks was defined as the age when the number remaining in service has

declined to approximately two percent of those originally produced.  Based on an examination of recent

registration data for previous model years, typical maximum ages appear to be 26 years for passenger cars and 36

years for light trucks.   
Summary of Interagency Working Comments on Draft Rule under EO 12866

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multiplied by the average number of miles a surviving car or light truck is expected to be driven 

at the age it will have reached in that year. 

Updated estimates of average annual miles driven by cars and light trucks at each age were 

developed by NHTSA from the Federal Highway Administration’s 2001 National Household 

Transportation Survey. These updated estimates, differ from those employed in past NHTSA 

analyses, were used previously by NHTSA to analyze the effects of the previously-established 

CAFE standards for MY 2011 cars and light trucks.h

 

Table 4-3 and Table 4-4 report NHTSA’s updated estimates of average car and light truck use 

which were used in the analyses for the MY 2011 final rule. As these tables show, the resulting 

survival-weighted mileages calculated for that rule over the 26-year maximum lifetime of 

passenger cars is 161,847 miles, while that over the 36-year maximum lifetime of light trucks is 

190,066 miles. It should be noted, however, that survival-weighted mileage is extremely low 

(less than 1,000 miles per year) after age 20 for cars and after age 25 for light trucks, and thus 

has little impact on lifetime fuel savings or other benefits from higher fuel economy, particularly 

after discounting those benefits to their present values. 

The survival and annual mileage estimates reported in the tables reflect the convention that 

vehicles are defined to be of age 1 during the calendar year that coincides with their model year 

Thus for example, model year 2012 vehicles will be considered to be of age 1 during calendar 

year 2012. This convention is used in order to account for the fact that vehicles produced during 

a model year typical are first offered for sale in June through September of the preceding 

calendar year (for example, sales of a model year typically begin in June through September of 

the previous calendar year, depending on manufacturer). Thus virtually all of the vehicles 

produced during a model year will be in use for some or all of the calendar year coinciding with 

their model year, and they are considered to be of age 1 during that year.i

 

 

h See also NHTSA, “Vehicle Survival and Travel Mileage Schedules,” Office of Regulatory Analysis and 

Evaluation, January 2006, pp. 15-17. The original source of information on annual use of passenger cars and light 

trucks by age used in this analysis is the 2001 National Household Travel Survey (NHTS), jointly sponsored by the 

Federal Highway Administration, Bureau of Transportation Statistics, and National Highway Traffic Safety 

Administration. 

i

As an illustration, virtually the entire production of model year 2012 cars and light trucks will have been sold by

the end of calendar year 2012, so those vehicles are defined to be of age 1 during calendar year 2012.  Model year

2012 vehicles are subsequently defined to be of age 2 during calendar year 2013, age 3 during calendar year 2014,

and so on.  One complication arises because registration data are typically collected for July 1 of each calendar

year, so not all vehicles produced during a model year will appear in registration data until the calendar year when

they have reached age 2 (and sometimes age 3) under this convention.   
Summary of Interagency Working Comments on Draft Rule under EO 12866

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Table 4-3 Survival Rates and Unadjusted Annual Miles Traveled (VMT) by Age for 

Passenger Cars (calculated from 2001 NHTS) Used in MY 2011 Final Rule 

Vehicle 

Age 

Estimated Survival 

Fraction

Estimated Annual 

VMT 

Survival-Weighted 

Annual VMT 

1 0.9950 14,231 14,160 

2 0.9900 13,961 13,821 

3 0.9831 13,669 13,438 

4 0.9731 13,357 12,998 

5 0.9593 13,028 12,497 

6 0.9413 12,683 11,938 

7 0.9188 12,325 11,324 

8 0.8918 11,956 10,662 

9 0.8604 11,578 9,961 

10 0.8252 11,193 9,237 

11 0.7866 10,804 8,499 

12 0.7170 10,413 7,466 

13 0.6125 10,022 6,138 

14 0.5094 9,633 4,907 

15 0.4142 9,249 3,831 

16 0.3308 8,871 2,934

17 0.2604 8,502 2,214 

18 0.2028 8,144 1,652 

19 0.1565 7,799 1,220 

20 0.1200 7,469 896 

21 0.0916 7,157 656 

22 0.0696 6,866 478 

23 0.0527 6,596 348 

24 0.0399 6,350 253 

25 0.0301 6,131 185 

26 0.0227 5,940 135 

Estimated Passenger Car Lifetime VMT 161,847 
Summary of Interagency Working Comments on Draft Rule under EO 12866

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Table 4-4 Survival Rates and Unadjusted Annual Vehicle-Miles Traveled (VMT) 

by Age for Light Trucks (calculated from 2001 NHTS) Used in MY 2011 Final Rule 

VEHICLE AGE 

ESTIMATED 

SURVIVAL 

FRACTION

ESTIMATED 

ANNUAL VMT 

SURVIVALWEIGHTED 

ANNUAL VMT 

1 0.9950 16,085 16,004 

2 0.9741 15,782 15,374 

3 0.9603 15,442 14,829 

4 0.9420 15,069 14,195 

5 0.9190 14,667 13,479 

6 0.8913 14,239 12,691 

7 0.8590 13,790 11,845 

8 0.8226 13,323 10,960 

9 0.7827 12,844 10,053 

10 0.7401 12,356 9,145 

11 0.6956 11,863 8,252 

12 0.6501 11,369 7,391 

13 0.6042 10,879 6,573 

14 0.5517 10,396 5,735 

15 0.5009 9,924 4,971 

16 0.4522 9,468 4,281 

17 0.4062 9,032 3,669 

18 0.3633 8,619 3,131 

19 0.3236 8,234 2,665 

20 0.2873 7,881 2,264 

21 0.2542 7,565 1,923 

22 0.2244 7,288 1,635 

23 0.1975 7,055 1,393 

24 0.1735 6,871 1,192 

25 0.1522 6,739 1,026 

26 0.1332 6,663 887 

27 0.1165 6,648 774 

28 0.1017 6,648 676 

29 0.0887 6,648 590 

30 0.0773 6,648 514 

31 0.0673 6,648 447 

32 0.0586 6,648 390 

33 0.0509 6,648 338 

34 0.0443 6,648 294 

35 0.0385 6,648 256 

36 0.0334 6,648 222 

Estimated Lifetime Light Truck VMT 190,066 
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4.2.3.1 Adjusting vehicle use for future fuel prices 

The estimates of average annual miles driven by passenger cars and light trucks reported in 

Table 4-3 and Table 4-4 reflect the historically low gasoline prices that prevailed at the time the 

2001 NHTS was conducted. To account for the effect on vehicle use of subsequent increases in 

fuel prices in the proposal, the estimates of annual vehicle use derived from the NHTS were 

adjusted to reflect the forecasts of future gasoline prices reported in the Energy Information 

Administration’s Annual Energy Outlook 2009 Updated Reference Case. For this final 

rulemaking, the agencies updated the analysis with the forecasts of future gasoline prices 

reported in the Energy Information Administration’s Annual Energy Outlook 2010 Early 

Release. This adjustment accounts for the difference between the average retail price per gallon 

of fuel forecast during each calendar year over the expected lifetimes of model year 2012-2016 

passenger cars and light trucks, and the average price that prevailed when the NHTS was 

conducted in 2001. The elasticity of annual vehicle use with respect to fuel cost per mile 

corresponding to the 10 percent fuel economy rebound effect used in this analysis (i.e., an 

elasticity of -0.10) was used in conjunction with the difference between each future year’s fuel 

prices and those prevailing in 2001 to adjust the estimates of vehicle use derived from the NHTS 

to reflect the effect of higher future fuel prices. This procedure was applied to the mileage 

figures reported previously in Table 4-3 and Table 4-4 to adjust annual mileage by age during 

each calendar year of the expected lifetimes of MY 2012-2016 cars and light trucks. 

4.2.3.2 Ensuring consistency with growth in total vehicle use 

The estimates of annual miles driven by passenger cars and light trucks at each age were also 

adjusted to reflect projected future growth in average vehicle use. Increases in the average 

number of miles cars and trucks are driven each year have been an important source of historical 

growth in total car and light truck use, and are expected to represent an important source of 

future growth in total light-duty vehicle travel as well. As an illustration of the importance of 

growth in average vehicle use, the total number of miles driven by passenger cars increased 35 

percent from 1985 through 2005, equivalent to a compound annual growth rate of 1.5 percent.7

 

During that time, however, the total number of passenger cars registered for in the U.S. grew by 

only about 0.3 percent annually.j

 Thus growth in the average number of miles automobiles are 

driven each year accounted for the remaining 1.2 percent (= 1.5 percent - 0.3 percent) annual 

growth in total automobile use.k

 Further, the AEO 2010 Reference Case forecasts of total car 

and light truck use and of the number of cars and light trucks in use suggest that their average 

annual use will continue to increase gradually from 2010 through 2035. 

In order to develop reasonable estimates of future growth in average car and light truck use, the 

agencies calculated the rate of growth in the mileage schedules shown previously in 

 

j

A slight increase in the fraction of new passenger cars remaining in service beyond age 10 has accounted for a

small share of growth in the U.S. automobile fleet.  The fraction of new automobiles remaining in service to various

ages was computed from R.L. Polk vehicle registration data for 1977 through 2005 by the agency’s Center for

Statistical Analysis.   

k See supra note k above.
Summary of Interagency Working Comments on Draft Rule under EO 12866

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Table 4-6 and Table 4-7 that would be necessary for total car and light truck travel to increase at 

the rate forecast in the AEO 2010 Reference Case. This calculated rate is also consistent with 

future changes in the overall size and age distributions of the U.S. passenger car and light truck 

fleets that are implied by the agency’s forecasts of total car and light truck sales and the survival 

rates reported in Table 4-3 and Table 4-4. The growth rate in average annual car and light truck 

use produced by this calculation is approximately 1.15 percent per year.l

 This rate was applied 

to the mileage figures reported previously in Table 4-3 and Table 4-4 to estimate annual mileage 

by age during each calendar year of the expected lifetimes of MY 2012-2016 cars and light 

trucks.m 

 

l

It was not possible to estimate separate growth rates in average annual use for cars and light trucks, because of

the significant reclassification of light truck models as passenger cars discussed previously.

m The agency has also identified an unintentional discrepancy between the estimates of expected lifetime VMT

used by EPA and NHTSA in their respective analyses of proposed GHG and CAFE standards reported in the NPRM.

EPA’s estimates of expected lifetime VMT for model year 2012‐26 vehicles reflect the shared assumption that the

average number of miles driven annually by cars and light trucks of all ages would grow at a rate of 1.15 percent

per year beginning in 2001.  Although NHTSA’s description of the procedures used to calculate its estimates of

expected lifetime VMT for passenger cars and light trucks indicated that it had also adjusted the base‐year

estimates of vehicle use to account for annual growth (see Preliminary Regulatory Impact Assessment, Chapter

VIII, p. 367), this adjustment was not in fact applied in NHTSA’s analysis of the effects of proposed increases in

CAFE standards for model years 2012‐16. This omission caused the estimates of expected lifetime VMT for

passenger cars and light trucks that NHTSA actually used in its NPRM analysis of CAFE standards for model years

2012‐16 to be lower than those used by EPA.  This error has been corrected by NHTSA, and this correction is

reflected in its analysis of the impacts of CAFE standards for model year 2012‐16 passenger cars and light trucks

reported in the Final Rule.  This error did not occur in the analysis of environmental impacts of alternative

increases in CAFE standards reported in the agency’s recent Draft Environmental Impact Statement.  
Summary of Interagency Working Comments on Draft Rule under EO 12866

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Table 4-6 and Table 4-7 report the results of applying the adjustments for both future fuel prices 

and annual growth in car and light truck use to the mileage schedules reported previously in 

Table 4-2 and Table 4-3. Separate adjustments for projected fuel prices and growth in car and 

light truck use were made for each calendar year from 2012 through 2030. Because the effects 

of both fuel prices and cumulative growth in average vehicle use vary by year, these adjustments 

result in differing VMT schedules for each future year. The adjusted annual VMT estimates 

reported in Table 4-4 and Table 4-5 and their lifetime totals represent the averages of the 

adjusted values of annual car and light truck use by age for calendar years 2012-2030. However, 

the estimates of fuel savings and other impacts of improved fuel efficiency for individual

calendar years over the lifetimes of model year 2012-16 cars and light trucks employ the 

adjusted values of car and light truck use by age during those specific calendar years. 

While the adjustment for future fuel prices reduces average mileage at each age from the values 

shown previously, the adjustment for expected future growth in average vehicle use increases it. 

Comparing the mileage estimates in 
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Table 4-6 and Table 4-7 to those shown previously in Table 4-2 and Table 4-3 shows that the net 

effect of these two adjustments is to increase expected lifetime mileage significantly. As an 

illustration, expected lifetime mileage for passenger cars, this figure rises to 195,264 miles from 

the 161,847 miles reported previously in Table 4-3 (or by 21 percent), while expected lifetime 

mileage for light trucks increases from the 190,066 miles reported previously in Table 4-4 to 

225,865 miles (19 percent). As previously noted, the estimates of survival-weighted mileage 

decline to less than 1,000 miles per year after age 20 for cars and after age 27 for light trucks. 

Thus they have relatively little impact on lifetime fuel savings or other benefits from higher fuel 

economy, particularly after discounting the benefits that occur in those distant future years to 

their present values. 

The VMT schedules used in the proposal and in this final rulemaking are presented below. To 

summarize the earlier discussion, the slight (~2.5 percent) increase in lifetime VMT schedule is 

attributable to the lower fuel prices projected in AEO 2010 Early Release as compared to the 

updated AEO 2009. 

Table 4-5 Summary of Expected Lifetime VMT Schedules 

(Presented in constant 2007$ and including all taxes)

MY 2012-2016 

Proposal 

MY 2012-2016 

Final 

Rulemaking 

Car 190,271 195,264 

Trucks 221,199 225,865 
Summary of Interagency Working Comments on Draft Rule under EO 12866

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Table 4-6 Survival Rates and Adjusted Annual Vehicle-Miles Traveled (VMT) by Age for 

Passenger Cars (average values for 2012-2030) 

Vehicle Age Estimated Survival 

Fraction

Adjusted Annual 

VMT 

Survival-Weighted 

Annual VMT 

1 0.9950 17,270 17,183 

2 0.9900 16,943 16,774 

3 0.9831 16,599 16,319 

4 0.9731 16,163 15,728 

5 0.9593 15,761 15,119 

6 0.9413 15,337 14,437 

7 0.9188 14,881 13,672 

8 0.8918 14,429 12,868 

9 0.8604 13,940 11,994 

10 0.8252 13,495 11,136 

11 0.7866 12,964 10,198 

12 0.7170 12,510 8,970 

13 0.6125 11,990 7,344 

14 0.5094 11,470 5,843 

15 0.4142 10,997 4,555 

16 0.3308 10,543 3,488 

17 0.2604 10,125 2,637 

18 0.2028 9,714 1,970 

19 0.1565 9,307 1,456 

20 0.1200 8,891 1,067 

21 0.0916 8,546 783 

22 0.0696 8,285 577 

23 0.0527 8,136 429 

24 0.0399 7,896 315 

25 0.0301 7,699 232 

26 0.0227 7,530 171 

Adjusted Lifetime Passenger Car VMT 195,264 
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Table 4-7 Survival Rates and Adjusted Annual Vehicle-Miles Traveled (VMT) by Age for 

Light Trucks (average values for 2012-2030) 

Vehicle Age Estimated 

Survival Fraction

Adjusted Annual 

VMT 

Survival-Weighted 

Annual VMT 

1 0.9950 19,219 19,123 

2 0.9741 18,782 18,296 

3 0.9603 18,419 17,688 

4 0.9420 17,946 16,905 

5 0.9190 17,502 16,085 

6 0.8913 16,952 15,109 

7 0.8590 16,439 14,121 

8 0.8226 15,829 13,021 

9 0.7827 15,218 11,911 

10 0.7401 14,648 10,841 

11 0.6956 13,992 9,733 

12 0.6501 13,450 8,744 

13 0.6042 12,832 7,753 

14 0.5517 12,212 6,737 

15 0.5009 11,600 5,811 

16 0.4522 11,069 5,005 

17 0.4062 10,617 4,313 

18 0.3633 10,125 3,679 

19 0.3236 9,650 3,123 

20 0.2873 9,238 2,654 

21 0.2542 8,882 2,258 

22 0.2244 8,667 1,945 

23 0.1975 8,400 1,659 

24 0.1735 8,395 1,456 

25 0.1522 8,197 1,248 

26 0.1332 8,188 1,091 

27 0.1165 8,218 957 

28 0.1017 8,216 836 

29 0.0887 8,213 728 

30 0.0773 8,211 635 

31 0.0673 8,210 553 

32 0.0586 8,208 481 

33 0.0509 8,203 418 

34 0.0443 8,196 363 

35 0.0385 8,182 315 

36 0.0334 8,167 273 

Adjusted Lifetime Light Truck VMT 225,865 
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4.2.4 Accounting for the fuel economy rebound effect 

 The rebound effect refers to the fraction of fuel savings expected to result from an increase in 

vehicle fuel economy that is offset by additional vehicle use. The increase in vehicle use that 

stems from improved fuel economy occurs because vehicle owners respond to the resulting 

reduction in vehicle fuel consumption and operating costs by driving slightly more. 

The magnitude of the rebound effect is one of the determinants of the actual fuel savings that are 

likely to result from adopting stricter fuel economy or emissions standards, and thus an important 

parameter affecting EPA’s and NHTSA’s evaluation of alternative standards for future model 

years. It can be measured directly by estimating the elasticity of vehicle use with respect to fuel 

economy itself, or indirectly by the elasticity of vehicle use with respect to fuel cost per mile 

driven.n

 When expressed as a positive percentage, either of these parameters gives the fraction 

of fuel savings that would otherwise result from adopting stricter standards, but is offset by the 

increase in fuel consumption that results when vehicles with increased fuel economy are driven 

more. 

The fuel economy rebound effect for light-duty vehicles has been the subject of a large number 

of studies since the early 1980s. Although they have reported a wide range of estimates of its 

exact magnitude, these studies generally conclude that a significant rebound effect occurs when 

vehicle fuel efficiency improves.o

 The most common approach to estimating its magnitude has 

been to analyze household survey data on vehicle use, fuel consumption, fuel prices (often 

obtained from external sources), and other determinants of household travel demand to isolate 

the response of vehicle use to higher fuel economy. Other studies have relied on econometric 

analysis of annual U.S. data on vehicle use, fuel economy, fuel prices, and other variables to 

identify the response of total or average vehicle use to changes in fleet-wide average fuel 

economy and its effect of fuel cost per mile driven. Two recent studies analyzed yearly variation 

in vehicle ownership and use, fuel prices, and fuel economy among individual states over an 

extended time period in order to measure the response of vehicle use to changing fuel economy.p

 

This section surveys these previous studies, summarizes recent work on the rebound effect, and 

explains the basis for the 10 percent rebound effect EPA and NHTSA are using in this 

rulemaking.8

4.2.4.1 Summary of historical literature on rebound effect 

It is important to note that a majority of the studies previously conducted on the rebound effect 

rely on data from the 1950-1990s. While these older studies provide valuable information on the 

potential magnitude of the rebound effect, studies that include more recent information (e.g., data 

 

n Fuel cost per mile is equal to the price of fuel in dollars per gallon divided by fuel economy in miles per gallon, so

this figure declines when a vehicle’s fuel economy increases.

o 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.  

p

 In effect, these studies treat U.S. states as a data “panel” by applying appropriate estimation procedures to data 

consisting of each year’s average values of these variables for the separate states. 
Summary of Interagency Working Comments on Draft Rule under EO 12866

- 25 - 

within the last decade) may provide more reliable estimates of how this rule will affect future 

driving behavior. Therefore, the more recent studies have been described in more detail below. 

Estimates based on aggregate U.S. vehicle travel data published by the U.S. Department of 

Transportation, Federal Highway Administration, covering the period from roughly 1950 to 

1990, have found long-run rebound effects on the order of 10-30 percent. Some of these studies 

are summarized in the following table. 

Table 4-8 Estimates of the Rebound Effect Using U.S. Aggregate Time-Series Data on 

Vehicle Travel1

AUTHOR 

(YEAR) 

SHORTRUN LONG-RUN TIME PERIOD 

Mayo & Mathis 

(1988) 

22% 26% 1958-84 

Gately (1992) 9% 9% 1966-88 

Greene (1992) Linear 5-

19% 

Log-linear 

13% 

Linear 5-19% 

Log-linear 

13% 

1957-89 

Jones (1992) 13% 30% 1957-89 

Schimek (1996) 5-7% 21-29% 1950-94 1 Source: Sorrell and Dimitropolous (2007) table 4.6. 

Table 4-9 Estimates of the Rebound Effect Using U.S. State Level Data1

AUTHOR 

(YEAR) 

SHORT-RUN LONG-RUN TIME PERIOD 

Haughton & 

Sarkar (1996) 

9-16% 22% 1973-1992 

Small and Van 

Dender (2007) 

4.5% 22% 1961-2001 

1 Source: Sorrell and Dimitropolous (2007) table 4.7. 

While national (Table 4-6) and state level (Table 4-9) data have found relatively consistent longrun estimates of the rebound effect, household surveys display more variability (Table 4-10). 

There are several possible explanations for this larger variability. One explanation is that some 

of these studies do not include vehicle age as an explanatory variable, thus leading to omitted 

variable bias.9

 Another explanation is that it is difficult to differentiate between the impacts of 

residential density and fuel prices, since households with higher fuel prices are more likely to be 

in urban areas.10 

Table 4-10 Estimates of the Rebound Effect Using U.S. Survey Data 

AUTHOR 

(YEAR) 

SHORTRUN LONG-RUN TIME PERIOD 

Goldberg (1966) 0% CES 1984-90 

Greene (1999) 23% EIA RTECS 

1979-1994 

Pickrell & 

Schimek (1999) 

 4-34% NPTS 1995 Single year 
Summary of Interagency Working Comments on Draft Rule under EO 12866

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Puller & 

Greening (1999) 

49% CES 1980-90 

Single year, cross-sectional 

West (2004) 87% CES 1997 

Single year 

An important distinction among studies of the rebound effect is whether they assume that the 

effect is constant, or varies over time in response to the absolute levels of fuel costs, personal 

income, or household vehicle ownership. Most studies using aggregate annual data for the U.S. 

assume a constant rebound effect, although some of these studies test whether the effect can vary 

as changes in retail fuel prices or average fuel economy alter fuel cost per mile driven. Many 

studies using household survey data estimate significantly different rebound effects for 

households owning varying numbers of vehicles, although they arrive at differing conclusions 

about whether the rebound effect is larger among households that own more vehicles. Finally, 

one recent study using state-level data concludes that the rebound effect varies directly in 

response to changes in personal income and the degree of urbanization of U.S. cities, as well as 

fuel costs. 

In order to provide a more comprehensive overview of previous estimates of the rebound effect, 

EPA and NHTSA reviewed 22 studies of the rebound effect conducted from 1983 through 2005. 

The agencies then performed a detailed analysis of the 66 separate estimates of the long-run 

rebound effect reported in these studies, which is summarized in 

Table 4-11 below.q

 As the table indicates, these 66 estimates of the long-run rebound effect 

range from as low as 7 percent to as high as 75 percent, with a mean value of 23 percent. 

Limiting the sample to 50 estimates reported in the 17 published studies of the rebound effect 

yields the same range, but a slightly higher mean estimate (24 percent). 

The type of data used and authors’ assumption about whether the rebound effect varies over time 

have important effects on its estimated magnitude. The 34 estimates derived from analysis of 

U.S. annual time-series data produce a mean estimate of 18 percent for the long-run rebound 

effect, while the mean of 23 estimates based on household survey data is considerably larger (31 

percent), and the mean of 9 estimates based on state data (25 percent) is close to that for the 

entire sample. The 37 estimates assuming a constant rebound effect produce a mean of 23 

percent, identical to the mean of the 29 estimates reported in studies that allowed the rebound 

effect to vary in response to fuel prices, vehicle ownership, or household income. 

Table 4-11 Summary Statistics for Estimates of the Rebound Effect 

 

q

In some cases, NHTSA derived estimates of the overall rebound effect from more detailed results reported in the

studies.   For example, where studies estimated different rebound effects for households owning different

numbers of vehicles but did not report an overall value, the agency computed a weighted average of the reported

values using the distribution of households among vehicle ownership categories.  
Summary of Interagency Working Comments on Draft Rule under EO 12866

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Range Distribution Category of Estimates Number of 

Studies 

Number of

Estimates Low High Median Mean Std. Dev. 

All Estimates 22 66 7% 75% 22% 23% 14% 

Published Estimates 17 50 7% 75% 22% 24% 14% 

U.S. Time-Series Data 7 34 7% 45% 14% 18% 9% 

Household Survey Data 13 23 9% 75% 31% 31% 16% 

Pooled U.S. State Data 2 9 8% 58% 22% 25% 14% 

Constant Rebound Effect (1) 15 37 7% 75% 20% 23% 16% 

Variable Rebound Effect: (1) 10 29 10% 45% 23% 23% 10% 

4.2.4.2 Summary of recent studies and analyses of the rebound effect 

More recent studies since 2007 indicate that the impacts of fuel prices and fuel economy have 

been decreasing over time as incomes increase and real gasoline prices fall. The theoretical 

argument for why the rebound effect should vary is that the responsiveness to the fuel cost of 

driving will be larger when it is a larger proportion of the total cost of driving. As incomes rise 

(or fuel prices fall), the responsiveness to the fuel cost per mile of driving will decrease if people 

view the time cost of driving – which is likely to be related to their income levels – as a larger 

component of the total cost. 

Small and Van Dender combined time series data for each of the 50 States and the District of 

Columbia to estimate the rebound effect, allowing the magnitude of the rebound to vary over 

time.11 For the time period from 1966-2001, their study found a long-run rebound effect of about 

22 percent, which is consistent with previously published studies. But for the most recent five 

year period (1997-2001), the long-run rebound effect decreased to 11 percent. Furthermore, 

when the authors updated their estimates with data through 2004, the long-run rebound effect for 

the most recent five year period (2000-2004) dropped to 6 percent.12 

New research conducted by David Greene in 2008-2009 at EPA's request further appears to 

support the theory that the magnitude of the rebound effect is declining over time.13 Over the 

entire time period analyzed (1966-2007), Greene found that fuel prices had a statistically 

significant impact on VMT, while fuel economy did not. In spite of this result, Greene also 

tested Small and Van Dender’s formulation which allows the elasticity of fuel cost per mile to 

decrease with increasing per capita income. The results of estimation using national time series 

data confirmed the results obtained by Small and Van Dender using a time series of state level 

data. 

While Small and Van Dender did not find a statistically significant coefficient for fuel efficiency, 

they did find a statistically significant coefficient for the price of fuel. They then tested the 

hypothesis that the elasticity of vehicle travel with respect to the price of fuel was equal to its 

elasticity with respect to the rate of fuel consumption (gallons per mile), and found that the data 

could not reject that hypothesis. As a consequence, they estimated the rebound effect as the 

elasticity of vehicle travel with respect to fuel cost per mile, which constrains these elasticities to 

be equal in magnitude. Greene also attempted to re-estimate the Small and Van Dender results 

using his national data set. When using Greene’s preferred functional form, the projected 

rebound effect is approximately 12 percent in 2007, and drops to 10 percent in 2010, 9 percent in 

2016 and 8 percent in 2030. 
Summary of Interagency Working Comments on Draft Rule under EO 12866

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4.2.4.3 NHTSA analysis of the rebound effect 

To provide additional insight into the rebound effect for the purposes of this rulemaking, 

NHTSA developed several new estimates of its magnitude. These estimates were developed by 

estimating and testing several econometric models of the relationship between vehicle milestraveled and factors that influence it, including household income, fuel prices, vehicle fuel 

efficiency, road supply, the number of vehicles in use, vehicle prices, and other factors. 

As the study by Small and Van Dender pointed out, it is important to account for the effect of 

fuel prices when attempting to estimate the rebound effect. Failing to control for changes in fuel 

prices is likely to bias estimates of the rebound effect. Therefore, changes in fuel prices are 

taken into account in Volpe’s analysis of the rebound effect. Several different approaches were 

used to estimate the fuel economy rebound effect for light duty vehicles, including single 

equation OLS regressions, multiple equation systems estimated using two- and three-stage least 

squares regression, vector autoregression, and vector error-correction models. With the except 

of single-equation regressions estimated using OLS, all of these procedures attempt to account 

for the endogenous relationship of fuel efficiency to fuel prices. 

The results from each of these approaches are presented in Table 4-12 below. The table 

reports the value of the rebound effect calculated over the entire period from 1950 through 2006, 

as well as for the final year of that period. In addition, the table presents forecasts of the average 

rebound effect between 2010 and 2030, which utilize forecasts of personal income, fuel prices, 

and fuel efficiency from EIA’s AEO 2009 Reference Case. 

The results of NHTSA’s analysis are broadly consistent with the findings from previous research 

summarized above. The historical average long-run rebound effect is estimated to range from 

16-30 percent, and comparing these estimates to its calculated values for 2006 (which range from 

8-14 percent) gives some an indication that it is declining in magnitude. The forecast values of 

the rebound effect shown in the table also suggest that this decline is likely to continue through 

2030, as they range from 4-16 percent. 

Comment [A5]: It would be useful to have not 

just the final year in that period but also the last ten 

years to get a better idea of the long-term trend 

(versus in anyone particular year). Please add this to 

table 4-12. 
Summary of Interagency Working Comments on Draft Rule under EO 12866

29 

 Table 4-12 Summary of NHTSA Estimates of the Rebound Effect 

Rebound Effects: 

Model VMT Measure Variables Included in VMT Equation Estimation Technique 1950- 2006 2006 2010- 2030* 

Small-Van Dender single VMT equation 

annual VMT per adult 

fuel cost per mile, per Capita income, vehicle stock, road miles per adult, fraction of population that is adult, fraction of population living in urban areas, fraction of population living in urban areas with heavy rail, dummy variables for fuel rationing, time trend 

OLS 33.0% 15.8% 8.0% 

Small-Van Dender three-equation system 

annual VMT per adult 

fuel cost per mile, per Capita income, vehicle stock, road miles per adult, fraction of population that is adult, fraction of population living in urban areas, fraction of population living in urban areas with heavy rail, dummy variables for fuel rationing, time trend 

3SLS 21.6% 5.8% 3.4% 

Single-equation VMT model 

annual VMT per adult personal income, road miles per Capita, time trend OLS 18.4% 11.7% 9.2% 

Single-equation VMT model 

annual VMT per vehicle 

fuel cost per mile, personal income, road miles per Capita, time trend OLS 17.6% 15.2% 15.7% 

Single-equation VMT model 

annual VMT per adult 

fuel cost per mile, personal income, road miles per Capita, dummy variables for fuel rationing, time trend OLS 34.0% 20.8% 13.6% 

Single-equation VMT model 

annual VMT per vehicle 

fuel cost per mile, personal income, vehicles per road mile, % of fleet manufactured under CAFE standards, new vehicle prices 

IV (for fuel 

cost per mile) 16.3% 9.2% 7.0% 

Three-equation system for VMT, fuel efficiency, and vehicle stock 

annual VMT per vehicle 

fuel cost per mile, personal income, vehicles per capita, vehicles per road mile, fraction of adult population licensed to drive, new vehicle prices, % of fleet manufactured under CAFE standards 

2SLS 29.5% 13.4% 15.9% 

Three-equation system for VMT, fuel efficiency, and vehicle stock 

annual VMT per vehicle 

fuel cost per mile, personal income, vehicles per capita, vehicles per road mile, fraction of adult population licensed to drive, new vehicle prices, % of fleet manufactured under CAFE standards 

3SLS 29.8% 13.7% 16.2% 

Three-equation system for VMT, 

annual VMT per vehicle 

fuel cost per mile, personal income, vehicles per capita, vehicles per road mile, fraction of adult population 

Vector autoregression 19.9% 10.8% -- 
Summary of Interagency Working Comments on Draft Rule under EO 12866

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Summary of Interagency Working Comments on Draft Rule under EO 12866

31 

4.2.4.4 Basis for rebound effect used by EPA and NHTSA in this rule 

Based on a combination of historical estimates of the rebound effect and more recent analyses 

conducted by EPA and NHTSA, the agencies used an estimate of 10 percent for the rebound 

effect in their analyses of proposed CAFE and GHG emission standards. Although this value 

represents the lower bound of the historical range of values for the rebound effect, more recent 

analysis suggests that the rebound effect is declining over time. The agencies sought comment 

on other alternatives for estimating the rebound effect. As one illustration, 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 demand for 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. Thus, the agencies 

sought comment on whether it would be appropriate to use the price elasticity of demand for 

gasoline, or other alternative approaches, to guide their choice of a value for the rebound effect. 

During the public comment period, EPA and NHTSA did not receive new data or analysis on the 

level of the rebound effect, but did receive some supportive comments on the 10 percent level. 

Hence, EPA and NHTSA have elected to continue to use the 10 percent estimate of the rebound 

effect in the analyses supporting this final rule. 

4.2.5 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 analysis estimates the economic benefits from increased rebound-effect driving as the sum 

of fuel costs drivers incur plus the consumer surplus they receive from the additional 

accessibility it provides.r

 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. 

4.2.6 Added costs from increased vehicle use 

Although it provides some benefits to drivers, increased vehicle use associated with the rebound 

effect also contributes to increased traffic congestion, motor vehicle accidents, and highway 

noise. Depending on how the additional travel is distributed over the day and on where it takes 

place, additional vehicle use can contribute to traffic congestion and delays by increasing traffic 

volumes on facilities that are already heavily traveled during peak periods. These added delays 

 

r

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.   
Summary of Interagency Working Comments on Draft Rule under EO 12866

32 

impose higher costs on drivers and other vehicle occupants in the form of increased travel time 

and operating expenses. Because drivers do not take these added costs into account in deciding 

when and where to travel, they must be accounted for separately as a cost of the added driving 

associated with the rebound effect. 

Increased vehicle use due to the rebound effect may also increase the costs associated with traffic 

accidents. Drivers may take account of the potential costs they (and their passengers) face from 

the possibility of being involved in an accident when they decide to make additional trips. 

However, they probably do not consider all of the potential costs they impose on occupants of 

other vehicles and on pedestrians when accidents occur, so any increase in these “external” 

accident costs must be considered as another cost of additional rebound-effect driving. Like 

increased delay costs, any increase in these external accident costs caused by added driving is 

likely to depend on the traffic conditions under which it takes place, since accidents are more 

frequent in heavier traffic (although their severity may be reduced by the slower speeds at which 

heavier traffic typically moves). 

Finally, added vehicle use from the rebound effect may also increase traffic noise. Noise 

generated by vehicles causes inconvenience, irritation, and potentially even discomfort to 

occupants of other vehicles, to pedestrians and other bystanders, and to residents or occupants of 

surrounding property. Because these effects are unlikely to be taken into account by the drivers 

whose vehicles contribute to traffic noise, they represent additional externalities associated with 

motor vehicle use. Although there is considerable uncertainty in measuring their value, any 

increase in the economic costs of traffic noise resulting from added vehicle use must be included 

together with other increased external costs from the rebound effect. 

EPA and NHTSA rely on estimates of congestion, accident, and noise costs caused by 

automobiles and light trucks developed by the Federal Highway Administration to estimate the 

increased external costs caused by added driving due to the rebound effect.14 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. They are intended to measure the 

increases in costs from added congestion, property damages and injuries in traffic accidents, and 

noise levels caused by automobiles and light trucks that are borne by persons other than their 

drivers (or “marginal” external costs). 

Updated to 2007 dollars, FHWA’s “Middle” estimates for marginal congestion, accident, and 

noise costs caused by automobile use amount to 5.2 cents, 2.3 cents, and 0.1 cents per vehiclemile (for a total of 7.6 cents per mile), while those for pickup trucks and vans are 4.7 cents, 2.5 

cents, and 0.1 cents per vehicle-mile (for a total of 7.3 cents per mile).15, s These costs are 

multiplied 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. 

 

s

 The Federal Highway Administration’s estimates of these costs agree closely with some other recent estimates. 

For example, recent published research conducted by Resources for the Future (RFF) estimates marginal congestion 

and external accident costs for increased light-duty vehicle use in the U.S. to be 3.5 and 3.0 cents per vehicle-mile in 

year-2002 dollars. See Ian W.H. Parry and Kenneth A. Small, “Does Britain or the U.S. Have the Right Gasoline 

Tax?” Discussion Paper 02-12, Resources for the Future, 19 and Table 1 (March 2002). Available at

http://www.rff.org/rff/Documents/RFF-DP-02-12.pdf (last accessed Feb. 15, 2010).
Summary of Interagency Working Comments on Draft Rule under EO 12866

33 

4.2.7 Petroleum and energy security impacts 

4.2.7.1 Impact on U.S. petroleum imports 

 In 2008, U.S. petroleum import expenditures represented 21 percent of total U.S. imports of all 

goods and services.16 In 2008, the United States imported 66 percent of the petroleum it 

consumed, and the transportation sector accounts for 70 percent of total U.S. petroleum 

consumption. This compares roughly to 37 percent of petroleum from imports and 55 percent 

consumption of petroleum in the transportation sector in 1975.17 It is clear that petroleum 

imports have a significant impact on the U.S. economy. Requiring lower-GHG vehicle 

technology and improved fuel economy in the U.S. is expected to lower U.S. petroleum imports. 

4.2.7.2 Background on U.S. energy security 

 U.S. energy security is broadly defined as protecting the U.S. economy against circumstances 

that threaten significant short- and long-term increases in energy costs. Most discussion of U.S. 

energy security revolves around the topic of the economic costs of U.S. dependence on oil 

imports. The problem is that the U.S. relies on sources of imported oil from potentially unstable 

sources. In addition, oil exporters have the ability to raise the price of oil by exerting monopoly 

power through the formation of a cartel, the Organization of Petroleum Exporting Countries 

(OPEC). Finally, these factors contribute to the vulnerability of the U.S. economy to episodic oil 

supply shocks and price spikes. In 2008, U.S. imports of crude oil were $326 billion (in 2007$, 

see Figure 4-1). 
Summary of Interagency Working Comments on Draft Rule under EO 12866

34 

U.S. Expenditures on Crude Oil

0

100

200

300

400

500

600

700

1970 1975 1980 1985 1990 1995 2000 2005

Year

(2007$ Billions)

Domestic

Imported

Figure 4-1 U.S. Expenditures on Crude Oil from 1970 through 2008t

One effect of the EPA/NHTSA joint rule is that it promotes more efficient use of transportation 

fuels in the U.S. The result is that it reduces U.S. oil imports, which reduces both financial and 

strategic risks associated with a potential disruption in supply or a spike in the cost of a particular 

energy source. This reduction in risks is a measure of improved U.S. energy security. For this 

rule, an “oil premium” approach is utilized to identify those energy-security related impacts 

which are not reflected in the market price of oil, and which are expected to change in response 

to an incremental change in the level of U.S. oil imports. 

4.2.7.2.1 Methodology Used to Estimate U.S. Energy Security Benefits

In order to understand the energy security implications of reducing U.S. oil imports, EPA 

has worked with Oak Ridge National Laboratory (ORNL), which has developed approaches for 

evaluating the social costs and energy security implications of oil use. The energy security 

estimates provide below are based upon a methodology developed in a peer-reviewed study 

entitled, “The Energy Security Benefits of Reduced Oil Use, 2006-2015,” completed in March 

2008. This recent study is included as part of the docket for this rulemaking.18 This ORNL 

study is an update version of the approach to estimating the energy security benefits of U.S. oil 

import reductions developed in an ORNL 1997 Report by Leiby, Paul N., Donald W. Jones, T. 

Randall Curlee, and Russell Lee, entitled “Oil Imports: An Assessment of Benefits and Costs.” 

When conducting this recent analysis, ORNL considered the full cost of importing petroleum 

into the U.S. The full economic cost is defined to include two components in addition to the 

 t

 For historical data through 2006: EIA Annual Energy Review, various editions. 

For data 2006-2008: EIA Annual Energy Outlook (AEO) 2009 (Update Reference (Stimulus) Base Case). 

See file "aeostimtab_11.xls" available at http://www.eia.doe.gov/oiaf/servicerpt/stimulus/aeostim.html 
Summary of Interagency Working Comments on Draft Rule under EO 12866

35 

purchase price of petroleum itself. These are: (1) the higher costs for oil imports resulting from 

the effect of U.S. import demand on the world oil price and on OPEC market power (i.e., the 

“demand” or “monopsony” costs); and (2) the risk of reductions in U.S. economic output and 

disruption of the U.S. economy caused by sudden disruptions in the supply of imported oil to the 

U.S. (i.e., macroeconomic disruption/adjustment costs). Maintaining a U.S. military presence to 

help secure stable oil supply from potentially vulnerable regions of the world was not included in 

this analysis because its attribution to particular missions or activities is difficult (as discussed 

further below). 

Section III.H of the preamble contains a detailed discussion of how the monopsony and 

macroeconomic disruption/adjustment components were treated for this analysis. As that 

discussion indicates, the monopsony cost represents a transfer of resources from consumers of 

petroleum products to oil producers, and does not involve the consumption of real economic 

resources. Reducing the magnitude of the monopsony cost does not produce a savings in 

economic resources, although it does reduce the value of resources transferred from U.S. 

consumers of petroleum products to foreign suppliers of petroleum. In contrast, the 

macroeconomic disruption and adjustment costs that arise from U.S. petroleum imports do 

represent real economic costs, and reductions in their magnitude do represent real economic 

benefits from reducing U.S. consumption and imports of petroleum. Therefore, the remainder of 

this discussion focuses on estimating the magnitude of the macroeconomic disruption and 

adjustment costs. 

As part of the process for using the ORNL energy security estimates, EPA sponsored an 

independent-expert peer review of this ORNL study. A report compiling the peer reviewers’ 

comments is provided in the docket.19 In addition, EPA has worked with ORNL to address 

comments raised in the peer review and to develop estimates of the energy security benefits 

associated with a reduction in U.S. oil imports for this rule. In response to peer reviewer 

comments, ORNL modified its model by changing several key parameters involving OPEC 

supply behavior, the responsiveness of oil demand and supply to a change in the world oil price, 

and the responsiveness of U.S. economic output to a change in the world oil price. 

For this rule, ORNL further updated the energy security premium by incorporating the most 

recent oil price forecast and energy market trends in AEO 2009 into its model. In order for the 

energy security premium estimated to be used in EPA’s VECTOR model, ORNL developed 

energy security estimates for a number of different years; i.e., 2015, 2020, 2030, and 2040. 

NHTSA used just the 2015 estimates to estimate the energy security benefits associated with this 

rule. 

For 2015, ORNL has estimated that the total energy security premium associated with a 

reduction of imported oil is $18.49/barrel. On a dollar per gallon basis, energy security benefits 

for 2015 are $0.44/gallon. Based upon alternative sensitivities regarding OPEC supply behavior, 

and the responsiveness of oil demand and supply to a change in the world oil price, the energy 

security premium ranges from $9.80 to $28.08/barrel. In terms of dollars per gallon, the energy 

security premium ranges from $0.23/gallon to $0.67/gallon. Please refer to Table 4-13 for 

similar information for years 2015, 2020, 2030 and 2040,u

 as well as a breakdown of the 

components of the energy security premium for each year. The components of the energy 

security premium and their values are discussed below. 

 

u AEO 2009 forecasts energy market trends and values only to 2030.  The energy security premia post‐2030 were

assumed to be the 2030 estimate.

Comment [A6]: You note that updating to 2010 

is expected to have minimal effect. Could you also 

add what you expect the difference would be of 

subtracting out the influence of CAFÉ from the AEO 

Reference cases? It should be subtracted out, but at 

a minimum noted. 
Summary of Interagency Working Comments on Draft Rule under EO 12866

36 

Table 4-13 Energy Security Premium in 2015, 2020, 2030 and 2040v

 (2007$/Barrel) 

Year Monopsony 

(Range) 

Macroeconomic 

Disruption/Adjustment Costs 

(Range) 

Total Mid-Point 

(Range) 

2015 $11.79 

($4.26 - $21.37) 

$6.70 

$3.11 – $10.67 

$18.49 

$9.80 - $28.08 

2020 $12.31 

($4.46 - $22.53) 

$7.62 

($3.77 – $12.46)

$19.94 

($10.58 - $30.47)

2030 $10.57 

($3.84 – 18.94) 

$8.12 

($3.90 – $13.04) 

$18.69 

($10.52 - $27.89) 

2040 $10.57 

($3.84 – $18.94) 

$8.12 

($3.90 – $13.04) 

$18.69 

($10.52 - $27.89) 

4.2.7.2.1.1 Effect of oil use on long-run oil price, U.S. import costs, and economic 

output 

The first component of the full economic costs of importing petroleum into the U.S. follows 

from the effect of U.S. import demand on the world oil price over the long-run. Because the 

U.S. is a sufficiently large purchaser of foreign oil supplies, its purchases can affect the world oil 

price. This monopsony power means that increases in U.S. petroleum demand can cause the 

world price of crude oil to rise, and conversely, that reduced U.S. petroleum demand can reduce 

the world price of crude oil. Thus, one benefit of decreasing U.S. oil purchases, due to the 

increased availability and use of other transportation fuels, is the potential decrease in the crude 

oil price paid for all crude oil purchased. 

The demand or monopsony effect can be readily illustrated with an example. If the U.S. imports 

10 million barrels per day at a world oil price of $50 per barrel, its total daily bill for oil imports 

is $500 million. If a decrease in U.S. imports to 9 million barrels per day causes the world oil 

price to drop to $49 per barrel, the daily U.S. oil import bill drops to $441 million (9 million 

barrels times $49 per barrel). While the world oil price only declines $1, the resulting decrease 

in oil purchase payments of $59 million per day ($500 million minus $441 million) is equivalent 

to an incremental benefit of $59 per barrel of oil imports reduced, or $10 more than the newlydecreased world price of $49 per barrel. This additional $10 per barrel “import cost premium” 

represents the incremental external benefits to the U.S. for avoided import costs beyond the price 

paid oil purchases. This additional benefit arises only to the extent that reduction in U.S. oil 

imports affects the world oil price. ORNL estimates this component of the energy security 

benefit in 2015 to be $11.79/barrel, with a range of $4.26 – $21.37/barrel of imported oil 

reduced. 

 

v AEO 2009 world oil prices were used, as in the proposed rule.  The analysis was not updated using the recently‐

released AEO 2010 forecast of world oil prices, because EPA and NHTSA believe that the changes in the fuel prices

would be too small to cause a change in the Energy Security Premium estimates.

Comment [A7]: Please note, however, that this 

decline in petroleum prices leads to increased use of 

petroleum elsewhere in the world and that this result 

in emission leakage due to the GHG emissions 

associated with this increase in oil consumption. 

This is a real effect, not just a transfer and could be 

potentially substantial even for a small decline in the 

world oil price. 

This effect also should be quantified in the RIA. 
Summary of Interagency Working Comments on Draft Rule under EO 12866

37 

4.2.7.2.1.2 Short-run disruption premium from expected costs of sudden supply 

disruptions 

The second component of the oil import premium, the “macroeconomic disruption/adjustment 

costs premium,” arises from the effect of oil imports on the expected cost of disruptions. A 

sudden increase in oil prices triggered by a disruption in world oil supplies has two main effects: 

(1) it increases the costs of imports in the short run, further expanding the transfer of U.S. wealth 

to foreign producers, and (2) it can lead to macroeconomic contraction, dislocation and Gross 

Domestic Product (GDP) losses. ORNL estimates the composite estimate of these two factors 

that comprise the macroeconomic disruption/adjustment costs premium to be $6.70/barrel in 

2015, with a range of $3.11 – $10.67/barrel of imported oil reduced. 

4.2.7.2.1.2.1 Higher costs of oil imports and wealth transfer during shocks 

During oil price shocks, the higher price of imported oil causes increased payments for imports 

and a transfer of wealth from the U.S to oil exporters. This increased claim on U.S. economic 

output is a loss to the U.S. that is separate from and additional to any reduction in economic 

output due to the shock. The increased wealth transfer during shocks is counted as a loss to the 

degree that the expected price increase is not anticipated and internalized by oil consumers. 

4.2.7.2.1.2.2 Macroeconomic costs: potential output loss and dislocation/adjustment costs 

Macroeconomic losses during price shocks reflect both aggregate output losses and “allocative” 

losses. The former are a reduction in the level of output that the U.S. economy can produce fully 

using its available resources; and the latter stem from temporary dislocation and underutilization 

of available resources due to the shock, such as labor unemployment and idle plant capacity. 

The aggregate output effect, a reduction in “potential” economic output, will last so long as the 

price is elevated. It depends on the extent and duration of any disruption in the world supply of 

oil, since these factors determine the magnitude of the resulting increase in prices for petroleum 

products, as well as whether and how rapidly these prices return to their pre-disruption levels. 

In addition to the aggregate contraction, there are “allocative” or “adjustment” costs associated 

with dislocated energy markets. Because supply disruptions and resulting price increases occur 

suddenly, empirical evidence shows they also impose additional costs on businesses and 

households which must adjust their use of petroleum and other productive factors more rapidly 

than if the same price increase had occurred gradually. Dislocational effects include the 

unemployment of workers and other resources during the time needed for their intersectoral or 

interregional reallocation, and pauses in capital investment due to uncertainty. These 

adjustments temporarily reduce the level of economic output that can be achieved even below the 

“potential” output level that would ultimately be reached once the economy’s adaptation to 

higher petroleum prices was complete. The additional costs imposed on businesses and 

households for making these adjustments reflect their limited ability to adjust prices, output 

levels, and their use of energy, labor and other inputs quickly and smoothly in response to rapid 

changes in prices for petroleum products. 

Since future disruptions in foreign oil supplies are an uncertain prospect, each of the disruption 

cost components must be weighted by the probability that the supply of petroleum to the U.S. 

will actually be disrupted. Thus, the “expected value” of these costs – the product of the 

probability that a supply disruption will occur and the sum of costs from reduced economic 

Comment [A8]: Then this is also a transfer to 

other countries and should not be included in the 

quantification of energy security benefits for this 

rule. 
Summary of Interagency Working Comments on Draft Rule under EO 12866

38 

output and the economy’s abrupt adjustment to sharply higher petroleum prices – is the relevant 

measure of their magnitude. Further, when assessing the energy security value of a policy to 

reduce oil use, it is only the change in the expected costs of disruption that results from the 

policy that is relevant. The expected costs of disruption may change from lowering the normal 

(i.e., pre-disruption) level of domestic petroleum use and imports, from any induced alteration in 

the likelihood or size of disruption, or from altering the short-run flexibility (e.g., elasticity) of 

petroleum use. 

In summary, the steps needed to calculate the disruption or security premium are: 1) determine 

the likelihood of an oil supply disruption in the future; 2) assess the likely impacts of a potential 

oil supply disruption on the world oil price; 3) assess the impact of the oil price shock on the 

U.S. economy (in terms of import costs and macroeconomic losses); and 4) determine how these 

costs change with oil imports. The value of price spike costs avoided by reducing oil imports 

becomes the oil security portion of the premium. 

4.2.7.2.2 Cost of existing U.S. energy security policies 

The last often-identified component of the full economic costs of U.S. oil imports is the costs to 

the U.S. taxpayers of existing U.S. energy security policies. The two primary examples are 

maintaining a military presence to help secure a stable oil supply from potentially vulnerable 

regions of the world and maintaining the Strategic Petroleum Reserve (SPR). The SPR is the 

largest stockpile of government-owned emergency crude oil in the world. Established in the 

aftermath of the 1973-74 oil embargo, the SPR provides the U.S. a response option should a 

disruption in commercial oil supplies threaten the U.S. economy. It also allows the U.S. to meet 

part of its International Energy Agency obligation to maintain emergency oil stocks, and it 

provides a national defense fuel reserve. 

U.S. military costs are excluded from the analysis performed by ORNL because their attribution 

to particular missions or activities is difficult. Most military forces serve a broad range of 

security and foreign policy objectives. Attempts to attribute some share of U.S. military costs to 

oil imports are further challenged by the need to estimate how those costs might vary with 

incremental variations in U.S. oil imports. Similarly, while the costs for building and 

maintaining the SPR are more clearly related to U.S. oil use and imports, historically these costs 

have not varied in response to changes in U.S. oil import levels. Thus, while SPR is factored 

into the ORNL analysis, the cost of maintaining the SPR is excluded. 

4.2.7.2.3 Modifications to analysis based upon peer reviewer comments 

The EPA commissioned ORNL to conduct a number of sensitivity analyses to address the 

comments of the peer reviewers. Based upon the peer reviewer comments, key parameters that 

influence the “oil import” premium were assessed. Since not all the comments were in 

agreement with each other, several ranges of different parameters were developed for the 

analyses. These sensitivities used the most recent price forecasts and energy market trends 

available at the time the peer review was being conducted and completed, the AEO 2007 

Reference Case. Thus, the results presented below are suggestive of how the energy security 

premium is influenced by alternative assumptions of key parameters that influence world oil 

markets. A summary of the results of the analyses are shown in Table 4-14. 

Three key parameters were varied in order to assess their impacts on the oil import premium: (1) 

the response of OPEC supply, (2) the combined response of non-U.S., non-OPEC demand and 
Summary of Interagency Working Comments on Draft Rule under EO 12866

39 

supply and (3) the GDP response to a change in the world oil as a result of reduced U.S. oil 

imports. The cases used updated supply/demand elasticities for non-U.S./non-OPEC region after 

considering more recent estimates than those used in 1997 study. As a result, the total market 

responsiveness is greater than previous ORNL estimates. Only small changes to the world oil 

price are anticipated from a substantial reduction in U.S. demand, on average, about $0.70/barrel 

for every million-barrels-per-day reduction in demand. 

In the ORNL framework, OPEC-behavior is treated parametrically, with a wide range of possible 

responses represented by a range of supply elasticities. Case One in Table 4-14 below refers to 

the AEO 2007 estimates of energy market trends and uses the elasticity parameters from the 

original 1997 ORNL study. In Case Two, the OPEC supply elasticities range for 0.25 to 6 with a 

mean elasticity of 1.7. Case Three alters the distribution of the OPEC supply elasticities so that 

the mean elasticity is 2.2 instead of 1.7. With the more elastic OPEC oil supply in Case Three, 

the oil premium is lower. Alternatively, a candidate rule for OPEC strategic response behavior, 

adapted from a lead article on what behavior maximizes OPEC’s long run net revenue in a robust 

way,20 would have OPEC responding to preserve its worldwide oil market share. This is 

presented as Case Seven. Application of this rule instead of the range of OPEC supply responses 

used leads to an estimate of the oil import premium that is between Case Two and Case Three. 

The second key parameter that was varied based upon peer reviewer comments was non-OPEC, 

non-U.S. demand and supply responsiveness to a change in the U.S. oil import demand and, 

hence, the world oil price. In Case Four, the mean non-U.S./non-OPEC demand and supply 

elasticities are taken to each be 0.3 in absolute value terms. When combined together, the net 

elasticity of import demand from this region — the non-U.S./non-OPEC region is — roughly 

1.6. Case Five takes the Case Four assumptions of a more elastic OPEC supply behavior and 

combines those assumptions with the 1.6 net elasticity of import demand for the non-U.S./nonOPEC region. Case Six looks at the consequences of a yet higher net elasticity of import 

demand — 2.28 — for the non-U.S./non-OPEC region. The impact on the oil import premium is 

relatively modest. 

Cases Eight and Nine consider a reduced GDP elasticity, the parameter which summarizes the 

sensitivity of GDP to oil price shocks. Several reviewers suggested a lower estimate for this 

parameter. In response to their comments, a couple of cases were examined where the GDP 

elasticity was lowered to 0.032 in comparison to the original ORNL estimate of 0.0495. As 

anticipated, this change lowered the oil import premium modestly. For example, compared with 

Case Four where OPEC supply is more elastic, lowering the GDP elasticity with respect to the 

world oil price reduced the oil import premium by roughly $0.40/barrel. This is because the 

GDP-dislocation component is only about one-quarter of the total premium, and there are 

offsetting changes in other components. The last case examined, Case Nine, looks at the 

consequences for the oil import premium with a reduced elasticity of GDP if OPEC attempts to 

maintain its share of the world oil market. 

Clearly there is an unavoidable degree of uncertainty about the magnitude of marginal economic 

costs from the U.S. importation of petroleum, and the size of the oil import premium. ORNL 

sought to reflect this with probabilistic risk analysis over key input factors, guided by the 

available literature and the best judgment of oil market experts. Cases shown in Table 4-14 

explore some reasonable variations in the ranges of input assumptions and the mean oil premium 

estimates vary in a fairly moderate range between roughly $11 and $15/barrel of imported oil. 

On balance, Case Eight suggested a reasonable and cautious assessment of the premium value to 

ORNL, and is ORNL’s recommended case. This is based on a review of important driving 
Summary of Interagency Working Comments on Draft Rule under EO 12866

40 

factors, the numerical evaluations and simulations over major uncertainties, and taking into 

consideration the many comments and suggestion from the reviewers, the EPA and other 

Agencies. This recommended case, and the premium range resulting from 90 percent of the 

simulated outcomes, encompasses a wide array of perspectives and potential market outcomes in 

response to a reduction of U.S. imports. 

As mentioned previously, this recommended case relied on the most recent available projections 

of the U.S. and world oil market for the next ten years based upon the AEO 2007 Reference 

Case. OPEC-behavior was treated parametrically, with a wide range of possible responses 

represented by a wide range of supply elasticities, from small to quite large. This recommended 

case recognized that the OPEC response is the most uncertain single element of this analysis. It 

could vary between inelastic defense of output levels, or market share, or could be highly elastic 

in defense of price, probably at the expense of longer run cartel power and discounted net profits. 

The balance between possible elastic and inelastic OPEC response was essentially even over a 

fairly wide range of elasticities. ORNL concluded that this is the best way to estimate OPEC 

behavior until greater progress can be made in synthesizing what insights are available from the 

evolving strategic game-theoretic and empirical research on OPEC behavior, and advancing that 

research. An alternative would have been to use OPEC strategic response behavior to maximize 

long-run net revenue, which may well correspond to market-share preservation behavior (e.g., 

Case Seven), and a somewhat higher premium value. 

Finally, ORNL’s recommended case used a GDP elasticity range, the parameter which 

summarizes the sensitivity of GDP to oil price shocks, which is reduced compared to earlier 

estimates, and compared to the full range of historically-based estimates. This helped address 

the concerns of those who either question the conclusions of past empirical estimates or expect 

that the impacts of oil shocks may well be declining. 
Economic Assumptions Used in the Agencies’ Analyses 

41 

Table 4-14 Summary Results – Oil Import Premium Under Various Cases ($2007/BBL) 

Component Statistic

1) AEO2007 Base Outlook, 1997 Study Elasticities

2) AEO2007 Base Outlook, Wider Range of OPEC Supply Elasticities

3) Case 2 with Revised Wider Range of OPEC Supply Elasticities

4) Case 2 with Updated NonOPEC Supply/Demand Elasticities

5) Case 4 plus Revised Wider Range of OPEC Supply Elasticities

6) Case 4 Variant with Wider, Higher Range of NonU.S./Non-OPEC Supply/Demand Elasticities

7) Case 6 with Applied Strategic OPEC Behavioral Rule: Maintain Market Share

8) Case 4 with Reduced GDP Elasticity

9) Case 7 with Reduced GDP Elasticity

Mean $5.57 $10.26 $8.16 $7.77 $6.52 $6.44 $9.36 $7.86 $9.42Range ($3.60 - $8.19) ($3.10 - $21.22) ($3.12 - $19.30) ($2.94 - $13.75) ($2.90 - $13.06) ($2.69 - $11.33) ($6.69 - $12.42) ($2.94 - $13.89) ($6.72 - $12.54)Mean $2.36 $2.33 $2.34 $1.92 $1.94 $1.93 $1.89 $2.20 $2.16Range ($0.51 - $4.66) ($0.58 - $4.57) ($0.66 - $4.61) ($0.39 - $3.75) ($0.38 - $3.84) ($0.42 - $3.70) ($0.44 - $3.66) ($0.63 - $4.07) ($0.62 - $3.96)Mean $3.83 $3.70 $3.76 $3.42 $3.45 $3.47 $3.41 $2.67 $2.64Range ($1.06 - $6.69) ($1.04 - $6.57) ($1.06 - $6.74) ($0.92 - $6.23) ($0.94 - $6.10) ($0.92 - $6.13) ($0.87 - $6.26) ($0.90 - $4.84) ($0.87 - $4.87)Mean $6.19 $6.03 $6.10 $5.34 $5.39 $5.40 $5.30 $4.87 $4.81Range ($2.94 - $10.01) ($2.94 - $9.75) ($2.91 - $9.85) ($2.53 - $8.69) ($2.60 - $8.62) ($2.58 - $8.92) ($2.54 - $8.74) ($2.23 - $7.85) ($2.25 - $7.77)Mean $11.75 $16.29 $14.27 $13.11 $11.90 $11.86 $14.65 $12.71 $14.23Range ($8.04 - $15.96) ($8.10 - $27.42) ($7.90 - $25.49) ($7.26 - $19.59) ($6.96 - $18.62) ($6.79 - $17.23) ($11.03 - $18.61) ($7.07 - $19.02) ($10.76 - $18.25)

Total Premium, in $/Gallon Mean $0.28 $0.39 $0.34 $0.31 $0.28 $0.28 $0.35 $0.30 $0.34Price Reduction ($/MMBD) Mean $0.52 $1.04 $0.81 $0.75 $0.61 $0.60 $0.90 $0.75 $0.90Cases7) Applied Strategic OPEC Behavioral Rule to Case 6: Maintain Market Share (Gately 2004 paper best strategy). This rule implies that OPEC Supply elasticity matches that of all non-OPEC supply. As a result non-U.S. elasticity of import demand ranges from8) Variant on version Case 4, considered reduced GDP elasticity for future disruptions (range -0.01 to -0.054; midcase value -0.032; mean value is -0.032, reduced from mean value of -0.0495). OPECbehavior treated parametrically.9) Revise Case 7 (which applied Strategic OPEC Behavioral Rule to Case 6: Maintain Market Share (Gately 2004 paper best strategy)) with reduced GDP elasticity for future disruptions (range -0.01 to -0.054; midcase value -0.032; mean value is -0.032, reduc3) Revise Case 2, with OPEC behavior distributed over elasticities 0 to 6, so that 25% of response is inelastic (< 1.0), mode elasticity is 2.0 (mean elasticity is 2.2 rather than 1.76)4) Updated Case 2 supply/demand elasticities for non-OPEC region with more recent estimates. Elasticity of non-U.S. demand -0.2 to -0.4, with mean and mode -0.3, non-U.S. Supply = 0.2 to 0.4, with mean and mode 0.3, implying (mode) net elasticity of impo5) Revise Case 4, with OPEC behavior distributed over elasticities 0 to 6, so that 25% of response is inelastic (< 1.0), mode elasticity is 2.0 (mean elasticity is 2.2 rather than 1.76). Net elasticity of import demand is -1.6 for the non-U.S./non-OPEC r6) Alternative to Case 4 with expanded (and higher) range of non-U.S. supply/demand elasticities. Elasticity of non-U.S. demand = -0.3 to -0.7, triangular distribution with mode -0.4 mean -0.467, elasticity of non-U.S. supply = 0.2 to 0.6, mode 0.3 and mEconomic Disruption/Adjustment CostsTotal Mid-Point1) Based on AEO2007. Updated oil market outlook from AEO1994 Base Case to AEO2007 Base Case. Among other things, this means average crude price rises from $20.33 to $48.34. All elasticities match 1997 values. Non-U.S. elasticity of import demand = -0.2) AEO2007 Base Outlook, with wider range of OPEC supply elasticities, 0.25 to 6.0 and a mean elasticity of 1.76.Monopsony ComponentDisruption Import CostsDisruption Dislocation Costs
Summary of Interagency Working Comments on Draft Rule under EO 12866

42 

4.2.7.2.4 Energy security premium values for this rule 

After the peer review process was completed, EPA worked with ORNL to further update 

the analysis for this vehicle program. Using the same methodology as the peer reviewed 

model, but updating the analysis using AEO 2009 world oil price values, ORNL 

calculated energy security premium estimates for the years 2015, 2020, and 2030. Since 

the AEO 2009 ends its forecast in the year 2030, EPA and NHTSA assumed that the 

post-2030 energy security premium estimates were the same as the 2030 estimate. The 

results of this analysis are shown above in Table 4-13in Chapter 4.2.8. 

The monopsony cost represents a transfer of resources from consumers of petroleum 

products to oil producers, and does not entail the use of real economic resources. 

Reducing the magnitude of the monopsony cost does not produce a savings in economic 

resources, although it does reduce the value of resources transferred from U.S. consumers 

of petroleum products to foreign suppliers of petroleum. In contrast, the macroeconomic 

disruption and adjustment costs that arise from U.S. petroleum imports do represent real 

economic costs, and reductions in their magnitude do represent real economic benefits 

from reducing U.S. consumption and imports of petroleum. Hence the agencies’ 

estimates of economic benefits from reducing fuel consumption via CAFE and GHG 

emission standards include ORNL’s estimates of the economic value of resulting 

reductions in macroeconomic and disruption costs, but exclude reductions in the 

monopsony cost component of the oil import premium. 

4.2.7.2.5 The impact of fuel savings on U.S. petroleum imports 

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 and 

EPA estimate that approximately 50 percent of the reduction in fuel consumption 

resulting from adopting improved fuel efficiency standards and GHG standards is likely 

to be reflected in reduced U.S. imports of refined fuel, while the remaining 50 percent 

would be expected to be reflected in reduced domestic fuel refining.23 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.24 Thus on balance, each gallon of fuel saved as a 

consequence of improved fuel efficiency standards and GHG standards is anticipated to 

 

23 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.  This analysis has not been updated using forecasts from AEO 2010, because to date only the

Reference Case from AEO 2010 has been released by EIA.   

24 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.
Summary of Interagency Working Comments on Draft Rule under EO 12866

43 

reduce total U.S. imports of crude petroleum or refined fuel by 0.95 gallons.25 Section 

5.3 of the RIA contains a discussion regarding caveats for the fuel savings estimated due 

to implementation of this rule. 

4.2.8 Air pollutant emissions 

Car and light truck use, fuel refining, and fuel distribution and retailing also generate 

emissions of certain criteria air pollutants, including carbon monoxide (CO), hydrocarbon 

compounds (usually referred to as “volatile organic compounds,” or VOC), nitrogen 

oxides (NOx), fine particulate matter (PM2.5), and sulfur dioxide (SO2). Emissions of 

most of these pollutants are associated with the number of vehicle miles driven, rather 

than with the quantity of fuel consumed. While reductions in fuel refining and 

distribution that result from lower fuel consumption will reduce emissions of criteria 

pollutants, additional vehicle use associated with the rebound effect from higher fuel 

economy will increase emissions of most of these pollutants. Sulfur dioxide is an 

exception, as described below. 

Thus the net effect of stricter fuel efficiency and GHG standards on total emissions of 

each criteria pollutant depends on the relative magnitudes of reduced emissions in fuel 

refining and distribution, and increases in emissions from vehicle use. Because the 

relationship between emission rates (emissions per gallon refined of fuel or mile driven) 

in fuel refining and vehicle use is different for each criteria pollutant, the net effect of 

fuel savings from increased fuel efficiency and GHG standards on total emissions of each 

pollutant is likely to differ. 

4.2.8.1 Reductions in emissions of criteria air pollutants 

For the analysis of criteria emissions over the lifetime of the model years covered by this 

rule, EPA and NHTSA estimate the increases in emissions of each criteria air pollutant 

from additional vehicle use by multiplying the increase in total miles driven by cars and 

light trucks of each model year and age by their estimated emission rates per vehicle-mile 

of each pollutant. These emission rates differ between cars and light trucks as well as 

between gasoline and diesel vehicles, and both their values for new vehicles and the rates 

at which they increase with age and accumulated mileage can vary among model years. 

With the exception of SO2, the agencies calculated the increase in emissions of these 

criteria pollutants from added car and light truck use by multiplying the estimated 

increases in their vehicles’ use during each year over their expected lifetimes by per-mile 

emission rates appropriate to each vehicle type, fuel used, model year, and age as of that 

future year. 

These emission rates were estimated by U.S. EPA using its newly updated Motor Vehicle 

Emission Simulator (MOVES2010). For the proposal, emission rates were estimated 

using Draft MOVES2009. 

 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 

 

25 This figure is calculated as 0.50 + 0.50*0.9 = 0.50 + 0.45 = 0.95.
Summary of Interagency Working Comments on Draft Rule under EO 12866

44 

economy. As a consequence, the effects of required increases in fuel economy on 

emissions of these pollutants from car and light truck use are determined entirely by the 

increases in driving that result from the fuel economy rebound effect. As discussed in the 

EPA RIA, anticipated changes in the fuel supply composition will also affect criteria 

pollutant emissions. 

Emission factors in the MOVES database are expressed in the form of grams per vehiclehour of operation. To convert these emission factors to grams per mile for use in EPA 

and NHTSA’s calculations, MOVES was run for the year 2050, and was programmed to 

report aggregate emissions from vehicle starting and running exhaust operation. EPA 

analysts selected the year 2050 in order to generate emission factors that were 

representative of lifetime average emission rates for vehicles meeting the agency’s Tier 2 

emission standard.26 Separate estimates were developed for each vehicle type and model 

year, as well as for each state and month, in order to reflect the effects of regional and 

temporal variation in temperature and other relevant variables on emissions. 

The MOVES emissions estimates were then summed to the model year level and divided 

by average distance traveled in order to produce per-mile emission factors for each 

pollutant. The resulting emission rates represent average values across the nation, and 

incorporate typical temperature variations over an entire calendar year. These national 

average rates also reflect county-specific differences in fuel composition, as well as in the 

presence and type of vehicle inspection and maintenance programs.27 

Emission rates for the criteria pollutant SO2 were calculated by EPA and 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. These calculations assumed 

that national average gasoline and diesel sulfur levels would remain at current levels.28 

There, unlike many other criteria pollutants, sulfur dioxide emissions from vehicle use 

decrease proportionally to the decrease in fuel consumption. 

Emissions of criteria air pollutants also occur during each phase of fuel production and 

distribution, including crude oil extraction and transportation, fuel refining, and fuel 

storage and transportation. The reduction in emissions during each of these phases 

depends on the extent to which fuel savings result in lower imports of refined fuel, or in 

reduced domestic fuel refining. To a lesser extent, they also depend on whether 

reductions in domestic gasoline refining are reflected in reduced imports of crude oil or in 

reduced domestic extraction of petroleum. 

 

26 Because all light-duty emission rates in MOVES2010 are assumed to be invariant after MY 

2010, a calendar-year 2050 run produced a full set of emission rates that reflect anticipated 

deterioration in the effectiveness of vehicles’ emission control systems with increasing age and 

accumulated mileage for post-MY 2010 vehicles. 

27 The national mix of fuel types includes county‐level market shares of conventional and reformulated

gasoline, as well as county‐level variation in sulfur content, ethanol fractions, and other fuel properties.  

Inspection/maintenance programs at the county level account for detailed program design elements such

as test type, inspection frequency, and program coverage by vehicle type and age.   

28 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.
Summary of Interagency Working Comments on Draft Rule under EO 12866

45 

Both EPA’s and NHTSA’s analyses assume 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. Finally, reduced domestic fuel refining using domesticallyproduced crude oil is assumed to reduce emissions during all four phases of fuel 

production and distribution.29

EPA estimated the reductions in criteria pollutant emissions from producing and 

distributing fuel that would occur with alternative fuel efficiency and GHG standards 

using emission rates obtained from Argonne National Laboratories’ Greenhouse Gases 

and Regulated Emissions in Transportation (GREET) model.xxi The GREET model 

provides separate estimates of air pollutant emissions that occur in four phases of fuel 

production and distribution: crude oil extraction, crude oil transportation and storage, fuel 

refining, and fuel distribution and storage.30 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. EPA also incorporated emission factors for the air toxics estimated 

in this analysis: benzene, 1,3-butadiene, acetaldehyde, acrolein, and formaldehyde. The 

resulting emission factors are shown in Table 4-15. 

 

29 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.   

30 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.
Summary of Interagency Working Comments on Draft Rule under EO 12866

46 

Table 4-15 Emissions by Stage of Fuel Production and Distribution (grams/million 

Btu) 

Pollutant Fuel Type 

Petroleum 

Extraction & 

Transportation1

Refinery 

Energy 

Use 

Upstream 

Emissions

Petroleum

Refining 

On-Site 

Petroleum 

Refining2

Fuel 

Transport, 

Storage, 

Distribution3

CO 

Conventional Gasoline 4.908 0.928 5.596 6.525 0.748 

Reformulated Gasoline 4.908 0.908 5.662 6.571 0.768 

Low Sulfur Diesel 4.908 0.800 5.103 5.903 0.780 

VOC 

Conventional Gasoline 3.035 0.602 2.560 3.162 42.91 

Reformulated Gasoline 3.035 0.627 2.584 3.211 42.92 

Low Sulfur Diesel 3.035 0.552 2.511 3.063 1.261 

NOx 

Conventional Gasoline 14.91 3.328 14.442 17.771 3.691 

Reformulated Gasoline 14.91 3.288 14.575 17.863 3.786 

Low Sulfur Diesel 14.91 2.895 12.972 15.866 3.570 

SOx 

Conventional Gasoline 3.926 4.398 9.678 14.076 0.886 

Reformulated Gasoline 3.926 4.422 9.922 14.344 0.909 

Low Sulfur Diesel 3.926 3.893 9.187 13.080 0.840 

PM2.5 

Conventional Gasoline 0.645 1.442 1.789 3.231 0.155 

Reformulated Gasoline 0.645 1.487 1.838 3.325 0.159 

Low Sulfur Diesel 0.645 1.309 1.635 2.943 0.133 

Air Toxics 

1,3-Butadiene 

Conventional Gasoline 0.0017 0.0003 0.0014 0.0017 0.0001 

Reformulated Gasoline 0.0017 0.0003 0.0014 0.0018 0.0001 

Low Sulfur Diesel 0.0017 0.0003 0.0014 0.0017 0.0001 

Acetaldehyde 

Conventional Gasoline 0.0002 0.0000 0.0002 0.0002 0.0046 

Reformulated Gasoline 0.0002 0.0000 0.0002 0.0002 0.0047 

Low Sulfur Diesel 0.0002 0.0000 0.0002 0.0002 0.0044 

Acrolein 

Conventional Gasoline 0.0001 0.0000 0.0001 0.0001 0.0006 

Reformulated Gasoline 0.0001 0.0000 0.0001 0.0001 0.0006 

Low Sulfur Diesel 0.0001 0.0000 0.0001 0.0001 0.0006 

Benzene 

Conventional Gasoline 0.0313 0.0062 0.0264 0.0326 0.0787 

Reformulated Gasoline 0.0313 0.0064 0.0264 0.0328 0.0788 

Low Sulfur Diesel 0.0313 0.0058 0.0264 0.0322 0.0015 

Formaldehyde 

Conventional Gasoline 0.0050 0.0010 0.0042 0.0052 0.0326 

Reformulated Gasoline 0.0050 0.0010 0.0042 0.0052 0.0335 

Low Sulfur Diesel 0.0050 0.0009 0.0042 0.0051 0.0316 1

 The petroleum extraction and transport emission factors are only applied to domestic crude oil. 

2

 Refinery emissions factors are applied to domestic refineries, whether refining domestic or imported 

crude. 

3

 Fuel transport, storage, and distribution emission factors represent domestic emissions and are applied to 

all finished fuel, whether refined domestically or internationally. 

The agency 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 the estimates of 

fuel energy content reported by GREET. The resulting emission rates were applied to 

both EPA’s and NHTSA’s estimates of fuel consumption under alternative fuel efficiency 

standards to develop estimates of total emissions of each criteria pollutant during fuel 

production and distribution. The assumptions about the effects of changes in fuel 
Summary of Interagency Working Comments on Draft Rule under EO 12866

47 

consumption on domestic and imported sources of fuel supply discussed above were then 

employed to calculate the effects of reductions in fuel use from alternative fuel efficiency 

and GHG standards on changes in domestic emissions of each criteria pollutant. 

Finally, EPA and NHTSA calculated the net changes in domestic emissions of each 

criteria pollutant by summing the increases in its emissions projected to result from 

increased vehicle use, and the reductions in emissions anticipated to result from lower 

domestic fuel refining and distribution.31 As indicated previously, the effect of adopting 

improved fuel efficiency and GHG 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, we 

project that on balance, adopting improved fuel efficiency and GHG standards would 

reduce emissions of all criteria air pollutants except carbon monoxide (CO). The analysis 

of criteria emissions during specific calendar years is described independently in 

NHTSA’s Environmental Impact Statement and EPA’s RIA. 

4.2.8.2 Estimated values of reducing PM related emissions in the model year 

analysis 

In this analysis, EPA and NHTSA estimate the economic value of the human health 

benefits associated with reducing exposure to PM2.5 using benefit-per-ton estimates for 

the analysis of PM-related benefits over the lifetime of specific model years. Due to 

analytical limitations, the estimated benefit-per-ton 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 a result these values 

underestimate the benefits associated with reductions of these pollutants. Note that EPA 

conducted full-scale photochemical air quality modeling for the calendar year analysis. 

Please refer to Chapter 7.2 of the RIA for a description of EPA’s air quality modeling 

results and to Chapter 7.3 for a description of the quantified and monetized PM- and 

ozone-related health impacts of the FRM. 

The analysis of PM-related benefits over the lifetime of specific model years uses a 

“benefit-per-ton” method to estimate selected PM2.5-related health benefits. These PM2.5-

related benefit-per-ton estimates provide the total monetized human health benefits (the 

sum of premature mortality and premature morbidity) of reducing one ton of directly 

emitted PM2.5, or one ton of a pollutant that contributes to secondarily-formed PM2.5

(such as NOx, SOx, and VOCs) from a specified source. 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. 

The dollar-per-ton estimates for reductions in PM2.5 emissions used in this analysis are 

provided in Table 4-16. 

 

31 All emissions from increased vehicle use are assumed to occur within the U.S., since fuel efficiency

standards  would apply only to vehicles produced for sale in the U.S.
Summary of Interagency Working Comments on Draft Rule under EO 12866

48 

Table 4-16 Benefits-per-ton Values (2007$) Derived Using the ACS Cohort Study 

for PM-related Premature Mortality (Pope et al., 2002)a

 and a 3% Discount Rateb

All Sourcesd Stationary (Non-EGU) 

Sourcese 

Year Mobile Sources c

SOx VOC NOx Direct PM2.5 NOx Direct PM2.5 

2015 $28,000 $1,200 $4,700 $220,000 $4,900 $270,000 

2020 $31,000 $1,300 $5,100 $240,000 $5,300 $290,000 

2030 $36,000 $1,500 $6,100 $280,000 $6,400 $350,000 

2040 $43,000 $1,800 $7,200 $330,000 $7,600 $420,000 

a The benefit-per-ton estimates presented in this table are based on an estimate of premature mortality 

derived from the ACS study (Pope et al., 2002). If the benefit-per-ton estimates were based on the Six 

Cities study (Laden et al., 2006), the values would be approximately 145% (nearly two-and-a-half times) 

larger. 

b

 The benefit-per-ton estimates presented in this table assume a 3% discount rate in the valuation of 

premature mortality to account for a twenty-year segmented cessation lag. If a 7% discount rate had been 

used, the values would be approximately 9% lower. 

c

 Benefit-per-ton values were estimated for the years 2015, 2020, and 2030. For 2040, EPA and NHTSA 

extrapolated exponentially based on the growth between 2020 and 2030. d

 Note that the benefit-per-ton value for SOx is based on the value for Stationary (Non-EGU) sources; no 

SOx value was estimated for mobile sources. The benefit-per-ton value for VOCs was estimated across all 

sources. 

e

 Non-EGU denotes stationary sources of emissions other than electric generating units. 

As Table 4-16 indicates, EPA projects that the per-ton values for reducing emissions of 

criteria pollutants from both vehicle use 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 population growth into the future, 

expanding the population exposed to air pollution in both urban and rural areas.xxii 

For certain PM2.5-related pollutants (such as direct PM2.5 and NOx), EPA estimates 

different per-ton values for reducing mobile source emissions than for reductions in 

emissions of the same pollutant from stationary sources such as fuel refineries and 

storage facilities. These reflect differences in the typical geographic distributions of 

emissions of each pollutant, their contributions to ambient levels of PM2.5, and resulting 

changes in population exposure. EPA and NHTSA apply these separate values to its 

estimates of changes in emissions from vehicle use and from fuel production and 

distribution to determine the net change in total economic damages from emissions of 

those pollutants. 

The benefit per-ton technique has been used in previous analyses, including EPA’s recent 

Ozone National Ambient Air Quality Standards (NAAQS) RIA (U.S. EPA, 2008a),xxiii

Portland Cement National Emissions Standards for Hazardous Air Pollutants (NESHAP) 

RIA (U.S. EPA, 2009a),xxiv and NO2 NAAQS (U.S. EPA, 2009b).xxv Table 4-17 shows 

the quantified and unquantified PM2.5-related co-benefits captured in these benefit-perton estimates. 

Table 4-17 Human Health and Welfare Effects of PM2.5

Pollutant / 

Effect 

Quantified and Monetized 

in Primary Estimates 

Unquantified Effects 

Changes in: 

PM2.5 Adult premature mortality Subchronic bronchitis cases 
Summary of Interagency Working Comments on Draft Rule under EO 12866

49 

Pollutant / 

Effect 

Quantified and Monetized 

in Primary Estimates 

Unquantified Effects 

Changes in: 

Bronchitis: chronic and acute 

Hospital admissions: respiratory and 

cardiovascular 

Emergency room visits for asthma 

Nonfatal heart attacks (myocardial 

infarction) 

Lower and upper respiratory illness 

Minor restricted-activity days 

Work loss days 

Asthma exacerbations (asthmatic 

population) 

Infant mortality 

Low birth weight 

Pulmonary function 

Chronic respiratory diseases other 

than chronic bronchitis 

Non-asthma respiratory emergency 

room visits 

Visibility 

Household soiling 

Consistent with the NO2 NAAQS,32 the benefits estimates utilize concentration-response 

functions as reported in the epidemiology literature. Readers interested in reviewing the 

complete methodology for creating the benefit-per-ton estimates used in this analysis can 

consult the Technical Support Document (TSD)xxvi accompanying the recent final ozone 

NAAQS RIA (U.S. EPA, 2008a). Readers can also refer to Fann et al. (2009)xxvii for a 

detailed description of the benefit-per-ton methodology.33

As described above, national per-ton estimates were developed for selected 

pollutant/source category combinations. The per-ton values calculated therefore apply 

only to tons reduced from those specific pollutant/source combinations (e.g., NO2 emitted 

from mobile sources; direct PM emitted from stationary sources). Our estimate of total 

PM2.5 benefits is therefore based on the total direct PM2.5 and PM2.5–related precursor 

emissions (NOx, SOx, and VOCs) controlled from each source and multiplied by the 

respective per-ton values of reducing emissions from that source. 

The benefit-per-ton coefficients in this analysis were derived using modified versions of 

the health impact functions used in the PM NAAQS Regulatory Impact Analysis. 

Specifically, this analysis uses the benefit-per-ton estimates first applied in the Portland 

Cement NESHAP RIA (U.S. EPA, 2009a), which incorporated concentration-response 

functions directly from the epidemiology studies, without any adjustment for an assumed 

threshold. Removing the threshold assumption is a key difference between the method 

used in this analysis to estimate PM co-benefits and the methods used in analyses prior to 

 

32 Although we summarize the main issues in this chapter, we encourage interested readers to see

benefits chapter of the NO2 NAAQS for a more detailed description of recent changes to the PM benefits

presentation and preference for the no‐threshold model.   

33 The values included in this report are different from those presented in the article cited above.  Benefits

methods change to reflect new information and evaluation of the science.  Since publication of the June

2009 article, EPA has made two significant changes to its benefits methods: (1) We no longer assume that

a threshold exists in PM‐related models of health impacts, which is consistent with the findings reported

in published research; and (2) We have revised the Value of a Statistical Life to equal $6.3 million (year

2000$), up from an estimate of $5.5 million (year 2000$) used in the June 2009 report.  Please refer to the

following website for updates to the dollar‐per‐ton estimates: http://www.epa.gov/air/benmap/bpt.html
Summary of Interagency Working Comments on Draft Rule under EO 12866

50 

EPA’s Portland Cement NESHAP. As a consequence, the benefit-per-ton estimates used 

in this analysis include incremental benefits of reductions in PM2.5 concentrations down 

to their lowest modeled levels. 

Reductions in PM-related mortality provide the majority of the monetized value 

in each benefit-per-ton estimate. Typically, the premature mortality-related effect 

coefficients that underlie the benefits-per-ton estimates are drawn from epidemiology 

studies that examine two large population cohorts: the American Cancer Society cohort 

(Pope et al., 2002)xxviii and the Harvard Six Cities cohort (Laden et al., 2006).xxix The 

concentration-response (C-R) function developed from the extended analysis of 

American Cancer Society (ACS) cohort, as reported in Pope et al. (2002), has previously 

been used by EPA to generate its primary benefits estimate. The extended analysis of the 

Harvard Six Cities cohort, as reported by Laden et al (2006), was published after the 

completion of the Staff Paper for the 2006 PM2.5 NAAQS and has been used as an 

alternative estimate in the PM2.5 NAAQS RIA and PM2.5 co-benefits estimates in analyses 

completed since the PM2.5 NAAQS. 

These studies provide logical choices for anchor points when presenting PMrelated benefits because, while both studies are well designed and peer-reviewed, there 

are strengths and weaknesses inherent in each. Although this argues for using both 

studies to generate benefits estimates, due to the analytical limitations associated with 

this analysis, EPA and NHTSA have chosen to use the benefit-per-ton value derived from 

the ACS study. The agencies note that benefits would be approximately 145 percent (or 

nearly two-and-a-half times) larger if the per-ton benefit values based on the Harvard Six 

Cities were used instead. 

As is the nature of benefits analyses, assumptions and methods evolve over time to reflect 

the most current interpretation of the scientific and economic literature. For a period of 

time (2004-2008), EPA’s Office of Air and Radiation (OAR) valued mortality risk 

reductions using a value of statistical life (VSL) estimate derived from a limited analysis 

of some of the available studies. OAR arrived at a VSL using a range of $1 million to 

$10 million (2000$) consistent with two meta-analyses of the wage-risk literature. 

The $1 million value represented the lower end of the interquartile range from the 

Mrozek and Taylor (2002)xxx meta-analysis of 33 studies. The $10 million value 

represented the upper end of the interquartile range from the Viscusi and Aldy (2003)xxxi

meta-analysis of 43 studies. The mean estimate of $5.5 million (2000$) was also 

consistent with the mean VSL of $5.4 million estimated in the Kochi et al. (2006)xxxii

meta-analysis. However, the Agency neither changed its official guidance on the use of 

VSL in rule-makings nor subjected the interim estimate to a scientific peer-review 

process through the Science Advisory Board (SAB) or other peer-review group. 

Until updated guidance is available, EPA determined that a single, peer-reviewed 

estimate applied consistently best reflects the SAB-EEAC advice it has received. 

Therefore, EPA has decided to apply the VSL that was vetted and endorsed by the SAB 

in the Guidelines for Preparing Economic Analyses (U.S. EPA, 2000)xxxiii while they 
Summary of Interagency Working Comments on Draft Rule under EO 12866

51 

continue efforts to update their guidance on this issue.34 This approach calculates a mean 

value across VSL estimates derived from 26 labor market and contingent valuation 

studies published between 1974 and 1991. The mean VSL across these studies is $6.3 

million (2000$). The dollar-per-ton estimates used in this analysis are based on this 

revised VSL. 

The benefit-per-ton estimates are subject to a number of assumptions and 

uncertainties. 

a. They do not reflect local variability in population density, meteorology, exposure, 

baseline health incidence rates, or other local factors that might lead to an 

overestimate or underestimate of the actual benefits of controlling fine 

particulates in specific locations. EPA conducted full-scale air quality modeling 

for the calendar year analysis in an effort to capture this variability. Please refer 

to Chapter 7.2 of the RIA for a description of EPA’s air quality modeling results 

and to Chapter 7.3 for the description of the agency’s quantification and 

monetization of PM- and ozone-related health impacts for the FRM. 

b. This analysis assumes that all fine particles, regardless of their chemical 

composition, are equally potent in causing premature mortality. This is an 

important assumption, because PM2.5 produced via transported precursors emitted 

from stationary sources may differ significantly from direct PM2.5 released from 

diesel engines and other industrial sources. At the present time, however, no clear 

scientific grounds exist for supporting differential effects estimates by particle 

type. 

c. This analysis assumes that the health impact function for fine particles is linear 

within the range of ambient concentrations under consideration. Thus, the 

estimates include health benefits from reducing fine particles in areas with varied 

initial concentrations of PM2.5, including both regions that are in attainment with 

fine particle standard and those that do not meet the standard, down to the lowest 

modeled concentrations. 

d. There are several health benefits categories that EPA and NHTSA were unable to 

quantify due to limitations associated with using benefits-per-ton estimates, 

several of which could be substantial. Because the NOX and VOC emission 

reductions associated with this rule are also precursors to ozone, reductions in 

NOX and VOC would also reduce ozone formation and the health effects 

associated with ozone exposure. Unfortunately, benefits-per-ton estimates for 

ozone do not exist due to issues associated with the complexity of the atmospheric 

air chemistry and nonlinearities associated with ozone formation. The PM-related 

benefits-per-ton estimates also do not include any human welfare or ecological 

benefits. Please refer to Chapter 7.3 of the RIA for a description of the 

quantification and monetization of both PM- and ozone-related health impacts for 

 

34 In the (draft) update of the Economic Guidelines (U.S. EPA, 2008c), EPA retained the VSL endorsed by

the SAB with the understanding that further updates to the mortality risk valuation guidance would be

forthcoming in the near future.  Therefore, this report does not represent final agency policy.  The draft

update of the Economic Guidelines is available on the Internet at

<http://yosemite.epa.gov/ee/epa/eermfile.nsf/vwAN/EE‐0516‐01.pdf/$File/EE‐0516‐01.pdf>.
Summary of Interagency Working Comments on Draft Rule under EO 12866

52 

the FRM and a description of the unquantified co-pollutant benefits associated 

with this rulemaking. 

As mentioned above, emissions changes and benefits-per-ton estimates alone are not a 

good indication of local or regional air quality and health impacts, as the localized 

impacts associated with the rulemaking may vary significantly. Additionally, the 

atmospheric chemistry related to ambient concentrations of PM2.5, ozone and air toxics is 

very complex. Full-scale photochemical modeling is therefore necessary to provide the 

needed spatial and temporal detail to more completely and accurately estimate the 

changes in ambient levels of these pollutants and their associated health and welfare 

impacts. For the final rule, EPA conducted a national-scale air quality modeling 

analysis in 2030 to analyze the impacts of the standards on PM2.5, ozone, and selected air 

toxics. 

4.2.9 Reductions in emissions of greenhouse gases 

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 fuel efficiency standards will thus 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 

otherwise expected to cause. Further, 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 

improved fuel efficiency and GHG standards. 

4.2.9.1 Estimating reductions in GHG emissions 

The agencies estimated emissions of carbon dioxide (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 with each alternative CAFE standard in effect 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 ultimately converted to 

CO2 emissions during the combustion process. The weighted average CO2 content of 

gasoline is estimated to be approximately 8,900 grams per gallon, while that of diesel fuel 

is estimated to be approximately 10,200 grams per gallon. For details, please see EPA’s 

RIA and NHTSA’s RIA. 

Although carbon dioxide emissions account for nearly 95 percent of total GHG emissions 

that result from fuel combustion during vehicle use, emissions of other GHGs are 

potentially significant as well because of their higher “potency” as GHGs than that of 

CO2 itself. EPA and NHTSA estimated the increases in emissions of methane (CH4) and 

nitrous oxide (N2O) from additional vehicle use by multiplying the increase in total miles 

driven by cars and light trucks of each model year and age by emission rates per vehicle-
Summary of Interagency Working Comments on Draft Rule under EO 12866

53 

mile for these GHGs. These emission rates, which differ between cars and light trucks as 

well as between gasoline and diesel vehicles, were estimated by EPA using its recentlydeveloped Motor Vehicle Emission Simulator (Draft MOVES 2009), as subsequently 

updated for use in this analysis. 

The MOVES model assumes that the per-mile rates at which cars and light trucks emit 

these GHGs are determined by the efficiency of fuel combustion during engine operation 

and chemical reactions that occur during catalytic after-treatment of engine exhaust, and 

are thus independent of vehicles’ fuel consumption rates. Thus MOVES emission factors 

for these GHGs, which are expressed per mile of vehicle travel, are assumed to be 

unaffected by changes in fuel economy. 

Increases in emissions of non-CO2 GHGs are converted to equivalent increases in 

CO2 emissions using estimates of the Global Warming Potential (GWP) of methane and 

nitrous oxide. These GWPs account for the higher radiative forcing capacity of methane 

and nitrous oxide when they are released into the earth’s atmosphere, measured relative 

to that of CO2 itself. However, because these gases differ in both radiative forcing and 

atmospheric lifetimes, their relative damages are not constant over time. Impacts other 

than temperature change also vary across gases in ways that are not captured by GWP. 

For instance, CO2 emissions, unlike methane and other greenhouse gases, contribute to 

ocean acidification. Likewise, damages from methane emissions are not offset by the 

positive effect of CO2 fertilization. Noting these caveats, the CO2 equivalents of 

increases in emissions of these gases are added to the increases in emissions of CO2 itself 

to determine the effect of the total increase in CO2-equivalent GHG emissions from 

vehicle use. 

4.2.9.2 Economic benefits from reducing GHG emissions 

For today’s final rule, EPA and NHTSA rely on a new set of values for the social cost of 

carbon (SCC) that were recently developed by an interagency process. A summary of the 

basis for these new values is provided below, and a more detailed description of the 

methodologies used is provided in X. 

Under Executive Order 12866, agencies are required, to the extent permitted by law, “to 

assess both the costs and the benefits of the intended regulation and, recognizing that 

some costs and benefits are difficult to quantify, propose or adopt a regulation only upon 

a reasoned determination that the benefits of the intended regulation justify its costs.” 

The purpose of the “social cost of carbon” (SCC) estimates presented here is to allow 

agencies to incorporate the social benefits of reducing carbon dioxide (CO2) emissions 

into cost-benefit analyses of regulatory actions that have small, or “marginal,” impacts on 

cumulative global emissions. The estimates are presented with an acknowledgement of 

the many uncertainties involved and with a clear understanding that they should be 

updated over time to reflect increasing knowledge of the science and economics of 

climate impacts. 

The SCC is an estimate of the monetized damages associated with an incremental 

increase in carbon emissions in a given year. It is intended to include (but is not limited 

Comment [A9]: Please note the caveats with 

using GWP. 
Summary of Interagency Working Comments on Draft Rule under EO 12866

54 

to) changes in net agricultural productivity, human health, property damages from 

increased flood risk, and the value of ecosystem services due to climate change. 

This document presents a summary of the interagency process that developed these SCC 

estimates. Technical experts from numerous agencies met on a regular basis to consider 

public comments, explore the technical literature in relevant fields, and discuss key 

model inputs and assumptions. The main objective of this process was to develop a range 

of SCC values using a defensible set of input assumptions grounded in the existing 

scientific and economic literatures. In this way, key uncertainties and model differences 

transparently and consistently inform the range of SCC estimates used in the rulemaking 

process. 

The interagency group selected four SCC values for use in regulatory analyses. Three 

values are based on the average SCC from three integrated assessment models, at 

discount rates of 2.5, 3, and 5 percent. The fourth value, which represents the 95th

percentile SCC estimate across all three models at a 3 percent discount rate, is included to 

represent higher-than-expected impacts from temperature change further out in the tails 

of the SCC distribution. 

Social Cost of CO2, 2010 – 2050 (in 2007 dollars) 

Discount Rate 5% 3% 2.5% 3% 

Year Avg Avg Avg 95th 

2010 4.7 21.4 35.1 64.9 

2015 5.7 23.8 38.4 72.8

2020 6.8 26.3 41.7 80.7 

2025 8.2 29.6 45.9 90.4 

2030 9.7 32.8 50.0 100.0

2035 11.2 36.0 54.2 109.7 

2040 12.7 39.2 58.4 119.3 

2045 14.2 42.1 61.7 127.8 

2050 15.7 44.9 65.0 136.2 
Summary of Interagency Working Comments on Draft Rule under EO 12866

55 

I. Monetizing Carbon Dioxide Emissions 

The “social cost of carbon” (SCC) is an estimate of the monetized damages associated 

with an incremental increase in carbon emissions in a given year. It is intended to 

include (but is not limited to) changes in net agricultural productivity, human health, 

property damages from increased flood risk, and the value of ecosystem services. We 

report estimates of the social cost of carbon in dollars per metric ton of carbon dioxide 

throughout this document.35 

When attempting to assess the incremental economic impacts of carbon dioxide 

emissions, the analyst faces a number of serious challenges. A recent report from the 

National Academies of Science (NRC 2009) points out that any assessment will suffer 

from uncertainty, speculation, and lack of information about (1) future emissions of 

greenhouse gases, (2) the effects of past and future emissions on the climate system, (3) 

the impact of changes in climate on the physical and biological environment, and (4) the 

translation of these environmental impacts into economic damages. As a result, any 

effort to quantify and monetize the harms associated with climate change will raise 

serious questions of science, economics, and ethics and should be viewed as provisional. 

Despite the serious limits of both quantification and monetization, SCC estimates can be 

useful in estimating the social benefits of reducing carbon dioxide emissions. Under 

Executive Order 12866, agencies are required, to the extent permitted by law, “to assess 

both the costs and the benefits of the intended regulation and, recognizing that some costs 

and benefits are difficult to quantify, propose or adopt a regulation only upon a reasoned 

determination that the benefits of the intended regulation justify its costs.” The purpose 

of the SCC estimates presented here is to make it possible for agencies to incorporate the 

social benefits from reducing carbon dioxide emissions into cost-benefit analyses of 

regulatory actions that have small, or “marginal,” impacts on cumulative global 

emissions. Most federal regulatory actions can be expected to have marginal impacts on 

global emissions. 

For such policies, the benefits from reduced (or costs from increased) emissions in any 

future year can be estimated by multiplying the change in emissions in that year by the 

SCC value appropriate for that year. The net present value of the benefits can then be 

calculated by multiplying each of these future benefits by an appropriate discount factor 

and summing across all affected years. This approach assumes that the marginal 

damages from increased emissions are constant for small departures from the baseline 

emissions path, an approximation that is reasonable for policies that have effects on 

emissions that are small relative to cumulative global carbon dioxide emissions. For 

policies that have a large (non-marginal) impact on global cumulative emissions, there is 

a separate question of whether the SCC is an appropriate tool for calculating the benefits 

of reduced emissions; we do not attempt to answer that question here. 

 

35 In this document, we present all values of the SCC as the cost per metric ton of CO2 emissions.  

Alternatively, one could report the SCC as the cost per metric ton of carbon emissions. The multiplier for

translating between mass of CO2 and the mass of carbon is 3.67 (the molecular weight of CO2 divided by

the molecular weight of carbon = 44/12 = 3.67).  
Summary of Interagency Working Comments on Draft Rule under EO 12866

56 

An interagency group convened on a regular basis to consider public comments, explore 

the technical literature in relevant fields, and discuss key inputs and assumptions in order 

to generate SCC estimates. Agencies that actively participated in the interagency process 

include the Environmental Protection Agency, and the Departments of Agriculture, 

Commerce, Energy, Transportation, and Treasury. This process was convened by the 

Council of Economic Advisers and the Office of Management and Budget, with active 

participation and regular input from the Council on Environmental Quality, National 

Economic Council, Office of Energy and Climate Change, and Office of Science and 

Technology Policy. The main objective of this process was to develop a range of SCC 

values using a defensible set of input assumptions that are grounded in the existing 

literature. In this way, key uncertainties and model differences can more transparently 

and consistently inform the range of SCC estimates used in the rulemaking process. 

The interagency group selected four SCC estimates for use in regulatory analyses. For 

2010, these estimates are $5, $21, $35, and $65 (in 2007 dollars). The first three estimates 

are based on the average SCC across models and socio-economic and emissions scenarios 

at the 5, 3, and 2.5 percent discount rates, respectively. The fourth value is included to 

represent the higher-than-expected impacts from temperature change further out in the 

tails of the SCC distribution. For this purpose, we use the SCC value for the 95th

percentile at a 3 percent discount rate. The central value is the average SCC across 

models at the 3 percent discount rate. For purposes of capturing the uncertainties 

involved in regulatory impact analysis, we emphasize the importance and value of 

considering the full range. These SCC estimates also grow over time. For instance, the 

central value increases to $24 per ton of CO2 in 2015 and $26 per ton of CO2 in 2020. 

See Appendix A for the full range of annual SCC estimates from 2010 to 2050. 

It is important to emphasize that the interagency process is committed to updating these 

estimates as the science and economic understanding of climate change and its impacts 

on society improves over time. Specifically, we have set a preliminary goal of revisiting 

the SCC values within two years or at such time as substantially updated models become 

available, and to continue to support research in this area. In the meantime, we will 

continue to explore the issues raised in this document and consider public comments as 

part of the ongoing interagency process. 

II. Social Cost of Carbon Values Used in Past Regulatory Analyses 

To date, economic analyses for Federal regulations have used a wide range of values to 

estimate the benefits associated with reducing carbon dioxide emissions. In the final 

model year 2011 CAFE rule, the Department of Transportation (DOT) used both a 

“domestic” SCC value of $2 per ton of CO2 and a “global” SCC value of $33 per ton of 

CO2 for 2007 emission reductions (in 2007 dollars), increasing both values at 2.4 percent 

per year. It also included a sensitivity analysis at $80 per ton of CO2. A domestic SCC 

value is meant to reflect the value of damages in the United States resulting from a unit 

change in carbon dioxide emissions, while a global SCC value is meant to reflect the 

value of damages worldwide. 

A 2008 regulation proposed by DOT assumed a domestic SCC value of $7 per ton CO2

(in 2006 dollars) for 2011 emission reductions (with a range of $0-$14 for sensitivity 

analysis), also increasing at 2.4 percent per year. A regulation finalized by DOE in 
Summary of Interagency Working Comments on Draft Rule under EO 12866

57 

October of 2008 used a domestic SCC range of $0 to $20 per ton CO2 for 2007 emission 

reductions (in 2007 dollars). In addition, EPA’s 2008 Advance Notice of Proposed 

Rulemaking for Greenhouse Gases identified what it described as “very preliminary” 

SCC estimates subject to revision. EPA’s global mean values were $68 and $40 per ton 

CO2 for discount rates of approximately 2 percent and 3 percent, respectively (in 2006 

dollars for 2007 emissions). 

In 2009, an interagency process was initiated to offer a preliminary assessment of how 

best to quantify the benefits from reducing carbon dioxide emissions. To ensure 

consistency in how benefits are evaluated across agencies, the Administration sought to 

develop a transparent and defensible method, specifically designed for the rulemaking 

process, to quantify avoided climate change damages from reduced CO2 emissions. The 

interagency group did not undertake any original analysis. Instead, it combined SCC 

estimates from the existing literature to use as interim values until a more comprehensive 

analysis could be conducted. 

The outcome of the preliminary assessment by the interagency group was a set of five 

interim values: global SCC estimates for 2007 (in 2006 dollars) of $55, $33, $19, $10, 

and $5 per ton of CO2. The $33 and $5 values represented model-weighted means of the 

published estimates produced from the most recently available versions of three 

integrated assessment models—DICE, PAGE, and FUND—at approximately 3 and 5 

percent discount rates. The $55 and $10 values were derived by adjusting the published 

estimates for uncertainty in the discount rate (using factors developed by Newell and 

Pizer (2003)) at 3 and 5 percent discount rates, respectively. The $19 value was chosen as 

a central value between the $5 and $33 per ton estimates. All of these values were 

assumed to increase at 3 percent annually to represent growth in incremental damages 

over time as the magnitude of climate change increases. 

These interim values represent the first sustained interagency effort within the U.S. 

government to develop an SCC for use in regulatory analysis. The results of this 

preliminary effort were presented in several proposed and final rules and were offered for 

public comment in connection with proposed rules, including the joint EPA-DOT fuel 

economy and CO2 tailpipe emission proposed rules. 

III. Approach and Key Assumptions 

Since the release of the interim values, interagency group has reconvened on a regular 

basis to generate improved SCC estimates. Specifically, the group has considered public 

comments and further explored the technical literature in relevant fields. This section 

details the several choices and assumptions that underlie the resulting estimates of the 

SCC. 

It is important to recognize that a number of key uncertainties remain, and that current 

SCC estimates should be treated as provisional and revisable since they will evolve with 

improved scientific and economic understanding. The interagency group also recognizes 

that the existing models are imperfect and incomplete. The National Academy of Science 

(2009) points out that there is tension between the goal of producing quantified estimates 

of the economic damages from an incremental ton of carbon and the limits of existing 

efforts to model these effects. Throughout this document, we highlight a number of 

concerns and problems that should be addressed by the research community, including 
Summary of Interagency Working Comments on Draft Rule under EO 12866

58 

research programs housed in many of the agencies participating in the interagency 

process to estimate the SCC. 

The U.S. Government will periodically review and reconsider estimates of the SCC used 

for cost-benefit analyses to reflect increasing knowledge of the science and economics of 

climate impacts, as well as improvements in modeling. In this context, statements 

recognizing the limitations of the analysis and calling for further research take on 

exceptional significance. The interagency group offers the new SCC values with all due 

humility about the uncertainties embedded in them and with a sincere promise to 

continue work to improve them. 

4.2.10 The value of increased driving range 

Improving the fuel economy of passenger cars and light-duty trucks may also increase 

their driving range before they require refueling. By reducing the frequency with which 

drivers typically refuel their vehicles and extending the upper limit of the range they can 

travel before requiring refueling, improving fuel economy thus provides some additional 

benefits to their owners. Alternatively, 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. If 

manufacturers respond by doing so, this presumably reflects their judgment that the value 

to economic benefits to vehicle buyers from lower purchase prices exceeds that from 

extended refueling range. 

No direct estimates of the value of extended vehicle range are readily available, so the 

agencies’ analyses calculate 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.xxxiv 

As a coarse illustration of how the value of extended refueling range is estimated, a 

typical small light truck model has an average fuel tank size of approximately 20 

gallons.36 Based on a California Air Resources Board Study, the average fuel purchase is 

approximately 55% of tank volume.xxxv Therefore, increasing this model’s actual on-road 

fuel economy from 24 to 25 mpg would extend its driving range from 216 miles (= 9 

gallons x 24 mpg) to 225 miles (= 9 gallons x 25 mpg). Assuming that this vehicle is 

driven 12,000 miles/year, this reduces the number of times it needs to be refueled each 

year from 55.5 (= 12,000 miles per year / 216 miles per refueling) to 53.3 (= 12,000 miles 

per year / 225 miles per refueling), or by 2.2 refuelings per year. 

Weighted by the nationwide mix of urban (about 2/3) and rural (about 1/3) driving and 

average vehicle occupancy for all driving trips (1.6 persons), the DOT-recommended 

value of travel time per vehicle-hour is $24.00 (in 2006 dollars).37 Assuming that locating 

 

36 Based on the Volpe Model Market Data file for Model Year 2011, average tank volumes for cars and

trucks are 16.6 gallons and 23.0 gallons, respectively.  This produces a production weighted average of

19.3 gallons.   

37  The hourly wage rate during 2006 is estimated to be $24.00.  Personal travel (94.4 percent of urban

travel) is valued at 50 percent of the hourly wage rate. Business travel (5.6 percent of urban travel) is

valued at 100 percent of the hourly wage rate.  For intercity travel, personal travel (87 percent) is valued

at 70 percent of the wage rate, while business travel (13 percent) is valued at 100 percent of the wage

Comment [A10]: What is the basis for this 

claim? 

Comment [A11]: Manufacturers could be 

reducing size of tank to comply with the rule not 

simply because they think consumers would value 

small tank size in lower purchase price. What is the 

basis for this claim? Did any manufacturer provide 

evidence? 
Summary of Interagency Working Comments on Draft Rule under EO 12866

59 

a station and filling up requires five minutes, the annual value of time saved as a result of 

less frequent refueling amounts to $4.40 (calculated as 5/60 x 2.2 x $24.00). This 

calculation is repeated for each future calendar year that light trucks of each model year 

affected by the alternative fuel economy standards considered in this rule would remain 

in service. Like fuel savings and other benefits, however, 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. The detailed values used in this calculation by each 

agency are available in EPA’s RIA and NHTSA’s FRIA respectively. 

The agencies’ estimate of benefits from less frequent refueling is subject to several 

sources of uncertainty. 

 First, this analysis assumes that manufacturers will not adjust fuel tank capacities 

downward (from the current average of 19.3 gallons) when they improve the fuel 

economy of their vehicle models, so that the entire increase in fuel economy will be 

reflected in increased driving range. Should manufacturers choose to downsize fuel tanks, 

and all other factors have been estimated with no error, the current estimates of refueling 

benefits would be overstated and could even out to zero benefits.. On the other hand, 

vehicle space, utility and value could increase and vehicle weight will decrease, 

improving fuel economy and CO2 emissions (all other things being equal). In the context 

of the rule, this will decrease the cost of compliance with the standards. 

Second, the agencies’ analysis assumes that fuel purchases average 55 percent of fuel 

tank capacity. However, as shown in the California Air Resource Board (CARB) report, 

refueling patterns vary. Moreover, the 55 percent estimate implies that drivers, on 

average, are either refueling when nearly a half tank of gas remains in their vehicles, or 

that they are habitually not filling their tanks. Since many drivers only refuel when their 

tanks are very low, and since many drivers habitually refuel, this in turn implies that 

many drivers in the CARB study are refueling when their tanks are still well above 50 

percent full. While based on field data, this estimate may thus overestimate the impact of 

refueling benefits. 

 For the primary analysis in both the proposal and this final rulemaking, the 

agencies assume that 100 percent of all refueling is demand-based; i.e., that every gallon 

of fuel which is saved would reduce the need to return to the refueling station. Based on 

anecdotal evidence, this value is potentially an overestimate. As an example, some 

people may refuel every Sunday morning at the same time as they buy their newspaper 

and chewing gum. Barring unusually long trips, these people would not benefit from an 

increased driving range. 

In order to understand how sensitive the overall estimate of the refueling benefit is to this 

specific input, we provide the following example. If 25 percent of gallons are refueled on 

a habitual rather than demand-based schedule, and the rest of the assumptions remain 

constant, the value of increased driving range decreases by 25 percent. There would be 

no value of increased driving range derived from these gallons. Returning to the example 

light truck discussed above, which generated a value of increased driving range worth 

$4.40 in the first year, if this owner refilled 1⁄4 of his annual fuel on a habitual rather than 

 

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 estimate value of time per vehicle hour.  

Comment [A12]: This is kind of circular. It could 

be that manufacturers are reducing size of tank to 

comply with the standards to begin with so it does 

not make sense to double count and claim additional 

reductions in fuel economy. Do the agencies know 

if manufactuers are reducing tank size to comply 

with standards and if they choose to downsize to 

improve other qualities such as space and utility? If 

not, then this sentence should be removed. 

Comment [A13]: Some manufacturers are 

planning to comply with increased hybrid sales, 

some of which have smaller (and none have larger) 

tanks than their non-hybrid counterparts. Thus any 

claim that there would be an offsetting savings in 

fuel tank size/space in all cases necessarily implies 

the agencies did not accurately estimate the cost of 

hybrids. 

We recommend this discussion on tank size 

reduction clearly acknowledge that some will occur 

and is already accounted for in other calculations.
Summary of Interagency Working Comments on Draft Rule under EO 12866

60 

demand based schedule, the value of increased driving range would decrease to $3.30. 

While the agencies acknowledge that the assumption of 100 percent is arbitrary, the 

agencies do not have an empirical basis to alter this assumption at this time. However, as 

noted below, DOT is undertaking a new survey which may provide a data-based basis for 

revising our 100 percent assumption for future analysis. 

Third, the agencies’ estimate of refueling benefits assumes that refueling stops involve 

the same number of vehicle occupants as the overall average for all vehicle trips (1.6 

persons). To the extent that drivers refuel while doing other errands or in advance of 

picking up passengers, this figure may overestimate the typical vehicle occupancy during 

refueling, and thus the total savings in refueling time. Similarly, the hourly value used to 

estimate the economic value of savings in refueling time reflects the typical mix of 

personal and business travel purposes, and drivers are likely to assign different values to 

their time when traveling for these different purposes. To the extent that drivers seek to 

refuel when traveling for purposes that typically use less valuable time, the hourly value 

used in the agencies’ analysis may overstate the benefits from saving refueling time. 

Finally, the agencies assume that both finding and using a refueling station takes, on 

average, five minutes. There are few, if any, data sources on average refueling time, and 

this estimate is subject to significant uncertainty. 

For these reasons, the agencies’ estimate of savings in refueling time is uncertain. To 

reduce the uncertainty, a new project is being planned by DOT which will include a 

detailed study of refueling events, using a random sample of refueling stations across the 

U.S. It is projected to include ~7,000 observations (time to refuel, # gallons refueled, 

etc.) and ~5,000 surveys of refueling participants. The agencies anticipate that this will 

provide a robust data set on which to revise many of the key inputs to the refueling 

benefit calculation. Some of the specific data categories which will be surveyed are 

listed below: 

• Miles driven and time out of way to get to gas station

• Fuel gage level before and after refueling

• # gallons purchased

• # people in vehicle, above and below 16 years old

• Reasons for travel

• Reason for stopping at gas station (e.g., fuel level too low, or other)

While the study results are not available in time for this final rulemaking, it is anticipated 

that the data will improve future estimations of the value of increased driving range. 

4.2.11 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 current perspective – for each year they are deferred into 

the future. In evaluating the benefits from alternative increases in fuel economy and 

GHG standards for MY 2012-2016 passenger cars and light trucks, EPA and NHTSA 

have employed a discount rates of both 3 percent and 7 percent per year, applied to nonclimate benefits and private fuel savings. 

Comment [A14]: Comment from the Main 

summary of comments: The TSD discusses 

uncertainties regarding the refueling benefit, but the 

preamble makes no mention of it. We recommend 

both agencies to clearly indicate all of the 

uncertainty regarding the refueling benefit estimate. 

Otherwise, the preamble presents the estimate as a 

best estimate when in reality the agencies 

acknowledge that it is not a best estimate. We also 

recommend that the economic assumptions table not 

just include the time value. The $24.64 is only one 

part of the refueling benefit estimate. We 

recommend adding the average number of fewer 

refueling stops. And since the agencies acknowledge 

that there are uncertainties in how they’re calculated, 

we recommend that the economic assumptions table 

include a footnote clarifying that the refueling 

estimate (or any other economic assumption that the 

agencies want to include) is likely biased and is not a 

best estimate. You can clarify that the agencies used 

what limited information was available and that 

further studies are underway, but we strongly 

recommend that the caveat be included in the table 

itself and discussed in the preamble. 

Comment [A15]: The way in which this section 

is written is inappropriate. Both 3 and 7 percent 

should be treated as equals. 7 percent should not be 

treated as a sensitivity. Two reasons why a higher 

discount rate is appropriate in this setting are the 

large proportion of private benefits associated with 

this rule in the form of fuel savings, and consumer 

heterogeneity in driving behavior and therefore in 

how these fuel savings are valued over time. 
Summary of Interagency Working Comments on Draft Rule under EO 12866

61 

Three percent may be the appropriate rate for discounting future benefits from 

increased fuel economy and GHG standards is that most or all of vehicle 

manufacturers’ costs for complying with improved fuel economy and GHG 

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 consumption rate of time preference.xxxvi OMB guidance 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, which makes it a reasonable estimate of the 

consumption rate of time preference.xxxvii Thus EPA and NHTSA have employed 

the 3 percent rate to discount projected future benefits and costs resulting from 

improved fuel economy and GHG standards for MY 2012-2016 passenger cars and 

light trucks. 

Because there is some uncertainty about the extent to which vehicle manufacturers 

will be able to recover their costs for complying with improved fuel economy and 

GHG standards by increasing vehicle sales prices, however, a higher percent discount 

rate may also be appropriate. 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.xxxviii Thus the agencies also use of a 7 percent real discount 

rate. 

One important exception to these values are the rates used to discount benefits from 

reducing CO2 emissions from the years in which reduced emissions occur, which span the 

lifetimes of model year 2012-16 cars and light trucks, to their present values. In order to 

ensure consistency in the derivation and use of the interagency group’s estimates of the 

unit values of reducing CO2 emissions, the total benefits from reducing those emissions 

during each future year are discounted using the same rates that were used to derive the 

alternative values of reducing each ton of CO2 emissions. As described previously in 

Section 4.2.10.2, these rates are 2.5, 3.0, and 5.0 percent. 

A section discussing the assumptions with regard to the effect of CAFE on consumer 

welfare is notably missing. Below is suggested text for inclusion based on the peer 

reviewed literature.The economics literature provides a wide ranging discussion of how 

consumers trade-off upfront costs and energy savings absent government intervention, a 

large segment of which focuses on trying to explain why consumers appear to undervalue 

energy efficiency improvements (often referred to as the Energy Efficiency Paradox). 

Some studies demonstrate how this seeming undervaluation can be explained by 

inaccurate assessments of energy savings, or by uncertainty and irreversibility of energy 

investments.38 Authors also point out that heterogeneity across consumers means that cost 

 

38 Greene, D., J. German, and M. Delucchi (2009). “Fuel Economy: The Case for Market Failure” in 

Reducing Climate Impacts in the Transportation Sector, Sperling, D., and J. Cannon, eds. Springer Science; 

Dasgupta, S., S. Siddarth, and J. Silva-Risso (2007). “To Lease or to Buy? A Structural Model of a 
Summary of Interagency Working Comments on Draft Rule under EO 12866

62 

calculations based on the average hide who may gain or lose as a result of the policy.39 

These results do not imply failure on the part of consumers in making adequate decisions, 

but rather that the rate of return on the investment necessary for energy efficiency 

investments is much higher for many consumers than what is implied by a net present 

value calculation that does not account for uncertainty or heterogeneity. Still other studies 

suggest that consumers “undervalue” future energy savings due to a divergence in 

incentives (e.g. renter versus owner) or routine mistakes in how they evaluate these tradeoffs.40 The mix of evidence in the empirical literature suggests that regulations mandating 

energy efficiency improvements should carefully discuss the potential for welfare loss to 

offset part or all of the net private savings typically attributed to these types of 

regulations and to move towards a fuller economic framework where such changes can 

be quantified.41 We discuss what each of the three cases mentioned above implies for 

how we compare private costs and private energy savings, the difficulty in quantifying 

welfare losses, and possible analytic improvements that could be made for future 

rulemakings. For its main analysis, NHTSA and EPA assume that consumers do not 

experience any loss in welfare due to the increased stringency of standards. However, 

recognizing that this is a strong assumption, fuel savings and other private benefits are 

presented separately from social benefits to make more transparent the implications of 

this assumption. 

Assuming perfectly competitive markets and perfect consumer foresight, standard 

economic theory suggests that in the absence of regulation, consumers understand their 

current and future financial positions and optimally balance the trade-off between upfront 

costs and future operating costs. So, any regulation that alters this trade-off must harm 

their well being (though this harm could be more than offset by the social benefits of the 

 Consumer’s Vehicle and Contract Choice Decisions.” Journal of Marketing Research 44: 490 – 502; 

Metcalf, G., and D. Rosenthal (1995). "The ‘New’ View of Investment Decisions and Public Policy 

Analysis: An Application to Green Lights and Cold Refrigerators,’’ Journal of Policy Analysis and 

Management 14: 517–531. Metcalf and Hassett (1995). "Energy Tax Credits and Residential Conservation 

Investment: Evidence from Panel Data" Journal of Public Economics 57: 201-217. Metcalf, G., and K. 

Hassett (1999). "Measuring the Energy Savings from Home Improvement Investments: Evidence from 

Monthly Billing Data." The Review of Economics and Statistics 81(3): 516-528; van Soest D., Bulte E. 

(2000). “Does the Energy-Efficiency Paradox Exist? Technological Progress and Uncertainty.” 

Environmental and Resource Economics 18: 101–12. 39 Hausman J., Joskow P. (1982). “Evaluating the Costs and Benefits of Appliance Efficiency Standards.” 

American Economic Review 72: 220–25. 40 Sanstad, A., and R. Howarth (1994). “’Normal’ Markets, Market Imperfections, and Energy Efficiency.” 

Energy Policy 22(10): 811-818; Larrick, R. P., and J.B. Soll (2008). “The MPG illusion.” Science 320: 

1593-1594; Yates S, Aronson E. (1983). “A Social Psychological Perspective on Energy Conservation in 

Residential Buildings.” American Psychologist 38: 435–44; Levinson A, Niemann S. (2004). “Energy Use 

by Apartment Tenants When Landlords Pay for Utilities.”Resource and Energy Economics 26: 51–75; 

Friedman L. (2002). “Bounded Rationality versus Standard Utility-Maximization: A Test of Energy Price 

Responsiveness.” In Judgments, Decisions, and Public Policy, ed. R Gowda, J Fox, pp. 138–73. New York: 

Cambridge University Press. Hartman R, Doane M, Woo C-K. (199)1. “Consumer Rationality and the 

Status Quo.” Quarterly Journal of Economics 106: 141–62; Kempton W, Montgomery L. 1982. Folk 

Quantification of Energy. Energy 7: 817–27 41 A good review of the literature related to this issue can be found in Gillingham, K., R. Newell, K. 

Palmer. (2009). “Energy Efficiency Economics and Policy,” Annual Review of Resource Economics, 1: 

597-619; and Tietenberg, T. (2009). “Energy Efficiency Policy: Pipe Dream or Pipeline to the Future?” 

Review of Environmental Economics and Policy. Vol. 3, No. 2: 304-320. 
Summary of Interagency Working Comments on Draft Rule under EO 12866

63 

policy such as pollution reduction). This is best understood by the recognition that 

companies currently sell a range of vehicles that already over-comply with current fuel 

economy standards yet many customers choose not to purchase them. There also is 

evidence that the pace of energy efficient innovation is tied to fuel prices, showing that 

the market responds as economists expect.42 In this case, no private net benefits would 

accrue to the rule (i.e. fuel savings are offset by the private upfront cost and welfare loss). 

When consumers have less than perfect foresight, consumers may implicitly discount 

future savings in operating costs due to uncertainty caused by inherent fluctuations in fuel 

prices or the unknown reliability of energy saving technologies. Government mandates 

to consume more energy efficiency (here, fuel economy) will not reduce these 

uncertainties, so consumers will still experience a loss in welfare. Thus, as in the case of 

perfect foresight, no private net benefits would accrue to the rule. It is worth noting that 

in this case a high hurdle rate for investment is observationally equivalent to a high 

private discount rate even though they are conceptually different. 

In both of these cases, because consumer had previously optimized their purchase 

decisions, fuel economy standards that change the upfront costs and energy savings will 

also change demand. Some consumers who would have bought a new vehicle before the 

introduction of the new standard will no longer do so due to the increase in price. Other 

consumers will still purchase a new vehicle, but will pay more than they would have 

without the regulation if manufacturers pass through the costs of complying with the 

efficiency standard.43 Some consumers will still purchase a vehicle but will switch the 

type they buy to re-optimize their decision. If there are ample substitutes that allow for 

greater fuel economy with no loss in other valued attributes, then there is no additional 

loss in welfare due to switching. However, if consumers now imperfectly substitute into 

another vehicle, they are giving up some level of another attribute they value. That loss 

should be counted as well. As a result, a true measure of the private costs should include 

the change in welfare from any foregone purchases, higher expenses due to compliance 

costs, and, in some cases, from changing which product the consumer buys. This should 

then be compared to the stream of future energy savings. Currently only the higher cost 

of the vehicle for those who continue to purchase it is compared to energy savings 

(assuming no change in how many vehicles or the types of vehicle that are purchased). 

On the other hand, some evidence suggests that consumers only take into account a 

portion of future cost savings when making investment decisions due to errors in decision 

making, limited information, or principle-agent problems that cause a divergence 

between owners’ and renters’ incentives. As a result, it is possible that consumers under 

invest in fuel economy. In this case a mandate may improve consumer welfare. If this 

view is correct, then it is possible that some private net savings accrue to the rule. In this 

case, the consumer also appears to use a higher private discount rate, but this implicit 

discount rate does not reflect true preferences. 

We expect this last case to be less applicable to industrial or commercial customers that 

own vehicle fleets and where energy consumption constitutes a substantial portion of 

 

42 Popp D, Newell R, Jaffe A. (2009). Energy, the Environment, and Technological Change. In Handbook 

of Economics of Technical Change, ed. B Hall, N Rosenberg. Oxford: North-Holland. 43 If manufacturers do not fully pass through compliance costs, then they bear a portion of the welfare

loss due to higher efficiency standards.  
Summary of Interagency Working Comments on Draft Rule under EO 12866

64 

their operating cost. It also is worth noting that miscalculations are less likely to result in 

large errors in the long run. We generally expect customers to adjust any rule of thumb 

calculations so that they “get it right,” on average. Short run errors seem more likely, 

given potentially large fluctuations in the price of fuel over time and the difficulty in 

predicting changes very far into the future. 

A key challenge in quantifying the possible welfare effects of proposed fuel economy 

standards is estimating the rate at which customers make trade-offs (i.e., the private 

discount rate). The rate of substitution will likely differ from the government’s social 

discount rate and may vary by consumer. The evidence suggests that consumers use 

much higher private discount rates than the government when evaluating energy 

efficiency gains.44 Attanasio et al (2008) use data from the Consumer Expenditure 

Survey from 1984 to 1995 and find that 46 percent of consumers who purchased a 

vehicle took out an auto loan, revealing a mean real interest rate of 8.9 percent with a 

standard deviation of 4.4 percent and a range from -5.3 to 22.9 percent. Dreyfus and 

Viscusi (1995) estimate rates of time preferences that range from 11 to 17 percent for 

vehicle purchases. In a representative survey, Kubik found that, on average, consumers 

will only invest in greater fuel savings if the additional cost is paid back in only 2.9 years. 

EPA and NHTSA also incorporate a relatively short “payback period” into their models 

to evaluate and order technologies that can be used to increase fuel economy, assuming 

that buyers value the resulting fuel savings over the first five years of a new vehicle’s 

lifetime. This assumption is based on the current average term of consumer loans to 

finance the purchase of new vehicles. A consumer financing a vehicle purchased at a 

higher interest rate may very rationally forego a more efficient model if the fuel savings 

do not outweigh the cost of the higher car payment. 45 

Another key challenge is that, though consumers face the same upfront cost for a given 

fuel economy improvement, the stream of energy savings is likely to vary by consumer 

due to heterogeneity. Regulatory impact analyses typically calculate welfare effects 

using data that reflect average consumer behavior. Even if all consumers are rational, 

they make purchasing decisions using different private discount rates, utilize equipment 

at different intensities, have different risk preferences, and face different fuel prices. This 

means that some consumers may gain while others lose as a result of mandating greater 

fuel economy. Higher standards may benefit consumers who use their vehicles more 

 

44 Attanasio et al. 2008, “Credit Constraints in the Market for Consumer Durables: Evidence from Micro

Data on Car Loans,” International Economic Review, Vol. 49, Issue 2, pp. 401‐436;  Dreyfus and Viscusi

(1995).  “Rates of Time Preference and Consumer Valuations of Automobile Safety and Fuel Efficiency.”

Journal of Law and Economics, v. 38, n. 79; Kubik, M. (2006). Consumer Views on Transportation and

Energy. Second Edition. Technical Report: National Renewable Energy Laboratory.

45 More general evidence also points to high implicit discount rates: Collier and Williams (1999) find

private discount rates of 15 – 17.5 percent when subjects are informed of prevailing market interest rates

and 20 – 25 percent when they are not.  Warner and Pleeter (2001) find that preference for a lump sum

payment over an annuity by members of the military implied a group discount rate of at least 18 percent.  

See Collier and Williams (1999). “Eliciting Individual Discount Rates.” Experimental Economics, v. 2, n. 2;

Warner and Pleeter (2001). “The Personal Discount Rate: Evidence from Military Downsizing Programs.”

American Economic Review, v. 91, n. 1.
Summary of Interagency Working Comments on Draft Rule under EO 12866

65 

intensively (though these same consumers might already purchase efficient products 

without regulation); meanwhile, consumers who use these products less intensively may 

not reap sufficient energy savings to justify the higher upfront costs.46 Failure to account 

for such heterogeneous impacts could foster a misleading impression that a regulation 

yields private net benefits for all consumers. 

In the future, more advanced modeling could be explored to calculate the net private 

energy savings explicitly accounting for future fuel price uncertainty, whether through 

the use of a higher private discount rate or a more formal modeling approach, including 

estimating the full welfare loss associated with the impact of standards via empirical 

consumer choice models; and developing formal models of consumer perception that 

account for mistakes or misaligned incentives and estimate them jointly with hedonic or 

consumer choice models that identify consumer willingness-to-pay. NHTSA will 

continue to explore these more advanced modeling methods and evaluate to what extent 

they can be used in future rulemakings. 

 

46 The EIA’s 2001 Transportation Energy Consumption Survey found that vehicles traveled an average of

12,000 miles per year.  However, miles traveled for rural vehicles was 9% higher than for urban vehicles,

and vehicles driven by households with children traveled 24% more miles than those driven by

households without children.   
Summary of Interagency Working Comments on Draft Rule under EO 12866

66 

 

1

 EPA, Fuel Economy Labeling of Motor Vehicles: Revisions To Improve Calculation of Fuel Economy 

Estimates; Final Rule, 40 CFR Parts 86 and 600, Federal Register, December 27, 2006, pp. 77872-77969,

http://www.epa.gov/fedrgstr/EPA-AIR/2006/December/Day-27/a9749.pdf. 

2

 EPA, Final Technical Support Document: Fuel Economy Labeling of Motor Vehicle Revisions to Improve 

Calculation of Fuel Economy Estimates, Office of Transportation and Air Quality EPA420-R-06-017 

December 2006, Chapter II, http://www.epa.gov/fueleconomy/420r06017.pdf. 

3

 Energy Information Administration, Annual Energy Outlook 2010, Early Release Reference Case 

(December 2009), Table 12. Available at

http://www.eia.doe.gov/oiaf/servicerpt/stimulus/excel/aeostimtab_12.xls

4

 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. 

5

 http://www.eia.doe.gov/oiaf/aeo/forecast.html (last accessed July 26, 2009), and Table 16, 

http://www.eia.doe.gov/oiaf/aeo/pdf/table16.pdf (last accessed July 26, 2009). 

6

 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/pdf/nrd30/NCSA/Rpts/2006/809952.pdf (last accessed Feb. 15, 2010). These updated survival rates suggest that 

the expected lifetimes of recent-model passenger cars and light trucks are 13.8 and 14.5 years. 

7

 FHWA, Highway Statistics, Summary to 1995, Table vm201at 

http://www.fhwa.dot.gov/ohim/summary95/vm201a.xlw , and annual editions 1996-2005, Table VM-1 at 

http://www.fhwa.dot.gov/policy/ohpi/hss/hsspubs.htm (last accessed Feb. 15, 2010). 

8

 Sorrell, S. and J. Dimitropoulos, 2007. “UKERC Review of Evidence for the Rebound Effect, Technical 

Report 2: Econometric Studies”, UKERC/WP/TPA/2007/010, UK Energy Research Centre, London, 

October and Greening, L.A., D.L. Greene and C. Difiglio, 2000. “Energy Efficiency and Consumption – 

The Rebound Effect – A Survey”, Energy Policy, vol. 28, pp. 389-401. 

9

 Greening et al. 2000. 

10 Pickrell, D. and P. Schimek, 1999. “Growth in Motor Vehicle Ownership and Use: Evidence from the 

Nationwide Personal Transportation Survey”, Journal of Transportation and Statistics, vol. 2, no. 1, pp. 1-

17. 

11 Small, K. and K. Van Dender, 2007a. “Fuel Efficiency and Motor Vehicle Travel: The Declining 

Rebound Effect”, The Energy Journal, vol. 28, no. 1, pp. 25-51. 

12 Small, K. and K. Van Dender, 2007b. "Long Run Trends in Transport Demand, Fuel Price Elasticities 

and Implications of the Oil Outlook for Transport Policy," OECD/ITF Joint Transport Research Centre 

Discussion Papers 2007/16, OECD, International Transport Forum. 

13 Greene paper accepted by Energy Journal. [EPA will update with publication citation]

14 FHWA. 1997 Federal Highway Cost Allocation Study; 

http://www.fhwa.dot.gov/policy/hcas/final/index.htm (last accessed July 29, 2009). 

15 Federal Highway Administration, 1997 Federal Highway Cost Allocation Study, 

http://www.fhwa.dot.gov/policy/hcas/final/index.htm, Tables V-22, V-23, and V-24 (last accessed Feb. 15, 

2010). 

16 U.S. Bureau of Economic Analysis, U.S. International Transactions Accounts Data, as shown on June 24, 

2009. 
Summary of Interagency Working Comments on Draft Rule under EO 12866

67 

 17 U.S. Department of Energy, Annual Energy Review 2008, Report No. DOE/EIA-0384(2008), Tables 5.1 

and 5.13c, June 26, 2009. 

18 Leiby, Paul N. "Estimating the Energy Security Benefits of Reduced U.S. Oil Imports," Oak Ridge 

National Laboratory, ORNL/TM-2007/028, Final Report, 2008. 

19 Peer Review Report Summary: Estimating the Energy Security Benefits of Reduced U.S. Oil Imports, 

ICF, Inc., September 2007. 

20 Gately, Dermot 2004. "OPEC's Incentives for Faster Output Growth," The Energy Journal, 25(2):75-96, 

"What Oil Export Levels Should We Expect From OPEC?" The Energy Journal, 28(2):151-173, 2007

xxi 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/software/GREET/index.html (last accessed April 20, 2008).

xxii The issue is discussed in more detail in the PM NAAQS RIA from 2006. See U.S. Environmental 

Protection Agency. 2006. Final Regulatory Impact Analysis (RIA) for the Proposed National Ambient Air 

Quality Standards for Particulate Matter. Prepared by: Office of Air and Radiation. October 2006. 

Available at http://www.epa.gov/ttn/ecas/ria.html. 

xxiii U.S. Environmental Protection Agency (U.S. EPA). 2008a. Regulatory Impact Analysis, 2008 National 

Ambient Air Quality Standards for Ground-level Ozone, Chapter 6. Office of Air Quality Planning and 

Standards, Research Triangle Park, NC. March. Available at 

<http://www.epa.gov/ttn/ecas/regdata/RIAs/6-ozoneriachapter6.pdf>. 

xxiv U.S. Environmental Protection Agency (U.S. EPA). 2009a. Regulatory Impact Analysis: National 

Emission Standards for Hazardous Air Pollutants from the Portland Cement Manufacturing Industry. 

Office of Air Quality Planning and Standards, Research Triangle Park, NC. April. Available on the 

Internet at <http://www.epa.gov/ttn/ecas/regdata/RIAs/portlandcementria_4-20-09.pdf>. 

xxv U.S. Environmental Protection Agency (U.S. EPA). 2009b. Proposed NO2 NAAQS Regulatory Impact 

Analysis (RIA). Office of Air Quality Planning and Standards, Research Triangle Park, NC. April. 

Available on the Internet at http://www.epa.gov/ttn/ecas/regdata/RIAs/proposedno2ria.pdf. 

xxvi U.S. Environmental Protection Agency (U.S. EPA). 2008b. Technical Support Document: Calculating 

Benefit Per-Ton estimates, Ozone NAAQS Docket #EPA-HQ-OAR-2007-0225-0284. Office of Air 

Quality Planning and Standards, Research Triangle Park, NC. March. Available on the Internet at 

<http://www.regulations.gov>.

xxvii Fann, N. et al. (2009). The influence of location, source, and emission type in estimates of the human 

health benefits of reducing a ton of air pollution. Air Qual Atmos Health. Published online: 09 June, 2009. 

xxviii Pope, C.A., III, R.T. Burnett, M.J. Thun, E.E. Calle, D. Krewski, K. Ito, and G.D. Thurston. 2002. 

“Lung Cancer, Cardiopulmonary Mortality, and Long-term Exposure to Fine Particulate Air Pollution.” 

Journal of the American Medical Association 287:1132-1141. 

xxix Laden, F., J. Schwartz, F.E. Speizer, and D.W. Dockery. 2006. “Reduction in Fine Particulate Air 

Pollution and Mortality.” American Journal of Respiratory and Critical Care Medicine 173:667-672. 

Estimating the Public Health Benefits of Proposed Air Pollution Regulations. Washington, DC: The 

National Academies Press. 

xxx Mrozek, J.R., and L.O. Taylor. 2002. “What Determines the Value of Life? A Meta-Analysis.” 

Journal of Policy Analysis and Management 21(2):253-270. 

xxxi Viscusi, V.K., and J.E. Aldy. 2003. “The Value of a Statistical Life: A Critical Review of Market 

Estimates throughout the World.” Journal of Risk and Uncertainty 27(1):5-76. 

xxxii Kochi, I., B. Hubbell, and R. Kramer. 2006. An Empirical Bayes Approach to Combining Estimates 

of the Value of Statistical Life for Environmental Policy Analysis. Environmental and Resource 

Economics. 34: 385-406. 
Summary of Interagency Working Comments on Draft Rule under EO 12866

68 

 xxxiii U.S. Environmental Protection Agency (U.S. EPA). 2000. Guidelines for Preparing Economic 

Analyses. EPA 240-R-00-003. National Center for Environmental Economics, Office of Policy 

Economics and Innovation. Washington, DC. September. Available on the Internet at 

<http://yosemite.epa.gov/ee/epa/eed.nsf/webpages/Guidelines.html/$file/cover.pdf>.

xxxiv See http://ostpxweb.dot.gov/policy/Data/VOT97guid.pdf and 

http://ostpxweb.dot.gov/policy/Data/VOTrevision1_2-11-03.pdf

xxxv California Environmental Protection Agency, Air Resources Board. Draft Assessment of the RealWorld Impacts of Commingling California Phase 3 Reformulated Gasoline. August 2003 

xxxvi Id.

xxxvii 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 July 24, 2009).

xxxviii Id. 
Summary of Interagency Working Comments on Draft Rule under EO 12866

69 

 
Summary of Interagency Working Comments on Draft Rule under EO 12866

1 

Below are interagency comments received during EO 12866 review of the draft rule 

“Joint Rulemaking to Establish Light-Duty Vehicle Greenhouse Gas Emission Standards 

and Corporate Average Fuel Economy Standards”. They are subject to further policy 

review. 

Suggestions for Preamble Sections: 

ENVIRONMENTAL PROTECTION AGENCY 

40 CFR Parts 9, 86, and 600 

DEPARTMENT OF TRANSPORTATION 

National Highway Traffic Safety Administration 

49 CFR Parts 531, 533, 537 and 538 

[EPA–HQ–OAR–2009–0472; FRL_8959-4; NHTSA-2009-0059]

RIN 2060-AP58; RIN 2127-AK50

Light-Duty Vehicle Greenhouse Gas Emission Standards and Corporate Average Fuel 

Economy Standards; Final Rule 

AGENCIES: Environmental Protection Agency (EPA) and National Highway Traffic 

Safety Administration (NHTSA). 

ACTION: Final Rule. 

_______________________________________________________________________ 

SUMMARY: EPA and NHTSA are issuing this joint Final Rule to establish a National 

Program consisting of new standards for light-duty vehicles that will reduce greenhouse 

gas emissions and improve fuel economy. This joint Final Rule is consistent with the 

National Fuel Efficiency Policy announced by President Obama on May 19, 2009, 

responding to the country’s critical need to address global climate change and to reduce 

oil consumption. EPA is finalizing greenhouse gas emissions standards under the Clean 

Air Act, and NHTSA is finalizing Corporate Average Fuel Economy standards under the 

Energy Policy and Conservation Act, as amended. These standards apply to passenger 

cars, light-duty trucks, and medium-duty passenger vehicles, covering model years 2012 

through 2016, and represent a harmonized and consistent National Program. Under the 

National Program, automobile manufacturers will be able to build a single light-duty 

national fleet that satisfies all requirements under both programs while ensuring that 

consumers still have a full range of vehicle choices. NHTSA’s final rule also constitutes 

the agency’s Record of Decision for purposes of its NEPA analysis. 

DATES: This final rule is effective on [Insert date 60 days after publication in the 

Federal Register], sixty days after date of publication in the Federal Register. The 

incorporation by reference of certain publications listed in this regulation is approved by 

the Director of the Federal Register as of [Insert date 60 days after publication in the 

Federal Register]. 
Summary of Interagency Working Comments on Draft Rule under EO 12866

2 

ADDRESSES: EPA and NHTSA have established dockets for this action under Docket 

ID No. EPA-HQ-OAR-2009-0472 and NHTSA-2009-0059, respectively. All documents 

in the docket are listed on the www.regulations.gov web site. Although listed in the 

index, some information is not publicly available, e.g., CBI or other information whose 

disclosure is restricted by statute. Certain other material, such as copyrighted material, is 

not placed on the Internet and will be publicly available only in hard copy form. Publicly 

available docket materials are available either electronically through 

www.regulations.gov or in hard copy at the following locations: EPA: EPA Docket 

Center, EPA/DC, EPA West, Room 3334, 1301 Constitution Ave., NW., Washington, 

DC. The Public Reading Room is open from 8:30 a.m. to 4:30 p.m., Monday through 

Friday, excluding legal holidays. The telephone number for the Public Reading Room is 

(202) 566–1744. NHTSA: 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. The Docket Management Facility is open between 9 a.m. 

and 5 p.m. Eastern Time, Monday through Friday, except Federal holidays. 

FOR FURTHER INFORMATION CONTACT: EPA: Tad Wysor, Office of 

Transportation and Air Quality, Assessment and Standards Division, Environmental 

Protection Agency, 2000 Traverwood Drive, Ann Arbor MI 48105; telephone number: 

734-214-4332; fax number: 734-214-4816; email address: wysor.tad@epa.gov, or 

Assessment and Standards Division Hotline; telephone number (734) 214-4636; e-mail 

address asdinfo@epa.gov. NHTSA: Rebecca Yoon, Office of Chief Counsel, National 

Highway Traffic Safety Administration, 1200 New Jersey Avenue, SE, Washington, DC 

20590. Telephone: (202) 366-2992. 

 

SUPPLEMENTARY INFORMATION: 

Does this Action Apply to Me? 

 This action affects companies that manufacture or sell new light-duty vehicles, 

light-duty trucks, and medium-duty passenger vehicles, as defined under EPA’s CAA 

regulations,1

 and passenger automobiles (passenger cars) and non-passenger automobiles 

(light trucks) as defined under NHTSA’s CAFE regulations.2

 Regulated categories and 

entities include: 

 

1

 “Light-duty vehicle,” “light-duty truck,” and “medium-duty passenger vehicle” are defined in 40 CFR 

86.1803-01. Generally, the term “light-duty vehicle” means a passenger car, the term “light-duty truck” 

means a pick-up truck, sport-utility vehicle, or minivan of up to 8,500 lbs gross vehicle weight rating, and 

“medium-duty passenger vehicle” means a sport-utility vehicle or passenger van from 8,500 to 10,000 lbs 

gross vehicle weight rating. Medium-duty passenger vehicles do not include pick-up trucks. 2

 “Passenger car” and “light truck” are defined in 49 CFR Part 523. 
Summary of Interagency Working Comments on Draft Rule under EO 12866

3 

Category NAICS 

CodesA

Examples of Potentially Regulated Entities 

Industry 336111 

336112 

Motor vehicle manufacturers. 

Industry 811112 

811198 

541514 

Commercial Importers of Vehicles and Vehicle 

Components. 

A North American Industry Classification System (NAICS) 

 This list is not intended to be exhaustive, but rather provides a guide regarding 

entities likely to be regulated by this action. To determine whether particular activities 

may be regulated by this action, you should carefully examine the regulations. You may 

direct questions regarding the applicability of this action to the person listed in FOR 

FURTHER INFORMATION CONTACT. 

I. Overview of Joint EPA/NHTSA National Program 

A. Introduction 

1. Building Blocks of the National Program 

2. Public Participation 

B. Summary of the Joint Final Rule and Differences from the Proposal 

1. Joint Analytical Approach 

2. Level of the Standards 

3. Form of the Standards 

4. Program Flexibilities 

5. Coordinated Compliance 

C. Summary of Costs and Benefits of the National Program 

1. Summary of Costs and Benefits of NHTSA's CAFE 

 Standards 

2. Summary of Costs and Benefits of EPA's GHG Standards 

D. Background and Comparison of NHTSA and EPA Statutory Authority 

II. Joint Technical Work Completed for This Final Rule 

A. Introduction 

B. Developing the Future Fleet for Assessing Costs, Benefits, and Effects 

1. Why Did the Agencies Establish a Baseline and Reference Vehicle Fleet? 

2. How Did the Agencies Develop the Baseline Vehicle Fleet? 

3. How Did the Agencies Develop the Projected MY 2011-2016 Vehicle 

Fleet? 

4. How Was the Development of the Baseline and Reference Fleets for this 

Final Rule Different from NHTSA’s Historical Approach? 

5. How Does Manufacturer Product Plan Data Factor into the Baseline Used 

in this Final Rule? 

C. Development of Attribute-Based Curve Shapes 

D. Relative Car-Truck Stringency 

E. Joint Vehicle Technology Assumptions 

1. What Technologies Did the Agencies Consider? 
Summary of Interagency Working Comments on Draft Rule under EO 12866

4 

2. How Did the Agencies Determine the Costs and Effectiveness of Each of 

These Technologies? 

F. Joint Economic Assumptions 

III. EPA Greenhouse Gas Vehicle Standards 

A. Executive Overview of EPA Rule 

1. Introduction 

2. Why is EPA Establishing this Rule? 

3. What is EPA Adopting? 

4. Basis for the GHG Standards under Section 202(a) 

B. GHG Standards for Light-duty Vehicles, Light-duty Trucks, and Medium-duty 

Passenger Vehicles 

1. What Fleet-wide Emissions Levels Correspond to the CO2 Standards? 

2. What are the CO2 Attribute-based Standards? 

3. Overview of How EPA’s CO2 Standards Will Be Implemented for 

Individual Manufacturers 

4. Averaging, Banking, and Trading Provisions for CO2 Standards 

5. CO2 Temporary Lead-Time Allowance Alternative Standards 

6. Deferment of CO2 Standards for Small Volume Manufacturers with 

Annual Sales Less than 5,000 Vehicles 

7. Nitrous Oxide and Methane Standards 

8. Small Entity Deferment 

C. Additional Credit Opportunities for CO2 Fleet Average Program 

1. Air Conditioning Related Credits 

2. Flexible Fuel and Alternative Fuel Vehicle Credits 

3. Advanced Technology Vehicle Incentives for Electric Vehicles, Plug-in 

Hybrids, and Fuel Cell Vehicles 

4. Off-cycle Technology Credits 

5. Early Credit Options 

D. Feasibility of the Final CO2 Standards 

1. How Did EPA Develop a Reference Vehicle Fleet for Evaluating Further 

CO2 Reductions? 

2. What Are the Effectiveness and Costs of CO2-reducing Technologies? 

3. How Can Technologies be Combined into “Packages” and What is the 

Cost and Effectiveness of Packages? 

4. Manufacturer’s Application of Technology 

5. How Is EPA Projecting that a Manufacturer Decides Between Options to 

Improve CO2 Performance to Meet a Fleet Average Standard? 

6. Why Are the Final CO2 Standards Feasible? 

7. What Other Fleet-Wide CO2 Levels Were Considered? 

E. Certification, Compliance, and Enforcement 

1. Compliance Program Overview 

2. Compliance with Fleet-Average CO2 Standards 

3. Vehicle Certification 

4. Useful Life Compliance 

5. Credit Program Implementation 
Summary of Interagency Working Comments on Draft Rule under EO 12866

5 

6. Enforcement 

7. Prohibited Acts in the CAA 

8. Other Certification Issues 

9. Miscellaneous Revisions to Existing Regulations 

10. Warranty, Defect Reporting, and Other Emission-related Components 

Provisions 

11. Light Duty Vehicles and Fuel Economy Labeling 

F. How Will This Final Rule Reduce GHG Emissions and Their Associated Effects? 

1. Impact on GHG Emissions 

2. Overview of Climate Change Impacts from GHG Emissions 

3. Changes in Global Mean Temperature and Sea Level Rise Associated with 

the Rule’s GHG Emissions Reductions 

4. Weight Reduction and Potential Safety Impacts 

G. How Will the Standards Impact Non-GHG Emissions and Their Associated 

Effects? 

1. Upstream Impacts of Program 

2. Downstream Impacts of Program 

3. Health Effects of Non-GHG Pollutants 

4. Environmental Effects of Non-GHG Pollutants 

5. Air Quality Impacts of Non-GHG Pollutants 

H. What Are the Estimated Cost, Economic, and Other Impacts of the Program? 

1. Conceptual Framework for Evaluating Consumer Impacts 

2. Costs Associated with the Vehicle Program 

3. Cost per Ton of Emissions Reduced 

4. Reduction in Fuel Consumption and its Impacts 

5. Impacts on U.S. Vehicle Sales and Payback Period 

6. Benefits of Reducing GHG Emissions 

7. Non-Greenhouse Gas Health and Environmental Impacts 

8. Energy Security Impacts 

9. Other Impacts 

10. Summary of Costs and Benefits 

I. Statutory and Executive Order Reviews 

1. Executive Order 12866: Regulatory Planning and Review 

2. Paperwork Reduction Act 

3. Regulatory Flexibility Act 

4. Unfunded Mandates Reform Act 

5. Executive Order 13132 (Federalism) 

6. Executive Order 13175 (Consultation and Coordination with Indian Tribal 

 Governments) 

7. Executive Order 13045: “Protection of Children from Environmental 

Health Risks and Safety Risks” 

8. Executive Order 13211 (Energy Effects) 

9. National Technology Transfer Advancement Act 

10. Executive Order 12898: Federal Actions to Address Environmental 

Justice in Minority Populations and Low-Income Populations 

J. Statutory Provisions and Legal Authority 
Summary of Interagency Working Comments on Draft Rule under EO 12866

6 

IV. NHTSA Final Rule and Record of Decision for Passenger Car and Light 

Truck CAFE Standards for MYs 2012-2016

A. Executive Overview of NHTSA Final Rule 

 1. Introduction 

 2. Role of Fuel Economy Improvements in Promoting Energy Independence, 

 Energy Security, and a Low Carbon Economy 

3. The National Program 

4. Review of CAFE Standard Setting Methodology per the President’s 

 January 26, 2009 Memorandum on CAFE Standards for MYs 2011 and 

 Beyond 

 5. Summary of the Final MY 2012-2016 CAFE Standards 

B. Background 

 1. Chronology of Events since the National Academy of Sciences Called for 

 Reforming and Increasing CAFE Standards 

2. Energy Policy and Conservation Act, as Amended by the Energy 

Independence and Security Act 

C. Development and Feasibility of the Proposed Standards 

1. How Was the Baseline and Reference Vehicle Fleet Developed? 

 2. How Were the Technology Inputs Developed? 

 3. How Did NHTSA Develop the Economic Assumptions? 

4. How Does NHTSA Use the Assumptions in its Modeling Analysis? 

5. How Did NHTSA Develop the Shape of the Target Curves for the Final 

Standards? 

D. Statutory Requirements 

1. EPCA, as Amended by EISA 

2. Administrative Procedure Act 

3. National Environmental Policy Act 

E. What Are the Final CAFE Standards? 

1. Form of the Standards 

2. Passenger Car Standards for MYs 2012-2016 

3. Minimum Domestic Passenger Car Standards 

4. Light Truck Standards 

F. How Do the Proposed Standards Fulfill NHTSA’s Statutory Obligations? 

G. Impacts of the Final CAFE Standards 

1. How Will these Standards Improve Fuel Economy and Reduce GHG 

Emissions for MY 2012-2016 Vehicles? 

2. How Will these Standards Improve Fleet-Wide Fuel Economy and Reduce 

GHG Emissions Beyond MY 2016? 

3. How Will these Standards Impact Non-GHG Emissions and their 

Associated Effects? 

4. What are the Estimated Costs and Benefits of these Final Standards? 

5. How Would these Standards Impact Vehicle Sales? 

6. What Are the Consumer Welfare Impacts of these Standards? 

7. What Are the Estimated Safety Impacts of these Standards? 
Summary of Interagency Working Comments on Draft Rule under EO 12866

7 

8. What Other Impacts (Quantitative and Unquantifiable) Will these 

Standards Have? 

H. Vehicle Classification 

I. Compliance and Enforcement 

1. Overview 

2. How Does NHTSA Determine Compliance? 

3. What Compliance Flexibilities Are Available under the CAFE Program 

and How Do Manufacturers Use Them? 

 4. Other CAFE Enforcement Issues—Variations in Footprint 

5. Other CAFE Enforcement Issues – Miscellaneous 

J. Other Near-Term Rulemakings Mandated by EISA 

1. Commercial Medium- and Heavy-Duty On-Highway Vehicles and Work 

Trucks 

 2. Consumer Information on Fuel Efficiency and Emissions 

K. NHTSA’s Record of Decision 

L. Regulatory Notices and Analyses 

1. Executive Order 12866 and DOT Regulatory Policies and 

Procedures 

 2. National Environmental Policy Act 

 3. Regulatory Flexibility Act 

 4. Executive Order 13132 (Federalism) 

 5. Executive Order 12988 (Civil Justice Reform) 

 6. Unfunded Mandates Reform Act 

 7. Paperwork Reduction Act 

 8. Regulation Identifier Number 

 9. Executive Order 13045 

 10. National Technology Transfer and Advancement Act 

 11. Executive Order 13211 

 12. Department of Energy Review 

 13. Plain Language 

 14. Privacy Act 

I. Overview of Joint EPA/NHTSA National Program 

A. Introduction 

 

The National Highway Traffic Safety Administration (NHTSA) and the 

Environmental Protection Agency (EPA) are each announcing final rules whose benefits 

will address the urgent and closely intertwined challenges of energy independence and 

security and global warming. These rules will implement 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 rules will 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 is already being commercially applied 
Summary of Interagency Working Comments on Draft Rule under EO 12866

8 

in most cases and that can be incorporated at a reasonable cost. NHTSA’s final rule also 

constitutes the agency’s Record of Decision for purposes of its NEPA analysis. 

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

2009 of a National Fuel Efficiency Policy of establishing consistent, harmonized, and 

streamlined requirements that would reduce greenhouse gas emissions and improve fuel 

economy for all new cars and light-duty trucks sold in the United States.3

 The National 

Program will deliver additional environmental and energy benefits, cost savings, and 

administrative efficiencies on a nationwide basis that would likely not be available under 

a less coordinated approach. The National Program also represents regulatory 

convergence by making 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. The National Program will allow automakers to produce and sell a single fleet 

nationally, mitigating the additional costs that manufacturers would otherwise face in 

having to comply with multiple sets of federal and state standards. This joint notice is 

also consistent with the Notice of Upcoming Joint Rulemaking issued by DOT and EPA 

on May 19, 20094

 and responds to the President’s January 26, 2009 memorandum on 

CAFE standards for model years 2011 and beyond,5

 the details of which can be found in 

Section IV of this joint notice. 

 Climate change is widely viewed as the mosta significant long-term threat to the 

global environment. According to the Intergovernmental Panel on Climate Change, 

anthropogenic emissions of greenhouse gases are very likely (90 to 99 percent 

probability) the cause of most of the observed global warming over the last 50 years. The 

primary GHGs of concern are carbon dioxide (CO2), methane, nitrous oxide, 

hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride.6

 Mobile sources emitted 

31 percent of all U.S. GHG in 2007 (transportation sources, which do not include certain 

off-highway sources, account for 28 percent) and have been the fastest-growing source of 

U.S. GHG since 1990.7

 Mobile sources addressed in the recent endangerment and 

contribution findings under CAA section 202(a)--light-duty vehicles, heavy-duty trucks, 

buses, and motorcycles--accounted for 23 percent of all U.S. GHG in 2007.8

 Light-duty 

 

3

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

Available at: http://www.whitehouse.gov/the_press_office/President-Obama-Announces-National-FuelEfficiency-Policy/. Remarks by the President on National Fuel Efficiency Standards, The White House, 

May 19, 2009. Available at: http://www.whitehouse.gov/the_press_office/Remarks-by-the-President-onnational-fuel-efficiency-standards/. 

4

 74 FR 24007 (May 22, 2009). 

5

 Available at: http://www.whitehouse.gov/the_press_office/Presidential_Memorandum_Fuel_Economy/. 6

 Intergovernmental Panel on Climate Change Working Group I. 2007. Climate Change 2007-The Physical 

Science Basis. Contribution of Working Group I to the Fourth Assessment Report of the Intergovernmental 

Panel on Climate Change. 

7

 U.S. Environmental Protection Agency. 2009. Inventory of U.S. Greenhouse Gas Emissions and Sinks: 

1990-2007. EPA 430-R-09-004. Available at 

http://epa.gov/climatechange/emissions/downloads09/GHG2007entire_report-508.pdf 

8

 U.S. EPA. 2009 Technical Support Document for Endangerment and Cause or Contribute Findings for 

Greenhouse Gases under Section 202(a) of the Clean Air Act. 

Washington, DC. pp. 180-194. Available at 

http://epa.gov/climatechange/endangerment/downloads/Endangerment%20TSD.pdf 

Comment [A1]: This section motivates 

government action by appropriately referencing the 

social benefits that results from addressing energy 

and environmental externalities and potential 

administrative efficiencies from harmonization. 

Reference to private fuel savings should be struck 

from this discussion 
Summary of Interagency Working Comments on Draft Rule under EO 12866

9 

vehicles emit four GHGs--CO2, methane, nitrous oxide, and hydrofluorocarbons--and are 

responsible for nearly 60 percent of all mobile source GHGs and over 70 percent of 

Section 202(a) mobile source GHGs. For light-duty vehicles in 2007, CO2 emissions 

represent about 94 percent of all greenhouse emissions (including HFCs), and the CO2

emissions measured over the EPA tests used for fuel economy compliance represent 

about 90 percent of total light-duty vehicle greenhouse gas emissions.9,10

Improving energy security by reducing our dependence on foreign oil has been a 

national objective since the first oil price shocks in the 1970s. Net petroleum imports 

now account for approximately 60 percent of U.S. petroleum consumption. World crude 

oil production is highly concentrated, exacerbating the risks of supply disruptions and 

price shocks. Tight global oil markets led to prices over $100 per barrel in 2008, with 

gasoline reaching as high as $4 per gallon in many parts of the U.S., causing financial 

hardship for many families. The export of U.S. assets for oil imports continues to be an

important component of the historically unprecedented U.S. trade deficits. 

Transportation accounts for about two-thirds of U.S. petroleum consumption. Light-duty 

vehicles account for about 60 percent of transportation oil use, which means that they 

alone account for about 40 percent of all U.S. oil consumption. 

 1. Building Blocks of the National Program

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. The amount of those CO2 emissions is essentially constant per gallon 

combusted of a given type of fuel. Thus, 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.11 While there are emission control technologies that reduce the pollutants 

(e.g., carbon monoxide) produced by imperfect combustion of fuel by capturing or 

converting them to other compounds, there is no such technology for CO2. Further, while 

some of those pollutants can also be reduced by achieving a more complete combustion 

of fuel, doing so only increases the tailpipe emissions of CO2. Thus, there is a single pool 

of technologies for addressing these twin problems, i.e., those that reduce fuel 

consumption and thereby reduce CO2 emissions as well. 

 

a. DOT’s CAFE Program 

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

mandating that NHTSA establish and implement 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. 

 

9

 U.S. Environmental Protection Agency. 2009. Inventory of 

U.S. Greenhouse Gas Emissions and Sinks: 1990-2007. EPA 430-R-09-004. 

Available at http://epa.gov/climatechange/emissions/downloads09/GHG2007entire_report-508.pdf 10 U.S. Environmental Protection Agency. RIA, Chapter 2 

11 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. p. 287. 
Summary of Interagency Working Comments on Draft Rule under EO 12866

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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 substantial, continuing increases in fuel economy 

standards. 

The CAFE standards address most, but not all, of the real world CO2 emissions 

because a provision in EPCA as originally enacted in 1975 requires the use of the 1975 

passenger car test procedures under which vehicle air conditioners are not turned on 

during fuel economy testing.12 Fuel economy is determined by measuring the amount of 

CO2 and other carbon compounds 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. The carbon content of the test fuel13 is then used to calculate the amount 

of fuel that had to be consumed per mile in order to produce that amount of CO2. Finally, 

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

b. EPA’s Greenhouse Gas Standards for Light-duty Vehicles 

Under the Clean Air Act EPA is responsible for addressing air pollutants from 

motor vehicles. On April 2, 2007, the U.S. Supreme Court issued its opinion in 

Massachusetts v. EPA,

14 a case involving a 2003 order of the EPA denying a petition for 

rulemaking to regulate greenhouse gas emissions from motor vehicles under section 

202(a) of the Clean Air Act (CAA).15 The Court held that greenhouse gases were air 

pollutants for purposes of the Clean Air Act and further held that the Administrator must 

determine whether or not emissions from new motor vehicles cause or contribute to air 

pollution which may reasonably be anticipated to endanger public health or welfare, or 

whether the science is too uncertain to make a reasoned decision. The Court further ruled 

that, in making these decisions, the EPA Administrator is required to follow the language 

of section 202(a) of the CAA. The Court rejected the argument that EPA cannot regulate 

CO2 from motor vehicles because to do so would de facto tighten fuel economy 

standards, authority over which has been assigned by Congress to DOT. The Court stated 

that “[b]ut that DOT sets mileage standards in no way licenses EPA to shirk its 

environmental responsibilities. EPA has been charged with protecting the public‘s 

‘health’ and ‘welfare’, a statutory obligation wholly independent of DOT’s mandate to 

promote energy efficiency.” The Court concluded that “[t]he two obligations may 

overlap, but there is no reason to think the two agencies cannot both administer their 

 

12 Although EPCA does not require the use of 1975 test procedures for light trucks, those procedures are 

used for light truck CAFE standard testing purposes. 13 This is the method that EPA uses to determine compliance with NHTSA’s CAFE standards. 14 549 U.S. 497 (2007). 

15 68 FR 52922 (Sept. 8, 2003). 
Summary of Interagency Working Comments on Draft Rule under EO 12866

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obligations and yet avoid inconsistency.” 16 The Court remanded the case back to the 

Agency for reconsideration in light of its findings. 17 

 On December 15, 2009, EPA published two findings (74 FR 66496): that 

emissions of GHGs from new motor vehicles and motor vehicle engines contribute to air 

pollution, and that the air pollution may reasonably be anticipated to endanger public 

health and welfare. 

c. California Air Resources Board 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 CO2 emissions for passenger cars 

and the smallest light trucks of 323 g/mi in 2009 and 205 g/mi in 2016, and for the 

remaining light trucks of 439 g/mi in 2009 and 332 g/mi in 2016. On June 30, 2009, 

EPA granted California’s request for a waiver of preemption under the CAA.18 The 

granting of the waiver permits California and the other states to proceed with 

implementing the California emission standards. 

In addition, to promote the National Program, California announced its 

commitment to take several actions in support of the National program, including 

revising its program for MYs 2012-2016 such that compliance with the federal GHG 

standards will be deemed to be compliance with California's GHG standards. This will 

allow the single national fleet produced by automakers to meet the two Federal 

requirements and to meet California requirements as well. California is proceeding with 

a rulemaking intended to revise its 2004 regulations to meet its commitments. 

2. Public Participation

The agencies proposed their respective rules on September 28, 2009 (74 FR 

49454), and received a large number of comments representing many perspectives on the 

proposed rule. The agencies received oral testimony at three public hearings in different 

parts of the country, and received written comments from more than 130 organizations, 

including auto manufacturers and suppliers, states, environmental and other nongovernmental organizations (NGOs), and over 129,000 comments from private citizens. 

The vast majority of commenters supported the central tenets of the proposed 

CAFE and GHG programs. That is, there was broad support from most organizations for 

 

16549 U.S. at 531-32. 

17 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 Bush Administration and the EPA from 2007-2008 in response to the 

Supreme Court remand. 

18 74 FR 32744 (July 8, 2009). 
Summary of Interagency Working Comments on Draft Rule under EO 12866

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a National Program that achieves a level of 250 gram/mile fleet average CO2, which 

would be 35.5 miles per gallon if the automakers were to meet this CO2 level solely 

through fuel economy improvements. The standards will be phased in over model years 

2012 through 2016 which will allow manufacturers to build a common fleet of vehicles 

for the domestic market. In general, commenters from the automobile industry supported 

the proposed standards as well as the credit opportunities and other compliance 

provisions providing flexibility, while also making some recommendations for changes. 

Environmental and public interest non-governmental organizations (NGOs), as well as 

most states that commented, were also generally supportive of the National Program 

standards. Many of these organizations also expressed concern about the possible impact 

on program benefits, depending on how the credit provisions and flexibilities are 

designed. The agencies also received specific comments on many aspects of the 

proposal. 

Throughout this notice, the agencies discuss many of the key issues arising from 

the public comments and the agencies' responses. In addition, the agencies have 

addressed all of the public comments in the Joint Response to Comments document 

associated with this final rule. 

B. Summary of the Joint Final Rule and Differences from the Proposal 

In this joint rulemaking, EPA is establishing GHG emissions standards under the 

Clean Air Act (CAA), and NHTSA is establishing Corporate Average Fuel Economy 

(CAFE) standards under the Energy Policy and Conservation Action of 1975 (EPCA), as 

amended by the Energy Independence and Security Act of 2007 (EISA). The intention of 

this joint rulemaking is to set forth a carefully coordinated and harmonized approach to 

implementing these two statutes, in accordance with all substantive and procedural 

requirements imposed by law. 

NHTSA and EPA have coordinated closely and worked jointly in developing their 

respective final rules. This is reflected in many aspects of this joint rule. For example, 

the agencies have developed a comprehensive Joint Technical Support Document (TSD) 

that provides a solid technical underpinning for each agency’s modeling and analysis 

used to support their standards. Also, to the extent allowed by law, the agencies have 

harmonized many elements of program design, such as the form of the standard (the 

footprint-based attribute curves), and the definitions used for cars and trucks. They have 

developed the same or similar compliance flexibilities, to the extent allowed and 

appropriate under their respective statutes, such as averaging, banking, and trading of 

credits, and have harmonized the compliance testing and test protocols used for purposes 

of the fleet average standards each agency is finalizing. Finally, under their respective 

statutes, each agency is called upon to exercise its judgment and determine standards that 

are an appropriate balance of various relevant statutory factors. Given the common 

technical issues before each agency, the similarity of the factors each agency is to 

consider and balance, and the authority of each agency to take into consideration the 

standards of the other agency, both EPA and NHTSA are establishing standards that 

result in a harmonized National Program. 
Summary of Interagency Working Comments on Draft Rule under EO 12866

13 

 This joint final rule covers passenger cars, light-duty-trucks, and medium-duty 

passenger vehicles built in model years 2012 through 2016. These vehicle categories are 

responsible for almost 60 percent of all U.S. transportation-related GHG emissions. EPA 

and NHTSA expect that automobile manufacturers will meet these standards by utilizing 

technologies that will reduce vehicle GHG emissions and improve fuel economy. 

Although many of these technologies are available today, the emissions reductions and 

fuel economy improvements finalized in this notice will involve more widespread use of 

these technologies across the light-duty vehicle fleet. These include improvements to 

engines, transmissions, and tires, increased use of start-stop technology, improvements in 

air conditioning systems, increased use of hybrid and other advanced technologies, and 

the initial commercialization of electric vehicles and plug-in hybrids. NHTSA’s and 

EPA’s assessments of likely vehicle technologies that manufacturers will employ to meet 

the standards are discussed in detail below and in the Joint TSD. 

 

The National Program will result estimated to achievein approximately 960 

million metric tons of total carbon dioxide equivalent emissions reductions and 

approximately 1.8 billion barrels of oil savings over the lifetime of vehicles sold in model 

years (MYs) 2012 through 2016. In total, the combined EPA and NHTSA 2012-2016 

standards will reduce GHG emissions from the U.S. light-duty fleet by approximately 21 

percent by 2030 over the level that would occur in the absence of the National Program. 

These actions also will provide important energy security benefits, as light-duty vehicles 

are about 95 percent dependent on oil-based fuels. The agencies project that the benefits 

of the National Program will total more than $240 billion at a 3% discount rate, or more 

than $190 billion at a 7% discount rate. In the discussion that follows in Sections III and 

IV, each agency explains the related benefits for their individual standards. 

Together, EPA and NHTSA estimate that the average cost increase for a model 

year 2016 vehicle due to the National Program will be less than $1,000. The average 

U.S. consumers who purchases theira vehicle outright will is estimated to save enough in 

lower fuel costs over the first three years to offset these higher vehicle costs. However, 

most U.S. consumers purchase a new vehicle using credit rather than paying cash and the 

typical car loan today is a five year, 60 month loan. These consumers will see immediate 

savings due to their vehicle’s lower fuel consumption in the form of a net reduction in 

annual costs of $130-$180 throughout the duration of the loan (that is, the fuel savings 

will outweigh the increase in loan payments by $130-$180 per year). Whether a 

consumer takes out a loan or purchases a new vehicle outright, over the lifetime of a 

model year 2016 vehicle, the consumer's net savings cshould be more than $3,000. The 

average 2016 MY vehicle will emit 16 fewer metric tons of CO2-equivalent emissions 

(that is, CO2 emissions plus HFC air conditioning leakage emissions) emissions during its 

lifetime. Assumptions that underlie these conclusions are discussed in greater detail in the 

regulatory impact analyses and in section X.

This joint rule also results in important regulatory convergence and certainty to 

automobile companies. Absent this rule, there would be three separate federal and state 

regimes independently regulating light-duty vehicles to reduce fuel consumption and 

Comment [A2]: Because these benefits occur in 

the future and agencies don’t know for certain, 

please revise to characterize them as estimate instead 

of impacts that are certain to occur precisely as 

described. 

Comment [A3]: How much is just from the 

vehicles themselves? (versus upstream) 

Comment [A4]: Resist asserting too strongly 

since consumers vary and you are only describing a 

“typical” consumer, not all consumers, using your 

modeling assumptions and estimates. 
Summary of Interagency Working Comments on Draft Rule under EO 12866

14 

GHG emissions: NHTSA’s CAFE standards, EPA’s GHG standards, and the GHG 

standards applicable in California and other states adopting the California standards. 

This joint rule will allow automakers to meet both the NHTSA and EPA requirements 

with a single national fleet, greatly simplifying the industry's technology, investment and 

compliance strategies. In addition, to promote the National Program, California 

announced its commitment to take several actions, including revising its program for 

MYs 2012-2016 such that compliance with the federal GHG standards will be deemed to 

be compliance with California's GHG standards. This will allow the single national fleet 

used by automakers to meet the two Federal requirements and to meet California 

requirements as well. California is proceeding with a rulemaking intended to revise its 

2004 regulations to meet its commitments. EPA and NHTSA are confident that these 

GHG and CAFE standards will successfully harmonize both the federal and state 

programs for MYs 2012-2016 and will allow our country to achieve the increased 

benefits of a single, nationwide program to reduce light-duty vehicle GHG emissions and 

reduce the country’s dependence on fossil fuels by improving these vehicles’ fuel 

economy. 

A successful and sustainable automotive industry depends upon, among other 

things, continuous technology innovation in general, and low greenhouse gas emissions 

and high fuel economy vehicles in particular. In this respect, this action will help spark 

the investment in technology innovation necessary for automakers to successfully 

compete in both domestic and export markets, and thereby continue to support a strong 

economy. 

While this action covers MYs 2012-2016, many stakeholders encouraged EPA 

and NHTSA to also begin working toward standards for MY 2017 and beyond that would 

maintain a single nationwide program. The agencies recognize the importance of and are 

committed to a strong, coordinated national program for light-duty vehicles for model 

years beyond 2016. 

Key elements of the National Program finalized today are the level and form of 

the GHG and CAFE standards, the available compliance mechanisms, and general 

implementation elements. These elements are summarized in the following section, with 

more detailed discussions about EPA’s GHG program following in Section III, and about 

NHTSA’s CAFE program in Section IV. This joint final rule responds to the wide array 

of comments that the agencies received on the proposed rule. This section summarizes 

many of the major comments on the primary elements of the proposal and describes 

whether and how the final rule has changed, based on the comments and additional 

analyses. Major comments and the agencies’ responses to them are also discussed in 

more detail in later sections of this preamble. For a full summary of public comments 

and EPA’s and NHTSA’s responses to them, please see the Joint Response to Comments 

document associated with this final rule. 

1. Joint Analytical Approach
Summary of Interagency Working Comments on Draft Rule under EO 12866

15 

 NHTSA and EPA have worked closely together on nearly every aspect of this 

joint final rule. The extent and results of this collaboration are reflected in the elements 

of the respective NHTSA and EPA rules, as well as the analytical work contained in the 

Joint Technical Support Document (Joint TSD). The Joint TSD, in particular, describes 

important details of the analytical work that are shared, as well as any differences in 

approach. These include the build up of the baseline and reference fleets, the derivation 

of the shape of the curves that define the standards, a detailed description of the costs and 

effectiveness of the technology choices that are available to vehicle manufacturers, a 

summary of the computer models used to estimate how technologies might be added to 

vehicles, and finally the economic inputs used to calculate the impacts and benefits of the 

rules, where practicable. 

EPA and NHTSA have jointly developed attribute curve shapes that each agency 

is using for its final standards. Further details of these functions can be found in Sections 

III and IV of this preamble as well as Chapter 2 of the Joint TSD. A critical technical 

underpinning of each agency’s analysis is the cost and effectiveness of the various 

control technologies. These are used to analyze the feasibility and cost of potential GHG 

and CAFE standards. A detailed description of all of the technology information 

considered can be found in Chapter 3 of the Joint TSD (and for A/C, Chapter 2 of the 

EPA RIA). This detailed technology data forms the inputs to computer models that each 

agency uses to project how vehicle manufacturers may add those technologies in order to 

comply with the new standards. These are the OMEGA and Volpe models for EPA and 

NHTSA, respectively. The models and their inputs can also be found in the docket. 

Further description of the model and outputs can be found in Sections III and IV of this 

preamble, and Chapter 3 of the Joint TSD. This comprehensive joint analytical approach 

has provided a sound and consistent technical basis for each agency in developing its 

final standards, which are summarized in the sections below. 

The vast majority of public comments expressed strong support for the joint 

analytical work performed for the proposal. Commenters generally agreed with the 

analytical work and its results, and supported the transparency of the analysis and its 

underlying data. Where commenters raised specific points, the agencies have considered 

them and made changes where appropriate. The agencies' further evaluation of various 

technical issues also led to a limited number of changes. A detailed discussion of these 

issues can be found in Section II of this preamble, and the Joint TSD. 

2. Level of the Standards 

In this notice, EPA and NHTSA are establishing two separate sets of standards, 

each under its respective statutory authorities. EPA is setting national CO2 emissions 

standards for light-duty vehicles under section 202 (a) of the Clean Air Act. These 

standards will require these vehicles to meet an estimated combined average emissions 

level of 250 grams/mile of CO2 in model year 2016. NHTSA is setting CAFE standards 

for passenger cars and light trucks under 49 U.S.C. 32902. These standards will require 

manufacturers of those vehicles to meet an estimated combined average fuel economy 

level of 34.1 mpg in model year 2016. The standards for both agencies begin with the 
Summary of Interagency Working Comments on Draft Rule under EO 12866

16 

2012 model year, with standards increasing in stringency through model year 2016. 

They represent a harmonized approach that will allow industry to build a single national 

fleet that will satisfy both the GHG requirements under the CAA and CAFE requirements 

under EPCA/EISA. 

 

Given differences in their respective statutory authorities, however, the agencies’ 

standards include some important differences. Under the CO2 fleet average standards 

adopted under CAA section 202(a), EPA expects manufacturers to take advantage of the 

option to generate CO2-equivalent credits by reducing emissions of hydrofluorocarbons 

(HFCs) and CO2 through improvements in their air conditioner systems. EPA accounted 

for these reductions in developing its final CO2 standards. NHTSA did not do so because 

EPCA does not allow vehicle manufacturers to use air conditioning credits in complying 

with CAFE standards for passenger cars.19 CO2 emissions due to air conditioning 

operation are not measured by the test procedure mandated by statute for use in 

establishing and enforcing CAFE standards for passenger cars. As a result, improvement 

in the efficiency of passenger car air conditioners is not considered as a possible control 

technology for purposes of CAFE. 

These differences regarding the treatment of air conditioning improvements 

(related to CO2 and HFC reductions ) affect the relative stringency of the EPA standard 

and NHTSA standard for MY 2016. The 250 grams per mile of CO2 equivalent 

emissions limit is equivalent to 35.5 mpg20 if the automotive industry were to meet this 

CO2 level all through fuel economy improvements. As a consequence of the prohibition 

against NHTSA’s allowing credits for air conditioning improvements for purposes of 

passenger car CAFE compliance, NHTSA is setting fuel economy standards that are 

estimated to require a combined (passenger car and light truck) average fuel economy 

level of 34.1 mpg by MY 2016. 

The vast majority of public comments expressed strong support for the National 

Program standards, including the stringency of the agencies’ respective standards and the 

phase-in from model year 2012 through 2016. There were a number of comments 

supporting standards more stringent than proposed, and a few others supporting less 

stringent standards, in particular for the 2012-2015 model years. The agencies' 

consideration of comments and their updated technical analyses led to only very limited 

changes in the footprint curves and did not change the agencies’ projections that the 

nationwide fleet will achieve a level of 250 grams/mile by 2016 (equivalent to 35.5 mpg). 

The responses to these comments are discussed in more detail in Sections III and IV, 

respectively, and in the Joint Response to Comments document.

As proposed, NHTSA and EPA’s final standards, like the standards NHTSA 

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

 

19 There is no such statutory limitation with respect to light trucks. 

20 The agencies are using a common conversion factor between fuel economy in units of miles per gallon 

and CO2 emissions in units of grams per mile. This conversion factor is 8,887 grams CO2 per gallon 

gasoline fuel. Diesel fuel has a conversion factor of 10,180 grams CO2 per gallon diesel fuel though for the 

purposes of this calculation, we are assuming 100% gasoline fuel. 
Summary of Interagency Working Comments on Draft Rule under EO 12866

17 

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.21 The standards that must be met by each manufacturer's fleet will be determined 

by computing the sales-weighted average (harmonic average for CAFE) of the targets 

applicable to each of the manufacturer’s passenger cars and light trucks. Under these 

footprint-based standards, the levels required of individual manufacturers will depend, as 

noted above, on the mix of vehicles sold. NHTSA's and EPA’s respective standards are 

shown in the tables below. It is important to note that the standards are the attributebased curves established by each agency. The values in the tables below reflect the 

agencies’ projection of the corresponding fleet levels that will result from these attributebased curves. 

As a result of public comments and updated economic and future fleet 

projections, EPA and NHTSA have updated the attribute based curves for this final rule, 

as discussed in detail in Section II.B of this preamble and Chapter 2 of the Joint TSD. 

This update in turn affects costs, benefits, and other impacts of the final standards. Thus, 

the agencies have updated their overall projections of the impacts of the final rule 

standards, and these results are only slightly different from those presented in the 

proposed rule. 

 As shown in Table I.B.2-1, NHTSA’s fleet-wide CAFE-required levels for 

passenger cars under the final standards are projected to increase from 33.3 to 37.8 mpg 

between MY 2012 and MY 2016. Similarly, fleet-wide CAFE levels for light trucks are 

projected to increase from 25.4 to 28.8 mpg. NHTSA has also estimated the average 

fleet-wide required levels for the combined car and truck fleets. As shown, the overall 

fleet average CAFE level is expected to be 34.1 mpg in MY 2016. These numbers do not 

include the effects of other flexibilities and credits in the program. These standards 

represent a 4.3 percent average annual rate of increase relative to the MY 2011 

standards.22 

Table I.B.2-1 Average Required Fuel Economy (mpg) 

under Final CAFE Standards 

 2011-base 2012 2013 2014 2015 2016 

Passenger Cars 30.4 33.3 34.2 34.9 36.2 37.8 

Light Trucks 24.4 25.4 26.0 26.6 27.5 28.8 

Combined Cars & Trucks 27.6 29.7 30.5 31.3 32.6 34.1 

Accounting for the expectation that some manufacturers could continue to pay 

civil penalties rather than achieving required CAFE levels, and the ability to use FFV 

 

21 See 49 CFR 523.2 for the exact definition of “footprint.” 22 Because required CAFE levels depend on the mix of vehicles sold by manufacturers in a model year, 

NHTSA’s estimate of future required CAFE levels depends on its estimate of the mix of vehicles that will 

be sold in that model year. NHTSA currently estimates that the MY 2011 standards will require average 

fuel economy levels of 30.4 mpg for passenger cars, 24.4 mpg for light trucks, and 27.6 mpg for the 

combined fleet. 
Summary of Interagency Working Comments on Draft Rule under EO 12866

18 

credits,23 NHTSA estimates that the CAFE standards will lead to the following average 

achieved fuel economy levels, based on the projections of what each manufacturer’s fleet 

will comprise in each year of the program:24

Table I.B.2-2 Projected Fleet-Wide Achieved CAFE Levels under the Final 

Footprint-Based CAFE Standards (mpg) 

 2012 2013 2014 2015 2016 

Passenger Cars 32.3 33.5 34.2 35.0 36.2 

Light Trucks 24.5 25.1 25.9 26.7 27.5 

Combined Cars & Trucks 28.7 29.7 30.6 31.5 32.7 

NHTSA is also required by EISA to set a minimum fuel economy standard for 

domestically manufactured passenger cars in addition to the attribute-based passenger car 

standard. The 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 non-domestic passenger automobile fleets manufactured for sale in the 

United States by all manufacturers in the model year....”25 

 

Based on NHTSA’s current market forecast, the agency’s estimates of these 

minimum standards under the MY 2012-2016 CAFE standards (and, for comparison, the 

final MY 2011 standard) are summarized below in Table I.B.2-3.26 For eventual 

compliance calculations, the final calculated minimum standards will be updated to 

reflect the average fuel economy level required under the final standards. 

Table I.B.2-3 Estimated Minimum Standard for Domestically Manufactured Passenger 

Cars under MY 2011 and MY 2012-2016 CAFE Standards for Passenger Cars (mpg) 

2011 2012 2013 2014 2015 2016

28.0 30.7 31.4 32.1 33.3 34.7 

EPA is establishing GHG emissions standards, and Table I.B.2-4 provides EPA’s 

estimates of their projected overall fleet-wide CO2 equivalent emission levels.27 The 

 

23 The penalties are similar in function to essentially unlimited, fixed-price allowances. 24 NHTSA’s estimates account for availability of CAFE credits for the sale of flexible-fuel vehicles (FFVs), 

and for the potential that some manufacturers will pay civil penalties rather than comply with the CAFE 

standards. This yields NHTSA’s estimates of the real-world fuel economy that will likely be achieved 

under the final CAFE standards. NHTSA has not included any potential impact of car-truck credit transfer 

in its estimate of the achieved CAFE levels. 

25 49 U.S.C. 32902(b)(4). 

26 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. 

27 These levels do not include the effect of flexible fuel credits, transfer of credits between cars and trucks, 

temporary lead time allowance, or any other credits with the exception of air conditioning. 
Summary of Interagency Working Comments on Draft Rule under EO 12866

19 

g/mi values are CO2 equivalent values because they include the projected use of air 

conditioning (A/C) credits by manufacturers, which include both HFC and CO2

reductions.

Table I.B.2-4 Projected Fleet-Wide Emissions Compliance Levels under the FootprintBased CO2 Standards (g/mi) 

 2012 2013 2014 2015 2016 

Passenger Cars 263 256 247 236 225 

Light Trucks 346 337 326 312 298 

Combined Cars & Trucks 295 286 276 263 250 

As shown in Table I.B.2-4, fleet-wide CO2 emission level requirements for cars 

are projected to increase in stringency from 263 to 225 g/mi between MY 2012 and MY 

2016. Similarly, fleet-wide CO2 equivalent emission level requirements for trucks are 

projected to increase in stringency from 346 to 298 g/mi. As shown, the overall fleet 

average CO2 level requirements are projected to increase in stringency from 295 g/mi in 

MY 2012 to 250 g/mi in MY 2016. 

EPA anticipates that manufacturers will take advantage of program flexibilities 

such as flexible fueled vehicle credits and car/truck credit trading. Due to the credit 

trading between cars and trucks, the estimated improvements in CO2 emissions are 

distributed differently than shown in Table I.B.2-4, where full manufacturer compliance 

without credit trading is assumed. Table I.B.2-5 shows EPA’s projection of the achieved 

emission levels of the fleet for MY 2012 through 2016, which does consider the impact 

of car/truck credit transfer and the increase in emissions due to certain program 

flexibilities including flex fueled vehicle credits and the temporary lead time allowance 

alternative standards. The use of optional air conditioning credits is considered both in 

this analysis of achieved levels and of the compliance levels described above. As can be 

seen in Table I.B.2-5, the projected achieved levels are slightly higher for model years 

2012-2015 due to EPA's assumptions about manufacturers' use of the regulatory 

flexibilities, but by model year 2016 the achieved level is projected to be 250 g/mi for the 

fleet. 

Table I.B.2-5 Projected Fleet-Wide Achieved Emission Levels under the 

Footprint-Based CO2 Standards (g/mi) 

2012 2013 2014 2015 2016 

Passenger Cars 267 256 245 234 223 

Light Trucks 365 353 340 324 303 

Combined Cars & Trucks 305 293 280 266 250 

Several auto manufacturers stated that the increasingly stringent requirements for 

fuel economy and GHG emissions in the early years of the program should follow a more 

linear phase-in. The agencies’ consideration of comments and of their updated technical 
Summary of Interagency Working Comments on Draft Rule under EO 12866

20 

analyses did not lead to changes to the phase-in of the standards discussed above. This 

issue is discussed in more detail in Sections II.D, and in Sections III and IV. 

NHTSA’s and EPA’s technology assessment indicates there is a wide range of 

technologies available for manufacturers to consider in upgrading vehicles to reduce 

GHG emissions and improve fuel economy. Commenters were in general agreement 

with this assessment.28 As noted, these include improvements to the engines such as use 

of gasoline direct injection and downsized engines that use turbochargers to provide 

performance similar to that of larger engines, the use of advanced transmissions, 

increased use of start-stop technology, improvements in tire performance rolling 

resistance, reductions in vehicle weight, increased use of hybrid and other advanced 

technologies, and the initial commercialization of electric vehicles and plug-in hybrids. 

EPA is also projecting improvements in vehicle air conditioners including more efficient 

as well as low leak systems. All of these technologies are already available today, and 

EPA’s and NHTSA’s assessments are that manufacturers will be able to meet the 

standards through more widespread use of these technologies across the fleet. 

 With respect to the practicability of the standards in terms of lead time, during 

MYs 2012-2016 manufacturers are expected to go through the normal automotive 

business cycle of redesigning and upgrading their light-duty vehicle products, and in 

some cases introducing entirely new vehicles not on the market today. This rule allows 

manufacturers the time needed to incorporate technology to achieve GHG reductions and 

improve fuel economy during the vehicle redesign process. This is an important aspect 

of the rule, as it avoids the much higher costs that would occur if manufacturers needed 

to add or change technology at times other than their scheduled redesigns. This time 

period also provides manufacturers the opportunity to plan for compliance using a multiyear time frame, again consistent with normal business practice. Over these five model 

years, there will be an opportunity for manufacturers to evaluate almost every one of their 

vehicle model platforms and add technology in a cost effective way to control GHG 

emissions and improve fuel economy. This includes redesign of the air conditioner 

systems in ways that will further reduce GHG emissions. Various commenters stated that 

the proposed phase-in of the standards should be introduced more aggressively, less 

aggressively, or in a more linear manner. However, our consideration of these comments 

about the phase-in, as well as our revised analyses, lead us to conclude that the general 

rate of introduction of the standards as proposed remains appropriate. This conclusion is 

also not affected by the slight difference from the proposal in the final footprint-based 

curves. These issues are addressed further in Sections III and IV. 

Both agencies considered other standards as part of the rulemaking analyses, both 

more and less stringent than those proposed. EPA’s and NHTSA’s analyses of 

alternative standards are contained in Sections III and IV of this preamble, respectively, 

as well as the agencies' respective RIAs. 

 

28 The close relationship between emissions of CO2 – the most prevalent greenhouse gas emitted by motor 

vehicles--and fuel consumption, means that the technologies to control CO2 emissions and to improve fuel 

economy overlap to a great degree. 

Comment [A5]: Please make this change in all of 

the Preamble, RIAs and TSD if mentioned anywhere 

else. These are only improvements to the rolling 

resistance, not all of the tire performance. Other 

aspects of tire performance which go the opposite 

direction are safety through traction and durability. 
Summary of Interagency Working Comments on Draft Rule under EO 12866

21 

The CAFE and GHG standards described above are based on determining 

emissions and fuel economy using the city and highway test procedures that are currently 

used in the CAFE program. Some environmental and other organizations commented 

that the test procedures should be improved to reflect more real-world driving conditions; 

auto manufacturers in general do not support such changes to the test procedures at this 

time. Both agencies recognize that these test procedures are not fully representative of 

real world driving conditions. For example, EPA has adopted more representative test 

procedures that are used in determining compliance with emissions standards for 

pollutants other than GHGs. These test procedures are also used in EPA’s fuel economy 

labeling program. However, as discussed in Section III, the current information on 

effectiveness of the individual emissions control technologies is based on performance 

over the CAFE test procedures. For that reason, EPA is using the current CAFE test 

procedures for the CO2 standards and is not changing those test procures in this 

rulemaking. NHTSA, as discussed above, is limited by statute in what test procedures 

can be used for purposes of passenger car testing, although there is no such statutory 

limitation with respect to test procedures for trucks. However, the same reasons for not 

changing the truck test procedures apply for CAFE as well. 

Both EPA and NHTSA are interested in developing programs that employ test 

procedures that are more representative of real world driving conditions, to the extent 

authorized under their respective statutes. This is an important issue, and the agencies 

intend to continue to evaluate it in the context of a future rulemaking to address standards 

for model year 2017 and thereafter. This could include consideration of a range of test 

procedure changes to better represent real-world driving conditions in terms of speed, 

acceleration, deceleration, ambient temperatures, use of air conditioners, and the like. 

With respect to air conditioner operation, EPA discusses the public comments on these 

issues and the final procedures for determining emissions credits for controls on air 

conditioners in Section III. 

Finally, based on the information EPA developed in its recent rulemaking that 

updated its fuel economy labeling program to better reflect average real-world fuel 

economy, the calculation of fuel savings and CO2 emissions reductions that will be 

achieved by the CAFE and GHG standards includes adjustments to account for the 

difference between the fuel economy level measured in the CAFE test procedure and the 

fuel economy actually achieved on average under real world driving conditions. These 

adjustments are industry averages for the vehicles’ performance as a whole, however, and 

are not a substitute for the information on effectiveness of individual control technologies 

that will be explored for purposes of a future GHG and CAFE rulemaking. 

 

3. Form of the Standards 

NHTSA and EPA proposed attribute-based standards for passenger cars and light 

trucks. NHTSA adopted an attribute approach based on vehicle footprint in its Reformed 

CAFE program for light trucks for model years 2008-2011,29 and recently extended this 

 

29 71 FR 17566 (Apr. 6, 2006). 
Summary of Interagency Working Comments on Draft Rule under EO 12866

22 

approach to passenger cars in the CAFE rule for MY 2011 as required by EISA.30 The 

agencies also proposed using vehicle footprint as the attribute for the GHG and CAFE 

standards. Footprint is defined as a vehicle’s wheelbase multiplied by its track width -- in 

other words, the area enclosed by the points at which the wheels meet the ground. Most 

commenters that expressed a view on this topic supported basing the standards on an 

attribute, and almost all of these supported the proposed choice of vehicle footprint as an 

appropriate attribute. The agencies continue to believe that the standards are best 

expressed in terms of an attribute, and that the footprint attribute is the most appropriate 

attribute on which to base the standards. These issues are further discussed later in this 

notice and in Chapter 2 of the Joint TSD. 

Under the footprint-based standards, each manufacturer will have a GHG and 

CAFE target unique to its fleet, depending on the footprints of the vehicle models 

produced by that manufacturer. A manufacturer will have separate footprint-based 

standards for cars and for trucks. Generally, larger vehicles (i.e., vehicles with larger 

footprints) will be subject to less stringent standards (i.e., higher CO2 grams/mile 

standards and lower CAFE standards) than smaller vehicles. This is because, generally 

speaking, smaller vehicles are more capable of achieving lower levels of CO2 and higher 

levels of fuel economy than larger vehicles. While a manufacturer’s fleet average 

standard could be estimated throughout the model year based on projected production 

volume of its vehicle fleet, the standard to which the manufacturer must comply will be 

based on its final model year production figures. A manufacturer’s calculation of fleet 

average emissions at the end of the model year will thus be based on the productionweighted average emissions of each model in its fleet. 

The final footprint-based standards are very similar in shape to those proposed. 

NHTSA and EPA include more discussion of the development of the final curves in 

Section II below, with a full discussion in the Joint TSD. In addition, a full discussion of 

the equations and coefficients that define the curves is included in Section III for the CO2

curves and Section IV for the mpg curves. The following figures illustrate the standards. 

First, Figure I.B.3-1 shows the fuel economy (mpg) car standard curve. 

Under an attribute-based standard, every vehicle model has a performance target 

(fuel economy for the CAFE standards, and CO2 g/mile for the GHG emissions 

standards), the level of which depends on the vehicle’s attribute (for this rule, footprint). 

The manufacturers’ fleet average performance is determined by the productionweighted31 average (for CAFE, harmonic average) of those targets. NHTSA and EPA are 

setting CAFE and CO2 emissions standards defined by constrained linear functions and, 

equivalently, piecewise linear functions.32 As a possible option for future rulemakings, 

the constrained linear form was introduced by NHTSA in the 2007 NPRM proposing 

CAFE standards for MY 2011-2015. 

 

30 74 FR 14196 (Mar. 30, 2009). 

31 Based on vehicles produced for sale in the United States. 

32 The equations are equivalent but are specified differently due to differences in the agencies’ respective 

models. 
Summary of Interagency Working Comments on Draft Rule under EO 12866

23 

NHTSA is establishing the attribute curves below for assigning a fuel economy 

level to an individual vehicle’s footprint value, for model years 2012 through 2016. 

These mpg values will be production weighted to determine each manufacturer’s fleet 

average standard for cars and trucks. Although the general model of the equation is the 

same for each vehicle category and each year, the parameters of the equation differ for 

cars and trucks. Each parameter also changes on an annual basis, resulting in the yearly 

increases in stringency. Figure I.B.3-1 below illustrates the passenger car CAFE standard 

curves for model years 2012 through 2016 while Figure I.B.3-2 below illustrates the light 

truck standard curves for model years 2012-2016. The MY 2011 final standards for cars 

and trucks, which are specified by a constrained logistic function rather than a 

constrained linear function, are shown for comparison. 
Summary of Interagency Working Comments on Draft Rule under EO 12866

24 

454035302520

35 40 45 50 55 60 65 70

)gpm(tegraT

Footprint (sf)

2011

20162015201420132012

Figure I.B.3-1 MY 2011 and MY 2012-2016 Passenger Car Fuel Economy Targets 
Summary of Interagency Working Comments on Draft Rule under EO 12866

25 

454035302520

35 40 45 50 55 60 65 70

)gpm(tegraT

Footprint (sf)

20162015201420132012

2011

Figure I.B.3-2. MY 2011 and MY 2012-2016 Light Truck Fuel Economy Targets 
Summary of Interagency Working Comments on Draft Rule under EO 12866

26 

 EPA is establishing the attribute curves below for assigning a CO2 level to an 

individual vehicle’s footprint value, for model years 2012 through 2016. These CO2

values will be production weighted to determine each manufacturer’s fleet average 

standard for cars and trucks. As with the CAFE curves above, the general form of the 

equation is the same for each vehicle category and each year, but the parameters of the 

equation differ for cars and trucks. Again, each parameter also changes on an annual 

basis, resulting in the yearly increases in stringency. Figure I.B.3-3 below illustrates the 

CO2 car standard curves for model years 2012 through 2016 while Figure I.B.3-4 shows 

the CO2 truck standard curves for model years 2012-2016. 
Summary of Interagency Working Comments on Draft Rule under EO 12866

27 

Figure I.B.3-3 CO2 (g/mi) Car Standard Curves 
Summary of Interagency Working Comments on Draft Rule under EO 12866

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Figure I.B.3-4 CO2 (g/mi) Truck Standard Curves 
Summary of Interagency Working Comments on Draft Rule under EO 12866

29 

 NHTSA and EPA received a number of comments about the shape of the car and 

truck curves. We address these comments further in Section II.C below as well as in 

Sections III and IV. 

 As proposed, NHTSA and EPA will use the same vehicle category definitions for 

determining which vehicles are subject to the car curve standards versus the truck curve 

standards. In other words, a vehicle classified as a car under the NHTSA CAFE program 

will also be classified as a car under the EPA GHG program, and likewise for trucks. 

Auto industry commenters generally agreed with this approach and believe it is an 

important aspect of harmonization across the two agencies’ programs. Some other 

commenters expressed concern about potential consequences, especially in how cars and 

trucks are distinguished. However, EPA and NHTSA are employing the same car and 

truck definitions for the MY 2012-2016 CAFE and GHG standards as those used in the 

CAFE program for the 2011 model year standards.33 This issue is further discussed for 

the EPA standards in Section III, and for the NHTSA standards in Section IV. This 

approach of using CAFE definitions allows EPA’s CO2 standards and the CAFE 

standards to be harmonized across all vehicles for this program. However, EPA is not 

changing the car/truck definition for the purposes of any other previous rules. 

Generally speaking, a smaller footprint vehicle will have higher fuel economy and 

lower CO2 emissions relative to a larger footprint vehicle. A footprint-based CO2 or 

CAFE standard can be relatively neutral with respect to vehicle size and consumer 

choice. All vehicles, whether smaller or larger, must make improvements to reduce CO2

emissions or improve fuel economy, and therefore all vehicles will be relatively more 

expensive. With the footprint-based standard approach, EPA and NHTSA believe there 

should be no significant effect on the relative distribution of different vehicle sizes in the 

fleet, which means that consumers will still be able to purchase the size of vehicle that 

meets their needs. Table I.B.3-1 illustrates the fact that different vehicle sizes will have 

varying CO2 emissions and fuel economy targets under the final standards. 

Table I.B.3-1 Model Year 2016 CO2 and Fuel Economy Targets for Various MY 2008 

Vehicle Types 

Vehicle 

Type 

Example 

Show Desktop.scf Models 

Example Model 

Footprint (sq. 

ft.) CO2 Emissions 

Target (g/mi) 

Fuel 

Economy 

Target (mpg) 

Example Passenger Cars 

Compact 

car Honda Fit 40 206 41.1 

Midsize 

car Ford Fusion 46 230 37.1 

Fullsize 

car Chrysler 300 53 263 32.6 

 

33 49 CFR Part 523. 

Comment [A6]: This sentence is confusing – 

maybe replace the sentence with, “While the 

standards apply to a manufacturer’s overall fleet and 

not a specific car or truck, a fleet that it dominated 

by small footprint vehicles will have higher fuel 

economy requirements than a fleet dominated by 

larger footprint vehicles.” 

Comment [A7]: Make sure the reader 

understands that these are illustrative in that the 

assume a fleet entirely made up of a particular type 

of vehicle. 
Summary of Interagency Working Comments on Draft Rule under EO 12866

30 

Example Light-duty Trucks 

Small 

SUV 4WD Ford Escape 44 259 32.9 

Midsize 

crossover Nissan Murano 49 279 28.2 

Minivan Toyota Sienna 55 303 24.7 

Large 

pickup 

truck Chevy Silverado 67 348 30.6 

4. Program Flexibilities

 EPA’s and NHTSA’s programs as established in this rule provide compliance 

flexibility to manufacturers, especially in the early years of the National Program. This 

flexibility is expected to provide sufficient lead time for manufacturers to make necessary 

technological improvements and reduce the overall cost of the program, without 

compromising overall environmental and fuel economy objectives. The broad goal of 

harmonizing the two agencies’ standards includes preserving manufacturers’ flexibilities 

in meeting the standards, to the extent appropriate and required by law. The following 

section provides an overview of this final rule’s flexibility provisions. Many auto 

manufacturers commented in support of these provisions as critical to meeting the 

standards in the lead time provided. Environmental groups, some states, and others 

raised concerns about the possibility for windfall credits and loss of program benefits. 

The provisions in the final rule are in most cases the same as those proposed. However 

consideration of the issues raised by commenters has led to modifications in certain 

provisions. These comments and the agencies’ response are discussed in Sections III and 

IV below and in the Joint Response to Comments document. 

a. CO2/CAFE Credits Generated Based on Fleet Average Performance 

 Under this NHTSA and EPA final rule, the fleet average standards that apply to a 

manufacturer’s car and truck fleets are based on the applicable footprint-based curves. At 

the end of each model year, when production of the model year is complete, a 

production-weighted fleet average will be calculated for each averaging set (cars and 

trucks). Under this approach, a manufacturer’s car and/or truck fleet that achieves a fleet 

average CO2/CAFE level better than the standard can generate credits. Conversely, if the 

fleet average CO2/CAFE level does not meet the standard, the fleet would incur debits 

(also referred to as a shortfall). 

 Under the final program, a manufacturer whose fleet generates credits in a given 

model year would have several options for using those credits, including credit carryback, credit carry-forward, credit transfers, and credit trading. These provisions exist in 

the MY 2011 CAFE program under EPCA and EISA, and similar provisions are part of 

EPA’s Tier 2 program for light-duty vehicle criteria pollutant emissions, as well as many 

other mobile source standards issued by EPA under the CAA. The manufacturer will be 
Summary of Interagency Working Comments on Draft Rule under EO 12866

31 

able to carry back credits to offset a deficit that had accrued in a prior model year and 

was subsequently carried over to the current model year. EPCA also provides for this. 

EPCA restricts the carry-back of CAFE credits to three years, and as proposed EPA is 

establishing the same limitation, in keeping with the goal of harmonizing both sets of 

standards. 

 After satisfying any need to offset pre-existing deficits, remaining credits can be 

saved (banked) for use in future years. Under the CAFE program, EISA allows 

manufacturers to apply credits earned in a model year to compliance in any of the five 

subsequent model years.34 As proposed, under the GHG program, EPA is also allowing 

manufacturers to use these banked credits in the five years after the year in which they 

were generated (i.e., five years carry-forward). 

 EISA required NHTSA to establish by regulation a CAFE credits transferring 

program, which NHTSA established in a March 2009 final rule codified at 49 CFR Part 

536, to allow a manufacturer to transfer credits between its vehicle fleets to achieve 

compliance with the standards. For example, credits earned by over-compliance with a 

manufacturer’s car fleet average standard could be used to offset debits incurred due to 

that manufacturer’s not meeting the truck fleet average standard in a given year. EPA’s 

Tier 2 program also provides for this type of credit transfer. As proposed for purposes of 

this rule, EPA allows unlimited credit transfers across a manufacturer’s car-truck fleet to 

meet the GHG standard. This is based on the expectation that this flexibility will facilitate 

manufacturers' ability to comply with the GHG standards in the lead time provided, and 

will allow the required GHG emissions reductions to be achieved in the most cost 

effective way. Under the CAA, unlike under EISA, there is no statutory limitation on 

car-truck credit transfers. Therefore, EPA is not constraining car-truck credit transfers, as 

doing so would reduce the flexibility for lead time, and would increase costs with no 

corresponding environmental benefit. For the CAFE program, however, EISA limits the 

amount of credits that may be transferred, which has the effects of limiting the extent to 

which a manufacturer can rely upon credits in lieu of making fuel economy 

improvements to a particular portion of its vehicle fleet, but also of potentially increasing 

the costs of improving the manufacturer’s overall fleet. EISA also prohibits the use of 

transferred credits to meet the statutory minimum level for the domestic car fleet 

standard.35 These and other statutory limits will continue to apply to the determination of 

compliance with the CAFE standards. 

 EISA also allowed NHTSA to establish by regulation a CAFE credit trading 

program, which NHTSA established in the March 2009 final rule at 40 CFR Part 536, to 

allow credits to be traded (sold) to other vehicle manufacturers. As proposed, EPA 

allows credit trading in the GHG program. These sorts of exchanges are typically 

allowed under EPA’s current mobile source emission credit programs, although 

manufacturers have seldom made such exchanges. Under the NHTSA CAFE program, 

EPCA also allows these types of credit trades, although, as with transferred credits, 

traded credits may not be used to meet the minimum domestic car standards specified by 

 

34 49 U.S.C. 32903(a)(2). 

35 49 U.S.C. 32903(g)(4). 
Summary of Interagency Working Comments on Draft Rule under EO 12866

32 

statute.36 Comments discussing these provisions supported the proposed approach. 

These final provisions are the same as proposed. 

As further discussed in section IV of this preamble, NHTSA sought to find a way 

to provide credits for improving the efficiency of light truck air conditioners (A/Cs) and 

solicited public comments to that end. The agency did so because the power necessary to 

operate an A/C compressor places a significant additional load on the engine, thus 

reducing fuel economy and increasing CO2 tailpipe emissions. See section III.C.1 below. 

The agency would have made a similar effort regarding cars, but a 1975 statutory 

provision made it unfruitful even to explore the possibility of administratively proving 

such credits for cars. The agency did not identify a workable way of providing such 

credits for light trucks in the context of this rulemaking. 

b. Air Conditioning Credits Under the EPA Final Rule 

 Air conditioning (A/C) systems contribute to GHG emissions in two ways. 

Hydrofluorocarbon (HFC) refrigerants, which are powerful GHG pollutants, can leak 

from the A/C system (direct A/C emissions). As just noted, operation of the A/C system 

also places an additional load on the engine, which results in additional CO2 tailpipe 

emissions (indirect A/C related emissions). EPA is allowing manufacturers to generate 

credits by reducing either or both types of GHG emissions related to A/C systems. 

Specifically, EPA is establishing a method to calculate CO2 equivalent reductions for the 

vehicle's full useful life on a grams/mile basis that can be used as credits in meeting the 

fleet average CO2 standards. EPA’s analysis indicates that this approach provides 

manufacturers with a highly cost-effective way to achieve a portion of GHG emissions 

reductions under the EPA program. EPA is estimating that manufacturers will on 

average generate 11 g/mi GHG credit toward meeting the 250 g/mi by 2016 (though 

some companies may generate more). EPA will also allow manufacturers to earn early 

A/C credits starting in MY 2009 through 2011, as discussed further in a later section. 

There were many comments on the proposed A/C provisions. Nearly every one of these 

was supportive of EPA including A/C control as part of this rule, though there was some 

disagreement on some of the details of the program. The HFC crediting scheme was 

widely supported. The comments mainly were concentrated on indirect A/C related 

credits. The auto manufacturers and suppliers had some technical comments on A/C 

technologies, and there were many concerns with the proposed idle test. EPA has made 

some minor adjustments in both of these areas that we believe are responsive to these 

concerns. EPA addresses A/C issues in greater detail in Section III of this preamble and 

in Chapter 2 of EPA’s RIA. 

c. Flexible-fuel and Alternative Fuel Vehicle Credits 

EPCA authorizes a compliance flexibility incentive under the CAFE program for 

production of dual-fueled or flexible-fuel vehicles (FFV) and dedicated alternative fuel 

vehicles. FFVs are vehicles that can run both on an alternative fuel and conventional 

fuel. Most FFVs are E85 capable vehicles, which can run on either gasoline or a mixture 

 

36 49 U.S.C. 32903(f)(2). 
Summary of Interagency Working Comments on Draft Rule under EO 12866

33 

of up to 85 percent ethanol and 15 percent gasoline (E85). Dedicated alternative fuel 

vehicles are vehicles that run exclusively on an alternative fuel. EPCA was amended by 

EISA to extend the period of availability of the FFV incentive, but to begin phasing it out 

by annually reducing the amount of FFV incentive that can be used toward compliance 

with the CAFE standards.37 Although NHTSA expressed concern about the non-use of 

alternative fuel by FFVs in a 2002 report to Congress (Effects of the Alternative Motor 

Fuels Act CAFE Incentives Policy), EISA does not premise the availability of the FFV 

credits on actual use of alternative fuel by an FFV vehicle. Under NHTSA’s CAFE 

program, pursuant to EISA, no FFV credits will be available for CAFE compliance after 

MY 2019.38 For dedicated alternative fuel vehicles, there are no limits or phase-out of 

the credits. As required by the statute, NHTSA will continue to allow the use of FFV 

credits for purposes of compliance with the CAFE standards until the end of the EISA 

phase-out period. 

For the GHG program, as proposed, EPA will allow FFV credits in line with 

EISA limits, but only during the period from MYs 2012 to 2015. After MY 2015, EPA 

will only allow FFV credits based on a manufacturer’s demonstration that the alternative 

fuel is actually being used in the vehicles and based on the vehicle’s actual performance. 

EPA discusses this in more detail in Section III.C of the preamble, including a summary 

of key comments. These provisions are being finalized as proposed, with further 

discussion in Section III.C of how manufacturers can demonstrate that the alternative fuel 

is being used. 

d. Temporary Lead-time Allowance Alternative Standards Under the EPA 

Final Rule 

Manufacturers with limited product lines may be especially challenged in the 

early years of the National Program, and need additional lead time. Manufacturers with 

narrow product offerings may not be able to take full advantage of averaging or other 

program flexibilities due to the limited scope of the types of vehicles they sell. For 

example, some smaller volume manufacturer fleets consist entirely of vehicles with very 

high baseline CO2 emissions. Their vehicles are above the CO2 emissions target for that 

vehicle footprint, but do not have other types of vehicles in their production mix with 

which to average. Often, these manufacturers pay fines under the CAFE program rather 

than meet the applicable CAFE standard. EPA believes that these technological 

circumstances call for more lead time in the form of a more gradual phase-in of 

standards. 

 EPA is finalizing a temporary lead-time allowance for manufacturers that sell 

vehicles in the U.S. in MY 2009 and for which vehicle sales in that model year are below 

400,000 vehicles. This allowance will be available only during the MY 2012-2015 

phase-in years of the program. A manufacturer that satisfies the threshold criteria will be 

 

37 EPCA provides a statutory incentive for production of FFVs by specifying that their fuel economy is 

determined using a special calculation procedure that results in those vehicles being assigned a higher fuel 

economy level than would otherwise occur. This is typically referred to as an FFV credit. 

38 Id.

Comment [A8]: It concluded that it was still a 

worth while program and extended availability of 

credits. We recommend that DOT mention this point 

in this preamble language. 
Summary of Interagency Working Comments on Draft Rule under EO 12866

34 

able to treat a limited number of vehicles as a separate averaging fleet, which will be 

subject to a less stringent GHG standard.39 Specifically, a standard of 25 percent above 

the vehicle’s otherwise applicable foot-print target level will apply to up to 100,000 

vehicles total, spread over the four year period of MY 2012 through 2015. Thus, the 

number of vehicles to which the flexibility could apply is limited. EPA also is setting 

appropriate restrictions on credit use for these vehicles, as discussed further in Section 

III. By MY 2016, these allowance vehicles must be averaged into the manufacturer’s full 

fleet (i.e., they will no longer be eligible for a different standard). EPA discusses this in 

more detail in Section III.B of the preamble. 

 EPA received comments from several smaller manufacturers that the TLAAS 

program was insufficient to allow manufacturers with very limited product lines to 

comply. These manufacturers commented that they need additional lead time to meet the 

standards, because their CO2 baselines are significantly higher and their vehicle product 

lines are even more limited, reducing their ability to average across their fleets compared 

even to other TLAAS manufacturers. EPA fully summarizes the public comments on the 

TLAAS program, including comments not supporting the program, in Section III.B. In 

summary, in response to the lead time issues raised by manufacturers, EPA is modifying 

the TLAAS program that applies to manufacturers with between 5,000 and 50,000 

vehicle sales in MY 2009. EPA believes these provisions are necessary given that, 

compared with other TLAAS manufacturers, these manufacturers have even more 

limited product offerings across which to average and higher baseline CO2 emissions, 

and thus need additional leadtime to meet the standards. These manufactures would have 

an increased allotment of vehicles, a total of 250,000, compared to 100,000 vehicles (for 

other TLAAS-eligible manufacturers). In addition, the TLAAS program for these 

manufacturers would be extended by one year, through MY2016 for these vehicles. The 

other provisions of the TLAAS program would continue to apply, such as the restrictions 

on credit trading and the level of the standard. Additional restrictions would also apply to 

these vehicles, as discussed in Section III. In addition, for the smallest volume 

manufacturers, those with below 5,000 vehicle sales, EPA is not setting standards at this 

time but is instead deferring standards until a future rulemaking. This is the same 

approach we are using for small businesses. The unique issues involved with these 

manufacturers will be addressed in that future rulemaking. Further discussion of the 

public comment on these issues and details on these changes from the proposed program 

are included in Section III. 

e. Additional Credit Opportunities under the Clean Air Act (CAA) 

 EPA is establishing additional opportunities for early credits in MYs 2009-2011 

through over-compliance with a baseline standard. The baseline standard is set to be 

equivalent, on a national level, to the California standards. Credits can be generated by 

over-compliance with this baseline in one of two ways – over-compliance by the fleet of 

vehicles sold in California and the CAA section 177 states (i.e., those states adopting the 

 

39 EPCA does not permit such an allowance. Consequently, manufacturers who may be able to take 

advantage of a lead-time allowance under the GHG standards would be required to comply with the 

applicable CAFE standard or be subject to penalties for non-compliance. 

Comment [A9]: US or world wide? Same 

comment for NHTSA. 
Summary of Interagency Working Comments on Draft Rule under EO 12866

35 

California program), or over-compliance with the fleet of vehicles sold in the 50 states. 

EPA is also providing for early credits based on over-compliance with CAFE, but only 

for vehicles sold in states outside of California and the CAA section 177 states. Under 

the early credit provisions, no early FFV credits would be allowed, except those achieved 

by over-compliance with the California program based on California’s provisions that 

manufacturers demonstrate actual use of the alternative fuel. EPA’s early credits 

provisions are designed to ensure that there would be no double counting of early credits. 

NHTSA notes, however, that credits for overcompliance with CAFE standards during 

MYs 2009-2011 will still be available for manufacturers to use toward compliance in 

future model years, just as before. 

 EPA received comments from some environmental organizations and states 

expressing concern that these early credits were inappropriate windfall credits because 

they provided credits for actions that were not surplus, that is above what would 

otherwise be required for compliance with either state or federal motor vehicle standards. 

This focused on the credits for over-compliance with the California standards generated 

during model years 2009 and perhaps 2010, where according to commenters the CAFE 

requirements were in effect more stringent than the California standards. EPA believes 

that early credits provide a valuable incentive for manufacturers that have implemented 

fuel efficient technologies in excess of their CAFE compliance obligations prior to 

MY2012. With appropriate restrictions, these credits, reflecting over-compliance over a 

three model year time frame (MY2009-2011) and not just over one or two model years, 

will be surplus reductions and not otherwise required by law. Therefore, EPA is 

finalizing these provisions largely as proposed, but in response to comments, with an 

additional restriction on the trading of MY 2009 credits. The overall structure of this 

early credit program addresses concerns about the potential for windfall credits in the 

first one or two model years. This issue is fully discussed in Section III.C. 

EPA is providing an additional temporary incentive to encourage the 

commercialization of advanced GHG/fuel economy control technologies--including 

electric vehicles (EVs), plug-in hybrid electric vehicles (PHEVs), and fuel cell vehicles 

(FCVs)--for model years 2012-2016. EPA’s proposal included an emissions compliance 

value of zero grams/mile for EVs and FCVs, and the electric portion of PHEVs, and a 

multiplier in the range of 1.2 to 2.0, so that each advanced technology vehicle would 

count as greater than one vehicle in a manufacturer’s fleetwide compliance calculation. 

EPA received many comments on the proposed incentives. Many state and 

environmental organization commenters believed that the combination of these incentives 

could undermine the GHG benefits of the rule, and believed the emissions compliance 

values should take into account the net upstream GHG emissions associated with 

electrified vehicles compared to vehicles powered by petroleum based fuel. Auto 

manufacturers generally supported the incentives, some believing the incentives to be a 

critical part of the National Program. Most auto makers supported both the zero 

grams/mile emissions compliance value and the higher multipliers. 

Upon considering the public comments on this issue, EPA is finalizing an 

advanced technology vehicle incentive program that includes a zero gram/mile emissions 
Summary of Interagency Working Comments on Draft Rule under EO 12866

36 

compliance value for EVs and FCVs, and the electric portion of PHEVs, for up to the 

first 200,000 EV/PHEV/FCV vehicles produced by a given manufacturer during 

MY2012-2016. For any production greater than this amount, the compliance value for 

the vehicle will be greater than zero gram/mile, set at a level that reflects the vehicle’s net 

increase in upstream GHG emissions in comparison to the gasoline vehicle it replaces. In 

addition, EPA is not finalizing a multiplier. EPA will also allow this early advanced 

technology incentive program beginning in MYs 2009-2011. The purpose of these 

provisions is to provide a temporary incentive to promote technologies which have the 

potential to produce very large GHG reductions in the future. The tailpipe GHG 

emissions from EVs, FCVs, and PHEVs operated on grid electricity are zero, and 

traditionally the emissions of the vehicle itself are all that EPA takes into account for 

purposes of compliance with standards set under section 202(a). This has not raised any 

issues for criteria pollutants, as upstream emissions associated with production and 

distribution of the fuel are addressed by comprehensive regulatory programs focused on 

the upstream sources of those emissions. At this time, however, there is no such 

comprehensive program addressing upstream emissions of GHGs, and the upstream GHG 

emissions associated with production and distribution of electricity are higher than the 

corresponding upstream GHG emissions of gasoline or other petroleum based fuels. In 

the future, if there were a program to control upstream emissions of GHGs, then the 

tailpipe level of zero gram/mile from these vehicles has the potential to produce very 

large reductions in GHG emissions, and to transform the transportation sector’s 

contribution to the country’s GHG emissions. Recognizing the potential of these vehicle 

technologies for very large future reductions, EPA will continue to use the tailpipe value 

of zero gram/mile as the compliance value as an incentive for the initial production of 

these vehicles. EPA will reassess the issue of how to address EVs, PHEVs, and FCVs in 

rulemakings for model years 2017 and beyond, based on the status of advanced vehicle 

technology commercialization, the status of upstream GHG control programs, and other 

relevant factors. Further discussion of the temporary advanced technology vehicle 

incentives, including more detail on the public comments and EPA’s response, is found 

in Section III.C. 

EPA is also providing an option for manufacturers to generate credits for 

employing new and innovative technologies that achieve GHG reductions that are not 

reflected on current test procedures, as proposed. Examples of such “off-cycle” 

technologies might include solar panels on hybrids, adaptive cruise control, and active 

aerodynamics, among other technologies. These three credit provisions are discussed in 

more detail in Section III. 

5. Coordinated Compliance 

Previous NHTSA and EPA regulations and statutory provisions establish ample 

examples on which to develop an effective compliance program that achieves the energy 

and environmental benefits from CAFE and motor vehicle GHG standards. NHTSA and 

EPA have developed a program that recognizes, and replicates as closely as possible, the 

compliance protocols associated with the existing CAA Tier 2 vehicle emission 

standards, and with CAFE standards. The certification, testing, reporting, and associated 
Summary of Interagency Working Comments on Draft Rule under EO 12866

37 

compliance activities closely track current practices and are thus familiar to 

manufacturers. EPA already oversees testing, collects and processes test data, and 

performs calculations to determine compliance with both CAFE and CAA standards. 

Under this coordinated approach, the compliance mechanisms for both programs are 

consistent and non-duplicative. EPA will also apply the CAA authorities applicable to its 

separate in-use requirements in this program. 

The compliance approach allows manufacturers to satisfy the new program 

requirements in the same general way they comply with existing applicable CAA and 

CAFE requirements. Manufacturers would demonstrate compliance on a fleet-average 

basis at the end of each model year, allowing model-level testing to continue throughout 

the year as is the current practice for CAFE determinations. The compliance program 

design establishes a single set of manufacturer reporting requirements and relies on a 

single set of underlying data. This approach still allows each agency to assess 

compliance with its respective program under its respective statutory authority. 

NHTSA and EPA do not anticipate any significant noncompliance under the 

National Program. However, failure to meet the fleet average standards (after credit 

opportunities are exhausted) would ultimately result in the potential for penalties under 

both EPCA and the CAA. The CAA allows EPA considerable discretion in assessment 

of penalties. Penalties under the CAA are typically determined on a vehicle-specific 

basis by determining the number of a manufacturer’s highest emitting vehicles that 

caused the fleet average standard violation. This is the same mechanism used for EPA’s 

National Low Emission Vehicle and Tier 2 corporate average standards, and to date there 

have been no instances of noncompliance. CAFE penalties are specified by EPCA and 

would be assessed for the entire noncomplying fleet at a rate of $5.50 times the number 

of vehicles in the fleet, times the number of tenths of mpg by which the fleet average falls 

below the standard. In the event of a compliance action arising out of the same facts and 

circumstances, EPA could consider CAFE penalties when determining appropriate 

remedies for the EPA case. 

Several stakeholders commented on the proposed coordinated compliance 

approach. The comments indicated broad support for the overall approach EPA 

proposed. In particular, both regulated industry and the public interest community 

appreciated the attempt to streamline compliance by adopting current practice where 

possible and by coordinating EPA and NHTSA compliance requirements. Thus the final 

compliance program design is largely unchanged from the proposal. Some commenters 

requested additional detail or clarification in certain areas and others suggested some 

relatively narrow technical changes, and EPA has responded to these suggestions. EPA 

and NHTSA summarize these comments and the agencies’ responses in Sections III and 

IV, respectively, below. The Joint Response to Comments document associated with 

this document includes all of the comments and responses of the two agencies. 
Summary of Interagency Working Comments on Draft Rule under EO 12866

38 

C. Summary of Costs and Benefits of the National Program 

 This section summarizes the projected costs and benefits of the CAFE and GHG 

emissions standards. These projections helped inform the agencies’ choices among the 

alternatives considered and provide further confirmation that the final standards are an 

appropriate choice within the spectrum of choices allowable under their respective 

statutory criteria. The costs and benefits projected by NHTSA to result from these CAFE 

standards are presented first, followed by those from EPA’s analysis of the GHG 

emissions standards. 

 For several reasons, the estimates for costs and benefits presented by NHTSA and 

EPA, while consistent, are not directly comparable, and thus should not be expected to be 

identical. Most important, NHTSA and EPA’s standards would require slightly different 

fuel efficiency improvements. EPA’s GHG standard is more stringent in part due to its 

assumptions about manufacturers’ use of air conditioning credits, which result from 

reductions in air conditioning-related emissions of HFCs and CO2. NHTSA was unable 

to make assumptions about manufacturers’ improving the efficiency of air conditioners 

due to statutory limitations. In addition, the CAFE and GHG standards offer different 

program flexibilities, and the agencies’ analyses differ in their accounting for these 

flexibilities (for example, FFVs), primarily because NHTSA is statutorily prohibited from 

considering some flexibilities when establishing CAFE standards, while EPA is not. 

These differences contribute to differences in the agencies’ respective estimates of costs 

and benefits resulting from the new standards. 

 NHTSA performed two analyses: a primary analysis that shows the estimates of 

costs, social benefits from reduced oil consumption, and private fuel savings, and related 

benefits that the agency considered for purposes of establishing new CAFE standards, 

and a supplemental analysis that reflects the agency’s best estimate of the potential realworld effects of the CAFE standards, including manufacturers’ potential use of FFV 

credits in accordance with the provisions of EISA concerning their availability. Because 

EPCA prohibits NHTSA from considering the ability of manufacturers to use of FFV 

credits to increase their fleet average fuel economy when establishing CAFE standards, 

the agency’s primary analysis does not include them. However, EPCA does not prohibit 

NHTSA from considering the fact that manufacturers may pay civil penalties rather than 

complying with CAFE standards, and NHTSA’s primary analysis accounts for some 

manufacturers’ tendency to do so. In addition, NHTSA’s supplemental analysis of the 

effect of FFV credits on benefits and costs from its CAFE standards, demonstrates the 

real-world impacts of FFVs, and the summary estimates presented in Section IV include 

these effects. Including the use of FFV credits reduces estimated per-vehicle compliance 

costs of the program. However, as shown below, including FFV credits does not 

significantly change the projected fuel savings and CO2 reductions, because FFV credits 

reduce the fuel economy levels that manufacturers achieve not only under the standards, 

but also under the baseline MY 2011 CAFE standards. 

Comment [A10]: Try to be explicit that these are 

different categories. Also, put social benefits first in 

the listing. 
Summary of Interagency Working Comments on Draft Rule under EO 12866

39 

Also, EPCA, as amended by EISA, allows manufacturers to transfer credits 

between their passenger car and light truck fleets. However, EPCA also prohibits 

NHTSA from considering manufacturers’ ability to increase their average fuel economy 

through the use of CAFE credits when determining the stringency of the CAFE standards. 

Because of this prohibition, NHTSA’s primary analysis does not account for the extent to 

which credit transfers might actually occur. For purposes of its supplemental analysis, 

NHTSA considered accounting for the possibility that some manufacturers might utilize 

the opportunity under EPCA to transfer some CAFE credits between the passenger car 

and light truck fleets, but determined that in NHTSA’s year-by-year analysis, 

manufacturers’ credit transfers cannot be reasonably estimated at this time.40

EPA made explicit assumptions about manufacturers’ use of FFV credits under 

both the baseline and control alternatives, and its estimates of costs and benefits from the 

GHG standards reflect these assumptions. However, under the GHG standards, FFV 

credits would be available through MY 2015; starting in MY 2016, EPA will only allow 

FFV credits based on a manufacturer’s demonstration that the alternative fuel is actually 

being used in the vehicles and the actual GHG performance for the vehicle run on that 

alternative fuel. 

 EPA’s analysis also assumes that manufacturers would transfer credits between 

their car and truck fleets in the MY 2011 baseline subject to the maximum value allowed 

by EPCA, and that unlimited car-truck credit transfers would occur under the GHG 

standards. Including these assumptions in EPA’s analysis increases the resulting 

estimates of fuel savings and reductions in GHG emissions, while reducing EPA’s 

estimates of program compliance costs. 

 Finally, under the EPA GHG program, there is no ability for a manufacturer to 

intentionally pay fines in lieu of meeting the standard. Under EPCA, however, vehicle 

manufacturers are allowed to pay fines as an alternative to compliance with applicable 

CAFE standards. NHTSA’s analysis explicitly estimates the level of voluntary fine 

payment by individual manufacturers, which reduces NHTSA’s estimates of both the 

costs and benefits of its CAFE standards. In contrast, the CAA does not allow for fine 

payment (civil penalties) in lieu of compliance with emission standards, and EPA’s 

analysis of benefits from its standard thus assumes full compliance. This assumption 

results in higher estimates of fuel savings, of reductions in GHG emissions, and of 

manufacturers’ compliance costs to sell fleets that comply with both NHTSA’s CAFE 

program and EPA’s GHG program. 

 In summary, the projected costs and benefits presented by NHTSA and EPA are 

not directly comparable, because the GHG emission levels established by EPA include 

air conditioning-related improvements in equivalent fuel efficiency and HFC reductions, 

 

40 NHTSA’s analysis estimates multi-year planning effects within a context in which each model year is 

represented explicitly, and technologies applied in one model year carry forward to future model years. 

NHTSA does not currently have a reasonable basis to estimate how a manufacturer might, for example, 

weigh the transfer of credits from the passenger car to the light truck fleet in MY 2013 against the potential 

to carry light truck technologies forward from MY 2013 through MY 2016. 
Summary of Interagency Working Comments on Draft Rule under EO 12866

40 

because of the assumptions incorporated in EPA’s analysis regarding car-truck credit 

transfers, and because of EPA's projection of complete compliance with the GHG 

standards. It should also be expected that overall, EPA’s estimates of GHG reductions 

and fuel savings achieved by the GHG standards will be slightly higher than those 

projected by NHTSA only for the CAFE standards because of the reasons described 

above. For the same reasons, EPA’s estimates of manufacturers’ costs for complying 

with the passenger car and light trucks GHG standards are slightly higher than NHTSA’s 

estimates for complying with the CAFE standards. 

 

 A number of stakeholders commented on NHTSA’s and EPA’s analytical 

assumptions in estimating costs and benefits of the program. These comments and any 

changes from the proposed values are summarized in Section II.F, and further in Sections 

III (for EPA) and IV (for NHTSA); the Response to Comments document presents the 

detailed responses to each of the comments. 

1. Summary of Costs and Benefits of NHTSA's CAFE 

Standards

 Without accounting for the compliance flexibilities that NHTSA is prohibited 

from considering when determining the level of new CAFE standards, since 

manufacturers’ decisions to use those flexibilities are voluntary, NHTSA estimates that 

these fuel economy increases would lead to fuel savings totaling 61 billion gallons 

throughout the useful lives of vehicles sold in MYs 2012-2016. At a 3% discount rate, 

we estimate that the present value of the economic benefits resulting from those fuel 

savings is $143 billion. At a 7% discount rate, we estimate that the present value of the 

social benefits resulting from those fuel savings is $Z billion while private fuel savings 

are worth $W. 

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

corresponding reductions in CO2 emissions totaling 655 million metric tons (mmt) during 

the useful lives of vehicles sold in MYs 2012-2016. The present value of the economic 

social benefits from avoiding those emissions is $14.5 billion, based on a global social 

cost of carbon value of approximately $21 per metric ton (in 2010, and growing 

thereafter). NHTSA also estimated the benefits associated with three more estimates of a 

one ton GHG reduction in 2010 ($5, $35, and $65), which will likewise grow thereafter. 

Using these values, the range of social benefits is $X - $Y. See Section II for a more 

detailed discussion of the social cost of carbon. 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. 

 

Table I.C.1-1 NHTSA Fuel Saved (billion gallons) and CO2 Emissions Avoided (mmt) 

under CAFE Standards (without FFV Credits) 

 2012 2013 2014 2015 2016 Total 

Comment [A11]: Please separate out social 

benefits from private ones. 

Comment [A12]: Add 7 percent here. 

Comment [A13]: Please include the full range 

using all four SCCs. 
Summary of Interagency Working Comments on Draft Rule under EO 12866

41 

Fuel (b. gal.) 4.2 8.9 12.5 16.0 19.5 61.0 

CO2 (mmt) 44 94 134 172 210 655 

 Considering manufacturers’ ability to earn credit toward compliance by selling 

FFVs, NHTSA estimates very little change in incremental fuel savings and avoided CO2

emissions, assuming FFV credits would be used toward both the baseline and final 

standards: 

Table I.C.1-2 NHTSA Fuel Saved (billion gallons) and CO2 Emissions Avoided (million 

metric tons, mmt) under CAFE Standards (with FFV Credits) 

 2012 2013 2014 2015 2016 Total 

Fuel (b. gal.) 4.9 8.2 11.3 15.0 19.1 58.6 

CO2 (mmt) 53 89 123 163 208 636 

NHTSA estimates that these fuel economy increases would produce other benefits 

both to drivers (e.g., reduced time spent refueling) and to the U.S. (e.g., reductions in the 

costs of petroleum imports beyond the direct savings from reduced oil purchases, as well 

as some disbenefits (e.g., increase traffic congestion) caused by drivers’ tendency to 

travel more when the cost of driving declines (as it does when fuel economy increases). 

NHTSA has estimated the total monetary value to society of these benefits and 

disbenefits, and estimates that the standards will produce significant net benefits to 

society. Using a 3% discount rate, NHTSA estimates that the present value of these 

benefits would total more than $180 billion over the useful lives of vehicles sold during 

MYs 2012-2016. More discussion regarding monetized benefits can be found in Section 

IV of this notice and in NHTSA’s Regulatory Impact Analysis. Note that the benefit 

calculation in Tables I.C.1-3 through 1-6 includes the benefits of reducing CO2

emissions,41 but not the benefits of reducing other GHG emissions. 

Table I.C.1-3 NHTSA Discounted Benefits ($billion) 

under the CAFE Standards (before FFV Credits, using 3 percent Discount Rate) 

 2012 2013 2014 2015 2016 Total 

Passenger Cars 6.8 15.2 21.6 28.7 35.2 107.5 

Light Trucks 5.1 10.7 15.5 19.4 24.3 75.0 

Combined 11.9 25.8 37.1 48 59.5 182.5 

Using a 7% discount rate, NHTSA estimates that the present value of these 

benefits would total more than $145 billion over the same time period. 

 

41 CO2 benefits for purposes of these tables are calculated using the $21/ton SCC values. Note that net 

present value of reduced GHG emissions is calculated differently than other benefits. The same discount 

rate used to discount the value of damages from future emissions (SCC at 5, 3, and 2.5 percent) is used to 

calculate net present value of SCC for internal consistency. 

Comment [A14]: This is confusing – can you 

please separate out the private benefits that accrue to 

the car buyer from social benefits? Also, please 

adjust the tables below to include a bit more 

information on social versus private benefits. 
Summary of Interagency Working Comments on Draft Rule under EO 12866

42 

Table I.C.1-4 NHTSA Discounted Benefits ($billion) 

Under the CAFE Standards (before FFV Credits, using 7 percent Discount Rate) 

 2012 2013 2014 2015 2016 Total 

Passenger Cars 5.5 12.3 17.5 23.2 28.6 87.0 

Light Trucks 4.0 8.4 12.2 15.3 19.2 59.2 

Combined 9.5 20.7 29.7 38.5 47.8 146.2 

 

NHTSA estimates that FFV credits could reduce achieved benefits by about 3.8%: 

Table I.C.1-5a NHTSA Discounted Benefits ($billion) 

under the CAFE Standards (with FFV Credits, using a 3 percent Discount Rate) 

 2012 2013 2014 2015 2016 Total 

Passenger Cars 7.6 13.7 19.1 25.6 34.0 100.0 

Light Trucks 6.4 10.4 14.6 19.8 24.4 75.6 

Combined 14.0 24.1 33.7 45.4 58.4 175.6 

Table I.C.1-5b NHTSA Discounted Benefits ($billion) 

under the CAFE Standards (with FFV Credits, using a 7 percent Discount Rate) 

 2012 2013 2014 2015 2016 Total 

Passenger Cars 6.1 11.1 15.5 20.7 27.6 80.9 

Light Trucks 5.0 8.2 11.5 15.6 19.3 59.7 

Combined 11.2 19.3 27.0 36.4 46.9 140.7 

 NHTSA attributes most of these benefits—about $143 billion (at a 3% discount 

rate and excluding consideration of FFV credits), as noted above—to reductions in fuel 

consumption, valuing fuel (for societal purposes) at the future pre-tax prices projected in 

the Energy Information Administration’s (AEO’s) reference case forecast from the 

Annual Energy Outlook (AEO) 2010 Early Release. NHTSA’s Final Regulatory Impact 

Analysis (FRIA) accompanying this rule presents a detailed analysis of specific benefits 

of the rule. 

Table I.C.1-6 Summary of Benefits Fuel Savings and CO2 Emissions Reduction Due to 

the Rule (before FFV Credits) 

Amount Monetized Value (Discounted) 

3% Discount Rate 7% Discount Rate 

Fuel savings 61.0 billion gallons $143.0 billion $112.0 billion 

CO2 emissions 

reductions 

655 mmt $14.5 billion $14.5 billion 

NHTSA estimates that the increases in technology application necessary to 

achieve the projected improvements in fuel economy will entail considerable monetary 

outlays. The agency estimates that incremental costs for achieving its standards – that is, 

Comment [A15]: This is a misleading table 

because it presents private fuel savings alongside 

social benefits. Can you produce a separate social 

benefits table and another that is just private 

savings? 
Summary of Interagency Working Comments on Draft Rule under EO 12866

43 

outlays by vehicle manufacturers over and above those required to comply with the MY 

2011 CAFE standards – will total about $52 billion (i.e., during MYs 2012-2016). 

Table I.C.1-7 NHTSA Incremental Technology Outlays ($billion) 

under the CAFE Standards (before FFV Credits) 

 2012 2013 2014 2015 2016 Total 

Passenger Cars 4.1 5.4 6.9 8.2 9.5 34.2 

Light Trucks 1.8 2.5 3.7 4.3 5.4 17.6 

Combined 5.9 7.9 10.5 12.5 14.9 51.7 

 NHTSA estimates that use of FFV credits could significantly reduce these 

outlays: 

Table I.C.1-8 NHTSA Incremental Technology Outlays ($billion) 

under CAFE Standards (with FFV Credits) 

 2012 2013 2014 2015 2016 Total 

Passenger Cars 2.6 3.6 4.8 6.1 7.5 24.6 

Light Trucks 1.1 1.5 2.5 3.4 4.4 12.9 

Combined 3.7 5.1 7.3 9.5 11.9 37.5 

 The agency projects that manufacturers will recover most or all of these additional 

costs through higher selling prices for new cars and light trucks. To allow manufacturers 

to recover these increased outlays (and, to a much lesser extent, the civil penalties that 

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

standards would lead to increases in average new vehicle prices ranging from $457 per 

vehicle in MY 2012 to $985 per vehicle in MY 2016: 

 

Table I.C.1-9 NHTSA Incremental Increases in Average New Vehicle Costs ($) 

under CAFE Standards (before FFV Credits) 

 2012 2013 2014 2015 2016 

Passenger Cars 505 573 690 799 907 

Light Trucks 322 416 621 752 961 

Combined 434 513 665 782 926 

 NHTSA estimates that use of FFV credits could significantly reduce these costs, 

especially in earlier model years: 

Table I.C.1-10 NHTSA Incremental Increases in Average New Vehicle Costs ($) 

under CAFE Standards (with FFV Credits) 

 2012 2013 2014 2015 2016 

Passenger Cars 303 378 481 593 713 

Light Trucks 194 260 419 581 784 

Combined 261 333 458 589 737 
Summary of Interagency Working Comments on Draft Rule under EO 12866

44 

 NHTSA estimates, therefore, that the total benefits of these CAFE standards will 

be more than three times the magnitude of the corresponding costs. As a consequence, its 

standards would produce net benefits of $130.7 billion at a 3 percent discount rate (with 

FFV credits, $135.0 billion) or $94.5 billion at a 7 percent discount rate over the useful 

lives of vehicles sold during MYs 2012-2016. Of this, x percent is attributable to private 

fuel savings.

2. Summary of Costs and Benefits of EPA's GHG Standards

 EPA has analyzed in detail the costs and benefits of the final GHG standards. 

Table I.C.2-1 shows EPA’s estimated lifetime fuel savings and CO2 equivalent emission 

reductions for all vehicles sold in the model years 2012-2016. The values in Table I.C.2-

1 are projected lifetime totals for each model year and are not discounted. As 

documented in EPA’s Final RIA, the potential credit transfer between cars and trucks 

may change the distribution of the fuel savings and GHG emission impacts between cars 

and trucks. As discussed above with respect to NHTSA’s CAFE standards, 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 reductions in CO2

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

discussion of costs and benefits of EPA’s GHG 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. 

Table I.C.2-1 EPA’s Estimated 2012-2016 Model Year Lifetime Fuel Saved and GHG

Emissions Avoided 

 2012 2013 2014 2015 2016 Total

Cars Fuel (billion gallons) 4.0 5.5 7.3 10.5 14.3 41.6

Fuel (billion barrels) 0.10 0.13 0.17 0.25 0.34 0.99

CO2 EQ (mmt) 49.3 68.5 92.7 134 177 521

 

Light Trucks Fuel (billion gallons) 3.3 5.0 6.6 9.0 12.2 36.1

Fuel (billion barrels) 0.08 0.12 0.16 0.21 0.29 0.86

CO2 EQ (mmt) 39.6 61.7 81.6 111 147 441

 

Combined Fuel (billion gallons) 7.3 10.5 13.9 19.5 26.5 77.7

Fuel (billion barrels) 0.17 0.25 0.33 0.46 0.63 1.85

CO2 EQ (mmt) 88.8 130 174 244 325 962

Table I.C.2-2 shows EPA’s estimated lifetime discounted benefits for all vehicles 

sold in model years 2012-2016. Although EPA estimated the benefits associated with 

four different values of a one ton GHG reduction ($5, $21, $35, $65), for the purposes of 

this overview presentation of estimated benefits EPA is showing the benefits associated 

with one of these marginal values, $21 per ton of CO2, in 2007 dollars and 2010 

Comment [A16]: Clarify if this is undiscounted 

or now. Please make sure all tables in this rule and 

RIAs are clear on whether tables information is 

discounted or not. It is not always clear. 
Summary of Interagency Working Comments on Draft Rule under EO 12866

45 

emissions. Table I.C.2-2 presents benefits based on the $21 value. Section III.H presents 

the four marginal values used to estimate monetized benefits of GHG reductions and 

Section III.H presents the program benefits using each of the four marginal values, which 

represent only a partial accounting of total benefits due to omitted climate change 

impacts and other factors that are not readily monetized. The values in the table are 

discounted values for each model year of vehicles throughout their projected lifetimes. 

The benefits include all social benefits considered by EPA such as fuel savings, GHG 

reductions, PM benefits, energy security and other externalities such as reduced refueling 

and accidents, congestion and noise. It also includes private fuel savings and refueling

benefits that accrue to car buyers. The lifetime discounted benefits are shown for one of 

four different social cost of carbon (SCC) values considered by EPA. The values in 

Table I.C.2-2 do not include costs associated with new technology required to meet the 

GHG standard. 

 

Table I.C.2-2 EPA’s Estimated 2012-2016 Model Year Lifetime Discounted Benefits 

Assuming the $21/ton SCC Valuea,b,c (billions of 2007 dollars) 

Discount Rate Model Year 

2012 2013 2014 2015 2016 Total

3% $21.8 $32.0 $42.8 $60.8 $83.3 $240

7% $17.4 $25.7 $34.2 $48.6 $66.4 $192 a The benefits include all benefits considered by EPA such as the 

economic value of reduced fuel consumption and accompanying savings 

in refueling time, climate-related economic benefits from reducing 

emissions of CO2 (but not other GHGs), economic benefits from reducing 

emissions of PM and other air pollutants that contribute to its formation, 

and reductions in energy security externalities caused by U.S. petroleum 

consumption and imports. The analysis also includes disbenefits 

stemming from additional vehicle use, such as the economic damages 

caused by accidents, congestion and noise. 

b

 Note that net present value of reduced GHG emissions is calculated 

differently than other benefits. The same discount rate used to discount 

the value of damages from future emissions (SCC at 5, 3, and 2.5 percent) 

is used to calculate net present value of SCC for internal consistency. 

Refer to Section III.F for more detail. 

c

The benefits presented above exclude the value of reductions in non-CO2

GHG emissions (CH4 and N2O) expected under this final rule. Although 

EPA has not monetized the benefits of reductions in CH4 and N2O, the 

value of these reductions should not be interpreted as zero. Rather, the 

reductions in CH4 and N2O will contribute to this rule’s climate benefits, 

as explained in Section III.F. The SCC Technical Support Document 

(TSD) notes the difference between the social cost of non-CO2 emissions 

and SCC and a goal to develop methods to value non-CO2 emissions in 

future analyses. Also, as noted in Section III.H, SCC increases over time. 

The $21/ton value applies to 2010 emissions and grows larger over time. 

Table I.C.2-3 shows EPA’s estimated lifetime fuel savings, lifetime CO2 emission 

reductions, and the monetized net present values of those fuel savings and CO2 emission 

reductions. The gallons of fuel and CO2 emission reductions are projected lifetime values 

for all vehicles sold in the model years 2012-2016. The estimated fuel savings in billions 

of barrels and the GHG reductions in million metric tons of CO2 shown in Table I.C.2-3 

Comment [A17]: This should not be included in 

a list with social benefits, but separated out for 

transparency. Please do this throughout this section. 

Comment [A18]: Please tee up and present 

separately the social benefits from the private 

savings before just presenting an aggregate. 
Summary of Interagency Working Comments on Draft Rule under EO 12866

46 

are totals for the five model years throughout their projected lifetime and are not 

discounted. The monetized values shown in Table I.C.2-3 are the summed values of the 

discounted monetized-fuel savings and monetized-CO2 reductions for the five model 

years 2012-2016 throughout their lifetimes. The monetized values in Table I.C.2-3 

reflect both a 3 percent and a 7 percent discount rate as noted. 

Table I.C.2-3 EPA’s Estimated 2012-2016 Model Year Lifetime Fuel savings, CO2

Emission Reductions, and Discounted Monetized Benefits at a 3% Discount Rate 

(monetized values in 2007 dollars) 

 Amount $ value 

(billions) 

Fuel savings 1.8 billion barrels $182, 3% discount rate 

$142, 7% discount rate 

CO2e emission reductions 

(CO2 portion valued assuming $21/ton 

CO2 in 2010) 

962 MMT CO2e $17a,b

a

 $17 billion for 858 MMT of reduced CO2 emissions. As noted in Section III.H, the $21/ton value applies 

to 2010 emissions and grows larger over time. Also, this estimate excludes the value of reductions in nonCO2 GHG emissions (CH4 and N2O) expected under this final rule. Although EPA has not monetized the 

benefits of reductions in CH4 and N2O, the value of these reductions should not be interpreted as zero. 

Rather, the reductions in CH4 and N2O will contribute to this rule’s climate benefits, as explained in 

Section XXX. The [SCC TSD] notes the difference between the social cost of non-CO2 emissions and 

SCC and a goal to develop methods to value non-CO2 emissions in future analyses. b

 Note that net present value of reduced CO2 emissions is calculated differently than other benefits. The 

same discount rate used to discount the value of damages from future emissions (SCC at 5, 3, and 2.5 

percent) is used to calculate net present value of SCC for internal consistency. Refer to Section III.F for 

more detail. 

Table I.C.2-4 shows EPA’s estimated incremental and total technology outlays for 

cars and trucks for each of the model years 2012-2016. The technology outlays shown in 

Table I.C.2-4 are for the industry as a whole and do not account for fuel savings 

associated with the program. 

Table I.C.2-4 EPA’s Estimated Incremental Technology Outlays (billions of 2007 

dollars) 

 2012 2013 2014 2015 2016 Total 

Cars $3.1 $5.0 $6.5 $8.0 $9.4 $31.9 

Trucks $1.8 $3.0 $3.9 $4.8 $6.2 $19.7 

Combined $4.9 $8.0 $10.3 $12.7 $15.6 $51.6 

 

Table I.C.2-5 shows EPA’s estimated incremental cost increase of the average 

new vehicle for each model year 2012-2016. The values shown are incremental to a 

baseline vehicle and are not cumulative. In other words, the estimated increase for 2012 

model year cars is $342 relative to a 2012 model year car absent the National Program. 

The estimated increase for a 2013 model year car is $507 relative to a 2013 model year 

car absent the National Program (not $342 plus $507). 
Summary of Interagency Working Comments on Draft Rule under EO 12866

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Table I.C.2-5 EPA’s Estimated Incremental Increase in Average New Vehicle Cost (2007 

dollars per unit) 

 2012 2013 2014 2015 2016 

Cars $342 $507 $631 $749 $869

Trucks $314 $496 $652 $820 $1,098

Combined $331 $503 $639 $774 $948

D. Background and Comparison of NHTSA and EPA Statutory Authority 

 Section I.C of the proposal contained a detailed overview discussion of the 

NHTSA and EPA statutory authorities. In addition to the discussion in the proposal, each 

agency discusses comments pertaining to its statutory authority and the agency’s 

responses in Sections III and IV of this notice, respectively. 

II. Joint Technical Work Completed for This Final Rule 

A. Introduction 

In this section NHTSA and EPA discuss several aspects of the joint technical 

analyses on which the two agencies collaborated. These analyses are common to the 

development of each agency’s final standards. Specifically we discuss: the development 

of the vehicle market forecast used by each agency for assessing costs, benefits, and 

effects, the development of the attribute-based standard curve shapes, the determination 

of the relative stringency between the car and truck fleet standards, the technologies the 

agencies evaluated and their costs and effectiveness, and the economic assumptions the 

agencies included in their analyses. The Joint Technical Support Document (TSD) 

discusses the agencies’ joint technical work in more detail. 

 B. Developing the Future Fleet for Assessing Costs, Benefits, and Effects 

1. Why Did the Agencies Establish a Baseline and Reference Vehicle Fleet? 

In order to calculate the impacts of the EPA and NHTSA regulations, it is 

necessary to estimate the composition of the future vehicle fleet absent these regulations, 

to provide a reference point relative to which costs, benefits, and effects of the 

regulations are assessed. As in the proposal, EPA and NHTSA have developed this 

comparison fleet in two parts. The first step was to develop a baseline fleet based on 

model year 2008 data. The second step was to project that fleet into model years 2011-

2016. This is called the reference fleet. The third step was to modify that MY 2011-

2016 reference fleet such that it had sufficient technology to meet the MY 2011 CAFE 

standards. This final version of the reference fleet is the light-duty fleet estimated to exist 

in MY 2012-2016 in the absence of today’s standards, based on the assumption that 
Summary of Interagency Working Comments on Draft Rule under EO 12866

48 

manufacturers would continue to meet the MY 2011 CAFE standards (or pay civil 

penalties allowed under EPCA42) in the absence of further increases in the stringency of 

CAFE standards. Each agency used this approach to develop a final reference fleet to use 

in its modeling. All of the agencies’ estimates of emission reductions, fuel economy 

improvements, costs, and societal impacts are developed in relation to the respective 

reference fleets. 

EPA and NHTSA proposed a transparent approach to developing the baseline and 

reference fleets, largely working from publicly available data. This proposed approach 

differed from previous CAFE rules, which relied on confidential manufacturers’ product 

plan information to develop the baseline. Most of the public comments to the NPRM 

addressing this issue supported this methodology for developing the inputs to the rule's 

analysis. Because the input sheets can be made public, stakeholders can verify and check 

EPA’s and NHTSA’s modeling, and perform their own analyses with these datasets. In 

this final rulemaking, EPA and NHTSA are using an approach very similar to that 

proposed, continuing to rely on publicly available data as the basis for the baseline and 

reference fleets. 

2. How did the Agencies Develop the Baseline Vehicle Fleet? 

At proposal, EPA and NHTSA developed a baseline fleet comprised of model 

year 2008 data gathered from EPA’s emission certification and fuel economy database. 

MY 2008 was used as the basis for the baseline vehicle fleet because it was the most 

recent model year for which a complete set of data is publicly available. This remains the 

case. Manufacturers are not required to submit final sales and mpg figures for MY 2009 

until April 2010, 43 after the CAFE standard’s mandated promulgation date. 

Consequently, in this final rule, EPA and NHTSA made no changes to the method or the 

results of the MY 2008 baseline fleet used at proposal, except for some specific 

corrections to engineering inputs for some vehicle models reflected in the market forecast 

input to NHTSA’s CAFE model. More details about how the agencies constructed this 

baseline fleet can be found in Chapter 1.2 of the Joint TSD. Corrections to engineering 

inputs for some vehicle models in the market forecast input to NHTSA’s CAFE model 

are discussed in Chapter 2 of the Joint TSD. 

3. How Did the Agencies Develop the Projected MY 2011-2016 Vehicle 

Fleet? 

EPA and NHTSA have based the projection of total car and total light truck sales 

for MYs 2011-2016 on projections made by the Department of Energy’s Energy 

Information Administration (EIA). EIA publishes a mid-term projection of national 

energy use called the Annual Energy Outlook (AEO). This projection utilizes a number 

 

42 That is, the manufacturers who have traditionally paid fines under EPCA instead of complying with the 

CAFE standards were “allowed,” for purposes of the reference fleet, to reach only the CAFE level at which 

paying fines became more cost-effective than adding technology, even if that fell short of the MY 2011 

standards. 

43 40 CFR 600.512-08, Model Year Report 
Summary of Interagency Working Comments on Draft Rule under EO 12866

49 

of technical and econometric models which are designed to reflect both economic and 

regulatory conditions expected to exist in the future. In support of its projection of fuel 

use by light-duty vehicles, EIA projects sales of new cars and light trucks. In the 

proposal, the agencies used the three reports published by EIA as part of the AEO 2009. 

We also stated that updated versions of these reports could be used in the final rules 

should AEO timely issue a new version. EIA published an early version of its AEO 2010 

in December 2009, and the agencies are making use of it in this final rulemaking. The 

differences in projected sales in the 2009 report (used in the NPRM) and the early 2010 

report are very small, so NHTSA and EPA have decided to simply scale the NPRM 

volumes for cars and trucks (in the aggregate) to match those in the 2010 report.44 We 

thus employ the sales projections from the scaled updated 2009 Annual Energy Outlook, 

which is equivalent to AEO 2010 Early Release, for the final rule. The scaling factors for 

each model year are presented in Chapter 1 of the Joint TSD for this final rule. 

In the AEO 2010 Early Release, EIA projects that total light-duty vehicle sales 

will gradually recover from their currently depressed levels by around 2013. In 2016, car 

sales are projected to be 9.4 million (57 percent) and truck sales are projected to be 7.1 

million (43 percent). Although the total level of sales of 16.5 million units is similar to 

pre-2008 levels, the fraction of car sales is projected to be higher than that existing in the 

2000-2007 timeframe. This projection reflects the impact of higher fuel prices, as well as 

EISA’s requirement that the new vehicle fleet average at least 35 mpg by MY 2020. The 

agencies note that AEO does not represent the fleet at a level of detail sufficient to 

explicitly account for the reclassification—promulgated as part of NHTSA’s final rule for 

MY 2011 CAFE standards—of a number of 2-wheel drive sport utility vehicles from the 

truck fleet to the car fleet for MYs 2011 and after. Sales projections of cars and trucks 

for future model years can be found in the Joint TSD for these final rules. 

In addition to a shift towards more car sales, sales of segments within both the car 

and truck markets have been changing and are expected to continue to change. 

Manufacturers are introducing more crossover models which offer much of the utility of 

SUVs but use more car-like designs. The AEO 2010 report does not, however, 

distinguish such changes within the car and truck classes. In order to reflect these 

changes in fleet makeup, EPA and NHTSA considered several other available forecasts. 

EPA purchased and shared with NHTSA forecasts from two well-known industry 

analysts, CSM Worldwide (CSM), and J.D. Powers. NHTSA and EPA decided to use the 

forecast from CSM, modified as described below, for several reasons presented in the 

NPRM preamble45 and draft Joint TSD. The changes between company market share and 

industry market segments were most significant from 2011-2014, while for 2014-2015 

the changes were relatively small. Noting this, and lacking a credible forecast of 

company and segment shares after 2015, the agencies assumed 2016 market share and 

market segments to be the same as for 2015. 

 

44 EPA and NHTSA have evaluated the differences between the AEO 2010 (early draft) and AEO 2009 and 

found little difference in the fleet projections (or fuel prices). This analysis can be found in the memo to 

the docket: (Docket EPA-HQ-OAR-2009-0472). The agencies therefore conclude that EIA has made no 

significant changes to its projections. 

45 See, e.g., 74 FR 49484. 

Comment [A19]: See comments on the TSD. 

AEO 2010 includes the proposed CAFÉ standards 

while AEO 2009 included EISA. EIA points out that 

this shifted sales, so this should have been subtracted 

out first before creating scaling factors. 
Summary of Interagency Working Comments on Draft Rule under EO 12866

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CSM Worldwide provides quarterly sales forecasts for the automotive industry. 

In the NPRM, the agencies identified a concern with the 2nd quarter CSM forecast that 

was used as a basis for the projection. CSM projections at that time were based on an 

industry that was going through a significant financial transition, and as a result the 

market share forecasts for some companies were impacted in surprising ways. As the 

industry’s situation has settled somewhat over the past year, the 4th quarter projection 

appears to address this issue – for example, it shows nearly a two-fold increase in sales 

for Chrysler compared to significant loss of market share shown for Chrysler in the 2nd

quarter projection. Additionally, some commenters, such as GM, recognized that the 

fleet appeared to include an unusually high number of large pickup trucks.46 In fact, the 

agencies discovered (independently of the comments) that CSM’s standard forecast 

included all vehicles below 14,000 GVWR, including class 2b and 3 heavy duty vehicles, 

which are not regulated by this final rule.47 The commenters were thus correct that light 

duty reference fleet projections at proposal had more full size trucks and vans due to the 

mistaken inclusion of the heavy duty versions of those vehicles. The agencies requested 

a separate data forecast from CSM that filtered their 4th quarter projection to exclude 

these heavy duty vehicles. The agencies then used this filtered 4th quarter forecast for the 

final rule. A detailed comparison of the market by manufacturer can be found in the final 

TSD. For the public’s reference, copies of the 2nd, 3rd, and 4th quarter CSM forecasts 

have been placed in the docket for this rulemaking.48

We then projected the CSM forecasts for relative sales of cars and trucks by 

manufacturer and by market segment onto the total sales estimates of AEO 2010. Tables 

II.B.3-1 and II.B.3-2 show the resulting projections for the reference 2016 model year 

and compare these to actual sales that occurred in baseline 2008 model year. Both tables 

show sales using the traditional definition of cars and light trucks. 

Table II.B.3-1 Annual Sales of Light-Duty Vehicles by Manufacturer in 2008 and 

Estimated for 2016 

 Cars Light Trucks Total 

 2008 MY 2016 MY 2008 MY 2016 MY 2008 MY 2016 MY 

BMW 291,796 

 

424,923 61,324 171,560 353,120 596,482 

Chrysler 537,808 

 

340,908 1,119,397 525,128 1,657,205 866,037 

 

46 GM argued that the unusually large volume of large pickups led to higher overall requirements for those 

vehicles. As discussed below, the agencies’ analysis for the final rule corrects the number of large pickups. 

With this correction and other updates to the agencies’ market forecast and other analytical inputs, the 

target functions defining the final standards (and achieving the average required performance levels 

defining the national program) are very similar to those from the NPRM, especially for light trucks, as 

illustrated below in Figures II.C-7 and II.C-8. 

47 These include the Ford F-250 & F-350, Econoline E-250, & E-350; Chevy Express, Silverado 2500, & 

3500; GMC Savana, Dodge 2500, & 3500; among others. 

48 The CSM Sales Forecast Excel file (“CSM North America Sales Forecasts 2Q09 3Q09 4Q09 for the 

Docket”) is available in the docket (Docket EPA-HQ-OAR-2009-0472). 
Summary of Interagency Working Comments on Draft Rule under EO 12866

51 

Daimler 208,052 

 

272,252 79,135 126,880 287,187 399,133 

Ford 709,583 

 

1,118,727 1,158,805 1,363,256 1,868,388 2,481,983 

General Motors 1,370,280 

 

230,705 1,749,227 95,054 3,119,507 325,760 

Honda 899,498 

 

1,283,937 612,281 1,585,828 1,511,779 2,869,766 

Hyundai 270,293 

 

811,214 120,734 671,437 391,027 1,482,651 

Kia 145,863 

 

401,372 135,589 211,996 281,452 613,368 

Mazda 191,326 

 

455,643 111,220 210,717 302,546 666,360 

Mitsubishi 76,701 

 

350,055 24,028 144,992 100,729 495,047 

Porsche 18,909 

 

49,914 18,797 88,754 37,706 138,668 

Nissan 653,121 

 

33,471 370,294 16,749 1,023,415 50,220 

Subaru 149,370 

 

876,677 49,211 457,114 198,581 1,333,790 

Suzuki 68,720 

 

97,466 45,938 26,108 114,658 123,574 

Tata 9,596 

 

65,806 55,584 42,695 65,180 108,501 

Toyota 1,143,696 

 

2,069,283 1,067,804 1,249,719 2,211,500 3,319,002 

Volkswagen 290,385 

 

586,011 26,999 124,703 317,384 710,011 

Total 7,034,997 

 

9,468,365 6,806,367 7,112,689 13,841,364 16,580,353 

Table II.B.3-2 Annual Sales of Light-Duty Vehicles by Market Segment in 2008 and 

Estimated for 2016 

Cars Light Trucks 

 2008 MY 2016 MY 2008 MY 2016 MY 

Full-Size Car 829,896 530,945 Full-Size Pickup 1,331,989 1,379,036 

Luxury Car 1,048,341 1,548,242 Mid-Size Pickup 452,013 332,082 

Mid-Size Car 2,166,849 2,550,561 Full-Size Van 33,384 65,650 

Mini Car 617,902 1,565,373 Mid-Size Van 719,529 839,194 
Summary of Interagency Working Comments on Draft Rule under EO 12866

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Small Car 1,912,736 2,503,566 Mid-Size MAV* 110,353 116,077 

Specialty Car 459,273 769,679 Small MAV 231,265 62,514 

 Full-Size SUV* 559,160 232,619 

 Mid-Size SUV 436,080 162,502 

 Small SUV 196,424 108,858 

 Full-Size CUV* 264,717 260,662 

 Mid-Size CUV 923,165 1,372,200 

 Small CUV 1,548,288 2,181,296 

Total Sales** 7,034,997 9,468,365 6,806,367 7,079,323 

* MAV – Multi-Activity Vehicle, SUV – Sport Utility Vehicle, CUV – Crossover Utility Vehicle 

**Total Sales are based on the classic Car/Truck definition. 

Determining which traditionally-defined trucks will be defined as cars for 

purposes of this final rule using the revised definition established by NHTSA for MYs 

2011 and beyond requires more detailed information about each vehicle model. This is 

described in greater detail in Chapter 1 of the final TSD. 

The forecasts obtained from CSM provided estimates of car and truck sales by 

segment and by manufacturer, but not by manufacturer for each market segment. 

Therefore, NHTSA and EPA needed other information on which to base these more 

detailed projected market splits. For this task, the agencies used as a starting point each 

manufacturer’s sales by market segment from model year 2008, which is the baseline 

fleet. Because of the larger number of segments in the truck market, the agencies used 

slightly different methodologies for cars and trucks. 

The first step for both cars and trucks was to break down each manufacturer’s 

2008 sales according to the market segment definitions used by CSM. For example, the 

agencies found that Ford’s49 cars sales in 2008 were broken down as shown in Table 

II.B.3-3: 

Table II.B.3-3: Breakdown of Ford’s 2008 Car Sales 

Full-size cars 160,857 units 

Mid-size Cars 170,399 units 

Small/Compact Cars 180,249 units 

Subcompact/Mini Cars None 

Luxury cars 87,272 units 

Specialty cars 110,805 units 

 

 

49 Note: In the NPRM, Ford’s 2008 sales per segment, and the total number of cars was different than 

shown here. The change in values is due to a correction of vehicle segments for some of Ford’s vehicles. 
Summary of Interagency Working Comments on Draft Rule under EO 12866

53 

EPA and NHTSA then adjusted each manufacturer’s sales of each of its car 

segments (and truck segments, separately) so that the manufacturer’s total sales of cars 

(and trucks) matched the total estimated for each future model year based on AEO and 

CSM forecasts. For example, as indicated in Table II.B.3-1, Ford’s total car sales in 2008 

were 709,583 units, while the agencies project that they will increase to 1,113,333 units 

by 2016. This represents an increase of 56.9 percent. Thus, the agencies increased the 

2008 sales of each Ford car segment by 56.9 percent. This produced estimates of future 

sales which matched total car and truck sales per AEO and the manufacturer breakdowns 

per CSM. However, the sales splits by market segment would not necessarily match 

those of CSM (shown for 2016 in Table II.B.3-2). 

In order to adjust the market segment mix for cars, the agencies first adjusted 

sales of luxury, specialty and other cars. Since the total sales of cars for each 

manufacturer were already set, any changes in the sales of one car segment had to be 

compensated by the opposite change in another segment. For the luxury, specialty and 

other car segments, it is not clear how changes in sales would be compensated. For 

example, if luxury car sales decreased, would sales of full-size cars increase, mid-size 

cars, and so on? The agencies have assumed that any changes in the sales of cars within 

these three segments were compensated for by proportional changes in the sales of the 

other four car segments. For example, for 2016, the figures in Table II.B.3-2 indicate that 

luxury car sales in 2016 are 1,548,242 units. Luxury car sales are 1,048,341 units in 

2008. However, after adjusting 2008 car sales by the change in total car sales for 2016 

projected by EIA and a change in manufacturer market share per CSM, luxury car sales 

decreased to 1,523,171 units. Thus, overall for 2016, luxury car sales had to increase by 

25,071 units or 6 percent. The agencies accordingly increased the luxury car sales by 

each manufacturer by this percentage. The absolute decrease in luxury car sales was 

spread across sales of full-size, mid-size, compact and subcompact cars in proportion to 

each manufacturer’s sales in these segments in 2008. The same adjustment process was 

used for specialty cars and the “other cars” segment defined by CSM. 

The agencies used a slightly different approach to adjust for changing sales of the 

remaining four car segments. Starting with full-size cars, the agencies again determined 

the overall percentage change that needed to occur in future year full-size car sales after 

1) adjusting for total sales per AEO 2010, 2) adjusting for manufacturer sales mix per 

CSM and 3) adjusting the luxury, specialty and other car segments, in order to meet the 

segment sales mix per CSM. Sales of each manufacturer’s large cars were adjusted by 

this percentage. However, instead of spreading this change over the remaining three 

segments, the agencies assigned the entire change to mid-size vehicles. The agencies did 

so because the CSM data followed the trend of increasing volumes of smaller cars while 

reducing volumes of larger cars. If a consumer had previously purchased a full-size car, 

we thought it unlikely that their next purchase would decrease by two size categories, 

down to a subcompact. It seemed more reasonable to project that they would drop one 

vehicle size category smaller. Thus, the change in each manufacturer’s sales of full-size 

cars was matched by an opposite change (in absolute units sold) in mid-size cars. 
Summary of Interagency Working Comments on Draft Rule under EO 12866

54 

The same process was then applied to mid-size cars, with the change in mid-size 

car sales being matched by an opposite change in compact car sales. This process was 

repeated one more time for compact car sales, with changes in sales in this segment being 

matched by the opposite change in the sales of subcompacts. The overall result was a 

projection of car sales for model years 2012-2016--the reference fleet--which matched 

the total sales projections of the AEO forecast and the manufacturer and segment splits of 

the CSM forecast. These sales splits can be found in Chapter 1 of the Joint TSD for this 

final rule. 

As mentioned above, the agencies applied a slightly different process to truck 

sales, because the agencies could not confidently project how the change in sales from 

one segment preferentially went to or came from another particular segment. Some trend 

from larger vehicles to smaller vehicles would have been possible. However, the CSM 

forecasts indicated large changes in total sport utility vehicle, multi-activity vehicle and 

cross-over sales which could not be connected. Thus, the agencies applied an iterative, 

but straightforward process for adjusting 2008 truck sales to match the AEO and CSM 

forecasts. 

The first three steps were exactly the same as for cars. EPA and NHTSA broke 

down each manufacturer’s truck sales into the truck segments as defined by CSM. The 

agencies then adjusted all manufacturers’ truck segment sales by the same factor so that 

total truck sales in each model year matched AEO projections for truck sales by model 

year. The agencies then adjusted each manufacturer’s truck sales by segment 

proportionally so that each manufacturer’s percentage of total truck sales matched that 

forecast by CSM. This again left the need to adjust truck sales by segment to match the 

CSM forecast for each model year. 

In the fourth step, the agencies adjusted the sales of each truck segment by a 

common factor so that total sales for that segment matched the combination of the AEO 

and CSM forecasts. For example, projected sales of large pickups across all 

manufacturers were 1,286,184 units in 2016 after adjusting total sales to match AEO’s 

forecast and adjusting each manufacturer’s truck sales to match CSM’s forecast for the 

breakdown of sales by manufacturer. Applying CSM’s forecast of the large pickup 

segment of truck sales to AEO’s total sales forecast indicated total large pickup sales of 

1,379,036 units. Thus, we increased each manufacturer’s sales of large pickups by 7 

percent.50 The agencies applied the same type of adjustment to all the other truck 

segments at the same time. The result was a set of sales projections which matched 

AEO’s total truck sales projection and CSM’s market segment forecast. However, after 

this step, sales by manufacturer no longer met CSM’s forecast. Thus, we repeated step 

three and adjusted each manufacturer’s truck sales so that they met CSM’s forecast. The 

sales of each truck segment (by manufacturer) were adjusted by the same factor. The 

resulting sales projection matched AEO’s total truck sales projection and CSM’s 

manufacturer forecast, but sales by market segment no longer met CSM’s forecast. 

 

50 Note: In the NPRM this example showed 29 percent instead of 7 percent. The significant decrease was 

due to using the filtered 4th quarter CSM forecast. Commenters, such as GM, had commented that we had 

too many full-size trucks and vans, and this change addresses their comment. 
Summary of Interagency Working Comments on Draft Rule under EO 12866

55 

However, the difference between the sales projections after this fifth step was closer to 

CSM’s market segment forecast than it was after step three. In other words, the sales 

projection was converging to the desired result. The agencies repeated these adjustments, 

matching manufacturer sales mix in one step and then market segment in the next a total 

of 19 times. At this point, we were able to match the market segment splits exactly and 

the manufacturer splits were within 0.1 percent of our goal, which is well within the 

needs of this analysis. 

The next step in developing the reference fleets was to characterize the vehicles 

within each manufacturer-segment combination. In large part, this was based on the 

characterization of the specific vehicle models sold in 2008 -- i.e., the vehicles 

comprising the baseline fleet. EPA and NHTSA chose to base our estimates of detailed 

vehicle characteristics on 2008 sales for several reasons. One, these vehicle 

characteristics are not confidential and can thus be published here for careful review by 

interested parties. Two, because it is constructed beginning with actual sales data, this 

vehicle fleet is limited to vehicle models known to satisfy consumer demands in light of 

price, utility, performance, safety, and other vehicle attributes. 

As noted above, the agencies gathered most of the information about the 2008 

baseline vehicle fleet from EPA’s emission certification and fuel economy database. The 

data obtained from this source included vehicle production volume, fuel economy, engine 

size, number of engine cylinders, transmission type, fuel type, etc. EPA’s certification 

database does not include a detailed description of the types of fuel economyimproving/CO2-reducing technologies considered in this final rule. Thus, the agencies 

augmented this description with publicly available data which includes more complete 

technology descriptions from Ward’s Automotive Group.51 In a few instances when 

required vehicle information (such as vehicle footprint) was not available from these two 

sources, the agencies obtained this information from publicly accessible internet sites 

such as Motortrend.com and Edmunds.com.52 

The projections of future car and truck sales described above apply to each 

manufacturer’s sales by market segment. The EPA emissions certification sales data are 

available at a much finer level of detail, essentially vehicle configuration. As mentioned 

above, the agencies placed each vehicle in the EPA certification database into one of the 

CSM market segments. The agencies then totaled the sales by each manufacturer for 

each market segment. If the combination of AEO and CSM forecasts indicated an 

increase in a given manufacturer’s sales of a particular market segment, then the sales of 

all the individual vehicle configurations were adjusted by the same factor. For example, 

if the Prius represented 30 percent of Toyota’s sales of compact cars in 2008 and 

Toyota’s sales of compact cars in 2016 was projected to double by 2016, then the sales of 

the Prius were doubled, and the Prius sales in 2016 remained 30 percent of Toyota’s 

compact car sales. 

 

51 Note that WardsAuto.com is a fee-based service, but all information is public to subscribers. 52 Motortrend.com and Edmunds.com are free, no-fee internet sites. 
Summary of Interagency Working Comments on Draft Rule under EO 12866

56 

The projection of average footprint for both cars and trucks remained virtually 

constant over the years covered by the final rulemaking. This occurrence is strictly a 

result of the CSM projections. There are a number of trends that occur in the CSM 

projections that caused the average footprint to remain constant. First, as the number of 

subcompacts increases, so do the number of 2-wheel drive crossover vehicles (that are 

regulated as cars). Second, truck volumes have many segment changes during the 

rulemaking time frame. There is no specific footprint related trend in any segment that 

can be linked to the unchanging footprint, but there is a trend that non-pickups’ volumes 

will move from truck segments that are ladder frame to those that are unibody-type 

vehicles. A table of the footprint projections is available in the TSD as well as further 

discussion on this topic. 

4. How Was the Development of the Baseline and Reference Fleets for this 

Final Rule Different from NHTSA’s Historical Approach?

 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. Although the agency has not attempted to 

compel manufacturers to submit such information, most major manufacturers and some 

smaller manufacturers have voluntarily provided it when requested. 

 

The proposal discusses many of the advantages and disadvantages of the market 

forecast approach used by the agencies, including the agencies’ interest in examining 

product plans as a check on the reference fleet developed by the agencies for this 

rulemaking. One of the primary reasons for the request for data in 2009 was to obtain 

permission from the manufacturers to make public their product plan information for 

model years 2010 and 2011. There are a number of reasons that this could be 

advantageous in the development of a reference fleet. First, some known changes to the 

fleet may not be captured by the approach of solely using publicly available information. 

For example, the agencies’ current market forecast includes some vehicles for which 

manufacturers have announced plans for elimination or drastic production cuts such as 

the Chevrolet Trailblazer, the Chrysler PT Cruiser, the Chrysler Pacifica, the Dodge 

Magnum, the Ford Crown Victoria, the Mercury Sable, the Pontiac Grand Prix, the 

Pontiac G5 and the Saturn Vue. These vehicle models appear explicitly in market inputs 

to NHTSA’s analysis, and are among those vehicle models included in the aggregated 

vehicle types appearing in market inputs to EPA’s analysis. However, although the 

agencies recognize that these specific vehicles will be discontinued, we continue to 

include them in the market forecast because they are useful as a surrogate for successor 

vehicles that may appear in the rulemaking time frame to replace the discontinued 

vehicles in that market segment.53

Second, the agencies’ market forecast does not include some forthcoming vehicle 

models, such as the Chevrolet Volt, the Ford Fiesta and several publicly announced 

 

53 An example of this is in the GM Pontiac line, which is in the process of being phased out during the 

course of this rulemaking. GM has similar vehicles within their other brands (like Chevy) that will 

presumable pick up the loss in Pontiac share. We model this simply by leaving the Pontiac brand in. 
Summary of Interagency Working Comments on Draft Rule under EO 12866

57 

electric vehicles, including the announcements from Nissan regarding the Leaf. Nor does 

it include several MY 2009 or 2010 vehicles, such as the Honda Insight, the Hyundai 

Genesis and the Toyota Venza, as our starting point for defining specific vehicle models 

in the reference fleet was Model Year 2008. Additionally, the market forecast does not 

account for publicly announced technology introductions, such as Ford’s EcoBoost 

system, whose product plans specify which vehicles and how many are planned to have 

this technology. Chrysler Group LLC has announced plans to offer small- and mediumsized cars using Fiat powertrains. Were the agencies to rely on manufacturers’ product 

plans (that were submitted), the market forecast would account for not only these specific 

examples, but also for similar examples that have not yet been announced publicly. 

Some commenters, such as CBD and NESCAUM, suggested that the agencies’ 

omission of known future vehicles and technologies in the reference fleet causes 

inaccuracies, which CBD further suggested could lead the agencies to set lower 

standards. On the other hand, CARB commented that “the likely impact of this omission 

is minor.” Because the agencies’ analysis examines the costs and benefits of 

progressively adding technology to manufacturers’ fleets, the omission of future vehicles 

and technologies primarily affects how much additional technology (and, therefore, how 

much incremental cost and benefit) is available relative to the point at which the 

agencies’ examination of potential new standards begins. Thus, in fact, the omission only 

reflects the reference fleet, rather than the agencies’ conclusions regarding how stringent 

the standards should be. This is discussed further below. The agencies believe the 

above-mentioned comments by CBD, NESCAUM, and others are based on a 

misunderstanding of the agencies’ approach to analyzing potential increases in regulatory 

stringency. The agencies also note that manufacturers do not always use technology 

solely to increase fuel economy, and that use of technology to increase vehicles’ 

acceleration performance or utility would probably make that technology unavailable 

toward more stringent standards. Considering the incremental nature of the agencies’ 

analysis, and the counterbalancing aspects of potentially omitted technology in the 

reference fleet, the agencies believe their determination of the stringency of new 

standards has not been impacted by any such omissions. 

Moreover, EPA and NHTSA believe that not including such vehicles after MY 

2008 does not significantly impact our estimates of the technology required to comply 

with the standards. If included, these vehicles could increase the extent to which 

manufacturers are, in the reference case, expected to over-comply with the MY 2011 

CAFE standards, and could thereby make the new standards appear to cost less and yield 

less benefit relative to the reference case. However, in the agencies’ judgment, 

production of the most advanced technology vehicles, such as the Chevy Volt or the 

Nissan Leaf (for example), will most likely be too limited during MY 2011 through MY 

2016 to significantly impact manufacturers’ compliance positions. While we are 

projecting the characteristics of the future fleet by extrapolating from the MY 2008 fleet, 

the primary difference between the future fleet and the 2008 fleet in the same vehicle 

segment is the use of additional CO2-reducing and fuel-saving technologies. Both the 

NHTSA and EPA models add such technologies to evaluate means of complying with the 

standards, and the costs of doing so. Thus, our future projections of the vehicle fleet 
Summary of Interagency Working Comments on Draft Rule under EO 12866

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generally shift vehicle designs towards those more likely to be typical of newer vehicles. 

Compared to using product plans that show continued fuel economy increases planned 

based on expectations that CAFE standards will continue to increase, this approach helps 

to clarify the costs and benefits of the new standards, as the costs and benefits of all fuel 

economy improvements beyond those required by the MY 2011 CAFE standards are 

being assigned to the final rules. In some cases, the “actual” (vs. projected or “modeled”) 

new vehicles being introduced into the market by manufacturers are done so in 

anticipation of this rulemaking. On the other hand, manufacturers may plan to continue 

using technologies to improve vehicle performance and/or utility, not just fuel economy. 

Our approach prevents some of these actual technological improvements and their 

associated cost and fuel economy improvements from being assumed in the reference 

fleet. Thus, the added technology will not be considered to be free (or having no 

benefits) for the purposes of this rule. 

In this regard, the agencies further note that manufacturer announcements 

regarding forward models (or future vehicle models) need not be accepted automatically. 

Manufacturers tend to limit accurate production intent information in these releases for 

reasons such as: (a) competitors will closely examine their information for data in their 

product planning decisions; (b) the press coverage of forward model announcements is 

not uniform, meaning highly anticipated models have more coverage and materials than 

models that may be less exciting to the public and consistency and uniformity cannot be 

ensured with the usage of press information; and (c) these market projections are subject 

to change (sometimes significant), and manufacturers may not want to give the 

appearance of being indecisive, or under/over-confident to their shareholders and the 

public with premature release of information. 

NHTSA has evaluated the use of public manufacturer forward model press 

information to update the vehicle fleet inputs to the baseline and reference fleet. The 

challenges in this approach are evidenced by the continuous stream of manufacturer press 

releases throughout a defined rulemaking period. Manufacturers’ press releases suffer 

from the same types of inaccuracies that many commenters believe can affect product 

plans. Manufacturers can often be overly optimistic in their press releases, both on 

projected date of release of new models and on sales volumes. 

More generally and more critically, as discussed in the proposal and as endorsed 

by many of the public comments, there are several advantages to the approach used by 

the agencies in this final rule. Most importantly, today’s market forecast is much more 

transparent. The information sources used to develop today’s market forecast are all 

either in the public domain or available commercially. Another significant advantage of 

today’s market forecast is the agencies’ ability to assess more fully the incremental costs 

and benefits of the proposed standards. In addition, by developing baseline and reference 

fleets from common sources, the agencies have been able to avoid some errors—perhaps 

related to interpretation of requests—that have been observed in past responses to 

NHTSA’s requests. An additional advantage of the approach used for this proposal is a 

consistent projection of the change in fuel economy and CO2 emissions across the various 

vehicles from the application of new technology. With the approach used for this final 
Summary of Interagency Working Comments on Draft Rule under EO 12866

59 

rule, the baseline market data comes from actual vehicles (on the road today) which have 

actual fuel economy test data (in contrast to manufacturer estimates of future product fuel 

economy) – so there is no question what is the basis for the fuel economy or CO2

performance of the baseline market data as it is. 

 

5. How Does Manufacturer Product Plan Data Factor into the Baseline used 

in this Final Rule? 

In the spring and fall of 2009, many manufacturers submitted product plans in 

response to NHTSA’s recent requests that they do so. NHTSA and EPA both have 

access to these plans, and both agencies have reviewed them in detail. A small amount of 

product plan data was used in the development of the baseline. The specific pieces of 

data are: 

• Wheelbase 

• Track Width Front 

• Track Width Rear 

• EPS (Electric Power Steering) 

• ROLL (Reduced Rolling Resistance) 

• LUB (Advance Lubrication i.e. low weight oil) 

• IACC (Improved Electrical Accessories) 

• Curb Weight 

• GVWR (Gross Vehicle Weight Rating) 

The track widths, wheelbase, curb weight, and GVWR for vehicles could have 

been looked up on the internet (159 were), but were taken from the product plans when 

available for convenience. To ensure accuracy, a sample from each product plan was 

used as a check against the numbers available from Motortrend.com. These numbers will 

be published in the baseline file since they can be easily looked up on the internet. On 

the other hand, EPS, ROLL, LUB, and IACC are difficult to determine without using 

manufacturer’s product plans. These items will not be published in the baseline file, but 

the data has been aggregated into the agencies’ baseline in the technology effectiveness 

and cost effectiveness for each vehicle in a way that allows the baseline for the model to 

be published without revealing the manufacturer’s data. 

Also, some technical information that manufacturers have provided in product 

plans regarding specific vehicle models is, at least insofar as NHTSA and EPA have been 

able to determine, not available from public or commercial sources. While such gaps do 

not bear significantly on the agencies’ analysis, the diversity of pickup configurations 

necessitated utilizing a sales-weighted average footprint value54 for many manufacturers’ 

 

54 A full-size pickup might be offered with various combinations of cab style (e.g., regular, extended, crew) 

and box length (e.g., 51⁄2’, 61⁄2’, 8’) and, therefore, multiple footprint sizes. CAFE compliance data for MY 

2008 data does not contain footprint information, and does not contain information that can be used to 

reliably identify which pickup entries correspond to footprint values estimable from public or commercial 

sources. Therefore, the agencies have used the known production levels of average values to represent all 

variants of a given pickup line (e.g., all variants of the F-150 and the Sierra/Silverado) in order to calculate 

the sales-weighted average footprint value for each pickup family. Again, this has no impact on the results 
Summary of Interagency Working Comments on Draft Rule under EO 12866

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pickups. Since our modeling only utilizes footprint in order to estimate each 

manufacturer’s CO2 or fuel economy standard and all the other vehicle characteristics are 

available for each pickup configuration, this approximation has no practical impact on the 

projected technology or cost associated with compliance with the various standards 

evaluated. The only impact which could arise would be if the relative sales of the various 

pickup configurations changed, or if the agencies were to explore standards with a 

different shape. This would necessitate recalculating the average footprint value in order 

to maintain accuracy. 

Additionally, as discussed in the NPRM, in an effort to update the 2008 baseline 

to account for the expected changes in the fleet in the near-term model years 2009-2011 

described above, NHTSA requested permission from the manufacturers to make this 

limited product plan information public. Unfortunately, virtually no manufacturers 

agreed to allow the use of their data after 2009 model year. A few manufacturers, such as 

GM and Ford, stated we could use their 2009 product plan data after the end of 

production (December 31), but this would not have afforded us sufficient time to do the 

analysis for the final rule. Since the agencies were unable to obtain consistent updates, 

the baseline and reference fleets were not updated beyond 2008 model year for the final 

rule. The 2008 baseline fleet and projections were instead updated using the latest AEO 

and CSM data as discussed earlier. 

 NHTSA and EPA recognize that the approach applied for the current rule gives 

transparency and openness of the vehicle market forecast high priority, and 

accommodates minor inaccuracies that may be introduced by not accounting for future 

product mix changes anticipated in manufacturers’ confidential product plans. For any 

future fleet analysis that the agencies are required to perform, NHTSA and EPA plan to 

request that manufacturers submit product plans and allow some public release of 

information. In performing this analysis, the agencies plan to reexamine potential 

tradeoffs between transparency and technical reasonableness, and to explain resultant 

choices.

C. Development of Attribute-Based Curve Shapes 

In the NPRM, NHTSA and EPA proposed to set attribute-based CAFE and CO2

standards that are defined by a mathematical function for MYs 2012-2016 passenger cars 

and light trucks. 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.55 The CAA has 

no such requirement, though in past rules, EPA has relied on both universal and attributebased standards (e.g., for nonroad engines, EPA uses the attribute of horsepower). 

 of our modeling effort, although it would require re-estimation if we were to examine light truck standards 

of a different shape. In the extreme, one single footprint value could be used for every vehicle sold by a 

single manufacturer as long as the fuel economy standard associated with this footprint value represented 

the sales-weighted, harmonic average of the fuel economy standards associated with each vehicle’s 

footprint values. 

55 49 U.S.C. 32902(a)(3)(A). 
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61 

However, given the advantages of using attribute-based standards and given the goal of 

coordinating and harmonizing CO2 standards promulgated under the CAA and CAFE 

standards promulgated under EPCA, EPA also proposed to issue standards that are 

attribute-based and defined by mathematical functions. There was consensus in the 

public comments that EPA should develop attribute-based CO2 standards. 

 

Comments received in response to the agencies’ decision to base standards on 

vehicle footprint were largely supportive. Several commenters (BMW, NADA, 

NESCAUM) expressed support for attribute-based (as opposed to flat or universal) 

standards generally, and agreed with EPA’s decision to harmonize with NHTSA in this 

respect. Many commenters (Aluminum Association, BMW, ICCT, NESCAUM, NY 

DEC, Schade, Toyota) also supported the agencies’ decision to continue setting CAFE 

standards, and begin setting GHG standards, on the basis of vehicle footprint, although 

one commenter (NJ DEP) opposed the use of footprint due to concern that it encourages 

manufacturers to upsize vehicles and undercut the gains of the standard. Of the 

commenters supporting the use of footprint, several focused on the benefits of 

harmonization—both between EPA and NHTSA, and between the U.S. and the rest of the 

world. BMW commented, for example, that many other countries use weight-based 

standards rather than footprint-based. While BMW did not object to NHTSA’s and 

EPA’s use of footprint-based standards, it emphasized the impact of this nonharmonization on manufacturers who sell vehicles globally, and asked the agencies to 

consider these effects. NADA supported the use of footprint, but cautioned that the 

agencies must be careful in setting the footprint curve for light trucks to ensure that 

manufacturers can continue to provide functionality like 4WD and towing/hauling 

capacity. 

 

Some commenters requested that the agencies consider other or more attributes in 

addition to footprint, largely reiterating comments submitted to the MYs 2011-2015 

CAFE NPRM. Cummins supported the agencies using a secondary attribute to account 

for towing and hauling capacity in large trucks, for example, while Ferrari asked the 

agencies to consider a multi-attribute approach incorporating curb weight, maximum 

engine power or torque, and/or engine displacement, as it had requested in the previous 

round of CAFE rulemaking. An individual, Mr. Kenneth Johnson, commented that 

weight-based standards would be preferable to footprint-based ones, because weight 

correlates better with fuel economy than footprint, because the use of footprint does not 

necessarily guarantee safety the way the agencies say it does, and because weight-based 

standards would be fairer to manufacturers. 

 In response, EPA and NHTSA continue to believe that the benefits of footprintattribute-based standards outweigh any potential drawbacks raised by commenters, and 

that harmonization between the two agencies should be the overriding goal on this issue. 

As discussed by NHTSA in the MY 2011 CAFE final rule,56 the agencies believe that the 

possibility of gaming is lowest with footprint-based standards, as opposed to weightbased or multi-attribute-based standards. Specifically, standards that incorporate weight, 

torque, power, towing capability, and/or off-road capability in addition to footprint would 

 

56 See 74 FR 14359 (Mar. 30, 2009). 
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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 average fuel economy and CO2 levels projected by the 

agencies. The agencies are therefore finalizing MYs 2012-2016 CAFE and GHG 

standards based on footprint. 

 The agencies also recognize that there could be benefits for a number of 

manufacturers if there was greater international harmonization of fuel economy and GHG 

standards, but this is largely a question of how stringent standards are and how they are 

enforced. It is entirely possible that footprint-based and weight-based systems can 

coexist internationally and not present an undue burden for manufacturers if they are 

carefully crafted. Different countries or regions may find different attributes appropriate 

for basing standards, depending on the particular challenges they face – from fuel prices, 

to family size and land use, to safety concerns, to fleet composition and consumer 

preference, to other environmental challenges besides climate change. The agencies 

anticipate working more closely with other countries and regions in the future to consider 

how to mitigate these issues in a way that least burdens manufacturers while respecting 

each country’s need to meet its own particular challenges. 

Under an attribute-based standard, every vehicle model has a performance target 

(fuel economy and CO2 emissions for CAFE and CO2 emissions standards, respectively), 

the level of which depends on the vehicle’s attribute (for the proposal, footprint). The 

manufacturers’ fleet average performance is determined by the production-weighted57

average (for CAFE, harmonic average) of those targets. NHTSA and EPA are 

promulgating CAFE and CO2 emissions standards defined by constrained linear functions 

and, equivalently, piecewise linear functions.58 As a possible option for future 

rulemakings, the constrained linear form was introduced by NHTSA in the 2007 NPRM 

proposing CAFE standards for MY 2011-2015. Described mathematically, the proposed 

constrained linear function was defined according to the following formula:59

1

1 1

, ,

TARGET

MIN MAX c FOOTPRINT d

a b

= ⎡ ⎤ ⎛ ⎞ ⎜ ⎟ × + ⎢ ⎥ ⎣ ⎦ ⎝ ⎠

where 

TARGET = the fuel economy target (in mpg) applicable to vehicles of a given 

footprint (FOOTPRINT, in square feet), 

a = the function’s upper limit (in mpg), 

b = the function’s lower limit (in mpg), 

c = the slope (in gpm per square foot) of the sloped portion of the function, 

 

57 Production for sale in the United States. 

58 The equations are equivalent but are specified differently due to differences in the agencies’ respective 

models. 

59 This function is linear in fuel consumption but not in fuel economy. 
Summary of Interagency Working Comments on Draft Rule under EO 12866

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d = 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, and 

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. 

 Because the format is linear on a gallons-per-mile basis, not on a miles-per-gallon 

basis, it is plotted as fuel consumption below. Graphically, the constrained linear form 

appears as shown in Figure II.C-1. 
Summary of Interagency Working Comments on Draft Rule under EO 12866

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0.0500.0450.0400.0350.0300.0250.0200.0150.0100.0050.000

35 40 45 50 55 60 65 70

Footprint (sf)

Fuel Consumption (gpm) 1/LIMIT UPPER 1/LIMIT LOWER

INTERCEP

T

SLOPE

Figure II.C-1 The Shape of the Constrained Linear Form 
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The specific form and stringency for each fleet (passenger car and light trucks) 

and model year are defined through specific values for the four coefficients shown above. 

EPA proposed the equivalent equation below for assigning CO2 targets to an 

individual vehicle’s footprint value. Although the general model of the equation is the 

same for each vehicle category and each year, the parameters of the equation differ for 

cars and trucks and for each model year. Described mathematically, EPA’s proposed 

piecewise linear function was as follows: 

Target = a, if x ≤ l 

Target = cx + d, if l < x ≤ h 

Target = b, if x > h 

 

In the constrained linear form similar in form to the fuel economy equation above, this 

equation takes the simplified form: 

Target = MIN [ MAX ( c * x + d , a) , b] 

where 

Target = the CO2 target value for a given footprint (in g/mi) 

a = the minimum target value (in g/mi CO2)

60

b = the maximum target value (in g/mi CO2) 

c = the slope of the linear function (in g/mi per sq ft CO2) 

d = is the intercept or zero-offset for the line (in g/mi CO2) 

x = footprint of the vehicle model (in square feet, rounded to the nearest tenth) 

l & h are the lower and higher footprint limits or constraints or (“kinks”) or the 

boundary between the flat regions and the intermediate sloped line (in sq ft) 

 Graphically, piecewise linear form, like the constrained linear form, appears as 

shown in Figure II.C-2. 

 

60 These a, b, d coefficients differ from the a, b, d coefficients in the constrained linear fuel economy 

equation primarily by a factor of 8887 (plus an additive factor for air conditioning). 
Summary of Interagency Working Comments on Draft Rule under EO 12866

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30 35 40 45 50 55 60 65 70 Footprint (sq feet)

CO2 (gram/mile) or 

Fuel Consumption (gallons/mile)

lower limit = l Intercept = d

upper limit = h

slope = c

min = a

max = b

Figure II.C-2 The Shape of the Piecewise Linear Form 
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As for the constrained linear form, the specific form and stringency of the 

piecewise linear function for each fleet (passenger car and light trucks) and model year 

are defined through specific values for the four coefficients shown above. 

For purposes of the proposed rules, NHTSA and EPA developed the basic curve 

shapes using methods similar to those applied by NHTSA in fitting the curves defining 

the MY 2011 standards. The first step involved defining the relevant vehicle 

characteristics in the form used by NHTSA’s CAFE model (e.g., fuel economy, footprint, 

vehicle class, technology) described in Section II.B of this preamble and in Chapter 1 of 

the Joint TSD. However, because the baseline fleet utilizes a wide range of available fuel 

saving technologies, NHTSA used the CAFE model to develop a fleet to which all of the 

technologies discussed in Chapter 3 of the Joint TSD61 were applied, except dieselization 

and strong hybridization. This was accomplished 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 “phase-in 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 or reference fleets) for estimating the statistical 

relationship between vehicle size and fuel economy. 

In fitting the curves, NHTSA and EPA also continued to fit the sloped portion of 

the function to vehicle models between the footprint values at which the agencies 

continued to apply constraints to limit the function’s value for both the smallest and 

largest vehicles. Without a limit at the smallest footprints, the function—whether logistic 

or linear—can reach values that would be unfairly burdensome for a manufacturer that 

elects to focus on the market for small vehicles; depending on the underlying data, an 

unconstrained form, could result in stringency levels that are technologically infeasible 

and/or economically impracticable for those manufacturers that may elect to focus on the 

smallest vehicles. On the other side of the function, without a limit at the largest 

footprints, the function may provide no floor on required fuel economy. Also, the safety 

considerations that support the provision of a disincentive for downsizing as a 

compliance strategy apply weakly, if at all, to the very largest vehicles. Limiting the 

function’s value for the largest vehicles leads to a function with an inherent absolute 

minimum level of performance, while remaining consistent with safety considerations. 

Before fitting the sloped portion of the constrained linear form, NHTSA and EPA 

selected footprints above and below which to apply constraints (i.e., minimum and 

maximum values) on the function. The agencies believe that the linear form performs 

well in describing the observed relationship between footprint and fuel consumption or 

CO2 emissions for vehicle models within the footprint ranges covering most vehicle 

 

61 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. 
Summary of Interagency Working Comments on Draft Rule under EO 12866

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models, but that the single (as opposed to piecewise) linear form does not perform well in 

describing this relationship for the smallest and largest vehicle models. For passenger 

cars, the agency noted that several manufacturers offer small, sporty coupes below 41 

square feet, such as the BMW Z4 and Mini, Honda S2000, Mazda MX-5 Miata, Porsche 

Carrera and 911, and Volkswagen New Beetle. Because such vehicles represent a small 

portion (less than 10 percent) of the passenger car market, yet often have performance, 

utility, and/or structural characteristics that could make it technologically infeasible 

and/or economically impracticable for manufacturers focusing on such vehicles to 

achieve the very challenging average requirements that could apply in the absence of a 

constraint, EPA and NHTSA proposed to “cut off” the linear portion of the passenger car 

function at 41 square feet. For consistency, the agency proposed to do the same for the 

light truck function, although no light trucks are currently offered below 41 square feet. 

The agencies further noted that above 56 square feet, the only passenger car model 

present in the MY 2008 fleet were four luxury vehicles with extremely low sales 

volumes—the Bentley Arnage and three versions of the Rolls Royce Phantom. NHTSA 

and EPA therefore also proposed to “cut off” the linear portion of the passenger car 

function at 56 square feet. Finally, the agencies noted that although public information is 

limited regarding the sales volumes of the many different configurations (cab designs and 

bed sizes) of pickup trucks, most of the largest pickups (e.g., the Ford F-150, GM 

Sierra/Silverado, Nissan Titan, and Toyota Tundra) appear to fall just above 66 square 

feet in footprint. EPA and NHTSA therefore proposed to “cut off” the linear portion of 

the light truck function at 66 square feet. 

Having developed a set of vehicle emissions and footprint data which represent 

the benefit of all non-diesel, non-hybrid technologies, we determined the initial values for 

parameters c and d were determined for cars and trucks separately. c and d were initially 

set at the values for which the average (equivalently, sum) of the absolute values of the 

differences was minimized between the “maximum technology” fleet fuel consumption 

(within the footprints between the upper and lower limits) and the straight line of the 

function defined above at the same corresponding vehicle footprints. That is, c and d 

were determined by minimizing the average absolute residual, commonly known as the 

MAD (Mean Absolute Deviation) approach, of the corresponding straight line. 

Finally, NHTSA calculated the values of the upper and lower parameters (a and 

b) based on the corresponding footprints discussed above (41 and 56 square feet for 

passenger cars, and 41 and 66 square feet for light trucks). 

The result of this methodology is shown below in Figures II.C-3 and II.C-4 for 

passenger cars and light trucks, respectively. The fitted curves are shown with the 

underlying “maximum technology” passenger car and light truck fleets. For passenger 

cars, the mean absolute deviation of the sloped portion of the function was 14 percent. 

For trucks, the corresponding MAD was 10 percent. 
Summary of Interagency Working Comments on Draft Rule under EO 12866

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0.0600.0550.0500.0450.0400.0350.0300.0250.0200.0150.0100.0050.000

35 40 45 50 55 60 65 70 75 80

Footprint (sf)

Fuel Consumption (gpm)

Figure II.C-3 “Maximum Technology” Passenger Fleet with Fitted Constrained Linear Function 
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0.0600.0550.0500.0450.0400.0350.0300.0250.0200.0150.0100.0050.000

35 40 45 50 55 60 65 70 75 80

Footprint (sf)

Fuel Consumption (gpm)

Figure II.C--4 “Maximum Technology” Light Truck with Fitted Constrained Linear Function 
Summary of Interagency Working Comments on Draft Rule under EO 12866

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The agencies used these functional forms as a starting point to develop 

mathematical functions defining the actual proposed standards as discussed above. The 

agencies then transposed these functions vertically (i.e., on a gpm or CO2 basis, 

uniformly downward) to produce the same fleetwide fuel economy (and CO2 emission 

levels) for cars and light trucks described in the NPRM. 

A number of public comments generally supported the agencies’ choice of 

attribute-based mathematical functions, as well as the methods applied to fit the function. 

Ferrari indicated support for the use of a constrained linear form rather than a constrained 

logistic form, support for the application of limits on the functions’ values, support for a 

generally less steep passenger car curve compared to MY 2011, and support for the 

inclusion of all manufacturers in the analysis used to fit the curves. ICCT also supported 

the use of a constrained linear form. Toyota expressed general support for the methods 

and outcome, including a less-steep passenger car curve, and the application of limits on 

fuel economy targets applicable to the smallest vehicles. The UAW commented that the 

shapes and levels of the curves are reasonable. 

Other commenters suggested that changes to the agencies’ methods and results 

would yield better outcomes. GM suggested that steeper curves would provide a greater 

incentive for limited-line manufacturers to apply technology to smaller vehicles. GM 

argued that steeper and, in their view, fairer curves could be obtained by using salesweighted least-squares regression rather than minimization of the unweighted mean 

absolute deviation. Conversely, students from UC Santa Barbara commented that the 

passenger car and light truck curves should be flatter and should converge over time in 

order to encourage the market to turn, as the agencies’ analysis assumes it will, away 

from light trucks and toward passenger cars. 

NADA commented that there should be no “cut-off” points (i.e., lower limits or 

floors), because these de facto “backstops” might limit consumer choice, especially for 

light trucks—a possibility also suggested by the Alliance. The Alliance and several 

individual manufacturers also commented that the cut-off point for light trucks should be 

shifted to 72 square feet (from the proposed 66 square feet), arguing that the 

preponderance of high-volume light truck models with footprints greater than 66 square 

feet is such that a 72 square foot cut-off point makes it unduly challenging for 

manufacturers serving the large pickup market and thereby constitutes a de facto

backstop. Also, with respect to the smallest light truck models, Honda commented that 

the cut-off point should be set at the point defining the smallest 10 percent of the fleet, 

both for consistency with the passenger car cut-off point, and to provide a greater 

incentive for manufacturers to downsize the smallest light truck models (which provide 

greater functionality than passenger cars). 

Other commenters focused on whether the agencies should have separate curves 

for different fleets or whether they should have a single curve that applied to both 

passenger cars and light trucks. This issue is related, to some extent, to commenters who 

discussed whether car and truck definitions should change. CARB, Ford, and Toyota 
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supported separate curves for cars and trucks, generally stating that different fleets have 

different functional characteristics and these characteristics are appropriately addressed 

by separate curves. Likewise, AIAM, Chrysler, and NADA supported leaving the current 

definitions of car and truck the same. CBD, ICCT, and NESCAUM supported a single 

curve, based on concerns about manufacturers gaming the system and reclassifying 

passenger cars as light trucks in order to obtain the often-less stringent light truck 

standard, which could lead to lower benefits than anticipated by the agencies. 

In addition, the students from UC Santa Barbara reported being unable to 

reproduce the agencies’ analysis to fit curves to the passenger car and light truck fleets, 

even when using the model, inputs, and external analysis files posted to NHTSA’s web 

site when the NPRM was issued. 

Having considered public comments, NHTSA and EPA have re-examined the 

development of curves underlying the standards proposed in the NPRM, and are 

promulgating standards based on the same underlying curves. The agencies have made 

this decision considering that, while EISA mandates that CAFE standards be defined by a 

mathematical function in terms of one or more attributes related to fuel economy, neither 

EISA nor the CAA require that the mathematical function be limited to the observed or 

theoretical dependence of fuel economy on the selected attribute or attributes. As a 

means by which CAFE and GHG standards are specified, the mathematical function can 

and does properly play a normative role. Therefore, NHTSA and EPA have concluded 

that, as supported by comments, the mathematical function can reasonably be based on a 

blend of analytical and policy considerations, as discussed below and in the Joint 

Technical Support Document. 

With respect to GM’s recommendation that NHTSA and EPA use weighted leastsquares analysis, the agencies find that the market forecast used for analysis supporting 

both the NPRM and the final rule exhibits the two key characteristics that previously led 

NHTSA to use minimization of the unweighted Mean Absolute Deviation (MAD) rather 

than weighted least-squares analysis. First, projected model-specific sales volumes in the 

agencies’ market forecast cover an extremely wide range, such that, as discussed in 

NHTSA’s rulemaking for MY 2011, while unweighted regression gives low-selling 

vehicle models and high-selling vehicle models equal emphasis, sales-weighted 

regression would give some vehicle models considerably more emphasis than other 

vehicle models.62 The agencies’ intention is to fit a curve that describes a technical 

relationship between fuel economy and footprint, given comparable levels of technology, 

and this supports weighting discrete vehicle models equally. On the other hand, sales 

 

62 For example, the agencies’ market forecast shows MY 2016 sales of 187,000 units for Toyota’s 2WD 

Sienna, and shows 27 model configurations with MY 2016 sales of fewer than 100 units. Similarly, the 

agencies’ market forecast shows MY 2016 sales of 268,000 for the Toyota Prius, and shows 29 model 

configurations with MY 2016 sales of fewer than 100 units. Sales-weighted analysis would give the 

Toyota Sienna and Prius more than a thousand times the consideration of many vehicle model 

configurations. Sales-weighted analysis would, therefore, cause a large number of vehicle model 

configurations to be virtually ignored. See discussion in NHTSA’s final rule for MY 2011 passenger car 

and light truck CAFE standards, 74 FR 14368 (Mar. 30, 2009), and in NHTSA’s NPRM for that 

rulemaking, 73 FR 24423-24429 (May 2, 2008).
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weighted regression would allow the difference between other vehicle attributes to be 

reflected in the analysis, and also would reflect consumer demand. 

Second, even after NHTSA’s “maximum technology” analysis to increase 

technological parity of vehicle models before fitting curves, the agencies’ market forecast 

contains many significant outliers. As discussed in NHTSA’s rulemaking for MY 2011, 

MAD is a statistical procedure that has been demonstrated to produce more efficient 

parameter estimates than least-squares analysis in the presence of significant outliers.63 

In addition, the agencies remain concerned that the steeper curves resulting from 

weighted least-squares analysis would increase the risk that energy savings and 

environmental benefits would be lower than projected, because the steeper curves would 

provide a greater incentive to increase sales of larger vehicles with lower fuel economy 

levels. Based on these technical considerations and these concerns regarding potential 

outcomes, the agencies have decided not to re-fit curves using weighted least-squares 

analysis, but note that they may reconsider using least-squares regression in future 

analysis. 

NHTSA and EPA have considered GM’s comment that steeper curves would 

provide a greater incentive for limited-line manufacturers to apply technology to smaller 

vehicles. While the agencies agree that a steeper curve would, absent any changes in 

fleet mix, tend to shift average compliance burdens away from GM and toward 

companies that make smaller vehicles, the agencies are concerned, as stated above, that 

steeper curves would increase the risk that induced increases in vehicle size could erode 

projected energy and environmental benefits. 

NHTSA and EPA have also considered the comments by the students from UC 

Santa Barbara indicating that the passenger car and light truck curves should be flatter 

and should converge over time. The agencies conclude that flatter curves would reduce 

the incentives intended in shifting from “flat” CAFE standards to attribute-based CAFE 

and GHG standards—those being the incentive to respond to attribute-based standards in 

ways that minimize compromises in vehicle safety, and the incentive for more 

manufacturers (than primarily those selling a wider range of vehicles) across the range of 

the attribute to have to increase the application of fuel-saving technologies. With regard 

to whether the agencies should set separate curves or a single one, NHTSA also notes that 

EPCA requires NHTSA to establish standards separately for passenger cars and light 

 

63 Id. In the case of a dataset not drawn from a sample with a Gaussian, or normal, distribution, there is 

often a need to employ robust estimation methods rather than rely on least-squares approach to curve 

fitting. The least-squares approach has as an underlying assumption that the data are drawn from a normal 

distribution, and hence fits a curve using a sum-of-squares method to minimize errors. This approach will, 

in a sample drawn from a non-normal distribution, give excessive weight to outliers by making their 

presence felt in proportion to the square of their distance from the fitted curve, and, hence, distort the 

resulting fit. With outliers in the sample, the typical solution is to use a robust method such as a minimum 

absolute deviation, rather than a squared term, to estimate the fit (see, e.g., ‘‘AI Access: Your Access to 

Data Modeling,’’ at http://www.aiaccess.net/English/Glossaries/GlosMod/e_gm_O_Pa.htm#Outlier). The 

effect on the estimation is to let the presence of each observation be felt more uniformly, resulting in a 

curve more representative of the data (see, e.g., Peter Kennedy, A Guide to Econometrics, 3rd edition, 1992, 

MIT Press, Cambridge, MA). 
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trucks, and thus concludes that the standards for each fleet should be based on the 

characteristics of vehicles in each fleet. In other words, the passenger car curve should 

be based on the characteristics of passenger cars, and the light truck curve should be 

based on the characteristics of light trucks—thus to the extent that those characteristics 

are different, an artificially-forced convergence would not accurately reflect those 

differences. However, such convergence could be appropriate depending on future trends 

in the light vehicle market, specifically further reduction in the differences between 

passenger car and light truck characteristics. While that trend was more apparent when 

car-like 2WD SUVs were classified as light trucks, it seems likely to diminish for the 

model year vehicles subject to these rules as the truck fleet will be more purely “trucklike” than has been the case in recent years. 

NHTSA and EPA have also considered comments on the maxima and minima 

that the agencies have applied to “cut off” the linear function underlying the proposed 

curves for passenger cars and light trucks. Contrary to NADA’s suggestion that there 

should be no such cut-off points, the agencies conclude that curves lacking maximum 

fuel economy targets (i.e., minimum CO2 targets) would result in average fuel economy 

and GHG requirements that would not be technologically feasible or economically 

practicable for manufacturers concentrating on those market segments. In addition, 

minimum fuel economy targets (i.e., maximum CO2 targets) are important to mitigate the 

risk to energy and environmental benefits of potential market shifts toward large vehicles. 

The agencies also disagree with comments by the Alliance and several individual 

manufacturers that the cut-off point for light trucks should be shifted to 72 square feet 

(from the proposed 66 square feet) to ease compliance burdens facing manufacturers 

serving the large pickup market. Such a shift would increase the risk that energy and 

environmental benefits of the standards would be compromised by induced increases in 

the sales of large pickups, in situations where the increased compliance burden is feasible 

and appropriate. Also, the agencies’ market forecast suggests that most of the light trucks 

models with footprints larger than 66 square feet have curb weights near or above 5,000 

pounds. This suggests, in turn, that in terms of highway safety, there is little or no need 

to discourage downsizing of light trucks with footprints larger than 66 square feet. 

Based on these energy, environmental, technological feasibility, economic practicability, 

and safety considerations, the agencies conclude that the light truck curve should be cut 

off at 66 square feet, as proposed, rather than at 72 square feet. The agencies also 

disagree with Honda’s suggestion that the cut-off point for the smallest trucks be shifted 

to a larger footprint value, because doing so could potentially increase the incentive to 

reclassify vehicles in that size range as light trucks, and could thereby increase the 

possibility that energy and environmental benefits of the rule would be less than 

projected. 

Finally, considering comments by the UC Santa Barbara students regarding 

difficulties reproducing NHTSA’s analysis, NHTSA reexamined its analysis, and 

discovered some erroneous entries in model inputs underlying the analysis used to 

develop the curves proposed in the NPRM. These errors are discussed in NHTSA’s final 

Regulatory Impact Analysis (FRIA) and have since been corrected. They include the 

following: incorrect valvetrain phasing and lift inputs for many BMW engines, incorrect 
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indexing for some Daimler models, incorrectly enabled valvetrain technologies for rotary 

engines and Atkinson cycle engines, omitted baseline applications of cylinder 

deactivation in some Honda and GM engines, incorrect valve phasing codes for some 4-

cylinder Chrysler engines, omitted baseline applications of advanced transmissions in 

some VW models, incorrectly enabled advanced electrification technologies for several 

hybrid vehicle models, and incorrect DCT effectiveness estimates for subcompact 

passenger cars. These errors, while not significant enough to impact the overall analysis 

of stringency, did affect the fitted slope for the passenger car curve and would have 

prevented precise replication of NHTSA’s NPRM analysis by outside parties. 

After correcting these errors and repeating the curve development analysis 

presented in the NPRM, NHTSA obtained the curves shown below in Figures II.C-5 and 

II.C-6 for passenger cars and light trucks, respectively. The fitted curves are shown with 

the underlying “maximum technology” passenger car and light truck fleets. For 

passenger cars, the mean absolute deviation of the sloped portion of the function was 14 

percent. For trucks, the corresponding MAD was 10 percent. 
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0.0600.0550.0500.0450.0400.0350.0300.0250.0200.0150.0100.0050.000

35 40 45 50 55 60 65 70 75 80

Footprint (sf)

Fuel Consumption (gpm)

Figure II.C-5 Revised “Maximum Technology” Passenger Fleet with Fitted Constrained Linear Function 
Summary of Interagency Working Comments on Draft Rule under EO 12866

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0.0600.0550.0500.0450.0400.0350.0300.0250.0200.0150.0100.0050.000

35 40 45 50 55 60 65 70 75 80

)mpg(noitpmusnoCleuF

Footprint (sf)

 

Figure II.C-6 Revised “Maximum Technology” Light Truck with Fitted Constrained Linear Function 
Summary of Interagency Working Comments on Draft Rule under EO 12866

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 This refitted passenger car curve is similar to that presented in the NPRM, and the 

refitted light truck curve is nearly identical the corresponding curve in the NPRM. 

However, the slope of the refitted passenger car curve is about 27 percent steeper (on a 

gpm per sf basis) than the curve presented in the NPRM. For passenger cars and light 

trucks, respectively, Figures II.C-7 and II.C-8 show the results of adjustment—discussed 

in the next section—of the above curves to yield the average required fuel economy 

levels corresponding to the final standards. 
Summary of Interagency Working Comments on Draft Rule under EO 12866

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454035302520

35 40 45 50 55 60 65 70 75 80

)gpm(tegraT

Footprint (sf)

NPRMFinalRe-Fitted

Figure II.C-7 MY 2016 Passenger Car Targets: NPRM, Final Rule, and if Using Re-Fitted Curve 
Summary of Interagency Working Comments on Draft Rule under EO 12866

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454035302520

35 40 45 50 55 60 65 70 75 80

)gpm(tegraT

Footprint (sf)

NPRMFinalRe-Fitted

Figure II.C-8 MY 2016 Light Truck Targets: NPRM, Final Rule, and if Using Re-Fitted Curve 
Summary of Interagency Working Comments on Draft Rule under EO 12866

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While the resultant light truck curves are visually indistinguishable from one 

another, the refitted curve for passenger cars would increase stringency for the smallest 

cars, decrease stringency for the largest cars, and provide a greater incentive to increase 

vehicle size throughout the range of footprints within which NHTSA and EPA project 

most passenger car models will be sold through MY 2016. The agencies are concerned 

that these changes would make it unduly difficult for manufacturers to introduce new 

small passenger cars in the United States, and unduly risk losses in energy and 

environmental benefits by increasing incentives for the passenger car market to shift 

toward larger vehicles. 

Also, the agencies note that the refitted passenger car curve produces only a 

slightly closer fit to the corrected fleet than would the curve estimated in the NPRM; with 

respect to the corrected fleet (between the “cut off” footprint values, and after the 

“maximum technology” analysis discussed above), the mean absolute deviation for the 

refitted curve is 13.887 percent, and that of a refitted curve held to the original slope is 

13.933 percent. In other words, the data support the original slope very nearly as well as 

they support the refitted slope. 

Considering NHTSA’s and EPA’s concerns regarding the change in incentives 

that would result from a refitted curve for passenger cars, and considering that the data 

support the original curves about as well as they would support refitted curves, the 

agencies are finalizing CAFE and GHG standards based on the curves presented in the 

NPRM. 

 

 Finally, regarding some commenters’ inability to reproduce the agencies’ NPRM 

analysis, NHTSA believes that its correction of the errors discussed above and its release 

(on NHTSA’s web site) of the updated Volpe model and all accompanying inputs and 

external analysis files should enable outside parties to independently reproduce the 

agencies’ analysis. If outside parties continue to experience difficulty in doing so, we 

encourage them to contact NHTSA, and the agency will do its best to provide assistance. 

Thus, in summary, the agencies’ approach to developing the attribute-based 

mathematical functions for MY 2012-2016 CAFE and CO2 standards represents the 

agencies’ best technical judgment and consideration of potential outcomes at this time, 

and we are confident that the conclusions have resulted in appropriate and reasonable 

standards. The agencies recognize, however, that aspects of these decisions may merit 

updating or revision in future analysis to support CAFE and CO2 standards or for other 

purposes. Consistent with best rulemaking practices, the agencies will take a fresh look 

at all assumptions and approaches to curve fitting, appropriate attributes, and 

mathematical functions in the context of future rulemakings. 

The agencies also recognized in the NPRM the possibility that lower fuel prices 

could lead to lower fleetwide fuel economy (and higher CO2 emissions) than projected in 

this rule. One way of addressing that concern is through the use of a universal 

standard—that is, an average standard set at a (single) absolute level. This is often 
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described as a “backstop standard.” The agencies explained that under the CAFE 

program, EISA requires such a minimum average fuel economy standard for domestic 

passenger cars, but is silent with regard to similar backstops for imported passenger cars 

and light trucks, while under the CAA, a backstop could be adopted under section 202(a) 

assuming it could be justified under the relevant statutory criteria. NHTSA and EPA also 

noted that the flattened portions of the curves at the largest footprints directionally 

address the issue of a backstop (i.e., the mpg “floor” or gpm “ceiling” applied to the 

curves provides a universal and absolute value for that range of footprints). The agencies 

sought comment on whether backstop standards, or any other method within the 

agencies’ statutory authority, should and can be implemented in order to guarantee a level 

of CO2 emissions reductions and fuel savings under the attribute-based standards. 

 The agencies received a number of comments regarding the need for a backstop 

beyond NHTSA’s alternative minimum standard. Comments were divided fairly evenly 

between support for and opposition to additional backstop standards. The following 

organizations supported the need for EPA and NHTSA to have explicit backstop 

standards: American Council for an Energy Efficient Economy (ACEEE), American 

Lung Association, California Air Resources Board (CARB), Environment America, 

Environment Defense Fund, Massachusetts Department of Environmental Protection, 

Natural Resources Defense Council (NRDC), Northeast States for Coordinated Air Use 

Management (NESCAUM), Public Citizen and Safe Climate Campaign, Sierra Club, 

State of Washington Department of Ecology, Union of Concerned Scientists, and a 

number of private citizens. Commenters in favor of additional backstop standards for all 

fleets for both NHTSA and EPA64 generally stated that the emissions reductions and fuel 

savings expected to be achieved by MY 2016 depended on assumptions about fleet mix 

that might not come to pass, and that various kinds of backstop standards or “ratchet 

mechanisms”65 were necessary to ensure that those reductions were achieved in fact. In 

addition, some commenters66 stated that manufacturers might build larger vehicles or 

more trucks during MYs 2012-2016 than the agencies project, for example, because 1) 

any amount of slope in target curves encourages manufacturers to upsize, and 2) lower 

targets for light trucks than for passenger cars encourage manufacturers to find ways to 

reclassify vehicles as light trucks, such as by dropping 2WD versions of SUVs and 

offering only 4WD versions, perhaps spurred by NHTSA’s reclassification of 2WD 

SUVs as passenger cars. Both of these mechanisms will be addressed further below. 

Some commenters also discussed EPA authority under the CAA to set backstops,67

agreeing with EPA’s analysis that section 202 (a) allows such standards since EPA has 

wide discretion under that section to craft standards. 

The following organizations opposed a backstop: Alliance of Automobile 

Manufacturers (AAM), Association of International Automobile Manufacturers (AIAM), 

 

64 ACEEE, American Lung Association, CARB, Christopher Lish, Environment America, EDF, MA DEP, 

NRDC, NESCAUM, Public Citizen, Sierra Club et al., SCAQMD, UCS, WA DE 65 Commenters generally defined a “ratchet mechanism” as an automatic re-calculation of stringency to 

ensure cumulative goals are reached by 2016, even if emissions reductions and fuel savings fall short in the 

earlier years covered by the rulemaking. 

66 CBD, MA DEP, NJ DEP, Public Citizen, Sierra Club et al., UCS 67 CARB, Public Citizen, Sierra Club et al.
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Ford Motor Company, National Automobile Dealers Association (NADA), Toyota Motor 

Company, and the United Auto Workers Union. Commenters stating that additional 

backstops would not be necessary disagreed that upsizing was likely,68 and emphasized 

the anti-backsliding characteristics of the target curves. Others argued that universal 

absolute standards as backstops could restrict consumer choice of vehicles. Commenters 

making legal arguments under EPCA/EISA69 stated that Congress’ silence regarding 

backstops for imported passenger cars and light trucks should be construed as a lack of 

authority for NHTSA to create further backstops. Commenters making legal arguments 

under the CAA70 focused on the lack of clear authority under the CAA to create multiple 

GHG emissions standards for the same fleets of vehicles based on the same statutory 

criteria, and opposed EPA taking steps that would reduce harmonization with NHTSA in 

standard setting. Furthermore, AIAM indicated that EISA’s requirement that the 

combined (car and truck) fuel economy level reach at least 35 mpg by 2020 itself 

constitutes a backstop.71 One individual72 commented that while additional backstop 

standards might be necessary given optimism of fleet mix assumptions, both agencies’ 

authorities would probably need to be revised by Congress to clarify that backstop 

standards (whether for individual fleets or for the national fleet as a whole) were 

permissible. 

 In response, EPA and NHTSA remain confident that their projections of the 

future fleet mix are reliable, and that future changes in the fleet mix of footprints and 

sales are not likely to lead to more than modest changes in projected emissions reductions 

or fuel savings.73 Both agencies thus remain confident in these fleet projections and the 

 

68 For example, the Alliance and Toyota said that upsizing would not be likely because (1) it would not 

necessarily make compliance with applicable standards easier, since larger vehicles tend to be heavier and 

heavier vehicles tend to achieve worse fuel economy/emissions levels; (2) it may require expensive 

platform changes; (3) target curves become increasingly more stringent from year to year, which reduces 

the benefits of upsizing; and (4) the mpg floor and gpm ceiling for the largest vehicles (the point at which 

the curve is “cut off”) discourages manufacturers from continuing to upsize beyond a point because doing 

so makes it increasingly difficult to meet the flat standard at that part of the curve. 69 AIAM, Alliance, Ford, NADA, Toyota 

70 Alliance, Ford, NADA, UAW 

71 NHTSA and EPA agree with AIAM that the EISA 35 mpg requirement in MY 2020 has a backstop-like 

function, in that it requires a certain level of achieved fleetwide fuel economy by a certain date, although it 

is not literally a backstop standard. Considering that NHTSA’s MY 2011 CAFE standards increased 

projected average fuel economy requirements (relative to the MY 2010 standards) at a significantly faster 

rate than would be required to achieve the 35-in-2020 requirement, and considering that the standards being 

finalized today would increase projected average combined fuel economy requirements to 34.1 mpg in MY 

2016, four years before MY 2020, the agencies believe that the U.S. vehicle market would have to shift in 

highly unexpected ways in order to put the 35-in-2020 requirement at risk, even despite the fact that due to 

the attribute-based standards, average fuel economy requirements will vary depending on the mix of 

vehicles produced for sale in the U.S. in each model year. The agencies further emphasize that both 

NHTSA and EPA plan to conduct and document retrospective analyses to evaluate how the market’s 

evolution during the rulemaking timeframe compares with the agencies’ forecasts employed for this 

rulemaking. Additionally, we emphasize that both agencies have the authority, given sufficient lead time, 

to revise their standards upwards if necessary to avoid missing the 35-in-2020 requirement. 72 Schade 

73 For reference, NHTSA’s March 2009 final rule establishing MY 2011 CAFE standards was based on a 

forecast that passenger cars would represent 57.6 percent of the MY 2011 fleet, and that MY 2011 

passenger cars and light trucks would average 45.6 square feet (sf) and 55.1 sf, respectively, such that 
Summary of Interagency Working Comments on Draft Rule under EO 12866

84 

resulting emissions reductions and fuel savings from the standards. As explained in 

Section II.B above, the agencies’ projections of the future fleet are based on the most 

transparent information currently available to the agencies. In addition, there are only a 

relatively few model years at issue. Moreover, market trends today are consistent with 

the agencies’ estimates, showing shifts from light trucks to passenger cars and increased 

emphasis on fuel economy from all vehicles. 

Finally, the shapes of the curves, including the “flattening” at the largest footprint 

values, tend to avoid or minimize regulatory incentives for manufacturers to upsize their 

fleet to change their compliance burden. Given the way the curves are fit to the data 

points (which represent vehicle models’ fuel economy mapped against their footprint), 

the agencies believe that there is little real benefit to be gained by a manufacturer 

upsizing their vehicles. As discussed above, the agencies’ analysis indicates that, for 

passenger car models with footprints falling between the two flattened portions of the 

corresponding curve, the actual slope of fuel economy with respect to footprint, if fit to 

that data by itself, is about 27 percent steeper than the curve the agencies are 

promulgating today. This difference suggests that manufacturers would, if anything, 

have more to gain by reducing vehicle footprint than by increasing vehicle footprint. For 

light trucks, the agencies’ analysis indicates that, for models with footprints falling 

between the two flatted portions of the corresponding curve, the slope of fuel economy 

with respect to footprint is nearly identical to the curve the agencies are promulgating 

today. This suggests that, within this range, manufacturers would typically have little 

incentive to either incrementally increase or reduce vehicle footprint. 

At the same time, adding another backstop standard would have virtually no 

effect if the standard was weak, but a more stringent backstop could compromise the 

objectives served by attribute-based standards – that they distribute compliance burdens 

more equally among manufacturers, and at the same time encourage manufacturers to 

apply fuel-saving technologies rather than simply downsizing their vehicles, as they did 

in past decades under flat standards. This is why Congress mandated attribute-based 

CAFE standards in EISA. This compromise in objectives could occur for any 

manufacturer whose fleet average was above the backstop, irrespective of why they were 

above the backstop and irrespective of whether the industry as a whole was achieving the 

emissions and fuel economy benefits projected for the final standards, the problem the 

backstop is supposed to address. For example, the projected industry wide level of 250 

gm/mile for MY 2016 is based on a mix of manufacturer levels, ranging from 

approximately 205 to 315 gram/mile74 but resulting in an industry wide basis in a fleet 

average of 250 gm/mile. Unless the backstop was at a very weak level, above the high 

end of this range, then some percentage of manufacturers would be above the backstop 

even if the performance of the entire industry remains fully consistent with the emissions 

 average required CAFE levels would be 30.2 mpg, 24.1 mpg, and 27.3 mpg, respectively, for passenger 

cars, light trucks, and the overall light-duty fleet. Based on the agencies’ current market forecast, even as 

soon as MY 2011, passenger cars will comprise a larger share (59.2 percent) of the light vehicle market; 

passenger cars and light trucks will, on average, be smaller by 0.5 sf and 1.3 sf, respectively; and average 

required CAFE levels will be higher by 0.2 mpg, 0.3 mpg, and 0.3 mpg, respectively, for passenger cars, 

light trucks, and the overall light-duty fleet. 

74 Based on estimated standards presented in tables III.B.1-1 and III.B.1-2. 
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85 

and fuel economy levels projected for the final standards. For these manufacturers and 

any other manufacturers who were above the backstop, the objectives of an attribute 

based standard would be compromised and unnecessary costs would be imposed. This 

could directionally impose increased costs for some manufacturers. It would be difficult 

if not impossible to establish the level of a backstop standard such that costs are likely to 

be imposed on manufacturers only when there is a failure to achieve the projected 

reductions across the industry as a whole. An example of this kind of industry wide 

situation could be when there is a significant shift to larger vehicles across the industry as 

a whole, or if there is a general market shift from cars to trucks. The problem the 

agencies are concerned about in those circumstances is not with respect to any single 

manufacturer, but rather is based on concerns over shifts across the fleet as a whole, as 

compared to shifts in one manufacturer's fleet that may be more than offset by shifts the 

other way in another manufacturer's fleet. However, in this respect, a traditional 

backstop acts as a manufacturer specific standard. 

The concept of a ratchet mechanism recognizes this problem, and would impose 

the new more stringent standard only when the problem arises across the industry as a 

whole. While the new more stringent standards would enter into force automatically, 

any such standards would still need to provide adequate lead time for the manufacturers. 

Given the limited number of model years covered by this rulemaking and the short leadtime already before the 2012 model year, a ratchet mechanism in this rulemaking that 

would automatically tighten the standards at some point after model year 2012 is finished 

and apply the new more stringent standards for model years 2016 or earlier, would fail to 

provide adequate lead time for any new, more stringent standards 

 Additionally, we do not believe that the risk of vehicle upsizing or changing 

vehicle offerings to “game” the passenger car and light truck definitions is as great as 

commenters imply for the model years in question.75 The changes that commenters 

suggest manufacturers might make are neither so simple nor so likely to be accepted by 

consumers. For example, 4WD versions of vehicles tend to be more expensive and, other 

things being equal, have inherently lower fuel economy than their 2WD equivalent 

models. Therefore, although there is a market for 4WD vehicles, and some consumers 

might shift from 2WD vehicles to 4WD vehicles if 4WD becomes available at little or no 

extra cost, many consumers still may not desire to purchase 4WD vehicles because of 

concerns about cost premium and additional maintenance requirements; conversely, 

many manufacturers often require the 2WD option to satisfy demand for base vehicle 

models. Additionally, increasing the footprint of vehicles requires platform changes, 

which usually requires a product redesign phase (the agencies estimate that this occurs on 

average once every 5 years for most models). Alternatively, turning many 2WD SUVs 

into 2WD light trucks would require manufacturers to squeeze a third row of seats in or 

significantly increase their GVWR, which also requires a significant change in the 

 

75 We note that NHTSA’s recent clarification of the light truck definitions has significantly reduced the 

potential for gaming, and resulted in the reclassification of over a million vehicles from the light truck to 

the passenger car fleet. 
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vehicle.76 The agencies are confident that the anticipated increases in average fuel 

economy and reductions in average CO2 emission rates can be achieved without 

backstops under EISA or the CAA. As noted above, the agencies plan to conduct 

retrospective analysis to monitor progress. Both agencies have the authority to revise 

standards if warranted, as long as sufficient lead time is provided. 

The agencies acknowledge that the MY 2016 fleet emissions and fuel economy 

goals of 250 g/mi and 34.1 mpg for EPA and NHTSA respectively are estimates and not 

standards (the MY 2012-2016 curves are the standards). Changes in fuel prices, 

consumer preferences, and/or vehicle survival and mileage accumulation rates could 

result in either smaller or larger oil and GHG savings. As explained above and elsewhere 

in the rule, the agencies believe that the possibility of not meeting (or, alternatively, 

exceeding) fuel economy and emissions goals exists, but is not likely Given this, and 

given the potential complexities in designing an appropriate backstop, the agencies 

believe the balance here points to not adopting additional backstops at this time for the 

MYs 2012-2016 standards other than NHTSA’s finalizing of the ones required by 

EPCA/EISA for domestic passenger cars. If, during the timeframe of this rule, the 

agencies observe a significant shift in the manufacturer’s product mix resulting in a 

relaxation of their estimated targets, NHTSA and EPA will reconsider options, both for 

MYs 2012-2016 and future rulemakings. This issue will be discussed further in Sections 

III and IV. 

D. Relative Car-Truck Stringency 

The agencies proposed fleetwide standards with the projected levels of stringency 

of 34.1 mpg or 250 g/mi in MY 2016 (as well as the corresponding intermediate year 

fleetwide standards) for NHTSA and EPA respectively. To determine the relative 

stringency of passenger car and light truck standards for those model years, the agencies 

were concerned that increasing the difference between the car and truck standards (either 

by raising the car standards or lowering the truck standards) could encourage 

manufacturers to build fewer cars and more trucks, likely to the detriment of fuel 

economy and CO2 reductions.77 In order to maintain consistent car/truck standards, the 

agencies applied a constant ratio between the estimated average required performance 

under the passenger car and light truck standards, in order to maintain a stable set of 

incentives regarding vehicle classification. 

To calculate relative car-truck stringency for the proposal, the agencies explored a 

number of possible alternatives, and for the reasons described in the proposal used the 

Volpe model in order to estimate stringencies at which net benefits would be maximized. 

 

76 Increasing the GVWR of a light truck (assuming this was the only goal) can be accomplished in a 

number of ways, and must include consideration of: (1) redesign of wheel axles; (2) improving the vehicle 

suspension; (3) changes in tire specification (which will likely affect ride quality); (4) vehicle dynamics 

development (especially with vehicles equipped with electronic stability control); and (5) brake redesign. 

Depending on the vehicle, some of these changes may be easier or more difficult than others. 

77 For example, since many 2WD SUVs are classified as passenger cars, manufacturers have already 

warned that high car standards relative to truck standards could create an incentive for them to drop the 

2WD version and sell only the 4WD version. 
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The agencies have followed the same approach in calculating the relative car-truck 

stringency for the final standards promulgated today. Further details of the development 

of this approach can be found in Section IV of this preamble as well as in NHTSA’s RIA 

and EIS. NHTSA examined passenger car and light truck standards that would produce 

the proposed combined average fuel economy levels from Table I.B.2-2 above. NHTSA 

did so by shifting downward the curves that maximize net benefits, holding the relative 

stringency of passenger car and light truck standards constant at the level determined by 

maximizing net benefits, such that the average fuel economy required of passenger cars 

remained 31 percent higher than the average fuel economy required of light trucks. This 

methodology resulted in the average fuel economy levels for passenger cars and light 

trucks during MYs 2012-2016 as shown in Table I.B.1-1. The following chart illustrates 

this methodology of shifting the standards from the levels maximizing net benefits to the 

levels consistent with the combined fuel economy standards in this final rule. 
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454035302520

2011 2012 2013 2014 2015 2016

)gpm(EFderiuqeR.evA

Model Year

Combined (National Policy)Cars (Maximizing Net Benefits)Trucks (Maximizing Net Benefits)Combined (Maximizing Net Benefits)Cars (Pending)Trucks (Pending)Combined (Pending)

Passenger CarsCombined Ave.Light Trucks

Figure II.D-1 Shifting the Standards from the Maximizing Net Benefit Levels to the Levels Consistent with the Combined 

Fuel Economy Standards in this Rule 
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The final car and truck standards for EPA (Table I.B.1-4 above) were 

subsequently determined by first converting the average required fuel economy levels to 

average required CO2 emission rates, and then applying the expected air conditioning 

credits for 2012-2016. These A/C credits are shown in the following table. Further 

details of the derivation of these factors can be found in Section III of this preamble or in 

the EPA RIA. 

Table II.D-1 Expected Fleet A/C Credits (in CO2 equivalent g/mi) from 2012-2016

Average Technology 

Penetration 

Average 

credit 

for cars 

Average 

credit for 

trucks 

Average 

credit for 

combined 

fleet 

2012 28%78 3.4 3.8 3.5 

2013 40% 4.8 5.4 5.0 

2014 60% 7.2 8.1 7.5 

2015 80% 9.6 10.8 10.0 

2016 85% 10.2 11.5 10.6 

The agencies sought comment on the use of this methodology for apportioning the 

fleet stringencies to relative car and truck standards for 2012-2016. General Motors 

commented that, compared to the passenger car standard, the light truck standard is too 

stringent because “the most fuel efficient cars and small trucks already meet the 2016 

MY requirements” but “the most fuel efficient large trucks must increase fuel economy 

by 20 percent to meet the 2016 MY requirements.” GM recommended that the agencies 

relax stringency specifically for large pickups, such as the Silverado. 

The agencies disagree with the premise of the comment that the standard is too 

stringent under the applicable statutory provisions because some existing large trucks are 

not already meeting a later model year standard. Our analysis shows that the standards 

are not too stringent for manufacturers selling these vehicles. The agencies’ analyses 

demonstrate a means by which manufacturers could apply cost-effective technologies in 

order to achieve the standards, and we have provided adequate lead time for the 

technology to be applied. More important, the agencies’ analysis demonstrate that the 

fleetwide emission standards for MY 2016 are technically feasible, for example by 

implementing technologies such as engine downsizing, turbocharging, direct injection, 

improving accessories and tire rolling resistance, etc. 

GM did not comment on the use of the methodology applied by the agencies to 

develop the gap between the passenger car and light truck standards—only on the 

outcome of the methodology. For the reasons discussed below, the agencies maintain 

that the methodology applied above provides an appropriate basis to determine the gap 

 

78 We assume slightly higher A/C penetration in 2012 than was assumed in the proposal only to correct for 

rounding that occurred in the curve setting process. 
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between the passenger car and light truck standards, and disagree with GM’s arguments 

that the outcome is unfair. 

First, GM’s argument incorrectly suggests that every individual vehicle model 

must achieve its fuel economy and emissions targets. CAFE standards and new GHG 

emissions standards apply to fleetwide average performance, not model-specific 

performance, even though average required levels are based on average model-specific 

targets, and the agencies’ analysis demonstrates that GM and other manufacturers of 

large trucks can cost-effectively comply with the new standards. 

Second, GM implies that every manufacturer must be challenged equally with 

respect to fuel economy and emissions. Although NHTSA and EPA maintain that 

attribute-based CAFE and GHG emissions standards can more evenly balance 

compliance challenges, attribute-based standards are not intended to and cannot make 

these challenges equal, and while the agencies are mindful of the potential impacts of the 

standards on the relative competitiveness of different vehicle manufacturers, there is 

nothing in EPCA or the CAA79 requiring that these challenges be equal. 

We have also already addressed and rejected GM’s suggestion of shifting the “cut 

off” point for light trucks from 66 square feet to 72 square feet, thereby “dropping the 

floor” of the target function for light trucks. As discussed in the preceding section, this is 

so as not to forego the rules’ energy and environmental benefits, and because there is 

little or no safety basis to discourage downsizing of the largest light trucks. 

Finally, NHTSA and EPA disagree with GM’s claim that the outcome of the 

agencies’ approach is unfairly burdensome for light trucks as compared to passenger cars. 

Based on the agencies’ market forecast, NHTSA’s analysis indicates that incremental 

technology outlays could, on average, be comparable for passenger cars and light trucks 

under the final CAFE standards, and further indicates that the ratio of total benefits to 

total costs could be greater under the final light truck standards than under the final 

passenger car standards. 

 

79 As NHTSA explained in the NPRM, 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 

economy.” CEI-I, 793 F.2d 1322, 1352 (D.C. Cir. 1986). Instead, NHTSA 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. Similarly, 

EPA is afforded great discretion under section 202 (a) of the CAA to balance issues of technical feasibility, 

cost, adequacy of lead time, and safety, and certainly is not required to do so in a manner that imposes 

regulatory obligations uniformly on each manufacturer. See NRDC v. EPA, 655 F. 2d 318, 322, 328 (D.C. 

Cir. 1981) (wide discretion afforded by the statutory factors, and EPA predictions of technical feasibility 

afforded considerable discretion subject to constraints of reasonableness EPA predictions of technical 

feasibility afforded considerable discretion subject to constraints of reasonableness); and cf. International 

Harvester Co. v. Ruckelshaus, 479 F. 2d 615, 640 (D.C. Cir. 1973) ( “as long as feasible technology 

permits the demand for new passenger automobiles to be generally met, the basic requirements of the Act 

would be satisfied, even though this might occasion fewer models and a more limited choice of engine 

types”). 
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E. Joint Vehicle Technology Assumptions 

Vehicle technology assumptions, i.e., assumptions about technologies' cost, 

effectiveness, and the rate at which they can be incorporated into new vehicles, are often 

controversial as they have a significant impact on the levels of the standards. The 

agencies must, therefore, take great care in developing and justifying these estimates. In 

developing technology inputs for the analysis of the MY 2012-2016 standards, the 

agencies reviewed the technology assumptions that NHTSA used in setting the MY 2011 

standards, the comments that NHTSA received in response to its May 2008 Notice of 

Proposed Rulemaking (NPRM), and the comments received in response to the NPRM for 

this rule. This review is consistent with the request by President Obama in his January 26 

memorandum to DOT. In addition, the agencies reviewed the technology input estimates 

identified in EPA’s July 2008 Advance Notice of Proposed Rulemaking. The review of 

these documents was supplemented with updated information from more current 

literature, new product plans from manufacturers, and from EPA certification testing. 

As a general matter, EPA and NHTSA believe that the best way to derive 

technology cost estimates is to conduct real-world tear down studies. Most of the 

commenters on this issue agreed. The advantages not only lie in the rigor of the 

approach, but also in its transparency. These studies break down each technology into its 

respective components, evaluate the costs of each component, and build up the costs of 

the entire technology based on the contribution of each component and the processes 

required to integrate them. As such, tear down studies require a significant amount of 

time and are very costly. EPA has been conducting tear down studies to assess the costs 

of vehicle technologies under a contract with FEV. Further details for this methodology 

is described below and in the TSD. 

 Due to the complexity and time incurred in a tear down study, only a few 

technologies evaluated in this rulemaking have been costed in this manner thus far. The 

agencies prioritized the technologies to be costed first based on how prevalent the 

agencies believed they might be likely to be during the rulemaking time frame, and based 

on their anticipated cost-effectiveness. The agencies believe that the focus on these 

important technologies (listed below) is sufficient for the analysis in this rule, but EPA is 

continuing to analyze more technologies beyond this rule as part of studies both already 

underway and in the future. For most of the other technologies, because tear down 

studies were not yet available, the agencies decided to pursue, to the extent possible, the 

Bill of Materials (BOM) approach as outlined in NHTSA’s MY 2011 final rule. A 

similar approach was used by EPA in the EPA 2008 Staff Technical Report. This 

approach was recommended to NHTSA by Ricardo, an international engineering 

consulting firm retained by NHTSA to aid in the analysis of public comments on its 

proposed standards for MYs 2011-2015 because of its expertise in the area of fuel 

economy technologies. A BOM approach is one element of the process used in tear 

down studies. The difference is that under a BOM approach, the build up of cost 

estimates is conducted based on a review of cost and effectiveness estimates for each 

component from available literature, while under a tear down study, the cost estimates 
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92 

which go into the BOM come from the tear down study itself. To the extent that the 

agencies departed from the MY 2011 CAFE final rule estimates, the agencies explained 

the reasons and provided supporting analyses in the Technical Support Document. 

Similarly, the agencies followed a BOM approach for developing the technology 

effectiveness estimates, insofar as the BOM developed for the cost estimates helped to 

inform the appropriate effectiveness values derived from the literature review. The 

agencies supplemented the information with results from available simulation work and 

real world EPA certification testing. 

The agencies would also like to note that per the Energy Independence and 

Security Act (EISA), the National Academies of Sciences has been conducting a study 

for NHTSA to update Chapter 3 of their 2002 NAS Report, which presents technology 

effectiveness estimates for light-duty vehicles. The update takes a fresh look at that list 

of technologies and their associated cost and effectiveness values. The updated NAS 

report was expected to be available on September 30, 2009, but has not been completed 

and released to the public. The results from this study thus are unavailable for this 

rulemaking. The agencies look forward to considering the results from this study as part 

of the next round of rulemaking for CAFE/GHG standards. 

1. What Technologies Did the Agencies Consider?

The agencies considered over 35 vehicle technologies that manufacturers could 

use to improve the fuel economy and reduce CO2 emissions 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. Other technologies considered may not currently be in production, but are 

beyond the research phase and under development, and are expected to be in production 

in the next few years. These are technologies which can, for the most part, be applied 

both to cars and trucks, and which are capable of achieving significant improvements in 

fuel economy and reductions in CO2 emissions, at reasonable costs. The agencies did not 

consider technologies in the research stage because the lead time available for this rule is 

not sufficient to move most of these technologies from research to production. 

The technologies considered in the agencies’ analysis are briefly described below. 

They fall into five broad categories: engine technologies, transmission technologies, 

vehicle technologies, electrification/accessory technologies, and hybrid technologies. For 

a more detailed description of each technology and their costs and effectiveness, we refer 

the reader to Chapter 3 of the Joint TSD, Chapter III of NHTSA’s FRIA, and Chapter 1 

of EPA’s final RIA. Technologies to reduce CO2 and HFC emissions from air 

conditioning systems are discussed in Section III of this preamble and in EPA’s final 

RIA. 

Types of engine technologies that improve fuel economy and reduce CO2

emissions include the following: 
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• Low-friction lubricants – low viscosity and advanced low friction lubricants oils 

are now available with improved performance and better lubrication. If 

manufacturers choose to make use of these lubricants, they would need to make 

engine changes and possibly conduct durability testing to accommodate the lowfriction lubricants. 

• Reduction of engine friction losses – can be achieved through low-tension piston 

rings, roller cam followers, improved material coatings, more optimal thermal 

management, piston surface treatments, and other improvements in the design of 

engine components and subsystems that improve engine operation. 

• Conversion to dual overhead cam with dual cam phasing – as applied to overhead 

valves designed to increase the air flow with more than two valves per cylinder 

and reduce pumping losses.

• Cylinder deactivation – deactivates the intake and exhaust valves and prevents 

fuel injection into some cylinders during light-load operation. The engine runs 

temporarily as though it were a smaller engine which substantially reduces 

pumping losses.

• Variable valve timing – alters the timing of the intake valve, exhaust valve, or 

both, primarily to reduce pumping losses, increase specific power, and control 

residual gases.

• Discrete variable valve lift – increases efficiency by optimizing air flow over a 

broader range of engine operation which reduces pumping losses. Accomplished 

by controlled switching between two or more cam profile lobe heights. 

• Continuous variable valve lift – is an electromechanically controlled system in 

which valve timing is changed as lift height is controlled. This yields a wide 

range of performance optimization and volumetric efficiency, including enabling 

the engine to be valve throttled. 

• Stoichiometric gasoline direct-injection technology – injects fuel at high pressure 

directly into the combustion chamber to improve cooling of the air/fuel charge 

within the cylinder, which allows for higher compression ratios and increased 

thermodynamic efficiency. 

• Combustion restart – can be used in conjunction with gasoline direct-injection 

systems to enable idle-off or start-stop functionality. Similar to other start-stop 

technologies, additional enablers, such as electric power steering, accessory drive 

components, and auxiliary oil pump, might be required. 

• Turbocharging and downsizing – increases the available airflow and specific 

power level, allowing a reduced engine size while maintaining performance. This 

reduces pumping losses at lighter loads in comparison to a larger engine.
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• Exhaust-gas recirculation boost – increases the exhaust-gas recirculation used in 

the combustion process to increase thermal efficiency and reduce pumping losses. 

• Diesel engines – have several characteristics that give superior fuel efficiency, 

including reduced pumping losses due to lack of (or greatly reduced) throttling, 

and a combustion cycle that operates at a higher compression ratio, with a very 

lean air/fuel mixture, relative to an equivalent-performance gasoline engine. This 

technology requires additional enablers, such as NOx trap catalyst after-treatment 

or selective catalytic reduction NOx after-treatment. The cost and effectiveness 

estimates for the diesel engine and aftertreatment system utilized in this final rule 

have been revised from the NHTSA MY 2011 CAFE final rule. Additionally, the 

diesel technology option has been made available to small cars in the Volpe and 

OMEGA models. Though this is not expected to make a significant difference in 

the modeling results, the agencies agreed with the commenters that supported 

such a revision. 

Types of transmission technologies considered include: 

• Improved automatic transmission controls – optimizes shift schedule to maximize 

fuel efficiency under wide ranging conditions, and minimizes losses associated 

with torque converter slip through lock-up or modulation. 

• Six-, seven-, and eight-speed automatic transmissions – the gear ratio spacing and 

transmission ratio are optimized to enable the engine to operate in a more efficient 

operating range over a broader range of vehicle operating conditions. 

• Dual clutch or automated shift manual transmissions – are similar to manual 

transmissions, but the vehicle controls shifting and launch functions. A dualclutch automated shift manual transmission uses separate clutches for evennumbered and odd-numbered gears, so the next expected gear is pre-selected, 

which allows for faster and smoother shifting.

• Continuously variable transmission – commonly uses V-shaped pulleys 

connected by a metal belt rather than gears to provide ratios for operation. Unlike 

manual and automatic transmissions with fixed transmission ratios, continuously 

variable transmissions can provide fully variable and an infinite number of 

transmission ratios that enable the engine to operate in a more efficient operating 

range over a broader range of vehicle operating conditions. 

• Manual 6-speed transmission –offers an additional gear ratio, often with a higher 

overdrive gear ratio, than a 5-speed manual transmission. 

Types of vehicle technologies considered include: 

• Low-rolling-resistance tires – have characteristics that reduce frictional losses 

associated with the energy dissipated in the deformation of the tires under load, 

thereby improving fuel economy and reducing CO2 emissions. 
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• Low-drag brakes – reduce the sliding friction of disc brake pads on rotors when 

the brakes are not engaged because the brake pads are pulled away from the 

rotors. 

• Front or secondary axle disconnect for four-wheel drive systems – provides a 

torque distribution disconnect between front and rear axles when torque is not 

required for the non-driving axle. This results in the reduction of associated 

parasitic energy losses. 

• Aerodynamic drag reduction – is achieved by changing vehicle shape or reducing 

frontal area, including skirts, air dams, underbody covers, and more aerodynamic 

side view mirrors. 

• Mass reduction and material substitution – Mass reduction encompasses a variety 

of techniques ranging from improved design and better component integration to 

application of lighter and higher-strength materials. Mass reduction is further 

compounded by reductions in engine power and ancillary systems (transmission, 

steering, brakes, suspension, etc.). The agencies recognize there is a range of 

diversity and complexity for mass reduction and material substitution 

technologies and there are many techniques that automotive suppliers and 

manufacturers are using to achieve the levels of this technology that the agencies 

have modeled in our analysis for the final standards. 

Types of electrification/accessory and hybrid technologies considered include: 

• Electric power steering (EPS) – is an electrically-assisted steering system that has 

advantages over traditional hydraulic power steering because it replaces a 

continuously operated hydraulic pump, thereby reducing parasitic losses from the 

accessory drive.

•

• Improved accessories (IACC) – may include high efficiency alternators, 

electrically driven (i.e., on-demand) water pumps and cooling fans. This excludes 

other electrical accessories such as electric oil pumps and electrically driven air 

conditioner compressors. The latter is covered explicitly within the A/C credit 

program. 

• Air Conditioner Systems – These technologies include improved hoses, 

connectors and seals for leakage control. They also include improved 

compressors, expansion valves, heat exchangers and the control of these 

components for the purposes of improving tailpipe CO2 emissions as a result of 

A/C use. These technologies are discussed later in this preamble and covered 

separately in the EPA RIA. 

• 12-volt micro-hybrid (MHEV) – also known as idle-stop or start-stop and 

commonly implemented as a 12-volt belt-driven integrated starter-generator, this 

is the most basic hybrid system that facilitates idle-stop capability. Along with 
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other enablers, this system replaces a common alternator with a belt-driven 

enhanced power starter-alternator, and a revised accessory drive system.

• Higher Voltage Stop-Start/Belt Integrated Starter Generator (BISG) – provides 

idle-stop capability and uses a higher voltage battery with increased energy 

capacity over typical automotive batteries. The higher system voltage allows the 

use of a smaller, more powerful electric motor. This system replaces a standard 

alternator with an enhanced power, higher voltage, higher efficiency starteralternator, that is belt driven and that can recover braking energy while the vehicle 

slows down (regenerative braking).

• Integrated Motor Assist (IMA)/Crank integrated starter generator (CISG) – 

provides idle-stop capability and uses a high voltage battery with increased 

energy capacity over typical automotive batteries. The higher system voltage 

allows the use of a smaller, more powerful electric motor and reduces the weight 

of the wiring harness. This system replaces a standard alternator with an 

enhanced power, higher voltage, higher efficiency starter-alternator that is 

crankshaft mounted and can recover braking energy while the vehicle slows down 

(regenerative braking).

• 2-mode hybrid (2MHEV) – is a hybrid electric drive system that uses an 

adaptation of a conventional stepped-ratio automatic transmission by replacing 

some of the transmission clutches with two electric motors that control the ratio of 

engine speed to vehicle speed, while clutches allow the motors to be bypassed. 

This improves both the transmission torque capacity for heavy-duty applications 

and reduces fuel consumption and CO2 emissions at highway speeds relative to 

other types of hybrid electric drive systems.

• Power-split hybrid (PSHEV) – a hybrid electric drive system that replaces the 

traditional transmission with a single planetary gearset and a motor/generator. 

This motor/generator uses the engine to either charge the battery or supply 

additional power to the drive motor. A second, more powerful motor/generator is 

permanently connected to the vehicle’s final drive and always turns with the 

wheels. The planetary gear splits engine power between the first motor/generator 

and the drive motor to either charge the battery or supply power to the wheels.

• Plug-in hybrid electric vehicles (PHEV) – are hybrid electric vehicles with the 

means to charge their battery packs from an outside source of electricity (usually 

the electric grid). These vehicles have larger battery packs with more energy 

storage and a greater capability to be discharged than other hybrids. They also 

use a control system that allows the battery pack to be substantially depleted 

under electric-only or blended mechanical/electric operation. 

• Electric vehicles (EV) – are vehicles with all-electric drive and with vehicle 

systems powered by energy-optimized batteries charged primarily from grid 

electricity. 
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The cost estimates for the various hybrid systems have been revised from the 

estimates used in the MY 2011 CAFE final rule, in particular with respect to estimated 

battery costs. 

2. How did the Agencies Determine the Costs and Effectiveness of Each of 

These Technologies?

As mentioned above, EPA and NHTSA believe that the best way to derive 

technology cost estimates is to conduct real-world tear down studies. To date, the costs 

of the following five technologies have been evaluated with respect to their baseline (or 

replaced) technologies. For these technologies noted below, the agencies relied on the 

tear down data available and scaling methodologies used in EPA’s ongoing study with 

FEV. Only the cost estimate for the first technology on the list below was used in the 

NPRM. The others were completed subsequent to the publication of the NPRM. 

1. Stoichiometric gasoline direct injection and turbo charging with engine 

downsizing (T-DS) for a large DOHC 4 cylinder engine to a small DOHC 

(dual overhead cam) 4 cylinder engine. 

2. Stoichiometric gasoline direct injection and turbo charging with engine 

downsizing for a SOHC single overhead cam) 3 valve/cylinder V8 engine 

to a SOHC V6 engine. 

3. Stoichiometric gasoline direct injection and turbo charging with engine 

downsizing for a DOHC V6 engine to a DOHC 4 cylinder engine. 

4. 6-speed automatic transmission replacing a 5-speed automatic 

transmission. 

5. 6-speed wet dual clutch transmission (DCT) replacing a 6-speed automatic 

transmission. 

 This costing methodology has been published and gone through a peer review.80 

Using this tear down costing methodology, FEV has developed costs for each of the 

above technologies. In addition, FEV and EPA extrapolated the engine downsizing costs 

for the following scenarios that were outside of the noted study cases:81

1. Downsizing a SOHC 2 valve/cylinder V8 engine to a DOHC V6. 

2. Downsizing a DOHC V8 to a DOHC V6. 

3. Downsizing a SOHC V6 engine to a DOHC 4 cylinder engine. 

4. Downsizing a DOHC 4 cylinder engine to a DOHC 3 cylinder engine. 

 The agencies relied on the findings of FEV in part for estimating the cost of these 

technologies in this rulemaking. However, for some of the technologies, NHTSA and 

EPA modified FEV’s estimated costs. FEV made the assumption that these technologies 

would be mature when produced in large volumes (450,000 units or more). The agencies 

believe that there is some uncertainty regarding each manufacturer’s near-term ability to 

employ the technology at the volumes assumed in the FEV analysis. There is also the 

 

80 EPA-420-R-09-020; EPA docket number EPA-HQ-OAR-2009-0472-11282 and 11285 

81 XX the methodology for which can be found in a memo to the docket titled " " 
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potential for near term (earlier than 2016) supplier-level Engineering, Design and Testing 

(ED&T) costs to be in excess of those considered in the FEV analysis as existing 

equipment and facilities are converted to production of new technologies. The agencies 

have therefore decided to average the FEV results with the NPRM values in an effort to 

account for these near-term factors. This methodology was done for the following 

technologies: 

1. Converting a port-fuel injected (PFI) DOHC I4 to a turbocharged-downsizedstoichiometric GDI DOHC I3. 

2. Converting a PFI DOHC V6 engine to a T-DS-stoichiometric GDI DOHC I4. 

3. Converting a PFI SOHC V6 engine to a T-DS-stoichiometric GDI DOHC I4. 

4. Converting a PFI DOHC V8 engine to a T-DS-stoichiometric GDI DOHC V6. 

5. Converting a PFI SOHC 3V V8 engine to a T-DS-stoichiometric GDI DOHC 

V6. 

6. Converting a PFI SOHC 2V V8 engine to a T-DS-stoichiometric GDI DOHC 

V6. 

7. Replacing a 4-speed automatic transmission with a 6-speed automatic 

transmission. 

8. Replacing a 5-speed automatic transmission with a 6-speed automatic 

transmission. 

9. Replacing a 6-speed automatic transmission with a 6-speed wet dual clutch 

transmission. 

For the I4 to Turbo GDI I4 study applied in the NPRM, the agencies requested 

from FEV an adjusted cost estimate which accounted for these uncertainties as an 

adjustment to the base technology burden rate.82 These new costs are used in the final 

rules. These details are also further described in the memo to the docket.83 The 

confidential information provided by manufacturers as part of their product plan 

submissions to the agencies or discussed in meetings between the agencies and the 

manufacturers and suppliers served largely as a check on publicly-available data. 

For the other technologies, considering all sources of information (including 

public comments) and using the BOM approach, the agencies worked together 

intensively to determine component costs for each of the technologies and build up the 

costs accordingly. Where estimates differ between sources, we have used our 

engineering judgment to arrive at what we believe to be the best available cost estimate, 

and explained the basis for that exercise of judgment in the TSD. Building on NHTSA’s 

estimates developed for the MY 2011 CAFE final rule and EPA’s Advance Notice of 

 

82 Burden costs include the following fixed and variable costs: rented and leased equipment; manufacturing 

equipment depreciation; plant office equipment depreciation; utilities expense; insurance (fire and general); 

municipal taxes; plant floor space (equipment and plant offices); maintenance of manufacturing equipment 

- non-labor; maintenance of manufacturing building - general, internal and external, parts, and labor; 

operating supplies; perishable and supplier-owned tooling; all other plant wages (excluding direct, indirect 

and MRO labor); returnable dunnage maintenance; and intra-company shipping costs (see EPA-HQ-OAR2009-0472-0149). 

83 XX Reference memo to docket. 
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Proposed Rulemaking, which relied on the EPA 2008 Staff Technical Report,84 the 

agencies took a fresh look at technology cost and effectiveness values for purposes of the 

joint rulemaking under the National Program. For costs, the agencies reconsidered both 

the direct or “piece” costs and indirect costs of individual components of technologies. 

For the direct costs, the agencies followed a bill of materials (BOM) approach employed 

in NHTSA’s MY 2011 final rule based on recommendation from Ricardo, Inc., as 

described above. EPA used a similar approach in the EPA 2008 Staff Technical Report. 

A bill of materials, in a general sense, is a list of components or sub-systems that make 

up a system—in this case, an item of fuel economy-improving technology. In order to 

determine what a system costs, one of the first steps is to determine its components and 

what they cost. 

NHTSA and EPA estimated these components and their costs based on a number 

of sources for cost-related information. The objective was to use those sources of 

information considered to be most credible for projecting the costs of individual vehicle 

technologies. For example, while NHTSA and Ricardo engineers had relied considerably 

in the MY 2011 final rule on the 2008 Martec Report for costing contents of some 

technologies, upon further joint review and for purposes of the MY 2012-2016 standards, 

the agencies decided that some of the costing information in that report was no longer 

accurate due to downward trends in commodity prices since the publication of that report. 

The agencies reviewed, then revalidated or updated cost estimates for individual 

components based on new information. Thus, while NHTSA and EPA found that much 

of the cost information used in NHTSA’s MY 2011 final rule and EPA’s staff report was 

consistent to a great extent, the agencies, in reconsidering information from many 

sources,85,86,87,88,89,90,91 revised several component costs of several major technologies: 

turbocharging with engine downsizing (as described above), mild and strong hybrids, 

diesels, stoichiometric gasoline direct injection fuel systems, and valve train lift 

technologies. These are discussed at length in the Joint TSD and in NHTSA’s final RIA. 

 

84 EPA Staff Technical Report: Cost and Effectiveness Estimates of Technologies Used to Reduce LightDuty Vehicle Carbon Dioxide Emissions. EPA420-R-08-008, March 2008. 

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

Standards,” National Academy Press, Washington, DC (2002) (the “2002 NAS Report”), available at 

http://www.nap.edu/openbook.php?isbn=0309076013 (last accessed August 7, 2009-update) 86 Northeast States Center for a Clean Air Future (NESCCAF), “Reducing Greenhouse Gas Emissions from 

Light-Duty Motor Vehicles,” 2004 (the “2004 NESCCAF Report”), available at 

http://www.nesccaf.org/documents/rpt040923ghglightduty.pdf (last accessed August 7, 2009-update) 87 “Staff Report: Initial Statement of Reasons for Proposed Rulemaking, Public Hearing to Consider 

Adoption of Regulations to Control Greenhouse Gas Emissions from Motor Vehicles,” California 

Environmental Protection Agency, Air Resources Board, August 6, 2004. 

88 Energy and Environmental Analysis, Inc., “Technology to Improve the Fuel Economy of Light Duty 

Trucks to 2015,” 2006 (the “2006 EEA Report”), Docket EPA-HQ-OAR-2009-0472 

89 Martec, “Variable Costs of Fuel Economy Technologies,” June 1, 2008, (the “2008 Martec Report”) 

available at Docket No. NHTSA-2008-0089-0169.1 

90 Vehicle fuel economy certification data 

91 Confidential data submitted by manufacturers in response to the March 2009 and other requests for 

product plans. 
Summary of Interagency Working Comments on Draft Rule under EO 12866

100 

Once costs were determined, they were adjusted to ensure that they were all 

expressed in 2007 dollars using a ratio of GDP values for the associated calendar years,92

and indirect costs were accounted for using the ICM (indirect cost multiplier) approach 

explained in Chapter 3 of the Joint TSD, rather than using the traditional Retail Price 

Equivalent (RPE) multiplier approach. A report explaining how EPA developed the ICM 

approach can be found in the docket for this rule. The comments addressing the ICM 

approach were generally positive and encouraging. However, one commenter suggested 

that we had mischaracterized the complexity of a few of our technologies, which would 

result in higher or lower markups than presented in the NPRM. That commenter also 

suggested that we had used the ICMs as a means of placing a higher level of 

manufacturer learning on the cost estimates. The latter comment is not true and the 

methodology behind the ICM approach is explained in detail in the reports that are 

available in the docket for this rule.93 The former is open to debate given the subjective 

nature of the engineering analysis behind it, but upon further thought both agencies 

believe that the complexities used in the NPRM were appropriate and have, therefore, 

carried those forward into the final rule. We discuss this in greater detail in the Response 

to Comments document. 

Regarding estimates for technology effectiveness, NHTSA and EPA also 

reexamined the estimates from NHTSA’s MY 2011 final rule and EPA’s ANPRM and 

2008 Staff Technical Report, which were largely consistent with NHTSA’s 2008 NPRM 

estimates. The agencies also reconsidered other sources such as the 2002 NAS Report, 

the 2004 NESCCAF report, recent CAFE compliance data (by comparing similar 

vehicles with different technologies against each other in fuel economy testing, such as a 

Honda Civic Hybrid versus a directly comparable Honda Civic conventional drive), and 

confidential manufacturer estimates of technology effectiveness. NHTSA and EPA 

engineers reviewed effectiveness information from the multiple sources for each 

technology and ensured that such effectiveness estimates were based on technology 

hardware consistent with the BOM components used to estimate costs. The agencies also 

carefully examined the pertinent public comments. Together, they compared the multiple 

estimates and assessed their validity, taking care to ensure that common BOM definitions 

and other vehicle attributes such as performance, refinement, and drivability were taken 

into account. However, because the agencies’ respective models employ different 

numbers of vehicle subclasses and use different modeling techniques to arrive at the 

standards, direct comparison of BOMs was somewhat more complicated. To address this 

and to confirm that the outputs from the different modeling techniques produced the same 

result, NHTSA and EPA developed mapping techniques, devising technology packages 

and mapping them to corresponding incremental technology estimates. This approach 

helped compare the outputs from the incremental modeling technique to those produced 

 

92 NHTSA examined the use of the CPI multiplier instead of GDP for adjusting these dollar values, but 

found the difference to be exceedingly small – only $0.14 over $100. 

93 Rogozhin, Alex, Michael Gallaher, and Walter McManus, “Automobile Industry Retail Price Equivalent 

and Indirect Cost Multipliers,” EPA 420-R-09-003, Docket EPA Docket EPA-HQ-OAR-2009-0472-0142, 

February 2009, http://epa.gov/otaq/ld-hwy/420r09003.pdf; A. Rogozhin et al., International Journal of 

Production Economics 124 (2010) 360–368, Volume 124, Issue 2, April 2010.
Summary of Interagency Working Comments on Draft Rule under EO 12866

101 

by the technology packaging approach to ensure results that are consistent and could be 

translated into the respective models of the agencies. 

In general, most effectiveness estimates used in both the MY 2011 final rule and 

the 2008 EPA staff report were determined to be accurate and were carried forward 

without significant change first into the NPRM, and now into these final rules. When 

NHTSA and EPA’s estimates for effectiveness diverged slightly due to differences in 

how the agencies apply technologies to vehicles in their respective models, we report the 

ranges for the effectiveness values used in each model. There were only a few comments 

on the technology effectiveness estimates used in the NPRM. Most of the technologies 

that were mentioned in the comments were the more advanced technologies that are not 

assumed to have large penetrations in the market within the timeframe of this rule, 

notably hybrid technologies. Even if the effectiveness figures for hybrid vehicles were 

adjusted, it would have made little difference in the NHTSA and EPA analysis of the 

impacts and costs of the rule. The response to comments document has more specific 

responses to these comments. 

The agencies note that the effectiveness values estimated for the technologies 

considered in the modeling analyses may represent average values, and do not reflect the 

enormous spectrum of possible values that could result from adding the technology to 

different vehicles. For example, while the agencies have estimated an effectiveness of 

0.5 percent for low friction lubricants, each vehicle could have a unique effectiveness 

estimate depending on the baseline vehicle’s oil viscosity rating. Similarly, the reduction 

in rolling resistance (and thus the improvement in fuel economy and the reduction in CO2

emissions) due to the application of low rolling resistance tires depends not only on the 

unique characteristics of the tires originally on the vehicle, but on the unique 

characteristics of the tires being applied, characteristics which must be balanced between 

fuel efficiency, safety, and performance. Aerodynamic drag reduction is much the 

same—it can improve fuel economy and reduce CO2 emissions, but it is also highly 

dependent on vehicle-specific functional objectives. For purposes of the final standards, 

NHTSA and EPA believe that employing average values for technology effectiveness 

estimates, as adjusted depending on vehicle subclass, is an appropriate way of 

recognizing the potential variation in the specific benefits that individual manufacturers 

(and individual vehicles) might obtain from adding a fuel-saving technology. 

Chapter 3 of the Joint Technical Support Document contains a detailed 

description of our assessment of vehicle technology cost and effectiveness estimates. 

The agencies note that the technology costs included in this final rule take into account 

only those associated with the initial build of the vehicle. Although comments were 

received to the NPRM that suggested there could be additional maintenance required with 

some new technologies (e.g., turbocharging, hybrids, etc.), and that additional 

maintenance costs could occur as a result, the agencies do not believe that the amount of 

additional cost will be significant in the timeframe of this rulemaking, based on the 

relatively low application rates for these technologies. The agencies will undertake a 

more detailed review of these potential costs in preparation for the next round of 

CAFE/GHG standards. 
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102 

F. Joint Economic Assumptions

The agencies’ final analysis of alternative CAFE and GHG standards for the 

model years covered by this final rulemaking rely on a range of forecast information, 

economic estimates, and input parameters. This section briefly describes the agencies’ 

choices of specific parameter values. These economic values play a significant role in 

determining the benefits of both CAFE and GHG standards. 

In reviewing these variables and the agency’s estimates of their values for 

purposes of this final rule, NHTSA and EPA reconsidered previous comments that 

NHTSA had received, reviewed newly available literature, and reviewed comments 

received in response to the proposed rule. For this final rule, we made three major 

changes to the economic assumptions. First, we revised the technology costs to reflect 

more recently available data. Second, we updated fuel price and transportation demand 

assumptions to reflect the Annual Energy Outlook (AEO) 2010 Early Release. Third, we 

have updated our estimates of the social cost of carbon (SCC) based on a recent 

interagency process. The key economic assumptions are summarized below, and are 

discussed in greater detail in Section III (EPA) and Section IV (NHTSA), as well as in 

Chapter 4 of the Joint TSD, Chapter VIII of NHTSA’s RIA and Chapter 8 of EPA’s RIA. 

• Costs of fuel economy-improving technologies – These estimates are presented in 

summary form above and in more detail in the agencies’ respective sections of 

this preamble, in Chapter 3 of the Joint TSD, and in the agencies’ respective 

RIAs. 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 cost 

reductions due to “learning curve” effects have been fully realized. Costs are then 

modified by applying near-term 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, depending on the 

complexity of the technology and the time frame over which costs are estimated. 

This accounts for both the direct and indirect costs associated with implementing 

new technologies in response to this final rule. The technology cost estimates for 

a select group of technologies have changed since the NPRM. These changes, as 

summarized in Section II.E and in Chapter 3 of the Joint TSD, were made in 

response to updated cost estimates available to the agencies shortly after 

publication of the NPRM, not in response to comments. In general, commenters 

were supportive of the cost estimates used in the NPRM and the transparency of 

the methodology used to generate them. 

• Potential opportunity costs of improved fuel economy – This estimate addresses 

the possibility that achieving the fuel economy improvements required by 

alternative CAFE or GHG standards would require manufacturers to compromise 

the performance, carrying capacity, safety, or comfort of their vehicle models. If 

it did so, the resulting sacrifice in the value of these attributes to consumers would 
Summary of Interagency Working Comments on Draft Rule under EO 12866

103 

represent an additional cost of achieving the required improvements, and thus of 

manufacturers’ compliance with stricter standards. Currently the agencies assume 

that these vehicle attributes do not change, and include the cost of maintaining 

these attributes as part of the cost estimates for technologies. However, it is 

possible that the technology cost estimates do not include adequate allowance for 

the necessary efforts by manufacturers to maintain vehicle performance, carrying 

capacity, and utility while improving fuel economy and reducing GHG emissions. 

While, in principle, consumer vehicle demand models can measure these effects, 

these models do not appear to be robust across specifications, since authors derive 

a wide range of willingness-to-pay values for fuel economy from these models, 

and there is not clear guidance from the literature on whether one specification is 

clearly preferred over another. This issue is discussed in EPA’s RIA, Section 

8.1.2 and NHTSA’s RIA Section XXX. The agencies requested comment on how 

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. Commenters did not 

provide recommendations for how to evaluate the quality of different models or 

identify a model appropriate for the agencies’ purposes. Some commenters 

expressed various concerns about the use of existing consumer vehicle choice 

models. While EPA and NHTSA are not using a consumer vehicle choice model 

to analyze the effects of this rule, we continue to investigate these models. 

• The on-road fuel economy “gap” – Actual fuel economy levels achieved by lightduty vehicles in on-road driving fall somewhat short of their levels measured 

under the laboratory-like test conditions used by NHTSA and EPA to establish 

compliance with the final CAFE and GHG standards. The agencies use an onroad fuel economy gap for light-duty vehicles of 20 percent lower than published 

fuel economy levels. For example, if the measured CAFE fuel economy value 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).94 NHTSA previously 

used this estimate in its MY 2011 final rule, and the agencies confirmed it based 

on independent analysis for use in this FRM. No substantive comments were 

received on this input. 

• Fuel prices and the value of saving fuel – Projected future fuel prices are a critical 

input into the preliminary economic analysis of alternative standards, because 

they determine the value of fuel savings both to new vehicle buyers and to 

society. For the proposed rule, the agencies had relied on the then most recent 

fuel price projections from the U.S. Energy Information Administration’s (EIA) 

Annual Energy Outlook (AEO) 2009 (Revised Updated). However, for this final 

rule, the agencies have updated the analyses based on AEO 2010 (December 2009 

Early Release) Reference Case forecasts of inflation-adjusted (constant-dollar) 

 

94 U.S. Environmental Protection Agency, Final Technical Support Document, Fuel Economy Labeling of 

Motor Vehicle Revisions to Improve Calculation of Fuel Economy Estimates, EPA420-R-06-017, 

December 2006. 
Summary of Interagency Working Comments on Draft Rule under EO 12866

104 

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.95 AEO 

2010 includes slightly lower petroleum prices compared to AEO 2009. 

The forecasts of fuel prices reported in EIA’s AEO 2010 Early Release Reference 

Case extends through 2035, compared to the AEO 2009 which only went through 

2030. As in the proposal, fuel prices beyond the time frame of AEO’s forecast 

were estimated using an average growth rate. 

While EIA revised AEO 2010, the vehicle MPG standards are similar to those that 

were published in AEO 2009. No substantive comments were received on the 

use of AEO as a source of fuel prices.96

• Consumer valuation of fuel economy and payback period – In estimating the 

value of fuel economy improvements that would result from alternative CAFE 

and GHG standards to potential vehicle buyers, the agencies assume 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 that buyers discount the 

value of these future fuel savings using rates of 3% and 7%. There is a large 

literature that looks at discount rates used by individual consumers that point to 

the possibility of higher discount rates. Likewise, our characterization of private 

fuel savings assumes that consumers do not face a loss in welfare due to mandated 

purchase of more fuel economy than they would choose absent regulation. This 

assumption is also discussed in greater detail in the accompanying TSDs and in 

the RIAs.The five-year figure represents the current average term of consumer 

loans to finance the purchase of new vehicles. One commenter argued that 

higher-fuel-economy vehicles should have higher resale prices than vehicles with 

lower fuel economy, but did not provide supporting data. This revision, if made, 

would increase the net benefits of the rule. Another commenter supported the use 

of a five-year payback period for this analysis. In the absence of data to support 

changes, EPA and NHTSA have kept the same assumptions. 

• Vehicle sales assumptions – The first step in estimating lifetime fuel consumption 

by vehicles produced during a model year is to calculate the number of vehicles 

expected to be produced and sold.97 The agencies relied on the AEO 2010 Early 

 

95 Energy Information Administration, Annual Energy Outlook 2010, Early Release Reference Case 

(December 2009), Table 12. Available at http://www.eia.doe.gov/oiaf/aeo/aeoref_tab.html (last accessed 

February 02, 2010). 

96 XX Cite memo to docket concerning this issue. 

97 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 2 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 

Comment [A20]: AEO 2010 has CAFÉ in its 

reference case, and states that this affected sales. 

This should be subtracted out. 
Summary of Interagency Working Comments on Draft Rule under EO 12866

105 

Release for forecasts of total vehicle sales, while the baseline market forecast 

developed by the agencies (see Section II.B) divided total projected sales into 

sales of cars and light trucks. 

• Vehicle survival assumptions -- We then applied updated values of age-specific 

survival rates for cars and light trucks to these adjusted forecasts of passenger car 

and light truck sales to determine the number of these vehicles remaining in use 

during each year of their expected lifetimes. No substantive comments were 

received on vehicle survival assumptions. 

• Total vehicle use – We then calculated the total number of miles that cars and 

light trucks produced in each model year will be driven during each year of their 

lifetimes using estimates of annual vehicle use by age tabulated from the Federal 

Highway Administration’s 2001 National Household Transportation Survey 

(NHTS),98 adjusted to account for the effect on vehicle use of subsequent 

increases in fuel prices. Due to the lower fuel prices projected in AEO 2010, the 

average vehicle is estimated to be used slightly more (~3 percent) over its lifetime 

than assumed in the proposal. In order to insure that the resulting mileage 

schedules imply reasonable estimates of future growth in total car and light truck 

use, we calculated the rate of growth in annual car and light truck mileage at each 

age that is necessary for total car and light truck travel to increase at the rates 

forecast in the AEO 2010 Early Release Reference Case. The growth rate in 

average annual car and light truck use produced by this calculation is 

approximately 1.1 percent per year.99 This rate 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. 100 While commenters 

requested further detail on the assumptions regarding total vehicle use, no specific 

issues were raised. 

• Accounting for the rebound effect of higher fuel economy – The 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 more stringent 

CAFE and GHG 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. We received comments supporting our proposed value of 10 

percent, although we also received comments recommending higher and lower 

 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 Feb. 15, 2010). 98 For a description of the Survey, see http://nhts.ornl.gov/quickStart.shtml (last accessed July 27, 2009). 99 It was not possible to estimate separate growth rates in average annual use for cars and light trucks, 

because of the significant reclassification of light truck models as passenger cars discussed previously. 100 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 for 

passenger cars and about 16 percent for light trucks. 
Summary of Interagency Working Comments on Draft Rule under EO 12866

106 

values. However, we did not receive any new data or comments that justify 

revising the 10 percent value for the rebound effect at this time. 

• 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. These 

benefits are measured by the net “consumer surplus” resulting from increased 

vehicle use, over and above the fuel expenses associated with this additional 

travel. We estimate the economic value of the consumer surplus provided by 

added driving using the conventional approximation, which is one half of the 

product of the decline in vehicle operating costs per vehicle-mile and the resulting 

increase in the annual number of miles driven. Because it depends on the extent 

of improvement in fuel economy, the value of benefits from increased vehicle use 

changes by model year and varies among alternative standards. 

• The value of increased driving range – By reducing the frequency with which 

drivers typically refuel their vehicles, and by extending the upper limit of the 

range they can travel before requiring refueling, improving fuel economy and 

reducing GHG emissions thus provides some additional benefits to their owners. 

No direct estimates of the value of extended vehicle range are readily available, so 

the agencies’ analysis calculates the reduction in the annual number of required 

refueling cycles that results from improved fuel economy, and applies DOTrecommended values of travel time savings to convert the resulting time savings 

to their economic value.101 Please see the Chapter 4 of the Joint TSD for details. 

• Added costs from congestion, crashes and noise – Although it provides some 

benefits to drivers, increased vehicle use associated with the rebound effect also 

contributes to increased traffic congestion, motor vehicle accidents, and highway 

noise. Depending on how the additional travel is distributed over the day and on 

where it takes place, additional vehicle use can contribute to traffic congestion 

and delays by increasing traffic volumes on facilities that are already heavily 

traveled during peak periods. These added delays impose higher costs on drivers 

and other vehicle occupants in the form of increased travel time and operating 

expenses, increased costs associated with traffic accidents, and increased traffic 

noise. The agencies rely on estimates of congestion, accident, and noise costs 

caused by automobiles and light trucks developed by the Federal Highway 

Administration to estimate the increased external costs caused by added driving 

due to the rebound effect.102 

 

101 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 Feb. 15, 2010); update available at

http://ostpxweb.dot.gov/policy/Data/VOTrevision1_2-11-03.pdf (last accessed Feb. 15, 2010). 

102 These estimates were developed by FHWA for use in its 1997 Federal Highway Cost Allocation Study; 

http://www.fhwa.dot.gov/policy/hcas/final/index.htm (last accessed Feb. 15, 2010). 
Summary of Interagency Working Comments on Draft Rule under EO 12866

107 

• 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. In economics literature on 

this subject, these costs include (1) higher prices for petroleum products resulting 

from the effect of U.S. oil import demand on the world oil price (“monopsony 

costs”); (2) the expected costs from 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.103 Reducing U.S. imports of crude 

petroleum or refined fuels can reduce the magnitude of these external costs. Any 

reduction in their total value that results from lower fuel consumption and 

petroleum imports represents an economic benefit of setting more stringent 

standards over and above the dollar value of fuel savings itself. Since the 

agencies are taking a global perspective with respect to the estimate of the social 

cost of carbon for this rulemaking, the agencies do not include the value of any 

reduction in monopsony payments as a benefit from lower fuel consumption, 

because those payments from a global perspective represent a transfer of income 

from consumers of petroleum products to oil suppliers rather than a savings in 

real economic resources. Similarly, the agencies do not include any savings in 

budgetary outlays to support U.S. military activities among the benefits of higher 

fuel economy and the resulting fuel savings. Based on a recently-updated ORNL 

study, we estimate that each gallon of fuel saved that results in a reduction in U.S. 

petroleum imports (either crude petroleum or refined fuel) will reduce the 

expected costs of oil supply disruptions to the U.S. economy by $0.169 (2007$). 

Each gallon of fuel saved as a consequence of higher standards is anticipated to 

reduce total U.S. imports of crude petroleum or refined fuel by 0.95 gallons.104 

EPA and NHTSA received comments about the treatment of the monopsony 

effect, macroeconomic disruption effect, and the military costs associated with the 

energy security benefits of this rule. The agencies did not receive any comments 

that justify changing the energy security analysis. As a result, the agencies 

continue to only use the macroeconomic disruption component of the energy 

security analysis under a global context when estimating the total energy security 

 

103 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.

104 Each gallon of fuel saved is assumed to reduce imports of refined fuel by 0.5 gallons, and the volume of 

fuel refined domestically by 0.5 gallons. Domestic fuel refining is assumed to utilize 90 percent imported 

crude petroleum and 10 percent domestically-produced crude petroleum as feedstocks. Together, these 

assumptions imply that each gallon of fuel saved will reduce imports of refined fuel and crude petroleum 

by 0.50 gallons + 0.50 gallons*90 percent = 0.50 gallons + 0.45 gallons = 0.95 gallons. 
Summary of Interagency Working Comments on Draft Rule under EO 12866

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benefits associated with this rule. Further, the Agencies did not receive any 

information that they could use to quantity that component of military costs 

directly related to energy security, and thus did not modify that part of its 

analysis. A more complete discussion of the energy security analysis can be 

found in Chapter 4 of the Joint TSD, and Sections III and IV of this preamble. 

• Air pollutant emissions

o Impacts on criteria air pollutant emissions – While reductions in domestic 

fuel refining and distribution that result from lower fuel consumption will 

reduce U.S. emissions of criteria pollutants, additional vehicle use 

associated with the rebound effect will increase emissions of these 

pollutants. Thus the net effect of stricter standards on emissions of each 

criteria pollutant depends on the relative magnitudes of reduced emissions 

from fuel refining and distribution, and increases in emissions resulting 

from added vehicle use. 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). It is assumed that the emission rates (per mile) stay 

constant for future year vehicles.

o Economic value of reductions in criteria air pollutants – For the purpose 

of the joint technical analysis, EPA and NHTSA estimate the economic 

value of the human health benefits associated with reducing exposure to 

PM2.5 using a “benefit-per-ton” method. These PM2.5-related benefit-perton estimates provide the total monetized benefits to human health (the 

sum of reductions in premature mortality and premature morbidity) that 

result from eliminating one ton of directly emitted PM2.5, or one ton of a 

pollutant that contributes to secondarily-formed PM2.5 (such as NOX, SOX, 

and VOCs), from a specified source. Chapter 4.2.9 of the Technical 

Support Document that accompanies this rule includes a description of 

these values. Separately, EPA also conducted air quality modeling to 

estimate the change in ambient concentrations of criteria pollutants and 

used this as a basis for estimating the human health benefits and their 

economic value. Section III.H.7 presents these benefits estimates. 

o Reductions in GHG emissions – 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 standards will thus reduce GHG emissions generated by fuel 

use, as well as throughout the fuel supply cycle. The agencies estimated 

the increases of GHGs other than CO2, including methane and nitrous 

oxide, from additional vehicle use by multiplying the increase in total 

miles driven by cars and light trucks of each model year and age by 
Summary of Interagency Working Comments on Draft Rule under EO 12866

109 

emission rates per vehicle-mile for these GHGs. These emission rates, 

which differ between cars and light trucks as well as between gasoline and 

diesel vehicles, were estimated by EPA using its recently-developed 

Motor Vehicle Emission Simulator (Draft MOVES 2010).105 Increases in 

emissions of non-CO2 GHGs are converted to equivalent increases in CO2

emissions using estimates of the Global Warming Potential (GWP) of 

methane and nitrous oxide. 

o Economic value of reductions in CO2 emissions - EPA and NHTSA 

assigned a dollar value to reductions in CO2 emissions using the marginal 

dollar value (i.e., cost) of climate-related damages resulting from carbon 

emissions, also referred to as “social cost of carbon” (SCC). The SCC is 

intended to measure the monetary value society places on impacts 

resulting from increased GHGs, such as property damage from sea level 

rise, forced migration due to dry land loss, and mortality changes 

associated with vector-borne diseases. Published estimates of the SCC 

vary widely as a result of uncertainties about future economic growth, 

climate sensitivity to GHG emissions, procedures used to model the 

economic impacts of climate change, and the choice of discount rates. 

EPA and NHTSA received extensive comments about how to improve the 

characterization of the SCC and have since developed new estimates 

through an interagency modeling exercise. The comments addressed 

various issues, such as discount rate selection, treatment of uncertainty, 

and emissions and socioeconomic trajectories, and justified the revision of 

SCC for the final rule. The modeling exercise involved running three 

integrated assessment models using inputs agreed upon by the interagency 

group for climate sensitivity, socioeconomic and emissions trajectories, 

and discount rates. A more complete discussion of SCC can be found in 

Section XX; revised SCC estimates corresponding to assumed values of 

the discount rate are shown in Table II.F-1. 

 Table II.F-1 Social Cost of CO2, 2010 (in 2007 dollars) 

Discount Rate 5% 3% 2.5% 3% 

Source of 

Estimate 

Mean of Estimates Values 95th

percentile 

estimate 

2010 Estimate $5 $21 $35 $65 

 

105 The MOVES model assumes that the per-mile rates at which cars and light trucks emit these GHGs are 

determined by the efficiency of fuel combustion during engine operation and chemical reactions that occur 

during catalytic after-treatment of engine exhaust, and are thus independent of vehicles’ fuel consumption 

rates. Thus MOVES’ emission factors for these GHGs, which are expressed per mile of vehicle travel, are 

assumed to be unaffected by changes in fuel economy. 
Summary of Interagency Working Comments on Draft Rule under EO 12866

110 

• 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 non-climate related benefits of the final standards, the agencies 

have employed discount rates of both 3 percent and 7 percent. We received some 

comments on the discount rates used in the proposal, most of which were directed 

at the discount rates used to value future fuel savings and the rates used to value 

of the social cost of carbon. In general, commenters were supporting one of the 

discount rates over the other, although some suggested that our rates were too 

high or too low. We have revised the discounting used when calculating the net 

present value of social cost of carbon as explained in Sections III.H. and VI but 

have not revised our discounting procedures for other costs or benefits. 

For the reader’s reference, Table II.F-2 below summarizes the values used to 

calculate the impacts of each final standard. The values presented in this table are 

summaries of the inputs used for the models; specific values used in the agencies’ 

respective analyses may be aggregated, expanded, or have other relevant adjustments. 

See the respective RIAs for details. 

In addition, the agencies have conducted a range of sensitivities and present them 

in their respective RIAs. For example, NHTSA has conducted a sensitivity analysis on 

several assumptions including (1) forecasts of future fuel prices, (2) the discount rate 

applied to future benefits and costs, (3) the magnitude of the rebound effect, (4) the value 

to the U.S. economy of reducing carbon dioxide emissions, (5) inclusion of the 

monopsony effect, and (6) the reduction in external economic costs resulting from lower 

U.S. oil imports. This information is provided in NHTSA’s RIA. 
Summary of Interagency Working Comments on Draft Rule under EO 12866

111 

Table II.F-2 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 1.15%

Fuel Prices (2012-50 average, $/gallon)

Retail gasoline price $3.66

Pre-tax gasoline price $3.29

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) $ 1,300

Nitrogen oxides (NOX) – vehicle use $ 5,100

Nitrogen oxides (NOX) – fuel production and distribution $ 5,300

Particulate matter (PM2.5) – vehicle use $ 240,000

Particulate matter (PM2.5) – fuel production and distribution $ 290,000,

Sulfur dioxide (SO2) $ 31,000

Carbon dioxide (CO2) emissions in 2010

$ 5

$ 21

$ 35

$ 65

Annual Increase in CO2 Damage Cost

variable, 

depending 

on estimate

External Costs from Additional Automobile Use ($/vehicle-mile)

Congestion $ 0.054

Accidents $ 0.023

Noise $ 0.001

Total External Costs $ 0.078

External Costs from Additional Light Truck Use ($/vehicle-mile)

Congestion $0.048

Accidents $0.026

Noise $0.001

Total External Costs $0.075

Discount Rates Applied to Future Benefits 3%, 7%
112 

III. EPA Greenhouse Gas Vehicle Standards 

A. Executive Overview of EPA Rule

 1. Introduction

 The Environmental Protection Agency (EPA) is establishing greenhouse gas emissions 

standards for the largest sources of transportation greenhouse gases--light-duty vehicles, lightduty trucks, and medium-duty passenger vehicles (hereafter light vehicles). These vehicle 

categories, which include cars, sport utility vehicles, minivans, and pickup trucks used for 

personal transportation, are responsible for almost 60% of all U.S. transportation related 

greenhouse gas emissions. This action represents the first-ever EPA rule to regulate vehicle 

greenhouse gas emissions under the Clean Air Act (CAA) and will establish standards for model 

years 2012-2016 and later light vehicles sold in the United States. 

 EPA is adopting three separate standards. The first and most important is a set of fleetwide average carbon dioxide (CO2) emission standards for cars and trucks. These standards are 

CO2 emissions-footprint curves, where each vehicle has a different CO2 emissions compliance 

target depending on its footprint value. Vehicle CO2 emissions will be measured over the EPA 

city and highway tests. The rule allows for credits based on demonstrated improvements in 

vehicle air conditioner systems, including both efficiency and refrigerant leakage improvement, 

which are not captured by the EPA tests. The EPA projects that the average light vehicle tailpipe 

CO2 level in model year 2011 will be 325 grams per mile while the average vehicle fleetwide 

average CO2 emissions compliance level for the model year 2016 standard will be 250 grams per 

mile, an average reduction of 23 percent from today’s CO2 levels. 

 EPA is also finalizing standards that will cap tailpipe nitrous oxide (N2O) and methane 

(CH4) emissions at 0.010 and 0.030 grams per mile, respectively. Even after adjusting for the 

higher relative global warming potencies of these two compounds, nitrous oxide and methane 

emissions represent less than one percent of overall vehicle greenhouse gas emissions from new 

vehicles. Accordingly, the goal of these two standards is to limit any potential increases of 

tailpipe emissions of these pollutants in the future but not to force reductions relative to today’s 

low levels. 

 

 This final rule responds to the Supreme Court’s 2007 decision in Massachusetts v. 

EPA106 which found that greenhouse gases were air pollutants for purposes of the Clean Air Act. 

The Court held that the Administrator must determine whether or not emissions from new motor 

vehicles cause or contribute to air pollution which may reasonably be anticipated to endanger 

public health or welfare, or whether the science is too uncertain to make a reasoned decision. 

The Court further ruled that, in making these decisions, the EPA Administrator is required to 

 

106 549 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 Bush Administration and the EPA from 2007-2008 in response to the Supreme Court 

remand. 
113 

follow the language of section 202(a) of the CAA. The Court remanded the case back to the 

Agency for reconsideration in light of its finding. 

 The Administrator has responded to the Court’s remand by issuing two findings under 

section 202(a) of the Clean Air Act.107 First, the Administrator found that the science supports a 

positive endangerment finding that the mix of six greenhouse gases (carbon dioxide (CO2), 

methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), and 

sulfur hexafluoride (SF6)) in the atmosphere endangers the public health and welfare of current 

and future generations. This is referred to as the endangerment finding. Second, the 

Administrator found that the emissions of the same six gases contribute to the atmospheric 

concentrations of these key greenhouse gases and hence to the threat of climate change. This is 

referred to as the cause and contribute finding. Motor vehicles and new motor vehicle engines 

contribute to four of these gases including--carbon dioxide, methane, nitrous oxide, and 

hydrofluorocarbons. EPA provides more details below on the legal and scientific bases for this 

final rule. 

 As discussed in Section I, this GHG rule is part of a joint National Program such that a 

large majority of the projected benefits are achieved jointly with NHTSA’s CAFE rule which is 

described in detail in Section IV of this preamble. EPA projects total carbon dioxide emissions 

savings of approximately 960 million metric tons as a result of the rule, and oil savings of 1.8 

billion barrels over the lifetimes of the MY 2012-2016 vehicles subject to the rule. EPA projects 

the rule will result in net societal benefits of $192 billion at a 3 percent discount rate, or $143 

billion at a 7 percent discount rate (both values assume a $21/ton SCC value). Accordingly, 

these light vehicle greenhouse gas emissions standards represent an important contribution under 

the Clean Air Act toward meeting long-term greenhouse gas emissions and import oil reduction 

goals, while providing important economic benefits as well. 

 2. Why is EPA Establishing this Rule? 

 This rule addresses only light vehicles. EPA is addressing light vehicles as a first step in 

control of greenhouse gas emissions under the Clean Air Act for four reasons. First, light 

vehicles are responsible for almost 60% of all mobile source greenhouse gas emissions, a share 

three times larger than any other mobile source subsector, and represent about one-sixth of all 

U.S. greenhouse gas emissions. Second, technology exists that can be readily and costeffectively applied to these vehicles to reduce their greenhouse gas emissions in the near term. 

Third, EPA already has an existing testing and compliance program for these vehicles, refined 

since the mid-1970s for emissions compliance and fuel economy determinations, which would 

require only minor modifications to accommodate greenhouse gas emissions regulations. Finally, 

this rule is an important first step in responding to the Supreme Court’s ruling in Massachusetts 

vs. EPA, which applies to other emissions sources in addition to light-duty vehicles. In fact, 

EPA is currently evaluating controls for motor vehicles other than those covered by this rule, and 

is also reviewing seven petitions submitted by various states and organizations requesting that 

EPA use its Clean Air Act authorities to take action to reduce greenhouse gas emissions from 

 

107 See 74 FR 66496 (Dec. 15, 2009) for Endangerment and Cause or Contribute Findings for Greenhouse Gases 

Under Section 202(a) of the Clean Air Act” 
114 

aircraft (under § 231(a)(2)), ocean-going vessels (under § 213(a)(4)), and other nonroad engines 

and vehicle sources (also under § 213(a)(4)). 

a. Light Vehicle Emissions Contribute to Greenhouse Gases and the Threat of 

Climate Change 

 Greenhouse gases are gases in the atmosphere that effectively trap some of the Earth’s 

heat that would otherwise escape to space. Greenhouse gases are both naturally occurring and 

anthropogenic. The primary greenhouse gases of concern are directly emitted by human 

activities and include carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, 

perfluorocarbons, and sulfur hexafluoride. 

 These gases, once emitted, remain in the atmosphere for decades to centuries. Thus, they 

become well mixed globally in the atmosphere and their concentrations accumulate when 

emissions exceed the rate at which natural processes remove greenhouse gases from the 

atmosphere. The heating effect caused by the human-induced buildup of greenhouse gases in the 

atmosphere is very likely108 the cause of most of the observed global warming over the last 50 

years. The key effects of climate change observed to date and projected to occur in the future 

include, but are not limited to, more frequent and intense heat waves, more severe wildfires, 

degraded air quality, heavier and more frequent downpours and flooding, increased drought, 

greater sea level rise, more intense storms, harm to water resources, continued ocean 

acidification, harm to agriculture, and harm to wildlife and ecosystems. A detailed explanation 

of observed and projected changes in greenhouse gases and climate change and its impact on 

health, society, and the environment is included in EPA’s technical support document for the 

recently promulgated Endangerment and Cause or Contribute Findings for Greenhouse Gases 

Under Section 202(a) of the Clean Air Act.109 

 Mobile sources represent a large and growing share of United States greenhouse gases 

and include light-duty vehicles, light-duty trucks, medium-duty passenger vehicles, heavy duty 

trucks, airplanes, railroads, marine vessels and a variety of other sources. In 2007, all mobile 

sources emitted 31% of all U.S. greenhouse gases, and were the fastest-growing source of U.S. 

greenhouse gases in the U.S. since 1990. Transportation sources, which do not include certain 

off-highway sources such as farm and construction equipment, account for 28% of U.S. 

greenhouse gas emissions, and Section 202(a) sources, which include light-duty vehicles, lightduty trucks, medium-duty passenger vehicles, heavy-duty trucks, buses, and motorcycles account 

for 23% of total U.S. greenhouse gases.110 

 Light vehicles emit four greenhouse gases: carbon dioxide, methane, nitrous oxide and 

hydrofluorocarbons. Carbon dioxide (CO2) is the end product of fossil fuel combustion. During 

combustion, the carbon stored in the fuels is oxidized and emitted as CO2 and smaller amounts of 

 

108 According to Intergovernmental Panel on Climate Change (IPCC) terminology, “very likely” conveys a 90 to 99 

percent probability of occurrence. “Virtually certain” conveys a greater than 99 percent probability, “likely” conveys 

a 66 to 90 percent probability, and “about as likely as not” conveys a 33 to 66 percent probability. 

109 74 FR 66496 (Dec. 15, 2009). Both the Federal Register Notice and the Technical Support Document for 

Endangerment and Cause or Contribute Findings are found in the public docket No. EPA-OAR-2009-0171 as well 

as the public docket established for this rulemaking. 

110 Inventory of U.S. Greenhouse Gases and Sinks: 1990-2007. 
115 

other carbon compounds.111 Methane (CH4) emissions are a function of the methane content of 

the motor fuel, the amount of hydrocarbons passing uncombusted through the engine, and any 

post-combustion control of hydrocarbon emissions (such as catalytic converters).112 Nitrous 

oxide (N2O) (and nitrogen oxide (NOX)) emissions from vehicles and their engines are closely 

related to air-fuel ratios, combustion temperatures, and the use of pollution control equipment. 

For example, some types of catalytic converters installed to reduce motor vehicle NOX, carbon 

monoxide (CO) and hydrocarbon emissions can promote the formation of N2O.113 

Hydrofluorocarbons (HFC) emissions are progressively replacing chlorofluorocarbons (CFC) 

and hydrochlorofluorocarbons (HCFC) in these vehicles’ cooling and refrigeration systems as 

CFCs and HCFCs are being phased out under the Montreal Protocol and Title VI of the CAA. 

There are multiple emissions pathways for HFCs with emissions occurring during charging of 

cooling and refrigeration systems, during operations, and during decommissioning and 

disposal.114 

b. Basis for Action under the Clean Air Act 

 

Section 202(a)(1) of the Clean Air Act (CAA) states that “the Administrator shall by 

regulation prescribe (and from time to time revise)...standards applicable to the emission of any 

air pollutant from any class or classes of new motor vehicles ..., which in his judgment cause, or 

contribute to, air pollution which may reasonably be anticipated to endanger public health or 

welfare.” As noted above, the Administrator has found that the air pollution of elevated levels of 

greenhouse gas concentrations may reasonably be anticipated to endanger public health and 

welfare.115 The Administrator defined the “air pollution” referred to in CAA section 202(a) to 

be the elevated concentrations of the mix of six long-lived and directly emitted GHGs: carbon 

dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), 

perfluorocarbons (PFCs), and sulfur hexafluoride (SF6). The Administrator has further found 

under CAA section 202(a) that emissions of those six gases contribute to the air pollution. New 

motor vehicles and engines emit four of the six GHGs: CO2, methane, N2O and HFC emissions. 

This preamble describes the provisions that control emissions of CO2, HFCs, nitrous oxide, and 

methane. As a result of these findings, section 202(a) requires EPA to issue standards applicable 

to emissions of those pollutants. For further discussion of EPA’s authority under section 202(a), 

see Section I.C.2 of the preamble to the proposed rule (74 FR at 49464-66). 

There are a variety of other CAA Title II provisions that are relevant to standards established 

under section 202(a). The standards are applicable to motor vehicles for their useful life. EPA 

has the discretion in determining what standard applies over the vehicles’ useful life and has 

exercised that discretion in this rule. See Section III.E.4 below. 

 

The standards established under CAA section 202(a) are implemented and enforced 

through various mechanisms. Manufacturers are required to obtain an EPA certificate of 

 

111 Mobile source carbon dioxide emissions in 2006 equaled 26 percent of total U.S. CO2 emissions. 112 In 2006, methane emissions equaled 0.32 percent of total U.S. methane emissions Nitrous oxide is a produce of 

the reaction that occurs between nitrogen and oxygen during fuel combustion. 

113 In 2006, nitrous oxide emissions for these sources accounted for 8 percent of total U.S. nitrous oxide emissions. 114 In 2006, HFC from these source categories equaled 56 percent of total U.S. HFC emissions, making it the single 

largest source category of U.S. HFC emissions. 

115 74 FR 66496 (Dec. 15, 2009). 
116 

conformity before they may sell or introduce their new motor vehicle into commerce, according 

to CAA section 206(a). The introduction into commerce of vehicles without a certificate of 

conformity is a prohibited act under CAA section 203 that may subject a manufacturer to civil 

penalties and injunctive actions (see CAA sections 204 and 205). Under CAA section 206(b), 

EPA may conduct testing of new production vehicles to determine compliance with the 

standards. For in-use vehicles, if EPA determines that a substantial number of vehicles do not 

conform to the applicable regulations then the manufacturer must submit and implement a 

remedial plan to address the problem (see CAA section 207(c)). There are also emissions-based 

warranties that the manufacturer must implement under CAA section 207(a). Section III.E 

describes the rule’s certification, compliance, and enforcement mechanisms. 

c. EPA’s Endangerment and Cause or Contribute Findings for Greenhouse Gases 

under Section 202(a) of the Clean Air Act 

On December 7, 2009 EPA’s Administrator promulgated an action with two distinct 

findings regarding greenhouse gases under section 202(a) of the Clean Air Act. On December 

15, 2009, the final findings were published in the Federal Register under Docket ID No. EPAHQ-OAR-2009-0171. This action is called the Endangerment and Cause or Contribute Findings 

for Greenhouse Gases under Section 202(a) of the Clean Air Act (Endangerment Finding).116

Below are the two distinct findings: 

• Endangerment Finding: The Administrator finds that the current and projected 

concentrations of the six key well-mixed greenhouse gases--carbon dioxide (CO2), 

methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons 

(PFCs), and sulfur hexafluoride (SF6)--in the atmosphere threaten the public health and 

welfare of current and future generations. 

• Cause or Contribute Finding: The Administrator finds that the combined emissions of 

these well-mixed greenhouse gases from new motor vehicles and new motor vehicle 

engines contribute to the greenhouse gas pollution which threatens public health and 

welfare. 

 

 Specifically, the Administrator found, after a thorough examination of the scientific 

evidence on the causes and impact of current and future climate change, and careful review of 

public comments, that the science compellingly supports a positive finding that atmospheric 

concentrations of these greenhouse gases result in air pollution which may reasonably be 

anticipated to endanger both public health and welfare. In her finding, the Administrator relied 

heavily upon the major findings and conclusions from the recent assessments of the U.S. Climate 

Change Science Program and the U.N. Intergovernmental Panel on Climate Change.117 The 

Administrator made a positive endangerment finding after considering both observed and 

projected future effects of climate change, key uncertainties, and the full range of risks and 

impacts to public health and welfare occurring within the United States. In addition, the finding 

 

116 74 FR 66496 (Dec. 15, 2009) 117 The U.S. Climate Change Science Program (CCSP) is now called the U.S. Global Change Research Program 

(GCRP). 
117 

focused on impacts within the U.S. but noted that the evidence concerning risks and impacts 

occurring outside the U.S. provided further support for the finding. 

 The key scientific findings supporting the endangerment finding are that: 

– Concentrations of greenhouse gases are at unprecedented levels compared to recent 

and distant past. These high concentrations are the unambiguous result of 

anthropogenic emissions and are very likely the cause of the observed increase in 

average temperatures and other climatic changes. 

– The effects of climate change observed to date and projected to occur in the future 

include more frequent and intense heat waves, more severe wildfires, degraded air 

quality, heavier downpours and flooding, increasing drought, greater sea level rise, 

more intense storms, harm to water resources, harm to agriculture, and harm to 

wildlife and ecosystems. These impacts are effects on public health and welfare 

within the meaning of the Clean Air Act. 

The Administrator found that the combined emissions of the six well-mixed gases 

contribute to the atmospheric concentrations of these key greenhouse gases and hence to the 

threat of climate change and that transportation sources including motor vehicles and new motor 

vehicle engines contribute to four of these gases including --carbon dioxide, methane, nitrous 

oxide, and hydrofluorocarbons. Key facts supporting this cause and contribute finding for onhighway vehicles regulated under section 202(a) of the Clean Air Act are that these sources are 

responsible for 24% of total U.S. greenhouse gas emissions, and more than 4% of total global 

greenhouse gas emissions.118 The Administrator also considered whether emissions of each 

greenhouse gas individually, as a separate air pollutant, would contribute to this air pollution. 

As noted above, these findings require EPA to issue standards under section 202 (a) 

“applicable to emission” of the air pollutant or pollutants that EPA finds causes or contributes to 

the air pollution that endangers public health and welfare. The final emissions standards satisfy 

his requirement for greenhouse gases from light-duty vehicles. 

 3. What is EPA Adopting? 

a. Light-Duty Vehicle, Light-Duty Truck, and Medium-Duty Passenger Vehicle 

Greenhouse Gas Emission Standards and Projected Compliance Levels 

The following section provides an overview of EPA’s final rule. The key public 

comments are not discussed here, but are discussed in the sections that follow which provide the 

details of the program. Comments are also discussed in the joint Response to Comments 

document. 

 

118 This figure includes the greenhouse gas contributions of light vehicles, heavy duty vehicles, and remaining onhighway mobile sources. Light-duty vehicles are responsible for over 70 percent of Section 202(a) mobile source 

GHGs, or about 17% of total U.S. greenhouse gas emissions. 
118 

The CO2 emissions standards are by far the most important of the three standards and are 

the primary focus of this summary. As proposed, EPA is adopting an attribute-based approach 

for the CO2 fleet-wide standard (one for cars and one for trucks), using vehicle footprint as the 

attribute. These curves establish different CO2 emissions targets for each unique car and truck 

footprint. Generally, the larger the vehicle footprint, the higher the corresponding vehicle CO2

emissions target. Table III.A.3-1 shows the greenhouse gas standards for light vehicles that EPA 

is finalizing for model years (MY) 2012 and later: 

Table III.A.3-1 Industry-Wide Greenhouse Gas Emissions Standards 

Standard/ 

Covered 

Pollutants 

Form of 

Standard 

Level of 

Standard 

Credits Test Cycles 

CO2 Standard119: 

Tailpipe CO2

Fleetwide 

average footprint 

CO2-curves for 

cars and trucks 

Projected 

Fleetwide CO2

level of 250 g/mi 

(See footprint 

curves in Sec. 

III.B.2) 

CO2-e credits120 EPA 2-cycle 

(FTP and HFET 

test cycles)121

N2O Standard: 

Tailpipe N2O 

Cap per vehicle 0.010 g/mi None* EPA FTP test 

CH4 Standard: 

Tailpipe CH4

Cap per vehicle 0.030 g/mi None* EPA FTP test 

* For N2O and CH4, manufacturers may optionally demonstrate compliance with a CO2-equivalent 

standard equal to its footprint-based CO2 target level, using the FTP and HFET tests. 

One important flexibility associated with the CO2 standard is the option for 

manufacturers to obtain credits associated with improvements in their air conditioning systems. 

EPA is adopting the air conditioning provisions with minor modifications. As will be discussed 

in greater detail in later sections, EPA is establishing test procedures and design criteria by which 

manufacturers can demonstrate improvements in both air conditioner efficiency (which reduces 

vehicle tailpipe CO2 by reducing the load on the engine) and air conditioner refrigerants (using 

lower global warming potency refrigerants and/or improving system design to reduce GHG 

emissions associated with leaks). Neither of these strategies to reduce GHG emissions from air 

conditioners will be reflected in the EPA FTP or HFET tests. These improvements will be 

translated to a g/mi CO2-equivalent credit that can be subtracted from the manufacturer’s tailpipe 

 

119 While over 99 percent of the carbon in automotive fuels is converted to CO2 in a properly functioning engine, 

compliance with the CO2 standard will also account for the very small levels of carbon associated with vehicle 

tailpipe hydrocarbon (HC) and carbon monoxide (CO) emissions, converted to CO2 on a mass basis, as discussed 

further in Section III.B 

120 CO2-e refers to CO2-equivalent, and is a metric that allows non-CO2 greenhouse gases (such as 

hydrofluorocarbons used as automotive air conditioning refrigerants) to be expressed as an equivalent mass (i.e., 

corrected for relative global warming potency) of CO2 emissions. 121 FTP is the Federal Test Procedure which uses what is commonly referred to as the “city” driving schedule, and 

HFET is the Highway Fuel Economy Test which uses the “highway” driving schedule. Compliance with the CO2

standard will be based on the same 2-cycle values that are currently used for CAFE standards compliance; EPA 

projects that fleet-wide in-use or real world CO2 emissions are approximately 25 percent higher, on average, than 2-

cycle CO2 values. Separate mechanisms apply for A/C credits. 
119 

CO2 compliance value. EPA expects a high percentage of manufacturers to use this flexibility to 

earn air conditioning-related credits for MY2012-2016 vehicles such that the average credit 

earned is about 11 grams per mile CO2–equivalent in 2016. 

A second flexibility, being finalized essentially as proposed, is CO2 credits for flexible 

and dual fuel vehicles, similar to the CAFE credits for such vehicles which allow manufacturers 

to gain up to 1.2 mpg in their overall CAFE ratings. The Energy Independence and Security Act 

of 2007 (EISA) mandated a phase-out of these flexible fuel vehicle CAFE credits beginning in 

2015, and ending after 2019. EPA is allowing comparable CO2 credits for flexible fuel vehicles 

through MY 2015, but for MY 2016 and beyond, the GHG rule treats flexible and dual fuel 

vehicles on a CO2-performance basis, calculating the overall CO2 emissions for flexible and dual 

fuel vehicles based on a fuel use-weighted average of the CO2 levels on gasoline and on the 

alternative fuel, and on a manufacturer’s demonstration of actual usage of the alternative fuel in 

its vehicle fleet. 

Table III.A.3-2 summarizes EPA projections of industry-wide 2-cycle CO2 emissions and 

fuel economy levels that will be achieved by manufacturer compliance with the GHG standards 

for MY2012-2016. 

For MY2011, Table III.A.3-2 uses the NHTSA projections of the average fuel economy 

level that will be achieved by the MY 2011 fleet of 30.8 mpg for cars and 23.3 mpg for trucks, 

converted to an equivalent combined car and truck CO2 level of 326 grams per mile.122 EPA 

believes this is a reasonable estimate with which to compare the MY2012-2016 CO2 emission 

standards. Identifying the proper MY2011 estimate is complicated for many reasons, among 

them being the turmoil in the current automotive market for consumers and manufacturers, 

uncertain and volatile oil and gasoline prices, the ability of manufacturers to use flexible fuel 

vehicle credits to meet MY2011 CAFE standards, and the fact that most manufacturers have 

been surpassing CAFE standards (particularly the car standard) in recent years. Taking all of 

these considerations into account, EPA believes that the MY2011 projected CAFE achieved 

values, converted to CO2 emissions levels, represent a reasonable estimate. 

Table III.A.3-2 shows projected industry-wide average CO2 emissions values. The 

Projected CO2 Emissions for the Footprint-Based Standard column shows the CO2 g/mi level 

corresponding with the footprint standard that must be met. It is based on the promulgated CO2-

footprint curves and projected footprint values, and will decrease each year to 250 grams per 

mile (g/mi) in MY2016. For MY2012-2016, the emissions impact of the projected utilization of 

flexible fuel vehicle (FFV) credits and the temporary lead-time allowance alternative standard 

(TLAAS, discussed below) are shown in the next two columns. The Projected CO2 Emissions 

column gives the CO2 emissions levels projected to be achieved given use of the flexible fuel 

credits and temporary lead-time allowance program. This column shows that, relative to the MY 

2011 estimate, EPA projects that MY2016 CO2 emissions will be reduced by 23 percent over 

five years. The Projected A/C Credit column represents the industry wide average air 

conditioner credit manufacturers are expected to earn on an equivalent CO2 gram per mile basis 

in a given model year. In MY2016, the projected A/C credit of 10.6 g/mi represents 14 percent 

of the 76 g/mi CO2 emissions reductions associated with the final standards. The Projected 2-

 

122 As discussed in Section IV of this preamble. 
120 

cycle CO2 Emissions column shows the projected CO2 emissions as measured over the EPA 2-

cycle tests, which will allow compliance with the standard assuming projected utilization of the 

FFV, TLAAS, and A/C credits. 

Table III.A.3-2 Projected Fleetwide CO2 Emissions Values (grams per mile) 

Model 

Year 

Projected 

CO2

Emissions 

for the 

FootprintBased 

Standard 

 

Projected 

FFV 

Credit 

Projected 

TLAAS 

Credit 

Projected 

CO2

Emissions

Projected 

A/C Credit

Projected 

2-cycle 

CO2

Emissions 

2011 - - - (326) - (326) 

2012 295 6.5 1.2 303 3.5 307 

2013 286 5.8 0.9 293 5.0 298 

2014 276 5.0 0.6 282 7.5 290 

2015 263 3.7 0.3 267 10.0 277 

2016 250 0.0 0.1 250 10.6 261 

EPA is also finalizing a series of flexibilities for compliance with the CO2 standard which 

are not expected to significantly affect the projected compliance and achieved values shown 

above, but which should reduce the costs of achieving those reductions. These flexibilities 

include the ability to earn: annual credits for a manufacturer’s over-compliance with its unique 

fleet-wide average standard, early credits from MY2009-2011, credit for “off-cycle” CO2

reductions from new and innovative technologies that are not reflected in CO2/fuel economy 

tests, as well as the carry-forward and carry-backward of credits, and the ability to transfer 

credits between a manufacturer’s car and truck fleets. These flexibilities are being adopted with 

only very minor changes from the proposal, as discussed in Section III.C. 

EPA is finalizing an incentive to encourage the commercialization of advanced GHG/fuel 

economy control technologies, including electric vehicles (EVs), plug-in hybrid electric vehicles 

(PHEVs), and fuel cell vehicles (FCVs), for model years 2012-2016. EPA’s proposal included 

an emissions compliance value of zero grams/mile for EVs and FCVs, and the electric portion of 

PHEVs, and a multiplier in the range of 1.2 to 2.0, so that each advanced technology vehicle 

would count as greater than one vehicle in a manufacturer’s fleet-wide compliance calculation. 

Several commenters were very concerned about these credits and upon considering the public 

comments on this issue, EPA is finalizing an advanced technology vehicle incentive program to 

assign a zero gram/mile emissions compliance value for EVs and FCVs, and the electric portion 

of PHEVs, for up to the first 200,000 EV/PHEV/FCV vehicles produced by a given 

manufacturer during MY2012-2016. For any production greater than this amount, the 

compliance value for the vehicle will be greater than zero gram/mile, set at a level that reflects 

the vehicle’s average net increase in upstream greenhouse gas emissions in comparison to the 

gasoline or diesel vehicle it replaces. EPA is not finalizing a multiplier based on the concerns 

potentially excessive credits using that incentive. EPA agrees that the multiplier, in combination 

with the zero grams/mile compliance value, would be excessive. EPA will also allow this early 
121 

advanced technology incentive program beginning in MYs 2009 through 2011. Further 

discussion on the advanced technology vehicle incentives, including more detail on the public 

comments and EPA’s response, is found in Section III.C. 

EPA is also finalizing a temporary lead-time allowance (TLAAS) for manufacturers that 

sell vehicles in the U.S. in MY 2009 and for which vehicle sales in that model year are below 

400,000 vehicles. This allowance will be available only during the MY 2012-2015 phase-in 

years of the program. A manufacturer that satisfies the threshold criteria will be able to treat a 

limited number of vehicles as a separate averaging fleet, which will be subject to a less stringent 

GHG standard.123 Specifically, a standard of 125 percent of the vehicle’s otherwise applicable 

foot-print target level will apply to up to 100,000 vehicles total, spread over the four year period 

of MY 2012 through 2015. Thus, the number of vehicles to which the flexibility could apply is 

limited. EPA also is setting appropriate restrictions on credit use for these vehicles, as discussed 

further in Section III. By MY 2016, these allowance vehicles must be averaged into the 

manufacturer’s full fleet (i.e., they will no longer be eligible for a different standard). EPA 

discusses this in more detail in Section III.B of the preamble. 

 EPA received comments from several smaller manufacturers that the TLAAS program 

was insufficient to allow manufacturers with very limited product lines to comply. These 

manufacturers commented that they need additional leadtime to meet the standards, because their 

CO2 baselines are significantly higher and their vehicle product lines are even more limited, 

reducing their ability to average across their fleets compared even to other TLAAS 

manufacturers. EPA fully summarizes the public comments on the TLAAS program, including 

comments not supporting the program, in Section III.B. In summary, in response to the lead time 

issues raised by manufacturers, EPA is modifying the TLAAS program that applies to 

manufacturers with between 5,000 and 50,000 vehicle sales in MY 2009. These manufactures 

would have an increased allotment of vehicles, a total of 250,000, compared to 100,000 vehicles 

(for other TLAAS-eligible manufacturers. In addition, the TLAAS program for these 

manufacturers would be extended by one year, through MY2016 for these vehicles. The other 

provisions of the TLAAS program would continue to apply, such as the restrictions on credit 

trading and the level of the standard. Additional restrictions would also apply to these vehicles, 

as discussed in Section III.B.5. In addition, for the smallest volume manufacturers, those with 

below 5,000 vehicle sales, EPA is not setting standards at this time but is instead deferring 

standards until a future rulemaking. This is the same approach we are using for small businesses. 

The unique issues involved with these manufacturers will be addressed in that future rulemaking. 

Further discussion of the public comment on these issues and details on these changes from the 

proposed program are included in Section III.B.6. The agency received comments on its 

compliance with the Regulatory Flexibility Act. As stated in Section III.I.3, small entities are 

not significantly impacted by this rulemaking. 

EPA is also adopting caps on the tailpipe emissions of nitrous oxide (N2O) and methane 

(CH4)--0.010 g/mi for N2O and 0.030 g/mi for CH4—over the EPA FTP test. While N2O and 

CH4 can be potent greenhouse gases on a relative mass basis, their emission levels from modern 

 

123 EPCA does not permit such an allowance. Consequently, manufacturers who may be able to take advantage of a 

lead-time allowance under the GHG standards would be required to comply with the applicable CAFE standard or 

be subject to penalties for non-compliance. 

Comment [A21]: Global or US? 

Comment [A22]: Over 4 years? 
122 

vehicle designs are extremely low and represent only about 1% of total late model light vehicle 

GHG emissions. These cap standards are designed to ensure that N2O and CH4 emissions levels 

do not rise in the future, rather than to force reductions in the already low emissions levels. 

Accordingly, these standards are not designed to require automakers to make any changes in 

current vehicle designs, and thus EPA is not projecting any environmental or economic costs or 

benefits associated with these standards. 

EPA has attempted to build on existing practice wherever possible in designing a 

compliance program for the GHG standards. In particular, the program structure will streamline 

the compliance process for both manufacturers and EPA by enabling manufacturers to use a 

single data set to satisfy both the new GHG and CAFE testing and reporting requirements. 

Timing of certification, model-level testing, and other compliance activities also follow current 

practices established under the Tier 2 emissions and CAFE programs. 

EPA received numerous comments on issues related to the impacts on stationary sources, 

due to the Clean Air Act’s provisions for permitting requirements related to the setting of GHG 

standards. Some comments suggested that EPA had underestimated the number of stationary 

sources that may be subject to GHG permitting requirements; other comments suggested that 

EPA did not adequately consider the permitting impact on small business sources. Other 

comments related to EPA’s interpretation of the CAA’s provisions for subjecting stationary 

sources to permit regulation after GHG standards are set. EPA’s response to these comments in 

contained in the Response to Comments document; however, many of these comments pertain to 

issues that EPA is addressing in its consideration of the final Greenhouse Gas Permit Tailoring 

Rule,124 and will thus fully be addressed in that rulemaking. 

Further, some of the comments relating to the stationary source permitting issues also 

suggested that EPA should defer setting GHG standards to avoid such stationary source 

permitting impacts. EPA is issuing these final GHG standards for light-duty vehicles as part of 

its efforts to expeditiously respond to the Supreme Court’s nearly three year old ruling that 

greenhouse gases are air pollutants under the Clean Air Act. As discussed above, EPA has made 

findings that six greenhouse gases threaten public health and welfare, and that the combined 

emissions of these greenhouse gases from new motor vehicles and new motor vehicle engines 

contribute to the greenhouse gas pollution which threatens public health and welfare.125 EPA 

takes very seriously the obligation to respond to the Supreme Court’s opinion. Furthermore, in 

the absence of these final standards, there would be three separate federal and state regimes 

independently regulating light-duty vehicles to reduce fuel consumption and GHG emissions: 

NHTSA’s CAFE standards, EPA’s GHG standards, and the GHG standards applicable in 

California and other states adopting the California standards. This joint EPA-NHTSA program 

will allow automakers to meet both the NHTSA and EPA requirements with a single national 

fleet. In addition, California’s commitment to defer to the federal program is also conditioned on 

EPA adopting GHG standards of this type. California and several other states have expressed 

concern that, without comparable federal vehicle GHG standards, the states will not be able to 

 

124 Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule; Proposed Rule, 74 FR 55292 

(October 27, 2009). 

125 74 FR 66496 (December 15, 2009) 
123 

offer the federal program as an alternative compliance option to automakers.126 Thus, the states 

expressed a concern that, without a federal harmonized program, benefits would be lost to the 

automakers and consumers. 

In addition, the agency received comments on its compliance with the Regulatory 

Flexibility Act. As stated in Section III.I.3, small entities are not significantly impacted by this 

rulemaking. 

b. Environmental and Economic Benefits and Costs of EPA’s Standards 

In Table III.A.3-3 EPA presents estimated annual net benefits for the indicated calendar 

years. The table also shows the net present values of those benefits for the calendar years 2012-

2050 using both a 3 percent and a 7 percent discount rate. As discussed previously, EPA 

recognizes that much of these same costs and benefits are also attributable to the CAFE standard 

contained in this joint final rule. 

Table III.A.3-3 Projected Quantifiable Benefits and Costs for CO2 Standard 

(in million 2007$) 

2020 2030 2040 2050 NPV, 3%a NPV, 7%a

Quantified Annual 

Costsb -$20,100 -$64,000 -$101,900 -$152,200 -$1,199,700 -$480,700

Benefits from Reduced CO2 Emissions at each assumed SCC valuec,d,e

Avg SCC at 5% $900 $2,700 $4,600 $7,200 $34,500 $34,500 

Avg SCC at 3% $3,700 $8,900 $14,000 $21,000 $176,700 $176,700 

Avg SCC at 2.5% $5,800 $14,000 $21,000 $30,000 $299,600 $299,600 

95th percentile SCC at 

3% $11,000 $27,000 $43,000 $62,000 $538,500 $538,500 

Other Quantified Externalities 

Criteria Pollutant 

Benefitsf,g,h [XX Will be available pending results of air quality modeling] 

Energy Security Impacts 

(price shock) $2,200 $4,500 $6,000 $7,600 $81,900 $36,900 

Reduced Refueling $2,400 $4,800 $6,300 $8,000 $87,900 $40,100 

Value of Increased 

Drivingi $4,200 $8,800 $13,000 $18,400 $171,500 $75,500 

Accidents, Noise, 

Congestion -$2,300 -$4,600 -$6,100 -$7,800 -$84,800 -$38,600 

Quantified Net Benefits at each assumed SCC valuec,d,e

 

126 Letter dated February 23, 2010 from Commissioners of California, Maine, New Mexico, Oregon and Washington 

to Senators Harry Reid and Mitch McConnell. 

Comment [A23]: Please separate these into two 

lines - upfront costs and fuel savings. This is not at 

all transparent and has many assumptions embedded 

in it (consumer welfare assumptions, discount rate 

assumptions, etc.) 

Comment [A24]: Reduced refueling and value of 

increased driving are not externalities but private 

benefits. Please move these two lines to a private 

savings section that also includes fuel savings. 
124 

Avg SCC at 5% $27,500 $80,200 $125,700 $185,600 $1,490,700 $629,100 

Avg SCC at 3% $30,300 $86,400 $135,100 $199,400 $1,632,900 $771,300 

Avg SCC at 2.5% $32,400 $91,500 $142,100 $208,400 $1,755,800 $894,200 

95th percentile SCC at 

3% $37,600 $104,500 $164,100 $240,400 $1,994,700 $1,133,100 

a

 Note that net present value of reduced GHG emissions is calculated differently than other benefits. The same 

discount rate used to discount the value of damages from future emissions (SCC at 5, 3, 2.5 percent) is used to 

calculate net present value of SCC for internal consistency. Refer to Section III.F for more detail.

b

 Quantified annual costs are negative because fuel savings are included as negative costs (i.e., positive savings). 

Since the fuel savings outweigh the vehicle technology costs, the costs of as presented here are actually negative 

(i.e., they represent savings). 

c

 Monetized GHG benefits exclude the value of reductions in non-CO2 GHG emissions (HFC, CH4 and N2O) 

expected under this final rule. Although EPA has not monetized the benefits of reductions in these non-CO2 

emissions, the value of these reductions should not be interpreted as zero. Rather, the reductions in non-CO2 GHGs 

will contribute to this rule’s climate benefits, as explained in Section III.F.2. The SCC Technical Support Document 

(TSD) notes the difference between the social cost of non-CO2 emissions and CO2 emissions, and specifies a goal to 

develop methods to value non-CO2 emissions in future analyses. d Section III.H.6 notes that SCC increases projects over time. Corresponding to the years in this table, the SCC 

estimates range as follows: for Average SCC at 5%: $5-$16; for Average SCC at 3%: $21-$45; for Average SCC 

at 2.5%: $35-$65; and for 95th percentile SCC at 3%: $65-$136. Section III.H.6 also presents these SCC estimates. e

 Note that net present value of reduced GHG emissions is calculated differently than other benefits. The same 

discount rate used to discount the value of damages from future emissions (SCC at 5, 3, 2.5 percent) is used to 

calculate net present value of SCC for internal consistency. Refer to SCC TSD for more detail. 

f

 Note that the co-pollutant impacts associated with the standards presented here do not include the full complement 

of endpoints that, if quantified and monetized, would change the total monetized estimate of rule-related impacts. 

The full complement of human health and welfare effects associated with PM and ozone remain unquantified 

because of current limitations in methods or available data. We have not quantified a number of known or suspected 

health effects linked with ozone and PM for which appropriate health impact functions are not available or which do 

not provide easily interpretable outcomes (e.g., changes in heart rate variability). Additionally, we are unable to 

quantify a number of known welfare effects, including reduced acid and particulate deposition damage to cultural 

monuments and other materials, and environmental benefits due to reductions of impacts of eutrophication in coastal 

areas. As a result, the health benefits quantified in this section are likely underestimates of the total benefits 

attributable to the final rule. 

g

 The benefits presented in this table include an estimate of premature mortality derived from the ACS study (Pope 

et al., 2002). If the benefit estimates were based on the Six Cities study (Laden et al., 2006), the values would be 

approximately 145% (nearly two-and-a-half times) larger. 

h

 The benefits presented in this table assume a 3% discount rate in the valuation of PM-related premature mortality 

to account for a twenty-year segmented cessation lag. If a 7% discount rate had been used, the values would be 

approximately 9% lower. 

i

Calculated using pre-tax fuel prices. 

4. Basis for the GHG Standards under Section 202(a)

 EPA statutory authority under section 202(a) (1) of the Clean Air Act (CAA) is discussed 

in more detail in Section I.C.2 of the proposed rule (74 FR at 49464-65). The following is a 

summary of the basis for the final GHG standards under section 202(a), which is discussed in 

more detail in the following portions of Section III. 

 With respect to CO2 and HFCs, EPA is adopting attribute-based light-duty car and truck 

standards that achieve large and important emissions reductions of GHGs. EPA has evaluated 

the technological feasibility of the standards, and the information and analysis performed by 

EPA indicates that these standards are feasible in the lead time provided. EPA and NHTSA have 
125 

carefully evaluated the effectiveness of individual technologies as well as the interactions when 

technologies are combined. EPA’s projection of the technology that would be used to comply 

with the standards indicates that manufacturers will be able to meet the standards by employing a 

wide variety of technologies that are already commercially available and can be incorporated 

into their vehicles at the time of redesign. In addition to the consideration of the manufacturers’ 

redesign cycle, EPA’s analysis also takes into account certain flexibilities that will facilitate 

compliance especially in the early years of the program when potential lead time constraints are 

most challenging. These flexibilities include averaging, banking, and trading of various types of 

credits. For the industry as a whole, EPA’s projections indicate that the standards can be met 

using technology that will be available in the lead-time provided. At the same time, it must be 

noted that because technology is commercially available today does not mean it can 

automatically be incorporated fleet-wide during the model years in question. As discussed 

below, and in detail in Section III.D.7, EPA and NHTSA carefully analyzed issues of adequacy 

of lead time in determining the level of the standards, and the agencies are convinced both that 

lead time is sufficient to meet the standards but that major further additions of technology across 

the fleet is not possible during these model years. 

To account for additional lead-time concerns for various manufacturers of typically 

higher performance vehicles, EPA is adopting a Temporary Lead-time Allowance similar to that 

proposed that will further facilitate compliance for limited volumes of such vehicles in the 

program’s initial years. For a few very small volume manufacturers, EPA is deferring standards 

pending later rulemaking. 

EPA has also carefully considered the cost to manufacturers of meeting the standards, 

estimating piece costs for all candidate technologies, direct manufacturing costs, cost markups to 

account for manufacturers’ indirect costs, and manufacturer cost reductions attributable to 

learning. In estimating manufacturer costs, EPA took into account manufacturers’ own practices 

such as making major changes to model technology packages during a planned redesign cycle. 

EPA then projected the average cost across the industry to employ this technology, as well as 

manufacturer –by- manufacturer costs. EPA considers the per vehicle costs estimated from this 

analysis to be within a reasonable range in light of the emissions reductions and benefits 

received. EPA projects, for example, that the fuel savings over the life of the vehicles will more 

than offset the increase in cost associated with the technology used to meet the standards. 

EPA has also evaluated the impacts of these standards with respect to reductions in 

GHGs and reductions in oil usage. For the lifetime of the model year 2012-2016 vehicles we 

estimate GHG reductions of approximately 960 million metric tons CO2 eq. and fuel reductions 

of 1.8 billion barrels of oil. These are important and significant reductions. EPA has also 

analyzed a variety of other impacts of the standards, ranging from the standards’ effects on 

emissions of non-GHG pollutants, impacts on noise, energy, safety and congestion. EPA has also 

quantified the cost and benefits of the standards, to the extent practicable. Our analysis to date 

indicates that the overall quantified benefits of the standards far outweigh the projected costs. 

Utilizing a 3% discount rate, we estimate the total net social benefits over the life of the model 

year 2012-2016 vehicles is $192 billion, and the net present value of the net social benefits of the 
126 

standards through the year 2050 is $1.9 trillion dollars.127 These values are estimated at $136 

billion and $787 billion, respectively, using a 7% discount rate and the SCC discounted at 3 

percent.128 

Under section 202(a) EPA is called upon to set standards that provide adequate lead-time 

for the development and application of technology to meet the standards. EPA’s standards 

satisfy this requirement, as discussed above. In setting the standards, EPA is called upon to 

weigh and balance various factors, and to exercise judgment in setting standards that are a 

reasonable balance of the relevant factors. In this case, EPA has considered many factors, such 

as cost, impacts on emissions (both GHG and non-GHG), impacts on oil conservation, impacts 

on noise, energy, safety, and other factors, and has where practicable quantified the costs and 

benefits of the rule. In summary, given the technical feasibility of the standard, the moderate 

cost per vehicle in light of the savings in fuel costs over the life time of the vehicle, the very 

significant reductions in emissions and in oil usage, and the significantly greater quantified 

benefits compared to quantified costs, EPA is confident that the standards are an appropriate and 

reasonable balance of the factors to consider under section 202(a). See Husqvarna AB v. EPA, 

254 F. 3d 195, 200 (D.C. Cir. 2001) (great discretion to balance statutory factors in considering 

level of technology-based standard, and statutory requirement “to [give appropriate] 

consideration to the cost of applying ... technology” does not mandate a specific method of cost 

analysis); see also Hercules Inc. v. EPA, 598 F. 2d 91, 106 (D.C. Cir. 1978) (“In reviewing a 

numerical standard we must ask whether the agency’s numbers are within a zone of 

reasonableness, not whether its numbers are precisely right”); Permian Basin Area Rate Cases, 

390 U.S. 747, 797 (1968) (same); Federal Power Commission v. Conway Corp., 426 U.S. 271, 

278 (1976) (same); Exxon Mobil Gas Marketing Co. v. FERC, 297 F. 3d 1071, 1084 (D.C. Cir. 

2002) (same). 

EPA recognizes that the vast majority of technologies which we are considering for 

purposes of setting standards under section 202(a) are commercially available and already being 

utilized to a limited extent across the fleet. The vast majority of the emission reductions which 

would result from this rule would result from the increased use of these technologies. EPA also 

recognizes that this rule would enhance the development and limited use of more advanced 

technologies, such as PHEVs and EVs. In this technological context, there is no clear cut line 

that indicates that only one projection of technology penetration could potentially be considered 

feasible for purposes of section 202(a), or only one standard that could potentially be considered 

a reasonable balancing of the factors relevant under section 202(a). EPA therefore evaluated 

two sets of alternative standards, one more stringent than the promulgated standards and one less 

stringent. 

The alternatives are 4% per year increase in standards which would be less stringent and 

a 6% per year increase in the standards which would be more stringent. EPA is not adopting 

either of these. As discussed in Section III.D.7, the 4% per year forgoes CO2 reductions which 

 

127 Based on the mean SCC at 3 percent discount rate, which is $21 per metric ton CO2 in 2010 rising to $45 per 

metric ton CO2 in 2050. 128 SCC was discounted at 3 percent to maintain internal consistency in the SCC calculations while all other benefits 

were discounted at 7 percent. Specifically, the same discount rate used to discount the value of damages from future 

CO2 emissions is used to calculate net present value of SCC. 
127 

can be achieved at reasonable cost and are achievable by the industry within the rule’s 

timeframe. The 6% per year alternative requires a significant increase in the projected required 

technology penetration which appears inappropriate in this timeframe due to the limited available 

lead time and the current difficult financial condition of the automotive industry. (See Section 

III.D.7 for a detailed discussion of why EPA is not adopting either of the alternatives.). EPA 

also believes that the no backsliding standards it is adopting for N2O and CH4 are appropriate 

under section 202 (a). 

B. GHG Standards for Light-duty Vehicles, Light-duty Trucks, and Mediumduty Passenger Vehicles 

 EPA is finalizing new emission standards to control greenhouse gases (GHGs) from 

light-duty vehicles. First, EPA is finalizing an emission standard for carbon dioxide (CO2) on a 

gram per mile (g/mile) basis that will apply to a manufacturer’s fleet of cars, and a separate 

standard that will apply to a manufacturer’s fleet of trucks. CO2 is the primary pollutant 

resulting from the combustion of vehicular fuels, and the amount of CO2 emitted is directly 

correlated to the amount of fuel consumed. Second, EPA is providing auto manufacturers with 

the opportunity to earn credits toward the fleet-wide average CO2 standards for improvements to 

air conditioning systems, including both hydrofluorocarbon (HFC) refrigerant losses (i.e., system 

leakage) and indirect CO2 emissions related to the increased load on the engine. Third, EPA is 

finalizing separate emissions standards for two other GHG pollutants: methane (CH4) and nitrous 

oxide (N20). CH4 and N2O emissions relate closely to the design and efficient use of emission 

control hardware (i.e., catalytic converters). The standards for CH4 and N2O will be set as a cap 

that will limit emissions increases and prevent backsliding from current emission levels. The 

final standards described below will apply to passenger cars, light-duty trucks, and medium-duty 

passenger vehicles (MDPVs). As an overall group, they are referred to in this preamble as light 

vehicles or simply as vehicles. In this preamble section passenger cars may be referred to simply 

as “cars”, and light-duty trucks and MDPVs as “light trucks” or “trucks.”129

EPA’s program includes a number of credit opportunities and other flexibilities to help 

manufacturers comply, especially in the early years of the program. EPA is establishing a 

system of averaging, banking, and trading of credits integral to the fleet averaging approach, 

based on manufacturer fleet average CO2 performance, as discussed in Section III.B.4. This 

approach is similar to averaging, banking, and trading (ABT) programs EPA has established in 

other programs and is also similar to provisions in the CAFE program. In addition to traditional 

ABT credits based on the fleet emissions average, EPA is also including A/C credits as an aspect 

of the standards, as mentioned above. EPA is also including several additional credit provisions 

that apply only in the initial model years of the program. These include flex fuel vehicle credits, 

incentives for the early commercialization of certain advanced technology vehicles, credits for 

new and innovative “off-cycle” technologies that are not captured by the current test procedures, 

and generation of credits prior to model year 2012. The A/C credits and additional credit 

opportunities are described in Section III.C. These credit programs will provide flexibility to 

manufacturers, which may be especially important during the early transition years of the 

program. EPA will also allow a manufacturer to carry a credit deficit into the future for a limited 

 

129 As described in Section III.B.2., GHG emissions standards will use the same vehicle category definitions as are 

used in the CAFE program. 
128 

number of model years. A parallel provision, referred to as credit carry-back, will be part of the 

CAFE program. Finally, EPA is finalizing an optional compliance flexibility, the Temporary 

Leadtime Allowance Alternative Standard program, for intermediate volume manufacturers, and 

is deferring standards for the smallest manufacturers, as discussed in Sections III.B.5 and 6 

below. 

 1. What Fleet-wide Emissions Levels Correspond to the CO2 Standards?

The attribute-based CO2 standards, are projected to achieve a national fleet-wide average, 

covering both light cars and trucks, of 250 grams/mile of CO2 in model year (MY) 2016. This 

includes CO2-equivalent emission reductions from A/C improvements, reflected as credits in the 

standard. The standards will begin with MY 2012, with a generally linear increase in stringency 

from MY 2012 through MY 2016. EPA will have separate standards for cars and light trucks. 

The tables in this section below provide overall fleet average levels that are projected for both 

cars and light trucks over the phase-in period which is estimated to correspond with the 

standards. The actual fleet-wide average g/mi level that will be achieved in any year for cars and 

trucks will depend on the actual production for that year, as well as the use of the various credit 

and averaging, banking, and trading provisions. For example, in any year, manufacturers may 

generate credits from cars and use them for compliance with the truck standard. Such transfer of 

credits between cars and trucks is not reflected in the table below. In Section III.F, EPA 

discusses the year-by-year estimate of emissions reductions that are projected to be achieved by 

the standards. 

In general, the schedule of standards acts as a phase-in to the MY 2016 standards, and 

reflects consideration of the appropriate lead-time for each manufacturer to implement the 

requisite emission reductions technology across its product line.130 Note that 2016 is the final 

model year in which standards become more stringent. The 2016 CO2 standards will remain in 

place for 2017 and later model years, until revised by EPA in a future rulemaking. 

EPA estimates that, on a combined fleet-wide national basis, the 2016 MY standards will 

achieve a level of 250 g/mile CO2, including CO2-equivalent credits from A/C related reductions. 

The derivation of the 250 g/mile estimate is described in Section III.B.2. 

EPA has estimated the overall fleet-wide CO2-equivalent emission levels that correspond 

with the attribute-based standards, based on the projections of the composition of each 

manufacturer’s fleet in each year of the program. Tables III.B.1-1 and III.B.1-2 provides these 

estimates for each manufacturer.131 

As a result of public comments and updated economic and future fleet projections, the 

attribute based curves have been updated for this final rule, as discussed in detail in Section II.B 

of this preamble and Chapter 2 of the Joint TSD. This update in turn affects costs, benefits, and 

other impacts of the final standards - thus EPA's overall projection of the impacts of the final rule 

 

130 See CAA section 202(a)(2). 131 These levels do not include the effect of flexible fuel credits, transfer of credits between cars and trucks, 

temporary lead time allowance, or any other credits. 
129 

standards have been updated and the results are different than for the NPRM, though in general 

not by a large degree. 

Table III.B.1-1 Estimated Fleet CO2-equivalent Levels Corresponding to the Standards for Cars 

Manufacturer Model Year 

 2012 2013 2014 2015 2016

BMW 266 259 250 239 228 

Chrysler 269 262 254 243 232 

Daimler 274 267 259 249 238 

Ford 267 259 251 240 229 

General 

Motors 268 261 252 241 230 

Honda 260 252 244 233 222 

Hyundai 260 254 246 233 222 

Kia 263 255 247 235 224 

Mazda 260 252 243 232 221 

Mitsubishi 257 249 241 230 219 

Nissan 263 256 248 237 226 

Porsche 244 237 228 217 206 

Subaru 253 246 237 226 215 

Suzuki 245 238 230 218 208 

Tata 288 280 272 261 250 

Toyota 259 251 243 232 221 

Volkswagen 256 249 240 229 219 

Table III.B.1-2 Estimated Fleet CO2-equivalent Levels Corresponding to the Standards for Light 

Trucks 

Manufacturer Model Year 

 2012 2013 2014 2015 2016 

BMW 330 320 310 297 283 

Chrysler 342 333 323 309 295 

Daimler 343 332 323 308 294 

Ford 354 344 334 319 305 

General 

Motors 364 354 344 330 316 

Honda 327 318 309 295 281 

Hyundai 325 316 307 292 278 

Kia 335 327 318 303 289 

Mazda 319 308 299 285 271 

Mitsubishi 316 306 297 283 269 

Nissan 343 334 323 308 294 

Porsche 334 325 315 301 287 

Subaru 315 305 296 281 267 

Comment [A25]: Are these g/mi? Please clarify 

for all tables. 
130 

Suzuki 320 310 300 286 272 

Tata 321 310 301 287 272 

Toyota 342 333 323 308 294 

Volkswagen 341 331 322 307 293 

 These estimates were aggregated based on projected production volumes into the fleetwide averages for cars and trucks (Table III.B.1-3).132

Table III.B.1-3 Estimated Fleet-wide CO2-equivalent Levels Corresponding to the Standards 

 Cars Trucks 

Model Year CO2 (g/mi) CO2 (g/mi) 

2012 263 346 

2013 256 337 

2014 247 326 

2015 236 312 

2016 and later 225 298 

As shown in Table III.B.1-3, fleet-wide CO2-equivalent emission levels for cars under the 

approach are projected to decrease from 263 to 225 grams per mile between MY 2012 and MY 

2016. Similarly, fleet-wide CO2-equivalent emission levels for trucks are projected to decrease 

from 346 to 398 grams per mile. These numbers do not include the effects of other flexibilities 

and credits in the program. The estimated achieved values can be found in Chapter 5 of the 

Regulatory Impact Analysis (RIA). 

EPA has also estimated the average fleet-wide levels for the combined car and truck 

fleets. These levels are provided in Table III.B.1-4. As shown, the overall fleet average CO2

level is expected to be 250 g/mile in 2016. 

Table III.B.1-4 Estimated Fleet-wide Combined CO2-equivalent Levels Corresponding to the 

Standards 

 Combined Car and Truck 

Model Year CO2 (g/mi) 

2012 295 

2013 286 

2014 276 

2015 263 

2016 250 

As noted above, EPA is finalizing standards that will result in increasingly stringent 

levels of CO2 control from MY 2012 though MY 2016 – applying the CO2 footprint curves 

 

132 Due to rounding during calculations, the estimated fleet-wide CO2-equivalent levels may vary by plus or minus 1 

gram. 
131 

applicable in each model year to the vehicles expected to be sold in each model year produces 

fleet-wide annual reductions in CO2 emissions. Comments from the Center for Biological 

Diversity (CBD) challenged EPA to increase the stringency of the standards for all of the years 

of the program, and even argued that 2016 standards should be feasible in 2012. Other 

commenters noted the non-linear increase in the standards from 2011 (CAFE) to the 2012 GHG 

standards. As explained in greater detail in Section III.D below and the relevant support 

documents, EPA believes that the level of improvement achieves important CO2 emissions 

reductions through the application of feasible control technology at reasonable cost, considering 

the needed lead time for this program. EPA further believes that the averaging, banking and 

trading provisions, as well as other credit-generating mechanisms, allow manufacturers further 

flexibilities which reduce the cost of the CO2 standards and help to provide adequate lead time. 

EPA believes this approach is justified under section 202(a) of the Clean Air Act. 

EPA has analyzed the feasibility under the CAA of achieving the CO2 standards, based 

on projections of what actions manufacturers are expected to take to reduce emissions. The 

results of the analysis are discussed in detail in Section III.D below and in the RIA. EPA also 

presents the estimated costs and benefits of the car and truck CO2 standards in Section III.H. In 

developing the final rule, EPA has evaluated the kinds of technologies that could be utilized by 

the automobile industry, as well as the associated costs for the industry and fuel savings for the 

consumer, the magnitude of the GHG reductions that may be achieved, and other factors relevant 

under the CAA. 

 

With respect to the lead time and cost of incorporating technology improvements that 

reduce GHG emissions, EPA and NHTSA place important weight on the fact that during MYs 

2012-2016 manufacturers are expected to redesign and upgrade their light-duty vehicle products 

(and in some cases introduce entirely new vehicles not on the market today). Over these five 

model years there will be an opportunity for manufacturers to evaluate almost every one of their 

vehicle model platforms and add technology in a cost-effective way to control GHG emissions 

and improve fuel economy. This includes redesign of the air conditioner systems in ways that 

will further reduce GHG emissions. The time-frame and levels for the standards, as well as the 

ability to average, bank and trade credits and carry a deficit forward for a limited time, are 

expected to provide manufacturers the time needed to incorporate technology that will achieve 

GHG reductions, and to do this as part of the normal vehicle redesign process. This is an 

important aspect of the final rule, as it will avoid the much higher costs that will occur if 

manufacturers needed to add or change technology at times other than these scheduled redesigns. 

This time period will also provide manufacturers the opportunity to plan for compliance using a 

multi-year time frame, again in accord with their normal business practice. Further details on 

lead time, redesigns and feasibility can be found in Section III-D. 

Consistent with the requirement of CAA section 202(a)(1) that standards be applicable to 

vehicles “for their useful life,” EPA is finalizing CO2 vehicle standards that will apply for the 

useful life of the vehicle. Under section 202(i) of the Act, which authorized the Tier 2 standards, 

EPA established a useful life period of 10 years or 120,000 miles, whichever first occurs, for all 

Tier 2 light-duty vehicles and light-duty trucks.133 Tier 2 refers to EPA’s standards for criteria 

pollutants such as NOX, HC, and CO. EPA is finalizing new CO2 standards for the same group 

 

133 See 65 FR 6698 (February 10, 2000). 
132 

of vehicles, and therefore the Tier 2 useful life will apply for CO2 standards as well. The in-use 

emission standard will be 10% higher than the model-level certification emission test results, to 

address issues of production variability and test-to-test variability. The in-use standard is 

discussed in Section III.E. 

EPA is requiring manufacturers to measure CO2 for certification and compliance 

purposes using the same test procedures currently used by EPA for measuring fuel economy. 

These procedures are the Federal Test Procedure (FTP or ‘‘city’’ test) and the Highway Fuel 

Economy Test (HFET or ‘‘highway’’ test).134 This corresponds with the data used to develop the 

footprint-based CO2 standards, since the data on control technology efficiency was also 

developed in reference to these test procedures. Although EPA recently updated the test 

procedures used for fuel economy labeling, to better reflect the actual in-use fuel economy 

achieved by vehicles, EPA is not using these test procedures for the CO2 standards in this final 

rule, given the lack of data on control technology effectiveness under these procedures. 135 There 

were a number of commenters that advocated for a change in either the test procedures or the 

fuel economy calculation weighting factors. The U.S. Coalition for Advanced Diesel Cars urged 

a changing of the city/highway weighting factors from their current values of 45/55 to 43/57 to 

be more consistent with the EPA (5-cycle) fuel economy labeling rule. EPA has decided that 

such a change would not be appropriate, nor consistent with the technical analyses supporting the 

5-cycle fuel economy label rulemaking. The city/highway weighting of 43/57 was found to be 

appropriate when the city fuel economy is based on a combination of Bags 2 and 3 of the FTP 

and the city portion of the US06 test cycle, and when the highway fuel economy is based on a 

combination of the HFET and the highway portion of the US06 cycle. When city and highway 

fuel economy are based on the FTP and HFET cycles, respectively, the appropriate city/highway 

weighting is not 43/57, but very close to 55/45. Therefore, the weighting of the city and highway 

fuel economy values contained in this rule is appropriate for and consistent with the use of the 

FTP and HFET cycles to measure city and highway fuel economy. 

The American Council for an Energy-Efficient Economy (ACEEE), Cummins, and Sierra 

Club all suggested using more real-world test procedures. It is not feasible at this time to base 

the final CO2 standards on EPA’s five-cycle fuel economy formulae. Consistent with its name, 

these formulae require vehicle testing over five test cycles, the two cycles associated with the 

proposed CO2 standards, plus the cold temperature FTP, the US06 high speed, high acceleration 

cycle and the SC03 air conditioning test. EPA considered employing the five-cycle calculation 

of fuel economy and GHG emissions for this rule, but there were a number of reasons why this 

was not practical. As discussed extensively in the Joint TSD, setting the appropriate levels of 

CO2 standards requires extensive knowledge of the CO2 emission control effectiveness over the 

certification test cycles. Such knowledge has been gathered over the FTP and HFET cycles for 

decades, but is severely lacking for the other three test cycles. EPA simply lacks the technical 

basis to project the effectiveness of the available technologies over these three test cycles and 

therefore, could not adequately support a rule which set CO2 standards based on the five-cycle 

 

134 EPA established the FTP for emissions measurement in the early 1970s. In 1976, in response to the Energy 

Policy and Conservation Act (EPCA) statute, EPA extended the use of the FTP to fuel economy measurement and 

added the HFET. The provisions in the 1976 regulation, effective with the 1977 model year, established procedures 

to calculate fuel economy values both for labeling and for CAFE purposes. 

135 See 71 FR 77872, December 27, 2006. 
133 

formulae. The benefits of today’s rule do presume a strong connection between CO2 emissions 

measured over the FTP and HFET cycles and onroad operation. Since CO2 emissions 

determined by the five-cycle formulae are believed to correlate reasonably with onroad 

emissions, this implies a strong connection between emissions over the FTP and HFET cycles 

and the five cycle formulae. However, while we believe that this correlation is reasonable on 

average for the vehicle fleet, it may not be reasonable on a per vehicle basis, nor for any single 

manufacturer’s vehicles. Thus, we believe that it is reasonable to project a direct relationship 

between the percentage change in CO2 emissions over the two certification cycles and onroad 

emissions (a surrogate of which is the five-cycle formulae), but not reasonable to base the 

certification of specific vehicles on that untested relationship. Furthermore, EPA is allowing for 

off-cycle credits to encourage technologies that may not be not properly captured on the 2-cycle 

city/highway test procedure (although these credits could apply toward compliance with EPA's 

standards, not toward compliance with the CAFE standards). For future analysis, EPA will 

consider examining new drive cycles and test procedures for fuel economy.136 

EPA is finalizing standards that include hydrocarbons (HC) and carbon monoxide (CO) 

in its CO2 emissions calculations on a CO2-equivalent basis. It is well accepted that HC and CO 

are typically oxidized to CO2 in the atmosphere in a relatively short period of time and so are 

effectively part of the CO2 emitted by a vehicle. In terms of standard stringency, accounting for 

the carbon content of tailpipe HC and CO emissions and expressing it as CO2-equivalent 

emissions will add less than one percent to the overall CO2-equivalent emissions level. This will 

also ensure consistency with CAFE calculations since HC and CO are included in the “carbon 

balance” methodology that EPA uses to determine fuel usage as part of calculating vehicle fuel 

economy levels. 

2. What Are the CO2 Attribute-based Standards?

EPA is finalizing the same vehicle category definitions that are used in the CAFE 

program for the 2011 model year standards.137 This approach allows EPA’s CO2 standards and 

the CAFE standards to be harmonized across all vehicles. In other words, vehicles will be 

subject to either car standards or truck standards under both programs, and not car standards 

under one program and trucks standards under the other. The CAFE vehicle category definitions 

differ slightly from the EPA definitions for cars and light trucks used for the Tier 2 program and 

other EPA vehicle programs. However, EPA is not changing the vehicle category definitions for 

any other light-duty mobile source programs, except the GHG standards. 

EPA is finalizing separate car and truck standards, that is, vehicles defined as cars have 

one set of footprint-based curves for MY 2012-2016 and vehicles defined as trucks have a 

different set for MY 2012-2016. In general, for a given footprint the CO2 g/mi target for trucks 

is less stringent then for a car with the same footprint. 

 

136 There were also a number of comments on air conditioner test procedures; these will be discussed in Section III.C 

and the RIA. 

137 See 49 CFR 523. 
134 

Some commenters requested a single or converging curve for both cars and trucks.138 

EPA is not finalizing a single fleet standard where all cars and trucks are measured against the 

same footprint curve for several reasons. First, some vehicles classified as trucks (such as pickup trucks) have certain attributes not common on cars which attributes contribute to higher CO2

emissions – notably high load carrying capability and/or high towing capability.139 Due to these 

differences, it is reasonable to separate the light-duty vehicle fleet into two groups. Second, EPA 

wishes to harmonize key program design elements of the GHG standards with NHTSA’s CAFE 

program where it is reasonable to do so. NHTSA is required by statute to set separate standards 

for passenger cars and for non-passenger cars. As discussed in Section IV, EPCA does not 

preclude NHTSA from issuing converging standards if its analysis indicates that these are the 

appropriate standards under the statute applicable separately to each fleet. 

Finally, most of the advantages of a single standard for all light duty vehicles are also 

present in the two-fleet standards finalized here. Because EPA is allowing unlimited credit 

transfer between a manufacturer’s car and truck fleets, the two fleets can essentially be viewed as 

a single fleet when manufacturers consider compliance strategies. Manufacturers can thus 

choose on which vehicles within their fleet to focus GHG reducing technology and then use 

credit transfers as needed to demonstrate compliance, just as they will if there was a single fleet 

standard. The one benefit of a single light-duty fleet not captured by a two-fleet approach is that 

a single fleet prevents potential “gaming” of the car and truck definitions to try and design 

vehicles which are more similar to passenger cars but which may meet the regulatory definition 

of trucks. Although this is of concern to EPA, we do not believe at this time that concern is 

sufficient to outweigh the other reasons for finalizing separate car and truck fleet standards. 

However, it is possible that in the future, recent trends may continue such that cars may become 

more truck-like and trucks may become more car-like. Therefore, EPA will reconsider whether 

it is appropriate to use converging curves if justified by future analysis. 

For model years 2012 and later, EPA is finalizing a series of CO2 standards that are 

described mathematically by a family of piecewise linear functions (with respect to vehicle 

footprint). The form of the function is as follows: 

CO2 = a, if x ≤ l 

CO2 = cx + d, if l < x ≤ h 

CO2 = b, if x > h 

 

Where, 

CO2 = the CO2 target value for a given footprint (in g/mi) 

a = the minimum CO2 target value (in g/mi) 

b = the maximum CO2 target value (in g/mi) 

c = the slope of the linear function (in g/mi per sq ft) 

d = is the zero-offset for the line (in g/mi CO2) 

 

138 CBD, ICCT and NESCAUM supported a single curve and the students at UC Santa Barbara commented on 

converging curves. 

139 There is a distinction between body-on-frame trucks and unibody cars and trucks that make them technically 

different in a number of ways. Also, 2WD vehicles tend to have lower CO2 emissions than their 4WD counterparts 

(all other things being equal). More discussion of this can be found in the TSD and RIA. 
135 

x = footprint of the vehicle model (in square feet, rounded to the nearest tenth) 

l & h are the lower and higher footprint limits, constraints, or the boundary (“kinks”) 

between the flat regions and the intermediate sloped line 

EPA’s parameter values that define the family of functions for the CO2 fleetwide average 

car and truck standards are as follows: 

Table III.B.2-1 Parameter Values for Cars (for CO2 gram per mile targets) 

Model Year a b C D Lower 

constraint

Upper 

constraint

2012 244 315 4.72 50.5 41 56 

2013 237 307 4.72 43.3 41 56 

2014 228 299 4.72 34.8 41 56 

2015 217 288 4.72 23.4 41 56 

2016 and 

later 206 277 4.72 12.7 41 56 

Table III.B.2-2 Parameter Values for Trucks (for CO2 gram per mile targets) 

Model Year a b C D Lower 

constraint

Upper 

constraint

2012 294 395 4.04 128.6 41 66 

2013 284 385 4.04 118.7 41 66 

2014 275 376 4.04 109.4 41 66 

2015 261 362 4.04 95.1 41 66 

2016 and 

later 247 348 4.04 81.1 41 66 

The equations can be shown graphically for each vehicle category, as shown in Figures 

III.B.2-1 and III.B.2-2. These standards (or functions) decrease from 2012-2016 with a vertical 

shift. 

The EPA received a number of comments on both the attribute and the shape of the 

curve. For reasons described in Section IIC and Chapter 2 of the TSD, the EPA feels that 

footprint is the most appropriate choice of attribute for this rule. More background discussion on 

other alternative attributes and curves EPA explored can be found in the EPA RIA. EPA 

recognizes that the CAA does not mandate that EPA use an attribute based standard, as 

compared to NHTSA’s obligations under EPCA. The EPA believes that a footprint-based 

program will harmonize EPA’s program and the CAFE program as a single national program, 

resulting in reduced compliance complexity for manufacturers. EPA’s reasons for using an 

attribute based standard are discussed in more detail in the Joint TSD. Also described in these 

other sections are the reasons why EPA is finalizing the slopes and the constraints as shown 

above. For future analysis, EPA will consider other options and suggestions made by 

commenters. 
136 Figure III.B.2-1. CO2 (g/mi) Car standard curves. 
137 

 

Figure III.B.2-2. CO2 (g/mi) Truck standard curves. 
138 

3. Overview of How EPA’s CO2 Standards Will Be Implemented for Individual 

Manufacturers 

 

 This section provides a brief overview of how EPA will implement the CO2 standards. 

Section III.E explains EPA’s approach to certification and compliance in detail. As proposed, 

EPA is finalizing two kinds of standards – fleet average standards determined by a 

manufacturer’s fleet makeup, and in-use standards that will apply to the individual vehicles that 

make up the manufacturer’s fleet. Although this is similar in concept to the current light-duty 

vehicle Tier 2 program, there are important differences. In explaining EPA’s CO2 standards, it is 

useful to summarize how the Tier 2 program works. 

 Under Tier 2, manufacturers select a test vehicle prior to certification and test the vehicle 

and/or its emissions hardware to determine both its emissions performance when new and the 

emissions performance expected at the end of its useful life. Based on this testing, the vehicle is 

assigned to one of several specified bins of emissions levels, identified in the Tier 2 rule, and this 

bin level becomes the emissions standard for the test group the test vehicle represents. All of the 

vehicles in the group must meet the emissions level for that bin throughout their useful life. The 

emissions level assigned to the bin is also used in calculating the manufacturer’s fleet average 

emissions performance. 

 Since compliance with the Tier 2 fleet average depends on actual test group sales 

volumes and bin levels, it is not possible to determine compliance at the time the manufacturer 

applies for and receives a certificate of conformity for a test group. Instead, at certification, the 

manufacturer demonstrates that the vehicles in the test group are expected to comply throughout 

their useful life with the emissions bin assigned to that test group, and makes a good faith 

demonstration that its fleet is expected to comply with the Tier 2 average when the model year is 

over. EPA issues a certificate for the vehicles covered by the test group based on this 

demonstration, and includes a condition in the certificate that if the manufacturer does not 

comply with the fleet average then production vehicles from that test group will be treated as not 

covered by the certificate to the extent needed to bring the manufacturer’s fleet average into 

compliance with Tier 2. 

 EPA is retaining the Tier 2 approach of requiring manufacturers to demonstrate in good 

faith at the time of certification that vehicles in a test group will meet applicable standards 

throughout useful life. EPA is also retaining the practice of conditioning certificates upon 

attainment of the fleet average standard. However, there are several important differences 

between a Tier 2 type of program and the CO2 standards program. These differences and 

resulting modifications to EPA’s certification protocols are summarized below and are described 

in detail in Section III.E. 

 EPA will continue to certify test groups as it does for Tier 2, and the CO2 emission results 

for the test vehicle will serve as the initial or default standard for all of the vehicles in the test 

group. However, manufacturers will later collect and submit data for individual vehicle model 
139 

types140 within each test group, based on the extensive fuel economy testing that occurs through 

the course of the model year. This model type data will be used to assign a distinct certification 

level for each model type, thus replacing the initial test group data as the compliance value for 

each model. It is these model type values that will be used to calculate the fleet average after the 

end of the model year.141 The option to substitute model type data for the test group data is at the 

manufacturer's discretion, except they are required, as they are under the CAFE test protocols, to 

submit sufficient vehicle test data to represent no less than 90 percent of their actual model year 

production. The test group emissions data will continue to apply for any model type that is not 

covered by vehicle test data specific to that model type. 

EPA’s CO2 standards also differ from Tier 2 in that the fleet average calculation for Tier 

2 is based on test group bin levels and test group sales whereas under the CO2 program the CO2

fleet average could be based on a combination of test group and model type emissions and model 

type production. For the new CO2 standards, the final regulations use production rather than 

sales in calculating the fleet average in order to closely conform with the CAFE program, which 

is a production-based program.142 Production as defined in the regulations is relatively easy for 

manufacturers to track, but once the vehicle is delivered to dealerships the manufacturer becomes 

once step removed from the sale to the ultimate customer, and it becomes more difficult to track 

that final transaction. There is no environmental impact of using production instead of actual 

sales, and many commenters supported maintaining alignment between EPA’s program and the 

CAFE program where possible. 

4. Averaging, Banking, and Trading Provisions for CO2 Standards

 As explained above, EPA is finalizing a fleet average CO2 program for passenger cars 

and light trucks. EPA has previously implemented similar averaging programs for a range of 

motor vehicle types and pollutants, from the Tier 2 fleet average for NOX to motorcycle 

hydrocarbon (HC) plus oxides of nitrogen (NOX) emissions to NOX and particulate matter (PM) 

emissions from heavy-duty engines.143 The program will operate much like EPA’s existing 

averaging programs in that manufacturers will calculate production-weighted fleet average 

emissions at the end of the model year and compare their fleet average with a fleet average 

emission standard to determine compliance. As in other EPA averaging programs, the Agency is 

also finalizing a comprehensive program for averaging, banking, and trading of credits which 

together will help manufacturers in planning and implementing the orderly phase-in of emissions 

control technology in their production, consistent with their typical redesign schedules. 

 

140 “Model type” is defined in 40 CFR 600.002-08 as “... a unique combination of car line, basic engine, and 

transmission class.” A “car line” is essentially a model name, such as “Camry,” “Malibu,” or “F150.” The fleet 

average is calculated on the basis of model type emissions 

141 The final in-use vehicle standards for each vehicle will also be based on the testing used to determine the model 

type values. As discussed in Section III.E.4, an in-use adjustment factor will be applied to the vehicle test results to 

determine the in-use standard that will apply during the useful life of the vehicle. 142 “Production” is defined as “vehicles produced and delivered for sale” and is not a measure of the number of 

vehicles actually sold. 

143 For example, see the Tier 2 light-duty vehicle emission standards program (65 FR 6698, February 10, 2000), the 

2010 and later model year motorcycle emissions program (69 FR 2398, January 15, 2004), and the 2007 and later 

model year heavy-duty engine and vehicle standards program (66 FR 5001, January 18, 2001). 
140 

 Averaging, Banking, and Trading (ABT) of emissions credits has been an important part 

of many mobile source programs under CAA Title II, both for fuels programs as well as for 

engine and vehicle programs. ABT is important because it can help to address many issues of 

technological feasibility and lead-time, as well as considerations of cost. ABT is an integral part 

of the standard setting itself, and is not just an add-on to help reduce costs. In many cases, ABT 

resolves issues of lead-time or technical feasibility, allowing EPA to set a standard that is either 

numerically more stringent or goes into effect earlier than could have been justified otherwise. 

This provides important environmental benefits and at the same time it increases flexibility and 

reduces costs for the regulated industry. A wide range of commenters expressed general support 

for the ABT provisions. Some commenters noted issues regarding specific provisions of the 

ABT program, which will be discussed in the appropriate context below. Several commenters 

requested that EPA publicly release manufacturer-specific ABT data to improve the transparency 

of credit transactions. These comments are addressed in Section III.E. 

This section discusses generation of credits by achieving a fleet average CO2 level that is 

lower than the manufacturer’s CO2 fleet average standard. The final rule includes a variety of 

additional ways credits may be generated by manufacturers. Section III.C describes these 

additional opportunities to generate credits in detail. Manufacturers may earn credits through 

A/C system improvements beyond a specified baseline. Credits can also be generated by 

producing alternative fuel vehicles, by producing advanced technology vehicles including 

electric vehicles, plug-in hybrids, and fuel cell vehicles, and by using technologies that improve 

off-cycle emissions. In addition, early credits can be generated prior to the program’s MY 2012 

start date. The credits will be used to determine a manufacturer’s compliance at the end of the 

model year. These credit generating opportunities are described below in Section III.C. 

 As explained earlier, manufacturers will determine the fleet average standard that applies 

to their car fleet and the standard for their truck fleet from the applicable attribute-based curve. 

A manufacturer’s credit or debit balance will be determined by comparing their fleet average 

with the manufacturer’s CO2 standard for that model year. The standard will be calculated from 

footprint values on the attribute curve and actual production levels of vehicles at each footprint. 

A manufacturer will generate credits if its car or truck fleet achieves a fleet average CO2 level 

lower than its standard and will generate debits if its fleet average CO2 level is above that 

standard. At the end of the model year, each manufacturer will calculate a production-weighted 

fleet average for each averaging set (cars and trucks). A manufacturer’s car or truck fleet that 

achieves a fleet average CO2 level lower than its standard will generate credits, and if its fleet 

average CO2 level is above that standard its fleet will generate debits. 

 The regulations will account for the difference in expected lifetime vehicle miles traveled 

(VMT) between cars and trucks in order to preserve CO2 reductions when credits are transferred 

between cars and trucks. As directed by EISA, NHTSA accomplishes this in the CAFE program 

by using an adjustment factor that is applied to credits when they are transferred between car and 

truck compliance categories. The CAFE adjustment factor accounts for two different influences 

that can cause the transfer of car and truck credits (expressed in tenths of a mpg), if left 

unadjusted, to potentially negate fuel reductions. First, mpg is not linear with fuel consumption, 

i.e., a 1 mpg improvement above a standard will imply a different amount of actual fuel 

consumed depending on the level of the standard. Second, NHTSA’s conversion corrects for the 
141 

fact that the typical lifetime miles for cars is less than that for trucks, meaning that credits earned 

for cars and trucks are not necessarily equal. NHTSA’s adjustment factor essentially converts 

credits into vehicle lifetime gallons to ensure preservation of fuel savings and the transfer credits 

on an equal basis, and then converts back to the statutorily-required credit units of tenths of a 

mile per gallon. To convert to gallons NHTSA’s conversion must take into account the expected 

lifetime mileage for cars and trucks. Because EPA’s standards are expressed on a CO2 gram per 

mile basis, which is linear with fuel consumption, EPA’s credit calculations do not need to 

account for the first issue noted above. However, EPA is accounting for the second issue by 

expressing credits when they are generated in total lifetime Megagrams (metric tons), rather than 

through the use of conversion factors that would apply at certain times. In this way credits may 

be freely exchanged between car and truck compliance categories without the need for 

adjustment. Additional detail regarding this approach, including a discussion of the vehicle 

lifetime mileage estimates for cars and trucks can be found in Section III.E.5. A discussion of 

the derivation of the estimated vehicle lifetime miles traveled can be found in Chapter 4 of the 

Joint Technical Support Document. 

 A manufacturer that generates credits in a given year and vehicle category may use those 

credits in essentially four ways, although with some limitations. These provisions are very 

similar to those of other EPA averaging, banking, and trading programs. These provisions have 

the potential to reduce costs and compliance burden, and support the feasibility of the standards 

in terms of lead time and orderly redesign by a manufacturer, thus promoting and not reducing 

the environmental benefits of the program. 

 

 First, EPA proposed that the manufacturer must use any credits earned to offset any 

deficit that had accrued in the current year or in a prior model year that had been carried over to 

the current model year. NRDC commented that such a provision is necessary to prevent credit 

“shell games” from delaying the adoption of new technologies. EPA’s Tier 2 program includes 

such a restriction, and EPA is applying an identical restriction to the GHG program. Simply 

stated, a manufacturer may not bank (or carry forward) credits if that manufacturer is also 

carrying a deficit. In such a case, the manufacturer is obligated to use any current model year 

credits to offset that deficit. Using current model year credits to offset a prior model year deficit 

is referred to in the CAFE program as credit carry-back. EPA’s deficit carry-forward, or credit 

carry-back provisions are described further, below. 

 Second, after satisfying any needs to offset pre-existing deficits, remaining credits may 

be banked, or saved for use in future years. Credits generated in this program will be available to 

the manufacturer for use in any of the five model years after the model year in which they were 

generated, consistent with the CAFE program under EISA. This is also referred to as a credit 

carry-forward provision. 

 EPA received a number of comments regarding the credit carry-back and carry-forward 

provisions. Many supported the proposed consistency of these provisions with EISA and the 

flexibility provided by these provisions, and several offered qualified or tentative support. For 

example, NRDC encouraged EPA to consider further restrictions in the 2017 and later model 

years. Public Citizen expressed concern regarding the complexity of the program and how these 

provisions might obscure a straightforward determination of compliance in any given model 
142 

year. At least two automobile manufacturers suggested modeling the program after California, 

which allows credits to be carried forward for three additional years following a discounting 

schedule. 

For other new emission control programs, EPA has sometimes initially restricted credit 

life to allow time for the Agency to assess whether the credit program is functioning as intended. 

When EPA first offered averaging and banking provisions in its light-duty emissions control 

program (the National Low Emission Vehicle Program), credit life was restricted to three years. 

The same is true of EPA’s early averaging and banking program for heavy-duty engines. As 

these programs matured and were subsequently revised, EPA became confident that the 

programs were functioning as intended and that the standards were sufficiently stringent to 

remove the restrictions on credit life. EPA is therefore acting consistently with our past practice 

in finalizing reasonable restrictions on credit life in this new program. The Agency believes that 

a credit life of five years represents an appropriate balance between promoting orderly redesign 

and upgrade of the emissions control technology in the manufacturer’s fleet and the policy goal 

of preventing large numbers of credits accumulated early in the program from interfering with 

the incentive to develop and transition to other more advanced emissions control technologies. 

As discussed below in Section III.C, early credits generated by a manufacturer are also be 

subject to the five year credit carry-forward restriction based on the year in which they are 

generated. This limits the effect of the early credits on the long-term emissions reductions 

anticipated to result from the new standards. 

 Third, the new program enables manufacturers to transfer credits between the two 

averaging sets, passenger cars and trucks, within a manufacturer. For example, credits accrued 

by over-compliance with a manufacturer’s car fleet average standard may be used to offset debits 

accrued due to that manufacturer’s not meeting the truck fleet average standard in a given year. 

EPA believes that such cross-category use of credits by a manufacturer provides important 

additional flexibility in the transition to emissions control technology without affecting overall 

emission reductions. Comments regarding the credit transfer provisions expressed general 

support, noting that it does not matter to the environment whether a gram of pollutant is 

generated from a car or a truck. Additional comments regarding EPA’s streamlined megagram 

approach and method of accounting for expected vehicle lifetime miles traveled are summarized 

in Section III.E. 

 Finally, accumulated credits may be traded to another vehicle manufacturer. As with 

intra-company credit use, such inter-company credit trading provides flexibility in the transition 

to emissions control technology without affecting overall emission reductions. Trading credits to 

another vehicle manufacturer could be a straightforward process between the two manufacturers, 

but could also involve third parties that could serve as credit brokers. Brokers may not own the 

credits at any time. These sorts of exchanges are typically allowed under EPA’s current 

emission credit programs, e.g., the Tier 2 light-duty vehicle NOX fleet average standard and the 

heavy-duty engine NOX fleet average standards, although manufacturers have seldom made such 

exchanges. Comments generally reflected support for the credit trading flexibility, although 

some questioned the extent to which trading might actually occur. As noted above, comments 

regarding program transparency are addressed in Section III.E. 
143 

If a manufacturer has accrued a deficit at the end of a model year – that is, its fleet 

average level failed to meet the required fleet average standard – the manufacturer may carry that 

deficit forward (also referred to credit carry-back) for a total of three model years after the model 

year in which that deficit was generated. EPA continues to believe that three years is an 

appropriate amount of time that gives the manufacturers adequate time to respond to a deficit 

situation but does not create a lengthy period of prolonged non-compliance with the fleet average 

standards.144 As noted above, such a deficit carry-forward may only occur after the manufacturer 

has applied any banked credits or credits from another averaging set. If a deficit still remains 

after the manufacturer has applied all available credits, and the manufacturer did not obtain 

credits elsewhere, the deficit may be carried forward for up to three model years. No deficit may 

be carried into the fourth model year after the model year in which the deficit occurred. Any 

deficit from the first model year that remains after the third model year will constitute a violation 

of the condition on the certificate, which will constitute a violation of the Clean Air Act and will 

be subject to enforcement action. 

 The averaging, banking, and trading provisions are generally consistent with those 

included in the CAFE program, with a few notable exceptions. As with EPA’s approach, CAFE 

allows five year carry-forward of credits and three year carry-back. Under CAFE, transfers of 

credits across a manufacturer’s car and truck averaging sets are also allowed, but with limits 

established by EISA on the use of transferred credits. The amount of transferred credits that can 

be used in a year is limited, and transferred credits may not be used to meet the CAFE minimum 

domestic passenger car standard. CAFE allows credit trading, but again, traded credits cannot be 

used to meet the minimum domestic passenger car standard. EPA did not propose, and is not 

finalizing, these constraints on the use of transferred credits. 

 Additional details regarding the averaging, banking, and trading provisions and how EPA 

will implement these provisions can be found in Section III.E. 

5. CO2 Temporary Lead-Time Allowance Alternative Standards 

EPA proposed adopting a limited and narrowly prescribed option, called the Temporary 

Lead-time Allowance Alternative Standards (TLAAS), to provide additional lead time for a 

certain subset of manufacturers. As noted in the proposal, this option was designed to address 

two different situations where we project that more lead time is needed, based on the level of 

emissions control technology and emissions control performance currently exhibited by certain 

vehicles. One situation involves manufacturers who have traditionally paid CAFE fines instead 

of complying with the CAFE fleet average, and as a result at least part of their vehicle production 

currently has significantly higher CO2 and lower fuel economy levels than the industry average. 

More lead time is needed in the program’s initial years to upgrade these vehicles to meet the 

aggressive CO2 emissions performance levels required by the final rule. The other situation 

involves manufacturers who have a limited line of vehicles and are therefore unable to average 

emissions performance across a full line of production. For example, some smaller volume 

manufacturers produce only vehicles with emissions above the corresponding CO2 footprint 

 

144 EPA emission control programs that incorporate ABT provisions (e.g., the Tier 2 program and the Mobile Source 

Air Toxics program) have provided this three-year deficit carry-forward provision for this reason. See 65 FR 6745 

(February 10, 2000), and 71 FR 8427 (February 26, 2007). 
144 

target, and do not have other types of vehicles (that exceed their compliance targets) in their 

production mix with which to average. Often, these manufacturers also pay fines under the 

CAFE program rather than meeting the applicable CAFE standard. Because voluntary noncompliance through payment of civil penalties is impermissible for the GHG standards under the 

CAA, both of these types of manufacturers need additional lead time to upgrade vehicles and 

meet the standards. EPA proposed that this subset of manufacturers be allowed to produce up to 

100,000 vehicles over model years 2012-2015 that would be subject to a somewhat less stringent 

CO2 standard of 1.25 times the standard that would otherwise apply to those vehicles. Only 

manufacturers with total U.S. sales of less than 400,000 vehicles per year in MY 2009 would be 

eligible for this allowance. Those manufacturers would have to exhaust designated program 

flexibilities in order to be eligible, and credit generating and trading opportunities for the eligible 

vehicles would be restricted. See 74 FR 49522-224. 

EPA is finalizing the optional TLAAS provisions, with certain limited modifications, so 

that these manufacturers can have sufficient lead time to meet the tougher MY 2016 GHG 

standards, while preserving consumer choice of vehicles during this time. EPA is finalizing 

modified provisions to address the unique lead-time issues of smaller volume manufacturers. 

One provision involves additional flexibility under the TLAAS program for manufacturers below 

50,000 vehicle sales, as discussed further in Section III.B.5.b below. Another provision defers 

the CO2 standards for the smallest volume manufacturers, those below 5,000 vehicle sales, as 

discussed in Section III.B.6. 

Comments from several manufacturers strongly supported the TLAAS program as critical 

to provide the lead time needed for manufacturers to meet the standards. Volkswagen 

commented that TLAAS is an important aspect of EPA’s proposal and that it responds to the 

needs of some smaller manufacturers for additional lead time and flexibility under the CAA. 

Daimler Automotive Group commented that TLAAS is a critical element of the program and 

falls squarely within EPA’s discretion to provide appropriate lead time to limited-line lowvolume manufacturers. BMW also commented that TLAAS is needed because most of the 

companies with limited lines will have to meet a more stringent fleet standard by 2016 than fullline manufacturers because they sell “feature-dense” vehicles (as opposed to light-weight large 

wheel-base vehicles) and no pick-up trucks. BMW commented that their MY 2016 footprintbased standard is projected to be 4 percent more stringent than the fleet average standard of 250 

g/mile. The Alliance of Automobile Manufacturers supported the flexibilities proposed by EPA, 

including TLAAS. As discussed in detail below, EPA received extensive comments from many 

smaller volume manufacturers that the proposed TLAAS program was insufficient to address 

lead time and feasibility issues they will face under the program. 

In contrast, EPA also received comments from the Center for Biological Diversity 

opposing the TLAAS program, commenting that an exception for high performance vehicles is 

not allowed under EPCA or the CAA and that it rewards manufacturers that pay penalties under 

CAFE and penalizes those that have complied with CAFE. This commenter suggests that 

manufacturers could decrease vehicle mass or power output of engines, purchase credits from 

another manufacturer, or earn off-cycle credits. EPA responds to these comments below. 

 
145 

After carefully considering the public comments, EPA continues to believe that the 

TLAAS program is essential in providing necessary lead time and flexibility to eligible 

manufacturers in the early years of the standards. First, EPA believes that it is acting well within 

its legal authority in adopting the various TLAAS provisions. EPA is required to provide 

sufficient lead time for industry as a whole for standards under section 202 (a) (1), which 

mandates that standards are to take effect only “after providing such period as the Administrator 

finds necessary to permit the development and application of the requisite technology, giving 

appropriate consideration to the cost of compliance within such period.” Thus, although section 

202 (a)(1) does not explicitly authorize this or any other specific lead time provision, it affords 

ample leeway for EPA to craft provisions designed to provide adequate lead time, and to tailor 

those provisions as appropriate. We show below that the types of technology penetrations 

required for TLAAS-eligible vehicles in the program’s earlier years raise critical issues as to 

adequacy of lead time. As discussed in the EPA feasibility analysis provided in section III.D.6 

and III.D.7 several manufacturers eligible for TLAAS are projected to face a compliance 

shortfall in MY2016 without the TLAAS program, even with the full application of technologies 

assumed by the OMEGA Model, including hybrid use of up to 15 percent. These include BMW, 

Jaguar Land Rover, Daimler, Porsche, and Volkswagen In addition, the smaller volume 

manufacturers of this group (i.e., Jaguar Land Rover and Porsche) face the greatest shortfall (see 

Table III.D.6-4). Even with TLAAS, these manufacturers will need to take technology steps to 

comply with standards above and beyond those of other manufacturers. These manufacturers 

have relatively few models with high baseline emissions and this flexibility allows them 

additional lead time to adapt to a longer term strategy of meeting the final standards within their 

vehicle redesign cycles. 

Second, EPA has carefully evaluated other means of eligible manufacturers to meet the 

standards, such as utilizing available credit opportunities. Indeed, eligibility for the TLAAS, and 

for temporary deferral of regulation for very small volume manufacturers, is conditioned on first 

exhausting the various programmatic flexibilities including credit utilization. At the same time, 

a basic reason certain manufacturers are faced with special lead time difficulties is their inability 

to generate credits which can be then be averaged across their fleet because of limited product 

lines. And although purchasing credits is an option under the program, there are no guarantees 

that credits will be available. Historic practice in fact suggests that manufacturers do not sell 

credits to competitors. While some of the smaller manufacturers covered by the TLAAS 

program may be in a position to obtain credits, they are not likely to be available for the TLAAS 

manufacturers across the board in the volume needed to comply without the TLAAS provisions. 

At the same time the TLAAS provisions have been structured such that any credits that do 

become available would likely be used before a manufacturer would turn to the more restricted 

and limiting TLAAS provisions. 

As discussed in Section III.C., off-cycle credits are available if manufacturers are able to 

employ new and innovative technologies not already in widespread use, which provide realworld emissions reductions not captured on the current test cycles. Further, these credits are 

eligible only for technologies that are newly introduced on just a few vehicle models, and are not 

yet in widespread use across the fleet. The magnitude of these credits are highly uncertain 

because they are based on new technologies, and EPA is not aware of any such technologies that 

would provide enough credits to bring these manufacturers into compliance without TLAAS lead 
146 

time flexibility. Manufacturers first must develop these technologies and then demonstrate their 

emissions reductions capabilities, which will require lead time. Moreover, the technologies 

mentioned in the proposal which are the most likely to be eligible based on present knowledge, 

including solar panels and active aerodynamics, are likely to provide only small incremental 

emissions reductions. 

We agree with the comment that reducing vehicle mass or power are potential methods 

for reducing emissions that should be employed by TLAAS-eligible manufacturers to help them 

meet standards. However, based on our assessment of the lead time needed for these 

manufacturers to comply with the standards, especially given their more limited product 

offerings and higher baseline emissions, we believe that additional time is needed for them to 

come into compliance. EPA can permissibly consider the TLAAS and other manufacturers’ lead 

time, cost, and feasibility issues in developing the primary standards and has discretion in setting 

the overall stringency of the standards to account for these factors. Natural Resources Defense 

Council v. Thomas, 805 F. 2d 410, 421 (D.C. Cir. 1986) (even when implementing technologyforcing provisions of Title II, EPA may base standards on an industry-wide capability “taking 

into account the broad spectrum of technological capabilities as well as cost and other factors” 

across the industry). EPA is not legally required to set standards that drive these manufacturers 

or their products out of the market, nor is EPA legally required to preserve a certain product line 

or vehicle characteristic. Instead EPA has broad discretion under section 202(a)(1) to set 

standards that reasonably balance lead time needs across the industry as a whole and vehicle 

availability. In this rulemaking, EPA has consistently emphasized the importance of obtaining 

very significant reductions in emissions of GHGs from the industry as a whole, and obtaining 

those reductions through regulatory approaches that avoid limiting the ability of manufacturers to 

provide model availability and choice for consumers. The primary mechanism to achieve this is 

the use of a footprint attribute curve in setting the increasingly stringent model year standards. 

The TLAAS provisions are a temporary and strictly limited modification to these attribute 

standards allowing the TLAAS manufacturers lead time to upgrade their product lines to meet 

the 2016 GHG standards. EPA has made a reasonable choice here to preserve the overall 

stringency of the program, and to afford increased flexibility in the program’s early years to a 

limited class of vehicles to assure adequate lead time for all manufacturers to meet the strictest of 

the standards by MY 2016. 

As described below, EPA also carefully considered the comments of smaller volume 

manufacturers and believes additional lead time is needed. Therefore, EPA is finalizing the 

TLAAS program, similar to that proposed, and is also finalizing an additional TLAAS option for 

manufacturers with annual U.S. sales under 50,000 vehicles. EPA is also deferring standards for 

manufacturers with annual sales of less than 5,000 vehicles. These new TLAAS provisions and 

the small volume manufacturer deferment are discussed in detail below and in Section III.B.6, 

respectively. 

a. Base TLAAS Program 

 As proposed, EPA is establishing the TLAAS program for a specified subset of 

manufacturers. This alternative standard is an option only for manufacturers with total U.S. sales 

of less than 400,000 vehicles per year, using 2009 model year final sales numbers to determine 
147 

eligibility for these alternative standards. For manufacturers with annual sales of 50,000 or more 

but less than 400,000 vehicles, EPA is finalizing the TLAAS program largely as proposed. EPA 

proposed that under the TLAAS, qualifying manufacturers would be allowed to produce up to 

100,000 vehicles that would be subject to a somewhat less stringent CO2 standard of 1.25 times 

the standard that would otherwise apply to those vehicles. This 100,000 volume is not an annual 

limit, but is an absolute limit for the total number of vehicles which can use the TLAAS program 

over the model years 2012-2015. Any additional production would be subject to the same 

standards as any other manufacturer. EPA is retaining this limit for manufacturers with baseline 

MY 2009 sales of 50,000 but less than 400,000. In addition, as discussed further below, EPA is 

finalizing a variety of restrictions on the use of the TLAAS program, to ensure that only 

manufacturers who need more lead time for the kinds of reasons noted above are likely to use the 

program. 

 

EPA received only supportive comments on the appropriateness of an upper bound of 

400,000 vehicles to determine eligibility for TLAAS (except of course from commenters 

challenging the entire TLAAS). However, Volvo and Saab commented that basing eligibility 

strictly on MY2009 sales would be problematic for these companies, which are being spun-off 

from larger manufacturer in the MY2009 time frame due to the upheaval in the auto industry 

over the past few years. These commenters offered a variety of suggestions including using 

MY2010 as the eligibility cut-off instead of MY2009, reassessing eligibility on a year-by-year 

basis as corporate relationships change, or allowing companies separated from a larger parent 

company by the end of 2010 to use their MY2009 branded U.S. sales to qualify for TLAAS. In 

response to these concerns, EPA recognizes that these companies currently being sold by larger 

manufacturer will share the same characteristics of the manufacturers for which the TLAAS 

program was designed. As newly independent companies, these firms will face the challenges of 

a narrower fleet of vehicles across which to average, and may potentially be in a situation, at 

least in the first few years, of paying fines under CAFE. Lead time concerns in the program’s 

initial years are in fact particularly acute for these manufacturers since they will be newly 

independent, and thus would have even less of an opportunity to modify their vehicles to meet 

the standards. Therefore, EPA is finalizing an approach that allows manufacturers with U.S. 

“branded sales” in MY2009 under the umbrella of a larger manufacturer that become 

independent by the end of calendar year 2010 to use their MY2009 branded sales to qualify for 

TLAAS eligibility. In other words, a manufacturer will be eligible for TLAAS if it produced 

vehicles for the U.S. market in MY 2009, its branded sales of U.S. vehicles were less than 

400,000 in MY2009 but whose vehicles were sold as part of a larger manufacturer, and it 

becomes independent by the end of calendar year 2010, if the new entity has sales below 400,000 

vehicles. 

Manufacturers with no U.S. sales in MY2009 are not eligible to utilize the TLAAS 

program. EPA does not support the commenter’s suggestion of a year-by-year eligibility 

determination because it opens up the TLAAS program to an unknown universe of potential 

eligible manufacturers, with the potential for gaming. EPA does not believe the TLAAS 

program should be available to new entrants to the U.S. market since these manufacturers are not 

transitioning from the CAFE regime which allows fine paying as a means of compliance to a 

CAA regime which does not, and hence do not present the same types of lead time issues. 
148 

Manufacturers entering the U.S. market for the first time thus will be fully subject to the GHG 

fleet-average standards. 

As proposed, manufacturers qualifying for TLAAS will be allowed to meet slightly less 

stringent standards for a limited number of vehicles. An eligible manufacturer could have a total 

of up to 100,000 units of cars or trucks combined over model years 2012 – 2015 which would be 

subject to a standard 1.25 times the standard that would otherwise apply to those vehicles under 

the primary program. In other words, the footprint curves upon which the individual 

manufacturer standards for the TLAAS fleets are based would be less stringent by a factor of 

1.25 for up to 100,000 of an eligible manufacturer’s vehicles for model years 2012-2015. EPA 

believes that 100,000 units over four model years achieves an appropriate balance, as the 

emissions impact is quite small, but does provide companies with necessary lead time during 

MY 2012 – 2015. For example, for a manufacturer producing 400,000 vehicles per year, this 

would be a total of up to 100,000 vehicles out of a total production of up to 1.6 million vehicles 

over the four year period, or about 6 percent of total production. 

Finally, for manufacturers of 50,000 but less than 400,000 U.S. vehicles sales during 

2009, the program expires at the end of MY 2015 as proposed. EPA continues to believe the 

program reasonably addresses a real world lead time constraint for these manufacturers, and does 

so in a way that balances the need for more lead time with the need to minimize any resulting 

loss in potential emissions reductions. In MY 2016, the TLAAS option thus ends for all but the 

smallest manufacturers opting for TLAAS, and manufacturers must comply with the same CO2

standards as non-TLAAS manufacturers; under the CAFE program companies would continue to 

be allowed to pay civil penalties in lieu of complying with the CAFE standards. However, 

because companies must meet both the CAFE standards and the EPA CO2 standards, the 

National Program will have the practical impact of providing a level playing field for almost all 

except the smallest companies beginning in MY2016. This option, even with the modifications 

being adopted, thereby results in more fuel savings and CO2 reductions than would be the case 

under the CAFE program by itself. 

EPA proposed that manufacturers meeting the cut-point of below 400,000 sales for MY 

2009 but whose U.S. sales grew above 400,000 in any subsequent model years would remain 

eligible for the TLAAS program. The total sales number applies at the corporate level, so if a 

corporation owns several vehicle brands the aggregate sales for the corporation must be used. 

These provisions would help prevent gaming of the provisions through corporate restructuring. 

Corporate ownership or control relationships would be based on determinations made under 

CAFE for model year 2009 (except in the case of a manufacturer being sold by a larger 

manufacturer by the end of calendar year 2010, as discussed above). In other words, 

corporations grouped together for purposes of meeting CAFE standards in MY2009, must be 

grouped together for determining whether or not they are eligible under the 400,000 vehicle cut 

point. EPA is finalizing these provisions with the following modifications. EPA recognizes the 

dynamic corporate restructuring occurring in the auto industry and believes it is important to 

structure additional provisions to ensure there is no ability to game the TLAAS provisions and to 

ensure no unintended loss of feasible environmental benefits. Therefore, EPA is finalizing a 

provision that if two or more TLAAS eligible companies are later merged, with one company 

having at least 50% or more ownership of the other, or if the companies are combined for the 
149 

purposes of EPA certification and compliance, the TLAAS allotment is not additive. The 

merged company will only be allowed the allotment for what is considered the parent company 

under the new corporate structure. Further, if the newly formed company would have exceeded 

the 400,000 vehicle cut point based on combined MY2009 sales, the new entity is not eligible for 

TLAAS in the model year following the merger. EPA believes that such mergers and 

acquisitions would give the parent company additional opportunities to average across its fleet, 

eliminating one of the primary needs for the TLAAS program. This provision will not be 

retroactive and will not affect the TLAAS program in the year of the merger or for previous 

model years. EPA believes these additional provisions are essential to ensure the integrity of the 

TLAAS program by ensuring that it does not become available to large manufacturers through 

mergers and acquisitions. 

 

 As proposed, the TLAAS vehicles will be separate car and truck fleets for that model 

year and subject to the less stringent footprint-based standards of 1.25 times the primary fleet 

average that would otherwise apply. The manufacturer will determine what vehicles are 

assigned to these separate averaging sets for each model year. As proposed, credits from the 

primary fleet average program can be transferred and used in the TLAAS program. Credits 

generated within the TLAAS program may also be transferred between the TLAAS car and truck 

averaging sets (but not to the primary fleet as explained below) for use through MY2015 when 

the TLAAS ends. 

EPA is finalizing a number of restrictions on credit trading within the TLAAS program, 

as proposed. EPA is concerned that if credit use in the TLAAS program were unrestricted, some 

manufacturers would be able to place relatively clean vehicles in the TLAAS fleet, and generate 

credits for the primary program fleet. First, credits generated under TLAAS may not be 

transferred or traded to the primary program. Therefore, any unused credits under TLAAS 

expire after model year 2015 (or 2016 for manufacturers with annual sales less than 50,000 

vehicles). EPA believes that this is necessary to limit the program to situations where it is 

needed and to prevent the allowance from being inappropriately transferred to the long-term 

primary program where it is not needed. EPA continues to believe this provision is necessary to 

prevent credits from being earned simply by removing some high-emitting vehicles from the 

primary fleet. Absent this restriction, manufacturers would be able to choose to use the TLAAS 

for these vehicles and also be able to earn credits under the primary program that could be 

banked or traded under the primary program without restriction. Second, EPA is finalizing two 

additional restrictions on the use of TLAAS by requiring that for any of the 2012-2015 model 

years for which an eligible manufacturer would like to use the TLAAS, the manufacturer must 

use two of the available flexibilities in the GHG program first in order to try and comply with the 

primary standard before accessing the TLAAS -- i.e., TLAAS eligibility is not available to those 

manufacturers with other readily-available means of compliance. Specifically, before using the 

TLAAS a manufacturer must: (1) use any banked emission credits from previous model years; 

and, (2) use any available credits from the companies’ car or truck fleet for the specific model 

year (i.e., use credit transfer from cars to trucks or from trucks to cars). That is, before using the 

TLAAS for either the car fleet or the truck fleet, the company must make use of any available 

intra-manufacturer credit transfers first. Finally, EPA is restricting the use of banking and 

trading between companies of credits in the primary program in years in which the TLAAS is 

being used. No such restriction is in place for years when the TLAAS is not being used. 
150 

EPA received several comments in support of these credit restrictions for the TLAAS 

program. On the negative side, one manufacturer commented that the restrictions were not 

necessary, saying that the restrictions are counter to providing manufacturers with flexibility and 

that the emissions impacts estimated by EPA due to the full use of the program are small. 

However, EPA continues to believe that the restrictions are appropriate to prevent the potential 

gaming described above, and to ensure that the TLAAS program is used only by those 

manufacturers that have exhausted all other readily available compliance mechanisms and 

consequently have legitimate lead time issues. 

One manufacturer commented that the program is restrictive due to the requirement that 

manufacturers must decide prior to the start of the model year whether or not and how to use the 

TLAAS program. EPA did not intend for manufactures to have to make this determination prior 

to the start of the model year. EPA expects that manufacturers will provide a best estimate of the 

need to use the TLAAS program during certification based on projected model year sales, but 

clarifies that the manufacturer may determine the program’s actual use at the end of the model 

year during the process of demonstrating year-end compliance. 

b. Additional TLAAS Flexibility for Manufacturers with MY 2009 Sales of Less 

Than 50,000 Vehicles 

 EPA received extensive comments that the TLAAS program would not provide sufficient 

lead time and flexibility for companies with sales of significantly less than 400,000 vehicles. 

Jaguar Land Rover, which separated from Ford in 2008, commented that it sells products only in 

the middle and large vehicle segments and that its total product range remains significantly more 

limited in terms of segments in comparison with its main competitors which typically have 

approximately 75% of their passenger car fleet in the small and middle segments. Jaguar Land 

Rover also commented that it has already committed $1.3 billion of investment to reducing CO2

from its vehicle fleet and that this investment is already delivering a range of technologies to 

improve the fuel economy and CO2 performance of its existing vehicles. Jaguar Land Rover 

submitted confidential business information regarding their future product plans and emissions 

performance capabilities of their vehicles which documents their assertions. 

Porsche commented that their passenger car footprint-based standard is the most stringent 

of any manufacturer and this, combined with their high baseline emissions level, means that it 

would need to reduce emissions by about 10 percent per year over the 2012 – 2016 time-frame. 

Porsche commented that such reductions were not feasible. They commented that their 

competitors will be able to continue to offer their full line of products because the competitors 

have a wider range of products with which to average. Porsche further commented that their 

product development cycles are longer than larger competitors. Porsche recommended for small 

limited line niche manufacturers that EPA require an annual 5 percent reduction in emissions 

from baseline up to a total reduction of 25 percent, or to modify the TLAAS program to require 

such reductions. Porsche noted that this percent reduction would be in line with the average 

emissions reductions required for larger manufacturers. 
151 

EPA also received comments from several very small volume manufacturers that, even 

with the TLAAS program, the proposed standards are not feasible for them, certainly not in the 

MY 2012-2016 MY time frame. These manufacturers included Aston Martin, McLaren, Lotus, 

and Ferrari. Their comments consistently focused on the need for separate, less stringent 

standards for small volume manufacturers. The manufacturers commented that they are willing 

to make progress in reducing emissions, but that separate, less-stringent small volume 

manufacturer standards are needed for them to remain in the U.S. market. The commenters note 

that their product line consists entirely of high end sports cars. Most of these manufacturers have 

only a few vehicle models, have annual sales on the order of a few hundred to a few thousand 

vehicles, and several have average baseline CO2 emissions in excess of 500 g/mile – nearly twice 

the industry average. McLaren commented that its vehicle model to be introduced in MY2011 

will have class leading CO2 performance but that it would not be able to offer the vehicle in the 

U.S. market because it does not have other vehicle models with which to average. Similarly, 

Aston Martin commented that it is of utmost importance that it is not required to reduce 

emissions significantly more than equivalent vehicles from larger manufacturers, which would 

render them uncompetitive due purely to the size of its business. Manufacturers also noted that 

they launch new products less frequently than larger manufacturers (e.g., Ferrari noted that their 

production period for models is 7-8 years), and that suppliers serve large manufacturers first 

because they can buy in larger volumes. Some manufacturers also noted that they would be 

willing to purchase credits at a reasonable price, but they believed that credit availability from 

other manufacturers was highly unlikely due to the competitive nature of the auto industry. 

Several of these manufacturers provided confidential business information indicating their 

preliminary plans for reducing GHG emissions across their product lines through MY2016 and 

beyond. 

 The Association of International Automobile Manufacturers (AIAM) also commented 

that, because of their essential features, vehicles produced by small volume manufacturers would 

not be able to meet the proposed greenhouse gas standards. AIAM commented that “while it is 

possible that these small volume manufacturers (SVMs) might be able to comply with 

greenhouse gas standards by purchasing credits from other manufacturers, this is far too 

speculative a solution. The market for credits is unpredictable at this point. Other than exiting the 

U.S. market, therefore, the only other possible solution for an independent SVM would be to sell 

an equity interest in the company to a larger, full-line manufacturer, so that the emissions of the 

luxury vehicles could be averaged in with the much larger volume of other vehicles produced by 

the major manufacturer. This cannot possibly be the outcome EPA intends, especially when 

measured against the minimal, if any, environmental benefit that would result.” AIAM 

commented further that “there is ample legal authority for EPA to provide SVMs a more 

generous lead-time allowance or an alternative standard. Indeed, EPA recognizes such authority 

in the proposal for a small entity deferment (for those companies defined under the Small 

Business Administration's regulations), see 74 FR at 49574, and in the TLAAS. These 

provisions are consistent with previous EPA rulemaking under the Clean Air Act which offer 

relief to SVMs.” AIAM recommended deferring standards for SVMs to a future rulemaking, 

providing EPA with adequate time to assess relevant product plans and technology feasibility 

information from SVMs, conduct the necessary reviews and modeling that may be needed, and 

consult with the stakeholders. 
152 

These commenters noted that standards for the smallest manufacturers were deferred in 

the California program until MY2016 and that California’s program would have established 

standards for small volume manufacturers in MY 2016 at a level that would be technologically 

feasible. The commenters also suggested that California’s approach is similar to the approach 

being taken by EPA for small business entities. Further, these commenters noted that in Tier 2 

and other light-duty vehicle programs, EPA has allowed small volume manufacturers (SVMs) 

until the end of the phase-in period to comply with standards. The commenters recommended 

that EPA should defer standards for SVMs, and conduct a future rulemaking to establish 

appropriate standards for SVMs starting in model year 2016. Alternatively, some manufacturers 

recommended establishing much less stringent standards for SVMs as part of the current 

rulemaking. 

In summary, the manufacturers commented that their range of products was insufficient 

to allow them to meet the standards in the time provided, even with the proposed TLAAS 

program. Many of these manufacturers have baseline emissions significantly higher than their 

larger-volume competitors, and thus the CO2 reductions required from baseline under the 

program are larger for many of these companies than for other companies. Although they are 

investing substantial resources to reduce CO2 emissions, they believe that they will not be able to 

achieve the standards under the proposed approach. 

EPA also received comments urging us not to expand the TLAAS program. The 

commenters are concerned about the loss of benefits that would occur with any expansion. 

EPA has considered the comments carefully and concludes that additional flexibility is 

needed for these companies. After assessing the issues raised by commenters, EPA believes 

there are two groups of manufacturers that need additional lead time. The first group includes 

manufacturers with annual U.S. sales of less than 5,000 vehicles per year. Standards for these 

small volume manufacturers are being deferred until a future rulemaking in the 2012 timeframe, 

as discussed in Section III.B.6, below. This will allow EPA to determine the appropriate level of 

standards for these manufacturers, as well as the small business entities, at a later time. The 

second group includes manufacturers with MY 2009 U.S. sales of less than 50,000 vehicles but 

above the 5,000 vehicle threshold being established for small volume manufacturers. EPA has 

selected a cut point of 50,000 vehicles in order to limit the additional flexibility to only the 

smaller manufacturers with much more limited product lines over which to average. EPA has 

tailored these provisions as narrowly as possible to provide additional lead time only as needed 

by these smaller manufacturers. We estimate that the TLAAS program, including the changes 

below will result in a total decrease in overall emissions reductions of about one percent of the 

total projected GHG program emission benefits. These estimates are provided in RIA Chapter 5 

Appendix A. 

 

For some of the companies, the reduction from baseline CO2 emissions required to meet 

the standards is clearly greater than for other TLAAS-eligible manufacturers. Compared with 

other TLAAS-eligible manufacturers, these companies also have more limited fleets across 

which to average the standards. Some companies have only a few vehicle models all of a similar 

utility, and thus their averaging abilities are extremely limited posing lead time issues of greater 

severity than other TLAAS-eligible manufacturers. EPA’s feasibility analysis provided in 
153 

Section III.D., shows that these companies face a compliance shortfall significantly greater than 

other TLAAS companies (see Table III.D.6-4). This shortfall is primarily due to their narrow 

product lines and more limited ability to average across their vehicle fleets. In addition, with 

fewer models with which to average, there is a higher likelihood that phase-in requirements may 

conflict with normal product redesign cycles. 

Therefore, for manufacturers with MY2009 U.S. sales of less than 50,000 vehicles, EPA 

is finalizing additional TLAAS compliance flexibility through model year 2016. These 

manufacturers will be allowed to place up to 200,000 vehicles in the TLAAS program in 

MY2012-2015 and an additional 50,000 vehicles in MY2016. To be eligible for the additional 

allotment above the base TLAAS level of 100,000 vehicles, manufacturers must annually 

demonstrate that they have diligently attempted to purchase credits from other manufacturers in 

order to comply with the base TLAAS program, but that sufficient credits were not available. 

Manufacturers must secure credits to the extent they are available at a reasonable price from 

other manufacturers to offset the difference between their emissions reductions obligations under 

the base TLAAS program and the expanded TLAAS program. Manufacturers must document 

their efforts to purchase credits as part of their end of year compliance report. All other aspects 

of the TLAAS program including the 1.25x adjustment to the standards and the credits provision 

restrictions remain the same as described above for the same reasons. This will still require the 

manufacturers to reduce emissions significantly in the 2012-2016 time-frame and to meet the 

final emissions standards in MY2017. The standards remain very challenging for these 

manufacturers but these additional provisions will allow them the necessary lead time for 

implementing their strategy for compliance with the final, most stringent standards. 

 The eligibility limit of 50,000 vehicles will be treated in a similar way as the 400,000 

vehicle eligibility limit is treated, as described above. Manufacturers with model year 2009 U.S. 

sales of less than 50,000 vehicles are eligible for the expanded TLAAS flexibility. 

Manufacturers whose sales grow in later years above 50,000 vehicles without merger or 

acquisition will continue to be eligible for the expanded TLAAS program. However, 

manufacturers that exceed the 50,000 vehicle limit through mergers or acquisitions will not be 

eligible for the expanded TLAAS program in the model year following the merger or acquisition, 

but may continue to be eligible for the base TLAAS program if the MY2009 sales of the new 

company would have been below the 400,000 vehicle eligibility cut point. The use of TLAAS 

by all the entities within the company in years prior to the merger must be counted against the 

100,000 vehicle limit of the base program. If the 100,000 vehicle limit has been exceeded, the 

company is no longer eligible for TLAAS. 

 

6. Deferment of CO2 Standards for Small Volume Manufacturers with Annual Sales 

Less than 5,000 Vehicles 

 In the proposal, in the context of the TLAAS program, EPA recognized that there would 

be a wide range of companies within the eligible manufacturers with sales less than 400,000 

vehicles in model year 2009. As noted in the proposal, some of these companies, while having 

relatively small U.S. sales volumes, are large global automotive firms, including companies such 

as Mercedes and Volkswagen. Other companies are significantly smaller niche firms, with sales 

volumes closer to 10,000 vehicles per year worldwide, such as Aston Martin. EPA anticipated 
154 

that there are a small number of such smaller volume manufacturers, which may face greater 

challenges in meeting the standards due to their limited product lines across which to average. 

EPA requested comment on whether the proposed TLAAS program would provide sufficient 

lead-time for these smaller firms to incorporate the technology needed to comply with the 

proposed GHG standards. See 74 FR at 49524. 

EPA received comments from several very small volume manufacturers that the TLAAS 

program would not provide sufficient lead time, as described above. EPA agrees with comments 

that the standards would be extremely challenging and potentially infeasible for these small 

volume manufacturers, absent credits from other manufacturers, and that credit availability at 

this point is highly uncertain –Although these companies are planning to introduce significant 

GHG-reducing technologies to their product lines, they are still highly unlikely to meet the 

standards by MY2016. Because the products produced by these manufacturers are so unique, 

these manufacturers were not included in EPA’s OMEGA modeling assessment of the 

technology feasibility and costs to meet the proposed standards. As noted above, these 

manufacturers have only a few models and have very high baseline emissions. TLAAS 

manufacturers are projected to be required to reduce emissions by up to 39%, whereas SVMs in 

many cases would need to cut their emissions by more than half to comply with MY2016 

standards. 

Given the unique feasibility issues raised for these manufacturers, EPA is deferring 

establishing CO2 standards for manufacturers with sales of less than 5,000 vehicles. This will 

provide EPA more time to consider the unique challenges faced by these manufacturers. EPA 

expects to conduct this rulemaking in the 2012 timeframe. The deferment only applies to CO2 

standards and SVMs must meet N2O and CH4 standards. EPA plans to set standards for these 

manufacturers as part of a future rulemaking in the next 18 months. This future rulemaking will 

allow EPA to fully examine the technologies and emissions levels of vehicles offered by small 

manufacturers and to determine the potential emissions control capabilities, costs, and necessary 

lead time. This timing may also allow a credits market to develop, so that EPA may consider the 

availability of credits during the rulemaking process. See State of Mass. v. EPA, 549 U.S. at 533 

(EPA retains discretion as to timing of any regulations addressing vehicular GHG emissions 

under section 202 (a)(1)). We expect that standards would begin to be implemented in the 

MY2016 time frame. This approach is consistent with that envisioned by California for these 

manufacturers. EPA estimates that eligible small volume manufacturers currently comprise less 

than 0.1 percent of the total light-duty vehicle sales in the U.S., and therefore the deferment will 

have a very small impact on the GHG emissions reductions from the standards, as discussed in 

RIA Chapter 5, Appendix A. 

In addition to the 5,000 vehicle per year cut point, to be eligible for deferment each year, 

manufacturers must also demonstrate due diligence in attempting to secure credits from other 

manufacturers. Manufacturers must secure credits to the extent they are available at a reasonable 

price from other manufacturers to offset the difference between their baseline emissions and 

what their obligations would be under the TLAAS program starting in MY2012. 

 Eligibility will be determined somewhat differently compared to the TLAAS program. 

Manufacturers with either MY2008 or MY2009 sales of less than 5,000 vehicles will be initially 
155 

eligible. This includes “branded sales” for companies that sold vehicles under a larger 

manufacturer but has become independent by the end of calendar year 2010. EPA is including 

MY2008 as well as MY2009 because some manufacturers in this market segment have such 

limited sales that they often drop in and out of the market from year to year. 

In determining eligibility, manufacturers must be aggregated according to the provisions 

of 40 CFR 86.1838-01(b)(3), which requires the sales of different firms to be aggregated in 

various situations, including where one firm has a 10% or more equity ownership of another 

firm, or where a third party has a 10% or more equity ownership of two or more firms. EPA 

received public comment from a manufacturer requesting that EPA should allow a manufacturer 

to apply to EPA to establish small volume manufacturer status based on the independence of its 

research, development, testing, design, and manufacturing from another firm that may have an 

ownership interest in that manufacturer. EPA has reviewed this comment, but is not finalizing 

such a provision at this time. EPA believes that this issue likely presents some competitive 

issues, which we would like to be fully considered through the public comment process. 

Therefore, EPA plans to consider this issue and seek public comments in our proposal for small 

volume manufacturer CO2 standards, which we expect to complete within 18 months. 

To remain eligible for the deferral from standards, the rolling average of three 

consecutive model years of sales must remain below 5,000 vehicles. EPA is establishing the 

5,000 vehicle threshold to allow for some sales growth by SVMs, as SVMs typically have annual 

sales of below 2,000 vehicles. However, EPA wants to ensure that standards for as few vehicles 

as possible are deferred and therefore believes it is appropriate that manufacturers growing to 

above 5,000 vehicles per year be required to comply with standards (including TLAAS, as 

applicable). Manufacturers with unusually strong sales in a given year would still likely remain 

eligible, based on the three year rolling average. However, if a manufacturer takes steps to 

expand in the U.S. market on a permanent basis such that they consistently sell more than 5,000 

vehicles per year, they must meet the TLAAS standards. EPA believes a manufacturer will be 

able to consider these provisions, along with other factors, in its planning to significantly expand 

in the U.S. market. 

For manufacturers exceeding the 5,000 vehicle rolling average through mergers or 

acquisitions of other manufacturers, those manufacturers will lose eligibility in the MY 

immediately following the last year of the rolling average. For manufacturers exceeding this 

level through sales growth, but remaining below a 50,000 vehicle threshold, the manufacturer 

will lose eligibility for the deferred standards in the second model year following the last year of 

the rolling average. For example, if the rolling average of MYs 2009-2011 exceeded 5,000 

vehicles but was below 50,000 vehicles, the manufacturer would not be eligible for the deferred 

standards in MY2013. For manufacturers with a 3-year rolling average exceeding 50,000 

vehicles, the manufacturer would lose eligibility in the MY immediately following the last model 

year in the rolling average. For example, if the rolling average of MYs 2009-2011 exceeded 

50,000 vehicles, the manufacturer would not be eligible for the deferred standards in MY2012. 

Such manufacturers may continue to be eligible for TLAAS, or the expanded TLAAS program, 

per the provisions described above. EPA believes these provisions are needed to ensure that the 

SVM deferment remains targeted to true small volume manufacturers and does not become 

available to larger manufacturers through mergers or acquisitions. EPA is including the 50,000 
156 

vehicle criteria to differentiate between manufacturers that may slowly gain more sales and 

manufacturers that have taken major steps to significantly increase their presence in the U.S. 

market, such as by introducing new vehicle models. EPA believes manufacturers selling more 

than 50,000 vehicles should not be able to take advantage of the deferment, as they should be 

able to meet the applicable TLAAS standards through averaging across their larger product line. 

EPA is requiring that potential SVMs submit a declaration to EPA containing a detailed 

written description of how the manufacturer qualifies as a small volume manufacturer. The 

declaration must contain eligibility information including MY2008 and 2009 U.S. sales, the last 

three completed MYs sales information, detailed information regarding ownership relationships 

with other manufacturers, and documentation of efforts to purchase credits from other 

manufacturers. Because such manufacturers are not automatically exempted from other EPA 

regulations for light-duty vehicles and light-duty trucks, entities are subject to the greenhouse gas 

control requirements in this program until such a declaration has been submitted and approved 

by EPA. The declaration must be submitted annually at the time of vehicle emissions 

certification under the EPA Tier 2 program, beginning in MY2012. 

7. Nitrous Oxide and Methane Standards

In addition to fleet-average CO2 standards, as proposed, EPA is establishing separate pervehicle standards for nitrous oxide (N2O) and methane (CH4) emissions. The agency's intention 

is to set emissions standards that act to cap emissions to ensure that future vehicles do not 

increase their N2O and CH4 emissions above levels typical of today's vehicles. EPA proposed to 

cap N2O at a level of 0.010 g/mi and to cap CH4 at a level of 0.03 g/mi. Both of these pollutants 

are more potent contributors to global warming than CO2; N2O has a global warming potential, or 

GWP, of 298 and CH4 has a GWP of 25.145 

EPA received many comments on the proposed N2O and CH4 standards. A range of 

stakeholders supported the proposed approach of "cap" standards and the proposed emission 

levels, including most states and environmental organizations that addressed this topic, and the 

Manufacturers of Emissions Control Association. These commenters stated that EPA needs to 

address all mobile greenhouse gases under the Clean Air Act, and N2O and CH4 are both more 

potent contributors to global warming than CO2. The Center for Biological Diversity commented 

that in light of the potency of these pollutants, EPA should develop standards which reduce 

emissions over current levels and that EPA had not analyzed either the technologies or the costs 

of doing so. EPA discusses these comments and our responses below and in the Joint Response 

to Comments Document. 

Auto manufacturers generally did not support standards for these pollutants, stating that 

the levels of these pollutants from current vehicles are too small to warrant standards at this time. 

These commenters also stated that if EPA were to proceed with "cap" standards, the stringency 

of the proposed levels could restrict the introduction of some new technologies. Commenters 

specifically raised this concern with the examples of diesel and lean-burn gasoline for N2O, or 

natural gas and ethanol fueled vehicles for CH4. Only one manufacturer, Volkswagen, submitted 

 

145 The global warming potentials (GWP) used in this rule are consistent with the Intergovernmental Panel on 

Climate Change (IPCC) Fourth Assessment Report (AR4). 
157 

actual test data to support these claims; very limited emission data on two concept vehicles -- a 

CNG vehicle and a flexible-fuel vehicle -- indicated measured emission levels near or above the 

proposed standards, but included no indication of whether any technological steps had been 

taken to reduce emissions below the cap levels. Many commenters support an approach of 

establishing a CO2 -equivalent standard, where N2O and CH4 could be averaged with CO2

emissions to result in an overall CO2-equivalent compliance value, similar to the approach 

California has used for its GHG standards146 Under such an approach, the auto industry 

commenters supported using a default value for N2O emissions in lieu of a measured test value. 

Several auto manufacturers also had concerns that a new requirement to measure N2O would 

require significant equipment and facility upgrades and would create testing challenges with new 

measurement equipment with which they have little experience. 

 EPA has considered these comments and is finalizing the cap standards for N2O and CH4

as proposed. EPA agrees with the NGO, state, and other commenters that light-duty vehicle 

emissions are small but important contributors to the U.S. N2O and CH4 inventories, and that in 

the absence of a limitation, the potential for significant emission increases exists with the 

evolution of new vehicle and engine technologies. (Indeed, the industry commenters concede as 

much in stating that they are contemplating introducing vehicle technologies that could result in 

emissions exceeding the cap standard levels). . EPA also believes that in most cases N2O and 

CH4 emissions from light-duty vehicles will remain well below the cap standards. Therefore, we 

are setting cap standards for these pollutants at the proposed levels. However, as described 

below, the agency is incorporating several provisions intended to address industry concerns 

about technological feasibility and leadtime, including an optional CO2-equivalent approach and, 

for N2O, more leadtime before testing will be required to demonstrate compliance with the 

emissions standard (in interim, manufacturers may certify based on a compliance statement 

based on good engineering judgment). 

a. Nitrous Oxide (N2O) Exhaust Emission Standard 

As stated above, N2O is a global warming gas with a high global warming potential.147 It 

accounts for about 2.3% of the current greenhouse gas emissions from cars and light trucks.148 

EPA is setting a per-vehicle N2O emission standard of 0.010 g/mi, measured over the traditional 

FTP vehicle laboratory test cycles. The standard will become effective in model year 2012 for 

all light-duty cars and trucks. The standard is designed to prevent increases in N2O emissions 

from current levels; i.e., it is a no-backsliding standard. 

N2O is emitted from gasoline and diesel vehicles mainly during specific catalyst 

temperature conditions conducive to N2O formation. Specifically, N2O can be generated during 

periods of emission hardware warm-up when rising catalyst temperatures pass through the 

temperature window when N2O formation potential is possible. For current Tier 2 compatible 

gasoline engines with conventional three-way catalyst technology, N2O is not generally produced 

 

146 California Environmental Protection Agency Air Resources Board, Staff Report: Initial Statement of Reasons for 

Proposed Rulemaking Public Hearing To Consider Adoption Of Regulations To Control Greenhouse Gas Emissions 

From Motor Vehicles, August 6, 2004. 

147 N2O has a GWP of 298 according to the IPCC Fourth Assessment Report (AR4). 148 See RIA Chapter 2. 
158 

in significant amounts because the time the catalyst spends at the critical temperatures during 

warm-up is short. This is largely due to the need to quickly reach the higher temperatures 

necessary for high catalyst efficiency to achieve emission compliance for criteria pollutants. As 

several auto manufacturer comments noted, N2O is a more significant concern with diesel 

vehicles, and potentially future gasoline lean-burn engines, equipped with advanced catalytic 

NOX emissions control systems. In the absence of N2O emission standards, these systems could 

be designed in a way that emphasizes efficient NOX control while at the same time allowing the 

formation of significant quantities of N2O. Excess oxygen present in the exhaust during leanburn conditions in diesel or lean-burn gasoline engines equipped with these advanced systems 

can favor N2O formation if catalyst temperatures are not carefully controlled. Without specific 

attention to controlling N2O emissions in the development of such new NOX control systems, 

vehicles could have N2O emissions many times greater than are emitted by current gasoline 

vehicles. 

EPA is setting an N2O emission standard that the agency believes will be met by currenttechnology gasoline vehicles at essentially no cost. As just noted, N2O formation in current 

catalyst systems occurs, but the emission levels are relatively low, because the time the catalyst 

spends at the critical temperatures during warm-up when N2O can form is short. At the same 

time, EPA believes that the standard will ensure that the design of advanced NOX control 

systems, especially for future diesel and lean-burn gasoline vehicles, will control N2O emission 

levels. While current NOX control approaches used on current Tier 2 diesel vehicles do not tend 

to favor the formation of N2O emissions, EPA believes that this N2O standard will discourage 

new emission control designs that achieve criteria emissions compliance at the cost of increased 

N2O emissions. Thus, the standard will cap N2O emission levels, with the expectation that 

current gasoline and diesel vehicle control approaches that comply with the Tier 2 vehicle 

emission standards for NOX will not increase their emission levels, and that the cap will ensure 

that future vehicle designs will be appropriately controlled for N2O emissions. 

 

The level of the N2O standard is approximately two times the average N2O level of 

current gasoline passenger cars and light-duty trucks that meet the Tier 2 NOX standards. EPA 

has not previously regulated N2O emissions, and available data on current vehicles is limited. 

However, EPA derived the standard from a combination of emission factor values used in 

modeling light duty vehicle emissions and limited recent EPA test data. 149,150 Because the 

standard represents a level 100 percent higher than the average current N2O level, we continue to 

believe that most if not all Tier 2 compliant gasoline and diesel vehicles will easily be able to 

meet the standards. Manufacturers typically use design targets for NOX emission levels of about 

50% of the standard, to account for in-use emissions deterioration and normal testing and 

production variability, and EPA expects that manufacturers will use a similar approach for N2O 

emission compliance. EPA did not propose and is not finalizing a more stringent standard for 

current vehicles because we believe that the stringent Tier 2 program and the associated NOX

fleet average requirement already result in significant N2O control, and the agency does not 

expect current N2O levels to rise for these vehicles. Moreover, EPA believes that the CO2

standards will be challenging for the industry and that these standards should be the industry’s 

 

149 Memo to docket “Derivation of Proposed N2O and CH4 Cap Standards," Tad Wysor, EPA, November 19, 2009. 

Docket EPA-HQ-OAR-2009-0472-6801 

150 Memo to docket “EPA NVFEL N2O Test Data,” Tony Fernandez, EPA. 
159 

chief focus in this first phase of vehicular GHG emission controls. See Massachusetts v. EPA, 

549 U.S. at 533 (EPA has significant discretion as to timing of GHG regulations); see also Sierra 

Club v. EPA, 325 F. 3d 374, 379 (D.C. Cir. 2003) (upholding anti-backsliding standards for air 

toxics under technology-forcing section 202 (l) because it is reasonable for EPA to assess the 

effects of its other regulations on the motor vehicle sector before aggressively regulating 

emissions of toxic vehicular air pollutants. 

Diesel cars and light trucks with advanced emission control technology are in the early 

stages of development and commercialization. As this segment of the vehicle market develops, 

the N2O standard will likely require these manufacturers to incorporate control strategies that 

minimize N2O formation. Available approaches include using electronic controls to limit 

catalyst conditions that might favor N2O formation and consider different catalyst formulations. 

While some of these approaches may have modest associated costs, EPA believes that they will 

be small compared to the overall costs of the advanced NOX control technologies already 

required to meet Tier 2 standards. 

 

In the proposal, EPA sought comment on an approach of expressing N2O and CH4 in 

common terms of CO2-equivalent emissions and combining them into a single standard along 

with CO2 emissions. 74 FR at 49524. California’s “Pavley” program adopted such a CO2-

equivalent emissions standards approach to GHG emissions.151 EPA was primarily concerned 

that such an approach could undermine the stringency of the CO2 standards, as the proposed 

standards were designed to “cap” N2O and CH4 emissions, rather than reflecting a level either 

that is the industry fleet-wide average or that would effect reductions in these pollutants. 

As noted above, several auto manufacturers expressed interest in such a CO2-equivalent 

approach, due to concerns that the caps could be limiting for some advanced technology 

vehicles. While we continue to believe that the vast majority of light-duty vehicles will be able 

to easily meet the standards, we acknowledge that advanced diesel or lean-burn gasoline vehicles 

of the future may face slightly greater challenges. Therefore, after considering these comments, 

EPA is finalizing an optional compliance approach to provide flexibility for any advanced 

technologies that may have challenges in meeting the N2O or CH4 cap standards. 

In lieu of complying with the separate N2O and CH4 cap standards, a manufacturer may 

choose to comply with a CO2-equivalent standard. A manufacturer choosing this option will 

convert its N2O and CH4 test results (or, as described below, a default N2O value for MY 2012-

2014) into CO2-equivalent values and add this sum to their CO2 emissions. This CO2-equivalent 

value will still need to comply with the manufacturer’s footprint-based CO2 target level. In other 

words, a manufacturer could offset any N2O emissions (or any CH4 emissions) by taking steps to 

further reduce CO2. A manufacturer choosing this option will need to apply this approach to all 

of the test groups in its fleet. This approach is more environmentally protective overall than the 

cap standard approach, since the manufacturer will need to reduce its CO2 emissions to offset the 

higher N2O (or CH4) levels, but will not be allowed to increase CO2 above its footprint target 

level by reducing N2O (or CH4). 

 

151 California Environmental Protection Agency Air Resources Board, Staff Report: Initial Statement of Reasons for 

Proposed Rulemaking Public Hearing To Consider Adoption Of Regulations To Control Greenhouse Gas Emissions 

From Motor Vehicles, August 6, 2004. 
160 

 The compliance level in g/mi for the optional CO2-equivalent approach is calculated as 

CO2 + (310 x N2O) + (21 x CH4). The N2O and CH4 values are the measured emission values for 

these pollutants, except N2O in model years 2012 through 2014. For these model years, 

manufacturers may use a default N2O value of 0.010 g/mi, the same value as the N2O cap 

standard. For MY 2015 and later, the manufacturer would need to provide actual test data on the 

emission data vehicle for each test group. (That is, N2O data would not be required for each 

model type, since EPA believes that there will likely be little N2O variability among model types 

within a test group.) EPA believes that its selection of 0.010 g/mi as the N2O default value is an 

appropriately protective level, on the high end of current technologies, as further discussed 

below. Finally, for manufacturers using this option, the CO2-equivalent emission level would 

also be the basis for any credits that the manufacturer might generate. 

Manufacturers expressed concerns about their ability to acquire and install N2O analytical 

equipment. However, the agency continues to believe that such burdens, while not trivial, will 

also not be excessive. While many manufacturers do not appear to have invested yet in adding 

N2O measurement equipment to their test facilities, EPA is not aware of any information to 

indicate that that suppliers will have difficulty providing sufficient hardware, or that such 

equipment is unusually expensive or complex compared to existing measurement hardware. 

EPA allows N2O measurement using any of four methods, all of which are commercially 

available today. The costs of certification and other indirect costs of this rule are accounted for 

in the Indirect Cost Multipliers, discussed in Section III.H below. 

Still, given the short lead-time for this rule and the newness of N2O testing to this 

industry, EPA proposed that manufacturers be able to apply for a certificate of conformity with 

the N2O standard for model year 2012 provided that they supply a compliance statement based 

on good engineering judgment. Under the proposal, beginning in MY2013, manufacturers 

would have needed to base certification on actual N2O testing data This approach was intended 

to reasonably ensure that the emission standards are being met, while allowing manufacturers 

lead time to purchase new N2O emissions measurement equipment, modify certification test 

facilities, and begin N2O testing. After consideration of the comments, EPA agrees with 

manufacturers that one year of additional lead-time to begin actual N2O measurement across 

their vehicle fleets may be still be insufficient for manufacturers to efficiently make the 

necessary facility changes and equipment purchases. Therefore, EPA is extending the ability to 

certify based on a compliance statement for two additional years, through model year 2014. For 

2015 and later model years, manufacturers will need to submit measurements of N2O for 

compliance purposes. 

b. Methane (CH4) Exhaust Emission Standard 

Methane (CH4) is a greenhouse gas with a high global warming potential.152 It accounts 

for about 0.2% of the greenhouse gases from cars and light trucks.153

 

152 CH4 has a GWP of 25 according to the IPCC Fourth Assessment Report (AR4). 153 See RIA Chapter 2. 
161 

EPA is setting a CH4 emission standard of 0.030 g/mi as measured on the FTP, to apply 

beginning with model year 2012 for both cars and trucks. EPA believes that this level for the 

standard will be met by current gasoline and diesel vehicles, and will prevent large increases in 

future CH4 emissions. This is particularly a concern in the event that alternative fueled vehicles 

with high methane emissions, like some past dedicated compressed natural gas (CNG) vehicles 

and some flexible-fueled vehicle when operated on E85 fuel, become a significant part of the 

vehicle fleet. Currently EPA does not have separate CH4 standards because unlike other 

hydrocarbons it does not contribute significantly to ozone formation.154 However, CH4

emissions levels in the gasoline and diesel car and light truck fleet have nevertheless generally 

been controlled by the Tier 2 standards for non-methane organic gases (NMOG). However, 

without an emission standard for CH4, there is no guarantee that future emission levels of CH4

will remain at current levels as vehicle technologies and fuels evolve. 

The standard will cap CH4 emission levels, with the expectation that emissions levels of 

current gasoline and diesel vehicles meeting the Tier 2 emission standards will not increase. The 

level of the standard will generally be achievable for typical vehicles through normal emission 

control methods already required to meet the Tier 2 emission standards for NMOG. Also, since 

CH4 is already measured under the current Tier 2 regulations (so that it may be subtracted to 

calculate non-methane hydrocarbons), we believe that the standard will not result in any 

additional testing costs Therefore, EPA is not attributing any costs to this part of this program. 

Since CH4 is produced during fuel combustion in gasoline and diesel engines similarly to other 

hydrocarbon components, controls targeted at reducing overall NMOG levels are generally also 

effective in reducing CH4 emissions. Therefore, for typical gasoline and diesel vehicles, 

manufacturer strategies to comply with the Tier 2 NMOG standards have to date tended to 

prevent increases in CH4 emissions levels. The CH4 standard will ensure that emissions will be 

addressed if in the future there are increases in the use of natural gas or other alternative fuels or 

technologies that may result in higher CH4 emissions. 

As with the N2O standard, EPA is setting the level of the CH4 standard to be 

approximately two times the level of average CH4 emissions from Tier 2 gasoline passenger cars 

and light-duty trucks. EPA believes the standard will easily be met by current gasoline vehicles, 

and that flexible fuel vehicles operating on ethanol can be designed to resolve any potential CH4

emissions concerns. Similarly, since current diesel vehicles generally have even lower CH4

emissions than gasoline vehicles, EPA believes that diesels will also meet the CH4 standard. 

However, EPA also believes that to set a CH4 emission standard more stringent than the 

proposed standard could effectively make the Tier 2 NMOG standard more stringent and is 

inappropriate for that reason (and untimely as well, given the challenge of meeting the CO2

standards, as noted above). 

Some CNG-fueled vehicles have historically produced significantly higher CH4

emissions than gasoline or diesel vehicles. This is because CNG fuel is essentially methane and 

any unburned fuel that escapes combustion and is not oxidized by the catalyst is emitted as 

methane. However, in recent model years, the few dedicated CNG vehicles sold in the U.S. 

meeting the Tier 2 standards have had CH4 control as effective as that of gasoline or diesel 

 

154 But see Ford Motor Co. v. EPA, 604 F. 2d 685 (D.C. Cir. 1979) (permissible for EPA to regulate CH4 under 

CAA section 202 (b)). 
162 

vehicles. Still, even if these vehicles meet the Tier 2 NMOG standard and appear to have 

effective CH4 control by nature of the NMOG controls, Tier 2 standards do not require CH4

control. Although EPA believes that in most cases that the CH4 cap standard should not require 

any different emission control designs beyond what is already required to meet Tier 2 NMOG 

standards on a dedicated CNG vehicle, the cap will ensure that systems maintain the current level 

of CH4 control. 

Some manufacturers have also expressed some concerns about CH4 emissions from 

flexible fueled vehicles operating on E85 (85% ethanol, 15% gasoline). However, we are not 

aware of any information would indicate that if engine-out CH4 proves to be higher than for a 

typical gasoline vehicle, that such emissions could not be managed by reasonably available 

control strategies (perhaps similar to those of used in dedicated CNG vehicles). 

 

As described above, in response to the comments, EPA will also allow manufacturers to 

choose to comply with a CO2-equivalent standard in lieu of complying with a separate CH4 cap 

standards. A manufacturer choosing this option would convert its N2O and CH4 test results into 

CO2-equivalent values (using the respective GWP values), and would then compare this value to 

the manufacturer's footprint-based CO2 target level to determine compliance. However, as with 

N2O, this approach will not permit a manufacturer to increase its CO2 by reducing CH4; the 

company's footprint-based CO2 target level would remain the same. 

8. Small Entity Deferment 

 As proposed, EPA is deferring setting GHG emissions standards for small entities 

meeting the Small Business Administration (SBA) size criteria of a small business as described 

in 13 CFR 121.201. EPA would instead consider appropriate GHG standards for these entities as 

part of a future regulatory action. This includes both U.S.-based and foreign small entities in 

three distinct categories of businesses for light-duty vehicles: small volume manufacturers, 

independent commercial importers (ICIs), and alternative fuel vehicle converters. 

EPA has identified about 13 entities that fit the Small Business Administration (SBA) 

size criterion of a small business. EPA estimates there currently are approximately two small 

volume manufacturers, eight ICIs, and three alternative fuel vehicle converters in the light-duty 

vehicle market. Further detail is provided in Section III.I.3, below. EPA estimates that these 

small entities comprise less than 0.1 percent of the total light-duty vehicle sales in the U.S., and 

therefore the deferment will have a negligible impact on the GHG emissions reductions from the 

standards. 

To ensure that EPA is aware of which companies would be deferred, EPA is requiring 

that such entities submit a declaration to EPA containing a detailed written description of how 

that manufacturer qualifies as a small entity under the provisions of 13 CFR 121.201. Because 

such entities are not automatically exempted from other EPA regulations for light-duty vehicles 

and light-duty trucks, the entity is subject to the greenhouse gas control requirements in this 

GHG program until such a declaration has been submitted and approved by EPA. The 

declaration must be submitted annually at time of vehicle emissions certification under the EPA 

Tier 2 program, beginning in model year 2012. Small entities are currently covered by a number 
163 

of EPA motor vehicle emission regulations, and they routinely submit information and data on 

an annual basis as part of their compliance responsibilities. EPA expects that the additional 

paperwork burden associated with completing and submitting a small entity declaration to gain 

deferral from the GHG standards would be negligible and easily done in the context of other 

routine submittals to EPA. However, EPA has accounted for this cost with a nominal estimate 

included in the Information Collection Request completed under the Paperwork Reduction Act. 

Additional information can be found in the Paperwork Reduction Act discussion in Section 

III.I.2. 

 EPA did not receive adverse comments regarding the proposed small entity deferment. 

EPA received comments concerning whether or not the small entity deferment applies to foreign 

manufacturers. EPA clarifies that foreign manufacturers meeting the SBA size criteria are 

eligible for the deferment, as was EPA’s intent during the proposal. 

C. Additional Credit Opportunities for CO2 Fleet Average Program 

 The final standards represent a significant multi-year challenge for manufacturers, 

especially in the early years of the program. Section III.B.4 above describes EPA's provisions 

for manufacturers to be able to generate credits by achieving fleet average CO2 emissions below 

their fleet average standard, and also how manufacturers can use credits to comply with the 

standards. As described in Section III.B.4, credits can be carried forward five years, carried back 

three years, transferred between vehicle categories, and traded between manufacturers. The 

credits provisions described below provide manufacturers with additional ways to earn credits 

starting in MY 2012. EPA is also including early credits provisions for the 2009–2011 model 

years, as described below in Section III.C.5. 

The provisions described below provide additional flexibility, especially in the early 

years of the program. This helps to address issues of lead-time or technical feasibility for 

various manufacturers and in several cases provides an incentive for promotion of technology 

pathways that warrant further development. EPA is finalizing a variety of credit opportunities 

because manufacturers are not likely to be in a position to use every credit provision. EPA 

expects that manufacturers are likely to select the credit opportunities that best fit their future 

plans. 

EPA believes it is critical that manufacturers have options to ease the transition to the 

final MY 2016 standards. At the same time, EPA believes these credit programs must be and are 

designed in a way to ensure that they achieve emission reductions that achieve real-world 

reductions over the full useful life of the vehicle (or, in the case of FFV credits and Advanced 

Technology incentives, to incentivize the introduction of those vehicle technologies) and are 

verifiable. In addition, EPA believes that these credit programs do not provide an opportunity 

for manufacturers to earn “windfall” credits. Comments on the proposed EPA credit programs 

are summarized below along with EPA’s response, and are detailed in the Joint Response to 

Comments document. 

 1. Air Conditioning Related Credits
164 

Manufacturers will be able to generate and use credits for improved air conditioner (A/C) 

systems in complying with the CO2 fleetwide average standards described above (or otherwise to 

be able to bank or trade the credits). EPA expects that most manufacturers will choose to utilize 

the A/C provisions as part of its compliance demonstration (and for this reason cost of 

compliance with A/C related emission reductions are assumed in the cost analysis). The A/C 

provisions are structured as credits, unlike the CO2 standards for which manufacturers will 

demonstrate compliance using 2-cycle (city/highway) tests (see Sections III.B and III.E.). Those 

tests do not measure either A/C leakage or tailpipe CO2 emissions attributable to A/C load. 

Thus, it is a manufacturer’s option to include A/C GHG emission reductions as an aspect of its 

compliance demonstration. Since this is an elective alternative, EPA is referring to the A/C part 

of the rule as a credit. 

EPA estimates that direct A/C GHG emissions - emissions due to the leakage of the 

hydrofluorocarbon refrigerant in common use today - account for 5.1% of CO2-equivalent GHGs 

from light-duty cars and trucks. This includes the direct leakage of refrigerant as well as the 

subsequent leakage associated with maintenance and servicing, and with disposal at the end of 

the vehicle’s life. The emissions that are associated with leakage reductions are the direct 

leakage and the leakage associated with maintenance and servicing. Together these are 

equivalent to CO2 emissions of approximately 13.6 g/mi per car and light-truck. EPA also 

estimates that indirect GHG emissions (additional CO2 emitted due to the load of the A/C system 

on the engine) account for another 3.9% of light-duty GHG emissions.155 This is equivalent to 

CO2 emissions of approximately 14.2 g/mi per vehicle. The derivation of these figures can be 

found in Chapter 2.2 of the EPA RIA. 

 EPA believes that it is important to address A/C direct and indirect emissions because 

the technologies that manufacturers will employ to reduce vehicle exhaust CO2 will have little or 

no impact on A/C related emissions. Without addressing A/C related emissions, as vehicles 

become more efficient, the A/C related contribution will become a much larger portion of the 

overall vehicle GHG emissions. 

 

Over 95% of the new cars and light trucks in the United States are equipped with A/C 

systems and, as noted, there are two mechanisms by which A/C systems contribute to the 

emissions of greenhouse gases: through leakage of refrigerant into the atmosphere and through 

the consumption of fuel to provide mechanical power to the A/C system. With leakage, it is the 

high global warming potential (GWP) of the current automotive refrigerant (HFC-134a, with a 

GWP of 1430) that results in the CO2-equivalent impact of 13.6 g/mi.156 Due to the high GWP 

of this HFC, a small leakage of the refrigerant has a much greater global warming impact than a 

similar amount of emissions of CO2 or other mobile source GHGs. Manufacturers can reduce 

A/C leakage emissions by using leak-tight components. Also, manufacturers can largely 

eliminate the global warming impact of leakage emissions by adopting systems that use an 

 

155 See Chapter 2, Section 2.2.1.2 of the RIA. 156 The global warming potentials (GWP) used in this rule are consistent with Intergovernmental Panel on Climate 

Change (IPCC) Fourth Assessment Report (AR4). (At this time, the IPCC Second Assessment Report (SAR) GWP 

values are used in the official U.S. greenhouse gas inventory submission to the climate change framework.) 
165 

alternative, low-GWP refrigerant, as discussed below.157 The A/C system also contributes to 

increased CO2 emissions through the additional work required to operate the compressor, fans, 

and blowers. This additional work typically is provided through the engine’s crankshaft, and 

delivered via belt drive to the alternator (which provides electric energy for powering the fans 

and blowers) and the A/C compressor (which pressurizes the refrigerant during A/C operation). 

The additional fuel used to supply the power through the crankshaft necessary to operate the A/C 

system is converted into CO2 by the engine during combustion. This incremental CO2 produced 

from A/C operation can thus be reduced by increasing the overall efficiency of the vehicle’s A/C 

system, which in turn will reduce the additional load on the engine from A/C operation.158

Manufacturers can make very feasible improvements to their A/C systems to address A/C 

system leakage and efficiency. EPA is finalizing two separate credit approaches to address 

leakage reductions and efficiency improvements independently. A leakage reduction credit will 

take into account the various technologies that could be used to reduce the GHG impact of 

refrigerant leakage, including the use of an alternative refrigerant with a lower GWP. An 

efficiency improvement credit will account for the various types of hardware and control of that 

hardware available to increase the A/C system efficiency. For purposes of use of A/C credits at 

certification, manufacturers will be required to attest to the durability of the leakage reduction 

and the efficiency improvement technologies over the full useful life of the vehicle. 

 

EPA believes that both reducing A/C system leakage and increasing efficiency are highly 

cost-effective and technologically feasible. EPA expects most manufacturers will choose to use 

these A/C credit provisions, although some may not find it necessary to do so. 

 

a. A/C Leakage Credits 

The refrigerant used in vehicle A/C systems can get into the atmosphere by many 

different means. These refrigerant emissions occur from the slow leakage over time that all 

closed high pressure systems will experience. Refrigerant loss occurs from permeation through 

hoses and leakage at connectors and other parts where the containment of the system is 

compromised. The rate of leakage can increase due to deterioration of parts and connections as 

well. In addition, there are emissions that occur during accidents and maintenance and servicing 

events. Finally, there are end-of-life emissions if, at the time of vehicle scrappage, refrigerant is 

not fully recovered. 

Because the process of refrigerant leakage has similar root causes as those that cause fuel 

evaporative emissions from the fuel system, some of the emission control technologies are 

similar (including hose materials and connections). There are, however, some fundamental 

differences between the systems that require a different approach, both to controlling and to 

documenting that control. The most notable difference is that A/C systems are completely 

 

157 Refrigerant emissions during maintenance and at the end of the vehicle’s life (as well as emissions during the 

initial charging of the system with refrigerant) are also addressed by the CAA Title VI stratospheric ozone program, 

as described below. 

158 We chose not to address changes to the weight of the A/C system, since the issue of CO2 emissions from the fuel 

consumption of normal (non-A/C) operation, including basic vehicle weight, is inherently addressed by the primary 

CO2 standards (Section III.B above). 
166 

closed systems and always under significant pressure, whereas the fuel system is not. Fuel 

systems are meant to be refilled as liquid fuel is consumed by the engine, while the A/C system 

ideally should never require “recharging” of the contained refrigerant. Thus it is critical that the 

A/C system leakages be kept to an absolute minimum. As a result, these emissions are typically 

too low to accurately measure in most current SHED chambers designed for fuel evaporative 

emissions measurement, especially for A/C systems that are new or early in life. 

A few commenters suggested that we allow manufacturers, as an option, to use an 

industry-developed “mini-shed” test procedure (SAE J2763 – Test Procedure for Determining 

Refrigerant Emissions from Mobile Air Conditioning Systems) to measure and report annual 

refrigerant leakage.159 However, while EPA generally prefers performance testing, for an 

individual vehicle A/C system or component, there is not a strong inherent correlation between a 

performance test using SAE J2763 and the design-based approach we are adopting (based on 

SAE J2727, as discussed below).160 Establishing such a correlation would require testing of a 

fairly broad range of current-technology systems in order to establish the effects of such factors 

as production variability and assembly practices (which are included in J2727 scores, but not in 

J2763 measurements). To EPA's knowledge, such a correlation study has not been done. At the 

same time, as discussed below, there are indications that much of the industry will eventually be 

moving toward alternative refrigerants with very low GWPs. EPA believes such a transition 

would diminish the value of any correlation studies that might be done to confirm the 

appropriateness of the SAE J2763 procedure as an option in this rule. For these reasons, EPA is 

therefore not adopting such an optional direct measurement approach to addressing refrigerant 

leakage at this time. 

Instead, as proposed, EPA is adopting a design-based method for manufacturers to 

demonstrate improvements in their A/C systems and components. Manufacturers implementing 

system designs expected to result in reduced refrigerant leakage will be eligible for credits that 

could then be used to meet their CO2 emission compliance requirements (or otherwise banked or 

traded). The A/C Leakage Credit provisions will generally assign larger credits to system 

designs that would result in greater leakage reductions. In addition, proportionately larger A/C 

Leakage Credits will be available to manufacturers that substitute a refrigerant with lower GWP 

than the current HFC-134a refrigerant. 

Our method for calculating A/C Leakage Credits is based closely on an industryconsensus leakage scoring method, described below. This leakage scoring method is correlated 

to experimentally-measured leakage rates from a number of vehicles using the different available 

A/C components. Under the approach, manufacturers will choose from a menu of A/C 

equipment and components used in their vehicles in order to establish leakage scores which will 

characterize their A/C system leakage performance. Credits will be generated from leakage 

reduction improvements that exceed average fleetwide leakage rates. 

EPA believes that the design-based approach will result in estimates of leakage emissions 

reductions that will be comparable to those that will eventually result from performance-based 

 

159 Honeywell and Volvo supported this view; most other commenters did not. 160 However, there is a correlation in the fleet between J2763 measurements and J2727 scores. 
167 

testing. We believe that this method appropriately approximates the real-world leakage rates for 

the expected MY 2012-2016 A/C systems. 

The cooperative industry and government Improved Mobile Air Conditioning (IMAC) 

program161 has demonstrated that new-vehicle leakage emissions can be reduced by 50%. This 

program has shown that this level of improvement can be accomplished by reducing the number 

and improving the quality of the components, fittings, seals, and hoses of the A/C system. All of 

these technologies are already in commercial use and exist on some of today’s systems. 

As proposed, a manufacturer wishing to generate A/C Leakage Credits will compare the 

components of its A/C system with a set of leakage-reduction technologies and actions based 

closely on that developed through IMAC and the Society of Automotive Engineers (as SAE 

Surface Vehicle Standard J2727, August 2008 version). The J2727 approach was developed 

from laboratory testing of a variety of A/C related components, and EPA believes that the J2727 

leakage scoring system generally represents a reasonable correlation with average real-world 

leakage in new vehicles. The EPA credit approach addresses the same A/C components as does 

SAE J2727 and associates each component with the same gram-per-year leakage rate as the SAE 

method, although, as described below, EPA limits the credits allowed and also modifies it for 

other factors such as alternative refrigerants. 

A manufacturer choosing to generate A/C Leakage Credits will sum the leakage values 

for an A/C system for a total A/C leakage score according to the following formula. Because the 

primary GHG program standards are expressed in terms of vehicle exhaust CO2 emissions as 

measured in grams per mile, the credits programs adopted in this rule, including A/C related 

credits, must ultimately be converted to a common metric for proper calculation of credits 

toward compliance with the primary vehicle standards. This formula describes the conversion of 

the grams-per-year leakage score to a grams-per-mile CO2eq value, taking vehicle miles traveled 

(VMT) and the GWP of the refrigerant into account: 

A/C Leakage Credit = (MaxCredit) * [ 1 - (LeakScore/AvgImpact) * (GWPRefrigerant/1430)] 

Where: 

MaxCredit is 12.6 and 15.6 g/mi CO2eq for cars and trucks, respectively. These values become 

13.8 and 17.2 for cars and trucks, respectively, if low-GWP refrigerants are used, since this 

would generate additional credits from reducing emissions during maintenance events, accidents, 

and at end-of-life. 

LeakScore is the leakage score of the A/C system as measured according to the EPA leakage 

method (based on the J2727 procedure, as discussed above) in units of g/yr. The minimum score 

that EPA considers feasible is fixed at 8.3 and 10.4 g/yr for cars and trucks respectively (4.1 and 

5.2 g/yr for systems using electric A/C compressors) as discussed below. 

 

Avg Impact is the average current A/C leakage emission rate, which is 16.6 and 20.7 g/yr for 

cars and trucks, respectively 

 

161 Team 1-Refrigerant Leakage Reduction: Final Report to Sponsors, SAE, 2007. 
168 

GWPRefrigerant is the global warming potential (GWP) for direct radiative forcing of the 

refrigerant. For purposed of this rule, the GWP of HFC-134a is 1430, the GWP of HFC-152a is 

124, the GWP of HFO-1234yf is 4, and the GWP of CO2 as a refrigerant is 1. 

The EPA Final RIA elaborates further on the development of each of the values 

incorporated in the A/C Leakage Credit formula above, as summarized here. First, as proposed, 

EPA estimates that leakage emission rates for systems using the current refrigerant (HFC-134a) 

could be feasibly reduced to rates no less than 50% of current rates -- or 8.3 and 10.4 g/yr for 

cars and trucks, respectively -- based on the conclusions of the IMAC study as well as 

consideration of refrigerant emissions over the full life of the vehicle. 

Also, some commenters noted that A/C compressors powered by electric motors (e.g. as 

used today in several hybrid vehicle models) were not included in the IMAC study and yet allow 

for leakage emission rate reductions beyond EPA's estimates for systems with conventional beltdriven compressors. EPA agrees with these comments, and we have incorporated lower 

minimum emission rates into the formula above – 4.1 and 5.2 g/yr for cars and trucks, 

respectively – in order to allow additional leakage reduction credits for vehicles that use sealed 

electric A/C compressors. The maximum available credits for these two approaches are 

summarized in Table III.C.1-1 below. 

AIAM commented that EPA should not set a lower limit on the leakage score, even for 

non-electric compressors. EPA has determined not to do so. First, although there do exist 

vehicles in the Minnesota data with lower scores than our proposed (and now final) minimum 

scores, there are very few car models that have scores less than 8.3, and these range from 7.0 to 

about 8.0 and the difference are small compared to our minimum score.162 More important, 

lowering the leakage limit would necessarily increase credit opportunities for equipment design 

changes, and EPA believes that these changes could discourage the environmentally optimal 

result of using low GWP refrigerants. Introduction of low GWP refrigerants could be 

discouraged because it may be less costly to reduce leakage than to replace many of the A/C 

system components. Moreover, due to the likelihood of in-use factors, even a leakless 

(according to J2727) R134a system will have some emissions due to manufacturing variability, 

accidents, deterioration, maintenance, and end of life emissions, a further reason to cap the 

amount of credits available through equipment design. The only way to guarantee a near zero 

emission system in-use is to use a low GWP refrigerant. The EPA has therefore decided for the 

purposes of this final rule to not change the minimum score for belt driven compressors due to 

the reason cited above and to the otherwise overwhelming support for the program as proposed 

from commenters. 

In addition, as discussed above, EPA recognizes that substituting a refrigerant with a 

significantly lower GWP will be a very effective way to reduce the impact of all forms of 

refrigerant emissions, including maintenance, accidents, and vehicle scrappage. To address 

future GHG regulations in Europe and California, systems using alternative refrigerants -- 

including HFO1234yf, with a GWP of 4 and CO2 with a GWP of 1 -- are under serious 

 

162 The Minnesota refrigerant leakage data can be found at 

http://www.pca.state.mn.us/climatechange/mobileair.html#leakdata 
169 

development and have been demonstrated in prototypes by A/C component suppliers. The 

European Union has enacted regulations phasing in alternative refrigerants with GWP less than 

150 starting this year, and the State of California proposed providing credits for alternative 

refrigerant use in its GHG rule. Within the timeframe of MYs 2012-2016, EPA is not expecting 

widespread use of low-GWP refrigerants. However, EPA believes that these developments are 

promising, and, as proposed, has included in the A/C Leakage Credit formula above a factor to 

account for the effective GHG reductions that could be expected from refrigerant substitution. 

The A/C Leakage Credits that will be available will be a function of the GWP of the alternative 

refrigerant, with the largest credits being available for refrigerants with GWPs at or approaching 

a value of 1. For a hypothetical alternative refrigerant with a GWP of 1 (e.g., CO2 as a 

refrigerant), effectively eliminating leakage as a GHG concern, our credit calculation method 

could result in maximum credits equal to total average emissions, or credits of 13.8 and 17.2 

g/mi CO2eq for cars and trucks, respectively, as incorporated into the A/C Leakage Credit 

formula above as the "MaxCredit" term. 

 Table III.C.1-1 summarizes the maximum A/C leakage credits available to a 

manufacturer, according to the formula above. 

Table III.C.1-1 Maximum Leakage Credit Available to Manufacturers 

 Car (g/mi) Truck (g/mi) 

R-134a refrigerant with belt-driven 

compressor 

6.3 7.8 

R-134a refrigerant with electric 

motor-driven compressor 

9.5 11.7 

Lowest-GWP refrigerant (GWP=1) 13.8 17.2 

 

It is possible that alternative refrigerants could, without compensating action by the 

manufacturer, reduce the efficiency of the A/C system (see related discussion of the A/C 

Efficiency Credit below.) However, as noted at proposal and discussed further in the following 

section, EPA believes that manufacturers will have substantial incentives to design their systems 

to maintain the efficiency of the A/C system. Therefore EPA is not accounting for any potential 

efficiency degradation due to the use of alternative refrigerants. 

Beyond the comments mentioned above, commenters generally supported or were silent 

about EPA's refrigerant leakage methodology (as based on SAE J2727), including the maximum 

leakage credits available, the technologies eligible for credit and their associated leakage 

reduction values, and the potential for alternative refrigerants. All comments related to A/C 

credits are addressed in the Joint Response to Comments Document. 

b. A/C Efficiency Credits 

Manufacturers that make improvements in their A/C systems to increase efficiency and 

thus reduce CO2 emissions due to A/C system operation may be eligible for A/C Efficiency 

Credits. As with A/C Leakage Credits, manufacturers could apply A/C Efficiency Credits 

toward compliance with their overall CO2 standards (or otherwise bank and trade the credits). 
170 

As mentioned above, EPA estimates that the CO2 emissions due to A/C related loads on 

the engine account for approximately 3.9% of total greenhouse gas emissions from passenger 

vehicles in the United States. Usage of A/C systems is inherently higher in hotter and more 

humid months and climates; however, vehicle owners may use their A/C systems all year round 

in all parts of the nation. For example, people commonly use A/C systems to cool and 

dehumidify the cabin air for passenger comfort on hot humid days, but they also use the systems 

to de-humidify cabin air to assist in defogging/de-icing the front windshield and side glass in 

cooler weather conditions for improved visibility. A more detailed discussion of seasonal and 

geographical A/C usage rates can be found in the RIA. 

Most of the additional load on the engine from A/C system operation comes from the 

compressor, which pumps the refrigerant around the system loop. Significant additional load on 

the engine may also come from electric or hydraulic fans, which are used to move air across the 

condenser, and from the electric blower, which is used to move air across the evaporator and into 

the cabin. Manufacturers have several currently-existing technology options for improving 

efficiency, including more efficient compressors, fans, and motors, and system controls that 

avoid over-chilling the air (and subsequently re-heating it to provide the desired air temperature 

with an associated loss of efficiency). For vehicles equipped with automatic climate-control 

systems, real-time adjustment of several aspects of the overall system (such as engaging the full 

capacity of the cooling system only when it is needed, and maximizing the use of recirculated 

air) can result in improved efficiency. Table III.C.1-2 below lists some of these technologies and 

their respective efficiency improvements. 

As discussed in the proposal, EPA is adopting a design-based “menu” approach for 

estimating efficiency improvements and, thus, quantifying A/C Efficiency Credits. However, 

EPA’s ultimate preference is performance-based standards and credit mechanisms (i.e., using 

actual measurements) as typically providing a more accurate measure of performance. However, 

EPA has concluded that a practical, performance-based procedure for the purpose of accurately 

quantifying A/C-related CO2 emission reductions, and thus efficiency improvements for 

assigning credits, is not yet available. Still, EPA is introducing a new specialized performancebased test for the more limited purpose of demonstrating that actual efficiency improvements are 

being achieved by the design improvements for which a manufacturer is seeking A/C credits. As 

discussed below, beginning in MY 2014, manufacturers wishing to generate A/C Efficiency 

Credits will need to show improvement on the new A/C Idle Test in order to then use the "menu" 

approach to quantify the number of credits attributable to those improvements. 

In response to comments concerning the applicability and effectiveness of technologies 

that were or were not included in our analysis, we have made several changes to the designbased menu.163 First, we have separated the credit available for ‘recirculated air’164 technologies 

into those with closed-loop control of the air supply and those with open-loop control. By 

“closed-loop” control, we mean a system that uses feedback from a sensor, or sensors, (e.g., 

humidity, glass fogging, CO2, etc.) to actively control the interior air quality. For those systems 

 

163 Commenters included the Alliance of Automobile Manufacturers, Jaguar Land Rover, Denso, and the Motor and 

Equipment Manufacturers Association, among others. 

164 Recirculated air is defined as air present in the passenger compartment of the vehicle (versus outside air) 

available for the A/C system to cool or condition. 
171 

that use “open-loop” control of the air supply, we project that since this approach cannot 

precisely adjust to varying ambient humidity or passenger respiration levels, the relative 

effectiveness will be less than that for systems using closed-loop control. 

Second, many commenters indicated that the electronic expansion valve, or EXV, should 

not be included in the menu of technologies, as its effectiveness may not be as high as we 

projected. Commenters noted that the SAE IMAC report stated efficiency improvements for an 

EXV used in conjunction with a more efficient compressor, and not as a stand alone technology 

and that no manufacturers are considering this technology for their products within the 

timeframe of this rulemaking. We believe other technologies (improved compressor controls for 

example) can achieve the same benefit as an EXV, without the need for this unique component, 

and therefore are not adopting it as an option in the design menu of efficiency-improving A/C 

technologies. 

Third, many commenters requested that an internal heat exchanger, or IHX, be added to 

the design menu. EPA initially considered adding this technology, but in our initial review of 

studies on this component, we had understood that the value of the technology is limited to 

systems using the alternative refrigerant HFO-1234yf. Some manufacturers, however, 

commented that an IHX can also be used with systems using the current refrigerant HFC-134a to 

improve efficiency, and that they plan on implementing this technology as part their strategy to 

improve A/C efficiency. Based on these comments, and projections in a more recent SAE 

Technical Paper, we project that an IHX in a conventional HFC-134a system can improve 

system efficiency by 20%, resulting in a credit of 1.1 g/mi.165 Further discussion of IHX 

technology can be found in the RIA. 

Fourth, we have modified the definition of ‘improved evaporators and condensers’ to 

recognize that improved versions of these heat exchangers may be used separately or in 

conjunction with one another, and that an engineering analysis must indicate a COP 

improvement of 10% or better when using either or both components (and not a 10% COP 

improvement for each component). Furthermore, we have modified the regulation text to clarify 

what is considered to be the ‘baseline’ components for this analysis. We consider the baseline 

component to be the version which a manufacturer most recently had in production on the same 

vehicle or a vehicle in a similar EPA vehicle classification. The dimensional characteristics (e.g. 

tube configuration/ thickness/spacing, and fin density) of the baseline components are then 

compared to the new components, and an engineering analysis is required to demonstrate the 

COP improvement. 

For model years 2012 and 2013, a manufacturers wishing to generate A/C Efficiency 

Credits for a group of its vehicles with similar A/C systems will compare several of its vehicle 

A/C-related components and systems with a list of efficiency-related technology improvements 

(see Table III.C.1-2 below). Based on the technologies the manufacturer chooses, an A/C 

Efficiency Credit value will be established. This design-based approach will recognize the 

relationships and synergies among efficiency-related technologies. Manufacturers could receive 

credits based on the technologies they chose to incorporate in their A/C systems and the 

 

165 Mathur, Gursaran D., "Experimental Investigation with Cross Fluted Double-Pipe Suction Line Heat Exchanger 

to Enhance A/C System Performance,” SAE 2009-01-0970, 2009. 
172 

associated credit value for each technology. The total A/C Efficiency Credit will be the total of 

these values, up to a maximum allowable credit of 5.7 g/mi CO2eq. This will be the maximum 

improvement from current average efficiencies for A/C systems (see the RIA for a full 

discussion of our derivation of the reductions and credit values for individual technologies and 

for the maximum total credit available). Although the total of the individual technology credit 

values may exceed 5.7 g/mi CO2eq, synergies among the technologies mean that the values are 

not additive. A/C Efficiency Credits as adopted may not exceed 5.7 g/mi CO2eq. 

Table III.C.1-2 Efficiency-Improving A/C Technologies and Credits 

Technology Description Estimated 

Reduction in 

A/C CO2

Emissions 

A/C 

Efficiency 

Credit (g/mi 

CO2) 

Reduced reheat, with externally-controlled, 

variable-displacement compressor 

30% 1.7 

Reduced reheat, with externally-controlled, 

fixed-displacement or pneumatic variabledisplacement compressor 

20% 1.1 

Default to recirculated air with closed-loop 

control of the air supply (sensor feedback to 

control interior air quality) whenever the 

ambient temperature is 75 °F or higher 

(although deviations from this temperature 

are allowed if accompanied by an 

engineering analysis) 

30% 1.7 

Default to recirculated air with open-loop 

control air supply (no sensor feedback) 

whenever the ambient temperature 75 °F or 

higher lower temperatures are allowed) 

20% 1.1 

Blower motor controls which limit wasted 

electrical energy (e.g., pulse width 

modulated power controller) 

15% 0.9 

Internal heat exchanger 20% 1.1 

Improved condensers and/or evaporators 

(with system analysis on the component(s) 

indicating a COP improvement greater than 

10%, when compared to previous industry 

standard designs) 

20% 1.1 

Oil Separator (with engineering analysis 

demonstrating effectiveness relative to the 

baseline design) 

10% 0.6 

The proposal requested comment on adjusting the efficiency credit for alternative 

refrigerants. Although a few commenters noted that the efficiency of an HFO1234yf system 
173 

may differ from a current HFC-134a system,166 we believe that this difference does not take into 

account any efficiency improvements that may be recovered or gained when the overall system is 

specifically designed with consideration of the new refrigerant properties (as compared to only 

substituting the new refrigerant). EPA is therefore not adjusting the credits based on efficiency 

differences for this rule. 

 As noted above, for model years 2014 and later, manufacturers seeking to generate 

design-based A/C Efficiency Credits will also need to use a specific new EPA performance test 

to confirm that the design changes are resulting in improvements in A/C system efficiency as 

integrated into the vehicle. As proposed, beginning in MY 2014 manufacturers will need to 

perform an A/C CO2 Idle Test for each A/C system (family) for which it desires to generate 

Efficiency Credits. Manufacturers will need to demonstrate an improvement over current 

average A/C CO2 levels (21.3 g/minute on the Idle Test) to qualify for the menu approach 

credits. Upon qualifying on the Idle Test, the manufacturer will be eligible to use the menu 

approach above to quantify the potential credits it could generate. To earn the full amount of 

credits available in the menu approach (limited to the maximum), the test must demonstrate a 

30% or greater improvement in CO2 levels over the current average. 

 For A/C systems that achieve an improvement between 0-and-30% (or a result between 

21.3 and 14.9 g/minute result on the A/C CO2 Idle Test), a credit can still be earned, but a 

multiplicative credit adjustment factor will be applied to the eligible credits. As shown in Figure 

III.C.1-1 this factor will be scaled from 1.0 to 0, with vehicles demonstrating a 30% or better 

improvement (14.9 g/min or lower) receiving 100% of the eligible credit (adj. factor = 1.0), and 

vehicles demonstrating a 0% improvement - 21.3 g/min or higher result -- receiving no credit 

(adj. factor = 0)). We adopted this adjustment factor in response to commenters who were 

concerned that a vehicle which incorporated many efficiency-improving technologies may not 

achieve the full 30% improvement, and as a result would receive no credit (thus discouraging 

them from using any of the technologies). Because there is environmental benefit (reduced CO2) 

from the use of even some of these efficiency-improving technologies, EPA believes it is 

appropriate to scale the A/C efficiency credits to account for these partial improvements. 

 

166 Ford noted that “the physical properties of the alternative refrigerant R1234yf could result in a reduction of 

efficiency by 5 to 10 percent compared to R134a in use today with a similar refrigerant system and controls 

technology.” 
174 Figure III.C.1-1 A/C Credit Adjustment Factor 
175 

EPA is adopting the A/C CO2 Idle Test procedure as proposed in most respects. This 

laboratory idle test is performed while the vehicle is at idle, similar to the idle carbon monoxide 

(CO) test that was once a part of EPA vehicle certification. The test determines the additional 

CO2 generated at idle when the A/C system is operated. The A/C CO2 Idle Test will be run with 

and without the A/C system cooling the interior cabin while the vehicle’s engine is operating at 

idle and with the system under complete control of the engine and climate control system. The 

test includes tighter restrictions on test cell temperatures and humidity levels than apply for the 

basic FTP test procedure in order to more closely control the loads from operation of the A/C 

system. EPA is also adopting additional refinements to the required in-vehicle blower fan 

settings for manually controlled systems to more closely represent “real world” usage patterns. 

Many commenters questioned the ability of this test to measure the improved efficiency 

of certain A/C technologies, and stated that the test was not representative of real-world driving 

conditions. However, although EPA acknowledges that this test directly simulates a relatively 

limited range of technologies and conditions, we determined that it is sufficiently robust for the 

purpose of demonstrating that the system design changes are indeed implemented properly and 

are resulting in improved efficiency of a vehicle’s A/C system, at idle as well as under a range of 

operating conditions. Further details of the A/C Idle Test can be found in the RIA and the 

regulations, as well as in the Joint Response to Comments Document. 

The design of the A/C CO2 Idle Test represents a balancing of the need for performance 

tests whenever possible to ensure the most accurate quantification of efficiency improvements, 

with practical concerns for testing burden and facility requirements. EPA believes that the Idle 

Test adds to the robust quantification of A/C credits that will result in real-world efficiency 

improvements and reductions in A/C-related CO2 emissions. The Idle Test will not be required 

in order to generate A/C Efficiency Credits until MY 2014 to allow sufficient time for 

manufacturers to make the necessary facilities improvements and to gain experience with the 

test. 

EPA also considered and invited comment on a more comprehensive testing approach to 

quantifying A/C CO2 emissions that could be somewhat more technically robust, but would 

require more test time and test facility improvements for many manufacturers. EPA invited 

comment on using an adapted version of the SCO3, an existing test procedure that is part of the 

Supplemental Federal Test Procedure. EPA discussed and invited comment on the various 

benefits and concerns associated with using an adapted SCO3 test. There were many comments 

opposed to this proposal, and very few supporters. Most of the comments opposing this 

approach echoed the concerns made by in the NPRM. These included excessive testing burden, 

limited test facilities and the cost of adding new ones, and the concern that the SC03 test may not 

be sufficiently representative of in use A/C usage. Some commenters supported a derivative of 

the SCO3 test or multiple runs of other urban cycles (such as the LA-4) for quantifying A/C 

system efficiency. While EPA considers a test cycle that covers a broader range of vehicle speed 

and climatic conditions to be ideal, developing such a representative A/C test would involve the 

work of many stakeholders, and would require a significant amount of time, exceeding the scope 

of this rule. EPA expects to continue working with industry, the California Air Resources Board, 

and other stakeholders to move toward increasingly robust performance tests and methods for 
176 

determining the efficiency of mobile A/C systems and the related impact on vehicle CO2

emissions, including a potential adapted SC03 test. 

c. Interaction with Title VI Refrigerant Regulations 

Title VI of the Clean Air Act deals with the protection of stratospheric ozone. Section 

608 establishes a comprehensive program to limit emissions of certain ozone-depleting 

substances (ODS). The rules promulgated under section 608 regulate the use and disposal of 

such substances during the service, repair or disposal of appliances and industrial process 

refrigeration. In addition, section 608 and the regulations promulgated under it, prohibit 

knowingly venting or releasing ODS during the course of maintaining, servicing, repairing or 

disposing of an appliance or industrial process refrigeration equipment. Section 609 governs the 

servicing of motor vehicle A/C systems. The regulations promulgated under section 609 (40 

CFR part 82, subpart B) establish standards and requirements regarding the servicing of A/C 

systems. These regulations include establishing standards for equipment that recovers and 

recycles (or, for refrigerant blends, only recovers) refrigerant from A/C systems; requiring 

technician training and certification by an EPA-approved organization; establishing 

recordkeeping requirements; imposing sales restrictions; and prohibiting the venting of 

refrigerants. Section 612 requires EPA to review substitutes for class I and class II ozone 

depleting substances and to consider whether such substitutes will cause an adverse effect to 

human health or the environment as compared with other substitutes that are currently or 

potentially available. EPA promulgated regulations for this program in 1992 and those 

regulations are located at 40 CFR part 82, subpart G. When reviewing substitutes, in addition to 

finding them acceptable or unacceptable, EPA may also find them acceptable so long as the user 

meets certain use conditions. For example, all motor vehicle air conditioning system must have 

unique fittings and a uniquely colored label for the refrigerant being used in the system. 

 On September 14, 2006, EPA proposed to approve R-744 (CO2) for use in motor vehicle 

A/C systems (71 FR 55140) and on October 19, 2009, EPA proposed to approve the low-GWP 

refrigerant HFO-1234yf for these systems (74 FR 53445), both subject to certain requirements. 

Final action on both of these proposals is expected later this year. EPA previously issued a final 

rule allowing the use of HFC-152a as a refrigerant in motor vehicle A/C systems subject to 

certain requirements (June 12, 2008; 73 FR 33304). As discussed above, manufacturers 

transitioning to any of the approved refrigerants would be eligible for A/C Leakage Credits, the 

value of which would depend on the GWP of their refrigerant and the degree of leakage 

reduction of their systems. 

EPA views this rule as complementing these Title VI programs, and not conflicting with 

them. To the extent that manufacturers choose to reduce refrigerant leakage in order to earn A/C 

Leakage Credits, this will dovetail with the Title VI section 609 standards which apply to 

maintenance events, and to end-of-vehicle life disposal. In fact, as noted, a benefit of the A/C 

credit provisions is that there should be fewer and less impactive maintenance events for 

MVACs, since there will be less leakage. In addition, the credit provisions will not conflict (or 

overlap) with the Title VI section 609 standards. EPA also believes the menu of leak control 

technologies described in this rule will complement the section 612 requirements, because these 
177 

control technologies will help ensure that HFC-134a (or other refrigerants) will be used in a 

manner that further minimizes potential adverse effects on human health and the environment. 

2. Flexible Fuel and Alternative Fuel Vehicle Credits

EPA is finalizing its proposal to allow flexible-fuel vehicles (FFVs) and alternative fuel 

vehicles to generate credits for purposes of the GHG rule starting in the 2012 model year. FFVs 

are vehicles that can run on both an alternative fuel and a conventional fuel. Most FFVs are E85 

vehicles, which can run on a mixture of up to 85 percent ethanol and gasoline. Dedicated 

alternative fuel vehicles are vehicles that run exclusively on an alternative fuel (e.g., compressed 

natural gas). These credits are designed to complement the treatment of FFVs under CAFE, 

consistent with the emission reduction objectives of the CAA. As explained at proposal, EPCA 

includes an incentive under the CAFE program for production of dual-fueled vehicles or FFVs, 

and dedicated alternative fuel vehicles.167 For FFVs and dual-fueled vehicles, the EPCA/EISA 

credits have three elements: 1) the assumption that the vehicle is operated 50% of the time on 

the conventional fuel and 50% of the time on the alternative fuel, 2) that 1 gallon of alternative 

fuel is treated as 0.15 gallon of fuel, essentially increasing the fuel economy of a vehicle on 

alternative fuel by a factor of 6.67, and 3) a “cap” provision that limits the maximum fuel 

economy increase that can be applied to a manufacturer’s overall CAFE compliance value for all 

CAFE compliance categories (i.e., domestic passenger cars, import passenger cars, and light 

trucks) to 1.2 mpg. EPCA’s provisions were amended by the EISA to extend the period of 

availability of the FFV credits, but to begin phasing them out by annually reducing the amount of 

FFV credits that can be used in demonstrating compliance with the CAFE standards.168 EPCA 

does not premise the availability of the FFV credits on actual use of alternative fuel. Under 

EPCA, after MY 2019 no FFV credits will be available for CAFE compliance.169 Under EPCA, 

for dedicated alternative fuel vehicles, there are no limits or phase-out. As proposed, FFV and 

Alternative Fuel Vehicle Credits will be calculated as a part of the calculation of a 

manufacturer’s overall fleet average fuel economy and fleet average carbon-related exhaust 

emissions (§ 600.510-12). 

 Manufacturers supported the inclusion of FFV credits in the program. Chrysler noted 

that the credits encourage manufacturers to continue production of vehicles capable of running 

on alternative fuels as the production and distribution systems of such fuels are developed. 

Chrysler believes the lower carbon intensity of such fuels is an opportunity for further 

greenhouse gas reductions and increased energy independence, and the continuance of such 

incentives recognizes the important potential of this technology to reduce GHGs. Toyota noted 

that because actions taken by manufacturers to comply with EPA's regulation will, to a large 

extent, be the same as those taken to comply with NHTSA's CAFE regulation, it is appropriate 

for EPA to consider flexibilities contained in the CAFE program that clearly impact product 

plans and technology deployment plans already in place or nearly in place. Toyota believes that 

 

167 49 U.S.C 32905 168 See 49 U.S.C 32906. The mechanism by which EPCA provides an incentive for production of FFVs is by 

specifying that their fuel economy is determined using a special calculation procedure that results in those vehicles 

being assigned a higher fuel economy level than would otherwise occur. 49 U.S.C 32905 (b). This is typically 

referred to as an FFV credit. 

169 49 U.S.C 32906 
178 

adopting the FFV credit for a transitional period of time appears to recognize this reality, while 

providing a pathway to eventually phase-out the flexibility. 

 As proposed, electric vehicles (EVs) or plug-in hybrid electric vehicles (PHEVs) are not 

eligible to generate this type of credit. These vehicles are covered by the advanced technology 

vehicle incentives provisions described in Section III.C.3, so including them here would lead to a 

double counting of credits. 

 a. Model Year 2012 – 2015 Credits 

i. FFVs 

For the GHG program, EPA is allowing FFV credits corresponding to the amounts 

allowed by the amended EPCA but only during the period from MYs 2012 to 2015. (As 

discussed below in Section III.E., EPA is not allowing CAFE-based FFV credits to be generated 

as part of the early credits program.) As noted at proposal, several manufacturers have already 

taken the availability of FFV credits into account in their near-term future planning for CAFE 

and this reliance indicates that these credits need to be considered in assessing necessary lead 

time for the CO2 standards. Manufacturers commented that the credits are necessary in allowing 

them to transition to the new standards. EPA thus believes that allowing these credits, in the 

near term, would help provide adequate lead time for manufacturers to implement the new multiyear standards, but that for the longer term there is adequate lead time without the use of such 

credits. This will also tend to harmonize the GHG and the CAFE program during these interim 

years. As discussed below, EPA is requiring for MY 2016 and later that manufacturers will need 

to reliably estimate the extent to which the alternative fuel is actually being used by vehicles in 

order to count the alternative fuel use in the vehicle’s CO2 emissions level determination. 

Beginning in MY2016, the FFV credits as described above for MY2012-2015 will no longer be 

available for EPA’s GHG program. Rather, GHG compliance values will be based on actual 

emissions performance of the FFV on conventional and alternative fuels, weighted by the actual 

use of these fuels in the FFVs. 

 

As with the CAFE program, EPA will base MY 2012-2015 credits on the assumption that 

the vehicles would operate 50% of the time on the alternative fuel and 50% of the time on 

conventional fuel, resulting in CO2 emissions that are based on an arithmetic average of 

alternative fuel and conventional fuel CO2 emissions. 170 In addition, the measured CO2

emissions on the alternative fuel will be multiplied by a 0.15 volumetric conversion factor which 

is included in the CAFE calculation as provided by EPCA. Through this mechanism a gallon of 

alternative fuel is deemed to contain 0.15 gallons of fuel. For example, for a flexible-fuel 

vehicle that emitted 330 g/mi CO2 operating on E85 and 350 g/mi CO2 operating on gasoline, the 

resulting CO2 level to be used in the manufacturer’s fleet average calculation would be: 

[ ] ( ) CO 199.8g / mi

2

330 0.15 350 2 = × + =

 

170 49 U.S.C 32905 (b) 
179 

 EPA understands that by using the CAFE approach -- including the 0.15 factor -- the CO2

emissions value for the vehicle is calculated to be significantly lower than it actually would be 

otherwise, even if the vehicle were assumed to operate on the alternative fuel at all times. This 

represents a “credit” being provided to FFVs. 

 EPA notes also that the above equation and example are based on an FFV that is an E85 

vehicle. EPCA, as amended by EISA, also establishes the use of this approach, including the 

0.15 factor, for all alternative fuels, not just E85.171 The 0.15 factor is used for B-20 (20 percent 

biofuel and 80 percent diesel) FFVs. EPCA also establishes this approach, including the 0.15 

factor, for gaseous-fueled dual-fueled vehicles, such as a vehicle able to operate on gasoline and 

CNG.172 (For natural gas dual-fueled vehicles, EPCA establishes a factor of 0.823 gallons of 

fuel for every 100 cubic feet a natural gas used to calculate a gallons equivalent.173) The EISA’s 

use of the 0.15 factor in this way provides a similar regulatory treatment across the various types 

of alternative fuel vehicles. EPA also will use the 0.15 factor for all FFVs in order not to disrupt 

manufacturers’ near-term compliance planning and assure sufficient lead time. EPA, in any 

case, expects the vast majority of FFVs to be E85 vehicles, as is the case today. 

 The FFV credit limits for CAFE are 1.2 mpg for model years 2012-2014 and 1.0 mpg for 

model year 2015.174 In CO2 terms, these CAFE limits translate to declining CO2 credit limits 

over the four model years, as the CAFE standards increase in stringency. As the CAFE standard 

increases numerically, the limit becomes a smaller fraction of the standard. EPA proposed, but 

is not adopting, credit limits based on the overall industry average CO2 standards for cars and 

trucks. EPA also requested comments on basing the calculated CO2 credit limits on the 

individual manufacturer fleet-average standards calculated from the footprint curves. EPA 

received comment from one manufacturer supporting this approach. EPA also received 

comments from another manufacturer recommending that the credit limits for an individual 

manufacturer be based instead on that manufacturer’s fleet average performance. The 

commenter noted that this approach is in line with how CAFE FFV credit limits are applied. 

This is due to the fact that the GHG-equivalent of the CAFE 1.2 mpg cap will vary due to the 

non-linear relationship between fuel economy and GHGs/fuel consumption. EPA agrees with 

this approach since it best harmonizes how credit limits are determined in CAFE. EPA intended 

and continues to believe it is appropriate to provide essentially the same FFV credits under both 

programs for MYs 2012-2015. Therefore, EPA is finalizing FFV credits limits for MY2012-

2015 based on a manufacturer’s fleet-average performance. For example, if a manufacturer’s 

2012 car fleet average emissions performance was 260 g/mile (34.2 mpg), the credit limit in CO2

terms would be 9.5 g/mile (34.2 mpg – 1.2 mpg = 33.0 mpg = 269.5 g/mile) and if it were 270 

g/mile the limit would be 10.2 g/mile. 

ii. Dedicated Alternative Fuel Vehicles 

 As proposed, EPA will calculate CO2 emissions from dedicated alternative fuel vehicles 

for MY 2012 – 2015 by measuring the CO2 emissions over the test procedure and multiplying 

 

171 49 U.S.C 32905 (c) 172 49 U.S.C 32905 (d). 173 49 U.S.C 32905 (c). 174 49 U.S.C 32906 (a). 
180 

the results by the 0.15 conversion factor described above. For example, for a dedicated 

alternative fuel vehicle that would achieve 330 g/mi CO2 while operating on alcohol (ethanol or 

methanol), the effective CO2 emissions of the vehicle for use in determining the vehicle’s CO2

emissions would be calculated as follows: 

CO 330 0.15 49.5g / mi 2 = × =

b. Model Years 2016 and Later 

i. FFVs 

EPA is treating FFV credits the same as under EPCA for model years 2012-2015, but is 

applying a different approach starting with model year 2016. EPA recognizes that under EPCA 

automatic FFV credits are entirely phased out of the CAFE program by MY 2020, and apply in 

the prior model years with certain limitations, but without a requirement that the manufacturers 

demonstrate actual use of the alternative fuel. Unlike EPCA, CAA section 202(a) does not 

mandate that EPA treat FFVs in a specific way. Instead EPA is required to exercise its own 

judgment and determine an appropriate approach that best promotes the goals of this CAA 

section. Under these circumstances, EPA will treat FFVs for model years 2012-2015 the same as 

under EPCA, as part of providing sufficient lead time given manufacturers’ compliance 

strategies which rely on the existence of these EPCA statutory credits, as explained above. 

Starting with model year 2016, as proposed, EPA will no longer allow manufacturers to 

base FFV emissions on the use of the 0.15 factor credit described above, and on the use of an 

assumed 50% usage of alternative fuel. Instead, EPA believes the appropriate approach is to 

ensure that FFV emissions are based on demonstrated emissions performance. This will promote 

the environmental goals of the final program. EPA received several comments in support of 

EPA’s proposal to use this approach instead of the EPCA approach for MY2016 and later. 

Under the EPA program in MY2016 and later, manufacturers will be allowed to base an FFV’s 

emissions compliance value in part on the vehicle test values run on the alternative fuel, for that 

portion of its fleet for which the manufacturer demonstrates utilized the alternative fuel in the 

field. In other words, the default is to assume FFVs operate on 100% gasoline, and the emissions 

value for the FFV vehicle will be based on the vehicle’s tested value on gasoline. However, if a 

manufacturer can demonstrate that a portion of its FFVs are using an alternative fuel in use, then 

the FFV emissions compliance value can be calculated based on the vehicle’s tested value using 

the alternative fuel, prorated based on the percentage of the fleet using the alternative fuel in the 

field. An example calculation is described below. EPA believes this approach will provide an 

actual incentive to ensure that such fuels are used. The incentive arises since actual use of the 

flexible fuel typically results in lower tailpipe GHG emissions than use of gasoline and hence 

improves the vehicles’ performance, making it more likely that its performance will improve a 

manufacturers’ average fleetwide performance. Based on existing certification data, E85 FFV 

CO2 emissions are typically about 5 percent lower on E85 than CO2 emissions on 100 percent 

gasoline. Moreover, currently there is little incentive to optimize CO2 performance for vehicles 

when running on E85. EPA believes the above approach would provide such an incentive to 

manufacturers and that E85 vehicles could be optimized through engine redesign and calibration 

to provide additional CO2 reductions. 
181 

Under the EPCA credit provisions, there is an incentive to produce FFVs but no actual 

incentive to ensure that the alternative fuels are used, or that actual vehicle fuel economy 

improves. GHG and energy security benefits are only achieved if the alternative fuel is actually 

used and (for GHGs) that performance improves, and EPA’s approach for MY2016 and beyond 

will now provide such an incentive. This approach will promote greater use of alternative fuels, 

as compared to a situation where there is a credit but no usage requirement. This is also 

consistent with the agency’s overall commitment to the expanded use of renewable fuels. 

Therefore, EPA is basing the FFV program for MYs 2016 and thereafter on real-world 

reductions: i.e., actual vehicle CO2 emissions levels based on actual use of the two fuels, without 

the 0.15 conversion factor specified under EISA. 

For 2016 and later model years, EPA will therefore treat FFVs similarly to conventional 

fueled vehicles in that FFV emissions would be based on actual CO2 results from emission 

testing on the fuels on which it operates. In calculating the emissions performance of an FFV, 

manufacturers may base FFV emissions on vehicle testing based on the alternative fuel 

emissions, if they can demonstrate that the alternative fuel is actually being used in the vehicles. 

Performance will otherwise be calculated assuming use only of conventional fuel. The 

manufacturer must establish the ratio of operation that is on the alternative fuel compared to the 

conventional fuel. The ratio will be used to weight the CO2 emissions performance over the 2-

cycle test on the two fuels. The 0.15 conversion factor will no longer be included in the CO2

emissions calculation. For example, for a flexible-fuel vehicle that emitted 300 g/mi CO2

operating on E85 ten percent of the time and 350 g/mi CO2 operating on gasoline ninety percent 

of the time, the CO2 emissions for the vehicles to be used in the manufacturer’s fleet average 

would be calculated as follows: 

(300 0.10) (350 0.90) 345 g/mi CO2 = × + × =

 The most complex part of this approach is to establish what data are needed for a 

manufacturer to accurately demonstrate use of the alternative fuel, where the manufacturer 

intends for its performance to be calculated based on some use of alternative fuels. One option 

EPA is finalizing is establishing a rebuttable presumption using a national average approach 

based on national E85 fuel use. Manufacturers could use this value along with their vehicle 

emissions results demonstrating lower emissions on E85 to determine the emissions compliance 

values for FFVs sold by manufacturers under this program. For example, national E85 volumes 

and national FFV sales may be used to prorate E85 use by manufacturer sales volumes and FFVs 

already in-use. EPA will conduct an analysis of vehicle miles travelled (VMT) by year for all 

FFVs using its emissions inventory MOVES model. Using the VMT ratios and the overall E85 

sales, E85 usage will be assigned to each vehicle. This method accounts for the VMT of new 

FFVs and FFVs already in the existing fleet using VMT data in the model. The model will then 

be used to determine the ratio of E85 and gasoline for new vehicles being sold. Fluctuations in 

E85 sales and FFV sales will be taken into account to adjust the manufacturers’ E85 actual use 

estimates annually. EPA plans to make this assigned fuel usage factor available through 

guidance prior to the start of MY 2016 and adjust it annually as necessary. EPA believes this is a 

reasonable way to apportion E85 use across the fleet. 
182 

If manufacturers decide not to use EPA’s assigned fuel usage based on the national 

average analysis, they have a second option of presenting their own data for consideration as the 

basis for evaluating fuel usage. Manufacturers have suggested demonstrations using vehicle onboard data gathering through the use of on-board sensors and computers. California’s program 

allows FFV credits based on FFV use and envisioned manufacturers collecting fuel use data from 

vehicles in fleets with on-site refueling. Manufacturers must present a statistical analysis of 

alternative fuel usage data collected on actual vehicle operation. EPA is not attempting to 

specify how the data is collected or the amount of data needed. However, the analysis must be 

based on sound statistical methodology. Uncertainty in the analysis must be accounted for in a 

way that provides reasonable certainty that the program does not result in loss of emissions 

reductions. 

 

EPA received comments that the 2016 and later FFV emissions performance 

methodology should be based on the life cycle emissions (i.e., including the upstream GHG 

emissions associated with fuel feedstocks, production, and transportation) associated with the use 

of the alternative fuel. Commenters are concerned that the use of ethanol will not result in lower 

GHGs on a lifecycle basis. After considering these comments, EPA is not including lifecycle 

emissions in the calculation of vehicle credits. EPA continues to believe that it is appropriate to 

base credits for MY2012-2015 on the EPCA/CAFE credits and to base compliance values for 

MY2016 on the demonstrated tailpipe emissions performance on gasoline and E85, and is 

finalizing this approach as proposed. EPA recently finalized its RFS2 rulemaking which 

addresses lifecycle emissions from ethanol and the upstream GHG benefits of E85 use are 

already captured by this program.175 

 

ii. Dedicated Alternative Fuel Vehicles 

 As proposed, for model years 2016 and later dedicated alternative fuel vehicles, CO2 will 

be measured over the 2-cycle test in order to be included in a manufacturer’s fleet average CO2

calculations. As noted above, this is different than CAFE methodology which provides a 

methodology for calculating a petroleum-based mpg equivalent for alternative fuel vehicles so 

they can be included in CAFE. However, because CO2 can be measured directly from 

alternative fuel vehicles over the test procedure, EPA believes this is the simplest and best 

approach since it is consistent with all other vehicle testing under the CO2 program. EPA did not 

receive comments on this approach. 

3. Advanced Technology Vehicle Incentives for Electric Vehicles, Plug-in Hybrids, 

and Fuel Cell Vehicles

EPA is finalizing provisions that provide a temporary regulatory incentive for the 

commercialization of certain advanced vehicle power trains—electric vehicles (EVs), plug-in 

hybrid electric vehicles (PHEVs), and fuel cell vehicles (FCVs)—for model year 2012-2016 

light-duty and medium-duty passenger vehicles. The purpose of these provisions is to provide a 

temporary incentive to promote technologies which have the potential to produce very large 

GHG reductions in the future, but which face major challenges such as vehicle cost, consumer 

acceptance, and the development of low-GHG fuel production infrastructure. The tailpipe GHG 

 

175 XX Cite RFS2 FR notice 
183 

emissions from EVs, PHEVs operated on grid electricity, and hydrogen-fueled FCVs are zero, 

and traditionally the emissions of the vehicle itself are all that EPA takes into account for 

purposes of compliance with standards set under section 202(a). Focusing on vehicle tailpipe 

emissions has not raised any issues for criteria pollutants, as upstream emissions associated with 

production and distribution of the fuel are addressed by comprehensive regulatory programs 

focused on the upstream sources of those emissions.176 At this time, however, there is no such 

comprehensive program addressing upstream emissions of GHGs, and the upstream GHG 

emissions associated with production and distribution of electricity are higher than the 

corresponding upstream GHG emissions of gasoline or other petroleum based fuels. In the 

future, if there were a program to comprehensively control upstream GHG emissions, then the 

zero tailpipe levels from these vehicles have the potential to produce very large GHG reductions, 

and to transform the transportation sector’s contribution to nationwide GHG emissions. 

This temporary incentive program applies only for the model years 2012-2016 covered 

by this final rule. EPA will reassess the issue of how to address EVs, PHEVs, and FCVs in 

rulemakings for model years 2017 and beyond, based on the status of advanced vehicle 

technology commercialization, the status of upstream GHG emissions control programs, and 

other relevant factors. 

 In the Joint Notice of Intent, EPA stated that “EPA is currently considering proposing 

additional credit opportunities to encourage the commercialization of advanced GHG/fuel 

economy control technology such as electric vehicles and plug-in hybrid electric vehicles. These 

‘super credits’ could take the form of a multiplier that would be applied to the number of 

vehicles sold such that they would count as more than one vehicle in the manufacturer’s fleet 

average.”177 Following through, EPA proposed two mechanisms by which these vehicles would 

earn credits: 1) a zero grams/mile compliance value for EVs, FCVs, and for PHEVs when 

operated on grid electricity, and 2) a vehicle multiplier in the range of 1.2 to 2.0.178 

 The zero grams/mile compliance value for EVs (and for PHEVs when operated on grid 

electricity, as well as for FCVs which involve similar upstream GHG issues with respect to 

hydrogen production) is an incentive that operates like a credit because, while it accurately 

accounts for tailpipe GHG emissions, it does not reflect the increase in upstream GHG emissions 

associated with the electricity used by EVs compared to the upstream GHG emissions associated 

with the gasoline or diesel fuel used by conventional vehicles.179 For example, based on GHG 

emissions from today’s national average electricity generation (including GHG emissions 

associated with feedstock extraction, processing, and transportation) and other key assumptions 

related to vehicle electricity consumption, vehicle charging losses, and grid transmission losses, 

a midsize EV might have an upstream GHG emissions of about 180 grams/mile, compared to the 

upstream GHG emissions of a typical midsize gasoline car of about 60 grams/mile. Thus, the EV 

would cause a net upstream GHG emissions increase of about 120 grams/mile (in general, the net 

 

176 In this section, “upstream” means all fuel-related GHG emissions prior to the fuel being introduced to the vehicle. 177 Notice of Upcoming Joint Rulemaking to Establish Vehicle GHG Emissions and CAFE Standards, 74 FR 24007, 

24011 (May 22, 2009) 

178 74 FR 49533-34. 179 See 74 FR 49533 (“EPA recognizes that for each EV that is sold, in reality the total emissions off-set relative to 

the typical gasoline or diesel powered vehicle is not zero, as there is a corresponding increase in upstream CO2

emissions due to an increase in the requirements for electric utility generation”). 
184 

upstream GHG increase would be less for a smaller EV and more for a larger EV). The zero 

grams/mile compliance value provides an incentive because it is less than the 120 grams/mile 

value that would fully account for the net increase in GHG emissions, counting upstream 

emissions.180 The net upstream GHG impact could change over time, of course, based on 

changes in electricity generation or gasoline production. 

 The proposed vehicle multiplier incentive would also have operated like a credit as it 

would have allowed an EV, PHEV, or FCV to count as more than one vehicle in the 

manufacturer’s fleet average. For example, combining a multiplier of 2.0 with a zero grams/mile 

compliance value for an EV would allow that EV to be counted as two vehicles, each with a zero 

grams/mile compliance value, in the manufacturer’s fleet average calculations. In effect, a 

multiplier of 2.0 would double the overall credit associated with an EV, PHEV, or FCV. 

 EPA explained in the proposal that the potential for large future emissions benefits from 

these technologies provides a strong reason for providing incentives at this time to promote their 

commercialization in the 2012-2016 model years. At the same time, EPA acknowledged that the 

zero grams/mile compliance value did not account for increased upstream GHG emissions. EPA 

requested comment on providing some type of incentive, the appropriateness of both the zero 

grams/mile and vehicle multiplier incentive mechanisms, and on any alternative approaches for 

addressing advanced technology vehicle incentives. EPA received many comments on these 

issues, which will be briefly summarized below. 

 Although some environmental organizations and State agencies supported the principle of 

including some type of regulatory incentive mechanism, almost all of their comments were 

opposed to the combination of both the zero grams/mile compliance value and multipliers in the 

higher end of the proposed range of 1.2 to 2.0. The California Air Resources Board stated that 

the proposed credits “are excessive” and the Union of Concerned Scientists stated that it 

“strongly objects” to the approach that lacks “technical justification” by not “accounting for 

upstream emissions.” The Natural Resources Defense Council (NRDC) stated that the credits 

could “undermine the emissions benefits of the program and will have the unintended 

consequence of slowing the development of conventional cleaner vehicle emission reduction 

technologies into the fleet.” NRDC, along with several other commenters who made the same 

point, cited an example based on Nissan’s public statements that it plans on producing up to 

150,000 Nissan Leaf EVs in the near future at its plant in Smyrna, Tennessee.181 NRDC’s 

analysis showed that if EVs were to account for 10% of Nissan’s car fleet in 2016, the 

combination of the zero grams/mile and 2.0 multiplier would allow Nissan to make only 

relatively small improvements to its gasoline car fleet and still be in compliance. NRDC 

described a detailed methodology for calculating “true full fuel cycle emissions impacts” for 

EVs. The Sierra Club suggested that the zero grams/mile credit would “taint” EVs as the public 

 

180 This 120 grams/mile value for a midsize EV is approximately similar to the compliance value for today’s most 

efficient conventional hybrid vehicle, so the EV would not be significantly more “GHG-positive” than the most 

efficient conventional hybrid counterpart under a full accounting approach. It should be noted that these emission 

levels would still be well below the footprint targets for the vehicles in question. 181 ”Secretary Chu Announces Closing of $1.4 Billion Loan to Nissan,” Department of Energy, January 28, 2010, 

http://www.energy.gov/news/8581.htm 
185 

comes to understand that these vehicles are not zero-GHG vehicles, and that the zero grams/mile 

incentive would allow higher gasoline vehicle GHG emissions. 

Most vehicle manufacturers were supportive of both the zero grams/mile compliance 

value and a higher vehicle multiplier. The Alliance of Automobile Manufacturers supported zero 

grams/mile “since customers need to receive a clear signal that they have made the right choice 

by preferring an EV, PHEV, or EREV....However, the Alliance recognizes the need for a 

comprehensive approach with shared responsibility in order to achieve an overall carbon 

reduction.” Nissan claimed that zero grams/mile is “legally required,” stating that EPA’s 2-cycle 

test procedures do not account for upstream GHG emissions, that accounting for upstream 

emissions from electric vehicles but not from other vehicles would be arbitrary, and that 

including upstream GHG would “disrupt the careful balancing embedded into the National 

Program.” Several other manufacturers, including Ford, Chrysler, Toyota, and Mitsubishi, also 

supported the proposed zero grams/mile compliance value. BMW suggested a compliance value 

approach similar to that used for CAFE compliance (described below), which would yield a very 

low, non-zero grams/mile compliance value. Honda opposed the zero grams/mile incentive. 

Honda suggested that EPA should fully account for upstream GHG and “should separate 

incentives and credits from the measurement of emissions.” Automakers universally supported 

higher multipliers, many higher than the maximum 2.0 level proposed by EPA. Honda suggested 

a multiplier of 16.0 for FCVs. Mitsubishi supported the concept of larger, temporary incentives 

until advanced technology vehicle sales achieved a 10% market share. Finally, some commenters 

suggested that other technologies should also receive incentives, such as diesel vehicles, 

hydrogen-fueled internal combustion engines, and natural gas vehicles. 

 Based on a careful consideration of these comments, EPA is modifying its proposed 

advanced technology vehicle incentive program for EVs, PHEVs, and FCVs produced in 2012-

2016. EPA is not extending the program to include additional technologies at this time. The final 

incentive program, and our rationale for it, are described below. 

 One, the incentive program retains the zero grams/mile value for EVs and FCVs, and for 

PHEVs when operated on grid electricity, subject to vehicle production caps discussed below. 

Although EVs and FCVs will have compliance values of zero grams/mile, PHEV compliance 

values will be determined by combining zero grams/mile for grid electricity operation with the 

GHG emissions from the 2-cycle test results during operation on liquid fuel, and weighting these 

values by the percentage of miles traveled that EPA believes will be performed on grid 

electricity and on liquid fuel, which will vary for different PHEVs. EPA acknowledges that, 

based on current electricity and hydrogen production processes, that EVs, PHEVs, and FCVs 

yield higher upstream GHG emissions than comparable gasoline vehicles. But EPA reiterates its 

support for temporarily rewarding advanced emissions control technologies by foregoing modest 

emissions reductions in the short term in order to lay the foundation for the potential for much 

larger emission reductions in the longer term.182 EPA notes that EVs, PHEVs, and FCVs are 

potential GHG “game changers” if major cost and consumer barriers can be overcome and if 

there is a nationwide transformation to low-GHG electricity (or hydrogen, in the case of FCVs). 

 

182 EPA has adopted this strategy in several of its most recent and important mobile source rulemakings, such as its 

Tier 2 Light-Duty Vehicle, 2007 Heavy-Duty Highway, and Tier 4 Nonroad Diesel rulemakings. 
186 

EPA agrees with the comments by the environmental organizations, States, and Honda 

that the zero grams/mile compliance value will reduce the overall GHG benefits of the program. 

However, EPA believes these reductions in GHG benefits will be relatively small based on the 

projected production of EVs, PHEVs, and FCVs during the 2012-2016 timeframe, along with the 

other changes that we are making in the incentive program. EPA believes this modest potential 

for reduction in near-term emissions control is more than offset by the potential for very large 

future emissions reductions that commercialization of these technologies could promote. 

 Two, the incentive program will not include any vehicle multipliers, i.e., an EV’s zero 

grams/mile compliance value will count as one vehicle in a manufacturer’s fleet average, not as 

more than one vehicle as proposed. EPA has concluded that the combination of the zero 

grams/mile and multiplier credits would be excessive. Compared to the maximum multiplier of 

2.0 that EPA had proposed, dropping this multiplier reduces the aggregate impact of the overall 

credit program by a factor of two (less so for lower multipliers, of course). 

 Three, EPA is placing a cumulative cap on the total production of EVs, PHEVs, and 

FCVs for which an individual manufacturer can claim the zero grams/mile compliance value 

during model years 2012-2016. The cumulative production cap will be 200,000 vehicles, except 

those manufacturers that sell at least 25,000 EVs, PHEVs, and FCVs in MY2012 will have a cap 

of 300,000 vehicles for MY2012-2016. This higher cap option is an additional incentive for 

those manufacturers that take an early leadership role in aggressively and successfully marketing 

advanced technology vehicles. These caps are a second way to limit the potential GHG benefit 

losses associated with the incentive program and therefore are another response to the concerns 

that the proposed incentives were excessive and could significantly undermine the program’s 

GHG benefits. If, for example, 500,000 EVs were produced in 2012-2016 that qualified for the 

zero grams/mile compliance value, the loss in GHG benefits due to this program would be about 

25 million metric tons, or less than 3 percent of the total projected GHG benefits of this 

program.183 The rationale for these caps is that the incentive for EVs, PHEVs, and FCVs is most 

critical when individual automakers are beginning to introduce advanced technologies in the 

market, and less critical once individual automakers have successfully achieved a reasonable 

market share and technology costs decline due to higher production volumes and experience. 

EPA believes that cap levels of 200,000-300,000 vehicles over a five model year period are 

reasonable, as production greater than this would indicate that the manufacturer has overcome at 

least some of the initial market barriers to these advanced technologies. Further, EPA believes 

that it is unlikely that many manufacturers will approach these cap levels in the 2012-2016 

timeframe.184 

Production beyond the cumulative vehicle production cap for a given manufacturer in 

MY2012-2016 would have its compliance values calculated according to a methodology that 

 

183 See Regulatory Impact Analysis, Appendix 5.B. While it is, of course, impossible to predict the number of EVs, 

PHEVs, and FCVs that will be produced between 2012 and 2016 with absolute certainty, EPA believes that 500,000 

“un-capped” EVs is an optimistic scenario. Fewer EVs, or a combination of 500,000 EVs and PHEVs, would lessen 

the short-term reduction in GHG benefits. Production of more than 500,000 “un-capped” EVs would increase the 

short-term reduction in GHG benefits. 

184 Fundamental power train changes in the automotive market typically evolve slowly over time. For example, over 

ten years after the U.S. introduction of the first conventional hybrid electric vehicle, total hybrid sales are 

approximately 300,000 units per year. 
187 

accounts in full for the net increase in upstream GHG emissions. For an EV, for example, this 

would involve: 1) measuring the vehicle electricity consumption in watt-hours/mile over the 2-

cycle test (in the example introduced earlier, a midsize EV might have a 2-cycle test electricity 

consumption of 230 watt-hours/mile), 2) adjusting this watt-hours/mile value upward to account 

for electricity losses during transmission and vehicle charging (dividing 230 watt-hours/mile by 

0.93 to account for grid/transmission losses and by 0.90 to reflect losses during vehicle charging 

yields a value of 275 watt-hours/mile), 3) multiplying the adjusted watt-hours/mile value by a 

nationwide average electricity upstream GHG emissions rate of 0.642 grams/watt-hour at the 

powerplant185 (275 watt-hours/mile multiplied by 0.642 grams GHG/watt-hour yields 177 

grams/mile), and 4) subtracting the upstream GHG emissions of a comparable midsize gasoline 

vehicle of 56 grams/mile to reflect a true net increase in upstream GHG emissions (177 

grams/mile for the EV minus 56 grams/mile for the gasoline vehicle yields a net increase and EV 

compliance value of 121 grams/mile).186 187 The full accounting methodology for the portion of 

PHEV operation on grid electricity would use this same approach. 

EPA projects that the aggregate impact of the incentive program on advanced technology 

vehicle GHG compliance values will be similar to the way advanced technologies are treated 

under DOT’s CAFE program. In the CAFE program, the mpg value for an EV is determined 

using a “petroleum equivalency factor” that has a 1/0.15 factor built into it similar to the flexible 

fuel vehicle credit.188 For example, under current regulations, an EV with a 2-cycle electricity 

consumption of 230 watt-hours/mile would have a CAFE rating of about 360 miles per gallon, 

which would be equivalent to a gasoline vehicle GHG emissions value of 25 grams/mile, which 

is close to EPA’s zero grams/mile for EV production that is below an individual automaker’s 

cumulative vehicle production cap. The exception would be if a manufacturer exceeded its 

cumulative vehicle production cap during MY2012-2016. Then, the same EV would have a 

GHG compliance value of about 120 grams/mile, which would be significantly higher than the 

25 gram/mile implied by the 360 mile/gallon CAFE value. 

 

185 The nationwide average electricity upstream GHG emissions rate of 0.642 grams GHG/watt-hour was calculated 

from 2005 nationwide powerplant data for CO2, CH4, and N2O emissions from eGRID2007 

(http://www.epa.gov/cleanenergy/energy-resources/egrid/index.html), converting to CO2 -e using Global Warming 

Potentials of 25 for CH4 and 298 for N2O, and multiplying by a factor of 1.06 to account for GHG emissions 

associated with feedstock extraction, transportation, and processing (based on Argonne National Laboratory’s The 

Greenhouse Gases, Regulated Emissions, and Energy Use in Transportation (GREET) Model, Version 1.8c.0, 

available at http://www.transportation.anl.gov/modeling_simulation/GREET/). EPA recognizes that there are many 

issues involved with projecting the electricity upstream GHG emissions associated with future EV and PHEV use 

including, but not limited to, average vs marginal, daytime vs nighttime vehicle charging, geographical differences, 

and changes in future electricity feedstocks. EPA chose to use the 2005 national average value because it is known 

and documentable. Values appropriate for future vehicle use may be higher or lower than this value. EPA will 

reevaluate this value in future rulemakings. 

186 A midsize gasoline vehicle with a footprint of 45 square feet would have a MY2016 GHG target of about 225 

grams/mile; dividing 8887 grams CO2/gallon of gasoline by 225 grams/mile yields an equivalent fuel economy level 

of 39.5 mpg; and dividing 2208 grams upstream GHG/gallon of gasoline by 39.5 mpg yields a midsize gasoline 

vehicle upstream GHG value of 56 grams/mile. The 2208 grams upstream GHG/gallon of gasoline is calculated 

from 19,200 grams upstream GHG/mmBtu (Department of Energy: National Energy Technology Laboratory. 2009. 

NETL: Petroleum-Based Fuels Life Cycle Greenhouse Gas Analysis - 2005 Baseline Model. Available at 

http://www.netl.doe.gov/energy-analyses) and multiplying by 0.115 mmBtu/gallon of gasoline. 187 Manufacturers can utilize alternate calculation methodologies if shown to yield equivalent or superior results and 

if approved in advance by the Administrator. 

188 65 FR 36987 (June 12, 2000). 
188 

EPA disagrees with Nissan that excluding upstream GHGs is legally required under 

section 202(a)(1). In this rulemaking, EPA is adopting standards under section 202(a)(1), which 

provides EPA with broad discretion in setting emissions standards. This includes authority to 

structure the emissions standards in a way that provides an incentive to promote advances in 

emissions control technology. This discretion includes the adjustments to compliance values 

adopted in the final rule, the multipliers we proposed, and other kinds of incentives. EPA 

recognizes that we have not previously made adjustments to a compliance value to account for 

upstream emissions in a section 202(a) vehicle emissions standard, but that does not mean we do 

not have authority to do so in this case. In addition, EPA is not directly regulating upstream 

GHG emissions from stationary sources, but instead is deciding how much value to assign to a 

motor vehicle for purposes of compliance calculations with the motor vehicle standard. While 

the logical place to start is the emissions level measured under the test procedure, section 

202(a)(1) does not require that EPA limit itself to only that level. For vehicles above the 

production volume cap described above, EPA will adjust the measured value to a level that 

reflects the net difference in upstream GHG emissions compared to a comparable conventional 

vehicle. This will account for the actual GHG emissions increase associated with the use of the 

EV. As shown above, upstream GHG emissions attributable to increased electricity production 

to operate EVs or PHEVs currently exceed the upstream GHG emissions attributable to gasoline 

vehicles. There is a rational basis for EPA to account for this net difference, as that best reflects 

the real world effect on the air pollution problem we are addressing. For vehicles above the cap, 

EPA is reasonably and fairly accounting for the incremental increase in upstream GHG 

emissions from both the electric vehicles and the conventional vehicles. EPA is not, as Nissan 

suggested, arbitrarily counting upstream emissions for electric vehicles but not for conventional 

fuel vehicles. Nor is EPA arbitrarily ignoring upstream GHG emissions of flexible fuel vehicles 

(FFVs) that can operate on E85. Data show that, on average, FFVs operate on gasoline over 99 

percent of the time, and on E85 fuel less than 1 percent of the time.189 EPA’s recently 

promulgated Renewable Fuel Standard Program shows that, with respect to non-tailpipe GHG 

emissions (such as feedstock growth, transportation, fuel production, and land use), ethanol from 

corn using advanced production technologies emits about 20 percent less GHG than gasoline 

from oil.190 Given this difference, and that E85 is used in FFVs less than 1 percent of the time, 

EPA has concluded that it is not necessary to adopt a more complicated upstream accounting for 

FFVs. Accordingly, EPA’s incentive approach here is both reasonable and authorized under 

section 202(a)(1). 

 In summary, EPA believes that this program for MY2012-2016 strikes a reasoned 

balance by providing a temporary regulatory incentive to help promote commercialization of 

advanced vehicle technologies which are potential game-changers, but which also face major 

barriers, while effectively minimizing potential GHG losses by dropping the proposed multiplier 

and adding individual automaker production volume caps. In the future, if there were a 

comprehensive program to control upstream emissions of GHGs from utilities and other fuel 

production facilities, then these advanced technology vehicles have the potential to produce very 

large reductions in GHG emissions, and to transform the transportation sector’s contribution to 

nationwide GHG emissions. EPA will reassess the issue of how to address EVs, PHEVs, and 

 

189 Renewable Fuel Standard Program (RFS2), Regulatory Impact Analysis, Section 1.7.4, February 2010. 190 XX (fill in after RFS publication) 
189 

FCVs in rulemakings for model years 2017 and beyond based on the status of advanced vehicle 

technology commercialization, the status of upstream GHG control programs, and other relevant 

factors. 

Finally, the criteria and definitions for what vehicles qualify for the advanced technology 

vehicle incentives are provided in Section III.E. These definitions for EVs, PHEVs, and FCVs 

ensure that only credible advanced technology vehicles are provided the incentives. 

4. Off-cycle Technology Credits

As proposed, EPA is adopting an optional credit opportunity intended to apply to new 

and innovative technologies that reduce vehicle CO2 emissions, but for which the CO2 reduction 

benefits are not captured over the 2-cycle test procedure used to determine compliance with the 

fleet average standards (i.e., “off-cycle”). Eligible innovative technologies are those that are 

relatively newly introduced in one or more vehicle models, but that are not yet implemented in 

widespread use in the light-duty fleet. EPA will not approve credits for technologies that are not 

innovative or do not provide novel approaches to reducing greenhouse gas emissions. 

Manufacturers must obtain EPA approval for new and innovative technologies at the time of 

vehicle certification in order to earn credits for these technologies at the end of the model year. 

This approval must include the testing methodology to be used for quantifying credits. Further, 

any credits for these off-cycle technologies must be based on real-world GHG reductions not 

captured on the current 2-cycle tests and verifiable test methods, and represent average U.S. 

driving conditions. 

Similar to the technologies used to reduce A/C system indirect CO2 emissions by 

increasing A/C efficiency, eligible technologies would not be active during the 2-cycle test and 

therefore the associated improvements in CO2 emissions would not be captured. Because these 

technologies are not nearly so well developed and understood, EPA is not prepared to consider 

them in assessing the stringency of the CO2 standards. However, EPA is aware of some 

emerging and innovative technologies and concepts in various stages of development with CO2

reduction potential that might not be adequately captured on the FTP or HFET. EPA believes 

that manufacturers should be able to generate credit for the emission reductions these 

technologies actually achieve, assuming these reductions can be adequately demonstrated and 

verified. Examples include solar panels on hybrids or electric vehicles, adaptive cruise control, 

and active aerodynamics. EPA believes it would be appropriate to provide an incentive to 

encourage the introduction of these types of technologies, that bona fide reductions from these 

technologies should be considered in determining a manufacturer’s fleet average, and that a 

credit mechanism is an effective way to do this. This optional credit opportunity would be 

available through the 2016 model year. 

 EPA received comments from a few manufacturers that the “new and innovative” criteria 

should be broadened. The commenters pointed out that there are technologies already in the 

marketplace that would provide emissions reductions off-cycle and that their use should be 

incentivized. One manufacturer suggested that off-cycle credits should be given for start-stop 

technologies. EPA does not agree that this technology, which EPA’s modeling projects will be 

widely used by manufacturers in meeting the CO2 standards, should qualify for off-cycle credits. 
190 

Start-stop technology already achieves a CO2 benefit on the current 2-cycle tests, which is why 

many manufacturers have announced plans to adopt in across large segments of the fleet. EPA 

recognizes there may be additional benefits to start-stop technology beyond the 2-cycle tests 

(e.g., heavy idle use), and that this is likely the case for other technologies that manufacturers 

will rely on to meet the MY2012-2016 standards. EPA plans to continue to assess the off-cycle 

potential for these technologies in the future. However, EPA does not believe that off-cycle 

credits should be granted for technologies which we expect manufacturers to rely on in 

widespread use throughout the fleet in meeting the CO2 standards. Such credits could lead to 

double counting, as there is already some CO2 benefit over the 2-cycle tests. EPA expects that 

most if not all technologies that reduce CO2 emission on the 2-cycle test will also reduce CO2

emissions during the wide variety of in-use operation that is not directly captured in the 2-cycle 

test. This is no different than what occurs from the control technology on vehicles for criteria 

pollutants. We expect that the catalytic converter and other emission control technology will 

operate to reduce emissions throughout in-use driving, and not just when the vehicle is tested on 

the specified test procedure. The aim for this off-cycle credit provisions is to provide an 

incentive for technologies that normally would not be chosen as a GHG control strategy, as their 

GHG benefits are not measured on the specified 2-cycle test. It is not designed to provide credits 

for technology that does provide GHG benefits on the 2-cycle test and as expected will also 

typically provide GHG benefits in other kinds of operation. Thus, EPA is finalizing the “new 

and innovative” criteria as proposed. That is, the potential to earn off-cycle credits will be 

limited to those technologies that are new and innovative, are introduced in only a limited 

number of vehicle models (i.e., not in widespread use), and are not captured on the current 2-

cycle tests. This approach will encourage future innovation, which may lead to the opportunity 

for future emissions reductions. 

 

 As proposed, manufacturers would quantify CO2 reductions associated with the use of the 

innovative off-cycle technologies such that the credits could be applied on a g/mile equivalent 

basis, as is the case with A/C system improvements. Credits must be based on real additional 

reductions of CO2 emissions and must be quantifiable and verifiable with a repeatable 

methodology. As proposed, the technologies upon which the credits are based would be subject 

to full useful life compliance provisions, as with other emissions controls. Unless the 

manufacturer can demonstrate that the technology would not be subject to in-use deterioration 

over the useful life of the vehicle, the manufacturer must account for deterioration in the 

estimation of the credits in order to ensure that the credits are based on real in-use emissions 

reductions over the life of the vehicle. 

 As discussed below, EPA is finalizing a two-tiered process for demonstrating the CO2

reductions of an innovative and novel technology with benefits not captured by the FTP and 

HFET test procedures. First, a manufacturer must determine whether the benefit of the 

technology could be captured using the 5-cycle methodology currently used to determine fuel 

economy label values. EPA established the 5-cycle test methods to better represent real-world 

factors impacting fuel economy, including higher speeds and more aggressive driving, colder 

temperature operation, and the use of air conditioning. If this determination is affirmative, the 

manufacture must follow the procedures described below (as codified in today’s rules). If the 

manufacturer finds that the technology is such that the benefit is not adequately captured using 

the 5-cycle approach, then the manufacturer would have to develop a robust methodology, 
191 

subject to EPA approval, to demonstrate the benefit and determine the appropriate CO2 gram per 

mile credit. As discussed below, EPA is also providing opportunity for public comment as part 

of the approval process for such non-5-cycle credits. 

 

a. Technology Demonstration Using EPA 5-Cycle Methodology 

As noted above, the CO2 reduction benefit of some innovative technologies could be 

demonstrated using the 5-cycle approach currently used for EPA’s fuel economy labeling 

program. The 5-cycle methodology was finalized in EPA’s 2006 fuel economy labeling rule,191

which provides a more accurate fuel economy label estimate to consumers starting with 2008 

model year vehicles. In addition to the FTP and HFET test procedures, the 5-cycle approach 

folds in the test results from three additional test procedures to determine fuel economy. The 

additional test cycles include cold temperature operation, high temperature, high humidity and 

solar loading, and aggressive and high-speed driving; thus these tests could be used to 

demonstrate the benefit of a technology that reduces CO2 over these types of driving and 

environmental conditions. Using the test results from these additional test cycles collectively 

with the 2-cycle data provides a more precise estimate of the average fuel economy and CO2

emissions of a vehicle for both the city and highway independently. A significant benefit of 

using the 5-cycle methodology to measure and quantify the CO2 reductions is that the test cycles 

are properly weighted for the expected average U.S. operation, meaning that the test results 

could be used without further adjustments. 

EPA continues to believe that the use of these supplemental cycles may provide a method 

by which technologies not demonstrated on the baseline 2-cycles can be quantified and is 

finalizing this approach as proposed. The cold temperature FTP can capture new technologies 

that improve the CO2 performance of vehicles during colder weather operation. These 

improvements may be related to warm-up of the engine or other operation during the colder 

temperature. An example of such a new, innovative technology is a waste heat capture device 

that provides heat to the cabin interior, enabling additional engine-off operation during colder 

weather not previously enabled due to heating and defrosting requirements. The additional 

engine-off time would result in additional CO2 reductions that otherwise would not have been 

realized without the heat capture technology. 

Although A/C credits for efficiency improvements will largely be captured in the A/C 

credits provisions through the credit menu of known efficiency improving components and 

controls, certain new technologies may be able to use the high temperatures, humidity, and solar 

load of the SC03 test cycle to accurately measure their impact. An example of a new technology 

may be a refrigerant storage device that accumulates pressurized refrigerant during driving 

operation or uses recovered vehicle kinetic energy during deceleration to pressurize the 

refrigerant. Much like the waste heat capture device used in cold weather, this device would also 

allow additional engine-off operation while maintaining appropriate vehicle interior occupant 

comfort levels. SC03 test data measuring the relative impact of innovative A/C-related 

technologies could be applied to the 5-cycle equation to quantify the CO2 reductions of the 

technology. 

 

191 Fuel Economy Labeling of Motor Vehicles: Revisions to Improve Calculation of Fuel Economy Estimates; Final 

Rule (71 FR 77872, December 27, 2006). 
192 

The US06 cycle may be used to capture innovative technologies designed to reduce CO2

emissions during higher speed and more aggressive acceleration conditions, but not reflected on 

the 2-cycle tests. An example of this is an active aerodynamic technology. This technology 

recognizes the benefits of reduced aerodynamic drag at higher speeds and makes changes to the 

vehicle at those speeds. The changes may include active front or grill air deflection devices 

designed to redirect frontal airflow. Certain active suspension devices designed primarily to 

reduce aerodynamic drag by lowering the vehicle at higher speeds may also be measured on the 

US06 cycle. To properly measure these technologies on the US06, the vehicle would require 

unique load coefficients with and without the technologies. The different load coefficient 

(properly weighted for the US06 cycle) could effectively result in reduced vehicle loads at the 

higher speeds when the technologies are active. Similar to the previously discussed cycles, the 

results from the US06 test with and without the technology could then use the 5-cycle 

methodology to quantify CO2 reductions. 

If the 5-cycle procedures can be used to demonstrate the innovative technology, then the 

regulatory evaluation/approval process will be relatively simple. The manufacturer will simply 

test vehicles with and without the technology installed or operating and compare results. All 5-

cycles must be tested with the technology enabled and disabled, and the test results will used to 

calculate a combined city/highway CO2 value with the technology and without the technology. 

These values will then be compared to determine the amount of the credit; the combined 

city/highway CO2 value with the technology operating will be subtracted from the combined 

city/highway CO2 value without the technology operating to determine the gram per mile CO2

credit. It is likely that multiple tests of each of the five test procedures will need to be performed 

in order to achieve the necessary strong degree of statistical significance of the credit 

determination results. This will have to be done for each model type for which a credit is sought, 

unless the manufacturer could demonstrate that the impact of the technology was independent of 

the vehicle configuration on which it was installed. In this case, EPA may consider allowing the 

test to be performed on an engine family basis or other grouping. At the end of the model year, 

the manufacturer will determine the number of vehicles produced subject to each credit amount 

and report that to EPA in the final model year report. The gram per mile credit value determined 

with the 5-cycle comparison testing will be multiplied by the total production of vehicles subject 

to that value to determine the total number of credits. 

 EPA received a few comments regarding the 5-cycle approach. While not commenting 

directly on the 5-cycle testing methodology, the Alliance raised general concerns that the 

proposed approach did not offer manufacturers enough certainty with regard to credit 

applications and testing in order to take advantage of the credits. The Alliance further 

commented that the proposal did not provide a level playing field to all manufacturers in terms of 

possible credit availability. The Alliance recommended that rather than attempting to quantify 

CO2 reductions with a prescribed test procedure on unknown technologies, EPA should handle 

credit applications and testing guidelines via future guidance letters, as technologies emerge and 

are developed. 

 EPA believes that 5-cycle testing methodology is one clear and objective way to 

demonstrate certain off-cycle emissions control technologies, as discussed above. It provides 
193 

certainty with regard to testing, and is available for all manufacturers. As discussed below, there 

are also other options for manufactures where the 5-cycle test is not appropriate. EPA is 

retaining this as a primary methodology for determining off-cycle credits. For technologies not 

able to be demonstrated on the 5-cycle test, EPA is finalizing an approach that will include a 

public comment opportunity, as discussed below, which we believe addresses commenter 

concerns regarding maintaining a level playing field. 

b. Alternative Off-Cycle Credit Methodologies 

As proposed, in cases where the benefit of a technological approach to reducing CO2

emissions can not be adequately represented using existing test cycles, manufacturers will need 

to develop test procedures and analytical approaches to estimate the effectiveness of the 

technology for the purpose of generating credits. As discussed above, the first step must be a 

thorough assessment of whether the 5-cycle approach can be used to demonstrate a reduction in 

emissions. If EPA determines that the 5-cycle process is inadequate for the specific technology 

being considered by the manufacturer (i.e., the 5-cycle test does not demonstrate any emissions 

reductions), then an alternative approach may be developed and submitted to EPA for approval. 

The demonstration program must be robust, verifiable, and capable of demonstrating the realworld emissions benefit of the technology with strong statistical significance. 

The CO2 benefit of some technologies may be able to be demonstrated with a modeling 

approach, using engineering principles. An example would be where a roof solar panel is used to 

charge the on-board vehicle battery. The amount of potential electrical power that the panel 

could supply could be modeled for average U.S. conditions and the units of electrical power 

could be translated to equivalent fuel energy or annualized CO2 emission rate reduction from the 

captured solar energy. The CO2 reductions from other technologies may be more challenging to 

quantify, especially if they are interactive with the driver, geographic location, environmental 

condition, or other aspect related to operation on actual roads. In these cases, manufacturers 

might have to design extensive on-road test programs. Any such on-road testing programs 

would need to be statistically robust and based on average U.S. driving conditions, factoring in 

differences in geography, climate, and driving behavior across the U.S. 

Whether the approach involves on-road testing, modeling, or some other analytical 

approach, the manufacturer will be required to present a proposed methodology to EPA. EPA 

will approve the methodology and credits only if certain criteria are met. Baseline emissions and 

control emissions must be clearly demonstrated over a wide range of real world driving 

conditions and over a sufficient number of vehicles to address issues of uncertainty with the data. 

The analytical approach must be robust, verifiable, and capable of demonstrating the real-world 

emissions benefit with strong statistical significance. Data must be on a vehicle model-specific 

basis unless a manufacturer demonstrated model specific data was not necessary. Approval of 

the approach to determining a CO2 benefit will not imply approval of the results of the program 

or methodology; when the testing, modeling, or analyses are complete the results will likewise be 

subject to EPA review and approval. EPA believes that manufacturers could work together to 

develop testing, modeling, or analytical methods for certain technologies, similar to the SAE 

approach used for A/C refrigerant leakage credits. 
194 

 In addition, EPA received several comments recommending that the approval process 

include an opportunity for public comment. As noted above, some manufacturers are concerned 

that there be a level playing field in terms of all manufacturers having a reasonable opportunity 

to earn credits under an approved approach. Commenters also want an opportunity for input in 

the methodology to ensure the accuracy of credit determinations for these technologies. 

Commenters point out that there are a broad number of stakeholders with experience in the 

issues pertaining to the technologies that could add value in determining the most appropriate 

method to assess these technologies’ performance. EPA agrees with these comments and is 

including an opportunity for public comment as part of the approval process. If and when EPA 

receives an application for off-cycle credits using an alternative non 5-cycle methodology, EPA 

will publish a notice of availability in the Federal Register with instructions on how to comment 

on draft off-cycle credit methodology. The public information available for review will focus on 

the methodology for determining credits but the public review obviously is limited to nonconfidential business information. The timing for final approval will depend on the comments 

received. EPA also believes that a public review will encourage manufacturers to be thorough in 

their preparation prior to submitting their application for credits to EPA for approval. EPA will 

take comments into consideration, and where appropriate, work with the manufacturer to modify 

their approach prior to approving any off-cycle credits methodology. EPA will give final notice 

of its determination to the general public as well as the applicant. Off-cycle credits would be 

available in the model year following the final approval. Thus, it will be imperative for a 

manufacturer pursuing this option to begin the process as early as possible. 

 EPA also received comments that the off-cycle credits highlights the inadequacy of 

current test procedures, and that there is a clear need for updated certification test procedures. 

As discussed in Section III. B., EPA believes the current test procedures are adequate for 

implementing the standards finalized today. However, EPA is interested in improving test 

procedures in the future and believes that the off-cycle credits program has the potential to 

provide useful data and insights both for the 5-cycle test procedures and also other test 

procedures that capture off-cycle emissions. 

 

5. Early Credit Options

 EPA is finalizing a program to allow manufacturers to generate early credits in model 

years 2009-2011. As described below, credits may be generated through early additional fleet 

average CO2 reductions, early A/C system improvements, early advanced technology vehicle 

credits, and early off-cycle credits. As with other credits, early credits are subject to a five year 

carry-forward limit based on the model year in which they are generated. Manufacturers may 

transfer early credits between vehicle categories (e.g., between the car and truck fleet). With the 

exception of MY2009 early program credits, as discussed below, a manufacturer may trade other 

early credits to other manufacturers without limits. The agencies note that CAFE credits earned 

in MYs prior to MY 2011 will still be available to manufacturers for use in the CAFE program in 

accordance with applicable regulations. 

 EPA is not adopting certification, compliance, or in-use requirements for vehicles 

generating early credits. Since manufacturers are already certifying MY 2010 and in some cases 

even MY 2011 vehicles, doing so would make certification, compliance, and in-use requirements 
195 

unworkable. As discussed below, manufacturers are required to submit an early credits report to 

EPA for approval no later than 90 days after the end of MY 2011. This report must include 

details on all early credits the manufacturer generates, why the credits are bona fide, how they 

are quantified, and how they can be verified. 

 a. Credits Based on Early Fleet Average CO2 Reductions 

 As proposed, EPA is finalizing opportunities for early credit generation in MYs 2009-

2011 through over-compliance with a fleet average CO2 baseline established by EPA. EPA is 

finalizing four pathways for doing so. In order to generate early CO2 credits, manufacturers 

must select one of the four paths for credit generation for the entire three year period and may 

not switch between pathways for different model years. For two pathways, EPA is establishing 

the baseline equivalent to the California standards for the relevant model year. Generally, 

manufacturers that over-comply with those CARB standards would earn credits. Two additional 

pathways, described below, include credits based on over-compliance with CAFE standards in 

states that have not adopted the California standards. 

 EPA received comments from manufacturers in support of the early credits program as a 

necessary compliance flexibility. The Alliance commented that the early credits reward 

manufacturers for providing fleet performance that exceeds California and Federal standards and 

do not result in a windfall. AIAM commented that early credits are essential to assure the 

feasibility of the proposed standards and the need for such credits must be evaluated in the 

context of the dramatic changes the standards will necessitate in vehicle design and the current 

economic environment in which manufacturers are called upon to make the changes. 

Manufacturers also supported retaining all four pathways, commenting that eliminating pathways 

would diminish the flexibility of the program. EPA also received comments from many 

environmental organizations and states that the program would provide manufacturers with 

windfall credits because manufacturers will not have to take any steps to earn credits beyond 

those that are already planned and in some cases implemented. These commenters were 

particularly concerned that the California truck standards in MY 2009 are not as stringent as 

CAFE, so overcompliance with the California standards could be a windfall in MY 2009, and 

possibly even MY2010. These commenters supported an early credits program based on 

overcompliance with the more stringent of either the CAFE or California standards in any given 

year. EPA is retaining the early credits program because EPA judges that they are not windfall 

credits, and manufacturers in some cases have reasonably relied on the availability of these 

credits, and have based early model year compliance strategies on their availability so that the 

credits are needed to provide adequate lead for the initial years of the program. However, as 

discussed below, EPA is restricting credit trading for MY2009 credits earned under the 

California-based pathways. 

Manufacturers selecting Pathway 1 will generate credits by over-complying with the 

California equivalent baseline established by EPA over the manufacturer’s fleet of vehicles sold 

nationwide. Manufacturers selecting Pathway 2 will generate credits against the California 

equivalent baseline only for the fleet of vehicles sold in California and the CAA section 177 
196 

states.192 This approach includes all CAA 177 states as of the date of promulgation of the Final 

Rule in this proceeding. Manufacturers are required to include both cars and trucks in the 

program. Under Pathways 1 and 2, EPA is requiring manufacturers to cover any deficits 

incurred against the baseline levels established by EPA during the three year period 2009-2011 

before credits can be carried forward into the 2012 model year. For example, a deficit in 2011 

would have to be subtracted from the sum of credits earned in 2009 and 2010 before any credits 

could be applied to 2012 (or later) model year fleets. EPA is including this provision to help 

ensure the early credits generated under this program are consistent with the credits available 

under the California program during these model years. In its comments, California supported 

such an approach. 

 Table III.C.5-1 provides the California equivalent baselines EPA is finalizing to be used 

as the basis for CO2 credit generation under the California-based pathways. These are the 

California GHG standards for the model years shown. EPA proposed to adjust the California 

standards by 2.0 g/mile to account for the exclusion of N2O and CH4, which are included in the 

California GHG standards, but not included in the credits program. EPA received comments 

from one manufacturer that this adjustment is in error and should not be made. The commenter 

noted that EPA already includes total hydrocarbons in the carbon balance determination of 

carbon related exhaust emissions and therefore already accounts for CH4. EPA also includes CO 

in the carbon related exhaust emissions determination which acts to offset the need for an N20 

adjustment. The commenter noted that THC and CO add about 0.8 to 3.0 g/mile to the 

determination of carbon related emissions and therefore EPA should not make the 2.0g/mile 

adjustment. The commenter is correct, and therefore the final levels shown in the table below 

are 2.0 g/mile higher than proposed. These comments are further discussed in the Joint 

Response to Comments document. Manufacturers will generate CO2 credits by achieving fleet 

average CO2 levels below these baselines. As shown in the table, the California-based early 

credit pathways are based on the California vehicle categories. Also, the California-based 

baseline levels are not footprint-based, but universal levels that all manufacturers would use. 

Manufacturers will need to achieve fleet levels below those shown in the table in order to earn 

credits, using the California vehicle category definitions. 

Table III.C.5-1 California Equivalent Baselines CO2 Emissions Levels for Early Credit 

Generation 

Model Year 

Passenger Cars and Light 

Trucks with an LVW of 0-

3,750 lbs 

Light Trucks with a LVW of 3,751 or 

more and a GVWR of up to 8,500 lbs 

plus Medium-duty Passenger Vehicles 

2009 323 439 

2010 301 420 

2011 267 390 

 

Manufacturers using Pathways 1 or 2 above will use year end car and truck sales in each 

category. Although production data is used for the program starting in 2012, EPA is using sales 

 

192 CAA 177 states refers to states that have adopted the California GHG standards. At present, there are thirteen 

CAA 177 states: New York, Massachusetts, Maryland, Vermont, Maine, Connecticut, Arizona, New Jersey, New 

Mexico, Oregon, Pennsylvania, Rhode Island, Washington, as well as Washington, DC. 
197 

data for the early credits program in order to apportion vehicles by state. This is described 

further below. Manufacturers must calculate actual fleet average emissions over the appropriate 

vehicle fleet, either for vehicles sold nationwide for Pathway 1, or California plus 177 states 

sales for Pathway 2. Early CO2 credits are based on the difference between the baseline shown 

in the table above and the actual fleet average emissions level achieved. Any early A/C credits 

generated by the manufacturer, described below in Section III.C.5.b, will be included in the fleet 

average level determination. In model year 2009, the California CO2 standard for cars (323 g/mi 

CO2) is equivalent to 323 g/mi CO2, and the California light-truck standard (437 g/mi CO2) is 

less stringent than the equivalent CAFE standard, recognizing that there are some differences 

between the way the California program and the CAFE program categorize vehicles. 

Manufacturers are required to show that they over comply over the entire three model year time 

period, not just the 2009 model year, to generate early credits under either Pathways 1, 2 or 3. A 

manufacturer cannot use credits generated in model year 2009 unless they offset any debits from 

model years 2010 and 2011. 

EPA received comments that this approach will provide windfall credits to manufacturers 

because the MY2009 California light truck standards is less stringent than the corresponding 

CAFE standards. While this could be accurate if credits were based on performance in just MY 

2009, that is not how credits are determined. Credits are based on the performance over a three 

model year period, MY 2009-2011. As noted in the proposal, EPA expects that the requirement 

to over comply over the entire time period covering these three model years should mean that the 

credits that are generated are real and are in excess of what would have otherwise occurred. 

However, because of the circumstances involving the 2009 model year, in particular for 

companies with significant truck sales, there is some concern that under Pathways 1, 2, and 3, 

there is a potential for a large number of credits generated in 2009 against the California 

standard, in particular for a number of companies who have significantly over-achieved on 

CAFE in recent model years. Some commenters were very concerned about this issue and 

commented in support of restricting credit trading between firms of MY2009 credits based on the 

California program. EPA requested comments on this approach and is finalizing this credit 

trading restriction based on continued concerns regarding the issue of windfall credits. EPA 

wants to avoid a situation where, contrary to expectation, some part of the early credits generated 

by a manufacturer are in fact not excess, where companies could trade such credits to other 

manufacturers, risking a delay in the addition of new technology across the industry from the 

2012 and later EPA CO2 standards. Therefore, manufacturers selecting Pathways 1, 2, or 3 will 

not be allowed to trade any MY 2009 credits that they may generate. 

Commenters also recommended basing credits on the more stringent of the standards 

between CAFE and CARB, which for MY2009, would be the CAFE standards. However, EPA 

believes that this would not be necessary in light of the credit provisions requiring manufacturers 

choosing the California based pathways to use the California pathway for all three MYs 2009-

2011, and the credit trading restrictions for MY2009 discussed above. 
198 

In addition, for Pathways 1 and 2, EPA is allowing manufacturers to include alternative 

compliance credits earned per the California alternative compliance program.193 These 

alternative compliance credits are based on the demonstrated use of alternative fuels in flex fuel 

vehicles. As with the California program, the credits are available beginning in MY 2010. 

Therefore, these early alternative compliance credits are available under EPA’s program for the 

2010 and 2011 model years. FFVs are otherwise included in the early credit fleet average based 

on their emissions on the conventional fuel. This does not apply to EVs and PHEVs. The 

emissions of EVs and PHEVs are to be determined as described in Section III.C.3. 

Manufacturers may choose to either include their EVs and PHEVs in one of the four pathways 

described in this section or under the early advanced technology emissions credits described 

below, but not both due to issues of credit double counting. 

 EPA is also finalizing two additional early credit pathways manufacturers could select. 

Pathways 3 and 4 incorporate credits based on over-compliance with CAFE standards for 

vehicles sold outside of California and CAA 177 states in MY 2009-2011. Pathway 3 allows 

manufacturers to earn credits as under Pathway 2, plus earn CAFE-based credits in other states. 

Credits may not be generated for cars sold in California and CAA 177 states unless vehicle fleets 

in those states are performing better than the standards which otherwise would apply in those 

states, i.e., the baselines shown in Table III.C.5-1 above. 

Pathway 4 is for manufacturers choosing to forego California-based early credits entirely 

and earn only CAFE-based credits outside of California and CAA 177 states. Manufacturers 

may not include FFV credits under the CAFE-based early credit pathways since those credits do 

not automatically reflect actual reductions in CO2 emissions. 

The baselines for CAFE-based early pathways are provided in Table III.C.5-2 below. 

They are based on the CAFE standards for the 2009-2011 model years. For CAFE standards in 

2009-2011 model years that are footprint-based, the baseline would vary by manufacturer. 

Footprint-based standards are in effect for the 2011 model year CAFE standards.194 

Additionally, for Reform CAFE truck standards, footprint standards are optional for the 2009-

2010 model years. Where CAFE footprint-based standards are in effect, manufacturers will 

calculate a baseline using the footprints and sales of vehicles outside of California and CAA 177 

states. The actual fleet CO2 performance calculation will also only include the vehicles sold 

outside of California and CAA 177 states, and as mentioned above, may not include FFV credits. 

Table III.C.5-2 CAFE Equivalent Baselines CO2 Emissions Levels for Early Credit Generation 

Model Year Cars Trucks 

2009 323 381* 

2010 323 376* 

2011 Footprint-based standard Footprint-based standard 

* Must be footprint-based standard for manufacturers selecting footprint option under CAFE 

 

193 See Section 6.6.E, California Environmental Protection Agency Air Resources Board, Staff Report: Initial 

Statement of Reasons For Proposed Rulemaking, Public Hearing to Consider Adoption of Regulations to Control 

Greenhouse Gas Emissions From Motor Vehicles, August 6, 2004. 

194 74 FR 14196, March 30, 2009. 
199 

 For the CAFE-based pathways, EPA is using the NHTSA car and truck definitions that 

are in place for the model year in which credits are being generated. EPA understands that the 

NHTSA definitions change starting in the 2011 model year, and therefore changes part way 

through the early credits program. EPA further recognizes that medium-duty passenger vehicles 

(MDPVs) are not part of the CAFE program until the 2011 model year, and therefore are not be 

part of the early credits calculations for 2009 – 2010 under the CAFE-based pathways. 

 Pathways 2 through 4 involve splitting the vehicle fleet into two groups, vehicles sold in 

California and CAA 177 states and vehicles sold outside of these states. This approach requires 

a clear accounting of location of vehicle sales by the manufacturer. EPA believes it will be 

reasonable for manufacturers to accurately track sales by state, based on its experience with the 

National Low Emissions Vehicle (NLEV) Program. NLEV required manufacturers to meet 

separate fleet average standards for vehicles sold in two different regions of the country.195 As 

with NLEV, the determination is to be based on where the completed vehicles are delivered as a 

point of first sale, which in most cases would be the dealer.196

 As noted above, manufacturers choosing to generate early CO2 credits must select one of 

the four pathways for the entire early credits program and would not be able to switch among 

them. Manufacturers must submit their early credits report to EPA when they submit their final 

CAFE report for MY 2011 (which is required to be submitted no later than 90 days after the end 

of the model year). Manufacturers will have until then to decide which pathway to select. This 

gives manufacturers enough time to determine which pathway works best for them. This timing 

may be necessary in cases where manufacturers earn credits in MY 2011 and need time to assess 

data and prepare an early credits submittal for final EPA approval. 

 The table below provides a summary of the four fleet average-based CO2 early credit 

pathways EPA is finalizing: 

Table III.C.5-3 Summary of Early Fleet Average CO2 Credit Pathways 

Common Elements - Manufacturers select a pathway. Once selected, 

may not switch among pathways 

- All credits subject to 5 year carry-forward 

restrictions 

- For Pathways 2-4, vehicles apportioned by state 

based on point of first sale 

Pathway 1: California-based 

Credits for National Fleet 

- Manufacturers earn credits based on fleet average 

emissions compared with California equivalent 

baseline set by EPA 

- Based on nationwide CO2 sales-weighted fleet 

average 

- Based on use of California vehicle categories 

- FFV alternative compliance credits per California 

program may be included 

- Once in the program, manufacturers must make up 

 

195 62 FR 31211, June 6, 1997. 196 62 FR 31212, June 6, 1997 
200 

any deficits that are incurred prior to 2012 in order 

to carry credits forward to 2012 and later 

Pathway 2: California-based 

Credits for vehicles sold in 

California plus CAA 177 States 

- Same as Pathway 1, but manufacturers only 

includes vehicles sold in California and CAA 177 

states in the fleet average calculation 

Pathway 3: Pathway 2 plus 

CAFE-based Credits outside of 

California plus CAA 177 States 

- Manufacturer earns credits as provided by Pathway 

2: California-based credits for vehicles sold in 

California plus CAA 177 States, plus: 

- CAFE-based credits allowed for vehicles sold 

outside of California and CAA 177 states 

- For CAFE-based credits, manufacturers earn 

credits based on fleet average emissions compared 

with baseline set by EPA 

- CAFE-based credits based on NHTSA car and 

truck definitions 

- FFV credits not allowed to be included for CAFEbased credits 

Pathway 4: Only CAFE-based 

Credits outside of California plus 

CAA 177 States 

- Manufacturer elects to only earn CAFE-based 

credits for vehicles sold outside of California and 

CAA 177 states. Earns no California and 177 state 

credits. 

- For CAFE-based credits, manufacturers earn 

credits based on fleet average emissions compared 

with baseline set by EPA 

- CAFE-based credits based on NHTSA car and 

truck definitions 

- FFV credits not allowed to be included for CAFEbased credits 

 

b. Early A/C Credits 

 As proposed, EPA is finalizing provisions allowing manufacturers to earn early A/C 

credits in MYs 2009-2011 using the same A/C system design-based EPA provisions being 

finalized for MYs commencing in 2012, as described in Section III.C.1, above. Manufacturers 

will be able to earn early A/C CO2-equivalent credits by demonstrating improved A/C system 

performance, for both direct and indirect emissions. To earn credits for vehicles sold in 

California and CAA 177 states, the vehicles must be included in one of the California-based 

early credit pathways described above in III.C.5.a. EPA is finalizing this constraint in order to 

avoid credit double counting with the California program in place in those states, which also 

allows A/C system credits in this time frame. Manufacturers must fold the A/C credits into the 

fleet average CO2 calculations under the California-based pathway. For example, the MY 2009 

California-based program car baseline would be 323 g/mile (see Table III.C.5-1). If a 

manufacturer under Pathway 1 had a MY 2009 car fleet average CO2 level of 320 g/mile and 

then earned an additional 9 g/mile CO2-equivalent A/C credit, the manufacturers would earn a 
201 

total of 10 g/mile of credit. Vehicles sold outside of California and 177 states would be eligible 

for the early A/C credits whether or not the manufacturers participate in other aspects of the early 

credits program. The early A/C credits for vehicles sold outside of California and 177 states are 

based on the NHTSA vehicle categories established for the model year in which early A/C 

credits are being earned. 

 c. Early Advanced Technology Vehicle Incentive 

 As discussed in Section III.C.3, above, EPA is finalizing an incentive for sales of 

advanced technology vehicles including EVs, PHEVs, and fuel cell vehicles. EPA is not 

including a multiplier for these vehicles. However, EPA is allowing the use of the 0 g/mile value 

for electricity operation for up to 200,000 vehicles per manufacturer (or 300,000 vehicles for any 

manufacturer that sells 25,000 or more advanced technology vehicles in MY 2012). EPA 

believes that providing an incentive for the sales of such vehicles prior to MY 2012 is consistent 

with the goal encouraging the introduction of such vehicles as early as possible. Therefore, 

manufacturers may use the 0 g/mile value for vehicles sold in MY2009-2011 consistent with the 

approach being finalized for MY 2012-2016. Any vehicles sold prior to MY 2012 under these 

provisions must be counted against the cumulative sales cap of 200,000 (or 300,000, if 

applicable) vehicles. Manufacturers selling such vehicles in MY 2009-2011 have the option of 

either folding them into the early credits calculation under Pathways 1 through 4 described in 

III.C.5.a above, or tracking the sales of these vehicles separately for use in their fleetwide 

average compliance calculation in MY 2012 or later years, but may not do both as this would 

lead to double counting. Manufacturers tracking the sales of vehicles not folded into Pathways 

1-4, may choose to use the vehicle counts along with the 0 g/mi emissions value (up to the 

applicable vehicle sales cap) to comply with 2012 or later standards. For example, if a 

manufacturer sells 1,000 EVs in MY 2011, the manufacturer would then be able to include 1,000 

vehicles at 0 g/mile in their MY 2012 fleet to decrease the fleet average for that model year. 

Again, these 1,000 vehicles would be counted against the cumulative cap of 200,000 or 300,000, 

as applicable, vehicles. Also, these 1,000 EVs would not be included in the early credit 

pathways discussed above in Section III.C.5.a, otherwise the vehicles would be double counted. 

As with early credits, these early advanced technology vehicles will be tracked by model year 

(2009, 2010, or 2011) and subject to the 5 year carry-forward restrictions. 

 d. Early Off-Cycle Credits 

 EPA’s is finalizing off-cycle innovative technology credit provisions, as described in 

Section III.C.4. EPA requested comment on beginning these credits in the 2009-2011 time 

frame, provided manufacturers are able to make the necessary demonstrations outlined in Section 

III.C.4, above. EPA is finalizing this approach for early off-cycle credits as a way to encourage 

innovation to lower emissions as early as possible, including the requirements for public review 

described in Section III.C.4. Upon EPA approval of a manufacturer’s application for credits, the 

credits may be earned retroactively. EPA did not receive comments specifically on early offcycle credits. 

D. Feasibility of the Final CO2 Standards 
202 

This final rule is based on the need to obtain significant GHG emissions reductions from 

the transportation sector, and the recognition that there are cost-effective technologies to achieve 

such reductions for MY 2012-2016 vehicles. As in many prior mobile source rulemakings, the 

decision on what standard to set is largely based on the effectiveness of the emissions control 

technology, the cost and other impacts of implementing the technology, and the lead time needed 

for manufacturers to employ the control technology. The standards derived from assessing these 

factors are also evaluated in terms of the need for reductions of greenhouse gases, the degree of 

reductions achieved by the standards, and the impacts of the standards in terms of costs, 

quantified benefits, and other impacts of the standards. The availability of technology to achieve 

reductions and the cost and other aspects of this technology are therefore a central focus of this 

rulemaking. 

EPA is taking the same basic approach in this rulemaking, although the technological 

problems and solutions involved in this rulemaking differ in some ways from prior mobile source 

rulemakings. Here, the focus of the emissions control technology is on reducing CO2 and other 

greenhouse gases. Vehicles combust fuel to perform two basic functions: 1) to transport the 

vehicle, its passengers and its contents (and any towed loads), and 2) to operate various 

accessories during the operation of the vehicle such as the air conditioner. Technology can 

reduce CO2 emissions by either making more efficient use of the energy that is produced through 

combustion of the fuel or reducing the energy needed to perform either of these functions. 

This focus on efficiency calls for looking at the vehicle as an entire system, and the 

proposed and now final standards reflect this basic paradigm. In addition to fuel delivery, 

combustion, and aftertreatment technology, any aspect of the vehicle that affects the need to 

produce energy must also be considered. For example, the efficiency of the transmission system, 

which takes the energy produced by the engine and transmits it to the wheels, and the resistance 

of the tires to rolling both have major impacts on the amount of fuel that is combusted while 

operating the vehicle. The braking system, the aerodynamics of the vehicle, and the efficiency of 

accessories, such as the air conditioner, all affect how much fuel is combusted as well. 

 In evaluating vehicle efficiency, we have excluded fundamental changes in vehicles’ size 

and utility. For example, we did not evaluate converting minivans and SUVs to station wagons, 

converting vehicles with four wheel drive to two wheel drive, or reducing headroom in order to 

lower the roofline and reduce aerodynamic drag. We have limited our assessment of technical 

feasibility and resultant vehicle cost to technologies which maintain vehicle utility as much as 

possible. Manufacturers may decide to alter the utility of the vehicles which they sell in 

response to this rule, but this is not a necessary consequence of the rule but rather a matter of 

automaker choice. 

This need to focus on the efficient use of energy by the vehicle as a system leads to a 

broad focus on a wide variety of technologies that affect almost all the systems in the design of a 

vehicle. As discussed below, there are many technologies that are currently available which can 

reduce vehicle energy consumption. These technologies are already being commercially utilized 

to a limited degree in the current light-duty fleet. These technologies include hybrid 

technologies that use higher efficiency electric motors as the power source in combination with 

or instead of internal combustion engines. While already commercialized, hybrid technology 
203 

continues to be developed and offers the potential for even greater efficiency improvements. 

Finally, there are other advanced technologies under development, such as lean burn gasoline 

engines, which offer the potential of improved energy generation through improvements in the 

basic combustion process. In addition, the available technologies are not limited to powertrain 

improvements but also include mass reduction, electrical system efficiencies, and aerodynamic 

improvements. 

 The large number of possible technologies to consider and the breadth of vehicle systems 

that are affected mean that consideration of the manufacturer’s design and production process 

plays a major role in developing the final standards. Vehicle manufacturers typically develop 

many different models by basing them on a limited number of vehicle platforms. The platform 

typically consists of a common set of vehicle architecture and structural components. This allows 

for efficient use of design and manufacturing resources. Given the very large investment put into 

designing and producing each vehicle model, manufacturers typically plan on a major redesign 

for the models approximately every 5 years. At the redesign stage, the manufacturer will 

upgrade or add all of the technology and make most other changes supporting the manufacturer’s 

plans for the next several years, including plans related to emissions, fuel economy, and safety 

regulations. 

This redesign often involves a package of changes designed to work together to meet the 

various requirements and plans for the model for several model years after the redesign. This 

often involves significant engineering, development, manufacturing, and marketing resources to 

create a new product with multiple new features. In order to leverage this significant upfront 

investment, manufacturers plan vehicle redesigns with several model years’ of production in 

mind. Vehicle models are not completely static between redesigns as limited changes are often 

incorporated for each model year. This interim process is called a refresh of the vehicle and 

generally does not allow for major technology changes although more minor ones can be done 

(e.g., small aerodynamic improvements, valve timing improvements, etc). More major 

technology upgrades that affect multiple systems of the vehicle thus occur at the vehicle redesign 

stage and not in the time period between redesigns. The Center for Biological Diversity 

commented on EPA’s assumptions on redesign cycles, and these comments are addressed in 

Section III.D.7 below. 

 As discussed below, there are a wide variety of CO2 reducing technologies involving 

several different systems in the vehicle that are available for consideration. Many can involve 

major changes to the vehicle, such as changes to the engine block and cylinder heads, redesign of 

the transmission and its packaging in the vehicle, changes in vehicle shape to improve 

aerodynamic efficiency and the application of aluminum (and other lightweight materials) in 

body panels to reduce mass. Logically, the incorporation of emissions control technologies 

would be during the periodic redesign process. This approach would allow manufacturers to 

develop appropriate packages of technology upgrades that combine technologies in ways that 

work together and fit with the overall goals of the redesign. It also allows the manufacturer to fit 

the process of upgrading emissions control technology into its multi-year planning process, and it 

avoids the large increase in resources and costs that would occur if technology had to be added 

outside of the redesign process. 
204 

 This final rule affects five years of vehicle production, model years 2012-2016. Given 

the now-typical five year redesign cycle, nearly all of a manufacturer’s vehicles will be 

redesigned over this period. However, this assumes that a manufacturer has sufficient lead time 

to redesign the first model year affected by this final rule with the requirements of this final rule 

in mind. In fact, the lead time available for the start of model year 2012 (January 2011) is 

relatively short, less than a year. The time between this final rule and the start of 2013 model 

year (January 2012) production is under two years. At the same time, manufacturer product 

plans indicate that they are planning on introducing many of the technologies EPA projects could 

be used to show compliance with the final CO2 standards in both 2012 and 2013. In order to 

account for the relatively short lead time available prior to the 2012 and 2013 model years, albeit 

mitigated by their existing plans, EPA has factored this reality into how the availability is 

modeled for much of the technology being considered for model years 2012-2016 as a whole. If 

the technology to control greenhouse gas emissions is efficiently folded into this redesign 

process, then EPA projects that 85 percent of each manufacturer’s sales will be able to be 

redesigned with many of the CO2 emission reducing technologies by the 2016 model year, and as 

discussed below, to reduce emissions of HFCs from the air conditioner. 

 In determining the level of this first ever GHG emissions standard under the CAA for 

light-duty vehicles, EPA uses an approach that accounts for and builds on this redesign process. 

This provides the opportunity for several control technologies to be incorporated into the vehicle 

during redesign, achieving significant emissions reductions from the model at one time. This is 

in contrast to what would be a much more costly approach of trying to achieve small increments 

of reductions over multiple years by adding technology to the vehicle piece by piece outside of 

the redesign process. 

As described below, the vast majority of technology required by this final rule is 

commercially available and already being employed to a limited extent across the fleet (although 

the final rule will necessitate far wider penetration of these technologies throughout the fleet). 

The vast majority of the emission reductions which will result from this final rule will be 

produced from the increased use of these technologies. EPA also believes that this final rule will 

encourage the development and limited use of more advanced technologies, such as PHEVs and 

EVs, and the final rule is structured to facilitate this result 

In developing the final standard, EPA built on the technical work performed by the State 

of California during its development of its statewide GHG program. EPA began 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 Pavley 1. In essence, EPA developed an assessment 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. This assessment is documented in Chapter 3.1 of the 

RIA. The results of this assessment predicts that a national light-duty vehicle fleet which adopts 

technology that achieves performance of 250 g/mile CO2 for model year 2016 will result in 

vehicles sold in California that would achieve the CO2 performance equivalent to the Pavley 1 

standards. 
205 

 EPA then analyzed a level of 250 g/mi CO2 in 2016 using the OMEGA model (described 

in more detail below), and the car and truck footprint curves’ relative stringency discussed in 

Section II to determine what technology will be needed to achieve a fleet wide average of 250 

g/mi CO2. As discussed later in this section we believe this level of technology application to the 

light-duty vehicle fleet can be achieved in this time frame, that such standards will produce 

significant reductions in GHG emissions, and that the costs for both the industry and the costs to 

the consumer are reasonable. EPA also developed standards for the model years 2012 through 

2015 that lead up to the 2016 level. 

 

 EPA’s independent technical assessment of the technical feasibility of the final 

MY2012-2016 standards is described below. EPA has also evaluated a set of alternative 

standards for these model years, one that is more stringent than the final standards and one that is 

less stringent. The technical feasibility of these alternative standards is discussed at the end of 

this section. 

Evaluating the feasibility of these standards primarily includes identifying available 

technologies and assessing their effectiveness, cost, and impact on relevant aspects of vehicle 

performance and utility. The wide number of technologies which are available and likely to be 

used in combination requires a more sophisticated assessment of their combined cost and 

effectiveness. An important factor is also the degree that these technologies are already being 

used in the current vehicle fleet and thus, unavailable for use to improve energy efficiency 

beyond current levels. Finally, the challenge for manufacturers to design the technology into 

their products, and the appropriate lead time needed to employ the technology over the product 

line of the industry must be considered. 

Applying these technologies efficiently to the wide range of vehicles produced by various 

manufacturers is a challenging task. In order to assist in this task, EPA has developed a 

computerized model called the Optimization Model for reducing Emissions of Greenhouse gases 

from Automobiles (OMEGA) model. Broadly, the model starts with a description of the future 

vehicle fleet, including manufacturer, sales, base CO2 emissions, footprint and the extent to 

which emission control technologies are already employed. For the purpose of this analysis, 

over 200 vehicle platforms were used to capture the important differences in vehicle and engine 

design and utility of future vehicle sales of roughly 16 million units in the 2016 timeframe. The 

model is then provided with a list of technologies which are applicable to various types of 

vehicles, along with their cost and effectiveness and the percentage of vehicle sales which can 

receive each technology during the redesign cycle of interest. The model combines this 

information with economic parameters, such as fuel prices and a discount rate, to project how 

various manufacturers would apply the available technology in order to meet various levels of 

emission control. The result is a description of which technologies are added to each vehicle 

platform, along with the resulting cost. While OMEGA can apply technologies which reduce 

CO2 emissions and HFC refrigerant emissions associated with air conditioner use, this task is 

currently handled outside of the OMEGA model. The model can be set to account for various 

types of compliance flexibilities, such as FFV credits. 

The remainder of this section describes the technical feasibility analysis in greater detail. 

Section III.D.1 describes the development of our projection of the MY 2012-2016 fleet in the 
206 

absence of this final rule. Section III.D.2 describes our estimates of the effectiveness and cost of 

the control technologies available for application in the 2012-2016 timeframe. Section III.D.3 

combines these technologies into packages likely to be applied at the same time by a 

manufacturer. In this section, the overall effectiveness of the technology packages vis-à-vis their 

effectiveness when combined individually is described. Section III.D.4 describes the process 

which manufacturers typically use to apply new technology to their vehicles. Section III.D.5 

describes EPA’s OMEGA model and its approach to estimating how manufacturers will add 

technology to their vehicles in order to comply with CO2 emission standards. Section III.D.6 

presents the results of the OMEGA modeling, namely the level of technology added to 

manufacturers’ vehicles and its cost. Section III.D.7 discusses the feasibility of the alternative 4-

percent-per-year and 6-percent-per-year standards. Further detail on all of these issues can be 

found in EPA and NHTSA’s Joint Technical Support Document as well as EPA’s Regulatory 

Impact Analysis. 

 

1. How Did EPA Develop a Reference Vehicle Fleet for Evaluating Further CO2

Reductions?

In order to calculate the impacts of this final rule, it is necessary to project the GHG 

emissions characteristics of the future vehicle fleet absent this regulation. This is called the 

“reference” fleet. EPA and NHTSA develop this reference fleet using a three step process. Step 

one develops a set of detailed vehicle characteristics and sales for a specific model year (in this 

case, 2008). This is called the baseline fleet. Step two adjusts the sales of these vehicles using 

projections made by AEO and CSM to account for expected changes in market conditions. Step 

three applies fuel saving and emission control technology to these vehicles to the extent 

necessary for manufacturers to comply with the MY2011 CAFE standards. Thus, the reference 

fleet differs from the MY 2008 baseline fleet in both the level of technology utilized and in terms 

of the sales of any particular vehicle. 

EPA and NHTSA perform steps one and two in an identical manner. The development of 

the characteristics of the baseline 2008 fleet and the adjustment of sales to match AEO and CSM 

forecasts is described in detail in Section II.B above. The two agencies perform step three in a 

conceptually identical manner, but each agency utilizes its own vehicle technology and emission 

model to project the technology needed to comply with the 2011 CAFE standards. The agencies 

use the same two models to project the technology and cost of the 2012-2016 standards. Use of 

the same model for both pre-control and post-control costs ensures consistency. 

The agencies received one comment from the Center for Biological Diversity that the use 

of 2008 vehicles in our baseline and reference fleets inherently includes vehicle models which 

already have or will be discontinued by the time this rule takes effect and will be replaced by 

more advanced vehicle models. This is true. However, we believe that the use of 2008 vehicle 

designs is still the most appropriate approach available. First, as discussed in Section II.B above, 

the designs of these new vehicles at the level of detail required for emission and cost modeling 

are not publically available. Even the confidential descriptions of these vehicle designs are 

usually not of sufficient detail to facilitate the level of technology and emission modeling 

performed by both agencies. Second, steps two and three of the process used to create the 

reference fleet adjust both the sales and technology of the 2008 vehicles. Thus, our reference 

Comment [A26]: Please mention/tee up the issue 

of using the AEO 2010 (also true for 2009) to 

calibrate the baseline – they build into the AEO a 

shift in the number of cars vs. trucks sold as a result 

of this proposed CAFÉ rule. 
207 

fleet reflects the extent that completely new vehicles are expected to shift the light vehicle 

market in terms of both segment and manufacturer. Also, by adding technology to facilitate 

compliance with the 2011 CAFE standards, we account for the vast majority of ways in which 

these new vehicles will differ from their older counterparts. 

 

The agencies also received a comment that some manufacturers have already announced 

plans to introduce technology well beyond that required by the 2011 MY CAFE standards. This 

commenter indicated that the agencies’ approach over-estimated the technology and cost 

required by the proposed standards and resulted in less stringent standards being proposed than a 

more realistic reference fleet would have supported. First, the agencies agree that limiting the 

application of additional technology beyond that already on 2008 vehicles to only that required 

by the 2011 CAFE standards could under-estimate the use of such technology absent this rule. 

However, it is difficult, if not impossible, to separate future fuel economy improvements made 

for marketing purposes from those designed to facilitate compliance with anticipated CAFE or 

CO2 emission standards. For example, EISA was signed over two years ago, which contained 

specific minimum limits on light vehicle fuel economy in 2020, while also requiring ratable 

improvements in the interim. NHTSA proposed fuel economy standards for the 2012-2015 

model years under the EISA provisions in April of 2008, although NHTSA finalized only 2011 

standards for passenger vehicles. It is also true that manufacturers can change their plans based 

on market conditions and other factors. Thus, announcements of future plans are not certain. As 

mentioned above, these plans do not include specific vehicle characteristics. Thus, in order to 

avoid under-estimating the cost associated with this rule, the agencies have limited the fuel 

economy improvements in the reference fleet to those projected to result from the existing CAFE 

standards. We disagree with the commenter that this has caused the standards being 

promulgated today to be less stringent than would have been the case had we been able to 

confidently predict additional fuel economy and CO2 emission improvements which will occur 

absent this rule. The inclusion of such technology in the reference fleet would certainly have 

reduced the cost of this final rule, as well as the benefits, but would not have changed the final 

level of technology required to meet the final standards. Also, we believe that the same impacts 

would apply to our evaluations of the two alternative sets of standards, the 4% per year and 6% 

per year standards. We are confident that the vast majority of manufacturers would not comply 

with the least stringent of these standards (the 4% per year standards) in the absence of this rule. 

Thus, changes to the reference fleet would not have affected the differences in technology, cost 

or benefits between the final standards and the two alternatives. As described below, our 

rejection of the two alternatives in favor of the final standards is based primarily on the relative 

technology, cost and benefits associated with the three sets of standards than the absolute cost or 

benefit relative to the reference fleet. Thus, we do not agree with the commenter that our choice 

of reference fleet adversely impacted the development of the final standards being promulgated 

today. 

The addition of technology to the baseline fleet so that it complies with the MY 2011 

CAFE standards is described later in Section III.D.4, as this uses the same methodology used to 

project compliance with the final CO2 emission standards. In summary, the reference fleet 

represents vehicle characteristics and sales in the 2012 and later model years absent this final 

rule. Technology is then added to these vehicles in order to reduce CO2 emissions to achieve 

compliance with the final CO2 standards. As noted above, EPA did not factor in any changes to 
208 

vehicle utility or characteristics, or sales in projecting manufacturers’ compliance with this final 

rule. 

After the reference fleet is created, the next step aggregates vehicle sales by a 

combination of manufacturer, vehicle platform, and engine design. As discussed in Section 

III.D.4 below, manufacturers implement major design changes at vehicle redesign and tend to 

implement these changes across a vehicle platform. Because the cost of modifying the engine 

depends on the valve train design (such as SOHC, DOHC, etc.), the number of cylinders and in 

some cases head design, the vehicle sales are broken down beyond the platform level to reflect 

relevant engine differences. The vehicle groupings are shown in Table III.D.1-1. These 

groupings are the same as those used in the NPRM. 

Table III.D.1-1 Vehicle Groupingsa

Vehicle Description Vehicle 

Type Vehicle Description Vehicle Type 

Large SUV (Car) V8+ OHV 13 Subcompact Auto I4 1 

Large SUV (Car) V6 4v 16 Large Pickup V8+ DOHC 19 

Large SUV (Car) V6 OHV 12 Large Pickup V8+ SOHC 3v 14 

Large SUV (Car) V6 2v SOHC 9 Large Pickup V8+ OHV 13 

Large SUV (Car) I4 and I5 7 Large Pickup V8+ SOHC 10 

Midsize SUV (Car) V6 2v SOHC 8 Large Pickup V6 DOHC 18 

Midsize SUV (Car) V6 S/DOHC 4v 5 Large Pickup V6 OHV 12 

Midsize SUV (Car) I4 7 Large Pickup V6 SOHC 2v 11 

Small SUV (Car) V6 OHV 12 Large Pickup I4 S/DOHC 7 

Small SUV (Car) V6 S/DOHC 4 Small Pickup V6 OHV 12 

Small SUV (Car) I4 3 Small Pickup V6 2v SOHC 8 

Large Auto V8+ OHV 13 Small Pickup I4 7 

Large Auto V8+ SOHC 10 Large SUV V8+ DOHC 17 

Large Auto V8+ DOHC, 4v SOHC 6 Large SUV V8+ SOHC 3v 14 

Large Auto V6 OHV 12 Large SUV V8+ OHV 13 

Large Auto V6 SOHC 2/3v 5 Large SUV V8+ SOHC 10 

Midsize Auto V8+ OHV 13 Large SUV V6 S/DOHC 4v 16 

Midsize Auto V8+ SOHC 10 Large SUV V6 OHV 12 

Midsize Auto V7+ DOHC, 4v SOHC 6 Large SUV V6 SOHC 2v 9 

Midsize Auto V6 OHV 12 Large SUV I4/ 7 

Midsize Auto V6 2v SOHC 8 Midsize SUV V6 OHV 12 

Midsize Auto V6 S/DOHC 4v 5 Midsize SUV V6 2v SOHC 8 

Midsize Auto I4 3 Midsize SUV V6 S/DOHC 4v 5 

Compact Auto V7+ S/DOHC 6 Midsize SUV I4 S/DOHC 7 

Compact Auto V6 OHV 12 Small SUV V6 OHV 12 

Compact Auto V6 S/DOHC 4v 4 Minivan V6 S/DOHC 16 

Compact Auto I5 7 Minivan V6 OHV 12 

Compact Auto I4 2 Minivan I4 7 

Subcompact Auto V8+ OHV 13 Cargo Van V8+ OHV 13 

Subcompact Auto V8+ S/DOHC 6 Cargo Van V8+ SOHC 10 
209 

Subcompact Auto V6 2v SOHC 8 Cargo Van V6 OHV 12 

Subcompact Auto I5/V6 S/DOHC 4v 4 

a

I4 = 4 cylinder engine, I5 = 5 cylinder engine, V6, V7, and V8 = 6, 7, and 8 cylinder engines, respectively, DOHC 

= Double overhead cam, SOHC = Single overhead cam, OHV = Overhead valve, v = number of valves per cylinder, 

“/” = and, “+” = or larger.

As mentioned above, the second factor which needs to be considered in developing a 

reference fleet against which to evaluate the impacts of this final rule is the impact of the 2011 

MY CAFE standards. Since the vehicles which comprise the above reference fleet are those sold 

in the 2008 MY, when coupled with our sales projections, they do not necessarily meet the 2011 

MY CAFE standards. 

The levels of the 2011 MY CAFE standards are straightforward to apply to future sales 

fleets, as is the potential fine-paying flexibility afforded by the CAFE program (i.e., $55 per mpg 

of shortfall). However, projecting some of the compliance flexibilities afforded by EISA and the 

CAFE program are less clear. Two of these compliance flexibilities are relevant to EPA’s 

analysis: 1) the credit for FFVs, and 2) the limit on the transferring of credits between car and 

truck fleets. The FFV credit is limited to 1.2 mpg in 2011 and EISA gradually reduces this 

credit, to 1.0 mpg in 2015 and eventually to zero in 2020. In contrast, the limit on car truck 

transfer is limited to 1.0 mpg in 2011, and EISA increases this to 1.5 mpg beginning in 2015 and 

then to 2.0 mpg beginning in 2020. The question here is whether to hold the 2011 MY CAFE 

provisions constant in the future or incorporate the changes in the FFV credit and car-truck credit 

trading limits contained in EISA. 

As was done for the NPRM, EPA has decided to hold the 2011 MY limits on FFV credit 

and car-truck credit trading constant in projecting the fuel economy and CO2 emission levels of 

vehicles in our reference case. This approach treats the changes in the FFV credit and car-truck 

credit trading provisions consistently with the other EISA-mandated changes in the CAFE 

standards themselves. All EISA provisions relevant to 2011 MY vehicles are reflected in our 

reference case fleet, while all post-2011 MY provisions are not. Practically, relative to the 

alternative, this increases both the cost and benefit of the final standards. In our analysis of this 

final rule, any quantified benefits from the presence of FFVs in the fleet are not considered. 

Thus, the only impact of the FFV credit is to reduce onroad fuel economy. By assuming that the 

FFV credit stays at 1.2 mpg in the future absent this rule, the assumed level of onroad fuel 

economy that would occur absent this final rule is reduced. As this final rule eliminates the FFV 

credit (for purposes of CO2 emission compliance) starting in 2016, the net result is to increase 

the projected level of fuel savings from our final standards. Similarly, the higher level of FFV 

credit reduces projected compliance cost for manufacturers to meet the 2011 MY standards in 

our reference case. This increases the projected cost of meeting the final 2012 and later 

standards. 

As just implied, EPA needs to project the technology (and resultant costs) required for 

the 2008 MY vehicles to comply with the 2011 MY CAFE standards in those cases where they 

do not automatically do so. The technology and costs are projected using the same methodology 

that projects compliance with the final 2012 and later CO2 standards. The description of this 

process is described in the following four sections and is essentially the same process used for 

the NPRM. 
210 

A more detailed description of the methodology used to develop these sales projections 

can be found in the Joint TSD. Detailed sales projections by model year and manufacturer can 

also be found in the TSD. 

2. What Are the Effectiveness and Costs of CO2-reducing Technologies?

EPA and NHTSA worked together to jointly develop information on the effectiveness 

and cost of the CO2-reducing technologies, and fuel economy-improving technologies, other than 

A/C related control technologies. This joint work is reflected in Chapter 3 of the Joint TSD and 

in Section II of this preamble. A summary of the effectiveness and cost of A/C related 

technology is contained here. For more detailed information on the effectiveness and cost of 

A/C related technology, please refer to Section III.C of this preamble and Chapter 2 of EPA’s 

RIA. 

A/C improvements are an integral part of EPA’s technology analysis and have been 

included in this section along with the other technology options. While discussed in Section 

III.C as a credit opportunity, air conditioning-related improvements are included in Table 

III.D.2-1.because A/C improvements are a very cost-effective technology at reducing CO2 (or 

CO2-equivalent) emissions. EPA expects most manufacturers will choose to use AC 

improvement credit opportunities as a strategy for meeting compliance with the CO2 standards. 

Note that the costs shown in Table III.D.2-1 do not include maintenance savings that would be 

expected from the new AC systems. Further, EPA does not include AC-related maintenance 

savings in our cost and benefit analysis presented in Section III.H. EPA discusses the likely 

maintenance savings in Chapter 2 of the RIA, though these savings are not included in our final 

cost estimates for the final rule. The EPA approximates that the level of the credits earned will 

increase from 2012 to 2016 as more vehicles in the fleet are redesigned. The penetrations and 

average levels of credit are summarized in Table III.D.2-2, though the derivation of these 

numbers (and the breakdown of car vs. truck credits) is described in the RIA. As demonstrated 

in the IMAC study (and described in Section III.C as well as the RIA), these levels are feasible 

and achievable with technologies that are available and cost-effective today. 

These improvements are categorized as either leakage reduction, including use of 

alternative refrigerants, or system efficiency improvements. Unlike the majority of the 

technologies described in this section, A/C improvements will not be demonstrated in the test 

cycles used to quantify CO2 reductions in this final rule. As described earlier, for this analysis 

A/C-related CO2 reductions are handled outside of OMEGA model and therefore their CO2

reduction potential is expressed in grams per mile rather than a percentage used by the OMEGA 

model. See Section III.C.1 for the method by which potential reductions are calculated or 

measured. Further discussion of the technological basis for these improvements is included in 

Chapter 2 of the RIA. 

Table III.D.2-1 Total CO2 Reduction Potential and 2016 Cost for A/C Related Technologies for 

all Vehicle Classes (Costs in 2007 dollars) 

 CO2 Reduction Potential Incremental Compliance Costs
211 

A/C refrigerant leakage reduction 7.5 g/mi197 $17 

A/C efficiency improvements 5.7 g/mi $53 

Table III.D.2-2 A/C Related Technology Penetration and Credit Levels Expected to be 

Earned 

Technology 

Penetration 

Average credit over entire fleet 

 Car Truck Fleet Average 

2012 28%198 3.4 3.8 3.5 

2013 40% 4.8 5.4 5.0 

2014 60% 7.2 8.1 7.5 

2015 80% 9.6 10.8 10.0 

2016 85% 10.2 11.5 10.6 

3. How can Technologies be Combined into “Packages” and What is the Cost and 

Effectiveness of Packages?

Individual technologies can be used by manufacturers to achieve incremental CO2

reductions. However, as mentioned in Section III.D.1, EPA believes that manufacturers are 

more likely to bundle technologies into “packages” to capture synergistic aspects and reflect 

progressively larger CO2 reductions with additions or changes to any given package. In addition, 

manufacturers typically apply new technologies in packages during model redesigns that occur 

approximately once every five years, rather than adding new technologies one at a time on an 

annual or biennial basis. This way, manufacturers can more efficiently make use of their 

redesign resources and more effectively plan for changes necessary to meet future standards. 

Therefore, as explained at proposal, the approach taken here is to group technologies into 

packages of increasing cost and effectiveness. EPA determined that 19 different vehicle types 

provided adequate representation to accurately model the entire fleet. This was the result of 

analyzing the existing light duty fleet with respect to vehicle size and powertrain configurations. 

All vehicles, including cars and trucks, were first distributed based on their relative size, starting 

from compact cars and working upward to large trucks. Next, each vehicle was evaluated for 

powertrain, specifically the engine size, I4, V6, and V8, and finally by the number of valves per 

cylinder. Note that each of these 19 vehicle types was mapped into one of the five classes of 

vehicles mentioned in Section III.D.2. While the five classes provide adequate representation for 

the cost basis associated with most technology application, they do not adequately account for all 

existing vehicle attributes such as base vehicle powertrain configuration and mass reduction. As 

an example, costs and effectiveness estimates for engine friction reduction for the small car class 

were used to represent cost and effectiveness for three vehicle types: subcompact cars, compact 

cars, and small multi-purpose vehicles (MPV) equipped with a 4-cylinder engine, however the 

mass reduction associated for each of these vehicle types was based on the vehicle type sales-

 

197 This represents 50% improvement in leakage and thus 50% of the A/C leakage impact potential compared to a 

maximum of 15 g/mi credit that can be achieved through the incorporation of a low very GWP refrigerant. 198 We assume slightly higher A/C penetration in 2012 than was assumed in the proposal to correct for rounding that 

occurred in the curve setting process. 
212 

weighted average. In another example, a vehicle type for V8 single overhead cam 3-valve 

engines was created to properly account for the incremental cost in moving to a dual overhead 

cam 4-valve configuration. Note also that these 19 vehicle types span the range of vehicle 

footprint (smaller footprints for smaller vehicles and larger footprints for larger vehicles) which 

serve as the basis for the standards being promulgated today. A complete list of vehicles and 

their associated vehicle types is shown above in Table III.D.1-1. 

Within each of the 19 vehicle types, multiple technology packages were created in 

increasing technology content resulting in increasing effectiveness. Important to note that the 

effort in creating the packages attempted to maintain a constant utility for each package as 

compared to the baseline package. As such, each package is meant to provide equivalent driverperceived performance to the baseline package. The initial packages represent what a 

manufacturer will most likely implement on all vehicles, including low rolling resistance tires, 

low friction lubricants, engine friction reduction, aggressive shift logic, early torque converter 

lock-up, improved electrical accessories, and low drag brakes.199 Subsequent packages include 

advanced gasoline engine and transmission technologies such as turbo/downsizing, GDI, and 

dual-clutch transmission. The most technologically advanced packages within a segment 

included HEV, PHEV and EV designs. The end result is a list of several packages for each of 19 

different vehicle types from which a manufacturer could choose in order to modify its fleet such 

that compliance could be achieved. 

Before using these technology packages as inputs to the OMEGA model, EPA calculated 

the cost and effectiveness for the package. The first step was to apply the scaling class for each 

technology package and vehicle type combination. The scaling class establishes the cost and 

effectiveness for each technology with respect to the vehicle size or type. The Large Car class 

was provided as an example in Section III.D.2. Additional classes include Small Car, Minivan, 

Small Truck, and Large Truck and each of the 19 vehicle types was mapped into one of those 

five classes. In the next step, the cost for a particular technology package was determined as the 

sum of the costs of the applied technologies. The final step, determination of effectiveness, 

requires greater care due to the synergistic effects mentioned in Section III.D.2. This step is 

described immediately below. 

Usually, the benefits of the engine and transmission technologies can be combined 

multiplicatively. For example, if an engine technology reduces CO2 emissions by five percent 

and a transmission technology reduces CO2 emissions by four percent, the benefit of applying 

both technologies is 8.8 percent (100% - (100% – 4%) * (100% - 5%)). In some cases, however, 

the benefit of the transmission-related technologies overlaps with many of the engine 

technologies. This occurs because the primary goal of most of the transmission technologies is 

to shift operation of the engine to more efficient locations on the engine map. This is 

accomplished by incorporating more ratio selections and a wider ratio span into the 

transmissions. Some of the engine technologies have the same goal, such as cylinder 

deactivation, advanced valvetrains, and turbocharging. In order to account for this overlap and 

 

199 When making reference to low friction lubricants, the technology being referred to is the engine changes and 

possible durability testing that would be done to accommodate the low friction lubricants, not the lubricants 

themselves. 
213 

avoid over-estimating emissions reduction effectiveness, EPA has developed a set of adjustment 

factors associated with specific pairs of engine and transmission technologies. 

The various transmission technologies are generally mutually exclusive. As such, the 

effectiveness of each transmission technology generally supersedes each other. For example, the 

9.5-14.5 percent reduction in CO2 emissions associated with the automated manual transmission 

includes the 4.5-6.5 percent benefit of a 6-speed automatic transmission. Exceptions are 

aggressive shift logic and early torque converter lock-up that can be applied to vehicles with 

several types of automatic transmissions. 

EPA has chosen to use an engineering approach known as the lumped-parameter 

technique to determine these adjustment factors. The results from this approach were then 

applied directly to the vehicle packages. The lumped-parameter technique is well documented in 

the literature, and the specific approach developed by EPA is detailed in Chapter 1 of the RIA. 

Table III.D.3-1 presents several examples of the reduction in the effectiveness of 

technology pairs. A complete list and detailed discussion of these synergies is presented in 

Chapter 3 of the Joint TSD. 

Table III.D.3-1 Reduction in Effectiveness for Selected Technology Pairs 

Engine Technology Transmission Technology Reduction in Combined 

Effectiveness 

Intake cam phasing 5 speed automatic 0.5% 

Coupled cam phasing 5 speed automatic 0.5% 

Coupled cam phasing Aggressive shift logic 0.5% 

Cylinder deactivation 5 speed automatic 1.0% 

Cylinder deactivation Aggressive shift logic 0.5% 

 Table III.D.3-2 presents several examples of the CO2-reducing technology vehicle 

packages used in the OMEGA model for the large car class. Similar packages were generated 

for each of the 19 vehicle types and the costs and effectiveness estimates for each of those 

packages are discussed in detail in Chapter 3 of the Joint TSD. 

Table III.D.3-2 CO2 Reducing Technology Vehicle Packages for a Large Car 

Effectiveness and Costs in 2016 (Costs in 2007 dollars) 

Engine 

Technology 

Transmission 

Technology 

Additional 

Technology 

CO2

Reduction 

Package 

Cost 

3.3L V6 4 speed automatic None Baseline 

3.0L V6 + GDI 

+ CCP 6 speed automatic 3% Mass Reduction 17.9% $985 

3.0L V6 + GDI 

+ CCP + Deac 6 speed automatic 5% Mass Reduction 20.6% $1,238 

2.2L I4 + GDI + 

Turbo + DCP 6 speed DCT 10% Mass Reduction Start-Stop 34.3% $1,903 

 
214 

4. Manufacturer’s Application of Technology

Vehicle manufacturers often introduce major product changes together, as a package. In 

this manner the manufacturers can optimize their available resources, including engineering, 

development, manufacturing and marketing activities to create a product with multiple new 

features. In addition, manufacturers recognize that a vehicle will need to remain competitive 

over its intended life, meet future regulatory requirements, and contribute to a manufacturer’s 

CAFE requirements. Furthermore, automotive manufacturers are largely focused on creating 

vehicle platforms to limit the development of entirely new vehicles and to realize economies of 

scale with regard to variable cost. In very limited cases, manufacturers may implement an 

individual technology outside of a vehicle’s redesign cycle.200 In following with these industry 

practices, EPA has created set of vehicle technology packages that represent the entire light duty 

fleet. 

In evaluating needed lead time, EPA has historically authorized manufacturers of new 

vehicles or nonroad equipment to phase in available emission control technology over a number 

of years. Examples of this are EPA’s Tier 2 program for cars and light trucks and its 2007 and 

later PM and NOX emission standards for heavy-duty vehicles. In both of these rules, the major 

modifications expected from the rules were the addition of exhaust aftertreatment control 

technologies. Some changes to the engine were expected as well, but these were not expected to 

affect engine size, packaging or performance. The CO2 reduction technologies described above 

potentially involve much more significant changes to car and light truck designs. Many of the 

engine technologies involve changes to the engine block and heads. The transmission 

technologies could change the size and shape of the transmission and thus, packaging. 

Improvements to aerodynamic drag could involve body design and therefore, the dies used to 

produce body panels. Changes of this sort potentially involve new capital investment and the 

obsolescence of existing investment. 

At the same time, vehicle designs are not static, but change in major ways periodically. 

The manufacturers’ product plans indicate that vehicles are usually redesigned every 5 years on 

average.201 Vehicles also tend to receive a more modest “refresh” between major redesigns, as 

discussed above. Because manufacturers are already changing their tooling, equipment and 

designs at these times, further changes to vehicle design at these times involve a minimum of 

stranded capital equipment. Thus, the timing of any major technological changes is projected to 

coincide with changes that manufacturers are already making to their vehicles. This approach 

effectively avoids the need to quantify any costs associated with discarding equipment, tooling, 

emission and safety certification, etc. when CO2-reducing equipment is incorporated into a 

vehicle. 

This final rule affects five years of vehicle production, model years 2012-2016. Given 

the now-typical five year redesign cycle, nearly all of a manufacturer’s vehicles will be 

redesigned over this period. However, this assumes that a manufacturer has sufficient lead time 

to redesign the first model year affected by this final rule with the requirements of this final rule 

 

200 The Center for Biological Diversity submitted comments disputing this distinction as well as the need for lead 

time. These comments are addressed in Section III.D.7. 

201 See discussion in Section III.D.7 with references 
215 

in mind. In fact, the lead time available for model year 2012 is relatively short. The time 

between a likely final rule and the start of 2013 model year production is likely to be just over 

two years. At the same time, the manufacturer product plans indicate that they are planning on 

introducing many of the technologies projected to be required by this final rule in both 2012 and 

2013. In order to account for the relatively short lead time available prior to the 2012 and 2013 

model years, albeit mitigated by their existing plans, EPA projects that only 85 percent of each 

manufacturer’s sales will be able to be redesigned with major CO2 emission-reducing 

technologies by the 2016 model year. Less intrusive technologies can be introduced into 

essentially all of a manufacturer’s sales. This resulted in three levels of technology penetration 

caps, by manufacturer. Common technologies (e.g., low friction lubes, aerodynamic 

improvements) had a penetration cap of 100%. More advanced powertrain technologies (e.g., 

stoichiometric GDI, turbocharging) had a penetration cap of 85%. The most advanced 

technologies considered in this analysis (e.g., diesel engines,202 as well as IMA, powersplit and 

2-mode hybrids) had a 15% penetration cap. 

This is the same approach as was taken in the NPRM. EPA received several comments 

commending it on its approach to establishing technical feasibility via its use of the OMEGA 

model. The only adverse comment received regarding the application of technology was from 

the Center for Biological Diversity (CBD), which criticized EPA’s use of the 5-year redesign 

cycle. CBD argued that manufacturers occasionally redesign vehicles sooner than 5 years and 

that EPA did not quantify the cost of shortening the redesign cycle to less than 5 years and 

compare this cost to the increased benefit of reduced CO2 emissions. CBD also noted that 

manufacturers have been recently dropping vehicle lines and entire divisions with very little 

leadtime, indicating their ability to change product plans much quicker than projected above. 

EPA did not explicitly evaluate the cost of reducing the average redesign cycle to less 

than 5 years for two reasons. One, in the past, manufacturers have usually shortened the 

redesign cycle to address serious problems with the current design, usually lower than 

anticipated sales. However, the amortized cost of the capital necessary to produce a new vehicle 

design will increase by 23%, from one-fifth of the capital cost to one-fourth (and assuming a 3% 

discount rate). This would be on top of the cost of the emission control equipment itself. The 

only benefit of this increase in societal cost will be earlier CO2 emission reductions (and the 

other benefits associated with CO2 emission control). The capital costs associated with vehicle 

redesign go beyond CO2 emission control and potentially involve every aspect of the vehicle and 

can represent thousands of dollars. We believe that it would be an inefficient use of societal 

resources to incur such costs when they can be obtained much more cost effectively just one year 

later. 

Two, the examples of manufacturers dropping vehicle lines and divisions with very short 

lead time is not relevant to the redesign of vehicles. There is no relationship between a 

manufacturer’s ability to stop selling a vehicle model or to close a vehicle division and a 

manufacturer's ability to redesign a vehicle. A company could decide to stop selling all of its 

products within a few weeks – but it would still take a firm approximately 5 years to introduce a 

major new vehicle line. It is relatively easy to stop the manufacture of a particular product 

 

202 While diesel engines are a mature technology and not “advanced”, the aftertreatment systems necessary for them 

in the U.S. market are advanced. 
216 

(though this too can incur some cost -- such as plant wind-down costs, employee layoff or 

relocation costs, and dealership related costs). It is much more difficult to perform the required 

engineering design and development, design, purchase, and install the necessary capital 

equipment and tooling for components and vehicle manufacturing and develop all the processes 

associated with the application of a new technology. Further discussion of the CBD comments 

can be found in III.D.7 below. 

5. How is EPA Projecting that a Manufacturer Decides Between Options to Improve 

CO2 Performance to Meet a Fleet Average Standard?

 EPA is generally taking the same approach to projecting the application of technology to 

vehicles as it did for the NPRM. With the exception of two comments, all commenters agreed 

with the modeling approach taken in the NPRM. One of these two comments is addressed is 

Section III.D.1 above, while the other is addressed in Section III.D.3. above. 

There are many ways for a manufacturer to reduce CO2-emissions from its vehicles. A 

manufacturer can choose from a myriad of CO2 reducing technologies and can apply one or more 

of these technologies to some or all of its vehicles. Thus, for a variety of levels of CO2 emission 

control, there are an almost infinite number of technology combinations which produce the 

desired CO2 reduction. As noted earlier, EPA developed a new vehicle model, the OMEGA 

model in order to make a reasonable estimate of how manufacturers will add technologies to 

vehicles in order to meet a fleet-wide CO2 emissions level. EPA has described OMEGA’s 

specific methodologies and algorithms in a memo to the docket for this rulemaking (Docket 

EPA-HQ-OAR-2009-0472). 

The OMEGA model utilizes four basic sets of input data. The first is a description of the 

vehicle fleet. The key pieces of data required for each vehicle are its manufacturer, CO2

emission level, fuel type, projected sales and footprint. The model also requires that each vehicle 

be assigned to one of the 19 vehicle types, which tells the model which set of technologies can 

be applied to that vehicle. (For a description of how the 19 vehicle types were created, reference 

Section III.D.3.) In addition, the degree to which each vehicle already reflects the effectiveness 

and cost of each available technology must also be input. This avoids the situation, for example, 

where the model might try to add a basic engine improvement to a current hybrid vehicle. 

Except for this type of information, the development of the required data regarding the reference 

fleet was described in Section III.D.1 above and in Chapter 1 of the Joint TSD. 

The second type of input data used by the model is a description of the technologies 

available to manufacturers, primarily their cost and effectiveness. Note that the five vehicle 

classes are not explicitly used by the model, rather the costs and effectiveness associated with 

each vehicle package is based on the associated class. This information was described in 

Sections III.D.2 and III.D.3 above as well as Chapter 3 of the Joint TSD. In all cases, the order 

of the technologies or technology packages for a particular vehicle type is determined by the 
217 

model user prior to running the model. Several criteria can be used to develop a reasonable 

ordering of technologies or packages. These are described in the Joint TSD. 

The third type of input data describes vehicle operational data, such as annual scrap rates 

and mileage accumulation rates, and economic data, such as fuel prices and discount rates. 

These estimates are described in Section II.F above, Section III.H below and Chapter 4 of the 

Joint TSD. 

The fourth type of data describes the CO2 emission standards being modeled. These 

include the CO2 emission equivalents of the 2011 MY CAFE standards and the final CO2

standards for 2016. As described in more detail below, the application of A/C technology is 

evaluated in a separate analysis from those technologies which impact CO2 emissions over the 2-

cycle test procedure. Thus, for the percent of vehicles that are projected to achieve A/C related 

reductions, the CO2 credit associated with the projected use of improved A/C systems is used to 

adjust the final CO2 standard which will be applicable to each manufacturer to develop a target 

for CO2 emissions over the 2-cycle test which is assessed in our OMEGA modeling. 

As mentioned above for the market data input file utilized by OMEGA, which 

characterizes the vehicle fleet, our modeling must and does account for the fact that many 2008 

MY vehicles are already equipped with one or more of the technologies discussed in Section 

III.D.2 above. Because of the choice to apply technologies in packages, and 2008 vehicles are 

equipped with individual technologies in a wide variety of combinations, accounting for the 

presence of specific technologies in terms of their proportion of package cost and CO2

effectiveness requires careful, detailed analysis. The first step in this analysis is to develop a list 

of individual technologies which are either contained in each technology package, or would 

supplant the addition of the relevant portion of each technology package. An example would be 

a 2008 MY vehicle equipped with variable valve timing and a 6-speed automatic transmission. 

The cost and effectiveness of variable valve timing would be considered to be already present for 

any technology packages which included the addition of variable valve timing or technologies 

which went beyond this technology in terms of engine related CO2 control efficiency. An 

example of a technology which supplants several technologies would be a 2008 MY vehicle 

which was equipped with a diesel engine. The effectiveness of this technology would be 

considered to be present for technology packages which included improvements to a gasoline 

engine, since the resultant gasoline engines have a lower CO2 control efficiency than the diesel 

engine. However, if these packages which included improvements also included improvements 

unrelated to the engine, like transmission improvements, only the engine related portion of the 

package already present on the vehicle would be considered. The transmission related portion of 

the package’s cost and effectiveness would be allowed to be applied in order to comply with 

future CO2 emission standards. 

The second step in this process is to determine the total cost and CO2 effectiveness of the 

technologies already present and relevant to each available package. Determining the total cost 

usually simply involves adding up the costs of the individual technologies present. In order to 

determine the total effectiveness of the technologies already present on each vehicle, the lumped 

parameter model described above is used. Because the specific technologies present on each 

2008 vehicle are known, the applicable synergies and dis-synergies can be fully accounted for. 
218 

The third step in this process is to divide the total cost and CO2 effectiveness values 

determined in step 2 by the total cost and CO2 effectiveness of the relevant technology packages. 

These fractions are capped at a value of 1.0 or less, since a value of 1.0 causes the OMEGA 

model to not change either the cost or CO2 emissions of a vehicle when that technology package 

is added. 

As described in Section III.D.3 above, technology packages are applied to groups of 

vehicles which generally represent a single vehicle platform and which are equipped with a 

single engine size (e.g., compact cars with four cylinder engine produced by Ford). These 

grouping are described in Table III.D.1-1. Thus, the fourth step is to combine the fractions of the 

cost and effectiveness of each technology package already present on the individual 2008 

vehicles models for each vehicle grouping. For cost, percentages of each package already 

present are combined using a simple sales-weighting procedure, since the cost of each package is 

the same for each vehicle in a grouping. For effectiveness, the individual percentages are 

combined by weighting them by both sales and base CO2 emission level. This appropriately 

weights vehicle models with either higher sales or CO2 emissions within a grouping. Once 

again, this process prevents the model from adding technology which is already present on 

vehicles, and thus ensures that the model does not double count technology effectiveness and 

cost associated with complying with the 2011 MY CAFE standards and the final CO2 standards. 

Conceptually, the OMEGA model begins by determining the specific CO2 emission 

standard applicable for each manufacturer and its vehicle class (i.e., car or truck). Since the final 

rule allows for averaging across a manufacturer’s cars and trucks, the model determines the CO2

emission standard applicable to each manufacturer’s car and truck sales from the two sets of 

coefficients describing the piecewise linear standard functions for cars and trucks in the inputs, 

and creates a combined car-truck standard. This combined standard considers the difference in 

lifetime VMT of cars and trucks, as indicated in the final regulations which govern credit trading 

between these two vehicle classes. For both the 2011 CAFE and 2016 CO2 standards, these 

standards are a function of each manufacturer’s sales of cars and trucks and their footprint 

values. When evaluating the 2011 MY CAFE standards, the car-truck trading was limited to 1.2 

mpg. When evaluating the final CO2 standards, the OMEGA model was run only for MY 2016. 

OMEGA is designed to evaluate technology addition over a complete redesign cycle and 2016 

represents the final year of a redesign cycle starting with the first year of the final CO2 standards, 

2012. Estimates of the technology and cost for the interim model years are developed from the 

model projections made for 2016. This process is discussed in Chapter 6 of EPA’s RIA to this 

final rule. When evaluating the 2016 standards using the OMEGA model, the final CO2 standard 

which manufacturers will otherwise have to meet to account for the anticipated level of A/C 

credits generated was adjusted. On an industry wide basis, the projection shows that 

manufacturers will generate 11 g/mi of A/C credit in 2016. Thus, the 2016 CO2 target for the 

fleet evaluated using OMEGA was 261 g/mi instead of 250 g/mi. 

As noted above, EPA estimated separately the cost of the improved A/C systems required 

to generate the 11 g/mi credit. This is consistent with our final A/C credit procedures, which will 

grant manufacturers A/C credits based on their total use of improved A/C systems, and not on 

the increased use of such systems relative to some base model year fleet. Some manufacturers 
219 

may already be using improved A/C technology. However, this represents a small fraction of 

current vehicle sales. To the degree that such systems are already being used, EPA is overestimating both the cost and benefit of the addition of improved A/C technology relative to the 

true reference fleet to a small degree. 

The model then works with one manufacturer at a time to add technologies until that 

manufacturer meets its applicable standard. The OMEGA model can utilize several approaches 

to determining the order in which vehicles receive technologies. For this analysis, EPA used a 

“manufacturer-based net cost-effectiveness factor” to rank the technology packages in the order 

in which a manufacturer is likely to apply them. Conceptually, this approach estimates the cost 

of adding the technology from the manufacturer’s perspective and divides it by the mass of CO2

the technology will reduce. One component of the cost of adding a technology is its production 

cost, as discussed above. However, it is expected that new vehicle purchasers value improved 

fuel economy since it reduces the cost of operating the vehicle. Typical vehicle purchasers are 

assumed to value the fuel savings accrued over the period of time which they will own the 

vehicle, which is estimated to be roughly five years. It is also assumed that consumers discount 

these savings at the same rate as that used in the rest of the analysis (3 or 7 percent). Any 

residual value of the additional technology which might remain when the vehicle is sold is not 

considered. The CO2 emission reduction is the change in CO2 emissions multiplied by the 

percentage of vehicles surviving after each year of use multiplied by the annual miles travelled 

by age, again discounted to the year of vehicle purchase. 

Given this definition, the higher priority technologies are those with the lowest 

manufacturer-based net cost-effectiveness value (relatively low technology cost or high fuel 

savings leads to lower values). Because the order of technology application is set for each 

vehicle, the model uses the manufacturer-based net cost-effectiveness primarily to decide which 

vehicle receives the next technology addition. Initially, technology package #1 is the only one 

available to any particular vehicle. However, as soon as a vehicle receives technology package 

#1, the model considers the manufacturer-based net cost-effectiveness of technology package #2 

for that vehicle and so on. In general terms, the equation describing the calculation of 

manufacturer-based cost effectiveness is as follows: 

[ ]

[ ] [ ] ( ) ∑

∑

+

=

− × ×

− − × ×

= 35

1

1

1 2

(1 )

1

i

i

i

PP

i

i i

Gap

dCO VMT

Gap

TechCost dFS VMT

ManufCostEff

Where 

ManufCostEff = Manufacturer-Based Cost Effectiveness (in dollars per kilogram CO2), 

TechCost = Marked up cost of the technology (dollars), 

PP = Payback period, or the number of years of vehicle use over which consumers value fuel 

savings when evaluating the value of a new vehicle at time of purchase, 

dFSi = Difference in fuel consumption due to the addition of technology times fuel price in year 

i, 

dCO2 = Difference in CO2 emissions due to the addition of technology, 
220 

VMTi = product of annual VMT for a vehicle of age i and the percentage of vehicles of age i still 

on the road, and 

1- Gap = Ratio of onroad fuel economy to two-cycle (FTP/HFET) fuel economy 

The OMEGA model does not currently allow for the VMT used in determining the 

various technology ranking factors to be a function of the rebound factor. If the user believed 

that the consideration of rebound VMT was important, they could increase their estimate of the 

payback period to simulate the impact of the rebound VMT. 

EPA describes the technology ranking methodology and manufacturer-based cost 

effectiveness metric in greater detail in a technical memo to the Docket for this final rule (Docket 

EPA-HQ-OAR-2009-0472). 

When calculating the fuel savings, the full retail price of fuel, including taxes is used. 

While taxes are not generally included when calculating the cost or benefits of a regulation, the 

net cost component of the manufacturer-based net cost-effectiveness equation is not a measure of 

the social cost of this final rule, but a measure of the private cost, (i.e., a measure of the vehicle 

purchaser’s willingness to pay more for a vehicle with higher fuel efficiency). Since vehicle 

operators pay the full price of fuel, including taxes, they value fuel costs or savings at this level, 

and the manufacturers will consider this when choosing among the technology options. 

This definition of manufacturer-based net cost-effectiveness ignores any change in the 

residual value of the vehicle due to the additional technology when the vehicle is five years old. 

As discussed in Chapter 1 of the RIA, based on historic used car pricing, applicable sales taxes, 

and insurance, vehicles are worth roughly 23% of their original cost after five years, discounted 

to year of vehicle purchase at 7% per annum. It is reasonable to estimate that the added 

technology to improve CO2 level and fuel economy will retain this same percentage of value 

when the vehicle is five years old. However, it is less clear whether first purchasers, and thus, 

manufacturers consider this residual value when ranking technologies and making vehicle 

purchases, respectively. For this final rule, this factor was not included in our determination of 

manufacturer-based net cost-effectiveness in the analyses performed in support of this final rule. 

The values of manufacturer-based net cost-effectiveness for specific technologies will 

vary from vehicle to vehicle, often substantially. This occurs for three reasons. First, both the 

cost and fuel-saving component cost, ownership fuel-savings, and lifetime CO2 effectiveness of a 

specific technology all vary by the type of vehicle or engine to which it is being applied (e.g., 

small car versus large truck, or 4-cylinder versus 8-cylinder engine). Second, the effectiveness 

of a specific technology often depends on the presence of other technologies already being used 

on the vehicle (i.e., the dis-synergies. Third, the absolute fuel savings and CO2 reduction of a 

percentage an incremental reduction in fuel consumption depends on the CO2 level of the vehicle 

prior to adding the technology. Chapter 1 of the RIA of this final rule contains further detail on 

the values of manufacturer-based net cost-effectiveness for the various technology packages. 

6. Why are the Final CO2 Standards Feasible?
221 

 The finding that the final standards are technically feasible is based primarily on two 

factors. One is the level of technology needed to meet the final standards. The other is the cost 

of this technology. The focus is on the final standards for 2016, as this is the most stringent 

standard and requires the most extensive use of technology. 

 With respect to the level of technology required to meet the standards, EPA established 

technology penetration caps. As described in Section III.D.4, EPA used two constraints to limit 

the model’s application of technology by manufacturer. The first was the application of common 

fuel economy enablers such as low rolling resistance tires and transmission logic changes. These 

were allowed to be used on all vehicles and hence had no penetration cap. The second constraint 

was applied to most other technologies and limited their application to 85% with the exception of 

the most advanced technologies (e.g., power-split hybrid and 2-mode hybrid) and diesel203, 

whose application was limited to 15%. 

 EPA used the OMEGA model to project the technology (and resultant cost) required for 

manufacturers to meet the current 2011 MY CAFE standards and the final 2016 MY CO2

emission standards. Both sets of standards were evaluated using the OMEGA model. The 2011 

MY CAFE standards were applied to cars and trucks separately with the transfer of credits from 

one category to the other allowed up to an increase in fuel economy of 1.0 mpg as allowed under 

the applicable MY2011 CAFE regulations. Chrysler, Ford and General Motors are assumed to 

utilize FFV credits up to the maximum of 1.2 mpg for both their car and truck sales. Nissan is 

assumed to utilize FFV credits up to the maximum of 1.2 mpg for only their truck sales. The use 

of any banked credits from previous model years was not considered. The modification of the 

reference fleet to comply with the 2011 CAFE standards through the application of technology 

by the OMEGA model is the final step in creating the final reference fleet. This final reference 

fleet forms the basis for comparison for the model year 2016 standards. 

 Table III.D.6-1 shows the usage level of selected technologies in the 2008 vehicles 

coupled with 2016 sales prior to projecting their compliance with the 2011 MY CAFE standards. 

These technologies include converting port fuel-injected gasoline engines to direct injection 

(GDI), adding the ability to deactivate certain engine cylinders during low load operation to 

overhead cam engines (OHC-DEAC), adding a turbocharger and downsizing the engine (Turbo), 

diesel engine technology, increasing the number of transmission speeds to 6, or converting 

automatic transmissions to dual-clutch automated manual transmissions (Dual-Clutch Trans), 

adding 42 volt start-stop capability (Start-Stop), and converting a vehicle to an intermediate or 

strong hybrid design. This last category includes three current hybrid designs: integrated motor 

assist (IMA), power-split (PS), 2-mode hybrids and electric vehicles.204 

Table III.D.6-1 Penetration of Technology in 2008 Vehicles with 2016 Sales: Cars and Trucks 

 

203 While diesel engines are not an “advanced technology” per se, diesel engines that can meet EPA’s light duty Tier 

2 Bin 5 NOx standards have advanced (and somewhat costly) aftertreatment systems on them that make this 

technology penetration cap appropriate in addition to their relatively high incremental costs. 204 EPA did not project reliance on the use of any plug-in hybrid or battery electric vehicles when projecting 

manufacturers’ compliance with the 2016 standards. However, BMW did sell a battery electric vehicle in the 2008 

model year, so these sales are included in the technology penetration estimates for the reference case and the final 

and alternative standards evaluated for 2016. 
222 

GDI 

OHCDEAC Turbo Diesel 

6 Speed 

Auto 

Trans 

Dual 

Clutch 

Trans 

StartStop Hybrid 

BMW 7.5% 0.0% 6.1% 0.0% 86% 0.9% 0% 0.1% 

Chrysler 0.0% 0.0% 0.5% 0.1% 14% 0.0% 0% 0.0% 

Daimler 0.0% 0.0% 6.5% 5.6% 76% 7.5% 0% 0.0% 

Ford 0.4% 0.0% 2.2% 0.0% 29% 0.0% 0% 0.0% 

General Motors 3.1% 0.0% 1.4% 0.0% 15% 0.0% 0% 0.3% 

Honda 1.4% 7.1% 1.4% 0.0% 0% 0.0% 0% 2.1% 

Hyundai 0.0% 0.0% 0.0% 0.0% 3% 0.0% 0% 0.0% 

Kia 0.0% 0.0% 0.0% 0.0% 0% 0.0% 0% 0.0% 

Mazda 13.6% 0.0% 13.6% 0.0% 26% 0.0% 0% 0.0% 

Mitsubishi 0.0% 0.0% 0.0% 0.0% 10% 0.0% 0% 0.0% 

Nissan 0.0% 0.0% 0.0% 0.0% 0% 0.0% 0% 0.8% 

Porsche 58.6% 0.0% 14.9% 0.0% 49% 0.0% 0% 0.0% 

Subaru 0.0% 0.0% 9.8% 0.0% 0% 0.0% 0% 0.0% 

Suzuki 0.0% 0.0% 0.0% 0.0% 0% 0.0% 0% 0.0% 

Tata 0.0% 0.0% 17.3% 0.0% 99% 0.0% 0% 0.0% 

Toyota 6.8% 0.0% 0.0% 0.0% 21% 0.0% 0% 11.6% 

Volkswagen 50.6% 0.0% 39.5% 0.0% 69% 13.1% 0% 0.0% 

Overall 3.8% 0.8% 2.6% 0.1% 19.1% 0.5% 0.0% 2.2% 

As can be seen, all of these technologies were already being used on some 2008 MY 

vehicles, with the exception of direct injection gasoline engines with either cylinder deactivation 

or turbocharging and downsizing. Transmissions with more gearsets were the most prevalent, 

with some manufacturers (e.g., BMW, Suzuki) using them on essentially all of their vehicles. 

Both Daimler and VW equip many of their vehicles with automated manual transmissions, while 

VW makes extensive use of direct injection gasoline engine technology. Toyota has converted a 

significant percentage of its 2008 vehicles to strong hybrid design. 

 Table III.D.6-2 shows the usage level of the same technologies in the reference case fleet 

after projecting their compliance with the 2011 MY CAFE standards. Except for mass reduction, 

the figures shown represent the percentages of each manufacturer’s sales which are projected to 

be equipped with the indicated technology. For mass reduction, the overall mass reduction 

projected for that manufacturer’s sales is also shown. The last row in Table III.D.6-2 shows the 

increase in projected technology penetration due to compliance with the 2011 MY CAFE 

standards. The results of DOT’s Volpe modeling were used to project that all manufacturers 

would comply with the 2011 MY standards in 2016 without the need to pay fines, with one 

exception. This exception was Porsche in the case of their car fleet. When projecting Porsche’s 

compliance with the 2011 MY CAFE standard for cars, NHTSA projected that Porsche would 

achieve a CO2 emission level of 304.3 g/mi instead of the required 284.8 g/mi level (29.2 mpg 

instead of 31.2 mpg), and pay fines in lieu of further control. 
223 

Table III.D.6-2 Penetration of Technology Under 2011 MY CAFE Standards in 2016 Sales: Cars 

and Trucks (Percent of Sales) 

 GDI 

OHCDEAC Turbo 

6 Speed 

Auto 

Trans 

Dual 

Clutch 

Trans 

StartStop 

Mass 

Reduction 

(%) 

BMW 44% 12% 30% 53% 37% 13% 2%

Chrysler 0% 0% 0% 18% 0% 0% 0%

Daimler 23% 22% 8% 52% 34% 26% 2%

Ford 0% 0% 3% 27% 0% 0% 0%

General 

Motors 3% 0% 1% 15% 0% 0% 0%

Honda 2% 6% 2% 0% 0% 0% 0%

Hyundai 0% 0% 0% 3% 0% 0% 0%

Kia 0% 0% 0% 0% 0% 0% 0%

Mazda 13% 0% 13% 20% 0% 0% 0%

Mitsubishi 32% 0% 2% 25% 35% 0% 1%

Nissan 0% 0% 0% 0% 0% 0% 0%

Porsche 92% 0% 75% 5% 55% 38% 4%

Subaru 0% 0% 9% 0% 0% 0% 0%

Suzuki 70% 0% 0% 3% 67% 67% 3%

Tata 85% 54% 20% 27% 73% 73% 6%

Toyota 7% 0% 0% 19% 0% 0% 0%

Volkswagen 89% 5% 81% 14% 78% 18% 3%

Overall 10% 2% 7% 16% 7% 3% 0%

Increase over 

2008 MY 6% 1% 4% -3% 6% 3% 0%

As can be seen, the 2011 MY CAFE standards, when evaluated on an industry wide 

basis, require only a modest increase in the use of these technologies. The projected MY2016 

fraction of automatic transmission with more gearsets actually decreases slightly due to 

conversion of these units to more efficient designs such as automated manual transmissions and 

hybrids. However, the impact of the 2011 MY CAFE standards is much greater on selected 

manufacturers, particularly BMW, Daimler, Porsche, Tata (Jaguar/Land Rover) and VW. All of 

these manufacturers are projected to increase their use of direct injection gasoline engine 

technology, advanced transmission technology, and start-stop technology. It should be noted 

that these manufacturers have traditionally paid fines under the CAFE program. However, with 

higher fuel prices and the lower cost mature technology projected to be available by 2016, these 

manufacturers would likely find it in their best interest to improve their fuel economy levels 

instead of continuing to pay fines (again with the exception of Porsche cars). While not shown, 

no gasoline engines were projected to be converted to diesel technology and no hybrid vehicles 

were projected. Most manufacturers do not require the level of CO2 emission control associated 
224 

with either of these technologies. The few manufacturers that would were projected to choose to 

pay CAFE fines in 2011 in lieu of adding diesel or hybrid technologies. 

 This 2008 baseline fleet, modified to meet 2011 standards, becomes our “reference” case. 

See Section II.B above. This is the fleet against which the final 2016 standards are compared. 

Thus, it is also the fleet that is assumed to exist in the absence of this rule. No air conditioning 

improvements are assumed for model year 2011 vehicles. The average CO2 emission levels of 

this reference fleet vary slightly from 2012-2016 due to small changes in the vehicle sales by 

market segments and manufacturer. CO2 emissions from cars range from 282-284 g/mi, while 

those from trucks range from 382-384 g/mi. CO2 emissions from the combined fleet range from 

316-320. These estimates are described in greater detail in Section 5.3.2.2 of the EPA RIA. 

 Conceptually, both EPA and NHTSA perform the same projection in order to develop 

their respective reference fleets. However, because the two agencies use two different models to 

modify the baseline fleet to meet the 2011 CAFE standards, the projected technology that could 

be added will be slightly different. The differences, however, are relatively small since most 

manufacturers only require modest addition of technology to meet the 2011 CAFE standards. 

 EPA then used the OMEGA model once again to project the level of technology needed 

to meet the final 2016 CO2 emission standards. Using the results of the OMEGA model, every 

manufacturer was projected to be able to meet the final 2016 standards with the technology 

described above except for four: BMW, VW, Porsche and Tata (which is comprised of Jaguar 

and Land Rover vehicles in the U.S. fleet) . For these manufacturers, the results presented below 

are those with the fully allowable application of technology available in EPA’s OMEGA 

modeling analysis and not for the technology projected to enable compliance with the final 

standards. Described below are a number of potential feasible solutions for how these 

companies can achieve compliance. The overall level of technology needed to meet the final 

2016 standards is shown in Table III.D.6-3. As discussed above, all manufacturers are projected 

to improve the air conditioning systems on 85% of their 2016 sales.205

Table III.D.6-3 Final Penetration of Technology for 2016 CO2 Standards: Cars and Trucks 

 GDI 

OHCDEAC Turbo Diesel 

6 Speed 

Auto 

Trans 

Dual 

Clutch 

Trans 

StartStop Hybrid 

Mass 

Reduction 

(%) 

BMW 80% 21% 61% 6% 13% 63% 65% 14% 5% 

Chrysler 79% 13% 17% 0% 31% 52% 54% 0% 6% 

Daimler 76% 30% 53% 5% 12% 72% 67% 14% 5% 

Ford 84% 21% 19% 0% 27% 60% 61% 0% 6% 

General 

Motors 67% 25% 14% 0% 8% 61% 61% 0% 6% 

Honda 43% 6% 2% 0% 0% 49% 18% 2% 3% 

Hyundai 59% 0% 1% 0% 8% 52% 32% 0% 3% 

 

205 Many of the technologies shown in this table are mutually exclusive. Thus, 85% penetration might not be 

possible. For example, any use of hybrids will reduce the DEAC, Turbo, 6SPD, DCT, and 42V S-S technologies. 

Additionally, not every technology is available to be used on every vehicle type. 
225 

Kia 33% 0% 1% 0% 0% 52% 4% 0% 2% 

Mazda 60% 0% 14% 1% 17% 47% 41% 0% 4% 

Mitsubishi 74% 0% 33% 0% 14% 74% 74% 0% 6% 

Nissan 66% 7% 11% 0% 2% 62% 58% 1% 5% 

Porsche 83% 15% 62% 8% 5% 45% 62% 15% 4% 

Subaru 60% 0% 9% 0% 0% 58% 44% 0% 3% 

Suzuki 77% 0% 0% 0% 10% 67% 67% 0% 4% 

Tata 85% 55% 27% 0% 14% 70% 70% 15% 5% 

Toyota 26% 7% 3% 0% 13% 40% 7% 12% 2% 

Volkswagen 82% 18% 71% 11% 10% 68% 60% 15% 4% 

Overall 60% 13% 15% 1% 12% 55% 42% 4% 4% 

Increase 

over 2011 

CAFE 49% 11% 9% 1% -4% 48% 39% 2% 4% 

 Table III.D.6-4 shows the 2016 standards, as well as the achieved CO2 emission levels 

for the five manufacturers which are not able to meet these standards under the premises of our 

modeling. It should be noted that the two sets of combined emission levels shown in Table 

III.D.6-4 are based on sales weighting car and truck emission levels. 

Table III.D.6-4 Emissions of Manufacturers Unable to Meet Final 2016 Standards (g/mi CO2) 

 Achieved Emissions 2016 Standards Shortfall 

Manufacturer Car Truck Combined Car Truck Combined Combined

BMW 236.3 278.7 248.5 228.4 282.5 243.9 4.6 

Tata 258.6 323.6 284.2 249.9 272.5 258.8 25.4 

Daimler 246.3 297.8 262.6 238.3 294.3 256.1 6.5 

Porsche 244.1 332.0 273.4 206.1 286.9 233.0 40.4 

Volkswagen 223.5 326.6 241.6 218.6 292.7 231.6 10.0 

 

As can be seen, BMW and Daimler have the smallest shortfalls, 5-6 g/mi, while Porsche has the 

largest, 40 g/mi. 

On an industry average basis, the technology penetrations are very similar to those 

projected in the proposal. There is a slight shift from the use of cylinder deactivation to the two 

advanced transmission technologies. This is due to the fact that the estimated costs for these 

three technologies have been updated, and thus, their relative cost effectiveness when applied to 

specific vehicles have also shifted. The reader is referred to Section II.E of this preamble as well 

as Chapter 3 of the Joint TSD for a detailed description of the cost estimates supporting this final 

rule and to the RIA for a description of the selection of technology packages for specific vehicle 

types. The other technologies shown in Table III.D.6-4 changed by 2 percent or less between the 

proposal and this final rule. 
226 

As can be seen, the overall average reduction in vehicle weight is projected to be 4 

percent. This reduction varies across the two vehicle classes and vehicle base weight. For cars 

below 2,950 pounds curb weight, the average reduction is 2.8 percent (75 pounds), while the 

average was 4.3 percent (153 pounds) for cars above 2,950 curb weight. For trucks below 3,850 

pounds curb weight, the average reduction is 4.7 percent (163 pounds), while it was 5.1 percent 

(240 pounds) for trucks above 3,850 curb weight. Splitting trucks at a higher weight, for trucks 

below 5,000 pounds curb weight, the average reduction is 4.4 percent (186 pounds), while it was 

7.0 percent (376 pounds) for trucks above 5,000 curb weight. 

 The levels of requisite technologies differ significantly across the various manufacturers. 

Therefore, several analyses were performed to ascertain the cause. Because the baseline case 

fleet consists of 2008 MY vehicle designs, these analyses were focused on these vehicles, their 

technology and their CO2 emission levels. 

 Comparing CO2 emissions across manufacturers is not a simple task. In addition to 

widely varying vehicle styles, designs, and sizes, manufacturers have implemented fuel efficient 

technologies to varying degrees, as indicated in Table III.D.6-1. The projected levels of requisite 

technology to enable compliance with the final 2016 standards shown in Table III.D.6-3 account 

for two of the major factors which can affect CO2 emissions:1) level of technology already being 

utilized and 2) vehicle size, as represented by footprint. 

 For example, the fuel economy of a manufacturer’s 2008 vehicles may be relatively high 

because of the use of advanced technologies. This is the case with Toyota’s high sales of their 

Prius hybrid. However, the presence of this technology in a 2008 vehicle eliminates the ability 

to significantly reduce CO2 further through the use of this technology. In the extreme, if a 

manufacturer were to hybridize a high level of its sales in 2016, it does not matter whether this 

technology was present in 2008 or whether it would be added in order to comply with the 

standards. The final level of hybrid technology would be the same. Thus, the level at which 

technology is present in 2008 vehicles does not explain the difference in requisite technology 

levels shown in Table III.D.6-3. 

 Similarly, the final CO2 emission standards adjust the required CO2 level according to a 

vehicle’s footprint, requiring lower absolute emission levels from smaller vehicles. Thus, just 

because a manufacturer produces larger vehicles than another manufacturer does not explain the 

differences seen in Table III.D.6-3. 

 In order to remove these two factors from our comparison, the EPA lumped parameter 

model described above was used to estimate the degree to which technology present on each 

2008 MY vehicle in our reference fleet was improving fuel efficiency. The effect of this 

technology was removed and each vehicle’s CO2 emissions were estimated as if it utilized no 

additional fuel efficiency technology beyond the baseline. The differences in vehicle size were 

accounted for by determining the difference between the sales-weighted average of each 

manufacturer’s “no technology” CO2 levels to their required CO2 emission level under the final 

2016 standards. The industry-wide difference was subtracted from each manufacturer’s value to 
227 

highlight which manufacturers had lower and higher than average “no technology” emissions. 

The results are shown in Figure III.D.6-1. 
228 

-20-40-60

0

80604020

120100

BMW Chrysler DaimlerFord

GeneralMotors Honda HyundaiKia Mazda Mitsubishi Nissan Porsche Subaru SuzukiTata Toyota Volk wage s n

) CO2 Emissions (g/mi Car Truck

Figure III.D.6-1 CO2 Emission Reduction Required in 2016 from 2008 Vehicles After Removing the 

Benefit of Technology Already Present, Relative to That for the Fleet as a Whole 
229 

As can be seen in Table III.D.6-3 the manufacturers projected to require the greatest levels of 

technology also show the highest offsets relative to the industry. The greatest offset shown in 

Figure III.D.6-1 is for Tata’s trucks (Land Rover). These vehicles are estimated to have 100 

g/mi greater CO2 emissions than the average 2008 MY truck after accounting for differences in 

the use of fuel saving technology and footprint. The lowest adjustment is for Subaru’s trucks, 

which have 50 g/mi CO2 lower emissions than the average truck. 

 While this comparison confirms the differences in the technology penetrations shown in 

Table III.D.6-3, it does not yet explain why these differences exist. Two well known factors 

affecting vehicle fuel efficiency are vehicle weight and acceleration performance (henceforth 

referred to as “performance”). The footprint-based form of the final CO2 standard accounts for 

most of the difference in vehicle weight seen in the 2008 MY fleet. However, even at the same 

footprint, vehicles can have varying weights. Higher performing vehicles also tend to have 

higher CO2 emissions over the two-cycle fuel economy test procedure. So manufacturers with 

higher average performance levels will tend to have higher average CO2 emissions for any given 

footprint. This variability at any given footprint contributes to much of the scatter in the data 

(shown for example on plots like Figures II.C.1-3 through II.C.1-6). 

 We developed a methodology to assess the impact of these two factors on each 

manufacturer’s projected compliance with the 2016 standards. First, we had to remove (or 

isolate) the effect of CO2 control technology already being employed on 2008 vehicles. As 

described above, 2008 vehicles exhibit a wide range of control technology and leaving these 

impacts in place would confound the assessment of performance and weight on CO2 emissions. 

Thus, the first step was to estimate each vehicle’s “no technology” CO2 emissions. To do this, 

we used the EPA lumped parameter model (described in the TSD) to estimate the overall 

percentage reduction in CO2 emissions associated with technology already on the vehicle and 

then backed out this effect mathematically. Second, we performed a least-square linear 

regression of these no technology CO2 levels against curb weight and the ratio of rated engine 

horsepower to curb weight simultaneously. The ratio of rated engine horsepower to curb weight 

is a good surrogate for acceleration performance and the data is available for all vehicles, 

whereas the zero to sixty time is not. Both factors were found to be statistically significant at the 

95% confidence level. Together, they explained over 80% of the variability in vehicles’ CO2

emissions for cars and over 70% for trucks. Third, we determined the sales-weighted average 

curb weight per footprint for cars and trucks, respectively, for the fleet as a whole. We also 

determined the sales-weighted average of the ratio of rated engine horsepower to curb weight for 

cars and trucks, respectively, for the fleet as a whole. Fourth, we adjusted each vehicle’s “no 

technology” CO2 emissions to eliminate the degree to which the vehicle had higher or lower 

acceleration performance or curb weight per footprint relative to the car or truck fleet as a whole. 

For example, if a car’s ratio of horsepower to weight was 0.007 and the average ratio for all cars 

was 0.006, then the vehicle’s “no technology” CO2 emission level was reduced by the difference 

between these two values (0.001) times the impact of the ratio of horsepower to weight on car 

CO2 emissions from the above linear regression. Finally, we substituted these performance and 

weight adjusted CO2 emission levels for the original, “no technology” CO2 emission levels 

shown in Figure III.D.6-1. The results are shown in Figure III.D.6-2. 
230 

-10-20-30-40

0

302010

BMWDaimler

Genera Motors l HyundaiMazdaNissanSuba ur Tata Vo kswag l en

) CO2 Emissions (g/mi Car Truck

Figure III.D.6-2 Figure III.D.6-2 CO2 Emission Reduction Required in 2016 From 2008 Vehicles After 1) Removing 

the Benefit of Technology Already Present, and 2) Adjusting for Differences in Weight per 

Footprint, and Performance, Relative to That for the Fleet as a as a Whole
231 

First, note that the scale in Figure III.D.6-2 is much smaller by a factor of 3 than that in 

Figure III.D.6-1. In other words, accounting for differences in vehicle weight (at constant 

footprint) and performance dramatically reduces the variability among the manufacturers’ CO2

emissions. Most of the manufacturers with high positive offsets in Figure III.D.6-1 now show 

low or negative offsets. For example, BMW’s and VW’s trucks show very low CO2 emissions. 

Tata’s emissions are very close to the industry average. Daimler’s vehicles are no more than 10 

g/mi above the average for the industry. This analysis indicates that the primary reasons for the 

differences in technology penetrations shown for the various manufacturers in Table III.D.6-3 

are weight and acceleration performance. EPA has not determined why some manufacturers’ 

vehicle weight is relatively high for its footprint value, or whether this weight provides 

additional utility for the consumer. Performance is more straightforward. Some consumers 

desire high acceleration performance and some manufacturers orient their sales towards these 

consumers. However, the cost in terms of CO2 emissions is clear. Manufacturers producing 

relatively heavy or high performance vehicles presently (with concomitant increases CO2

emissions) will require greater levels of technology in order to meet the final CO2 standards in 

2016. 

 As can be seen from Table III.D.6-3 above, widespread use of several technologies is 

projected due to the final standards. The vast majority of engines are projected to be converted 

to direct injection, with some of these engines including cylinder deactivation or turbocharging 

and downsizing. More than 60 percent of all transmissions are projected to be either 6+ speed 

automatic transmissions or dual-clutch automated manual transmissions. More than one third of 

the fleet is projected to be equipped with 42 volt start-stop capability. This technology was not 

utilized in 2008 vehicles, but as discussed above, promises significant fuel efficiency 

improvement at a moderate cost. 

 In their comments, Porsche stated that their vehicles have twice the power-to-weight ratio 

as the fleet average and that their vehicles presently have a high degree of technology 

penetration, which allows them to meet the 2009 CAFE standards. Porsche also commented that 

the 2016 standards are not feasible for their firm, in part due to the high level of technologies 

already present in their vehicles and due to their “very long production life cycles”. BMW in 

their comments stated that their vehicles are “feature-dense” thus “requiring additional efforts to 

comply” with future standards.206 Ferrari, in their comments, states that the standards are not 

feasible for high-performance sports cars without compromising on their “distinctiveness”. They 

also state that because they already have many technologies on the vehicles, “there are limited 

possibilities for further improvements.” Finally Ferrari states that smaller volume manufacturers 

have higher costs “because they can be distributed over very limited production volumes”, and 

they have longer product lifecycles. The latter view was also shared by Lotus. These comments 

will be addressed below, but are cited here as supporting the conclusions from the above analysis 

that high performance and feature dense vehicles have a greater challenge meeting the 2016 

standards. In general, other manufacturers covering the rest of the fleet and other commenters 

 

206 As a side note, one of the benefits for the off-cycle technology credits allowed in this final rule is the 

opportunity this flexibility provides for some of these ‘feature dense’ vehicles to generate such credits to assist, to 

some extent, in the companies’ ability to comply. 
232 

agreed with EPA’s analysis in the proposal of projected technology usage, and supported the 

view that the 2016 model year standards were feasible in the lead-time provided. 

 In response to the comments above, EPA foresees no significant technical or engineering 

issues with the projected deployment of these technologies across the fleet by MY 2016, with 

their incorporation being folded into the vehicle redesign process (with the exception of some of 

the small volume manufacturers). All of these technologies are commercially available now. 

The automotive industry has already begun to convert its port fuel-injected gasoline engines to 

direct injection. Cylinder deactivation and turbocharging technologies are already commercially 

available. As indicated in Table III.D.6-1, high speed transmissions are already widely used. 

However, while more common in Europe, automated manual transmissions are not currently 

used extensively in the U.S. Widespread use of this technology would require significant capital 

investment but does not present any significant technical or engineering issues. Start-stop 

systems based on a 42-volt architecture also represent a challenge because of the complications 

involved in a changeover to a higher voltage electrical architecture. However, with appropriate 

capital investments (which are captured in the EPA estimated costs), these technology 

penetration rates are achievable within the timeframe of this rule. While most manufacturers 

have some plans for these systems, our projections indicate that their use may exceed 35% of 

sales, with some manufacturers projected to use higher levels. 

 Most manufacturers are not projected to hybridize any vehicles to comply with the final 

standards. The hybrids shown for Toyota are projected to be sold even in the absence of the final 

standards. However the relatively high hybrid penetrations (14-15%) projected for BMW, 

Daimler, Porsche, Tata and Volkswagen deserve further discussion. These manufacturers are all 

projected by the OMEGA model to utilize the maximum application of full hybrids allowed by 

our model in this time frame, which is 15 percent. 

 As discussed in the EPA RIA, a maximum 2016 technology penetration rate of 85% is 

projected for the vast majority of available technologies, however, for full hybrid systems the 

projection shows that given the available lead-time full hybrids can only be applied to 

approximately 15% of a manufacturer’s fleet. This number of course can vary by manufacturer. 

Hybrids are a relatively costly technology option which requires significant changes to a 

vehicle’s powertrain design, and EPA estimates that manufacturers will require a significant 

amount of lead time and capital investment to introduce this technology into the market in very 

large numbers. Thus the EPA captures this significant change in production facilities with a 

lower penetration cap. A more thorough discussion of lead time limitations can be found below 

and in Section III.B.5. 

While the hybridization levels of BMW, Daimler, Porsche, Tata and Volkswagen are 

relatively high, the sales levels of these five manufacturers are relatively low. Thus, industrywide, hybridization reaches only 4 percent, compared with 3 percent in the reference case. This 

4 percent level is believed to be well within the capability of the hybrid component industry by 

2016. Thus, the primary challenge for these five companies would be at the manufacturer level, 

redesigning a relatively large percentage of sales to include hybrid technology. The final 

TLAAS provisions will provide significant needed lead time to these manufacturers for pre-2016 

compliance, since all qualified companies are able to take advantage of these provisions. 
233 

By 2016, it is likely that these manufacturers would also be able to change vehicle 

characteristics which currently cause their vehicles to emit much more CO2 than similar sized 

vehicles produced by other manufacturers. These factors may include changes in model mix, 

further mass reduction, electric and/or plug-in hybrid vehicles as well as technologies that may 

not be included in our packages. Also, companies may have technology penetration rates of less 

costly technologies (listed in the above tables) greater than 85%, and they may also be able to 

apply hybrid technology to more than 15 percent of their fleet (while the 15% cap on the 

application of hybrid technology is reasonable for the industry as a whole, higher percentages are 

certainly possible for individual manufacturers, particularly those with small volumes). For 

example, a switch to a low GWP alternative refrigerant in a large fraction of a fleet can replace 

many other much more costly technologies, but this option is not captured in the modeling. In 

addition, these manufacturers can also take advantage of flexibilities, such as early credits for air 

conditioning and trading with other manufacturers. 

EPA believes it is likely that there will be certain high volume manufacturers that will 

earn a significant amount of early GHG credits starting in 2010 that would expire 5 years later, 

by 2015, unused. It is possible that these manufacturers may be willing to sell these credits to 

manufacturers with whom there is little or no direct competition.207 Furthermore, a large number 

of manufacturers have also stated publicly that they support the 2016 standards. The following 

companies have all submitted letters in support of the national program, including the 2016 MY 

levels discussed above: BMW, Chrysler, Daimler, Ford, GM, Nissan, Honda, Mazda, Toyota, 

and Volkswagen. This supports the view that the emissions reductions needed to achieve the 

standards are technically and economically feasible for all these companies, and that EPA’s 

projection of model year 2016 non-compliance for BMW, Daimler, and Volkswagen is based on 

an inability of our model at this time to fully account for the full flexibilities of the EPA program 

as well as the potentially unique technology approaches or new product offerings which these 

manufactures are likely to employ. 

 In addition, manufacturers do not need to apply technology exactly according to our 

projections. Our projections simply indicate one path which would achieve compliance. Those 

manufacturers whose vehicles are heavier (feature dense) and higher performing than average in 

particular have additional options to facilitate compliance and reduce their technological burden 

closer to the industry average. These options include decreasing the mass of the vehicles and/or 

decreasing the power output of the engines. Finally, EPA allows compliance to be shown 

through the use of emission credits obtained from other manufacturers. Especially for the lower 

volume sales of some manufacturers that could be one component of an effective compliance 

strategy, reducing the technology that needs to be employed on their vehicles. 

 For light-duty cars and trucks, manufacturers have available to them a range of 

technologies that are currently commercially available and can feasibly be employed in their 

vehicles by MY 2016. Our modeling projects widespread use of these technologies as a 

technologically feasible approach to complying with the final standards. Comments from the 

manufactures provided broad support for this conclusion. A limited number of commenters 

 

207 For example, a manufacturer that only sells electric vehicles may very well sell the credits they earn to another 

manufacturer that does not sell any electric vehicles. 
234 

presented specific concerns about their technology opportunities, and EPA has described above 

(and elsewhere in the rule) the paths available for them to comply. 

 In sum, EPA believes that the emissions reductions called for by the final standards are 

technologically feasible, based on projections of widespread use of commercially available 

technology, as well as use by some manufacturers of other technology approaches and 

compliance flexibilities not fully reflected in our modeling. 

 EPA also projected the cost associated with these projections of technology penetration. 

Table III.D.6-4 shows the cost of technology in order for manufacturers to comply with the 2011 

MY CAFE standards, as well as those associated with the final 2016 CO2 emission standards. 

The latter costs are incremental to those associated with the 2011 MY standards and also include 

$60 per vehicle, on average, for the cost of projected use of improved air-conditioning 

systems.208 

Table III.D.6-4 Cost of Technology per Vehicle in 2016 ($2007) 

2011 MY CAFE Standards, 

Relative to 2008 MY 

Final 2016 CO2 Standards, Relative to 

2011 MY CAFE Standards 

 Cars Trucks All Cars Trucks All 

BMW $346 $423 $368 $1,558 $1,195 $1,453 

Chrysler $33 $116 $77 $1,129 $1,501 $1,329 

Daimler $468 $683 $536 $1,536 $931 $1,343 

Ford $73 $161 $106 $1,108 $1,442 $1,231 

General Motors $31 $181 $102 $899 $1,581 $1,219 

Honda $0 $0 $0 $635 $473 $575 

Hyundai $0 $69 $10 $802 $425 $745 

Kia $0 $42 $7 $667 $247 $594 

Mazda $0 $0 $0 $855 $537 $808 

Mitsubishi $328 $246 $295 $817 $1,218 $978 

Nissan $0 $61 $18 $686 $1,119 $810 

Porsche $473 $706 $550 $1,506 $759 $1,257 

Subaru $68 $62 $66 $962 $790 $899 

Suzuki $49 $232 $79 $1,015 $537 $937 

Tata $611 $1,205 $845 $1,181 $680 $984 

Toyota $0 $0 $0 $381 $609 $455 

Volkswagen $228 $482 $272 $1,848 $972 $1,694 

Overall $63 $138 $89 $870 $1,099 $948 

 

208 Note that the actual cost of the A/C technology is estimated at $71 per vehicle as shown in Table III.D.2-3. 

However, we expect only 85 percent of the fleet to add that technology. Therefore, the cost of the technology when 

spread across the entire fleet is $60 per vehicle ($71 x 85% = $60). 
235 

As can be seen, the industry average cost of complying with the 2011 MY CAFE 

standards is quite low, $89 per vehicle. This cost is $11 per vehicle higher than that projected in 

the NPRM. This change is very small and is due to several factors, mainly changes in the 

projected sales of each manufacturer’s specific vehicles, and changes in estimated technology 

costs. Similar to the costs projected in the NPRM, the range of costs across manufacturers is 

quite large. Honda, Mazda and Toyota are projected to face no cost. In contrast, Mitsubishi, 

Porsche, Tata and Volkswagen face costs of at least $272 per vehicle. As described above, three 

of these last four manufacturers (all but Mitsubishi) face high costs to meet even the 2011 MY 

CAFE standards due to either their vehicles’ weight per unit footprint or performance. Porsche 

would have been projected to face lower costs in 2016 if they were not expected to pay CAFE 

fines in 2011. 

 As shown in the last row of Table III.D.6-4, the average cost of technology to meet the 

final 2016 standards for cars and trucks combined relative to the 2011 MY CAFE standards is 

$948 per vehicle. This is $103 lower than that projected in the NPRM, due primarily to lower 

technology cost projections for the final rule compared to the NPRM for certain technologies. 

(See Chapter 1 of the Joint TSD for a detailed description of how our technology costs for the 

final rule differ from those used in the NPRM). As was the case in the NPRM, Table III.D.6-4 

shows that the average cost for cars would be slightly lower than that for trucks. Toyota and 

Honda show projected costs significantly below the average, while BMW, Porsche, Tata and 

Volkswagen show significantly higher costs. On average, the $948 per vehicle cost is 

significant, representing 3.4 percent of the total cost of a new vehicle. However, as discussed 

below, the fuel savings associated with the final standards exceed this cost significantly. In 

general, commenters supported EPA’s cost projections, as discussed in Section II. 

 

 While the CO2 emission compliance modeling using the OMEGA model focused on the 

final 2016 MY standards, the final standards for 2012-2015 are also feasible. As discussed 

above, manufacturers develop their future vehicle designs with several model years in view. 

Generally, the technology estimated above for 2016 MY vehicles represents the technology 

which would be added to those vehicles which are being redesigned in 2012-2015. The final 

CO2 standards for 2012-2016 reduce CO2 emissions at a fairly steady rate. Thus, manufacturers 

which redesign their vehicles at a fairly steady rate will automatically comply with the interim 

standard as they plan for compliance in 2016. 

 Manufacturers which redesign much fewer than 20% of their sales in the early years of 

the final program would face a more difficult challenge, as simply implementing the “2016 MY” 

technology as vehicles are redesigned may not enable compliance in the early years. However, 

even in this case, manufacturers would have several options to enable compliance. One, they 

could utilize the debit carry-forward provisions described above. This may be sufficient alone to 

enable compliance through the 2012-2016 MY time period, if their redesign schedule exceeds 

20% per year prior to 2016. If not, at some point, the manufacturer might need to increase their 

use of technology beyond that projected above in order to generate the credits necessary to 

balance the accrued debits. For most manufacturers representing the vast majority of U.S. sales, 

this would simply mean extending the same technology to a greater percentage of sales. The 

added cost of this in the later years of the program would be balanced by lower costs in the 

earlier years. Two, the manufacture could take advantage of the many optional credit generation 
236 

provisions contained in this final rule, including early-credit generation for model years 2009-

2011, credits for advanced technology vehicles, and credits for the application of technology 

which result in off-cycle GHG reductions. Finally, the manufacturer could buy credits from 

another manufacturer. As indicated above, several manufacturers are projected to require less 

stringent technology than the average. These manufacturers would be in a position to provide 

credits at a reasonable technology cost. Thus, EPA believes the final standards for 2012-2016 

would be feasible. Further discussion of the technical feasibility of the interim year standards, 

including for smaller volume manufacturers can be found in Section III.B, in the discussion on 

the Temporary Leadtime Allowance Alternative Standards. 

7. What Other Fleet-Wide CO2 Levels Were Considered?

Two alternative sets of CO2 standards were considered. One set would reduce CO2

emissions at a rate of 4 percent per year. The second set would reduce CO2 emissions at a rate of 

6 percent per year. The analysis of these standards followed the exact same process as described 

above for the final standards. The only difference was the level of CO2 emission standards. The 

footprint-based standard coefficients of the car and truck curves for these two alternative control 

scenarios were discussed above. The resultant projected CO2 standards in 2016 for each 

manufacturer under these two alternative scenarios and under the final rule are shown in Table 

III.D.7-1. 

Table III.D.7-1 Overall Average CO2 Emission Standards by Manufacturer in 2016 

 4% per Year Final Rule 6% per Year 

BMW 248 244 224 

Chrysler 270 266 245 

Daimler 260 256 236 

Ford 261 257 237 

General Motors 275 271 250 

Honda 248 244 224 

Hyundai 234 231 212 

Kia 239 236 217 

Mazda 232 228 210 

Mitsubishi 244 239 219 

Nissan 250 245 226 

Porsche 237 233 213 

Subaru 238 234 214 

Suzuki 222 218 199 

Tata 263 259 239 

Toyota 249 245 225 

Volkswagen 236 232 213 

Overall 254 250 230 

Tables III.D.7-2 and III.D.7-3 show the technology penetration levels for the 4 percent 

per year and 6 percent per year standards in 2016. 
237 

Table III.D.7-2 Technology Penetration - 4% per Year CO2 Standards in 2016: Cars and Trucks 

Combined 

 GDI 

OHCDEAC Turbo Diesel 

6 Speed 

Auto 

Trans 

Dual 

Clutch 

Trans 

StartStop Hybrid 

Mass 

Reduction 

(%) 

BMW 80% 21% 61% 6% 13% 63% 65% 14% 5%

Chrysler 67% 13% 17% 0% 26% 52% 54% 0% 6%

Daimler * 76% 30% 53% 5% 12% 72% 67% 14% 5%

Ford 77% 18% 16% 0% 25% 58% 59% 0% 5%

General 

Motors 62% 24% 11% 0% 7% 57% 57% 0% 5%

Honda 44% 6% 2% 0% 0% 49% 15% 2% 2%

Hyundai 52% 0% 1% 0% 3% 52% 28% 0% 3%

Kia 37% 0% 1% 0% 0% 57% 0% 0% 2%

Mazda 79% 0% 14% 1% 17% 66% 60% 0% 5%

Mitsubishi 85% 0% 31% 0% 16% 72% 72% 0% 6%

Nissan 69% 7% 11% 0% 2% 64% 61% 1% 6%

Porsche * 83% 15% 62% 8% 5% 45% 62% 15% 4%

Subaru 72% 0% 9% 0% 0% 70% 37% 0% 3%

Suzuki 70% 0% 0% 0% 3% 67% 67% 0% 3%

Tata * 85% 55% 27% 0% 14% 70% 70% 15% 5%

Toyota 15% 7% 0% 0% 13% 30% 7% 12% 1%

Volkswagen * 82% 18% 71% 11% 10% 68% 60% 15% 4%

Overall 56% 13% 14% 1% 11% 53% 41% 4% 4%

Increase over 

2011 CAFE 46% 11% 7% 1% -5% 46% 38% 2% 4%

* These manufacturers were unable to meet the final 2016 standards with the imposed caps on 

technology. 

Table III.D.7-3 Technology Penetration - 6% per Year Alternative Standards in 2016: Cars and 

Trucks Combined 

 GDI 

OHCDEAC Turbo Diesel 

6 Speed 

Auto 

Trans 

Dual 

Clutch 

Trans 

StartStop Hybrid 

Mass 

Reduction 

(%) 

BMW * 80% 21% 61% 6% 13% 63% 65% 14% 5%

Chrysler 85% 13% 50% 0% 3% 82% 83% 2% 8%

Daimler * 76% 30% 53% 5% 12% 72% 67% 14% 5%

Ford* 85% 13% 57% 0% 4% 74% 75% 10% 7%

General 

Motors 85% 25% 43% 0% 2% 83% 83% 2% 8%

Honda 68% 6% 10% 0% 1% 65% 65% 2% 6%

Hyundai 73% 1% 12% 0% 9% 64% 64% 0% 5%

Kia 62% 0% 1% 0% 0% 62% 61% 0% 5%
238 

Mazda 85% 0% 19% 1% 4% 80% 82% 0% 7%

Mitsubishi* 85% 4% 42% 0% 4% 75% 75% 10% 7%

Nissan 85% 8% 38% 0% 0% 78% 81% 4% 8%

Porsche * 83% 15% 62% 8% 5% 45% 62% 15% 4%

Subaru 84% 0% 18% 1% 3% 79% 80% 0% 6%

Suzuki 85% 0% 85% 0% 0% 85% 85% 0% 8%

Tata * 85% 55% 27% 0% 14% 70% 70% 15% 5%

Toyota 71% 7% 5% 0% 20% 49% 47% 12% 4%

Volkswagen * 82% 18% 71% 11% 10% 68% 60% 15% 4%

Overall 79% 12% 33% 1% 7% 69% 69% 6% 6%

Increase over 

2011 CAFE 69% 10% 26% 1% -9% 62% 66% 4% 6%

* These manufacturers were unable to meet the final 2016 standards with the imposed caps on 

technology. 

With respect to the 4 percent per year standards, the levels of requisite control technology 

are lower than those under the final standards, as would be expected. Industry-wide, the largest 

decreases were a 7 percent decrease in use of gasoline direct injection engines, a 4 percent 

decrease in the use of dual clutch transmissions, and a 2 percent decrease in the application of 

start-stop technology. On a manufacturer specific basis, the most significant decreases were a 10 

percent or larger decrease in the use of stop-start technology for Honda, Kia, Mitsubishi and 

Suzuki and a 12 percent drop in turbocharger use for Mitsubishi. These are relatively small 

changes and are due to the fact that the 4 percent per year standards only require 4 g/mi CO2 less 

control than the final standards in 2016. Porsche, Tata and Volkswagen continue to be unable to 

comply with the CO2 standards in 2016, even under the 4 percent per year standard scenario. 

BMW just complied under this scenario, so its costs and technology penetrations are the same as 

under the final standards. 

With respect to the 6 percent per year standards, the levels of requisite control technology 

increased substantially relative to those under the final standards, as again would be expected. 

Industry-wide, the largest increase was a 25 percent increase in the application of start-stop 

technology and 13-17 percent increases in the use of gasoline direct injection engines, 

turbocharging and dual clutch transmissions. On a manufacturer specific basis, the most 

significant increases were a 10 percent increase in hybrid penetration for Ford and Mitsubishi. 

These are more significant changes and are due to the fact that the 6 percent per year standards 

require 20 g/mi CO2 more control than the final standards in 2016. Our projections for BMW, 

Porsche, Tata and Volkswagen continue to show they are unable to comply with the CO2

standards in 2016, so our projections for these manufacturers do not differ relative to the final 

standards, though the amount of short-fall for each firm increases significantly, by an additional 

20 g/mi CO2 per firm. However, Ford and Mitsubishi join this list as can be seen from Figure 

III.D.6-2. The CO2 emissions from Ford's cars are very similar to those of the industry when 

adjusted for technology, weight and performance. However, their trucks emit more than 25% 

more CO2 per mile than the industry average. It is possible that addressing this issue would 

resolve their difficulty in complying with the 6 percent per year scenario. Both Mitsubishi's cars 

and truck emit roughly 10% more than the industry average vehicles after adjusting for 
239 

technology, weight and performance. Again, addressing this issue could resolve their difficulty 

in complying with the 6 percent per year scenario. Five manufacturers are projected to need to 

increase their use of start-stop technology by at least 30 percent. 

Table III.D.7-4 shows the projected cost of the two alternative sets of standards. 

Table III.D.7-4 Technology Cost per Vehicle in 2016 – Alternative Standards ($2007) 

4 Percent per Year Standards, 

relative to 2011 MY CAFE 

standards 

6 Percent per Year Standards, 

relative to 2011 MY CAFE 

standards 

 Cars Trucks All Cars Trucks All 

BMW $1,558 $1,195 $1,453 $1,558 $1,195 $1,453 

Chrysler $1,111 $1,236 $1,178 $1,447 $2,156 $1,827 

Daimler $1,536 $931 $1,343 $1,536 $931 $1,343 

Ford $1,013 $1,358 $1,140 $1,839 $2,090 $1,932 

General Motors $834 $1,501 $1,148 $1,728 $2,030 $1,870 

Honda $598 $411 $529 $894 $891 $893 

Hyundai $769 $202 $684 $1,052 $1,251 $1,082 

Kia $588 $238 $527 $1,132 $247 $979 

Mazda $766 $537 $733 $1,093 $1,083 $1,092 

Mitsubishi $733 $1,164 $906 $1,224 $1,840 $1,471 

Nissan $572 $1,119 $729 $1,151 $1,693 $1,306 

Porsche $1,506 $759 $1,257 $1,506 $759 $1,257 

Subaru $962 $616 $836 $1,173 $1,316 $1,225 

Suzuki $1,015 $179 $879 $1,426 $1,352 $1,414 

Tata $1,181 $680 $984 $1,181 $680 $984 

Toyota $323 $560 $400 $747 $906 $799 

Volkswagen $1,848 $972 $1,694 $1,848 $972 $1,694 

Overall $811 $1,020 $883 $1,296 $1,538 $1,379 

As can be seen, the average cost of the 4 percent per year standards is only $65 per 

vehicle less than that for the final standards. This incremental cost is very similar to that 

projected in the NPRM. In contrast, the average cost of the 6 percent per year standards is over 

$430 per vehicle more than that for the final standards, which is $80 less than that projected in 

the NPRM (again due to lower technology costs). Compliance costs are entering the region of 

non-linearity. The $65 cost savings of the 4 percent per year standards relative to the final rule 

represents $19 per g/mi CO2 increase. The $430 cost increase of the 6 percent per year standards 

relative to the final rule represents a25 per g/mi CO2 increase. More importantly, two additional 

manufacturers, Ford and Mitsubishi, are projected to be unable to comply with the 6% per year 

standards. In addition, under the 6% per year standards, four manufacturers (Chrysler, General 

Motors, Suzuki and Nissan) are within 2 g/mi CO2 of the minimum achievable levels projected 

by EPA’s OMEGA model analysis for 2016. 
240 

 

 EPA does not believe the 4% per year alternative is an appropriate standard for the 

MY2012-2016 time frame. As discussed above, the 250 g/mi final rule is technologically 

feasible in this time frame at reasonable costs, and provides higher GHG emission reductions at a 

modest cost increase over the 4% per year alternative (less than $100 per vehicle). In addition, 

the 4% per year alternative does not result in a harmonized National Program for the country. 

Based on California’s letter of May 18, 2009, the emission standards under this alternative would 

not result in the State of California revising its regulations such that compliance with EPA’s 

GHG standards would be deemed to be in compliance with California’s GHG standards for these 

model years. Thus, the consequence of promulgating a 4% per year standard would be to require 

manufacturers to produce two vehicle fleets: a fleet meeting the 4% per year federal standard, 

and a separate fleet meeting the more stringent California standard for sale in California and the 

section 177 states. This further increases the costs of the 4% per year standard and could lead to 

additional difficulties for the already stressed automotive industry. 

EPA also does not believe the 6% per year alternative is an appropriate standard for the 

MY 2012-2016 time frame. As shown in Tables III.D.7-3 and III.D.7-4, the 6% per year 

alternative represents a significant increase in both the technology required and the overall costs 

compared to the final standards. In absolute percent increases in the technology penetration, 

compared to the final standards the 6% per year alternative requires for the industry as a whole: 

an 18% increase in GDI fuel systems, an 11% increase in turbo-downsize systems, a 6% increase 

in dual-clutch automated manual transmissions (DCT), and a 9% increase in start-stop systems. 

For a number of manufacturers the expected increase in technology is greater: for GM, a 15% 

increase in both DCTs and start-stop systems, for Nissan a 9% increase in full hybrid systems, 

for Ford an 11% increase in full hybrid systems, for Chrysler a 34% increase in both DCT and 

start-stop systems and for Hyundai a 23% increase in the overall penetration of DCT and startstop systems. For the industry as a whole, the per-vehicle cost increase for the 6% per year 

alternative is nearly $500. On average this is a 50% increase in costs compared to the final 

standards. At the same time, CO2 emissions would be reduced by about 8%, compared to the 

250 g/mi target level. 

As noted above, EPA’s OMEGA model predicts that for model year 2016, Ford, 

Mitsubhisi, Mercedes, BMW, Volkswagen, Jaguar-LandRover, and Porsche do not meet their 

target under the 6 percent per year scenario. In addition, Chrysler, General Motors, Suzuki and 

Nissan all are within 2 grams/mi CO2 of maximizing the applicable technology allowed under 

EPA’s OMEGA model – that is, these companies have almost no head-room for compliance. In 

total, these 11 companies represent more than 58 percent of total 2016 projected U.S. light-duty 

vehicle sales. This provides a strong indication that the 6 percent per year standard is much more 

stringent than the final standards, and presents a significant risk of non-compliance for many 

firms, including four of the seven largest firms by U.S. sales. 

These technology and cost increases are significant, given the amount of lead-time 

between now and model years 2012-2016. In order to achieve the levels of technology 

penetration for the final standards, the industry needs to invest significant capital and product 

development resources right away, in particular for the 2012 and 2013 model year, which is only 

2-3 years from now. For the 2014-2016 time frame, significant product development and capital 
241 

investments will need to occur over the next 2-3 year in order to be ready for launching these 

new products for those model years. Thus a major part of the required capital and resource 

investment will need to occur now and over the next few years, under the final standards. EPA 

believes that the final rule (a target of 250 gram/mile in 2016) already requires significant 

investment and product development costs for the industry, focused on the next few years. 

It is important to note, and as discussed later in this preamble, as well as in the Joint 

Technical Support Document and the EPA Regulatory Impact Analysis document, the average 

model year 2016 per-vehicle cost increase of nearly $500 includes an estimate of both the 

increase in capital investments by the auto companies and the suppliers as well as the increase in 

product development costs. These costs can be significant, especially as they must occur over 

the next 2-3 years. Both the domestic and transplant auto firms, as well as the domestic and 

world-wide automotive supplier base, is experiencing one of the most difficult markets in the 

U.S. and internationally that has been seen in the past 30 years. One major impact of the global 

downturn in the automotive industry and certainly in the U.S. is the significant reduction in 

product development engineers and staffs, as well as a tightening of the credit markets which 

allow auto firms and suppliers to make the near-term capital investments necessary to bring new 

technology into production. The 6% per year alternative standard would impose significantly 

increased pressure on capital and other resources, indicating it is too stringent for this time 

frame, given both the relatively limited amount of lead-time between now and model years 2012-

2016, the need for much of these resources over the next few years, as well the current financial 

and related circumstances of the automotive industry. EPA is not concluding that the 6% per 

year alternative standards are technologically infeasible, but EPA believes such standards for this 

time frame would be overly stringent given the significant strain it would place on the resources 

of the industry under current conditions. EPA believes this degree of stringency is not 

warranted at this time. Therefore EPA does not believe the 6% per year alternative would be an 

appropriate balance of various relevant factors for model years 2012-1016. 

Jaguar/Land Rover, in their comments, agreed that the more stringent standards would 

not be economically practicable, and several automotive firms indicated that the proposed 

standards, while feasible, would be overly challenging.209 On the other hand, the Center for 

Biological Diversity (henceforth referred to here as CBD), strongly urged EPA to adopt more 

stringent standards. CBD gives examples of higher standards in other nations to support their 

contention that the standards should be more stringent. CBD also claims that the agencies are 

“setting standards that deliberately delay implementation of technology that is available now” by 

setting lead time for the rule greater than 18 months. CBD also accuses the agencies of 

arbitrarily “adhering to strict five-year manufacturer ‘redesign cycles.’” CBD notes that the 

agencies have stated that all of the “technologies are already available today,” and EPA and 

NHTSA’s assessment is that manufacturers “would be able to meet the proposed standards 

through more widespread use of these technologies across the fleet.” Based on the agencies’ 

previous statements, CBD concludes that the fleet can meet the 250 g/mi target in 2010. EPA 

believes that in all cases, CBD’s analysis for feasibility and necessary lead time is flawed. 

 Other countries’ absolute fleetwide standards are not a reliable or directly relevant 

comparison. The fleet make-up in other nations is quite different than that of the United States. 

 

209 See comments from Toyota, General Motors 
242 

CBD primarily cites the European Union and Japan as examples. Both of these regions have a 

large fraction of small vehicles (with lower average weight, and footprint size) when compared 

to vehicles in the U.S. Also the U.S. has a much greater fraction of light-duty trucks. In 

particular in Europe, there is a much higher fraction of diesel vehicles in the existing fleet, which 

leads to lower CO2 emissions in the baseline fleet as compared to the U.S. This is in large part 

due to the significantly different fuel prices seen in Europe as compared to the U.S. The 

European fleet also has a much higher penetration of manual transmission than the U.S., which 

also results in lower CO2 emissions. Moreover, these countries use different test cycles, which 

bias CO2 emissions relative to the EPA 2 cycle test cycles. When looked at from a technologybasis, with the exception of the existing large penetration of diesels and manual transmissions in 

the European fleet – there is no “magic” in the European and Japanese markets which leads to 

lower fleet-wide CO2 emissions. In fact, from a technology perspective, the standards contained 

in this final rule are premised to a large degree on the same technologies which the European and 

Japanese governments have relied upon to establish their CO2 & fuel economy limits for this 

same time frame and for the fleet mixes in their countries. That is for example, large increases in 

the use of 6+ speed transmissions, automated manual transmissions, gasoline direct injection, 

engine downsizing and turbocharging, and start-stop systems. CBD has not provided any 

detailed analysis of what technologies are available in Europe which EPA is not considering – 

and there are no such “magic” technologies. The vast majority of the differences between the 

current and future CO2 performance of the Japanese and European light-duty vehicle fleets are 

due to differences in the size and current composition of the vehicle fleets in those two regions – 

not because EPA has ignored technologies which are available for application to the U.S. market 

in the 2012-2016 time frame. 

If CBD is advocating a radical reshifting of domestic fleet composition, (such as 

requiring U.S. consumers to purchase much smaller vehicles and requiring U.S. consumers to 

purchase vehicles with manual transmissions), it is sufficient to say that standards forcing such a 

result are not compelled under section 202 (a), where reasonable preservation of consumer 

choice remains a pertinent factor for EPA to consider in balancing the relevant statutory factors. 

See also International Harvester (478 F. 2d at 640 (Administrator required to consider issues of 

basic demand for new passenger vehicles in making technical feasibility and lead time 

determinations). Thus EPA believes that the standard is at the proper level of stringency for the 

projected domestic fleet in the 2012-2016 model years taking into account the wide variety of 

consumer choice that is reflected in this projection of the domestic fleet. 

As mentioned earlier (in III.D.4), CBD’s comments on available lead time also are 

inaccurate. Under section 202 (a), standards are to take effect only “after providing such period 

as the Administrator finds necessary to permit the development and application of the requisite 

technology, giving appropriate consideration to the cost of compliance within such period.” 

Having sufficient lead time includes among other things, the time required to certify vehicles. 

For example, model year 2012 vehicles will be tested and certified for the EPA within a short 

time after the rule is finalized, and this can start as early as calendar year 2010, for MY 2012 

vehicles that can be produced in calendar year 2011. In addition, these 2012 MY vehicles have 

already been fully designed, with prototypes built several years earlier. It takes several years to 

redesign a vehicle, and several more to design an entirely new vehicle not based on an existing 

platform. Thus, redesign cycles are an inextricable component of adequate lead time under the 
243 

Act. A full line manufacturer only has limited staffing and financial resources to redesign 

vehicles, therefore the redesigns are staggered throughout a multi-year period to optimize human 

capital.210 Furthermore, redesigns require a significant outlay of capital from the manufacturer. 

This includes research and development, material and equipment purchasing, overhead, benefits, 

etc. These costs are significant and are included in the cost estimates for the technologies in this 

rule. Because of the manpower and financial capital constraints, it would only be possible to 

redesign all the vehicles across a manufacturer’s line simultaneously if the manufacturer has 

access to tremendous amounts of ready capital and an unrealistically large engineering staff– 

However no major automotive firm in the world has the capability to undertake such an effort, 

and it is unlikely that the supplier basis could support such an effort if it was required by all 

major automotive firms. Even if this unlikely condition were possible, the large engineering 

staff would then have to be downsized or work on the next redesign of the entire line another few 

years later. This would have the effect of increasing the cost of the vehicles. 

There is much evidence to indicate that the average redesign cycle in the industry is about 

5 years.211 There are some manufacturers who have longer cycles (such as smaller 

manufacturers described above), and there are others who have shorter cycles for some of their 

products. EPA believes that there are no full line manufacturers who can maintain significant 

redesigns of vehicles (with relative large sales) in 1 or 2 years, and CBD has provided no 

evidence indicating this is technically feasible. A complete redesign of the entire U.S. light-duty 

fleet by model year 2012 is clearly infeasible, and EPA believes that several model years 

additional lead time is necessary in order for the manufacturers to meet the standards. The 

graduated increase in the stringency of the standards from MYs 2012 through 2016 accounts for 

this needed lead time. 

 There are other reasons that the fleet cannot meet the 250g/mi CO2 target in 2012 (much 

less in 2010). The commenter reasons that if technology is in use now – even if limited use—it 

can be utilized across the fleet nearly immediately. This is not the case. An immediate demand 

from original equipment manufacturers (OEMs) to supply 100% of the fleet with these 

technologies in 2012 would cause their suppliers to encounter the same lead time issues 

discussed above. Suppliers have limited capacity to change their current production over to the 

newer technologies quickly. Part of this reason is due to engineering, cost and manpower 

constraints as described above, but additionally, the suppliers face an issue of “stranded capital”. 

This is when the basic tooling and machines that produce the technologies in question need to be 

replaced. If these tools and machines are replaced before they near the end of their useful life, 

the suppliers are left with “stranded capital” i.e., a significant financial loss because they are 

replacing perfectly good equipment with newer equipment. This situation can also occur for the 

OEMs. In an extreme example, a plant that switches over from building port fuel injected 

gasoline engines to building batteries and motors, will require a nearly complete retooling of the 

plant. In a less extreme example, a plant that builds that same engine and switches over to 

suddenly building smaller turbocharged direct injection engines with starter alternators might 

have significant retooling costs as well as stranded capital. Finally, it takes a significant amount 

 

210 See for example “How Automakers Plan Their Products”, Center for Automotive Research, July 2007. 211 See for example “Car Wars 2009-2012, The U.S. automotive product pipeline”, John Murphy, Research Analyst, 

Merrill Lynch research paper , May 14, 2008 and “Car Wars 2010-2013, The U.S. automotive product pipeline”, 

John Murphy, Research Analyst, Bank of America/Merrill Lynch research paper, July 15, 2009. 
244 

of time to retool a factory and smoothly validate the tooling and processes to mass produce a 

replacement technology. This is why most manufacturers do this process over time, replacing 

equipment as they wear out. CBD has not accounted for any of these considerations. EPA 

believes that attempting to force the types of massive technology penetration needed in the early 

model years of the standard to achieve the 2016 standards would be physically and cost 

prohibitive. 

A number of automotive firms and associations (including the Alliance of Automobile 

Manufacturers, Mercedes, and Toyota) commented that the standards during the early model 

years, in particular MY2012, are too stringent, and that a more linear phase-in of the standards 

beginning with the MY2011 CAFE standards and ending with the 250 gram/mi proposed EPA 

projected fleet-wide level in MY2016 is more appropriate. In the May 19, 2009 Joint Notice of 

Intent, EPA and NHTSA stated that the standards would have “... a generally linear phase-in 

from MY 2012 through to model year 2016.” (74 FR 24008). The Alliance of Automobile 

Manufacturers stated that the phase-in of the standards is not linear, and they proposed a 

methodology for the CAFE standards to be a linear progression from MY2011 to MY2016. The 

California Air Resources Board commented that the proposed level of stringency, including the 

EPA proposed standards for MY2012-2015, were appropriate and urged EPA to finalize the 

standards as proposed and not reduce the stringency in the early model years as this would result 

in a large loss of the GHG reductions from the National Program. EPA agrees with the 

comments from CARB, and we have not reduced the stringency of the program for the early 

model years. While some automotive firms indicated a desire to see a linear transition from the 

Model Year 2011 CAFE standards, our technology and cost analysis indicates that our standards 

are appropriate for these interim years. As shown in Section III.H of this final rule, the final 

standards result in significant GHG reductions, including the reductions from MY2012-2015, 

and at reasonable costs, providing appropriate lead time. The automotive industry commenters 

did not point to a specific technical issue with the standards, but rather their desire for a linear 

phase-in from the existing 2011 CAFE standards. 

In summary, the EPA believes that the MY2012-2016 standards finalized are feasible and 

that there are compelling reasons not to adopt more stringent standards, based on a reasonable 

weighing of the statutory factors, including available technology, its cost, and the lead time 

necessary to permit its development and application.. For further discussion of these issues, see 

Chapter 4 of the RIA as well as the response to comments. 

E. Certification, Compliance, and Enforcement 

 1. Compliance Program Overview

This section describes EPA's comprehensive program to ensure compliance with 

emission standards for carbon dioxide (CO2), nitrous oxide (N2O), and methane (CH4), as 

described in Section III.B. An effective compliance program is essential to achieving the 

environmental and public health benefits promised by these mobile source GHG standards. 

EPA's GHG compliance program is designed around two overarching priorities: 1) to address 

Clean Air Act (CAA) requirements and policy objectives; and 2) to streamline the compliance 

process for both manufacturers and EPA by building on existing practice wherever possible, and 

by structuring the program such that manufacturers can use a single data set to satisfy both the 
245 

new GHG and Corporate Average Fuel Economy (CAFE) testing and reporting requirements. 

The EPA and NHTSA programs recognize, and replicate as closely as possible, the compliance 

protocols associated with the existing CAA Tier 2 vehicle emission standards, and with CAFE 

standards. The certification, testing, reporting, and associated compliance activities closely track 

current practices and are thus familiar to manufacturers. EPA already oversees testing, collects 

and processes test data, and performs calculations to determine compliance with both CAFE and 

CAA standards. Under this coordinated approach, the compliance mechanisms for both 

programs are consistent and non-duplicative. 

 Vehicle emission standards established under the CAA apply throughout a vehicle's full 

useful life. Today’s rule establishes fleet average greenhouse gas standards where compliance 

with the fleet average is determined based on the testing performed at time of production, as with 

the current CAFE fleet average. EPA is also establishing in-use standards that apply throughout 

a vehicle’s useful life, with the in-use standard determined by adding an adjustment factor to the 

emission results used to calculate the fleet average. EPA’s program will thus not only assess 

compliance with the fleet average standards described in Section III.B, but will also assess 

compliance with the in-use standards. As it does now, EPA will use a variety of compliance 

mechanisms to conduct these assessments, including pre-production certification and postproduction, in-use monitoring once vehicles enter customer service. Specifically, EPA is 

establishing a compliance program for the fleet average that utilizes CAFE program protocols 

with respect to testing, a certification procedure that operates in conjunction with the existing 

CAA Tier 2 certification procedures, and an assessment of compliance with the in-use standards 

concurrent with existing EPA and manufacturer Tier 2 emission compliance testing programs. 

Under this compliance program manufacturers will also be afforded numerous flexibilities to 

help achieve compliance, both stemming from the program design itself in the form of a 

manufacturer-specific CO2 fleet average standard, as well as in various credit banking and 

trading opportunities, as described in Section III.C. EPA received broad comment from 

regulated industry and from the public interest community supporting this overall compliance 

program structure. The compliance program is outlined in further detail below. 

2. Compliance with Fleet-Average CO2 Standards 

 Fleet average emission levels can only be determined when a complete fleet profile 

becomes available at the close of the model year. Therefore, EPA will determine compliance 

with the fleet average CO2 standards when the model year closes out, as is currently the protocol 

under EPA’s Tier 2 program as well as under the current CAFE program. The compliance 

determination will be based on actual production figures for each model and on model-level 

emissions data collected through testing over the course of the model year. Manufacturers will 

submit this information to EPA in an end-of-year report which is discussed in detail in Section 

III.E.5.h below. 

 Manufacturers currently conduct their CAFE testing over an entire model year to 

maximize efficient use of testing and engineering resources. Manufacturers submit their CAFE 

test results to EPA and EPA conducts confirmatory fuel economy testing at its laboratory on a 

subset of these vehicles under EPA's Part 600 regulations. EPA’s proposal to extend this 

approach to the GHG program received overwhelming support from vehicle manufacturers. EPA 
246 

is finalizing GHG requirements under which manufacturers will continue to perform the model 

level testing currently required for CAFE fuel economy performance and measure and report the 

CO2 values for all tests conducted.212 Manufacturers will submit one data set in satisfaction of 

both CAFE and GHG requirements such that EPA’s program will not impose additional timing 

or testing requirements on manufacturers beyond that required by the CAFE program. For 

example, manufacturers currently submit fuel economy test results at the subconfiguration and 

configuration levels to satisfy CAFE requirements. Now manufacturers will also submit CO2

values for the same vehicles. Section III.E.3 discusses how this will be implemented in the 

certification process. 

 a. Compliance Determinations 

 As described in Section III.B above, the fleet average standards will be determined on a 

manufacturer by manufacturer basis, separately for cars and trucks, using the footprint attribute 

curves. EPA will calculate the fleet average emission level using actual production figures and, 

for each model type, CO2 emission test values generated at the time of a manufacturer's CAFE 

testing. EPA will then compare the actual fleet average to the manufacturer's footprint standard 

to determine compliance, taking into consideration use of averaging and credits. 

 Final determination of compliance with fleet average CO2 standards may not occur until 

several years after the close of the model year due to the flexibilities of carry-forward and carryback credits and the remediation of deficits (see Section III.C). A failure to meet the fleet 

average standard after credit opportunities have been exhausted could ultimately result in 

penalties and injunctive orders under the CAA as described in Section III.E.6 below. 

 EPA received considerable comment about the need for transparency in its 

implementation of the greenhouse gas program and specifically about the need for public access 

to information about Agency compliance determinations. Many comments emphasized the 

importance of making greenhouse gas compliance information publicly available to ensure such 

transparency. EPA also received comment from industry about the need to protect confidential 

business information. Both transparency and protection of confidential information are 

longstanding EPA practices, and both will remain priorities in EPA’s implementation of the 

greenhouse gas program. EPA periodically provides mobile source emissions and fuel economy 

information to the public, for example through the annual Compliance Report213 and Fuel 

Economy Trends Report.214 As proposed, EPA plans to expand these reports to include GHG 

performance and compliance trends information, such as annual status of credit balances or 

debits, use of various credit programs, attained fleet average emission levels compared with 

 

212 As discussed in Section III.B.1, vehicle and fleet average compliance will be based on a combination of CO2, 

HC, and CO emissions. This is consistent with the carbon balance methodology used to determine fuel consumption 

for the labeling and CAFE programs. The final regulations account for these total carbon emissions appropriately 

and refer to the sum of these emissions as the “carbon-related exhaust emissions” (CREE). Although regulatory text 

uses the more accurate term “CREE” to represent the CO2 – equivalent sum of carbon emissions, the term CO2 is 

used as shorthand throughout Section III.E as a more familiar term for most readers. 

213 2007 Progress Report Vehicle and Engine Compliance Activities; EPA-420-R-08-011; October 2008. This 

document is available electronically at http://www.epa.gov/otaq/about/420r08011.pdf 

214 Light-Duty Automotive Technology and Fuel-Economy Trends: 1975 Through 2008; EPA-420-S-08-003; 

September 2008. This document is available electronically at http://www.epa.gov/otaq/fetrends.htm 
247 

standards, and final compliance status for a model year after credit reconciliation occurs. EPA 

intends to regularly disseminate non-confidential, model-level and fleet information for each 

manufacturer after the close of the model year. EPA will reassess data release needs and 

opportunities once the program is underway. 

 Beyond transparency in reporting emissions data and compliance status, EPA is 

concerned, as a matter of principle moving into a new era of greenhouse gas control, that 

greenhouse gas reductions reported for purposes of compliance with the standards adopted in this 

rule will be reflected in the real world and not just as calculated fleet average emission levels or 

measured certification test results. Therefore EPA will pay close attention to technical details 

behind manufacturer reports. For example, EPA intends to look closely at each manufacturer’s 

certification testing procedures, GHG calculation procedures, and laboratory correlation with 

EPA’s laboratory, and to carefully review manufacturer pre-production, production, and in-use 

testing programs. In addition, EPA plans to monitor GHG performance through its own in-use 

surveillance program in the coming years. This will ensure that the environmental benefits of the 

rule are achieved as well as ensure a level playing field for all. 

b. Required Minimum Testing For Fleet Average CO2 

 EPA received no public comment on provisions that would extend current CAFE testing 

requirements and flexibilities to the GHG program, and is finalizing as proposed minimum 

testing requirements for fleet average CO2 determination. EPA will require and use the same test 

data to determine a manufacturer’s compliance with both the CAFE standard and the fleet 

average CO2 emissions standard. CAFE requires manufacturers to submit test data representing 

at least 90% of the manufacturer's model year production, by configuration.215 The CAFE 

testing covers the vast majority of models in a manufacturer’s fleet. Manufacturers industrywide currently test more than 1,000 vehicles each year to meet this requirement. EPA believes 

this minimum testing requirement is necessary and applicable for calculating accurate CO2 fleet 

average emissions. Manufacturers may test additional vehicles, at their option. As described 

above, EPA will use the emissions results from the model-level testing to calculate a 

manufacturer's fleet average CO2 emissions and to determine compliance with the CO2 fleet 

average standard. 

 EPA will continue to allow certain testing flexibilities that exist under the CAFE 

program. EPA has always permitted manufacturers some ability to reduce their test burden in 

tradeoff for lower fuel economy numbers. Specifically the practice of “data substitution” enables 

manufacturers to apply fuel economy test values from a “worst case” configuration to other 

configurations in lieu of testing them. The substituted values may only be applied to 

configurations that would be expected to have better fuel economy and for which no actual test 

data exist. EPA will continue to accept use of substituted data in the GHG program, but only 

when the substituted data are also used for CAFE purposes. 

 EPA's regulations for CAFE fuel economy testing permit the use of analytically derived 

fuel economy data in lieu of actual fuel economy testing in certain situations.216 Analytically 

 

215 See 40 CFR 600.010-08(d). 216 40 CFR 600.006-08(e) 
248 

derived data are generated mathematically using expressions determined by EPA and are allowed 

on a limited basis when a manufacturer has not tested a specific vehicle configuration. This has 

been done as a way to reduce some of the testing burden on manufacturers without sacrificing 

accuracy in fuel economy measurement. EPA has issued guidance that provides details on 

analytically derived data and that specifies the conditions when analytically derived fuel 

economy may be used. EPA will apply the same guidance to the GHG program and will allow 

any analytically derived data used for CAFE to also satisfy the GHG data reporting 

requirements. EPA will revise the terms in the current equations for analytically derived fuel 

economy to specify them in terms of CO2. Analytically derived CO2 data will not be permitted 

for the Emission Data Vehicle representing a test group for pre-production certification, only for 

the determination of the model level test results used to determine actual fleet-average CO2

levels. 

 EPA is retaining the definitions needed to determine CO2 levels of each model type (such 

as "subconfiguration," "configuration," "base level," etc.) as they are currently defined in EPA's 

fuel economy regulations. 

 3. Vehicle Certification

CAA section 203(a)(1) prohibits manufacturers from introducing a new motor vehicle 

into commerce unless the vehicle is covered by an EPA-issued certificate of conformity. Section 

206(a)(1) of the CAA describes the requirements for EPA issuance of a certificate of conformity, 

based on a demonstration of compliance with the emission standards established by EPA under 

section 202 of the Act. The certification demonstration requires emission testing, and must be 

done for each model year.217 

Under Tier 2 and other EPA emission standard programs, vehicle manufacturers certify a 

group of vehicles called a test group. A test group typically includes multiple vehicle car lines 

and model types that share critical emissions-related features.218 The manufacturer generally 

selects and tests one vehicle to represent the entire test group for certification purposes. The test 

vehicle is the one expected to be the worst case for the emission standard at issue. Emission 

results from the test vehicle are used to assign the test group to one of several specified bins of 

emissions levels, identified in the Tier 2 rule, and this bin level becomes the in-use emissions 

standard for that test group.219 

Since compliance with the Tier 2 fleet average depends on actual test group sales 

volumes and bin levels, it is not possible to determine compliance with the fleet average at the 

time the manufacturer applies for and receives a certificate of conformity for a test group. 

Instead, EPA requires the manufacturer to make a good faith demonstration in the certification 

application that vehicles in the test group will both 1) comply throughout their useful life with 

 

217 CAA section 206(a)(1). 218 The specific test group criteria are described in 40 CFR 86.1827-01, car lines and model types have the meaning 

given in 40 CFR 86.1803-01. 

219 Initially in-use standards were different from the bin level determined at certification as the useful life level. The 

current in-use standards, however, are the same as the bin levels. In all cases, the bin level, reflecting useful life 

levels, has been used for determining compliance with the fleet average. 
249 

the emissions bin assigned, and 2) contribute to fleet-wide compliance with the Tier 2 average 

when the year is over. EPA issues a certificate for the vehicles included in the test group based 

on this demonstration, and includes a condition in the certificate that if the manufacturer does not 

comply with the fleet average, then production vehicles from that test group will be treated as not 

covered by the certificate to the extent needed to bring the manufacturer’s fleet average into 

compliance with Tier 2. 

The certification process often occurs several months prior to production and 

manufacturer testing may occur months before the certificate is issued. The certification process 

for the Tier 2 program is an efficient way for manufacturers to conduct the needed testing well in 

advance of certification, and to receive the needed certificates in a time frame which allows for 

the orderly production of vehicles. The use of a condition on the certificate has been an effective 

way to ensure compliance with the Tier 2 fleet average. 

 EPA will similarly condition each certificate of conformity for the GHG program upon a 

manufacturer's demonstration of compliance with the manufacturer’s fleet-wide average CO2

standard. The following discussion explains how EPA will integrate the new GHG vehicle 

certification program into the existing certification program. 

a. Compliance Plans 

 In an effort to expedite the Tier 2 program certification process and facilitate early 

resolution of any compliance related concerns, EPA conducts annual reviews of each 

manufacturer’s certification, in-use compliance and fuel economy plans for upcoming model 

year vehicles. EPA meets with each manufacturer individually, typically before the manufacturer 

begins to submit applications for certification for the new model year. Discussion topics include 

compliance plans for the upcoming model year, any new product offerings/new technologies, 

certification and/or testing issues, phase-in and/or ABT plans, and a projection of potential EPA 

confirmatory test vehicles. EPA has been conducting these compliance preview meetings for 

more than 10 years and has found them to be very useful for both EPA and manufacturers. 

Besides helping to expedite the certification process, certification preview meetings provide an 

opportunity to resolve potential issues before the process begins. The meetings give EPA an 

early opportunity to assess a manufacturer’s compliance strategy, which in turn enables EPA to 

address any potential concerns before plans are finalized. The early interaction reduces the 

likelihood of unforeseen issues occurring during the actual certification of a test group which can 

result in the delay or even termination of the certification process. 

For the reasons discussed above, along with additional factors, EPA believes it is 

appropriate for manufacturers to include their GHG compliance plan information as part of the 

new model year compliance preview process. This requirement is both consistent with existing 

practice under Tier 2 and very similar to the pre-model year report required under existing and 

new CAFE regulation. Furthermore, in light of the production weighted fleet average program 

design in which the final compliance determination cannot be made until after the end of the 

model year, EPA believes it is especially important for manufacturers to demonstrate that they 

have a credible compliance plan prior to the beginning of certification. 
250 

Several commenters raised concerns about EPA’s proposal for requiring manufacturers to 

submit GHG compliance plans. AIAM stated that EPA did not identify a clear purpose for the 

review of the plans, criteria for evaluating the plans, or consequences if EPA found the plans to 

be unacceptable. AIAM also expressed concern over the appropriateness of requiring 

manufacturers to prepare regulatory compliance plans in advance, since vicissitudes of the 

market and other factors beyond a manufacturer’s direct control may change over the course of 

the year and affect the model year outcome. Finally, AIAM commented that EPA should not 

attempt to take any enforcement action based on an asserted inadequacy of a plan. They felt that 

compliance should be determined only after the end of a model year and the subsequent credit 

earning period. The Alliance commented that there was an inconsistency between the proposed 

preamble language and the regulatory language in 600.514-12(a)(2)(i). The preamble language 

indicated that the compliance report should be submitted prior to the beginning of the model year 

and prior to the certification of any test group, while the regulatory language stated that the premodel year report must be submitted during the month of December. The Alliance pointed out 

that if EPA wanted GHG compliance plan information before the certification of any test groups, 

the regulatory language would need to be corrected. 

EPA understands that a manufacturer’s plan may change over the course of a model year 

and that compliance information manufacturers present prior to the beginning of a new model 

year may not represent their final compliance outcome. Rather, EPA views the compliance plan 

as a manufacturer’s good-faith projection of strategy for achieving compliance with the 

greenhouse gas standard. It is not EPA’s intent to base compliance action solely on differences 

between projections in the compliance plan and end of year results. EPA understands that 

compliance with the GHG program will be determined at the end of the model year after all 

appropriate credits have been taken into consideration. 

As stated earlier, a requirement to include GHG compliance information in the new 

model year compliance preview meetings is consistent with long standing EPA policy. The 

information will provide EPA with an early overview of the manufacturer’s GHG compliance 

plan and allow EPA to make an early assessment as to possible issues, questions, or concerns 

with the program in order to expedite the certification process and help manufacturers better 

understand overall compliance provisions of the GHG program. Therefore, EPA is finalizing 

revisions to 40 CFR 600.514-12 which will require manufacturers to submit a compliance plan to 

EPA prior to the beginning of the model year and prior to the certification of any test group. The 

compliance plan must, at a minimum, include a manufacturer’s projected footprint profile, 

projected total and model-level production volumes, projected fleet average and model-level CO2

emission values, projected fleet average CO2 standards and projected fleet average CO2 credit 

status. In addition, EPA will expect the compliance plan to explain the various credit, transfer 

and trading options that will be used to comply with the standard, including the amount of credit 

the manufacturer intends to generate for air conditioning leakage, air conditioning efficiency, 

off-cycle technology, and various early credit programs. The compliance plan should also 

indicate how and when any deficits will be paid off through accrual of future credits. 

EPA has corrected the inconsistency between the proposed preamble and regulatory 

language with respect to when the compliance report must be submitted and what level of 

information detail it must contain. EPA is finalizing revisions to 40 CFR 600.514-12 which 
251 

require the compliance plan to be submitted to EPA prior to the beginning of the model year and 

prior to the certification of any test group. Today’s action will also finalize simplified reporting 

requirements as discussed above. 

 

b. Certification Test Groups and Test Vehicle Selection 

Manufacturers currently divide their fleet into "test groups" for certification purposes. 

The test group is EPA's unit of certification; one certificate is issued per test group. These 

groupings cover vehicles with similar emission control system designs expected to have similar 

emissions performance.220 The factors considered for determining test groups include 

combustion cycle, engine type, engine displacement, number of cylinders and cylinder 

arrangement, fuel type, fuel metering system, catalyst construction and precious metal 

composition, among others. Vehicles having these features in common are generally placed in 

the same test group.221 Cars and trucks may be included in the same test group as long as they 

have similar emissions performance (manufacturers frequently produce cars and trucks that have 

identical engine designs and emission controls). 

 

 EPA recognizes that the Tier 2 test group criteria do not necessarily relate to CO2

emission levels. For instance, while some of the criteria, such as combustion cycle, engine type 

and displacement, and fuel metering, may have a relationship to CO2 emissions, others, such as 

those pertaining to the catalyst, may not. In fact, there are many vehicle design factors that affect 

CO2 generation and emissions but are not included in EPA's test group criteria.222 Most 

important among these may be vehicle weight, horsepower, aerodynamics, vehicle size, and 

performance features. 

 As described in the proposal, EPA considered but did not propose a requirement for 

separate CO2 test groups established around criteria more directly related to CO2 emissions. 

Although CO2-specific test groups might more consistently predict CO2 emissions of all vehicles 

in the test group, the addition of a CO2 test group requirement would greatly increase the preproduction certification burden for both manufacturers and EPA. For example, a current Tier 2 

test group would need to be split into two groups if automatic and manual transmissions models 

had been included in the same group. Two- and four-wheel drive vehicles in a current test group 

would similarly require separation, as would weight differences among vehicles. This would at 

least triple the number of test groups. EPA believes that the added burden of creating separate 

CO2 test groups is not warranted or necessary to maintain an appropriately rigorous certification 

program because the test group data are later replaced by model specific data which are used as 

the basis for determining compliance with a manufacturer’s fleet average standard. 

For these reasons, EPA will retain the current Tier 2 test group structure for cars and light 

trucks in the certification requirements for CO2. EPA believes that the current test group concept 

is also appropriate for N20 and CH4 because the technologies that are employed to control N2O 

 

220 40 CFR 86.1827-01. 221 EPA provides for other groupings in certain circumstances, and can establish its own test groups in cases where 

the criteria do not apply. 40 CFR 86.1827-01(b), (c) and (d). 

222 EPA noted this potential lack of connection between fuel economy testing and testing for emissions standard 

purposes when it first adopted fuel economy test procedures. See 41 FR at 38677 (Sept. 10, 1976). 
252 

and CH4 emissions will generally be the same as those used to control the criteria pollutants. 

Vehicle manufacturers agreed with this assessment and universally supported the use of current 

Tier 2 test groups in lieu of developing separate CO2 test groups. 

At the time of certification, manufacturers may use the CO2 emission level from the Tier 

2 Emission Data Vehicle as a surrogate to represent all of the models in the test group. However, 

following certification further testing will generally be required for compliance with the fleet 

average CO2 standard as described below. EPA's issuance of a certificate will be conditioned 

upon the manufacturer's subsequent model level testing and attainment of the actual fleet 

average. Further discussion of these requirements is presented in Section III.E.6. 

As just discussed, the “worst case” Emissions Data Vehicle selected to represent a test 

group under Tier 2 (40 CFR 86.1828-01) may not have the highest levels of CO2 in that group. 

For instance, there may be a heavier, more powerful configuration that emits higher CO2, but 

may, due to the way the catalytic converter has been matched to the engine, actually have lower 

NOX, CO, PM or HC. 

 Therefore, in lieu of a separate CO2 -specific test group, EPA considered requiring 

manufacturers to select a CO2 test vehicle from within the Tier 2 test group that would be 

expected, based on good engineering judgment, to have the highest CO2 emissions within that 

test group. The CO2 emissions results from this vehicle would be used to establish an in-use CO2

emission standard for the test group. The requirement for a separate, worst case CO2 vehicle 

would provide EPA with some assurance that all vehicles within the test group would have CO2

emission levels at or below those of the selected vehicle, even if there is some variation in the 

CO2 control strategies within the test group (such as different transmission types). Under this 

approach, the test vehicle might or might not be the same one that would be selected as worst 

case for criteria pollutants. Vehicle manufacturers expressed concern with this approach as well, 

and EPA ultimately rejected this approach because it could have required manufacturers to test 

two vehicles in each test group, rather than a single vehicle. This would represent an added 

timing burden to manufacturers because they might need to build additional test vehicles at the 

time of certification that previously weren't required to be tested. 

 Instead, EPA proposed and will adopt provisions that allow a single Emission Data 

Vehicle to represent the test group for both Tier 2 and CO2 certification. The manufacturer will 

be allowed to initially apply the Emission Data Vehicle’s CO2 emissions value to all models in 

the test group, even if other models in the test group are expected to have higher CO2 emissions. 

However, as a condition of the certificate, this surrogate CO2 emissions value will generally be 

replaced with actual, model-level CO2 values based on results from CAFE testing that occurs 

later in the model year. This model level data will become the official certification test results (as 

per the conditioned certificate) and will be used to determine compliance with the fleet average. 

Only if the test vehicle is in fact the worst case CO2 vehicle for the test group could the 

manufacturer elect to apply the Emission Data Vehicle emission levels to all models in the test 

group for purposes of calculating fleet average emissions. Manufacturers would be unlikely to 

make this choice, because doing so would ignore the emissions performance of vehicle models in 

their fleet with lower CO2 emissions and would unnecessarily inflate their CO2 fleet average. 

Testing at the model level already occurs and data is already being submitted to EPA for CAFE 
253 

and labeling purposes, so it would be an unusual situation that would cause a manufacturer to 

ignore these data and choose to accept a higher CO2 fleet average. 

 

 Manufacturers will be subject to two standards, the fleet average standard and the in-use 

standard for the useful life of the vehicle. Compliance with the fleet average standard is based 

on production-weighted averaging of the test data applied to each model. For each model, the inuse standard will generally be set at 10% higher than the level used for that model in calculating 

the fleet average (see Section III.E.4).223 The certificate will cover both of these standards, and 

the manufacturer will have to demonstrate compliance with both of these standards for purposes 

of receiving a certificate of conformity. The certification process for the in-use standard is 

discussed below in Section III.E.4. 

 

 c. Certification Testing Protocols and Procedures 

To be consistent with CAFE, EPA will combine the CO2 emissions results from the FTP 

and HFET tests using the same calculation method used to determine fuel economy for CAFE 

purposes. This approach is appropriate for CO2 because CO2 and fuel economy are so closely 

related. Other than the fact that fuel economy is calculated using a harmonic average and CO2

emissions can be calculated using a conventional average, the calculation methods are very 

similar. The FTP CO2 data will be weighted at 55%, and the highway CO2 data at 45%, and then 

averaged to determine the combined number. See Section III.B.1 for more detailed information 

on CO2 test procedures, Section III.C.1 on Air Conditioning Emissions, and Section III.B.7 for 

N2O and CH4 test procedures. 

For the purposes of compliance with the fleet average and in-use standards, the emissions 

measured from each test vehicle will include hydrocarbons (HC) and carbon monoxide (CO), in 

addition to CO2. All three of these exhaust constituents are currently measured and used to 

determine the amount of fuel burned over a given test cycle using a “carbon balance equation” 

defined in the regulations, and thus measurement of these is an integral part of current fuel 

economy testing. As explained in Section III.C, it is important to account for the total carbon 

content of the fuel. Therefore the carbon-related combustion products HC and CO must be 

included in the calculations along with CO2, and any other carbon-containing exhaust 

components such as aldehyde emissions from alcohol-fueled vehicles. CO emissions are 

adjusted by a coefficient that reflects the carbon weight fraction (CWF) of the CO molecule, and 

HC emissions are adjusted by a coefficient that reflects the CWF of the fuel being burned (the 

molecular weight approach doesn’t work since there are many different hydrocarbons 

compounds being accounted for). Thus, EPA will calculate the carbon-related exhaust 

emissions, also known as “CREE,” of each test vehicle according to the following formula, 

where HC, CO, and CO2 are in units of grams per mile: 

carbon-related exhaust emissions (grams/mile) = CWF*HC + 1.571*CO + CO2 

where: CWF = the carbon weight fraction of the test fuel 

 

 

223 In cases where configuration or sub-configuration level data exist, the in-use standard will be set at 10% higher 

than those emissions test results. See Section III.E.4 
254 

As part of the current CAFE and Tier 2 compliance programs, EPA selects a subset of 

vehicles for confirmatory testing at its National Vehicle and Fuel Emissions Laboratory. The 

purpose of confirmatory testing is to validate the manufacturer’s emissions and/or fuel economy 

data. Under this rule, EPA will add CO2, N2O, and CH4 to the emissions measured in the course 

of Tier 2 and CAFE confirmatory testing. The N2O and methane measurement requirements will 

begin for model year 2015, when requirements for manufacturer measurement to comply with 

the standard also take effect. The emission values measured at the EPA laboratory will continue 

to stand as official, as under existing regulatory programs. 

Under current practice, if during EPA’s confirmatory fuel economy testing, the EPA fuel 

economy value differs from the manufacturer's value by more than 3%, manufacturers can 

request a re-test. Results of the re-test stand as official, even if they differ from the 

manufacturer value by more than 3%. EPA proposed extending this practice to CO2 results, but 

manufacturers commented that this could lead to duplicative testing and increased test burden. 

EPA agrees that the close relationship between CO2 and fuel economy precludes the need to 

conduct additional confirmatory tests for both fuel economy and CO2 to resolve potential 

discrepancies. Therefore EPA will continue to allow a re-test request based on a 3% or greater 

disparity in manufacturer and EPA confirmatory fuel economy test values, since a manufacturer's 

fleet average emissions level would be established on the basis of model level testing only 

(unlike Tier 2 for which a fixed bin standard structure provides the opportunity for a compliance 

buffer).. 

 4. Useful Life Compliance

Section 202(a)(1) of the CAA requires emission standards to apply to vehicles throughout 

their statutory useful life, as further described in Section III.A. For emission programs that have 

fleet average standards, such as Tier 2 NOx fleet average standards and the new CO2 standards, 

the useful life requirement applies to individual vehicles rather than to the fleet average standard. 

For example, in Tier 2 the useful life requirements apply to the individual emission standard 

levels or “bins” that the vehicles are certified to, not the fleet average standard. For Tier 2, the 

useful life requirement is 10 years224 or 120,000 miles with an optional 15 year or 150,000 mile 

provision. A similar approach is used for heavy-duty engines, however a specific Family 

Emissions Level is assigned to the engine family at certification, as compared to a pre-defined 

bin emissions level as in Tier 2. 

As noted above, the in-use CO2 standard under the greenhouse gas program, like Tier 2, 

will apply to individual vehicles and is separate from the fleet-average standard. However, 

unlike the Tier 2 program and other EPA fleet average standards, the model-level CO2 test 

results are themselves used to calculate the fleet average standard for compliance purposes. This 

is consistent with the current CAFE practice, but it means the fleet average standard and the 

emission test results used to calculate compliance with the fleet average standard do not take into 

account test-to-test variability and production variability that can affect in-use levels. Since the 

CO2 fleet average uses the model level emissions test results themselves for purposes of 

calculating the fleet average, EPA proposed an adjustment factor for the in-use standard to 

provide some margin for production and test-to-test variability that could result in differences 

 

224 11 years for heavy-light-duty trucks, ref. 40 CFR 86.1805-12 
255 

between the initial emission test results used to calculate the fleet average and emission results 

obtained during subsequent in-use testing. EPA proposed that each model’s in-use CO2 standard 

would be the model specific level used in calculating the fleet average, adjusted to be 10% 

higher. 

 EPA received significant comment from industry expressing concern with the in-use 

standard. The comments focused on concerns about manufacturer liability for in-use CO2

performance and for the most part did not address the proposed 10% adjustment level or even the 

need for an adjustment to account for variability. Some comments suggested that an in-use 

standard is not necessary because in-use testing is not mandated in the CAA. Others stated that 

since there is no evidence that CO2 emission levels increase over time, there is no need for an inuse standard. Finally, there was a general concern that failure to meet the in-use standard would 

result in recall liability and that recall can only be used in cases where it can be demonstrated 

that a “repair” can remedy the nonconformity. One manufacturer provided comments supporting 

the use of a 10% adjustment factor for the in-use standard. These comments also recommended 

that the 10% adjustment factor be applied to configuration or subconfiguration data rather than to 

model-level data unless there was no subconfiguration data available. Finally, the manufacturer 

expressed concern that a straight 10% adjustment would result in inequity between high- and 

low-emitting vehicles. 

Section 202(a)(1) specifies that emissions standards are to be applicable for the useful life 

of the vehicle. The in-use emissions standard for CO2 implements this provision. In addition, 

while EPA agrees that the CAA does not require the Agency to perform in-use testing to monitor 

compliance with in-use standards, the Act clearly authorizes in-use testing and EPA has a long 

tradition of performing in-use testing. EPA has found it to be an effective tool in the Agency’s 

overall light-duty vehicle compliance program. EPA continues to believe that it is appropriate to 

perform in-use testing and that the evaluation of individual vehicle performance for all regulated 

emission constituents, including CO2, N2O and CH4, is necessary to ensure compliance with all 

light-duty requirements. EPA also believes that the CAA clearly mandates that all emission 

standards apply for a vehicle’s useful life and that an in-use standard is therefore necessary. 

EPA agrees with industry commenters that there is little evidence to indicate that CO2

emission levels from current-technology vehicles increase over time. However, as stated above, 

the CAA mandates that all emission standards apply for a vehicle’s useful life regardless of 

whether the emissions increase over time. In addition, there are factors other than emission 

deterioration over time that can cause in-use emissions to be greater than emission standards. 

The most obvious are component defects, production mistakes, and the stacking of component 

production and design tolerances. Any one of these can cause an exceedance of emission 

standards for individual vehicles or whole model lines. Finally EPA believes that it is essential to 

monitor in-use GHG emissions performance of new technologies, for which there is currently no 

in-use experience, as they enter the market. Thus EPA believes there is value in establishing an 

in-use standard that extends beyond just addressing emission deterioration over time from 

current technology vehicles. 

The concern over recall liability in cases where there is no effective repair remedy has 

some legitimate basis. For example, EPA agrees there would be a concern if a number of 
256 

vehicles for a particular model were to have in-use emissions that exceed the in-use standard, 

with no effective repair available to remedy the noncompliance. However, EPA does not 

anticipate a scenario involving exceedance of the in-use standard that would cause the Agency to 

pursue a recall unless there is a repairable cause of the exceedance. At the same time, failures to 

emission-related components, systems, software, and calibrations do occur that could result in a 

failure of the in-use CO2 standard. For example, a defective oxygen sensor that could cause a 

vehicle to burn excessive fuel would result in higher CO2 levels that could exceed the in-use 

standard. While it is likely that such a problem would also affect other emissions as well, there 

would still be a demonstratable problem that can be repaired and a recall may be valid. 

Therefore, EPA believes that a CO2 in-use standard is statutorily required and can serve as a 

useful tool for determining compliance with the GHG program. 

EPA agrees with the industry comment that it is appropriate to apply the 10% adjustment 

factor to the vehicle-level emission test results, rather than to a model-type value that includes 

production weighting factors. If no subconfiguration test data are available, then the adjustment 

factor will be applied to the model-type value. Therefore, EPA is finalizing an in-use standard 

based on a 10% multiplicative adjustment factor but the adjustment will be applied to emissions 

test results for the vehicle subconfiguration if such data exist, or to the configuration or modeltype emissions level used to calculate the fleet average if subconfiguration test data are not 

available.. 

This in-use standard will apply for the same useful life period as in Tier 2. Section 202 (i) 

(3) (D) of the CAA allows EPA to adopt useful life periods for light duty vehicles and light-duty 

trucks which differ from those in section 202(d). Similar to Tier 2, the useful life requirements 

will be applicable to the model-level CO2 certification values (similar to the Tier 2 bins), not to 

the fleet average standard. 

 

 EPA believes that the useful life period established for criteria pollutants under Tier 2 is 

also appropriate for CO2. Data from EPA’s current in-use compliance test program indicate that 

CO2 emissions from current technology vehicles increase very little with age and in some cases 

may actually improve slightly. The stable CO2 levels are expected because unlike criteria 

pollutants, CO2 emissions in current technology vehicles are not controlled by after treatment 

systems that may fail with age. Rather, vehicle CO2 emission levels depend primarily on 

fundamental vehicle design characteristics that do not change over time. Therefore, vehicles 

designed for a given CO2 emissions level will be expected to sustain the same emissions profile 

over their full useful life. 

The CAA requires emission standards to be applicable for the vehicle’s full useful life. 

Under Tier 2 and other vehicle emission standard programs, EPA requires manufacturers to 

demonstrate at the time of certification that the new vehicles being certified will continue to meet 

emission standards throughout their useful life. EPA allows manufacturers several options for 

predicting in-use deterioration, including full vehicle testing, bench-aging specific components, 

and application of a deterioration factor based on data and/or engineering judgment. 

In the specific case of CO2, EPA does not currently anticipate notable deterioration and 

has therefore determined that an assigned deterioration factor be applied at the time of 

Comment [A27]: Is this a good example? 
257 

certification. At this time EPA will use an additive assigned deterioration factor of zero, or a 

multiplicative factor of one. EPA anticipates that the deterioration factor will be updated from 

time to time, as new data regarding emissions deterioration for CO2 are obtained and analyzed. 

Additionally, EPA may consider technology-specific deterioration factors, should data indicate 

that certain CO2 control technologies deteriorate differently than others. 

During compliance plan discussions prior to the beginning of the certification process, 

EPA will explore with each manufacturer any new technologies that could warrant use of a 

different deterioration factor. For any vehicle model determined likely to experience increases in 

CO2 emissions over the vehicle’s useful life, manufacturers will not be allowed to use the 

assigned deterioration factor but rather will be required to establish an appropriate factor. If such 

an instance were to occur, EPA would allow manufacturers to use the whole-vehicle mileage 

accumulation method currently offered in EPA's regulations.225

 

 N2O and CH4 emissions are directly affected by vehicle emission control systems. Any 

of the durability options offered under EPA's current compliance program can be used to 

determine how emissions of N2O and CH4 change over time. EPA recognizes that manufacturers 

have not been required to account for durability effects of N2O and CH4 prior to now. EPA also 

realizes that industry will need sufficient time to explore durability options and become familiar 

with procedures for determining deterioration of N2O and CH4. Therefore, until the 2015 model 

year, rather than requiring manufacturers to establish a durability program for N2O and CH4, 

EPA will allow manufacturers to attest that vehicles meet the deteriorated, full useful life 

standard. If manufacturers choose to comply with the optional CO2 equivalent standard, EPA 

will allow the use of the manufacturer’s existing NOX deterioration factor for N2O and the 

existing NMOG deterioration factor for CH4. 

 

 a. Ensuring Useful Life Compliance 

 The CAA requires a vehicle to comply with emission standards over its regulatory useful 

life and affords EPA broad authority for the implementation of this requirement. As such, EPA 

has authority to require a manufacturer to remedy any noncompliance issues. The remedy can 

range from adjusting a manufacturer’s credit balance to the voluntary or mandatory recall of 

noncompliant vehicles. These potential remedies provide manufacturers with a strong incentive 

to design and build complying vehicles. 

 

Currently, EPA regulations require manufacturers to conduct in-use testing as a condition 

of certification. Specifically, manufacturers must commit to later procure and test privatelyowned vehicles that have been normally used and maintained. The vehicles are tested to 

determine the in-use levels of criteria pollutants when they are in their first and fourth years of 

service. This testing is referred to as the In-Use Verification Program (IUVP) testing, which was 

first implemented as part of EPA’s CAP 2000 certification program.226 The emissions data 

collected from IUVP serve several purposes. IUVP results provide EPA with annual real-world 

in-use data representing the majority of certified vehicles. EPA uses IUVP data to identify inuse problems, validate the accuracy of the certification program, verify the manufacturer’s 

 

225 40 CFR 86.1823-08 226 64 FR 23906, May 4, 1999. 
258 

durability processes, and support emission modeling efforts. Manufacturers are required to test 

low mileage and high mileage vehicles over the FTP and US06 test cycles. They are also 

required to provide evaporative emissions, onboard refueling vapory recovery (ORVR) 

emissions and on-board diagnostics (OBD) data. 

Manufacturers are required to provide data for all regulated criteria pollutants. Some 

manufacturers have voluntarily submitted CO2 data as part of IUVP. EPA proposed that 

manufacturers provide CO2, N2O, and CH4 data as part of the IUVP. EPA also proposed that in 

order to adequately analyze and assess in-use CO2 results, which are based on the combination of 

FTP and highway cycle test results, the highway fuel economy test would also need to be part of 

IUVP. The University of California, Santa Barbara expressed support for including N2O and 

CH4 emissions as part of the IUVP. Manufacturer comments were almost unanimously opposed 

to including any GHG standards as part of the IUVP. Specifically, industry commented that CO2

emissions do not deteriorate over time and in some cases actually improve. Ford provided data 

for several 2004 through 2007 model year vehicles that indicate CO2 emissions actually 

improved an average of 1.42% when vehicles were tested over 5,000 miles. Since CO2 emissions 

do not deteriorate over time, manufacturers commented that including CO2 emissions and the 

highway test cycle as part of the IUVP would provide no benefit and would unnecessarily burden 

manufacturers. Manufacturers also commented that N2O and CH4 emissions are very low and by 

EPA’s own account only represent about 1% of total light-duty vehicle GHG emissions. They 

also expressed concern over the cost and burden of measuring N2O for IUVP, since many 

manufacturers use contractor laboratories to assist in their IUVP testing and many of these 

facilities do not have the necessary equipment to measure N2O. They stated that since it was 

unnecessary to include CO2 emissions as part of IUVP and since N2O and CH4 were such small 

contributors to GHG emissions, it did not make sense to include N2O and CH4 as part of the 

IUVP either. They felt that N2O and CH4 could be more appropriately handled through 

attestation or an annual unregulated emissions report. 

As discussed above, although EPA shares the view expressed in manufacturer comments 

that historical data demonstrate little CO2 deterioration, in-use emissions can increase for a 

number of reasons other than deterioration over time. For example, production or design errors 

can result in increased GHG emissions. Components that aren’t built as they were designed or 

vehicles inadvertently assembled improperly or with the wrong parts or with parts improperly 

designed can result in GHG emissions greater than those demonstrated to EPA during the 

certification process and used in calculating the manufacturers fleet average. The “stacking” of 

component design and production tolerances can also result in in-use emissions that are greater 

than those used in calculating a manufacturer’s fleet average. 

EPA believes IUVP testing is also important to monitor in-use versus certification 

emission levels. Because the emphasis of the GHG program is on a manufacturer’s fleet average 

standard, it is difficult for EPA to make an assessment as to whether manufacturer’s vehicles are 

actually producing the GHG levels claimed in their fleet average without some in-use data for 

comparison. For example, EPA has expressed concern that with the in-use standard based on a 

10% adjustment factor, there would be an incentive for manufacturers to develop their fleet 

average utilizing the full range of the 10% in-use standard. The only way for EPA to assess 
259 

whether manufacturers are designing and producing vehicles that meet their respective fleet 

average standards is for EPA to be able to review in-use GHG emissions from the IUVP. 

Finally EPA does have some concern about potential CO2 emissions deterioration in 

advanced technologies for which we currently have no in-use experience or data. Since CAFE 

has never had an in-use requirement and today’s final regulations are the first ever GHG 

standards, there has been no need to focus on GHG emissions in use as there will be with the 

new GHG standards. Many of the advanced technologies that EPA expects manufacturers to use 

to meet the GHG standards have been introduced in production vehicles, but until now not for 

the purpose of controlling greenhouse gas emissions. For example, advanced dual-clutch or 

seven-speed automatic transmissions, and start-stop technologies have not been broadly tested in 

the field for their long-term CO2 performance. In-use GHG performance information for vehicles 

using these technologies is needed for many reasons, including evaluation of whether allowing 

use of assigned deterioration factors for CO2 in lieu of actual deterioration factors will continue 

to be appropriate. 

Therefore, EPA is finalizing the requirement that all manufacturers must provide IUVP 

emission data for CO2. EPA will also require manufacturers to perform the highway test cycle as 

part of IUVP. Since the CO2 standard reflects a combined value of FTP and highway results, it 

is necessary to include the highway emission test in IUVP to enable EPA to compare an in-use 

CO2 level with a vehicle’s in-use standard. EPA understands that requiring manufacturers to 

also measure N2O and CH4 will be initially challenging, since many manufacturer facilities do 

not currently have the proper analytical equipment. To be consistent with timing of the N2O and 

CH4 emissions standards for this rule, N2O and CH4 will not be required for IUVP until the 2015 

model year. 

Another component of the CAP 2000 certification program is the In-Use Confirmatory 

Program (IUCP). This is a manufacturer-conducted recall quality in-use test program that can be 

used as the basis for EPA to order an emission recall. In order for vehicles tested in the IUVP to 

qualify for IUCP, there is a threshold of 1.30 times the certification emission standard and an 

additional requirement that at least 50% of the test vehicles for the test group fail for the same 

pollutant. EPA proposed to exclude IUVP data for CO2, N2O, and CH4 emissions from the IUCP 

thresholds EPA felt that there was not sufficient data to determine if the existing IUCP 

thresholds were appropriate or even applicable to those emissions. The University of California, 

Santa Barbara disagreed with EPA’s concerns and recommended that CO2, N2O, and CH4

emissions all be subject to the IUVP threshold criteria. Manufacturers commented that since 

CO2 performance is a function of vehicle design and cannot be remedied in the field with the 

addition or replacement of emissions control devices like traditional criteria pollutants, it would 

not be appropriate or necessary to include IUCP threshold criteria for GHG emissions. 

EPA continues to believe that the IUCP is an important part of EPA’s in-use compliance 

program and it will continue to be so for traditional criteria pollutants. For GHG emissions, EPA 

believes the IUCP will also be a valuable future tool for achieving compliance, but believes that 

there is insufficient data today to determine whether the current IUCP threshold criteria are 

appropriate for GHG emissions. Once EPA can gather more data from the IUVP program and 

from EPA’s internal surveillance program described below, EPA will reassess the need to 
260 

exclude IUCP thresholds, and if warranted, propose a separate rulemaking establishing IUCP 

threshold criteria which may include CO2, N2O, and CH4 emissions. Therefore, for today’s final 

action, EPA will exclude IUVP data for CO2, N2O, and CH4 emissions from the IUCP 

thresholds. 

 EPA has also administered its own in-use testing program for light-duty vehicles under 

authority of section 207(c) of the CAA for more than 30 years. In this program, EPA procures 

and tests representative privately owned vehicles to determine whether they are complying with 

emission standards. When testing indicates noncompliance, EPA works with the manufacturer to 

determine the cause of the problem and to conduct appropriate additional testing to determine its 

extent or the effectiveness of identified remedies. This program operates in conjunction with the 

IUVP program and other sources of information to provide a comprehensive picture of the 

compliance profile for the entire fleet and address compliance problems that are identified. EPA 

will add CO2, N2O, and CH4 to the emissions measurements it collects during surveillance 

testing. 

b. In-Use Compliance Standard 

For Tier 2, the in-use standard and the standard used for fleet average calculation are the 

same. In-use compliance for an individual vehicle is determined by comparing the vehicle’s inuse emission results with the emission standard levels or “bin” to which the vehicle is certified 

rather than to the Tier 2 fleet average standard for the manufacturer. This is because as part of a 

fleet average standard, individual vehicles can be certified to various emission standard levels, 

which could be higher or lower than the fleet average standard. Thus, it would be inappropriate 

to compare an individual vehicle to the fleet average, since that vehicle could have been certified 

to an emission level that is different than the fleet average level. 

This will also be true for the CO2 fleet average standard. Therefore, to ensure that an 

individual vehicle complies with the CO2 standards in-use, it is necessary to compare the 

vehicle’s in-use CO2 emission result with the appropriate model-level certification CO2 level 

used in determining the manufacturer’s fleet average result. 

There is a fundamental difference between the CO2 standards and Tier 2 standards. For 

Tier 2, the standard level used for the fleet average calculation is one of eight different emission 

levels, or “bins,” whereas for the CO2 fleet average standard, the standard level used for the fleet 

average calculation is the model-level certification CO2 result. The Tier 2 fleet average standard 

is calculated using the “bin” emission level or standard, not the actual certification emission level 

of the certification test vehicle. So no matter how low a manufacturer’s actual certification 

emission results are, the fleet average is still calculated based on the “bin” level rather than the 

lower certification result.227 In contrast, the CO2 fleet average standard will be calculated using 

the actual vehicle model-level CO2 values from the certification test vehicles. With a specified 

certification emission standard, such as the Tier 2 “bins,” manufacturers typically attempt to 

over-comply with the standard to give themselves some cushion for potentially higher in-use 

testing results due to emissions performance deterioration and/or variability that could result in 

 

227 In a similar fashion, the fleet average for heavy-duty engines is calculated using a Family Emission Level, 

determined by the manufacturer, which is different from the emission level of the test engine. 
261 

higher emission levels during subsequent in-use testing. For our CO2 standards, the emission 

level used to calculate the fleet average is the actual certification vehicle test result, thus 

manufacturers cannot over comply since the certification test vehicle result will always be the 

value used in determining the CO2 fleet average. If the manufacturer attempted to design the 

vehicle to achieve a lower CO2 value, similar to Tier 2 for in-use purposes, the new lower CO2

value would simply become the new value used for calculating the fleet average. 

The CO2 fleet average standard is based on the performance of pre-production technology 

that is representative of the point of production, and while there is expected to be limited if any 

deterioration in effectiveness for any vehicle during the useful life, the fleet average standard 

does not take into account the test to test variability or production variability that can affect inuse levels. Therefore, EPA believes that unlike Tier 2, it is necessary to have a different in-use 

standard for CO2 to account for these variabilities. EPA proposed an in-use standard that was 

10% higher than the appropriate model-level certification CO2 level used in determining the 

manufacturer’s fleet average result. 

As described above, manufacturers typically design their vehicles to emit at emission 

levels considerably below the certification standards. This intentional difference between the 

actual emission level and the emission standard is referred to as “certification margin,” since it is 

typically the difference between the certification emission level and the emission standard. The 

certification margin can provide manufacturers with some protection from exceeding emission 

standards in-use, since the in-use standards are typically the levels used to calculate the fleet 

average. For Tier 2, the certification margin is the delta between the specific emission standard 

level, or “bin,” to which the vehicle is certified, and the vehicle’s certification emission level. 

 Since the level of the fleet average standard does not reflect this kind of variability, EPA 

believes it is appropriate to set an in-use standard that provides a reasonable cushion for in-use 

variability that is beyond a manufacturer’s control. EPA proposed a factor of 10% that would act 

as a surrogate for a certification margin. The factor would only be applicable to CO2 emissions, 

and would be applied to the model-level test results that would be used to establish the modellevel in-use standard 

 EPA selected a value of 10% for the in-use standard based on a review of EPA’s fuel 

economy labeling and CAFE confirmatory test results for the past several vehicle model years. 

The EPA data indicate that it is common for test variability to range between three to six percent 

and only on rare occasions to exceed 10%. EPA believes that a value of 10% should be 

sufficient to account for testing variability and any production variability that a manufacturer 

may encounter. EPA considered both higher and lower values. The Tier 2 fleet as a whole, for 

example, has a certification margin approaching 50%.228 However, there are some fundamental 

differences between CO2 emissions and other criteria pollutants in the magnitude of the 

pollutants. Tier 2 NMOG and NOX emission standards are hundredths of a gram per mile (e.g., 

0.07 g/mi NOX & 0.09 g/mi NMOG), whereas the CO2 standards are four orders of magnitude 

greater (e.g., 250 g/mi). Thus EPA does not believe it is appropriate to consider a value on the 

 

228 See pages 39-41 of EPA’s Vehicle and Engine Compliance Activities 2007 Progress Report (EPA-420-R-08-011) 

published in October, 2008. This document is available electronically at http://epa.gov/otaq/about/420r08011.pdf 
262 

order of 50 percent. In addition, little deterioration in emissions control is expected in-use. The 

adjustment factor addresses only one element of what is usually built into a compliance margin. 

The intent of the separate in-use standard, based on a 10% compliance factor adjustment, 

is to provide a reasonable margin such that vehicles are not automatically deemed as exceeding 

standards simply because of normal variability in test results. EPA has some concerns however 

that this in-use compliance factor could be perceived as providing manufacturers with the ability 

to design their fleets to generate CO2 emissions up to 10% higher than the actual values they use 

to certify and to calculate the year end fleet average value that determines compliance with the 

fleet average standard. This concern provides additional rationale for requiring FTP and HFET 

IUVP data for CO2 emissions to ensure that in-use values are not regularly 10% higher than the 

values used in the fleet average calculation. If in the course of reviewing a manufacturer’s IUVP 

data it becomes apparent that a manufacturer’s CO2 results are consistently higher than the 

values used for calculation of the fleet average, EPA will discuss the matter with the 

manufacturer and consider possible resolutions such as changes to ensure that the emissions test 

data more accurately reflect the emissions level of vehicles at the time of production, increased 

EPA confirmatory testing, and other similar measures. 

Commenters generally did not comment on whether 10% was the appropriate level for 

the adjustment factor. Honda did support use of the proposed 10% adjustment factor for the inuse standard. But Honda also recommended that the 10% adjustment factor be applied to 

subconfiguration data rather than the model-level data unless there was no subconfiguration data 

available. Honda also expressed some concern over the inequity a 10% value would provide 

between high- and low-emitting vehicles. They suggested that rather than using a straight 10% 

multiplicative adjustment factor applied to the model-level CO2 value for all vehicles, it would 

be more equitable to take the sum of a 5% multiplicative factor applied to the model-level CO2

value and a 5% factor applied to the manufacturer’s fleet CO2 target. 

 EPA understands that use of a multiplicative adjustment factor would result in a higher 

absolute in-use value for a vehicle that has higher CO2 than for a vehicle with a lower CO2. 

However, this difference is not relevant to the purpose of the adjustment factor, which is to 

provide some cushion for test and production variability. EPA does not believe the difference 

would be great enough to confer the higher-emitting vehicles with an unfair advantage with 

respect to emissions variability. 

Given that the purpose of the in-use standard is to enable a fair comparison between 

certification and in-use emission levels, EPA agrees that it is appropriate to apply the 10% 

adjustment factor to actual emission test results rather than to model-type emission levels which 

are production weighted. Therefore, EPA is finalizing an in-use standard that applies a 

multiplicative 10% adjustment factor to the subconfiguration emissions values, if such are 

available. If no emissions data exist at the configuration level the adjustment will be applied to 

the model-type value as originally proposed. If the in-use emission result for a vehicle exceeds 

the emissions level, as applicable, adjusted as just described by 10%, then the vehicle will have 

exceeded the in-use emission standard. The in-use standard will apply to all in-use compliance 

testing including IUVP, selective enforcement audits, and EPA’s internal test program. 
263 

5. Credit Program Implementation

As described in Section III.E.2 above, for each manufacturer’s model year production, 

the manufacturer will average the CO2 emissions within each of the two averaging sets 

(passenger cars and trucks) and compare that with its respective fleet average standards (which in 

turn will have been determined from the appropriate footprint curve applicable to that model 

year). In addition to this within-company averaging, when a manufacturer’s fleet average CO2

values of vehicles produced in an averaging set over-complies compared to the applicable fleet 

average standard, the manufacturer could generate credits that it could save for later use 

(banking) or could sell or otherwise distribute to another manufacturer (trading). Section III.C 

discusses opportunities for manufacturers to improve their fleet average, beyond the credits that 

are simply calculated by over-achieving their applicable fleet average standard. Implementation 

of the credit program generally involves two steps: calculation of the credit amount and reporting 

the amount and the associated data and calculations to EPA. 

EPA is promulgating two broad types of credit programs under this rulemaking. One 

type of credit directly lowers a manufacturer’s actual fleet average by virtue of being applied 

within the methodology for calculating the fleet average emissions. Examples of this type of 

credit include the credits available for alternative fuel vehicles and the advanced technology 

vehicle provisions. The second type of credit is independent of the calculation of a 

manufacturer’s fleet average. Rather than giving credit by lowering a manufacturer’s fleet 

average via a credit mechanism, these credits (in megagrams) are calculated separately and are 

simply added to the manufacturer’s overall “bank” of credits (or debits). Using a fictional 

example, the remainder of this section reviews the different types of credits and shows where and 

how they are calculated and how they impact a manufacturer’s available credits. 

a. Basic Credits: Fleet Average Emissions are Below the Standard 

As just noted, basic credits are earned by a manufacturer’s fleet that performs better than 

the applicable fleet average standard. Manufacturers will calculate their fleet average standards 

(separate standards are calculated for cars and trucks) using the footprint-based equations 

described in Section III.B. A manufacturer’s actual end-of-year fleet average is calculated 

similarly to the way in which CAFE values are currently calculated; in fact, the regulations are 

essentially identical. The current CAFE calculation methods are in 40 CFR Part 600. As part of 

this rulemaking, EPA has amended key subparts and sections of Part 600 to require that fleet 

average CO2 emissions be calculated in a manner parallel to the way CAFE values are 

calculated. First, manufacturers will determine a CO2-equivalent value for each model type. 

The CO2-equivalent value is a summation of the carbon-containing constituents of the exhaust 

emissions on a CO2-equivalent basis. For gasoline and diesel vehicles this simply involves 

measurement of total hydrocarbons and carbon monoxide in addition to CO2. The calculation 

becomes somewhat more complex for alternative fuel vehicles due to the different nature of their 

exhaust emissions. For example, for ethanol-fueled vehicles, the emission tests must measure 

ethanol, methanol, formaldehyde, and acetaldehyde in addition to CO2. However, all these 

measurements are currently necessary to determine fuel economy for the labeling and CAFE 
264 

programs, and thus no new testing or data collection will be required. 229 Second, manufacturers 

will calculate a fleet average by weighting the CO2 value for each model type by the production 

of that model type, as they currently do for the CAFE program. Again, this will be done 

separately for cars and trucks. Finally, the manufacturer will compare the calculated standard 

with the fleet average that is actually achieved to determine the credits (or debits) that are 

generated. Both the determination of the applicable standard and the actual fleet average will be 

done after the model year is complete and using final model year vehicle production data. 

Consider a basic hypothetical example where Manufacturer “A” has calculated a car fleet 

average standard of 300 grams/mile and a car fleet average of 290 grams/mile (Table III.E.5-1). 

Further assume that the manufacturer produced 500,000 cars. The credit is calculated by taking 

the difference between the standard and the fleet average (300-290=10) and multiplying it by the 

manufacturer’s production of 500,000. This result is then multiplied by the assigned lifetime 

vehicle miles travelled (for cars this is 195,264 miles, as discussed in Joint TSD Chapter 4), then 

finally divided by 1,000,000 to convert from grams to total megagrams. The result is the total 

number of megagrams of credit generated by the manufacturer’s car fleet. The same 

methodology is used to calculate the total number of megagrams of deficit, if the manufacturer 

was not able to comply with the fleet average standard. In this example, the result is 976,320 

megagrams of credits, as shown in Table III.E.5-1. 

Table III.E.5-1 Summary for Manufacturer A: Earning Basic Credits 

 CO2 Totals 

Total production Conventional: 500,000 290 g/mi 500,000 

Fleet average 

standard 

 300 g/mi 

Fleet average 290 g/mi 

Credits [(300-290) × 500,000 × 195,264] ÷ 

1,000,000 

 = 954,855 Mg 

b. Interim Advanced Technology Vehicle Provisions 

 The lower exhaust greenhouse gas emissions of some advanced technology vehicles can 

directly benefit a manufacturer’s fleet average, thus increasing the amount of fleet average-based 

credits they earn (or reducing the amount of debits that would otherwise accrue). Manufacturers 

that produce electric vehicles, plug-in hybrid electric vehicles, or fuel cell electric vehicles will 

include these vehicles in the fleet average calculation with their model type emission values. As 

described in detail in Section III.C.3, the emissions from electric vehicles and plug-in hybrid 

electric vehicles when operating on electricity will be accounted for by assuming zero emissions 

(0 g/mi CO2) for a limited number of vehicles through the 2016 model year. This interim limited 

use of 0 g/mi will be allowed for the technologies specifically noted above and as defined in the 

regulations, with the limitation that the vehicles must be certified to Tier 2 Bin 5 emission 

standards or cleaner (i.e., advanced technology vehicles must contribute to criteria pollutant 

reductions as well as to greenhouse gas emission reductions). 

 

229 Note that the final rule also provides an option for manufacturers to incorporate N2O and CH4 in this calculation 

at their CO2-equivalent values. 
265 

 EPA proposed specific definitions for the vehicle technologies eligible for these 

provisions. One manufacturer suggested the following changes in their comments: 

• Insert an additional criterion for electric vehicles that specifically states that an electric 

vehicle may not have an onboard combustion engine/generator system. 

• A minor deletion of text from the definition for “Fuel cell.” 

• The deletion of the requirement that a PHEV have an equivalent all-electric range of 

more than 10 miles. 

EPA agrees with the first comment. As written in the proposal, a vehicle with an onboard 

combustion engine that serves as a generator would not have been excluded from the definition 

of electric vehicle. However, EPA believes it should be. Although such a vehicle might be 

propelled by an electric motor directly, if the indirect source of electricity is an onboard 

combustion engine then the vehicle is fundamentally not an electric vehicle. EPA is also 

adopting the commenter’s proposed rephrasing of the definition for “Fuel cell,” which is simpler 

and clearer. Finally, in the context of the advanced technology incentive provisions in this final 

rule, EPA concurs with the commenter that the requirement that a PHEV have an equivalent allelectric range of at least ten miles is unnecessary. In the context of the proposed credit multiplier 

EPA was concerned that some vehicles could install a charging system on a limited battery and 

gain credit beyond what the limited technology would deserve simply by virtue of being defined 

as a PHEV. However, because EPA is not finalizing the proposed multiplier provisions (see 

Section III.C.3) and is instead using as the sole incentive the zero emission tailpipe level as the 

compliance value for a manufacturer’s fleetwide average, this concern is no longer valid. Since 

EPA is not promulgating multipliers, the concern expressed at proposal no longer applies, and 

each PHEV will get a benefit from electricity commensurate with its measured use of grid 

electricity, thus EPA is no longer concerned about the multiplier effect. Thus, EPA is finalizing 

the following definitions in the regulations: 

• Electric vehicle means a motor vehicle that is powered solely by an electric motor 

drawing current from a rechargeable energy storage system, such as from storage 

batteries or other portable electrical energy storage devices, including hydrogen fuel 

cells, provided that: 

o Recharge energy must be drawn from a source off the vehicle, such as residential 

electric service; 

o The vehicle must be certified to the emission standards of Bin #1 of Table S04-1 

in paragraph (c)(6) of §86.1811; and 

o The vehicle does not have an onboard combustion engine/generator system as a 

means of providing electrical energy. 

• Fuel cell electric vehicle means a motor vehicle propelled solely by an electric motor 

where energy for the motor is supplied by a fuel cell. 

• Fuel cell means an electrochemical cell that produces electricity via the non-combustion 

reaction of a consumable fuel, typically hydrogen. 

• Plug-in hybrid electric vehicle (PHEV) means a hybrid electric vehicle that has the 

capability to charge the battery from an off-vehicle electric source, such that the offvehicle source cannot be connected to the vehicle while the vehicle is in motion. 
266 

With some simplifying assumptions, assume that 25,000 of Manufacturer A’s fleet are now 

plug-in hybrid electric vehicles with a calculated CO2 value of 80 g/mi, and the remaining 

475,000 are conventional technology vehicles with an average CO2 value of 290 grams/mile. By 

including the advanced technology PHEVs in their fleet, Manufacturer A now has more than 2.9 

million credits (Table III.E.5-2). 

Table III.E.5-2 Summary for Manufacturer A: 

Earning Basic and Interim Advanced Technology Credits 

 CO2 Totals 

Total production Conventional: 475,000 290 

g/mi 

 500,000 

 PHEV: 25,000 80 g/mi 

Fleet average 

standard 

 300 

g/mi 

 

Fleet average [(475,000 × 290) + (25,000 × 80)] 

÷ [500,000] 

280 

g/mi 

 

Credits [(300-280) × 500,000 × 195,264] 

÷ 1,000,000 

 = 1,952,640 

Mg 

c. Flexible-Fuel Vehicle Credits 

As noted in Section III.C, treatment of flexible-fuel vehicle (FFV) credits differs between 

model years 2012-2015 and 2016 and later. For the 2012 through 2015 model years the FFV 

credits will be calculated as they are in the CAFE program for the same model years, except that 

formulae in the final regulations have been modified as needed to do the calculations in terms of 

grams per mile of CO2 values rather than miles per gallon. These credits are integral to the fleet 

average calculation and allow the vehicles to be represented by artificially reduced emissions. 

To use this credit program, the CO2 values of FFVs will be represented by the average of two 

things: the CO2 value while operating on gasoline and the CO2 value while operating on the 

alternative fuel multiplied by 0.15. 

For MY 2012 to 2015 for example, Manufacturer A makes 30,000 FFVs with CO2 values 

of 280 g/mi using gasoline and 260 g/mi using E85. The CO2 value that would represent the 

FFVs in the fleet average calculation would be calculated as follows: 

FFV emissions = [280 + (260×0.15)] ÷ 2 = 160 g/mi 

Including these FFVs with the applicable credit in Manufacturer A’s fleet average, as 

shown below in Table III.E.5-3, further reduces the fleet average to 256 grams/mile and 

increases the manufacturer’s credits to about 4.2 million megagrams. 

Table III.E.5-3 Summary for Manufacturer A: 

Earning Basic, Interim Advanced Technology, and Flexible Fuel Vehicle Credits 
267 

 CO2 Totals 

Total production Conventional: 445,000 290 g/mi 500,000 

 PHEV: 25,000 80 g/mi 

 FFV: 30,000 160 g/mi 

Fleet average 

standard 

 300 g/mi 

Fleet average [(445,000 × 290) + (25,000 × 80) + 

30,000 x 160] 

÷ [500,000] 

272 g/mi 

Credits [(300-272) × 500,000 × 195,264] 

÷ 1,000,000 

 = 2,733,696 

Mg 

 In the 2016 and later model years, the calculation of FFV emissions differ substantially 

from prior years in that the determination of the CO2 value to represent an FFV model type will 

be based upon the actual use of the alternative fuel and on actual emissions while operating on 

that fuel. EPA’s default assumption in the regulations is that the alternative fuel is used 

negligibly, and the CO2 value that will apply to an FFV by default would be the value 

determined for operation on conventional fuel. However, if the manufacturer believes that the 

alternative fuel is used in real-world driving and that accounting for this use could improve the 

fleet average, the manufacturer has two options. First, the regulations allow a manufacturer to 

request that EPA determine an appropriate weighting value for an alternative fuel to reflect the 

degree of use of that fuel in FFVs relative to real-world use of the conventional fuel. Section 

III.C describes how EPA might make this determination. Any value determined by EPA will be 

published by EPA, and that weighting value would be available for all manufacturers to use for 

that fuel. The second option allows a manufacturer to determine the degree of alternative fuel 

use for their own vehicle(s), using a variety of potential methods. Both the method and the use 

of the final results must be approved by EPA before their use is allowed. In either case, whether 

EPA supplies the weighting factors or EPA approves a manufacturer’s alternative fuel weighting 

factors, the CO2 emissions of an FFV in 2016 and later would be as follows (assuming non-zero 

use of the alternative fuel): 

(W1×CO2conv)+(W2×CO2alt), 

where W1 and W2 are the proportion of miles driven using conventional fuel and alternative 

fuel, respectively, CO2conv is the CO2 value while using conventional fuel, and CO2alt is the 

CO2 value while using the alternative fuel. In the example above, for instance, the default CO2

value for the fictional FFV described above would be the gasoline value of 280 g/mi, and the 

resulting fleet average and total credits would be 279 g/mi and 2,050,272 megagrams, 

respectively. However, if the EPA determines that real-world ethanol use amounts to 40 percent 

of driving, then using the equation above the FFV would be included in the fleet average 

calculation with a CO2 value of 272 g/mi, resulting in an overall fleet average of 278 g/mi and 

total credit accumulation of 2,147,904 megagrams. 

d. Dedicated Alternative Fuel Vehicle Credits 
268 

Like the FFV credit program described above, these credits will be treated differently in 

the first years of the program than in the 2016 and later model years. In fact, these credits are 

essentially identical to the FFV credits except for two things: (1) there is no need to average CO2

values for gasoline and alternative fuel, and (2) in 2016 and later there is no demonstration 

needed to get a benefit from the alternative fuel. The CO2 values are essentially determined the 

same way they are for FFVs operating on the alternative fuel. For the 2012 through 2015 model 

years the CO2 test results are multiplied by the credit adjustment factor of 0.15, and the result is 

production-weighted in the fleet average calculation. For example, assume that Manufacturer A 

now produces 20,000 dedicated CNG vehicles with CO2 emissions of 220 grams/mile, in 

addition to the FFVs and PHEVs already included in their fleet (Table III.E.5-4). Prior to the 

2016 model year the CO2 emissions representing these CNG vehicles will be 33 grams/mile (220 

× 0.15). 

Table III.E.5-4 Summary for Manufacturer A: 

Earning Basic, Advanced Technology, Flexible Fuel Vehicle, and Dedicated Alternative Fuel 

Vehicle Credits 

 CO2 Totals 

Total production Conventional: 425,000 290 g/mi 500,000 

 PHEV: 25,000 80 g/mi 

 FFV: 30,000 160 g/mi 

 CNG: 20,000 33 g/mi 

Fleet average 

standard 

 300 g/mi 

Fleet average [(425,000 × 290) + (25,000 × 80) + 

(30,000 × 160) + (20,000 × 33)] 

÷ [500,000] 

261 g/mi 

Credits [(300-261) × 500,000 × 195,264] 

÷ 1,000,000 

 = 3,807,648 

Mg 

The calculation for 2016 and later will be the same except the 0.15 credit adjustment 

factor is removed from the equation, and the CNG vehicles in this example would simply be 

production-weighted in the equation using their actual emissions value of 220 grams/mile instead 

of the “credited” value of 33 grams/mile. 

e. Air Conditioning Leakage Credits 

Unlike the credit programs described above, air conditioning-related credits do not affect 

the overall calculation of the fleet average or fleet average standard. Whether a manufacturer 

generates zero air conditioning credits or many, the calculated fleet average remains the same. 

Air conditioning credits are calculated and added to any credits (or deficit) that results from the 

fleet average calculations shown above. Thus, these credits can increase a manufacturer’s credit 

balance or offset a deficit, but their calculation is external to the fleet average calculation. As 

noted in Section III.C, manufacturers can generate credits for reducing the leakage of refrigerant 

from their air conditioning systems. To do this the manufacturer will identify an air conditioning 

system improvement, indicate that they intend to use the improvement to generate credits, and 

then calculate an annual leakage rate (grams/year) for that system based on the method defined 
269 

by the regulations. Air conditioning credits will be determined separately for cars and trucks 

using the car and truck-specific equations described in Section III.C. 

In order to put these credits on the same basis as the basic and other credits describe 

above, the air conditioning leakage credits will need to be calculated separately for cars and 

trucks. Thus, the resulting grams per mile credit determined from the appropriate car or truck 

equation will be multiplied by the lifetime VMT assigned by EPA (195,264 for cars; 225,865 for 

trucks), and then divided by 1,000,000 to get the total megagrams of CO2 credits generated by 

the improved air conditioning system. Although the calculations are done separately for cars and 

trucks, the total megagrams will be summed and then added to the overall credit balance 

maintained by the manufacturer. 

For example, assume that Manufacturer A has improved an air conditioning system that 

is installed in 250,000 cars and that the calculated leakage rate is 12 grams/year. Assume that 

the manufacturer has also implemented a new refrigerant with a Global Warming Potential of 

850. In this case the credit per air conditioning unit, rounded to the nearest gram per mile would 

be: 

[13.8 × [1 – (12/16.6 × 850/1430)] = 7.9 g/mi. 

Total megagrams of credits would then be: 

[ 7.9 × 250,000 × 195,264] ÷ 1,000,000 = 385,646 Mg. 

These credits would be added directly to a manufacturer’s total balance; thus in this 

example Manufacturer A would now have, after consideration of all the above credits, a total of 

4,193,294 megagrams of credits. 

f. Air Conditioning Efficiency Credits 

As noted in Section III.C.1.b, manufacturers may earn credits for improvements in air 

conditioning efficiency that reduce the impact of the air conditioning system on fuel 

consumption. These credits are similar to the air conditioning leakage credits described above, 

in that these credits are determined independently from the manufacturer’s fleet average 

calculation, and the resulting credits are added to the manufacturer’s overall balance for the 

respective model year. Like the air conditioning leakage credits, these credits can increase a 

manufacturer’s credit balance or offset a deficit, but their calculation is external to the fleet 

average calculation. 

In order to put these credits on the same basis as the basic and other credits describe 

above, the air conditioning efficiency credits are calculated separately for cars and trucks. Thus, 

the resulting grams per mile credit determined in the above equation is multiplied by the lifetime 

VMT, and then divided by 1,000,000 to get the total megagrams of efficiency credits generated 

by the improved air conditioning system. Although the calculations are done separately for cars 

and trucks, the total megagrams can be summed and then added to the overall credit balance 

maintained by the manufacturer. 
270 

As described in Section III.C, manufacturers will determine their credit based on 

selections from a menu of technologies, each of which provides a gram per mile credit amount. 

The credits will be summed for all the technologies implemented by the manufacturer, but 

cannot exceed 5.7 grams per mile. Once this is done, the calculation is a straightforward 

translation of a gram per mile credit to total car or truck megagrams, using the same 

methodology described above. For example, if Manufacturer A implements enough technologies 

to get the maximum 5.7 grams per mile for an air conditioning system that sells 250,000 units in 

cars, the calculation of total credits would be as follows: 

[ 5.7 × 250,000 × 195,264] ÷ 1,000,000 = 278,251 Mg. 

These credits would be added directly to a manufacturer’s total balance; thus in this 

example Manufacturer A would now have, after consideration of all the above credits, a total of 

4,471,545 megagrams of credits. 

g. Off-Cycle Technology Credits 

As described in Section III.C, these credits will be available for certain new or innovative 

technologies that achieve real-world CO2 reductions that aren’t adequately captured on the city 

or highway test cycles used to determine compliance with the fleet average standards. Like the 

air conditioning credits, these credits are independent of the fleet average calculation. Section 

III.C.4 describes two options for generating these credits: either using EPA’s 5-cycle fuel 

economy labeling methodology, or if that method fails to capture the CO2-reducing impact of the 

technology, the manufacturer could propose and use, with EPA approval, a different analytical 

approach to determining the credit amount. Like the air conditioning credits above, these credits 

will have to be determined separately for cars and trucks because of the differing lifetime 

mileage assumptions between cars and trucks. 

Using the 5-cycle approach is relatively straightforward, and because the 5-cycle 

formulae account for nationwide variations in driving conditions, no additional adjustments to 

the test results would be necessary. The manufacturer would simply calculate a 5-cycle CO2

value with the technology installed and operating and compare it with a 5-cycle CO2 value 

determined without the technology installed and/or operating. Existing regulations describe how 

to calculate 5-cycle fuel economy values, and the GHG regulations contain provisions that 

describe how to calculate 5-cycle CO2 values (see 40 CFR 600.114-08). The manufacturer will 

have to design a test program that accounts for vehicle differences if the technology is installed 

in different vehicle types, and enough data will have to be collected to address data uncertainty 

issues. Manufacturers seeking to generate off-cycle credits based on a 5-cycle analysis will be 

required to submit a description of their test program and the results to EPA for approval. 

As noted in Section III.C.4, a manufacturer-developed testing, data collection, and 

analysis program will require additional EPA approval and oversight. EPA received 

considerable comment from environmental and public interest organizations suggesting that 

EPA’s decisions about which technologies merit off-cycle credit should be open and public. EPA 

agrees that a public process will help ensure a fair review and alleviate concerns about potential 
271 

misuse of the off-cycle credit flexibility. Therefore EPA intends to seek public comment on 

manufacturer proposals for off-cycle credit that do not use the 5-cycle approach to quantify 

emission reductions. EPA will consider any comments it receives in determining whether and 

how much credit is appropriate. Manufacturers should submit proposals well in advance of their 

desired decision date to allow time for these public and EPA reviews. 

Once the demonstration of the CO2 reduction of an off-cycle technology is complete, and 

the resulting value accounts for variations in driving, climate and other conditions across the 

country, the two approaches are treated fundamentally the same way and in a way that parallels 

the approach for determining the air conditioning credits described above. Once a gram per mile 

value is approved by the EPA, the manufacturer will determine the total credit value by 

multiplying the gram per mile per vehicle credit by the production volume of vehicles with that 

technology and approved for use of the credit. This would then be multiplied by the lifetime 

vehicle miles for cars or trucks, whichever applies, and divided by 1,000,000 to obtain total 

megagrams of CO2 credits. These credits would then be added to the manufacturer’s total 

balance for the given model year. Just like the above air conditioning case, an off-cycle 

technology that is demonstrated to achieve an average CO2 reduction of 4.4 grams /mile and that 

is installed in 175,000 cars would generate credits as follows: 

[ 4.4 × 175,000 × 195,264] ÷ 1,000,000 = 150,353 Mg. 

h. End-of-Year Reporting 

In general, implementation of the averaging, banking, and trading (ABT) program, 

including the calculation of credits and deficits, will be accomplished via existing reporting 

mechanisms. EPA’s existing regulations define how manufacturers calculate fleet average miles 

per gallon for CAFE compliance purposes. Today’s action modifies these regulations to also 

require the parallel calculation of fleet average CO2 levels for car and light truck compliance 

categories. These regulations already require an end-of-year report for each model year, 

submitted to EPA, which details the test results and calculations that determine each 

manufacturer’s CAFE levels. EPA will now require a similar report that includes fleet average 

CO2 levels and related information. That can be integrated with the CAFE report at the 

manufacturer’s option. In addition to requiring reporting of the actual fleet average achieved, this 

end-of-year report will also contain the calculations and data determining the manufacturer’s 

applicable fleet average standard for that model year. As under the existing Tier 2 program, the 

report will be required to contain the fleet average standard, all values required to calculate the 

fleet average standard, the actual fleet average CO2 that was achieved, all values required to 

calculate the actual fleet average, the number of credits generated or debits incurred, all the 

values required to calculate the credits or debits, the number of credits bought or sold, and the 

resulting balance of credits or debits. 

Because of the multitude of credit programs that are available under the greenhouse gas 

program, the end-of-year report will be required to have more data and a more defined and 

specific structure than the CAFE end–of-year report does today. Although requiring “all the data 

required” to calculate a given value should be inclusive, the report will contain some 

requirements specific to certain types of credits. For advanced technology credits that apply to 
272 

vehicles like electric vehicles and plug-in hybrid electric vehicles, manufacturers will be required 

to identify the number and type of these vehicles and the effect of these credits on their fleet 

average. The same will be true for credits due to flexible-fuel and alternative-fuel vehicles, 

although for 2016 and later flexible-fuel credits manufacturers may also have to provide a 

demonstration of the actual use of the alternative fuel in-use and the resulting calculations of 

CO2 values for such vehicles. For air conditioning leakage credits manufacturers will have to 

include a summary of their use of such credits that will include which air conditioning systems 

were subject to such credits, information regarding the vehicle models which were equipped with 

credit-earning air conditioning systems, the production volume of these air conditioning systems, 

the leakage score of each air conditioning system generating credits, and the resulting calculation 

of leakage credits. Air conditioning efficiency reporting will be somewhat more complicated 

given the phase-in of the efficiency test procedure, and reporting will have to detail compliance 

with the phase-in as well as the test results and the resulting efficiency credits generated. Similar 

reporting requirements will also apply to the variety of possible off-cycle credit options, where 

manufacturers will have to report the applicable technology, the amount of credit per unit, the 

production volume of the technology, and the total credits from that technology. 

Although it is the final end-of-year report, when final production numbers are known, 

that will determine the degree of compliance and the actual values of any credits being generated 

by manufacturers, EPA will expect manufacturers to be prepared to discuss their compliance 

approach and their potential use of the variety of credit options in pre-certification meetings that 

EPA routinely has with manufacturers. In addition, and in conjunction with a pre-model year 

report required under the CAFE program, the manufacturer will be required to submit projections 

of all of the elements described above, plus any projected credit trading transactions (described 

below). 

Finally, to the extent that there are any credit transactions, the manufacturer will have to 

detail in the end-of-year report documentation on all credit transactions that the manufacturer has 

engaged in. Information for each transaction will include: the name of the credit provider, the 

name of the credit recipient, the date the transfer occurred, the quantity of credits transferred, and 

the model year in which the credits were earned. The final report is due to EPA within 90 days 

of the end of the model year, or no later than March 31 in the calendar year after the calendar 

year named for the model year. For example, the final GHG report for the 2012 model year is 

due no later than March 31, 2013. Failure by the manufacturer to submit the annual report in the 

specified time period will be considered to be a violation of section 203(a)(1) of the Clean Air 

Act. 

6. Enforcement

As discussed above in Section III.E.5, manufacturers will report to EPA their fleet 

average and fleet average standard for a given model year (reporting separately for each of the 

car and truck averaging sets), the credits or deficits generated in the current year, the balance of 

credit balances or deficits (taking into account banked credits, deficit carry-forward, etc. see 

Section III.E.5), and whether they were in compliance with the fleet average standard under the 

terms of the regulations. EPA will review the annual reports, figures, and calculations submitted 

by the manufacturer to determine any nonconformance. 
273 

Each certificate, required prior to introduction into commerce, will be conditioned upon 

the manufacturer attaining the CO2 fleet average standard. If a manufacturer fails to meet this 

condition and has not generated or purchased enough credits to cover the fleet average 

exceedance following the three year deficit carry-forward (Section III.B.4, then EPA will review 

the manufacturer's production for the model year in which the deficit originated and designate 

which vehicles caused the fleet average standard to be exceeded. 

EPA proposed that the vehicles that would be identified as nonconforming would come 

from the most recent model year, and some comments pointed out that this was inconsistent with 

how the NLEV and Tier 2 programs were structured. EPA agrees with these comments and is 

finalizing an enforcement structure that is essentially identical to that for existing programs. 

EPA would designate as nonconforming those vehicles with the highest emission values first, 

continuing until a number of vehicles equal to the calculated number of non-complying vehicles 

as determined above is reached. Those vehicles would be considered to be not covered by the 

certificates of conformity covering those model types. In a test group where only a portion of 

vehicles would be deemed nonconforming, EPA would determine the actual nonconforming 

vehicles by counting backwards from the last vehicle produced in that model type. A 

manufacturer would be subject to penalties and injunctive orders on an individual vehicle basis 

for sale of vehicles not covered by a certificate. This is the same general mechanism used for the 

National LEV and Tier 2 corporate average standards. 

 Section 205 of the CAA authorizes EPA to assess penalties of up to $37,500 per vehicle 

for violations of the requirements or prohibitions of this rule.230 This section of the CAA 

provides that the agency shall take the following penalty factors into consideration in 

determining the appropriate penalty for any specific case: the gravity of the violation, the 

economic benefit or savings (if any) resulting from the violation, the size of the violator's 

business, the violator's history of compliance with this title, action taken to remedy the violation, 

the effect of the penalty on the violator's ability to continue in business, and such other matters as 

justice may require. 

 Manufacturer comments expressed concern about potential enforcement action for 

violations of the greenhouse gas standards, and the circumstances under which EPA would 

impose penalties. Manufacturers also suggested that EPA should adopt a penalty structure 

similar to the one in place under CAFE. 

 The CAA specifies different civil penalty provisions for noncompliance than EPCA does, 

and EPA cannot therefore adopt the CAFE penalty structure. However, EPA recognizes that it 

may be appropriate, should a manufacturer fail to comply with the NHTSA fuel economy 

standards as well as the CO2 standard in a case arising out of the same facts and circumstances, 

to take into account the civil penalties that NHTSA has assessed for violations of the CAFE 

standards when determining the appropriate penalty amount for violations of the CO2 emissions 

standards. This approach is consistent with EPA’s broad discretion to consider “such other 

matters as justice may require,” and will allow EPA to exercise its discretion to prevent injustice 

 

230 42 U.S.C. 7524(a), Civil Monetary Penalty Inflation Adjustment, 69 FR 7121 (Feb. 13, 2004) and Civil Monetary 

Penalty Inflation Adjustment Rule, 73 FR 75340 (Dec. 11,2008). 
274 

and ensure that penalties for violations of the CO2 rule are assessed in a fair and reasonable 

manner. 

 The statutory penalty factor that allows EPA to consider “such other matters as justice 

may require” vests EPA with broad discretion to reduce the penalty when other adjustment 

factors prove insufficient or inappropriate to achieve justice.231. The underlying principle of this 

penalty factor is to operate as a safety mechanism when necessary to prevent injustice.232 

 In other environmental statutes, Congress has specifically required EPA to consider 

penalties assessed by other government agencies where violations arise from the same set of 

facts. For instance, section 311(b)(8) of the Clean Water Act, 33 U.S.C. 1321(b)(8) authorizes 

EPA to consider any other penalty for the same incident when determining the appropriate Clean 

Water Act penalty. Likewise, section 113(e) of the CAA authorizes EPA to consider "payment 

by the violator of penalties previously assessed for the same violation" when assessing penalties 

for certain violations of Title I of the Act. 

 7. Prohibited Acts in the CAA

 

Section 203 of the Clean Air Act describes acts that are prohibited by law. This section 

and associated regulations apply equally to the greenhouse gas standards as to any other 

regulated pollutant. Acts that are prohibited by section 203 of the Clean Air Act include the 

introduction into commerce or the sale of a vehicle without a certificate of conformity, removing 

or otherwise defeating emission control equipment, the sale or installation of devices designed to 

defeat emission controls, and other actions. EPA proposed to include in the regulations a new 

section that details these prohibited acts. Prior regulations, such as the NLEV program, had 

included such a section, and although there is no burden associated with the regulations or any 

specific need to repeat what is in the Clean Air Act, EPA believes that including this language in 

the regulations provides clarity and improves the ease of use and completeness of the 

regulations. No comments were received on the proposal, and EPA is finalizing the section on 

prohibited acts (see 40 CFR 86.1854-12). 

8. Other Certification Issues

 a. Carryover/Carry Across Certification Test Data 

EPA's certification program for vehicles allows manufacturers to carry certification test data over 

and across certification testing from one model year to the next, when no significant changes to 

models are made. EPA will also apply this policy to CO2, N2O and CH4 certification test data. 

A manufacturer may also be eligible to use carryover and carry across data to demonstrate CO2

fleet average compliance if they have done so for CAFE purposes. 

 

b. Compliance Fees 

 

231 In re Spang & Co., 6 E.A.D. 226, 249 (EAB 1995) 232 B.J. Carney Industries, 7 E.A.D. 171, 232, n. 82 (EAB 1997). 
275 

 The CAA allows EPA to collect fees to cover the costs of issuing certificates of 

conformity for the classes of vehicles and engines covered by this rule. On May 11, 2004, EPA 

updated its fees regulation based on a study of the costs associated with its motor vehicle and 

engine compliance program (69 FR 51402). At the time that cost study was conducted the 

current rulemaking was not considered. 

At this time the extent of any added costs to EPA as a result of this rule is not known. EPA will 

assess its compliance testing and other activities associated with the rule and may amend its fees 

regulations in the future to include any warranted new costs. 

c. Small Entity Deferment 

 EPA is deferring CO2 standards for certain small entities, and these entities (necessarily) 

would not be subject to the certification requirements of this rule. 

 As discussed in Section III.B.8, businesses meeting the Small Business Administration 

(SBA) criterion of a small business as described in 13 CFR 121.201 would not be subject to the 

GHG requirements, pending future regulatory action. Such entities instead are required to 

submit a declaration to EPA containing a detailed written description of how that manufacturer 

qualifies as a small entity under the provisions of 13 CFR 121.201. This declaration would have 

to be signed by a chief officer of the company, and would have to be made at least 30 days prior 

to the introduction into commerce of any vehicles for each model year for which the small entity 

status is requested, but not later than December of the calendar year prior to the model year for 

which deferral is requested. For example, if a manufacturer will be introducing model year 2012 

vehicles in October of 2011, then the small entity declaration would be due in September, 2011. 

If 2012 model year vehicles are not planned for introduction until March, 2012, then the 

declaration would have to be submitted in December 2011. Such entities are not automatically 

exempted from other EPA regulations for light-duty vehicles and light-duty trucks; therefore, 

absent this annual declaration EPA would assume that each entity was not deferred from 

compliance with the greenhouse gas standards. 

As discussed in detail in Section III.B.6, small volume manufacturers with annual sales 

volumes of less than 5,000 vehicles will also be deferred from the CO2 standards, pending future 

regulatory action. These manufacturers would still be required to meet N2O and CH4 standards, 

however. To qualify for CO2 standard deferral, manufacturers would need to submit a 

declaration to EPA as described above, and would also be required to demonstrate due diligence 

in having attempted to first secure credits from other manufacturers. 

 

d. Onboard Diagnostics (OBD) and CO2 Regulations 

 The light-duty on-board diagnostics (OBD) regulations require manufacturers to detect 

and identify malfunctions in all monitored emission-related powertrain systems or 

components.233 Specifically, the OBD system is required to monitor catalysts, oxygen sensors, 

engine misfire, evaporative system leaks, and any other emission control systems directly 

intended to control emissions, such as exhaust gas recirculation (EGR), secondary air, and fuel 

control systems. The monitoring threshold for all of these systems or components is 1.5 times 

 

233 40 CFR 86.1806-04 
276 

the applicable standards, which typically include NMHC, CO, NOX, and PM. EPA did not 

propose that CO2 emissions would become one of the applicable standards required to be 

monitored by the OBD system. EPA did not propose CO2 become an applicable standard for 

OBD because it was confident that many of the emission-related systems and components 

currently monitored would effectively catch any malfunctions related to CO2 emissions. For 

example, malfunctions resulting from engine misfire, oxygen sensors, the EGR system, the 

secondary air system, and the fuel control system would all have an impact on CO2 emissions. 

Thus, repairs made to any of these systems or components should also result in an improvement 

in CO2 emissions. In addition, EPA did not have data on the feasibility or effectiveness of 

monitoring various emission systems and components for CO2 emissions and did not believe that 

it would be prudent to include CO2 emissions without such information. 

EPA did not address whether N2O or CH4 emissions should become applicable standards 

for OBD monitoring in the proposal. Several manufacturers felt that EPA’s silence on this issue 

implied that EPA was proposing that N2O and CH4 emissions become applicable OBD standards. 

They commented that EPA should not include them as part of OBD. They felt that adding N2O 

and CH4 would significantly increase OBD development burden, without significant benefit, 

since any malfunctions that increase N2O and CH4 would likely be caught by current OBD 

system designs. EPA agrees with the manufacturer’s comments on including N2O and CH4 as 

applicable standards. Therefore, at this time, EPA is not requiringCO2, N2O, and CH4 emissions 

as one of the applicable standards required for the OBD monitoring threshold. EPA plans to 

evaluate OBD monitoring technology, with regard to monitoring these GHG emissions-related 

systems and components, and may choose to propose to includeCO2, N2O, and CH4 emissions as 

part of the OBD requirements in a future regulatory action. 

 e. Applicability of Current High Altitude Provisions to Greenhouse Gases 

 Vehicles covered by this proposal must meet the CO2, N2O and CH4 standard at altitude. 

The CAA requires emission standards under section 202 for light-duty vehicles and trucks to 

apply at all altitudes.234 EPA does not expect vehicle CO2, CH4, or N2O emissions to be 

significantly different at high altitudes based on vehicle calibrations commonly used at all 

altitudes. Therefore, EPA will retain its current high altitude regulations so manufacturers will 

not normally be required to submit vehicle CO2 test data for high altitude. Instead, they must 

submit an engineering evaluation indicating that common calibration approaches will be utilized 

at high altitude. Any deviation in emission control practices employed only at altitude will need 

to be included in the auxiliary emission control device (AECD) descriptions submitted by 

manufacturers at certification. In addition, any AECD specific to high altitude will be required 

to include emissions data to allow EPA evaluate and quantify any emission impact and validity 

of the AECD. 

 f. Applicability of Standards to Aftermarket Conversions 

 With the exception of the small entity and small volume deferments, EPA’s emission 

standards, including greenhouse gas standards, will continue to apply as stated in the 

applicability sections of the relevant regulations. The greenhouse gas standards are being 

 

234 See CAA 206(f). 
277 

incorporated into 40 CFR part 86, subpart S, which includes exhaust and evaporative emission 

standards for criteria pollutants. Subpart S includes requirements for new light-duty vehicles, 

light-duty trucks, medium-duty passenger vehicles, Otto-cycle complete heavy-duty vehicles, 

and some incomplete light-duty trucks. Subpart S is currently specifically applicable to 

aftermarket conversion systems, aftermarket conversion installers, and aftermarket conversion 

certifiers, as those terms are defined in 40 CFR 85.502. EPA expects that some aftermarket 

conversion companies will qualify for and seek the small entity and/or small volume deferment, 

but those that do not qualify will be required to meet the applicable emission standards, including 

the greenhouse gas standards. 

g. Geographical Location of Greenhouse Gas Fleet Vehicles 

One manufacturer commented that the CAFE sales area location defined by Department 

of Transportation regulations is different than the EPA sales area location defined by the CAA. 

DOT regulations require CAFE compliance235 in the 50 states, the District of Columbia, and 

Puerto Rico. However, EPA emission certification regulations require emission compliance236

in the 50 states, the District of Columbia, the Puerto Rico, the Virgin Islands, Guam, American 

Samoa and the Commonwealth of the Northern Mariana Islands. 

The comment stated that EPA has the discretion under the CAA to align the sales area 

location of production vehicles for the greenhouse gas fleet with the sales area location for the 

CAFE fleet and recommended that EPA amend the definitions in 40 CFR 86.1803 accordingly. 

This would exclude from greenhouse gas requirements production vehicles that are introduced 

into commerce in the Virgin Islands, Guam, American Samoa, and the Commonwealth of the 

Northern Mariana. 

Although EPA has tried to harmonize greenhouse gas and CAFE requirements in this rule 

to the extent possible, EPA believes that the approach suggested in comment would be contrary 

to the requirements of the Act. EPA does not believe that the Agency has discretion under the 

CAA to exclude from greenhouse gas requirements production vehicles introduced into 

commerce in the Virgin Islands, Guam, American Samoa, and the Commonwealth of the 

Northern Mariana Islands. In addition, this change would introduce an undesirable level of 

complexity into the certification process and result in confusion due to vehicles intended for 

commerce in separate geographical locations being covered under a single certificate. For these 

 

235 DOT regulations at 49 CFR 525.4(a)(5) read “The term customs territory of the United States is used as defined 

in 19 U.S.C. 1202.” Section 19 U.S.C. 1202 has been replaced by the Harmonized Tariff Schedule of the United 

States. The Harmonized Tariff Schedule reads in part that "The term 'customs territory of the United 

States'...includes only the States, the District of Columbia, and Puerto Rico." 

236 Section 216 of the Clean Air Act defines the term commerce to mean “(A) commerce between any place in any 

State and any place outside thereof; and (B) commerce wholly within the District of Columbia.” 

Section 302(d) of the Clean Air Act reads “The term ``State'' means a State, the District of Columbia, the 

Commonwealth of Puerto Rico, the Virgin Islands, Guam, and American Samoa and includes the Commonwealth of 

the Northern Mariana Islands.” In addition, 40 CFR 85.1502 (14) regarding the importation of motor vehicles and 

motor vehicle engines defines the United States to include “the States, the District of Columbia, the Commonwealth 

of Puerto Rico, the Commonwealth of the Northern Mariana Islands, Guam, American Samoa, and the U.S. Virgin 

Islands.” 
278 

reasons, EPA will retain the proposed greenhouse gas production vehicle sales area location as 

defined in the CAA. 

 

 9. Miscellaneous Revisions to Existing Regulations 

 a. Revisions and Additions to Definitions 

 EPA has amended its definitions of "engine code," "transmission class," and 

"transmission configuration" in its vehicle certification regulations (Part 86) to conform to the 

definitions for those terms in its fuel economy regulations (Part 600). The exact terms in Part 86 

are used for reporting purposes and are not used for any compliance purpose (e.g., an engine 

code will not determine which vehicle was selected for emission testing). However, the terms 

are used for this purpose in Part 600 (e.g., engine codes, transmission class, and transmission 

configurations are all criteria used to determine which vehicles are to be tested for the purposes 

of establishing corporate average fuel economy). Since the same vehicles tested to determine 

corporate average fuel economy will also be tested to determine fleet average CO2, the same 

definitions will apply. Thus EPA has amended its Part 86 definitions of the above terms to 

conform to the definitions in Part 600. 

 

 Two provisions have been amended to bring EPA's fuel economy regulations in Part 600 

into conformity with the fleet average CO2 requirement contained in this rulemaking and with 

NHTSA's reform truck regulations. First, the definition of "footprint" in this rule is also being 

added to EPA's Part 86 and 600 regulations. This definition is based on the definition 

promulgated by NHTSA at 49 CFR 523.2. Second, EPA is amending its model year CAFE 

reporting regulations to include the footprint information necessary for EPA to determine the 

reformed truck standards and the corporate average fuel economy. This same information is 

included in this rule for fleet average CO2 and fuel economy compliance. 

 b. Addition of Ethanol Fuel Economy Calculation Procedures 

 EPA has amended part 600 to add calculation procedures for determining the carbonrelated exhaust emissions and calculating the fuel economy of vehicles operating on ethanol fuel. 

Manufacturers have been using these procedures as needed, but the regulatory language – which 

specifies how to determine the fuel economy of gasoline, diesel, compressed natural gas, and 

methanol fueled vehicles – has not previously been updated to specify procedures for vehicles 

operating on ethanol. Under today’s rule EPA is requiring use of a carbon balance approach for 

ethanol-fueled vehicles that is similar to the way carbon-related exhaust emissions are calculated 

for vehicles operating on other fuels for the purpose of determining fuel economy and for 

compliance with the fleet average CO2 standards. The carbon balance formula is similar to the 

one in place for methanol, except that ethanol and acetaldehyde emissions must also be measured 

for ethanol-fueled vehicles. The carbon balance equation for determining fuel economy is as 

follows, where CWF is the carbon weight fraction of the fuel and CWFexHC is the carbon weight 

fraction of the exhaust hydrocarbons: 

mpg = (CWF × SG × 3781.8)/((CWFexHC× HC) + (0.429 × CO) + (0.273 × CO2) + (0.375 × 

CH3OH) + (0.400 × HCHO) + (0.521 × C2H5OH) + (0.545 × C2H4O)) 
279 

The equation for determining the total carbon-related exhaust emissions for compliance with the 

CO2 fleet average standards is the following, where CWFexHC is the carbon weight fraction of the 

exhaust hydrocarbons: 

CO2-eq = (CWFexHC× HC) + (0.429 × CO) + (0.375 × CH3OH) + (0.400 × HCHO) + (0.521 × 

C2H5OH) + (0.545 × C2H4O) + CO2. 

c. Revision of Electric Vehicle Applicability Provisions 

In 1980 EPA issued a rule that provided for the inclusion of electric vehicles in the CAFE 

program.237 EPA now believes that certain provisions of the regulations should be updated to 

reflect the current state of motor vehicle emission and fuel economy regulations. In particular, 

EPA believes that the exemption of electric vehicles in certain cases from fuel economy labeling 

and CAFE requirements should be reevaluated and revised. 

The 1980 rule created an exemption for electric vehicles from fuel economy labeling in 

the following cases: (1) if the electric vehicles are produced by a company that produces only 

electric vehicles; and (2) if the electric vehicles are produced by a company that produces fewer 

than 10,000 vehicles of all kinds worldwide. EPA believes that this exemption language is no 

longer appropriate and is deleting it from the affected regulations. First, since 1980 many 

regulatory provisions have been put in place to address the concerns of small manufacturers and 

enable them to comply with fuel economy and emission programs with reduced burden. EPA 

believes that all small volume manufacturers should compete on a fair and level regulatory 

playing field and that there is no longer a need to treat small volume electric vehicles any 

differently than small volume manufacturers of other types of vehicles. Current regulations 

contain streamlined certification procedures for small companies, and because electric vehicles 

emit no direct pollution there is effectively no certification emission testing burden. For example, 

the greenhouse gas regulations contain a provision allowing the exemption of certain small 

entities. Meeting the requirements for fuel economy labeling and CAFE will entail a testing, 

reporting, and labeling burden, but these burdens are not extraordinary and should be applied 

equally to all small volume manufacturers, regardless of the fuel that moves their vehicles. EPA 

has been working with existing electric vehicle manufacturers on fuel economy labeling, and 

EPA believes it is important for the consumer to have impartial, accurate, and useful label 

information regarding the energy consumption of these vehicles. Second, EPCA does not 

provide for an exemption of electric vehicles from NHTSA’s CAFE program, and NHTSA 

regulations regarding the applicability of the CAFE program do not provide an exemption for 

electric vehicles. Third, the blanket exemption for any manufacturer of only electric vehicles 

assumed at the time that these companies would all be small, but the exemption language 

inappropriately did not account for size and would allow large manufacturers to be exempt as 

well. Finally, because of growth expected in the electric vehicle market in the future, EPA 

believes that the labeling and CAFE regulations need to be designed to more specifically 

accommodate electric vehicles and to require that consumers be provided with appropriate 

information regarding these vehicles. For these reasons EPA has revised 40 CFR Part 600 

 

237 45 FR 49256, July 24, 1980. 
280 

applicability regulations such that these electric vehicle exemptions are deleted starting with the 

2012 model year. 

d. Miscellaneous Conforming Regulatory Amendments 

EPA has made a number of minor amendments to update the regulations as needed or to 

ensure that the regulations are consistent with changes discussed in this preamble. For example, 

for consistency with the ethanol fuel economy calculation procedures discussed above, EPA has 

amended regulations where necessary to require the collection of emissions of ethanol and 

acetaldehyde. Other changes are made to applicability sections to remove obsolete regulatory 

requirements such as phase-ins related to EPA’s Tier 2 emission standards program, and still 

other changes are made to better accommodate electric vehicles in EPA emission control 

regulations. Not all of these minor amendments are noted in this preamble, thus the reader 

should carefully evaluate regulatory text to ensure a complete understanding of the regulatory 

changes being promulgated by EPA. 

10. Warranty, Defect Reporting, and Other Emission-related Components Provisions

As outlined in the proposal, Section 207(a) of the Clean Air Act (CAA) requires 

manufacturers to provide a defect warranty that warrants a vehicle is designed to comply with 

emission standards and will be free from defects that may cause noncompliance over the 

specified warranty period which is 2 years/24,000 miles (whichever is first) or, for major 

emission control components, 8 years/ 80,000 miles. The warranty covers parts which must 

function properly to assure continued compliance with emission standards. The proposal 

explained that under the greenhouse gas rule, this coverage would include compliance with the 

proposed CO2, CH4, and N2O standards. The proposal did not discuss the CAA Section 207(b) 

performance warranty. 

EPA proposed to include air conditioning system components under the CAA section 

207(a) emission warranty in cases where manufacturers use air conditioning leakage and 

efficiency credits to comply with the proposed fleet average CO2 standards. The warranty period 

of 2 years/ 24,000 miles would apply. EPA requested comments as to whether any other parts or 

components should be designated as ‘‘emission related parts’’ and thus subject to warranty and 

defect reporting provisions under this proposal. 

 

The Alliance of Automobile Manufacturers (Alliance), Toyota and the State of New 

Jersey provided comments. The State of New Jersey supported EPA’s proposal to include motor 

vehicle air conditioning system components under the emission warranty provisions. Both the 

Alliance and Toyota commented that emission warranty requirements are not appropriate for 

mobile air conditioners because 1) in-use performance of the air conditioning system at levels 

comparable to a new vehicle is not needed to achieve the emission levels targeted by EPA and 2) 

manufacturer general warranties already cover air conditioning systems and are typically longer 

than the two-year/24,000 mile proposed emissions warranty period. 

Regarding direct emissions (refrigerant leakage), the Alliance and Toyota commented 

that warranty requirements are unnecessary for refrigerants with a global warming potential 
281 

(GWP) below 150 because the environmental impact is negligible even if refrigerants are 

released from the system. Regarding indirect emissions (fuel consumed to power the air 

conditioning system), the Alliance commented that EPA should not require warranty coverage of 

the air conditioning system because in the vast majority of air conditioning failure modes, the 

system stops cooling and ceases operation -- either because the critical moving parts stop moving 

or because the system is switched off -- thereby actually reducing the indirect CO2 emissions. 

EPA received no comments regarding 1) other parts or components which should be 

designated as ‘‘emission related parts’’ subject to warranty requirements, 2) defect reporting 

requirements, or 3) other requirements associated with warranty and defect reporting 

requirements (e.g., voluntary emission-related recall reporting requirements, performance 

warranty requirements, voluntary aftermarket parts certification requirements or tampering 

requirements. 

Defect Warranty. EPA’s current policy for defect warranty requirements is provided in 

Section 207 of the Act. There are currently no defect warranty regulations. Congress provided 

under Section 207(a) and (b) of the CAA that emission-related components shall be covered 

under the 207(a) defect warranty and the 207(b) performance warranty for the warranty period 

outlined in section 207(i) of the CAA. For example, section 207(a) reads in part: 

“....the manufacturer of each new motor vehicle and new motor vehicle engine shall warrant 

to the ultimate purchaser and each subsequent purchaser that such vehicle or engine is (A) 

designed, built and equipped so as to conform at the time of sale with applicable regulations 

under section 202, and (B) free from defects in materials and workmanship which cause such 

vehicle or engine to fail to conform with applicable regulations for its useful life (as 

determined under sec. 202(d)). In the case of vehicles and engines manufactured in the 

model year 1995 and thereafter such warranty shall require that the vehicle or engine is free 

from any such defects for the warranty period provided under subsection (i).” 

Section 207(i) reads in part: 

"(i) Warranty Period.--- 

(1) In General.—For purposes of subsection (a)(1) and subsection (b), the warranty period, 

effective with respect to new light-duty trucks and new light-duty vehicles and engines, 

manufactured in model year 1995 and thereafter, shall be the first 2 years or 24,000 miles of 

use (whichever first occurs), except as provided in paragraph (2). For the purposes of 

subsection (a)(1) and subsection (b), for other vehicles and engines the warranty period shall 

be the period established by the Administrator by regulation (promulgated prior to the 

enactment of the Clean Air Act Amendments of 1990) for such purposes unless the 

Administrator subsequently modifies such regulation. 

(2) In the case of a specified major emission control component, the warranty period for new 

light-duty trucks and new light-duty vehicles manufactured in the model year 1995 and 

thereafter for purposes of subsection (a)(1) and subsection (b) shall be 8 years or 80,000 

miles of use (whichever first occurs). As used in this paragraph, the term 'specified major 

emission control component' means only a catalytic converter, an electronic emissions 

control unit, and an onboard emissions diagnostic device, except that the Administrator may 

designate any other pollution control device or component as a specified major emission 

control component if--- 

(A) the device or component was not in general use on vehicles and engines manufactured 

prior to the model year 1990; and (B) the Administrator determines that the retail cost 

(exclusive of installation costs) of such device or component exceeds $200 (in 1989 dollars, 
282 

adjusted for inflation or deflation as calculated by the Administrator at the time of such 

determination....." 

Thus, the CAA provides the basis of the warranty requirements contained in today’s final 

rule, which will cover “emission related parts” necessary to provide compliance with CO2, CH4, 

and N2O standards. Emission related parts would include those parts, systems, components and 

software installed for the specific purpose of controlling emissions or those components, 

systems, or elements of design which must function properly to assure continued vehicle 

emission compliance, including compliance with CO2, CH4, and N2O standards; (similar to the 

current definition of “emission related parts” provided in 40 CFR 85.2102(14) for performance 

warranty requirements). For example, today’s action will extend defect warranty requirements to 

emission-related components on advanced technology vehicles such as cylinder deactivation 

components or batteries used in hybrid-electric vehicles. 

Under today’s rule, EPA will extend the defect warranty requirement to emission-related 

components necessary to meet CO2, CH4, and N2O standards, including emission-related 

components which are used to obtain optional credits for 1) certification of advanced technology 

vehicles, 2) credits for reduction of air conditioning refrigerant leakage, 3) credits for improving 

air conditioning system efficiency, 4) credits for off-cycle CO2 reducing technologies, and 5) 

optional early credits for 2009-2011 model year vehicles outlined in the provisions of 40 CFR 

86.1867-12 (which are required to be reported to EPA after the 2011 model year). 

Regarding the comments received by the Alliance and Toyota, that warranty coverage is 

not needed for air conditioning components, EPA believes that the Clean Air Act requires 

warranty coverage on components used to demonstrate compliance with the emission standards, 

including components used in the optional credit programs for reduction of air conditioning 

refrigerant leakage and air conditioning efficiency improvements. EPA does not have the 

discretion to forgo warranty requirements by regulation in today’s final rule. Thus, the Agency 

is adopting defect warranty requirements for air conditioning components as proposed. 

Effective date of Warranty for Components used to Obtain Early Credits. Regarding the 

defect warranty for emission-related components used to obtain optional early credits for 2009-

2011 vehicles, the defect warranty should provide coverage for these components at the time the 

early credits report is submitted to EPA (e.g., no later than 90 days after the end of the 2011 

model year). For example, the defect warranty for early credit components does not have to 

apply retroactively (before the manufacturer declares the credits to EPA). The Agency believes 

this approach is reasonable, because 1) manufacturer’s early credit plans may not be finalized 

until after vehicles have been produced; 2) manufacturers will be provided satisfactory lead time 

to provide warranty requirements to customers; and 3) the manufacturer’s basic (bumper-tobumper) warranty for air conditioning and other early credit components are typically longer 

than the two-year/24,000 mile proposed warranty period which will be applicable to most early 

credit components. ). 

Performance Warranty. EPA did not propose any changes to the current performance 

warranty requirements, because the performance warranty preconditions outlined in section 

207(b) of the CAA have not been satisfied. For example, section 207(b) of the CAA comes into 

play if EPA issues performance warranty short test regulations and determines that there are 
283 

inspection facilities available in the field to determine when vehicles do not comply with 

greenhouse gas emission standards. Once EPA issues performance warranty short test 

regulations, then the CAA performance warranty provisions require the manufacturer to pay for 

emission-related repairs if a vehicle is properly maintained and used, and fails the short test and 

is required to repair the vehicle. Currently the provisions of 85.2207 and 85.2222 provide 

performance warranty short test (commonly called an inspection and maintenance or I/M test). 

The provisions of 85.2207 and 85.2222 provide an I/M test procedure and failure criteria based 

on an inspection of the onboard diagnostic (OBD) system of the vehicle. The OBD inspection 

procedure in 85.2222 is currently used in most areas of the country where I/M tests are required. 

For example, a vehicle fails the OBD test procedure outlined in 85.2222 if the vehicle’s MIL is 

commanded to be “on” during the I/M test procedure. 

Although most areas of the country which require I/M testing use the OBD test procedure 

outlined in 40 CFR 85.2207 and 85.2222, the NPRM did not propose that the OBD system 

would be required monitor CO2, CH4 or N2O emission performance, ref 74 FR 49574 and 74 FR 

49755. Therefore, the performance warranty preconditions in 201(b) of the CAA are not 

currently in effect for greenhouse gas CO2 emissions (and the performance warranty continues to 

apply for criteria pollutants but not for greenhouse emissions). 

Defect Reporting and Voluntary Emission-related Recall Reporting Requirements. EPA 

did not propose any changes to the current defect reporting and voluntary emission-related recall 

reporting requirements outlined in the provisions of 40 CFR 85.1901-1909. Although EPA 

requested comments, we did not receive any comments on defect reporting and voluntary 

emission-related recall reporting requirements. Current regulations require manufacturers to 

submit a defect report to EPA whenever an emission-related defect exists in 25 or more in-use 

vehicles or engines of the same model year. The defect report is required to be submitted to EPA 

within 15 working days of the time the manufacturer become aware of that a defect affects 25 or 

more vehicles. Current regulations require manufacturers to submit to EPA voluntary emissionrelated recall reports within 15 working days of the date when owner notification begins. 

Similar to the performance warranty requirements outlined above, the Agency believes 

that as proposed, defect reporting and voluntary emission-related recall reporting requirements 

would apply to emission-related components necessary to meet CO2, CH4, and N2O standards 

for the useful life of the vehicle, including emission-related components which are used to obtain 

optional credits for 1) certification of advanced technology vehicles, 2) credits for reduction of 

air conditioning refrigerant leakage, 3) credits for improving air conditioning system efficiency, 

and 4) credits for off-cycle CO2 reducing technologies, and 5) optional early credits for 2009-

2011 model year vehicles outlined in the provisions of 40 CFR 86.1867-12 (which are required 

to be reported to EPA after the 2011 model year). For early credit components, defect reporting 

requirements and voluntary emission-related recall reporting requirements become effective at 

the time the early credits report is submitted to EPA (e.g., no later than 90 days after the end of 

the 2011 model year). 

The final rule includes a minor clarification to the provisions of 40 CFR 85.1902 (b) and 

(d) to clarify that beginning with the 2012 model year, manufacturers are required to report 
284 

emission-related defects and voluntary emission recalls to EPA, including emission-related 

defects and voluntary emission recalls related to greenhouse gas emissions (CH4, N2O and CO2). 

Voluntary Aftermarket Parts Certification Program. EPA did not propose any changes to 

or receive comments on the current voluntary aftermarket parts certification program outlined in 

the provisions of 40 CFR 85.2102 and 85.2112-2123. These regulations provide an optional 

method for aftermarket manufacturers to certify that aftermarket parts (notably aftermarket 

catalysts) comply with current EPA emission requirements for criteria pollutants. The current 

regulations, although they need updating to conform to current Tier 2 requirements (including 

the 120,000 mile full useful life requirement for passenger cars), are being used today by several 

aftermarket parts manufacturers. 

The current aftermarket parts regulations were not intended to evaluate the effect of 

aftermarket parts on greenhouse gas emissions. For example, the current aftermarket parts 

regulations, when promulgated, provided durability requirements (which are not currently 

considered a major issue with CO2 emissions) and did not consider the ramifications of certifying 

aftermarket parts to fleet average or in-use CO2 standards. However, current regulations seem 

appropriate to evaluate the effects of aftermarket parts on CH4 and N2O emissions, because the 

emission control components used to control CH4 and N2O are similar to the emission control 

components used to control other criteria pollutants. 

 

Therefore, the Agency is including some minor revisions in the final to the provisions of 

40 CFR 85.2112. The revisions clarify that beginning with the 2012 model year, the current 

aftermarket parts regulations are applicable to light-duty vehicles, light-duty trucks and mediumduty passenger vehicles for exhaust emissions (including CH4 and N2O emissions) but should not 

be used to evaluate the effects of automotive aftermarket parts on CO2 emissions. Also included 

in the final rule is a revision to ensure that beginning with the 2012 model year, the useful life 

requirements contained in the 40 CFR Part 85 aftermarket parts regulations are consistent with 

the useful life requirements contained in 40 CFR Part 86 regulations. 

Tampering. EPA did not provide any tampering guidance in the proposal, nor did EPA 

receive any comments on tampering. Even though EPA did not address tampering or receive any 

comments on the subject, EPA believes that once implementation of the GHG regulations 

begins, there may be interest among manufacturers and the general public as to how EPA will 

view tampering with respect to the GHG standards. EPA believes that a reasonable approach for 

the interpretation of tampering through the 2016 model year would be to not consider any 

alteration or modification made to a light-duty vehicle that is temporary in nature to be construed 

as tampering for the purposes of CO2 emissions. Examples of this might include temporary roof 

racks and temporary snow tires. All parts suppliers should provide clear instructions about the 

temporary nature of any aftermarket part that may affect greenhouse gas emissions, and this 

provision does not apply to any aftermarket part or modifications affecting criteria pollutant 

emissions. Even if a modification is not temporary, EPA will permit modifications to vehicles 

that involve components weighing less than or equal to 500 pounds, consistent with Advisory 

Circular (A/C) 64238. All A/C-64 requirements must still be met for modifications that affect 

 

238 This document can be found electronically at 

http://iaspub.epa.gov/otaqpub/display_file.jsp?docid=14366&flag=1. AC-64 requires dealer modifications to be less 
285 

criteria pollutants. EPA plans to review in-use data on vehicles in modified conditions, and plans 

to revisit the above exclusions from the prohibition against tampering239 once the impact of 

various vehicle alterations on CO2 rates has been more thoroughly analyzed. For the 2017 model 

year and beyond, EPA may readdress both of these tampering exemptions from modifications 

that may affect carbon related exhaust emission rates. 

For OEMs, EPA expects any modification or addition that is considered a vehicle 

“option” and may affect emission rate will continue to follow testing requirements in 40 CFR 

86.1832-01. 

 11. Light Duty Vehicles and Fuel Economy Labeling 

 American consumers need accurate and meaningful information about the environmental 

and fuel economy performance of new light duty vehicles. EPA believes it is important that the 

fuel-economy label affixed to the new vehicles provide consumers with the critical information 

they need to make smart purchase decisions, especially in light of the expected increase in 

market share of electric and other advanced technology vehicles. Consumers may need new and 

different information than today’s vehicle labels provide in order to help them understand the 

energy use and associated cost of owning these electric and advanced technology vehicles. 

Therefore, in proposing this greenhouse gas action, EPA sought comment on issues 

surrounding consumer vehicle labeling in general, and labeling of advanced technology vehicles 

in particular. EPA specifically asked for input as to whether today’s miles per gallon fuel 

economy metric provides adequate information to consumers. 

EPA received considerable public input in response to the request for comment in the 

proposal. Since the greenhouse gas rule was proposed in September, 2009, EPA has initiated a 

separate rulemaking to explore in detail the information displayed on the fuel economy label and 

the methodology for deriving that information. The purpose of the vehicle labeling rulemaking is 

to ensure that American consumers continue to have the most accurate, meaningful, and useful 

information available to them when purchasing new vehicles, and that the information is 

presented to them in clear and understandable terms. 

EPA will consider all vehicle labeling comments received in response to the greenhouse 

gas proposal in its development of the new labeling rule in coming months. We encourage the 

interested public to stay engaged and continue to provide input on this issue in the context of the 

vehicle labeling rulemaking. 

 

F. How Will This Final Rule Reduce GHG Emissions and Their Associated 

Effects? 

This action is an important step towards curbing steady growth of GHG emissions from 

cars and light trucks. In the absence of control, GHG emissions worldwide and in the U.S. are 

 than or equal to 500 pounds and not remove the vehicle from its original test group or evaporative emissions family. 

Both criteria are still required for modifications that affect criteria pollutants. 239 42 U.S.C. 7522(a)(3) 
286 

projected to continue steady growth. Table III.F-1 shows emissions of CO2, methane, nitrous 

oxide and air conditioning refrigerants on a CO2-equivalent basis for calendar years 2010, 2020, 

2030, 2040 and 2050. As shown below, U.S. GHGs are estimated to make up roughly 17 percent 

of total worldwide emissions in 2010, and the contribution of direct emissions from cars and 

light-trucks to this U.S. share is growing over time, reaching an estimated 19 percent of U.S. 

emissions by 2030 in the absence of control. As discussed later in this section, this steady rise in 

GHG emissions is associated with numerous adverse impacts on human health, food and 

agriculture, air quality, and water and forestry resources. 

Table III.F-1 Reference Case GHG Emissions by Calendar Year (MMTCO2eq)

 2010 2020 2030 2040 2050 

All Sectors (Worldwide)a 41,016 48,059 52,870 56,940 60,209 

All Sectors (U.S. Only)a 7,118 7,390 7,765 8,101 8,379 

U.S. Cars/Light Truck 

Onlyb 1,243 1,293 1,449 1,769 2,219 

a

ADAGE model projections, U.S. EPA 240 

b MOVES2010 (2010), OMEGA Model (2020-50) U.S. EPA. See RIA Chapter 5.3 for modeling details. 

EPA’s GHG rule will result in significant reductions as newer, cleaner vehicles come into 

the fleet, and the rule is estimated to have a measurable impact on world global temperatures. As 

discussed in Section I, this GHG rule is part of a joint National Program such that a large 

majority of the projected benefits would be achieved jointly with NHTSA’s CAFE standards, 

which are described in detail in Section IV. EPA estimates the reductions attributable to the 

GHG program over time assuming the model year 2016 standards continue indefinitely post2016,241 compared to a reference scenario in which the 2011 model year fuel economy standards 

continue beyond 2011. 

Using this approach EPA estimates these standards would cut annual fleetwide car and 

light truck tailpipe CO2-eq emissions by 21 percent by 2030, when 90 percent of car and light 

truck miles will be travelled by vehicles meeting the new standards. Roughly 20 percent of these 

reductions are due to “upstream” emission reductions from gasoline extraction, production and 

distribution processes as a result of reduced gasoline demand associated with this rule. Some of 

the overall emission reductions also come from projected improvements in the efficiency of 

vehicle air conditioning systems, which will substantially reduce direct emissions of HFCs, one 

of the most potent greenhouse gases, as well as indirect emissions of tailpipe CO2 emissions 

attributable to reduced engine load from air conditioning. In total, EPA estimates that compared 

to a baseline of indefinite 2011 model year standards, net GHG emission reductions from the 

program would be 307 million metric tons CO2-equivalent (MMTCO2eq) annually by 2030, 

 

240 U.S. EPA (2009). “EPA Analysis of the American Clean Energy and Security Act of 2009: H.R. 2454 in the 

111th Congress.” U.S. Environmental Protection Agency, Washington, DC, USA 

(www.epa.gov/climatechange/economics/economicanalyses.html). ADAGE model projections of worldwide and 

U.S. totals include EISA, and are provided for context. 

241 This analysis does not include the EISA requirement for 35 MPG through 2020 or California’s Pavley 1 GHG 

standards. The standards are intended to supersede these requirements, and the baseline case for comparison are the 

emissions that would result without further action above the currently promulgated fuel economy standards. 
287 

which represents a reduction of 4 percent of total U.S. GHG emissions and 0.6 percent of total 

worldwide GHG emissions projected in that year. This estimate accounts for all upstream fuel 

production and distribution emission reductions, vehicle tailpipe emission reductions including 

air conditioning benefits, as well as increased vehicle miles travelled (VMT) due to the 

"rebound" effect discussed in Section III.H. EPA estimates this would be the equivalent of 

removing approximately 60 million cars and light trucks from the road in this timeframe.242 

EPA projects the total reduction of the program over the full life of model year 2012-

2016 vehicles to be about 960 MMTCO2eq, with fuel savings of 78 billion gallons (1.8 billion 

barrels) of gasoline over the life of these vehicles, assuming that some manufacturers take 

advantage of low-cost HFC reduction strategies to help meet these standards. 

The impacts on global mean temperature and global mean sea level rise resulting from 

these emission reductions are discussed in Section III.F.3. 

1. Impact on GHG Emissions

This action will reduce GHG emissions emitted directly from vehicles due to reduced 

fuel use and more efficient air conditioning systems. In addition to these “downstream” 

emissions, reducing CO2 emissions translates directly to reductions in the emissions associated 

with the processes involved in getting petroleum to the pump, including the extraction and 

transportation of crude oil, and the production and distribution of finished gasoline (termed 

“upstream” emissions). Reductions from tailpipe GHG standards grow over time as the fleet 

turns over to vehicles subject to the standards, meaning the benefit of the program will continue 

as long as the oldest vehicles in the fleet are replaced by newer, lower CO2 emitting vehicles. 

EPA is not projecting any reductions in tailpipe CH4 or N2O emissions as a result of the 

emission caps set forth in this rule, which are meant to prevent emission backsliding and to bring 

diesel vehicles equipped with advanced technology aftertreatment, and other advanced 

technology vehicles such as lean-burn gasoline vehicles, into alignment with current gasoline 

vehicle emissions.243

No substantive comments were received on the emissions modeling methods or on the 

greenhouse gas inventories presented in the proposal. These analyses are updated here to include 

model revisions and more recent economic analysis, including revised estimates of future vehicle 

sales, fuel prices, and vehicle miles traveled. The primary source for these data is the AEO 2010 

preliminary release.244 For more details, please see the TSD and RIA Chapter 5. 

 As detailed in the RIA, EPA estimated calendar year tailpipe CO2 reductions based on 

pre- and post-control CO2 gram per mile levels from EPA’s OMEGA model and assumed to 

 

242 Estimated using MOVES2010, the average vehicle in the light duty fleet emitted 5.1 tons of CO2 during calendar 

year 2008. 

243 EPA is adopting a compliance option whereby manufacturers can comply with a CO2 equivalent standard in lieu 

of meeting the CH4 and N2O standards. This should have no effect on the estimated GHG reductions attributable to 

the rule since a condition of meeting that alternative standard is that the fleetwide CO2 target remains in place. 244 Energy Information Administration. Annual Energy Outlook 2010 Early Release. 

http://www.eia.doe.gov/oiaf/aeo/. 
288 

continue indefinitely into the future, coupled with VMT projections derived from AEO 2010 

Early Release. These estimates reflect the real-world CO2 emissions reductions projected for 

the entire U.S. vehicle fleet in a specified calendar year, including the projected effect of air 

conditioning credits, the TLAAS program and FFV credits. EPA also estimated full lifetime 

reductions for model years 2012-2016 using pre- and post-control CO2 levels projected by the 

OMEGA model, coupled with projected vehicle sales and lifetime mileage estimates. These 

estimates reflect the real-world CO2 emissions reductions projected for model years 2012 

through 2016 vehicles over their entire life. 

This rule allows manufacturers to earn credits for improved vehicle air conditioning 

efficiency. Since these improvements are relatively low cost, EPA projects that manufacturers 

will take advantage of this flexibility, leading to reductions from emissions associated with 

vehicle air conditioning systems. As explained above, these reductions will come from both 

direct emissions of air conditioning refrigerant over the life of the vehicle and tailpipe CO2

emissions produced by the increased load of the A/C system on the engine. In particular, EPA 

estimates that direct emissions of HFCs, one of the most potent greenhouse gases, would be 

reduced 50 percent from light-duty vehicles when the fleet has turned over to more efficient 

vehicles. The fuel savings derived from lower tailpipe CO2 would also lead to reductions in 

upstream emissions. Our estimated reductions from the A/C credits program are based on our 

analysis of how manufacturers are expected to take advantage of this credit opportunity in 

complying with the CO2 fleetwide average tailpipe standards. 

Upstream emission reductions associated with the production and distribution of fuel 

were estimated using emission factors from DOE’s GREET1.8 model, with some modifications 

as detailed in Chapter 5 of the RIA. These estimates include both international and domestic 

emission reductions, since reductions in foreign exports of finished gasoline and/or crude would 

make up a significant share of the fuel savings resulting from the GHG standards. Thus, 

significant portions of the upstream GHG emission reductions will occur outside of the U.S.; a 

breakdown of projected international versus domestic reductions is included in the RIA. 

a. Calendar Year Reductions for Future Years 

 

Table III.F.1-1 shows reductions estimated from these GHG standards assuming a precontrol case of 2011 MY standards continuing indefinitely beyond 2011, and a post-control case 

in which 2016 MY GHG standards continue indefinitely beyond 2016.245 These reductions are 

broken down by upstream and downstream components, including air conditioning 

improvements, and also account for the offset from a 10 percent VMT “rebound” effect as 

discussed in Section III.H. Including the reductions from upstream emissions, total reductions 

are estimated to reach 307 MMTCO2eq annually by 2030 (a 21 percent reduction in U.S. car and 

light truck emissions), and grow to over 500 MMTCO2eq in 2050 as cleaner vehicles continue to 

come into the fleet (a 23 percent reduction in U.S. car and light truck emissions). 

Table III.F.1-1 Projected GHG Reductions (MMTCO2eq per year)

 

245 Legally, the 2011 CAFE standards only apply to the 2011 model year and no standards apply to future model 

years. However, we do not believe that it would be appropriate to assume that no CAFE standards would apply 

beyond the 2011 model year when projecting the impacts of this rule. 

Comment [A28]: Please tee up the issue of 

leakage – since there will be a discernible impact on 

the world price of crude oil, we expect greater 

consumption of oil in other countries as a result of 

our rule, which will have implications for GHG 

emissions. Can you please state the likely magnitude 

of that effect? 
289 

Calendar Year: 2020 2030 2040 2050 

Net Reduction* 156.4 307.0 401.5 505.9 

Net CO2 139.1 273.3 360.4 458.7 

Net other GHG 17.3 33.7 41.1 47.2 

Downstream Reduction 125.2 245.7 320.7 403.0

CO2 (excluding A/C) 101.2 199.5 263.2 335.1

A/C – indirect CO2 10.6 20.2 26.5 33.8

 A/C – direct HFCs 13.3 26.0 30.9 34.2

 CH4 (rebound effect) 0.0 0.0 0.0 0.0 

 N2O (rebound effect) 0.0 -0.1 -0.1 -0.1 

Upstream Reduction 31.2 61.3 80.8 102.9

CO2 27.2 53.5 70.6 89.9 

CH4 3.9 7.6 10.0 12.7 

N2O 0.1 0.3 0.3 0.4 

 

Percent reduction relative to U.S. 

reference (cars + light trucks) 12.1% 21.2% 22.7% 22.8%

Percent reduction relative to U.S. 

reference (all sectors) 2.1% 4.0% 5.0% 6.0%

Percent reduction relative to 

worldwide reference 0.3% 0.6% 0.7% 0.8%

* includes impacts of 10% VMT rebound rate presented in Table III.F.1-3 

 

b. Lifetime Reductions for 2012-2016 Model Years 

EPA also analyzed the emission reductions over the full life of the 2012-2016 model year 

cars and trucks affected by this program.246 These results, including both upstream and 

downstream GHG contributions, are presented in Table III.F.1-2, showing lifetime reductions of 

about 960 MMTCO2eq, with fuel savings of 78 billion gallons (1.8 billion barrels) of gasoline. 

Table III.F.1-2 Projected Net GHG Reductions (MMTCO2eq per year)

Model Year Lifetime GHG 

Reduction 

(MMT CO2 EQ) 

Lifetime Fuel 

Savings 

(Billion Gallons) 

2012 88.9 7.3 

2013 130.2 10.5 

2014 174.2 13.9 

2015 244.2 19.5 

2016 324.6 26.5 

 

246 As detailed in the RIA Chapter 5 and TSD Chapter 4, for this analysis the full life of the vehicle is represented by 

average lifetime mileages for cars (195,000 miles) and trucks (226,000 miles) averaged over calendar years 2012 

through 2030, a function of how far vehicles drive per year and scrappage rates. 
290 

Total Program Benefit 962.0 77.7 

c. Impacts of VMT Rebound Effect 

As noted above and discussed more fully in Section III.H., the effect of fuel cost on VMT 

(“rebound”) was accounted for in our assessment of economic and environmental impacts of this 

rule. A 10 percent rebound case was used for this analysis, meaning that VMT for affected 

model years is modeled as increasing by 10 percent as much as the increase in fuel economy; i.e., 

a 10 percent increase in fuel economy would yield a 1.0 percent increase in VMT. Results are 

shown in Table III.F.1-3; using the 10 percent rebound rate results in an overall emission 

increase of 25.0 MMTCO2eq annually in 2030 (this increase is accounted for in the reductions 

presented in Tables III.F.1-1 and III.F.1-2). Our estimated changes in CH4 or N2O emissions as 

a result of these vehicle GHG standards are attributed solely to this rebound effect. 

Table III.F.1-3 GHG Impact Of 10% VMT Rebounda

(MMTCO2eq per year)

 2020 2030 2040 2050 

Total GHG Increase 13.0 25.0 32.9 41.9 

Tailpipe & Indirect A/C CO2 10.2 19.6 25.8 32.8 

Upstream GHGs b 2.8 5.4 7.1 9.1 

Tailpipe CH4 0.0 0.0 0.0 0.0 

Tailpipe N2O 0.0 0.1 0.1 0.1 

a

 These impacts are included in the reductions shown in Table III.F.1-1 and III.F.1-2. 

b

 Upstream rebound impact calculated as upstream total CO2 effect times ratio of downstream tailpipe rebound 

CO2 effect to downstream tailpipe total CO2 effect. 

d. Analysis of Alternatives 

EPA analyzed two alternative scenarios, including 4% and 6% annual increases in GHG 

emission standards. In addition to this annual increase, EPA assumed that manufacturers would 

use air conditioning improvements in identical penetrations as in the primary scenario. Under 

these assumptions, EPA expects achieved fleetwide average emission levels of 253 g/mile CO2eq 

(4%), and 230 g/mile CO2eq(6%) in 2016. 

As in the primary scenario, EPA assumed that the fleet complied with the standards. For 

full details on modeling assumptions, please refer to RIA Chapter 5. EPA’s assessment of these 

alternative standards, including our response to public comments, is discussed in Section III.D. 
291 

Table III.F.1-4 Calendar Year Impacts Of Alternative Scenarios

Calendar Year 

 Scenario CY 2020 CY2030 CY 2040 CY 2050 

Total GHG 

Reductions (MMT 

CO2eq) 

Primary -156.4 -307.0 -401.5 -505.8 

4% -141.9 -286.2 -375.4 -472.9 

6% -202.6 -403.4 -529.3 -668.7 

Fuel Savings 

(Billion Gallons 

Gasoline 

Equivalent) 

Primary -12.6 -24.7 -32.6 -41.5 

4% -11.3 -22.9 -30.3 -38.6 

6% -16.7 -33.2 -43.9 -55.9 

Table III.F.1-5 Model Year Impacts of Alternative Scenarios

Model Year Lifetime 

 Scenario MY 2012 MY 2013 MY 2014 MY 2015 MY 2016 Total 

Total GHG 

Reductions (MMT 

CO2eq) 

Primary -88.8 -130.2 -174.2 -244.2 -324.6 -962.0 

4% -39.9 -96.6 -155.4 -226.5 -303.6 -822.0 

6% -61.7 -146.5 -237.0 -332.2 -427.6 -1,204.9 

Fuel Savings 

(Billion Gallons 

Gasoline 

Equivalent) 

Primary -7.3 -10.5 -13.9 -19.5 -26.5 -77.7 

4% -2.9 -7.1 -12.2 -18.0 -24.6 -64.8 

6% -4.9 -12.0 -19.4 -27.3 -35.6 -99.1 

2. Overview of Climate Change Impacts from GHG Emissions

Once emitted, GHGs that are the subject of this regulation can remain in the atmosphere 

for decades to centuries, meaning that 1) their concentrations become well-mixed throughout the 

global atmosphere regardless of emission origin, and 2) their effects on climate are long lasting. 

GHG emissions come mainly from the combustion of fossil fuels (coal, oil, and gas), with 

additional contributions from the clearing of forests and agricultural activities. The transportation 

sector represents a significant portion, 28%, of U.S. GHG emissions.247

This section provides a summary of observed and projected changes in GHG emissions 

and associated climate change impacts. The source document for the section below is the 

Technical Support Document (TSD)248 for EPA’s Endangerment and Cause or Contribute 

Findings Under the Clean Air Act.249 Below is the Executive Summary of the TSD which 

provides technical support for the endangerment and cause or contribute analyses concerning 

GHG emissions under section 202(a) of the Clean Air Act. The TSD reviews observed and 

projected changes in climate based on current and projected atmospheric GHG concentrations 

and emissions, as well as the related impacts and risks from climate change that are projected in 

the absence of GHG mitigation actions, including this action and other U.S. and global actions. 

The TSD was updated and revised based on expert technical review and public comment as part 

of EPA’s rulemaking process for the final Endangerment Findings. The key findings synthesized 

 

247 U.S. EPA (2009) Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990–2007. EPA-430-R-09-004, 

Washington, DC.

248 “Technical Support Document for Endangerment and Cause or Contribute Findings for Greenhouse Gases Under 

Section 202(a) of the Clean Air Act” Docket: EPA-HQ-OAR-2009-0472-11292 249 See 74 FR 66496 (Dec. 15, 2009) 
292 

here and the information throughout the TSD are primarily drawn from the assessment reports of 

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

Program (CCSP), the U.S. Global Change Research Program (USGCRP), and the National 

Research Council (NRC).250

a. Observed Trends in Greenhouse Gas Emissions and Concentrations 

The primary long-lived GHGs directly emitted by human activities include carbon 

dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), 

perfluorocarbons (PFCs), and sulfur hexafluoride (SF6). Greenhouse gases have a warming 

effect by trapping heat in the atmosphere that would otherwise escape to space. In 2007, U.S. 

GHG emissions were 7,150 teragrams251 of CO2 equivalent252 (TgCO2eq). The dominant gas 

emitted is CO2, mostly from fossil fuel combustion. Methane is the second largest component of 

U.S. emissions, followed by N2O and the fluorinated gases (HFCs, PFCs, and SF6). Electricity 

generation is the largest emitting sector (34% of total U.S. GHG emissions), followed by 

transportation (28%) and industry (19%). 

Transportation sources under Section 202(a)253 of the Clean Air Act (passenger cars, light 

duty trucks, other trucks and buses, motorcycles, and passenger cooling) emitted 1,649 TgCO2eq 

in 2007, representing 23% of total U.S. GHG emissions. U.S. transportation sources under 

Section 202(a) made up 4.3% of total global GHG emissions in 2005,254 which, in addition to the 

United States as a whole, ranked only behind total GHG emissions from China, Russia, and India 

but ahead of Japan, Brazil, Germany, and the rest of the world’s countries. In 2005, total U.S. 

GHG emissions were responsible for 18% of global emissions, ranking only behind China, 

which was responsible for 19% of global GHG emissions. The scope of this action focuses on 

GHG emissions under Section 202(a) from passenger cars and light duty trucks source categories 

(see Section III.F.1). 

The global atmospheric CO2 concentration has increased about 38% from pre-industrial 

levels to 2009, and almost all of the increase is due to anthropogenic emissions. The global 

atmospheric concentration of CH4 has increased by 149% since pre-industrial levels (through 

2007); and the N2O concentration has increased by 23% (through 2007). The observed 

concentration increase in these gases can also be attributed primarily to anthropogenic emissions. 

The industrial fluorinated gases, HFCs, PFCs, and SF6, have relatively low atmospheric 

 

250 For a complete list of core references from IPCC, USGCRP/CCSP, NRC and others relied upon for development 

of the TSD for EPA’s Endangerment and Cause or Contribute Findings see section 1(b), specifically, Table 1.1 of 

the TSD. 

251 One teragram (Tg) = 1 million metric tons. 1 metric ton = 1,000 kilograms = 1.102 short tons = 2,205 pounds. 252 Long-lived GHGs are compared and summed together on a CO2-equivalent basis by multiplying each gas by its 

global warming potential (GWP), as estimated by IPCC. In accordance with United Nations Framework Convention 

on Climate Change (UNFCCC) reporting procedures, the U.S. quantifies GHG emissions using the 100-year 

timeframe values for GWPs established in the IPCC Second Assessment Report. 

253 Source categories under Section 202(a) of the Clean Air Act are a subset of source categories considered in the 

transportation sector and do not include emissions from non-highway sources such as boats, rail, aircraft, 

agricultural equipment, construction/mining equipment, and other off-road equipment. 254 More recent emission data are available for the United States and other individual countries, but 2005 is the most 

recent year for which data for all countries and all gases are available. 
293 

concentrations but the total radiative forcing due to these gases is increasing rapidly; these gases 

are almost entirely anthropogenic in origin. 

Historic data show that current atmospheric concentrations of the two most important 

directly emitted, long-lived GHGs (CO2 and CH4) are well above the natural range of 

atmospheric concentrations compared to at least the last 650,000 years. Atmospheric GHG 

concentrations have been increasing because anthropogenic emissions have been outpacing the 

rate at which GHGs are removed from the atmosphere by natural processes over timescales of 

decades to centuries. 

b. Observed Effects Associated With Global Elevated Concentrations of GHGs 

Current ambient air concentrations of CO2 and other GHGs remain well below published 

exposure thresholds for any direct adverse health effects, such as respiratory or toxic effects. 

The global average net effect of the increase in atmospheric GHG concentrations, plus 

other human activities (e.g., land-use change and aerosol emissions), on the global energy 

balance since 1750 has been one of warming. This total net heating effect, referred to as forcing, 

is estimated to be +1.6 (+0.6 to +2.4) watts per square meter (W/m2

), with much of the range 

surrounding this estimate due to uncertainties about the cooling and warming effects of aerosols. 

However, as aerosol forcing has more regional variability than the well-mixed, long-lived GHGs, 

the global average might not capture some regional effects. The combined radiative forcing due 

to the cumulative (i.e., 1750 to 2005) increase in atmospheric concentrations of CO2, CH4, and 

N2O is estimated to be +2.30 (+2.07 to +2.53) W/m2

. The rate of increase in positive radiative 

forcing due to these three GHGs during the industrial era is very likely to have been 

unprecedented in more than 10,000 years.

Warming of the climate system is unequivocal, as is now evident from observations of 

increases in global average air and ocean temperatures, widespread melting of snow and ice, and 

rising global average sea level. Global mean surface temperatures have risen by 1.3 ± 0.32°F 

(0.74°C ± 0.18°C) over the last 100 years. Eight of the 10 warmest years on record have 

occurred since 2001. Global mean surface temperature was higher during the last few decades of 

the 20th century than during any comparable period during the preceding four centuries. 

Most of the observed increase in global average temperatures since the mid-20th century 

is very likely due to the observed increase in anthropogenic GHG concentrations. Climate model 

simulations suggest natural forcing alone (i.e., changes in solar irradiance) cannot explain the 

observed warming. 

U.S. temperatures also warmed during the 20th and into the 21st century; temperatures are 

now approximately 1.3°F (0.7°C) warmer than at the start of the 20th century, with an increased 

rate of warming over the past 30 years. Both the IPCC255 and the CCSP reports attributed recent 

 

255 Hegerl, G.C. et al. (2007) Understanding and Attributing Climate Change. In: Climate Change 2007: The 

Physical Science Basis. Contribution of Working Group I to the Fourth Assessment Report of the Intergovernmental 
294 

North American warming to elevated GHG concentrations. In the CCSP (2008) report,256 the 

authors find that for North America, “more than half of this warming [for the period 1951-2006] 

is likely the result of human-caused greenhouse gas forcing of climate change.” 

Observations show that changes are occurring in the amount, intensity, frequency and 

type of precipitation. Over the contiguous United States, total annual precipitation increased by 

6.1% from 1901 to 2008. It is likely that there have been increases in the number of heavy 

precipitation events within many land regions, even in those where there has been a reduction in 

total precipitation amount, consistent with a warming climate. 

There is strong evidence that global sea level gradually rose in the 20th century and is 

currently rising at an increased rate. It is not clear whether the increasing rate of sea level rise is 

a reflection of short-term variability or an increase in the longer-term trend. Nearly all of the 

Atlantic Ocean shows sea level rise during the last 50 years with the rate of rise reaching a 

maximum (over 2 millimeters [mm] per year) in a band along the U.S. east coast running eastnortheast. 

Satellite data since 1979 show that annual average Arctic sea ice extent has shrunk by 

4.1% per decade. The size and speed of recent Arctic summer sea ice loss is highly anomalous 

relative to the previous few thousands of years. 

Widespread changes in extreme temperatures have been observed in the last 50 years 

across all world regions, including the United States. Cold days, cold nights, and frost have 

become less frequent, while hot days, hot nights, and heat waves have become more frequent. 

Observational evidence from all continents and most oceans shows that many natural 

systems are being affected by regional climate changes, particularly temperature increases. 

However, directly attributing specific regional changes in climate to emissions of GHGs from 

human activities is difficult, especially for precipitation. 

Ocean CO2 uptake has lowered the average ocean pH (increased acidity) level by 

approximately 0.1 since 1750. Consequences for marine ecosystems can include reduced 

calcification by shell-forming organisms, and in the longer term, the dissolution of carbonate 

sediments.

Observations show that climate change is currently affecting U.S. physical and biological 

systems in significant ways. The consistency of these observed changes in physical and 

biological systems and the observed significant warming likely cannot be explained entirely due 

to natural variability or other confounding non-climate factors.

 Panel on Climate Change [Solomon, S., D. Qin, M. Manning, Z. Chen, M. Marquis, K.B. Averyt, M. Tignor, and 

H.L. Miller (eds.)]. Cambridge University Press, Cambridge, United Kingdom and New York, NY, USA. 256 CCSP (2008) Reanalysis of Historical Climate Data for Key Atmospheric Features: Implications for Attribution 

of Causes of Observed Change. A Report by the U.S. Climate Change Science Program and the Subcommittee on 

Global Change Research [Randall Dole, Martin Hoerling, and Siegfried Schubert (eds.)]. National Oceanic and 

Atmospheric Administration, National Climatic Data Center, Asheville, NC, 156 pp. 
295 

c. Projections of Future Climate Change With Continued Increases in Elevated GHG 

Concentrations

Most future scenarios that assume no explicit GHG mitigation actions (beyond those 

already enacted) project increasing global GHG emissions over the century, with climbing GHG 

concentrations. Carbon dioxide is expected to remain the dominant anthropogenic GHG over the 

course of the 21st century. The radiative forcing associated with the non-CO2 GHGs is still 

significant and increasing over time. 

Future warming over the course of the 21st century, even under scenarios of low-emission 

growth, is very likely to be greater than observed warming over the past century. According to 

climate model simulations summarized by the IPCC,257 through about 2030, the global warming 

rate is affected little by the choice of different future emissions scenarios. By the end of the 21st

century, projected average global warming (compared to average temperature around 1990) 

varies significantly depending on the emission scenario and climate sensitivity assumptions, 

ranging from 3.2 to 7.2°F (1.8 to 4.0°C), with an uncertainty range of 2.0 to 11.5°F (1.1 to 

6.4°C).

All of the United States is very likely to warm during this century, and most areas of the 

United States are expected to warm by more than the global average. The largest warming is 

projected to occur in winter over northern parts of Alaska. In western, central and eastern 

regions of North America, the projected warming has less seasonal variation and is not as large, 

especially near the coast, consistent with less warming over the oceans. 

It is very likely that heat waves will become more intense, more frequent, and longer 

lasting in a future warm climate, whereas cold episodes are projected to decrease significantly. 

Increases in the amount of precipitation are very likely in higher latitudes, while 

decreases are likely in most subtropical latitudes and the southwestern United States, continuing 

observed patterns. The mid-continental area is expected to experience drying during summer, 

indicating a greater risk of drought. 

Intensity of precipitation events is projected to increase in the United States and other 

regions of the world. More intense precipitation is expected to increase the risk of flooding and 

result in greater runoff and erosion that has the potential for adverse water quality effects. 

It is likely that hurricanes will become more intense, with stronger peak winds and more 

heavy precipitation associated with ongoing increases of tropical sea surface temperatures. 

Frequency changes in hurricanes are currently too uncertain for confident projections. 

 

257 Meehl, G.A. et al. (2007) Global Climate Projections. In: Climate Change 2007: The Physical Science Basis. 

Contribution of Working Group I to the Fourth Assessment Report of the Intergovernmental Panel on Climate 

Change [Solomon, S., D. Qin, M. Manning, Z. Chen, M. Marquis, K.B. Averyt, M. Tignor and H.L. Miller (eds.)]. 

Cambridge University Press, Cambridge, United Kingdom and New York, NY, USA. 
296 

By the end of the century, global average sea level is projected by IPCC258 to rise 

between 7.1 and 23 inches (18 and 59 centimeter [cm]), relative to around 1990, in the absence 

of increased dynamic ice sheet loss. Recent rapid changes at the edges of the Greenland and 

West Antarctic ice sheets show acceleration of flow and thinning. While an understanding of 

these ice sheet processes is incomplete, their inclusion in models would likely lead to increased 

sea level projections for the end of the 21st century. 

Sea ice extent is projected to shrink in the Arctic under all IPCC emissions scenarios. 

d. Projected Risks and Impacts Associated With Future Climate Change 

Risk to society, ecosystems, and many natural Earth processes increase with increases in 

both the rate and magnitude of climate change. Climate warming may increase the possibility of 

large, abrupt regional or global climatic events (e.g., disintegration of the Greenland Ice Sheet or 

collapse of the West Antarctic Ice Sheet). The partial deglaciation of Greenland (and possibly 

West Antarctica) could be triggered by a sustained temperature increase of 2 to 7°F (1 to 4oC) 

above 1990 levels. Such warming would cause a 13 to 20 feet (4 to 6 meter) rise in sea level, 

which would occur over a time period of centuries to millennia. 

The CCSP259 reports that climate change has the potential to accentuate the disparities 

already evident in the American health care system, as many of the expected health effects are 

likely to fall disproportionately on the poor, the elderly, the disabled, and the uninsured. The 

IPCC260 states with very high confidence that climate change impacts on human health in U.S. 

cities will be compounded by population growth and an aging population. 

Severe heat waves are projected to intensify in magnitude and duration over the portions 

of the United States where these events already occur, with potential increases in mortality and 

morbidity, especially among the elderly, young, and frail. 

Some reduction in the risk of death related to extreme cold is expected. It is not clear 

whether reduced mortality from cold will be greater or less than increased heat-related mortality 

in the United States due to climate change. 

Increases in regional ozone pollution relative to ozone levels without climate change are 

expected due to higher temperatures and weaker circulation in the United States and other world 

 

258 IPCC (2007) Summary for Policymakers. In: Climate Change 2007: The Physical Science Basis. Contribution of 

Working Group I to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change [Solomon, S., 

D. Qin, M. Manning, Z. Chen, M. Marquis, K.B. Averyt, M. Tignor and H.L. Miller (eds.)]. Cambridge University 

Press, Cambridge, United Kingdom and New York, NY, USA. 

259 Ebi, K.L., J. Balbus, P.L. Kinney, E. Lipp, D. Mills, M.S. O’Neill, and M. Wilson (2008) Effects of Global 

Change on Human Health. In: Analyses of the effects of global change on human health and welfare and human 

systems. A Report by the U.S. Climate Change Science Program and the Subcommittee on Global Change Research. 

[Gamble, J.L. (ed.), K.L. Ebi, F.G. Sussman, T.J. Wilbanks, (Authors)]. U.S. Environmental Protection Agency, 

Washington, DC, USA, pp. 2-1 to 2-78. 

260 Field, C.B. et al. (2007) North America. In: Climate Change 2007: Impacts, Adaptation and Vulnerability. 

Contribution of Working Group II to the Fourth Assessment Report of the Intergovernmental Panel on Climate 

Change [M.L. Parry, O.F. Canziani, J.P. Palutikof, P.J. van der Linden and C.E. Hanson (eds.)]. Cambridge 

University Press, Cambridge, United Kingdom and New York, NY, USA. 
297 

cities relative to air quality levels without climate change. Climate change is expected to 

increase regional ozone pollution, with associated risks in respiratory illnesses and premature 

death. In addition to human health effects, tropospheric ozone has significant adverse effects on 

crop yields, pasture and forest growth, and species composition. The directional effect of 

climate change on ambient particulate matter levels remains uncertain. 

Within settlements experiencing climate change, certain parts of the population may be 

especially vulnerable; these include the poor, the elderly, those already in poor health, the 

disabled, those living alone, and/or indigenous populations dependent on one or a few resources. 

Thus, the potential impacts of climate change raise environmental justice issues. 

The CCSP261 concludes that, with increased CO2 and temperature, the life cycle of grain 

and oilseed crops will likely progress more rapidly. But, as temperature rises, these crops will 

increasingly begin to experience failure, especially if climate variability increases and 

precipitation lessens or becomes more variable. Furthermore, the marketable yield of many 

horticultural crops (e.g., tomatoes, onions, fruits) is very likely to be more sensitive to climate 

change than grain and oilseed crops. 

Higher temperatures will very likely reduce livestock production during the summer 

season in some areas, but these losses will very likely be partially offset by warmer temperatures 

during the winter season. 

Cold-water fisheries will likely be negatively affected; warm-water fisheries will 

generally benefit; and the results for cool-water fisheries will be mixed, with gains in the 

northern and losses in the southern portions of ranges. 

Climate change has very likely increased the size and number of forest fires, insect 

outbreaks, and tree mortality in the interior West, the Southwest, and Alaska, and will continue 

to do so. Over North America, forest growth and productivity have been observed to increase 

since the middle of the 20th century, in part due to observed climate change. Rising CO2 will 

very likely increase photosynthesis for forests, but the increased photosynthesis will likely only 

increase wood production in young forests on fertile soils. The combined effects of expected 

increased temperature, CO2, nitrogen deposition, ozone, and forest disturbance on soil processes 

and soil carbon storage remain unclear. 

Coastal communities and habitats will be increasingly stressed by climate change impacts 

interacting with development and pollution. Sea level is rising along much of the U.S. coast, and 

the rate of change will very likely increase in the future, exacerbating the impacts of progressive 

inundation, storm-surge flooding, and shoreline erosion. Storm impacts are likely to be more 

 

261 Backlund, P., A. Janetos, D.S. Schimel, J. Hatfield, M.G. Ryan, S.R. Archer, and D. Lettenmaier (2008) 

Executive Summary. In: The Effects of Climate Change on Agriculture, Land Resources, Water Resources, and 

Biodiversity in the United States. A Report by the U.S. Climate Change Science Program and the Subcommittee on 

Global Change Research. Washington, DC., USA, 362 pp. 
298 

severe, especially along the Gulf and Atlantic coasts. Salt marshes, other coastal habitats, and 

dependent species are threatened by sea level rise, fixed structures blocking landward migration, 

and changes in vegetation. Population growth and rising value of infrastructure in coastal areas 

increases vulnerability to climate variability and future climate change. 

Climate change will likely further constrain already overallocated water resources in 

some regions of the United States, increasing competition among agricultural, municipal, 

industrial, and ecological uses. Although water management practices in the United States are 

generally advanced, particularly in the West, the reliance on past conditions as the basis for 

current and future planning may no longer be appropriate, as climate change increasingly creates 

conditions well outside of historical observations. Rising temperatures will diminish snowpack 

and increase evaporation, affecting seasonal availability of water. In the Great Lakes and major 

river systems, lower water levels are likely to exacerbate challenges relating to water quality, 

navigation, recreation, hydropower generation, water transfers, and binational relationships. 

Decreased water supply and lower water levels are likely to exacerbate challenges relating to 

aquatic navigation in the United States. 

Higher water temperatures, increased precipitation intensity, and longer periods of low 

flows will exacerbate many forms of water pollution, potentially making attainment of water 

quality goals more difficult. As waters become warmer, the aquatic life they now support will be 

replaced by other species better adapted to warmer water. In the long term, warmer water and 

changing flow may result in deterioration of aquatic ecosystems. 

Ocean acidification is projected to continue, resulting in the reduced biological 

production of marine calcifiers, including corals. 

Climate change is likely to affect U.S. energy use and energy production and physical 

and institutional infrastructures. It will also likely interact with and possibly exacerbate ongoing 

environmental change and environmental pressures in settlements, particularly in Alaska where 

indigenous communities are facing major environmental and cultural impacts. The U.S. energy 

sector, which relies heavily on water for hydropower and cooling capacity, may be adversely 

impacted by changes to water supply and quality in reservoirs and other water bodies. Water 

infrastructure, including drinking water and wastewater treatment plants, and sewer and 

stormwater management systems, will be at greater risk of flooding, sea level rise and storm 

surge, low flows, and other factors that could impair performance. 

Disturbances such as wildfires and insect outbreaks are increasing in the United States 

and are likely to intensify in a warmer future with warmer winters, drier soils, and longer 

growing seasons. Although recent climate trends have increased vegetation growth, continuing 

increases in disturbances are likely to limit carbon storage, facilitate invasive species, and disrupt 

ecosystem services. 

Over the 21st century, changes in climate will cause species to shift north and to higher 

elevations and fundamentally rearrange U.S. ecosystems. Differential capacities for range shifts 

and constraints from development, habitat fragmentation, invasive species, and broken 

ecological connections will alter ecosystem structure, function, and services. 
299 

Climate change impacts will vary in nature and magnitude across different regions of the 

United States. 

• Sustained high summer temperatures, heat waves, and declining air quality are projected in 

the Northeast,262 Southeast,263 Southwest,264 and Midwest.265 Projected climate change 

would continue to cause loss of sea ice, glacier retreat, permafrost thawing, and coastal 

erosion in Alaska. 

• Reduced snowpack, earlier spring snowmelt, and increased likelihood of seasonal summer 

droughts are projected in the Northeast, Northwest,266 and Alaska. More severe, sustained 

droughts and water scarcity are projected in the Southeast, Great Plains,267 and Southwest. 

• The Southeast, Midwest, and Northwest in particular are expected to be impacted by an 

increased frequency of heavy downpours and greater flood risk. 

• Ecosystems of the Southeast, Midwest, Great Plains, Southwest, Northwest, and Alaska are 

expected to experience altered distribution of native species (including local extinctions), 

more frequent and intense wildfires, and an increase in insect pest outbreaks and invasive 

species. 

• Sea level rise is expected to increase storm surge height and strength, flooding, erosion, and 

wetland loss along the coasts, particularly in the Northeast, Southeast, and islands. 

• Warmer water temperatures and ocean acidification are expected to degrade important 

aquatic resources of islands and coasts such as coral reefs and fisheries. 

• A longer growing season, low levels of warming, and fertilization effects of carbon dioxide 

may benefit certain crop species and forests, particularly in the Northeast and Alaska. 

Projected summer rainfall increases in the Pacific islands may augment limited freshwater 

supplies. Cold-related mortality is projected to decrease, especially in the Southeast. In the 

Midwest in particular, heating oil demand and snow-related traffic accidents are expected to 

decrease.

Climate change impacts in certain regions of the world may exacerbate problems that 

raise humanitarian, trade, and national security issues for the United States. The IPCC268

identifies the most vulnerable world regions as the Arctic, because of the effects of high rates of 

projected warming on natural systems; Africa, especially the sub-Saharan region, because of 

current low adaptive capacity as well as climate change; small islands, due to high exposure of 

 

262 Northeast includes West Virginia, Maryland, Delaware, Pennsylvania, New Jersey, New York, Connecticut, 

Rhode Island, Massachusetts, Vermont, New Hampshire, and Maine. 

263 Southeast includes Kentucky, Virginia, Arkansas, Tennessee, North Carolina, South Carolina, southeast Texas, 

Louisiana, Mississippi, Alabama, Georgia, and Florida. 

264 Southwest includes California, Nevada, Utah, western Colorado, Arizona, New Mexico (except the extreme 

eastern section), and southwest Texas. 

265 The Midwest includes Minnesota, Wisconsin, Michigan, Iowa, Illinois, Indiana, Ohio, and Missouri. 266 The Northwest includes Washington, Idaho, western Montana, and Oregon. 267 The Great Plains includes central and eastern Montana, North Dakota, South Dakota, Wyoming, Nebraska, 

eastern Colorado, Nebraska, Kansas, extreme eastern New Mexico, central Texas, and Oklahoma 

268 Parry, M.L. et al. (2007) Technical Summary. In: Climate Change 2007: Impacts, Adaptation and Vulnerability. 

Contribution of Working Group II to the Fourth Assessment Report of the Intergovernmental Panel on Climate 

Change [M.L. Parry, O.F. Canziani, J.P. Palutikof, P.J. van der Linden, and C.E. Hanson (eds.)], Cambridge 

University Press, Cambridge, United Kingdom, pp. 23S78. 
300 

population and infrastructure to risk of sea level rise and increased storm surge; and Asian megadeltas, such as the Ganges-Brahmaputra and the Zhujiang, due to large populations and high 

exposure to sea level rise, storm surge and river flooding. Climate change has been described as 

a potential threat multiplier with regard to national security issues. 

3. Changes in Global Mean Temperature and Sea Level Rise Associated with the 

Rule’s GHG Emissions Reductions 

EPA examined269 the reductions in CO2 and other GHGs associated with this action and 

analyzed the projected effects on global mean surface temperature and sea level, two common 

indicators of climate change. The analysis projects that this action will reduce climate warming 

and sea level rise. Although the projected reductions are small in overall magnitude by 

themselves, they are quantifiable and would contribute to reducing climate change risks. A 

commenter agreed that the modeling results showed small, but quantifiable, reductions in the 

global atmospheric CO2 concentration, as well as a reduction in projected global mean surface 

temperature and sea level rise, from implementation of this action, across all climate sensitivities. 

As such, the commenter encourages the agencies to move forward with this action while 

continuing to develop additional, more stringent vehicle standards beyond 2016. 

Another commenter indicated that the projected changes in climate impacts resulting 

from this action are small and therefore not meaningful. EPA disagrees with this view as the 

reductions may be small in overall magnitude, but in the global climate change context, they are 

quantifiable showing a clear directional signal across a range of climate sensitivities.270,271 EPA 

therefore determines that the projected reductions in atmospheric CO2, global mean temperature 

and sea level rise are meaningful in the context of this rule. EPA addresses this point further in 

the Joint Response to Comments document. For this final rule, EPA has provided an additional 

climate change impact analysis for projected changes in ocean pH in the context of this action. 

In addition, EPA updated the modeling analysis based on the revised GHG emission reductions 

provided in Section III.F.1; however, the change in modeling results was very small in 

magnitude. Based on the reanalysis the results for projected atmospheric CO2 concentrations are 

estimated to be reduced by an average of 2.9 ppm (previously 3.0 ppm), global mean temperature 

is estimated to be reduced by 0.006 to 0.015 °C by 2100 (previously 0.007 to 0.016 °C) and sealevel rise is projected to be reduced by approximately 0.06-0.14cm by 2100 (previously 0.06-

0.15cm). 

 

269 Using the Model for the Assessment of Greenhouse Gas Induced Climate Change (MAGICC, 

http://www.cgd.ucar.edu/cas/wigley/magicc/), EPA estimated the effects of this action’s greenhouse gas emissions 

reductions on global mean temperature and sea level. Please refer to Chapter 7.4 of the RIA for additional 

information. 

270 The National Research Council (NRC) 2001 study, Climate Change Science: An Analysis of Some Key 

Questions, defines climate sensitivity as the sensitivity of the climate system to a forcing is commonly expressed in 

terms of the global mean temperature change that would be expected after a time sufficiently long enough for both 

the atmosphere and ocean to come to equilibrium with the change in climate forcing. 271 To capture some of the uncertainty in the climate system, the changes in atmospheric CO2, projected 

temperatures and sea level were estimated across the most current Intergovernmental Panel on Climate Change 

(IPCC) range of climate sensitivities, 1.5°C to 6.0°C. 
301 

a. Estimated Projected Reductions in Atmospheric CO2 Concentration, Global Mean 

Surface Temperatures and Sea Level Rise 

EPA estimated changes in the atmospheric CO2 concentration, global mean surface 

temperature and sea level to 2100 resulting from the emissions reductions in this action using the 

Model for the Assessment of Greenhouse Gas Induced Climate Change (MAGICC, version 5.3). 

This widely-used, peer reviewed modeling tool was also used to project temperature and sea 

level rise under different emissions scenarios in the Third and Fourth Assessments of the 

Intergovernmental Panel on Climate Change (IPCC). 

GHG emissions reductions from Section III.F.1 were applied as net reductions to a peer 

reviewed global reference case (or baseline) emissions scenario to generate an emissions 

scenario specific to this action. For the scenario related to this action, all emissions reductions 

were assumed to begin in 2012, with zero emissions change in 2011 (from the reference case) 

followed by emissions linearly increasing to equal the value supplied in Section III.F.1 for 2020 

and then continuing to 2100. Details about the reference case scenario and how the emissions 

reductions were applied to generate the scenario can be found in the RIA Chapter 7. 

Changes in atmospheric CO2 concentration, temperature, and sea-level for both the 

reference case and the emissions scenarios associated with this action were computed using 

MAGICC. To compute the reductions in the atmospheric CO2 concentrations as well as in 

temperature and sea level resulting from this action, the output from the scenario associated with 

this final rule was subtracted from an existing Global Change Assessment Model (GCAM, 

formerly MiniCAM) reference emission scenario. To capture some key uncertainties in the 

climate system with the MAGICC model, changes in temperature and sea-level rise were 

projected across the most current IPCC range for climate sensitivities which ranges from 1.5°C 

to 6.0°C (representing the 90% confidence interval).272 This wide range reflects the uncertainty 

in this measure of how much the global mean temperature would rise if the concentration of 

carbon dioxide in the atmosphere were to double. Details about this modeling analysis can be 

found in the RIA Chapter 7.4. 

The results of this modeling, summarized in Table III.F.3-1, show small, but quantifiable, 

reductions in atmospheric CO2 concentrations, projected global mean surface temperature and 

sea level resulting from this action, across all climate sensitivities. As a result of the emission 

reductions from this action, the atmospheric CO2 concentration is projected to be reduced by an 

average of 2.9 parts per million (ppm), the global mean temperature is projected to be reduced by 

approximately 0.006-0.015°C by 2100, and global mean sea level rise is projected to be reduced 

by approximately 0.06-0.14cm by 2100. The reductions are small relative to the IPCC’s 2100 

“best estimates” for global mean temperature increases (1.8 – 4.0oC) and sea level rise (0.20-

0.59m) for all global GHG emissions sources for a range of emissions scenarios. EPA used a 

 

272 In IPCC reports, equilibrium climate sensitivity refers to the equilibrium change in the annual mean global 

surface temperature following a doubling of the atmospheric equivalent carbon dioxide concentration. The IPCC 

states that climate sensitivity is “likely” to be in the range of 2°C to 4.5°C, “very unlikely” to be less than 1.5°C, and 

“values substantially higher than 4.5°C cannot be excluded.” IPCC WGI, 2007, Climate Change 2007 - The 

Physical Science Basis, Contribution of Working Group I to the Fourth Assessment Report of the IPCC, 

http://www.ipcc.ch/ 
302 

peer reviewed model, the MAGICC model, to do this analysis. This analysis is specific to this 

rule and therefore does not come from previously published work. Further discussion of EPA’s 

modeling analysis is found in the final RIA.

Table III.F.3-1 Effect of GHG Emissions Reductions On Projected Changes in Global Climate 

for the Final Vehicles Rulemaking (for climate sensitivities ranging from 1.5-6°C)

Measure Units Year Projected Change 

Atmospheric CO2

Concentration ppm 2100 -2.7-3.1

Global Mean Surface 

Temperature o C 2100 -0.006-0.015

Sea Level Rise cm 2100 -0.06-0.14

Ocean pH pH units 2100 0.0015

As a substantial portion of CO2 emitted into the atmosphere is not removed by natural 

processes for millennia, each unit of CO2 not emitted into the atmosphere avoids essentially 

permanent climate change on centennial time scales. Though the magnitude of the avoided 

climate change projected here is small, these reductions would represent a reduction in the 

adverse risks associated with climate change (though these risks were not formally estimated for 

this action) across all climate sensitivities. 

The IPCC273 has noted that ocean acidification due to the direct effects of elevated CO2 

concentrations will impair a wide range of planktonic and other marine organisms that use 

aragonite to make their shells or skeletons. EPA used the Program CO2SYS,274 version 1.05 to 

estimate projected changes in tropical ocean pH based on the atmospheric CO2 concentration 

reductions resulting from this action. The program performs calculations relating parameters of 

the carbon dioxide (CO2) system in seawater. EPA used the program to calculate ocean pH as a 

function of atmospheric CO2, among other specified input conditions. Based on the projected 

atmospheric CO2 concentration reductions (average of 2.9 ppm by 2100) that would result from 

this rule, the program calculates an increase in ocean pH of about 0.0015 pH units in 2100. Thus, 

this analysis indicates the projected decrease in atmospheric CO2 concentrations from today’s 

rule would result in an increase in ocean pH. 

EPA’s analysis of the rule’s effect on global climate conditions is intended to quantify 

these potential reductions using the best available science. While EPA’s modeling results of the 

effect of this rule alone show small differences in climate effects (CO2 concentration, 

temperature, sea-level rise, ocean pH), when expressed in terms of global climate endpoints and 

global GHG emissions, they yield results that are repeatable and consistent within the modeling 

frameworks used. 

 

273 Fischlin, A. et al. (2007) Ecosystems, their Properties, Goods, and Services. In: Climate Change 2007: Impacts, 

Adaptation and Vulnerability. Contribution of Working Group II to the Fourth Assessment Report of the 

Intergovernmental Panel on Climate Change [M.L. Parry, O.F. Canziani, J.P. Palutikof, P.J. van der Linden and C.E. 

Hanson (eds.)]. Cambridge University Press, Cambridge, United Kingdom and New York, NY, USA. 

274 Lewis, E., and D. W. R. Wallace. 1998. Program Developed for CO2 System Calculations. ORNL/CDIAC-105. 

Carbon Dioxide Information Analysis Center, Oak Ridge National Laboratory, U.S. Department of Energy, Oak 

Ridge, Tennessee. 
303 

4. Weight Reduction and Potential Safety Impacts

XX- To be added through discussion with NHTSA 

G. How Will the Standards Impact Non-GHG Emissions and Their Associated 

Effects? 

In addition to reducing the emissions of greenhouse gases, this rule will influence the 

emissions of “criteria” air pollutants and air toxics (i.e., hazardous air pollutants). The criteria 

air pollutants include carbon monoxide (CO), fine particulate matter (PM2.5), sulfur dioxide 

(SOX) and the ozone precursors hydrocarbons (VOC) and oxides of nitrogen (NOX); the air 

toxics include benzene, 1,3-butadiene, formaldehyde, acetaldehyde, and acrolein. Our estimates 

of these non-GHG emission impacts from the GHG program are shown by pollutant in Table 

III.G-1 and Table III.G-2 in total, and broken down by the two drivers of these changes: a) 

“upstream” emission reductions due to decreased extraction, production and distribution of 

motor gasoline; and b) “downstream” emission increases, reflecting the effects of VMT rebound 

(discussed in Sections III.F and III.H) and an increased market share of 10 percent ethanol 

blended fuel (E10), as discussed below. Total program impacts on criteria and toxics emissions 

are discussed below, followed by individual discussions of the upstream and downstream 

impacts. Those are followed by discussions of the effects on air quality, health, and other 

environmental concerns. 

As in the proposal, for this analysis we attribute decreased fuel consumption from this 

program to gasoline only, while assuming no effect on volumes of ethanol and other renewable 

fuels mandated under the Renewable Fuel Standard. Since the absolute volume of renewable 

fuel components used in the gasoline pool is mandated, the result is a greater projected market 

share of E10 in the control case, which affects downstream non-GHG emissions. In the 

proposal, EPA stated these same fuel assumptions and qualitatively noted that there were likely 

unquantified impacts on non-GHG emissions between the two cases. In DRIA Chapter 5, EPA 

indicated its plans to quantify these impacts in the air quality modeling and in the final rule 

inventories. Upstream emission impacts depend only on fuel volumes, so the impacts presented 

here reflect only the reduced gasoline consumption. 

The inventories presented in this rulemaking include an analysis of these fuel effects 

which was conducted using EPA’s Motor Vehicle Emission Simulator (MOVES2010). The 

emission model results indicate that increased E10 market share has some effect on fleetwide 

average non-GHG emission rates. The most notable impact, although still relatively slight, is a 

2.2 percent increase in 2030 in national acetaldehyde emissions over the baseline scenario. It 

should be noted that these emission impacts are estimated as a consequence of an assumed 

constant ethanol volume in the face of reduced gasoline volumes which result from the new 
304 

GHG standards; in actuality this rule will not be the driver of this shift. This program does not 

mandate an increase in E10, nor any particular fuel blend. The emission impact of this shift was 

also modeled in the RFS2 rule. 

As shown in Table III.G-1, EPA estimates that this program would result in reductions of 

NOX, VOC, PM and SOX, but would increase CO emissions. For NOx, VOC, and PM we 

estimate net reductions because the emissions reductions from upstream sources are larger than 

the emission increases due to downstream sources. In the case of CO, we estimate slight 

emission increases, because there are relatively small reductions in upstream emissions, and thus 

the projected downstream emission increases are greater than the projected emission decreases 

due to reduced fuel production. For SOx, downstream emissions are roughly proportional to fuel 

consumption, therefore a decrease is seen in both upstream and downstream sources. 

 For all criteria pollutants the overall impact of the program would be relatively small 

compared to total U.S. inventories across all sectors. In 2030, EPA estimates the program would 

reduce total NOX, PM and SOX inventories by 0.1 to 0.8 percent and reduce the VOC inventory 

by 1.0 percent, while increasing the total national CO inventory by 0.6 percent. 

As shown in Table III.G-2, EPA estimates that the GHG program would result in small 

changes for air toxic emissions compared to total U.S. inventories across all sectors. In 2030, 

EPA estimates the program would reduce total benzene and 1,3 butadiene emissions by 0.1 to 0.3 

percent. Total acrolein and formaldehyde emissions would increase by 0.1 percent. 

Acetaldehyde emissions would increase by 2.2 percent. 

One commenter requested that EPA present emission inventories for additional air toxics. 

EPA is presenting inventories for certain air toxic emissions which were identified as key 

national and regional-scale cancer and noncancer risk drivers in past National Air Toxics 

Assessments (NATA). For additional details, please refer to the Joint Response to Comments 

document.275 

Other factors which may impact non-GHG emissions, but are not estimated in this analysis, 

include: 

• Vehicle technologies used to reduce tailpipe CO2 emissions; because the regulatory 

standards for non-GHG emissions are the primary driver for these emissions, EPA 

expects the impact of this program to be negligible on non-GHG emission rates per mile. 

• The potential for increased market penetration of diesel vehicles; because these vehicles 

would be held to the same certification and in-use standards for criteria pollutants as their 

gasoline counterparts, EPA expects their impact to be negligible on criteria pollutants and 

other non-GHG emissions. EPA does not project increased penetration of diesels as 

necessary to meet the GHG standards. 

• Early introduction of electric vehicles and plug-in hybrid electric vehicles, which would 

reduce criteria emissions in cases where those vehicles are able to be certified to lower 

certification standards. This would also likely reduce gaseous air toxics. 

 

275 U.S. EPA. National Air Toxics Assessment. 2002, 1999, and 1996. Available at: http://www.epa.gov/nata/ 
305 

• Reduced refueling emissions due to less frequent refueling events and reduced annual 

refueling volumes resulting from the GHG standards. 

• Increased hot soak evaporative emissions due to the likely increase in number of trips 

associated with VMT rebound modeled in this rule. 

Table III.G-1 Annual Criteria Emission Impacts of Program (short tons) 

 Total Impacts Upstream Impacts Downstream Impacts

 2020 2030 2020 2030 2020 2030 

VOC -60,187 -115,542 -64,506 -126,749 4,318 11,207 

 % of total 

inventory -0.51% -1.01% -0.55% -1.11% 0.04% 0.01% 

CO 3,992 170,675 -6,165 -12,113 10,156 182,788 

 % of total 

inventory 0.01% 0.56% -0.02% -0.04% 0.01% 0.6% 

NOX -5,881 -21,763 -19,291 -37,905 13,410 16,143 

 % of total 

inventory -0.02 -0.07% -0.06% -0.12% 0.04% 0.05% 

PM2.5 -2,398 -4,564 -2,629 -5,165 231.0 602.3 

 % of total 

inventory -0.03% -0.05% -0.03% -0.06% 0.00% 0.01% 

SOX -13,832 -27,443 -11,804 -23,194 -2,027 -4,249 

 % of total 

inventory -0.41% -0.82% -0.35% -0.69% -0.06% -0.13% 

Table III.G-2 Annual Air Toxic Emission Impacts of Program (short tons) 

 Total Impacts Upstream Impacts Downstream Impacts 

 2020 2030 2020 2030 2020 2030 

1,3-Butadiene -95 -21 -1.5 -3.0 -93.6 -18.1 

 % of total 

inventory -0.38% -0.10% -0.01% -0.01% -0.37% -0.09% 

Acetaldehyde 760 668 -6.8 -13.4 766.9 681.5 

 % of total 

inventory 2.26% 2.18% -0.02% -0.04% 2.28% 2.22% 

Acrolein 1 5 -0.9 -1.8 1.7 6.5 

 % of total 

inventory 0.01% 0.07% -0.01% -0.03% 0.03% 0.10% 

Benzene -890 -523 -139.6 -274.3 -750.0 -248.3 

 % of total 

inventory -0.48% -0.29% -0.08% -0.15% -0.40% -0.14% 

Formaldehyde -49 15 -51.4 -101.0 2.1 116.3

 % of total 

inventory -0.06% 0.02% -0.06% -0.12% 0.00% 0.14% 

1. Upstream Impacts of Program 

 

No substantive comments were received on the upstream inventory modeling used in the 

proposal. The rulemaking inventories were updated with the revised estimates of fuel savings as 

detailed in Section III.F. 
306 

 

Reducing tailpipe CO2 emissions from light-duty cars and trucks through tailpipe 

standards and improved A/C efficiency will result in reduced fuel demand and reductions in the 

emissions associated with all of the processes involved in getting petroleum to the pump. These 

upstream emission impacts on criteria pollutants are summarized in Table III.G-1. The upstream 

reductions grow over time as the fleet turns over to cleaner CO2 vehicles, so that by 2030 VOC 

would decrease by 127,000 tons, NOX by 38,000 tons, and PM2.5 by 5,000 tons. Table III.G-2 

shows the corresponding impacts on upstream air toxic emissions in 2030. Formaldehyde 

decreases by 101 tons, benzene by 274 tons, acetaldehyde by 13 tons, acrolein by 2 tons, and 1,3-

butadiene by 3 tons. 

To determine these impacts, EPA estimated the impact of reduced petroleum volumes on 

the extraction and transportation of crude oil as well as the production and distribution of 

finished gasoline. For the purpose of assessing domestic-only emission reductions it was 

necessary to estimate the fraction of fuel savings attributable to domestic finished gasoline, and 

of this gasoline what fraction is produced from domestic crude. For this analysis EPA estimated 

that 50 percent of fuel savings is attributable to domestic finished gasoline and that 90 percent of 

this gasoline originated from imported crude. Emission factors for most upstream emission 

sources are based on the GREET1.8 model, developed by DOE’s Argonne National 

Laboratory,276 but in some cases the GREET values were modified or updated by EPA to be 

consistent with the National Emission Inventory (NEI).277 The primary updates for this analysis 

were to incorporate newer information on gasoline distribution emissions for VOC from the NEI, 

which were significantly higher than GREET estimates; and the incorporation of upstream 

emission factors for the air toxics estimated in this analysis: benzene, 1,3-butadiene, 

acetaldehyde, acrolein, and formaldehyde. The development of these emission factors is detailed 

in RIA Chapter 5. 

2. Downstream Impacts of Program 

No substantive comments were received on the emission modeling or emission 

inventories presented in this section. However, two changes in modeling differentiate the 

analysis presented here from that presented in the proposal. Economic inputs such as fuel prices 

and vehicle sales were updated from AEO 2009 to AEO 2010 Early Release, and as described 

above, fuel supplies were updated to include the effects of increased market share of E10 fuel in 

the control case. Thus, the primary differences in non-GHG emissions between the proposed rule 

and final rule are attributed more to these changes in analytic inputs, and less to changes in the 

GHG standards program. 

 Downstream emission impacts attributable to this program are due to the VMT rebound 

effect and the modeled change in fuel supply. As discussed in more detail in Section III.H, the 

effect of fuel cost on VMT (“rebound”) was accounted for in our assessment of economic and 

environmental impacts of this rule. A 10 percent rebound case was used for this analysis, 

 

276 Greenhouse Gas, Regulated Emissions, and Energy Use in Transportation model (GREET), U.S. Department of 

Energy, Argonne National Laboratory, http://www.transportation.anl.gov/modeling_simulation/GREET/ 277 U.S. EPA. 2002 National Emissions Inventory (NEI) Data and Documentation, 

http://www.epa.gov/ttn/chief/net/2002inventory.html . 
307 

meaning that VMT for affected model years is modeled as increasing by 10 percent as much as 

the increase in fuel economy; i.e., a 10 percent increase in fuel economy would yield 

approximately a 1 percent increase in VMT. 

 As detailed in the introduction to this section, fuel composition also has effects on vehicle 

emissions and particularly air toxics. The relationship between fuel composition and emission 

impacts used in MOVES2010 and applied in this analysis match those developed for the recent 

Renewable Fuels Standard (RFS2) requirement, and are extensively documented in the RFS2 

RIA and supporting documents.278 

 

Downstream emission impacts of the rebound effect are summarized in Table III.G-1 for 

criteria pollutants and precursors and Table III.G-2 for air toxics. The emission impacts from 

the rebound effect and the change in fuel supply grow over time as the fleet turns over to cleaner 

CO2 vehicles, so that by 2030 VOC would increase by 11,000 tons, NOX by 16,000 tons, and 

PM2.5 by 600 tons. Table III.G-2 shows the corresponding impacts on air toxic emissions. 

These impacts in 2030 include 18 fewer tons of 1,3-butadiene, 668 additional tons of 

acetaldehyde, 248 fewer tons of benzene, 116 additional tons of formaldehyde, and 6.5 

additional tons of acrolein. 

For this analysis, MOVES2010 was used to estimate base VOC, CO, NOX, PM and air 

toxics emissions for both control and reference cases. Rebound emissions from light duty cars 

and trucks were then calculated using the OMEGA model post-processor and added to the 

control case. A more complete discussion of the inputs, methodology, and results is contained in 

RIA Chapter 5. 

3. Health Effects of Non-GHG Pollutants

In this section we discuss health effects associated with exposure to some of the criteria 

and air toxics impacted by the vehicle standards; PM, ozone, NOX and SOX, CO and air toxics. 

No substantive comments were received on the health effects of non-GHG pollutants. 

a. Particulate Matter 

i. Background

Particulate matter is a generic term for a broad class of chemically and physically diverse 

substances. It can be principally characterized as discrete particles that exist in the condensed 

(liquid or solid) phase spanning several orders of magnitude in size. Since 1987, EPA has 

delineated that subset of inhalable particles small enough to penetrate to the thoracic region 

(including the tracheobronchial and alveolar regions) of the respiratory tract (referred to as 

thoracic particles). Current NAAQS use PM2.5 as the indicator for fine particles (with PM2.5

referring to particles with a nominal mean aerodynamic diameter less than or equal to 2.5 μm), 

and use PM10 as the indicator for purposes of regulating the coarse fraction of PM10 (referred to 

as thoracic coarse particles or coarse-fraction particles; generally including particles with a 

 

278 EPA 2010, Renewable Fuel Standard Program (RFS2) Regulatory Impact Analysis. EPA-420-R-10-006. 

February 2010. Docket EPA-HQ-OAR-2009-0472-11332 
308 

nominal mean aerodynamic diameter greater than 2.5 μm and less than or equal to 10 μm, or 

PM10-2.5). Ultrafine particles are a subset of fine particles, generally less than 100 nanometers 

(0.1 μm) in aerodynamic diameter. 

Fine particles are produced primarily by combustion processes and by transformations of 

gaseous emissions (e.g., SOX, NOX and VOC) in the atmosphere. The chemical and physical 

properties of PM2.5 may vary greatly with time, region, meteorology, and source category. Thus, 

PM2.5 may include a complex mixture of different pollutants including sulfates, nitrates, organic 

compounds, elemental carbon and metal compounds. These particles can remain in the 

atmosphere for days to weeks and travel hundreds to thousands of kilometers. 

ii. Health Effects of PM

Scientific studies show ambient PM is associated with a series of adverse health effects. 

These health effects are discussed in detail in EPA’s Integrated Science Assessment for 

Particulate Matter (ISA).279 Further discussion of health effects associated with PM can also be 

found in the RIA for this rule. The ISA summarizes evidence associated with PM2.5, PM10-2.5, 

and ultrafine particles (UFPs). 

The ISA concludes that health effects associated with short-term exposures (hours to 

days) to ambient PM2.5 include non-fatal cardiovascular effects, mortality, and respiratory 

effects, such as exacerbation of asthma symptoms in children and hospital admissions and 

emergency department visits for chronic obstructive pulmonary disease (COPD) and respiratory 

infections.280 The ISA notes that long-term exposure to PM2.5 (months to years) is associated 

with the development/progression of cardiovascular disease, premature mortality, and respiratory 

effects, including reduced lung function growth, increased respiratory symptoms, and asthma 

development.281 The ISA concludes that that the currently available scientific evidence from 

epidemiologic, controlled human exposure studies, and toxicological studies supports that a 

causal association exists between short- and long-term exposures to PM2.5 and cardiovascular 

effects and mortality. Furthermore, the ISA concludes that the collective evidence supports 

likely causal associations between short- and long-term PM2.5 exposures and respiratory effects. 

The ISA also concludes that the evidence is suggestive of a causal association for reproductive 

and developmental effects and cancer, mutagenicity, and genotoxicity and long-term exposure to 

PM2.5.

282

For PM10-2.5, the ISA concludes that the current evidence is suggestive of a causal 

relationship between short-term exposures and cardiovascular effects, such as hospitalization for 

ischemic heart disease. There is also suggestive evidence of a causal relationship between short-

 

279 U.S. EPA (2009) Integrated Science Assessment for Particulate Matter. EPA 600/R-08/139F, Docket EPA-HQOAR-2009-0472-11295 

280 U.S. EPA (2009). Integrated Science Assessment for Particulate Matter (Final Report). U.S. Environmental 

Protection Agency, Washington, DC, EPA/600/R-08/139F, 2009. Section 2.3.1.1. 

281 U.S. EPA (2009). Integrated Science Assessment for Particulate Matter (Final Report). U.S. Environmental 

Protection Agency, Washington, DC, EPA/600/R-08/139F, 2009. page 2-12, Sections 7.3.1.1 and 7.3.2.1. 282 U.S. EPA (2009). Integrated Science Assessment for Particulate Matter (Final Report). U.S. Environmental 

Protection Agency, Washington, DC, EPA/600/R-08/139F, 2009. Section 2.3.2. 
309 

term PM10-2.5 exposure and mortality and respiratory effects. Data are inadequate to draw 

conclusions regarding the health effects associated with long-term exposure to PM10-2.5.

283

 

For UFPs, the ISA concludes that there is suggestive evidence of a causal relationship 

between short-term exposures and cardiovascular effects, such as changes in heart rhythm and 

blood vessel function. It also concludes that there is suggestive evidence of association between 

short-term exposure to UFPs and respiratory effects. Data are inadequate to draw conclusions 

regarding the health effects associated with long-term exposure to UFP’s.284

b. Ozone 

i. Background 

Ground-level ozone pollution is typically formed by the reaction of VOC and NOX in the 

lower atmosphere in the presence of heat and sunlight. These pollutants, often referred to as 

ozone precursors, are emitted by many types of pollution sources, such as highway and nonroad 

motor vehicles and engines, power plants, chemical plants, refineries, makers of consumer and 

commercial products, industrial facilities, and smaller area sources. 

The science of ozone formation, transport, and accumulation is complex.285 Ground-level 

ozone is produced and destroyed in a cyclical set of chemical reactions, many of which are 

sensitive to temperature and sunlight. When ambient temperatures and sunlight levels remain 

high for several days and the air is relatively stagnant, ozone and its precursors can build up and 

result in more ozone than typically occurs on a single high-temperature day. Ozone can be 

transported hundreds of miles downwind from precursor emissions, resulting in elevated ozone 

levels even in areas with low local VOC or NOX emissions. 

ii. Health Effects of Ozone 

The health and welfare effects of ozone are well documented and are assessed in EPA’s 

2006 Air Quality Criteria Document (ozone AQCD) and 2007 Staff Paper.286, 287 Ozone can 

irritate the respiratory system, causing coughing, throat irritation, and/or uncomfortable sensation 

in the chest. Ozone can reduce lung function and make it more difficult to breathe deeply; 

breathing may also become more rapid and shallow than normal, thereby limiting a person’s 

activity. Ozone can also aggravate asthma, leading to more asthma attacks that require medical 

attention and/or the use of additional medication. In addition, there is suggestive evidence of a 

 

283 U.S. EPA (2009). Integrated Science Assessment for Particulate Matter (Final Report). U.S. Environmental 

Protection Agency, Washington, DC, EPA/600/R-08/139F, 2009. Section 2.3.4, Table 2-6. 

284 U.S. EPA (2009). Integrated Science Assessment for Particulate Matter (Final Report). U.S. Environmental 

Protection Agency, Washington, DC, EPA/600/R-08/139F, 2009. Section 2.3.5, Table 2-6. 

285 U.S. EPA. (2006). Air Quality Criteria for Ozone and Related Photochemical Oxidants (Final). EPA/600/R05/004aF-cF. Washington, DC: U.S. EPA. Docket EPA-HQ-OAR-2009-0472-0099 through -0101. 286 U.S. EPA.(2006). Air Quality Criteria for Ozone and Related Photochemical Oxidants (Final). EPA/600/R05/004aF-cF. Washington, DC: U.S. EPA.

287 U.S. EPA. (2007). Review of the National Ambient Air Quality Standards for Ozone: Policy Assessment of 

Scientific and Technical Information, OAQPS Staff Paper. EPA-452/R-07-003. Washington, DC, U.S. EPA. Docket 

EPA-HQ-OAR-2009-0472-0105 through -0106. 
310 

contribution of ozone to cardiovascular-related morbidity and highly suggestive evidence that 

short-term ozone exposure directly or indirectly contributes to non-accidental and 

cardiopulmonary-related mortality, but additional research is needed to clarify the underlying 

mechanisms causing these effects. In a recent report on the estimation of ozone-related 

premature mortality published by the National Research Council (NRC), a panel of experts and 

reviewers concluded that short-term exposure to ambient ozone is likely to contribute to 

premature deaths and that ozone-related mortality should be included in estimates of the health 

benefits of reducing ozone exposure.288 Animal toxicological evidence indicates that with 

repeated exposure, ozone can inflame and damage the lining of the lungs, which may lead to 

permanent changes in lung tissue and irreversible reductions in lung function. People who are 

more susceptible to effects associated with exposure to ozone can include children, the elderly, 

and individuals with respiratory disease such as asthma. Those with greater exposures to ozone, 

for instance due to time spent outdoors (e.g., children and outdoor workers), are of particular 

concern. 

The 2006 ozone AQCD also examined relevant new scientific information that has 

emerged in the past decade, including the impact of ozone exposure on such health effects as 

changes in lung structure and biochemistry, inflammation of the lungs, exacerbation and 

causation of asthma, respiratory illness-related school absence, hospital admissions and 

premature mortality. Animal toxicological studies have suggested potential interactions between 

ozone and PM with increased responses observed to mixtures of the two pollutants compared to 

either ozone or PM alone. The respiratory morbidity observed in animal studies along with the 

evidence from epidemiologic studies supports a causal relationship between acute ambient ozone 

exposures and increased respiratory-related emergency room visits and hospitalizations in the 

warm season. In addition, there is suggestive evidence of a contribution of ozone to 

cardiovascular-related morbidity and non-accidental and cardiopulmonary mortality. 

c. NOX and SOX 

i. Background 

Nitrogen dioxide (NO2) is a member of the NOX family of gases. Most NO2 is formed in 

the air through the oxidation of nitric oxide (NO) emitted when fuel is burned at a high 

temperature. SO2, a member of the sulfur oxide (SOX) family of gases, is formed from burning 

fuels containing sulfur (e.g., coal or oil derived), extracting gasoline from oil, or extracting 

metals from ore. 

SO2 andNO2 can dissolve in water vapor and further oxidize to form sulfuric and nitric 

acid which react with ammonia to form sulfates and nitrates, both of which are important 

components of ambient PM. The health effects of ambient PM are discussed in Section III.G.3.a 

 

288 National Research Council (NRC), 2008. Estimating Mortality Risk Reduction and Economic Benefits from 

Controlling Ozone Air Pollution. The National Academies Press: Washington, D.C. Docket EPA-HQ-OAR-2009-

0472-0322. 
311 

of this preamble. NOX along with non-methane hydrocarbon (NMHC) are the two major 

precursors of ozone. The health effects of ozone are covered in Section III.G.3.b. 

ii. Health Effects of NO2

Information on the health effects of NO2 can be found in the EPA Integrated Science 

Assessment (ISA) for Nitrogen Oxides.289 The EPA has concluded that the findings of 

epidemiologic, controlled human exposure, and animal toxicological studies provide evidence 

that is sufficient to infer a likely causal relationship between respiratory effects and short-term 

NO2 exposure. The ISA concludes that the strongest evidence for such a relationship comes from 

epidemiologic studies of respiratory effects including symptoms, emergency department visits, 

and hospital admissions. The ISA also draws two broad conclusions regarding airway 

responsiveness following NO2 exposure. First, the ISA concludes that NO2 exposure may 

enhance the sensitivity to allergen-induced decrements in lung function and increase the 

allergen-induced airway inflammatory response following 30-minute exposures of asthmatics to 

NO2 concentrations as low as 0.26 ppm. In addition, small but significant increases in nonspecific airway hyperresponsiveness were reported following 1-hour exposures of asthmatics to 

0.1 ppm NO2. Second, exposure to NO2 has been found to enhance the inherent responsiveness 

of the airway to subsequent nonspecific challenges in controlled human exposure studies of 

asthmatic subjects. Enhanced airway responsiveness could have important clinical implications 

for asthmatics since transient increases in airway responsiveness following NO2 exposure have 

the potential to increase symptoms and worsen asthma control. Together, the epidemiologic and 

experimental data sets form a plausible, consistent, and coherent description of a relationship 

between NO2 exposures and an array of adverse health effects that range from the onset of 

respiratory symptoms to hospital admission. 

Although the weight of evidence supporting a causal relationship is somewhat less certain 

than that associated with respiratory morbidity, NO2 has also been linked to other health 

endpoints. These include all-cause (nonaccidental) mortality, hospital admissions or emergency 

department visits for cardiovascular disease, and decrements in lung function growth associated 

with chronic exposure. 

iii. Health Effects of SO2

Information on the health effects of SO2 can be found in the EPA Integrated Science 

Assessment for Sulfur Oxides.290 SO2 has long been known to cause adverse respiratory health 

effects, particularly among individuals with asthma. Other potentially sensitive groups include 

children and the elderly. During periods of elevated ventilation, asthmatics may experience 

symptomatic bronchoconstriction within minutes of exposure. Following an extensive 

evaluation of health evidence from epidemiologic and laboratory studies, the EPA has concluded 

that there is a causal relationship between respiratory health effects and short-term exposure to 

 

289 U.S. EPA (2008). Integrated Science Assessment for Oxides of Nitrogen – Health Criteria (Final Report).

EPA/600/R-08/071. Washington, DC: U.S.EPA. Docket EPA-HQ-OAR-2009-0472-0350. 

290 U.S. EPA. (2008). Integrated Science Assessment (ISA) for Sulfur Oxides – Health Criteria (Final Report). 

EPA/600/R-08/047F. Washington, DC: U.S. Environmental Protection Agency. Docket EPA-HQ-OAR-2009-0472-

0335. 
312 

SO2. Separately, based on an evaluation of the epidemiologic evidence of associations between 

short-term exposure to SO2 and mortality, the EPA has concluded that the overall evidence is 

suggestive of a causal relationship between short-term exposure to SO2 and mortality. 

 d. Carbon Monoxide 

Information on the health effects of carbon monoxide (CO) can be found in the EPA 

Integrated Science Assessment (ISA) for Carbon Monoxide.291 The ISA concludes that ambient 

concentrations of CO are associated with a number of adverse health effects.292 This section 

provides a summary of the health effects associated with exposure to ambient concentrations of 

CO.293 

Human clinical studies of subjects with coronary artery disease show a decrease in the 

time to onset of exercise-induced angina (chest pain) and electrocardiogram changes following 

CO exposure. In addition, epidemiologic studies show associations between short-term CO 

exposure and cardiovascular morbidity, particularly increased emergency room visits and 

hospital admissions for coronary heart disease (including ischemic heart disease, myocardial 

infarction, and angina). Some epidemiologic evidence is also available for increased hospital 

admissions and emergency room visits for congestive heart failure and cardiovascular disease as 

a whole. The ISA concludes that a causal relationship is likely between short-term exposures to 

CO and cardiovascular morbidity. It also concludes that available data are inadequate to 

conclude that a causal relationship exists between long-term exposures to CO and cardiovascular 

morbidity. 

Animal studies show various neurological effects with in-utero CO exposure. Controlled 

human exposure studies report inconsistent neural and behavioral effects following low-level CO 

exposures. The ISA concludes the evidence is suggestive of a causal relationship with both 

short- and long-term exposure to CO and central nervous system effects. 

A number of epidemiologic and animal toxicological studies cited in the ISA have 

evaluated associations between preterm birth and cardiac birth defects and CO exposure. The 

epidemiologic studies provide limited evidence of a CO-induced effect on pre-term births and 

birth defects, with weak evidence for a decrease in birth weight. Animal toxicological studies 

have found associations between perinatal CO exposure and decrements in birth weight, as well 

as other developmental outcomes. The ISA concludes these studies are suggestive of a causal 

relationship between long-term exposures to CO and developmental effects and birth outcomes. 

 

291 U.S. EPA, 2010. Integrated Science Assessment for Carbon Monoxide (Final Report). U.S. Environmental 

Protection Agency, Washington, DC, EPA/600/R-09/019F, 2010. 

http://cfpub.epa.gov/ncea/cfm/recordisplay.cfm?deid=218686 292 The ISA evaluates the health evidence associated with different health effects, assigning one of five “weight of 

evidence” determination: causal relationship, likely to be a causal relationship, suggestive of a causal relationship, 

inadequate to infer a causal relationship, and not likely to be a causal relationship. For definitions of these levels of 

evidence, please refer to Section 1.6 of the ISA. 

293 Personal exposure includes contributions from many sources, and in many different environments. Total 

personal exposure to CO includes both ambient and nonambient components; and both components may contribute 

to adverse health effects. 
313 

Epidemiologic studies provide evidence of effects on respiratory morbidity such as 

changes in pulmonary function, respiratory symptoms, and hospital admissions associated with 

ambient CO concentrations. A limited number of epidemiologic studies considered copollutants 

such as ozone, SO2, and PM in two-pollutant models and found that CO risk estimates were 

generally robust, although this limited evidence makes it difficult to disentangle effects attributed 

to CO itself from those of the larger complex air pollution mixture. Controlled human exposure 

studies have not extensively evaluated the effect of CO on respiratory morbidity. Animal studies 

at levels of 50-100 ppm CO show preliminary evidence of altered pulmonary vascular 

remodeling and oxidative injury. The ISA concludes that the evidence is suggestive of a causal 

relationship between short-term CO exposure and respiratory morbidity, and inadequate to 

conclude that a causal relationship exists between long-term exposure and respiratory morbidity. 

Finally, the ISA concludes that the epidemiologic evidence is suggestive of a causal 

relationship between short-term exposures to CO and mortality. Epidemiologic studies provide 

evidence of an association between short-term exposure to CO and mortality, but limited 

evidence is available to evaluate cause-specific mortality outcomes associated with CO exposure. 

In addition, the attenuation of CO risk estimates which was often observed in copollutant models 

contributes to the uncertainty as to whether CO is acting alone or as an indicator for other 

combustion-related pollutants. The ISA also concludes that there is not likely to be a causal 

relationship between relevant long-term exposures to CO and mortality. 

e. Air Toxics 

Motor vehicle emissions contribute to ambient levels of air toxics known or suspected as 

human or animal carcinogens, or that have noncancer health effects. The population experiences 

an elevated risk of cancer and other noncancer health effects from exposure to the class of 

pollutants known collectively as “air toxics”. 294 These compounds include, but are not limited 

to, benzene, 1,3-butadiene, formaldehyde, acetaldehyde, acrolein, polycyclic organic matter 

(POM), and naphthalene. These compounds, except acetaldehyde, were identified as national or 

regional risk drivers in the 2002 National-scale Air Toxics Assessment (NATA) and have 

significant inventory contributions from mobile sources.295 Emissions and ambient 

concentrations of compounds are discussed in the RIA chapter on emission inventories and air 

quality (Chapters 5 and 7, respectively). 

i. Benzene

The EPA’s IRIS database lists benzene as a known human carcinogen (causing leukemia) 

by all routes of exposure, and concludes that exposure is associated with additional health 

effects, including genetic changes in both humans and animals and increased proliferation of 

bone marrow cells in mice.296,297,298 EPA states in its IRIS database that data indicate a causal 

 

294 U. S. EPA. 2002 National-Scale Air Toxics Assessment. http://www.epa.gov/ttn/atw/nata12002/risksum.html 

Docket EPA-HQ-OAR-2009-0472-11322 

295 U.S. EPA .2009. National-Scale Air Toxics Assessment for 2002. http://www.epa.gov/ttn/atw/nata2002/ Docket 

EPA-HQ-OAR-2009-0472-11321 

296 U.S. EPA. 2000. Integrated Risk Information System File for Benzene. This material is available electronically 

at http://www.epa.gov/iris/subst/0276.htm. Docket EPA-HQ-OAR-2009-0472-1659.
314 

relationship between benzene exposure and acute lymphocytic leukemia and suggest a 

relationship between benzene exposure and chronic non-lymphocytic leukemia and chronic 

lymphocytic leukemia. The International Agency for Research on Carcinogens (IARC) has 

determined that benzene is a human carcinogen and the U.S. Department of Health and Human 

Services (DHHS) has characterized benzene as a known human carcinogen.299,300 

A number of adverse noncancer health effects including blood disorders, such as 

preleukemia and aplastic anemia, have also been associated with long-term exposure to 

benzene.301,302 The most sensitive noncancer effect observed in humans, based on current data, 

is the depression of the absolute lymphocyte count in blood.303, 304 In addition, recent work, 

including studies sponsored by the Health Effects Institute (HEI), provides evidence that 

biochemical responses are occurring at lower levels of benzene exposure than previously 

known.305,306,307,308 EPA’s IRIS program has not yet evaluated these new data.

ii. 1,3-Butadiene

 297 International Agency for Research on Cancer (IARC). 1982. Monographs on the evaluation of carcinogenic risk 

of chemicals to humans, Volume 29. Some industrial chemicals and dyestuffs, World Health Organization, Lyon, 

France, p. 345-389. Docket EPA-HQ-OAR-2009-0472-0366 298 Irons, R.D.; Stillman, W.S.; Colagiovanni, D.B.; Henry, V.A. 1992. Synergistic action of the benzene metabolite 

hydroquinone on myelopoietic stimulating activity of granulocyte/macrophage colony-stimulating factor in vitro, 

Proc. Natl. Acad. Sci. 89:3691-3695. Docket EPA-HQ-OAR-2009-0472-0370. 

299 International Agency for Research on Cancer (IARC). 1982. Monographs on the evaluation of carcinogenic risk 

of chemicals to humans, Volume 29. Some industrial chemicals and dyestuffs, World Health Organization, Lyon, 

France. Docket EPA-HQ-OAR-2009-0472-0366 

300 U.S. Department of Health and Human Services National Toxicology Program 11th Report on Carcinogens 

available at: http://ntp.niehs.nih.gov/go/16183. 301 Aksoy, M. (1989). Hematotoxicity and carcinogenicity of benzene. Environ. Health Perspect. 82: 193-197. 

Docket EPA-HQ-OAR-2009-0472-0368. 

302 Goldstein, B.D. (1988). Benzene toxicity. Occupational medicine. State of the Art Reviews. 3: 541-554. Docket 

EPA-HQ-OAR-2009-0472-0325. 

303 Rothman, N., G.L. Li, M. Dosemeci, W.E. Bechtold, G.E. Marti, Y.Z. Wang, M. Linet, L.Q. Xi, W. Lu, M.T. 

Smith, N. Titenko-Holland, L.P. Zhang, W. Blot, S.N. Yin, and R.B. Hayes (1996) Hematotoxicity among Chinese 

workers heavily exposed to benzene. Am. J. Ind. Med. 29: 236-246. Docket EPA-HQ-OAR-2009-0472-0326. 

304 U.S. EPA (2002) Toxicological Review of Benzene (Noncancer Effects). Environmental Protection Agency, 

Integrated Risk Information System (IRIS), Research and Development, National Center for Environmental 

Assessment, Washington DC. This material is available electronically at http://www.epa.gov/iris/subst/0276.htm. 

Docket EPA-HQ-OAR-2009-0472-0327. 

305 Qu, O.; Shore, R.; Li, G.; Jin, X.; Chen, C.L.; Cohen, B.; Melikian, A.; Eastmond, D.; Rappaport, S.; Li, H.; 

Rupa, D.; Suramaya, R.; Songnian, W.; Huifant, Y.; Meng, M.; Winnik, M.; Kwok, E.; Li, Y.; Mu, R.; Xu, B.; 

Zhang, X.; Li, K. (2003) HEI Report 115, Validation & Evaluation of Biomarkers in Workers Exposed to Benzene 

in China. Docket EPA-HQ-OAR-2009-0472-0328. 

306 Qu, Q., R. Shore, G. Li, X. Jin, L.C. Chen, B. Cohen, et al. (2002) Hematological changes among Chinese 

workers with a broad range of benzene exposures. Am. J. Industr. Med. 42: 275-285. Docket EPA-HQ-OAR-2009-

0472-0329. 

307 Lan, Qing, Zhang, L., Li, G., Vermeulen, R., et al. (2004) Hematotoxically in Workers Exposed to Low Levels of 

Benzene. Science 306: 1774-1776. Docket EPA-HQ-OAR-2009-0472-0330. 

308 Turtletaub, K.W. and Mani, C. (2003) Benzene metabolism in rodents at doses relevant to human exposure from 

Urban Air. Research Reports Health Effect Inst. Report No.113. Docket EPA-HQ-OAR-2009-0472-0385. 
315 

EPA has characterized 1,3-butadiene as carcinogenic to humans by inhalation.309,310 The 

IARC has determined that 1,3-butadiene is a human carcinogen and the U.S. DHHS has 

characterized 1,3-butadiene as a known human carcinogen.311,312 There are numerous studies 

consistently demonstrating that 1,3-butadiene is metabolized into genotoxic metabolites by 

experimental animals and humans. The specific mechanisms of 1,3-butadiene-induced 

carcinogenesis are unknown; however, the scientific evidence strongly suggests that the 

carcinogenic effects are mediated by genotoxic metabolites. Animal data suggest that females 

may be more sensitive than males for cancer effects associated with 1,3-butadiene exposure; 

there are insufficient data in humans from which to draw conclusions about sensitive 

subpopulations. 1,3-butadiene also causes a variety of reproductive and developmental effects in 

mice; no human data on these effects are available. The most sensitive effect was ovarian 

atrophy observed in a lifetime bioassay of female mice.313

iii. Formaldehyde 

Since 1987, EPA has classified formaldehyde as a probable human carcinogen based on 

evidence in humans and in rats, mice, hamsters, and monkeys.314 EPA is currently reviewing 

recently published epidemiological data. For instance, research conducted by the National 

Cancer Institute (NCI) found an increased risk of nasopharyngeal cancer and 

lymphohematopoietic malignancies such as leukemia among workers exposed to 

formaldehyde.315, 316 In an analysis of the lymphohematopoietic cancer mortality from an 

extended follow-up of these workers, NCI confirmed an association between 

lymphohematopoietic cancer risk and peak exposures.317 A recent National Institute of 

Occupational Safety and Health (NIOSH) study of garment workers also found increased risk of 

 

309 U.S. EPA (2002) Health Assessment of 1,3-Butadiene. Office of Research and Development, National Center for 

Environmental Assessment, Washington Office, Washington, DC. Report No. EPA600-P-98-001F. This document 

is available electronically at http://www.epa.gov/iris/supdocs/buta-sup.pdf. Docket EPA-HQ-OAR-2009-0472-0386. 

310 U.S. EPA (2002) Full IRIS Summary for 1,3-butadiene (CASRN 106-99-0). Environmental Protection Agency, 

Integrated Risk Information System (IRIS), Research and Development, National Center for Environmental 

Assessment, Washington, DC http://www.epa.gov/iris/subst/0139.htm. Docket EPA-HQ-OAR-2009-0472-1660 

311 International Agency for Research on Cancer (IARC) (1999) Monographs on the evaluation of carcinogenic risk 

of chemicals to humans, Volume 71, Re-evaluation of some organic chemicals, hydrazine and hydrogen peroxide 

and Volume 97 (in preparation), World Health Organization, Lyon, France. Docket EPA-HQ-OAR-2009-0472-0387 

312 U.S. Department of Health and Human Services (2005) National Toxicology Program 11th Report on 

Carcinogens available at: ntp.niehs.nih.gov/index.cfm?objectid=32BA9724-F1F6-975E-7FCE50709CB4C932. 

313 Bevan, C.; Stadler, J.C.; Elliot, G.S.; et al. (1996) Subchronic toxicity of 4-vinylcyclohexene in rats and mice by 

inhalation. Fundam. Appl. Toxicol. 32:1-10. Docket EPA-HQ-OAR-2009-0472-0388. 

314 U.S. EPA (1987) Assessment of Health Risks to Garment Workers and Certain Home Residents from Exposure 

to Formaldehyde, Office of Pesticides and Toxic Substances, April 1987. Docket EPA-HQ-OAR-2009-0472-0389. 

315 Hauptmann, M..; Lubin, J. H.; Stewart, P. A.; Hayes, R. B.; Blair, A. 2003. Mortality from lymphohematopoetic 

malignancies among workers in formaldehyde industries. Journal of the National Cancer Institute 95: 1615-1623. 

Docket EPA-HQ-OAR-2009-0472-0336.

316 Hauptmann, M..; Lubin, J. H.; Stewart, P. A.; Hayes, R. B.; Blair, A. 2004. Mortality from solid cancers among 

workers in formaldehyde industries. American Journal of Epidemiology 159: 1117-1130. Docket EPA-HQ-OAR2009-0472-0337.

317 Beane Freeman, L. E.; Blair, A.; Lubin, J. H.; Stewart, P. A.; Hayes, R. B.; Hoover, R. N.; Hauptmann, M. 2009. 

Mortality from lymphohematopoietic malignancies among workers in formaldehyde industries: The National Cancer 

Institute cohort. J. National Cancer Inst. 101: 751-761. Docket EPA-HQ-OAR-2009-0472-0338. 
316 

death due to leukemia among workers exposed to formaldehyde.318 Extended follow-up of a 

cohort of British chemical workers did not find evidence of an increase in nasopharyngeal or 

lymphohematopoietic cancers, but a continuing statistically significant excess in lung cancers 

was reported.319 Recently, the IARC re-classified formaldehyde as a human carcinogen (Group 

1).320 

Formaldehyde exposure also causes a range of noncancer health effects, including 

irritation of the eyes (burning and watering of the eyes), nose and throat. Effects from repeated 

exposure in humans include respiratory tract irritation, chronic bronchitis and nasal epithelial 

lesions such as metaplasia and loss of cilia. Animal studies suggest that formaldehyde may also 

cause airway inflammation – including eosinophil infiltration into the airways. There are several 

studies that suggest that formaldehyde may increase the risk of asthma – particularly in the 

young.321,322 

iv. Acetaldehyde 

Acetaldehyde is classified in EPA’s IRIS database as a probable human carcinogen, 

based on nasal tumors in rats, and is considered toxic by the inhalation, oral, and intravenous 

routes.323 Acetaldehyde is reasonably anticipated to be a human carcinogen by the U.S. DHHS 

in the 11th Report on Carcinogens and is classified as possibly carcinogenic to humans (Group 

2B) by the IARC.324,325 EPA is currently conducting a reassessment of cancer risk from 

inhalation exposure to acetaldehyde. 

The primary noncancer effects of exposure to acetaldehyde vapors include irritation of 

the eyes, skin, and respiratory tract.326 In short-term (4 week) rat studies, degeneration of 

 

318 Pinkerton, L. E. 2004. Mortality among a cohort of garment workers exposed to formaldehyde: an update. 

Occup. Environ. Med. 61: 193-200. Docket EPA-HQ-OAR-2009-0472-0339.

319 Coggon, D, EC Harris, J Poole, KT Palmer. 2003. Extended follow-up of a cohort of British chemical workers 

exposed to formaldehyde. J National Cancer Inst. 95:1608-1615. Docket EPA-HQ-OAR-2009-0472-0340. 

320 International Agency for Research on Cancer (IARC). 2006. Formaldehyde, 2-Butoxyethanol and 1-tertButoxypropan-2-ol. Volume 88. (in preparation), World Health Organization, Lyon, France. Docket EPA-HQ-OAR2009-0472-1164 

321 Agency for Toxic Substances and Disease Registry (ATSDR). 1999. Toxicological profile for Formaldehyde. 

Atlanta, GA: U.S. Department of Health and Human Services, Public Health Service. 

http://www.atsdr.cdc.gov/toxprofiles/tp111.html Docket EPA-HQ-OAR-2009-0472-1191. 322 WHO (2002) Concise International Chemical Assessment Document 40: Formaldehyde. Published under the 

joint sponsorship of the United Nations Environment Programme, the International Labour Organization, and the 

World Health Organization, and produced within the framework of the Inter-Organization Programme for the Sound 

Management of Chemicals. Geneva. Docket EPA-HQ-OAR-2009-0472-1199. 

323 U.S. EPA. 1991. Integrated Risk Information System File of Acetaldehyde. Research and Development, National 

Center for Environmental Assessment, Washington, DC. This material is available electronically at 

http://www.epa.gov/iris/subst/0290.htm. Docket EPA-HQ-OAR-2009-0472-0390.

324 U.S. Department of Health and Human Services National Toxicology Program 11th Report on Carcinogens 

available at: ntp.niehs.nih.gov/index.cfm?objectid=32BA9724-F1F6-975E-7FCE50709CB4C932. 

325 International Agency for Research on Cancer (IARC). 1999. Re-evaluation of some organic chemicals, 

hydrazine, and hydrogen peroxide. IARC Monographs on the Evaluation of Carcinogenic Risk of Chemical to 

Humans, Vol 71. Lyon, France. Docket EPA-HQ-OAR-2009-0472-0387 

326 U.S. EPA. 1991. Integrated Risk Information System File of Acetaldehyde. This material is available 

electronically at http://www.epa.gov/iris/subst/0290.htm. 
317 

olfactory epithelium was observed at various concentration levels of acetaldehyde exposure.327, 

328 Data from these studies were used by EPA to develop an inhalation reference concentration. 

Some asthmatics have been shown to be a sensitive subpopulation to decrements in functional 

expiratory volume (FEV1 test) and bronchoconstriction upon acetaldehyde inhalation.329 The 

agency is currently conducting a reassessment of the health hazards from inhalation exposure to 

acetaldehyde. 

v. Acrolein

Acrolein is extremely acrid and irritating to humans when inhaled, with acute exposure 

resulting in upper respiratory tract irritation, mucus hypersecretion and congestion. The intense 

irritancy of this carbonyl has been demonstrated during controlled tests in human subjects, who 

suffer intolerable eye and nasal mucosal sensory reactions within minutes of exposure.330 These 

data and additional studies regarding acute effects of human exposure to acrolein are 

summarized in EPA’s 2003 IRIS Human Health Assessment for acrolein.331 Evidence available 

from studies in humans indicate that levels as low as 0.09 ppm (0.21 mg/m3

) for five minutes 

may elicit subjective complaints of eye irritation with increasing concentrations leading to more 

extensive eye, nose and respiratory symptoms.332 Lesions to the lungs and upper respiratory 

tract of rats, rabbits, and hamsters have been observed after subchronic exposure to acrolein.333 

Acute exposure effects in animal studies report bronchial hyper-responsiveness.334 In a recent 

study, the acute respiratory irritant effects of exposure to 1.1 ppm acrolein were more 

pronounced in mice with allergic airway disease by comparison to non-diseased mice which also 

showed decreases in respiratory rate.335 Based on these animal data and demonstration of 

similar effects in humans (e.g., reduction in respiratory rate), individuals with compromised 

 

327 Appleman, L. M., R. A. Woutersen, V. J. Feron, R. N. Hooftman, and W. R. F. Notten. 1986. Effects of the 

variable versus fixed exposure levels on the toxicity of acetaldehyde in rats. J. Appl. Toxicol. 6: 331-336. 328 Appleman, L.M., R.A. Woutersen, and V.J. Feron. 1982. Inhalation toxicity of acetaldehyde in rats. I. Acute and 

subacute studies. Toxicology. 23: 293-297. Docket EPA-HQ-OAR-2009-0472-0392. 329 Myou, S.; Fujimura, M.; Nishi K.; Ohka, T.; and Matsuda, T. 1993. Aerosolized acetaldehyde induces 

histamine-mediated bronchoconstriction in asthmatics. Am. Rev. Respir.Dis.148(4 Pt 1): 940-3. Docket EPA-HQOAR-2009-0472-0408. 

330 Sim VM, Pattle RE. Effect of possible smog irritants on human subjects JAMA165: 1980-2010, 1957. Docket 

EPA-HQ-OAR-2009-0472-0395. 

331 U.S. EPA (U.S. Environmental Protection Agency). (2003) Toxicological review of acrolein in support of 

summary information on Integrated Risk Information System (IRIS) National Center for Environmental Assessment, 

Washington, DC. EPA/635/R-03/003. Available online at: http://www.epa.gov/ncea/iris. 332 Weber-Tschopp, A; Fischer, T; Gierer, R; et al. (1977) Experimentelle reizwirkungen von Acrolein auf den 

Menschen. Int Arch Occup Environ Hlth 40(2):117-130. In German Docket EPA-HQ-OAR-2009-0472-0394. 

333 Integrated Risk Information System File of Acrolein. Office of Research and Development, National Center for 

Environmental Assessment, Washington, DC. This material is available at http://www.epa.gov/iris/subst/0364.htm 

Docket EPA-HQ-OAR-2009-0472-0391. 

334 U.S. EPA (U.S. Environmental Protection Agency). (2003) Toxicological review of acrolein in support of summary 

information on Integrated Risk Information System (IRIS) National Center for Environmental Assessment, 

Washington, DC. EPA/635/R-03/003. Available online at: http://www.epa.gov/ncea/iris. 335 Morris JB, Symanowicz PT, Olsen JE, et al. 2003. Immediate sensory nerve-mediated respiratory responses to 

irritants in healthy and allergic airway-diseased mice. J Appl Physiol 94(4):1563-1571. Docket EPA-HQ-OAR2009-0472-0396. 
318 

respiratory function (e.g., emphysema, asthma) are expected to be at increased risk of developing 

adverse responses to strong respiratory irritants such as acrolein. 

EPA determined in 2003 that the human carcinogenic potential of acrolein could not be 

determined because the available data were inadequate. No information was available on the 

carcinogenic effects of acrolein in humans and the animal data provided inadequate evidence of 

carcinogenicity.336 The IARC determined in 1995 that acrolein was not classifiable as to its 

carcinogenicity in humans.337

vi. Polycyclic Organic Matter (POM) 

POM is generally defined as a large class of organic compounds which have multiple 

benzene rings and a boiling point greater than 100 degrees Celsius. Many of the compounds 

included in the class of compounds known as POM are classified by EPA as probable human 

carcinogens based on animal data. One of these compounds, naphthalene, is discussed separately 

below. Polycyclic aromatic hydrocarbons (PAHs) are a subset of POM that contain only 

hydrogen and carbon atoms. A number of PAHs are known or suspected carcinogens. Recent 

studies have found that maternal exposures to PAHs (a subclass of POM) in a population of 

pregnant women were associated with several adverse birth outcomes, including low birth 

weight and reduced length at birth, as well as impaired cognitive development at age three.338,339 

EPA has not yet evaluated these recent studies. 

vii. Naphthalene 

Naphthalene is found in small quantities in gasoline and diesel fuels. Naphthalene 

emissions have been measured in larger quantities in both gasoline and diesel exhaust compared 

with evaporative emissions from mobile sources, indicating it is primarily a product of 

combustion. EPA released an external review draft of a reassessment of the inhalation 

carcinogenicity of naphthalene based on a number of recent animal carcinogenicity studies.340 

 

336 U.S. EPA. 2003. Integrated Risk Information System File of Acrolein. Research and Development, National Center 

for Environmental Assessment, Washington, DC. This material is available at 

http://www.epa.gov/iris/subst/0364.htm 

337 International Agency for Research on Cancer (IARC). 1995. Monographs on the evaluation of carcinogenic risk 

of chemicals to humans, Volume 63. Dry cleaning, some chlorinated solvents and other industrial chemicals, World 

Health Organization, Lyon, France. Docket EPA-HQ-OAR-2009-0472-0393 338 Perera, F.P.; Rauh, V.; Tsai, W-Y.; et al. (2002) Effect of transplacental exposure to environmental pollutants on 

birth outcomes in a multiethnic population. Environ Health Perspect. 111: 201-205. Docket EPA-HQ-OAR-2009-

0472-0372. 

339 Perera, F.P.; Rauh, V.; Whyatt, R.M.; Tsai, W.Y.; Tang, D.; Diaz, D.; Hoepner, L.; Barr, D.; Tu, Y.H.; Camann, 

D.; Kinney, P. (2006) Effect of prenatal exposure to airborne polycyclic aromatic hydrocarbons on 

neurodevelopment in the first 3 years of life among inner-city children. Environ Health Perspect 114: 1287-1292. 

Docket EPA-HQ-OAR-2009-0472-0373. 

340 U. S. EPA. 2004. Toxicological Review of Naphthalene (Reassessment of the Inhalation Cancer Risk), 

Environmental Protection Agency, Integrated Risk Information System, Research and Development, National 

Center for Environmental Assessment, Washington, DC. This material is available electronically at 

http://www.epa.gov/iris/subst/0436.htm. Docket EPA-HQ-OAR-2009-0472-0272.
319 

The draft reassessment completed external peer review.341 Based on external peer review 

comments received, additional analyses are being undertaken. This external review draft does 

not represent official agency opinion and was released solely for the purposes of external peer 

review and public comment. The National Toxicology Program listed naphthalene as 

"reasonably anticipated to be a human carcinogen" in 2004 on the basis of bioassays reporting 

clear evidence of carcinogenicity in rats and some evidence of carcinogenicity in mice.342 

California EPA has released a new risk assessment for naphthalene, and the IARC has 

reevaluated naphthalene and re-classified it as Group 2B: possibly carcinogenic to humans.343 

Naphthalene also causes a number of chronic non-cancer effects in animals, including abnormal 

cell changes and growth in respiratory and nasal tissues.344

viii. Other Air Toxics

In addition to the compounds described above, other compounds in gaseous hydrocarbon 

and PM emissions from vehicles will be affected by this final rule. Mobile source air toxic 

compounds that would potentially be impacted include ethylbenzene, propionaldehyde, toluene, 

and xylene. Information regarding the health effects of these compounds can be found in EPA’s 

IRIS database.345

f. Exposure and Health Effects Associated with Traffic 

Populations who live, work, or attend school near major roads experience elevated 

exposure concentrations to a wide range of air pollutants, as well as higher risks for a number of 

adverse health effects. While the previous sections of this preamble have focused on the health 

effects associated with individual criteria pollutants or air toxics, this section discusses the 

mixture of different exposures near major roadways, rather than the effects of any single 

pollutant. As such, this section emphasizes traffic-related air pollution, in general, as the 

relevant indicator of exposure rather than any particular pollutant. 

 Concentrations of many traffic-generated air pollutants are elevated for up to 300-500 

meters downwind of roads with high traffic volumes.346 Numerous sources on roads contribute 

to elevated roadside concentrations, including exhaust and evaporative emissions, and 

resuspension of road dust and tire and brake wear. Concentrations of several criteria and 

hazardous air pollutants are elevated near major roads. Furthermore, different semi-volatile 

 

341 Oak Ridge Institute for Science and Education. (2004). External Peer Review for the IRIS Reassessment of the 

Inhalation Carcinogenicity of Naphthalene. August 2004. 

http://cfpub.epa.gov/ncea/cfm/recordisplay.cfm?deid=84403 Docket EPA-HQ-OAR-2009-0472-0273. 342 National Toxicology Program (NTP). (2004). 11th Report on Carcinogens. Public Health Service, U.S. 

Department of Health and Human Services, Research Triangle Park, NC. Available from: http://ntpserver.niehs.nih.gov. 

343 International Agency for Research on Cancer (IARC). (2002). Monographs on the Evaluation of the 

Carcinogenic Risk of Chemicals for Humans. Vol. 82. Lyon, France. Docket EPA-HQ-OAR-2009-0472-0274.

344 U. S. EPA. 1998. Toxicological Review of Naphthalene, Environmental Protection Agency, Integrated Risk 

Information System, Research and Development, National Center for Environmental Assessment, Washington, DC. 

This material is available electronically at http://www.epa.gov/iris/subst/0436.htm 345 U.S. EPA Integrated Risk Information System (IRIS) database is available at: www.epa.gov/iris 346 Zhou, Y.; Levy, J.I. (2007) Factors influencing the spatial extent of mobile source air pollution impacts: a metaanalysis. BMC Public Health 7: 89. doi:10.1186/1471-2458-7-89 
320 

organic compounds and chemical components of particulate matter, including elemental carbon, 

organic material, and trace metals, have been reported at higher concentrations near major roads. 

 Populations near major roads experience greater risk of certain adverse health effects. 

The Health Effects Institute published a report on the health effects of traffic-related air 

pollution.347 It concluded that evidence is “sufficient to infer the presence of a causal 

association” between traffic exposure and exacerbation of childhood asthma symptoms. The 

HEI report also concludes that the evidence is either “sufficient” or “suggestive but not 

sufficient” for a causal association between traffic exposure and new childhood asthma cases. A 

review of asthma studies by Salam et al. (2008) reaches similar conclusions.348 The HEI report 

also concludes that there is “suggestive” evidence for pulmonary function deficits associated 

with traffic exposure, but concluded that there is “inadequate and insufficient” evidence for 

causal associations with respiratory health care utilization, adult-onset asthma, COPD symptoms, 

and allergy. A review by Holguin (2008) notes that the effects of traffic on asthma may be 

modified by nutrition status, medication use, and genetic factors.349

 The HEI report also concludes that evidence is “suggestive” of a causal association 

between traffic exposure and all-cause and cardiovascular mortality. There is also evidence of 

an association between traffic-related air pollutants and cardiovascular effects such as changes in 

heart rhythm, heart attack, and cardiovascular disease. The HEI report characterizes this 

evidence as “suggestive” of a causal association, and an independent epidemiological literature 

review by Adar and Kaufman (2007) concludes that there is “consistent evidence” linking 

traffic-related pollution and adverse cardiovascular health outcomes.350

 Some studies have reported associations between traffic exposure and other health 

effects, such as birth outcomes (e.g., low birth weight) and childhood cancer. The HEI report 

concludes that there is currently “inadequate and insufficient” evidence for a causal association 

between these effects and traffic exposure. A review by Raaschou-Nielsen and Reynolds (2006) 

concluded that evidence of an association between childhood cancer and traffic-related air 

pollutants is weak, but noted the inability to draw firm conclusions based on limited evidence.351

 

There is a large population in the U.S. living in close proximity of major roads. 

According to the Census Bureau’s American Housing Survey for 2007, approximately 20 million 

residences in the U.S., 15.6% of all homes, are located within 300 feet (91 m) of a highway with 

4+ lanes, a railroad, or an airport.352 Therefore, at current population of approximately 309 

 

347 HEI Panel on the Health Effects of Air Pollution. (2010) Traffic-related air pollution: a critical review of the 

literature on emissions, exposure, and health effects. [Online at www.healtheffects.org] 348 Salam, M.T.; Islam, T.; Gilliland, F.D. (2008) Recent evidence for adverse effects of residential proximity to 

traffic sources on asthma. Current Opin Pulm Med 14: 3-8. 

349 Holguin, F. (2008) Traffic, outdoor air pollution, and asthma. Immunol Allergy Clinics North Am 28: 577-588. 350 Adar, S.D.; Kaufman, J.D. (2007) Cardiovascular disease and air pollutants: evaluating and improving 

epidemiological data implicating traffic exposure. Inhal Toxicol 19: 135-149. 351 Raaschou-Nielsen, O.; Reynolds, P. (2006) Air pollution and childhood cancer: a review of the epidemiological 

literature. Int J Cancer 118: 2920-2929. 

352 U.S. Census Bureau (2008) American Housing Survey for the United States in 2007. Series H-150 (National 

Data), Table 1A-7. [Accessed at http://www.census.gov/hhes/www/housing/ahs/ahs07/ahs07.html on January 22, 

2009] 
321 

million, assuming that population and housing similarly distributed, there are over 48 million 

people in the U.S. living near such sources. The HEI report also notes that in two North 

American cities, Los Angeles and Toronto, over 40% of each city’s population live within 500 

meters of a highway or 100 meters of a major road. It also notes that about 33% of each city’s 

population resides within 50 meters of major roads. Together, the evidence suggests that a large 

U.S. population lives in areas with elevated traffic-related air pollution. 

 People living near roads are often socioeconomically disadvantaged. According to the 

2007 American Housing Survey, a renter-occupied property is over twice as likely as an owneroccupied property to be located near a highway with 4+ lanes, railroad or airport. In the same 

survey, the median household income of rental housing occupants was less than half that of 

owner-occupants ($28,921/$59,886). Numerous studies in individual urban areas report higher 

levels of traffic-related air pollutants in areas with high minority or poor populations.353,354,355

 Students may also be exposed in situations where schools are located near major roads. 

In a study of nine metropolitan areas across the U.S., Appatova et al. (2008) found that on 

average greater than 33% of schools were located within 400 m of an Interstate, U.S., or state 

highway, while 12% were located within 100 m.356 The study also found that among the 

metropolitan areas studied, schools in the Eastern U.S. were more often sited near major 

roadways than schools in the Western U.S. 

 Demographic studies of students in schools near major roadways suggest that this 

population is more likely than the general student population to be of non-white race or Hispanic 

ethnicity, and more often live in low socioeconomic status locations. 357,358,359 There is some 

inconsistency in the evidence, which may be due to different local development patterns and 

measures of traffic and geographic scale used in the studies.356 

4. Environmental Effects of Non-GHG Pollutants 

In this section we discuss some of the environmental effects of PM and its precursors 

such as visibility impairment, atmospheric deposition, and materials damage and soiling, as well 

as environmental effects associated with the presence of ozone in the ambient air, such as 

impacts on plants, including trees, agronomic crops and urban ornamentals, and environmental 

 

353 Lena, T.S.; Ochieng, V.; Carter, M.; Holguín-Veras, J.; Kinney, P.L. (2002) Elemental carbon and PM2.5 levels 

in an urban community heavily impacted by truck traffic. Environ Health Perspect 110: 1009-1015. 354 Wier, M.; Sciammas, C.; Seto, E.; Bhatia, R.; Rivard, T. (2009) Health, traffic, and environmental justice: 

collaborative research and community action in San Francisco, California. Am J Public Health 99: S499-S504. 355 Forkenbrock, D.J. and L.A. Schweitzer, Environmental Justice and Transportation Investment Policy. Iowa 

City: University of Iowa, 1997. 

356 Appatova, A.S.; Ryan, P.H.; LeMasters, G.K.; Grinshpun, S.A. (2008) Proximal exposure of public schools and 

students to major roadways: a nationwide U.S. survey. J Environ Plan Mgmt 

357 Green, R.S.; Smorodinsky, S.; Kim, J.J.; McLaughlin, R.; Ostro, B. (2004) Proximity of California public schools 

to busy roads. Environ Health Perspect 112: 61-66. 

358 Houston, D.; Ong, P.; Wu, J.; Winer, A. (2006) Proximity of licensed child care facilities to near-roadway vehicle 

pollution. Am J Public Health 96: 1611-1617. 

359 Wu, Y.; Batterman, S. (2006) Proximity of schools in Detroit, Michigan to automobile and truck traffic. J 

Exposure Sci Environ Epidemiol 16: 457-470. 
322 

effects associated with air toxics. No substantive comments were received on the environmental 

effects of non-GHG pollutants. 

a. Visibility 

Visibility can be defined as the degree to which the atmosphere is transparent to visible 

light.360 Visibility impairment is caused by light scattering and absorption by suspended particles and 

gases. Visibility is important because it has direct significance to people’s enjoyment of daily 

activities in all parts of the country. Individuals value good visibility for the well-being it 

provides them directly, where they live and work, and in places where they enjoy recreational 

opportunities. Visibility is also highly valued in significant natural areas, such as national parks 

and wilderness areas, and special emphasis is given to protecting visibility in these areas. For 

more information on visibility see the final 2009 PM ISA.361

EPA is pursuing a two-part strategy to address visibility. First, EPA has concluded that 

PM2.5 causes adverse effects on visibility in various locations, depending on PM concentrations 

and factors such as chemical composition and average relative humidity, and has set secondary 

PM2.5 standards.362 The secondary PM2.5 standards act in conjunction with the regional haze 

program. The regional haze rule (64 FR 35714) was put in place in July 1999 to protect the 

visibility in mandatory class I federal areas. There are 156 national parks, forests and wilderness 

areas categorized as mandatory class I federal areas (62 FR 38680-81, July 18, 1997).363 

Visibility can be said to be impaired in both PM2.5 nonattainment areas and mandatory class I 

federal areas. 

b. Plant and Ecosystem Effects of Ozone 

Elevated ozone levels contribute to environmental effects, with impacts to plants and 

ecosystems being of most concern. Ozone can produce both acute and chronic injury in sensitive 

species depending on the concentration level and the duration of the exposure. Ozone effects 

also tend to accumulate over the growing season of the plant, so that even low concentrations 

experienced for a longer duration have the potential to create chronic stress on vegetation. 

Ozone damage to plants includes visible injury to leaves and impaired photosynthesis, both of 

which can lead to reduced plant growth and reproduction, resulting in reduced crop yields, 

forestry production, and use of sensitive ornamentals in landscaping. In addition, the impairment 

of photosynthesis, the process by which the plant makes carbohydrates (its source of energy and 

food), can lead to a subsequent reduction in root growth and carbohydrate storage below ground, 

resulting in other, more subtle plant and ecosystems impacts. 

 

360 National Research Council, 1993. Protecting Visibility in National Parks and Wilderness Areas. National 

Academy of Sciences Committee on Haze in National Parks and Wilderness Areas. National Academy Press, 

Washington, DC. Docket EPA-HQ-OAR-2005-0161. This book can be viewed on the National Academy Press 

Website at http://www.nap.edu/books/0309048443/html/ 361 U.S. EPA (2009). Integrated Science Assessment for Particulate Matter (Final Report). U.S. Environmental 

Protection Agency, Washington, DC, EPA/600/R-08/139F, 2009. Docket EPA-HQ-OAR-2009-0472-11295. 

362 The existing annual primary and secondary PM2.5 standards have been remanded and are being addressed in the 

currently ongoing PM NAAQS review. 

363 These areas are defined in CAA section 162 as those national parks exceeding 6,000 acres, wilderness areas and 

memorial parks exceeding 5,000 acres, and all international parks which were in existence on August 7, 1977. 
323 

These latter impacts include increased susceptibility of plants to insect attack, disease, 

harsh weather, interspecies competition and overall decreased plant vigor. The adverse effects of 

ozone on forest and other natural vegetation can potentially lead to species shifts and loss from 

the affected ecosystems, resulting in a loss or reduction in associated ecosystem goods and 

services. Lastly, visible ozone injury to leaves can result in a loss of aesthetic value in areas of 

special scenic significance like national parks and wilderness areas. The final 2006 Ozone Air 

Quality Criteria Document presents more detailed information on ozone effects on vegetation 

and ecosystems. 

c. Atmospheric Deposition 

Wet and dry deposition of ambient particulate matter delivers a complex mixture of 

metals (e.g., mercury, zinc, lead, nickel, aluminum, cadmium), organic compounds (e.g., POM, 

dioxins, furans) and inorganic compounds (e.g., nitrate, sulfate) to terrestrial and aquatic 

ecosystems. The chemical form of the compounds deposited depends on a variety of factors 

including ambient conditions (e.g., temperature, humidity, oxidant levels) and the sources of the 

material. Chemical and physical transformations of the compounds occur in the atmosphere as 

well as the media onto which they deposit. These transformations in turn influence the fate, 

bioavailability and potential toxicity of these compounds. Atmospheric deposition has been 

identified as a key component of the environmental and human health hazard posed by several 

pollutants including mercury, dioxin and PCBs.364

Adverse impacts on water quality can occur when atmospheric contaminants deposit to 

the water surface or when material deposited on the land enters a waterbody through runoff. 

Potential impacts of atmospheric deposition to waterbodies include those related to both nutrient 

and toxic inputs. Adverse effects to human health and welfare can occur from the addition of 

excess nitrogen via atmospheric deposition. The nitrogen-nutrient enrichment contributes to 

toxic algae blooms and zones of depleted oxygen, which can lead to fish kills, frequently in 

coastal waters. Deposition of heavy metals or other toxics may lead to the human ingestion of 

contaminated fish, impairment of drinking water, damage to the marine ecology, and limits to 

recreational uses. Several studies have been conducted in U.S. coastal waters and in the Great 

Lakes Region in which the role of ambient PM deposition and runoff is 

investigated.365,366,367,368,369 

 

364 U.S. EPA (2000) Deposition of Air Pollutants to the Great Waters: Third Report to Congress. Office of Air 

Quality Planning and Standards. EPA-453/R-00-0005. Docket EPA-HQ-OAR-2009-0472-0091. 

365 U.S. EPA (2004) National Coastal Condition Report II. Office of Research and Development/ Office of Water. 

EPA-620/R-03/002. Docket EPA-HQ-OAR-2009-0472-0089. 

366 Gao, Y., E.D. Nelson, M.P. Field, et al. 2002. Characterization of atmospheric trace elements on PM2.5 

particulate matter over the New York-New Jersey harbor estuary. Atmos. Environ. 36: 1077-1086. Docket EPAHQ-OAR-2009-0472-11297. 

367 Kim, G., N. Hussain, J.R. Scudlark, and T.M. Church. 2000. Factors influencing the atmospheric depositional 

fluxes of stable Pb, 210Pb, and 7Be into Chesapeake Bay. J. Atmos. Chem. 36: 65-79. Docket EPA-HQ-OAR2009-0472-11299. 

368 Lu, R., R.P. Turco, K. Stolzenbach, et al. 2003. Dry deposition of airborne trace metals on the Los Angeles 

Basin and adjacent coastal waters. J. Geophys. Res. 108(D2, 4074): AAC 11-1 to 11-24. Docket EPA-HQ-OAR2009-0472-11296. 
324 

Atmospheric deposition of nitrogen and sulfur contributes to acidification, altering 

biogeochemistry and affecting animal and plant life in terrestrial and aquatic ecosystems across 

the U.S. The sensitivity of terrestrial and aquatic ecosystems to acidification from nitrogen and 

sulfur deposition is predominantly governed by geology. Prolonged exposure to excess nitrogen 

and sulfur deposition in sensitive areas acidifies lakes, rivers and soils. Increased acidity in 

surface waters creates inhospitable conditions for biota and affects the abundance and nutritional 

value of preferred prey species, threatening biodiversity and ecosystem function. Over time, 

acidifying deposition also removes essential nutrients from forest soils, depleting the capacity of 

soils to neutralize future acid loadings and negatively affecting forest sustainability. Major 

effects include a decline in sensitive forest tree species, such as red spruce (Picea rubens) and 

sugar maple (Acer saccharum), and a loss of biodiversity of fishes, zooplankton, and macro 

invertebrates.

In addition to the role nitrogen deposition plays in acidification, nitrogen deposition also 

leads to nutrient enrichment and altered biogeochemical cycling. In aquatic systems increased 

nitrogen can alter species assemblages and cause eutrophication. In terrestrial systems nitrogen 

loading can lead to loss of nitrogen sensitive lichen species, decreased biodiversity of grasslands, 

meadows and other sensitive habitats, and increased potential for invasive species. For a broader 

explanation of the topics treated here, refer to the description in Section 7.1.2 of the RIA. 

Adverse impacts on soil chemistry and plant life have been observed for areas heavily 

influenced by atmospheric deposition of nutrients, metals and acid species, resulting in species 

shifts, loss of biodiversity, forest decline and damage to forest productivity. Potential impacts 

also include adverse effects to human health through ingestion of contaminated vegetation or 

livestock (as in the case for dioxin deposition), reduction in crop yield, and limited use of land 

due to contamination. 

Atmospheric deposition of pollutants can reduce the aesthetic appeal of buildings and 

culturally important articles through soiling, and can contribute directly (or in conjunction with 

other pollutants) to structural damage by means of corrosion or erosion. Atmospheric deposition 

may affect materials principally by promoting and accelerating the corrosion of metals, by 

degrading paints, and by deteriorating building materials such as concrete and limestone. 

Particles contribute to these effects because of their electrolytic, hygroscopic, and acidic 

properties, and their ability to adsorb corrosive gases (principally sulfur dioxide). 

d. Environmental Effects of Air Toxics 

Fuel combustion emissions contribute to ambient levels of pollutants that contribute to 

adverse effects on vegetation. Volatile organic compounds (VOCs), some of which are 

considered air toxics, have long been suspected to play a role in vegetation damage.370 In 

 369 Marvin, C.H., M.N. Charlton, E.J. Reiner, et al. 2002. Surficial sediment contamination in Lakes Erie and 

Ontario: A comparative analysis. J. Great Lakes Res. 28(3): 437-450. Docket EPA-HQ-OAR-2009-0472-11300. 370 U.S. EPA. 1991. Effects of organic chemicals in the atmosphere on terrestrial plants. EPA/600/3-91/001. Docket 

EPA-HQ-OAR-2009-0472-0401. 
325 

laboratory experiments, a wide range of tolerance to VOCs has been observed.371 Decreases in 

harvested seed pod weight have been reported for the more sensitive plants, and some studies 

have reported effects on seed germination, flowering and fruit ripening. Effects of individual 

VOCs or their role in conjunction with other stressors (e.g., acidification, drought, temperature 

extremes) have not been well studied. In a recent study of a mixture of VOCs including ethanol 

and toluene on herbaceous plants, significant effects on seed production, leaf water content and 

photosynthetic efficiency were reported for some plant species.372 

Research suggests an adverse impact of vehicle exhaust on plants, which has in some 

cases been attributed to aromatic compounds and in other cases to nitrogen oxides.373, 374, 375 The 

impacts of VOCs on plant reproduction may have long-term implications for biodiversity and 

survival of native species near major roadways. Most of the studies of the impacts of VOCs on 

vegetation have focused on short-term exposure and few studies have focused on long-term 

effects of VOCs on vegetation and the potential for metabolites of these compounds to affect 

herbivores or insects. 

5. Air Quality Impacts of Non-GHG Pollutants 

Air quality modeling was performed to assess the impact of the vehicle standards on 

criteria and air toxic pollutants. In this section, we present information on current modeled 

levels of pollution as well as projections for 2030, with respect to ambient PM2.5, ozone, selected 

air toxics, visibility levels and nitrogen and sulfur deposition. The results are discussed in more 

detail below and in Section 7.2 of the RIA. No substantive comments were received on our 

plans for non-GHG air quality modeling that were detailed in the proposal for this rule 

We used the Community Multi-scale Air Quality (CMAQ) photochemical model, version 

4.7, for our analysis. This version of CMAQ includes a number of improvements to previous 

versions of the model that are important in assessing impacts of the increased use of renewable 

fuels, including additional pathways for formation of soluble organic aerosols (SOA). These 

improvements are discussed in Section 7.2 of the RIA. 

a. Particulate Matter 

i. Current Levels 

 

371 Cape JN, ID Leith, J Binnie, J Content, M Donkin, M Skewes, DN Price AR Brown, AD Sharpe. 2003. Effects 

of VOCs on herbaceous plants in an open-top chamber experiment. Environ. Pollut. 124:341-343. Docket EPA-HQOAR-2009-0472-0357. 

372 Cape JN, ID Leith, J Binnie, J Content, M Donkin, M Skewes, DN Price AR Brown, AD Sharpe. 2003. Effects 

of VOCs on herbaceous plants in an open-top chamber experiment. Environ. Pollut. 124:341-343. Docket EPA-HQOAR-2009-0472-0357. 

373 Viskari E-L. 2000. Epicuticular wax of Norway spruce needles as indicator of traffic pollutant deposition. Water, 

Air, and Soil Pollut. 121:327-337. Docket EPA-HQ-OAR-2009-0472-1128. 

374 Ugrekhelidze D, F Korte, G Kvesitadze. 1997. Uptake and transformation of benzene and toluene by plant leaves. 

Ecotox. Environ. Safety 37:24-29. Docket EPA-HQ-OAR-2009-0472-1142. 

375 Kammerbauer H, H Selinger, R Rommelt, A Ziegler-Jons, D Knoppik, B Hock. 1987. Toxic components of 

motor vehicle emissions for the spruce Picea abies. Environ. Pollut. 48:235-243. Docket EPA-HQ-OAR-2009-

0472-0358. 
326 

PM2.5 concentrations exceeding the level of the PM2.5 NAAQS occur in many parts of the 

country. In 2005, EPA designated 39 nonattainment areas for the 1997 PM2.5 NAAQS (70 FR 

943, January 5, 2005). These areas are composed of 208 full or partial counties with a total 

population exceeding 88 million. The 1997 PM2.5 NAAQS was revised in 2006 and the 2006 24-

hour PM2.5 NAAQS became effective on December 18, 2006. On October 8, 2009, the EPA 

issued final nonattainment area designations for the 2006 24-hour PM2.5 NAAQS (74 FR 58688, 

November 13, 2009). These designations include 31 areas composed of 120 full or partial 

counties with a population of over 70 million. In total, there are 54 PM2.5 nonattainment areas 

composed of 245 counties with a population of 101 million people. 

ii. Projected Levels without this Rule 

States with PM2.5 nonattainment areas are required to take action to bring those areas into 

compliance in the future. Areas designated as not attaining the 1997 PM2.5 NAAQS will need to 

attain the 1997 standards in the 2010 to 2015 time frame, and then maintain them thereafter. The 

2006 24-hour PM2.5 nonattainment areas will be required to attain the 2006 24-hour PM2.5

NAAQS in the 2014 to 2019 time frame and then be required to maintain the 2006 24-hour PM2.5

NAAQS thereafter. 

EPA has already adopted many emission control programs that are expected to reduce 

ambient PM2.5 levels and which will assist in reducing the number of areas that fail to achieve 

the PM2.5 NAAQS. Even so, our air quality modeling projects that in 2030, with all current 

controls but excluding the impacts of the vehicle standards adopted here, at least XX counties 

with a population of almost 28 million may not attain the 1997 annual PM2.5 standard of 15 

μg/m3

 and XX counties with a population of over XX million may not attain the 2006 24-hour 

PM2.5 standard of 35 μg/m3

.

376 These numbers do not account for those areas that are close to 

(e.g., within 10 percent of) the PM2.5 standards. These areas, although not violating the 

standards, will also benefit from any reductions in PM2.5 ensuring long-term maintenance of the 

PM2.5 NAAQS. 

iii. Projected Levels with this Rule 

 

XX- to be completed when we have AQ modeling results 

b. Ozone 

i. Current Levels 

8-hour ozone concentrations exceeding the level of the ozone NAAQS occur in many 

parts of the country. In 2008, the EPA amended the ozone NAAQS (73 FR 16436, March 27, 

2008). The final 2008 ozone NAAQS rule set forth revisions to the previous 1997 NAAQS for 

ozone to provide increased protection of public health and welfare. EPA recently proposed to 

reconsider the 2008 ozone NAAQS (75 FR 2938, January 19, 2010). Because of the uncertainty 

the reconsideration proposal creates regarding the continued applicability of the 2008 ozone 

 

376 U.S. EPA (2009). Final Rule “Control of Emissions from New Marine Compression-Ignition Engines at or 

Above 30 Liters per Cylinder”. (XX FR XXXXX, DATE). 
327 

NAAQS, EPA has used its authority to extend by 1 year the deadline for promulgating 

designations for those NAAQS (75 FR 2936, January 19, 2010). The new deadline is March 12, 

2011. EPA intends to complete the reconsideration by August 31, 2010. If EPA establishes new 

ozone NAAQS as a result of the reconsideration, they would replace the 2008 ozone NAAQS 

and requirements to designate areas and implement the 2008 NAAQS would no longer apply. 

As of January 6, 2010 there are 51 areas designated as nonattainment for the 1997 8-hour 

ozone NAAQS, comprising 266 full or partial counties with a total population of over 122 

million people. These numbers do not include the people living in areas where there is a future 

risk of failing to maintain or attain the 1997 8-hour ozone NAAQS. The numbers above likely 

underestimate the number of counties that are not meeting the ozone NAAQS because the 

nonattainment areas associated with the more stringent 2008 8-hour ozone NAAQS have not yet 

been designated. Table III.G.5-1 provides an estimate, based on 2005-07 air quality data, of the 

counties with design values greater than the 2008 8-hour ozone NAAQS of 0.075 ppm. 

Table III.G.5-1 

Counties with Design Values Greater Than the 2008 Ozone NAAQS Based on 2005-2007 Air 

Quality Data 

 NUMBER OF 

COUNTIES 

POPULATIONa

1997 Ozone Standard: counties within the 51 

areas currently designated as nonattainment 

(as of 1/6/10) 

266 122,343, 799 

2008 Ozone Standard: additional counties 

that would not meet the 2008 NAAQSb

227 41,285,262 

Total 493 163,629,061 

Notes: 

a

 Population numbers are from 2000 census data. 

b

 Area designations for the 2008 ozone NAAQS have not yet been made. Nonattainment for the 2008 Ozone 

NAAQS would be based on three years of air quality data from later years. Also, the county numbers in this row 

include only the counties with monitors violating the 2008 Ozone NAAQS. The numbers in this table may be an 

underestimate of the number of counties and populations that will eventually be included in areas with multiple 

counties designated nonattainment. 

ii. Projected Levels without this Rule 

States with 8-hour ozone nonattainment areas are required to take action to bring those 

areas into compliance in the future. Based on the final rule designating and classifying 8-hour 

ozone nonattainment areas for the 1997 standard (69 FR 23951, April 30, 2004), most 8-hour 

ozone nonattainment areas will be required to attain the ozone NAAQS in the 2007 to 2013 time 

frame and then maintain the NAAQS thereafter. EPA has recently proposed to reconsider the 

2008 ozone NAAQS. If EPA promulgates different ozone NAAQS in 2010 as a result of the 

reconsideration, they would fully replace the 2008 ozone NAAQS and there would no longer be 

a requirement to designate areas for the 2008 NAAQS. EPA would designate nonattainment 

areas for a potential new 2010 primary ozone NAAQS based on the reconsideration of the 2008 

ozone NAAQS in 2011. The attainment dates for areas designated nonattainment for a potential 
328 

new 2010 primary ozone NAAQS are likely to be in the 2014 to 2031 timeframe, depending on 

the severity of the problem. 

EPA has already adopted many emission control programs that are expected to reduce 

ambient ozone levels and assist in reducing the number of areas that fail to achieve the ozone 

NAAQS. Even so, our air quality modeling projects that in 2030, with all current controls but 

excluding the impacts of the vehicle standards, up to XX counties with a population of over XX 

million may not attain the 2008 ozone standard of 0.075 ppm (75 ppb). These numbers do not 

account for those areas that are close to (e.g., within 10 percent of) the 2008 ozone standard. 

These areas, although not violating the standards, will also benefit from any reductions in ozone 

ensuring long-term maintenance of the ozone NAAQS. 

iii. Projected Levels with this Rule 

 

XX- to be completed when we have AQ modeling results 

c. Air Toxics 

i. Current Levels 

The majority of Americans continue to be exposed to ambient concentrations of air toxics 

at levels which have the potential to cause adverse health effects.377 The levels of air toxics to 

which people are exposed vary depending on where people live and work and the kinds of 

activities in which they engage, as discussed in detail in U.S. EPA’s most recent Mobile Source 

Air Toxics Rule.378 According to the National Air Toxic Assessment (NATA) for 2002,379

mobile sources were responsible for 47 percent of outdoor toxic emissions, over 50 percent of 

the cancer risk, and over 80 percent of the noncancer hazard. Benzene is the largest contributor 

to cancer risk of all 124 pollutants quantitatively assessed in the 2002 NATA and mobile sources 

were responsible for 59 percent of benzene emissions in 2002. Over the years, EPA has 

implemented a number of mobile source and fuel controls resulting in VOC reductions, which 

also reduce benzene and other air toxic emissions. 

ii. Projected Levels 

XX- to be completed when we have AQ modeling results 

d. Nitrogen and Sulfur Deposition 

i. Current Levels 

Over the past two decades, the EPA has undertaken numerous efforts to reduce nitrogen 

and sulfur deposition across the U.S. Analyses of long-term monitoring data for the U.S. show 

that deposition of both nitrogen and sulfur compounds has decreased over the last 17 years 

 

377 U. S. EPA. (2009) 2002 National-Scale Air Toxics Assessment. http://www.epa.gov/ttn/atw/nata2002/ 378 U. S. Environmental Protection Agency (2007). Control of Hazardous Air Pollutants from Mobile Sources; Final 

Rule. 72 FR 8434, February 26, 2007. 

379 U. S. EPA. (2009) 2002 National-Scale Air Toxics Assessment. http://www.epa.gov/ttn/atw/nata2002/ 
329 

although many areas continue to be negatively impacted by deposition. Deposition of inorganic 

nitrogen and sulfur species routinely measured in the U.S. between 2004 and 2006 were as high 

as 9.6 kilograms of nitrogen per hectare per year (kg N/ha/yr) and 21.3 kilograms of sulfur per 

hectare per year (kg S/ha/yr). The data show that reductions were more substantial for sulfur 

compounds than for nitrogen compounds. These numbers are generated by the U.S. national 

monitoring network and they likely underestimate nitrogen deposition because neither ammonia 

nor organic nitrogen is measured. In the eastern U.S., where data are most abundant, total sulfur 

deposition decreased by about 36% between 1990 and 2005, while total nitrogen deposition 

decreased by 19% over the same time frame.380 

ii. Projected Levels 

XX- to be completed when we have AQ modeling results 

e. Visibility 

i. Current Levels 

As mentioned in Section III.5.a, millions of people live in nonattainment areas for the 

PM2.5 NAAQS. These populations, as well as large numbers of individuals who travel to these 

areas, are likely to experience visibility impairment. In addition, while visibility trends have 

improved in mandatory class I federal areas, the most recent data show that these areas continue 

to suffer from visibility impairment. In summary, visibility impairment is experienced 

throughout the U.S., in multi-state regions, urban areas, and remote mandatory class I federal 

areas. 

ii. Projected Levels 

XX- to be completed when we have AQ modeling results 

H. What are the Estimated Cost, Economic, and Other Impacts of the Program? 

In this section, EPA presents the costs and impacts of EPA’s GHG program. 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 average fuel economy increases and CO2 emissions reductions. The 

two agencies’ standards comprise the National Program, and this discussion of costs and benefits 

of EPA’s GHG standard 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. 

This section outlines the basis for assessing the benefits and costs of the GHG standards 

and provides estimates of these costs and benefits. Some of these effects are private, meaning 

that they affect consumers and producers directly in their sales, purchases, and use of vehicles. 

These private effects include the upfront costs of the technology, fuel savings, and the benefits of 

additional driving and reduced refueling. Other costs and benefits affect people outside the 

 

380 U.S. EPA. U.S. EPA's 2008 Report on the Environment (Final Report). U.S. Environmental Protection Agency, 

Washington, D.C., EPA/600/R-07/045F (NTIS PB2008-112484). Docket EPA-HQ-OAR-2009-0472-11298.

Comment [A29]: Please revise to indicate that 

these are costs and benefits from the National 

Program,not just EPA’s program. This makes it seem 

like NTHSA’s program does not exist. Please 

characterize all costs and benefits as stemming from 

the National Program. 

Comment [A30]: Suggest adding: While 

analyzed separately, the costs and benefits should 

not be added together as compliance with the joint 

rulemaking significantly overlaps and therefore so 

too do the costs and benefits. 
330 

markets for vehicles and their use; these effects are termed external costs, because they affect 

people in ways other than the effect on the market for and use of new vehicles and are generally 

not taken into account by the purchaser of the vehicle. The external effects include the climate 

impacts, the effects on non-GHG pollutants, energy security impacts, and the effects on traffic, 

accidents, and noise due to additional driving. The sum of the private and external benefits and 

costs is the net social benefits of the program. There is some debate about the role of private 

benefits in assessing the benefits and costs of the program: if consumers optimize their 

purchases of fuel economy, with full information and perfect foresight, in perfectly efficient 

markets, with complete and accurate technology cost and fuel savings estimates, it is possible 

that they have already considered these benefits in their vehicle purchase decisions. If so, then 

no net private benefits would result from the program, because consumers would already buy 

vehicles with the amount of fuel economy that is optimal for them; requiring additional fuel 

economy would alter both the purchase prices of new cars and their lifetime streams of operating 

costs in ways that will inevitably reduce consumers’ well-being. If these conditions do not hold, 

then it is likely that the private benefits and will outweigh the consumer welfare and upfront

costs and therefore some portion would be a part ofcount toward the program’s net benefits. 

Section III.H.1 discusses this issue more fully. 

EPA’s final program costs consist of the vehicle program costs (costs of complying with 

the vehicle CO2 standards, taking into account FFV credits through 2015, the temporary leadtime alternative allowance standard program (TLAASP), full car/truck trading, and the A/C 

credit program, and other flexibilities built into the final program), along with the cost reduction 

due to fuel savings associated with reduced fuel usage resulting from the program. The program 

benefits include private fuel savings that accrue to drivers over the lifetime of the vehicle, 

external benefits associated with greenhouse gas emissions, noise, congestion, accidents, other 

pollutants, and energy security impacts, and private benefits from reduced refueling events time, 

and increased driving due to the “rebound” effect. External benefits associated with the rule are 

both positive and negative: reductions in greenhouse gas emissions, increases in noise, 

congestion, accidents, other pollutants, and improvements in energy security. EPA also presents 

the cost-effectiveness of the standards. 

The total monetized benefits (excluding fuel savings and other private benefits) under the 

program are projected to be $XX to $XX billion in 2030, assuming a 3 percent discount rate and 

depending on the value used for the social cost of carbon. The costs of the program in 2030 are 

estimated to be approximately $15.8 billion for new vehicle technology less $79.8 billion in 

savings realized by consumers through fewer fuel expenditures (calculated using pre-tax fuel 

prices). 

EPA has undertaken an analysis of the economy-wide impacts of the GHG tailpipe 

standards as an exploratory exercise that EPA believes could provide additional insights into the 

potential impacts of the program.381 These results were not a factor regarding the 

appropriateness of the GHG tailpipe standards. It is important to note that the results of this 

modeling exercise are dependent on the assumptions associated with how producers will make 

fuel economy improvements and how consumers will respond to increases in higher vehicle 

 

381 See Memorandum to Docket, “Economy-Wide Impacts of Proposed Greenhouse Gas Tailpipe Standards,” March 

4, 2010. Docket EPA-HQ-OAR-2009-0472. 

Comment [A31]: They don’t need to know the 

cost of the technology – they will see the higher 

price of the car (they don’t even have to know why 

its higher) and will re-optimize across attributes 

given that it is now more expensive. 

Comment [A32]: They are always part of the 

calculation – it is just that they are more likely to be 

net positive. 

Comment [A33]: The write up is very confusing 

because sometimes you refer to fuel savings as a cost 

and other times a benefit. 

Comment [A34]: At 7 percent. 
331 

costs and improved vehicle fuel economy as a result of the program. Section III.H.1 discusses 

the underlying distinctions and implications of the role of consumer response in economic 

impacts. 

Further information on these and other aspects of the economic impacts of our rule are 

summarized in the following sections and are presented in more detail in the RIA for this 

rulemaking. 

1. Conceptual Framework for Evaluating Consumer Impacts

For this rule, EPA projects significant private gains to consumers in three major areas: (1) 

reductions in spending on fuel, (2) time saved due to less refueling, and (3) welfare gains from 

additional driving that results from the rebound effect. In combination, these private savings, 

mostly from fuel savings, appear to outweigh by a large margin the costs of the program, even 

without accounting for externalities. 

Admittedly, these findings pose an economic conundrum. On the one hand, consumers 

are expected to gain significantly from the rules, as the increased cost of fuel efficient cars 

appears to be far smaller than the fuel savings. Yet these technologies are readily available; 

financially savvy consumers could have sought vehicles with improved fuel efficiency, and auto 

makers seeking those customers could have offered them. Assuming full information, perfect 

foresight, perfect competition, and financially rational consumers and producers, standard 

economic theory suggests that normal market operations would have provided the private net 

gains to consumers, and the only benefits of the rule would be due to external benefits. 

Assuming those conditions, if our analysis projects that there are net private benefits that 

consumers have not realized in this perfectly functioning market, then increased fuel economy 

should be accompanied by a corresponding loss in consumer welfare. This calculation assumes 

that consumers accurately predict and act on all the benefits they will get from a new vehicle, 

and that producers market products providing those benefits. The existence of large private net 

benefits from this rule, then, suggests either that the assumptions noted above do not hold, or that 

EPA’s analysis has missed some factor(s) tied to improved fuel economy that reduce(s) 

consumer welfare. With respect to the latter, EPA believes the costs of the technologies 

developed for this rule take into account the cost needed to ensure that all vehicle qualities 

(including performance, reliability, and size) stay constant, except for fuel economy and vehicle 

price. As a result, there would need to be some other changed qualities that would reduce the 

benefits consumers receive from their vehicles. Changing circumstances (e.g., increased demand 

for horsepower in response to a drop in fuel prices), and any changes in vehicle attributes that 

manufacturers elect to make may result in additional private impacts to vehicle buyers from 

requiring increased fuel economy. Most comments generally supported the cost estimates and 

the maintenance of vehicle quality, though two comments expressed concern over unspecified 

losses to vehicle quality. Even if there is some such unidentified loss, EPA believes that under 

realistic assumptions, the private gains from the rule, together with the social gains (in the form 

of reduction of externalities), will continue to significantly outweigh the costs. 
332 

The central conundrum has been referred to as the Energy Paradox in this setting (and in 

several others).382 In short, the problem is that consumers appear not to purchase products that 

are in their economic self-interest. There are strong theoretical reasons why this might be so.383 

Consumers might be myopic and hence undervalue the long-term; they might lack information or 

a full appreciation of information even when it is presented; they might be especially averse to 

the short-term losses associated with the higher prices of energy efficient products (the 

behavioral phenomenon of “loss aversion”); even if consumers have relevant knowledge, the 

benefits of energy efficient vehicles might not be sufficiently salient to them at the time of 

purchase; or, in the case of vehicle fuel efficiency, consumers may have relatively few choices to 

purchase vehicles with greater fuel economy once other characteristics, such as vehicle class, are 

chosen.384 A great deal of work in behavioral economics identifies factors of this sort, which 

help account for the Energy Paradox.385 This point holds in the context of fuel savings (the main 

focus here), but it applies equally to the other private benefits, including reductions in refueling 

time and additional driving.386

Considerable research suggests that theThe research investigating the possible underlying 

reasons for the observed Energy Paradox is real and significantmixed, however. Some studies 

find that a substantial portion of this seeming undervaluation can be explained by inaccurate 

assessments of energy savings, or by uncertainty and irreversibility of energy investments due to 

fluctuations in energy prices.387 Consumer fuel savings also vary across individuals, who travel 

different amounts and have different driving styles. Cost calculations based on the average do 

not distinguish between those that may gain or lose as a result of the policy.388 These results do 

not imply failure on the part of consumers in making adequate decisions, but rather that the rate 

of return on the investment necessary for energy efficiency investments is much higher for many 

 

382 Jaffe, A. B., and Stavins, R. N. (1994). The Energy Paradox and the Diffusion of Conservation Technology. 

Resource and Energy Economics, 16(2), 91-122. Docket EPA-HQ-OAR-2009-0472-11415. 

383 For an overview, see id. 384 For instance, the range of fuel economy (combined city and highway) available among all listed 2010 6-cylinder 

minivans is 18 to 20 miles per gallon. With a manual-transmission 4-cylinder minivan, it is possible to get 24 mpg. 

See http://www.fueleconomy.gov, which is jointly maintained by the U.S. Department of Energy and the EPA. 385 Jaffe, A. B., and Stavins, R. N. (1994). The Energy Paradox and the Diffusion of Conservation Technology. 

Resource and Energy Economics, 16(2), 91-122. Docket EPA-HQ-OAR-2009-0472-11415.

386 For example, it might be maintained that, at the time of purchase, consumers take full account of the time spent 

refueling potentially saved by fuel-efficient cars, but it might also be questioned whether they have adequate 

information to do so, or whether that factor is sufficiently salient to play the proper role in purchasing decisions. 387 Greene, D., J. German, and M. Delucchi (2009). “Fuel Economy: The Case for Market Failure” in Reducing

Climate Impacts in the Transportation Sector, Sperling, D., and J. Cannon, eds. Springer Science; Dasgupta, S., S.

Siddarth, and J. Silva‐Risso (2007). “To Lease or to Buy? A Structural Model of a Consumer’s Vehicle and Contract

Choice Decisions.” Journal of Marketing Research 44: 490 – 502; Metcalf, G., and D. Rosenthal (1995). "The ‘New’

View of Investment Decisions and Public Policy Analysis: An Application to Green Lights and Cold Refrigerators,’’

Journal of Policy Analysis and Management 14: 517–531. Metcalf and Hassett (1995). "Energy Tax Credits and

Residential Conservation Investment: Evidence from Panel Data" Journal of Public Economics 57: 201‐217. Metcalf,

G., and K. Hassett (1999). "Measuring the Energy Savings from Home Improvement Investments: Evidence from

Monthly Billing Data." The Review of Economics and Statistics 81(3): 516‐528; van Soest D., Bulte E. (2000). “Does

the Energy‐Efficiency Paradox Exist? Technological Progress and Uncertainty.” Environmental and Resource

Economics 18: 101–12. 388 Hausman J., Joskow P. (1982). “Evaluating the Costs and Benefits of Appliance Efficiency Standards.” American

Economic Review 72: 220–25.

Comment [A35]: Not quite right – they are more 

averse to a loss than they are to a gain of an 

equivalent amount. 
333 

consumers than what is implied by a net present value calculation that does not account for 

uncertainty or heterogeneity. Still other studies suggest that consumers “undervalue” future 

energy savings due to routine mistakes in how they evaluate these trade-offs.389 due in part to 

consumers’ inability to value future fuel savings appropriately. For example, Sanstad and 

Howarth (1994) argue that consumers optimize behavior without full information by resorting to 

imprecise but convenient rules of thumb. Consumers face difficulty in predicting the fuel 

savings that they are likely to get from a vehicle, for a number of reasons. For instance, the 

calculation of fuel savings is complex, and consumers may not make it correctly.390 Larrick and 

Soll (2008) find evidencefind that consumers do not understand how to translate changes in 

miles-per-gallon into fuel savings (a concern that EPA is continuing to attempt to address).391 In 

addition, future fuel price (a major component of fuel savings) is highly uncertain. Consumer 

fuel savings also vary across individuals, who travel different amounts and have different driving 

styles. The disagreement in the literature about whether consumers value fuel savings 

appropriately at the time of purchase leaves no clear analytic path forward on how to properly 

account for or model this aspect of decision-making. , Studies regularly show that fuel economy 

plays a role in consumers’ vehicle purchases, but modeling that role may still be in 

development.392 

A recent review commissioned by EPA supports the finding of great variability, by 

looking at the role of fuel economy in consumers’ vehicle purchase decisions.393 It finds no 

consensus on the role of fuel economy in consumer purchase decisions. Of 22 studies, 

approximately equal numbers find that consumers undervalue, overvalue, or value approximately 

correctly the fuel savings that they will receive from improved fuel economy. The variation in 

the value of fuel economy in these studies is so high that it appears to be inappropriate to identify 

one central estimate from the literature. Thus, estimating consumer response to higher vehicle 

fuel economy is still unsettled science.

 

389 Sanstad, A., and R. Howarth (1994). “’Normal’ Markets, Market Imperfections, and Energy Efficiency.” Energy

Policy 22(10): 811‐818; Larrick, R. P., and J.B. Soll (2008). “The MPG illusion.” Science 320: 1593‐1594; Yates S,

Aronson E. (1983). “A Social Psychological Perspective on Energy Conservation in Residential Buildings.” American

Psychologist 38: 435–44; Levinson A, Niemann S. (2004). “Energy Use by Apartment Tenants When Landlords Pay

for Utilities.”Resource and Energy Economics 26: 51–75; Friedman L. (2002). “Bounded Rationality versus Standard

Utility‐Maximization: A Test of Energy Price Responsiveness.” In Judgments, Decisions, and Public Policy, ed. R

Gowda, J Fox, pp. 138–73. New York: Cambridge University Press. Hartman R, Doane M, Woo C‐K. (199)1.

“Consumer Rationality and the Status Quo.” Quarterly Journal of Economics 106: 141–62; Kempton W,

Montgomery L. 1982. Folk Quantification of Energy. Energy 7: 817–27 390 Turrentine, T. and K. Kurani (2007). “Car Buyers and Fuel Economy?” Energy Policy 35: 1213-1223 (Docket 

EPA-HQ-OAR-2009-0472); Larrick, R. P., and J.B. Soll (2008). “The MPG illusion.” Science 320: 1593-1594 

(Docket EPA-HQ-OAR-2009-0472-0041).

391 Sanstad, A., and R. Howarth (1994). “’Normal’ Markets, Market Imperfections, and Energy Efficiency.” Energy 

Policy 22(10): 811-818 (Docket EPA-HQ-OAR-2009-0472-11415); Larrick, R. P., and J.B. Soll (2008). “The MPG 

illusion.” Science 320: 1593-1594 (Docket EPA-HQ-OAR-2009-0472-0043). 392 Busse, Meghan R., Christopher R. Knittel, and Florian Zettelmeyer (2009). “Pain at the Pump: How Gasoline 

Prices Affect Automobile Purchasing in New and Used Markets,” Working paper (accessed 6/30/09), available at

http://www.econ.ucdavis.edu/faculty/knittel/papers/gaspaper_latest.pdf (Docket EPA-HQ-OAR-2009-0472-0044). 393 Greene, David L. XX- to fill in later

Comment [A36]: This is a partial and therefore 

mis-characterization of the research to-date. Other 

papers find no evidence to support this conclusion. 

Also, the Larrick and Sol paper should not be 

generalized to the country since it uses a small, nonrepresentative sample. Instead, it is suggestive. 

I have rewritten to make the discussion more 

balanced. 

Also, unpublished working papers should not be 

used tas sole support these arguments instead of 

peer-reviewed published papers. 
334 

If there is a difference between fuel savings and consumers’ willingness to pay for fuel 

savings, the next question is, which is the appropriate measure of consumer benefit? Fuel 

savings measure the actual monetary value that consumers will receive after purchasing a 

vehicle; the willingness to pay for fuel economy measures the value that, before a purchase, 

consumers place on additional fuel economy. As noted, there are a number of reasons that 

consumers may incorrectly estimate the benefits that they get from improved fuel economy, 

including risk or loss aversion, and poor ability to estimate savings. In addition, fuel economy 

may not be as salient as other vehicle characteristics when a consumer is considering vehicles. If 

these arguments are valid, then there will be significant gains to consumers of the government 

mandating additional fuel economy. 

EPA requested and received a number of comments discussing the role of the Energy 

Paradox in consumer vehicle purchase decisions. Ten commenters, primarily from a number of 

academic and non-governmental organizations, supported the existence of a gap between the fuel 

economy that consumers purchased and the cost-effective amount, due to a number of market 

and behavioral phenomena. These include consumers having inadequate information about 

future fuel savings relative to up-front costs; imperfect competition among auto manufacturers; 

lack of choice over fuel economy within classes; lack of salience of fuel economy relative to 

other vehicle features at the time of vehicle purchase; consumers using heuristic decision-making 

processes or other rules of thumb, rather than analyzing fuel economy decisions; consumer risk 

and loss aversion leading to more attention to up-front costs than future fuel savings; and 

consumer emphasis on visible, status-providing features of vehicles more than on relatively 

invisible features such as fuel economy. The RIA, Chapter 8.1.2, includes further discussion of 

these phenomena. However, the extent of that gap is unclear.

Because of the gap between the fuel economy consumers purchase and the cost-effective 

amount, those and additional commenters support using the full value of fuel savings as a benefit 

of the rule, because consumers will spend less money on fuel. A few asserted, in addition, that 

auto companies would benefit from offering vehicles with improved fuel economy. Automakers 

might underprovide fuel economy because they believe consumers would not buy it, or that it is 

not as salient as price when consumers are buying a vehicle. The commenters who supported the 

existence of the gap cite these phenomena as a basis for regulation of fuel economy. In contrast, 

two commenters (the United Auto Workers and one nonprofit research organization) argued that 

the market for fuel economy works efficiently; consumers reveal through their purchase 

decisions that additional fuel economy is not important for them. These commenters expressed 

concern that regulation to promote more fuel economy would limit consumers’ choices as well as 

the value of the vehicles to consumers. Yet other commenters (including some states) noted that 

the rule protects the existing variety and choice of vehicles in the market; the value of vehicles to 

consumers should not suffer due to the rule. 

EPA continues to include the full fuel savings as a private benefit of the rule. Improved 

fuel economy will reduce consumer expenditures on fuel. However, limitations in modeling 

affect our ability to estimate how much of these savings would have occurred in the absence of 

the rule. For example, some of the technologies predicted to be adopted in response to the rule 

may already be taking place due to shifts in consumer demand for fuel economy. It is possible 

that some of these savings would have occurred in the absence of the rule. If so, then some of 
335 

the fuel savings, as well as some of the costs of the technology to achieve those savings, may be 

due to market forces, not to the rule itself. In the absence of robust means to identify the changes 

in fuel economy that would have occurred without the rule, we estimate the benefits and costs 

under the assumption that the rule will lead to more fuel-efficient vehicles than would have 

occurred without the rule. As discussed below, limitations in modeling also affect our ability to 

estimate the effects of the rule on net benefits in the market for vehicles. 

Consumer vehicle choice models estimate what vehicles consumers buy based on vehicle 

and consumer characteristics. In principle, they could provide a means of understanding both the 

role of fuel economy in consumers’ purchase decisions and the effects of this rule on the benefits 

that consumers will get from vehicles. The NPRM included a discussion of the wide variation in 

the structure and results of these models. Models or model results have not frequently been 

systematically compared to each other. When they have, the results show large variation over, 

for instance, the value that consumers place on additional fuel economy. As a result, EPA found 

that further assessment needed to be done before adopting a consumer vehicle choice model. In 

the NPRM, EPA asked for comment on the state of the art of consumer vehicle choice modeling 

and whether it is sufficiently developed for use in regulatory analysis. 

The responses were varied. Of the six commenters on this issue, five supported EPA’s 

performing consumer vehicle choice modeling, but only in general terms; they did not provide 

recommendations for how to evaluate the quality of different models or identify a model 

appropriate for EPA’s purposes. One commenter argued that, if key differences across models 

were controlled, then different models would produce similar results, but there were no 

suggestions for what choices to make to control the key differences. One commenter specifically 

asked for estimates that quantify losses to consumer welfare. Two commenters mentioned the 

importance of taking into account any losses in vehicle attributes due to increasing fuel 

economy, but without specific guidance for how to do so. Some commenters, including some 

who supported the use of these models, highlighted some of the models’ potential limitations. 

Two commenters noted the challenges of modeling for vehicles that are not yet in the market. 

Most consumer vehicle choice models are based on existing vehicle fleets. Future vehicles will 

present combinations of vehicle characteristics not previously seen in markets, such as higher 

fuel economy and higher price with other characteristics constant; the existing models may not 

do well in predicting consumer responses to these changes. One comment suggested that the 

models might be sufficient for predicting changes in consumer purchase patterns, but not for 

calculating the welfare gains and losses to consumers of the changes. 

EPA has not used a consumer vehicle choice model for the final rule analysis, due to 

concerns we explained in the proposal (and discussed in Chapter 8.1 of the RIA), and because no 

new information became available to resolve those concerns. In fact, a recent review 

commissioned by EPA supports the finding of great variability, by looking at one key parameter: 

the role of fuel economy in consumers’ vehicle purchase decisions.394 It finds no consensus on 

the role of fuel economy in consumer purchase decisions. Of 22 studies, approximately equal 

numbers find that consumers undervalue, overvalue, or value approximately correctly the fuel 

savings that they will receive from improved fuel economy. The variation in the value of fuel 

economy in these studies is so high that it appears to be inappropriate to identify one central 

 

394 Greene, David L. XX- to fill in later
336 

estimate from the literature. Thus, estimating consumer response to higher vehicle fuel economy 

is still unsettled science. It is likely that this variation exists as well in measuring consumer 

response to changes in fuel economy as well as other vehicle characteristics, such as 

performance. Thus, there does not appear to be evidence at this time to develop robust estimates 

of consumer welfare effects of changes in vehicle attributes. As noted earlier, EPA’s and 

NHTSA’s cost estimates are based on maintaining these other vehicle attributes. Comments 

generally supported the finding that our cost and technology estimates succeeded in maintaining 

these other attributes. 

EPA will continue its efforts to review the literature, but, given the known difficulties, 

EPA has not conducted an analysis using these models for this program. These issues are 

discussed in detail in RIA Chapter 8.1.2. 

The next issue is the potential for loss in consumer welfare due to the rule. As mentioned 

above (and discussed more thoroughly in Section III.D of this preamble), the technology cost 

estimates developed here take into account the costs to hold other vehicle attributes, such as size 

and performance, constant. In addition, the analysis assumes that the full technology costs are 

passed along to consumers. With these assumptions, because welfare losses are monetary 

estimates of how much consumers would have to be compensated to be made as well off as in 

the absence of the change,395 the price increase measures the loss to the consumer.396 Assuming 

that the full technology cost gets passed along to the consumer as an increase in price, the 

technology cost thus measures the welfare loss to the consumer. Increasing fuel economy would 

have to lead to other changes in the vehicles that consumers find undesirable for there to be 

additional losses not included in the technology costs. At this time EPA has no available 

methods to estimate potential additional effects on consumers not included in the technology cost 

estimates, e.g., due to changes in vehicles that consumers find undesirable, shifts in consumer 

demand for other attributes, and uncertainties about the long term reliability of new technologies. 

Comments on the rule generally supported EPA’s analysis of the technology costs and the 

assumption that other vehicle characteristics were not adversely affected. 

Chapter 8.1 of the RIA discusses in more depth the research on the Energy Paradox and 

the state of the art of consumer vehicle choice modeling. 

2. Costs Associated with the Vehicle Program 

 

395 This approach describes the economic concept of compensating variation, a payment of money after a change 

that would make a consumer as well off after the change as before it. A related concept, equivalent variation, 

estimates the income change that would be an alternative to the change taking place. The difference between them 

is whether the consumer’s point of reference is her welfare before the change (compensating variation) or after the 

change (equivalent variation). In practice, these two measures are typically very close together. 396 Indeed, it is likely to be an overestimate of the loss to the consumer, because the consumer has choices other than 

buying the same vehicle with a higher price; she could choose a different vehicle, or decide not to buy a new 

vehicle. The consumer would choose one of those options only if the alternative involves less loss than paying the 

higher price. Thus, the increase in price that the consumer faces would be the upper bound of loss of consumer 

welfare, unless there are other changes to the vehicle due to the fuel economy improvements that make the vehicle 

less desirable to consumers. 
337 

 In this section, EPA presents our estimate of the costs associated with the final vehicle 

program. The presentation here summarizes the costs associated with the new vehicle 

technology expected to be added to meet the new GHG standards, including hardware costs to 

comply with the A/C credit program. The analysis summarized here provides our estimate of 

incremental costs on a per vehicle basis and on an annual total basis. 

 The presentation here summarizes the outputs of the OMEGA model that was discussed 

in some detail in Section III.D of this preamble. For details behind the analysis such as the 

OMEGA model inputs and the estimates of costs associated with individual technologies, the 

reader is directed to Chapters 1 and 2 of the RIA, and Chapter 3 of the Joint TSD. For more 

detail on the outputs of the OMEGA model and the overall vehicle program costs summarized 

here, the reader is directed to Chapters 4 and 7 of the RIA. 

With respect to the cost estimates for vehicle technologies, EPA notes that, because these 

estimates relate to technologies which are in most cases already available, these cost estimates 

are technically robust. Some comments were received that addressed the technology costs that 

served as inputs to the OMEGA model as was mentioned in Section II.E. While those comments 

did not result in changes to the technology cost inputs, the technology cost estimates for a select 

group of technologies have changed since the NPRM thus changing the vehicle program costs 

presented here. These changes, as summarized in Section II.E and in Chapter 3 of the Joint TSD, 

were made in response to updated cost estimates, from the FEV teardown study, available to the 

agencies shortly after publication of the NPRM, not in response to comments. Those cost 

changes are summarized in Section II.E and in Chapter 3 of the Joint TSD. EPA believes that 

we have been conservative in estimating the vehicle hardware costs associated with this rule. 

With respect to the aggregate cost estimations presented in Section III.H.2.b, EPA notes 

that there are a number of areas where the results of our analysis may be conservative and, in 

general, EPA believes we have directionally overestimated the costs of compliance with these 

new standards, especially in not accounting for the full range of credit opportunities available to 

manufacturers. For example, some cost saving programs are considered in our analysis, such as 

full car/truck trading, while others are not, such as early credit generation and advanced vehicle 

technology credits. 

a. Vehicle Compliance Costs Associated with the CO2 Standards 

 For the technology and vehicle package costs associated with adding new CO2-reducing 

technology to vehicles, EPA began with EPA’s 2008 Staff Report and NHTSA’s 2011 CAFE 

FRM both of which presented costs generated using existing literature, meetings with 

manufacturers and parts suppliers, and meetings with other experts in the field of automotive 

cost estimation.397 EPA has updated some of those technology costs with new information from 

our contract with FEV, through further discussion with NHTSA, and by converting from 2006 

dollars to 2007 dollars using the GDP price deflator. The estimated costs presented here 

represent the incremental costs associated with this rule relative to what the future vehicle fleet 

 

397 “EPA Staff Technical Report: Cost and Effectiveness Estimates of Technologies Used to Reduce Light-duty 

Vehicle Carbon Dioxide Emissions,” EPA 420-R-08-008; NHTSA 2011 CAFE FRM is at 74 FR 14196; both 

documents are contained in Docket EPA-HQ-OAR-2009-0472. 
338 

would be expected to look like absent this rule. A more detailed description of the factors 

considered in our reference case is presented in Section III.D. 

The estimates of vehicle compliance costs cover the years of implementation of the 

program – 2012 through 2016. EPA has also estimated compliance costs for the years following 

implementation so that we can shed light on the long term (2022 and later) cost impacts of the 

program.398 EPA used the year 2022 here because our short-term and long-term markup factors 

described shortly below are applied in five year increments with the 2012 through 2016 

implementation span and the 2017 through 2021 span both representing the short-term. Some of 

the individual technology cost estimates are presented in brief in Section III.D, and account for 

both the direct and indirect costs incurred in the automobile manufacturing and dealer industries 

(for a complete presentation of technology costs, please refer to Chapter 3 of the Joint TSD). To 

account for the indirect costs, EPA has applied an indirect cost markup (ICM) factor to all of our 

direct costs to arrive at the estimated technology cost.399 The ICM factors used range from 1.11 

to 1.64 in the short-term (2012 through 2021), depending on the complexity of the given 

technology, to account for differences in the levels of R&D, tooling, and other indirect costs that 

will be incurred. Once the program has been fully implemented, some of the indirect costs will 

no longer be attributable to these standards and, as such, a lower ICM factor is applied to direct 

costs in years following full implementation. The ICM factors used range from 1.07 to 1.39 in 

the long-term (2022 and later) depending on the complexity of the given technology.400 Note 

that the short-term ICMs are used in the 2012 through 2016 years of implementation and 

continue through 2021. EPA does this since the standards are still being implemented during the 

2012 through 2016 model years. Therefore, EPA considers the five year period following full 

implementation also to be short-term. Note that, in general the comments received were 

supportive of our use of ICMs as opposed to the more traditional Retail Price Equivalent 

(RPE).401 However, we did receive some comment that we applied inappropriate ICM factors to 

some technologies. We have not changed our approach in response to those comments as 

explained in greater detail in our Joint Response to Comments document. 

 

398 Note that the assumption made here is that the standards would continue to apply for years beyond 2016 so that 

new vehicles sold in model years 2017 and later would continue to incur costs as a result of this rule. Those costs 

are estimated to get lower in 2022 because some of the indirect costs attributable to this rule in the years prior to 

2022 would be eliminated in 2022 and later. 

399 Need to add the recent reference for this study by RTI. Alex Rogozhin et al., Automobile Industry Regail Price 

Equivalent and Indirect Cost Multipliers. Prepared for EPA by RTI International and Transportation Research 

Institute, University of Michigan. EPA-420-R-09-003, February 2009 (Docket EPA-HQ-OAR-2009-0472). 

400 Gloria Helfand and Todd Sherwood, “Documentation of the Development of Indirect Cost Multipliers for Three 

Automotive Technologies,” Office of Transportation and Air Quality, USEPA, August 2009 (Docket EPA-HQOAR-2009-0472). 

401 The RPE is based on the historical relationship between direct costs and consumer prices; it is intended to reflect 

the average markup over time required to sustain the industry as a viable operation. Unlike the RPE approach, the 

ICM focuses more narrowly on the changes that are required in direct response to regulation-induced vehicle design 

changes which may not directly influence all of the indirect costs that are incurred in the normal course of business. 

For example, an RPE markup captures all indirect costs including costs such as the retirement benefits of retired 

employees. However, the retirement benefits for retired employees are not expected to change as a result of a new 

GHG regulation and, therefore, those indirect costs should not increase in relation to newly added hardware in 

response to a regulation. 
339 

EPA has also considered the impacts of manufacturer learning on the technology cost 

estimates. Consistent with past EPA rulemakings, EPA has estimated that some costs would 

decline by 20 percent with each of the first two doublings of production beginning with the first 

year of implementation. These volume-based cost declines, which EPA calls “volume” based 

learning, take place after manufacturers have had the opportunity to find ways to improve upon 

their manufacturing processes or otherwise manufacture these technologies in a more efficient 

way. After two 20 percent cost reduction steps, the cost reduction learning curve flattens out 

considerably as only minor improvements in manufacturing techniques and efficiencies remain 

to be had. By then, costs decline roughly three percent per year as manufacturers and suppliers 

continually strive to reduce costs. These time-based cost declines, which EPA calls “time” based 

learning, take place at a rate of three percent per year. EPA has considered learning impacts on 

most but not all of the technologies expected to be used because some of the expected 

technologies are already used rather widely in the industry and, presumably, learning impacts 

have already occurred. EPA has considered volume-based learning for only a handful of 

technologies that EPA considers to be new or emerging technologies such as the hybrids and 

electric vehicles. For most technologies, EPA has considered them to be more established given 

their current use in the fleet and, hence, we have applied the lower time based learning. We have 

more discussion of our learning approach and the technologies to which we have applied which 

type of learning in Chapter 3 of the Joint TSD. 

The technology cost estimates discussed in Section III.D and detailed in Chapter 3 of the 

Joint TSD are used to build up technology package cost estimates which are then used as inputs 

to the OMEGA model. EPA discusses our technology packages and package costs in Chapter 1 

of the RIA. The model determines what level of CO2 improvement is required considering the 

reference case for each manufacturer’s fleet. The vehicle compliance costs are the outputs of the 

model and take into account FFV credits through 2015, TLAASP, full car/truck trading, and the 

A/C credit program. Table III.H.2-1 presents the fleet average incremental vehicle compliance 

costs for this rule. As the table indicates, 2012-2016 costs increase every year as the standards 

become more stringent. Costs per car and per truck then remain stable through 2021 while cost 

per vehicle (car/truck combined) decline slightly as the fleet mix trends slowly to increasing car 

sales. In 2022, costs per car and per truck decline as the long-term ICM is applied because some 

indirect costs decrease or are no longer considered attributable to the program (e.g., warranty 

costs go down). Costs per car and per truck remain constant thereafter while the cost per vehicle 

declines slightly as the fleet continues to trend toward cars. By 2030, projections of fleet mix 

changes become static and the cost per vehicle remains constant. EPA has a more detailed 

presentation of vehicle compliance costs on a manufacturer by manufacturer basis in Chapter 6 

of the RIA. 

Table III.H.2-1 Industry Average Vehicle Compliance Costs Associated with the Tailpipe CO2

Standards 

($/vehicle in 2007 dollars) 

Calendar Year $/car $/truck 

$/vehicle 

(car & truck 

combined) 

2012 $342 $314 $331 

2013 $507 $496 $503 
340 

2014 $631 $652 $639 

2015 $749 $820 $774 

2016 $869 $1,098 $948 

2017 $869 $1,098 $947 

2018 $869 $1,098 $945 

2019 $869 $1,098 $943 

2020 $869 $1,098 $940 

2021 $869 $1,098 $939 

2022 $817 $1,032 $882 

2030 $817 $1,032 $878 

2040 $817 $1,032 $875 

2050 $817 $1,032 $875 

b. Annual Costs of the Vehicle Program 

 The costs presented here represent the incremental costs for newly added technology to 

comply with the final program. Together with the projected increases in car and light-truck 

sales, the increases in per-vehicle average costs shown in Table III.H.2-1 above result in the total 

annual costs reported in Table III.H.2-2 below. Note that the costs presented in Table III.H.2-2 

do not include the savings that would occur as a result of the improvements to fuel consumption. 

Those impacts are presented in Section III.H.4. 

 

Table III.H.2-2 Quantified Annual Costs Associated with the Vehicle Program 

($Millions of 2007 dollars)

Year Quantified 

Annual Costs

2012 $4,900

2013 $8,000

2014 $10,300

2015 $12,700

2016 $15,600

2020 $15,600

2030 $15,800

2040 $17,400

2050 $19,000

NPV, 3% $345,900

NPV, 7% $191,900

3. Cost per Ton of Emissions Reduced

EPA has calculated the cost per ton of GHG (CO2-equivalent, or CO2e) reductions 

associated with this rule using the above costs and the emissions reductions described in Section 

III.F. More detail on the costs, emission reductions, and the cost per ton can be found in the RIA 

and Joint TSD. EPA has calculated the cost per metric ton of GHG emissions reductions in the 

years 2020, 2030, 2040, and 2050 using the annual vehicle compliance costs and emission 

reductions for each of those years. The value in 2050 represents the long-term cost per ton of the 
341 

emissions reduced. EPA has also calculated the cost per metric ton of GHG emission reductions 

including the savings associated with reduced fuel consumption (presented below in section 

III.H.4). This latter calculation does not include the other benefits associated with this rule such 

as those associated with criteria pollutant reductions or energy security benefits as discussed later 

in sections III.H.4 through III.H.9. By including the fuel savings in the cost estimates, the cost 

per ton is less than $0, since the estimated value of fuel savings outweighs the vehicle program 

costs. With regard to the CH4 and N2O standards, since these standards will be emissions caps 

designed to ensure that manufacturers do not backslide from current levels, EPA has not 

estimated costs associated with the standards (since the standards will not require any change 

from current practices nor does EPA estimate they will result in emissions reductions). 

The results for CO2e costs per ton under the rule are shown in Table III.H.3-1. 

Table III.H.3-1 Annual Cost Per Metric Ton of CO2e Reduced, in $2007 dollars 

Year 

Vehicle 

Program 

Costa 

($Millions) 

Fuel Savings b

($Millions) 

CO2e Reduced 

(Million Metric 

Tons) 

Cost per Ton 

of the Vehicle 

Program Onlya

Cost per Ton 

of the Vehicle 

Program with 

Fuel Savings b

2020 $15,600 -$35,700 160 $100 -$130 

2030 $15,800 -$79,800 310 $50 -$210 

2040 $17,400 -$119,300 400 $40 -$250 

2050 $19,000 -$171,200 510 $40 -$300 a

 Costs here include vehicle compliance costs and do not include any fuel savings. 

b Fuel savings calculated using pre-tax fuel prices. 

4. Reduction in Fuel Consumption and its Impacts

a. What Are the Projected Changes in Fuel Consumption? 

The new CO2 standards will result in significant improvements in the fuel efficiency of 

affected vehicles. Drivers of those vehicles will see corresponding savings associated with 

reduced fuel expenditures. EPA has estimated the impacts on fuel consumption for both the 

tailpipe CO2 standards and the A/C credit program. To do this, fuel consumption is calculated 

using both current CO2 emission levels and the new CO2 standards. The difference between these 

estimates represents the net savings from the CO2 standards. Note that the total number of miles 

that vehicles are driven each year is different under each of the control case scenarios than in the 

reference case due to the “rebound effect,” which is discussed in Section III.H.4.c. 

The expected impacts on fuel consumption are shown in Table III.H.4-1. The gallons 

shown in the tables reflect impacts from the new CO2 standards, including the A/C credit 

program, and include increased consumption resulting from the rebound effect. 

Table III.H.4-1 Fuel Consumption Impacts of the Vehicle Standards and A/C Credit Programs 

 (Million gallons) 

Year Total 
342 

2012 550

2013 1,320

2014 2,330

2015 3,750

2016 5,670

2020 12,590

2030 24,730

2040 32,620

2050 41,520

 

b. What are the Monetized Fuel Savings? 

 Using the fuel consumption estimates presented in Section III.H.4.a, EPA can calculate 

the monetized fuel savings associated with the CO2 standards. To do this, we multiply reduced 

fuel consumption in each year by the corresponding estimated average fuel price in that year, 

using the reference case taken from the AEO 2010 Early Release.402 AEO is the government 

consensus estimate used by NHTSA and many other government agencies to estimate the 

projected price of fuel. EPA has done this calculation using both the pre-tax and post-tax fuel 

prices. Since the post-tax fuel prices are what consumers pay, the fuel savings calculated using 

these prices represent the savings consumers will see. The pre-tax fuel savings are those savings 

that society will see. These results are shown in Table III.H.4-2. Note that in Section III.H.10, 

EPA presents the benefit-cost of the rule and, for that reason, presents only the pre-tax fuel 

savings and presents them as negative costs of the program while here EPA presents them as 

positive savings. 

Table III.H.4-2 Estimated Monetized Fuel Savings 

(Millions of 2007 dollars) 

Calendar Year 

Fuel 

Savings 

(pre-tax) 

Fuel 

Savings 

(post-tax) 

2012 $1,137 $1,400

2013 $2,923 $3,800

2014 $5,708 $6,900

2015 $9,612 $11,300

2016 $14,816 $17,400

2020 $35,739 $41,100

2030 $79,838 $89,100

2040 $119,324 $131,700

2050 $171,248 $186,300

NPV, 3% $1,545,638 $1,723,900

NPV, 7% $672,629 $755,700

 

402 Energy Information Administration. Annual Energy Outlook 2010 Early Release. Supplemental Transportation 

Tables. December 2009. http://www.eia.doe.gov/oiaf/aeo/supplement/sup_tran.xls 
343 

As shown in Table III.H.4-2, EPA is projecting that consumers would realize very large 

fuel savings as a result of the standards contained in this rule. As discussed further in Section 

III.H.1, it is a conundrum from an economic perspective that these large fuel savings have not 

been provided by automakers and purchased by consumers. A number of behavioral and market 

phenomena may lead to this disparity between the fuel economy that makes financial sense to 

consumers and the fuel economy they purchase. Regardless how consumers make their 

decisions on how much fuel economy to purchase, EPA expects that they will gain these fuel 

savings, which will provide actual money in consumers’ pockets. We received considerable 

comment on this issue, as discussed in Section III.H.1, and the issue is discussed further in 

Chapter 8 of the RIA. 

c. VMT Rebound Effect 

The fuel economy rebound effect refers to the fraction of fuel savings expected to result 

from an increase in vehicle fuel economy, particularly one required by higher fuel efficiency 

standards, that is offset by additional vehicle use. The increase in vehicle use occurs because 

higher fuel economy reduces the fuel cost of driving, which is 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. 

For this rule, EPA is using an estimate of 10% for the rebound effect. This value is based 

on the most recent time period analyzed in the Small and Van Dender 2007 paper,403 and falls 

within the range of the larger body of historical work on the rebound effect.404 Recent work by 

David Greene on the rebound effect for light-duty vehicles in the U.S. further supports the 

hypothesis that the rebound effect is decreasing over time. 405 If we were to use a dynamic 

estimate of the future rebound effect, our analysis shows that the rebound effect could be in the 

range of 5% or lower.406 The rebound effect is also further discussed in Chapter 4 of the Joint 

TSD which reviews the relevant literature and discusses in more depth the reasoning for the 

rebound values used here. 

We received several comments on the proposed value of the rebound effect. The 

California Air Resources Board (CARB) and the New Jersey Department of Environmental 

Protection supported the use of a 10% rebound effect, although CARB encouraged EPA to 

 

403 Small, K. and K. Van Dender, 2007a. “Fuel Efficiency and Motor Vehicle Travel: The Declining Rebound 

Effect”, The Energy Journal, vol. 28, no. 1, pp. 25-51 (Docket EPA-HQ-OAR-2009-0472-0018). 

404 Sorrell, S. and J. Dimitropoulos, 2007. “UKERC Review of Evidence for the Rebound Effect, Technical Report 

2: Econometric Studies”, UKERC/WP/TPA/2007/010, UK Energy Research Centre, London, October (Docket 

EPA-HQ-OAR-2009-0472-0012). 

405 Report by Kenneth A. Small of University of California at Irvine to EPA, “The Rebound Effect from Fuel 

Efficiency Standards: Measurement and Projection to 2030”, June 12, 2009 (Docket EPA-HQ-OAR-2009-0472-

0002). 

406 Report by David Greene of Oak Ridge National Laboratory to EPA, “Rebound 2007: Analysis of National LightDuty Vehicle Travel Statistics,” March 24, 2009 (Docket EPA-HQ-OAR-2009-0472-0220). This paper has been 

accepted for an upcoming special issue of the Energy Journal, although the publication date has not yet been 

determined. 

Comment [A37]: This statement should be struck 

– this statement is not true if consumers invest in less 

fuel economy than predicted because the USG has a 

simplistic model that assumes with certainty that the 

gasoline price will be X, when in reality we know 

that it probably will not. If instead we modeled it 

with uncertainty, it might look very different. 

Consumers will gain more or less in their pockets 

depending on whether our gasoline price projection 

is too low or too high. Also, this is only the average 

consumer but we know that people drive different 

distances, and drive more or less aggressively, so 

some may end up with more or less than what is 

estimated here base don the average. 
344 

consider lowering the value to 5%. Other commenters, such as the Missouri Department of 

Natural Resources, the International Council on Clean Transportation (ICCT), the Center for 

Biological Diversity, and the Consumer Federation of America, recommended using a lower 

rebound effect. ICCT specifically recommended that the dynamic rebound effect methodology 

utilized by Small & Van Dender was the most appropriate methodology, which would support a 

rebound effect of 5% or lower. In contrast, the National Association of Dealerships asserted that 

the rebound effect should be higher (e.g., in the lower range of the 15-30% historical range), but 

did not submit any data to support this claim. 

While we appreciate the input provided by commenters, we did not receive any new data 

or analysis to justify revising our initial estimates of the rebound effect at this time. Based on the 

positive comments we received, we will continue using the dynamic rebound effect to help 

inform our estimate of the rebound effect in future rulemakings. However, given the relatively 

new nature of this analytical approach, we believe the larger body of historical studies should 

also be considered when determining the value of the rebound effect. As we described in the 

Technical Support Document, the more recent literature suggests that the rebound effect is 10% 

or lower, whereas the larger body of historical studies suggests a higher rebound effect. 

Therefore, we will continue to use the 10% rebound effect for this rulemaking. However, we 

plan to update our estimate of the rebound effect in future rulemakings as new data becomes 

available. 

We also invited comments on whether we should also explore other alternatives for 

estimating the rebound effect, such as whether it would be appropriate to use the price elasticity 

of demand for gasoline to guide the choice of a value for the rebound effect. We received only 

one comment on this issue from ICCT. In their comments, ICCT stated that the short run 

elasticity can provide a useful point of comparison for rebound effect estimates, but it should not 

be used to guide the choice of a value for the rebound effect. Therefore, we have not 

incorporated this metric into our analysis. 

5. Impacts on U.S. Vehicle Sales and Payback Period

a. Vehicle Sales Impacts 

 

 This analysis compares two effects. On the one hand, the vehicles will become more 

expensive, which would, by itself, discourage sales. On the other hand, the vehicles will have 

improved fuel economy and thus lower operating costs, which makes them more attractive to 

consumers. The basic question is, then, which effect dominates? The methodology EPA used 

for estimating the impact on vehicle sales is relatively straightforward, but makes a number of 

simplifying assumptions. According to the literature, the price elasticity of demand for vehicles 

is commonly estimated to be -1.0.407 In other words, a one percent increase in the price of a 

 

407 Kleit A.N., 1990. “The Effect of Annual Changes in Automobile Fuel Economy Standards.” 

Comment [A38]: The answer to this seems 

obvious – there is nothing about a fuel economy 

standard that changes the way in which consumers 

make decisions, so to the extent they are rationally 

consuming less fuel economy than they should or 

making mistakes in how they value fuel economy, 

they will continue to do so. They will just be 

contemplating it for a somewhat more fuel economy 

intensive vehicle fleet. 
345 

vehicle would be expected to decrease sales by one percent, holding all other factors constant. 

For our estimates, EPA calculated the effect of an increase in vehicle costs due to the GHG 

standards and assumes that consumers will face the full increase in costs, not an actual 

(estimated) change in vehicle price. (The estimated increases in vehicle cost due to the rule are 

discussed in Section III.H.2) This is a conservative methodology, since an increase in cost may 

not pass fully into an increase in market price in an oligopolistic industry such as the automotive 

sector.408 EPA also notes that we have not used these estimated sales impacts in the OMEGA 

Model. 

Although EPA uses the one percent price elasticity of demand for vehicles as the basis 

for our vehicle sales impact estimates, we assumed that the consumer would take into account 

both the higher vehicle purchasing costs as well as some of the fuel savings benefits when 

deciding whether to purchase a new vehicle. Therefore, the incremental cost increase of a new 

vehicle would be offset by reduced fuel expenditures over a certain period of time (i.e., the 

“payback period”). For the purposes of this rulemaking, EPA used a five-year payback period, 

which is consistent with the length of a typical new light-duty vehicle loan.409 The one 

commenter on this analysis stated that use of the five-year payback period was reasonable. This 

approach may not accurately reflect the role of fuel savings in consumers’ purchase decisions, as 

the discussion in Section III.H.1 suggests. If consumers consider fuel savings in a different 

fashion than modeled here, then this approach will not accurately reflect the impact of this rule 

on vehicle sales. 

This increase in costs has other effects on consumers as well: if vehicle prices increase, 

consumers will face higher insurance costs and sales tax, and additional finance costs if the 

vehicle is bought on credit. In addition, the resale value of the vehicles will increase. EPA 

received no comments on these adjustments. The only change to these adjustments between the 

NPRM and this discussion is an updating of the interest rate on auto loans. EPA estimates that, 

with corrections for these factors, the effect on consumer expenditures of the cost of the new 

technology should be 0.914 times the cost of the technology at a 3% discount rate, and 0.876 

times the cost of the technology at a 7% discount rate. The details of this calculation are in the 

RIA, Chapter 8.l. 

Once the cost estimates are adjusted for these additional factors, the fuel cost savings 

associated with the rule, discussed in Section III.H.4, are subtracted to get the net effect on 

consumer expenditures for a new vehicle. With the assumed elasticity of demand of -1, the 

 Journal of Regulatory Economics 2: 151-172 (Docket EPA-HQ-OAR-2009-0472-0015); McCarthy, Patrick S., 

1996. “Market Price and Income Elasticities of New Vehicle Demands.” Review of Economics and Statistics 78: 

543-547 (Docket EPA-HQ-OAR-2009-0472-0016); Goldberg, Pinelopi K., 1998. “The Effects of the Corporate 

Average Fuel Efficiency Standards in the U.S.,” Journal of Industrial Economics 46(1): 1-33 (Docket EPA-HQOAR-2009-0472-0017). 

408 See, for instance, Gron, Ann, and Deborah Swenson, 2000. “Cost Pass-Through in the U.S. Automobile 

Market,” Review of Economics and Statistics 82: 316-324 (Docket EPA-HQ-OAR-2009-0472-0007). 409 As discussed further in Section III.H.1, there is not a consensus in the literature on how consumers consider fuel 

economy in their vehicle purchases. Results are inconsistent, possibly due to fuel economy not being a major focus 

of many of the studies, and possibly due to sensitivity of results to modeling and data used. A survey by Greene 

(2010) finds that estimates in the literature of the value that consumers place on fuel economy when buying a 

vehicle range from negative – consumers would pay to reduce fuel economy – to more than 1000 times the value of 

fuel savings. 

Comment [A39]: The Kubik survey suggests less 

than three years. What happens when you use his 

payback period? Where is the cut point? 
346 

percent change in this “effective price,” estimated as the adjusted increase in cost, is equal to the 

negative of the percent change in vehicle purchases. The net effect of this calculation is in Table 

III.H.5-1 and Table III.H.5-2. The values have changed slightly from the NPRM, due to changes 

in fuel prices and fuel savings, technology costs, and baseline vehicle sales projections, in 

addition to the adjustment in financing costs. 

The estimates provided in Table III.H.5-1 and Table III.H.5-2 are meant to be illustrative 

rather than a definitive prediction. When viewed at the industry-wide level, they give a general 

indication of the potential impact on vehicle sales. As shown below, the overall impact is 

positive and growing over time for both cars and trucks. Because the fuel savings associated 

with this rule are expected to exceed the technology costs, the effective prices of vehicles (the 

adjusted increase in technology cost less the fuel savings over five years) to consumers will fall, 

and consumers will buy more new vehicles. As a result, the lower net cost of the vehicles is 

projected to lead to an increase in sales for both cars and trucks. Note this analysis has not 

accounted for a number of factors that might affect consumer vehicle purchases, such as 

changing market conditions, changes in vehicle characteristics that might accompany 

improvements in fuel economy, or consumers considering a different “payback period” for their 

fuel economy purchases. These complications add considerable uncertainty to our vehicle sales 

impact analysis. 

Table III.H.5-1 Vehicle Sales Impacts Using a 3% Discount Rate 

 Change in Car 

Sales 

% Change Change in 

Truck Sales 

% Change 

2012 67,500 0.7 62,100 1.1 

2013 76,000 0.8 190,200 3.2 

2014 114,000 1.1 254,900 4.3 

2015 222,200 2.1 352,800 6.1 

2016 360,500 3.3 488,000 8.6 

Table III.H.5-1 shows the impacts on new vehicle sales using a 3% discount rate. The 

fuel savings over five years are always higher than the technology costs. Although both cars and 

trucks show very small effects initially, over time vehicle sales become increasingly positive, as 

increased fuel prices make improved fuel economy more desirable. The increases in sales for 

trucks are larger than the increases for trucks (except in 2012) in both absolute numbers and 

percentage terms. 

Table III.H.5-2 New Vehicle Sales Impacts Using a 7% Discount Rate 

 Change in Car 

Sales 

% Change Change in 

Truck Sales 

% Change 

2012 62,800 0.7 58,300 1 

2013 70,500 0.7 92,300 1.5 

2014 106,100 1 127,700 2.1 

2015 208,400 2 194,200 3.3 

2016 339,400 3.1 280,000 4.9 

Comment [A40]: This is a rather nonsensical 

result. I recommend it be dropped. Regulation is not 

a win-win – this implies that regulation actually 

makes the private market better off (absent any 

social reason for intervention) than when left on its 

own, a highly contentious result. 

Also the assumed discount rate used by consumers 

matters. 
347 

Table III.H.5-2 shows the impacts on new vehicle sales using a 7% interest rate. While a 

7% interest rate shows slightly lower impacts than using a 3% discount rate, the results are 

qualitatively similar to those using a 3% discount rate. Sales increase for every year. For both 

cars and trucks, sales become increasingly positive over time, as higher fuel prices make 

improved fuel economy more valuable. The car market grows more than the truck market in 

absolute numbers, but less on a percentage basis. 

The effect of this rule on the use and scrappage of older vehicles will be related to its 

effects on new vehicle prices, the fuel efficiency of new vehicle models, and the total sales of 

new vehicles. If the value of fuel savings resulting from improved fuel efficiency to the typical 

potential buyer of a new vehicle outweighs the average increase in new models’ prices, sales of 

new vehicles will rise, while scrappage rates of used vehicles will increase slightly. This will 

cause the “turnover” of the vehicle fleet (i.e., the retirement of used vehicles and their 

replacement by new models) to accelerate slightly, thus accentuating the anticipated effect of the 

rule on fleet-wide fuel consumption and CO2 emissions. However, if potential buyers value 

future fuel savings resulting from the increased fuel efficiency of new models at less than the 

increase in their average selling price, sales of new vehicles will decline, as will the rate at which 

used vehicles are retired from service. This effect will slow the replacement of used vehicles by 

new models, and thus partly offset the anticipated effects of this rule on fuel use and emissions. 

Because the agencies are uncertain about how the value of projected fuel savings from 

this rule to potential buyers will compare to their estimates of increases in new vehicle prices, we 

have not attempted to estimate explicitly the effects of the rule on scrappage of older vehicles 

and the turnover of the vehicle fleet. 

A detailed discussion of the vehicle sales impacts methodology is provided in the Chapter 

8 of EPA’s RIA. 

b. Consumer Payback Period and Lifetime Savings on New Vehicle Purchases 

Another factor of interest is the payback period on the purchase of a new vehicle that 

complies with the new standards. In other words, how long would it take for the expected fuel 

savings to outweigh the increased cost of a new vehicle? For example, a new 2016 MY vehicle 

is estimated to cost $948 more (on average, and relative to the reference case vehicle) due to the 

addition of new GHG reducing technology (see Section III.D.6 for details on this cost estimate). 

This new technology will result in lower fuel consumption and, therefore, savings in fuel 

expenditures (see Section III.H.10) for details on fuel savings). But how many months or years 

would pass before the fuel savings exceed the upfront cost of $948? 

Table III.H.5-3 provides the answer to this question for a vehicle purchaser who pays for 

the new vehicle upfront in cash (we discuss later in this section the payback period for 

consumers who finance the new vehicle purchase with a loan). The table uses annual miles 

driven (vehicle miles traveled, or VMT) and survival rates consistent with the emission and 
348 

benefits analyses presented in Chapter 4 of the Joint TSD. The control case includes rebound 

VMT but the reference case does not, consistent with other parts of the analysis. Also included 

are fuel savings associated with A/C controls (in the control case only). Not included here are 

the likely A/C-related maintenance savings as discussed in Chapter 2 of EPA’s RIA. Further, 

this analysis does not include other societal impacts such as the value of increased driving, or 

noise, congestion and accidents since the focus is meant to be on those factors consumers think 

about most while in the showroom considering a new car purchase. Car/truck fleet weighting is 

handled as described in Chapter 1 of the Joint TSD. As can be seen in the table, it will take under 

3 years (2 years and 7 months at a 3% discount rate, 2 years and 9 months at a 7% discount rate) 

for the cumulative discounted fuel savings to exceed the upfront increase in vehicle cost. More 

detail on this analysis can be found in Chapter 8 of EPA’s RIA. 

Table III.H.5-3 Payback Period on a 2016 MY New Vehicle Purchase via Cash (2007 dollars) 

YEAR OF 

OWNERSHIP 

INCREASED 

VEHICLE COSTa 

ANNUAL FUEL 

SAVINGSb

CUMULATIVE 

DISCOUNTED 

FUEL SAVINGS 

AT 3% 

CUMULATIVE 

DISCOUNTED 

FUEL SAVINGS 

AT 7% 

1 $1,018 $424 $418 $410 

2 $420 $820 $790 

3 $414 $1,204 $1,139 

4 $402 $1,567 $1,457 a

 Increased vehicle cost due to the rule is $948; the value here includes nationwide average sales tax of 5.3% and 

increased insurance premiums of 1.98%; both of these percentages are discussed in Section 8.1.1 of EPA’s RIA. b Calculated using AEO 2010 Early Release reference case fuel price including taxes.

 However, most people purchase a new vehicle using credit rather than paying cash up 

front. The typical car loan today is a five year, 60 month loan. As of February 9, 2010, the 

national average interest rate for a 5 year new car loan was 6.54 percent. If the increased 

vehicle cost is spread out over 5 years at 6.54 percent, the analysis would look like that shown in 

Table III.H.5-4. As can be seen in this table, the fuel savings immediately outweigh the 

increased payments on the car loan, amounting to $177 in discounted net savings (3% discount 

rate) in the first year and similar savings for the next two years before reduced VMT starts to 

cause the fuel savings to fall. Results are similar using a 7% discount rate. This means that for 

every month that the average owner is making a payment for the financing of the average new 

vehicle their monthly fuel savings would be greater than the increase in the loan payments. This 

amounts to a savings on the order of $9 to $15 per month throughout the duration of the 5 year 

loan. Note that in year six when the car loan is paid off, the net savings equal the fuel savings 

(as would be the case for the remaining years of ownership). 

Table III.H.5-4 Payback Period on a 2016 MY New Vehicle Purchase via Credit (2007 dollars) 

YEAR OF 

OWNERSHIP 

INCREASED 

VEHICLE COSTa ANNUAL FUEL 

SAVINGSb

ANNUAL 

DISCOUNTED 

NET SAVINGS AT 

3% 

ANNUAL 

DISCOUNTED 

NET SAVINGS AT 

7% 

1 $245 $424 $177 $173 

2 $245 $420 $167 $158 

3 $245 $414 $157 $142 

4 $245 $402 $142 $124 

5 $245 $391 $127 $107 
349 

6 $0 $374 $318 $258 a This uses the same increased cost as Table III.H.4-3 but spreads it out over 5 years assuming a 5 year car loan at 

6.54 percent. 

b

 Calculated using AEO 2010 Early Release reference case fuel price including taxes.

 The lifetime fuel savings and net savings can also be calculated for those who purchase 

the vehicle using cash and for those who purchase the vehicle with credit. This calculation 

applies to the vehicle owner who retains the vehicle for its entire life and drives the vehicle each 

year at the rate equal to the national projected average. The results are shown in Table III.H.5-5. 

In either case, the present value of the lifetime net savings is greater than $3,100 at a 3% 

discount rate, or $2,300 at a 7% discount rate. 

Table III.H.5-5 Lifetime Discounted Net Savings on a 2016 MY New Vehicle Purchase (2007 

dollars) 

PURCHASE 

OPTION 

INCREASED 

DISCOUNTED 

VEHICLE COST 

LIFETIME 

DISCOUNTED 

FUEL SAVINGS B

LIFETIME 

DISCOUNTED 

NET SAVINGS 

3% discount rate 

Cash $1,018 $4,306 $3,303 

Credit a $1,140 $4,306 $3,166 

7% discount rate 

Cash $1,018 $3,381 $2,396 

Credit a $1,040 $3,381 $2,340 a

 Assumes a 5 year loan at 6.54 percent. 

b Fuel savings here were calculated using AEO 2010 Early Release reference case fuel price 

including taxes.

 Note that throughout this consumer payback discussion, the average number of vehicle 

miles traveled per year has been used. Drivers who drive more miles than the average would 

incur fuel related savings more quickly and, therefore, the payback would come sooner. Drivers 

who drive fewer miles than the average would incur fuel related savings more slowly and, 

therefore, the payback would come later. 

6. Benefits of Reducing GHG Emissions

a. Social Cost of Carbon 

In today’s final rule, EPA and NHTSA assigned a dollar value to reductions in CO2

emissions using the marginal dollar value of climate-related damages resulting from carbon 

emissions, also referred to as “social cost of carbon” (SCC). The SCC estimates used in today’s 

rule were recently developed by an interagency process, in which EPA and NHTSA participated. 

EPA and NHTSA have critically evaluated the decisions of the interagency group and the new 

SCC estimates and endorse them as reasonable for this final rule for the reasons presented below. 

As part of the interagency group, EPA and NHTSA have critically evaluated the new SCC 

estimates and endorse them for use in our regulatory analyses, for the reasons presented 

below.”The SCC TSD, Social Cost of Carbon for Regulatory Impact Analysis Under Executive 

Order 12866, presents a more detailed description of the methodology used to generate the new 

estimates, the underlying assumptions, and the limitations of the new SCC estimates. 
350 

Under Executive Order 12866, agencies are required, to the extent permitted by law, “to 

assess both the costs and the benefits of the intended regulation and, recognizing that some costs 

and benefits are difficult to quantify, propose or adopt a regulation only upon a reasoned 

determination that the benefits of the intended regulation justify its costs.” The purpose of the 

SCC estimates presented here is to incorporate the social benefits of reducing carbon dioxide 

(CO2) emissions from light-duty vehicles into a cost-benefit analysis of this final rule, which has 

a small, or “marginal,” impact on cumulative global emissions. The estimates are presented with 

an acknowledgement of the many uncertainties involved and with a clear understanding that they 

should be updated over time to reflect increasing knowledge of the science and economics of 

climate impacts. 

The interagency process that developed these SCC estimates involved a group of 

technical experts from numerous agencies, which met on a regular basis to consider public 

comments, explore the technical literature in relevant fields, and discuss key model inputs and 

assumptions. The main objective of this process was to develop a range of SCC values using a 

defensible set of input assumptions grounded in the existing scientific and economic literatures. 

In this way, key uncertainties and model differences transparently and consistently inform the 

range of SCC estimates used in this rulemaking process. 

The interagency group selected four SCC values for use in regulatory analyses, which 

EPA and NHTSA have applied to this final rule. Three values are based on the average SCC 

from three integrated assessment models, at discount rates of 2.5, 3, and 5 percent. The fourth 

value, which represents the 95th percentile SCC estimate across all three models at a 3 percent 

discount rate, is included to represent higher-than-expected impacts from temperature change 

further out in the tails of the SCC distribution. 

Table III.H.6-1 Social Cost of CO2, 2010 – 2050a (in 2007 dollars)

Discount Rate 5% 3% 2.5% 3% 

Year Avg Avg Avg 95th 

2010 5 21 35 65 

2015 6 24 38 73 

2020 7 26 42 81 

2025 8 30 46 90 

2030 10 33 50 100 

2035 11 36 54 110 

2040 13 39 58 119 

2045 14 42 62 128 

2050 16 45 65 136 a

 The SCC estimates presented above have been rounded to nearest dollar for 

consistency with the benefits analysis. The SCC TSD presents estimates rounded 

to the nearest tenth of a cent. 

i. Monetizing Carbon Dioxide Emissions 
351 

The “social cost of carbon” (SCC) is an estimate of the monetized damages associated 

with an incremental increase in carbon emissions in a given year. It is intended to include (but is 

not limited to) changes in net agricultural productivity, human health, property damages from 

increased flood risk, and the value of ecosystem services. We report estimates of the social cost 

of carbon in dollars per metric ton of carbon dioxide throughout this document. 

When attempting to assess the incremental economic impacts of carbon dioxide 

emissions, the analyst faces a number of serious challenges. A 2009 report from the National 

Academies of Science points out that any assessment will suffer from uncertainty, speculation, 

and lack of information about (1) future emissions of greenhouse gases, (2) the effects of past 

and future emissions on the climate system, (3) the impact of changes in climate on the physical 

and biological environment, and (4) the translation of these environmental impacts into 

economic damages.410 As a result, any effort to quantify and monetize the harms associated with 

climate change will raise serious questions of science, economics, and ethics and should be 

viewed as provisional. 

Despite the serious limits of both quantification and monetization, SCC estimates can be 

useful in estimating the social benefits of reducing carbon dioxide emissions. Under Executive 

Order 12866, agencies are required, to the extent permitted by law, “to assess both the costs and 

the benefits of the intended regulation and, recognizing that some costs and benefits are difficult 

to quantify, propose or adopt a regulation only upon a reasoned determination that the benefits of 

the intended regulation justify its costs.” EPA and NHTSA have used the SCC estimates to 

incorporate social benefits from reducing carbon dioxide emissions from light-duty vehicles into 

a cost-benefit analysis of this final rule, which has a small, or “marginal,” impacts on cumulative 

global emissions. Most federal regulatory actions can be expected to have marginal impacts on 

global emissions. 

For policies that have marginal impacts on global emissions, the benefits from reduced 

(or costs from increased) emissions in any future year can be estimated by multiplying the 

change in emissions in that year by the SCC value appropriate for that year. The net present 

value of the benefits can then be calculated by multiplying each of these future benefits by an 

appropriate discount factor and summing across all affected years. This approach assumes that 

the marginal damages from increased emissions are constant for small departures from the 

baseline emissions path, an approximation that is reasonable for policies that have effects on 

emissions that are small relative to cumulative global carbon dioxide emissions. For policies that 

have a large (non-marginal) impact on global cumulative emissions, there is a separate question 

of whether the SCC is an appropriate tool for calculating the benefits of reduced emissions; we 

do not attempt to answer that question here. 

As noted above, the interagency group convened on a regular basis to consider public 

comments, explore the technical literature in relevant fields, and discuss key inputs and 

assumptions in order to generate SCC estimates. In addition to EPA and NHTSA, agencies that 

actively participated in the interagency process included the Departments of Agriculture, 

Commerce, Energy, and Treasury. This process was convened by the Council of Economic 

 

410National Research Council (2009). Hidden Costs of Energy: Unpriced Consequences of Energy Production and 

Use. National Academies Press. 
352 

Advisers and the Office of Management and Budget, with active participation and regular input 

from the Council on Environmental Quality, National Economic Council, Office of Energy and 

Climate Change, and Office of Science and Technology Policy. The main objective of this 

process was to develop a range of SCC values using a defensible set of input assumptions that 

are grounded in the existing literature. In this way, key uncertainties and model differences can 

more transparently and consistently inform the range of SCC estimates used in the rulemaking 

process. 

The interagency group selected four global SCC estimates for use in regulatory analyses. 

For 2010, these estimates are $5, $21, $35, and $65 (in 2007 dollars). The first three estimates 

are based on the average SCC across models and socio-economic and emissions scenarios at the 

5, 3, and 2.5 percent discount rates, respectively. The fourth value is included to represent the 

higher-than-expected impacts from temperature change further out in the tails of the SCC 

distribution. For this purpose, we use the SCC value for the 95th percentile at a 3 percent 

discount rate. The central value is the average SCC across models at the 3 percent discount rate. 

For purposes of capturing the uncertainties involved in regulatory impact analysis, we emphasize 

the importance and value of considering the full range. These SCC estimates also grow over 

time. For instance, the central value increases to $24 per ton of CO2 in 2015 and $26 per ton of 

CO2 in 2020. See the SCC TSD for the full range of annual SCC estimates from 2010 to 2050. 

These new SCC estimates represent global measures and the center of our current 

attention because of the distinctive nature of the climate change problem. The climate change 

problem is highly unusual in at least two respects. First, it involves a global externality: 

emissions of most greenhouse gases contribute to damages around the world even when they are 

emitted in the United States. Consequently, to address the global nature of the problem, the SCC 

must incorporate the full (global) damages caused by GHG emissions. Second, climate change 

presents a problem that the United States alone cannot solve. Even if the United States were to 

reduce its greenhouse gas emissions to zero, that step would be far from enough to avoid 

substantial climate change. Other countries would also need to take action to reduce emissions if 

significant changes in the global climate are to be avoided. 

It is important to emphasize that the interagency process is committed to updating these 

estimates as the science and economic understanding of climate change and its impacts on 

society improves over time. Specifically, the interagency group has set a preliminary goal of 

revisiting the SCC values within two years or at such time as substantially updated models 

become available, and to continue to support research in this area. In the meantime, the 

interagency group will continue to explore the issues raised in the SCC TSD and consider public 

comments as part of the ongoing interagency process. 

ii. Social Cost of Carbon Values Used in Past Regulatory Analyses 

To date, economic analyses for Federal regulations have used a wide range of values to 

estimate the benefits associated with reducing carbon dioxide emissions. In the final model year 

2011 CAFE rule, the Department of Transportation (DOT) used both a “domestic” SCC value of 

$2 per ton of CO2 and a “global” SCC value of $33 per ton of CO2 for 2007 emission reductions 

(in 2007 dollars), increasing both values at 2.4 percent per year. It also included a sensitivity 
353 

analysis at $80 per ton of CO2. A domestic SCC value is meant to reflect the value of damages 

in the United States resulting from a unit change in carbon dioxide emissions, while a global 

SCC value is meant to reflect the value of damages worldwide. 

A 2008 regulation proposed by DOT assumed a domestic SCC value of $7 per ton CO2

(in 2006 dollars) for 2011 emission reductions (with a range of $0-$14 for sensitivity analysis), 

also increasing at 2.4 percent per year. A regulation finalized by DOE in October of 2008 used a 

domestic SCC range of $0 to $20 per ton CO2 for 2007 emission reductions (in 2007 dollars). In 

addition, EPA’s 2008 Advance Notice of Proposed Rulemaking for Greenhouse Gases identified 

what it described as “very preliminary” SCC estimates subject to revision. EPA’s global mean 

values were $68 and $40 per ton CO2 for discount rates of approximately 2 percent and 3 

percent, respectively (in 2006 dollars for 2007 emissions). 

In 2009, an interagency process was initiated to offer a preliminary assessment of how 

best to quantify the benefits from reducing carbon dioxide emissions. To ensure consistency in 

how benefits are evaluated across agencies, the Administration sought to develop a transparent 

and defensible method, specifically designed for the rulemaking process, to quantify avoided 

climate change damages from reduced CO2 emissions. The interagency group did not undertake 

any original analysis. Instead, it combined SCC estimates from the existing literature to use as 

interim values until a more comprehensive analysis could be conducted. 

The outcome of the preliminary assessment by the interagency group was a set of five 

interim values: global SCC estimates for 2007 (in 2006 dollars) of $55, $33, $19, $10, and $5 per 

ton of CO2. The $33 and $5 values represented model-weighted means of the published 

estimates produced from the most recently available versions of three integrated assessment 

models (DICE, PAGE, and FUND) at approximately 3 and 5 percent discount rates.411 The $55 

and $10 values were derived by adjusting the published estimates for uncertainty in the discount 

rate (using factors developed by Newell and Pizer (2003)) at 3 and 5 percent discount rates, 

respectively.412 The $19 value was chosen as a central value between the $5 and $33 per ton 

estimates. All of these values were assumed to increase at 3 percent annually to represent 

growth in incremental damages over time as the magnitude of climate change increases. 

These interim values represent the first sustained interagency effort within the U.S. 

government to develop an SCC for use in regulatory analysis. The results of this preliminary 

effort were presented in several proposed and final rules and were offered for public comment in 

connection with proposed rules. In particular, EPA and NHTSA used the interim SCC estimates 

in the joint proposal leading to this final rule. 

 

411 The DICE (Dynamic Integrated Climate and Economy) model by William Nordhaus evolved from a series of 

energy models and was first presented in 1990 (Nordhaus and Boyer 2000, Nordhaus 2008). The PAGE (Policy 

Analysis of the Greenhouse Effect) model was developed by Chris Hope in 1991 for use by European decisionmakers in assessing the marginal impact of carbon emissions (Hope 2006, Hope 2008). The FUND (Climate 

Framework for Uncertainty, Negotiation, and Distribution) model, developed by Richard Tol in the early 1990s, 

originally to study international capital transfers in climate policy. is now widely used to study climate impacts (e.g., 

Tol 2002a, Tol 2002b, Anthoff et al. 2009, Tol 2009). 

412 Newell, R., and W. Pizer. 2003. Discounting the distant future: how much do uncertain rates increase valuations? 

Journal of Environmental Economics and Management 46: 52-71. 
354 

iii. Approach and Key Assumptions 

Since the release of the interim values, interagency group has reconvened on a regular 

basis to generate improved SCC estimates, which EPA and NHTSA used in this final rule. 

Specifically, the group has considered public comments and further explored the technical 

literature in relevant fields. The general approach to estimating SCC values was to run the three 

integrated assessment models (FUND, DICE, and PAGE) using the following inputs agreed upon 

by the interagency group: 

• A Roe and Baker distribution for the climate sensitivity parameter bounded 

between 0 and 10 with a median of 3 °C and a cumulative probability between 

2 and 4.5 °C of two-thirds.413

• Five sets of GDP, population and carbon emissions trajectories based on the 

recent Stanford Energy Modeling Forum, EMF-22. 

• Constant annual discount rates of 2.5, 3, and 5 percent. 

The SCC TSD presents a summary of the results and details the modeling exercise and the 

choices and assumptions that underlie the resulting estimates of the SCC. The complete model 

results are available in the docket for this final rule [EPA-HQ-OAR-2009-0472]. 

It is important to recognize that a number of key uncertainties remain, and that current 

SCC estimates should be treated as provisional and revisable since they will evolve with 

improved scientific and economic understanding. The interagency group also recognizes that the 

existing models are imperfect and incomplete. The National Academy of Science (2009) points 

out that there is tension between the goal of producing quantified estimates of the economic 

damages from an incremental ton of carbon and the limits of existing efforts to model these 

effects. The SCC TSD highlights a number of concerns and problems that should be addressed 

by the research community, including research programs housed in many of the agencies 

participating in the interagency process to estimate the SCC. 

The U.S. Government will periodically review and reconsider estimates of the SCC used 

for cost-benefit analyses to reflect increasing knowledge of the science and economics of climate 

impacts, as well as improvements in modeling. In this context, statements recognizing the 

limitations of the analysis and calling for further research take on exceptional significance. The 

interagency group offers the new SCC values with all due humility about the uncertainties 

embedded in them and with a sincere promise to continue work to improve them. 

iv. Use of New SCC Estimates to Calculate GHG Benefits for this Final Rule 

The table below summarizes the total GHG benefits for the lifetime of the rule, which are 

calculated by using the four new SCC values. Specifically, EPA calculated the total monetized 

benefits in each year by multiplying the marginal benefits estimates per metric ton of CO2 (the 

SCC) by the reductions in CO2 for that year. 

Table III.H.6-2 Monetized CO2 Benefits of Vehicle Program, CO2 Emissionsa,b (Million 2007$) 

 

413 Roe, G., and M. Baker. 2007. “Why is climate sensitivity so unpredictable?” Science 318:629-632 
355 

YEAR 

CO2 EMISSIONS 

REDUCTION 

(Million Metric 

Tons) 

BENEFITS 

Avg SCC at 5% 

($5-$16)c Avg SCC at 3% 

($21-$45)c Avg SCC at 2.5% ($35-$65)c

95th percentile 

SCC at 3% 

($65-$136)c

2020 139 $900 $3,700 $5,800 $11,000 

2030 273 $2,700 $8,900 $14,000 $27,000 

2040 360 $4,600 $14,000 $21,000 $43,000 

2050 459 $7,200 $21,000 $30,000 $62,000 a Monetized GHG benefits exclude the value of reductions in non-CO2 GHG emissions (HFC, CH4 and N2O) 

expected under this final rule. Although EPA has not monetized the benefits of reductions in these non-CO2 

emissions, the value of these reductions should not be interpreted as zero. Rather, the reductions in non-CO2 GHGs 

will contribute to this rule’s climate benefits, as explained in Section III.F.2. The SCC TSD notes the difference 

between the social cost of non-CO2 emissions and CO2 emissions, and specifies a goal to develop methods to value 

non-CO2 emissions in future analyses. b

 Numbers may not compute exactly from Tables III.H.6-1 and III.H.6-2 due to rounding. 

c As noted above, SCC increases over time; tables lists ranges for years 2010 through 2050. See Table III.H.6-1 for 

the SCC estimates corresponding to the years in this table. 

b. Summary of the Response to Comments 

EPA and NHTSA received extensive public comments about the scientific, economic, 

and ethical issues involved in estimating the SCC, including the proposed rule’s estimates of the 

value of emissions reductions from new cars and trucks.414 In particular, the comments 

addressed the methodology used to derive the interim SCC estimates, limitations of integrated 

assessment models, discount rate selection, treatment of uncertainty and catastrophic impacts, 

use of global and domestic SCC, and the presentation and use of SCC estimates. The rest of this 

preamble section briefly summarizes EPA’s response to the comments; the Joint Response to 

Comments document provides the complete responses to all comments received. 

 

EPA received extensive comments about the methodology and discount rates used to 

derive the interim SCC estimates. While one commenter from the auto industry noted that the 

interim methodology was acceptable given available data, many commenters (representing 

academic and environmental organizations) expressed concerns that the filters were too narrow, 

stated that model-weighting averaging was inappropriate, and recommended that EPA use lower 

discount rates. These commenters also discussed alternative approaches to select discount rates 

and generally recommended that EPA use lower rates to give more weight to climate damages 

experienced by future generations. 

For the final rule, EPA conducted new analyses of SCC. EPA did not continue with its 

interim approach to derive estimates from the existing literature and instead conducted new 

model runs that produced a vast amount of SCC data at three separate certainty-equivalent 

discount rates (2.5, 3, and 5 percent). As discussed further in the SCC TSD, this modeling 

exercise resulted in a fuller distribution of SCC estimates and better accounted for uncertainty 

 

414 EPA estimated GHG benefits in the proposed rule using a set of interim SCC values developed by an interagency 

group, in which EPA and NHTSA participated. As discussed in the SCC TSD, the interagency group selected the 

interim estimates from the existing literature and agreed to use those interim estimates in regulatory analyses until it 

could develop a more comprehensive characterization of the SCC. 
356 

through a Monte Carlo analysis. Comments on specific issues are addressed in the Joint 

Response to Comments document. 

EPA received comments on the limitations of the integrated assessment models 

concluding that the selection of models and reliance on the model authors’ datasets contributed 

to the downward bias of the interim SCC estimates. In this final rule, EPA relied on the default 

values in each model for the remaining parameter; research gaps and practical constraints 

required EPA to limit its modification of the models to socioeconomic and emissions scenarios, 

climate sensitivity, and discount rate. While EPA recognizes that the models’ translations of 

physical impacts to economic values are incomplete, approximate, and highly uncertain, it 

regards them as the best currently available representations. EPA also considered, for each 

model, the treatment of uncertainty, catastrophic impacts, and omitted impacts, and as discussed 

in the SCC TSD and the Joint Response to Comments document, used best available information 

and techniques to quantify such impacts as feasible and supplemented the SCC with qualitative 

assessments. Comments on specific issues are addressed in the Joint Response to Comments 

document. 

Six commenters, representing academia and environmental organizations, supported the 

proposed rule’s preference for global SCC estimates while several industry groups stated that 

under the Clean Air Act, EPA is prohibited from using global estimates. EPA agrees that a 

global measure of GHG mitigation benefits is both appropriate and lawful for EPA to consider in 

evaluating the benefits of GHG emissions standards adopted under section 202(a). Global 

climate change represents a problem that the United States cannot solve alone without global 

action, and for a variety of reasons there is a value to the U.S. from domestic emissions 

reductions that reduce the harm occurring globally. This is not exercise of regulatory authority 

over conduct occurring overseas, but instead is a reasonable exercise of discretion in how to 

place a monetary value on a reduction in domestic emissions. See the Joint Response to 

Comments document for a complete discussion of this issue. 

Finally, EPA received various comments regarding the presentation of the SCC 

methodology and resulting estimates. EPA has responded to these concerns by presenting a 

detailed discussion about the methodology, including key model assumptions, as well as 

uncertainties and research gaps associated with the SCC estimates and the implications for the 

SCC estimates. Among these key assumptions and uncertainties are issues involving discount 

rates, climate sensitivity and socioeconomic scenario assumptions, incomplete treatment of 

potential catastrophic impacts, incomplete treatment of non-catastrophic impacts, uncertainty in 

extrapolation of damages to high temperatures, incomplete treatment of adaptation and 

technological change, and assumptions about risk aversion to high-impact outcomes (see SCC 

TSD). 

 

7. Non-Greenhouse Gas Health and Environmental Impacts 

This section presents EPA’s analysis of the non-GHG health and environmental impacts 

that can be expected to occur as a result of the light-duty vehicle GHG rule. GHG emissions are 

predominantly the byproduct of fossil fuel combustion processes that also produce criteria and 

hazardous air pollutants. The vehicles that are subject to the standards are also significant 
357 

sources of mobile source air pollution such as direct PM, NOX, VOCs and air toxics. The 

standards will affect exhaust emissions of these pollutants from vehicles. They will also affect 

emissions from upstream sources related to changes in fuel consumption. Changes in ambient 

ozone, PM2.5, and air toxics that will result from the standards are expected to affect human 

health in the form of premature deaths and other serious human health effects, as well as other 

important public health and welfare effects. 

As many commenters noted, it is important to quantify the health and environmental 

impacts associated with the final rule because a failure to adequately consider these ancillary copollutant impacts could lead to an incorrect assessment of their net costs and benefits. Moreover, 

co-pollutant impacts tend to accrue in the near term, while any effects from reduced climate 

change mostly accrue over a time frame of several decades or longer. 

This section is split into two sub-sections: the first presents the PM- and ozone-related 

health and environmental impacts associated with final rule in calendar year (CY) 2030; the 

second presents the PM-related benefits-per-ton values used to monetize the PM-related cobenefits associated with the model year (MY) analysis of the final rule.415 

a. Quantified and Monetized Non-GHG Human Health Benefits of the 2030 

Calendar Year (CY) Analysis 

 XX- To be completed when we have air quality results 

b. PM-related Monetized Benefits of the Model Year (MY) Analysis 

As described in Section III.G, the final standards will reduce emissions of several criteria 

and toxic pollutants and precursors. In the MY analysis, EPA estimates the economic value of 

the human health benefits associated with reducing PM2.5 exposure. Due to analytical 

limitations, this analysis does not estimate benefits related to other criteria pollutants (such as 

ozone, NO2 or SO2) or toxics pollutants, nor does it monetize all of the potential health and 

welfare effects associated with PM2.5. 

The MY analysis uses a “benefit-per-ton” method to estimate a selected suite of PM2.5-

related health benefits described below. These PM2.5 benefit-per-ton estimates provide the total 

monetized human health benefits (the sum of premature mortality and premature morbidity) of 

reducing one ton of directly emitted PM2.5, or its precursors (such as NOX, SOX, and VOCs), 

from a specified source. Ideally, the human health benefits associated with the MY analysis 

would be estimated based on changes in ambient PM2.5 as determined by full-scale air quality 

modeling. However, this modeling was not possible in the timeframe for the final rule. 

 

415 EPA typically analyzes rule impacts (emissions, air quality, costs and benefits) in the year in which they occur; 

for this analysis, we selected 2030 as a representative future year. We refer to this analysis as the “Calendar Year” 

(CY) analysis. EPA also conducted a separate analysis of the impacts over the model year lifetimes of the 2012 

through 2016 model year vehicles. We refer to this analysis as the “Model Year” (MY) analysis. In contrast to the 

CY analysis, the MY lifetime analysis shows the lifetime impacts of the program on each of these MY fleets over 

the course of its lifetime. 
358 

The dollar-per-ton estimates used in this analysis are provided in Table III.H.7-6. In the 

summary of costs and benefits, Section III.H.10 of this preamble, EPA presents the monetized 

value of PM-related improvements associated with the rule. 

Table III.H.7-6 Benefits-per-ton Values (2007$) Derived Using the ACS Cohort Study for PMrelated Premature Mortality (Pope et al., 2002)a

 and a 3% Discount Rateb

Yearc All Sourcesd Stationary (Non-EGU) Sources Mobile Sources 

SOX VOC NOX Direct PM2.5 NOX Direct PM2.5 

2015 $28,000 $1,200 $4,700 $220,000 $4,900 $270,000 

2020 $31,000 $1,300 $5,100 $240,000 $5,300 $290,000 

2030 $36,000 $1,500 $6,100 $280,000 $6,400 $350,000 

2040 $43,000 $1,800 $7,200 $330,000 $7,600 $420,000 a The benefit-per-ton estimates presented in this table are based on an estimate of premature mortality derived from 

the ACS study (Pope et al., 2002). If the benefit-per-ton estimates were based on the Six Cities study (Laden et al., 

2006), the values would be approximately 145% (nearly two-and-a-half times) larger. 

b

 The benefit-per-ton estimates presented in this table assume a 3% discount rate in the valuation of premature 

mortality to account for a twenty-year segmented cessation lag. If a 7% discount rate had been used, the values 

would be approximately 9% lower. 

c

 Benefit-per-ton values were estimated for the years 2015, 2020, and 2030. For 2040, EPA and NHTSA 

extrapolated exponentially based on the growth between 2020 and 2030. 

d

 Note that the benefit-per-ton value for SOX is based on the value for Stationary (Non-EGU) sources; no SOX value 

was estimated for mobile sources. The benefit-per-ton value for VOCs was estimated across all sources. 

The benefit per-ton technique has been used in previous analyses, including EPA’s recent 

Ozone National Ambient Air Quality Standards (NAAQS) RIA (U.S. EPA, 2008a),416 the 

proposed Portland Cement National Emissions Standards for Hazardous Air Pollutants 

(NESHAP) RIA (U.S. EPA, 2009a),417 and the proposed NO2 NAAQS (U.S. EPA, 2009b).418 

Table III.H.7 -7 shows the quantified and unquantified PM2.5-related co-benefits captured in 

those benefit-per-ton estimates. 

 

416 U.S. Environmental Protection Agency (U.S. EPA). 2008a. Regulatory Impact Analysis, 2008 National Ambient 

Air Quality Standards for Ground-level Ozone, Chapter 6. Office of Air Quality Planning and Standards, Research 

Triangle Park, NC. March. Available at <http://www.epa.gov/ttn/ecas/regdata/RIAs/6-ozoneriachapter6.pdf>. 

417 U.S. Environmental Protection Agency (U.S. EPA). 2009a. Regulatory Impact Analysis: National Emission 

Standards for Hazardous Air Pollutants from the Portland Cement Manufacturing Industry. Office of Air Quality 

Planning and Standards, Research Triangle Park, NC. April. Available on the Internet at 

<http://www.epa.gov/ttn/ecas/regdata/RIAs/portlandcementria_4-20-09.pdf>. 418 U.S. Environmental Protection Agency (U.S. EPA). 2009b. Proposed NO2 NAAQS Regulatory Impact Analysis 

(RIA). Office of Air Quality Planning and Standards, Research Triangle Park, NC. April. Available on the Internet 

at http://www.epa.gov/ttn/ecas/regdata/RIAs/proposedno2ria.pdf. 

Comment [A41]: Can you show these for 7 

percent as well? 
359 

Table III.H.7-7 Human Health and Welfare Effects of PM2.5 

Pollutant / 

Effect 

Quantified and Monetized 

in Primary Estimates 

Unquantified Effects 

Changes in: 

PM2.5 Adult premature mortality 

Bronchitis: chronic and acute 

Hospital admissions: respiratory and 

cardiovascular 

Emergency room visits for asthma 

Nonfatal heart attacks (myocardial infarction) 

Lower and upper respiratory illness 

Minor restricted-activity days 

Work loss days 

Asthma exacerbations (asthmatic population) 

Infant mortality 

Subchronic bronchitis cases 

Low birth weight 

Pulmonary function 

Chronic respiratory diseases other than chronic 

bronchitis 

Non-asthma respiratory emergency room visits 

Visibility 

Household soiling 

Consistent with the NO2 NAAQS,419 the benefits estimates utilize the concentrationresponse functions as reported in the epidemiology literature. To calculate the total monetized 

impacts associated with quantified health impacts, EPA applies values derived from a number of 

sources. For premature mortality, EPA applies a value of a statistical life (VSL) derived from 

the mortality valuation literature. For certain health impacts, such as chronic bronchitis and a 

number of respiratory-related ailments, EPA applies willingness-to-pay estimates derived from 

the valuation literature. For the remaining health impacts, EPA applies values derived from 

current cost-of-illness and/or wage estimates. 

Readers interested in reviewing the complete methodology for creating the benefit-perton estimates used in this analysis can consult the Technical Support Document (TSD)420

accompanying the recent final ozone NAAQS RIA (U.S. EPA, 2008a). Readers can also refer 

to Fann et al. (2009)421 for a detailed description of the benefit-per-ton methodology.422 A more 

detailed description of the benefit-per-ton estimates is also provided in the Draft Joint TSD that 

accompanies this rulemaking. 

As described in the documentation for the benefit per-ton estimates cited above, national 

per-ton estimates were developed for selected pollutant/source category combinations. The perton values calculated therefore apply only to tons reduced from those specific pollutant/source 

combinations (e.g., NO2 emitted from mobile sources; direct PM emitted from stationary 

 

419 Although we summarize the main issues in this chapter, we encourage interested readers to see benefits chapter 

of the NO2 NAAQS for a more detailed description of recent changes to the PM benefits presentation and 

preference for the no-threshold model. 

420 U.S. Environmental Protection Agency (U.S. EPA). 2008b. Technical Support Document: Calculating Benefit 

Per-Ton estimates, Ozone NAAQS Docket #EPA-HQ-OAR-2007-0225-0284. Office of Air Quality Planning and 

Standards, Research Triangle Park, NC. March. Available on the Internet at <http://www.regulations.gov>. 421 Fann, N. et al. (2009). The influence of location, source, and emission type in estimates of the human health 

benefits of reducing a ton of air pollution. Air Qual Atmos Health. Published online: 09 June, 2009. 422 The values included in this report are different from those presented in the article cited above. Benefits methods 

change to reflect new information and evaluation of the science. Since publication of the June 2009 article, EPA has 

made two significant changes to its benefits methods: (1) We no longer assume that a threshold exists in PM-related 

models of health impacts; and (2) We have revised the Value of a Statistical Life to equal $6.3 million (year 2000$), 

up from an estimate of $5.5 million (year 2000$) used in the June 2009 report. Please refer to the following website 

for updates to the dollar-per-ton estimates: http://www.epa.gov/air/benmap/bpt.html 
360 

sources). Our estimate of PM2.5 benefits is therefore based on the total direct PM2.5 and PMrelated precursor emissions controlled by sector and multiplied by each per-ton value. 

The benefit-per-ton estimates are subject to a number of assumptions and uncertainties. 

• Dollar-per-ton estimates do not reflect local variability in population density, 

meteorology, exposure, baseline health incidence rates, or other local factors that 

might lead to an overestimate or underestimate of the actual benefits of 

controlling fine particulates. In Section III.G, we describe the full-scale air 

quality modeling conducted for the 2030 calendar year analysis in an effort to 

capture this variability. 

• There are several health benefits categories that EPA was unable to quantify in 

the MY analysis due to limitations associated with using benefits-per-ton 

estimates, several of which could be substantial. Because the NOX and VOC 

emission reductions associated with this rule are also precursors to ozone, 

reductions in NOX and VOC would also reduce ozone formation and the health 

effects associated with ozone exposure. Unfortunately, benefits-per-ton estimates 

do not exist due to issues associated with the complexity of the atmospheric air 

chemistry and nonlinearities associated with ozone formation. The PM-related 

benefits-per-ton estimates also do not include any human welfare or ecological 

benefits. Please refer to Chapter 7 of the RIA that accompanies this rule for a 

description of the quantification and monetization of health impacts for the CY 

analysis and a description of the unquantified co-pollutant benefits associated 

with this rulemaking. 

• The benefit-per-ton estimates used in this analysis incorporate projections of key 

variables, including atmospheric conditions, source level emissions, population, 

health baselines and incomes, technology. These projections introduce some 

uncertainties to the benefit per ton estimates. 

• As described above, using the benefit-per-ton value derived from the ACS study 

(Pope et al., 2002) alone provides an incomplete characterization of PM2.5

benefits. When placed in the context of the Expert Elicitation results, this estimate 

falls toward the lower end of the distribution. By contrast, the estimated PM2.5

benefits using the coefficient reported by Laden in that author’s reanalysis of the 

Harvard Six Cities cohort fall toward the upper end of the Expert Elicitation 

distribution results. 

As mentioned above, emissions changes and benefits-per-ton estimates alone are not a 

good indication of local or regional air quality and health impacts, as there may be localized 

impacts associated with this rulemaking. Additionally, the atmospheric chemistry related to 

ambient concentrations of PM2.5, ozone and air toxics is very complex. Full-scale photochemical 

modeling is therefore necessary to provide the needed spatial and temporal detail to more 

completely and accurately estimate the changes in ambient levels of these pollutants and their 

associated health and welfare impacts. Timing and resource constraints precluded EPA from 

conducting full-scale photochemical air quality modeling for the MY analysis. We have, 

however, conducted national-scale air quality modeling for the CY analysis to analyze the 

impacts of the standards on PM2.5, ozone, and selected air toxics. 
361 

8. Energy Security Impacts

 This rule to reduce GHG emissions in light-duty vehicles results in improved fuel 

efficiency which, in turn, helps to reduce U.S. petroleum imports. A reduction of U.S. petroleum 

imports reduces both financial and strategic risks caused by potential sudden disruptions in the 

supply of imported petroleum to the U.S. This reduction in risk is a measure of improved U.S. 

energy security. This section summarizes our estimate of the monetary value of the energy 

security benefits of the GHG vehicle standards against the reference case by estimating the 

impact of the expanded use of lower-GHG vehicle technologies on U.S. oil imports and avoided 

U.S. oil import expenditures. Additional discussion of this issue can be found in Chapter 5.1 of 

EPA’s RIA and Section 4.2.8 of the TSD. 

 a. Implications of Reduced Petroleum Use on U.S. Imports 

In 2008, U.S. petroleum import expenditures represented 21 percent of total U.S. imports 

of all goods and services.423 In 2008, the U.S. imported 66 percent of the petroleum it consumed, 

and the transportation sector accounted for 70 percent of total U.S. petroleum consumption. This 

compares to approximately 37 percent of petroleum from imports and 55 percent of consumption 

from petroleum in the transportation sector in 1975.424 It is clear that petroleum imports have a 

significant impact on the U.S. economy. Requiring lower-GHG vehicle technology in the U.S. is 

expected to lower U.S. petroleum imports. 

 

b. Energy Security Implications 

 In order to understand the energy security implications of reducing U.S. petroleum 

imports, EPA worked with Oak Ridge National Laboratory (ORNL), which has developed 

approaches for evaluating the economic costs and energy security implications of oil use. The 

energy security estimates provided below are based upon a methodology developed in a peerreviewed study entitled "The Energy Security Benefits of Reduced Oil Use, 2006-2015," 

completed in March 2008. This study is included as part of the docket for this rulemaking.425,426

 When conducting this analysis, ORNL considered the economic cost of importing 

petroleum into the U.S. The economic cost of importing petroleum into the U.S. is defined to 

include two components in addition to the purchase price of petroleum itself. These are: (1) the 

higher costs for oil imports resulting from the effect of increasing U.S. import demand on the 

world oil price and on OPEC market power (i.e., the "demand" or "monopsony" costs); and (2) 

 

423 Source: U.S. Bureau of Economic Analysis, U.S. International Transactions Accounts Data, as shown on June 24, 

2009. 

424 Source: U.S. Department of Energy, Annual Energy Review 2008, Report No. DOE/EIA-0384(2008), Tables 5.1 

and 5.13c, June 26, 2009. 

425 Leiby, Paul N. "Estimating the Energy Security Benefits of Reduced U.S. Oil Imports" Oak Ridge National 

Laboratory, ORNL/TM-2007/028, Final Report, 2008. (Docket EPA-HQ-OAR-2009-0472) 

426 The ORNL study “The Energy Security Benefits of Reduced Oil Use, 2006-2015," completed in March 2008, is 

an update version of the approach used for estimating the energy security benefits of U.S. oil import reductions 

developed in an ORNL 1997 Report by Leiby, Paul N., Donald W. Jones, T. Randall Curlee, and Russell Lee, 

entitled “Oil Imports: An Assessment of Benefits and Costs." (Docket EPA-HQ-OAR-2009-0472) 
362 

the risk of reductions in U.S. economic output and disruption of the U.S. economy caused by 

sudden disruptions in the supply of imported petroleum to the U.S. (i.e., macroeconomic 

disruption/adjustment costs). Maintaining a U.S. military presence to help secure stable oil 

supply from potentially vulnerable regions of the world was not included in this analysis because 

its attribution to particular missions or activities is hard to quantify. 

 One commenter on this rule felt that that the magnitude of the economic disruption 

portion of the energy security benefit may be too high. This commenter cites a recent paper 

written by Stephen P.A. Brown and Hillard G. Huntington, entitled "Estimating U.S. Oil Security 

Premiums" (September 2009) as the basis for their comment. The Agency reviewed this paper 

and found that it conducted a somewhat different analysis than the one conducted by ORNL in 

support of this rule. The Brown and Huntington paper focuses on policies and the energy 

security implications of increasing U.S. demand for oil (or at least holding U.S. oil consumption 

constant), while the ORNL analysis examines the energy security implications of decreasing 

U.S. oil consumption and oil imports. These asymmetrical analyses would be expected to yield 

somewhat different energy security results. 

 However, even given the different scenarios consider, the Brown and Huntington 

estimates are roughly similar to the ORNL estimates. For example, for an increase in U.S. 

consumption that leads to an increase in U.S. imports of oil, Brown and Huntington estimate a 

2015 disruption premium of $4.87 per barrel, with an uncertainty range from $1.03 to $14.10 per 

barrel. The corresponding 2015 estimate for ORNL as the result of a reduction in U.S. oil 

imports is $6.70 per barrel, with an uncertainty range of $3.11 to $10.67 per barrel. Given that 

the two studies analyze different scenarios, since the Brown and Huntington disruption 

premiums are well within the uncertainty range of the ORNL study, and given that the ORNL 

scenario matches the specific oil market impacts anticipated from the rule while the Brown and 

Huntington paper does not, the Agency has concluded that the ORNL disruption security 

premium estimates are more applicable for analyzing this final rule. 

In addition, the Agency received several comments on how to account for the potential 

military cost associated with maintaining a U.S. military presence to help secure stable oil supply 

from potentially vulnerable regions of the world. Some commenters indicated that the Agency 

should attempt to monetize U.S. military costs and include these costs in the energy security 

analysis, while other commenters agreed with the Agency that these costs should be excluded 

since they are too difficult to quantify. The Agency did not receive any new analysis or 

methodological approach from commenters which could be used to monetize U.S. military costs 

in a meaningful or credible manner. 

Moreover, a recent study conducted by the National Academy of Sciences (NAS)427 notes that it 

is difficult to disentangle military spending to achieve political goals from spending to protect 

petroleum supply routes. Further, it notes that spending to protect petroleum supply routes 

would not likely change, given a moderate reduction in oil flowing from volatile regions to the 

U.S. However, the NAS study also suggests that a very large reduction in oil demand could 

affect military spending. The EPA has adopted the NAS position that a change in military 

spending is unlikely given a moderate reduction in oil demand, and continues to exclude a 

 

427 Hidden Costs of Energy: Unpriced Consequences of Energy Production and Use, NAS, ISBN - 10: 0-309-14636-

4. February 2010.
363 

monetary estimate of military costs in our energy security calculations for this rule. However, the 

Agency also believes that more examination of this issue is warranted in the future. 

 

 For this rule, ORNL estimated the energy security premium by incorporating the oil price 

forecast of the Energy Information Administration’s 2009 Annual Energy Outlook (AEO) to its 

model. The Agency considered, but rejected the option, of further updating this analysis using 

the oil price estimates provided by the AEO 2010. Given the broad uncertainty bands around oil 

price forecasts and the relatively modest change in oil price forecasts between the AEO 2009 and 

AEO 2010, the Agency felt that updating to AEO 2010 oil prices would not significantly change 

the results of this energy security analysis. Finally, the EPA used its OMEGA model in 

conjunction with ORNL’s energy security premium estimates to develop the total energy security 

benefits for a number of different years; please refer to Table III.H.8-1 for this information for 

years 2015, 2020, 2030 and 2040,428 as well as a breakdown of the components of the energy 

security premium for each of these years. The components of the energy security premium and 

their values are discussed in detail in the Joint TSD Chapter 4. 

Table III.H.8-1 Energy Security Premium in 2015, 2020, 2030 and 2040 (2007$/Barrel) 

Year 

(range) 

Monopsony Macroeconomic 

Disruption/Adjustment Costs 

Total Mid-Point 

2015 $11.79 

($4.26 - $21.37) 

$6.70 

($3.11 – $10.67) 

$18.49 

($9.80 - $28.08) 

2020 $12.31 

($4.46 - $22.53) 

$7.62 

($3.77 – $12.46) 

$19.94 

($10.58 - $30.47) 

2030 $10.57 

($3.84 – 18.94)) 

$8.12 

($3.90 – $13.04) 

$18.69 

($10.52 - $27.89) 

2040 $10.57 

($3.84 – $18.94) 

$8.12 

($3.90 - $13.04) 

$18.69 

($10.52 - $27.89) 

 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 rule, such as the benefits of reducing greenhouse gas emissions, are 

calculated using a global value? 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. OMB’s Circular A-4 gives guidance in 

 

428 AEO 2009 forecasts energy market trends and values only to 2030. The energy security premium estimates post2030 were assumed to be the 2030 estimate. 
364 

this regard. Domestic pecuniary benefits (or transfers between buyers and sellers) generally 

should not be included because they do not represent real resource costs, though A-4 notes that 

transfers to the U.S. from other countries may be counted as benefits as long as the analysis is 

conducted from a U.S. perspective.

However, even when the global value for greenhouse gas reduction benefits is used, an 

argument can be made that the monopsony benefits should be included in net benefits 

calculations for this rule. Maintaining the earth’s climate is a global public good and as such 

requires that a global cooperative perspective be taken on the benefits of GHG mitigation by all 

nations, including the U.S. Given that a cooperative global approach is required to address the 

climate change issue, each country (and market participant) should face the global SCC. In other 

words, using the global SCC does not transform the calculation from a domestic (i.e., U.S.) to a 

global one. Instead, the global SCC represents the domestic value that the U.S. should utilize to 

contribute cooperatively to a global solution of the climate change problem. 

 

 Energy security, on the other hand, is broadly defined as protecting the U.S. economy 

against circumstances that threaten significant short- and long-term increases in energy costs. 

Energy security is inherently a domestic benefit. Accordingly, it is possible to argue that the use 

of the domestic monopsony benefit is may not necessarily in conflict with the use of the global 

SCC, because the global SCC represents the benefits against which the costs of our (i.e., the 

U.S.’s) domestic mitigation efforts should be judged. If this reasoning holds, the two benefits 

(the global benefits of reducing greenhouse gas emissions and the full energy security premium, 

including the monopsony benefits) should be counted in the net benefits estimates of the rule. 

However, iIn the final analysis, the Agency determined that the first argument is more 

compelling and therefore has determined that using only the macroeconomic disruption 

component of the energy security benefit is the appropriate metric for this rule. 

At proposal, the Agency took the position that since a global perspective was being taken 

with the use of the global SCC, that the monopsony benefits “net out” and were a transfer. Two 

commenters felt that the monopsony effect should be excluded from net benefits calculations for 

the rule since it is a “pecuniary” externality or does not represent an efficiency gain. One of the 

commenters suggested that EPA instead conduct a distributional analysis of the monopsony 

impacts of the final rule. The Agency disagrees that all pecuniary externalities should necessarily 

be excluded from net benefits calculations as a general rule. In this case considered here, the oil 

market is non-competitive, and if the social decision-making unit of interest is the U.S., there is 

an argument for accounting for the monopsony premium to assess the excess transfer of wealth 

caused by the exercise of cartel power outside of the U.S. 

 

However, for the final rule, the Agency continues to take a global perspective with 

respect to climate change by using the global SCC. Therefore, the Agency did not count 

monopsony benefits since they “net out” with losses to other countries outside the U.S. Since a 

global perspective has been taken, a distributional analysis was not undertaken for this final rule, 

since the losses to the losers (oil producers that export oil to the U.S.) would equal the gains to 

the winners (U.S. consumers of imported oil). As a result, the Agency has included only the 

macroeconomic disruption portion of the energy security benefits to monetize the total energy 

security benefits of this rule. Hence, the total annual energy security benefits are derived from 
365 

the estimated reductions in U.S. imports of finished petroleum products and crude oil using only 

the macroeconomic disruption/adjustment portion of the energy security premium. These values 

are shown in Table III.H.8-2.429 The reduced oil estimates were derived from the OMEGA 

model, as explained in Section III.F of this preamble. EPA used the same assumption that 

NHTSA used in its Corporate Average Fuel Economy and CAFE Reform for MY 2008-2011 

Light Trucks rule, which assumed that each gallon of fuel saved reduces total U.S. imports of 

crude oil or refined products by 0.95 gallons.430

Table III.H.8-2 Total Annual Energy Security Benefits Using Only the Macroeconomic 

Disruption/Adjustment Component of the Energy Security Premium in 2015, 2020, 2030 and 

2040 (billions of 2007$) 

Year Benefits 

2015 $0.57 

2020 $2.17 

2030 $4.55 

2040 $6.00 

9. Other Impacts

There are other impacts associated with the CO2 emissions standards and associated 

reduced fuel consumption that vary with miles driven. Lower fuel consumption would, 

presumably, result in fewer trips to the filling station to refuel and, thus, time saved. The 

rebound effect, discussed in detail in Section III.H.4.c, produces additional benefits to vehicle 

owners in the form of consumer surplus from the increase in vehicle-miles driven, but may also 

increase the societal costs associated with traffic congestion, motor vehicle crashes, and noise. 

These effects are likely to be relatively small in comparison to the value of fuel saved as a result 

of the standards, but they are nevertheless important to include. Table III.H.9-1 summarizes the 

other economic impacts. Please refer to Preamble Section II.F and the Joint TSD that 

accompanies this rule for more information about these impacts and how EPA and NHTSA use 

them in their analyses. Note that for the estimated value of less frequent refueling events, EPA's 

estimate is subject to a number of uncertainties which we discuss in detail in Chapter 4.1.11 of 

the Joint TSD, and the actual value could be higher or lower than the value presented here.

 

429 Estimated reductions in U.S. imports of finished petroleum products and crude oil are 95% of 89 million barrels 

(MMB) in 2015, 300 MMB in 2020, 590 MMB in 2030, and 778 MMB in 2040. 

430 Preliminary Regulatory Impacts Analysis, April 2008. 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 the Energy Information Administration’s 

Annual Energy Outlook 2007, NHTSA estimated that approximately 50 percent of the reduction in fuel 

consumption is likely to be reflected in reduced U.S. imports of refined fuel, while the remaining 50 percent would 

be expected to be reflected in reduced domestic fuel refining. 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. Thus on balance, each gallon of fuel saved is anticipated to 

reduce total U.S. imports of crude petroleum or refined fuel by 0.95 gallons. 
366 

Table III.H.9-1 Other Impacts Associated with the Light-Duty Vehicle GHG Program 

 ($Millions of 2007 dollars) 

 2020 2030 2040 2050 NPV, 3% NPV, 7% 

Value of Less 

Frequent 

Refueling 

$2,400 $4,800 $6,300 $8,000 $87,900 $40,100 

Value of 

Increased 

Drivinga

$4,200 $8,800 $13,000 $18,400 $171,500 $75,500 

Accidents, 

Noise, 

Congestion 

-$2,300 -$4,600 -$6,100 -$7,800 -$84,800 -$38,600 

a Calculated using post-tax fuel prices. 

10. Summary of Costs and Benefits

 In this section, EPA presents a summary of costs, benefits, and net benefits of the rule. 

EPA presents fuel consumption impacts as negative costs of the vehicle program. 

 Table III.H.10-1 shows the estimated annual societal costs of the vehicle program for the 

indicated calendar years. The table also shows the net present values of those costs for the 

calendar years 2012-2050 using both a 3 percent and a 7 percent discount rate. In this table, fuel 

savings are calculated using pre-tax fuel prices and are presented as negative costs associated 

with the vehicle program (rather than positive savings). 

 Consumers are expected assumed to receive the fuel savings presented here. The cost 

estimates for the fuel-saving technology also are based on designs that will holdassume all 

vehicle attributes are held constant except fuel economy and technology cost. This analysis also 

assumes that consumers will not change the vehicles that they purchase or purchase fewer 

vehicles as a result of the standards. Automakers may redesign vehicles as part of their 

compliance strategies. The redesigns should be expected to make the vehicles more attractive to 

consumers, because the ability to hold all other attributes constant means that the only reason to 

change them is to make them more marketable to consumers. In addition,However, consumers 

may choose to purchase different vehicles than they would in the absence of this rule. They 

may also decide to put off purchasing a vehicle given the higher upfront cost. And 

manufacturers may choose to redesign vehicles in ways that change the attributes offered. These 

changes may affect the net benefits that consumers receive from their vehicles. If consumers can 

buy the same vehicle as before, except with increased price and fuel economy, then the increase 

in vehicle price is the maximum loss in welfare to the consumer, because compensating the 

increase in price would leave her able to buy her previous vehicle with no change. If she decides 

to purchase a different vehicle, or not to purchase a vehicle, she would do so only if she were 

better off than buying her original choice. Because of the unsettled state of the modeling of 

consumer choices (discussed in Section III.H.1 and in RIA Section 8.1.2), this analysis does not 

Comment [A42]: Please note that these estimates 

are biased and hence not best estimates. 

Comment [A43]: You assume they can keep all 

other attributes constant, that may or may not be true 

in reality. It is circular to argue that because you 

assumed this, manufacturers will conform to this 

assumption. 

Comment [A44]: This is neither here nor there – 

you assume that the exact same set of vehicles are 

available as before, you assume a given discount rate 

for trading off upfront costs and fuels savings. These 

assumptions could very well be incorrect, which is 

the point. 

Comment [A45]: Not clear – her original choice 

is no longer available – she now must choose 

between her new choice (same attributes plus more 

fuel economy and greater upfront cost) and other 

altered choices – or spending her money elsewhere. 
367 

measure these effects. If the technology costs are not sufficient to maintain other vehicle 

attributes, then it is possible that automakers would be required to make less marketable vehicles 

in order to comply with the rule; as a result, there may be an additional loss in consumer welfare 

due to the rule. While EPA received comments expressing concern over the possibility of these 

losses, there were no specific losses identified. Due to the unsettled nature of this issue, we 

distinguish between private fuel savings and social benefit categories in the tables presented 

throughout the Preamble and RIA.

Table III.H.10-1 Estimated Societal Costs of the Light-Duty Vehicle GHG Program 

 (Millions of 2007 dollars) 

Social Costs 2020 2030 2040 2050 NPV, 3% NPV, 7% 

Vehicle 

Compliance 

Costs 

$15,600 $15,800 $17,400 $19,000 $345,900 $191,900

Fuel Savingsa -$35,700 -$79,800 -$119,300 -$171,200 -$1,545,600 -$672,600

Quantified 

Annual Costs -$20,100 -$64,000 -$101,900 -$152,200 -$1,199,700 -$480,700

a Calculated using pre-tax fuel prices. 

Table III.H.10-2 presents estimated annual societal benefits for the indicated calendar 

years. The table also shows the net present values of those benefits for the calendar years 2012-

2050 using both a 3 percent and a 7 percent discount rate. The table shows the benefits of 

reduced CO2 emissions—and consequently the annual quantified benefits (i.e., total benefits)—

for each of four SCC values considered by EPA. As discussed in the RIA Section 7.5, the IPCC 

Fourth Assessment Report (2007) concluded that that the benefit estimates from CO2 reductions 

are “very likely” underestimates. One of the primary reasons is that models used to calculate 

SCC values do not include information about impacts that have not been quantified. 

In addition, these monetized GHG benefits exclude the value of reductions in non-CO2

GHG emissions (HFC, CH4, N2O) expected under this final rule. Although EPA has not 

monetized the benefits of reductions in non-CO2 GHGs, the value of these reductions should not 

be interpreted as zero. Rather, the reductions in non-CO2 GHGs will contribute to this rule’s 

climate benefits, as explained in Section III.F. The SCC TSD notes the difference between the 

social cost of non-CO2 emissions and SCC and specifies a goal to develop methods to value nonCO2 emissions in future analyses. 

Table III.H.10-2 Estimated Societal Benefits Associated with the Light-Duty Vehicle GHG 

Program (Millions of 2007 dollars) 

Benefits Category 2020 2030 2040 2050 NPV, 3%a NPV, 7% a

Social Benefits

Reduced CO2 Emissions at each assumed SCC valueb,c

Avg SCC at 5% $900 $2,700 $4,600 $7,200 $34,500 $34,500 

Avg SCC at 3% $3,700 $8,900 $14,000 $21,000 $176,700 $176,700 

Avg SCC at 2.5% $5,800 $14,000 $21,000 $30,000 $299,600 $299,600 

95th percentile SCC at 3% $11,000 $27,000 $43,000 $62,000 $538,500 $538,500 

Criteria Pollutant Benefitsd,e,f [XX Will be available pending results of air quality modeling] 

Energy Security Impacts 

(price shock) $2,200 $4,500 $6,000 $7,600 $81,900 $36,900 

Comment [A46]: This tale needs to be 

reorganized so that private savings are separated 

from social benefits. I have reorganized it 

accordingly. 
368 

Accidents, Noise, Congestion -$2,300 -$4,600 -$6,100 -$7,800 -$84,800 -$38,600

Private Benefits

Fuel Savings

Reduced Refueling $2,400 $4,800 $6,300 $8,000 $87,900 $40,100 

Value of Increased Drivingg $4,200 $8,800 $13,000 $18,400 $171,500 $75,500 

Accidents, Noise, 

Congestion -$2,300 -$4,600 -$6,100 -$7,800 -$84,800 -$38,600

Quantified Annual Benefits at each assumed SCC valueb,c

Avg SCC at 5% $7,400 $16,200 $23,800 $33,400 $291,000 $148,400 

Avg SCC at 3% $10,200 $22,400 $33,200 $47,200 $433,200 $290,600 

Avg SCC at 2.5% $12,300 $27,500 $40,200 $56,200 $556,100 $413,500 

95th percentile SCC at 3% $17,500 $40,500 $62,200 $88,200 $795,000 $652,400 a

 Note that net present value of reduced GHG emissions is calculated differently than other benefits. The same 

discount rate used to discount the value of damages from future emissions (SCC at 5, 3, 2.5 percent) is used to 

calculate net present value of SCC for internal consistency. Refer to the SCC TSD for more detail. b

 Monetized GHG benefits exclude the value of reductions in non-CO2 GHG emissions (HFC, CH4 and N2O) 

expected under this final rule. Although EPA has not monetized the benefits of reductions in these non-CO2 

emissions, the value of these reductions should not be interpreted as zero. Rather, the reductions in non-CO2 GHGs 

will contribute to this rule’s climate benefits, as explained in Section III.F.2. The SCC TSD notes the difference 

between the social cost of non-CO2 emissions and CO2 emissions, and specifies a goal to develop methods to value 

non-CO2 emissions in future analyses. c

 Section III.H.6 notes that SCC increases over time. Corresponding to the years in this table, the SCC estimates 

range as follows: for Average SCC at 5%: $5-$16; for Average SCC at 3%: $21-$45; for Average SCC at 2.5%: 

$36-$65; and for 95th percentile SCC at 3%: $65-$136. Section III.H.6 also presents these SCC estimates. d

 Note that the co-pollutant impacts associated with the standards presented here do not include the full complement 

of endpoints that, if quantified and monetized, would change the total monetized estimate of rule-related impacts. 

The full complement of human health and welfare effects associated with PM and ozone remain unquantified 

because of current limitations in methods or available data. We have not quantified a number of known or suspected 

health effects linked with ozone and PM for which appropriate health impact functions are not available or which do 

not provide easily interpretable outcomes (e.g., changes in heart rate variability). Additionally, we are unable to 

quantify a number of known welfare effects, including reduced acid and particulate deposition damage to cultural 

monuments and other materials, and environmental benefits due to reductions of impacts of eutrophication in coastal 

areas. As a result, the health benefits quantified in this section are likely underestimates of the total benefits 

attributable to the final rule. 

e

 The benefits presented in this table include an estimate of premature mortality derived from the ACS study (Pope 

et al., 2002). If the benefit estimates were based on the Six Cities study (Laden et al., 2006), the values would be 

approximately 145% (nearly two-and-a-half times) larger. 

f

 The benefits presented in this table assume a 3% discount rate in the valuation of PM-related premature mortality 

to account for a twenty-year segmented cessation lag. If a 7% discount rate had been used, the values would be 

approximately 9% lower. 

g Calculated using pre-tax fuel prices. 

 Table III.H.10-3 presents estimated annual net benefits for the indicated calendar years. 

The table also shows the net present values of those net benefits for the calendar years 2012-

2050 using both a 3 percent and a 7 percent discount rate. The table includes the benefits of 

reduced CO2 emissions (and consequently the annual net benefits) for each of four SCC values 

considered by EPA. As noted above, the benefit estimates from CO2 reductions are “very 

likely,” according to the IPCC Fourth Assessment Report, underestimates because, in part, 

models used to calculate SCC values do not include information about impacts that have not 

been quantified. 

Comment [A47]: Please note in this table that 

these values are biased and are not best estimates. 
369 

Table III.H.10-3 Quantified Net Benefits [XX NOTE that co-pollutant benefits are not yet 

available] Associated with the Light-Duty Vehicle GHG Programa, b (Millions of 2007 dollars) 

 2020 2030 2040 2050 NPV, 3%c NPV, 7% c

Quantified Annual 

Costs -$20,100 -$64,000 -$101,900 -$152,200 -$1,199,700 -$480,700 

Quantified Annual Benefits at each assumed SCC valued,e

Avg SCC at 5% $7,400 $16,200 $23,800 $33,400 $291,000 $148,400 

Avg SCC at 3% $10,200 $22,400 $33,200 $47,200 $433,200 $290,600 

Avg SCC at 2.5% $12,300 $27,500 $40,200 $56,200 $556,100 $413,500 

95th percentile SCC at 

3% $17,500 $40,500 $62,200 $88,200 $795,000 $652,400 

Quantified Net Benefits at each assumed SCC valued,e

Avg SCC at 5% $27,500 $80,200 $125,700 $185,600 $1,490,700 $629,100 

Avg SCC at 3% $30,300 $86,400 $135,100 $199,400 $1,632,900 $771,300 

Avg SCC at 2.5% $32,400 $91,500 $142,100 $208,400 $1,755,800 $894,200 

95th percentile SCC at 

3% $37,600 $104,500 $164,100 $240,400 $1,994,700 $1,133,100 

a

 Note that the co-pollutant impacts associated with the standards presented here do not include the full complement 

of endpoints that, if quantified and monetized, would change the total monetized estimate of rule-related impacts. 

The full complement of human health and welfare effects associated with PM and ozone remain unquantified 

because of current limitations in methods or available data. We have not quantified a number of known or suspected 

health effects linked with ozone and PM for which appropriate health impact functions are not available or which do 

not provide easily interpretable outcomes (e.g., changes in heart rate variability). Additionally, we are unable to 

quantify a number of known welfare effects, including reduced acid and particulate deposition damage to cultural 

monuments and other materials, and environmental benefits due to reductions of impacts of eutrophication in coastal 

areas. As a result, the health benefits quantified in this section are likely underestimates of the total benefits 

attributable to the final rule. 

b Fuel impacts were calculated using pre-tax fuel prices. c

 Note that net present value of reduced GHG emissions is calculated differently than other benefits. The same 

discount rate used to discount the value of damages from future emissions (SCC at 5, 3, 2.5 percent) is used to 

calculate net present value of SCC for internal consistency. Refer to the SCC TSD for more detail. d

 Monetized GHG benefits exclude the value of reductions in non-CO2 GHG emissions (HFC, CH4 and N2O) 

expected under this final rule. Although EPA has not monetized the benefits of reductions in these non-CO2 

emissions, the value of these reductions should not be interpreted as zero. Rather, the reductions in non-CO2 GHGs 

will contribute to this rule’s climate benefits, as explained in Section III.F.2. The SCC TSD notes the difference 

between the social cost of non-CO2 emissions and CO2 emissions, and specifies a goal to develop methods to value 

non-CO2 emissions in future analyses. e

 Section III.H.6 notes that SCC increases over time. Corresponding to the years in this table, the SCC estimates 

range as follows: for Average SCC at 5%: $5-$16; for Average SCC at 3%: $21-$45; for Average SCC at 2.5%: 

$36-$65; and for 95th percentile SCC at 3%: $65-$136. Section III.H.6 also presents these SCC estimates.

 

EPA also conducted a separate analysis of the total benefits over the model year lifetimes 

of the 2012 through 2016 model year vehicles. In contrast to the calendar year analysis 

presented in Table III.H.10-1 through Table III.H.10-3, the model year lifetime analysis shows 

the lifetime impacts of the program on each of these MY fleets over the course of its lifetime. 

Full details of the inputs to this analysis can be found in RIA Chapter 5. The societal benefits of 

the full life of each of the five model years from 2012 through 2016 are shown in Tables 

III.H.10-4 and III.H.10-5 at both a 3 percent and a 7 percent discount rate, respectively. The net 

benefits are shown in Tables III.H.10-6 and III.H.10-7 for both a 3 percent and a 7 percent 

discount rate. Note that the quantified annual benefits shown in Table III.H.10-4 and Table 

III.H.10-5 include fuel savings as a positive benefit. As such, the quantified annual costs as 
370 

shown in Table III.H.10-6 and Table III.H.10-7 do not include fuel savings since those are 

included as benefits. Also note that each of the Tables III.H.10-4 through Table III.H.10-7 

include the benefits of reduced CO2 emissions—and consequently the total benefits—for each of 

four SCC values considered by EPA. As noted above, the benefit estimates from CO2 reductions 

are “very likely,” according to the IPCC Fourth Assessment Report, underestimates because, in 

part, models used to calculate SCC values do not include information about impacts that have not 

been quantified. 

Table III.H.10-4 Estimated Societal and Private Benefits Associated with the Lifetimes of 2012-

2016 Model Year Vehicles (Millions of 2007 dollars; 3% Discount Rate) 

Monetized Values (millions) 2012MY 2013MY 2014MY 2015MY 2016MY Sum 

Private Benefits 

Pretax Fuel Savings ($) $16,100 $23,900 $32,200 $46,000 $63,500 $181,800

Value of Reduced Refueling time ($) $1,100 $1,600 $2,100 $3,000 $4,000 $11,900

Value of Additional Driving ($) $2,400 $3,400 $4,400 $6,000 $7,900 $24,000

Social Benefits

Cost of Noise, Accident, Congestion ($) -$1,100 -$1,600 -$2,100 -$2,900 -$3,900 -$11,600 

Pretax Fuel Savings ($) $16,100 $23,900 $32,200 $46,000 $63,500 $181,800

Energy Security (price shock) ($)a $900 $1,400 $1,800 $2,500 $3,500 $10,100 

Value of Reduced Refueling time ($) $1,100 $1,600 $2,100 $3,000 $4,000 $11,900

Value of Additional Driving ($) $2,400 $3,400 $4,400 $6,000 $7,900 $24,000

Value of PM2.5-related Health Impacts 

($)b,c,d $700 $900 $1,300 $1,800 $2,400 $7,000 

Reduced CO2 Emissions at each assumed SCC valuee,f,g 

Avg SCC at 5% $400 $500 $700 $1,000 $1,300 $3,800 

Avg SCC at 3% $1,700 $2,400 $3,100 $4,400 $5,900 $17,000 

Avg SCC at 2.5% $2,700 $3,900 $5,200 $7,200 $9,700 $29,000 

95th percentile SCC at 3% $5,100 $7,300 $9,600 $13,000 $18,000 $53,000 

Total Benefits at each assumed SCC valuee,f,g

Avg SCC at 5% $20,500 $30,100 $40,400 $57,400 $78,700 $227,000 

Avg SCC at 3% $21,800 $32,000 $42,800 $60,800 $83,300 $240,200 

Avg SCC at 2.5% $22,800 $33,500 $44,900 $63,600 $87,100 $252,200 

95th percentile SCC at 3% $25,200 $36,900 $49,300 $69,400 $95,400 $276,200 a Note that, due to a calculation error in the proposal, the energy security impacts for the model year analysis were 

roughly half what they should have been. 

 b Note that the co-pollutant impacts associated with the standards presented here do not include the full complement 

of endpoints that, if quantified and monetized, would change the total monetized estimate of rule-related impacts. 

Instead, the co-pollutant benefits are based on benefit-per-ton values that reflect only human health impacts 

associated with reductions in PM2.5 exposure. Ideally, human health and environmental benefits would be based on 

changes in ambient PM2.5 and ozone as determined by full-scale air quality modeling. However, EPA was unable 

to conduct a full-scale air quality modeling analysis associated with the vehicle model year lifetimes for the final 

rule. 

c

 The PM2.5-related benefits (derived from benefit-per-ton values) presented in this table are based on an estimate of 

premature mortality derived from the ACS study (Pope et al., 2002). If the benefit-per-ton estimates were based on 

the Six Cities study (Laden et al., 2006), the values would be approximately 145% (nearly two-and-a-half times) 

larger. 

Formatted: Left
371 

d

 The PM2.5-related benefits (derived from benefit-per-ton values) presented in this table assume a 3% discount rate 

in the valuation of premature mortality to account for a twenty-year segmented cessation lag. If a 7% discount rate 

had been used, the values would be approximately 9% lower. 

e

 Note that net present value of reduced GHG emissions is calculated differently than other benefits. The same 

discount rate used to discount the value of damages from future emissions (SCC at 5, 3, 2.5 percent) is used to 

calculate net present value of SCC for internal consistency. Refer to the SCC TSD for more detail. f

 Monetized GHG benefits exclude the value of reductions in non-CO2 GHG emissions (HFC, CH4 and N2O) 

expected under this final rule. Although EPA has not monetized the benefits of reductions in these non-CO2 

emissions, the value of these reductions should not be interpreted as zero. Rather, the reductions in non-CO2 GHGs 

will contribute to this rule’s climate benefits, as explained in Section III.F.2. The SCC TSD notes the difference 

between the social cost of non-CO2 emissions and CO2 emissions, and specifies a goal to develop methods to value 

non-CO2 emissions in future analyses. g

 Section III.H.6 notes that SCC increases over time. Corresponding to the years in this table, the SCC estimates 

range as follows: for Average SCC at 5%: $5-$16; for Average SCC at 3%: $21-$45; for Average SCC at 2.5%: 

$36-$65; and for 95th percentile SCC at 3%: $65-$136. Section III.H.6 also presents these SCC estimates.

Table III.H.10-5 Estimated Societal Benefits Associated with the Lifetimes of 2012-2016 Model 

Year Vehicles (Millions of 2007 dollars; 7% Discount Rate) 

Monetized Values (millions) 2012MY 2013MY 2014MY 2015MY 2016MY Sum 

Cost of Noise, Accident, Congestion ($) -$900 -$1,200 -$1,600 -$2,300 -$3,100 -$9,200 

Pretax Fuel Savings ($) $12,500 $18,600 $25,100 $36,000 $49,600 $141,900 

Energy Security (price shock) ($)a $800 $1,100 $1,400 $2,000 $2,700 $8,000 

Value of Reduced Refueling time ($) $900 $1,300 $1,700 $2,400 $3,200 $9,400 

Value of Additional Driving ($) $1,900 $2,700 $3,500 $4,700 $6,200 $19,000 

Value of PM2.5-related Health Impacts 

($)b,c,d $500 $800 $1,000 $1,400 $1,900 $5,600 

Reduced CO2 Emissions at each assumed SCC valuee,f,g

Avg SCC at 5% $400 $500 $700 $1,000 $1,300 $3,800 

Avg SCC at 3% $1,700 $2,400 $3,100 $4,400 $5,900 $17,000 

Avg SCC at 2.5% $2,700 $3,900 $5,200 $7,200 $9,700 $29,000 

95th percentile SCC at 3% $5,100 $7,300 $9,600 $13,000 $18,000 $53,000 

Total Benefits at each assumed SCC valuee,f,g

Comment [A48]: Change so that private benefit 

categories are presented separate from social benefits 

– see above. 
372 

Avg SCC at 5% $16,100 $23,800 $31,800 $45,200 $61,800 $178,500 

Avg SCC at 3% $17,400 $25,700 $34,200 $48,600 $66,400 $191,700 

Avg SCC at 2.5% $18,400 $27,200 $36,300 $51,400 $70,200 $203,700 

95th percentile SCC at 3% $20,800 $30,600 $40,700 $57,200 $78,500 $227,700 a Note that, due to a calculation error in the proposal, the energy security impacts for the model year analysis were 

roughly half what they should have been. 

b

 Note that the co-pollutant impacts associated with the standards presented here do not include the full complement 

of endpoints that, if quantified and monetized, would change the total monetized estimate of rule-related impacts. 

Instead, the co-pollutant benefits are based on benefit-per-ton values that reflect only human health impacts 

associated with reductions in PM2.5 exposure. Ideally, human health and environmental benefits would be based on 

changes in ambient PM2.5 and ozone as determined by full-scale air quality modeling. However, EPA was unable 

to conduct a full-scale air quality modeling analysis associated with the vehicle model year lifetimes for the final 

rule. 

c

 The PM2.5-related benefits (derived from benefit-per-ton values) presented in this table are based on an estimate of 

premature mortality derived from the ACS study (Pope et al., 2002). If the benefit-per-ton estimates were based on 

the Six Cities study (Laden et al., 2006), the values would be approximately 145% (nearly two-and-a-half times) 

larger. 

d

 The PM2.5-related benefits (derived from benefit-per-ton values) presented in this table assume a 3% discount rate 

in the valuation of premature mortality to account for a twenty-year segmented cessation lag. If a 7% discount rate 

had been used, the values would be approximately 9% lower. 

e

 Note that net present value of reduced GHG emissions is calculated differently than other benefits. The same 

discount rate used to discount the value of damages from future emissions (SCC at 5, 3, 2.5 percent) is used to 

calculate net present value of SCC for internal consistency. Refer to the SCC TSD for more detail. f

 Monetized GHG benefits exclude the value of reductions in non-CO2 GHG emissions (HFC, CH4 and N2O) 

expected under this final rule. Although EPA has not monetized the benefits of reductions in these non-CO2 

emissions, the value of these reductions should not be interpreted as zero. Rather, the reductions in non-CO2 GHGs 

will contribute to this rule’s climate benefits, as explained in Section III.F.2. The SCC TSD notes the difference 

between the social cost of non-CO2 emissions and CO2 emissions, and specifies a goal to develop methods to value 

non-CO2 emissions in future analyses. g

 Section III.H.6 notes that SCC increases over time. Corresponding to the years in this table, the SCC estimates 

range as follows: for Average SCC at 5%: $5-$16; for Average SCC at 3%: $21-$45; for Average SCC at 2.5%: 

$36-$65; and for 95th percentile SCC at 3%: $65-$136. Section III.H.6 also presents these SCC estimates.

Table III.H.10-6 Quantified Net Benefits Associated with the Lifetimes of 2012-2016 Model 

Year Vehiclesa

 (Millions of 2007 dollars; 3% Discount Rate) 

Monetized Values (millions) 2012MY 2013MY 2014MY 2015MY 2016MY Sum 

Quantified Annual Costs (excluding fuel 

savings)b $4,900 $8,000 $10,300 $12,700 $15,600 $51,500 

Quantified Annual Benefits at each assumed SCC valuec,d,e

Avg SCC at 5% $20,500 $30,100 $40,400 $57,400 $78,700 $227,000 

Avg SCC at 3% $21,800 $32,000 $42,800 $60,800 $83,300 $240,200 

Avg SCC at 2.5% $22,800 $33,500 $44,900 $63,600 $87,100 $252,200 

95th percentile SCC at 3% $25,200 $36,900 $49,300 $69,400 $95,400 $276,200 

Quantified Net Benefits at each assumed SCC valuec,d,e
373 

Avg SCC at 5% $15,600 $22,100 $30,100 $44,700 $63,100 $175,500 

Avg SCC at 3% $16,900 $24,000 $32,500 $48,100 $67,700 $188,700 

Avg SCC at 2.5% $17,900 $25,500 $34,600 $50,900 $71,500 $200,700 

95th percentile SCC at 3% $20,300 $28,900 $39,000 $56,700 $79,800 $224,700 a Note that the co-pollutant impacts associated with the standards presented here do not include the full complement 

of endpoints that, if quantified and monetized, would change the total monetized estimate of rule-related impacts. 

Instead, the co-pollutant benefits are based on benefit-per-ton values that reflect only human health impacts 

associated with reductions in PM2.5 exposure. Ideally, human health and environmental benefits would be based on 

changes in ambient PM2.5 and ozone as determined by full-scale air quality modeling. However, EPA was unable 

to conduct a full-scale air quality modeling analysis associated with the vehicle model year lifetimes for the final 

rule. 

b

 Quantified annual costs as shown here are the increased costs for new vehicles in each given model year. Since 

those costs are assumed to occur in the given model year (i.e., not over a several year time span), the discount rate 

does not affect the costs. 

c

 Note that net present value of reduced GHG emissions is calculated differently than other benefits. The same 

discount rate used to discount the value of damages from future emissions (SCC at 5, 3, 2.5 percent) is used to 

calculate net present value of SCC for internal consistency. Refer to the SCC TSD for more detail. d Monetized GHG benefits exclude the value of reductions in non-CO2 GHG emissions (HFC, CH4 and N2O) 

expected under this final rule. Although EPA has not monetized the benefits of reductions in these non-CO2 

emissions, the value of these reductions should not be interpreted as zero. Rather, the reductions in non-CO2 GHGs 

will contribute to this rule’s climate benefits, as explained in Section III.F.2. The SCC TSD notes the difference 

between the social cost of non-CO2 emissions and CO2 emissions, and specifies a goal to develop methods to value 

non-CO2 emissions in future analyses. e

 Section III.H.6 notes that SCC increases over time. Corresponding to the years in this table, the SCC estimates 

range as follows: for Average SCC at 5%: $5-$16; for Average SCC at 3%: $21-$45; for Average SCC at 2.5%: 

$36-$65; and for 95th percentile SCC at 3%: $65-$136. Section III.H.6 also presents these SCC estimates.

Table III.H.10-7 Quantified Net Benefits Associated with the Lifetimes of 2012-2016 Model 

Year Vehiclesa

 (Millions of 2007 dollars; 7% Discount Rate) 

Monetized Values (millions) 2012MY 2013MY 2014MY 2015MY 2016MY Sum 

Quantified Annual Costs (excluding fuel 

savings) b $4,900 $8,000 $10,300 $12,700 $15,600 $51,500 

Quantified Annual Benefits at each assumed SCC valuec,d,e

Avg SCC at 5% $16,100 $23,800 $31,800 $45,200 $61,800 $178,500 

Avg SCC at 3% $17,400 $25,700 $34,200 $48,600 $66,400 $191,700 

Avg SCC at 2.5% $18,400 $27,200 $36,300 $51,400 $70,200 $203,700 

95th percentile SCC at 3% $20,800 $30,600 $40,700 $57,200 $78,500 $227,700 

Quantified Net Benefits at each assumed SCC valuec,d,e

Avg SCC at 5% $11,200 $15,800 $21,500 $32,500 $46,200 $127,000 

Avg SCC at 3% $12,500 $17,700 $23,900 $35,900 $50,800 $140,200 

Avg SCC at 2.5% $13,500 $19,200 $26,000 $38,700 $54,600 $152,200 

95th percentile SCC at 3% $15,900 $22,600 $30,400 $44,500 $62,900 $176,200 
374 

 a Note that the co-pollutant impacts associated with the standards presented here do not include the full complement 

of endpoints that, if quantified and monetized, would change the total monetized estimate of rule-related impacts. 

Instead, the co-pollutant benefits are based on benefit-per-ton values that reflect only human health impacts 

associated with reductions in PM2.5 exposure. Ideally, human health and environmental benefits would be based on 

changes in ambient PM2.5 and ozone as determined by full-scale air quality modeling. However, EPA was unable 

to conduct a full-scale air quality modeling analysis associated with the vehicle model year lifetimes for the final 

rule. 

b

 Quantified annual costs as shown here are the increased costs for new vehicles in each given model year. Since 

those costs are assumed to occur in the given model year (i.e., not over a several year time span), the discount rate 

does not affect the costs. 

c

 Note that net present value of reduced GHG emissions is calculated differently than other benefits. The same 

discount rate used to discount the value of damages from future emissions (SCC at 5, 3, 2.5 percent) is used to 

calculate net present value of SCC for internal consistency. Refer to the SCC TSD for more detail. d

 Monetized GHG benefits exclude the value of reductions in non-CO2 GHG emissions (HFC, CH4 and N2O) 

expected under this final rule. Although EPA has not monetized the benefits of reductions in these non-CO2 

emissions, the value of these reductions should not be interpreted as zero. Rather, the reductions in non-CO2 GHGs 

will contribute to this rule’s climate benefits, as explained in Section III.F.2. The SCC TSD notes the difference 

between the social cost of non-CO2 emissions and CO2 emissions, and specifies a goal to develop methods to value 

non-CO2 emissions in future analyses. e Section III.H.6 notes that SCC increases over time. Corresponding to the years in this table, the SCC estimates 

range as follows: for Average SCC at 5%: $5-$16; for Average SCC at 3%: $21-$45; for Average SCC at 2.5%: 

$36-$65; and for 95th percentile SCC at 3%: $65-$136. Section III.H.6 also presents these SCC estimates. 

I. Statutory and Executive Order Reviews 

1. Executive Order 12866: Regulatory Planning and Review

 

 Under section 3(f)(1) of Executive Order (EO) 12866 (58 FR 51735, October 4, 1993), 

this action is an "economically significant regulatory action” because it is likely to have an 

annual effect on the economy of $100 million or more. Accordingly, EPA submitted this action 

to the Office of Management and Budget (OMB) for review under EO 12866 and any changes 

made in response to OMB recommendations have been documented in the docket for this action. 

 In addition, EPA prepared an analysis of the potential costs and benefits associated with 

this action. This analysis is contained in the Final Regulatory Impact Analysis, which is 

available in the docket for this rulemaking and at the docket internet address listed under 

ADDRESSES above. 

2. Paperwork Reduction Act

The information collection requirements in this final rule have been submitted for 

approval to the Office of Management and Budget (OMB) under the Paperwork Reduction Act, 

44 U.S.C. 3501 et seq., and has been assigned OMB control number 0783.57. The information 

collection requirements are not enforceable until OMB approves them. 

The Agency is finalizing requirements for manufacturers to submit information to ensure 

compliance with the provisions in this rule. This includes a variety of requirements for vehicle 

manufacturers. Section 208(a) of the Clean Air Act requires that vehicle manufacturers provide 

information the Administrator may reasonably require to determine compliance with the 
375 

regulations; submission of the information is therefore mandatory. We will consider confidential 

all information meeting the requirements of section 208(c) of the Clean Air Act. 

As shown in Table III.I.2-1, the total annual burden associated with this rule is about 

39,900 hours and $5 million, based on a projection of 33 respondents. The estimated burden for 

vehicle manufacturers is a total estimate for new reporting requirements. Burden means the total 

time, effort, or financial resources expended by persons to generate, maintain, retain, or disclose 

or provide information to or for a Federal agency. This includes the time needed to review 

instructions; develop, acquire, install, and utilize technology and systems for the purposes of 

collecting, validating, and verifying information, processing and maintaining information, and 

disclosing and providing information; adjust the existing ways to comply with any previously 

applicable instructions and requirements; train personnel to be able to respond to a collection of 

information; search data sources; complete and review the collection of information; and 

transmit or otherwise disclose the information. 

 

Table III.I.2-1 Estimated Burden for Reporting and Recordkeeping Requirements 

Number of 

respondents 

Annual burden 

hours 

Annual 

costs 

33 39,940 $5,001,000 

 

An agency may not conduct or sponsor, and a person is not required to respond to, a 

collection of information unless it displays a currently valid OMB control number. The OMB 

control numbers for EPA's regulations in 40 CFR are listed in 40 CFR part 9. In addition, EPA is 

amending the table in 40 CFR part 9 of currently approved OMB control numbers for various 

regulations to list the regulatory citations for the information requirements contained in this final 

rule. 

3. Regulatory Flexibility Act

a. Overview 

 The Regulatory Flexibility Act (RFA) generally requires an agency to prepare a 

regulatory flexibility analysis of any rule subject to notice and comment rulemaking 

requirements under the Administrative Procedure Act or any other statute unless the agency 

certifies that the rule will not have a significant economic impact on a substantial number of 

small entities directly subject to the rule. Small entities include small businesses, small 

organizations, and small governmental jurisdictions. 

For purposes of assessing the impacts of this rule on small entities, small entity is defined 

as: (1) a small business as defined by the Small Business Administration’s (SBA) regulations at 

13 CFR 121.201 (see table below); (2) a small governmental jurisdiction that is a government of 

a city, county, town, school district or special district with a population of less than 50,000; and 

(3) a small organization that is any not-for-profit enterprise which is independently owned and 

operated and is not dominant in its field. 

Table III.I.3-1 provides an overview of the primary SBA small business categories 
376 

included in the light-duty vehicle sector: 

Table III.I.3-1 Primary SBA Small Business Categories in the Light-Duty Vehicle Sector 

Industry a

Defined as small 

entity by SBA if less 

than or equal to: 

NAICS Codesb 

Light-duty vehicles: 

- vehicle manufacturers 

(including small volume manufacturers) 

- independent commercial importers 

- alternative fuel vehicle converters 

1,000 employees 

$7 million annual sales 

$23 million annual sales 

100 employees 

50 employees 

750 employees 

1,000 employees 

$7 million annual sales 

336111 

811111, 811112, 811198 

441120 

423110, 424990 

336312, 336322, 336399 

335312 

454312, 485310, 811198 

Notes: 

a Light-duty vehicle entities that qualify as small businesses would not be subject to this rule. We are 

deferring action on small vehicle entities, and we intend to address these entities in a future rule. b

 North American Industrial Classification System

b. Summary of Potentially Affected Small Entities 

 

 EPA has not conducted a Regulatory Flexibility Analysis or a SBREFA SBAR Panel for 

the rule because we are certifying that the rule would not have a significant economic impact on 

a substantial number of small entities directly subject to the rule. As proposed, EPA is deferring 

standards for manufacturers meeting SBA’s business size criteria for small business as provided 

in 13 CFR 121.201, due to the short lead time to develop this rule, the extremely small emissions 

contribution of these entities, and the potential need to develop a program that would be 

structured differently for them (which would require more time). EPA would instead consider 

appropriate GHG standards for these entities as part of a future regulatory action. This includes 

U.S. and foreign small entities in three distinct categories of businesses for light-duty vehicles: 

small volume manufacturers (SVMs), independent commercial importers (ICIs), and alternative 

fuel vehicle converters. EPA has identified a total of about 47 vehicle businesses; about 13 

entities (or 28 percent) fit the Small Business Administration (SBA) criteria of a small business. 

There are about 2 SVMs, 8 ICIs, and 3 alternative fuel vehicle converters in the light-duty 

vehicle market which are small businesses (no major vehicle manufacturers meet the small-entity 

criteria as defined by SBA). EPA estimates that these small entities comprise about 0.03 percent 

of the total light-duty vehicle sales in the U.S., and therefore the deferment will have a negligible 

impact on the GHG emissions reductions from the standards. 

To ensure that EPA is aware of which companies would be deferred, EPA is requiring 

that such entities submit a declaration to EPA containing a detailed written description of how 

that manufacturer qualifies as a small entity under the provisions of 13 CFR 121.201. Small 
377 

entities are currently covered by a number of EPA motor vehicle emission regulations, and they 

routinely submit information and data on an annual basis as part of their compliance 

responsibilities. Because such entities are not automatically exempted from other EPA 

regulations for light-duty vehicles and light-duty trucks, absent such a declaration and EPA 

approval, EPA will assume that the entity is subject to the greenhouse gas control requirements 

in this GHG rule. The declaration must be submitted at time of vehicle emissions certification 

under the EPA Tier 2 program. EPA expects that the additional paperwork burden associated 

with completing and submitting a small entity declaration to gain deferral from the GHG 

standards would be negligible and easily done in the context of other routine submittals to EPA. 

However, EPA has accounted for this cost with a nominal estimate included in the Information 

Collection Request completed under the Paperwork Reduction Act. Additional information can 

be found in the Paperwork Reduction Act discussion in Section III.I.2. Based on this, EPA is 

certifying that the rule would not have a significant economic impact on a substantial number of 

small entities. 

c. Conclusions 

I therefore certify that this rule will not have a significant economic impact on a 

substantial number of small entities. However, EPA recognizes that some small entities continue 

to be concerned about the potential impacts of the statutory imposition of PSD requirements that 

may occur given the various EPA rulemakings currently under consideration concerning 

greenhouse gas emissions. As explained in the preamble for the proposed PSD tailoring rule (74 

FR 55292, Oct. 27, 2009), EPA used the discretion afforded to it under section 609(c) of the 

RFA to consult with OMB and SBA, with input from outreach to small entities, regarding the 

potential impacts of PSD regulatory requirements that might occur as EPA considers regulations 

of GHGs. Concerns about the potential impacts of statutorily imposed PSD requirements on 

small entities were the subject of deliberations in that consultation and outreach. EPA has 

compiled a summary of that consultation and outreach, which is available in the docket for the 

Tailoring Rule (EPA-HQ-OAR-2009-0517). 

 

4. Unfunded Mandates Reform Act

Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), 2 U.S.C. 1531-1538, 

requires Federal agencies, unless otherwise prohibited by law, to assess the effects of their 

regulatory actions on State, local, and tribal governments and the private sector. Under section 

202 of the UMRA, EPA generally must prepare a written statement, including a cost-benefit 

analysis, for proposed and final rules with "Federal mandates" that may result in expenditures to 

State, local, and tribal governments, in the aggregate, or to the private sector, of $100 million or 

more in any one year. 

This rule is not subject to the requirements of section 203 of UMRA because it contains 

no regulatory requirements that might significantly or uniquely affect small governments. This 

rule contains no Federal mandates (under the regulatory provisions of Title II of the UMRA) for 

State, local, or tribal governments. The rule imposes no enforceable duty on any State, local or 

tribal governments. EPA has determined that this rule contains no regulatory requirements that 

might significantly or uniquely affect small governments. EPA has determined that this rule 
378 

contains a Federal mandate that may result in expenditures of $100 million or more for the 

private sector in any one year. EPA believes that the action represents the least costly, most 

cost-effective approach to achieve the statutory requirements of the rule. The costs and benefits 

associated with the rule are discussed above and in the Final Regulatory Impact Analysis, as 

required by the UMRA. 

5. Executive Order 13132 (Federalism)

 This action does not have federalism implications. It will not 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, as 

specified in Executive Order 13132. This rulemaking applies to manufacturers of motor vehicles 

and not to state or local governments. Thus, Executive Order 13132 does not apply to this action. 

Although section 6 of Executive Order 13132 does not apply to this action, EPA did consult with 

representatives of state governments in developing this action. 

 In the spirit of Executive Order 13132, and consistent with EPA policy to promote 

communications between EPA and State and local governments, EPA specifically solicited 

comment on the proposed action from State and local officials. Many state and local 

governments submitted public comments on the rule, the majority of which were supportive of 

the EPA’s greenhouse gas program. However, these entities did not provide comments 

indicating there would be a substantial direct effect on state or local governments resulting from 

this rule. 

 

6. Executive Order 13175 (Consultation and Coordination with Indian Tribal

Governments)

 This action does not have tribal implications, as specified in Executive Order 13175 (65 

FR 67249, November 9, 2000). This rule will be implemented at the Federal level and impose 

compliance costs only on vehicle manufacturers. Tribal governments will be affected only to the 

extent they purchase and use regulated vehicles. Thus, Executive Order 13175 does not apply to 

this action. 

7. Executive Order 13045: “Protection of Children from Environmental Health 

Risks and Safety Risks”

 This action is subject to EO 13045 (62 FR 19885, April 23, 1997) because it is an 

economically significant regulatory action as defined by EO 12866, and EPA believes that the 

environmental health or safety risk addressed by this action may have a disproportionate effect 

on children. A synthesis of the science and research regarding how climate change may affect 

children and other vulnerable subpopulations is contained in the Technical Support Document 

for Endangerment or Cause or Contribute Findings for Greenhouse Gases under Section 202(a) 
379 

of the Clean Air Act, which can be found in the public docket for this rule.431 A summary of the 

analysis is presented below. 

With respect to GHG emissions, the effects of climate change observed to date and 

projected to occur in the future include the increased likelihood of more frequent and intense 

heat waves. Specifically, EPA’s analysis of the scientific assessment literature has determined 

that severe heat waves are projected to intensify in magnitude, frequency, and duration over the 

portions of the U.S. where these events already occur, with potential increases in mortality and 

morbidity, especially among the young, elderly, and frail. EPA has estimated reductions in 

projected global mean surface temperatures as a result of reductions in GHG emissions 

associated with the standards finalized in this action (Section III.F). Children may receive 

benefits from reductions in GHG emissions because they are included in the segment of the 

population that is most vulnerable to extreme temperatures. 

For non-GHG pollutants, EPA has determined that climate change is expected to increase 

regional ozone pollution, with associated risks in respiratory infection, aggravation of asthma, 

and premature death. The directional effect of climate change on ambient PM levels remains 

uncertain. However, disturbances such as wildfires are increasing in the U.S. and are likely to 

intensify in a warmer future with drier soils and longer growing seasons. PM emissions from 

forest fires can contribute to acute and chronic illnesses of the respiratory system, particularly in 

children, including pneumonia, upper respiratory diseases, asthma and chronic obstructive 

pulmonary diseases. 

8. Executive Order 13211 (Energy Effects)

 This rule is not a “significant energy action” as defined in Executive Order 13211, 

“Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” 

(66 FR 28355 (May 22, 2001)) because it is not likely to have a significant adverse effect on the 

supply, distribution, or use of energy. In fact, this rule has a positive effect on energy supply and 

use. Because the GHG emission standards finalized today result in significant fuel savings, this 

rule encourages more efficient use of fuels. Therefore, we have concluded that this rule is not 

likely to have any adverse energy effects. Our energy effects analysis is described above in 

Section III.H. 

9. National Technology Transfer Advancement Act

 Section 12(d) of the National Technology Transfer and Advancement Act of 1995 

(“NTTAA”), Public Law No. 104-113, 12(d) (15 U.S.C. 272 note) directs EPA to use voluntary 

consensus standards in its regulatory activities unless to do so would be inconsistent with 

applicable law or otherwise impractical. Voluntary consensus standards are technical standards 

(e.g., materials specifications, test methods, sampling procedures, and business practices) that are 

developed or adopted by voluntary consensus standards bodies. NTTAA directs EPA to provide 

 

431 U.S. EPA. (2009). Technical Support Document for Endangerment or Cause or Contribute Findings for 

Greenhouse Gases under Section 202(a) of the Clean Air Act. Washington, D.C.: U.S. EPA.. Docket EPA-HQOAR-2009-0472-11292 
380 

Congress, through OMB, explanations when the Agency decides not to use available and 

applicable voluntary consensus standards. 

 The rulemaking involves technical standards. Therefore, the Agency conducted a search 

to identify potentially applicable voluntary consensus standards. For CO2, N2O, and CH4

emissions, we identified no such standards, and none were brought to our attention in comments. 

Therefore, EPA is collecting data over the same test cycles that are used for the CAFE program 

following standardized test methods and sampling procedures. This will minimize the amount of 

testing done by manufacturers, since manufacturers are already required to run these tests. For 

A/C system leakage improvement credits, EPA identified a Society of Automotive Engineers 

(SAE) methodology and EPA’s approach is based closely on this SAE methodology. For the 

A/C system efficiency improvement credits, including the new idle test, EPA generally uses 

standardized test methods and sampling procedures. However, EPA knows of no consensus 

standard available for an A/C idle test to measure system efficiency improvements. 

10. Executive Order 12898: Federal Actions to Address Environmental Justice in 

Minority Populations and Low-Income Populations

Executive Order (EO) 12898 (59 FR 7629 (Feb. 16, 1994)) establishes federal executive 

policy on environmental justice. Its main provision directs federal agencies, to the greatest 

extent practicable and permitted by law, to make environmental justice part of their mission by 

identifying and addressing, as appropriate, disproportionately high and adverse human health or 

environmental effects of their programs, policies, and activities on minority populations and lowincome populations in the United States. 

With respect to GHG emissions, EPA has determined that this final rule will not have 

disproportionately high and adverse human health or environmental effects on minority or lowincome populations because it increases the level of environmental protection for all affected 

populations without having any disproportionately high and adverse human health or 

environmental effects on any population, including any minority or low-income population. The 

reductions in CO2 and other GHGs associated with the standards will affect climate change 

projections, and EPA has estimated reductions in projected global mean surface temperatures 

(Section III.F.3). Within communities experiencing climate change, certain parts of the 

population may be especially vulnerable; these include the poor, the elderly, those already in 

poor health, the disabled, those living alone, and/or indigenous populations dependent on one or 

a few resources. 432 In addition, the U.S. Climate Change Science Program433 stated as one of its 

conclusions: “The United States is certainly capable of adapting to the collective impacts of 

climate change. However, there will still be certain individuals and locations where the adaptive 

capacity is less and these individuals and their communities will be disproportionally impacted 

 

432 U.S. EPA. (2009). Technical Support Document for Endangerment or Cause or Contribute Findings for 

Greenhouse Gases under Section 202(a) of the Clean Air Act. Washington, D.C.: U.S. EPA. Docket EPA-HQOAR-2009-0472-11292 

433 CCSP (2008) Analyses of the effects of global change on human health and welfare and human systems. A 

Report by the U.S. Climate Change Science Program and the Subcommittee on Global Change Research. [Gamble, 

J.L. (ed.), K.L. Ebi, F.G. Sussman, T.J. Wilbanks, (Authors)]. U.S. Environmental Protection Agency, Washington, 

DC, USA.
381 

by climate change.” Therefore, these specific sub-populations may receive benefits from 

reductions in GHGs. 

For non-GHG co-pollutants such as ozone, PM2.5, and toxics, EPA has concluded that it 

is not practicable to determine whether there would be disproportionately high and adverse 

human health or environmental effects on minority and/or low income populations from this 

final rule. 

11. Congressional Review Act

The Congressional Review Act, 5 U.S.C. 801 et seq., as added by the Small Business 

Regulatory Enforcement Fairness Act of 1996, generally provides that before a rule may take 

effect, the agency promulgating the rule must submit a rule report, which includes a copy of the 

rule, to each House of the Congress and to the Comptroller General of the United States. EPA 

will submit a report containing this rule and other required information to the U.S. Senate, the 

U.S. House of Representatives, and the Comptroller General of the United States prior to 

publication of the rule in the Federal Register. A Major rule cannot take effect until 60 days after 

it is published in the Federal Register. This action is a “major rule” as defined by 5 U.S.C. 

804(2). This rule will be effective [Insert date 60 days after publication in the Federal 

Register], sixty days after date of publication in the Federal Register. 

J. Statutory Provisions and Legal Authority 

Statutory authority for the vehicle controls finalized today is found in section 202 (a) 

(which authorizes standards for emissions of pollutants from new motor vehicles which 

emissions cause or contribute to air pollution which may reasonably be anticipated to endanger 

public health or welfare), 202 (d), 203-209, 216, and 301 of the Clean Air Act, 42 U.S.C. 7521 

(a), 7521 (d), 7522, 7523, 7524, 7525, 7541, 7542, 7543, 7550, and 7601. 

IV. NHTSA Final Rule and Record of Decision for Passenger Car and Light Truck 

CAFE Standards for MYs 2012-2016 

A. Executive Overview of NHTSA Final Rule 

 

1. Introduction

The National Highway Traffic Safety Administration (NHTSA) is establishing Corporate 

Average Fuel Economy (CAFE) 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.434 NHTSA’s CAFE standards will 

 

434 Among the reports and studies noting this point are the following: 
382 

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 27.6 mpg 

combined fuel economy level in MY 2011. NHTSA’s final rule projects total fuel savings of 

approximately 61 billion gallons over the lifetimes of the vehicles sold in model years 2012-

2016, with corresponding net societal benefits of over $180 billion using a 3 percent discount 

rate.435

The significance accorded to 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 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.436 Using vehicle technology to improve fuel economy, thereby 

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

tailpipe emissions of CO2.

437 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. 

 John Podesta, Todd Stern and Kim Batten, “Capturing the Energy Opportunity; Creating a Low-Carbon 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 March 1, 2010). 

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 March 1, 2010). 

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 March 1, 2010). 

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 March 1, 2010). 

“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 March 1, 2010); 

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/mae/people/faculty/socolow/ENVIRONMENTDec2004issue.pdf (last accessed March 1, 

2010). 

435 This value is based on what NHTSA refers to as “Reference Case” inputs, which are based on the assumptions 

that NHTSA has employed for its main analysis (as opposed to sensitivity analyses to examine the effect of 

variations in the assumptions on costs and benefits). The Reference Case inputs include fuel prices based on the 

AEO 2010 Reference Case, a 3 percent discount rate, a 10 percent rebound effect, a value for the social cost of 

carbon (SCC) of $21/metric ton CO2 (in 2010, rising to $45/metric ton in 2050, at a 3 percent discount rate), etc. 

For a full listing of the Reference Case input assumptions, see Section IV.C.3 below. 

436 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 March 1, 2010). 437 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 March 1, 2010). 
383 

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

represents the first-ever joint final rule by NHTSA with another agency, the Environmental 

Protection Agency. As discussed in Section I, NHTSA’s final MYs 2012-2016 CAFE standards 

are part of a joint National Program. 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 

final CAFE standards are consistent with the President’s National Fuel Efficiency Policy 

announcement of May 19, 2009, which called 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 final 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 Fuel Economy Improvements in Promoting Energy Independence, Energy 

Security, and a Low Carbon Economy

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.438 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 increased fuel economy) largely flow into changes in the 

quantity of imports. Since petroleum imports account for about 2 percent of GDP, increase in oil 

imports can create a discernable fiscal drag. As a consequence, measures that reduce petroleum 

consumption, such as fuel economy standards, will directly benefit 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 

 

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

http://www.eia.doe.gov/basics/quickoil.html (last accessed March 1, 2010). 
384 

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 final rules that have the effect of addressing the 

urgent and closely intertwined challenges of energy independence and security and global 

warming. These final 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 final 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 in the rulemaking timeframe. The agencies’ final rules 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 

relatively short amount of lead time for the model years covered by the rulemaking and the 

serious current economic situation faced by this industry. 

These joint standards are 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,439 and with the Notice 

of Upcoming Joint Rulemaking signed by DOT and EPA on that date.440 This joint final rule 

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 below. 

a. Building Blocks of the National Program 

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.441 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 

 

439 President Obama Announces National Fuel Efficiency Policy, The White House, May 19, 2009. 440 74 FR 24007 (May 22, 2009). 441 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. 
385 

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 measuring the amount 

of CO2 emitted from the tailpipe, rather than 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 fuel442 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 currently requires EPA to use the 1975 passenger car test procedures 

under which vehicle air conditioners are not turned on during fuel economy testing.443 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 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, attribute-based 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,

444

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

 

442 This is the method that EPA uses to determine compliance with NHTSA’s CAFE standards. 443 See 49 U.S.C. 32904(c). 444 127 S.Ct. 1438 (2007). 
386 

for rulemaking to regulate greenhouse gas emissions from motor vehicles under the Clean Air 

Act.445 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. 446 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 issued a final rule finding that emissions of GHGs from new 

motor vehicles and motor vehicle engines cause or contribute to air pollution that endanger 

public health and welfare.447 

iii. California Air Resources Board’s Greenhouse Gas Program 

In 2004, the California Air Resources Board approved standards for new light-duty 

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 CO2 emissions levels for passenger cars and some light trucks of 323 

g/mil in 2009, decreasing to 205 g/mi in 2016, and 439 g/mi for light trucks in 2009, decreasing 

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.448 

EPA withdrew the prior denial and granted California’s request for a waiver on June 30, 2009.449 

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 

 

445 68 FR 52922 (Sept. 8, 2003). 446 549 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. 

447 74 FR 66496 (Dec. 15, 2009). 448 74 FR 66495 (Dec. 15, 2009). The endangerment finding was challenged by industry in a filing submitted 

December 23, 2009; a hearing date does not appear to have been set. 

449 74 FR 32744 (July 8, 2009). 
387 

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 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. 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, a harmonized approach may help to mitigate the cost 

to manufacturers of having to comply with multiple sets of federal and state standards 

4. Review of CAFE Standard Setting Methodology Per the President’s January 26, 

2009 Memorandum on CAFE Standards for MYs 2011 and Beyond

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 concluded review of the 

rule as consistent with the Order.450 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. 

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 

 

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

March 1, 2010). 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.”
388 

appropriate level of standards for MYs 2012 and beyond, the President issued a memorandum on 

January 26, 2009, requesting the Secretary of Transportation and Administrator 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 a given model year must be 

adopted at least 18 months before the beginning of that model year (49 U.S.C. 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, 2009 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. 
389 

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.451 Further, 

if the test procedures used for light trucks were revised to provide for the operation of air 

conditioning during fuel economy testing, vehicle manufacturers would have a regulatory 

incentive to increase the efficiency of air conditioning systems, thereby reducing both fuel 

consumption and tailpipe emissions of CO2.

452 

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 apply nationally under the National Program. 

As requested in the President’s memorandum, NHTSA 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 more information on how the proposed 

CAFE standards were developed with those comments in mind, see the NPRM and the 

supporting documents. 

 5. Summary of the Final MY 2012-2016 CAFE Standards

 NHTSA is issuing 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.453 Under the final CAFE standards, each light 

vehicle model produced for sale in the United States has a fuel economy target. The CAFE 

levels that must be met by the fleet of each manufacturer will be determined by computing the 

sales-weighted 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: 

 

451 Under 49 U.S.C. 32912(c), roughly, NHTSA may raise the penalty amount if the agency decides that doing so 

will increase energy conservation substantially without having a substantial deleterious impact on the economy, 

employment, or competition among automobile manufacturers. 

452 Under 49 U.S.C. 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. 

453 See 49 CFR 523.2 for the exact definition of “footprint.” 
390 

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

Passenger Car Fuel Economy Targets 

20

25

30

35

40

45

35 40 45 50 55 60 65 70

T

a

r

g

e

t

(

m

p

g

)

Footprint (sf)

2011

2016

2015

2014

2013

2012
391 

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

Light Truck Fuel Economy Targets 

 

20

25

30

35

40

45

35 40 45 50 55 60 65 70

T

a

r

g

e

t

(

m

p

g

)

Footprint (sf)

2011

2016

2015

2014

2013

2012
392 

 Under these final 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 final rule of the MYs 2012-2016 vehicle fleet, 

NHTSA estimates that the targets shown above will result in the following estimated average 

required CAFE levels: 

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

under Final Standards 

 2012 2013 2014 2015 2016 

Passenger Cars 33.3 34.2 34.9 36.2 37.8 

Light Trucks 25.4 26.0 26.6 27.5 28.8 

Combined Cars & Trucks 29.7 30.5 31.3 32.6 34.1 

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

gallons per 100 miles values for passenger cars and light trucks: 

2012 2013 2014 2015 2016 

Passenger Cars 3.00 2.92 2.87 2.76 2.65 

Light Trucks 3.94 3.85 3.76 3.64 3.47 

Combined Cars & Trucks 3.37 3.28 3.19 3.07 2.93 

 

NHTSA estimates that average achieved fuel economy levels will correspondingly 

increase through MY 2016, but that manufacturers will, on average, undercomply454 in some 

model years and overcomply455 in others, reaching a combined average fuel economy of 32.7 

mpg in MY 2016.456 Table IV.A.5-1 is the estimated required fuel economy for the final CAFE 

standards while Table IV.A.5-2 includes the effects of some manufacturers’ payment of CAFE 

fines and use of FFV credits. In addition, Section IV.G.4 below contains an analysis of the 

 

454 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. 455 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) 456 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. 
393 

achieved levels (and projected fuel savings, costs, and benefits) when the use of FFV credits is 

assumed. 

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

under Final Standards 

 2012 2013 2014 2015 2016 

Passenger Cars 32.3 33.5 34.2 35.0 36.2 

Light Trucks 24.5 25.1 25.9 26.7 27.5 

Combined Cars & Trucks 28.7 29.7 30.6 31.5 32.7 

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

gallons per 100 miles values for passenger cars and light trucks: 

 2012 2013 2014 2015 2016 

Passenger Cars 3.10 2.99 2.92 2.86 2.76 

Light Trucks 4.08 3.98 3.86 3.75 3.64 

Combined Cars & Trucks 3.48 3.37 3.27 3.17 3.06 

 NHTSA estimates that these fuel economy increases will lead to fuel savings totaling 61 

billion gallons during the lifetimes of vehicles sold in MYs 2012-2016 (all following tables 

assume Reference Case economic inputs): 

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

under Final Standards 

Model Year 2012 2013 2014 2015 2016 Total 

Passenger Cars 2.4 5.2 7.2 9.4 11.4 35.7 

Light Trucks 1.8 3.7 5.3 6.5 8.1 25.4 

Combined 4.2 8.9 12.5 16.0 19.5 61.0 

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

reductions of CO2 emissions totaling 655 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 Final Standards 

 2012 2013 2014 2015 2016 Total 

Passenger Cars 25 54 77 101 123 380 

Light Trucks 19 40 57 71 88 275 

Combined 44 94 134 172 210 655 

 
394 

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., increased 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 final standards will produce 

significant benefits to society. NHTSA estimates that, in present value terms, these benefits 

would total over $180 billion over the useful lives of vehicles sold during MYs 2012-2016: 

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

under Final CAFE Standards 

2012 2013 2014 2015 2016 Total 

Passenger Cars 6.8 15.2 21.6 28.7 35.2 107.5 

Light Trucks 5.1 10.7 15.5 19.4 24.3 75.0 

Combined 11.9 25.8 37.1 48 59.5 182.5 

 NHTSA attributes most of these benefits—about $143 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) 2010. The Final Regulatory Impact Analysis (FRIA) accompanying today’s 

final rule presents a detailed analysis of specific benefits of the final rule. 

Amount Monetized Value (Discounted) 

3% Discount Rate 7% Discount Rate 

Fuel savings 61.0 billion gallons $143.0 billion $112.0 billion 

CO2 emissions 

reductions457

655 mmt $14.5 billion $14.5 billion 

NHTSA estimates that the necessary increases in technology application will involve 

considerable monetary outlays, totaling $52 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 Final CAFE Standards 

 2012 2013 2014 2015 2016 Total 

Passenger Cars 4.1 5.4 6.9 8.2 9.5 34.2 

Light Trucks 1.8 2.5 3.7 4.3 5.4 17.6 

Combined 5.9 7.9 10.5 12.5 14.9 51.7 

 

457 We note that the net present value of reduced CO2 emissions is calculated differently than other benefits. The 

same discount rate used to discount the value of damages from future emissions (SCC at 5 percent, 3 percent, and 

2.5 percent) is used to calculate the net present value of the SCC for internal consistency. Additionally, we note that 

the SCC increases over time. See the SCC TSD [still TBD] for more information. 

Comment [A49]: Can you please separate out 

more clearly the social benefits from the private 

savings? 
395 

 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 final standards 

would lead to increases in average new vehicle prices, ranging from $322 per vehicle in MY 

2012 to $961 per vehicle in MY 2016: 

 

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

under Final CAFE Standards 

 2012 2013 2014 2015 2016 

Passenger Cars 505 573 690 799 907 

Light Trucks 322 416 621 752 961 

Combined 434 513 665 782 926 

 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, again assuming Reference Case 

inputs (except for the variation in discount rate). Numbers in parentheses represent negative 

values. 

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 

5,903 7,890 10,512 12,539 14,904 51,748 

Private Savings Benefits

Savings in 

Lifetime Fuel 

Expenditures 

9,265 20,178 29,083 37,700 46,823 143,048 

Consumer 

Surplus from 

Additional 

Driving 

696 1,504 2,150 2,754 3,387 10,491 

Value of Savings 

in Refueling 

Time 

706 1,383 1,939 2,464 2,950 9,443 

Social Benefits

Reduction in 

Petroleum 

Market 

Externalities 

545 1,154 1,630 2,080 2,543 7,952 

Reduction in 

Climate-Related 

Damages from 

921 2,025 2,940 3,840 4,804 14,528 

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396 

Lower CO2 

Emissions458

Social Dis-Benefits from Increased Driving: 

Congestion Costs (447) (902) (1,282) (1,633) (2,000) (6,264)

Noise Costs (9) (18) (25) (32) (39) (122)

Crash Costs (217) (430) (614) (778) (950) (2,989)

Reduction in Health Damage Costs from Lower Emissions of Criteria Air Pollutants: 

CO 0 0 0 0 0 0 

VOC 42 76 102 125 149 494 

NOX 70 104 126 146 166 612 

PM 205 434 612 776 946 2,974 

SOX 158 332 469 598 731 2,288 

Total Benefits 11,936 25,840 37,132 48,040 59,509 182,457 

Net Benefits 6,033 17,950 26,619 35,501 44,606 130,709 

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 

5,903 7,890 10,512 12,539 14,904 51,748 

BenefitsPrivate Savings

Savings in 

Lifetime Fuel 

Expenditures 

9,265 20,178 29,083 37,700 46,823 143,048 

Consumer 

Surplus from 

Additional 

Driving 

696 1,504 2,150 2,754 3,387 10,491 

Value of Savings 

in Refueling 

Time 

706 1,383 1,939 2,464 2,950 9,443 

Social Benefits

Reduction in 

Petroleum 

Market 

Externalities 

545 1,154 1,630 2,080 2,543 7,952 

Reduction in 

Climate-Related 

921 2,025 2,940 3,840 4,804 14,528 

 

458 See supra note [directly above here] 

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397 

Damages from 

Lower CO2 

Emissions459

Social Dis-Benefits from Increased Driving: 

Congestion Costs (447) (902) (1,282) (1,633) (2,000) (6,264)

Noise Costs (9) (18) (25) (32) (39) (122)

Crash Costs (217) (430) (614) (778) (950) (2,989)

Reduction in Health Damage Costs from Lower Emissions of Criteria Air Pollutants: 

CO 0 0 0 0 0 0 

VOC 42 76 102 125 149 494 

NOX 70 104 126 146 166 612 

PM 205 434 612 776 946 2,974 

SOX 158 332 469 598 731 2,288 

Total Benefits 11,936 25,840 37,132 48,040 59,509 182,457 

Net Benefits 6,033 17,950 26,619 35,501 44,606 130,709 

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

determining average fuel economy standards, but too, neither precludes its use.460 EPCA does 

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

concluded, as discussed elsewhere herein, that the standards it promulgates today are 

economically practicable. Further validating and supporting its conclusion that the standards it 

promulgates today are reasonable, a comparison of the standards’ costs and 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 final standards would be more than 

three times the magnitude of the corresponding costs, such that the final standards would 

produce net benefits of over $130 billion over the useful lives of vehicles sold during MYs 2012-

2016. 

B. Background

1. Chronology of Events Since the National Academy of Sciences Called for 

Reforming and Increasing CAFE Standards

a. National Academy of Sciences Issues Report on Future of CAFE Program 

(February 2002) 

 

459 See supra note [directly above] 460 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.”) 
398 

i. Significantly Increasing CAFE Standards Without Making them Attribute-based 

Would Adversely Affect Safety 

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

Corporate Average Fuel Economy (CAFE) Standards,” 461 a majority of the 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.462 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 trade-offs that must be made if CAFE standards were increased by any significant 

amount.463

 In response to these conclusions, NHTSA considered various attributes and ultimately 

issued footprint-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 attributebased standards, but also mandating them. 

ii. Climate Change and Other Externalities Justify Increasing the CAFE Standards 

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

the fuel economy standards, both relating to externalities. The first and most important concern, 

it argued, is the accumulation in the atmosphere of greenhouse gases, principally carbon 

dioxide.464 

 

 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. 

 

 

461 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 March 1, 2010). 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.

462 NHTSA formerly used this approach for CAFE standards. EISA prohibits its use after MY 2010. 463 NAS, p. 9. As discussed at length in prior CAFE rules, two members of the NAS Committee dissented from the 

majority opinion that there would be safety impacts to downweighting under a flat-standard system. 464 NAS, pp. 2, 13, and 83. 
399 

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

urged that all social benefits of such increases 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. 

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 it was then structured. While raising CAFE standards under the then 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.465 

 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.”466 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.467 

b. NHTSA Issues Final Rule Establishing Attribute-Based CAFE Standards for MY 

2008-2011 Light Trucks (March 2006) 

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.468 Reforming the CAFE program enabled it to achieve 

larger fuel savings, while enhancing safety and preventing adverse economic consequences. 

 As noted above, fuel economy standards were restructured so that they were 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. 

 

465 NAS, pp. 4-5 (Finding 10). 466 NAS, p. 5 (Finding 12). 467 NAS, p. 87. 468 71 FR 17566 (Apr. 6, 2006). 
400 

Compared to non-attribute-based CAFE, attribute-based CAFE enhances overall fuel 

savings while providing vehicle manufacturers with the flexibility they need to respond to 

changing market conditions. Attribute-based 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 attribute-based 

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 non-attribute-based CAFE program. 

c. Ninth Circuit Issues Decision 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,

469 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. Although the Court found that NHTSA 

had been arbitrary and capricious in several respects, 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.” 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. 

d. Congress Enacts 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). 

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

The agency could not 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 could, 

however, project what the industry-wide level of average fuel economy would have been for 

passenger cars and for light trucks if each manufacturer produced its expected mix of 

automobiles and just met its obligations under the proposed “optimized” standards for each 

model year. 

 

469 508 F.3d 508. 
401 

 

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. 

f. Ninth Circuit Revises its Decision re Final Rule for MY 2008-2011 Light Trucks 

(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.470

g. NHTSA Releases Final Environmental Impact Statement (October 2008)

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

final environmental impact statement (FEIS) for the MYs 2011-2015 rulemaking.471 Throughout 

the FEIS, NHTSA relied extensively on findings of the United Nations Intergovernmental Panel 

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

 

470 See CBD v. NHTSA, 538 F.3d 1172 (9th Cir. 2008). 471 73 FR 61859 (Oct. 18, 2008). 
402 

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. 

h. 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. 472

i. 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 feasible, a forthcoming report by 

the National Academy of Sciences assessing automotive technologies that can practicably be 

used to improve fuel economy. 

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

 

472 The statement can be found at http://www.dot.gov/affairs/dot0109.htm (last accessed March 1, 2010). 
403 

 i. Standards 

The final rule established footprint-based fuel economy standards for MY 2011 passenger 

cars and light trucks. 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 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 2011.473 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, for the reasons 

discussed extensively in that final rule. 

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 

 

473 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. 
404 

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 cars474 for that model year, whichever is higher. This 

requirement resulted in the following projected alternative minimum standard (not attributebased) for domestic passenger cars: 

 Domestic passenger cars mpg 

MY 2011 27.8 

ii. 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.475 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. 

2. Energy Policy and Conservation Act, as Amended by the Energy Independence 

and Security Act

NHTSA establishes CAFE standards for passenger cars and light trucks for each model 

year under EPCA, as amended by EISA. EPCA mandates a motor vehicle fuel economy 

regulatory program to meet the various facets of the need to conserve energy, including ones 

having environmental and foreign policy implications. EPCA allocates the responsibility for 

implementing the program between NHTSA and EPA as follows: NHTSA sets CAFE standards 

for passenger cars and light trucks; EPA establishes the procedures for testing, tests vehicles, 

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

manufacturer’s passenger cars and light trucks; and NHTSA enforces the standards based on 

EPA’s calculations. 

 a. Standard Setting 

 

474 Those numbers set out several paragraphs above. 475 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. 
405 

 We have summarized below the most important aspects of standard setting under EPCA, 

as amended by EISA. 

For each future model year, EPCA requires that NHTSA establish standards at “the 

maximum feasible average fuel economy level that it decides the manufacturers can achieve in 

that model year,” based on the agency’s consideration of four statutory 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. EPCA does not define these terms or 

specify what weight to give each concern in balancing them; thus, NHTSA defines them and 

determines the appropriate weighting based on the circumstances in each CAFE standard 

rulemaking.476 

For MYs 2011-2020, EPCA further requires that separate standards for passenger cars 

and for light trucks be set at levels high enough to ensure that the CAFE of the industry-wide 

combined fleet of new passenger cars and light trucks reaches at least 35 mpg not later than MY 

2020. 

i. Factors That Must be Considered in Deciding the Appropriate Stringency of 

CAFE Standards 

(1) Technological feasibility 

“Technological feasibility” refers to whether a particular method of improving fuel 

economy can be 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. NHTSA 

has historically considered all types of technologies that improve real-world fuel economy, 

except those whose effects are not reflected in fuel economy testing. Principal among them are 

technologies that improve air conditioner efficiency because the air conditioners are not turned 

on during testing under existing test procedures. 

(2) Economic practicability 

“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.”477 This 

factor is especially important in the context of current events, where the automobile industry is 

facing significantly adverse economic conditions, as well as significant loss of jobs. In an 

attempt to ensure the economic practicability of attribute-based standards, NHTSA considers a 

variety of factors, including the annual rate at which manufacturers can increase the percentage 

 

476 See Center for Biological Diversity v. NHTSA, 538 F.3d. 1172, 1195 (9th Cir. 2008) (“The EPCA clearly requires 

the agency to consider these four factors, but it gives NHTSA discretion to decide how to balance the statutory 

factors—as long as NHTSA’s balancing does not undermine the fundamental purpose of the EPCA: energy 

conservation.”) 

477 67 FR 77015, 77021 (Dec. 16, 2002). 
406 

of its fleet that employs a particular type of fuel-saving technology, and cost to consumers. 

Consumer acceptability is also an element of economic practicability, one which is particularly 

difficult to gauge during times of frequently-changing fuel prices. NHTSA believes this 

approach is reasonable for the MY 2012-2016 standards in view of the facts before it at this time. 

 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 economy.”478 Instead, NHTSA 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. 

(3) The effect of other motor vehicle standards of the Government on fuel economy 

“The effect of other motor vehicle standards of the Government on fuel economy,” 

involves an analysis of the effects of compliance with emission,479 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 years480 until present, the effects of such compliance on fuel economy 

capability over the history of the CAFE program have been negative ones. 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. 

NHTSA also recognizes that in some cases the effect of other motor vehicle standards of 

the Government on fuel economy may be neutral or positive. For example, to the extent the 

GHG standards set by EPA and California 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 lower-GHG-producing air conditioners. The agency considered EPA’s standards and the 

harmonization benefits of the National Program in developing its own standards. 

(4) The need of the United States to conserve energy 

 

478 CEI-I, 793 F.2d 1322, 1352 (D.C. Cir. 1986). 479 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. 

480 42 FR 63184, 63188 (Dec. 15, 1977). See also 42 FR 33534, 33537 (Jun. 30, 1977). 
407 

“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.”481 Environmental implications 

principally include reductions in emissions of criteria pollutants and carbon dioxide. Prime 

examples of foreign policy implications are energy independence and security concerns. 

 (a) 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 both to new 

vehicle buyers and to society. In this rule, NHTSA relies on fuel price projections from the U.S. 

Energy Information Administration’s (EIA) Annual Energy Outlook (AEO) for this analysis. 

Federal government agencies generally use EIA’s projections in their assessments of future 

energy-related policies. 

(b) Petroleum consumption and import externalities 

U.S. consumption and imports of petroleum products 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 provide a response option should a disruption in commercial oil supplies threaten the 

U.S. economy, to allow the United States to meet part of its International Energy Agency 

obligation to maintain emergency oil stocks, and to provide a national defense fuel reserve. 

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 the resource costs of producing them. Conversely, reducing U.S. imports of crude 

petroleum or refined fuels or reducing fuel consumption can reduce these external costs. 

(c) Air pollutant emissions 

While reductions in domestic fuel refining and distribution that result from lower fuel 

consumption will reduce U.S. emissions of various pollutants, additional vehicle use associated 

with the rebound effect482 from higher fuel economy will increase emissions of these pollutants. 

Thus, the net effect of stricter CAFE standards on emissions of each pollutant depends on the 

relative magnitudes of its reduced emissions in fuel refining and distribution, and increases in its 

emissions from vehicle use. 

 

481 42 FR 63184, 63188 (1977). 482 The “rebound effect” refers to the tendency of drivers to drive their vehicles more as the cost of doing so goes 

down, as when fuel economy improves. 
408 

Fuel savings from stricter CAFE standards also result in lower emissions of CO2, the 

main greenhouse gas emitted as a result of refining, distribution, and use of transportation fuels. 

Lower fuel consumption reduces carbon dioxide emissions directly, because the primary source 

of transportation-related CO2 emissions is fuel combustion in internal combustion engines. 

NHTSA has considered environmental issues, both within the context of EPCA and the 

National Environmental Policy Act, in making decisions about the setting of standards from the 

earliest days of the CAFE program. As courts of appeal have noted in three decisions stretching 

over the last 20 years,483 NHTSA defined the “need of the Nation to conserve energy” in the late 

1970s as including “the consumer cost, national balance of payments, environmental, and foreign 

policy implications of our need for large quantities of petroleum, especially imported 

petroleum.”484 Pursuant to that view, NHTSA declined in the past to include diesel engines in 

determining the appropriate level of standards for passenger cars and for light trucks because 

particulate emissions from diesels were then both a source of concern and unregulated.485 In 

1988, NHTSA included climate change concepts in its CAFE notices and prepared its first 

environmental assessment addressing that subject.486 It cited concerns about climate change as 

one of its reasons for limiting the extent of its reduction of the CAFE standard for MY 1989 

passenger cars.487 Since then, NHTSA has considered the benefits of reducing tailpipe carbon 

dioxide emissions in its fuel economy rulemakings pursuant to the statutory requirement to 

consider the nation’s need to conserve energy by reducing fuel consumption. 

ii. Other Factors Considered by NHTSA 

NHTSA considers the potential for adverse safety consequences when in establishing 

CAFE standards. This practice is recognized approvingly in case law.488 Under the universal or 

“flat” CAFE standards that NHTSA was previously authorized to establish, manufacturers were 

encouraged to 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, which resulted 

in a higher mass differential between the smallest and the largest vehicles, with a 

 

483 Center for Auto Safety v. NHTSA, 793 F.2d 1322, 1325 n. 12 (D.C.Cir.1986); Public Citizen v. NHTSA, 848 

F.2d 256, 262-3 n. 27 (D.C. Cir. 1988)(noting that “NHTSA itself has interpreted the factors it 

must consider in setting CAFE standards as including environmental effects”); and Center for 

Biological Diversity v. NHTSA, 538 F.3d 1172 (9th Cir. 2007). 484 42 FR 63184, 63188 (Dec. 15, 1977) (emphasis added) 485 For example, the final rules establishing CAFE standards for MY 1981-84 passenger cars, 42 FR 33533, 

33540-1 and 33551 (Jun. 30, 1977), and for MY 1983-85 light trucks, 45 FR 81593, 81597 

(Dec. 11, 1980).

486 53 FR 33080, 33096 (Aug. 29, 1988). 487 53 FR 39275, 39302 (Oct. 6, 1988). 

488 See, e.g., Center for Auto Safety v. NHTSA (CAS), 793 F. 2d 1322 (D.C. Cir. 1986) (Administrator’s 

consideration of market demand as component of economic practicability found to be reasonable); Public 

Citizen 848 F.2d 256 (Congress established broad guidelines in the fuel economy statute; agency’s decision to set 

lower standard was a reasonable accommodation of conflicting policies). As the United States Court of Appeals 

pointed out in upholding NHTSA's exercise of judgment in setting the 1987-1989 passenger car standards, “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 (CEI I), 901 

F.2d 107, 120 at n.11 (D.C. Cir. 1990). 
409 

correspondingly greater risk to safety. 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, and because all 

vehicles are required to continue improving their fuel economy. 

In addition, the agency considers consumer demand in establishing new standards and in 

assessing whether already established standards remained feasible. In the 1980s, the agency 

relied in part on the unexpected drop in fuel prices and the resulting unexpected failure of 

consumer demand for small cars to develop in explaining the need to reduce CAFE standards for 

a several year period in order to give manufacturers time to develop alternative technology-based 

strategies for improving fuel economy. 

iii. Factors that NHTSA is Statutorily Prohibited from Considering in Setting 

Standards 

EPCA 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.489 As noted 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. 

iv. Weighing and Balancing of Factors 

NHTSA has broad discretion in balancing the above factors in determining the average 

fuel economy level that the manufacturers can achieve. Congress “specifically delegated the 

process of setting ... fuel economy standards with broad guidelines concerning the factors that 

the agency must consider. 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-as long as NHTSA's 

balancing does not undermine the fundamental purpose of the EPCA: energy conservation, and 

as long as that balancing reasonably accommodates “conflicting policies that were committed to 

the agency's care by the statute.’” 

Thus, EPCA does not mandate that any particular number be adopted when NHTSA 

determines the level of CAFE standards. Rather, any number within a zone of reasonableness 

may be, in NHTSA’s assessment, the level of stringency that manufacturers can achieve. See, 

e.g., Hercules Inc. v. EPA, 598 F. 2d 91, 106 (D.C. Cir. 1978) (“In reviewing a numerical 

 

489 49 U.S.C. 32902(h). 
410 

standard we must ask whether the agency’s numbers are within a zone of reasonableness, not 

whether its numbers are precisely right”). 

v. Other Requirements Related to Standard Setting 

The standards for passenger cars and those for light trucks must increase ratably each 

year. This statutory requirement is interpreted, in combination with the requirement to set the 

standards for each model year at the level determined to be the maximum feasible level that 

manufacturers can achieve for that model year, to mean that the annual increases should not be 

disproportionately large or small in relation to each other. 

The standards for passenger cars and light trucks must be based on one or more vehicle 

attributes, like size or weight, that correlate with fuel economy and must be expressed in terms of 

a mathematical function. Fuel economy targets are set for individual vehicles and increase as the 

attribute decreases and vice versa. For example, size-based (i.e., size-indexed) standards assign 

higher fuel economy targets to smaller (and generally, but not necessarily, lighter) vehicles and 

lower ones to larger (and generally, but not necessarily, heavier) vehicles. The fleet-wide 

average fuel economy that a particular manufacturer is required to achieve depends on the size 

mix of its fleet, i.e., the proportion of the fleet that is small-, medium- or large-sized. 

This approach can be used to require virtually all manufacturers to increase significantly 

the fuel economy of a broad range of both passenger cars and light trucks, i.e., the manufacturer 

must improve the fuel economy of all the vehicles in its fleet. Further, this approach can do so 

without creating an incentive for manufacturers to make small vehicles smaller or large vehicles 

larger, with attendant implications for safety. 

b. Test Procedures for Measuring Fuel Economy 

EPCA provides EPA with the responsibility for establishing CAFE test procedures. 

Current test procedures measure the effects of many fuel saving technologies. The principal 

exception is improvements in air conditioning efficiency. By statutory law in the case of 

passenger cars and by administrative regulation in the case of light trucks, air conditioners are 

not turned on during fuel economy testing. 

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. NHTSA sought comment in 

the NPRM regarding implementing such amendments beginning in MY 2017 and also on the 

more immediate interim alternative step of providing CAFE program credits under the authority 

of 49 U.S.C. 32904(c) for light trucks equipped with relatively efficient air conditioners for MYs 

2012-2016, but decided against finalizing either option for purposes of this final rule, choosing to 

defer the matter for now. Modernizing the passenger car test procedures, or even providing 

similar credits, would not be possible under EPCA as currently written. 

c. Enforcement and Compliance Flexibility 
411 

EPA is responsible for measuring automobile manufacturers’ CAFE so that NHTSA can 

determine compliance with the CAFE standards. When NHTSA finds that a manufacturer is not 

in compliance, it notifies the manufacturer. Surplus credits generated from the five previous 

years can be used to make up the deficit. The amount of credit earned is determined by 

multiplying the number of tenths of a mpg by which a manufacturer exceeds 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. If there are no (or not enough) credits 

available, then the manufacturer can either pay the fine, or submit a carry back plan to NHTSA. 

A carry back plan describes what the manufacturer plans to do in the following three model years 

to earn enough credits to make up for the deficit. NHTSA must examine and determine whether 

to approve the plan. 

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, unless, as provided 

below, the manufacturer has earned credits for exceeding a standard in an earlier year or expects 

to earn credits in a later year.490 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. 

 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 

provisions491 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 that 

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 attribute-based approach to setting CAFE 

standards fuel economy targets are established for individual vehicles based on their footprints, 

the vehicles are not required to comply with those targets. However, as a practical matter, if a 

manufacturer chooses to design some vehicles that fall below their target levels of fuel economy, 

it will need to design other vehicles that exceed their targets if the manufacturer’s overall fleet 

average is to meet the applicable standard. 

 

490 EPCA does not provide authority for seeking to enjoin violations of the CAFE standards. 491 49 U.S.C. 30120, Remedies for defects and noncompliance. 
412 

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. 

C. Development and Feasibility of the Final Standards 

 

1. How Was the Baseline and Reference Vehicle Fleet Developed?

a. Why Do the Agencies Establish a Baseline and Reference Vehicle Fleet? 

As also discussed in Section II.B above, 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 

established a baseline vehicle fleet representing those vehicles, based on the best available 

transparent information. Each agency then developed a separate reference fleet, accounting (via 

their respective analytical 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 for other relevant comparisons in the rule. 

Because NHTSA and EPA have different established practices, the agencies’ rulemaking 

documents (the Federal Register notice, joint Technical Support Document, agency-specific 

Regulatory Impact Analyses, and NHTSA Environmental Impact Analysis) have some 

differences in terminology. In connection with its first-ever GHG emissions rule under the CAA, 

EPA has used the term “baseline fleet” to refer to the MY 2008 fleet (i.e., from EPA certification 

and fuel economy data for MY 2008) prior to adjustment to reflect projected shifts in market 

composition. NHTSA, as in recent CAFE rulemakings, refers to the resultant market forecast, as 

specified in CAFE model input files (and corresponding input files for EPA’s OMEGA model), 

as the “baseline” fleet. EPA refers to this fleet as the “reference fleet.” NHTSA refers to the “no 

action” standards identified in the EIS (that is, the MY 2011 standards carried forward through 

MY 2016) as defining the “baseline” scenario, and refers to the fleet to which technologies have 

been added in response to these standards as the “adjusted baseline” fleet.492 EPA refers to this 

as the “final reference fleet.” These differences in terminology are summarized in the following 

table: 

Fleet Description EPA Terminology NHTSA Terminology 

MY 2008 Fleet with MY 2008 Production Volumes Baseline MY 2008 Fleet 

MY 2008 Fleet Adjusted to Reflect Projected Market 

Shifts 

Reference Fleet Baseline [Market Forecast] 

MY 2008 Fleet Adjusted to Reflected Projected Market 

Shifts and Response to MY 2011 CAFE Standards 

[Final] Reference Fleet Adjusted Baseline 

The agencies have retained this mixed terminology in order to facilitate comparison to 

past rulemakings. In general, EPA’s RIA and the joint TSD apply EPA’s nomenclature, 

NHTSA’s RIA and EIS apply NHTSA’s nomenclature, and the joint Federal Register notice 

 

492 Some manufacturers’ baseline fleets (as reflected in the agencies’ market forecast) do not, without applying 

additional technology and/or CAFE credits, do not show compliance with the baseline standards. 
413 

uses EPA’s nomenclature when focusing on GHG emissions standards, and NHTSA’s 

nomenclature when focusing CAFE standards. 

b. What Data Did the Agencies Use to Construct the Baseline, and How Did They 

Do So? 

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 model year for which final data is 

currently available from manufacturers. These data were used as the source for MY 2008 

production volumes and some vehicle engineering characteristics, such as 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 footprint-based 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 the 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).493 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 CSM-Worldwide and used their projections 

of the number of vehicles of each type predicted to be sold by manufacturers in 2011-2015.494 

This provided the year-by-year percentages of cars and trucks sold by each manufacturer as well 

as the percentages of each vehicle segment. The changes between company market share and 

industry market segments were most significant from 2011-2014, while for 2014-2015 the 

changes were relatively small. Noting this, and lacking a credible forecast of company and 

 

493 Available at http://www.eia.doe.gov/oiaf/aeo/index.html. Specifically, while the total volume of both cars and 

trucks was obtained from AEO 2010, the car-truck split was obtained from AEO 2009. The agencies have also used 

fuel price forecasts from AEO 2010. 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. 494 EPA also considered other sources of similar information, such as J.D. Powers, and concluded that CSM was 

more appropriate for purposes of this rulemakjng analysis. 
414 

segment shares after 2015, the agencies assumed 2016 market share and market segments to be 

the same as for 2015. 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 Joint Technical Support Document accompanying today’s final rule. 

c. How is This Different From NHTSA’s Historical Approach and Why is This 

Approach Preferable? 

 As discussed above in Section II.B.4, 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-duty 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. 

Although manufacturers did not comment on the agency’s proposal to rely on public and 

commercial information rather than manufacturers’ confidential product plans when developing 

a market forecast, those organizations that did comment on this issue supported this change. The 

California Air Resources Board (CARB) and Center for Biological Diversity (CBD) both 

commended the resultant increase in transparency. CARB further indicated that the use of public 

and commercial information should produce a better forecast. On the other hand, as discussed 

above in Section I, CBD and the Northeast States for Coordinated Air Use Management 

(NESCAUM) both raised concerns regarding the resultant omission of some new vehicle 

models, and the inclusion of some vehicles to be discontinued, while CARB suggested that the 

impact of these inaccuracies should be minor. 

As discussed above in Section II.B.4, while a baseline developed using publicly and 

commercially available sources has both advantages and disadvantages relative to a baseline 

developed using manufacturers’ product plans, NHTSA has concluded for today’s rule that the 

advantages outweigh the disadvantages. Today’s approach is much more transparent han the 

agency’s past approach of relying on product plans, and as discussed in Section II.B.4, any 

inaccuracies related to new or discontinued vehicle models should have only a minor impact on 

the agency’s analysis. 

For subsequent rulemakings, NHTSA remains hopeful that manufacturers will agree to 

make public their plans for model years that are very near, so that this information could be 
415 

incorporated into analysis available for public review and comment. In any event, because 

NHTSA is releasing market inputs used in the agency’s analysis of this final rule, all interested 

parties can review these inputs fully, as intended in adopting the transparent approach. More 

information on the advantages and disadvantages of the current approach and the agencies’ 

decision to follow it is available in Section II.B.4. 

d. How is This Baseline Different Quantitatively from the Baseline That NHTSA 

Used 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. This comparison provides a basis for 

understanding general characteristics and measures of the difference, in this case, between using 

publicly (and commercially) available sources and using manufacturers’ confidential product 

plans. The current baseline, while developed using the same methods as the baseline used for 

MYs 2012-2016 NPRM, reflects updates to the underlying commercially-available forecast of 

manufacturer and market segment shares of the future light vehicle market. These changes are 

discussed above in Section II.B. 

 Estimated vehicle sales: 

The sales forecasts, based on the Energy Information Administration’s (EIA’s) Annual 

Energy Outlook 2010 (AEO 2010), 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 41 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 

Comment [A50]: Please note that AEO 2010 

actually models the effects of the proposed CAFÉ 

stds and as such includes a shift in the number of 

cars vs. trucks on the road. 
416 

time as vehicles (with different fuel economy and footprint characteristics) are added to and 

dropped from the product mix. 
417 

Figure IV.C.1-1. Planned Fuel Economy vs. Footprint, Passenger Cars 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

Footprint (sf)

Fuel Economy(mpg)
418 

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)
419 

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)
420 

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)
421 

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, given that the agency is 

relying on different sources of material for these assumptions as discussed in Section II.B above 

and Chapter 1 of the joint TSD. 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.495

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 326 737 707 1,216

Ford 1,344 792 1,615 1,144

General Motors 1,249 1,347 1,700 1,844

Honda 851 585 1,250 470

Hyundai 382 46 655 221

Kia 306 88 

Nissan 612 331 789 479

Toyota 1,356 888 1,405 1,094

Other Asian 664 246 441 191

European 833 396 724 190

Total 7,923 5,458 9,286 6,849

 Dual-fueled vehicles: 

Manufacturers have also, during and since MY 2008, indicated to the agency that they 

intend 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.496 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.”497 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 7 percent for the current baseline, versus 17 percent for the MY 2011 final 

rule. NHTSA notes that in MY 2008 (the model year providing the vehicle models upon which 

today’s market forecast is based), the three U.S.-based OEMs produced most of the FFVs offered 

for sale in the U.S., yet these OEMs account are projected to account for a smaller share of the 

 

495 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. 

496 See 49 U.S.C. 32905 and 32906. 497 49 U.S.C..32902(h). 
422 

future market in the forecast the agency has used to develop and analyze today’s rule than in the 

forecast the agency used to develop and analyze the MY 2011 standards. 

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 applesto-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 lower in 

MY 2011 than shown in the MY 2011 final rule and the MYs 2012-2016 NPRM. Under the 

current baseline, average fuel economy for MY 2011 is 26.4 mpg, versus 26.5 mpg under the 

baseline in the MY 2011 final rule, and 26.7 mpg under the baseline in the MYs 2012-2016 

NPRM. The 0.3 mpg change relative to the MYs 2012-2016 baseline is the result of changes in 

manufacturer and market segment shares of the MY 2011 market. 

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 Volkswagen is essentially the same under both, Toyota 

and Nissan show increased combined CAFE levels under the current baseline (by 1.9 and 0.7 

mpg respectively), while Chrysler, Ford, and GM show decreased combined CAFE levels under 

the current baseline (by 1.4, 1.1, and 0.8 mpg, respectively) relative to the MY 2011 final rule 

baseline. 

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 23.0 27.0 23.0

Chrysler 27.8 21.8 28.2 23.1

Ford 28.0 21.0 29.3 22.5

Subaru 29.2 26.1 28.6 28.6

General Motors 28.2 21.2 30.3 21.4

Honda 33.5 25.0 32.3 25.2

Hyundai 32.5 24.3 31.7 26.0

Tata 24.6 19.6 24.7 23.9

Kia498 31.7 23.7

 

498 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). 
423 

Mazda499 30.6 26.0

Daimler 26.4 21.0 25.2 20.6

Mitsubishi 29.4 23.6 29.3 26.7

Nissan 31.7 21.7 31.3 21.4

Porsche 26.2 20.0 27.2 20.0

Ferrari500 16.2

Maserati501 18.2

Suzuki 30.9 23.3 28.7 24.0

Toyota 35.1 23.7 33.2 22.7

Volkswagen 29.1 20.2 28.5 20.1

Total/Average 30.3 22.2 30.4 22.6

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 25.0 26.0

Chrysler 23.3 24.7

Ford 24.9 26.0

Subaru 27.9 28.6

General Motors 24.1 24.9

Honda 29.5 30.0

Hyundai 31.3 30.0

Tata 21.4 24.4

Kia 29.5

Mazda 29.8

Daimler 24.4 23.6

Mitsubishi 27.4 29.1

Nissan 27.3 26.6

Porsche 23.7 22.0

Ferrari 16.2

Maserati 18.2

Suzuki 29.7 27.8

Toyota 29.5 27.6

Volkswagen 27.0 27.1

Total/Average 26.4 26.5

 

499 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. 

500 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. 501 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. 
424 

 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 power-to-weight ratios for each 

manufacturer represented in the current baseline and of the seven largest manufacturers 

represented in the product plan data used in that rulemaking, 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. 

Table IV.C.1-4a. Current Baseline Average MY 2011 Vehicle Footprint 

(Square Feet) 

Manufacturer PC LT Avg. 

BMW 45.4 49.9 47.5

Chrysler 46.8 52.8 50.9

Daimler 47.1 53.3 49.0

Ford 46.3 56.1 49.9

General 

Motors 46.4 58.2 52.5

Honda 44.3 49.1 46.3

Hyundai 44.4 48.7 44.8

Kia 45.2 51.0 46.5

Mazda 44.4 47.3 44.9

Mitsubishi 43.8 46.5 44.6

Nissan 45.3 53.9 48.3

Porsche 38.6 51.0 42.8

Subaru 43.1 26.6 36.8

Suzuki 40.8 47.2 41.6

Tata 50.3 47.8 48.8

Toyota 44.0 53.0 47.6

Volkswagen 43.5 52.6 45.1

Industry 

Average 45.2 53.5 48.6

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 
425 

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. 

Table IV.C.1-5a. Current Baseline Average MY 2011 Vehicle Curb Weight (Pounds)

Manufacturer PC LT Avg. 

BMW 3,535 4,648 4,055

Chrysler 3,572 4,469 4,194

Daimler 3,583 5,127 4,063

Ford 3,526 4,472 3,877

General Motors 3,528 4,978 4,281

Honda 3,040 4,054 3,453

Hyundai 3,014 4,078 3,129

Kia 3,035 4,007 3,252

Mazda 3,258 3,803 3,348

Mitsubishi 3,298 3,860 3,468

Nissan 3,251 4,499 3,689

Porsche 3,159 4,906 3,760

Subaru 3,176 2,001 2,727

Suzuki 2,842 3,843 2,965

Tata 3,906 5,171 4,627

Toyota 3,109 4,321 3,589

Volkswagen 3,445 5,672 3,839

Industry 

Average 3,313 4,499 3,797

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 
426 

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. 

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 0.067

Chrysler 0.055 0.052 0.053

Daimler 0.068 0.056 0.064

Ford 0.058 0.054 0.056

General Motors 0.057 0.056 0.056

Honda 0.056 0.054 0.056

Hyundai 0.052 0.055 0.052

Kia 0.050 0.056 0.051

Mazda 0.052 0.055 0.052

Mitsubishi 0.053 0.056 0.054

Nissan 0.059 0.057 0.058

Porsche 0.105 0.073 0.094

Subaru 0.060 0.030 0.048

Suzuki 0.049 0.062 0.051

Tata 0.077 0.057 0.065

Toyota 0.053 0.062 0.056

Volkswagen 0.057 0.052 0.056

Industry Average 0.057 0.056 0.056

Table IV.C.1-6b. MY 2011 Final Rule Average Planned MY 2011 Vehicle Power-to-Weight 

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 
427 

nearly all technologies to coincide with either a vehicle redesign or a 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 fiveyear redesign cycle and the two- to three-year 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% 37% 34%

Chrysler 0% 13% 9%

Daimler 0% 0% 0%

Ford 12% 8% 11%

General Motors 17% 3% 9%

Honda 29% 26% 28%

Hyundai 26% 0% 23%

Kia 38% 83% 48%

Mazda 0% 0% 0%

Mitsubishi 0% 59% 18%

Nissan 5% 25% 12%

Porsche 0% 100% 34%

Subaru 0% 42% 16%

Suzuki 4% 21% 6%

Tata 28% 100% 69%

Toyota 5% 15% 9%

Volkswagen 16% 0% 13%

Industry Average 13% 15% 14%
428 

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%

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.5 above, while the agencies received updated product plans 

in Spring and Fall 2009 in response to NHTSA’s requests, the baseline data used in this final rule 

is not informed by these product plans, except with respect to specific engineering characteristics 

(e.g., GVWR) of some MY 2008 vehicle models, because these product plans contain 

confidential business information that the agencies are legally required to protect from 

disclosure, and because the agencies have concluded that, for purposes of this final rule, a 

transparent baseline is preferable. 

For the NPRM, NHTSA conducted a separate analysis that did make use of these product 

plans. NHTSA performed this separate analysis for purposes of comparison only. For today’s 

final rule NHTSA used the publicly available baseline for all analysis related to the development 

and evaluation of the new CAFE standards. As discussed above in Section II.B.4, while a 

baseline developed using publicly and commercially available sources has both advantages and 

disadvantages relative to a baseline developed using manufacturers’ product plans, NHTSA has 

concluded for today’s rule that the advantages outweigh the disadvantages. NHTSA plans to 

consider these advantages and disadvantages further in connection with future rulemakings, 

taking into account changes in the market, changes in the scope and quality of publicly and 
429 

commercially available data, and any changes in manufacturers’ willingness to make some 

product planning information publicly available. 

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, as well as the comments received to 

the NPRM for this rule. In addition, the agencies supplemented their review with updated 

information from the FEV tear-down studies contracted by EPA, 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 final rule above in Section II.E, in Chapter 3 of 

the Joint TSD, and in Section V of NHTSA’s FRIA. 

 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,502 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.503 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 FRIA. 

Table IV.C.2-1. List of technologies 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

 

502 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, which are available in Docket No. NHTSA2009-0059 and on NHTSA’s website. 

503 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. 
430 

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 DEACD 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 final rule 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. 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 final 
431 

standards. However, some refinements were made as discussed in the NPRM.504 Additionally, 

the following refinements were made for purposes of the final rule. 

Specific to its modeling, NHTSA has revised two technologies used in the final rule 

analysis from those considered in the NPRM. These revisions were based on comments received 

in response to the NPRM and the identification of area to improve accuracy. In the NPRM, a 

diesel engine option (DSLT or DSLC) was not available for small vehicles because it did not 

appear to be a cost-effective option. However, based on comments received in response to the 

NPRM, the agency added a diesel engine option for small vehicles. Additionally, in the NPRM, 

the mass reduction/material substitution technology, MS1, assumed engine downsizing. 

However, for purposes of the final rule, engine downsizing is no longer assumed for MS1, thus 

slightly lowering the effectiveness estimate to better reflect how manufacturers might implement 

small amounts of mass reduction/material substitution. Chapter 3 of the Joint TSD and Section 

V of NHTSA’s FRIA provide a more detailed explanation of these revisions. 

b. How Did NHTSA Determine the Costs and Effectiveness of Each of These 

Technologies for Use 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 EPA’s 2008 Staff Technical 

Report,505 the agencies took a fresh look at technology cost and effectiveness values and 

incorporated additional FEV tear-down study results for purposes of this final rule. This joint 

work is reflected in Chapter 3 of the Joint TSD and in Section II of this preamble, as summarized 

below. For more detailed information on the effectiveness and cost of fuel-saving technologies, 

please refer to Chapter 3 of the joint TSD and Section V of NHTSA’s FRIA. NHTSA and EPA 

are confident that the thorough review conducted for purposes of this final rule led to the best 

available conclusions 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. 

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 for purposes of the NRPM: mild and strong hybrids, diesels, 

SGDI, and Valve Train Lift Technologies. In addition, based on FEV tear-down studies, the 

costs for turbocharging/downsizing, 6-,7-,8-speed automatic transmissions, and dual clutch 

transmissions were revised for this final rule. These revisions are discussed at length in the joint 

TSD and in NHTSA’s FRIA. 

Most effectiveness estimates used in 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 the agencies apply technologies to vehicles in their respective models, we 

 

504 74 Fed. Reg. at 49655-56 (Sept. 28, 2009). 505 EPA Staff Technical Report: Cost and Effectiveness Estimates of Technologies Used to Reduce Light-Duty 

Vehicle Carbon Dioxide Emissions. EPA420-R-08-008, March 2008. 
432 

report the ranges for the effectiveness values used in each model. For purposes of the final rule 

analysis, NHTSA made only a couple of changes to the effectiveness estimates. Specifically, in 

reviewing the NPRM effectiveness estimates for this final rule NHTSA discovered that the 

DCTAM effectiveness value for Subcompact and Compact subclasses was incorrect; the (lower) 

wet clutch effectiveness estimate had been used instead of the intended (higher) dry clutch 

estimate for these vehicle classes.506 Thus, NHTSA corrected these effectiveness estimates. 

Additionally, as discussed above, the effectiveness estimate for MS1 was revised (lowered) to 

better represent the impact of reducing mass at a refresh. 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 FRIA. 

As a general matter, NHTSA received relatively few comments related to technology cost 

and effectiveness estimates as compared to the number received on these issues in previous 

CAFE rulemakings. The California Air Resources Board (CARB) generally agreed with cost 

estimates used in the NPRM analysis. NHTSA also received comments from the Aluminum 

Association, General Motors, Honeywell, International Council on Clean Transportation (ICCT), 

Manufacturers of Emission Controls Association (MECA), Motor and Equipment Manufacturers 

Association (MEMA) and the New Jersey Department of Environmental Protection related to 

cost and effectiveness estimates for specific technologies, including but not limited to hybrids, 

diesels, turbocharging and downsizing, and mass reduction/material substitution. A detailed 

description of these comments and NHTSA’s responses can be found in Section V of NHTSA’s 

FRIA. 

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 nonperformance passenger cars. NHTSA sought comment on the extent to which commenters 

believed that the agencies have been successful in holding constant these elements of vehicle 

performance and utility in developing the technology cost and effectiveness estimates, but 

received relatively little in response. NHTSA thus concludes that commenters had no significant 

issues with its approach for purposes of this rulemaking, but the agency will continue to analyze 

this issue going forward. 

Additionally, NHTSA notes that the technology costs included in this final rule take into 

account only those associated with the initial build of the vehicle. The agencies sought 

comment 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 

 

506 “Dry clutch” DCTAMs and “wet clutch” DCTAMs have different characteristics and different uses. A dry clutch 

DCTAM is more efficient and less expensive than a wet clutch DCTAM, which requires a wet-clutch-type hydraulic 

system to cool the clutches. However, without a cooling system, a dry clutch DCTAM has a lower torque capacity. 

Dry clutch DCTAMs are thus ideal for smaller vehicles with lower torque ratings, like those in the Subcompact and 

Compact classes, while wet clutch DCTAMs would be more appropriate for, e.g., larger trucks. Thus, it is 

appropriate to distinguish accordingly in DCTAM effectiveness between subclasses. 
433 

maintenance costs for diesel aftertreatment components, but received no responses. The agency 

will continue to examine this issue closely for subsequent rulemakings, particularly as 

manufacturers turn increasingly to even more advanced technologies in the future that may have 

more significant lifetime costs.

The tables below provide examples of the incremental cost and effectiveness estimates 

employed by the agency in developing this final rule, according to the decision trees used in the 

Volpe modeling analysis. Thus, the effectiveness and cost estimates are not absolute to a single 

reference vehicle, but are incremental to the technology or technologies that precede it. 
434 
435 

Table IV.C.2-2. Technology Effectiveness Estimates Employed in the Volpe Model for Certain Technologies 

VEHICLE TECHNOLOGY INCREMENTAL FUEL CONSUMPTION REDUCTION (-%) 

Subcomp. 

Car 

Compact 

Car 

Midsize 

Car 

Large 

Car 

Perform. 

Subcomp. 

Car 

Perform. 

Compact 

Car 

Perform. 

Midsize 

Car 

Perform. 

Large 

Car 

Minivan 

LT 

Small 

LT 

Midsize 

LT 

Large 

LT 

Low Friction Lubricants 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 VVT - Dual Cam Phasing (DCP) 2.0 - 3.0 2.0 - 3.0 2.0 - 3.0 2.0 - 3.0 2.0 - 3.0 2.0 - 3.0 2.0 - 3.0 2.0 - 3.0 2.0 - 3.0 2.0 - 3.0 2.0 - 3.0 2.0 - 3.0 Discrete Variable Valve Lift (DVVL) on DOHC 1.0 - 3.0 1.0 - 3.0 1.0 - 3.0 1.0 - 3.0 1.0 - 3.0 1.0 - 3.0 1.0 - 3.0 1.0 - 3.0 1.0 - 3.0 1.0 - 3.0 1.0 - 3.0 1.0 - 3.0 Cylinder Deactivation on OHV n.a. n.a. n.a. 3.9 - 5.5 n.a. 3.9 - 5.5 3.9 - 5.5 3.9 - 5.5 3.9 - 5.5 n.a. 3.9 - 5.5 3.9 - 5.5 Stoichiometric Gasoline Direct Injection (GDI) 2.0 - 3.0 2.0 - 3.0 2.0 - 3.0 2.0 - 3.0 2.0 - 3.0 2.0 - 3.0 2.0 - 3.0 2.0 - 3.0 2.0 - 3.0 2.0 - 3.0 2.0 - 3.0 2.0 - 3.0 Turbocharging and Downsizing 4.2 - 4.8 4.2 - 4.8 4.2 - 4.8 1.8 - 1.9 4.2 - 4.8 1.8 - 1.9 1.8 - 1.9 1.8 - 1.9 1.8 - 1.9 4.2 -4.8 1.8 - 1.9 1.8 - 1.9 6/7/8-Speed Auto. Trans with Improved Internals 1.4 - 3.4 1.4 - 3.4 1.4 - 3.4 1.4 - 3.4 1.4 - 3.4 1.4 - 3.4 1.4 - 3.4 1.4 - 3.4 1.4 - 3.4 1.4 - 3.4 1.4 - 3.4 1.4 - 3.4 Electric Power Steering 1.0 - 2.0 1.0 - 2.0 1.0 - 2.0 1.0 - 2.0 1.0 - 2.0 1.0 - 2.0 1.0 - 2.0 1.0 - 2.0 1.0 - 2.0 1.0 - 2.0 1.0 - 2.0 1.0 - 2.0 12V Micro-Hybrid 2.0 - 3.0 2.0 - 3.0 2.0 - 3.0 2.5 - 3.5 2.0 - 3.0 2.5 - 3.5 2.5 - 3.5 3.0 - 4.0 2.5 - 3.5 2.0 - 3.0 2.5 - 3.5 n.a. Crank mounted Integrated Starter Generator 

8.6 - 8.9 8.6 - 8.9 8.6 - 8.9 8.7 - 8.9 8.6 - 8.9 8.7 - 8.9 8.7 - 8.9 8.7 - 8.9 8.7 - 8.9 8.6 - 8.9 8.7 - 8.9 14.1 - 16.3 

Power Split Hybrid 6.3 - 12.4 6.3 - 12.4 6.3 - 12.4 6.3 - 12.4 6.3 - 12.4 6.3 - 12.4 6.3 - 12.4 6.3 - 12.4 6.3 - 12.4 6.3 - 12.4 6.3 - 12.4 n.a. Aero Drag Reduction 2.0 - 3.0 2.0 - 3.0 2.0 - 3.0 2.0 - 3.0 2.0 - 3.0 2.0 - 3.0 2.0 - 3.0 2.0 - 3.0 2.0 - 3.0 2.0 - 3.0 2.0 - 3.0 2.0 - 3.0 
436 

Table IV.C.2-3. Technology Cost Estimates Employed in the Volpe Model for Certain Technologies 

VEHICLE TECHNOLOGY ICM COSTS PER VEHICLE ($) 

Subcomp. 

Car 

Compact 

Car 

Midsize 

Car 

Large 

Car 

Perform. 

Subcomp. 

Car 

Perform. 

Compact 

Car 

Perform. 

Midsize 

Car 

Perform. 

Large 

Car 

Minivan 

LT 

Small 

LT 

Midsize 

LT 

Large 

LT 

Nominal baseline engine (for cost purpose) Inline 4 Inline 4 Inline 4 V6 Inline 4 V6 V6 V8 V6 Inline 4 V6 V8 Low Friction Lubricants 3 3 3 3 3 3 3 3 3 3 3 3 VVT - Dual Cam Phasing (DCP) 38 38 38 82 38 82 82 82 82 38 82 82 Discrete Variable Valve Lift (DVVL) on DOHC 142 142 142 206 142 206 206 294 206 142 206 294 Cylinder Deactivation on OHV n.a. n.a. n.a. 168 n.a. 168 168 192 168 n.a. 168 192 Stoichiometric Gasoline Direct Injection (GDI) 236 236 236 342 236 342 342 392 342 236 342 392 Turbocharging and Downsizing 445 445 445 325 445 325 325 919 325 445 325 919 6/7/8-Speed Auto. Trans with Improved Internals 112 112 112 112 112 - 214 112 - 214 112 - 214 112 - 214 112 - 214 112 112 - 214 112 - 214 Electric Power Steering 106 106 106 106 106 106 106 106 106 106 106 106 12V Micro-Hybrid 288 311 342 367 314 337 372 410 337 325 376 n.a. Crank mounted Integrated Starter Generator 2,791 3,107 3,319 3,547 2,839 3,149 3,335 3,571 3,149 3,141 3,611 5,124 Power Split Hybrid 1,600 2,133 2,742 3,261 3,661 4,018 5,287 6,723 4,018 2,337 3,462 n.a. Aero Drag Reduction 48 48 48 48 48 48 48 48 48 48 48 48 
437 
438 

c. How Does NHTSA Use These Assumptions in its Modeling Analysis? 

 NHTSA relies on several inputs and data files to conduct the compliance analysis 

using the Volpe model , as discussed further below and in Section V of the FRIA. For 

the purposes of applying technologies, the Volpe model primarily uses two data files, one 

that contains data on the vehicles expected to be manufactured in the model years 

covered by the rulemaking and identifies the appropriate stage within the vehicle’s lifecycle 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 final 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 standards, which cover MYs 2012-2016, the light-duty 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—previous analyses 

would count a vehicle as “new” in any year when significant technology differences are 

made, such as at a redesign.507 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-duty vehicle fuel economy.508

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 estimated 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. 

 

507 The market file for the MY 2011 final rule, which included data for MYs 2011-2015, had 5500 vehicles, 

about 5 times what we are using in this analysis of the MY 2008 certification data. 

508 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 the fleets that 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. 
439 

 

Is a vehicle already equipped, or can it not be equipped, with a particular 

technology?

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 likely be applied to vehicles equipped with 

manual transmissions during the rulemaking timeframe, due primarily to the cylinder 

deactivation system not being able to anticipate gear shifts. 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. 

In response to the NPRM, NHTSA received comments from GM that included a 

description of technical considerations, concerns, limitations and risks that need to be 

considered when implementing turbocharging and downsizing technologies on full size 

trucks. These include concerns related to engine knock, drivability, control of boost 

pressure, packaging complexity, enhanced cooling for vehicles that are designed for 

towing or hauling, and noise, vibration and harshness. NHTSA judges that the expressed 

technical considerations, concerns, limitations and risks are well recognized within the 

industry and it is standard industry practice to address each during the design and 

development phases of applying turbocharging and downsizing technologies. Cost and 

effectiveness estimates used in the final rule are based on analysis that assumes each of 

these factors is addressed prior to production implementation of the technologies. In 

comments related to full size trucks, GM commented that potential to address knock limit 

concerns through various alternatives, which include use of higher octane premium fuel 

and/or the addition of a supplemental ethanol injection system. For this rulemaking, 

NHTSA has not assumed that either of these approaches is implemented to address knock 
440 

limit concerns, and these technologies are not included in assessment of turbocharging 

and downsizing feasibility, cost or effectiveness.509 In addition, NHTSA has received 

confidential business information from a manufacturer that supports that turbocharging 

and downsizing is feasible on a full size truck product during the rulemaking period. 

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 

them at a refresh or redesign, because their application would be significant enough to 

involve some level of engineering, testing, and calibration work.510 

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 

 

509 Note that for one of the teardown analysis cost studies of turbocharging and downsizing conducted by 

FEV, in which a 2.4L I4 DOHC naturally aspirated engine was replaced by a 1.6L I4 DOHC SGDI 

turbocharged engine, the particular 1.6L turbocharged engine chosen for the study was a premium octane 

fuel engine. For this rulemaking, NHTSA intends that a turbocharged and downsized engine achieve 

comparable performance to a baseline engine without requiring premium octane fuel. For the FEV study of 

the 1.6L turbocharged engine, this could be achieved through the specification of an engine with a 

displacement of slightly greater than 1.6L. NHTSA judges that a slightly larger engine would have small 

effect on the overall cost analysis used in this rulemaking. For all other teardown studies conducted by 

FEV, both the naturally aspirated engine and the replacement turbocharged and downsized engine were 

specified to use regular octane fuel. 

510 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 a vehicle’s braking characteristics or how it performs in crash avoidance tests. 
441 

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 FRIA and in Chapter 3 of 

the TSD. 

NHTSA received comments from the Center for Biological Diversity (CBD) and 

Ferrari regarding redesign cycles. CBD stated that manufacturers do not necessarily 

adhere to the agencies’ assumed five-year redesign cycle, and may add significant 

technologies by redesigning vehicles at more frequent intervals, albeit at higher costs. 

CBD argued that NHTSA should analyze the costs and benefits of manufacturers 

choosing to redesign vehicles more frequently than a 5-year average. Conversely, Ferrari 

agreed with the agencies that major technology changes are introduced at vehicle 

redesigns, rather than at vehicle freshenings, stating further that as compared to full-line 

manufacturers, small-volume manufacturers in fact may have 7 to 8-year redesign cycles. 

In response, NHTSA recognizes that not all manufacturers follow a precise five-year 

redesign cycle for every vehicle they produce,511 but continues to believe that the fiveyear redesign cycle assumption is a reasonable estimate of how often manufacturers can 

make major technological changes for purposes of its modeling analysis.512 NHTSA has 

 

511 In prior NHTSA rulemakings, the agency was able to account for shorter redesign cycles on some 

models (e.g., some sedans), and longer redesign cycles on others (e.g., cargo vans), but has standardized the 

redesign cycle in this analysis using the transparent baseline. 512 In the MY 2011 final rule, NHTSA noted that the CAR report submitted by the Alliance, prepared by 

the Center for Automotive Research and EDF, stated that “For a given vehicle line, the time from 

conception to first production may span two and one-half to five years,” but that “The time from first 

production (“Job#1”) to the last vehicle off the line (“Balance Out”) may span from four to five years to 

eight to ten years or more, depending on the dynamics of the market segment,” The CAR report then stated 

that “At the point of final production of the current vehicle line, a new model with the same badge and 

similar characteristics may be ready to take its place, continuing the cycle, or the old model may be 

dropped in favor of a different product.” See NHTSA-2008-0090-0170.1, Attachment 16, at 8 (393 of pdf). 

NHTSA explained that this description, which states that a vehicle model will be redesigned or dropped 

after 4-10 years, was consistent with other characterizations of the redesign and freshening process, and 

supported the 5-year redesign and 2-3 year refresh cycle assumptions used in the MY 2011 final rule. See 

id., at 9 (394 of pdf). Given that the situation faced by the auto industry today is not so wholly different 

from that in March 2009, when the MY 2011 final rule was published, and given that the commenters did 
442 

considered attempting to quantify the increased cost impacts of setting standards that rise 

in stringency so rapidly that manufacturers are forced to apply “usual redesign” 

technologies at non-redesign intervals, but such an analysis would be exceedingly 

complex and is beyond the scope of this rulemaking given the timeframe and the current 

condition of the industry. NHTSA emphatically disagrees that the redesign cycle is a 

barrier to increasing penetration of technologies as CBD suggests, but we also believe 

that standards so stringent that they would require manufacturers to abandon redesign 

cycles entirely would be beyond the realm of economic practicability and technological 

feasibility, particularly in this rulemaking timeframe given lead time and capital 

constraints. Manufacturers can and will accomplish much improvement in fuel economy 

and GHG reductions while applying technology consistent with their redesign schedules. 

Once the model indicates 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 

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 

 not present information to suggest that these assumptions are unreasonable (but rather simply that different 

manufacturers may redesign their vehicles more or less frequently, as the range of cycles above indicates), 

NHTSA believes that the assumptions remain reasonable for purposes of this final rule analysis. See also

“Car Wars 2009-2012, The U.S. automotive product pipeline”, John Murphy, Research Analyst, Merrill 

Lynch research paper, May 14, 2008 and “Car Wars 2010-2013, The U.S. automotive product pipeline”, 

John Murphy, Research Analyst, Bank of America/Merrill Lynch research paper, July 15, 2009. 
443 

differentiated technology application using ten vehicle “classes” (4 cars classes and 6 

truck classes),513 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 “like” 

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 final rule as for the NPRM, 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 

final rule for MYs 2012-2016. No comments were received on the vehicle subclasses 

employed in the agency’s NPRM analysis, and NHTSA has retained the subclasses and 

the methodology for dividing vehicles among them for the final rule analysis. Vehicle 

subclasses are discussed in more detail in Section V of the FRIA 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, Hyundai Accent 

Subcompact Performance Mazda MX-5, BMW Z4 

Compact Chevy Cobalt, Nissan Sentra and Altima 

Compact Performance Audi S4, Mazda RX-8 

Midsize Chevy Impala, Toyota Camry, Honda Accord, 

 

513 The NAS classes included subcompact cars, compact cars, midsize cars, large cars, small SUVs, midsize 

SUVs, large SUVs, small pickups, large pickups, and minivans. 
444 

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, Toyota Tacoma 

Large 

SUV/Pickup/Van 

Chevy Silverado, Ford E-Series, 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 add up as technology levels increase. 

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 final 

rule, 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 

and in the MY 2012-2016 NPRM. 

 

In general, and as described in great detail in the MY 2011 final rule and in 

Section V of the current FRIA, each technology is assigned to one of the five following 

categories based on the system it affects or impacts: engine, transmission, 
445 

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 FRIA. 

Expanded decision trees are available in the docket for this final rule. 
446 

Figure IV.C.2-1. Engine Technology (EngMod) Decision Tree 
447 

Each technology within the decision trees has an incremental cost and an 

incremental effectiveness estimate associated with it, and estimates are specific to a 

particular vehicle subclass (see the tables in Section V of the FRIA). 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 this 

and 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 that have been offered for the agencies’ consideration 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 final rule.514 

To the extent that the decision trees have changed for purposes of the NPRM and this 

final rule, 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 did not receive any comments related to the use or ordering of the 

decision trees, and the agency continued to use the decision trees as they were proposed 

in the NPRM. 

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 (albeit in varying degrees) in the 

model years covered by this rule. 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 

 

514 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. 
448 

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. 

CBD commented that because many of the technologies considered in the NPRM 

are currently available, manufacturers should be able to attain mpg levels equivalent to 

the MY 2016 standards in MY 2009. In response, as discussed above, technology 

“availability” is not determined based simply on whether the technology exists, but 

depends also on whether the technology has achieved a level of technical viability that 

makes it appropriate for widespread application. This depends in turn on component 

supplier constraints, capital investment and engineering constraints, and manufacturer 

product cycles, among other things. Moreover, even if a technology is available for 

application, it may not be available for every vehicle. Some technologies may have 

considerable fuel economy benefits, but cannot be applied to some vehicles due to 

technological constraints – for example, cylinder deactivation cannot be applied to 

vehicles with current 4-cylinder engines (because not enough cylinders are present to 

deactivate some and continue moving the vehicle) or on vehicles with manual 

transmissions within the rulemaking timeframe. The agencies have provided for 

increases over time to reach the mpg level of the MY 2016 standards precisely because of 

these types of constraints, because they have a real effect on how quickly manufacturers 

can apply technology to vehicles in their fleets. 

Has the technology reached the phase-in cap for this model year?

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.515 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 

 

515 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. 
449 

technological feasibility and economic practicability in determining the stringency of the 

standards. 

NHTSA has been developing the concept of phase-in caps for purposes of the 

agency’s modeling analysis over the course of the last several CAFE rulemakings, as 

discussed in greater detail in the MY 2011 final rule,516 and in Section V of the FRIA 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.517

For purposes of this final rule 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.518 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. 

In developing phase-in cap values for purposes of this final rule, 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 this final rule 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 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 analysis underlying this final rule. 

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 final rule for the majority of technologies are set to reach 

 

516 74 FR 14268–14271 (Mar. 30, 2009) 517 See 74 FR at 14269 (Mar. 20, 2009). 518 See 74 FR at 14270 (Mar. 30, 2009) for further discussion and examples. 
450 

85 or 100 percent by MY 2016, although more advanced technologies like diesels and 

strong hybrids reach only 15 percent by MY 2016. 

NHTSA received comments from the Alliance and ICCT relating to phase-in 

caps. The Alliance commented that the higher phase-in caps in the NPRM analysis (as 

compared to the MY 2011 final rule) “ignore OEM engine architecture 

differences/limitations,” arguing that the agency must consider manufacturing investment 

and lead time implications when defining phase-in caps. ICCT did not raise the issue of 

phase-in caps directly, but commented that the agencies had not provided information in 

the proposal documents explaining when each manufacturer can implement the different 

technologies and how long it will take the technologies to spread across the fleet. ICCT 

argued that this information was crucial to considering how quickly the stringency of the 

standards could be increased, and at what cost. 

In response to the Alliance comments, the phase-in cap constraint is, in fact, 

exactly intended to account for manufacturing investment and lead time implications, as 

discussed above: phase-in caps are intended to reflect a manufacturer’s overall resource 

capacity available for implementing new technologies (such as engineering and 

development personnel and financial resources), to help ensure that resource capacity is 

accounted for in the modeling process. Although the phase-in caps for the analysis 

supporting these standards are higher than the phase-in caps employed in the MY 2011 

final rule, as stated in the NPRM, the agencies considered the fact that manufacturers, as 

part of the agreements supporting the National Program, appear to be anticipating higher 

technology application rates during the rulemaking timeframe – indicating that the values 

selected for the phase-in caps are more likely within the range of practicability. 

Additionally, the agencies did not receive any comments from manufacturers indicating a 

direct concern with the proposed application rates, which they were able to review in the 

detailed manufacturer level model outputs. The agencies believe that as manufacturers 

focus their resources (i.e., engineering, capital investment, etc.) on fuel economyimproving technologies, many of which have been in production for many years, the 

application rates being modeled are appropriate for the timeframe being analyzed. 

In response to ICCT’s comments, the combination of phase-in caps, 

refresh/redesign cycles, engineering constraints, etc., are intended to simulate 

manufacturers’ technology application decisions, and ultimately define the technology 

application/implementation rates for each manufacturer. NHTSA has used the best 

public data available to define refresh and redesign schedules to define technology 

implementation, which allows us to apply technologies at the specific times each 

manufacturer is planning. There was full notice of not just the phase-in caps themselves, 

but their specific application as well. NHTSA notes that the PRIA and the FRIA do 

contain manufacturer-specific application/implementation rates for prominent 

technologies, and that manufacturer-specific technology application as employed in the 

agency’s analysis is available in full in the Volpe model outputs available on NHTSA’s 
451 

website. The model outputs present the resultant application of technologies at the 

industry, manufacturer, and vehicle levels. 

Theoretically, significantly higher phase-in caps, such as those used in the current 

proposal and final rule 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 final standards.519 NHTSA believes that this is due to the interaction 

of the various changes in methodology for this final rule—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 the modeling analysis for this final 

rule as compared to prior rulemakings. Other revisions that could impact modeled 

application rates include the use of transparent CAFE certification data in baseline fleet 

formulation and the use of other data for projecting it forward,520 or the use of a multiyear 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 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 the analysis underlying these 

final standards, achieving a suitable level of stringency without requiring unrealistic or 

unachievable penetration rates. 

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 

 

519 The modeling output for the analysis underlying these final standards is available on NHTSA’s website. 520 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 projected net application of 

technology. 
452 

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. 

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 the proposed standards, NHTSA and EPA reviewed both types of 

learning factors, and the thresholds (300,000) and reduction rates (20 percent for volume, 

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 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. Volumebased learning was applied to the higher complexity hybrid technologies, while no 

learning was 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. 
453 

ICCT and Ferrari commented on learning curves. ICCT stated the agencies could 

improve the accuracy of the learning curve assumptions if they used a more dynamic or 

continuous learning curve that is more technology-specific, rather than using step 

decreases as the current time- and volume-based learning curves appear to do. ICCT also 

commented on the appropriate application of volume- versus time-based learning, and 

stated further that worldwide production volumes should be taken into account when 

developing learning curves. Ferrari commented that is more difficult for small-volume 

manufacturers to negotiate cost decreases from things like cost learning effects with their 

suppliers, implying that learning effects may not be applicable equally for all 

manufacturers. 

NHTSA agrees that a continuous curve, if implemented correctly, could 

potentially improve the accuracy of modeling cost-learning effects, although the agency 

cannot estimate at this time how significant the improvement would be. To implement a 

continuous curve, however, NHTSA would need to develop a learning curve cost model 

to be integrated into the agency’s existing model for CAFE analysis. Due to time 

constraints the agencies were not able to investigate fully the use of a continuous costlearning effects curve for each technology, but we will investigate the applicability of this 

approach for future rulemakings. For purposes of the final rule analysis, however, 

NHTSA believes that while more detailed cost learning approaches may eventually be 

possible, the approach taken for this final rule is valid. 

Additionally, while the agencies agree that worldwide production volumes can 

impact learning curves, the agencies do not forecast worldwide vehicle production 

volumes in addition to the already complex task of forecasting the U.S. market. That 

said, the agencies do consider current and projected worldwide technology proliferation 

when determining the maturity of a particular technology used to determine the 

appropriateness of applying time- or volume-based learning, which helps to account for 

the effect of globalized production. 

With regard to ICCT’s comments on the appropriate application of volumeversus time-based learning, however, it seems as though ICCT is referencing a study that 

defines volume- and time-based learning in a different manner than the current 

definitions used by the agencies, and so is not directly relevant. The agencies use 

“volume-based” learning for non-mature technologies that have the potential for 

significant cost reductions through learning, while “time-based” learning is used for 

mature technologies that have already had significant cost reductions and only have the 

potential for smaller cost reductions. For “time-based” learning, the agencies chose to 

emulate the small year-over-year cost reductions manufacturers realize through defined 

cost reductions, approximately 3 percent per year, negotiated into contracts with 

suppliers. A more detailed description of how the agencies define volume- and timebased learning can be found in NHTSA’s PRIA. 
454 

And finally, in response to Ferrari’s comment, NHTSA recognizes that cost 

negotiations can be different for different manufacturers, but believes that on balance, 

cost learning at the supplier level will generally impact costs to all purchasers. Thus, if 

cost reductions are realized for a particular technology, all entities that purchase the 

technology will benefit from these cost reductions. 

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.521 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 

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.522 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 

 

521 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 percent (i.e., 0.1) and 20 percent (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 percent rather than the 30 

percent obtained by adding 10 percent to 20 percent. The “synergy factors” discussed in this section 

further adjust these multiplicatively combined effectiveness values. 522 EPA Staff Technical Report: Cost and Effectiveness Estimates of Technologies Used to Reduce Lightduty Vehicle Carbon Dioxide Emissions; EPA420-R-08-008, March 2008. 
455 

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 that 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 FRIA. 

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).523 Inputs to the Volpe model 

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 FRIA) 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 

 

523 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/EIAM070(2007), at 29-30. Available at http://tonto.eia.doe.gov/ftproot/modeldoc/m070(2007).pdf (last 

accessed Feb. 22, 2010). 
456 

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 received only one comment regarding synergies, from MEMA, who 

commented that NHTSA’s Volpe model adequately addressed synergistic effects. 

Having received no information to the contrary, NHTSA finalized the synergy approach 

and values for the final rule. 

d. Where Can Readers Find More Detailed Information about NHTSA’s 

Technology Analysis? 

 Much more detailed information is provided in Section V of the FRIA, and a 

discussion of how NHTSA and EPA jointly reviewed and updated technology 

assumptions for purposes of this final rule 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 final rule, Docket No. NHTSA-2009-0059, and on NHTSA’s website. 

And finally, because much of NHTSA’s technology analysis for purposes of this final 

rule 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.524

3. How Did NHTSA Develop its Economic Assumptions?

NHTSA’s analysis of alternative CAFE standards for the model years covered by 

this rulemaking relies on a range of forecast variables, economic assumptions, and 

parameter values. This section describes the sources of these forecasts, the rationale 

underlying each assumption, and the agency’s choices of specific parameter values. 

These 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 final rule, NHTSA reconsidered previous comments it had received and 

comments received to the NPRM, as well as reviewed newly available literature. As a 

consequence, the agency elected to revise some of its economic assumptions and 

 

524 74 FR 14233-308 (Mar. 30, 2009). 
457 

parameter estimates from previous rulemakings at the NPRM stage, 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 FRIA, 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. 

The comments the agency received and its responses are discussed in detail below, as 

well as in the TSD and FRIA. For the reader’s reference, Table IV.C.3-1 below 

summarizes the values used to calculate the economic benefits from each alternative. 

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 1.15%

Fuel Prices (2012-50 average, $/gallon) 

Retail gasoline price $3.66

Pre-tax gasoline price $3.29

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) $ 1,300

Nitrogen oxides (NOx) – vehicle use $ 5, 300

Nitrogen oxides (NOx) – fuel production and distribution $ 5,100

Particulate matter (PM2.5) – vehicle use $ 290,000

Particulate matter (PM2.5) – fuel production and distribution $ 240,000

Sulfur dioxide (SO2) $ 31,000

Carbon dioxide (CO2) $ 21525

Annual Increase in CO2 Damage Cost 

Varies by 

year

External Costs from Additional Automobile Use ($/vehiclemile) 

Congestion $ 0.054

Accidents $ 0.023

Noise $ 0.001

Total External Costs $ 0.078

 

525 The $21 value is for CO2 emissions in 2010, which rises to $45/ton in 2050, at an average discount rate 

of 3 percent. 
458 

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 Economy-Improving Technologies 

NHTSA and EPA previously developed detailed estimates of the costs of 

applying fuel economy-improving technologies to vehicle models for use in analyzing the 

impacts of alternative standards considered in the proposed rulemaking, including 

varying cost estimates for applying certain fuel economy technologies to vehicles of 

different sizes and body styles. These estimates were modified for purposes of this 

analysis as a result of extensive consultations among engineers from NHTSA, EPA, and 

the Volpe Center. Building on NHTSA’s estimates developed for the MY 2011 CAFE 

final rule and EPA’s Advanced Notice of Proposed Rulemaking, which relied on EPA’s 

2008 Staff Technical Report, the two agencies took a fresh look at technology cost and 

effectiveness values and incorporated FEV tear-down study results for purposes of this 

joint final rule under the National Program. 

While NHTSA generally found that much of the cost information used in the 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 the component costs 

of several major technologies including: turbocharging/downsizing, mild and strong 

hybrids, diesels, SGDI, and Valve Train Lift Technologies for purposes of the NPRM. In 

addition, based on FEV tear-down studies, the costs for turbocharging/downsizing, 6-,7-

,8-speed automatic transmissions, and dual clutch transmissions were revised for this 

final rule. 

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 
459 

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.526 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 and EPA received far fewer specific comments on technology cost 

estimates than in previous CAFE rulemakings, which suggests that most, although not all, 

stakeholders generally agreed with the agencies’ assumptions. Several commenters 

supported the agencies’ use of tear-down studies for developing some of the technology 

costs, largely citing the agencies’ own reasons in support of that methodology. Some 

specific comments were received with regard to hybrid and other technology costs, to 

which the agencies are responding directly in Chapter 3 of the joint TSD and in the 

agencies’ respective FRIAs. Generally speaking, however, to the extent that 

commenters disagreed with the agencies’ cost estimates, often the disagreement stemmed 

from assumptions about the technology’s maturity, which the agencies have tried to 

account for in the analysis. These issues are discussed further in Chapter 3 of the TSD. 

Additionally, we note that technology costs will also be addressed in the upcoming 

revised NAS report. 

With regard to the indirect cost multiplier approach, commenters also generally 

supported the higher level of specificity provided by the ICM approach compared to the 

RPE approach, although some commenters suggested specific refinements to the 

measurement of ICMs. For example, while the automotive dealer organization NADA 

argued that all dealer costs of sales should be included in “dealer profit,” another 

commenter noted expressly that the ICM does not include profits. Comments from ICCT 

also argued in favor of revising the “technology complexity” component of the ICM to 

account for the complexity of integrating a new technology into a vehicle, rather than for 

only the complexity of producing the technology itself. These comments and others on 

the ICM are addressed in Chapter 3 of the joint TSD and in the agencies’ respective 

FRIAs. NHTSA notes that profits were not included in the indirect cost estimates of this 

 

526 NHTSA notes that in addition to the technology cost analysis employing this “ICM” approach, the FRIA 

contains a sensitivity analysis using a technology cost multiplier of 1.5. 
460 

rule. NHTSA continues to study this issue and may employ a different approach in future 

rulemakings. 

b. Potential Opportunity Costs of Improved Fuel Economy 

An important concern is whether achieving the fuel economy improvements 

required by alternative CAFE standards might result in manufacturers compromising 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. 

(This possibility is addressed in detail in Section IV.G.6.) Although 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 varying combinations of 

these characteristics clearly demonstrate that changes in these attributes affect the utility 

and economic value that vehicles offer to potential buyers.527

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 cost estimates for fuel economy-improving 

technologies include adequate provision for accompanying outlays that are necessary to 

prevent any significant degradation in other attributes that vehicle owners value, 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 

 

527 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. 
461 

capacity, and utility, and omitting these will cause the agency’s estimated technology 

costs to underestimate the true economic costs of improving fuel economy. 

Recognizing this possibility, it would be desirable 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. Although the agency has been unable to 

develop a procedure for doing so as part of this rulemaking, Section IV.G.6. below 

includes a detailed analysis and discussion of how omitting possible changes in vehicle 

attributes other than their prices and fuel economy might affect its estimates of benefits 

and costs resulting from the standards this rule establishes. 

c. The On-Road 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.528 

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 final rule, 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 

rated 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 vehicle fleet would have achieved from 2000 through 2006 if cars and light 

 

528 71 FR 77871 (Dec. 27, 2006). 
462 

trucks of each model year achieved the same fuel economy levels in actual on-road 

driving as they did under test conditions when new. 

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.529 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. 

NHTSA received no comments on this issue in response to the NPRM. 

Accordingly, it has not revised its estimate of the on-road fuel economy gap from the 20 

percent figure used previously. 

d. Fuel Prices and the Value of Saving Fuel 

Projected future fuel prices are a critical input into the economic analysis of 

alternative CAFE standards, because they determine the value of fuel savings 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 2010 Early Release (December 2009) 

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.530 This forecast is somewhat lower than the AEO 

2009 Reference Case forecast the agency relied upon in the analysis it conducted for the 

NPRM. Over the period from 2010 to 2030, the AEO 2010 Early Release Reference 

 

529 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 March 1, 2010). 530 Energy Information Administration, Annual Energy Outlook 2010 Early Release, Reference Case 

(December 2009), Table A12. Available at http://www.eia.doe.gov/oiaf/aeo/pdf/appa.pdf, p. 25(last 

accessed March 1, 2010). These forecasts reflect the provisions of the Energy Independence and Security 

Act of 2007 (EISA), including the requirement that the combined mpg level of U.S. cars and light trucks 

reach 35 miles per gallon by model year 2020. Because this provision would be expected to reduce future 

U.S. demand for gasoline and lead to a decline in its future price, there is some concern about whether the 

AEO 2010 forecast of fuel prices partly reflects the increases in CAFE standards considered in this rule, 

and thus whether it is suitable for valuing the projected reductions in fuel use. In response to this concern, 

the agency notes that EIA issued a revised version of AEO 2008 in June 2008, which modified its previous 

December 2007 Early Release of AEO 2008 to reflect the effects of then recently-passed EISA 

legislation.530 The fuel price forecasts reported in EIA’s Revised Release of AEO 2008 differed by less 

than one cent per gallon throughout the entire forecast period (2008-230) from those previously issued as 

part of its initial release of AEO 2008. Thus, the agencies are reasonably confident that the fuel price 

forecasts presented in AEO 2010 and used to analyze the value of fuel savings projected to result from this 

rule are not unduly affected by the CAFE provisions of EISA. 
463 

Case forecast of retail gasoline prices used in this analysis averages $3.18 per gallon (in 

2007 dollars), in contrast to the $3.38 per gallon average price for that same period 

forecast in the earlier AEO 2009 Reference Case and used in the NPRM analysis. 

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. We also anticipated that the Reference Case forecasts would be 

significantly higher in subsequent editions of AEO, and that in future rulemaking 

analyses the agency would be likely to rely on the Reference Case rather than High Price 

Case forecasts. In fact, both EIA’s AEO 2009 Reference Case and its subsequent AEO 

2010 Early Release Reference Case forecasts project 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 2010 Early Release Reference Case is an appropriate forecast for 

projected future fuel prices. 

NHTSA and EPA received relatively few comments on the fuel prices used in the 

NPRM analysis, compared to previous CAFE rulemakings. Two commenters, CARB 

and NADA, supported the use of AEO’s Reference Case for use in the agencies’ analysis, 

although they disagreed on the agencies’ use of the High and Low Price Cases for 

sensitivities. Both commenters emphasized the sensitivity of the market and the 

agencies’ analysis to higher and lower gas prices, and on that basis, CARB supported the 

use of the High and Low Price Cases in sensitivity analysis but urged the agencies to 

caveat the “Reference Case” results more explicitly. In contrast, NADA argued that the 

agencies should not use the High and Low Price Cases, because EIA does not assign 

specific probabilities to either of them. Only one commenter, James Adcock, argued that 

the agencies should use forecasts of future fuel prices other than those reported in AEO; 

Adcock stated that future fuel prices should be assumed to be higher than current pump 

prices. 

Measured in constant 2007 dollars, the AEO 2010 Early Release Reference Case 

forecast of retail gasoline prices during calendar year 2010 is $2.44 per gallon, and rises 

gradually to $3.83 by the year 2035 (these values include federal, state and local taxes). 

However, the agency’s analysis of the value of fuel savings over the lifetimes of MY 

2012-2016 cars and light trucks requires forecasts extending through calendar year 2050, 

approximately the last year during which a significant number of MY 2016 vehicles will 

remain in service. To obtain fuel price forecasts for the years 2036 through 2050, the 

agency assumes that retail fuel prices will continue to increase after 2035 at the average 

annual rates projected for 2025 through 2035 in the AEO 2010 Early Release Reference 

Case.531 This assumption results in a projected retail price of gasoline that reaches $4.49 

in 2007 dollars during the year 2050. 

 

531 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 
464 

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. The agency has updated the estimates of 

gasoline taxes it employed in the NPRM using the recent data on state fuel tax rates; 

expressed in 2007 dollars, federal gasoline taxes are currently $0.178, while state and 

local gasoline taxes together average $0.231 per gallon, for a total tax burden of $0.401 

per gallon. 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, NHTSA deducts their value from retail fuel prices to 

determine the true value of fuel savings resulting from more stringent CAFE standards to 

the U.S. economy. 

NHTSA follows the assumptions used by EIA in AEO 2010 Early Release that 

state and local gasoline taxes will keep pace with inflation in nominal terms, and thus 

remain constant when expressed in constant dollars. In contrast, EIA assumes that 

federal gasoline taxes will remain unchanged in nominal terms, and thus decline 

throughout the forecast period when expressed in constant 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 rather than an ad valorem

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 to 

determine the economic value of each gallon of fuel saved during that year as a result of 

improved fuel economy. Subtracting fuel taxes from the retail prices forecast in AEO 

2010 Early Release results in a projected value for saving gasoline of $2.04 per gallon 

during 2010, rising to $3.48 per gallon by the year 2035,and averaging $2.91 over this 

25-year period. 

Although the Early Release of AEO 2010 contains only the Reference Case 

forecast, EIA includes “High Price Case” and “Low Price Case” forecasts in each year’s 

complete AEO, which reflect uncertainties regarding future levels of oil production and 

demand. For this final rule, NHTSA has continued to use the most recent “High Price 

Case” and “Low Price Case” forecasts available, which are those from AEO 2009. While 

NHTSA recognizes that these forecasts are not probabilistic, as NADA commented, we 

continue to believe that using them for sensitivity analyses provides valuable information 

for agency decision-makers, because it illustrates the sensitivity of the rule’s primary 

economic benefit resulting from uncertainty about future growth in world demand for 

petroleum energy and the strategic behavior of oil suppliers. 

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 

 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. 
465 

during 2030 (all figures in 2007 dollars). In conjunction with our assumption that fuel 

taxes will remain constant in real or inflation-adjusted 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 $1.66 to $5.09 per gallon in 2030 (again, all figures are in constant 

2007 dollars). In conducting the 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. Detailed results and 

discussion of this sensitivity analysis can be found in the FRIA. Generally, however, this 

analysis confirmed that as several commenters suggested, the primary economic benefit 

resulting from the rule – the value of fuel savings – is quite sensitive to forecast fuel 

prices. 

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. 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 economyimproving 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. 

One commenter, NADA, supported the agency’s assumption of a five-year period 

for buyers’ valuation of fuel economy, on the basis that the considerable majority of 

consumers seek to recoup costs quickly. However, NADA also encouraged the agencies 

to ensure that purchaser finance costs, opportunity costs of vehicle ownership, and 

increased maintenance costs were accounted for. Another commenter, James Adcock, 

argued that the assumption of a five-year period was irrational, because it did not account 

for the fact that first purchasers will be able to sell a higher-mpg vehicle for more money 

than a lower-mpg vehicle. 
466 

 In response to these comments, the agency notes that it 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 the shorter 5-year “payback period” we assume that 

manufacturers employ to represent the preferences of vehicle buyers. The 5-year 

payback period is only utilized to identify the likely sequence of improvements in fuel 

economy that manufacturers are likely to make to their different vehicle models. The 

procedure the agency uses for calculating lifetime fuel savings is discussed in detail in the 

following section, while alternative assumptions about the time horizon over which 

potential buyers consider fuel savings in their vehicle purchasing decisions are analyzed 

and discussed in detail in Section IV.G.6 below. 

Valuing fuel savings over vehicles’ entire lifetimes in effect recognizes the gains 

that future vehicle owners will receive, even if initial purchasers of higher-mpg models 

are not able to recover the entire remaining value of fuel savings when they re-sell those 

vehicles. The agency acknowledges, however, that it has not accounted for any effects of 

increased financing costs for purchasing vehicles with higher fuel economy or increased 

expenses for maintaining them on benefits to vehicle owners, over either the short-run 

payback period or the full lifetimes of vehicles. 

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.532 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.” 

As discussed in more detail in Section II.B.3 above and in Chapter 1 of the TSD, 

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 and NHTSA used projected car and truck volumes for this period from 

 

532 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 March 1, 

2010).
467 

Energy Information Administration’s (EIA’s) Annual Energy Outlook (AEO) 2009 in the 

NPRM analysis.533 For the analysis supporting this final rule, NHTSA substituted the 

revised forecasts of total volume reported in EIA’s Annual Energy Outlook 2010 Early 

Release. However, Annual Energy Outlook forecasts only total car and light truck sales, 

rather than sales at the manufacturer and model-specific level, which the agencies require 

in order to estimate the effects new standards will have on individual manufacturers.534 

To estimate sales of individual car and light truck models produced by each 

manufacturer, EPA purchased data from CSM Worldwide and used its projections of the 

number of vehicles of each type (car or truck) that will be produced and sold by 

manufacturers in model years 2011 through 2015.535 This provided year-by-year 

estimates of the percentage of cars and trucks sold by each manufacturer, as well as the 

sales percentages accounted for by each vehicle market segment. (The distributions of 

car and truck sales by manufacturer and by market segment for the 2016 model year and 

beyond were assumed to be the same as CSM’s forecast for the 2015 calendar year.) 

Normalizing these percentages to the total car and light truck sales volumes projected for 

2012 through 2016 in AEO 2009 provided manufacturer-specific market share and 

model-specific sales estimates for those model years. The volumes were then scaled to 

AEO 2010 total volume for each year. 

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.536 

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. 

 

533 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. 

534 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. 

535 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. 

536 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 March 1, 2010). These updated survival rates suggest 

that the expected lifetimes of recent-model passenger cars and light trucks are 13.8 and 14.5 years. 
468 

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).537 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 

FRIA and Chapter 4 of the 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 2010 Early Release Reference Case.538 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 survival rates. The resulting growth rate in average annual car and light 

truck use of 1.15 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.539 

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.540 

 

537 For a description of the Survey, see http://nhts.ornl.gov/quickStart.shtml (last accessed March 1, 2010). 538 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. 

539 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. 

540 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 
469 

NHTSA and EPA received no comments on their respective NPRMs indicating 

that these assumptions should be updated or reconsidered. Thus the agencies have 

continued to employ them in the analysis supporting this final rule. 

g. Accounting for the Fuel Economy Rebound Effect 

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 

generally concludes that a statistically significant rebound effect occurs when vehicle fuel 

efficiency improves.541 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 the NPRM.542 Recent studies provide some 

evidence that the rebound effect has been declining over time, and may 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, 

 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). 541 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. 

542 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. 
470 

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.543 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 used a 10 percent rebound effect in its 

analysis of fuel savings and other benefits from higher CAFE standards for the NPRM. 

The agency also sought comment on other alternatives for estimating the rebound effect, 

such as 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. 

NHTSA and EPA received far fewer comments on the rebound effect than were 

previously received to CAFE rulemakings. Only one commenter, NJ DEP, expressly 

supported the agencies’ assumption of 10 percent for the rebound effect; other 

commenters (CARB, CBD, ICCT) argued that 10 percent should be the absolute 

maximum value and that the rebound effect assumed by the agencies should be lower, 

and would also be expected to decline over time. ICCT added that the price elasticity of 

gasoline demand could be a useful comparison for the rebound effect, but should not be 

used to derive it. Other commenters argued that a rebound effect either was unlikely to 

occur (James Hyde), or was unlikely to produce a uniform increase in use of all vehicles 

with improved fuel economy (Missouri DNR). NADA argued, in contrast, that the 

agencies had not provided sufficient justification for lowering the rebound effect to 10 

percent from the “historically justified” range of 15 to 30 percent. 

 

543 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. 
471 

 The agency’s interpretation of historical and recent evidence on the magnitude 

of the rebound effect is that a significant fuel economy rebound effect exists, and 

commenters did not provide any additional data or analysis to justify revising our initial 

estimates of the rebound effect. Therefore, the data available at this time do not justify 

using a rebound effect below the 10 percent figure employed in its NPRM analysis. 

NHTSA believes that projections of a continued decline in the magnitude of the rebound 

effect are unrealistic because they assume the rate at which it declines in response to 

increasing incomes remain constant, and in some cases imply that the rebound effect will 

become negative in the near future. In addition, the continued increases in fuel prices 

used in this analysis will tend to increase the magnitude of the rebound effect, thus 

offsetting part of the effect of rising incomes. Thus the agency has continued to use the 

10 percent rebound effect over the entire future period spanned by the analysis it 

conducted for this final rule. 

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 

receive from the additional accessibility it provides.544 Because the increase in travel 

depends 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. Because no comments addressed 

this issue of benefits from increased vehicle use or the procedure used to estimate them, 

the agencies have finalized their proposed assumptions for purposes of the final rule 

analysis. 

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, 

 

544 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. 
472 

improving fuel economy thus provides some additional benefits to their owners.545 

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.546 

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 

55 percent full (i.e., 11 gallons in reserve), increasing this model’s actual on-road fuel 

economy from 24 to 25 mpg would extend its driving range from 216 miles (= 9 gallons 

x 24 mpg) to 225 miles (= 9 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 55.6 

(= 12,000 miles per year / 216 miles per refueling) to 53.3 (= 12,000 miles per year / 225 

miles per refueling), or by 2.3 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 DOTrecommended values of travel time per vehicle-hour is $24.64 (in 2007 dollars).547 

Assuming that locating a station and filling up requires a total of five minutes, the annual 

value of time saved as a result of less frequent refueling amounts to $4.72 (calculated as 

5/60 x 2.3 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. 

Although the agencies received no public comments on the procedures they used 

to estimate the benefits from less frequent refueling or the magnitude of those benefits, 

 

545 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. 

546 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 March 1, 2010); update available at

http://ostpxweb.dot.gov/policy/Data/VOTrevision1_2-11-03.pdf (last accessed March 1, 2010). 

547 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 

rural areas, and these percentages are used to calculate a weighted average of the value of time in all 

driving. 
473 

NHTSA recognizes that many assumptions made in its estimate for the value of increased 

driving range are subject to uncertainty. Chapter 4 of the TSD and Chapter VIII of 

NHTSA’s FRIA present detailed discussions of potential sources of uncertainty regarding 

these assumptions, and explore the effect of varying those assumptions on the estimated 

benefits from less frequent refueling. 

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.548 NHTSA employed these estimates previously in its 

analysis accompanying the MY 2011 final rule, and after reviewing the procedures used 

by FHWA to develop them and considering other available estimates of these values, 

continues to find them appropriate for use in this final rule. 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. 

One commenter, Inrix, Inc., stated that “deeply connected vehicles,” i.e., those 

with built-in computer systems to help drivers identify alternative routes to avoid 

congestion, are better able to avoid congestion than conventional vehicles. The 

commenter argued that increased use of these models may be less likely to contribute to 

increased congestion, and urged the agencies to consider the impact of this on their 

estimates of fuel use and GHG emissions. NHTSA notes that the number of such 

vehicles is extremely small at present, and is likely to remain modest for the model years 

affected by this rule, and has thus continued to employ the estimates of congestion costs 

from additional rebound-effect vehicle use that it utilized in the NPRM analysis. The 

agency recognizes that these vehicles may become sufficiently common in the future that 

their effect on the fuel economy drivers actually experience could become significant, but 

notes that to the extent this occurs, it would be reflected in the gap between test and onroad fuel economy. NHTSA will continue to monitor the production of such vehicles and 

their representation in the vehicle fleet in its future rulemakings. 

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 

 

548 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 March 1, 2010). 
474 

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.549 

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 final 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.550 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.551 The updated ORNL study was 

subjected to a detailed peer review comissioned by EPA, and ORNL’s estimates of the 

value of oil import externalities were subsequently revised to reflect their comments and 

recommendations of the peer reviewers.552 Finally, 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, as well as 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 increase in payments 

from U.S. oil purchasers to foreign oil suppliers beyond the increased purchase price of 

 

549 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.

550 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 March 1, 2010). 

551 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 March 1, 2010). 

552 Peer Review Report Summary: Estimating the Energy Security Benefits of Reduced U.S. Oil Imports, 

ICF, Inc., September 2007. [Locate]
475 

petroleum itself that results when increased U.S. import demand raises the world price of 

petroleum.553 However, the monopsony premium represents a financial transfer from 

consumers of petroleum products to oil producers, which does not entail the consumption 

of real economic resources. Thus reducing the magnitude of the monopsony premium 

produces no savings in real economic resources globally or domestically, although it does 

reduce the value of the financial transfer from U.S. consumers of petroleum products to 

foreign suppliers of petroleum. Accordingly, NHTSA’s analysis of the benefits from 

adopting proposed CAFE standards for MY 2012-2016 cars and light trucks excluded the 

reduced value of monopsony payments by U.S. oil consumers that might result from 

lower fuel consumption by these vehicles. The agency sought comment on whether it 

would be reasonable to include 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. 

 Commenters from NYU School of Law argued that monopsony payments should 

be treated as a distributional effect, not a standard efficiency benefit. An individual 

commenter, A.G. Fraas, also supported the agencies’ exclusion of the monopsony benefit, 

arguing that it represents a pecuniary externality that should not be considered in benefitcost analyses of governmental actions—again, in essence, that it represents a 

distributional effect. These comments support the agency’s decision to exclude any 

reduction in monopsony premium payments that results from lower U.S. petroleum 

imports from its accounting of benefits from reduced fuel consumption. Thus the agency 

continues to exclude any reduction in monopsony premium payments from its estimates 

of benefits for the stricter CAFE standards this final rule establishes. 

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 $0.169 per gallon (in 2007$). In contrast to reduced monopsony 

premium payments, 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 analysis of the economic benefits from adopting higher CAFE standards for MY 2012-

2016 cars and light trucks. 

A.G. Fraas commented on this proposed rule and felt that that magnitude of the 

economic disruption portion of the energy security benefit may be too high. He cites a 

recent paper written by Stephen P.A. Brown and Hillard G. Huntington, entitled 

“Estimating U.S. Oil Security Premiums” (September 2009). He commented that the 

Brown and Huntington premium associated with replacing oil imports by increased 

domestic oil production while keeping U.S. oil consumption unchanged (i.e., “the cost of 

 

553 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.
476 

displacing a barrel of domestic oil with a barrel of imported oil”) ranges from $2.17 per 

barrel in 2015 to $2.37 per barrel in 2030 (2007$), or $0.052 to $0.056 per gallon. 

In contrast, this rule is not a domestic oil supply initiative, but is one intended to 

reduce domestic oil consumption and thereby also to a significant extent reduce U.S. oil 

imports. When NHTSA used the ORNL Energy Security Premium Analysis to calculate 

the energy security premium for this rule, it based the energy security premium on 

decreased demand for oil and oil products. The agency estimated that most of the 

decreased demand for oil and oil products would come from decreased imports of oil, 

given the inelasticity of U.S. supply and the modest estimated change in world oil price. 

The Brown and Huntington estimates for this change, considering the disruption 

component alone, are much in line with the ORNL estimates. For a reduction in U.S. 

consumption that largely leads to a reduction in imports, Brown and Huntington estimate 

a midpoint premium of $4.98 per barrel in 2015 rising to $6.82 per barrel by 2030 

(2007$). The 2015 disruption premium estimate has an uncertainty range of $1.10 to 

$14.35 (2007$). The corresponding 2030 estimate from ORNL is only about 19 percent 

higher ($8.12/bbl), with an uncertainty range -- $3.90 to $13.04 – completely enclosed by 

that of Brown and Huntington. Thus, we conclude that the ORNL disruption security 

premium estimates for this rule is roughly consistent with the Brown and Huntington 

results.

Commenters from the NYU School of Law agreed that reduced disruption costs 

should be counted as a benefit, but stated that the agencies should disaggregate and 

exclude any reduction in wealth transfers that occur during oil shocks from their 

calculation of this benefit. NHTSA acknowledges that for consistency with its exclusion 

of reductions in monopsony premium payments from the benefits of reduced fuel 

consumption and petroleum imports, it may be necessary to exclude reductions in the 

wealth transfer component of macroeconomic disruption costs from the benefits of 

reducing U.S. petroleum imports. In future rulemakings, the agency will assess the 

arguments for excluding the wealth transfer component of disruption costs from its 

accounting of benefits from reducing domestic fuel consumption and U.S. petroleum 

imports, and explore whether it is practical to estimate its value separately and exclude it 

from the benefits calculations. 

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 

savings.554 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 

 

554 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. 
477 

are unlikely to result from reductions in consumption of petroleum products and oil 

imports on the scale of those resulting from higher CAFE standards. 

Commenters from the NYU School of Law stated that the agencies were justified 

in not including a value for military security, as long as the agencies incorporate the 

increased protection value of the SPR into their calculation of disruption effects. CBD 

and James Adcock disagreed, and stated that the agencies should, in fact, include a value 

for military security – CBD cited several studies, and Mr. Adcock presented his own 

value of $0.275 per gallon. CARB stated simply that the agencies should include a 

sensitivity analysis for military security at $0.15 per gallon, in addition to the $0.05 per 

gallon already evaluated. EDF also cited studies claiming a benefit for increased national 

security 

In response to the comments from CBD and Mr. Adcock, NHTSA’s examination 

of the historical record indicates that while costs for U.S. military security may vary over 

time in response to long-term changes in the level of oil imports into the U.S., these costs 

are unlikely to decline in response to the small reductions in U.S. oil imports (relative to 

total oil imports) that are typically projected to result from raising CAFE standards for 

light-duty vehicles. U.S. military activities in regions that represent vital sources of oil 

imports also serve a broader range of security and foreign policy objectives than simply 

protecting oil supplies, and as a consequence are unlikely to vary significantly in 

response to the modest changes in the level of oil imports likely to be prompted by higher 

CAFE standards. 

The agency does not find evidence in the historical record that Congress or the 

Executive Branch has ever attempted to calibrate U.S. military expenditures, overall force 

levels, or specific deployments to any measure of global oil market activity or U.S. 

reliance on petroleum imports, or to any calculation of the projected economic 

consequences of hostilities arising in the Persian Gulf. Instead, changes in U.S. force 

levels, deployments, and thus military spending in that region have been largely governed 

by political events, emerging threats, and other military and political considerations, 

rather than by shifts in U.S. oil consumption or imports. NHTSA thus concludes that the 

levels of U.S. military activity and expenditures are likely to remain unaffected by even 

relatively large changes in light duty vehicle fuel consumption, and has continued to 

exclude any reduction in these outlays from its estimates of the economic benefits 

resulting from lower U.S. fuel consumption and petroleum imports. 

In response to the comments from the NYU School of Law, NHTSA will explore 

how it might estimate the contribution of the SPR to reducing potential macroeconomic 

costs from oil supply disruptions, although the agency notes that to some extent the 

existence of the SPR may already be reflected in the magnitude of price elasticities of the 

supplies of foreign oil available for import to the U.S. However, the agency notes that 

the size of the SPR has not appeared to change significantly in response to historical 

variation in U.S. petroleum consumption or imports, suggesting that its effect on the 
478 

magnitude of potential macroeconomic costs from disruptions in petroleum imports may 

be limited. 

Finally, in response to the comment from EDF, the agency notes that the value of 

$0.05 per gallon for the reduction in military security outlays that is used for sensitivity 

analysis assumes that the entire reduction in U.S. petroleum imports resulting from 

higher CAFE standards would reflect lower imports from Persian Gulf suppliers, that the 

estimate of annual U.S. military costs for securing Persian Gulf oil supplies reported by 

Delucchi and Murphy is correct, and that Congress would reduce half of these outlays in 

proportion to any decline in U.S. oil imports from the region. The $0.15 per gallon 

estimate recommended by CARB would thus require that U.S. military outlays to protect 

Persian Gulf oil supplies are three times as large as Delucchi and Murphy estimate, or 

that Congress would reduce military spending in that region more than in proportion to 

any reduction in U.S. petroleum imports originating there. Because it views these 

possibilities as unrealistic, NHTSA has continued to use the $0.05 figure in its sensitivity 

analysis, rather than the higher figure suggested. 

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 estimated 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 reduce domestic fuel 

refining.555 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.556 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.557 

NHTSA employed this estimate in the analysis presented in the NPRM, and 

received no comments on the assumptions or data used to develop it. Hence the agency 

has continued to assume that each 100 gallons of fuel saved as a consequence of the 

CAFE standards established by this final rule will reduce total U.S. imports of crude 

petroleum or refined fuel by 95 gallons. NHTSA has applied the estimates of economic 

benefits from lower U.S. petroleum imports to the resulting estimate of reductions in 

imports of crude petroleum and refined fuel. 

 

555 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. 

556 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. 557 This figure is calculated as 50 gallons + 50 gallons*90% = 50 gallons + 45 gallons = 95 gallons. 
479 

l. Air Pollutant Emissions 

i. Changes in Criteria Air Pollutant Emissions 

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. We note that any benefits in terms of criteria air pollutant 

reductions resulting from this rule would not be direct benefits. 

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 (MOVES 2010).558 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.

559 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 

 

558 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. 

559 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. 
480 

Regulated Emissions in Transportation (GREET) model.560 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.561 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 

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.562

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.563 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 

 

560 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).

561 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. 562 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. We note that while assuming that all changes in upstream emissions result from a 

decrease in petroleum production and transport, our analysis of downstream criteria pollutant impacts 

assumes no change in the composition of the gasoline fuel supply. 

563 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. 
481 

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 per-ton values for reducing emissions from vehicle 

use than for reductions in emissions of that occur during fuel production and 

distribution.564 NHTSA applies these separate values to its estimates of changes in 

emissions from vehicle use and fuel production and 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. 

NHTSA and EPA received no comments on the procedures they employed to 

estimate the reductions in emissions of criteria air pollutants reported in their respective 

NPRMs, or on the unit economic values the agencies applied to those reductions to 

calculate their total value. Thus the agencies have continued to employ these procedures 

and values in the analysis reported in this final rule. However, the agencies have made 

some minor changes in the emission factors used to calculate changes in emissions 

resulting from increased vehicle use; these revisions are detailed in Chapter 4 of the Final 

Technical Support Document accompanying this rule. 

 

564 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. 
482 

ii. Reductions in CO2 Emissions 

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 Value of Reductions in CO2 Emissions 

NHTSA has taken the economic benefits of reducing CO2 emission into account 

in this rulemaking, both in developing alternative CAFE standards and in assessing the 

economic benefits of each alternative that was considered. Since direct estimates of the 

economic benefits from reducing CO2 or other 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. Thus the benefits from reducing CO2 emissions are usually 

measured by the savings in estimated economic damages that an equivalent increase in 

emissions would otherwise have caused. 

The “social cost of carbon” (SCC) is intended to be a monetary measure of the 

incremental damage resulting from increased carbon dioxide (CO2) emissions, including 

losses in agricultural productivity, the economic damages caused by adverse effects on 

human health, property losses and damages resulting from sea level rise, and changes in 

the value of ecosystem services. The SCC is usually expressed in dollars per additional 

metric ton of CO2 emissions occurring during a specified year, and is higher for more 

distant future years because the damages caused by an additional ton of emissions 
483 

increase with larger existing concentrations of CO2 in the earth’s atmosphere. Marginal 

reductions in CO2 emissions that are projected to result from lower fuel consumption, 

refining, and distribution during each future year are multiplied by the estimated SCC 

appropriate for that year, which is used to represent the value of eliminating each ton of 

CO2 emissions, to determine the total economic benefit from reduced emissions during 

that year. These benefits are then discounted to their present value as usual, using a 

discount rate that is consistent with that used to develop the estimate of the SCC itself. 

[Insert comment summary] 

After carefully considering comments received to the NPRM, for purposes of this 

final rule, NHTSA has relied on estimates of the SCC developed by a federal interagency 

working group convened for the specific purpose of developing new estimates to be used 

by U.S. federal agencies in regulatory evaluations. Under Executive Order 12866, 

federal agencies are required, to the extent permitted by law, “to assess both the costs and 

the benefits of the intended regulation and, recognizing that some costs and benefits are 

difficult to quantify, propose or adopt a regulation only upon a reasoned determination 

that the benefits of the intended regulation justify its costs.” The group’s purpose in 

developing new estimates of the SCC was to allow federal agencies to incorporate the 

social benefits of reducing carbon dioxide (CO2) emissions into cost-benefit analyses of 

regulatory actions that have small, or “marginal,” impacts on cumulative global 

emissions, as most federal regulatory actions can be expected to have. 

The interagency group convened on a regular basis to consider public comments, 

explore the technical literature in relevant fields, and discuss key inputs and assumptions 

in order to generate SCC estimates. Agencies that actively participated in the interagency 

process included the Environmental Protection Agency and the Departments of 

Agriculture, Commerce, Energy, Transportation, and Treasury. This process was 

convened by the Council of Economic Advisers and the Office of Management and 

Budget, with active participation and regular input from the Council on Environmental 

Quality, National Economic Council, Office of Energy and Climate Change, and Office 

of Science and Technology Policy. The main objective of this process was to develop a 

range of SCC values using a defensible set of input assumptions that are grounded in the 

existing literature. In this way, key uncertainties and model differences can more 

transparently and consistently inform the range of SCC estimates used in the rulemaking 

process. 

The interagency group developed its estimates of the SCC estimates while clearly 

acknowledging the many uncertainties involved, and with a clear understanding that they 

should be updated over time to reflect increasing knowledge of the science and 

economics of climate impacts. Technical experts from numerous agencies met on a 

regular basis to consider public comments, explore the technical literature in relevant 

fields, and discuss key model inputs and assumptions. The main objective of this process 

was to develop a range of SCC values using a defensible set of input assumptions 
484 

grounded in the existing scientific and economic literature. In this way, key uncertainties 

and model differences transparently and consistently can inform the range of SCC 

estimates used in the rulemaking process. 

The group ultimately selected four SCC values for use in regulatory analyses. 

Three values are based on the average SCC from three integrated assessment models, 

using discount rates of 2.5, 3, and 5 percent. The fourth value, which represents the 95th

percentile SCC estimate across all three models at a 3 percent discount rate, is included to 

represent the possibility of higher-than-expected impacts from temperature change that 

lie further out in the tails of the distribution of SCC estimates. Table IV.C.3-2 

summarizes the interagency group’s estimates of the SCC during various future years. 

The SCC estimates reported in the table assume that the marginal damages from 

increased emissions are constant for small departures from the baseline emissions path, 

an approximation that is reasonable for policies that have effects on emissions that are 

small relative to cumulative global carbon dioxide emissions. 

Table IV.C.3-2 

Social Cost of CO2 Emissions, 2010 – 2050 (2007 dollars) 

Discount Rate 5% 3% 2.5% 3% 

Source Average of Estimates 95th Percentile Estimate

2010 4.7 21.4 35.1 64.9 

2015 5.7 23.8 38.4 72.8 

2020 6.8 26.3 41.7 80.7 

2025 8.2 29.6 45.9 90.4 

2030 9.7 32.8 50.0 100.0 

2035 11.2 36.0 54.2 109.7 

2040 12.7 39.2 58.4 119.3 

2045 14.2 42.1 61.7 127.8 

2050 15.7 44.9 65.0 136.2 

As Table IV.C.3-2 shows, the four SCC estimates selected by the interagency 

group for use in regulatory analyses are $5, $21, $35, and $65 (in 2007 dollars) for 

emissions occurring in the year 2010. The first three estimates are based on the average 

SCC across models and socio-economic and emissions scenarios at the 5, 3, and 2.5 

percent discount rates, respectively. The fourth value is included to represent the higherthan-expected impacts from temperature change further out in the tails of the SCC 

distribution. For this purpose, the group elected to use the SCC value for the 95th

percentile at a 3 percent discount rate. 
485 

The central value identified by the interagency group is the average SCC across 

models at the 3 percent discount rate, or $21 per metric ton in 2010. To capture the 

uncertainties involved in regulatory impact analysis, however, the group emphasized the 

importance of considering the full range of estimated SCC values. As the table also 

shows, the SCC estimates also rise over time; for example, the central value increases to 

$24 per ton of CO2 in 2015 and $26 per ton of CO2 in 2020. 

The interagency group is committed to updating these estimates as the science and 

economic understanding of climate change and its impacts on society improves over 

time. Specifically, the group has set a preliminary goal of revisiting the SCC values 

within two years or at such time as substantially updated models become available, and to 

continue to support research in this area. U.S. federal agencies will periodically review 

and reconsider estimates of the SCC used for cost-benefit analyses to reflect increasing 

knowledge of the science and economics of climate impacts, as well as improvements in 

modeling. 

Details of the process used by the interagency group to develop its SCC estimates, 

complete results including year-by-year estimates of each of the four values, and a 

thorough discussion of their intended use and limitations is provided in the document 

Social Cost of Carbon for Regulatory Impact Analysis Under Executive Order 12866, 

Interagency Working Group on Social Cost of Carbon, United States Government, 

February 2010.565

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 proposed increases in CAFE 

standards for MY 2012-2016 passenger cars and light trucks, NHTSA employed a 

discount rate of 3 percent per year, but also tested the sensitivity ofpresents these benefit 

and cost estimates to the use ofat a 7 percent discount rate. Although these are the same 

discount rates that were used to analyze the benefits and costs of CAFE standards 

adopted in the agency’s MY 2011 final rule, NHTSA has chosen to rely on the 3 percent 

rate as the basis for the Reference Case in this final rule rather than the 7 percent rate it 

employed in previous rulemakings, for the reasons discussed below.

The primary reason thatWhile both discount rates are presented, NHTSA has 

selectedbelieves that 3 percent ias the more appropriate rate for discounting future 

benefits from increased CAFE standards is that the agency believesbecause most or all of 

 

565 This document is available at 

http://www2.eere.energy.gov/buildings/appliance_standards/commercial/pdfs/sem_finalrule_appendix15a.

pdf (last accessed March 2, 2010). 

Comment [A51]: These should both be presented 

as co-equals. 
486 

vehicle manufacturers’ costs for complying with higher CAFE standards will ultimately 

be reflected in higher sales prices for their new vehicle models. By increasing sales 

prices for new cars and light trucks, CAFE regulations 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 consumers’ rate of time 

preference.566 

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 consumers’ rate of time 

preference, NHTSA has employedbelieves that 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 is more appropriate than 7 percent but presents both.

567 

One commenter, NRDC, supported the agencies’ use of a 3 percent discount rate as 

consistent with DOE practice in energy efficiency-related rulemakings and OMB 

guidance. OMB guidance actually requires that benefits and costs be presented at both a 3 

and 7 percent discount rate.

Because there is some remaining uncertainty about whether vehicle manufacturers 

will completely recover their costs for complying with higher CAFE standards by 

increasing vehicle sales prices, however, NHTSA has also tested the sensitivity ofalso 

presents these benefit and cost estimates to the use ofat 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 OMB 

estimates that this rate currently averages about 7 percent.568 Thus the agency has also 

testing the sensitivity ofexamined its benefit and cost estimates for alternative MY 2012-

2016 CAFE standards to the use ofat a 7 percent real discount rate. 

In its proposed rule, NHTSA sought comment on whether it should evaluate 

CAFE standards using a discount rate of 3 percent, 7 percent, or an alternative value. 

NRDC not only opposed the agency’s use of a 7 percent discount rate, but also opposed 

conducting sensitivity analyses with discount rates higher than 3 percent. In contrast, two 

other commenters, NADA and the Institute for Energy Research, advised that the 

agencies should use discount rates of 7 percent or higher. NADA argued that the most 

appropriate discount rate would be one closer to historical financing rates on motor 

vehicle loans (which currently average about 6.5 percent), while the Institute for Energy 

 

566 Id. 567 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). 568 Id.
487 

Research argued that consumers may have much higher discount rates than the agencies 

assumed, perhaps even as high as 25 percent. 

After carefully considering these comments, NHTSA has elected to rely primarily 

on theuse 3 and 7 percent discount rate in the analysis supporting this final rule. As 

indicated above, however, the agency believes that vehicle manufacturers will recover 

most or all of their added costs for complying with the CAFE standards this rule 

establishes by raising sales prices for some or all vehicle models. As a consequence, this 

regulation will thus primarily affect vehicle purchases and related consumption decisions, 

which suggests that its future benefits and costs should be discounted at the rate of time 

preference vehicle buyers reveal in their consumption and savings behavior. OMB’s 3 

percent figure appears to be a conservative (i.e., low) estimate of this rate, because it 

assumes in effect that vehicle buyers face little risk about the value of future fuel savings 

and other benefits from the rule; nevertheless, in the current economic environment it 

appears to represent a reasonable estimate of consumers’ rate of time preference. Thus 

NHTSA has mainly relied upon 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 

One important exception to the 3 percent discount rate is the rates used to 

discount benefits from reducing CO2 emissions from the years in which reduced 

emissions occur, which span the lifetimes of MY 2012-2016 cars and light trucks, to their 

present values. In order to ensure consistency in the derivation and use of the interagency 

group’s estimates of the unit values of reducing CO2 emissions, the benefits from 

reducing those emissions during each future year are discounted using the same

“intergenerational” discount rates that were used to derive each of the alternative unit 

values of reducing CO2 emissions. As indicate in Table IV.C.3-2 above, these rates are 

2.5 percent, 3 percent, and 5 percent depending on which estimate of the SCC is being 

considered.569 

n. Accounting for Uncertainty in Benefits 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, [_________________________], and the discount rate applied to future benefits 

 

569 The fact that the 3 percent discount rate used by the interagency group to derive its central estimate of 

the SCC is identical to the 3 percent short-term or “intra-generational” discount rate used by NHTSA to 

discount future benefits other than reductions in CO2 emissions is coincidental, and should not be 

interpreted as a required condition that must be satisfied in future rulemakings. 
488 

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 Can Readers Find More Information About the Economic 

Assumptions? 

 Much more detailed information is provided in Chapter VIII of the FRIA, and a 

discussion of how NHTSA and EPA jointly reviewed and updated economic assumptions 

for purposes of this final rule is available in Chapter 4 of the joint 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 

final rule, NHTSA-2009-0059, and on NHTSA’s website.570 Finally, because much of 

NHTSA’s economic analysis for purposes of this final rule 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.571

4. How Does NHTSA Use the Assumptions in its Modeling Analysis?

In developing today’s final 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, 

 

570 [link] 571 74 FR 14308-14358 (Mar. 30, 2009). 
489 

(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 final rule, as are inputs for and 

outputs from analysis of today’s final CAFE standards. 

a. How Does the Model Operate? 

As discussed above, the agency uses the Volpe model to estimate how 

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 and 

reference market forecast discussed above in Section IV.C.1 and Chapter 1 of the TSD, 

(b) technology-related estimates discussed above in Section IV.C.2 and Chapter 3 of the 

TSD, (c) economic inputs discussed above in Section IV.C.3 and Chapter 4 of the TSD, 

and (d) inputs defining baseline and 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 to identify a set of technologies 

the manufacturer could apply in response to new CAFE standards.572 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”573 available technologies; or 

 

572 NHTSA does its best to remain scrupulously neutral in the application of technologies through the 

modeling analysis, to avoid picking technology “winners.” The technology application methodology has 

been reviewed by the agency over the course of several rulemakings, and commenters have been generally 

supportive of the agency’s approach. See, e.g., 74 Fed Reg. at 14238-14246 (Mar. 30, 2009). 573 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 

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 
490 

(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.574

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. This is designed to simulate a manufacturer’s decision to plan for CAFE 

obligations several years in advance, which NHTSA believes better replicates 

manufacturers’ actual behavior as compared to the year-by-year evaluation which EPCA 

would otherwise require. 

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.575 The multi-year planning capability 

mentioned above increases the model’s ability to simulate manufacturers’ real-world 

behavior, accounting for the fact that manufacturers will seek out compliance paths for 

several model years at a time, while accommodating the year-by-year requirement. 

The model also calculates the costs, effects, and benefits of technologies that it 

estimates could be added in response to a given CAFE standard.576 It calculates costs by 

 given model year that these constraints make further technology application unavailable, technologies are 

“exhausted” for that manufacturer in that model year. 

574 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. 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. NHTSA thus includes the possibility of 

manufacturers choosing to pay fines in its modeling analysis in order to achieve what the agency believes is 

a more realistic simulation of manufacturer decision-making. Unlike flex-fuel and other credits, NHTSA is 

not barred by statute from considering fine-payment in determining maximum feasible standards under 

EPCA/EISA. 49 U.S.C. 32902(h). 

575 49 U.S.C. 32902(a) states that at 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 each 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. 32902(b)(2)(C) also requires that standards increase ratably between MY 2011 and MY 2020. 

576 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 February 21, 2010). 
491 

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 

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 Considered 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 today’s 

final standards, the agency did not use the Volpe model’s curve fitting routines; rather, as 

discussed above in Section II, the agency fitted curves outside the model (as for the 

NPRM) but elected to retain the curve shapes defining the proposed standards. 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.577 Also, although some observers have criticized analyses the agency has 

conducted using the Volpe model, those criticisms have largely concerned inputs to the 

 

577 74 FR 14372 (Mar. 30, 2009). 
492 

model (such as fuel prices and the estimated economic cost of CO2 emissions), not the 

model itself. In comments on the NPRM preceding today’s final rule, one of these 

observers, the Center for Biological Diversity (CBD), suggested that the revisions to such 

inputs have produced an unbiased cost-benefit analysis. 

One commenter, the International Council on Clean Transportation (ICCT) 

suggested that the Volpe model is excessively complex and insufficiently transparent. 

However, in NHTSA’s view, the complexity of the Volpe model has evolved in response 

to the complex analytical demands surrounding very significant regulations impacting a 

large and important sector of the economy, and ICCT’s own comments illustrate some of 

the potential pitfalls of model simplification. Furthermore, ICCT’s assertions regarding 

model transparency relate to the use of confidential business information, not to the 

Volpe model itself; as discussed elsewhere in this final rule, NHTSA and the Volpe 

Center have taken pains to make the Volpe model transparent by releasing the model and 

supporting documentation, along with the underlying source code and accompanying 

model inputs and outputs. Therefore, the agency disagrees with these ICCT comments. 

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. 

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

that would be “maximum feasible” for that year.578 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. 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. 

 

578 49 U.S.C. 32902(a). 
493 

In response to these concerns, and to 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 final CAFE standards for 

passenger cars, the CAFE model estimated that manufacturers could apply turbocharged 

SGDI engines mated with dual-clutch AMTs to 2.4 million passenger cars in MY 2016, 

about 22 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 

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 final 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 
494 

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 Has DOT Made to the Model? 

As discussed in the NPRM preceding today’s final rule, the Volpe model has been 

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.” Multiyear 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.579 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. 

 

579 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. 
495 

The model now includes this capability, and NHTSA has applied it in conducting 

analysis to support the NPRM and in analyzing the standards finalized today. 

Consequently, this new capability 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 FRIA. 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 

values of these coefficients in published studies. 

In the NPRM preceding today’s final rule, NHTSA sought comment on ways to 

improve on this earlier work and develop this capability effectively. Some comments 

implied that the agency should continue work to do so, without providing specific 

recommendations. The Alliance of Automobile Manufacturers identified consumer 

choice as one of several factors outside the industry’s control yet influential with respect 

to the agencies’ analysis. Also, the University of Pennsylvania Environmental Law 

Project suggested that the rule would change consumers’ vehicle purchasing decisions, 

and the California Air Resources Board expressed support for continued consideration of 

consumer choice modeling. On the other hand, citing concerns regarding model 

calibration, handling of advanced technologies, and applicability to the future light 

vehicle market, ACEEE, ICCT, UCS, and NRDC all expressed opposition to the 
496 

possibility of using consumer choice models in estimating the costs and benefits of new 

standards. Notwithstanding comments on this issue, NHTSA has been unable to further 

develop this capability in time to include it in the analysis supporting decisions regarding 

final CAFE standards. The agency will, however, continue efforts to develop and make 

use of this capability in future rulemakings, taking into account comments received in 

connection with today’s final rule. 

d. Does the Model Set the Standards? 

 Since NHTSA began using the Volpe model in CAFE analysis, some commenters 

have interpreted the agency’s use of the model as the way by which the agency chooses 

the maximum feasible fuel economy standards. This is incorrect. 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, it was not the model’s decision to seek that level of stringency, it 

was the agency’s, as it is always the agency’s decision what level of CAFE stringency is 

appropriate. Ultimately, NHTSA’s selection of appropriate CAFE standards 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 final standards, based on the agency’s determinations and 

assumptions. Others assess alternative standards, some of which exceed the final 

standards and/or the point at which net benefits are maximized.580 These comprehensive 

analyses, which also included scenarios with different economic input assumptions as 

 

580 See Section IV.F below for a discussion of the regulatory alternatives considered in this rulemaking. 
497 

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. 32902(f). Additionally, the agency’s 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 Does 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)581 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 or 2007 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 final 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. 

NHTSA is aware of two attempts by commenters to install and use the Volpe 

model in connection with the NPRM. James Adcock, an individual reviewer, reported 

difficulties installing the model on a computer with Microsoft® Office 2003 installed. 

Also, students from the University of California at Santa Barbara, though successful in 

installing and running the model, reported being unable to reproduce NHTSA’s results 

underlying the development of the shapes of the passenger car and light truck curves. 

Regarding the difficulties Mr. Adcock reported encountering, NHTSA staff is 

aware of no attempts to contact the agency for assistance locating supporting material 

related to the MYs 2012-2016 CAFE rulemaking. Further, the model documentation 

provides specific minimum hardware requirements and also indicates operating 

environment requirements, both of which have remained materially unchanged for more 

than a year. Volpe Center staff members routinely install and run the model successfully 

on new laptops, desktops, and servers as part of normal equipment refreshes and 

interagency support activities. We believe, therefore, that if the minimum hardware and 

operating environment requirements are met, installing and running the model should be 

straightforward and successful. The model documentation notes that some of the 

development and operating environment used by the Volpe model (e.g., the software 

environment rather than the hardware on which that software environment operates), 

particularly the version of Microsoft® Excel used by the model, is Microsoft® Office 

2003. We recognize that some users may have more recent versions of Microsoft® 

 

581 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. 
498 

Office. However, as in the case of other large organizations, software licensing 

decisions, including the version of Microsoft® Office, is centralized in the Office of the 

Chief Information Officer. Nonetheless, the Volpe Model is proven on both Microsoft® 

Office version 2003 and the newer 2007 version. 

As discussed in Section II.C, considering comments by the UC Santa Barbara 

students regarding difficulties reproducing NHTSA’s analysis, NHTSA reexamined its 

analysis, and discovered some erroneous entries in model inputs underlying the analysis 

used to develop the curves proposed in the NPRM. These errors are discussed in the 

FRIA and have since been corrected. Updated inputs and outputs have been posted to 

NHTSA’s web site, and should enable outside replication of the analysis documented in 

today’s notice. 

5. How Did NHTSA Develop the Shape of the Target Curves for the Final 

Standards?

 In developing the shape of the target curves for today’s final 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 final 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. Given 

comments received in response to the NPRM preceding this final rule, it appears that the 

constrained linear function developed here significantly mitigates prior steepness 

concerns, and appropriately balances, for purposes of this rulemaking, the objectives of 

(1) discouraging vehicle downsizing that could compromise highway safety and (2) 

avoiding an overly strong incentive to increase vehicle sizes in ways that could 

compromise energy and environmental benefits. 

a. Standards are Attribute-Based and Defined by a Mathematical Function 

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.582 Like the MY 2011 

standards, the MY 2012-2016 passenger car and light truck standards are attribute-based 

 

582 49 U.S.C. 32902(a)(3)(A). 
499 

and defined by a mathematical function.583 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. 

Second, attribute-based standards minimize the incentive for manufacturers to 

respond to CAFE in ways harmful to safety.584 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 

 

583 As discussed in Chapter 2 of the TSD, EPA is also setting 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. 

584 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. 
500 

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.585 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 universal 

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 finalized 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. Section II discusses the reasons that the agency does not 

believe that fuel savings and emissions reductions will be significantly lower than 

anticipated such as to warrant additional backstop measures beyond the one mandated by 

EISA, but the agency will monitor the situation and consider further rulemaking solutions 

if necessary and as lead time permits. See also Section IV.E.3 below for further 

discussion of NHTSA’s backstop authority. 

b. What Attribute Does NHTSA Use, and Why? 

Consistent with the MY 2011 CAFE standards, NHTSA is using 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. 

As discussed in Section IV.D.1.a.ii below, 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. NHTSA’s research indicates that reductions in vehicle mass tend to compromise 

 

585 Id. at 4-5, finding 10. 
501 

vehicle safety if applied on an equal basis across the entire light duty vehicle fleet, 

however if greater mass reduction is applied to the higher mass vehicles (the larger light 

trucks), an improvement in aggregate fleet safety is possible. Footprint-based standards 

provide an incentive to use advanced lightweight materials and structures that, if 

carefully designed and validated, should minimize impacts on safety, although that will 

be better proven as these vehicles become more prevalent in the future. 

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. 

 As discussed above in Section II.C, NHTSA and EPA sought comment on 

whether the agencies should consider setting standards for the final rule based on another 

attribute or another combination of attributes. Although NHTSA specifically requested 

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, commenters raising the issue 

largely reiterated comments submitted in prior CAFE rulemakings, which the agency 

answered in the MY 2011 final rule.586 As a result, and as discussed further in Section II, 

the agencies finalized target curve standards based on footprint for MYs 2012-2016. 

c. What Mathematical Function Did 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: 

( )

( )

1

1 11

1

FOOTPRINT c d

FOOTPRINT c d

TARGET e

a ba e

−

−

= ⎛ ⎞ + − ⎜ ⎟ ⎝ ⎠ +

 

586 See 74 Fed. Reg. at 14358-59 (Mar. 30, 2009).
502 

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 2.718,587 c 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: 

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

 

587 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. 
503 

d. What Mathematical Function is NHTSA Using for the MYs 2012-2016 

CAFE Standards, and Why? 

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 for the final 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 final 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 

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 discussed above in Section II.C, NHTSA and EPA have considered comments by 

students from UC Santa Barbara indicating that the passenger car and light truck curves 

should be flatter. The agencies conclude that flatter curves would reduce the incentives 

intended in shifting from “flat” CAFE standards to attribute-based CAFE and GHG 

standards—those being the incentive to respond to attribute-based standards in ways that 

minimize compromises in vehicle safety, and the incentive for more manufacturers (than 

primarily those selling a wider range of vehicles) across the range of the attribute to have 

to increase the application of fuel-saving technologies. 

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 at that time, 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 final 

standards, and considered comments discussed above in Section II, NHTSA, with EPA, 
504 

concludes that for both passenger cars and light trucks, the constrained linear functions 

finalized today remain meaningfully sloped over a wide footprint range, thereby 

providing a well-distributed disincentive to downsize vehicles in ways that could 

compromise highway safety. Further, the constrained linear functions finalized today are 

not so steeply sloped that they 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, today’s final CAFE 

standards 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. 

e. How Did NHTSA Fit the Coefficients that Determine the Shape of the 

Final Curves? 

For purposes of this final rule and the preceding NPRM, and for EPA’s use in 

developing new CO2 emissions standards, potential curve shapes were fitted 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 V of the FRIA and Chapter 3 of 

the joint TSD588 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 “phase-in 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 

 

588 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 final standards. NHTSA and EPA did include diesel engines and 

strong hybrid vehicle technologies in all other portions of their analyses. 
505 

basis (than the baseline fleet) for estimating the statistical relationship between vehicle 

size and fuel economy. 

However, while this approach produced curves that the agencies’ judged 

appropriate for the NPRM, it did not do so for the final rule. Corrections to some 

engineering inputs in NHTSA’s market forecast, while leading to a light truck curve 

nearly identical to that derived for the NPRM, yielded a considerably steeper passenger 

car curve. As discussed above in Section II, NHTSA and EPA are concerned about the 

incentives that would result from a significantly steeper curve. Considering this, and 

considering that the updated analysis—in terms of the error measure applied by the 

agency—supports the curve from the NPRM nearly as well as it supports the steeper 

curve, NHTSA and EPA are promulgating final standards based on the curves proposed 

in the NPRM. 

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. Section II.C also discusses 

comments NHTSA and EPA received on this process, and on the outcomes thereof. 

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.589 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 2020.590 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 

and light trucks at the maximum feasible average fuel economy level that the Secretary 

decides the manufacturers can achieve in that model year, based on a balancing of 

 

589 EISA added the following additional requirements-- 

• Standards must be attribute-based and expressed in the form of a mathematical function. 49 

U.S.C. 32902(b)(3)(A). 

• Standards for MYs 2011-2020 must “increase ratably” in each model year. 49 U.S.C. 

32902(b)(2)(C). This requirement does not have a precise mathematical meaning, particularly 

because it must be interpreted in conjunction 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. 

Generally speaking, the requirement for ratable increases means that the annual increases 

should not be disproportionately large or small in relation to each other. 590 49 U.S.C. 32902(b)(2)(A). 
506 

express statutory and other factors.591 The implication of this second requirement is that 

it calls for setting a standard that exceeds 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. The ultimate determination of what standards can be considered 

maximum feasible involves a weighing and balancing of these factors. NHTSA received 

a number of comments on how the agency interprets its statutory requirements, and will 

respond to them in this section. 

i. Statutory Factors Considered 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 Feasibility 

“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. 

Commenters appear to have generally agreed with the agency’s interpretation of 

technological feasibility. NESCAUM commented that the proposed standards were 

technologically feasible and cost-effective in the rulemaking timeframe. CBD and the 

UCSB students focused their comments more on the technology-forcing aspects of the 

definition of technological feasibility. CBD commented that the standards must be below 

the level of all that is technologically feasible if all the technology necessary to meet 

them is available today. The UCSB students similarly commented that the agencies 

should not base regulations for MY 2016 solely on technologies available today, that they 

should also consider technologies still in the research phase for the later years of the 

rulemaking timeframe. 

 While NHTSA agrees that the technological feasibility factor can include a degree 

of technology forcing, and that this could certainly be appropriate given EPCA’s 

 

591 49 U.S.C. 32902(a). 
507 

overarching purpose of energy conservation, we note that determining what levels of 

technology to require in the rulemaking timeframe requires a balancing of all relevant 

factors. Technologies that are still in the research phase now may be sufficiently 

advanced to become available for commercial application in, for example, MY 2016. 

However, given the rate at which the standards already require average mpg to rise, and 

given the current state of the industry, NHTSA does not believe that it would be 

reasonable to set standards mandating that manufacturers devote substantial resources to 

bringing these technologies to market immediately rather than to simply improving the 

fuel economy of their fleets by applying more of the technologies on the market today. 

As will be discussed further in section IV.F below, technological feasibility is one of four 

factors that the agency balances in determining what standards would be maximum 

feasible for each model year. As the balancing may vary depending on the circumstances 

at hand for the model years in which the standards are set, the extent to which 

technological feasibility is simply met or plays a more dynamic role may also shift. 

(2) Economic Practicability 

“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.”592 In an attempt to ensure the standards’ economic practicability, the 

agency considers a variety of factors, including the annual rate at which manufacturers 

can increase the percentage of the 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 

economy.”593 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. 

 

592 67 FR 77015, 77021 (Dec. 16, 2002). 593 CEI-I, 793 F.2d 1322, 1352 (D.C. Cir. 1986). 
508 

Thus, NHTSA believes that this factor must be considered in the context of the 

competing concerns associated with different levels of standards. Prior to the MY 2005-

2007 rulemaking, the agency generally 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 should 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. 

Besides the many commenters raising economic practicability as an issue in the 

context of the stringency of the proposed standards, some commenters also directly 

addressed the agency’s interpretation of economic practicability. AIAM commented that 

NHTSA has wide discretion to consider economic practicability concerns as long as 

EPCA’s overarching purpose of energy conservation is met, and that it would be within 

NHTSA’s statutory discretion to set standards at levels below those at which net benefits 

are maximized due to economic practicability. GM and Mitsubishi both commented that 

consideration of economic practicability should include more focus on individual 

manufacturers: GM stated that NHTSA must consider sales and employment impacts on 

individual manufacturers and not just industry in the aggregate, while Mitsubishi 

emphasized the difficulties of limited-line manufacturers in meeting standards that might 

be economically practicable for full-line manufacturers. CBD commented that a 

determination of economic practicability should not be tied to “differences between 

incremental improvements” that “fail to consider all relevant costs and benefits and fail to 

analyze the overall impact of the proposed standards.” CBD pointed to the three-to-one 

benefit-cost ratio of the proposed standards to argue that much more stringent standards 

would still be economically practicable. ACEEE also commented that standards set at 

the level at which net benefits are maximized should be considered a “lower bound” for 

determining economic practicability. 

 While NHTSA agrees with AIAM in general that the agency has wide discretion 

to consider economic practicability concerns, we do not believe that economic 

practicability will always counsel setting standards lower than the point at which net 

benefits are maximized, given that it must be considered in the context of the overall 

balancing and EPCA’s overarching purpose of energy conservation. Depending on the 

conditions of the industry and the assumptions used in the agency’s analysis of 

alternative stringencies, NHTSA could well find that standards that maximize net 

benefits, or even higher standards, could be economically practicable. To that end, 

however, given the current conditions faced by the industry, which is perhaps just now 

passing the nadir of the economy-wide downturn and looking at a challenging road to 

recovery, and the relatively limited amount of lead time for MYs 2012-2016, we disagree 

with CBD’s comment that the benefit-cost ratio of the final standards indicates that more 
509 

stringent standards would be economically practicable during the rulemaking timeframe 

and with ACEEE’s comment that standards higher than those that would maximize net 

benefits would be economically practicable at this time. These comments overlook the 

fact that nearly all manufacturers are capital-constrained at this time and may be for the 

next couple of model years; access to capital in a down market is crucial to making the 

investments in technology that the final standards will require, and requiring more 

technology will require significantly more capital, to which manufacturers would not 

likely have access. Moreover, economic practicability depends as well on manufacturers’ 

ability to sell the vehicles that the standards require them to produce. If per-vehicle costs 

increase too much too soon, consumers may defer new vehicle purchases, which defeats 

the object of raising CAFE standards to get vehicles with better mileage on the road 

sooner and meet the need of the Nation to conserve energy. See Section IV.F below for 

further discussion of these issues. 

 

As for GM’s and Mitsubishi’s comments, while the agency does consider 

carefully the impacts on individual manufacturers in the agency’s analysis, as shown in 

the FRIA, we reiterate that economic practicability is not keyed to any single 

manufacturer. One of the main benefits of attribute-based standards is greater regulatory 

fairness – for all the manufacturers who build vehicles of a particular footprint, the target 

for that footprint is the same, yet each manufacturer has their own individual compliance 

obligation depending on the mix of vehicles they produce for sale. More manufacturers 

are required to improve their fuel economy, yet in a fairer way. And while some 

manufacturers may face difficulties under a given CAFE standard, others will find 

opportunities. The agency’s consideration of economic practicability recognizes these 

difficulties and opportunities in the context of the industry as a whole, and in the context 

of balancing against the other statutory factors, as discussed further below. 

(3) The Effect of Other Motor Vehicle Standards of the Government on Fuel 

Economy 

“The effect of other motor vehicle standards of the Government on fuel 

economy,” involves an analysis of the effects of compliance with emission,594 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 595 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 has said that it is called upon to “mak[e] a straightforward adjustment to the fuel 

economy improvement projections to account for the impacts of other Federal standards, 

 

594 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. 

595 42 FR 63184, 63188 (Dec. 15, 1977). See also 42 FR 33534, 33537 (Jun. 30, 1977).
510 

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 

economy effects of those standards.”596 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.597 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 endangerment finding, its 

granting of a waiver to California for its motor vehicle GHG standards, and its own GHG 

standards for light-duty vehicles, NHTSA 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. 

In the NPRM, NHTSA tentatively concluded that the effects of the EPA and 

California standards are neither positive nor negative because the proposed rule resulted 

in consistent standards among all components of the National Program, but sought 

comment on whether and in what way the effects of the California and EPA standards 

 

596 42 FR 33534, 33537 (Jun. 30, 1977). 597 That provision was deleted as obsolete when EPCA was codified in 1994. 
511 

should be considered under the “other motor vehicle standards” provision or other 

provisions of EPCA in 49 U.S.C. 32902, consistent with NHTSA’s independent 

obligation under EPCA/EISA to issue CAFE standards. NHTSA stated that it had 

already considered EPA’s proposal and the harmonization benefits of the National 

Program in developing its own proposed maximum feasible standards. 

The Alliance commented that the extent to which the consideration of other motor 

vehicle standards of the government should affect NHTSA’s standard-setting process was 

entirely within the agency’s discretion. The Alliance agreed with NHTSA that the 

original intent of the factor was to ensure that NHTSA accounted for other government 

standards that might reduce fuel economy or inhibit fuel economy improvements, but 

stated that since GHG standards set by EPA and California overlap CAFE standards so 

extensively, and are thus functionally equivalent to CAFE standards (plus air 

conditioning), those standards should be “basically irrelevant to NHTSA’s mission to set 

fuel economy standards, unless some specific aspect of the GHG standards actually 

makes it harder for mfrs to improve fuel economy.” The Alliance stated further that 

NHTSA must still determine what levels of CAFE standards would be maximum feasible 

regardless of the findings or standards set by EPA and California. Thus, the Alliance 

stated, for purposes of the MYs 2012-2016 CAFE standards, EPA’s GHG standards 

could be sufficiently considered by NHTSA given the agency’s decision to harmonize as 

part of the National Program,598 while California’s GHG standards need not be 

considered because of the state’s agreement under the National Program that compliance 

with EPA’s standards would constitute compliance with its own. Ford concurred 

individually with the Alliance comments. NADA, in contrast, commented that EPA’s 

GHG standards should not be considered as an “other vehicle standard” for purposes of 

this statutory factor, and argued that NHTSA need not and should not consider 

California’s GHG standards due to preemption under EPCA. 

 Commenters from the state of California (the Attorney General and the Air 

Resources Board), in contrast, stated that NHTSA must consider the effects of the 

California GHG standards on fuel economy as a baseline for NHTSA’s analysis, to give 

credit to the state’s leadership role in achieving the levels required by the National 

Program. CBD seconded this comment.599 The California Attorney General further 

stated that Congress discussed both positive and negative impacts of other standards on 

fuel economy in the 1975 Conference Reports preceding EPCA’s enactment.600 CARB 

and the University of Pennsylvania Environmental Law Project both cited the Green 

Mountain Chrysler601 and Central Valley Chrysler602 cases as supporting NHTSA’s 

consideration of CARB’s GHG standards pursuant to this factor. 

 

598 The University of Pennsylvania Environmental Law Project offered a similar comment. 599 NHTSA answered similar comments in the FEIS. See FEIS Section 10.2.4.2 for the agency’s response. 600 Citing HR Rep 94-340 at 86-87, 89-91 (1975 USCCAN 1762, 1848-49, 1851-53). 601 Green Mountain Chrysler Plymouth Dodge Jeep v. Crombie, 508 F.Supp.2d 295 (D.Vt. 2007). 602 Central Valley Chrysler Jeep, Inc. v. Goldstene, 529 F.Supp.2d 1151 (E.D. Cal. 2007).
512 

NHTSA believes that these comments generally support the agency’s 

interpretation of this factor as stated in the NPRM. While the agency may consider both 

positive and negative effects of other motor vehicle standards of the Government on fuel 

economy in determining what level of CAFE standards would be maximum feasible, 

given the fact that the final rule results in consistent standards among all components of 

the National Program, and given that NHTSA considered the harmonization benefits of 

the National Program in developing its own standards, the agency’s obligation to balance 

this factor with the others may be considered accounted for. 

(4) The Need of the United States to Conserve Energy 

 “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.”603 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. 

 While a number of commenters cited the need of the nation to conserve energy in 

calling for the agency to set more stringent CAFE standards, none disagreed with the 

agency’s interpretation of this factor and its influence on the statutory balancing required 

by EPCA. CBD, for example, commented that “Increasing mileage standards for this 

vehicle fleet is the single most effective and quickest available step the U.S. can take to 

conserve energy and to reduce the U.S. dependence on foreign oil, and also has an 

immediate and highly significant effect on total U.S. GHG emissions,” and that 

accordingly, NHTSA should consider the need of the nation to conserve energy as 

counseling the agency to raise standards at a faster rate. NHTSA agrees that this factor 

tends to influence stringency upwards, but reiterates that the need of the nation to 

conserve energy is still but one of four factors that must be balanced, as discussed below. 

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. 

 

603 42 FR 63184, 63188 (1977). 
513 

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, manufacturers were encouraged to 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, which resulted in a higher mass differential 

between the smallest and the largest vehicles, with a correspondingly greater risk to 

safety. Under the attribute-based standards being finalized 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, and because all vehicles are 

required to continue improving their fuel economy. In prior rulemakings, NHTSA 

limited the application of mass reduction/material substitution in our modeling analysis to 

vehicles over 5,000 lbs GVWR,604 but for purposes of today’s final standards, NHTSA 

has revised its modeling analysis to allow some application of mass reduction/material 

substitution for all vehicles, although it is concentrated in the largest and heaviest 

vehicles, 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 joint TSD and in 

Section V of the FRIA; and the estimated safety impacts that may be due to the final 

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.605 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. 

 

604 See 74 FR 14396-14407 (Mar. 30, 2009). 605 49 U.S.C. 32902(h). 
514 

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.”606 

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 broad 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 does not undermine the fundamental purpose of the EPCA: energy 

conservation,607 and as long as that balancing reasonably accommodates “conflicting 

policies that were committed to the agency's care by the statute.”608 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.609 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, as 

noted above, 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 

 

606 Center for Auto Safety v. NHTSA, 793 F.2d 1322, 1341 (C.A.D.C. 1986). 607 Center for Biological Diversity v. NHTSA, 538 F.3d 1172, 1195 (9th Cir. 2008) 608 CAS, 1338 (quoting Chevron U.S.A., Inc. v. Natural Resources Defense Council , Inc., 467 U.S. 837, 

845) 

609 CBD v. NHTSA, 538 F.3d 1172, 1198 (9th Cir. 2008) 
515 

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. 

v. Other standards – minimum domestic passenger car standard

 The minimum domestic passenger car standard was added to the CAFE program 

through EISA, when Congress gave NHTSA explicit authority to set universal standards 

for domestically-manufactured passenger cars at the level of 27.5 mpg or 92 percent of 

the average fuel economy of the combined domestic and import passenger car fleets in 

that model year, whichever was greater.610 This minimum standard was intended to act 

as a “backstop,” ensuring that domestically-manufactured passenger cars reached a given 

mpg level even if the market shifted in ways likely to reduce overall fleet mpg. Congress 

was silent as to whether the agency could or should develop similar backstop standards 

for imported passenger cars and light trucks. NHTSA has struggled with this question 

since EISA was enacted. 

 In the MY 2011 final rule, facing comments split fairly evenly between support 

and opposition to additional backstop standards, NHTSA noted Congress’ silence and 

“accept[ed] at least the possibility that ... [it] could be reasonably interpreted as 

permissive rather than restrictive,” but concluded based on the record for that rulemaking 

as a whole that additional backstop standards were not necessary for MY 2011, given the 

lack of leadtime for manufacturers to change their MY 2011 vehicles, the apparentlygrowing public preference for smaller vehicles, and the anti-backsliding characteristics of 

the footprint-based curves.611 NHTSA stated, however, that it would continue to monitor 

manufacturers’ product plans and compliance, and would revisit the backstop issue if it 

became necessary in future rulemakings.612

 Thus, in the MYs 2012-2016 NPRM, NHTSA again sought comment on the issue 

of additional backstop standards, recognizing the possibility that low fuel prices during 

the years that the MYs 2012-2016 vehicles are in service might lead to less than 

anticipated fuel savings.613 NHTSA asked commenters, in addressing this issue, to 

consider reviewing the agency’s discussion in the MY 2011 final rule, which the agency 

described as concluding that its authority was likely limited by Congress’ silence to 

setting only the backstop that Congress expressly provided for.614 EPA also sought 

 

610 49 U.S.C. 32902(b)(4). 611 74 Fed. Reg. at 14412 (Mar. 30, 2009). 612 Id. 613 74 Fed. Reg. at 49685 (Sept. 28, 2009). 614 Id. at 49637, 49685 (Sept. 28, 2009). 
516 

comment on whether it should set backstop standards under the CAA for MYs 2012-

2016. 

 As discussed above in Section II, many commenters addressed the backstop issue, 

and again comments were fairly evenly split between support and opposition to additional 

backstop standards. While commenters opposed to additional backstops, such as the 

Alliance, largely reiterated NHTSA’s previous statements with regard to its backstop 

authority, some commenters in favor of additional backstops provided more detailed legal 

arguments than have been previously presented for the agency’s consideration. Section II 

provides NHTSA’s and EPA’s general response to comments on the backstop issue; this 

section provides NHTSA’s specific response to the legal arguments by Sierra Club et 

al.

615 on the agency’s authority to set additional backstop standards. 

 The Sierra Club et al. commented that a more permissive reading of Congress’ 

silence in EISA was appropriate given the context of the statute, the 9th Circuit’s revised 

opinion in CBD v. NHTSA, and the assumptions employed in the NPRM analysis. The 

commenters stated that given that EISA includes the 35-in-2020 and ratable increase 

requirements, and given that CAFE standards were only just starting to rise for light 

trucks at the time of EISA’s enactment and had remained at the statutory level of 27.5 

mpg for passenger cars for many years, it appears that Congress’ intent in EISA was to 

raise CAFE standards as rapidly as possible. Thus, the commenters stated, if the purpose 

of EISA was to promote the maximum feasible increase in fuel economy with ratable 

increases, then there was no reason to think that backstop standards would be inconsistent 

with that purpose – if they were inconsistent, Congress would not have included one for 

domestic passenger cars. Similarly, Congress could not have thought that additional 

backstops were inconsistent with attribute-based standards, or it would not have included 

one for domestic passenger cars.616 The commenters also cited D.C. Circuit case law 

stating that congressional silence leaves room for agency discretion; specifically, that 

“[w]hen interpreting statutes that govern agency action, [the courts] have consistently 

recognized that a congressional mandate in one section and silence in another often 

‘suggests not a prohibition but simply a decision not to mandate any solution in the 

second context, i.e., to leave the question to agency discretion.’”617

 The Sierra Club et al. also commented that it appeared that the 9th Circuit’s 

revised opinion in CBD v. NHTSA supported the agency’s discretion to set additional 

backstops, since it was revised after the passage of EISA and did not change its earlier 

 

615 NHTSA refers to these commenters by the shorthand “Sierra Club et al.,” but the group consists of the 

Sierra Club, the Safe Climate Campaign, the Coalition for Clean Air, the Alliance for Climate Protection, 

and Environment America. Their comments may be found at Docket No. EPA-HQ-OAR-2009-0472-

7278.1. 

616 The commenters also suggested that NHTSA could set attribute-based backstop standards if it was 

concerned that Congress’ mandate to set attribute-based standards generally precluded additional flat 

backstops. 

617 Citing Catawba County, N.C. v. EPA, 571 F.3d 20, 36 (D.C. Cir. 2009) (quoting Cheney R. Co. v. ICC, 

902 F.2d 66, 69 (D.C. Cir. 1990)).
517 

holding (pertaining to the original EPCA language) that backstop standards were within 

the agency’s discretion.618

 And finally, the commenters stated that NHTSA’s rationale for not adopting 

additional backstops in the MY 2011 final rule should not be relied on for MYs 2012-

2016, namely, that the agency’s belief that backstop standards were unnecessary to 

ensure the expected levels of fuel savings given the short lead time between the 

promulgation of the final standards and the beginning of MY 2011, the apparent growing 

consumer preference for smaller vehicles, and the existing anti-backsliding measures in 

the attribute-based curves. As described above in Section II, these commenters (and 

many others) expressed concern about the agencies’ fleet mix assumptions and their 

potential effect on estimated fuel savings. 

 In response, and given D.C. Circuit precedent as cited above, NHTSA agrees that 

whether to adopt additional minimum standards for imported passenger cars and light 

trucks is squarely within the agency’s discretion, and that such discretion should be 

exercised as necessary to avoid undue losses in fuel savings due to market shifts or other 

forces while still respecting the statutorily-mandated manufacturer need for lead time in 

establishing CAFE standards. However, as discussed above in Section II.C, NHTSA 

remains confident that the projections of the future fleet mix are reliable, and that future 

changes in the fleet mix of footprints and sales are not likely to lead to more than modest 

changes in projected emissions reductions or fuel savings. There are only a relatively 

few model years at issue, and market trends today are consistent with the agencies’ 

estimates, showing shifts from light trucks to passenger cars and increased emphasis on 

fuel economy from all vehicles. The shapes of the curves also tend to avoid or minimize 

regulatory incentives for manufacturers to upsize their fleet to change their compliance 

burden, and the risk of vehicle upsizing or changing vehicle offerings to “game” the 

passenger car and light truck definitions to which commenters refer is not so great for the 

model years in question, because the changes that commenters suggest manufacturers 

might make are neither so simple nor so likely to be accepted by consumers, as discussed 

above. 

 Thus, NHTSA is confident that the anticipated increases in average fuel economy 

and reductions in average CO2 emission rates can be achieved without backstops under 

EISA, as noted above. Nevertheless, we acknowledge that the MY 2016 fuel economy 

goal of 34.1 mpg is an estimate and not a standard,619 and that changes in fuel prices, 

consumer preferences, and/or vehicle survival and mileage accumulation rates could 

result in either smaller or larger oil savings. However, as explained above and elsewhere 

in the rule, NHTSA believes that the possibility of not meeting (or, alternatively, 

exceeding) fuel economy goals exists, but is not likely to lead to more than modest 

changes in the currently-projected levels of fuel and GHG savings. NHTSA plans to 

conduct retrospective analysis to monitor progress, and has the authority to revise 

 

618 Citing CBD v. NHTSA, 538 F.3d at 1204-06 (9th Cir. 2008). 619 The MYs 2012-2016 passenger car and light truck curves are the actual standards. 
518 

standards if warranted, as long as sufficient lead time is provided. Given this, and given 

the potential complexities in designing an appropriate backstop, NHTSA believes that the 

balance here points to not adopting additional backstops at this time for the MYs 2012-

2016 standards other than NHTSA’s issuing the ones required by EPCA/EISA for 

domestic passenger cars. If, during the timeframe of this rule, NHTSA observes a 

significant shift in the manufacturer’s product mix resulting in a relaxation of their 

estimated targets, NHTSA and EPA will reconsider options, both for MYs 2012-2016 

and future rulemakings. 

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 

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.”620 

The APA also requires that agencies provide notice and comment to the public 

when proposing regulations.621 Two commenters, the American Chemistry Council and 

 

620 Ibid., 1181. 621 5 U.S.C. 553. 
519 

the American Petroleum Institute, argued that the agreements by auto manufacturers and 

California to support the National Program indicated that a “deal” had been struck 

between the agencies and these parties, which was not available as part of the 

administrative record and which the public had not been given the opportunity to 

comment on. The commenters argued that this violated the APA. 

In response, under the APA, agencies “must justify their rulemakings solely on 

the basis of the record [they] compile[] and make[] public.”622 Any informal contacts 

that occurred prior to the release of the NPRM may have been informative for the 

agencies and other parties involved in developing the NPRM, but they did not release the 

agencies of their obligation consider and respond to public comments on the NPRM and 

to justify the final standards based on the public record. The agencies believe that the 

record fully justifies the final standards, demonstrating analytically that they are the 

maximum feasible and reasonable for the model years covered. Thus, we disagree that 

there has been any violation of the APA. 

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 both a 

draft and a final 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 CFR 

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). 

 

622 Sierra Club v. Costle, 657 F.2d 298, 401 (D.C. Cir. 1981). 
520 

The agency must identify the “environmentally preferable” alternative, but need 

not adopt it. “Congress in enacting NEPA . . . did not require agencies to elevate 

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. 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. 

This final rule also constitutes a Record of Decision for NHTSA under NEPA. 

Section IV.K below provides much more information on the agency’s NEPA analysis for 

this rulemaking, and on how this final rule constitutes a Record of Decision. 

E. What are the Final CAFE Standards? 

1. Form of the Standards

Each of the CAFE standards that NHTSA is finalizing 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.623

As discussed above in Section II.C, NHTSA has determined 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. 

 

623 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 established today. 
521 

In the NPRM preceding today’s final rule (as under the recently-promulgated MY 

2011 standards), NHTSA proposed that the CAFE level required of any given 

manufacturer 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

=

∑

∑

 

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. 

However, comments by Honda and Toyota indicate that the defined variables 

used in the equations could be interpreted differently by vehicle manufacturers. The 

term “footprint of a vehicle model” could be interpreted to mean that a manufacturer only 

has to use one representative footprint within a model type or that it is necessary to use 

all the unique footprints and corresponding fuel economy target standards within a model 

type when determining a fleet target standard. 

In the same NPRM, EPA proposed new regulations which also include the 

calculation of standards based on the attribute of footprint. The EPA regulation text is 

specific and states that standards will be derived using the target values “for each unique 

combination of model type and footprint value” (proposed regulation text 40 CFR 

86.1818-12 (c)(2)(ii)(B) for passenger automobiles and (c)(3)(ii)(B) for light trucks). 

Also, in an EPA final rule issued November 25, 2009, the manufacturers are required to 

provide in their final model year reports to EPA data for “each unique footprint within 

each model type” used to calculate the new CAFE program fuel economy levels (40 CFR 

600.512-08(c)(8)and(9)). Using this term would be more definitive than using terms such 

as “footprint of a vehicle model” and would more fully harmonize the NHTSA and EPA 

regulations. Therefore, under the final CAFE standards promulgated today, a 

manufacturer’s “fleet target standard” will be derived from the summation of the targets 

for all and every unique footprint within each model type for all model types that make 

up a fleet of vehicles. Also, to provide greater clarity, the equation will use the variable 

name PRODUCTION rather than SALES to refer to production of vehicles for sale in the 

United States. Otherwise, for purposes of the final rule the same equation will apply: 

i

i

required

i

i i

PRODUCTION

CAFE PRODUCTION

TARGET

=

∑

∑
522 

 

However, PRODUCTIONi is the number of units produced for sale in the United 

States of each i

th unique footprint within each model type, produced for sale in the United 

States, and TARGETi is the corresponding fuel economy target (according to the equation 

shown in Chapter II and based on the corresponding footprint), and the summations in the 

numerator and denominator are both performed over all unique footprint and model type 

combinations in the fleet in question. The equations and terms specified for calculating 

the required CAFE fleet values in Part 531.5 (b) and (c) for MYs 2012-2016, and Part 

533.5 (g), (h) and (i) for MYs 2008-2016 will be updated accordingly. Although the 

agency is not changing the equations for the MY 2011 standards, we would expect 

manufacturers to follow the same procedures for calculating their required levels for that 

model year. Also, the Appendices in each of these parts will also be updated to provide 

corresponding examples of calculating the fleet standards. 

Corresponding changes to regulatory text defining CAFE standards are discussed 

below in section IV.I. 

 The final 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 proposed CAFE standards defined by the following 

coefficients during MYs 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 

After updating inputs to its analysis, and revisiting the form and stringency of 

both passenger cars and light truck standards, as discussed in Section II, NHTSA is 

finalizing passenger car CAFE standards defined by the following coefficients during 

MYs 2012-2016: 
523 

Table IV.E.2-2. Coefficients Defining Final MY 2012-2016 Fuel Economy Targets for 

Passenger Cars

Coefficient 2012 2013 2014 2015 2016 

a (mpg) 35.95 36.80 37.75 39.24 41.09 

b (mpg) 27.95 28.46 29.03 29.90 30.96 

c (gpm/sf) 0.0005308 0.0005308 0.0005308 0.0005308 0.0005308 

d (gpm) 0.006057 0.005410 0.004725 0.003719 0.002573 

These coefficients reflect the agency’s decision, discussed above in Section II, to 

leave the shapes of both the passenger car and light truck curves unchanged. They also 

reflect the agency’s reevaluation of the “gap” in stringency between the passenger car 

and light truck standard, also discussed in Section II. 

These coefficients result in the 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. 
524 

Figure IV.E.2-1. Final MY 2011 and Final MY 2012-2016 Fuel Economy Target Curves 

for Passenger Cars 

20

25

30

35

40

45

35 40 45 50 55 60 65 70

T

a

r

g

e

t

(

m

p

g

)

Footprint (sf)

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 final 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)624: 

 

624 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 30.4 

mpg in MY 2011. This does not mean that the agency is making the standards more stringent for that 

model year, or that any manufacturer will necessarily face a more difficult CAFE standard, it simply 

reflects the change in assumptions about what vehicles will be produced for sale in that model year. The 

target curve remains the same, and each manufacturer’s compliance obligation will still be determined at 

the end of the model year. 
525 

Table IV.E.2-3. Estimated Average Fuel Economy Required under Final MY 2011 and 

Final MY 2012-2016 CAFE Standards for Passenger Cars 

Manufacturer MY 2011 MY 2012 MY 2013 MY 2014 MY 2015 MY 2016 

BMW 30.2 33.0 33.7 34.5 35.7 37.3 

Chrysler 29.4 32.6 33.3 34.1 35.2 36.7 

Daimler 29.2 32.0 32.7 33.3 34.4 35.8 

Ford 29.7 32.9 33.7 34.4 35.6 37.1 

General Motors 30.3 32.7 33.5 34.2 35.4 36.9 

Honda 30.8 33.8 34.6 35.4 36.7 38.3 

Hyundai 30.9 33.8 34.3 35.1 36.6 38.2 

Kia 30.6 33.4 34.2 35.0 36.3 37.9 

Mazda 30.6 33.8 34.6 35.5 36.8 38.4 

Mitsubishi 31.0 34.2 35.0 35.8 37.1 38.7 

Nissan 30.7 33.3 34.1 34.9 36.1 37.7 

Porsche 31.2 35.9 36.8 37.8 39.2 41.1 

Subaru 31.0 34.6 35.5 36.3 37.7 39.4 

Suzuki 31.2 35.8 36.6 37.5 39.0 40.8 

Tata 28.0 30.7 31.4 32.1 33.3 34.7 

Toyota 30.8 33.9 34.7 35.5 36.8 38.4 

Volkswagen 30.8 34.3 35.0 35.9 37.2 38.8 

Average 30.4 33.3 34.2 34.9 36.2 37.8 

Because a manufacturer’s required average fuel economy level for a model year 

under the final standards will be based on its actual production numbers in that model 

year, its official required fuel economy level will not be known until the end of that 

model year. However, because the targets for each vehicle footprint will 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. 32902(b)(4)) the 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 non-domestic 

passenger automobile fleets manufactured for sale in the United States by all 

manufacturers in the model year. 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. 

As published in the MY 2011 final rule, the domestic minimum passenger car 

standard for MY 2011 was set at 27.8 mpg, which represented 92 percent of the final 
526 

projected passenger car standards promulgated for that model year.625 NHTSA stated at 

the time that “The final calculated minimum standards will be updated to reflect any 

changes in the projected passenger car standards.”626 Subsequently, in the NPRM 

proposing the MYs 2012-2016 standards, NHTSA noted that given changes in the 

projected estimated required passenger car standard for MY 2011,627 92 percent of that 

standard would be 28.0 mpg, not 27.8 mpg, and proposed to raise the minimum domestic 

passenger car standard accordingly. 

The Alliance commented to the NPRM that the minimum domestic passenger car 

standard is subject to the 18-month lead time rule for standards per 49 U.S.C. per 49 

U.S.C. 32902(a), and that NHTSA therefore cannot revise it at this time. Toyota 

individually offered identical comments. 

49 U.S.C. 32902(b)(4)(B) does state that the minimum domestic passenger car 

standard shall be 92 percent of the projected average fuel economy for the passenger car 

fleet, “which projection shall be published in the Federal Register when the standard for 

that model year is promulgated in accordance with this section.” In reviewing the statute, 

the agency concurs that the minimum domestic passenger car standard should be based 

on the agency’s fleet assumptions when the passenger car standard for that year is 

promulgated, which would make it inappropriate to change the minimum standard for 

MY 2011 at this time. However, we note that we do not read this language to preclude 

any change in the minimum standard after it is first promulgated for a model year. As 

long as the 18-month lead-time requirement of 49 U.S.C. 32902(a) is respected, NHTSA 

believes that the language of the statute suggests that the 92 percent should be determined 

anew any time the passenger car standards are revised. 

The Alliance also commented that the minimum domestic passenger car standard 

should be based on the projected “actual” (NHTSA refers to this as “estimated achieved”) 

mpg level for the combined passenger car fleet, rather than based on the projected 

“target” mpg level (NHTSA refers to this as “estimated required”) for the combined fleet. 

The Alliance argued that the plain language of the statute states that 92 percent should be 

taken of the “average fuel economy projected ... for the combined ... fleets,” which is 

different than the average fuel economy standard projected. The Alliance further argued 

that using the “estimated achieved” value to determine the 92 percent will avoid 

inadvertently “considering” FFV credits in setting the minimum standard, since the 

“estimated achieved” value is determined by ignoring FFV credits. Toyota individually 

offered identical comments. 

 

625 See 74 Fed. Reg. at 14410 (Mar. 30, 3009). 626 Id. 627 Readers should remember, of course, that the “estimated required standard” is not necessarily the 

ultimate mpg level with which manufacturers will have to comply, because the ultimate mpg level for each 

manufacturer is determined at the end of the model year based on the target curves and the mix of vehicles 

that each manufacturer has produced for sale. The mpg level designated as “estimated required’ is exactly 

that, an estimate. 
527 

NHTSA disagrees that the minimum standard should be based on the estimated 

achieved levels rather than the estimated required levels. NHTSA interprets Congress’ 

reference in the second clause of 32902(b)(4)(B) to the standard promulgated in that 

model year as indicating that Congress intended “projected average fuel economy” in the 

first clause to pertain to the estimated required level, not the estimated achieved level. 

The Alliance’s concern that a minimum standard based on the estimated required level 

“inadvertently considers” FFV credits is misplaced, because NHTSA is statutorily 

prohibited from considering FFV credits in setting maximum feasible standards. Thus, 

NHTSA has continued to determine the minimum domestic passenger car standard based 

on the estimated required mpg levels projected for the model years covered by the 

rulemaking. 

Based on NHTSA’s current market forecast, the agency’s estimates of these 

minimum standards under the final MY 2012-2016 CAFE standards (and, for 

comparison, the final MY 2011 minimum domestic passenger car standard) are 

summarized below in Table IV.E.2-1. 

Table IV.E.3-1. Estimated Minimum Standard for Domestically Manufactured Passenger 

Cars under Final MY 2011 and Final MY 2012-2016 CAFE Standards for Passenger Cars 

2011 2012 2013 2014 2015 2016

27.8 30.7 31.4 32.1 33.3 34.7 

4. Light Truck Standards

For light trucks, NHTSA proposed CAFE standards defined by the following 

coefficients during MYs 2012-2016: 

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 

After updating inputs to its analysis, and revisiting the form and stringency of 

both passenger cars and light truck standards, as discussed in Section II, NHTSA is 

finalizing light truck CAFE standards defined by the following coefficients during MYs 

2012-2016: 

Table IV.E.4-2. Coefficients Defining Final MY 2012-2016 Fuel Economy Targets for 

Light Trucks

Coefficient 2012 2013 2014 2015 2016 
528 

a (mpg) 29.82 30.67 31.38 32.72 34.42 

b (mpg) 22.27 22.74 23.13 23.85 24.74 

c (gpm/sf) 0.0004546 0.0004546 0.0004546 0.0004546 0.0004546 

d (gpm) 0.014900 0.013968 0.013225 0.011920 0.010413 

As for passenger cars, these coefficients reflect the agency’s decision, discussed 

above in Section II, to leave the shapes of both the passenger car and light truck curves 

unchanged. They also reflect the agency’s reevaluation of the “gap” in stringency 

between the passenger car and light truck standard, also discussed in Section II. 

These coefficients result in the 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. 
529 

Figure IV.E.4-1. Final MY 2011 and Final MY 2012-2016 Fuel Economy Targets for 

Light Trucks 

20

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35 40 45 50 55 60 65 70

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2016

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2012

Again, 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 final 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)628: 

Table IV.E.4-3. Estimated Average Fuel Economy Required under Final MY 2011 and 

Final MY 2012-2016 CAFE Standards for Light Trucks

Manufacturer MY 2011 MY 2012 MY 2013 MY 2014 MY 2015 MY 2016 

BMW 25.6 26.6 27.3 27.9 28.9 30.2 

Chrysler 24.5 25.7 26.2 26.8 27.8 29.0 

Daimler 24.7 25.6 26.3 26.9 27.8 29.1 

 

628 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 24.4 mpg in MY 2011. The 

increase in the estimate reflects a decrease in the size of the average light truck. 
530 

Ford 23.7 24.8 25.4 26.0 27.0 28.1 

General Motors 23.3 24.2 24.8 25.2 26.1 27.2 

Honda 25.7 26.9 27.5 28.0 29.1 30.4 

Hyundai 25.9 27.0 27.6 28.2 29.3 30.7 

Kia 25.2 26.2 26.7 27.3 28.3 29.5 

Mazda 26.2 27.6 28.4 28.9 30.1 31.5 

Mitsubishi 26.4 27.8 28.5 29.1 30.2 31.7 

Nissan 24.5 25.6 26.2 26.8 27.8 29.1 

Porsche 25.5 26.3 26.9 27.5 28.5 29.8 

Subaru 26.5 27.9 28.6 29.2 30.4 31.9 

Suzuki 26.3 27.5 28.2 28.8 29.9 31.4 

Tata 26.2 27.4 28.2 28.8 29.9 31.3 

Toyota 24.6 25.7 26.2 26.8 27.8 29.1 

Volkswagen 25.0 25.8 26.4 27.0 28.0 29.2 

Average 24.4 25.4 26.0 26.6 27.5 28.8 

As discussed above with respect to the final passenger cars standards, we note that 

a manufacturer’s required fuel economy level for a model year under the final standards 

will be based on its actual production numbers in that model year. 

F. How Do the Final Standards Fulfill NHTSA’s Statutory Obligations? 

In developing the proposed MY 2012-16 standards, the agency developed and 

considered a wide variety of alternatives. 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%.629 That same approach has been carried over to this 

final rule and to the accompanying FEIS and FRIA. Thus, 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 clearly communicates the level of stringency of each alternative and 

allows us to identify alternatives that represent different ways to balance NHTSA’s 

statutory requirements under EPCA/EISA. 

In the NPRM, we noted that each of the listed alternatives represents, in part, a 

different way in which NHTSA could conceivably balance different policies and 

considerations in setting the standards. We were mindful that the agency needs to weigh 

and balance many factors, such as technological feasibility, economic practicability, 

including lead time considerations for the introduction of technologies and impacts on the 

auto industry, the impacts of the standards on fuel savings and CO2 emissions, and fuel 

savings by consumers, as well as other relevant factors such as safety. For example, the 

 

629 Notice of intent to prepare an EIS, 74 FR 14857, 14859-60, April 1, 2009.
531 

7% 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. We also recognized that 

some technologies (e.g., , PHEVs and EVs) will not be available for more than limited 

commercial use through MY 2016, and that even those technologies that could be more 

widely commercialized through MY 2016 cannot all be deployed on every vehicle model 

in MY 2012 but require a realistic schedule for more widespread commercialization to be 

within the realm of economically practicability. 

In addition to the alternatives that increase evenly at annual rates ranging from 

3% to 7%, NHTSA also included alternatives developed using benefit-cost criteria. The 

agency emphasized benefit-cost-related alternatives in its rulemakings for MY 2008-2011 

and, subsequently, MY 2011 standards. By including such alternatives in its current 

analysis, the agency is providing a degree of analytical continuity between the two 

approaches to defining alternatives in an effort to illustrate the similarities and 

dissimilarities. To that end, we included and analyzed two additional alternatives, one 

that sets standards at the point where net benefits are maximized (labeled “MNB” in the 

table below), and another that sets standards at the point at which total costs are most 

nearly equal to total benefits (labeled “TCTB” in the table below).630 With respect to the 

first of those alternatives, we note that Executive Order 12866 focuses attention on an 

approach that maximizes net benefits. Further, since NHTSA has thus far set attributebased 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, NHTSA used the 

Volpe model extensively to assess the technologies that the manufacturers could apply in 

order to comply with each of the alternatives. This allowed us to assess the variety, 

amount and cost of the technologies that could be used to enable the manufacturers to 

comply with each of the alternatives. NHTSA estimated how the application of these and 

 

630 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 FRIA, the agency 

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. 
532 

other technologies could increase vehicle costs, reduce fuel consumption, and reduce CO2

emissions. 

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 other relevant goals and priorities. Those priorities and goals include 

maximizing energy conservation and achieving a nationally harmonized and coordinated 

program for regulating fuel economy and GHG emissions. 

Part of that assessment of alternatives 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 a national attribute-based GHG emissions standard would 

need to be set to achieve the same emission reductions in California as the California 

GHG program. This was done by evaluating a nationwide Clean Air Act standard for 

MY 2016 that would apply across the country and require the levels of emissions 

reduction 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 national new vehicle fleet-wide CO2 performance standards for model year 

2016 which would result in the new light-duty 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 were met 

exclusively by fuel economy improvements – and the overall result is the model year 

2016 goals of the National Program. 

However, the level of stringency for the National Program goal of 250 g/mi CO2

can be met with both fuel economy “tailpipe” improvements as well as other GHGreduction related improvements, such as A/C refrigerant leakage reductions. CAFE 

standards, as discussed elsewhere in this final rule, cannot be met by improvements that 

cannot be accounted for on the FTP/HFET tests. Thus, setting CAFE standards at 35.5 

mpg would require more tailpipe technology (at more expense to manufacturers) than 

would be required under such a CAA standard. To obtain an equivalent CAFE standard, 

we determined how much tailpipe technology would be necessary in order to meet an 

mpg level of 35.5 if manufacturers also employed what EPA deemed to be an average 

amount of A/C “credits” (leakage and efficiency) to reach the 250 g/mi equivalent. This 

results in a figure of 34.1 mpg as the appropriate counterpart CAFE standard. This 

differential gives manufacturers the opportunity to reach 35.5 mpg equivalent 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. 
533 

Thus, as part of the process of considering all of the factors relevant under EPCA 

for setting standards, in a context where achieving a harmonized National Program is 

important, for the proposal 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 alternatives presented 

above, represents a unique balancing of the statutory factors and other relevant 

considerations. For the reader’s reference, the estimated required levels of stringency for 

each alternative in each model year are presented below: 

Table IV.F.1. Estimated Required Fuel Economy Level for Regulatory 

Alternatives.631

Alt. 1 Alt. 2 Alt. 3 Alt. 4 Alt. 5 Alt. 6 Alt. 7 Alt. 8 Alt. 9 

No 

Action 

3%/year 

Increase 

4%/year 

Increase 

~4.3%/year

Increase 

5%/year

Increase

~6.0%/year 

Increase 

MNB 

6%/year

Increase

7%/year 

Increase 

~6.6%/year 

Increase 

 TCTB 

2012 

Passenger 

Cars 30.5 31.7 32.1 33.4 32.4 33.0 32.7 33.0 33.4

Light Trucks 24.4 24.1 24.4 25.3 24.6 26.3 24.9 25.1 26.3

Combined 27.8 28.3 28.6 29.7 28.8 30.0 29.1 29.4 30.3

2013 

Passenger 

Cars 30.5 32.6 33.3 34.2 33.9 36.1 34.5 35.2 36.7

Light Trucks 24.4 24.8 25.3 25.9 25.8 27.7 26.3 26.8 28.0

Combined 27.8 29.1 29.7 30.5 30.3 32.3 30.8 31.4 32.8

2014 

Passenger 

Cars 30.5 33.5 34.5 35.0 35.5 38.1 36.5 37.6 39.2

Light Trucks 24.5 25.5 26.3 26.6 27.0 29.1 27.8 28.6 29.7

Combined 28.0 30.0 30.9 31.3 31.8 34.2 32.7 33.7 35.0

2015 

Passenger 

Cars 30.5 34.4 35.8 36.2 37.1 39.4 38.6 40.1 40.7

Light Trucks 24.4 26.2 27.2 27.5 28.3 30.3 29.4 30.5 30.7

Combined 28.0 31.0 32.2 32.6 33.4 35.6 34.7 36.0 36.5

2016 

Passenger 

Cars 30.5 35.4 37.2 37.8 39.0 40.9 40.9 42.9 42.3

Light Trucks 24.4 27.0 28.3 28.7 29.7 31.1 31.1 32.6 31.8

 

631 Also, the “MNB” and the “TCTB” alternatives depend on the inputs to the agencies’ analysis. The 

sensitivity analysis presented in the RIA documents the response of these alternatives to changes in key 

economic inputs. For example, the combined average required fuel economy under the “MNB” alternative 

is 36.9 mpg under the reference case economic inputs presented here, and ranges from 32.0 mpg to 37.2 

mpg under the alternative economic inputs presented in the RIA. [NOTE: Verify range based on 

alternatives included in FRIA.] 
534 

Combined 28.1 32.0 33.6 34.1 35.2 36.9 36.9 38.7 38.0

The following figure presents this same information but in a different way, 

comparing estimated 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 FRIA. 
535 

Figure IV.F.1. Average Estimated Required Fuel Economy (MYs 2012, 2014, and 2016) 

20 

25 

30 

35 

40 

45 

A

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PC, 2012

LT, 2012

Comb., 2012

PC, 2014

LT, 2014

Comb., 2014

PC, 2016

LT, 2016

Comb. 2016

3%/y 4%/y Final 5%/y 6%/y Max

NB

7%/y TC=TB
536 

 As this figure illustrates, the final 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 

final standards reflects an average annual increase of 4.3%/y. The final 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.” 

For each alternative, including today’s final standards, NHTSA has 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. The 

accompanying FRIA presents a detailed analysis of these results. Table IV.F.2 presents 

fuel savings, CO2 reductions, and total industry cost outlays for model year 2012 – 2016 

for the eight alternatives. 

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 34 373 23 

4% per Year 50 539 39 

Final (4.3% per Year) 61 655 52 

5% per Year 68 709 63 

6% per Year 82 840 90 

Maximum Net Benefit 90 925 103 

7% per Year 93 945 111 

Total Cost = Total Benefit 96 986 114 

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 
537 

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 requirement that NHTSA not consider statutory 

credits in establishing CAFE standards, NHTSA did not consider FFV credits, credits 

carried forward and backward, and transferred credits in this calculation632, 633 In 

addition, the analysis incorporates fines for some manufacturers that have traditionally 

paid fines rather than comply with the standards. 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 NHTSA’s FRIA. 

In reviewing the results of the various alternatives, NHTSA confirmed that 

progressive increases in stringency require progressively greater deployment of fuelsaving technology and corresponding increases in technology outlays and related costs, 

fuel savings, and CO2 emission reductions. To begin, NHTSA estimated total 

incremental outlays for additional technology in each model year. The following figure 

shows cumulative results for MYs 2012-2016 for industry as a whole and Chrysler, Ford, 

General Motors, Honda, Nissan, and Toyota. This figure focuses on these manufacturers 

as they currently (in MY 2010) represent three large U.S.-headquartered and three large 

foreign-headquartered full-line manufacturers. 

 

632 NHTSA has conducted a separate analysis, discussed above in Section I, which accounts for EPCA’s 

provisions regarding FFVs. 

633 For a number of reasons, the results of this modeling differ from EPA’s for specific manufacturers, 

fleets, and model years. These reasons include representing every model year explicitly, accounting for 

estimates of when vehicle model redesigns will occur, and not considering those compliance flexibilities 

where EPCA forbids such consideration in setting CAFE standards. It should be noted, however, that these 

flexibilities in fact provide manufacturers significant latitude to manage their compliance obligations. 
538 

Figure IV.F.2. Incremental Technology Outlays (MYs 2012-2016) 

-

20 

40 

60 

80 

100 

120 

-

5 

10 

15 

20 

25 

30 

3%/y 4%/y Final 5%/y 6%/y Max. NB 7%/y TC=TB

I

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$

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Chrysler

Ford

General Motors

Honda

Nissan

Toyota

Industry

 

As part of the incremental technology outlays, NHTSA also analyzes which 

technologies manufacturers could apply to meet the standards. In NHTSA’s analysis, 

manufacturers achieve compliance with the fuel economy levels through application of 

technology rather than through changes in the mix of vehicles produced for sale in the 

U.S. The accompanying FRIA 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 by 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 

presented because they 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 are presented because they represent technologies involving significant cost 

and related lead time challenges for widespread use through MY 2016. These figures 
539 

focus on Chrysler, Ford, General Motors, Honda, Nissan, and Toyota, as above. For each 

alternative, the figures show additional application of technology by MY 2016.634 

 

634 The FRIA presents results for all model years, technologies, and manufacturers, and NHTSA has 

considered these broader results when considering the eight regulatory alternatives. 
540 

Figure IV.F.3. Additional Application of GDI (MY 2016) 

0%

20%

40%

60%

80%

100%

3%/y 4%/y Final 5%/y 6%/y Max. NB 7%/y TC=TB

A

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Chrysler

Ford

General Motors

Honda

Nissan

Toyota

Industry
541 

Figure IV.F.4. Additional Application of Engine Turbocharging & Downsizing 

(MY 2016) 

0%

20%

40%

60%

80%

100%

3%/y 4%/y Final 5%/y 6%/y Max. NB 7%/y TC=TB

A

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Chrysler

Ford

General Motors

Honda

Nissan

Toyota

Industry
542 

Figure IV.F.5. Additional Application of Diesel Engines (MY 2016) 

0%

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Figure IV.F.6. Additional Application of CISG and Strong HEV Systems (MY 2016) 

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544 

The modeling analysis demonstrates that applying these technologies, of course, 

results in fuel savings. 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 and related cost presented 

above for the industry to the corresponding cumulative fuel savings. 

Figure IV.F.7. Incremental Technology Outlays and Fuel Savings (MYs 2012-2016) 

-

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40 

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545 

These incremental technology outlays (and corresponding fuel savings) also result 

in corresponding increases in incremental cost per vehicle, as shown below. 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 NHTSA’s FRIA. 

Figure IV.F.8. Average Incremental Per-Vehicle Costs (MY 2012) 

-

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1,000 

1,500 

2,000 

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3%/y 4%/y Final 5%/y 6%/y Max. NB 7%/y TC=TB

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Figure IV.F.9. Average Incremental Per-Vehicle Costs (MY 2013) 

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1,000 

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3%/y 4%/y Final 5%/y 6%/y Max. NB 7%/y TC=TB

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547 

Figure IV.F.10. Average Incremental Per-Vehicle Costs (MY 2014) 

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2,000 

2,500 

3%/y 4%/y Final 5%/y 6%/y Max. NB 7%/y TC=TB

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Figure IV.F.11. Average Incremental Per-Vehicle Costs (MY 2015) 

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1,000 

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2,000 

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3%/y 4%/y Final 5%/y 6%/y Max. NB 7%/y TC=TB

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549 

Figure IV.F.12. Average Incremental Per-Vehicle Costs (MY 2016) 

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1,000 

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2,000 

2,500 

3%/y 4%/y Final 5%/y 6%/y Max. NB 7%/y TC=TB

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Comb.

As discussed in the NPRM, 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. 

Additionally, given that CO2 and fuel savings are very closely correlated, 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. And finally, neither the 3%/y 

nor the 4%/y alternatives 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. These alternatives would give inadequate weight to other standards of the 

Government, specifically EPA’s and CARB’s. Thus, the agency concluded that 

alternatives less stringent than the proposed standards would not yield the emissions 

reductions required to produce a harmonized national program and would not produce 
550 

corresponding fuel savings, and therefore would not place adequate emphasis on the 

nation’s need to conserve energy. NHTSA has therefore concluded that it must reject the 

3%/y and 4%/y alternatives. 

NHTSA then considered the “environmentally-preferable” alternative. Based on 

the information provided in the FEIS, the environmentally-preferable alternative would 

be that involving stringencies that increase at 7% annually.635 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 technology and cost required by the 

environmentally-preferable alternative and the lack of lead time to achieve such levels 

between now and MY 2016, as discussed further below, NHTSA concludes that the 

environmentally-preferable alternative would not be economically practicable or 

technologically feasible, and thus concludes that it would result in standards that would 

be beyond the level achievable for MYs 2012-2016. 

For the other alternatives, NHTSA determined that it would be inappropriate to 

choose any of the other more stringent alternatives due to concerns over lead time and 

economic practicability. There are real-world technological and economic 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. The alternatives more 

stringent than the final standards begin to accrue costs considerably more rapidly than 

they accrue fuel savings and emissions reductions, and at levels that are increasingly 

economically burdensome, especially considering the need to make underlying 

investments (e.g., for engineering and tooling) well in advance of actual production. As 

shown in Figures IV-2 to IV-6 above, while the final standards already require aggressive 

application of technologies, more stringent standards would require more widespread use 

(including more substantial implementation of advanced technologies such as 

stoichiometric gasoline direct injection engines, diesel engines, and strong hybrids), and 

would raise serious issues of adequacy of lead time, not only to meet the standards but to 

coordinate such significant changes with manufacturers’ redesign cycles. The agency 

maintains, as it has historically, that there is an important distinction between 

considerations of technological feasibility and economic practicability, both of which 

enter into the agency’s determination of the maximum feasible levels of stringency. A 

given level of performance may be technologically feasible (i.e., setting aside economic 

constraints) for a given vehicle model. However, it would not be economically 

practicable to require a level of fleet average performance that assumes every vehicle will 

immediately (i.e., within 18 months of the rule’s promulgation) perform at its highest 

technologically feasible level, because manufacturers do not have unlimited access to the 

financial resources or the time required to hire enough engineers, build enough facilities, 

and install enough tooling. The lead time reasonably needed to make capital investments 

and to devote the resources and time to design and prepare for commercial production of 

 

635 See, e.g., FEIS, figure S-12, p. 18, which shows that 7%/y alternative yields greatest cumulative effect 

on global mean temperature. 
551 

a more fuel efficient vehicle is an important element that NHTSA takes into 

consideration in establishing the standards. 

In addition, the figures presented above reveal that increasing stringency beyond 

the final standards would entail significant additional application of technology. Among 

the more stringent alternatives, the one closest in stringency to the standards being 

finalized 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 11% and 8% higher, respectively, than the final standards. However, 

compared to the final standards, this alternative would increase outlays for new 

technologies during MY 2012-2016 by about 22%, or $12b. Average MY 2016 cost 

increases would, in turn, rise from $903 under the final standards to $1,152 when 

stringency increases at 5% annually. This represents a 28% 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). Additionally, the 5%/y alternative disproportionally burdens 

the light truck fleet requiring a nearly $400 (42 percent) cost increase in MY 2016 

compared to the final standards. 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 3 4 24 184 585 

Chrysler 734 1,303 1,462 1,653 1,727 

Daimler - - 410 801 1,109 

Ford 743 1,245 1,261 1,583 1,923 

General Motors 448 823 1,187 1,425 1,594 

Honda 50 109 271 375 606 

Hyundai 747 877 1,057 1,052 1,124 

Kia 49 128 197 261 369 

Mazda 555 718 1,166 1,407 1,427 

Mitsubishi 534 507 2,534 3,213 3,141 

Nissan 294 491 965 1,064 1,125 

Porsche 68 (52) (51) (50) (49) 

Subaru 292 324 1,372 1,723 1,679 

Suzuki - 959 1,267 1,316 1,540 

Tata 111 93 183 306 710 

Toyota 31 29 52 129 212 

Volkswagen 145 428 477 492 783 

Average 337 540 726 886 1,053 

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 169 160 201 453 868 

Chrysler 360 559 1,120 1,216 1,432 
552 

Daimler 60 55 51 52 51 

Ford 1,207 1,663 1,882 2,258 2,225 

General Motors 292 628 866 968 1,136 

Honda 258 234 611 750 1,047 

Hyundai 711 685 1,923 1,909 1,862 

Kia 47 293 556 782 1,157 

Mazda 248 408 419 519 768 

Mitsubishi - - 1,037 1,189 1,556 

Nissan 613 723 2,142 2,148 2,315 

Porsche - (0) (1) 469 469 

Subaru 1,225 1,220 1,365 1,374 1,330 

Suzuki - 1,998 1,895 1,837 2,096 

Tata - - - - 503 

Toyota 63 187 594 734 991 

Volkswagen - - 514 458 441 

Average 415 628 1,026 1,173 1,343 

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 72 64 84 265 666 

Chrysler 499 870 1,272 1,414 1,569 

Daimler 20 20 281 554 773 

Ford 914 1,407 1,498 1,838 2,034 

General Motors 371 726 1,033 1,205 1,379 

Honda 135 157 396 518 769 

Hyundai 742 838 1,237 1,186 1,235 

Kia 49 168 273 355 506 

Mazda 500 667 1,053 1,272 1,330 

Mitsubishi 371 352 1,973 2,386 2,506 

Nissan 399 565 1,344 1,387 1,467 

Porsche 52 (39) (35) 130 124 

Subaru 617 628 1,369 1,597 1,553 

Suzuki - 1,134 1,381 1,404 1,630 

Tata 61 56 101 182 629 

Toyota 43 82 239 333 466 

Volkswagen 117 333 486 486 723 

Average 367 573 836 987 1,152 

These cost increases derive from increased application of advanced technologies 

as stringency increases past the levels in the final standards. For example, under the final 

standards, additional diesel application rates average 1.6% for the industry and range 

from 0% to 3% among Chrysler, Ford, GM, Honda, Nissan, and Toyota. Under standards 

increasing in combined stringency at 5% annually, these rates more than triple, averaging 

6.2% for the industry and ranging from 0% to 21% for the same six manufacturers. 

These technology and cost increases are significant, given the amount of leadtime between now and model years 2012-2016. In order to achieve the levels of 

technology penetration for the final standards, the industry needs to invest significant 
553 

capital and product development resources right away, in particular for the 2012 and 

2013 model year, which is only 2-3 years from now. For the 2014-2016 time frame, 

significant product development and capital investments will need to occur over the next 

2-3 year in order to be ready for launching these new products for those model years. 

Thus a major part of the required capital and resource investment will need to occur now 

and over the next few years, under the final standards. NHTSA believes that the final 

rule requires significant investment and product development costs for the industry, 

focused on the next few years. 

It is important to note, and as discussed later in this preamble, as well as in the 

Joint Technical Support Document and the agency’s Regulatory Impact Analysis, the 

average model year 2016 per-vehicle cost increase of more than $900 includes an 

estimate of both the increase in capital investments by the auto companies and the 

suppliers as well as the increase in product development costs. These costs can be 

significant, especially as they must occur over the next 2-3 years. Both the domestic and 

transplant auto firms, as well as the domestic and world-wide automotive supplier base, 

are experiencing one of the most difficult markets in the U.S. and internationally that has 

been seen in the past 30 years. One major impact of the global downturn in the 

automotive industry and certainly in the U.S. is the significant reduction in product 

development engineers and staffs, as well as a tightening of the credit markets which 

allow auto firms and suppliers to make the near-term capital investments necessary to 

bring new technology into production. 

The agency concludes that the levels of technology penetration required by the 

final standards are reasonable. Increasing the standards beyond those levels would lead 

to rapidly increasing dependence on advanced technologies with higher costs—

technology that, though perhaps technologically feasible for individual vehicle models, 

would, at the scales involved, pose too great an economic burden given the state of the 

industry, particularly in the early years of the rulemaking time frame.636

Therefore, the agency concluded that these more stringent alternatives would give 

insufficient weight to economic practicability and related lead time concerns, given the 

current state of the industry and the rate of increase in stringency that would be required. 

Overall, the agency concluded that among the alternatives considered by the agency, the 

proposed alternative contained the maximum feasible CAFE standards for MYs 2012-

2016 as they were the most appropriate balance of the various statutory factors. 

 

636 Although the final standards are projected to be slightly more costly than the 5% alternative in MY 

2012, that alternative standard becomes progressively more costly than the final standards in the remaining 

model years. See Figures IV.F.8 through IV.F.10 above. Moreover, as discussed above, after MY 2012, 

the 5% alternative standard yields less incremental fuel economy benefits at increased cost (both industrywide and per vehicle), directionally the less desirable result. These increased costs incurred to increase fuel 

economy through MY 2016 would impose significantly increased economic burden on the manufacturers in 

the next few calendar years to prepare for these future model years. In weighing the statutory factors, 

NHTSA accordingly rejected this alternative in favor of the final standard. 
554 

Some commenters argued that the agency should select a more stringent 

alternative than that proposed in the NPRM. The Union of Concerned Scientists (UCS) 

commented that NHTSA should set standards to produce the “maximum environmental 

benefit” available at “reasonable” cost, and at least at the stringency maximizing net 

benefits. Students from the University of California at Santa Barbara commented that the 

agency should have based standards not just on technologies known to be available, but 

also on technologies that may be available in the future—and should do so in order to 

force manufacturers to “reach” to greater levels of performance. Also, the Center for 

Biological Diversity (CBD) commented that, having conducted an unbiased cost-benefit 

analysis showing benefits three times the magnitude of costs for the proposed alternative, 

the agency should select a more stringent alternative. CBD also argued that the agency 

should have evaluated the extent to which manufacturers could deploy technology more 

rapidly than suggested by a five-year redesign cycle. 

Conversely, other commenters argued that NHTSA should select a less stringent 

alternative, either in all model years or at least in the earlier model years. Chrysler, VW, 

and the Alliance of Automobile Manufacturers commented that the stringency of 

NHTSA’s CAFE standards should be further reduced relative to that of EPA’s GHG 

emissions standards, so that manufacturers would not be required by CAFE to add any 

tailpipe technology beyond what they thought would be necessary to meet an mpg level 

of 35.5 minus the maximum possible A/C credits that could be obtained under the EPA 

program. Also, Chrysler, Daimler, Toyota, Volkswagen, and the Alliance argued that the 

agency should reduce the rate of increase in stringency to produce steadier and more 

“linear” increases between MY 2011 and MY 2016. In addition, the Heritage Foundation 

commented that the proposed standards would, in effect, force accelerated progress 

toward EISA’s “35 mpg by 2020” requirement, causing financially-stressed 

manufacturers to incur undue costs that would passed along to consumers. 

However, most commenters supported the agency’s selection of the proposed 

standards. The American Chemical Society, the New York Department of 

Environmental Conservation, the Washington State Department of Ecology, and several 

individuals all expressed general support for the levels of stringency proposed by 

NHTSA as part of the joint proposal. General Motors and Nissan both indicated that the 

proposed standards are consistent with the National Program announced by the President 

and supported in letters of commitment signed by these companies’ executives. Finally, 

the California Air Resources Board (CARB) strongly supported the stringency of the 

proposed standards, as well as the agencies’ underlying technical analysis and weighing 

of statutory factors. CARB further commented that the stringency increases in the earlier 

model years are essential to providing environmental benefits at least as great as would 

be achieved through state-level enforcement of CARB’s GHG emissions standards.637 

 

637 Generally speaking, the cumulative benefits (in terms of fuel savings and GHG reductions) of frontloaded standards will be greater than standards that increase linearly. 
555 

The agency has considered these comments and all others, and having considered 

those comments, believes the final standards best balance of all relevant factors that the 

agency considers when determining maximum feasible CAFE standards. As discussed 

below, having updated inputs to its analysis and correspondingly updated its definition 

and analysis of these regulatory alternatives, the agency continues to conclude that 

manufacturers can respond to the proposed standards with technologies that will be 

available at reasonable cost. The agency finds that alternatives less stringent that the one 

adopted today would leave too much technology “on the shelf” unnecessarily, thereby 

failing to deliver the fuel savings that the nation needs or to yield environmental benefits 

necessary to support a harmonized national program. In response to some manufacturers’ 

suggestion that NHTSA’s CAFE standards should be made even less stringent compared 

to EPA’s GHG emissions standards, NHTSA notes that the difference, consistent with 

the underlying Notice of Intent, is based on the agencies’ estimate of the average amount 

of air conditioning credit earned, not the maximum theoretically available, and that 

NHTSA’s analysis indicates that most manufacturers can achieve the CAFE standards by 

MY 2016 using tailpipe technologies. This is fully consistent with the agency’s historical 

position. As NHTSA explained in the NPRM, the Conference Report for EPCA, as 

enacted in 1975, makes clear, and applicable 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 economy.” CEI-I, 

793 F.2d 1322, 1352 (D.C. Cir. 1986). Instead, NHTSA is compelled “to weigh the 

benefits to the nation of a higher fuel economy standard against the difficulties of 

individual automobile manufacturers.” Id. Thus, 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. 

While some manufacturers may find greater A/C improvements to be a more costeffective way of meeting the GHG standards, that does not mean those manufacturers 

will be unable to meet the CAFE standards with tailpipe technologies. NHTSA’s 

analysis has demonstrated a feasible path to compliance with the CAFE standards for 

most manufacturers using those technologies. “Economic practicability” means just that, 

practicability, and need not always mean what is “cheapest” or “most cost-effective” for a 

specific manufacturer. Moreover, many of the A/C improvements on which 

manufacturers intend to rely for meeting the GHG standards will reduce GHG emissions, 

specifically HFC emissions, but they will not lead to greater fuel savings.638 The core 

purpose of the CAFE standards under EPCA is to reduce fuel consumption. NHTSA 

believes that less stringent standards would allow tailpipe fuel economy technologies to 

be left on the table that can be feasibly and economically applied, and failing to apply 

them would lead to a loss in fuel savings. This would not place appropriate emphasis on 

the core CAFE purpose of conserving fuel. For this reason, we decline to reduce the 

 

638 This is not to say that NHTSA means, in any way, to deter manufacturers from employing A/C 

technologies to meet EPA’s standards, but simply to say that NHTSA’s independent obligation to set 

maximum feasible CAFE standards to be met through application of tailpipe technologies alone must be 

fulfilled, while recognizing the flexibilities offered in another regulatory program. 
556 

stringency of our standards as requested by some manufacturers. Similarly, we decline to 

pursue with EPA in this rulemaking the suggestion by one commenter that that agency’s 

calculation authority under EPCA be used to provide A/C credits. 

With respect to some manufacturers’ concerns regarding the increase in 

stringency through MY 2013, the agency notes that stringency increases in these model 

years are especially important in terms of the accumulation of fuel savings and emission 

reductions over time. In addition, a weakening would risk failing to produce emission 

reductions at least as great as might be achieved through CARB’s GHG standards. 

Therefore, the agency believes that alternatives less stringent than the one adopted today 

would not give sufficient emphasis to the nation’s need to conserve energy. The 

requirement to set standards that increase ratably between MYs 2011 and 2020 must also 

be considered in the context of what levels of standards would be maximum feasible. 

The agency believes that the rate of increase of the final standards is reasonable. 

On the other hand, the agency disagrees with comments by UCS, CBD, and others 

indicating that more stringent standards would be appropriate. As discussed above, 

alternatives more stringent than the one adopted today would entail a rapidly increasing 

dependence on the most expensive technologies and those which are technically more 

demanding to implement, with commensurately rapid increases in costs. In the agency’s 

considered judgment, these alternatives are not economically practicable, nor do they 

provide correspondingly sufficient lead time. The agency also disagrees with CBD’s 

assertion that NHTSA and EPA have been overly conservative in assuming an average 

redesign cycle of 5 years. There are some manufacturers who apply longer cycles (such 

as smaller manufacturers described above), there are others who have shorter cycles for 

some of their products, and there are some products (e.g., cargo vans) that tend to be 

redesigned on longer cycles. NHTSA believes that there are no full line manufacturers 

who can maintain significant redesigns of vehicles (with relative large sales) in 1 or 2 

years, and CBD has provided no evidence indicating this would be practicable. A 

complete redesign of the entire U.S. light-duty fleet by model year 2012 is clearly 

infeasible, and NHTSA and EPA believe that several model years additional lead time is 

necessary in order for the manufacturers to meet the most stringent standards. The 

graduated increase in the stringency of the standards from MYs 2012 through 2016 

accounts for the economic necessity of timing the application of many major technologies 

to coincide with scheduled model redesigns. 

In contrast, through analysis of the illustrative results shown above, as well as the 

more complete and detailed results presented in the accompanying FRIA, NHTSA has 

concluded that the final standards are technologically feasible and economically 

practicable. The final standards will require manufacturers to apply considerable 

additional technology, starting with very significant investment in technology design, 

development and capital investment called for in the next few years. Although NHTSA 

cannot predict how manufacturers will respond to the final standards, the agency’s 

analysis indicates that the standards could lead to significantly greater use of advanced 
557 

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 final 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 costly technologies, 

such as diesel engines and advanced technologies, such as strong HEVs. 

As shown below, NHTSA estimates that the final standards could lead to average 

incremental costs ranging from $303 per vehicle (for light trucks in MY 2012) to $947 

per vehicle (for light trucks in MY 2016), increasing steadily from $396 per vehicle for 

all light vehicles in MY 2012 to $903 for all light vehicle in MY 2016. NHTSA 

estimates that these costs would vary considerably among manufacturers, but would 

rarely exceed $1,800 per vehicle. The following three tables summarize estimated 

manufacturer-level average incremental costs for the final standards and the average of 

the passenger and light truck fleets: 

Table IV.F.6. Average Incremental Costs ($/vehicle) under Final Passenger Car CAFE 

Standards 

Manufacturer MY 2012 MY 2013 MY 2014 MY 2015 MY 2016 

BMW 3 4 24 184 585 

Chrysler 734 1,043 1,129 1,270 1,358 

Daimler - - 410 801 1,109 

Ford 1,619 1,537 1,533 1,713 1,884 

General Motors 448 896 1,127 1,302 1,323 

Honda 33 98 205 273 456 

Hyundai 559 591 768 744 838 

Kia 110 144 177 235 277 

Mazda 555 656 799 854 923 

Mitsubishi 534 460 1,588 1,875 1,831 

Nissan 119 323 707 723 832 

Porsche 68 (52) (51) (50) (49) 

Subaru 292 324 988 1,385 1,361 

Suzuki - 625 779 794 1,005 

Tata 111 93 183 306 710 

Toyota 31 29 41 121 126 

Volkswagen 145 428 477 492 783 

Average 455 552 670 774 880 

Table IV.F.7. Average Incremental Costs ($/vehicle) under Final Light Truck CAFE 

Standards 

Manufacturer MY 2012 MY 2013 MY 2014 MY 2015 MY 2016 

BMW 252 239 277 281 701 

Chrysler 360 527 876 931 1,170 

Daimler 60 51 51 52 51 
558 

Ford 465 633 673 1,074 1,174 

General Motors 292 513 749 807 986 

Honda 233 217 370 457 806 

Hyundai 693 630 1,148 1,136 1,113 

Kia 400 467 582 780 1,137 

Mazda 144 241 250 354 480 

Mitsubishi - - 553 686 1,371 

Nissan 398 489 970 1,026 1,362 

Porsche - (1) (1) 469 469 

Subaru 1,036 995 1,016 1,060 1,049 

Suzuki - 1,797 1,744 1,689 1,732 

Tata - - - - 503 

Toyota 130 150 384 499 713 

Volkswagen - - 514 458 441 

Average 303 411 615 741 947 

Table IV.F.8. Average Incremental Costs ($/vehicle) under Final CAFE Standards 

Manufacturer MY 2012 MY 2013 MY 2014 MY 2015 MY 2016 

BMW 106 94 110 213 618 

Chrysler 499 743 989 1,084 1,257 

Daimler 20 18 281 554 773 

Ford 1,195 1,187 1,205 1,472 1,622 

General Motors 371 705 946 1,064 1,165 

Honda 116 144 266 343 585 

Hyundai 577 599 847 805 879 

Kia 176 221 263 334 426 

Mazda 482 587 716 778 858 

Mitsubishi 371 319 1,200 1,389 1,647 

Nissan 211 376 792 813 984 

Porsche 52 (39) (35) 130 124 

Subaru 551 552 998 1,267 1,248 

Suzuki - 823 954 946 1,123 

Tata 61 56 101 182 629 

Toyota 67 70 159 248 317 

Volkswagen 117 333 486 486 723 

Average 396 498 650 762 903 

In summary, NHTSA has considered eight regulatory alternatives, including the 

final 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 final 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, and would forego these benefits even 

though there is adequate lead time to implement reasonable and feasible technology for 

the vehicles. Conversely, the agency has concluded that more stringent standards would 

involve levels of additional technology and cost that would be economically 

impracticable and, correspondingly, would provide inadequate lead time, considering the 
559 

economic state of the automotive industry, would not be economically practicable. 

Therefore, having considered these eight regulatory alternatives, and the statutorilyrelevant 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 final standards,639 NHTSA concludes that the final 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 Will These 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. Estimated Average Required Fuel Economy (mpg) 

under Final Standards 

Model Year 2012 2013 2014 2015 2016 

Passenger Cars 33.3 34.2 34.9 36.2 37.8 

Light Trucks 25.4 26.0 26.6 27.5 28.8 

Combined 29.7 30.5 31.3 32.6 34.1 

 NHTSA estimates that average achieved fuel economy levels will 

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

 

639 See Section IV.G.7 below. 
560 

undercomply640 in some model years and overcomply641 in others, reaching a combined 

average fuel economy of 33.7 mpg in MY 2016:642

Table IV.G.1-2. Estimated Average Achieved Fuel Economy (mpg) 

under Final Standards 

Model Year 2012 2013 2014 2015 2016 

Passenger Cars 32.8 34.4 35.3 36.3 37.2 

Light Trucks 25.1 26.0 27.0 27.6 28.5 

Combined 29.3 30.6 31.7 32.6 33.7 

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

totaling 61 billion gallons during the useful lives of vehicles manufactured in MYs 2012-

2016: 

Table IV.G.1-3. Fuel Saved (billion gallons) 

under Final Standards 

Model Year 2012 2013 2014 2015 2016 Total 

Passenger Cars 2.4 5.2 7.2 9.4 11.4 35.7 

Light Trucks 1.8 3.7 5.3 6.5 8.1 25.4 

Combined 4.2 8.9 12.5 16.0 19.5 61.0 

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

corresponding reductions of CO2 emissions totaling 655 million metric tons (mmt) during 

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

Table IV.G.1-4. Carbon Dioxide Emissions (mmt) Avoided 

under Final Standards 

Model Year 2012 2013 2014 2015 2016 Total 

Passenger Cars 25 54 77 101 123 380 

Light Trucks 19 40 57 71 88 275 

Combined 44 94 134 172 210 655 

 

640 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. 

641 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) 642 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. 
561 

2. How Will These 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 being 

finalized today for MY 2016 would be established for subsequent model years, the effects 

of the final 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. lightduty vehicle fleet will be comprised of cars and light trucks that meet the MY 2016 

standard. The impact of the new 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 standards as stringent as those established for MY 2016. 

As Table IV.G.2-1 shows, NHTSA estimates that the fuel economy increases 

resulting from the final standards will lead to reductions in total fuel consumption by cars 

and light trucks of 10 billion gallons during 2020, increasing to 32 billion gallons by 

2050. Over the period from 2012, when the final standards would begin to take effect, 

through 2050, cumulative fuel savings would total 729 billion gallons, as Table IV.G.2-1 

also indicates. 

Table IV.G.2-1. Reduction in Fleet-Wide Fuel Use (billion gallons) 

under Final Standards 

Calendar Year 2020 2030 2040 2050 Total, 2012-

2050

Passenger Cars 6 13 17 21 469

Light Trucks 4 7 9 11 260 

Combined 10 20 26 32 729 

 As a consequence of these reductions in fleet-wide fuel consumption, the agency 

also estimates that the new 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 annual CO2 emissions associated with 

passenger car and light truck use in the U.S. use will decline by 116 million metric tons 

(mmt) in 2020 as a consequence of the new standards, as Table IV.G.2-2 reports. The 

table also shows that the this annual reduction is estimated to grow to nearly 400 million 

metric tons by the year 2050, and will total nearly 9 billion metric tons over the period 

from 2012, when the final standards would take effect, through 2050. 

Table IV.G.2-2. Reduction in Fleet-Wide Carbon Dioxide Emissions (mmt) 

From Passenger Car and Light Truck Use under Final Standards

Calendar Year 2020 2030 2040 2050 Total, 2012-

2050 
562 

Passenger Cars 69 153 205 255 5,607 

Light Trucks 49 89 112 136 3,208 

Combined 117 242 316 391 8,815 

 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, 

based on analysis documented in the final Environmental Impact Statement (EIS) that 

informed the agency’s decisions regarding this rule, 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 3.125 -0.011

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%

3. How Will These Final 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 new 

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 new 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. 
563 

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.643 

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 final standards during calendar year 2030. By that date, the majority of lightduty vehicles in use will have met the MY 2016 CAFE standards, so these reductions 

provide a useful index of the long-term impact of the final 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 2,718 465 -2,442 2,523 

Fuel 

production 

and 

distribution 

-20,970 -2,831 -12,698 -75,342 

All sources -18,252 -2,366 -15,140 -72,820 

Light 

Trucks

Vehicle use 3,544 176 -1,420 1,586

Fuel 

production 

and 

distribution

-12,252 -1,655 -7,424 -43,763

All sources -8,707 -1,479 -8,845 -42,177

Total

Vehicle use 6,263 642 -3,862 4,108

Fuel 

production 

and 

distribution 

-33,222 -4,487 -20,122 -119,106 

 

643 As stated elsewhere, while the agency’s analysis assumes that all changes in upstream emissions result 

from a decrease in petroleum production and transport, the analysis of non-GHG emissions in future 

calendar years also assumes that retail gasoline composition is unaffected by this rule; as a result, the 

impacts of this rule on downstream non-GHG emissions (more specifically, on air toxics) may be 

underestimated. See also Section III.G above for more information. 
564 

All sources -26,959 -3,845 -23,984 -114,997 

Table IV.G.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 72 18 59 

Fuel production 

and distribution 

-161 -2 -58 

All sources -89 16 1 

Light Trucks 

Vehicle use 38 10 65 

Fuel production 

and distribution 

-94 -1 -34 

All sources -55 9 32 

Total

Vehicle use 111 28 124 

Fuel production 

and distribution

-254 -3 -91

All sources -144 25 33

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 

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, based on analysis documented in the final Environmental Impact 

Statement (EIS) that informed the agency’s decisions regarding this rule, 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. However, emissions 

changes and dollar-per-ton estimates alone are not necessarily a good indication of local 

or regional air quality and health impacts, as there may be localized impacts associated 

with this rulemaking, because the atmospheric chemistry related to ambient 

concentrations of PM2.5, ozone, and air toxics is very complex. Full-scale photochemical 

modeling provides the necessary spatial and temporal detail to more completely and 

accurately estimate the changes in ambient levels of these pollutants and their associated 

health and welfare impacts. Although EPA conducted such modeling for purposes of the 

final rule, it was not available in time to be included in NHTSA’s FEIS. See Section 

III.G above for EPA’s description of the full-scale air quality modeling it conducted for 

the 2030 calendar year in an effort to capture this variability. 
565 

Table IV.G.3-2. Projected Reductions in Health Impacts of Exposure to Criteria Air 

Pollutants from Final Standards (calendar year 2030) 

Health Impact Measure

Projected 

Reduction 

(2030)

Mortality (ages 30 and older) premature deaths per year 243 to 623

Chronic Bronchitis cases per year 160

Emergency Room Visits for Asthma number per year 222

Work Loss workdays per year 28,705
566 

Table IV.G.4-1. Addition of Technologies to Passenger Car Fleet 

under Final Standards 

Technology MY 2012 MY 2013 MY 2014 MY 2015 MY 2016

Low Friction Lubricants 15% 17% 18% 21% 21%

Engine Friction Reduction 15% 36% 41% 43% 52%

VVT - Coupled Cam Phasing (CCP) on SOHC 2% 3% 3% 5% 7%

Discrete Variable Valve Lift (DVVL) on SOHC 0% 1% 2% 4% 4%

Cylinder Deactivation on SOHC 0% 1% 1% 0% 0%

VVT - Intake Cam Phasing (ICP) 0% 0% 0% 0% 0%

VVT - Dual Cam Phasing (DCP) 11% 15% 16% 17% 25%

Discrete Variable Valve Lift (DVVL) on DOHC 13% 22% 26% 27% 33%

Continuously Variable Valve Lift (CVVL) 0% 0% 0% 0% 0%

Cylinder Deactivation on DOHC 0% 0% 0% 1% 1%

Cylinder Deactivation on OHV 0% 1% 1% 1% 1%

VVT - Coupled Cam Phasing (CCP) on OHV 0% 1% 2% 2% 2%

Discrete Variable Valve Lift (DVVL) on OHV 0% 2% 2% 3% 3%

Conversion to DOHC with DCP 0% 0% 0% 0% 0%

Stoichiometric Gasoline Direct Injection (GDI) 13% 22% 25% 28% 35%

Combustion Restart 0% 0% 1% 4% 10%

Turbocharging and Downsizing 8% 16% 17% 20% 23%

Exhaust Gas Recirculation (EGR) Boost 0% 9% 11% 15% 18%

Conversion to Diesel following TRBDS 2% 3% 3% 3% 3%

Conversion to Diesel following CBRST 0% 0% 0% 0% 0%

6-Speed Manual/Improved Internals 1% 1% 1% 1% 1%

Improved Auto. Trans. Controls/Externals 0% 3% 5% 3% -2%

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 12% 26% 34% 46% 54%

Electric Power Steering 9% 28% 33% 33% 43%

Improved Accessories 18% 25% 28% 31% 43%

12V Micro-Hybrid 0% 0% 0% 0% 0%

Belt mounted Integrated Starter Generator 5% 11% 19% 24% 25%

Crank mounted Integrated Starter Generator 3% 3% 3% 3% 3%

Power Split Hybrid 2% 2% 2% 2% 2%

2-Mode Hybrid 0% 0% 0% 0% 0%

Plug-in Hybrid 0% 0% 0% 0% 0%

Material Substitution (1.5%) 21% 28% 34% 40% 48%

Material Substitution (5% to 10%) 0% 0% 17% 31% 40%

Material Substitution (NA) 0% 0% 0% 0% 0%

Low Rolling Resistance Tires 4% 20% 29% 36% 37%

Low Drag Brakes 2% 3% 4% 5% 7%

Secondary Axle Disconnect - Unibody 0% 0% 0% 0% 0%

Secondary Axle Disconnect - Ladder Frame 1% 2% 2% 2% 2%

Aero Drag Reduction 8% 22% 30% 34% 43%
567 

 

Table IV.G.4-2. Addition of Technologies to Light Truck Fleet 

under Final Standards 

Technology MY 2012 MY 2013 MY 2014 MY 2015 MY 2016

Low Friction Lubricants 11% 12% 13% 15% 23%

Engine Friction Reduction 0% 15% 17% 23% 38%

VVT - Coupled Cam Phasing (CCP) on SOHC 2% 2% 2% 2% 2%

Discrete Variable Valve Lift (DVVL) on SOHC 1% 1% 2% 2% 3%

Cylinder Deactivation on SOHC 0% -1% -1% -1% -1%

VVT - Intake Cam Phasing (ICP) 0% 0% 0% 0% 0%

VVT - Dual Cam Phasing (DCP) 2% 3% 7% 7% 12%

Discrete Variable Valve Lift (DVVL) on DOHC 6% 9% 14% 14% 19%

Continuously Variable Valve Lift (CVVL) 0% 0% 0% 0% 0%

Cylinder Deactivation on DOHC -1% 0% -1% 1% 1%

Cylinder Deactivation on OHV 0% 0% 0% 0% 6%

VVT - Coupled Cam Phasing (CCP) on OHV 0% 0% 0% 0% 13%

Discrete Variable Valve Lift (DVVL) on OHV 0% 13% 15% 20% 20%

Conversion to DOHC with DCP 0% 0% 0% 0% 0%

Stoichiometric Gasoline Direct Injection (GDI) 12% 17% 21% 23% 30%

Combustion Restart 0% 0% 3% 8% 14%

Turbocharging and Downsizing 4% 6% 10% 10% 12%

Exhaust Gas Recirculation (EGR) Boost 0% 2% 5% 5% 7%

Conversion to Diesel following TRBDS 3% 4% 4% 4% 4%

Conversion to Diesel following CBRST 0% 0% 0% 0% 0%

6-Speed Manual/Improved Internals 0% 0% 0% 0% 0%

Improved Auto. Trans. Controls/Externals 0% -11% -18% -30% -34%

Continuously Variable Transmission 0% 0% 0% 0% 0%

6/7/8-Speed Auto. Trans with Improved Internals -2% -2% 4% 5% 5%

Dual Clutch or Automated Manual Transmission 10% 32% 41% 53% 60%

Electric Power Steering 7% 14% 17% 23% 25%

Improved Accessories 4% 5% 7% 13% 21%

12V Micro-Hybrid 0% 0% 0% 0% 0%

Belt mounted Integrated Starter Generator 7% 11% 22% 25% 25%

Crank mounted Integrated Starter Generator 0% 0% 0% 0% 0%

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%) 4% 3% 22% 33% 48%

Material Substitution (5% to 10%) 0% 0% 19% 34% 53%

Material Substitution (NA) 0% 0% 0% 0% 0%

Low Rolling Resistance Tires 11% 12% 15% 15% 16%

Low Drag Brakes 10% 13% 16% 18% 42%

Secondary Axle Disconnect - Unibody 0% 0% 0% 0% 0%

Secondary Axle Disconnect - Ladder Frame 10% 9% 10% 13% 23%

Aero Drag Reduction 13% 15% 20% 22% 25%
568 

 

Table IV.G.4-3. Addition of Technologies to Overall Fleet 

under Final Standards 

Technology MY 2012 MY 2013 MY 2014 MY 2015 MY 2016

Low Friction Lubricants 14% 15% 16% 19% 21%

Engine Friction Reduction 9% 28% 32% 36% 47%

VVT - Coupled Cam Phasing (CCP) on SOHC 2% 3% 3% 4% 5%

Discrete Variable Valve Lift (DVVL) on SOHC 0% 1% 2% 3% 3%

Cylinder Deactivation on SOHC 0% 0% 0% 0% 0%

VVT - Intake Cam Phasing (ICP) 0% 0% 0% 0% 0%

VVT - Dual Cam Phasing (DCP) 7% 11% 12% 13% 20%

Discrete Variable Valve Lift (DVVL) on DOHC 10% 17% 21% 22% 28%

Continuously Variable Valve Lift (CVVL) 0% 0% 0% 0% 0%

Cylinder Deactivation on DOHC 0% 0% 0% 1% 1%

Cylinder Deactivation on OHV 0% 0% 0% 0% 3%

VVT - Coupled Cam Phasing (CCP) on OHV 0% 0% 1% 1% 5%

Discrete Variable Valve Lift (DVVL) on OHV 0% 6% 7% 9% 9%

Conversion to DOHC with DCP 0% 0% 0% 0% 0%

Stoichiometric Gasoline Direct Injection (GDI) 12% 20% 24% 27% 33%

Combustion Restart 0% 0% 2% 6% 11%

Turbocharging and Downsizing 6% 12% 14% 17% 19%

Exhaust Gas Recirculation (EGR) Boost 0% 6% 9% 11% 15%

Conversion to Diesel following TRBDS 3% 3% 3% 3% 3%

Conversion to Diesel following CBRST 0% 0% 0% 0% 0%

6-Speed Manual/Improved Internals 0% 1% 1% 1% 1%

Improved Auto. Trans. Controls/Externals 0% -2% -3% -9% -13%

Continuously Variable Transmission 0% 0% 0% 0% 0%

6/7/8-Speed Auto. Trans with Improved Internals -1% 0% 2% 3% 3%

Dual Clutch or Automated Manual Transmission 11% 28% 37% 49% 56%

Electric Power Steering 8% 23% 27% 29% 37%

Improved Accessories 12% 18% 20% 24% 35%

12V Micro-Hybrid 0% 0% 0% 0% 0%

Belt mounted Integrated Starter Generator 5% 11% 20% 24% 25%

Crank mounted Integrated Starter Generator 2% 2% 2% 2% 2%

Power Split Hybrid 2% 2% 2% 1% 1%

2-Mode Hybrid 0% 0% 0% 0% 0%

Plug-in Hybrid 0% 0% 0% 0% 0%

Material Substitution (1.5%) 14% 18% 30% 38% 48%

Material Substitution (5% to 10%) 0% 0% 18% 32% 44%

Material Substitution (NA) 0% 0% 0% 0% 0%

Low Rolling Resistance Tires 7% 17% 24% 28% 30%

Low Drag Brakes 5% 7% 9% 9% 19%

Secondary Axle Disconnect - Unibody 0% 0% 0% 0% 0%

Secondary Axle Disconnect - Ladder Frame 4% 4% 5% 6% 9%

Aero Drag Reduction 10% 19% 26% 30% 36%
569 

 In order to pay for this additional technology (and, for some manufacturers, civil 

penalties), NHTSA estimates that the cost of an average passenger car and light truck 

will, relative to levels resulting from compliance with baseline (MY 2011) standards, 

increase by $505-$907 and $322-$961, respectively, during MYs 2011-2016. The 

following tables summarize the agency’s estimates of average cost 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 Cost Increases ($) 

under Final Standards 

Manufacturer MY 2012 MY 2013 MY 2014 MY 2015 MY 2016

BMW 157 196 255 443 855 

Chrysler 794 1,043 1,129 1,270 1,358 

Daimler 160 198 564 944 1,252 

Ford 1,641 1,537 1,533 1,713 1,884 

General Motors 552 896 1,127 1,302 1,323 

Honda 33 98 205 273 456 

Hyundai 559 591 768 744 838 

Kia 110 144 177 235 277 

Mazda 632 656 799 854 923 

Mitsubishi 644 620 1,588 1,875 1,831 

Nissan 119 323 707 723 832 

Porsche 316 251 307 390 496 

Subaru 413 472 988 1,385 1,361 

Suzuki 242 625 779 794 1,005 

Tata 243 258 370 532 924 

Toyota 31 29 41 121 126 

Volkswagen 293 505 587 668 964 

Total/Average 505 573 690 799 907 
570 

Table IV.G.4-5. Average Light Truck Incremental Cost Increases ($) 

under Final Standards 

Manufacturer MY 2012 MY 2013 MY 2014 MY 2015 MY 2016

BMW 252 272 338 402 827 

Chrysler 409 527 876 931 1,170 

Daimler 98 123 155 189 260 

Ford 465 633 673 1,074 1,174 

General Motors 336 513 749 807 986 

Honda 233 217 370 457 806 

Hyundai 693 630 1,148 1,136 1,113 

Kia 406 467 582 780 1,137 

Mazda 144 241 250 354 480 

Mitsubishi 39 77 553 686 1,371 

Nissan 398 489 970 1,026 1,362 

Porsche 44 76 109 568 640 

Subaru 1,036 995 1,016 1,060 1,049 

Suzuki 66 1,797 1,744 1,689 1,732 

Tata 66 110 137 198 690 

Toyota 130 150 384 499 713 

Volkswagen 44 77 552 557 606 

Total/Average 322 416 621 752 961 

Table IV.G.4-6. Average Incremental Cost Increases ($) 

By Manufacturer under Final Standards 

Manufacturer MY 2012 MY 2013 MY 2014 MY 2015 MY 2016

BMW 196 225 283 430 847 

Chrysler 553 743 989 1,084 1,257 

Daimler 139 171 417 695 937 

Ford 1,209 1,187 1,205 1,472 1,622 

General Motors 446 705 946 1,064 1,165 

Honda 116 144 266 343 585 

Hyundai 577 599 847 805 879 

Kia 177 221 263 334 426 

Mazda 545 587 716 778 858 

Mitsubishi 459 453 1,200 1,389 1,647 

Nissan 211 376 792 813 984 

Porsche 250 207 243 452 544 

Subaru 630 650 998 1,267 1,248 

Suzuki 231 823 954 946 1,123 

Tata 164 199 265 396 832 

Toyota 67 70 159 248 317 

Volkswagen 245 410 579 648 901 
571 

Total/Average 434 513 665 782 926 

Based on the agencies’ estimates of manufacturers’ future sales volumes, these 

cost increases will lead to a total of $51.7 billion in incremental outlays during MYs 

2012-2016 for additional technology attributable to the final standards: 

Table IV.G.4-7. Incremental Technology Outlays ($b) 

under Final Standards 

2012 2013 2014 2015 2016 Total 

Passenger Cars 4.1 5.4 6.9 8.2 9.5 34.2 

Light Trucks 1.8 2.5 3.7 4.3 5.4 17.6 

Combined 5.9 7.9 10.5 12.5 14.9 51.7 

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 is intended 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 final 

CAFE standards. Although these costs are difficult to estimate accurately, they 

nonetheless represent a notable category of omitted costs if they have not been 

adequately accounted for in the cost estimates. 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 a range of estimates of these potential 

safety impacts below and in the FRIA, no estimate of their economic value is included in 

the agency’s estimates of the net benefits resulting from the final standards. 

Finally, while NHTSA is confident that the cost estimates are the best available 

and appropriate for purposes of this final rule, 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. 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 final standards. 
572 

 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 $182.5 billion over the lifetimes of 

light vehicles sold during MYs 2012-2016: 

Table IV.G.4-8. Present Value of Benefits ($billion) 

under Final Standards644

2012 2013 2014 2015 2016 Total 

Passenger Cars 6.8 15.2 21.6 28.7 35.2 107.5 

Light Trucks 5.1 10.7 15.5 19.4 24.3 75.0 

Combined 11.9 25.8 37.1 48 59.5 182.5 

 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 dis-benefits, 

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 FRIA accompanying today’s final rule presents a detailed analysis of the rule’s 

specific benefits. 

 For both the passenger car and light truck fleets, NHTSA estimates that the 

benefits of today’s final standards will exceed the corresponding costs in every model 

year. Over the lifetimes of the affected (MY 2012-2016) vehicles, the agency estimates 

that the benefits of the final standards will exceed the costs of the final standards by 

$130.7 billion: 

Table IV.G.4-9. Present Value of Net Benefits ($billion) 

under Final Standards 

2012 2013 2014 2015 2016 Total 

Passenger Cars 2.7 9.7 14.8 20.5 25.7 73.3 

Light Trucks 3.4 8.2 11.8 15.0 18.9 57.4 

Combined 6.0 17.9 26.6 35.5 44.6 130.7 

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 

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. 

 

644 As for all tables in Section IV unless otherwise indicated, benefits are calculated using Reference Case 

input assumptions, with the social cost of carbon value discounted at 3 percent and not at 7 percent. 
573 

 

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 attributable to the rule 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. 

However, it is also possible 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. NHTSA’s analysis excludes 

these benefits because no reliable dollar-per-ton estimates of the health impacts of criteria 

pollutants other than PM2.5 or of the health impacts of airborne toxics were available for 

NHTSA 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.645 These include 

reductions in the risk of potential large-scale 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. 

The benefits, costs, and net benefits shown above are all based on a discount rate 

of 3 percent. As documented in the accompanying FRIA, the agency examined the 

sensitivity of results to changes in many economic inputs. With an alternative discount 

 

645 [ref interagency SCC group document] 
574 

rate of 7 percent, incremental technology outlays were virtually identical to those 

estimated at a 3 percent discount rate:646

Table IV.G.4-10. Incremental Technology Outlays ($b) 

under Final Standards (using 7 percent Discount Rate) 

2012 2013 2014 2015 2016 Total 

Passenger Cars 4.1 5.4 6.9 8.2 9.5 34.2 

Light Trucks 1.8 2.5 3.7 4.3 5.4 17.6 

Combined 5.9 7.9 10.5 12.5 14.9 51.7 

 However, the present value of the benefits accrued over the lifetime of the 

vehicles covered by the final standards is about 20 percent smaller when discounted at a 7 

percent annual rate than when discounted at a 3 percent annual rate:647

Table IV.G.4-11. Present Value of Benefits ($billion) 

under Final Standards (using 7 percent Discount Rate) 

2012 2013 2014 2015 2016 Total 

Passenger Cars 5.5 12.3 17.5 23.2 28.6 87.0 

Light Trucks 4.0 8.4 12.2 15.3 19.2 59.2 

Combined 9.5 20.7 29.7 38.5 47.8 146.2 

 As a result, net benefits are 28 percent lower when total benefits are discounted at 

a 7 percent annual rate: 

Table IV.G.4-12. Present Value of Net Benefits ($billion) 

under Final Standards (using 7 percent Discount Rate) 

2012 2013 2014 2015 2016 Total 

Passenger Cars 1.3 6.8 10.6 15.0 19.0 52.9 

Light Trucks 2.3 5.9 8.6 11.0 13.9 41.6 

Combined 3.6 12.8 19.2 26.0 32.9 94.5 

The following tables also present itemized costs and benefits for the combined 

fleet for each year of the final standards and for all the years combined, at 3 and 7 percent 

discount rates, respectively. Numbers in parentheses represent negative values. 

 

646 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. 

647 For these tables referring to a 7 percent discount rate, SCC was discounted at 3 percent to maintain 

internal consistency in the SCC calculations while all other benefits were discounted at 7 percent. 

Specifically, the same discount rate used to discount the value of damages from future CO2 emissions is 

used to calculate the net present value of the SCC. 
575 

Table IV.G.4-13. Itemized Cost and Benefit Estimates for the Combined Vehicle Fleet, 

3% Discount Rate ($m) 

 MY 2012 MY 2013 MY 2014 MY 2015 MY 2016 Total 

Costs 

Technology 

Costs 

5,903 7,890 10,512 12,539 14,904 51,748 

 

Benefits 

Savings in 

Lifetime Fuel 

Expenditures 

9,265 20,178 29,083 37,700 46,823 143,048 

Consumer 

Surplus from 

Additional 

Driving 

696 1,504 2,150 2,754 3,387 10,491 

Value of Savings 

in Refueling 

Time 

706 1,383 1,939 2,464 2,950 9,443 

Reduction in 

Petroleum 

Market 

Externalities 

545 1,154 1,630 2,080 2,543 7,952 

Reduction in 

Climate-Related 

Damages from 

Lower CO2 

Emissions648

921 2,025 2,940 3,840 4,804 14,528 

Dis-Benefits from Increased Driving: 

Congestion Costs (447) (902) (1,282) (1,633) (2,000) (6,264) 

Noise Costs (9) (18) (25) (32) (39) (122) 

Crash Costs (217) (430) (614) (778) (950) (2,989) 

Reduction in Health Damage Costs from Lower Emissions of Criteria Air Pollutants: 

CO 0 0 0 0 0 0 

VOC 42 76 102 125 149 494 

NOX 70 104 126 146 166 612 

PM 205 434 612 776 946 2,974 

 

648 Using the central value of $21 for the SCC. We note that the net present value of reduced CO2

emissions is calculated differently than other benefits. The same discount rate used to discount the value of 

damages from future emissions (SCC at 5 percent, 3 percent, and 2.5 percent) is used to calculate the net 

present value of the SCC for internal consistency. Additionally, we note that the SCC increases over time. 

See the SCC TSD [still TBD] for more information. 
576 

SOX 158 332 469 598 731 2,288 

Total Benefits 11,936 25,840 37,132 48,040 59,509 182,457 

 

Net Benefits 6,033 17,950 26,619 35,501 44,606 130,709 
577 

Table IV.G.4-14. Itemized Cost and Benefit Estimates for the Combined Vehicle Fleet, 

7% Discount Rate ($m) 

 MY 2012 MY 2013 MY 2014 MY 2015 MY 2016 Total 

Costs 

Technology Costs 6,217 8,485 11,327 13,455 15,866 55,349 

 

Benefits 

Savings in Lifetime 

Fuel Expenditures 

6,978 15,658 22,930 29,870 37,237 112,673 

Consumer Surplus 

from Additional 

Driving 

531 1,177 1,708 2,199 2,713 8,328 

Value of Savings in 

Refueling Time 

563 1,131 1,600 2,032 2,433 7,759 

Reduction in 

Petroleum Market 

Externalities 

423 917 1,314 1,682 2,061 6,398 

Reduction in ClimateRelated Damages from 

Lower CO2 

Emissions649

864 1,956 2,903 3,826 4,816 14,366 

Dis-Benefits from Increased Driving: 

Congestion Costs (353) (731) (1,046) (1,333) (1,634) (5,097) 

Noise Costs (7) (14) (20) (26) (32) (99) 

Crash Costs (170) (345) (498) (632) (773) (2,418) 

Reduction in Health Damage Costs from Lower Emissions of Criteria Air Pollutants: 

CO 0 0 0 0 0 0 

VOC 40 74 98 117 137 467 

NOX 80 124 149 165 181 699 

PM 168 341 495 627 761 2,393 

SOX 124 266 380 486 594 1,850 

Total Benefits 9,240 20,556 30,015 39,013 48,496 147,319 

 

Net Benefits 3,024 12,071 18,688 25,558 32,629 91,970 

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 

 

649 See supra note [directly above] 
578 

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 final standards to a meaningful extent. 

As discussed in the FRIA, 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 

explicitly, technologies carry forward between model years, and multi-year planning 

effects are represented, there is no basis to estimate reliably how manufacturers might use 

these mechanisms. Accounting for the FFV provisions indicates that achieved fuel 

economies would be 0.5-1.3 mpg lower than when these provisions are not considered 

(for comparison see Table IV.G.1-2 above): 

Table IV.G.4-15. Average Achieved Fuel Economy (mpg) 

under Final Standards (with FFV Credits) 

2012 2013 2014 2015 2016 

Passenger Cars 32.3 33.5 34.2 35.0 36.2 

Light Trucks 24.5 25.1 25.9 26.7 27.5 

Combined 28.7 29.7 30.6 31.5 32.7 

 As a result, NHTSA estimates that, when FFV credits are taken into account, fuel 

savings will total 58.6 billion gallons—about 3.9 percent less than the 61.0 billion gallons 

estimated when these credits are not considered: 

Table IV.G.4-16. Fuel Saved (billion gallons) 

under Final Standards (with FFV Credits) 

2012 2013 2014 2015 2016 Total 

Passenger Cars 2.7 4.7 6.4 8.4 11.0 33.1 

Light Trucks 2.3 3.6 5.0 6.6 8.1 25.5 

Combined 4.9 8.2 11.3 15.0 19.1 58.6 

 The agency similarly estimates CO2 emissions reductions will total 636 million 

metric tons (mmt), about 2.9 percent less than the 655 mmt estimated when these credits 

are not considered:650

Table IV.G.4-17. Avoided Carbon Dioxide Emissions (mmt) 

under Final Standards (with FFV Credits) 

2012 2013 2014 2015 2016 Total 

Passenger Cars 28 50 69 91 119 357 

 

650 Differences in the application of diesel engines lead to differences in the incremental percentage 

changes in fuel consumption and carbon dioxide emissions. 
579 

Light Trucks 25 39 54 72 88 279 

Combined 53 89 123 163 208 636 

 This analysis further indicates significant reductions in outlays for additional 

technology when FFV provisions are taken into account—about $37.5 billion, or about 

27 percent less than the $51.7b estimated when excluding these provisions: 

Table IV.G.4-18. Incremental Technology Outlays ($b) 

under Final Standards (with FFV Credits) 

2012 2013 2014 2015 2016 Total 

Passenger Cars 2.6 3.6 4.8 6.1 7.5 24.6 

Light Trucks 1.1 1.5 2.5 3.4 4.4 12.9 

Combined 3.7 5.1 7.3 9.5 11.9 37.5 

 Because NHTSA’s analysis indicated that FFV provisions will not significantly 

reduce fuel savings, the agency’s estimate of discounted benefits when including these 

provisions, $175.6b, is only about 3.8 percent lower than the $182.5b shown above for 

the analysis that excluded these provisions: 

Table IV.G.4-19. Present Value of Benefits ($billion) 

under Final Standards (with FFV Credits) 

2012 2013 2014 2015 2016 Total 

Passenger Cars 7.6 13.7 19.1 25.6 34.0 100.0 

Light Trucks 6.4 10.4 14.6 19.8 24.4 75.6 

Combined 14.0 24.1 33.7 45.4 58.4 175.6 

 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 5.7 percent, from $130.7b to $138.2b) because costs 

decrease by more than discounted benefits: 

Table IV.G.4-20. Present Value of Net Benefits ($billion) 

under Final Standards (with FFV Credits) 

2012 2013 2014 2015 2016 Total 

Passenger Cars 5.1 10.1 14.3 19.5 26.5 75.4 

Light Trucks 5.3 8.8 12.1 16.4 20.0 62.7 

Combined 10.4 19.0 26.5 35.9 46.5 138.2 

The agency has performed several sensitivity analyses to examine the effects of 

varying several important assumptions. We examine the sensitivity of fuel savings, total 

economic benefits, and technology costs with respect to the following five economic 

parameters: 
580 

1) The price of gasoline: The Reference Case uses the AEO 2010 reference case 

estimate for the price of gasoline. In this sensitivity analysis we examine the 

effect of instead using the AEO 2009 high or low forecast. 

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 instead using a 7 percent discount rate. 

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 instead using a 5 percent or 15 

percent rebound effect. 

4) The values of CO2 benefits: The Reference Case uses $21 per ton (in 2010 in 

2007$, rising over time to $45 in 2030) to quantify the benefits of reducing CO2

emissions and $0.17 per gallon to quantify the energy security benefits from 

reducing fuel consumption. In the sensitivity analysis, we examine the effect of 

using values of $5, and $65 per ton instead of the reference value of $21 per ton 

to value CO2 benefits. These values can be translated into cents per gallon by 

multiplying by 0.0089,651 giving the following values: 

($5 per ton CO2) x 0.0089 = $0.045 per gallon 

 ($21 per ton CO2) x 0.0089 = $0.187per gallon 

($35 per ton CO2) x 0.0089 = $0.312 per gallon 

 ($65 per ton CO2) x 0.0089 = $0.596 per gallon 

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 instead using a value of 5 cents per gallon. 

Varying each of the above 5 parameters in isolation results in 8 additional 

economic scenarios, in addition to the Reference case. These are listed in Table IV.G.4-

21 below, together with two additional scenarios that use combinations of these 

parameters that together produce the lowest and highest benefits. 

 

651 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. 
581 

Table IV.G.4-21. Sensitivity Analyses Evaluated in NHTSA’s FRIA 

Name Fuel Price Discount 

Rate 

Rebound 

Effect 

SCC Military 

Security 

Reference AEO 20210 

Reference Case 

3% 10% $21 0¢/gal 

High Fuel Price AEO 2009 High 

Price Case 

3% 10% $21 0¢/gal 

Low Fuel Price AEO 2009 Low 

Price Case 

3% 10% $21 0¢/gal 

7% Discount Rate AEO 20210 

Reference Case 

7% 10% $21 0¢/gal 

5% Rebound Effect AEO 20210 

Reference Case 

3% 5% $21 0¢/gal 

15% Rebound 

Effect 

AEO 20210 

Reference Case 

3% 15% $21 0¢/gal 

$65/ton CO2 Value AEO 20210 

Reference Case 

3% 10% $65 0¢/gal 

$35/ton CO2 Value AEO 20210 

Reference Case 

3% 10% $35 0¢/gal 

$5/ton CO2 Value AEO 20210 

Reference Case 

3% 10% $5 0¢/gal 

$5/ton CO2 AEO 20210 

Reference Case 

3% 10% $5 0¢/gal 

5¢/gal Military 

Security Value 

AEO 20210 

Reference Case 

3% 10% $21 5¢/gal 

Lowest Discounted 

Benefits 

AEO 2009 Low 

Price Case 

7% 15% $5 0¢/gal 

Highest Discounted 

Benefits 

AEO 2009 High 

Price Case 

3% 5% $67 5¢/gal 

The basic results of the sensitivity analyses were as follows: 

1) The various economic assumptions have no effect on the final passenger car 

and light truck standards established by this rule, because these are determined 

without reference to economic benefits. 

2) Varying the economic assumptions individually has comparatively modest 

impacts on fuel savings resulting from the adopted standards. The range of 

variation in fuel savings in response to changes in individual assumptions 

extends from a reduction of nearly 5 percent to an increase of that same 

percentage. 

3) The economic parameter with the greatest impacts on fuel savings is The 

magnitude of the rebound effect. Varying the rebound effect from 5 percent 

to 15 percent is responsible for the 4.6 percent increase and 4.6 percent 
582 

reduction in fuel savings compared to the Reference results. The only other 

parameter that has a significant effect on fuel savings is forecast fuel prices, 

although its effect is complex because changes in fuel prices affect vehicle use 

and fuel consumption in both the baseline and under the final standards. 

4) Variation in forecast fuel prices, the discount rate, and the value of reducing 

CO2 emissions each has a significant effect on the total economic benefits 

resulting from the final standards. Changing the fuel price forecast to AEO’s 

High Price forecast raises estimated economic benefits by almost 40 percent, 

while using AEO’s Low Price forecast reduces total economic benefits by 

only about 5 percent. Raising the discount rate to 7 percent from the 3 percent 

Reference value reduces the present value of economic benefits by nearly 20 

percent, while raising the value of eliminating each ton of CO2 emissions to 

$65 increases total benefits by 15 percent. 

5) Varying all economic parameters simultaneously has a significant effect on 

economic benefits. The combination of parameter values producing the 

highest benefits increases their total by slightly more than 50 percent, while 

that producing the lowest benefits reduces their value by almost 55 percent. 

However, varying these parameters in combination has less significant effects 

on other measures; for example, the high- and low-benefit combinations of 

parameter values raise or lower fuel savings and technology costs by only 

about 5 percent. 

For more detailed information regarding NHTSA’s sensitivity analyses for this final rule, 

please see Chapter X of NHTSA’s FRIA. 

5. How Would These Final 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 –1.0.652 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 

 

652 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. 
583 

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.653 

Consumer valuation of fuel economy improvements often depends upon the price of 

gasoline, which has been very volatile over the past several years. 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 improved fuel economy could potentially increase beyond that 

estimated here, which could result in 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.654 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. 

 

653 Gron, Ann and Swenson, Deborah, 2000, “Cost Pass-Through in the U.S. Automobile Market,” The 

Review of Economics and Statistics, 82: 316-324. 654 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 February 26, 2010). 
584 

 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 $448.655 This is compared to an 

average price for light vehicles of $24,033 for 2006.656 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. 

 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.657 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.658 Discounting the additional 3.2 percent (16 percent / 5 years) per year over 

the 5 years using a 3 percent mid-year discount rate659 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. 

 

655 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). 656 $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. 

657 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. 658 Based on www.bankrate.com auto loan calculator for a 5 year loan at 6 percent. 659 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. 
585 

 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.660 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, light 

trucks, and both combined for the final standards. 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, and 

Combined 

 MY 2012 MY 2013 MY 2014 MY 2015 MY 2016

Passenger Cars -65,202 46,801 103,422 168,334 227,039

Light Trucks 48,561 106,658 139,893 171,920 213,868

Combined -16,641 153,459 243,315 340,255 440,907

6. Potential Unquantified Consumer Welfare Impacts of The Final Standards

 The underlying premise of the CAFE and GHG standards is to increase social 

welfare, in the broadest sense, and as shown in earlier sections, NHTSA projects that the 

MY 2012-2016 CAFE standards will yield large positive net social benefits. In its net 

benefits analysis, NHTSA made every attempt to include all of the costs and benefits that 

could be identified and quantified. 

 It is important to highlight several features of the rulemaking analysis that 

NHTSA believes gives high confidence to its conclusion that there are large net social 

 

660 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 February 26, 2010). 
586 

benefits from these standards. First, the agencies adopted footprint-based standards in 

large part so that the full range of vehicle choices in the marketplace could be maintained. 

Second, the agencies performed a very rigorous technological feasibility, cost, and 

leadtime analysis that showed that the standards could be met while maintaining current 

levels of other vehicle attributes such as safety, utility, and performance. Third, 

widespread automaker support for the standards, in conjunction with the future product 

plans that have been provided by automakers to the agencies and recent industry 

announcements on new product offerings, provides further indication that the standards 

can be met while retaining the full spectrum of vehicle choices. 

 

NHTSA recognizes that there may be consumer welfare impacts that are not 

accounted for in its social welfare analysis. The agencies received public comments 

expressing diverging views on this issue. While the majority of commenters on this issue 

suggested that potential losses in welfare from requiring higher fuel economy was likely 

to be only a minor issue because of the many possible reasons why the market for fuel 

economy does not function perfectly, other comments suggested that potential 

unidentified and unquantified consumer welfare losses could be large. This section 

identifies the potential issues and summarizes the key public comments. The FRIA 

provides a sensitivity analysis showing how various levels of unidentified consumer 

welfare losses would affect the projected net social benefits from the CAFE standards 

established by this final rule. 

There are two viewpoints for evaluating the costs and benefits of the proposed 

increase in CAFE standards: the private perspective of vehicle buyers themselves on the 

higher fuel economy levels the proposed rule would require, and the economy-wide or 

“social” perspective on the costs and benefits of requiring higher fuel economy. The 

agency’s analysis of benefits and costs from requiring higher fuel efficiency, presented 

above, includes some categories of benefits that extend throughout the U.S. economy, 

such as reductions in the energy security costs associated with U.S. petroleum imports 

and in the economic damages expected to result from climate change. In contrast, other 

categories of benefits – principally the economic value of future fuel savings projected to 

result from higher fuel economy – will be experienced exclusively by the initial 

purchasers and subsequent owners of vehicle models whose fuel economy manufacturers 

elect to improve as part of their strategies for complying with higher CAFE standards. 

Although the economy-wide or “social” benefits from requiring higher fuel 

economy represent an important share of the total economic benefits from raising CAFE 

standards, NHTSA estimates that benefits to vehicle buyers themselves will significantly 

exceed the costs of complying with the stricter fuel economy standards this rule 

establishes, as shown above. Since the agency also assumes that the costs of new 

technologies manufacturers will employ to improve fuel economy will ultimately be 

shifted to vehicle buyers in the form of higher purchase prices, NHTSA concludes that 

the benefits to vehicle buyers from requiring higher fuel efficiency will far outweigh the 

costs they will be required to pay to obtain it. However, this raises the question of why 
587 

current purchasing patterns do not result in higher average fuel economy, and why stricter 

fuel efficiency standards should be necessary to achieve that goal. 

 

As an illustration, Table IV.G.6-1 reports the agency’s estimates of the average 

lifetime values of fuel savings for MY 2012-2016 passenger cars and light trucks 

calculated using future retail fuel prices, which are those likely to be used by vehicle 

buyers to project the value of fuel savings they expect from higher fuel economy. The 

table compares NHTSA’s estimates of the average lifetime value of fuel savings for cars 

and light trucks to the price increases it projects to result as manufacturers attempt to 

recover their costs for complying with increased CAFE standards for those model years 

by increasing vehicle sales prices. As the table shows, the agency’s estimates of the 

present value of lifetime fuel savings (discounted using the OMB-recommended 3% rate) 

outweigh projected vehicle price increases for both cars and light trucks in every model 

year, even under the assumption that all of manufacturers’ technology outlays are passed 

on to buyers in the form of higher selling prices for new cars and light trucks. By model 

year 2016, NHTSA projects that average lifetime fuel savings will exceed the average 

price increase by more than $2,000 for cars, and by more than $2,700 for light trucks. 

Table IV.G.6-1 

Value of Lifetime Fuel Savings vs. Vehicle Price Increases

 

Fleet Measure Model year 

2012 2013 2014 2015 2016 

Passenger 

Cars 

Value of Fuel Savings $759 $1,349 $1,914 $2,480 $2,932 

Average Price Increase $505 $573 $690 $799 $907 

Difference $255 $897 $1,264 $1,680 $2,025 

 

Light 

Trucks 

Value of Fuel Savings $828 $1,634 $2,277 $2,887 $3,700 

Average Price Increase $322 $416 $621 $752 $961 

Difference $506 $1,218 $1,656 $2,135 $2,739 

The comparisons above raise the question of why current vehicle purchasing 

patterns do not result in average fuel economy levels approaching those that this rule 

would require, and why stricter CAFE standards should be necessary to increase the fuel 

economy of new cars and light trucks. They also raise the question of why manufacturers 

do not elect to provide higher fuel economy even in the absence of increases in CAFE 

standards, since the comparisons in Table IV.G.6-1 suggest that doing so would reduce

the effective price of purchasing many new vehicle models, and thus to increase sales of 

new vehicles. More specifically, why would potential buyers of new vehicles hesitate to 

make investments in higher fuel economy that would produce the substantial economic 

returns illustrated by the comparisons presented in Table IV.G.6-1? And why would 

manufacturers voluntarily forego opportunities to increase the attractiveness, value, and 
588 

competitive positioning of their car and light truck models by improving their fuel 

economy? 

The majority of comments received on this topic answered this question by 

pointing out many reasons why the market for vehicle fuel economy does not appear to 

work perfectly, and accordingly, that properly designed CAFE standards would be 

expected to increase consumer welfare. Published literature also provides some support 

for the agency’s assertion that the benefits buyers will experience from higher fuel 

economy far outweigh the costs they will pay to acquire, by identifying plausible – if 

short-sighted – aspects of normal behavior that may make buyers reluctant to purchase 

vehicles whose higher fuel economy offers an attractive return. For example, consumers’ 

understandable aversion to the prospect of losses from making investments that do not 

produce their expected returns may exaggerate their uncertainty about the value of future 

fuel savings sufficiently to make purchasing a more fuel-efficient vehicle seem 

unattractive, even when doing so is likely to be a sound economic decision. As an 

illustration, Greene et al. (2009) find that the expected net present value of increasing the 

fuel economy of a passenger car from 28 to 35 miles per gallon falls from $405 when 

calculated using standard net present value calculations, to nearly zero when uncertainty 

regarding future cost savings is taken into account.661 

Another possible reconciliation of the agency’s claim that the average vehicle 

buyer will experience large fuel savings from the higher CAFE standards this rule 

establishes with the fact that the average fuel economy of vehicles currently purchased 

falls well short of the new standards is that the values consumers place on the future 

savings they expect to obtain from higher fuel economy vary widely. As an illustration, 

one recent review of consumers’ willingness to pay for improved fuel economy found 

estimates that varied from less than 1% to almost ten times the present value of the 

resulting fuel savings when those are discounted at 7% over the vehicle’s expected 

lifetime.662 Although the wide variation in these estimates undoubtedly reflects 

methodological and measurement differences among the studies surveyed, it may also 

reveal that the expected savings from purchasing a vehicle with higher fuel economy vary 

widely among individuals, because they travel different amounts, have different driving 

styles, or have different expectations about future fuel prices. 

 

661 Greene, D., J. German, and M. Delucchi (2009). “Fuel Economy: The Case for Market Failure” in 

Reducing Climate Impacts in the Transportation Sector, Sperling, D., and J. Cannon, eds. Springer Science. 

Surprisingly, the authors find that uncertainty regarding the future price of gasoline appears to be less 

important than uncertainty surrounding the expected lifetimes of new vehicles. 

662 Greene, David L., “How Consumers Value Fuel Economy: A Literature Review,” Draft report to U.S. 

Environmental Protection Agency, Oak Ridge National Laboratory, December 29, 2009; see Table 10, p. 

37. 

?? See also? David Greene and Jin-Tan Liu (1988). “Automotive Fuel Economy Improvements and 

Consumers’ Surplus.” Transportation Research Part A 22A(3): 203-218. The study actually calculated the 

willingness to pay for reduced vehicle operating costs, of which vehicle fuel economy is a major 

component.
589 

These differences may be reflected in the fact that buyers with high valuations of 

increased fuel economy already purchase vehicle models that offer it, while those with 

lower values of fuel economy emphasize other vehicle attributes in their purchasing 

decisions. A related possibility is that because the effects of differing fuel economy 

levels are relatively modest when compared to those provided by other, more prominent 

features of new vehicles – passenger and cargo-carrying capacity, performance, safety, 

etc. – it is simply not in many shoppers’ interest to spend the time and effort necessary to 

determine the economic value of higher fuel economy, attempt to isolate the component 

of a new vehicle’s selling price that is related to its fuel economy, and compare these two. 

In either case, although the agency’s estimates of the average value of fuel savings that 

will result from requiring cars and light trucks to achieve higher fuel economy may be 

correct, they may not be large enough to lead a sufficient number of buyers to push for 

vehicles with higher fuel economy to increase average fuel economy from its current 

levels. 

Defects in the market for cars and light trucks could also lead manufacturers to 

undersupply fuel economy, even in cases where many buyers were willing to pay the 

increased prices necessary to provide it. Most obviously, an absence of vigorous 

competition among producers of cars and light trucks may lead manufacturers to 

undersupply attributes that contribute to the overall quality of new vehicles, including 

fuel economy, because such “imperfect” competition reduces producers’ profit incentive 

to supply the level of fuel economy that buyers are willing to pay for. Incomplete or 

“asymmetric” access to information on vehicle attributes such as fuel economy – 

whereby manufacturers of new vehicles or sellers of used cars and light trucks have more 

complete knowledge of vehicles’ actual fuel economy levels, or of the value of 

purchasing higher fuel economy, than do potential buyers – may also prevents sellers of 

new or used vehicles from capturing its full value. In this situation, the level of fuel 

efficiency provided in the markets for new or used vehicles might remain persistently 

lower than that demanded by potential buyers. 

It is also possible that deliberate decisions by manufacturers of cars and light 

trucks, rather than constraints on the combinations of fuel economy, carrying capacity, 

and performance that manufacturers can offer using current technologies, limit the range 

of fuel economy available to buyers within individual vehicle market segments, such as 

full-size automobiles, small SUVs, or minivans. As an illustration, once a potential buyer 

has decided to purchase a minivan, the range of fuel economy among current models 

extends only from 18 to 24 mpg.663 Manufacturers might make such decisions if they 

underestimate the premiums that shoppers in certain market segments are willing to pay 

for more fuel-efficient versions of the vehicle models thy currently offer to prospective 

buyers within those segments. If this occurs, manufacturers may fail to supply levels of 

fuel efficiency as high as those buyers are willing to pay for, and the average fuel 

 

663 This is the range of combined city and highway fuel economy levels from lowest (Toyota Siena 4WD) 

to highest (Mazda 5) available for model year 2010; 

http://www.fueleconomy.gov/feg/bestworstEPAtrucks.htm (last accessed February 15, 2010). 
590 

efficiency of their entire new vehicle fleets could remain below the levels that potential 

buyers demand and are willing to pay for. 

Finally, some research suggests that the consumers’ apparent unwillingness to 

purchase more fuel efficient vehicles stems from their inability to value future fuel 

savings correctly. For example, Larrick and Soll (2008) find evidence that consumers do 

not understand how to translate changes in fuel economy, which is denominated in miles 

per gallon, into resulting changes in fuel consumption, measured in gallons per time 

period.664 Sanstad and Howarth (1994) argue that consumers resort to imprecise but 

convenient rules of thumb to compare vehicles that offer different fuel economy ratings, 

and that this behavior can cause many buyers to underestimate the value of fuel savings, 

particularly from significant increases in fuel economy.665 If the behavior identified in 

these studies is indeed widespread, then the agency’s calculations suggesting that the 

benefits to vehicle owners from requiring higher fuel economy significantly exceeds the 

costs of providing it may indeed be correct, yet the resulting difference is still insufficient 

to motivate buyers to purchase a mix of car or light truck vehicle models whose average 

fuel economy approaches those required by this rule. 

 

 However, other commenters suggested that, if one assumes a perfectly 

functioning market, there must be unidentified consumer welfare losses that would offset 

the private fuel savings that consumers are currently foregoing. 

One explanation for this apparent paradox is that NHTSA’s estimates of benefits 

and costs from requiring manufacturers to improve the fuel efficiency of their vehicle 

models do not match potential vehicle buyers’ assessment of the likely benefits and costs 

from requiring higher fuel efficiency. This could occur because the agency’s underlying 

assumptions about some of the factors that affect the value of fuel savings differ from 

those made by potential buyers, because NHTSA has used different estimates for some 

components of the benefits from saving fuel than do buyers, or because the agency has 

failed to account for some potential costs of achieving higher fuel economy. 

For example, buyers may not value increased fuel economy as highly as the 

agencies’ calculations suggest, because they have shorter time horizons than the full 

vehicle lifetimes assumed by NHTSA and EPA, or because, when buying vehicles, they 

discount future fuel future savings using higher rates than those prescribed by OMB for 

evaluating federal regulations. Potential buyers may also anticipate lower fuel prices in 

the future than those forecast by the Energy Information Administration, or may expect 

larger differences between vehicles’ rated and actual on-road mpg levels than the 

agencies estimate. 

 

664 Larrick, R. P., and J.B. Soll (2008). “The MPG illusion.” Science 320: 1593-1594. 665 Sanstad, A., and R. Howarth (1994). “’Normal’ Markets, Market Imperfections, and Energy 

Efficiency.” Energy Policy 22(10): 811-818. 
591 

To illustrate the first of these possibilities, Table IV.G.6-2 shows the effect of 

differing assumptions about vehicle buyers’ time horizons for assessing the value of 

future fuel savings. Specifically, the table compares the average value of fuel savings 

from purchasing a MY 2016 car or light truck when fuel savings are evaluated over 

different time horizons to the estimated increase in its price. This table shows that as 

reported previously in Table IV.G.6-2, when fuel savings are evaluated over the entire 

expected lifetime of a MY 2016 car (approximately 14 years) or light truck (about 16 

years), their discounted present value (using the OMB-recommended 3% discount rate) 

lifetime fuel savings exceeds the estimated average price increase by more than $2,000 

for cars and by more than $2,700 for light trucks. 

If buyers are instead assumed to consider fuel savings over a 10-year time 

horizon, however, the present value of fuel savings exceeds the projected price increase 

for a MY 2016 car by about $1,300, and by somewhat more than $1,500 for a MY 2016 

light truck. Finally, Table VI.G.6-2 shows that under the assumption that if buyers 

consider fuel savings only over the length of time for which they typically finance new 

car purchases (slightly more than 5 years during 2009), the value of fuel savings exceeds 

the estimated increase in the price of a MY 2016 car by only about $350, and the 

corresponding difference is reduced to slightly more than $500 for a MY 2016 light 

truck. 

Table IV.G.6-2 

Value of Fuel Savings vs. Vehicle Price Increases 

with Alternative Assumptions about Vehicle Buyer Time Horizons 

Vehicle Measure 

Value over Alternative Time Horizons 

Expected 

Lifetime666 10 Years Average Loan 

Term667

MY 2016 

Passenger 

Car 

Fuel Savings $2,932 $2,180 $1,254 

Price Increase $907 $907 $907 

Difference $2,025 $1,273 $347 

MY 2016 

Light Truck 

Fuel Savings $3,700 $2,508 $1,484 

Price Increase $961 $961 $961 

Difference $2,739 $1,547 $523 

Potential vehicle buyers may also discount future fuel future savings using higher 

rates than those typically used to evaluate federal regulations. OMB guidance prescribes 

that future benefits and costs of regulations that mainly affect private consumption 

 

666 Expected lifetimes are approximately 14 years for cars and 16 years for light trucks. 667 Average term on new vehicle loans made by auto finance companies during 2009 was 62 months; see

Board of Governors of the Federal Reserve System, Federal Reserve Statistical Release G.19, Consumer 

Credit. Available at http://www.federalreserve.gov/releases/g19/Current (last accessed March 1, 2010). 
592 

decisions, as will be the case if manufacturers’ costs for complying with higher fuel 

economy standards are passed on to vehicle buyers, should be discounted using a 

consumption rate of time preference.668 OMB estimates that savers currently discount 

future consumption at an average real or inflation-adjusted rate of about 3 percent when 

they face little risk about its likely level, which makes it a reasonable estimate of the 

consumption rate of time preference. However, vehicle buyers may view the value of 

future fuel savings that results from purchasing a vehicle with higher fuel economy as 

risky or uncertain, or they may instead discount future consumption at rates reflecting 

their costs for financing the higher capital outlays required to purchase more fuelefficient models. In either case, they may discount future fuel savings at rates well above 

the 3% assumed in NHTSA’s evaluation in their purchase decisions. 

Table IV.G.6-3 shows the effect of higher discount rates on vehicle buyers’ 

evaluation of the fuel savings projected to result from the CAFE standards established by 

this rule, again using MY 2016 passenger cars and light trucks as an example. As Table 

IV.G.6-1 showed previously, average future fuel savings discounted at the OMB 3% 

consumer rate exceed the agency’s estimated price increases by more than $2,000 for MY 

2016 passenger cars and by more than $2,700 for MY 2016 light trucks. If vehicle 

buyers instead discount future fuel savings at the average new-car loan rate during 2009 

(6.7%), however, these differences decline to slightly more than $1,400 for cars and 

$1,900 for light trucks, as Table IV.G.6-3 illustrates. This is a particularly plausible 

alternative assumption, because buyers are likely to finance the increases in purchase 

prices resulting from compliance with higher CAFE standards as part of the process 

financing the vehicle purchase itself. Finally, as the table also shows, discounting future 

fuel savings using a consumer credit card rate (which averaged 13.4% during 2009) 

reduces these differences to less than $800 for a MY 2016 passenger car and less than 

$1,100 for the typical MY 2016 light truck. Even at these higher discount rates, the 

private net benefits from purchasing more fuel efficient vehicles remain large. 

Table IV.G.6-3 

Value of Fuel Savings vs. Vehicle Price Increases 

with Alternative Assumptions about Consumer Discount Rates

Vehicle Measure 

Value over Alternative Time Horizons 

OMB 

Consumer 

Rate (3%) 

New Car 

Loan Rate 

(6.7%)669

OMB 

Investment 

Rate (7%) 

Consumer 

Credit 

Card Rate 

 

668 Office of Management and Budget, Circular A-4, “Regulatory Analysis,” September 17, 2003, 33. 

Available at http://www.whitehouse.gov/omb/assets/regulatory_matters_pdf/a-4.pdf (last accessed March 

1, 2009).

669 Average rate on 48-month new vehicle loans made by commercial banks during 2009 was 6.72%; see

Board of Governors of the Federal Reserve System, Federal Reserve Statistical Release G.19, Consumer 

Credit. Available at http://www.federalreserve.gov/releases/g19/Current (last accessed March 1, 2010). 
593 

(13.4%)670

MY 2016 

Passenger 

Car 

Fuel Savings $2,932 $2,336 $2,300 $1,669 

Price Increase $907 $907 $907 $907 

Difference $2,025 $1,429 $1,393 $762 

MY 2016 

Light 

Truck 

Fuel Savings $3,700 $2,884 $2,836 $2,030 

Price Increase $961 $961 $961 $961 

Difference $2,739 $1,923 $1,875 $1,069 

Combinations of a shorter time horizon and a higher discount rate could further 

reduce or even eliminate the difference between the value of fuel savings and the 

agency’s estimates of increases in vehicle prices. One plausible combination would be 

for buyers to discount fuel savings over the term of a new car loan, using the interest rate 

on that loan as a discount rate. Doing so would reduce the amount by which future fuel 

savings exceed the estimated increase in the prices of MY 2016 vehicles to about $340 

for passenger cars and $570 for light trucks. Some evidence also suggests directly that 

vehicle buyers may employ combinations of higher discount rates and shorter time 

horizons for their purchase decisions; for example, consumers surveyed by Kubik (2006) 

reported that fuel savings would have to be adequate to pay back the additional purchase 

price of a more fuel-efficient vehicle in less than 3 years to persuade a typical buyer to 

purchase it. 671 As these comparisons and evidence illustrate, reasonable alternative 

assumptions about how consumers might evaluate the major benefit from requiring 

higher fuel economy can significantly affect the benefits they expect to receive when they 

decide to purchase a new vehicle. 

Many plausible combinations of shorter time horizons, higher discount rates, and 

lower expectations about future fuel prices or annual vehicle use and fuel savings could 

make potential buyers hesitant or even unwilling to purchase vehicles offering the 

increased fuel economy levels this rule will require manufacturers to produce. At the 

same time, they might also cause vehicle buyers’ collective assessment of how the 

benefits from requiring higher fuel economy compare to the costs they will be required to 

pay for it to differ significantly from NHTSA’s assessment of the aggregate benefits and 

costs of this rule. If consumers’ views about critical variables such as future fuel prices 

or the appropriate discount rate differ sufficiently from the assumptions used by the 

agency, potential vehicle buyers might conclude that the value of fuel savings and other 

benefits they will experience from higher fuel economy are not sufficient to justify the 

increase in purchase prices they expect to pay. This would explain why their current 

 

670 Average rate on consumer credit card accounts at commercial banks during 2009 was 13.4%; see Board 

of Governors of the Federal Reserve System, Federal Reserve Statistical Release G.19, Consumer Credit. 

Available at http://www.federalreserve.gov/releases/g19/Current (last accessed March 1, 2010). 671 Kubik, M. (2006). Consumer Views on Transportation and Energy. Second Edition. Technical Report: 

National Renewable Energy Laboratory.
594 

choices among available models do not result in average fuel economy levels 

approaching those this rule would require. 

Another possibility is that achieving the fuel economy improvements required by 

stricter fuel economy standards might mean that manufacturers will forego planned future 

improvements in performance, carrying capacity, safety, or other features of their vehicle 

models that represent important sources of utility to vehicle owners. Although the 

specific economic values that vehicle buyers attach to individual vehicle attributes such 

as fuel economy, performance, passenger- and cargo-carrying capacity, and other sources 

of vehicles’ utility are difficult to infer from their purchasing decisions and vehicle 

prices, changes in vehicle attributes can significantly affect the overall utility that 

vehicles offer to potential buyers. Foregoing future improvements in these or other 

highly-valued attributes could be viewed by potential buyers as an additional cost of 

improving fuel economy.

As indicated in its previous discussion of technology costs, NHTSA has 

approached this potential problem by developing cost estimates for fuel economyimproving technologies that include allowances for any additional manufacturing costs 

that would be necessary to maintain the reference fleet (or baseline) levels of 

performance, comfort, capacity, or safety of light-duty vehicle models to which those 

technologies are applied. In doing so, the agency followed the precedent established by 

the 2002 NAS Report on improving fuel economy, which estimated “constant 

performance and utility” costs for technologies that manufacturers could employ to 

increase the fuel efficiency of cars or light trucks. Although NHTSA 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, safety, carrying capacity, and utility of 

vehicle models while improving their fuel economy. The adoption of the footprint-based 

standards also addresses this concern. 

Finally, vehicle buyers may simply prefer the choices of vehicle models they now 

have available to the combinations of price, fuel economy, and other attributes that 

manufacturers are likely to offer when required to achieve higher overall fuel economy. 

If this is the case, their choices among models – and even some buyers’ decisions about 

whether to purchase a new vehicle – will respond accordingly, and their responses to 

these new choices will reduce their overall welfare. Some may buy models with 

combinations of price, fuel efficiency, and other attributes that they consider less 

desirable than those they would otherwise have purchased, while others may simply 

postpone buying a new vehicle. The use of the footprint-based standards, the level of 

stringency, and the lead time this rule allows manufacturers are all intended to ensure that 

this does not occur. Although the losses in buyers’ welfare associated with these 

responses cannot be large enough to offset the estimated value of fuel savings reported in 

the agencies’ analyses, they might reduce the benefits from requiring manufacturers to 
595 

achieve higher fuel efficiency, particularly in combination with the other possibilities 

outlined previously. 

 The agency has been unable to resolve the question of why the apparently large 

differences between its estimates of benefits from requiring higher fuel economy and the 

costs of supplying it do not result in higher average fuel economy for new cars and light 

trucks in the absence of this rule. One explanation is that NHTSA’s estimates are 

reasonable, and the market for fuel economy is not operating efficiently. NHTSA also 

acknowledges that this situation may mean that it has incorrectly characterized the impact 

of the CAFE standards this rule establishes on consumers. To recognize this possibility, 

this section presents an alternative accounting of the benefits and costs of CAFE 

standards for MYs 2012-2016 passenger cars and light trucks and discusses its 

implications. 

Table IV.G.6-4 displays the economic impacts of the rule from the perspective of 

potential buyers, and also reconciles the estimated net benefits of the rule as they are 

likely to be viewed by vehicle buyers with its net benefits to the economy as a whole. As 

the table shows, the total benefits to vehicle buyers (line 4) consist of the value of fuel 

savings at retail fuel prices (line 1), the economic value of vehicle occupants’ savings in 

refueling time (line 2), and the economic benefits from added rebound-effect driving (line 

3). As the zero entries in line 5 of the table suggest, the agency’s estimate of the retail 

value of fuel savings reported in line 1 is assumed to be correct, and no losses in 

consumer welfare from changes in vehicle attributes (other than those from increases in 

vehicle prices) are assumed to occur. Thus there is no reduction in the total private 

benefits to vehicle owners, so that net private benefits to vehicle buyers (line 6) are equal 

to total private benefits (reported previously in line 4). 

As Table IV.G.6-4 also shows, the decline in fuel tax revenues (line 7) that results 

from reduced fuel purchases is in effect a social cost that offsets part of the benefits of 

fuel savings to vehicle buyers (line 1).672 Thus the sum of lines 1 and 7 is the savings in 

fuel production costs that was reported previously as the value of fuel savings at pre-tax 

prices in the agency’s usual accounting of benefits and costs. Lines 8 and 9 of Table 

IV.G.6-4 report the value of reductions in air pollution and climate-related externalities 

resulting from lower emissions during fuel production and consumption, while line 10 

reports the savings in energy security externalities to the U.S. economy from reduced 

consumption and imports of crude petroleum and refined fuel. Line 12 reports the costs 

of increased congestion delays, accidents, and noise that result from additional driving 

due to the fuel economy rebound effect; net social benefits (line 13) is thus the sum of the 

 

672 Strictly speaking, fuel taxes represent a transfer of resources from consumers of fuel to government 

agencies and not a use of economic resources. Reducing the volume of fuel purchases simply reduces the 

value of this transfer, and thus cannot produce a real economic cost or benefit. Representing the change in 

fuel tax revenues in effect as an economy-wide cost is necessary to offset the portion of fuel savings 

included in line 1 that represents savings in fuel tax payments by consumers. This prevents the savings in 

tax revenues from being counted as a benefit from the economy-wide perspective. 
596 

change in fuel tax revenues, the reduction in environmental and energy security 

externalities, and increased costs from added driving. 

Line 14 of Table IV.G.6-4 shows manufacturers’ technology outlays for meeting 

higher CAFE standards for passenger cars and light trucks, which represent the principal 

cost of requiring higher fuel economy. The net total benefits (line 15 of the table) 

resulting from the rule consist of the sum of private (line 6) and external (line 13) 

benefits, minus technology costs (line 14); as expected, the figures reported in line 15 of 

the table are identical to those reported previously in the agency’s customary format. 

Table IV.G.6-4 highlights several important features of this rule’s economic 

impacts. First, comparing the rule’s net private (line 6) and external (line 13) benefits 

makes it clear that virtually all of the benefits from requiring higher fuel economy are 

experienced by vehicle buyers, with only a small share distributed throughout the 

remainder of the U.S. economy. In turn, the vast majority of private benefits stem from 

fuel savings. External benefits are small because the value of reductions in 

environmental and energy security externalities is almost exactly offset by the decline in 

fuel tax revenues and the increased costs associated with added vehicle use via the 

rebound effect of higher fuel economy. As a consequence, the net economic benefits of 

the rule mirror closely its benefits to private vehicle buyers and the technology costs for 

achieving higher fuel economy, again highlighting the importance of accounting for any 

other effects of the rule on the economic welfare of vehicle buyers. 

Table IV.G.6-4 

Private, Social, and Total Benefits and Costs of MY 2012-16 CAFE Standards: 

Passenger Cars plus Light Trucks 

Entry 

Model Year Total, 

2012-

2016 2012 2013 2014 2015 2016 

1. Value of Fuel Savings (at Retail Fuel Prices) $10.5 $22.9 $32.9 $42.5 $52.7 $161.6 

2. Savings in Refueling Time $0.7 $1.4 $1.9 $2.5 $3.0 $9.4 

3. Consumer Surplus from Added Driving $0.7 $1.5 $2.2 $2.8 $3.4 $10.5 

4. Total Private Benefits (=1+2+3) $11.9 $25.8 $37.0 $47.8 $59.0 $181.5 

5. Reduction in Private Benefits $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 

6. Net Private Benefits (=1+2) $11.9 $25.8 $37.0 $47.8 $59.0 $181.5 

7. Change in Fuel Tax Revenues -$1.3 -$2.7 -$3.8 -$4.8 -$5.9 -$18.5 

8. Reduced Health Damages from Criteria 

Emissions $0.5 $0.9 $1.3 $1.6 $2.0 $6.4 

9. Reduced Climate Damages from CO2 

Emissions $0.9 $2.0 $2.9 $3.8 $4.8 $14.5 

10. Reduced Energy Security Externalities $0.5 $1.2 $1.6 $2.1 $2.5 $8.0 

11. Reduction in Externalities (=8+9+10) $1.9 $4.1 $5.9 $7.6 $9.3 $28.8 

12. Increased Costs of Congestion, etc. -$0.7 -$1.3 -$1.9 -$2.4 -$3.0 -$9.4 

13. Net Social Benefits (=7+11+12) $0.0 $0.1 $0.1 $0.3 $0.5 $1.0 
597 

14. Technology Costs $5.9 $7.9 $10.5 $12.5 $14.9 $51.7 

15. Net Social Benefits (=6+12-14) $6.0 $17.9 $26.6 $35.5 $44.6 $130.7 

 As discussed in detail previously, it is possible that NHTSA has overestimated the 

value of fuel savings to buyers and subsequent owners of the cars and light trucks to 

which higher CAFE standards will apply. It is also possible that the agency has failed to 

identify and value reductions in consumer welfare that could result from buyers’ 

responses to changes in vehicle attributes that manufacturers make as part of their efforts 

to achieve higher fuel economy. To acknowledge these possibilities, NHTSA examines 

their potential impact on the rule’s benefits and costs, showing the rule’s economic 

impacts for MY 2012-16 passenger cars and light trucks under varying theoretical 

assumptions about the agency’s potential overestimation of private benefits from higher 

fuel economy and the value of potential changes in other vehicle attributes. See Chapter 

VIII of the FRIA. 

 7. What are the Estimated Safety Impacts of These Proposed Standards?

[Placeholder] 

8. What Other Impacts (Quantitative and Unquantifiable) will These 

Proposed Standards Have?

In addition to the quantified benefits and costs of fuel economy standards, the 

final standards 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
598 

The final 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. Several commenters agreed. These innovative 

approaches may reduce the cost of the final 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 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

 

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 final rule raises vehicle 

costs by over $900 by 2016, and for some manufacturers costs will increase by $1000-

$1800. Depending on the retail price of the vehicle, this could represent a significant 

increase in the overall vehicle cost and subsequently increase insurance rates, operation 

costs, and maintenance costs. Comprehensive insurance costs are likely to be directly 

related to price increases, but liability premiums will go up by a smaller proportion 

because the bulk of liability coverage reflects the cost of personal injury. The impact on 

operation and maintenance costs is less clear, because the maintenance burden and useful 

life of each technology are not known. However, 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 for purposes of this final 

rule. The agency will analyze this issue further for future rulemakings to attempt to 

gauge its impact more completely. 

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-to-
599 

quantify 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 most vehicles will to some extent be 

impacted by the standards. 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

 

 The effect of this rule on the use and scrappage of older vehicles will be related to 

its effects on new vehicle prices, the fuel efficiency of new vehicle models, and the total 

sales of new vehicles. Elsewhere in this analysis, NHTSA estimates that vehicle sales 

will increase. This would occur because the value of fuel savings resulting from 

improved fuel efficiency to the typical potential buyer of a new vehicle outweighs the 

average increase in new models’ costs. Under these circumstances, sales of new vehicles 

will rise, while scrappage rates of used vehicles will increase slightly. This will cause the 

“turnover” of the vehicle fleet – that is, the retirement of used vehicles and their 

replacement by new models – to accelerate slightly, thus accentuating the anticipated 

effect of the rule on fleet-wide fuel consumption and CO2 emissions. However, if 

potential buyers value future fuel savings resulting from the increased fuel efficiency of 

new models at less than the increase in their average selling price, sales of new vehicles 

would decline, as would the rate at which used vehicles are retired from service. This 

effect will slow the replacement of used vehicles by new models, and thus partly offset 

the anticipated effects of the proposed rules on fuel use and emissions. 

 

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 or decrease the cost 

of blended gasoline and diesel depending on crude oil prices and tax subsidies. The 
600 

potential extra cost of renewable fuels would be borne through a cross-subsidy: the price 

of every gallon of blended gasoline could rise sufficiently to pay for any extra cost of 

renewable fuels. However, if the price of fuel increases enough, the consumer could 

actually realize a savings through the increased usage of renewable fuels. The final 

CAFE rule, by reducing total fuel consumption, could 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. 

 Tthese 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 

corresponding 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 final rule will itself be small. 

Macroeconomic Impacts of this Rule

 

The final 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 

passenger cars and light trucks 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 final rule, however a 

discussion of the economy-wide impacts of this rule conducted by EPA is presented in 

Section III.H and is included in the docket. Although economy-wide models do not 

capture all of the potential impacts of this rule (e.g., improvements in product quality), 
601 

these models can provide valuable insights on how this final rule 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 the risk of oil market disruption. We have not included estimates of 

monopsony effects or 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 passenger automobiles as any automobile (other than an 

automobile capable of off-highway operation) which NHTSA decides by rule is 

manufactured primarily for use in the transportation of not more than 10 individuals. 

EPCA 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.673 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. 

 

673 49 U.S.C. 32901(a)(18). We note that the statute refers both to vehicles that are 4WD and to vehicles 

over 6,000 lbs GVWR as potential candidates for off-road capability, if they also meet the “significant 

feature ...designed for off-highway operation” as defined by the Secretary. NHTSA would consider 

“AWD” vehicles as 4WD for purposes of this determination – they send power to all wheels of the vehicle 

all the time, while 4WD vehicles may only do so part of the time, which appears to make them equal 

candidates for off-road capability given other necessary characteristics. 
602 

 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.

674 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, NHTSA recognizes that manufacturers may have an incentive to 

classify vehicles as light trucks if 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 often the case given the current fleet, 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 and towing and hauling capacity (and correspondingly, although not 

necessarily, heavier 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 

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 

choose to make such changes before or during the model years covered by this 

rulemaking. 

In the NPRM, in looking forward to model years beyond 2011 and considering 

how CAFE should operate in the context of the National Program and previouslyreceived comments as requested by President Obama, NHTSA sought comment on the 

following potential changes to NHTSA’s vehicle classification system, as well as on 

whether, if any of the changes were to be adopted, they should be applied to any of the 

 

674 538 F.3d 1172 (9th Cir. 2008). 
603 

model years covered by this rulemaking or whether, due to lead time concerns, they 

should apply only to MY 2017 and thereafter. 

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 did not feel that it 

could say with certainty that moving these vehicles could negatively affect potential 

stringency levels for either passenger cars or light trucks. Thus, although such a change 

would not be made applicable during the MY 2012-2016 time frame, NHTSA sought 

comment on why the agency 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. 

Comments received on this issue were split between support and opposition. As 

perhaps expected, the Alliance, AIAM, NADA, Chrysler, Ford, and Toyota all 

commented in favor of maintaining 3-row vehicles as light trucks indefinitely. The 

Alliance and Chrysler stated that the existing definitions for light trucks are consistent 

with Congressional intent in EPCA and EISA, given that Congress could have changed 

the 3-row definition in passing EISA but did not do so. The Alliance, AIAM, and 

Chrysler also argued that the functional characteristics of 3-row vehicles do make them 

“truck-like,” citing their “high load characteristics” and ability to carry cargo if their seats 

are stowed or removed. Ford and Toyota emphasized the need for stability in the 

definitions as manufacturers adjust to the recent reclassification of many 2WD SUVs 

from the truck to the car fleet, and the Alliance argued further that moving the 3-row 

vehicles to the car fleet would simply deter manufacturers from continuing to provide 

them, causing consumers to purchase larger full-size vans instead and resulting in less 

fuel savings and emissions reductions. Toyota stated further that no significant changes 

have occurred in the marketplace (as in, not all 2WD SUVs suddenly have 3 rows) to 

trigger additional reclassification beyond that required by the MY 2011 final rule. 

Hyundai neither supported nor objected to reclassification, but requested ample lead time 

for the industry if any changes are eventually made. 
604 

Other commenters favored reclassification of 3-row vehicles from the truck to the 

car fleet: NJ DEP expressed general support for reclassifying 3-row vehicles for MYs 

2017 and beyond, while the UCSB student commenters seemed to support reclassifying 

these vehicles for the current rulemaking. The UCSB students stated that EPCA/EISA 

properly distinguishes light trucks based on their “specialized utility,” either their ability 

to go off-road or to transport material loads, but that 3-row vehicles do not generally have 

such utility as sold, and are clearly primarily sold and used for transporting passengers. 

The UCSB students suggested that reclassifying the 3-row vehicles from the truck to the 

car fleet could help to ensure the anticipated levels of fuel savings by moving the fleet 

closer to the 67/33 fleet split assumed in the agencies’ analysis for MY 2016, and stated 

that this would increase fuel economy over the long term. The students urged NHTSA to 

look at the impact on fuel savings from reclassifying these vehicles for the model years 

covered by the rulemaking. 

 In response, NHTSA did conduct such an analysis to attempt to consider the 

impact of moving these vehicles. As previously stated, the agency’s hypothesis is that 

moving 3-row vehicles from the truck to the car fleet will tend to bring the achieved fuel 

economy levels down in both fleets – the car fleet achieved levels could theoretically fall 

due to the introduction of many more vehicles that are relatively heavy for their footprint 

and thus comparatively less fuel economy-capable, while the truck fleet achieved levels 

could theoretically fall due to the characteristics of the vehicles remaining in the fleet 

(4WDs and pickups, mainly) that are often comparatively less fuel-economy capable than 

3-row vehicles, although more vehicles would be subject to the relatively more stringent 

passenger car standards, assuming the curves were not refit to the data. 

 The agency first identified which vehicles should be moved. We identified all of 

the 3-row vehicles in the baseline (MY 2008) fleet,675 and then considered whether any 

could be properly classified as a light truck under a different provision of 49 CFR § 523.5 

– about 40 vehicles were classifiable under § 523.5(b) as off-highway capable. 

 The agency then transferred those remaining 3-row vehicles from the light truck 

to the passenger car input sheets for the Volpe model, re-estimated the gap in stringency 

between the passenger car and light truck standards, shifted the curves to obtain the same 

overall average required fuel economy as under the final standards, and ran the model to 

evaluate potential impacts (in terms of costs, fuel savings, etc.) of moving these vehicles. 

The results of this analysis may be found in the same location on NHTSA’s web site as 

the results of the analysis of the final standards. In summary, moving the vehicles 

reduced the stringency of the passenger car standards by approximately 0.8 mpg on 

average for the five years of the rule, and reduced the stringency of the light truck 

standards by approximately 0.2 mpg on average for the five years of the rule. It also 

caused the gap between the car curve and the truck curve to decrease or narrow slightly, 

by 0.1 mpg. However, the analysis also showed that such a shift in 3-row vehicles could 

 

675 Of the 430 light trucks models in the fleet, 175 of these had 3 rows. 
605 

result in approximately 676 million fewer gallons of fuel consumed (equivalent to about 

1 percent of the reduction in fuel consumption under the final standards) and 7.1 mmt 

fewer CO2 emissions (equivalent to about 1 percent of the reduction in CO2 emissions 

under the final standards) over the lifetime of the MYs 2012-2016 vehicles. This result is 

attributable to slight differences (due to rounding precision) in the overall average 

required fuel economy levels in MYs 2012-2014, and to the retention of the relatively 

high lifetime mileage accumulation (compared to “traditional” passenger cars) of the 

vehicles moved from the light truck fleet to the passenger car fleet.

 The changes in overall costs and vehicle price did not necessarily go in the same 

direction for both fleets, however. Overall costs of applying technology for the passenger 

car fleet went up approximately $1 billion per year for each of MYs 2012-2016, while 

overall costs for the light truck fleet went down by an average of approximately $800 

million for each year, such that the net effect was approximately $200 million additional 

spending on technology each year (equivalent to about 2 percent of the average increase 

in annual technology outlays under the final standards). Assuming manufacturers would 

pass that cost forward to consumers by increasing vehicle costs, vehicle prices would 

increase by an average of approximately $13 during MYs 2012-2016. 

However, one important point to note in this comparative analysis is that, due to 

time constraints, the agency did not attempt to refit the respective fleet target curves or to 

change the intended required stringency in MY 2016 of 34.1 mpg for the combined 

fleets. If we had refitted curves following the same procedures described above in 

Section II, considering the vehicles in question, we expect that we might have obtained a 

somewhat steeper passenger car curve, and a somewhat flatter light truck curve. If so, 

this might have increased the gap in between portions of the passenger car and light truck 

curves. 

 NHTSA agrees with the industry commenters that some degree of stability in the 

passenger car and light truck definitions will assist the industry in making the transition 

to the stringency of the new National Program, and therefore will not reclassify 3-row 

vehicles to the passenger car fleet for purposes of MYs 2012-2016. Going forward, the 

real question is how to balance the benefits of regulatory stability against the potential 

benefits of greater fuel savings if reclassification is determined to lead in that direction. 

NHTSA believes that this question merits much further analysis before the agency can 

make a decision for model years beyond MY 2016, and will provide further opportunity 

for public comment regarding that analysis prior to finalizing any changes in the future. 

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 

same SUV in separate classes. They argued that the vehicles are the same, except for 
606 

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 sought comment 

in the NPRM on how the agency might go about reviewing this question as more 

information about manufacturer behavior is accumulated, but no commenters really 

responded to this issue directly, although several cited the possibility that manufacturers 

might cease to build 2WD SUVs as a way of avoiding the higher passenger car curve 

targets in arguing that the agencies should implement backstop standards for all fleets. 

Since NHTSA has already stated above that it will revisit the backstop question as 

necessary in the future, we may as well add that we will consider the need to classify 

“like” vehicles together as necessary in the future. 

 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 suggested in the NPRM that it could explore additional 

approaches, although it cautioned that not all could be pursued on current law. Possible 
607 

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 sought comment on whether and why it should pursue any 

of these courses of action. 

 Some commenters (ICCT, CBD, NESCAUM) did raise the issue of removing the 

regulatory distinction between cars and trucks and setting standards for the entire fleet of 

vehicles, but those commenters did not appear to recognize the fact that EPCA/EISA 

expressly requires that NHTSA set separate standards for passenger cars and light trucks. 

As the statute is currently written, NHTSA does not believe that a single standard would 

be appropriate unless the observed relationship between footprint and fuel economy of 

the two fleets converged significantly over time. Nevertheless, NHTSA will continue to 

monitor the issue going forward. 

 Besides these issues in vehicle classification, NHTSA additionally received 

comments from two manufacturers on issues not raised by NHTSA in the NPRM. VW 

requested clarification with respect to how the agency evaluates a vehicle for off-road 

capability under 49 CFR § 523.5(b)(2), asking the agency to measure vehicles with 

“active ride height management” at the “height setting representative of off-road 

operation if the vehicle has the capability to change ride height.” NHTSA issued an 

interpretation to Porsche in 2004 addressing this issue, when Porsche asked whether a 

driver-controlled variable ride height suspension system could be used in the “off-road” 

ride height position to meet the suspension parameters required for an off- road 

classification determination.676 Porsche argued that a vehicle should not need to satisfy 

the four-out-of-five criteria at all ride heights in order to be deemed capable of offhighway operation. NHTSA agreed that 523.5(b)(2) does not require a vehicle to meet 

four of the five criteria at all ride heights, but stated that a vehicle must meet four out of 

the five criteria in at least one ride height. The agency determined that it would be 

appropriate to measure the vehicle’s running clearance with the vehicle’s adjustable 

suspension placed in the position(s) intended for off-road operation under real-world 

conditions. 

 Thus, NHTSA clarifies that the agency would consider it appropriate to measure 

vehicles for off-road capability at the height setting intended for off-road operation under 

real-world conditions. However, we note that before this question need be asked and 

answered, the vehicle must first either be equipped with 4WD or be rated at more than 

6,000 pounds gross vehicle weight to be eligible for classification as a light truck under 

49 CFR 523.5(b). 

 

676 Available at http://isearch.nhtsa.gov/files/porschevrhs.html (last accessed Mar. 1, 2010).
608 

 The final comment on the issue of vehicle classification was received from 

Honda, who recommended that deformable aero parts, such as strakes, should be 

excluded from the ride height measurements that determine whether a vehicle qualifies as 

a truck for off-road capability. The air strakes described by Honda are semi-deformable 

parts similar to a mud flap that can be used to improve a vehicle’s aerodynamics, and 

thus to improve its fuel economy. Honda argued that NHTSA would deter the 

application of this technology if it did not agree to measure ride height with the air 

strakes at their most deformed state, because otherwise a vehicle so equipped would have 

to be classified as a passenger car and thus be faced with the more stringent standard. 

 In response, Honda did not provide enough information to the agency for the 

agency to make a decision with regard to how air strakes should be considered in 

measuring a vehicle for off-road capability. NHTSA personnel would prefer to directly 

examine a vehicle equipped with these devices before considering the issue further. The 

agency will defer consideration of this issue to another time, and no changes will be made 

in this final rule in response to this comment. 

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 Does NHTSA Determine Compliance?
609 

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.677 The reports for the current model year are submitted to 

NHTSA every December and July. As of the time of this final rule, NHTSA has received 

pre-model year reports from manufacturers for MY 2010, and anticipates receiving mid--

model year reports for MY 2010 in July 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 proposed to amend Part 537 to allow for electronic 

submission of the pre- and mid-model year CAFE reports. The only comments 

addressing this proposal were from Ferrari, who supported it in the interest of efficiency, 

and Ford, who did not object as long as CBI was sufficiently protected. Having received 

no comments objecting, NHTSA is finalizing this change to Part 537. 

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. 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 EPCA678 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. 

As discussed above in Section III, a number of commenters raised the issue of 

whether the city and highway test procedures and the calculation are still appropriate or 

whether they may be outdated. Several commenters argued that the calculation should be 

more “real-world”: for example, ACEEE stated that EPA should use a “correction 

factor” like the one used for the fuel economy label in the interim until test procedures 

can be changed, while BorgWarner, Cummins, Honeywell, MECA, and MEMA argued 

that EPA should change the weighting of the city and highway cycles (to more highway 

and less city) to reflect current American driving patterns and to avoid biasing the 

calculation against technologies that provide greater efficiency in highway driving than in 

city driving. Sierra Club et al. commented that the fact that EPA was proposing to allow 

off-cycle credits indicated that the test procedures and the calculation needed updating. 

Several commenters (API, James Hyde, MECA, NACAA, and NY DEC) stated that the 

 

677 49 CFR Part 537 is authorized by 49 U.S.C. 32907. 678 49 U.S.C. 32904(c). 
610 

test procedures should use more “real-world” fuel, like E-10 instead of “indolene clear.” 

The UCSB students also had a number of comments aimed at making the test procedures 

more thorough and real-world. Several industry-related commenters (AIAM, Ferrari, and 

Ford) argued to the contrary that existing test procedures and calculations are fine for 

now, and that any changes would require significant lead time to allow manufacturers to 

adjust their plans to the new procedures. 

Statutorily, the decision to change the test procedures or calculation is within 

EPA’s discretion, so NHTSA will not attempt to answer these comments in detail, see 

supra Section III.[x] for EPA’s responses. We note simply that the agency recognizes the 

need for lead time for the industry if test procedures were to change in the future to 

become more real-world, and will keep it in mind. 

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 in Section III 

above, 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 equipping 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. In the 

NPRM, NHTSA sought comment regarding implementing such amendments beginning 

in MY 2017 and also on the more immediate interim step of providing credits under 49 

U.S.C. 32904(c) for light trucks equipped with relatively efficient air conditioners for 

MYs 2012-2016. NHTSA emphasized that modernizing the passenger car test 

procedures as well would not be possible under EPCA as currently written. 

Comments were split as to whether the test procedure should be changed. Several 

manufacturers and manufacturer groups (BMW, GM, Toyota, VW, the Alliance) opposed 

changes to the test procedures to account for A/C usage on the grounds that any changes 

could create negative unintended consequences. Public Citizen also opposed changes to 

the test procedure, arguing that the fuel economy information presented to the consumer 

on the fuel economy label is already confusing, and that further changes to the light truck 

test procedures when there was no authority to change the passenger car test procedures 

would simply result in more confusion. In contrast, NJ DEP fully supported changes to 

the light truck test procedures beginning with MY 2017, and an individual commenter 

(Weber) also supported the inclusion of A/C in the test procedures to represent real-world 

“A/C on” time. 

However, some of the same commenters –BMW, Toyota, and VW, for example – 

that opposed changes to the test procedure supported NHTSA allowing credits for A/C. 

Toyota stated that it supported anything that increased compliance flexibility, while VW 
611 

emphasized that A/C credits for CAFE would help to address the fact that NHTSA’s 

standards could end up being more stringent than EPA’s for manufacturers relying 

heavily on A/C improvements to meet the GHG standards. NJ DEP also supported 

interim A/C credits for light trucks, but in contrast to VW, argued that the light truck 

standards would have to be made more stringent to account for those credits if they were 

allowed. 

Other commenters (Chrysler, Daimler, Ferrari) supported interim A/C credits for 

light truck CAFE, but stated that such credits could simply be added to EPA’s calculation 

of CAFE under 49 U.S.C. 32904(c) without any change in the test procedure ever being 

necessary. Daimler stated that the prohibition on changing the test procedure, according 

to legislative history, was to avoid sudden and dramatic changes and provide consistency 

for manufacturers in the beginning of the CAFE program, but that nothing indicated that 

EPA was barred from updating the way a manufacturer’s fuel economy is calculated after 

the test procedures are followed. Daimler emphasized that EPA has broad authority in 

how it calculates fuel economy, and that adding credits at the end of the calculation 

would make CAFE more consistent with the GHG program and recognize real-world 

benefits not measured by the test cycle. Daimler argued that if EPA did not include A/C 

credits as part of the calculation, it would remove incentives to improve A/C, because 

those gains could not be used for CAFE compliance and NHTSA has no authority to 

include A/C in determining stringency, because A/C is a “parasitic load” that does not 

impact mpg. 

Some commenters opposed interim A/C credits. CARB stated that no A/C credits 

should be given under EPCA unless the test procedures can be changed to fully account 

for A/C and NHTSA is given clear authority for A/C, while GM stated that NHTSA’s 

authority to create additional types of credits must be limited by the fact that Congress 

clearly provided in EPCA for some types of CAFE credits but not for A/C-related credits 

for CAFE. 

NHTSA has decided not to implement interim A/C credits for purposes of this 

final rule and MYs 2012-2016 light trucks. Changes to the test procedure for light trucks 

will be considered by the agencies in subsequent rulemakings. 

 While NHTSA agrees with commenters that the EPA authority to consider how 

fuel economy is calculated is broad, especially as to light trucks, we disagree that credits 

could simply be added to the CAFE calculation without making parallel changes in 

CAFE standard stringency to reflect their availability. CAFE stringency is determined, in 

part, with reference to the technologies available to manufacturers to improve mpg. If a 

technology draws power from the engine, like A/C, then making that technology more 

efficient to reduce its load on the engine will conserve fuel, consistent with EPCA’s 

purposes. However, as noted above, some technologies that improve mpg are not 

accounted for in current CAFE test procedures. NHTSA agrees that the test procedures 

should be updated to account for the real-world loads on the engine and their impact on 
612 

fuel economy, but recognizes that manufacturers will need lead-time and advance notice 

in order to ready themselves for such changes and their impact on CAFE compliance. 

Thus, if manufacturers are able to achieve improvements in mpg that are not 

reflected on the test cycle, then the level of CAFE that they are capable of achieving is 

higher than that which their performance on the test cycle would otherwise indicate, 

which suggests, in turn, that a higher stringency is feasible. NHTSA has determined that 

the current CAFE levels being finalized today are feasible using traditional “tailpipe 

technologies” alone. If manufacturers are capable of improving fuel economy beyond 

that level using A/C technologies, and wish to receive credit for doing so, then NHTSA 

believes that more stringent CAFE standards would need to be established. Not raising 

CAFE could allow manufacturers to leave tailpipe technology on the table and make 

cheaper A/C improvements, which would not result in the maximum feasible fuel savings 

contemplated by EPCA.

 Because raising CAFE stringency in conjunction with allowing A/C credits was 

not a possibility clearly contemplated in the NPRM, NHTSA does not believe that it 

would be within scope of notice for purposes of this rulemaking. Accordingly, the final 

rule cannot provide for interim A/C credits. However, if NHTSA were to allow A/C 

credits in the future, NHTSA believes it would be required to increase standard 

stringency accordingly, to avoid losses in fuel savings, as stated above. NHTSA will 

consider this approach further, ensuring that any changes to the treatment of A/C and 

accompanying changes in CAFE stringency are made with sufficient notice and leadtime. 

b. NHTSA Then Analyzes EPA-Certified 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), and 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. 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, 

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 
613 

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. 32903(a). Transferred credits 

are subject to the limitations specified by 49 U.S.C. 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. 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.679

 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 provisions680 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. 

 

679 Honeywell commented that any fines imposed and collected under the CAFE and GHG standards 

should be appropriated to the development of vehicle technologies that continue to improve fuel economy 

in the future, and that the direct application of the penalties collected would support the underlying 

legislative policy and drive innovation. While NHTSA certainly would not oppose such an outcome, it 

would lie within the hands of Congress and not the agency to direct the use of the fines in that manner. 680 49 U.S.C. 30120, Remedies for defects and noncompliance. 
614 

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 

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. 

Several commenters encouraged the agency to increase the transparency of how 

the agency monitors and enforces CAFE compliance. EDF, Public Citizen, Sierra Club et 

al., UCS, and Porsche all commented that NHTSA should publish an annual compliance 

report for manufacturers, and Porsche suggested that it be available online. Sierra Club et 

al. and Porsche stated that this would help clarify manufacturers’ credit status (for the 

benefit of the public and manufacturers looking to purchase credits, respectively) and 

sales, and Sierra Club et al. further stated that the agency should make public all 

information regarding credits and attained versus projected fleet average mpg levels. 

EDF similarly urged the agency to provide publicly a compliance report every year that 

would include any recommended adjustments to the program, enforcement actions, or 

prospective policy action to ensure the policy objectives are achieved. 

 In response, NHTSA agrees that there could be substantial benefits to increasing 

the transparency of information concerning the credit holdings of each credit holder. 

Along with the MY 2011 final rule, NHTSA issued a new regulation 49 CFR Part 536 to 

implement the new CAFE credit trading and transfer programs authorized by EISA. 

Paragraph 536.5(e) requires that we periodically publish credit holding information. 

NHTSA plans to make this information available to the public on the NHTSA web site. 

The exact format that will be used to display this information has not been finalized but it 

is our plan to begin making this information available no later than calendar year 2011 to 

coincide with MY 2011 when manufacturers may begin utilizing credit trades and 

transfers. 
615 

3. What Compliance Flexibilities Are Available under the CAFE Program 

and How Do Manufacturers Use Them?

 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. 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-Fueled 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 

0.15.681 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 0.15.682

 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 

 

681 49 U.S.C. 32905(a). 682 49 U.S.C. 32905(b) 
616 

other alternative fuels).683 Thus, if a vehicle averages 25 miles per 100 ft3

of 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 2019.684 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 updated Part 538 as part of this final rule 

to reflect the EISA changes extending the incentive to MY 2019, but to the extent that 49 

U.S.C. 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 III above, EPA is offering similar 

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. The manufacturer would then be allowed to weight the gasoline and 

alternative fuel test results based on the proportion of actual usage of both fuels, as 

discussed above in Section III.[x]. 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 requested comment in the NPRM on whether it should seek 

legislative changes to revise its authority to address this issue. 

 

 

683 49 U.S.C. 32905(c). 684 49 U.S.C. 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. 32905(a), was not phased-out by 

EISA. 
617 

 NHTSA received only one comment on this issue: VW commented that NHTSA 

should not seek a change in its authority, because Congress’ intent for NHTSA is already 

clear. VW did, however, encourage NHTSA to include the statutory FFV credit phaseout in Part 538, which the agency is doing. 

 b. Credit Trading and Transfer 

As part of 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.685 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 

“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, 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.686 

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 2012-2017.687 As a way to improve the transferring 

flexibility mechanism for manufacturers, NHTSA interprets EISA not to prohibit the 

 

685 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. 

686 Ford and Toyota both commented on NHTSA’s use of the adjustment factor: Ford stated that it 

preferred a streamlined “megagrams” approach like EPA was proposing, while Toyota stated that NHTSA 

and EPA should use consistent VMT estimates for purposes of all analysis and for use in the adjustment 

factor. In response to Ford, NHTSA is maintaining use of the adjustment factor just finalized last March, 

which uses mpg rather than gallons or grams and is thus consistent with the rest of the CAFE program. In 

response to Toyota, NHTSA agrees that consistency of VMT estimates should be maintained and will 

revise the adjustment factor as necessary. 

687 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. 
618 

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 

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. 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. 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 sought comment in the NPRM on this 

interpretation of EISA. 

Only one commenter, VW, commented on NHTSA’s interpretation of EISA as 

allowing the banking of transferred credits, and agreed with it. VW suggested that 

NHTSA revise Part 536 to clarify accordingly, and that NHTSA include the statutory 

transfer cap in Part 536 as well. While NHTSA does not believe that including the 

statutory transfer cap in the regulation is necessary, NHTSA will revise Part 536 in this 

final rule by amending the definition of “transfer” as follows (in bold and italics): 

Transfer means the application by a manufacturer of credits earned by that 

manufacturer in one compliance category or credits acquired be trade (and 

originally earned by another manufacturer in that category) to achieve compliance 

with fuel economy standards with respect to a different compliance category. For 

example, a manufacturer may purchase light truck credits from another 

manufacturer, and transfer them to achieve compliance in the manufacturer’s 

domestically manufactured passenger car fleet. Subject to the credit transfer 

limitations of 49 U.S.C. 32903 (g)(3), credits can also be transferred across 

compliance categories and banked or saved in that category to be carried 

forward or backward to address a credit shortfall. 

 c. Payment of Fines 
619 

 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 $785,772,714.50 

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 2008 fleets, six 

manufacturers paid CAFE fines for not meeting an applicable standard—Ferrari, 

Maserati, Mercedes-Benz, Porsche, Chrysler and Fiat—for a total of $12,922,255,50. 

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 

conformity 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. 

 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 “will result in, or substantially further, substantial energy conservation for 

automobiles in the model years in which the increased penalty may be imposed; and will 

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. 32912(c). 

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 

requested in the NPRM that commenters wishing to address this issue please provide, as 
620 

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. 

Only Ferrari and Daimler commented on this issue. Both manufacturers argued 

that raising the penalty would have no impact on fuel savings and would simply hurt the 

manufacturers forced to pay it. Daimler stated further that the agency’s asking for a 

quantitative analysis ignores the fact that manufacturers pay fines because they cannot 

increase energy savings any further. Thus, again, the agency finds itself without a clear 

quantitative explanation of what the benefits and drawbacks to raising the penalty might 

be, but it continues to appear that the range of possible increase is insufficient to result in 

additional substantial energy conservation. NHTSA will therefore defer consideration of 

this issue for purposes of this rulemaking. 

 4. Other CAFE Enforcement Issues—Variations in Footprint

NHTSA has a standardized test procedure for determining vehicle footprint,688

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.689

“Track width,” in turn, is defined as “the lateral distance between the centerlines of the 

base tires at ground, including the camber angle.”690 “Wheelbase” is defined as “the 

longitudinal distance between front and rear wheel centerlines.”691

NHTSA began requiring manufacturers to submit this information on footprint, 

wheelbase, and track width as part of their pre-model year reports in MY 2008 for light 

trucks, and will require manufacturers to submit this information for passenger cars as 

well beginning in MY 2010. 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 as discussed below. 

 

a. Variations in Track Width 

 

688 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). 

689 49 CFR 523.2. 690 Id. 691 Id.
621 

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,692 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. No comments were received on this issue. 

 b. How Manufacturers Designate “Base Tires” and Wheels 

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 

 

692 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) 
622 

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. No comments were received on this issue. 

 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 

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. No 

comments were received on this issue. 
623 

d. How Manufacturers Report this Information in their Pre-Model 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 sought comment in the NPRM on any potential benefits or 

drawbacks to requiring a more standardized reporting methodology. NHTSA requested 

that, if commenters recommend increasing standardization, they provide specific 

examples of what information should be required and how NHTSA should require it to be 

provided. but no comments were received on this specific issue. 

However, on a related topic, Honda and Toyota both commented on the equations 

and corresponding terms used to calculate the fleet required standards. Both 

manufacturers indicated that the terms defined for use in the equations could be 

interpreted differently by vehicle manufacturers. For example, the term “footprint of a 

vehicle model” could be interpreted to mean that a manufacturer only has to use one 

representative footprint within a model type or that it is necessary to use all the unique 
624 

footprints and corresponding fuel economy target standards within a model type when 

determining a fleet target standard. This issue is discussed in more detail in section IV.E. 

above. 

 5. Other CAFE Enforcement Issues – Miscellaneous

Hyundai commented that 49 CFR § 537.9 appeared to contain erroneous 

references to 40 CFR 600.506 and 600.506(a)(2), which seemed not to exist, and asked 

the agency to check those references. In response, NHTSA examined the issue and found 

that 40 CFR 600.506 was, in fact, eliminated by a final rule published on April 6, 1984 

(49 FR 13832). That section of 40 CFR originally required manufacturers to submit 

preliminary CAFE data to EPA prior to submitting the final end of the year data. EPA’s 

primary intent for eliminating the requirement, as stated in the final rule, was to reduce 

administration burden. To address these inaccurate references, NHTSA is revising Part 

537 to delete references to 40 CFR 600.506. This will not impact the existing 

requirements for the pre-model year, mid-model year and supplemental reports 

manufacturers must submit to NHTSA under Part 537. 

J. Other Near-Term Rulemakings Mandated by EISA

1. Commercial Medium- and Heavy-Duty On-Highway Vehicles and Work 

Trucks

EISA added new provisions to 49 U.S.C. 32902 requiring DOT, in consultation 

with DOE and EPA, to conduct a study regarding a program to require improvements in 

the fuel efficiency of commercial medium- and heavy-duty on-highway vehicles and 

work trucks and then to conduct a rulemaking to adopt and implement such a program . 

In the study, the agency must examine the fuel efficiency of commercial medium- and 

heavy-duty on-highway vehicles693 and work trucks694 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. Then the agency must determine in a 

rulemaking proceeding how to implement a commercial medium- and heavy-duty onhighway vehicle and work truck fuel efficiency improvement program designed to 

achieve the maximum feasible improvement, and adopt and implement appropriate test 

methods, measurement metrics, fuel economy standards, and compliance and 

enforcement protocols that are appropriate, cost-effective, and technologically feasible 

for commercial medium- and heavy-duty on-highway vehicles and work trucks. The 

agency is working closely with EPA on developing a proposal for these standards. 

 

 

693 Defined as an on-highway vehicle with a gross vehicle weight rating of 10,000 pounds or more. 694 Defined as a vehicle that is both rated at between 8,500 and 10,000 pounds gross vehicle weight; and 

also 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. 
625 

 2. Consumer Information on Fuel Efficiency and Emissions

EISA also added a new provision to 49 U.S.C. 32908 requiring DOT, in 

consultation with DOE and EPA, to develop and implement by rule a program to require 

manufacturers to label new automobiles sold in the United States with: 

1) 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) 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 with the lowest greenhouse gas 

emissions over the useful life of the vehicles; and with the highest fuel economy. 

DOT must also develop and implement by rule a program to require 

manufacturers 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; 

• 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. 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 ongoing. The agency is working closely with EPA on developing a proposal for these 

regulations. 

Additionally, in preparation for this future 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 
626 

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. 

 

K. Record of Decision 

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 GHG emissions. 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. 

In accordance with President Obama’s May 19, 2009 announcement, this Final 

Rule promulgates the fuel economy standards for MYs 2012-2016. This Final Rule 

constitutes the Record of Decision (ROD) for NHTSA’s MYs 2012-2016 CAFE 

standards, pursuant to the National Environmental Policy Act (NEPA) and the Council on 

Environmental Quality’s (CEQ) implementing regulations.695 See 40 CFR § 1505.2. 

As required by CEQ regulations, this Final Rule and ROD sets forth the 

following: (1) the agency’s decision; (2) alternatives considered by NHTSA in reaching 

its decision, including the environmentally preferable alternative; (3) the factors balanced 

by NHTSA in making its decision, including considerations of national policy; (4) how 

these factors and considerations entered into its decision; and (5) the agency’s 

preferences among alternatives based on relevant factors, including economic and 

technical considerations and agency statutory missions. This Final Rule also briefly 

addresses mitigation. 

The Agency’s Decision 

In the DEIS and the FEIS, the agency identified the approximately 4.3-percent 

average annual increase alternative as NHTSA’s Preferred Alternative. After carefully 

reviewing and analyzing all of the information in the public record including technical 

support documents, the FEIS, and public and agency comments submitted on the DEIS, 

the FEIS, and the NPRM, NHTSA has decided to proceed with the Preferred Alternative. 

The Preferred Alternative requires approximately a 4.3-percent average annual increase 

in mpg for MYs 2012-2016. This decision results in an estimated required MY 2016 

fleetwide 37.8 mpg for passenger cars and 28.7 mpg for light trucks. As stated in the 

FEIS, the Preferred Alternative results in a combined estimated required fleetwide 34.1 

mpg in MY 2016. 

 

695 NEPA is codified at 42 U.S.C. §§ 4321-47. CEQ NEPA implementing regulations are codified at 40 

Code of Federal Regulations (CFR) Parts 1500-08. 
627 

Following publication of the FEIS, the federal government Interagency Working 

Group on Social Cost of Carbon made public a revised estimate of the Social Cost of 

Carbon to support federal regulatory activities where reducing CO2 emissions is an 

important potential outcome. NHTSA relied upon the interagency group’s interim 

guidance published in August, 2009 for the FEIS analysis. For this Final Rule NHTSA 

has updated the analysis and now uses the central SCC value of $21 per metric ton (2010 

emissions) identified in the interagency group’s revised guidance.696 See Section 

IV.C.3.l.iii. 

The group’s purpose in developing new estimates of the SCC was to allow federal 

agencies to incorporate the social benefits of reducing carbon dioxide (CO2) emissions 

into cost-benefit analyses of regulatory actions that have small, or “marginal,” impacts on 

cumulative global emissions, as most federal regulatory actions can be expected to have. 

The interagency group convened on a regular basis to consider public comments, explore 

the technical literature in relevant fields, and discuss key inputs and assumptions in order 

to generate SCC estimates. The revised SCC estimates represent the interagency group’s 

consideration of the literature and judgments about how to monetize some of the benefits 

of GHG mitigation.697 [CITATION] 

Incorporating the revised estimate, NHTSA’s analysis indicates that the Agency’s 

Decision will likely result in slightly greater fuel savings and CO2 emissions reductions 

than those noted in the EIS. The revised SCC valuation applied for purposes of the final 

rule resulted in a slightly smaller gap in stringency between the passenger car and light 

truck standards; the ratio of passenger car stringency (i.e., average required fuel 

economy) to light truck stringency in MY 2016 shrank from 1.318 to 1.313, or about 0.4 

percent. Because manufacturers projected to pay civil penalties (rather than fully 

complying with CAFE standards) account for a smaller share of the light truck market 

than of the passenger car market, and because lifetime mileage accumulation is somewhat 

higher for light trucks than for passenger cars, this slight shift in relative stringency 

caused average fuel economy levels achieved under the preferred alternative to increase 

by about 0.02 mpg during MYs 2012-2016, resulted in corresponding lifetime (i.e., over 

the full useful life of MYs 2012-2016 vehicles) fuel savings increases of about 0.9 

percent, and corresponding increases in lifetime CO2 emission reductions of about 1.1 

percent. For environmental impacts associated with NHTSA’s Decision, see Section 

IV.G of this Final Rule. 

 

696 The $21/ton estimate is for 2010 emissions and increases over time because of damages resulting from 

increased GHG concentrations. $21 is the average SCC at the 3 percent discount rate. The other 3 

estimates include: Avg SCC at 5% ($5-$16); Avg SCC at 2.5% ($35-$65); and 95th percentile at 3% ($65-

$136). 

697 The interagency group intends to update these estimates as the science and economic understanding of 

climate change and its impacts on society improves over time. 
628 

The incorporation of the revised interagency estimate of SCC results in minimal 

changes to the required fleetwide mpg for some model years covered by this Final Rule. 

All changes are less than or equal to .1 mpg (but may reflect an increase when rounding 

up during calculations) and continue to result, on average, in a 4.3 percent annual 

increase in mpg.698 See Section IV.F for discussion of required annual fleetwide mpg. 

For a discussion of the agency’s selection of the Preferred Alternative as 

NHTSA’s Decision, see Section IV.F of this Final Rule. 

Alternatives Considered by NHTSA in Reaching its Decision, Including the 

Environmentally Preferable Alternative 

When preparing an EIS, NEPA requires an agency to compare the potential 

environmental impacts of its proposed action and a reasonable range of alternatives. 

NHTSA identified alternative stringencies that represent the spectrum of potential actions 

the agency could take. The environmental impacts of these alternatives, in turn, represent 

the spectrum of potential environmental impacts that could result from NHTSA’s chosen 

action in setting CAFE standards. Specifically, the DEIS and FEIS analyzed the impacts 

of the following eight “action” alternatives: 3-Percent Alternative (Alternative 2), 4-

Percent Alternative (Alternative 3), Preferred Alternative (Alternative 4), 5-Percent 

Alternative (Alternative 5), an alternative that maximizes net benefits (MNB) 

(Alternative 6), 6-Percent Alternative (Alternative 7), 7-Percent Alternative (Alternative 

8), and an alternative under which total cost equals total benefit (TCTB) (Alternative 9). 

The DEIS and FEIS also analyzed the impacts that would be expected if NHTSA 

imposed no new requirements (the No Action Alternative). In accordance with CEQ 

regulations, the agency selected a Preferred Alternative in the DEIS and the FEIS (the 

approximately 4.3-percent average annual increase alternative). 

In response to public comments, the FEIS expanded the analysis to determine 

how the proposed alternatives were affected by variations in the economic assumptions 

input into the computer model NHTSA uses to calculate the costs and benefits of various 

potential CAFE standards (the Volpe model). Variations in economic assumptions can 

be used to examine the sensitivity of costs and benefits of each of the alternatives, 

including future fuel prices, the value of reducing CO2 emissions (referred to as the social 

cost of carbon or SCC) the discount rate, the magnitude of the rebound effect, and the 

value of oil import externalities. Different combinations of economic assumptions can 

also affect the calculation of environmental impacts of the various action alternatives. 

This occurs partly because some economic inputs to the Volpe model—notably fuel 

 

698 There are no “substantial changes to the proposed action” and there are no “significant new 

circumstances or information relevant to environmental concerns and bearing on the proposed action or its 

impacts.” Therefore, consistent with 40 CFR 1502.9(c), no supplement to the EIS is required. Moreover, 

the environmental impacts of this decision fall within the spectrum of impacts analyzed in the DEIS and the 

FEIS. 
629 

prices and the size of the rebound effect – influence its estimates of vehicle use and fuel 

consumption, the main factors that determine emissions of GHGs criteria air pollutants, 

and airborne toxics. See section 2.4 of the FEIS for a discussion of the sensitivity 

analysis conducted for the FEIS. 

The agency considered and analyzed each of the individual economic assumptions 

to determine which assumptions most accurately represent future economic conditions. 

For a discussion of the analysis supporting the selection of the economic assumptions 

relied on by the agency in this Final Rule, see Section IV.C.3. 

Also in response to comments, the agency conducted a national-scale 

photochemical air quality modeling and health risk assessment for a subset of the DEIS 

alternatives to support and confirm the health effects and health-related economic 

estimates of the EIS. The photochemical air quality study is included as Appendix F to 

the EIS. The study used air quality modeling and health benefits analysis tools to 

quantify the air quality and health-related benefits associated with the alternative CAFE 

standards. Four alternatives from the DEIS were modeled: the No Action Alternative 

and Alternative 2 (the 3-Percent Alternative) to represent fuel economy requirements at 

the lower end of the range; Alternative 4 (the Preferred Alternative) and Alternative 8 

(the 7-Percent Alternative) to represent fuel economy requirements at the higher end of 

the range. 

The agency compared the potential environmental impacts of alternative mpg 

levels, analyzing direct, indirect, and cumulative impacts. For a discussion of the 

environmental impacts associated with each of the alternatives, see Chapters 3 and 4 of 

the FEIS. 

Alternative 8 (the 7-Percent Alternative) is the overall Environmentally Preferable 

Alternative, because it would result in the largest reductions in fuel use and GHG 

emissions by vehicles produced during MYs 2012-2016 among the alternatives 

considered. Under each alternative the agency considered, the reduction in fuel 

consumption resulting from higher fuel economy causes emissions that occur during fuel 

refining and distribution to decline. For most pollutants, this decline is more than 

sufficient to offset the increase in tailpipe emissions that results from increased driving 

due to the fuel economy rebound effect, leading to a net reduction in total emissions from 

fuel production, distribution, and use. Because it leads to the largest reductions in fuel 

refining, distribution, and consumption among the alternatives considered, Alternative 8 

would also lead to the largest net reductions in emissions of CO2 and other GHGs, most 

criteria air pollutants,699 as well as the mobile source air toxics (MSATs) benzene and 

diesel particulate matter (diesel PM).

 

699 Reductions in emissions of two criteria air pollutants, fine particulate matter (PM2.5) and sulfur oxides 

(SOx), are forecast to be slightly larger for Alternative 9 (TCTB) than for Alternative 8. Because the 

estimates of health benefits depend most critically on changes in particulate matter emissions, this causes 

the health benefits estimates reported in this FEIS to be slightly larger for Alternative 9 than for Alternative 
630 

However, NHTSA’s environmental analysis indicates that emissions of the 

MSATs acetaldehyde, acrolein, 1,3-butadiene, and formaldehyde would increase under 

some alternatives, with the largest increases in emissions of these MSATs projected to 

occur under Alternative 8 in most future years. This occurs because the rates at which 

these MSATs are emitted during fuel refining and distribution are very low relative to 

their emission rates during vehicle use. As a consequence, the reductions in their total 

emissions during fuel refining and distribution that result from lower fuel use are 

insufficient to offset the increases in emissions that result from additional vehicle use. 

The amount by which increased tailpipe emissions of these MSATs exceeds the 

reductions in their emissions during fuel refining and distribution increases for 

alternatives that require larger improvements in fuel economy, and in most future years is 

smallest under Alternative 2 (which would increase CAFE standards least rapidly among 

the action alternatives) and largest under Alternative 8 (which would require the most 

rapid increase in fuel economy). Thus while Alternative 8 is the environmentally 

preferable alternative on the basis of CO2 and other GHGs, most criteria air pollutants, 

and some MSATs, other alternatives are environmentally preferable from the standpoint 

of the criteria air pollutants fine particulate matter and sulfur oxides, as well as the 

MSATs acetaldehyde, acrolein, 1,3-butadiene, and formaldehyde. Overall, however, 

NHTSA considers Alternative 8 to be the Environmentally Preferable Alternative. 

For additional discussion regarding the alternatives considered by the agency in 

reaching its decision, including the Environmentally Preferable Alternative, see Section 

IV.F of this Final Rule. For a discussion of the environmental impacts associated with 

each alternative, see Chapters 3 and 4 of the FEIS. 

Factors Balanced By NHTSA In Making Its Decision 

For discussion of the factors balanced by NHTSA in making its decision, see 

Sections IV.D. and IV.F of this Final Rule. 

How the Factors and Considerations Balanced by NHTSA Entered into its Decision 

For discussion of how the factors and considerations balanced by the agency 

entered into NHTSA’s Decision, see Section IV.F of this Final Rule. 

The Agency’s Preferences Among Alternatives Based on Relevant Factors, Including 

Economic and Technical Considerations and Agency Statutory Missions 

 For discussion of the agency’s preferences among alternatives based on relevant 

factors, including economic and technical considerations, see Section IV.F of this Final 

Rule. 

 8. See section 3.3 of the FEIS. Nonetheless, for the other reasons explained above, NHTSA considers 

Alternative 8 to be the overall Environmentally Preferable Alternative. 
631 

Mitigation 

The CEQ regulations specify that a ROD must “state whether all practicable 

means to avoid or minimize environmental harm from the alternative selected have been 

adopted, and if not, why they were not.” 49 CFR 1505.2(c). The majority of the 

environmental effects of NHTSA’s action are positive, i.e., beneficial environmental 

impacts, and would not raise issues of mitigation. The only negative environmental 

impacts are the projected increase in emissions of carbon monoxide and certain air toxics, 

as discussed above under the Environmentally Preferable Alternative, and in section 2.6 

and Chapter 5 of the FEIS. The agency forecasts these increases because, under all the 

alternatives analyzed in the EIS, increase in vehicle use due to improved fuel economy is 

projected to result in growth in total miles traveled by passenger cars and light trucks. 

This growth is exacerbated by the expected growth in the number of passenger cars and 

light trucks in use in the United States. The growth in travel outpaces emissions 

reductions for some pollutants, resulting in projected increases for these pollutants. 

NHTSA’s authority to promulgate new fuel economy standards is limited and 

does not allow regulation of vehicle emissions or of factors affecting vehicle emissions, 

including driving habits. Consequently, under the CAFE program, NHTSA must set 

standards but is unable to take steps to mitigate the impacts of these standards. However, 

we note that the Department of Transportation is currently implementing initiatives that 

work toward the stated Secretarial policy goal of reducing annual vehicle miles traveled. 

Chapter 5 of the FEIS outlines a number of other initiatives across government that could 

ameliorate the environmental impacts of motor vehicle use. 

 Following is a discussion of regulatory notices and analyses relevant to this 

rulemaking. 

1. National Environmental Policy Act 

Under NEPA, a Federal agency must prepare an Environmental Impact Statement 

(EIS) on proposed actions that could significantly impact the quality of the human 

environment. The requirement is designed to serve three major functions: (1) to provide 

the decisionmaker(s) with a detailed description of the potential environmental impacts of 

a proposed action prior to its adoption, (2) to rigorously explore and evaluate all 

reasonable alternatives, and (3) to inform the public of, and allow comment on, such 

efforts. 

In addition, the CEQ regulations emphasize agency cooperation early in the 

NEPA process, and allow a lead agency (in this case, NHTSA) to request the assistance 

of other agencies that either have jurisdiction by law or have special expertise regarding 

issues considered in an EIS.700 NHTSA invited EPA to be a cooperating agency because 

 

700 40 CFR § 1501.6. 
632 

of its special expertise in the areas of climate change and air quality. On May 12, 2009, 

EPA agreed to become a cooperating agency. EPA’s environmental analysis of its own 

proposed rulemaking is summarized and referenced in the appropriate sections of this 

EIS.701

NHTSA, in cooperation with EPA, prepared a draft EIS (DEIS), solicited public 

comments in writing and in a public hearing, and prepared a final EIS (FEIS) responding 

to those comments. Specifically, in April 2009, NHTSA published an NOI to prepare an 

EIS for proposed MY 2012-2016 CAFE standards.702 See 40 CFR § 1501.7. 

On September 25, 2009, EPA issued its Notice of Availability of the DEIS,703

triggering the 45-day public comment period. See 74 FR 48951. See also 40 CFR § 

1506.10. In accordance with CEQ regulations, the public was invited to submit written 

comments on the DEIS until November 9, 2009. See 40 CFR § 1503, et seq. 

NHTSA mailed (both electronically and through regular U.S. mail) over 500 

copies of the DEIS to interested parties, including federal, state, and local officials and 

agencies; elected officials, environmental and public interest groups; Native American 

tribes; and other interested individuals. NHTSA held a public hearing on the DEIS at the 

National Transportation Safety Board Conference Center in Washington, DC on October 

30, 2009. 

NHTSA received 11 written comments from interested stakeholders, including 

federal agencies, state agencies, environmental advocacy groups, and private citizens. In 

addition, three interested parties spoke at the public hearing. The transcript from the 

public hearing and written comments submitted to NHTSA are part of the administrative 

record, and are available on the Federal Docket, which can be found on the Web at 

http://www.regulations.gov, Reference Docket No. NHTSA-2009-0059. 

NHTSA reviewed and analyzed all comments received during the public 

comment period and revised the FEIS in response to comments on the EIS where 

 

701 Consistent with the National Fuel Efficiency Policy that the President announced on May 19, 2009, EPA 

and NHTSA published their Notice of Upcoming Joint Rulemaking to ensure a coordinated National 

Program on GHG emissions and fuel economy for passenger cars, light-duty trucks, and medium-duty 

passenger vehicles. NHTSA takes no position on whether the EPA proposed rule on GHG emissions could 

be considered a “connected action” under the CEQ regulation at 40 CFR Section 1508.25. For purposes of 

this EIS, however, NHTSA has decided to treat the EPA proposed rule as if it were a “connected action” 

under that regulation to improve the usefulness of the EIS for NHTSA decisionmakers and the public. 

NHTSA is aware that Section 7(c) of the Energy Supply and Environmental Coordination Act of 1974 

expressly exempts from NEPA requirements EPA action taken under the CAA. See 15 U.S.C. § 793(c)(1). 702 See Notice of Intent to Prepare an Environmental Impact Statement for New Corporate Average Fuel 

Economy Standards, 74 FR 14857 (Apr. 1, 2009). 703 Also on September 25, 2009, NHTSA published a Federal Register Notice of Availability of its DEIS. 

See 74 FR 48894. NHTSA’s Notice of Availability also announced the date and location of a public 

hearing, and invited the public to participate at the hearing on October 30, 2009, in Washington, DC. See 

id. 
633 

appropriate.704 For a more detailed discussion of NHTSA’s scoping and comment 

periods, see Section 1.5 and Chapter 10 of the FEIS. 

On February 22, 2010, NHTSA submitted the FEIS to the EPA. NHTSA also 

mailed (both electronically and through regular U.S. mail) over 500 copies of the FEIS to 

interested parties and posted the FEIS on its website, 

http://www.nhtsa.gov/portal/fueleconomy.jsp. On March 3, 2010, the EPA published a 

Notice of Availability of the FEIS in the Federal Register. See 75 FR 9596. 

The MYs 2012-2016s CAFE standards adopted in this Final Rule have been 

informed by analyses contained in the Final Environmental Impact Statement, Corporate 

Average Fuel Eocnomy Standards, Passenger Cars and Light Trucks, Model Years 2012-

2016, Docket No. NHTSA-2009-0059 (FEIS). For purposes of this rulemaking, the 

agency referred to an extensive compilation of technical and policy documents available 

in NHTSA’s EIS/Rulemaking docket and EPA’s docket. NHTSA’s EIS and rulemaking 

docket and EPA’s rulemaking docket can be found on the Web at 

http://www.regulations.gov, Reference Docket Nos.: NHTSA-2009-0059 (EIS and 

Rulemaking) and EPA-HQ-OAR-2009-0472 (EPA Rulemaking). 

Based on the foregoing, the agency concludes that the environmental analysis and 

public involvement process complies with NEPA implementing regulations issued by 

CEQ, DOT Order 5610.1C, and NHTSA regulations.705 

2. Clean Air Act (CAA) 

The CAA (42 U.S.C. § 7401) is the primary Federal legislation that addresses air 

quality. Under the authority of the CAA and subsequent amendments, the EPA has 

established National Ambient Air Quality Standards (NAAQS) for six criteria pollutants, 

which are relatively commonplace pollutants that can accumulate in the atmosphere as a 

result of normal levels of human activity. The EPA is required to review the NAAQS 

every five years and to change the levels of the standards if warranted by new scientific 

information. 

The air quality of a geographic region is usually assessed by comparing the levels 

of criteria air pollutants found in the atmosphere to the levels established by the NAAQS. 

Concentrations of criteria pollutants within the air mass of a region are measured in parts 

of a pollutant per million parts of air (ppm) or in micrograms of a pollutant per cubic 

meter (μg/m3) of air present in repeated air samples taken at designated monitoring 

locations. These ambient concentrations of each criteria pollutant are compared to the 

 

704 The agency also changed the FEIS as a result of updated information that became available after 

issuance of the DEIS. 

705 NEPA is codified at 42 U.S.C. §§ 4321-4347. CEQ’s NEPA implementing regulations are codified at 

40 CFR Pts. 1500-1508, and NHTSA’s NEPA implementing regulations are codified at 49 CFR Part 520. 
634 

permissible levels specified by the NAAQS in order to assess whether the region’s air 

quality is potentially unhealthful. 

When the measured concentrations of a criteria pollutant within a geographic 

region are below those permitted by the NAAQS, the region is designated by the EPA as 

an attainment area for that pollutant, while regions where concentrations of criteria 

pollutants exceed Federal standards are called nonattainment areas (NAAs). Former 

NAAs that have attained the NAAQS are designated as maintenance areas. Each NAA is 

required to develop and implement a State Implementation Plan (SIP), which documents 

how the region will reach attainment levels within time periods specified in the CAA. In 

maintenance areas, the SIP documents how the State intends to maintain compliance with 

the NAAQS. When EPA changes a NAAQS, States must revise their SIPs to address 

how they will attain the new standard. 

Section 176(c) of the CAA prohibits Federal agencies from taking actions in 

nonattainment or maintenance areas that do not “conform” to the State Implementation 

Plan (SIP). The purpose of this conformity requirement is to ensure that Federal activities 

do not interfere with meeting the emissions targets in the SIPs, do not cause or contribute 

to new violations of the NAAQS, and do not impede the ability to attain or maintain the 

NAAQS. The EPA has issued two sets of regulations to implement CAA Section 176(c): 

 The Transportation Conformity Rules (40 CFR 51 Subpart T), which apply to 

transportation plans, programs, and projects funded under title 23 United States 

Code (U.S.C.) or the Federal Transit Act. Highway and transit infrastructure 

projects funded by FHWA or the Federal Transit Administration (FTA) usually 

are subject to transportation conformity. 

 The General Conformity Rules (40 CFR 51 Subpart W) apply to all other 

Federal actions not covered under transportation conformity. The General 

Conformity Rules established emissions thresholds, or de minimis levels, for use 

in evaluating the conformity of a project. If the net emission increases due to the 

project are less than these thresholds, then the project is presumed to conform 

and no further conformity evaluation is required. If the emission increases 

exceed any of these thresholds, then a conformity determination is required. The 

conformity determination may entail air quality modeling studies, consultation 

with EPA and State air quality agencies, and commitments to revise the SIP or 

to implement measures to mitigate air quality impacts. 

The CAFE standards and associated program activities are not funded under title 

23 U.S.C. or the Federal Transit Act. Further, CAFE standards are established by 

NHTSA and are not an action undertaken by FHWA or FTA. Accordingly, the CAFE 

standards are not subject to transportation conformity. 
635 

The General Conformity Rules contain several exemptions applicable to “Federal 

actions,” which the conformity regulations define as: “any activity engaged in by a 

department, agency, or instrumentality of the Federal Government, or any activity that a 

department, agency or instrumentality of the Federal Government supports in any way, 

provides financial assistance for, licenses, permits, or approves, other than activities 

[subject to transportation conformity].” 40 CFR § 51.852. “Rulemaking and policy 

development and issuance” are exempted at 40 CFR § 51.853(c)(2)(iii). Since NHTSA’s 

CAFE standards involve a rulemaking process, its action is exempt from general 

conformity. Also, emissions for which a Federal agency does not have a “continuing 

program responsibility” are not considered “indirect emissions” subject to general 

conformity under 40 CFR § 51.852. “Emissions that a Federal agency has a continuing 

program responsibility for means emissions that are specifically caused by an agency 

carrying out its authorities, and does not include emissions that occur due to subsequent 

activities, unless such activities are required by the Federal agency.” 40 CFR § 51.852. 

Emissions that occur as a result of the final CAFE standards are not caused by NHTSA 

carrying out its statutory authorities and clearly occur due to subsequent activities, 

including vehicle manufacturers’ production of passenger car and light truck fleets and 

consumer purchases and driving behavior. Thus, changes in any emissions that result 

from NHTSA’s final CAFE standards are not those for which the agency has a 

“continuing program responsibility” and NHTSA is confident that a general conformity 

determination is not required. NHTSA has evaluated the potential impacts of air 

emissions under NEPA. 

 3. National Historic Preservation Act (NHPA) 

The NHPA (16 U.S.C. § 470) sets forth government policy and procedures 

regarding “historic properties”—that is, districts, sites, buildings, structures, and objects 

included in or eligible for the National Register of Historic Places (NRHP). See also 36 

CFR Part 800. Section 106 of the NHPA requires federal agencies to “take into account” 

the effects of their actions on historic properties. The agency concludes that the NHPA is 

not applicable to NHTSA’s Decision, because it does not directly involve historic 

properties. The agency has, however, conducted a qualitative review of the related direct, 

indirect, and cumulative impacts, positive or negative, of the alternatives on potentially 

affected resources, including historic and cultural resources. See Section 3.5 of the FEIS. 

 4. Executive Order 12898 (Environmental Justice) 

 

Under Executive Order 12898, Federal agencies are required to identify and 

address any disproportionately high and adverse human health or environmental effects 

of its programs, policies, and activities on minority populations and low-income 

populations. NHTSA complied with this order by identifying and addressing the 

potential effects of the alternatives on minority and low-income populations in Section 

3.5 of the FEIS, the agency set forth a qualitative analysis of the cumulative effects of the 

alternatives on these populations. 
636 

 

 5. Fish and Wildlife Conservation Act (FWCA) 

 

The FWCA (16 U.S.C. § 2900) provides financial and technical assistance to 

States for the development, revision, and implementation of conservation plans and 

programs for nongame fish and wildlife. In addition, the Act encourages all Federal 

agencies and departments to utilize their authority to conserve and to promote 

conservation of nongame fish and wildlife and their habitats. The agency concludes that 

the FWCA is not applicable to NHTSA’s Decision, because it does not directly involve 

fish and wildlife. 

 6. Coastal Zone Management Act (CZMA) 

The Coastal Zone Management Act (16 U.S.C. § 1450) provides for the 

preservation, protection, development, and (where possible) restoration and enhancement 

of the nation’s coastal zone resources. Under the statute, States are provided with funds 

and technical assistance in developing coastal zone management programs. Each 

participating State must submit its program to the Secretary of Commerce for approval. 

Once the program has been approved, any activity of a Federal agency, either within or 

outside of the coastal zone, that affects any land or water use or natural resource of the 

coastal zone must be carried out in a manner that is consistent, to the maximum extent 

practicable, with the enforceable policies of the State’s program. 

The agency concludes that the CZMA is not applicable to NHTSA’s Decision, 

because it does not involve an activity within, or outside of, the nation’s coastal zones. 

The agency has, however, conducted a qualitative review of the related direct, indirect, 

and cumulative impacts, positive or negative, of the alternatives on potentially affected 

resources, including coastal zones. See Section 4.5 of the FEIS. 

7. Endangered Species Act (ESA) 

[Placeholder – will cite/copy EIS language] 

8. Floodplain Management (Executive Order 11988 & DOT Order 

5650.2) 

These Orders require Federal agencies to avoid the long- and short-term adverse 

impacts associated with the occupancy and modification of floodplains, and to restore 

and preserve the natural and beneficial values served by floodplains. Executive Order 

11988 also directs agencies to minimize the impact of floods on human safety, health and 

welfare, and to restore and preserve the natural and beneficial values served by 

floodplains through evaluating the potential effects of any actions the agency may take in 

a floodplain and ensuring that its program planning and budget requests reflect 

consideration of flood hazards and floodplain management. DOT Order 5650.2 sets forth 

DOT policies and procedures for implementing Executive Order 11988. The DOT Order 

requires that the agency determine if a proposed action is within the limits of a base 
637 

floodplain, meaning it is encroaching on the floodplain, and whether this encroachment is 

significant. If significant, the agency is required to conduct further analysis of the 

proposed action and any practicable alternatives. If a practicable alternative avoids 

floodplain encroachment, then the agency is required to implement it. 

In this rulemaking, the agency is not occupying, modifying and/or encroaching on 

floodplains. The agency, therefore, concludes that the Orders are not applicable to 

NHTSA’s Decision. The agency has, however, conducted a review of the alternatives on 

potentially affected resources, including floodplains. See Section 4.5 of the FEIS. 

9. Preservation of the Nation’s Wetlands (Executive Order 11990 

& DOT Order 5660.1a) 

These Orders require Federal agencies to avoid, to the extent possible, 

undertaking or providing assistance for new construction located in wetlands unless the 

agency head finds that there is no practicable alternative to such construction and that the 

proposed action includes all practicable measures to minimize harms to wetlands that 

may result from such use. Executive Order 11990 also directs agencies to take action to 

minimize the destruction, loss or degradation of wetlands in “conducting Federal 

activities and programs affecting land use, including but not limited to water and related 

land resources planning, regulating, and licensing activities.” DOT Order 5660.1a sets 

forth DOT policy for interpreting Executive Order 11990 and requires that transportation 

projects “located in or having an impact on wetlands” should be conducted to assure 

protection of the Nation’s wetlands. If a project does have a significant impact on 

wetlands, an EIS must be prepared. 

The agency is not undertaking or providing assistance for new construction 

located in wetlands. The agency, therefore, concludes that these Orders do not apply to 

NHTSA’s Decision. The agency has, however, conducted a review of the alternatives on 

potentially affected resources, including wetlands. See Section 4.5 of the FEIS. 

10. Migratory Bird Treaty Act (MBTA), Bald and Golden Eagle 

Protection Act (BGEPA), Executive Order 13186. 

 

The MBTA provides for the protection of migratory birds that are native to the 

United States by making it illegal for anyone to pursue, hunt, take, attempt to take, kill, 

capture, collect, possess, buy, sell, trade, ship, import, or export any migratory bird 

covered under the statute. The statute prohibits both intentional and unintentional acts. 

Therefore, the statute is violated if an agency acts in a manner that harms a migratory 

bird, whether it was intended or not. See, e.g., United States v. FMC Corp., 572 F.2d 902 

(2nd Cir. 1978). 

 
638 

The BGEPA (16 U.S.C. § 668) prohibits any form of possession or taking of both 

bald and golden eagles. Under the BGEPA, violators are subject to criminal and civil 

sanctions as well as an enhanced penalty provision for subsequent offenses. 

 

Executive Order 13186, “Responsibilities of Federal Agencies to Protect 

Migratory Birds,” helps to further the purposes of the MBTA by requiring a Federal 

agency to develop a Memorandum of Understanding (MOU) with the Fish and Wildlife 

Service when it is taking an action that has (or is likely to have) a measurable negative 

impact on migratory bird populations. 

 The agency concludes that the MBTA, BGEPA, and Executive Order 13186 do 

not apply to NHTSA’s Decision, because there is no disturbance and/or take involved in 

NHTSA’s Decision. 

 11. Department of Transportation Act (Section 4(f)) 

Section 4(f) of the Department of Transportation Act of 1966 (49 U.S.C. § 303), 

as amended by Pub. Law § 109-59, is designed to preserve publicly owned parklands, 

waterfowl and wildlife refuges, and significant historic sites. Specifically, Section 4(f) of 

the Department of Transportation Act provides that DOT agencies cannot approve a 

transportation program or project that requires the use of any publicly owned land from a 

significant public park, recreation area, or wildlife and waterfowl refuge, or any land 

from a significant historic site, unless a determination is made that: 

 There is no feasible and prudent alternative to the use of land, and 

 The program or project includes all possible planning to minimize harm to the 

property resulting from use, or 

 A transportation use of Section 4(f) property results in a de minimis impact. 

The agency concludes that the Section 4(f) is not applicable to NHTSA’s 

Decision because this rulemaking does not require the use of any publicly owned land. 

For a more detailed discussion, please see Section 3.5 of the FEIS. 

L. 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: 
639 

 (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 is economically significant. 

Accordingly, OMB reviewed it under Executive Order 12866. The rule is also 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 rule is 

economically significant under both the Department of Transportation’s procedures and 

OMB guidelines, the agency has prepared a Final Regulatory Impact Analysis (FRIA) 

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 technical challenges or where effects cascade 

and where the impacts of the rule exceed $1 billion. This final rule meets these criteria 

on all counts. 

 2. National Environmental Policy Act

On March 3, 2010 NHTSA published in the Federal Register the Final 

Environmental Impact Statement (EIS) for the MYs 2012-2016 CAFE standards. 75 FR 

9596. The FEIS analyzes and discloses the potential environmental impacts of the 

proposed MYs 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 National Environmental Policy Act (NEPA), the Council on Environmental Quality 

(CEQ) regulations implementing NEPA, DOT Order 5610.1C, and NHTSA 

regulations.706 The FEIS compared the potential environmental impacts of alternative 

mile per gallon (mpg) levels considered by NHTSA for the final rule. It also analyzed 

direct, indirect, and cumulative impacts and analyzes impacts in proportion to their 

 

706 NEPA is codified at 42 U.S.C. 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. 
640 

significance. See the FEIS and the FEIS Summary for a discussion of the environmental 

impacts analyzed. Docket Nos. NHTSA-2009-0059-0140, NHTSA-2009-0059-0141. 

 3. Regulatory Flexibility Act

 Pursuant to the Regulatory Flexibility Act (5 U.S.C. 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 this final rule will 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. 605(b)). 

The final rule directly affects twenty-one large single stage motor vehicle 

manufacturers.707 According to current information, the final rule would also affect two 

small domestic single stage motor vehicle manufacturers, Saleen and Tesla.708 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 

above those finalized 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 singlestage 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. 

Ferrari commented that NHTSA will not necessarily always grant the petitions of small 

vehicle manufacturers for alternative standards, and that therefore the relief is not 

 

707 BMW, Daimler (Mercedes), Chrysler, Ferrari, Ford, Subaru, General Motors, Honda, Hyundai, Kia, 

Lotus, Maserati, Mazda, Mitsubishi, Nissan, Porsche, Subaru, Suzuki, Tata, Toyota, and Volkswagen. 708 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. 
641 

guaranteed.709 In response, NHTSA notes that the fact that the agency may not grant a 

petition for an alternative standard for one manufacturer at one time does not mean that 

the mechanism for handling small businesses is unavailable for all. Thus, 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. Several 

state agencies provided comments to the proposed standards. 

Additionally, 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 will apply nationally 

under the National Program. 

 5. Executive Order 12988 (Civil Justice Reform)

 Pursuant to Executive Order 12988, “Civil Justice Reform,”710 NHTSA has 

considered whether this rulemaking would have any retroactive effect. This final 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 

 

709 We note that Ferrari would not currently qualify for such an alternative standard, because it does not 

manufacture fewer than 10,000 passenger automobiles per year, as required by 49 U.S.C. 32902(d) for 

exemption from the main passenger car CAFE standard. 

710 61 FR 4729 (Feb. 7, 1996). 
642 

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 final 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 final rule, 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 concluded that the final 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

[Placeholder. Do we still need this?] 

 

 8. Regulation Identifier Number

 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 13045711 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. 

 

711 62 FR 19885 (Apr. 23, 1997). 
643 

Chapter 4 of NHTSA’s FEIS 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).712 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 FEIS 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. 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. 2005). 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. 2005). 

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 

al. 1999, in Epstein et al. 2005); toxins associated with red tide directly affect the nervous 

system (Epstein et al. 2005). 

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 FEIS, NHTSA has evaluated the environmental health and 

safety effects of agency’s action on children. 

 10. National Technology Transfer and Advancement Act

 

712 The references referred to in the remainder of this section are detailed in section 7.4.5 of the FEIS. 
644 

 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 final 

CAFE standards. 

 11. Executive Order 13211

 Executive Order 13211713 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 final rule and explain why the final regulation is preferable to other 

potentially effective and reasonably feasible alternatives considered by us. 

 The final 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 final rulemaking action is not designated as a 

significant energy action. 

 12. Department of Energy Review

 In accordance with 49 U.S.C. 32902(j)(1), we submitted this final rule to the 

Department of Energy for review. That Department did not make any comments that we 

have not addressed. 

 

 

713 66 FR 28355 (May 18, 2001). 
645 

 13. 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. 

List of Subjects 

40 CFR Part 85 

Confidential business information, Imports, Labeling, Motor vehicle pollution, Reporting 

and recordkeeping requirements, Research, Warranties. 

40 CFR Part 86 

Administrative practice and procedure, Confidential business information, Labeling, 

Motor vehicle pollution, Reporting and recordkeeping requirements. 

40 CFR Part 600 

Administrative practice and procedure, Electric power, Fuel economy, Incorporation by 

reference, Labeling, Reporting and recordkeeping requirements. 

49 CFR Part 531 and 533 

Fuel economy. 

49 CFR Part 537 

Fuel economy, Reporting and recordkeeping requirements. 

49 CFR Part 538 

Administrative practice and procedure, Fuel economy, Motor vehicles, Reporting and 

recordkeeping requirements. 

Environmental Protection Agency 

40 CFR Chapter I 
646 

For the reasons set forth in the preamble, the Environmental Protection Agency is 

amending parts 9, 85, 86, and 600 of title 40, Chapter I of the Code of Federal 

Regulations as follows: 

PART 9—[Amended] 

1. The authority citation for part 9 continues to read as follows: 

Authority: 7 U.S.C. 135 et seq ., 136–136y; 15 U.S.C. 2001, 2003, 2005, 2006, 2601–

2671; 21 U.S.C. 331j, 346a, 31 U.S.C. 9701; 33 U.S.C. 1251 et seq ., 1311, 1313d, 1314, 

1318, 1321, 1326, 1330, 1342, 1344, 1345 (d) and (e), 1361; E.O. 11735, 38 FR 21243, 3 

CFR, 1971–1975 Comp. p. 973; 42 U.S.C. 241, 242b, 243, 246, 300f, 300g, 300g–1, 

300g–2, 300g–3, 300g–4, 300g–5, 300g–6, 300j–1, 300j–2, 300j–3, 300j–4, 300j–9, 1857 

et seq ., 6901–6992k, 7401–7671q, 7542, 9601–9657, 11023, 11048. 

2. The table in § 9.1 is amended by adding the following sections in numerical order 

under the undesignated center heading ‘‘Significant New Uses of Chemical Substances’’ 

to read as follows: 

§ 9.1 OMB approvals under the Paperwork Reduction Act. 

* * * * * 

40 CFR citation OMB control No. 

* * * * *

Control of Emissions From New and In-Use Highway Vehicles and Engines 

* * * * * 

86.165-12 

86.166-12 

86.1805-12 

86.1809-10 

86.1818-12 

86.1823-08 

86.1845-04 

86.1865-12 

86.1866-12 

86.1867-12 

2060-0104 

* * * * * 
647 

PART 85—CONTROL OF AIR POLLUTION FROM MOBILE SOURCES 

3. The authority citation for part 85 continues to read as follows: 

Authority: 42 U.S.C. 7401–7671q. 

Subpart T -- [Amended] 

4. Section 85.1902 is amended by revising paragraphs (b) and (d) as follows: 

§ 85.1902 Definitions. 

* * * * * 

(b) The phrase emission-related defect shall mean: 

(1) A defect in design, materials, or workmanship in a device, system, or 

assembly described in the approved Application for Certification (required by 40 CFR 

86.1843-01 and 86.1844-01, 40 CFR 86.098-22 and like provisions of subpart A of this 

part and 40 CFR part 86) which affects any parameter or specification enumerated in 

appendix VIII of this part; or 

(2) A defect in the design, materials, or workmanship in one or more emissions 

control or emission-related parts, components, systems, software or elements of design 

which must function properly to assure continued vehicle emission compliance (including 

compliance with greenhouse gas CH4, N2O, and carbon related exhaust emission 

standards); 

* * * * * 

(d) The phrase Voluntary Emissions Recall shall mean a repair, adjustment, or 

modification program voluntarily initiated and conducted by a manufacturer to remedy 

any emission-related defect for which direct notification of vehicle or engine owners has 

been provided, including programs to remedy defects related to greenhouse gas emissions 

(CH4, N2O and/or carbon-related exhaust emissions). 

* * * * * 
648 

PART 86--CONTROL OF EMISSIONS FROM NEW AND IN-USE HIGHWAY 

VEHICLES AND ENGINES 

5. The authority citation for part 86 continues to read as follows: 

Authority: 42 U.S.C. 7401-7671q. 

6. Section 86.1 is amended by adding paragraphs (b)(2)(xxxix) through (xxxx) to read as 

follows: 

§ 86.1 Reference materials.

* * * * * 

 (b) * * * 

 (2) * * * 

 (xxxix) SAE J2064, December 2005, R134a Refrigerant Automotive AirConditioned Hose, IBR approved for §86.166-12. 

 (xxxx) SAE J2765, October, 2008, Procedure for Measuring System COP 

[Coefficient of Performance] of a Mobile Air Conditioning System on a Test Bench, IBR 

approved for §86.1866-12. 

* * * * * 
649 

Subpart B--[Amended]

7. Section 86.111-94 is amended by revising paragraph (b) introductory text to read as 

follows: 

§86.111-94 Exhaust gas analytical system. 

* * * * * 

(b) Major component description. The exhaust gas analytical system, Figure B94–

7, consists of a flame ionization detector (FID) (heated, 235 °±15 °F (113 °±8 °C) for 

methanol-fueled vehicles) for the determination of THC, a methane analyzer (consisting 

of a gas chromatograph combined with a FID) for the determination of CH4, nondispersive infrared analyzers (NDIR) for the determination of CO and CO2, a 

chemiluminescence analyzer (CL) for the determination of NOX, and an analyzer meeting 

the requirements specified in §86.167-12 for the determination of N2O for 2015 and later 

model year vehicles. A heated flame ionization detector (HFID) is used for the 

continuous determination of THC from petroleum-fueled diesel-cycle vehicles (may also 

be used with methanol-fueled diesel-cycle vehicles), Figure B94–5 (or B94–6). The 

analytical system for methanol consists of a gas chromatograph (GC) equipped with a 

flame ionization detector. The analysis for formaldehyde is performed using highpressure liquid chromatography (HPLC) of 2,4-dinitrophenylhydrazine (DNPH) 

derivatives using ultraviolet (UV) detection. The exhaust gas analytical system shall 

conform to the following requirements: 

* * * * * 

8. A new section 86.127-12 is added to read as follows: 

§86.127-12 Test procedures; overview. 

Applicability. The procedures described in this subpart are used to determine the 

conformity of vehicles with the standards set forth in subpart A or S of this part (as 

applicable) for light-duty vehicles, light-duty trucks, and medium-duty passenger 

vehicles. Except where noted, the procedures of paragraphs (a) through (b) of this 

section, §86.127–96 (c) and (d), and the contents of §§86.135–94, 86.136–90, 86.137–96, 

86.140–94, 86.142–90, and 86.144–94 are applicable for determining emission results for 

vehicle exhaust emission systems designed to comply with the FTP emission standards, 

or the FTP emission element required for determining compliance with composite SFTP 

standards. Paragraphs (f) and (g) of this section discuss the additional test elements of 

aggressive driving (US06) and air conditioning (SC03) that comprise the exhaust 

emission components of the SFTP. Section 86.127–96(e) discusses fuel spitback 

emissions and paragraphs (h) and (i) of this section are applicable to all vehicle emission 

test procedures. Section 86.127–00 includes text that specifies requirements that differ 

from §86.127–96. 

(a) The overall test consists of prescribed sequences of fueling, parking, and 

operating test conditions. Vehicles are tested for any or all of the following emissions, 

depending upon the specific test requirements and the vehicle fuel type: 
650 

(1) Gaseous exhaust THC, NMHC, CO, NOX, CO2, N2O, CH4, CH 3OH, 

C2H5OH, C2H4O, and HCHO. 

(2) Particulates. 

(3) Evaporative HC (for gasoline-fueled, methanol-fueled and gaseous-fueled 

vehicles) and CH3OH (for methanol-fueled vehicles). The evaporative testing portion of 

the procedure occurs after the exhaust emission test; however, exhaust emissions need 

not be sampled to complete a test for evaporative emissions. 

(4) Fuel spitback (this test is not required for gaseous-fueled vehicles). 

(b) The FTP Otto-cycle exhaust emission test is designed to determine gaseous 

THC, CO, CO2, CH4, NOX, N2O, and particulate mass emissions from gasoline-fueled, 

methanol-fueled and gaseous-fueled Otto-cycle vehicles as well as methanol and 

formaldehyde from methanol-fueled Otto-cycle vehicles, as well as methanol, ethanol, 

acetaldehyde, and formaldehyde from ethanol-fueled vehicles while simulating an 

average trip in an urban area of 11 miles (18 kilometers). The test consists of engine startups and vehicle operation on a chassis dynamometer through a specified driving schedule 

(see paragraph (a) of appendix I to this part for the Urban Dynamometer Driving 

Schedule). A proportional part of the diluted exhaust is collected continuously for 

subsequent analysis, using a constant volume (variable dilution) sampler or critical flow 

venturi sampler. 

(c) The diesel-cycle exhaust emission test is designed to determine particulate and 

gaseous mass emissions during a test similar to the test in §86.127(b). For petroleumfueled diesel-cycle vehicles, diluted exhaust is continuously analyzed for THC using a 

heated sample line and analyzer; the other gaseous emissions (CH4, CO, CO2, N2O, and 

NOX) are collected continuously for analysis as in §86.127(b). For methanol- and 

ethanol-fueled vehicles, THC, methanol, formaldehyde, CO, CO2, CH4, N2O, and NOX

are collected continuously for analysis as in §86.127(b). Additionally, for ethanol-fueled 

vehicles, ethanol and acetaldehyde are collected continuously for analysis as in 

§86.127(b). THC, methanol, ethanol, acetaldehyde, and formaldehyde are collected 

using heated sample lines, and a heated FID is used for THC analyses. Simultaneous with 

the gaseous exhaust collection and analysis, particulates from a proportional part of the 

diluted exhaust are collected continuously on a filter. The mass of particulate is 

determined by the procedure described in §86.139. This testing requires a dilution tunnel 

as well as the constant volume sampler. 

(d) The evaporative emission test (gasoline-fueled vehicles, methanol-fueled and 

gaseous-fueled vehicles) is designed to determine hydrocarbon and methanol evaporative 

emissions as a consequence of diurnal temperature fluctuation, urban driving and hot 

soaks following drives. It is associated with a series of events that a vehicle may 

experience and that may result in hydrocarbon and/or methanol vapor losses. The test 

procedure is designed to measure: 

(1) Diurnal emissions resulting from daily temperature changes (as well as 

relatively constant resting losses), measured by the enclosure technique (see §86.133); 

(2) Running losses resulting from a simulated trip performed on a chassis 

dynamometer, measured by the enclosure or point-source technique (see §86.134; this 

test is not required for gaseous-fueled vehicles); and 
651 

(3) Hot soak emissions, which result when the vehicle is parked and the hot 

engine is turned off, measured by the enclosure technique (see §86.138). 

(e) Fuel spitback emissions occur when a vehicle's fuel fill neck cannot 

accommodate dispensing rates. The vehicle test for spitback consists of a short drive 

followed immediately by a complete refueling event. This test is not required for 

gaseous-fueled vehicles. 

(f) The element of the SFTP for exhaust emissions related to aggressive driving 

(US06) is designed to determine gaseous THC, NMHC, CO, CO2, CH4, and 

NOXemissions from gasoline-fueled or diesel-fueled vehicles (see §86.158–00 

Supplemental test procedures; overview, and §86.159–00 Exhaust emission test 

procedures for US06 emissions). The test cycle simulates urban driving speeds and 

accelerations that are not represented by the FTP Urban Dynamometer Driving Schedule 

simulated trips discussed in paragraph (b) of this section. The test consists of vehicle 

operation on a chassis dynamometer through a specified driving cycle (see paragraph (g), 

US06 Dynamometer Driving Schedule, of appendix I to this part). A proportional part of 

the diluted exhaust is collected continuously for subsequent analysis, using a constant 

volume (variable dilution) sampler or critical flow venturi sampler. 

(g)(1) The element of the SFTP related to the increased exhaust emissions caused 

by air conditioning operation (SC03) is designed to determine gaseous THC, NMHC, 

CO, CO2, CH4, and NOXemissions from gasoline-fueled or diesel fueled vehicles related 

to air conditioning use (see §86.158–00 Supplemental federal test procedures; overview 

and §86.160–00 Exhaust emission test procedure for SC03 emissions). The test cycle 

simulates urban driving behavior with the air conditioner operating. The test consists of 

engine startups and vehicle operation on a chassis dynamometer through specified 

driving cycles (see paragraph (h), SC03 Dynamometer Driving Schedule, of appendix I to 

this part). A proportional part of the diluted exhaust is collected continuously for 

subsequent analysis, using a constant volume (variable dilution) sampler or critical flow 

venturi sampler. The testing sequence includes an approved preconditioning cycle, a 10 

minute soak with the engine turned off, and the SC03 cycle with measured exhaust 

emissions. 

(2) The SC03 air conditioning test is conducted with the air conditioner operating 

at specified settings and the ambient test conditions of: 

(i) Air temperature of 95 °F; 

(ii) 100 grains of water/pound of dry air (approximately 40 percent relative 

humidity); 

(iii) Simulated solar heat intensity of 850 W/m2 (see §86.161–00(d)); and 

(iv) air flow directed at the vehicle that will provide representative air conditioner 

system condenser cooling at all vehicle speeds (see §86.161–00(e)). 

(3) Manufacturers have the option of simulating air conditioning operation during 

testing at other ambient test conditions provided they can demonstrate that the vehicle tail 

pipe exhaust emissions are representative of the emissions that would result from the 

SC03 cycle test procedure and the ambient conditions of paragraph (g)(2) of this section. 

The Administrator has approved two optional air conditioning test simulation procedures 

AC1 and AC2 (see §86.162–00) for only the model years of 2000 through 2002. If a 
652 

manufacturer desires to conduct simulation SC03 testing for model year 2003 and 

beyond, the simulation test procedure must be approved in advance by the Administrator 

(see §§86.162–00 and 86.163–00). 

(h) Except in cases of component malfunction or failure, all emission control 

systems installed on or incorporated in a new motor vehicle shall be functioning during 

all procedures in this subpart. Maintenance to correct component malfunction or failure 

shall be authorized in accordance with §86.098–25 or §86.1834–01 as applicable. 

(i) Background concentrations are measured for all species for which emissions 

measurements are made. For exhaust testing, this requires sampling and analysis of the 

dilution air. For evaporative testing, this requires measuring initial concentrations. (When 

testing methanol-fueled vehicles, manufacturers may choose not to measure background 

concentrations of methanol and/or formaldehyde, and then assume that the concentrations 

are zero during calculations.) 

9. A new section 86.135-12 is added to read as follows: 

§86.135-12 Dynamometer procedure. 

(a) Overview. The dynamometer run consists of two tests, a “cold” start test, after 

a minimum 12-hour and a maximum 36-hour soak according to the provisions of 

§§86.132 and 86.133, and a “hot” start test following the “cold” start by 10 minutes. 

Engine startup (with all accessories turned off), operation over the UDDS and engine 

shutdown make a complete cold start test. Engine startup and operation over the first 505 

seconds of the driving schedule complete the hot start test. The exhaust emissions are 

diluted with ambient air in the dilution tunnel as shown in Figure B94–5 and Figure B94–

6. A dilution tunnel is not required for testing vehicles waived from the requirement to 

measure particulates. Six particulate samples are collected on filters for weighing; the 

first sample plus backup is collected during the first 505 seconds of the cold start test; the 

second sample plus backup is collected during the remainder of the cold start test 

(including shutdown); the third sample plus backup is collected during the hot start test. 

Continuous proportional samples of gaseous emissions are collected for analysis during 

each test phase. For gasoline-fueled, natural gas-fueled and liquefied petroleum gasfueled Otto-cycle vehicles, the composite samples collected in bags are analyzed for 

THC, CO, CO2, CH4, NOX, and, for 2015 and later model year vehicles, N2O. For 

petroleum-fueled diesel-cycle vehicles (optional for natural gas-fueled, liquefied 

petroleum gas-fueled and methanol-fueled diesel-cycle vehicles), THC is sampled and 

analyzed continuously according to the provisions of §86.110. Parallel samples of the 

dilution air are similarly analyzed for THC, CO, CO2, CH4, NOX, and, for 2015 and later 

model year vehicles, N2O. For natural gas-fueled, liquefied petroleum gas-fueled and 

methanol-fueled vehicles, bag samples are collected and analyzed for THC (if not 

sampled continuously), CO, CO2, CH4, NOX, and, for 2015 and later model year vehicles, 

N2O. For methanol-fueled vehicles, methanol and formaldehyde samples are taken for 

both exhaust emissions and dilution air (a single dilution air formaldehyde sample, 

covering the total test period may be collected). For ethanol-fueled vehicles, methanol, 

ethanol, acetaldehyde, and formaldehyde samples are taken for both exhaust emissions 
653 

and dilution air (a single dilution air formaldehyde sample, covering the total test period 

may be collected). Parallel bag samples of dilution air are analyzed for THC, CO, CO2, 

CH4, NOX, and, for 2015 and later model year vehicles, N2O. Methanol and 

formaldehyde samples may be omitted for 1990 through 1994 model years when a FID 

calibrated on methanol is used. 

(b) During dynamometer operation, a fixed speed cooling fan shall be positioned 

so as to direct cooling air to the vehicle in an appropriate manner with the engine 

compartment cover open. In the case of vehicles with front engine compartments, the fan 

shall be squarely positioned within 12 inches (30.5 centimeters) of the vehicle. In the case 

of vehicles with rear engine compartments (or if special designs make the above 

impractical), the cooling fan shall be placed in a position to provide sufficient air to 

maintain vehicle cooling. The fan capacity shall normally not exceed 5300 cfm (2.50 

m3

/sec). However, if the manufacturer can show that during field operation the vehicle 

receives additional cooling, and that such additional cooling is needed to provide a 

representative test, the fan capacity may be increased, additional fans used, variable 

speed fan(s) may be used, and/or the engine compartment cover may be closed, if 

approved in advance by the Administrator. For example, the hood may be closed to 

provide adequate air flow to an intercooler through a factory installed hood scoop. 

Additionally, the Administrator may conduct certification, fuel economy and in-use 

testing using the additional cooling set-up approved for a specific vehicle. 

(c) The vehicle speed as measured from the dynamometer rolls shall be used. A 

speed vs. time recording, as evidence of dynamometer test validity, shall be supplied on 

request of the Administrator. 

(d) Practice runs over the prescribed driving schedule may be performed at test 

point, provided an emission sample is not taken, for the purpose of finding the minimum 

throttle action to maintain the proper speed-time relationship, or to permit sampling 

system adjustment. Note: When using two-roll dynamometers a truer speed-time trace 

may be obtained by minimizing the rocking of the vehicle in the rolls; the rocking of the 

vehicle changes the tire rolling radius on each roll. This rocking may be minimized by 

restraining the vehicle horizontally (or nearly so) by using a cable and winch. 

(e) The drive wheel tires may be inflated up to a gauge pressure of 45 psi (310 

kPa) in order to prevent tire damage. The drive wheel tire pressure shall be reported with 

the test results. 

(f) lf the dynamometer has not been operated during the 2-hour period 

immediately preceding the test, it shall be warmed up for 15 minutes by operating at 30 

mph (48 kph) using a non-test vehicle or as recommended by the dynamometer 

manufacturer. 

(g) If the dynamometer horsepower must be adjusted manually, it shall be set 

within 1 hour prior to the exhaust emissions test phase. The test vehicle shall not be used 

to make this adjustment. Dynamometers using automatic control of preselectable power 

settings may be set anytime prior to the beginning of the emissions test. 

(h) The driving distance, as measured by counting the number of dynamometer 

roll or shaft revolutions, shall be determined for the transient cold start, stabilized cold 
654 

start, and transient hot start phases of the test. The revolutions shall be measured on the 

same roll or shaft used for measuring the vehicle's speed. 

(i) Four-wheel drive and all-wheel drive vehicles may be tested either in a fourwheel drive or a two-wheel drive mode of operation. In order to test in the two-wheel 

drive mode, four-wheel drive and all-wheel drive vehicles may have one set of drive 

wheels disengaged; four-wheel and all-wheel drive vehicles which can be shifted to a 

two-wheel mode by the driver may be tested in a two-wheel drive mode of operation. 

10. A new §86.165-12 is added to subpart B to read as follows: 

§86.165-12 Air conditioning idle test procedure. 

(a) Applicability. This section describes procedures for determining air 

conditioning-related CO2 emissions from light-duty vehicles, light-duty trucks, and 

medium-duty passenger vehicles. The results of this test are used to qualify for air 

conditioning efficiency CO2 credits according to §86.1866-12(c). 

(b) Overview. The test consists of a brief period to stabilize the vehicle at idle, 

followed by a ten-minute period at idle when CO2 emissions are measured without any 

air conditioning systems operating, followed by a ten-minute period at idle when CO2

emissions are measured with the air conditioning system operating. This test is designed 

to determine the air conditioning-related CO2 emission value, in grams per minute. If 

engine stalling occurs during cycle operation, follow the provisions of §86.136–90 to 

restart the test. Measurement instruments must meet the specifications described in this 

subpart. 

(c) Test cell ambient conditions. 

(1) Ambient humidity within the test cell during all phases of the test sequence 

shall be controlled to an average of 50 ± 5 grains of water/pound of dry air. 

(2) Ambient air temperature within the test cell during all phases of the test 

sequence shall be controlled to 75 ± 2 °F on average and 75 ± 5 °F as an instantaneous 

measurement. Air temperature shall be recorded continuously at a minimum of 30 

second intervals. 

(d) Test sequence. 

(1) Connect the vehicle exhaust system to the raw sampling location or dilution 

stage according to the provisions of this subpart. For dilution systems, dilute the exhaust 

as described in this subpart. Continuous sampling systems must meet the specifications 

provided in this subpart. 

(2) Test the vehicle in a fully warmed-up condition. If the vehicle has soaked for 

two hours or less since the last exhaust test element, preconditioning may consist of a 505 

Cycle, 866 Cycle, US06, or SC03, as these terms are defined in §86.1803-01, or a 

highway fuel economy test procedure, as defined in §600.002-08 of this chapter. For soak 

periods longer than two hours, precondition the vehicle using one full Urban 

Dynamometer Driving Schedule. Ensure that the vehicle has stabilized at test cell 

ambient conditions such that the vehicle interior temperature is not substantially different 

from the external test cell temperature. Windows may be opened during preconditioning 

to achieve this stabilization. 
655 

(3) Immediately after the preconditioning, turn off any cooling fans, if present, 

close the vehicle’s hood, fully close all the vehicle’s windows, ensure that all the 

vehicle’s air conditioning systems are set to full off, start the CO2 sampling system, and 

then idle the vehicle for not less than 1 minute and not more than 5 minutes to achieve 

normal and stable idle operation. 

(4) Measure and record the continuous CO2 concentration for 600 seconds. 

Measure the CO2 concentration continuously using raw or dilute sampling procedures. 

Multiply this concentration by the continuous (raw or dilute) flow rate at the emission 

sampling location to determine the CO2 flow rate. Calculate the CO2 cumulative flow rate 

continuously over the test interval. This cumulative value is the total mass of the emitted 

CO2. 

(5) Within 60 seconds after completing the measurement described in paragraph 

(d)(4) of this section, turn on the vehicle’s air conditioning system. Set automatic air 

conditioning systems to a temperature 9 °F (5 °C) below the ambient temperature of the 

test cell. Set manual air conditioning systems to maximum cooling with recirculation 

turned off, except that recirculation shall be enabled if the air conditioning system 

automatically defaults to a recirculation mode when set to maximum cooling. Continue 

idling the vehicle while measuring and recording the continuous CO2 concentration for 

600 seconds as described in paragraph (d)(4) of this section. Air conditioning systems 

with automatic temperature controls are finished with the test after this 600 second idle 

period. Manually controlled air conditioning systems must complete one additional idle 

period described in paragraph (d)(6) of this section. 

(6) This paragraph (d)(6) applies only to manually controlled air conditioning 

systems. Within 60 seconds after completing the measurement described in paragraph 

(d)(5) of this section, leave the vehicle’s air conditioning system on and set as described 

in paragraph (d)(5) of this section but set the fan speed to the lowest setting that continues 

to provide air flow. Recirculation shall be turned off except that if the system defaults to 

a recirculation mode when set to maximum cooling and maintains recirculation with the 

low fan speed, then recirculation shall continue to be enabled. After the fan speed has 

been set, continue idling the vehicle while measuring and recording the continuous CO2

concentration for a total of 600 seconds as described in paragraph (d)(4) of this section. 

(e) Calculations. (1) For the measurement with no air conditioning, calculate the 

CO2 emissions (in grams per minute) by dividing the total mass of CO2 from paragraph 

(d)(4) of this section by 10.0 (the duration in minutes for which CO2 is measured). 

Round this result to the nearest tenth of a gram per minute. 

(2)(i) For the measurement with air conditioning in operation for automatic air 

conditioning systems, calculate the CO2 emissions (in grams per minute) by dividing the 

total mass of CO2 from paragraph (d)(5) of this section by 10.0. Round this result to the 

nearest tenth of a gram per minute. 

(ii) For the measurement with air conditioning in operation for manually 

controlled air conditioning systems, calculate the CO2 emissions (in grams per minute) by 

summing the total mass of CO2 from paragraphs (d)(5) and (d)(6) of this section and 

dividing by 20.0. Round this result to the nearest tenth of a gram per minute. 
656 

(3) Calculate the increased CO2 emissions due to air conditioning (in grams per 

minute) by subtracting the results of paragraph (e)(1) of this section from the results of 

paragraph (e)(2)(i) or (ii) of this section, whichever is applicable. 

(f) The Administrator may prescribe procedures other than those in this section 

for air conditioning systems and/or vehicles that may not be susceptible to satisfactory 

testing by the procedures and methods in this section. For example, the Administrator 

may prescribe alternative air conditioning system settings for systems with controls that 

are not able to meet the requirements in this section. 

11. A new §86.166-12 is added to subpart B to read as follows: 

§86.166-12 Method for calculating emissions due to air conditioning leakage.

This section describes procedures used to determine a refrigerant leakage rate 

from vehicle-based air conditioning units. The results of this test are used to determine air 

conditioning leakage credits according to §86.1866-12(b). 

(a) Emission totals. Calculate an annual rate of refrigerant leakage from an air 

conditioning system using the following equation: 

Grams/YRTOT = Grams/YRRP + Grams/YRSP + Grams/YRFH + Grams/YRMC + 

Grams/YRC – Grams/YRCREDIT

Where: 

Grams/YRTOT = Total air conditioning system emission rate in grams per year and 

rounded to the nearest tenth of a gram per year. 

Grams/YRRP = Emission rate for rigid pipe connections as described in paragraph 

(b) of this section. 

Grams/YRSP = Emission rate for service ports and refrigerant control devices as 

described in paragraph (c) of this section. 

Grams/YRFH = Emission rate for flexible hoses as described in paragraph (d) of 

this section. 

Grams/YRMC = Emission rate for heat exchangers, mufflers, receiver/driers, and 

accumulators as described in paragraph (e) of this section. 

Grams/YRC = Emission rate for compressors as described in paragraph (f) of this 

section. 

Grams/YRCREDIT = Leakage monitoring credit, as applicable, from paragraph (g) 

of this section. 

(b) Fittings. Determine the grams per year emission rate for rigid pipe 

connections using the following equation: 

Grams/YRRP = 0.00522 × [(125 × SO) + (75 × SCO) + (50 × MO) + (10 × SW) + 

(5 × SWO) + (MG)] 

Where: 

Grams/YRRP = Total emission rate for rigid pipe connections in grams per year. 

SO = The number of single O-ring connections. 

SCO = The number of single captured O-ring connections. 

MO = The number of multiple O-ring connections. 

SW = The number of seal washer connections. 
657 

SWO = The number of seal washer with O-ring connections. 

MG = The number of metal gasket connections. 

(c) Service ports and refrigerant control devices. Determine the grams per year 

emission rate for service ports and refrigerant control devices using the following 

equation: 

Grams/YRSP = (0.3 × HSSP × 0.522) + (0.2 × LSSP × 0.522) + (0.2 × STV × 

0.522) + (0.2 × TXV × 0.522) 

Where: 

Grams/YRSP = The emission rate for service ports and refrigerant control devices, 

in grams per year. 

HSSP = The number of high side service ports. 

LSSP = The number of low side service ports. 

STV = The total number of switches, transducers, and pressure relief valves. 

TXV = The number of TXV refrigerant control devices. 

(d) Flexible hoses. Determine the permeation emission rate in grams per year for 

each segment of flexible hose using the following equation, and then sum the values for 

each hose in the system to calculate a total emission rate for the system: 

Grams/YRFH = 0.00522 × (3.14159 × ID × L × ER) 

Where: 

Grams/YRFH = Emission rate for a segment of flexible hose in grams per year. 

ID = Inner diameter of hose, in millimeters. 

L = Length of hose, in millimeters. 

ER = Emission rate per unit internal surface area of the hose, in g/mm2

. Select the 

appropriate value from the following table: 

Material/configuration 

ER 

High-pressure 

side 

Low-pressure 

side 

All rubber hose 0.0216 0.0144 

Standard barrier or veneer hose 0.0054 0.0036 

Ultra-low permeation barrier or veneer hose 0.00225 0.00167 

(e) Heat exchangers, mufflers, receiver/driers, and accumulators. Use an 

emission rate of 0.261 grams per year as a combined value for all heat exchangers, 

mufflers, receiver/driers, and accumulators (Grams/YRMC). 

(f) Compressors. Determine the emission rate for compressors using the 

following equation, except that the final term in the equation (“1500/SSL”) is not 

applicable to electric (or semi-hermetic) compressors: 

Grams/YRC = 0.00522 × [(300 × OHS) + (200 × MHS) + (150 × FAP) + (100 × 

GHS) + (1500/SSL)] 

Where: 

Grams/YRC = The emission rate for the compressors in the air conditioning 

system, in grams per year. 

OHS = The number of O-ring housing seals. 
658 

MHS = The number of molded housing seals. 

FAP = The number of fitting adapter plates. 

GHS = The number of gasket housing seals. 

SSL = The number of lips on shaft seal (for belt-driven compressors only). 

(g) Leakage monitoring credits. Electronic monitoring systems that provide 

indication of a refrigerant loss to the operator through an interior driver information 

display or an air conditioning-specific malfunction indicator when the air conditioning 

system has lost 40 percent of its charge capacity shall use a credit of 1 g/yr. 

(h) Definitions. The following definitions apply to this section: 

(1) All rubber hose means a Type A or Type B hose as defined by SAE J2064 

with a permeation rate not greater than 15 kg/m2

/year when tested according to SAE 

J2064. SAE J2064 is incorporated by reference; see §86.1. 

(2) Standard barrier or veneer hose means a Type C, D, E, or F hose as defined 

by SAE J2064 with a permeation rate not greater than 5 kg/m2

/year when tested 

according to SAE J2064. SAE J2064 is incorporated by reference; see §86.1. 

(3) Ultra-low permeation barrier or veneer hose means a hose with a permeation 

rate not greater than 1.5 kg/m2

/year when tested according to SAE J2064. SAE J2064 is 

incorporated by reference; see §86.1. 

12. A new §86.167-12 is added to subpart B to read as follows: 

§86.167-12 N2O measurement devices. 

(a) General component requirements. We recommend that you use an analyzer 

that meets the specifications in Table 1 of 40 CFR 1065.205. Note that your system must 

meet the linearity verification in 40 CFR 1065.307. 

(b) Instrument types. You may use any of the following analyzers to measure 

N2O: 

(1) Nondispersive infra-red (NDIR) analyzer. You may use an NDIR analyzer that 

has compensation algorithms that are functions of other gaseous measurements and the 

engine’s known or assumed fuel properties. The target value for any compensation 

algorithm is 0.0 % (that is, no bias high and no bias low), regardless of the 

uncompensated signal’s bias. 

(2) Fourier transform infra-red (FTIR) analyzer. You may use an FTIR analyzer 

that has compensation algorithms that are functions of other gaseous measurements and 

the engine’s known or assumed fuel properties. The target value for any compensation 

algorithm is 0.0 % (that is, no bias high and no bias low), regardless of the 

uncompensated signal’s bias. Use EPA Test Method 320 “Measurement of Vapor Phase 

Organic and Inorganic Emissions by Extractive Fourier Transform Infrared (FTIR) 

Spectroscopy” for spectral interpretation (see 40 CFR Part 63 Appendix A). 

(3) Photoacoustic analyzer. You may use a photoacoustic analyzer that has 

compensation algorithms that are functions of other gaseous measurements. The target 

value for any compensation algorithm is 0.0 % (that is, no bias high and no bias low), 

regardless of the uncompensated signal’s bias. Use an optical wheel configuration that 

gives analytical priority to measurement of the least stable components in the sample. 
659 

Select a sample integration time of at least 5 seconds. Take into account sample chamber 

and sample line volumes when determining flush times for your instrument. 

(4) Gas chromatograph (GC) analyzer. You may use a gas chromatograph with 

Electron Capture Detector (ECD) to measure N2O concentrations of diluted exhaust for 

batch sampling. You may use a packed or porous layer open tubular (PLOT) column 

phase of suitable polarity and length to achieve adequate resolution of the N2O peak for 

analysis. Examples of acceptable columns are a PLOT column consisting of bonded 

polystyrene-divinylbenzene or a Porapack Q packed column. Take the column 

temperature profile and carrier gas selection into consideration when setting up your 

method to achieve adequate N2O peak resolution. 

(c) Interference validation. Perform interference validation for NDIR, FTIR, and 

Photoacoustic analyzers using the procedures of §86.168-12 as follows: 

(1) Certain interference gases can positively interfere with these analyzers by 

causing a response similar to N2O as follows: 

(i) The interference gases for NDIR analyzers are CO, CO2, H2O, CH4 and SO2. 

Note that interference species, with the exception of H2O, are dependent on the N2O 

infrared absorption band chosen by the instrument manufacturer and should be 

determined independently for each analyzer. 

(ii) Use good engineering judgment to determine interference gases for FTIR. 

Note that interference species, with the exception of H2O, are dependent on the N2O 

infrared absorption band chosen by the instrument manufacturer and should be 

determined independently for each analyzer. 

(iii) The interference gases for photoacoustic analyzers are CO, CO2, and H2O. 

(2) Analyzers must have combined interference that is within (0.0 ± 1.0) 

mol/mol. We strongly recommend a lower interference that is within (0.0 ± 0.5) 

mol/. 

13. A new §86.168-12 is added to subpart B to read as follows: 

§86.168-12 Interference verification for N2O analyzers. 

(a) Scope and frequency. See 40 CFR 1065.275 to determine whether you need to 

verify the amount of interference after initial analyzer installation and after major 

maintenance. 

(b) Measurement principles. Interference gasses can positively interfere with 

certain analyzers by causing a response similar to N2O. If the analyzer uses 

compensation algorithms that utilize measurements of other gases to meet this 

interference verification, simultaneously conduct these other measurements to test the 

compensation algorithms during the analyzer interference verification. 

(c) System requirements. See 40 CFR 1065.275 for system requirements related 

to allowable interference levels. 

(d) Procedure. Perform the interference verification as follows: 

(1) Start, operate, zero, and span the N2O FTIR analyzer as you would before an 

emission test. If the sample is passed through a dryer during emission testing, you may 

run this verification test with the dryer if it meets the requirements of 40 CFR 1065.342. 
660 

Operate the dryer at the same conditions as you will for an emission test. You may also 

run this verification test without the sample dryer. 

(2) Create a humidified test gas by bubbling a multi component span gas that 

incorporates the target interference species and meets the specifications in 40 CFR 

1065.750 through distilled water in a sealed vessel. If the sample is not passed through a 

dryer during emission testing, control the vessel temperature to generate an H2O level at 

least as high as the maximum expected during emission testing. If the sample is passed 

through a dryer during emission testing, control the vessel temperature to generate an 

H2O level at least as high as the level determined in 40 CFR 1065.145(e)(2) for that 

dryer. Use interference span gas concentrations that are at least as high as the maximum 

expected during testing. 

(3) Introduce the humidified interference test gas into the sample system. You 

may introduce it downstream of any sample dryer, if one is used during testing. 

(4) If the sample is not passed through a dryer during this verification test, 

measure the water mole fraction, xH2O, of the humidified interference test gas as close as 

possible to the inlet of the analyzer. For example, measure dewpoint, Tdew, and absolute 

pressure, ptotal, to calculate xH2O. Verify that the water content meets the requirement in 

paragraph (d)(2) of this section. If the sample is passed through a dryer during this 

verification test, you must verify that the water content of the humidified test gas 

downstream of the vessel meets the requirement in paragraph (d)(2) of this section based 

on either direct measurement of the water content (e.g., dewpoint and pressure) or an 

estimate based on the vessel pressure and temperature. Use good engineering judgment 

to estimate the water content. For example, you may use previous direct measurements 

of water content to verify the vessel’s level of saturation. 

(5) If a sample dryer is not used in this verification test, use good engineering 

judgment to prevent condensation in the transfer lines, fittings, or valves from the point 

where xH2O is measured to the analyzer. We recommend that you design your system so 

that the wall temperatures in the transfer lines, fittings, and valves from the point where 

xH2O is measured to the analyzer are at least 5 oC above the local sample gas dewpoint. 

(6) Allow time for the analyzer response to stabilize. Stabilization time may 

include time to purge the transfer line and to account for analyzer response. 

(7) While the analyzer measures the sample’s concentration, record its output for 

30 seconds. Calculate the arithmetic mean of this data. 

(8) The analyzer meets the interference verification if the result of paragraph 

(d)(7) of this section meets the tolerance in 40 CFR 1065.275. 

(9) You may also run interference procedures separately for individual 

interference gases. If the interference gas levels used are higher than the maximum levels 

expected during testing, you may scale down each observed interference value by 

multiplying the observed interference by the ratio of the maximum expected 

concentration value to the actual value used during this procedure. You may run separate 

interference concentrations of H2O (down to 0.025 mol/mol H2O content) that are lower 

than the maximum levels expected during testing, but you must scale up the observed 

H2O interference by multiplying the observed interference by the ratio of the maximum 

expected H2O concentration value to the actual value used during this procedure. The 
661 

sum of the scaled interference values must meet the tolerance specified in 40 CFR 

1065.275. 
662 

Subpart S--[Amended] 

14. A new §86.1801-12 is added to read as follows: 

§86.1801-12 Applicability. 

(a) Applicability. Except as otherwise indicated, the provisions of this subpart 

apply to new light-duty vehicles, light-duty trucks, medium-duty passenger vehicles, and 

Otto-cycle complete heavy-duty vehicles, including multi-fueled, alternative fueled, 

hybrid electric, plug-in hybrid electric, and electric vehicles. These provisions also apply 

to new incomplete light-duty trucks below 8,500 Gross Vehicle Weight Rating. In cases 

where a provision applies only to a certain vehicle group based on its model year, vehicle 

class, motor fuel, engine type, or other distinguishing characteristics, the limited 

applicability is cited in the appropriate section of this subpart. 

(b) Aftermarket conversions. The provisions of this subpart apply to aftermarket 

conversion systems, aftermarket conversion installers, and aftermarket conversion 

certifiers, as those terms are defined in 40 CFR 85.502, of all model year light-duty 

vehicles, light-duty trucks, medium-duty passenger vehicles, and complete Otto-cycle 

heavy-duty vehicles. 

(c) Optional applicability. 

(1) [Reserved] 

(2) A manufacturer may request to certify any incomplete Otto-cycle heavy-duty 

vehicle of 14,000 pounds Gross Vehicle Weight Rating or less in accordance with the 

provisions for complete heavy-duty vehicles. Heavy-duty engine or heavy-duty vehicle 

provisions of subpart A of this part do not apply to such a vehicle. 

(3) [Reserved] 

(4) Upon preapproval by the Administrator, a manufacturer may optionally certify 

an aftermarket conversion of a complete heavy-duty vehicle greater than 10,000 pounds 

Gross Vehicle Weight Rating and of 14,000 pounds Gross Vehicle Weight Rating or less 

under the heavy-duty engine or heavy-duty vehicle provisions of subpart A of this part. 

Such preapproval will be granted only upon demonstration that chassis-based 

certification would be infeasible or unreasonable for the manufacturer to perform. 

(5) A manufacturer may optionally certify an aftermarket conversion of a 

complete heavy-duty vehicle greater than 10,000 pounds Gross Vehicle Weight Rating 

and of 14,000 pounds Gross Vehicle Weight Rating or less under the heavy-duty engine 

or heavy-duty vehicle provisions of subpart A of this part without advance approval from 

the Administrator if the vehicle was originally certified to the heavy-duty engine or 

heavy-duty vehicle provisions of subpart A of this part. 

(d) Small volume manufacturers. Special certification procedures are available for 

any manufacturer whose projected or actual combined sales in all states and territories of 

the United States of light-duty vehicles, light-duty trucks, heavy-duty vehicles, and 

heavy-duty engines in its product line (including all vehicles and engines imported under 

the provisions of 40 CFR 85.1505 and 85.1509) are fewer than 15,000 units for the model 

year in which the manufacturer seeks certification. The small volume manufacturer's 
663 

light-duty vehicle and light-duty truck certification procedures and described in 

§86.1838–01. 

(e) - (g) [Reserved] 

(h) Applicability of provisions of this subpart to light-duty vehicles, light-duty 

trucks, medium-duty passenger vehicles, and heavy-duty vehicles. Numerous sections in 

this subpart provide requirements or procedures applicable to a “vehicle” or “vehicles.” 

Unless otherwise specified or otherwise determined by the Administrator, the term 

“vehicle” or “vehicles” in those provisions apply equally to light-duty vehicles (LDVs), 

light-duty trucks (LDTs), medium-duty passenger vehicles (MDPVs), and heavy-duty 

vehicles (HDVs), as those terms are defined in §86.1803-01. 

(i) Applicability of provisions of this subpart to exhaust greenhouse gas 

emissions. Numerous sections in this subpart refer to requirements relating to “exhaust 

emissions.” Unless otherwise specified or otherwise determined by the Administrator, 

the term “exhaust emissions” refers at a minimum to emissions of all pollutants described 

by emission standards in this subpart, including carbon dioxide (CO2), nitrous oxide 

(N2O), and methane (CH4), starting with the 2012 model year. 

(j) Conditional exemption from greenhouse gas emission standards for small 

businesses. Businesses meeting the Small Business Administration size standard 

defining a small business as described in 13 CFR 121.201 are eligible for exemption from 

the greenhouse gas emission standards specified in §86.1818-12. Both U.S.-based and 

non-U.S.-based businesses are eligible for exemption under this paragraph (j). To be 

exempted from these provisions, businesses must submit a declaration to EPA containing 

a detailed written description of how the business qualifies as a small business under the 

provisions of 13 CFR 121.201. This declaration must be signed by a chief officer of the 

company, and must be made prior to each model year for which the small business status 

is requested. The declaration must be submitted to EPA at least 30 days prior to the 

introduction into commerce of any vehicles for each model year for which the small 

business status is requested, but not later than December of the calendar year prior to the 

model year for which exemption is requested. Exemption will be granted when EPA 

approves the small business declaration. The declaration of small business status must be 

sent to the Environmental Protection Agency at the following address: Director, 

Certification and Innovative Strategies Division, U.S. Environmental Protection Agency, 

2000 Traverwood Drive, Ann Arbor, Michigan 48105. 

(1) The following categories of businesses (with their associated NAICS codes) 

may apply for exemption based on the Small Business Administration size standards in 

13 CFR 121.201. 

(i) Vehicle manufacturers (NAICS code 336111). 

(ii) Independent commercial importers (NAICS codes 811111, 811112, 811198, 

423110, 424990, and 441120). 

(iii) Alternate fuel vehicle converters (NAICS codes 335312, 336312, 336322, 

336399, 454312, 485310, and 811198). 

(2) For purposes of determining the number of employees or annual sales revenue 

for small entities, the entity shall include the employees or annual sales revenue of any 
664 

subsidiary companies, any parent company, subsidiaries of the parent company in which 

the parent has a controlling interest, and any joint ventures. 

(3) An entity may use the provisions of this paragraph (j) only if it has primary 

responsibility for (A) designing and assembling the vehicles, (B) converting the vehicles, 

or (C) modifying the vehicles. 

(4) An entity may import vehicles under this paragraph (j) only if that entity has 

primary responsibility for designing and assembling, converting or modifying the subject 

vehicles. 

15. Section 86.1803-01 is amended as follows: 

a. By adding the definition for “Air conditioning idle test.” 

b. By adding the definition for “Air conditioning system.” 

c. By revising the definition for “Banking.” 

d. By adding the definition for “Base level.” 

e. By adding the definition for “Base tire.” 

f. By adding the definition for “Base vehicle.” 

g. By revising the definition for “Basic engine.” 

i. By adding the definition for “Carbon-related exhaust emissions.” 

j. By adding the definition for “Combined CO2.” 

k. By adding the definition for “Combined CREE.” 

l. By adding the definition for “Electric vehicle.” 

m. By revising the definition for “Engine code.” 

n. By adding the definition for “Ethanol fueled vehicle.” 

o. By revising the definition for “Flexible fuel vehicle.” 

p. By adding the definition for “Footprint.” 

q. By adding the definition for “Fuel cell.” 

r. By adding the definition for “Fuel cell electric vehicle.” 

s. By adding the definition for “Highway fuel economy test procedure.” 

t. By adding the definition for “Hybrid electric vehicle.” 

u. By adding the definition for “Interior volume index.” 

v. By adding the definition for “Motor vehicle.” 

w. By adding the definition for “Multi-fuel vehicle.” 

x. By adding the definition for “Petroleum equivalency factor.” 

y. By adding the definition for “Petroleum-equivalent fuel economy.” 

z. By adding the definition for “Petroleum powered accessory.” 

aa. By adding the definition for “Plug-in hybrid electric vehicle.” 

bb. By adding the definition for “Production volume.” 

cc. By revising the definition for “Round, rounded, or rounding.” 

dd. By adding the definition for “Subconfiguration.” 

ee. By adding the definition for “Track width.” 

ff. By revising the definition for “Transmission class.” 

gg. By revising the definition for “Transmission configuration.” 

hh. By adding the definition for “Wheelbase.” 
665 

§86.1803-01 Definitions. 

* * * * * 

 Air Conditioning Idle Test means the test procedure specified in §86.165-12. 

Air conditioning system means a unique combination of air conditioning and 

climate control components, including: compressor type (e.g., belt, gear, or electricdriven, or a combination of compressor drive mechanisms); compressor refrigerant 

capacity; the number and type of rigid pipe and flexible hose connections; the number of 

high side service ports; the number of low side service ports; the number of switches, 

transducers, and expansion valves; the number of TXV refrigerant control devices; the 

number and type of heat exchangers, mufflers, receiver/dryers, and accumulators; and the 

length and type of flexible hose (e.g., rubber, standard barrier or veneer, ultra-low 

permeation). 

* * * * * 

Banking means one of the following: 

(1) The retention of NOX emission credits for complete heavy-duty vehicles by the 

manufacturer generating the emission credits, for use in future model year certification 

programs as permitted by regulation. 

(2) The retention of cold temperature non-methane hydrocarbon (NMHC) 

emission credits for light-duty vehicles, light-duty trucks, and medium-duty passenger 

vehicles by the manufacturer generating the emission credits, for use in future model year 

certification programs as permitted by regulation. 

(3) The retention of NOX emission credits for light-duty vehicles, light-duty 

trucks, and medium-duty passenger vehicles for use in future model year certification 

programs as permitted by regulation. 

(4) The retention of CO2 emission credits for light-duty vehicles, light-duty 

trucks, and medium-duty passenger vehicles for use in future model year certification 

programs as permitted by regulation. 

Base level has the meaning given in §600.002-08 of this chapter. 

Base tire has the meaning given in §600.002-08 of this chapter. 

Base vehicle has the meaning given in §600.002-08 of this chapter. 

Basic engine has the meaning given in §600.002-08 of this chapter. 

* * * * * 

Carbon-related exhaust emissions (CREE) has the meaning given in §600.002-08 

of this chapter. 

* * * * * 

Combined CO2 means the CO2 value determined for a vehicle (or vehicles) by 

averaging the city and highway CO2 values, weighted 0.55 and 0.45 respectively. 

* * * * * 

Combined CREE means the CREE value determined for a vehicle (or vehicles) by 

averaging the city and highway fuel CREE values, weighted 0.55 and 0.45 respectively. 

* * * * * 

Electric vehicle means a motor vehicle that is powered solely by an electric motor 

drawing current from a rechargeable energy storage system, such as from storage 
666 

batteries or other portable electrical energy storage devices, including hydrogen fuel 

cells, provided that: 

(1) The vehicle is capable of drawing recharge energy from a source off the 

vehicle, such as residential electric service; and 

(2) The vehicle must be certified to the emission standards of Bin #1 of Table 

S04-1 in §86.1811-09(c)(6). 

(3) The vehicle does not have an onboard combustion engine/generator system as 

a means of providing electrical energy. 

* * * * * 

Engine code means a unique combination within a test group of displacement, 

fuel injection (or carburetor) calibration, choke calibration, distributor calibration, 

auxiliary emission control devices, and other engine and emission control system 

components specified by the Administrator. For electric vehicles, engine code means a 

unique combination of manufacturer, electric traction motor, motor configuration, motor 

controller, and energy storage device. 

* * * * * 

Ethanol-fueled vehicle means any motor vehicle or motor vehicle engine that is 

engineered and designed to be operated using ethanol fuel (i.e., a fuel that contains at 

least 50 percent ethanol (C2H5OH) by volume) as fuel. 

* * * * * 

Flexible fuel vehicle means any motor vehicle engineered and designed to be 

operated on a petroleum fuel, a methanol or ethanol fuel, or any mixture of the two. 

Methanol-fueled and ethanol-fueled vehicles that are only marginally functional when 

using gasoline (e.g., the engine has a drop in rated horsepower of more than 80 percent) 

are not flexible fuel vehicles. 

Footprint is 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) and 

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. 

Fuel cell means an electrochemical cell that produces electricity via the noncombustion reaction of a consumable fuel, typically hydrogen. 

Fuel cell electric vehicle means an electric vehicle propelled solely by an electric 

motor where energy for the motor is supplied by a fuel cell. 

* * * * * 

Highway Fuel Economy Test Procedure (HFET) has the meaning given in 

§600.002-08 of this chapter. 

* * * * * 

Hybrid electric vehicle (HEV) means a motor vehicle which draws propulsion 

energy from onboard sources of stored energy that are both an internal combustion 

engine or heat engine using consumable fuel, and a rechargeable energy storage system 

such as a battery, capacitor, hydraulic accumulator, or flywheel, where recharge energy 

for the energy storage system comes solely from sources on board the vehicle. 

* * * * * 

Interior volume index has the meaning given in §600.315-08 of this chapter. 
667 

* * * * * 

Motor vehicle has the meaning given in 40 CFR 85.1703. 

* * * * * 

Multi-fuel vehicle means any motor vehicle capable of operating on two or more 

different fuel types, either separately or simultaneously. 

* * * * * 

Petroleum equivalency factor means the value specified in 10 CFR 474.3(b), 

which incorporates the parameters listed in 49 U.S.C. 32904(a)(2)(B) and is used to 

calculate petroleum-equivalent fuel economy. 

Petroleum-equivalent fuel economy means the value, expressed in miles per 

gallon, that is calculated for an electric vehicle in accordance with 10 CFR 474.3(a), and 

reported to the Administrator of the Environmental Protection Agency for use in 

determining the vehicle manufacturer's corporate average fuel economy. 

* * * * * 

Petroleum-powered accessory means a vehicle accessory (e.g., a cabin heater, 

defroster, and/or air conditioner) that: 

(1) Uses gasoline or diesel fuel as its primary energy source; and 

(2) Meets the requirements for fuel, operation, and emissions in 40 CFR part 

88.104–94(g). 

Plug-in hybrid electric vehicle (PHEV) means a hybrid electric vehicle that has 

the capability to charge the battery from an off-vehicle electric source, such that the offvehicle source cannot be connected to the vehicle while the vehicle is in motion. 

* * * * * 

Production volume has the meaning given in §600.002-08 of this chapter. 

* * * * * 

Round, rounded or rounding means, unless otherwise specified, that numbers will 

be rounded according to ASTM-E29-93a, which is incorporated by reference in this part 

pursuant to §86.1. 

* * * * * 

Subconfiguration has the meaning given in §600.002-08 of this chapter.

* * * * * 

Track width is the lateral distance between the centerlines of the base tires at 

ground, including the camber angle. 

* * * * * 

Transmission class has the meaning given in §600.002-08 of this chapter. 

Transmission configuration has the meaning given in §600.002-08 of this chapter. 

* * * * * 

Wheelbase is the longitudinal distance between front and rear wheel centerlines. 

* * * * * 

16. A new section 86.1805-12 is added to read as follows: 

§86.1805-12 Useful life. 
668 

(a) Except as permitted under paragraph (b) of this section or required under 

paragraphs (c) and (d) of this section, the full useful life for all LDVs and LLDTs is a 

period of use of 10 years or 120,000 miles, whichever occurs first. The full useful life for 

all HLDTs, MDPVs, and complete heavy-duty vehicles is a period of 11 years or 120,000 

miles, whichever occurs first. These full useful life values apply to all exhaust, 

evaporative and refueling emission requirements except for standards which are specified 

to only be applicable at the time of certification. These full useful life requirements also 

apply to all air conditioning leakage credits, air conditioning efficiency credits, and other 

credit programs used by the manufacturer to comply with fleet average CO2 emission 

standards. 

(b) Manufacturers may elect to optionally certify a test group to the Tier 2 exhaust 

emission standards for 150,000 miles to gain additional NOX credits, as permitted in 

§86.1860–04(g), or to opt out of intermediate life standards as permitted in §86.1811–

04(c). In such cases, useful life is a period of use of 15 years or 150,000 miles, whichever 

occurs first, for all exhaust, evaporative and refueling emission requirements except for 

cold CO standards and standards which are applicable only at the time of certification. 

(c) Where intermediate useful life exhaust emission standards are applicable, such 

standards are applicable for five years or 50,000 miles, whichever occurs first. 

(d) Where cold CO standards are applicable, the useful life requirement for 

compliance with the cold CO standard only, is 5 years or 50,000 miles, whichever occurs 

first. 

17. Section 86.1806-05 is amended by revising paragraph (a)(1) to read as follows: 

§86.1806-05 On-board diagnostics for vehicles less than or equal to 14,000 pounds 

GVWR. 

(a) * * * 

(1) Except as provided by paragraph (a)(2) of this section, all light-duty vehicles, 

light-duty trucks and complete heavy-duty vehicles weighing 14,000 pounds GVWR or 

less (including MDPVs) must be equipped with an onboard diagnostic (OBD) system 

capable of monitoring all emission-related powertrain systems or components during the 

applicable useful life of the vehicle. All systems and components required to be 

monitored by these regulations must be evaluated periodically, but no less frequently than 

once per applicable certification test cycle as defined in paragraphs (a) and (d) of 

Appendix I of this part, or similar trip as approved by the Administrator. Emissions of 

CO2, CH4, and N2O are not required to be monitored by the OBD system. 

* * * * * 

18. Section 86.1809-10 is amended by revising paragraphs (d)(1) and (e) to read as 

follows: 

§86.1809-10 Prohibition of defeat devices. 

* * * * * 

(d) * * * 
669 

(1) The manufacturer must show to the satisfaction of the Administrator that the 

vehicle design does not incorporate strategies that unnecessarily reduce emission control 

effectiveness exhibited during the Federal Test Procedure or Supplemental Federal Test 

Procedure (FTP or SFTP), or, for 2012 and later model years, the Highway Fuel 

Economy Test Procedure as described in subpart B of 40 CFR part 600, or the Air 

Conditioning Idle Test as described in §86.165-12, when the vehicle is operated under 

conditions that may reasonably be expected to be encountered in normal operation and 

use. 

* * * * * 

 (e) For each test group the manufacturer must submit, with the Part II certification 

application, an engineering evaluation demonstrating to the satisfaction of the 

Administrator that a discontinuity in emissions of non-methane organic gases, carbon 

monoxide, carbon dioxide, oxides of nitrogen, nitrous oxide, methane, and formaldehyde 

measured on the Federal Test Procedure (subpart B of this part) and on the Highway Fuel 

Economy Test Procedure (subpart B of 40 CFR Part 600) does not occur in the 

temperature range of 20 to 86 °F. For diesel vehicles, the engineering evaluation must 

also include particulate emissions. 

19. Section 86.1810-09 is amended by revising paragraph (f) to read as follows: 

§86.1810-09 General standards; increase in emissions; unsafe condition; waivers. 

* * * * * 

(f) Altitude requirements. (1) All emission standards apply at low altitude 

conditions and at high altitude conditions, except for the following standards, which 

apply only at low altitude conditions: 

(i) The supplemental exhaust emission standards as described in §86.1811–04(f); 

(ii) The cold temperature NMHC emission standards as described in §86.1811–

10(g); 

(iii) The evaporative emission standards as described in §86.1811-09(e). 

(2) For vehicles that comply with the cold temperature NMHC standards 

described in §86.1811–10(g) and the CO2, N2O, and CH4 exhaust emission standards 

described in §86.1818–12, manufacturers must submit an engineering evaluation 

indicating that common calibration approaches are utilized at high altitudes. Any 

deviation from low altitude emission control practices must be included in the auxiliary 

emission control device (AECD) descriptions submitted at certification. Any AECD 

specific to high altitude must require engineering emission data for EPA evaluation to 

quantify any emission impact and validity of the AECD. 

* * * * * 

20. A new §86.1818-12 is added to read as follows: 

 §86.1818-12 Greenhouse gas emission standards for light-duty vehicles, light-duty 

trucks, and medium-duty passenger vehicles. 
670 

(a) Applicability. This section contains regulations implementing greenhouse gas 

emission standards for CO2, N2O, and CH4 applicable to all LDVs, LDTs and MDPVs. 

This section applies to 2012 and later model year LDVs, LDTs and MDPVs, including 

multi-fuel vehicles, vehicles fueled with alternative fuels, hybrid electric vehicles, plug-in 

hybrid electric vehicles, electric vehicles, and fuel cell electric vehicles. Unless otherwise 

specified, multi-fuel vehicles must comply with all requirements established for each 

consumed fuel. The provisions of this section also apply to aftermarket conversion 

systems, aftermarket conversion installers, and aftermarket conversion certifiers, as those 

terms are defined in 40 CFR 85.502, of all model year light-duty vehicles, light-duty 

trucks, and medium-duty passenger vehicles. Manufacturers that have submitted a small 

business declaration for a model year according to the requirements of §86.1801-12(j) for 

which approval has been granted by the Administrator are exempted from the emission 

standards in this section. Manufacturers that have submitted a small manufacturer 

declaration for a model year according to the requirements of paragraph (h) of this 

section for which approval has been granted by the Administrator are exempted from the 

emission standards in paragraphs (c) and (d) of this section for that model year. 

(b) Definitions. For the purposes of this section, the following definitions shall 

apply: 

(1) Passenger automobile means a motor vehicle that is a passenger automobile as 

that term is defined in 49 CFR 523.4. 

(2) Light truck means a motor vehicle that is a non-passenger automobile as that 

term is defined by the Department of Transportation in 49 CFR 523.5. 

(c) Fleet average CO2 standards for passenger automobiles and light trucks. (1) 

For a given individual model year’s production of vehicles, manufacturers must comply 

with a fleet average CO2 standard calculated according to the provisions of this paragraph 

(c). Manufacturers must calculate separate fleet average CO2 standards for their 

passenger automobile and the light truck fleets, as those terms are defined in this section. 

Each manufacturer’s fleet average CO2 standards determined in this paragraph (c) shall 

be expressed in whole grams per mile, in the model year specified as applicable. 

Manufacturers eligible for and choosing to participate in the Temporary Leadtime 

Allowance Alternative Standards for qualifying manufacturers specified in paragraph (e) 

of this section shall not include vehicles subject to the Temporary Leadtime Allowance 

Alternative Standards in the calculations of their primary passenger automobile or light 

truck standards determined in this paragraph (c). Manufacturers shall demonstrate 

compliance with the applicable standards according to the provisions of §86.1865-12. 

(2) Passenger automobiles. 

(i) Calculation of CO2 target values for passenger automobiles. A CO2 target 

value shall be determined for each passenger automobile as follows: 

(A) For passenger automobiles with a footprint of less than or equal to 41 square 

feet, the gram/mile CO2 target value shall be selected for the appropriate model year from 

the following table: 

Model Year CO2 Target 

Value 

(grams/mile) 
671 

2012 244.0 

2013 237.0 

2014 228.0 

2015 217.0 

2016 and later 206.0 

(B) For passenger automobiles with a footprint of greater than 56 square feet, the 

gram/mile CO2 target value shall be selected for the appropriate model year from the 

following table: 

Model Year CO2 Target 

Value 

(grams/mile) 

2012 315.0 

2013 307.0 

2014 299.0 

2015 288.0 

2016 and later 277.0 

(C) For passenger automobiles with a footprint that is greater than 41 square feet 

and less than or equal to 56 square feet, the gram/mile CO2 target value shall be 

calculated using the following equation and rounded to the nearest 0.1 grams/mile: 

Target CO2 = [ ] 4 .72 × f + b

Where: 

f is the vehicle footprint, as defined in §86.1803; and 

b is selected from the following table for the appropriate model year: 

Model Year b 

2012 50.5 

2013 43.3 

2014 34.8 

2015 23.4 

2016 and later 12.7 

 

(ii) Calculation of the fleet average CO2 standard for passenger automobiles. In 

each model year manufacturers must comply with the CO2 exhaust emission standard for 

their passenger automobile fleet, calculated for that model year as follows: 

(A) A CO2 target value shall be determined according to paragraph (c)(2)(i) of 

this section for each unique combination of model type and footprint value. 

(B) Each CO2 target value, determined for each unique combination of model 

type and footprint value, shall be multiplied by the total production of that model 

type/footprint combination for the appropriate model year. 

(C) The resulting products shall be summed, and that sum shall be divided by the 

total production of passenger automobiles in that model year. The result shall be rounded 
672 

to the nearest whole gram per mile. This result shall be the applicable fleet average CO2

standard for the manufacturer’s passenger automobile fleet. 

(3) Light trucks. 

(i) Calculation of CO2 target values for light trucks. A CO2 target value shall be 

determined for each light truck as follows: 

(A) For light trucks with a footprint of less than or equal to 41 square feet, the 

gram/mile CO2 target value shall be selected for the appropriate model year from the 

following table: 

Model Year CO2 Target 

Value 

(grams/mile) 

2012 294.0 

2013 284.0 

2014 275.0 

2015 261.0 

2016 and later 247.0 

(B) For light trucks with a footprint of greater than 66 square feet, the gram/mile 

CO2 target value shall be selected for the appropriate model year from the following 

table: 

Model Year CO2 Target 

Value 

(grams/mile) 

2012 395.0 

2013 385.0 

2014 376.0 

2015 362.0 

2016 and later 348.0 

(C) For light trucks with a footprint that is greater than 41 square feet and less 

than or equal to 66 square feet, the gram/mile CO2 target value shall be calculated using 

the following equation and rounded to the nearest 0.1 grams/mile: 

Target CO2 = ( ) 4.04× f + b

Where: 

f is the footprint, as defined in §86.1803; and 

b is selected from the following table for the appropriate model year: 
673 

Model Year b 

2012 128.6 

2013 118.7 

2014 109.4 

2015 95.1 

2016 and later 81.1 

(ii) Calculation of fleet average CO2 standards for light trucks. In each model 

year manufacturers must comply with the CO2 exhaust emission standard for their light 

truck fleet, calculated for that model year as follows: 

(A) A CO2 target value shall be determined according to paragraph (c)(3)(i) of 

this section for each unique combination of model type and footprint value. 

(B) Each CO2 target value, which represents a unique combination of model type 

and footprint value, shall be multiplied by the total production of that model 

type/footprint combination for the appropriate model year. 

(C) The resulting products shall be summed, and that sum shall be divided by the 

total production of light trucks in that model year. The result shall be rounded to the 

nearest whole gram per mile. This result shall be the applicable fleet average CO2

standard for the manufacturer’s light truck fleet. 

(d) In-use CO2 exhaust emission standards. The in-use exhaust CO2 emission 

standard shall be the combined city/highway carbon-related exhaust emission value 

calculated for the appropriate vehicle carline/subconfiguration according to the 

provisions of 40 CFR 600.113-08(g)(4) multiplied by 1.1 and rounded to the nearest 

whole gram per mile. For in-use vehicle carlines/subconfigurations for which a combined 

city/highway carbon-related exhaust emission value was not determined under 40 CFR 

600.113(g)(4), the in-use exhaust CO2 emission standard shall be the combined 

city/highway carbon-related exhaust emission value calculated according to the 

provisions of 40 CFR 600.208 for the vehicle model type (except that total model year 

production data shall be used instead of sales projections) multiplied by 1.1 and rounded 

to the nearest whole gram per mile. For vehicles that are capable of operating on 

multiple fuels, including but not limited to alcohol dual fuel, natural gas dual fuel and 

plug-in hybrid electric vehicles, a separate in-use standard shall be determined for each 

fuel that the vehicle is capable of operating on. These standards apply to in-use testing 

performed by the manufacturer pursuant to regulations at §86.1845–04 and 86.1846–01 

and to in-use testing performed by EPA. 

(e) Temporary Lead Time Allowance Alternative Standards. (1) The interim fleet 

average CO2 standards in this paragraph (e) are optionally applicable to each qualifying 

manufacturer as follows: 

(i) A qualifying manufacturer is a manufacturer with sales of 2009 model year 

combined passenger automobiles and light trucks in the United States of greater than zero 

and less than 400,000 vehicles. 

(A) If a manufacturer produced less than 400,000 but more than zero 2009 model 

year combined passenger automobiles and light trucks for sale in the United States while 

under the control of another manufacturer, where those 2009 model year passenger 
674 

automobiles and light trucks bore the brand of the producing manufacturer, and where the 

producing manufacturer became independent no later than December 31, 2010, the 

producing manufacturer is a qualifying manufacturer. 

(B) In the case where two or more qualifying manufacturers combine as the result 

of merger or the purchase of 50 percent or more of one or more companies by another 

company, and if the combined 2009 model year U.S. production of the merged or 

combined companies is less than 400,000 but more than zero (combined passenger 

automobiles and light trucks), the corporate entity formed by the combination of two or 

more qualifying manufacturers shall continue to be a qualifying manufacturer. The total 

number of vehicles that the corporate entity is allowed to include under the Temporary 

Leadtime Allowance Alternative Standards shall be determined by paragraph (e)(2) or 

(e)(3) of this section where sales is the total combined 2009 model year U.S. production 

of all of the merged or combined companies. Vehicles produced by the companies that 

combined by merger/acquisition to form the corporate entity that were subject to the 

Temporary Leadtime Allowance Alternative Standards in paragraph (e)(4) of this section 

prior to the merger/acquisition shall be combined to determine the remaining number of 

vehicles that the corporate entity may include under the Temporary Leadtime Allowance 

Alternative Standards in this paragraph (e). 

 (C) In the case where two or more manufacturers combine as the result of merger 

or the purchase of 50 percent or more of one or more companies by another company, 

and if the combined 2009 model year U.S. production of the merged or combined 

companies is equal to or greater than 400,000 (combined passenger automobiles and light 

trucks), the new corporate entity formed by the combination of two or more 

manufacturers is not a qualifying manufacturer. Such a manufacturer shall meet the 

emission standards in paragraph (c) of this section beginning with the model year that is 

numerically two years greater than the calendar year in which the merger/acquisition(s) 

took place. 

(ii) For the purposes of making the determination in paragraph (e)(1)(i) of this 

section, “manufacturer” shall mean that term as defined at 49 CFR 531.4 and as that 

definition was applied to the 2009 model year for the purpose of determining compliance 

with the 2009 corporate average fuel economy standards at 49 CFR parts 531 and 533. 

(iii) A qualifying manufacturer may not use these Temporary Leadtime 

Allowance Alternative Standards until they have used all available banked credits and/or 

credits available for transfer accrued under [insert reference]. A qualifying manufacturer 

with a net positive credit balance calculated under [insert reference] in any model year 

after considering all available credits either generated, carried forward from a prior model 

year, transferred from other averaging sets, or obtained from other manufacturers, may 

not use these Temporary Leadtime Allowance Alternative Standards in such model year. 

(2) Qualifying manufacturers may select any combination of 2012 through 2015 

model year passenger automobiles and/or light trucks to include under the Temporary 

Leadtime Allowance Alternative Standards determined in this paragraph (e) up to a 

cumulative total of 100,000 vehicles. Vehicles selected to comply with these standards 

shall not be included in the calculations of the manufacturer’s fleet average standards 

under paragraph (c) of this section. 
675 

(3) Qualifying manufacturers with sales of 2009 model year combined passenger 

automobiles and light trucks in the United States of greater than zero and less than 50,000 

vehicles may select any combination of 2012 through 2015 model year passenger 

automobiles and/or light trucks to include under the Temporary Leadtime Allowance 

Alternative Standards determined in this paragraph (e) up to a cumulative total of 

200,000 vehicles, and additionally may select up to 50,000 2016 model year vehicles to 

include under the Temporary Leadtime Allowance Alternative Standards determined in 

this paragraph (e). To be eligible for the provisions of this paragraph (e)(3) qualifying 

manufacturers must provide annual documentation of good-faith efforts made by the 

manufacturer to purchase credits from other manufacturers. Without such 

documentation, the manufacturer may use the Temporary Leadtime Allowance 

Alternative Standards according to the provisions of paragraph (e)(2) of this section, and 

the provisions of this paragraph (e)(3) shall not apply. Vehicles selected to comply with 

these standards shall not be included in the calculations of the manufacturer’s fleet 

average standards under paragraph (c) of this section. 

(4) To calculate the applicable Temporary Leadtime Allowance Alternative 

Standards, qualifying manufacturers shall determine the fleet average standard separately 

for the passenger automobiles and light trucks selected by the manufacturer to be subject 

to the Temporary Leadtime Allowance Alternative Standards, subject to the limitations 

expressed in paragraphs (e)(1) through (3) of this section. 

(i) The Temporary Leadtime Allowance Alternative Standard applicable to 

qualified passenger automobiles shall be the standard calculated using the provisions of 

paragraph (c)(2)(ii) of this section for the appropriate model year multiplied by 1.25 and 

rounded to the nearest whole gram per mile. For the purposes of applying paragraph 

(c)(2)(ii) of this section to determine the standard, the passenger automobile fleet shall be 

limited to those passenger automobiles subject to the Temporary Leadtime Allowance 

Alternative Standard. 

(ii) The Temporary Leadtime Allowance Alternative Standard applicable to 

qualified light trucks shall be the standard calculated using the provisions of paragraph 

(c)(3)(ii) of this section for the appropriate model year multiplied by 1.25 and rounded to 

the nearest whole gram per mile. For the purposes of applying paragraph (c)(3)(ii) of this 

section to determine the standard, the light truck fleet shall be limited to those light trucks 

subject to the Temporary Leadtime Allowance Alternative Standard. 

(5) Manufacturers choosing to optionally apply these standards are subject to the 

restrictions on credit banking and trading specified in §86.1865-12. 

(f) Nitrous oxide (N2O) and methane (CH4) exhaust emission standards for 

passenger automobiles and light trucks. Each manufacturer’s fleet of combined 

passenger automobile and light trucks must comply with N2O and CH4 standards using 

either the provisions of paragraph (f)(1) of this section or the provisions of paragraph 

(f)(2) of this section. The manufacturer may not use the provisions of both paragraphs 

(f)(1) and (f)(2) of this section in a model year. For example, a manufacturer may not use 

the provisions of paragraph (f)(1) of this section for their passenger automobile fleet and 

the provisions of paragraph (f)(2) for their light truck fleet in the same model year. 

(1) Standards applicable to each test group. 
676 

(i) Exhaust emissions of nitrous oxide (N2O) shall not exceed 0.010 grams per 

mile at full useful life, as measured according to the Federal Test Procedure (FTP) 

described in subpart B of this part. 

(ii) Exhaust emissions of methane (CH4) shall not exceed 0.030 grams per mile at 

full useful life, as measured according to the Federal Test Procedure (FTP) described in 

subpart B of this part. 

(2) Fleet averaging option. Manufacturers may elect to not meet the emission 

standards in paragraph (f)(1) of this section. Manufacturers making this election shall 

include N2O and CH4 emissions in the determination of their fleet average carbon-related 

exhaust emissions, as calculated in subpart F of part 600 of this title. Manufacturers 

using this option must include both N2O and CH4 full useful life values in the fleet 

average calculations for passenger automobiles and light trucks. Use of this option will 

account for N2O and CH4 emissions within the carbon-related exhaust emission value 

determined for each model type according to the provisions 40 CFR Part 600. This option 

requires the determination of full useful life emission values for both the Federal Test 

Procedure and the Highway Fuel Economy Test. 

 (h) Deferral of standards for qualifying small manufacturers. Qualifying small 

manufacturers as described in this paragraph (h) may optionally request deferral from 

compliance with the emission standards described in paragraphs (c) and (d) of this 

section. 

(1) Eligibility requirements. Eligibility as determined in this paragraph (h) shall 

be based on the total sales in the states and territories of the United States of combined 

passenger automobiles and light trucks. For the purpose of determining eligibility the 

sales of related companies shall be aggregated according to the provisions of §86.1838-

01(b)(3). 

(i) A manufacturer with 2008 or 2009 model year sales of more than zero and 

fewer than 5,000 is eligible for optional deferral of the greenhouse gas emission standards 

described in paragraphs (c) and (d) of this section. 

(ii) A manufacturer with 2008 or 2009 model year sales of more than zero and 

fewer than 5,000 while under the control of another manufacturer, where those 2008 or 

2009 model year vehicles bore the brand of the producing manufacturer but were sold by 

or otherwise under the control of another manufacturer, and where the manufacturer 

producing the vehicles became independent no later than December 31, 2010, is eligible 

for optional deferral of the greenhouse gas emission standards described in paragraphs (c) 

and (d) of this section. 

(iii) If a manufacturer’s average sales for three consecutive model years exceeds 

4999, and if the increase in sales is the result of corporate acquisitions, mergers, or 

purchase by another manufacturer, the manufacturer shall comply with the emission 

standards described in paragraphs (c), (d), and (e) of this section, as applicable, beginning 

with the second model year after the last year of the three consecutive model years. 

(iv) If a manufacturer’s average sales for three consecutive model years exceeds 

4999 and is less than 50,000, and if the increase in sales is solely the result of the 

manufacturer’s expansion in vehicle production, the manufacturer shall comply with the 

emission standards described in paragraphs (c), (d), and (e) of this section, as applicable 
677 

beginning with the third model year after the last year of the three consecutive model 

years. 

(v) If a manufacturer’s average sales for three consecutive model years exceeds 

49,999, the manufacturer shall comply with the emission standards described in 

paragraphs (c), (d), and (e) of this section, as applicable, beginning with the second 

model year after the last year of the three consecutive model years. 

 (2) Requesting deferral from standards. To be deferred from the standards 

described in paragraphs (c) and (d) of this section, businesses must submit a declaration 

to EPA containing a detailed written description of how the business qualifies as a small 

volume manufacturer under the provisions of this paragraph (h). The declaration must 

describe eligibility information that includes the following: model year 2008 and 2009 

sales, sales volumes for each of the most recent three model years, detailed information 

regarding ownership relationships with other manufacturers, details regarding the 

application of the provisions of §86.1838-01(b)(3) regarding the aggregation of sales of 

related companies, and documentation of good-faith efforts made by the manufacturer to 

purchase credits from other manufacturers. This declaration must be signed by a chief 

officer of the company, and must be made prior to each model year for which the deferral 

is requested. The declaration must be submitted to EPA at least 30 days prior to the 

introduction into commerce of any vehicles for each model year for which the deferral is 

requested, but not later than December of the calendar year prior to the model year for 

which deferral is requested. Deferral will be granted when EPA approves the small 

volume manufacturer deferral declaration. The declaration must be sent to the 

Environmental Protection Agency at the following address: Director, Compliance and 

Innovative Strategies Division, U.S. Environmental Protection Agency, 2000 Traverwood 

Drive, Ann Arbor, Michigan 48105. 

21. Section 86.1823-08 is amended by adding paragraph (m) to read as follows: 

§86.1823-08 Durability demonstration procedures for exhaust emissions. 

* * * * * 

(m) Durability demonstration procedures for vehicles subject to the greenhouse 

gas exhaust emission standards specified in 86.1818-12. 

(1) CO2. (i) Unless otherwise specified under paragraph (m)(1)(ii) of this section, 

manufacturers may use a multiplicative CO2 deterioration factor of one or an additive 

deterioration factor of zero. 

(ii) Based on an analysis of industry-wide data, EPA may periodically establish 

and/or update the deterioration factor for CO2 emissions including air conditioning and 

other credit related emissions. Deterioration factors established and/or updated under this 

paragraph (m)(1)(ii) will provide adequate lead time for manufacturers to plan for the 

change. 

(iii) Alternatively, manufacturers may use the whole-vehicle mileage 

accumulation procedures in §86.1823-08 paragraphs (c) or (d)(1) to determine CO2

deterioration factors. In this case, each FTP test performed on the durability data vehicle 

selected under §86.1822-01 of this part must also be accompanied by an HFET test, and 
678 

combined FTP/HFET CO2 results determined by averaging the city (FTP) and highway 

(HFET) CO2 values, weighted 0.55 and 0.45 respectively. The deterioration factor will 

be determined for this combined CO2 value. Calculated multiplicative deterioration 

factors that are less than one shall be set to equal one, and calculated additive 

deterioration factors that are less than zero shall be set to zero. 

(iv) If, in the good engineering judgment of the manufacturer, the deterioration 

factors determined according to paragraphs (m)(1)(i), (m)(1)(ii), or (m)(1)(iii) of this 

section do not adequately account for the expected CO2 emission deterioration over the 

vehicle's useful life, the manufacturer may petition EPA to request a more appropriate 

deterioration factor. 

(2) N2O and CH4. (i) For manufacturers selecting the emission standards for N2O 

and CH4 specified in 40 CFR 86.1818-12(f)(1), deterioration factors for N2O and CH4

shall be determined according to the provisions of paragraphs (a) through (l) of this 

section. 

(ii) For manufacturers selecting the fleet averaging option for N2O and CH4 as 

allowed under 40 CFR 86.1818-12(f)(2), separate deterioration factors shall be 

determined for the FTP and HFET test cycles, therefore each FTP test performed on the 

durability data vehicle selected under 86.1822-01 of this part must also be accompanied 

by an HFET test. For the 2012 through 2014 model years only, manufacturers may use 

alternative deterioration factors. For N2O, the alternative deterioration factor to be used 

to adjust FTP and HFET emissions is the deterioration factor determined for NOX

emissions according to the provisions of this section. For CH4, the alternative 

deterioration factor to be used to adjust FTP and HFET emissions is the deterioration 

factor determined for NMOG or NMHC emissions according to the provisions of this 

section. 

(3) Other carbon-related exhaust emissions. Deterioration factors shall be 

determined according to the provisions of paragraphs (a) through (l) of this section. 

Optionally, in lieu of determining emission-specific FTP and HFET deterioration factors 

for CH3OH (methanol), HCHO (formaldehyde), C2H5OH (ethanol), and C2H4O 

(acetaldehyde), manufacturers may use the deterioration factor determined for NMOG or 

NMHC emissions according to the provisions of this section. 

(4) Air Conditioning leakage and efficiency or other emission credit 

requirements to comply with exhaust CO2 standards. Manufactures will attest to the 

durability of components and systems used to meet the CO2 standards. Manufacturers 

may submit engineering data to provide durability demonstration. 

22. Section 86.1827-01 is amended by revising paragraph (a)(5) and by adding paragraph 

(f) to read as follows: 

§86.1827-01 Test group determination. 

* * * * * 

(a) * * * 

(5) Subject to the same emission standards (except for CO2), or FEL in the case of 

cold temperature NMHC standards, except that a manufacturer may request to group 
679 

vehicles into the same test group as vehicles subject to more stringent standards, so long 

as all the vehicles within the test group are certified to the most stringent standards 

applicable to any vehicle within that test group. Light-duty trucks and light-duty vehicles 

may be included in the same test group if all vehicles in the test group are subject to the 

same emission standards, with the exception of the CO2 standard and/or the total HC 

standard. 

* * * * * 

(f) Unless otherwise approved by the Administrator, a manufacturer of electric 

vehicles must create separate test groups based on the type of battery technology, the 

capacity and voltage of the battery, and the type and size of the electric motor. 

23. Section 86.1829-01 is amended by revising paragraph (b)(1)(i) and by adding 

paragraph (b)(1)(iii)(G) to read as follows: 

§ 86.1829-01 Durability and emission testing requirements; waivers. 

* * * * * 

(b) * * 

(1) * * * 

(i) Testing at low altitude. One EDV shall be tested in each test group for exhaust 

emissions using the FTP and SFTP test procedures of subpart B of this part and the HFET 

test procedure of subpart B of part 600 of this chapter. The configuration of the EDV will 

be determined under the provisions of §86.1828–01 of this subpart. 

* * * * * 

(iii) * * * 

(G) For the 2012 through 2014 model years only, in lieu of testing a vehicle for 

N2O emissions, a manufacturer may provide a statement in its application for certification 

that such vehicles comply with the applicable standards. Such a statement must be based 

on previous emission tests, development tests, or other appropriate information and good 

engineering judgment. 

* * * * * 

24. Section 86.1835-01 is amended as follows: 

a. By revising paragraph (a)(4). 

b. By revising paragraph (b)(1) introductory text. 

c. By adding paragraph (b)(1)(vi). 

d. By revising paragraph (b)(3). 

e. By revising paragraph (c)(1)(ii). 

§86.1835-01 Confirmatory certification testing. 

(a) * * *

(4) Retesting for fuel economy reasons or for compliance with applicable exhaust 

CO2 emission standards may be conducted under the provisions of 40 CFR 600.008–01. 

(b) * * * 
680 

(1) If the Administrator determines not to conduct a confirmatory test under the 

provisions of paragraph (a) of this section, manufacturers of light-duty vehicles, lightduty trucks, and/or medium-duty passenger vehicles will conduct a confirmatory test at 

their facility after submitting the original test data to the Administrator whenever any of 

the conditions listed in paragraphs (b)(1)(i) through (vi) of this section exist, and 

complete heavy-duty vehicles manufacturers will conduct a confirmatory test at their 

facility after submitting the original test data to the Administrator whenever the 

conditions listed in paragraph (b)(1)(i) or (b)(1)(ii) of this section exist, as follows: 

* * * * * 

(vi) The exhaust CO2 emissions of the test as measured in accordance with the 

procedures in 40 CFR Part 600 are lower than expected based on procedures approved by 

the Administrator. 

* * * * * 

(3) For light-duty vehicles, light-duty trucks, and medium-duty passenger vehicles 

the manufacturer shall conduct a retest of the FTP or highway test if the difference 

between the fuel economy of the confirmatory test and the original manufacturer's test 

equals or exceeds three percent (or such lower percentage to be applied consistently to all 

manufacturer conducted confirmatory testing as requested by the manufacturer and 

approved by the Administrator). 

(i) For use in the fuel economy and CO2 fleet averaging program described in 40 

CFR parts 86 and 600, the manufacturer may, in lieu of conducting a retest, accept as 

official the lower of the original and confirmatory test fuel economy results, and the 

higher of the original and confirmatory test CO2 results. 

(ii) The manufacturer shall conduct a second retest of the FTP or highway test if 

the fuel economy difference between the second confirmatory test and the original 

manufacturer test equals or exceeds three percent (or such lower percentage as requested 

by the manufacturer and approved by the Administrator) and the fuel economy difference 

between the second confirmatory test and the first confirmatory test equals or exceeds 

three percent (or such lower percentage as requested by the manufacturer and approved 

by the Administrator). In lieu of conducting a second retest, the manufacturer may accept 

as official (for use in the fuel economy program and the CO2 fleet averaging program) the 

lowest fuel economy and highest CO2 emissions of the original test, the first confirmatory 

test, and the second confirmatory test fuel economy results. 

(c) * * * 

(1) * * * 

(ii) Official test results for fuel economy and exhaust CO2 emission purposes are 

determined in accordance with the provisions of 40 CFR 600.008–01. 

* * * * * 

25. Section 86.1841-01 is amended by adding paragraph (a)(3) and revising paragraph (b) 

to read as follows: 

§86.1841-01 Compliance with emission standards for the purpose of certification. 

(a) * * * 
681 

(3) Compliance with CO2 exhaust emission standards shall be demonstrated at 

certification by the certification levels on the FTP and HFET tests for carbon-related 

exhaust emissions determined according to §600.113-08 of this chapter. 

* * * * * 

(b) To be considered in compliance with the standards for the purposes of 

certification, the certification levels for the test vehicle calculated in paragraph (a) of this 

section shall be less than or equal to the standards for all emission constituents to which 

the test group is subject, at both full and intermediate useful life as appropriate for that 

test group. 

* * * * * 

26. Section 86.1845-04 is amended as follows: 

a. By revising paragraph (a)(1). 

b. By revising paragraph (b)(5)(i). 

c. By revising paragraph (c)(5)(i). 

§86.1845-04 Manufacturer in-use verification testing requirements. 

(a) * * * 

(1) A manufacturer of LDVs, LDTs, MDPVs and/or complete HDVs must test, or 

cause to have tested, a specified number of LDVs, LDTs, MDPVs and complete HDVs. 

Such testing must be conducted in accordance with the provisions of this section. For 

purposes of this section, the term vehicle includes light-duty vehicles, light-duty trucks 

and medium-duty passenger vehicles. 

* * * * * 

(b) * * * 

(5) * * * 

(i) Each test vehicle of a test group shall be tested in accordance with the Federal 

Test Procedure and the US06 portion of the Supplemental Federal Test Procedure as 

described in subpart B of this part, when such test vehicle is tested for compliance with 

applicable exhaust emission standards under this subpart. Test vehicles subject to 

applicable exhaust CO2 emission standards under this subpart shall also be tested in 

accordance with the highway fuel economy test as described in subpart B of 40 CFR part 

600. 

* * * * * 

(c) * * * 

(5) * * * 

(i) Each test vehicle shall be tested in accordance with the Federal Test Procedure 

and the US06 portion of the Supplemental Federal Test Procedure as described in subpart 

B of this part when such test vehicle is tested for compliance with applicable exhaust 

emission standards under this subpart. Test vehicles subject to applicable exhaust CO2

emission standards under this subpart shall also be tested in accordance with the highway 

fuel economy test as described in subpart B of 40 CFR part 600. The US06 portion of the 

SFTP is not required to be performed on vehicles certified in accordance with the 

National LEV provisions of subpart R of this part. One test vehicle from each test group 
682 

shall receive a Federal Test Procedure at high altitude. The test vehicle tested at high 

altitude is not required to be one of the same test vehicles tested at low altitude. The test 

vehicle tested at high altitude is counted when determining the compliance with the 

requirements shown in Table S04–06 and Table S04–07 in paragraph (b)(3) of this 

section or the expanded sample size as provided for in this paragraph (c). 

* * * * * 

27. Section 86.1846-01 is amended by revising paragraphs (a)(1) and (b) introductory 

text to read as follows: 

§86.1846-01 Manufacturer in-use confirmatory testing requirements. 

(a) * * * 

(1) A manufacturer of LDVs, LDTs and/or MDPVs must test, or cause testing to 

be conducted, under this section when the emission levels shown by a test group sample 

from testing under §§86.1845–01 or 86.1845–04, as applicable, exceeds the criteria 

specified in paragraph (b) of this section. The testing required under this section applies 

separately to each test group and at each test point (low and high mileage) that meets the 

specified criteria. The testing requirements apply separately for each model year starting 

with model year 2001. These provisions do not apply to heavy-duty vehicles or heavyduty engines prior to the 2007 model year. These provisions do not apply to emissions of 

CO2, CH4, and N2O. 

* * * * * 

(b) Criteria for additional testing. A manufacturer shall test a test group or a 

subset of a test group as described in paragraph (j) of this section when the results from 

testing conducted under §§86.1845–01 and 86.1845–04, as applicable, show mean 

emissions for that test group of any pollutant(s) (except CO2, CH4, and N2O) to be equal 

to or greater than 1.30 times the applicable in-use standard and a failure rate, among the 

test group vehicles, for the corresponding pollutant(s) of fifty percent or greater. 

* * * * * 

28. Section 86.1848-10 is amended by adding paragraph (c)(9) to read as follows: 

§86.1848-10 Certification. 

* * * * * 

(c) * * * 

(9) For 2012 and later model year LDVs, LDTs, and MDPVs, all certificates of 

conformity issued are conditional upon compliance with all provisions of §§86.1818–12 

and 86.1865–12 both during and after model year production. The manufacturer bears the 

burden of establishing to the satisfaction of the Administrator that the terms and 

conditions upon which the certificate(s) was (were) issued were satisfied. For recall and 

warranty purposes, vehicles not covered by a certificate of conformity will continue to be 

held to the standards stated or referenced in the certificate that otherwise would have 

applied to the vehicles. 
683 

(i) Failure to meet the fleet average CO2 requirements will be considered a failure 

to satisfy the terms and conditions upon which the certificate(s) was (were) issued and the 

vehicles sold in violation of the fleet average CO2 standard will not be covered by the 

certificate(s). The vehicles sold in violation will be determined according to §86.1865-

12(k)(7). 

(ii) Failure to comply fully with the prohibition against selling credits that are not 

generated or that are not available, as specified in §86.1865–12, will be considered a 

failure to satisfy the terms and conditions upon which the certificate(s) was (were) issued 

and the vehicles sold in violation of this prohibition will not be covered by the 

certificate(s). 

* * * * * 

29. A new §86.1854-12 is added to read as follows: 

§86.1854-12 Prohibited acts. 

(a) The following acts and the causing thereof are prohibited: 

(1) In the case of a manufacturer, as defined by §86.1803, of new motor vehicles 

or new motor vehicle engines for distribution in commerce, the sale, or the offering for 

sale, or the introduction, or delivery for introduction, into commerce, or (in the case of 

any person, except as provided by regulation of the Administrator), the importation into 

the United States of any new motor vehicle or new motor vehicle engine subject to this 

subpart, unless such vehicle or engine is covered by a certificate of conformity issued 

(and in effect) under regulations found in this subpart (except as provided in Section 

203(b) of the Clean Air Act (42 U.S.C. 7522(b)) or regulations promulgated thereunder). 

(2)(i) For any person to fail or refuse to permit access to or copying of records or 

to fail to make reports or provide information required under Section 208 of the Clean 

Air Act (42 U.S.C. 7542) with regard to vehicles. 

(ii) For a person to fail or refuse to permit entry, testing, or inspection authorized 

under Section 206(c) (42 U.S.C. 7525(c)) or Section 208 of the Clean Air Act (42 U.S.C. 

7542) with regard to vehicles. 

(iii) For a person to fail or refuse to perform tests, or to have tests performed as 

required under Section 208 of the Clean Air Act (42 U.S.C. 7542) with regard to 

vehicles. 

(iv) For a person to fail to establish or maintain records as required under 

§§86.1844, 86.1862, 86.1864, and 86.1865 with regard to vehicles. 

(v) For any manufacturer to fail to make information available as provided by 

regulation under Section 202(m)(5) of the Clean Air Act (42 U.S.C. 7521(m)(5)) with 

regard to vehicles. 

(3)(i) For any person to remove or render inoperative any device or element of 

design installed on or in a vehicle or engine in compliance with regulations under this 

subpart prior to its sale and delivery to the ultimate purchaser, or for any person 

knowingly to remove or render inoperative any such device or element of design after 

such sale and delivery to the ultimate purchaser. 
684 

(ii) For any person to manufacture, sell or offer to sell, or install, any part or 

component intended for use with, or as part of, any vehicle or engine, where a principal 

effect of the part or component is to bypass, defeat, or render inoperative any device or 

element of design installed on or in a vehicle or engine in compliance with regulations 

issued under this subpart, and where the person knows or should know that the part or 

component is being offered for sale or installed for this use or put to such use. 

(4) For any manufacturer of a vehicle or engine subject to standards prescribed 

under this subpart: 

(i) To sell, offer for sale, introduce or deliver into commerce, or lease any such 

vehicle or engine unless the manufacturer has complied with the requirements of Section 

207 (a) and (b) of the Clean Air Act (42 U.S.C. 7541 (a), (b)) with respect to such vehicle 

or engine, and unless a label or tag is affixed to such vehicle or engine in accordance with 

Section 207(c)(3) of the Clean Air Act (42 U.S.C. 7541(c)(3)). 

(ii) To fail or refuse to comply with the requirements of Section 207 (c) or (e) of 

the Clean Air Act (42 U.S.C. 7541 (c) or (e)). 

(iii) Except as provided in Section 207(c)(3) of the Clean Air Act (42 U.S.C. 

7541(c)(3)), to provide directly or indirectly in any communication to the ultimate 

purchaser or any subsequent purchaser that the coverage of a warranty under the Clean 

Air Act is conditioned upon use of any part, component, or system manufactured by the 

manufacturer or a person acting for the manufacturer or under its control, or conditioned 

upon service performed by such persons. 

(iv) To fail or refuse to comply with the terms and conditions of the warranty 

under Section 207 (a) or (b) of the Clean Air Act (42 U.S.C. 7541 (a) or (b)). 

(b) For the purposes of enforcement of this subpart, the following apply: 

(1) No action with respect to any element of design referred to in paragraph (a)(3) 

of this section (including any adjustment or alteration of such element) shall be treated as 

a prohibited act under paragraph (a)(3) of this section if such action is in accordance with 

Section 215 of the Clean Air Act (42 U.S.C. 7549); 

(2) Nothing in paragraph (a)(3) of this section is to be construed to require the use 

of manufacturer parts in maintaining or repairing a vehicle or engine. For the purposes of 

the preceding sentence, the term “manufacturer parts” means, with respect to a motor 

vehicle engine, parts produced or sold by the manufacturer of the motor vehicle or motor 

vehicle engine; 

(3) Actions for the purpose of repair or replacement of a device or element of 

design or any other item are not considered prohibited acts under paragraph (a)(3) of this 

section if the action is a necessary and temporary procedure, the device or element is 

replaced upon completion of the procedure, and the action results in the proper 

functioning of the device or element of design; 

(4) Actions for the purpose of a conversion of a motor vehicle or motor vehicle 

engine for use of a clean alternative fuel (as defined in title II of the Clean Air Act) are 

not considered prohibited acts under paragraph (a) of this section if: 

(i) The vehicle complies with the applicable standard when operating on the 

alternative fuel; and 
685 

(ii) In the case of engines converted to dual fuel or flexible use, the device or 

element is replaced upon completion of the conversion procedure, and the action results 

in proper functioning of the device or element when the motor vehicle operates on 

conventional fuel. 

30. A new §86.1865-12 is added to subpart S to read as follows: 

§86.1865-12 How to comply with the fleet average CO2 standards. 

(a) Applicability. (1) Unless otherwise exempted under the provisions of 

§86.1801-12(j), CO2 fleet average exhaust emission standards apply to: 

(i) 2012 and later model year passenger automobiles and light trucks. 

(ii) Aftermarket conversion systems as defined in 40 CFR 85.502. 

(iii) Vehicles imported by ICIs as defined in 40 CFR 85.1502. 

(2) The terms “passenger automobile” and “light truck” as used in this section 

have the meanings as defined in §86.1818–12. 

(b) Useful life requirements. Full useful life requirements for CO2 standards are 

defined in §86.1818–12. There is not an intermediate useful life standard for CO2

emissions. 

(c) Altitude. Altitude requirements for CO2 standards are provided in §86.1810–

12(f). 

(d) Small volume manufacturer certification procedures. Certification procedures 

for small volume manufacturers are provided in §86.1838–01. Small businesses meeting 

certain criteria may be exempted from the greenhouse gas emission standards in 

§86.1818-12 according to the provisions of §86.1801-12(j). 

(e) CO2 fleet average exhaust emission standards. The fleet average standards 

referred to in this section are the corporate fleet average CO2 standards for passenger 

automobiles and light trucks set forth in 86.1818-12(c) and (e). The fleet average CO2

standards applicable in a given model year are calculated separately for passenger 

automobiles and light trucks for each manufacturer and each model year according to the 

provisions in §86.1818–12. Each manufacturer must comply with the applicable CO2

fleet average standard on a production-weighted average basis, for each separate 

averaging set, at the end of each model year, using the procedure described in paragraph 

(c) of this section. 

(f) In-use CO2 standards. In-use CO2 exhaust emission standards applicable to 

each model type are provided in §86.1818–12(d). 

(g) Durability procedures and method of determining deterioration factors (DFs). 

Deterioration factors for CO2 exhaust emission standards are provided in §86.1823–

08(m). 

(h) Vehicle test procedures. (1) The test procedures for demonstrating compliance 

with CO2 exhaust emission standards are contained in subpart B of this part and subpart 

B of part 600 of this chapter. 

(2) Testing of all passenger automobiles and light trucks to determine compliance 

with CO2 exhaust emission standards set forth in this section must be on a loaded vehicle 

weight (LVW) basis, as defined in §86.1803–01. 
686 

(3) Testing for the purpose of providing certification data is required only at low 

altitude conditions. If hardware and software emission control strategies used during low 

altitude condition testing are not used similarly across all altitudes for in-use operation, 

the manufacturer must include a statement in the application for certification, in 

accordance with §§86.1844–01(d)(11) and 86.1810–12(f), stating what the different 

strategies are and why they are used. 

(i) Calculating the fleet average carbon-related exhaust emissions. (1)

Manufacturers must compute separate production-weighted fleet average carbon-related 

exhaust emissions at the end of the model year for passenger automobiles and light 

trucks, using actual production, where production means vehicles produced and delivered 

for sale, and certifying model types to standards as defined in §86.1818–12. The model 

type carbon-related exhaust emission results determined according to 40 CFR 600 

subpart F (in units of grams per mile rounded to the nearest whole number) become the 

certification standard for each model type. 

(2) Manufacturers must separately calculate production-weighted fleet average 

carbon-related exhaust emissions levels for the following averaging sets according to the 

provisions of part 600 subpart F of this chapter: 

(i) Passenger automobiles subject to the fleet average CO2 standards specified in 

§86.1818-12(c)(2); 

(ii) Light trucks subject to the fleet average CO2 standards specified in §86.1818-

12(c)(3); 

(iii) Passenger automobiles subject to the Temporary Leadtime Allowance 

Alternative Standards specified in §86.1818-12(e), if applicable; and 

(iv) Light trucks subject to the Temporary Leadtime Allowance Alternative 

Standards specified in §86.1818-12(e), if applicable. 

(j) Certification compliance and enforcement requirements for CO2 exhaust 

emission standards. (1) Compliance and enforcement requirements are provided in 

§86.1864–10 and §86.1848–10(c)(9). 

(2) The certificate issued for each test group requires all model types within that 

test group to meet the emission standard to which each model type is certified. 

(3) Each manufacturer must comply with the applicable CO2 fleet average 

standard on a production-weighted average basis, at the end of each model year, using the 

procedure described in paragraph (i) of this section. 

(4) Each manufacturer must comply on an annual basis with the fleet average 

standards as follows: 

(i) Manufacturers must report in their annual reports to the Agency that they met 

the relevant corporate average standard by showing that their production-weighted 

average CO2 emissions levels of passenger automobiles and light trucks, as applicable, 

are at or below the applicable fleet average standard; or 

(ii) If the production-weighted average is above the applicable fleet average 

standard, manufacturers must obtain and apply sufficient CO2 credits as authorized under 

paragraph (k)(8) of this section. A manufacturer must show that they have offset any 

exceedence of the corporate average standard via the use of credits. Manufacturers must 

also include their credit balances or deficits in their annual report to the Agency. 
687 

(iii) If a manufacturer fails to meet the corporate average CO2 standard for four 

consecutive years, the vehicles causing the corporate average exceedence will be 

considered not covered by the certificate of conformity (see paragraph (k)(8) of this 

section). A manufacturer will be subject to penalties on an individual-vehicle basis for 

sale of vehicles not covered by a certificate. 

(iv) EPA will review each manufacturer's production to designate the vehicles that 

caused the exceedence of the corporate average standard. EPA will designate as 

nonconforming those vehicles in test groups with the highest certification emission 

values first, continuing until reaching a number of vehicles equal to the calculated 

number of noncomplying vehicles as determined in paragraph (k)(8) of this section. In a 

group where only a portion of vehicles would be deemed nonconforming, EPA will 

determine the actual nonconforming vehicles by counting backwards from the last 

vehicle produced in that test group. Manufacturers will be liable for penalties for each 

vehicle sold that is not covered by a certificate. 

(k) Requirements for the CO2 averaging, banking and trading (ABT) program. (1) 

A manufacturer whose CO2 fleet average emissions exceed the applicable standard must 

complete the calculation in paragraph (k)(4) of this section to determine the size of its 

CO2 deficit. A manufacturer whose CO2 fleet average emissions are less than the 

applicable standard must complete the calculation in paragraph (k)(4) of this section to 

generate CO2 credits. In either case, the number of credits or debits must be rounded to 

the nearest whole number. 

(2) There are no property rights associated with CO2 credits generated under this 

subpart. Credits are a limited authorization to emit the designated amount of emissions. 

Nothing in this part or any other provision of law should be construed to limit EPA's 

authority to terminate or limit this authorization through a rulemaking. 

(3) Each manufacturer must comply with the reporting and recordkeeping 

requirements of paragraph (l) of this section for CO2 credits, including early credits. The 

averaging, banking and trading program is enforceable through the certificate of 

conformity that allows the manufacturer to introduce any regulated vehicles into 

commerce. 

(4) Credits are earned on the last day of the model year. Manufacturers must 

calculate, for a given model year, the number of credits or debits it has generated 

according to the following equation, rounded to the nearest megagram: 

CO2 Credits or Debits (Mg) = [(CO2 Standard - Manufacturer's ProductionWeighted Fleet Average CO2 Emissions) × (Total Number of Vehicles Produced) × 

(Vehicle Lifetime Miles)] ÷ 1,000,000 

Where: 

CO2 Standard = the applicable standard for the model year as determined by 

§86.1818-12; 

Manufacturer's Production-Weighted Fleet Average CO2 Emissions = average 

calculated according to paragraph (i) of this section; 

Total Number of Vehicles Produced = The number of vehicles domestically 

produced plus those imported as defined in 40 CFR 600.511-80; and 
688 

Vehicle Lifetime Miles is 195,264 for passenger automobiles and 225,865 for 

light trucks. 

(5) Total credits or debits generated in a model year, maintained and reported 

separately for passenger automobiles and light trucks, shall be the sum of the credits or 

debits calculated in paragraph (k)(4) of this section and any of the following credits, if 

applicable: 

(i) Air conditioning leakage credits earned according to the provisions of 86.1866-

12(b); 

(ii) Air conditioning efficiency credits earned according to the provisions of 

86.1866-12(c); 

(iii) Off-cycle technology credits earned according to the provisions of 86.1866-

12(d). 

(6) Unused CO2 credits shall retain their full value through the five subsequent 

model years after the model year in which they were generated. Credits available at the 

end of the fifth model year after the year in which they were generated shall expire. 

(7) Credits may be used as follows: 

(i) Credits generated and calculated according to the method in paragraph (k)(4) 

of this section may not be used to offset deficits other than those deficits accrued with 

respect to the standard in §86.1818–12. Credits may be banked and used in a future 

model year in which a manufacturer's average CO2 level exceeds the applicable standard. 

Credits may be exchanged between the passenger automobile and light truck fleets of a 

given manufacturer. Credits may also be traded to another manufacturer according to the 

provisions in paragraph (k)(8) of this section. Before trading or carrying over credits to 

the next model year, a manufacturer must apply available credits to offset any deficit, 

where the deadline to offset that credit deficit has not yet passed. 

(ii) The use of credits shall not change Selective Enforcement Auditing or in-use 

testing failures from a failure to a non-failure. The enforcement of the averaging standard 

occurs through the vehicle's certificate of conformity. A manufacturer's certificate of 

conformity is conditioned upon compliance with the averaging provisions. The certificate 

will be void ab initio if a manufacturer fails to meet the corporate average standard and 

does not obtain appropriate credits to cover its shortfalls in that model year or subsequent 

model years (see deficit carry-forward provisions in paragraph (k)(8) of this section). 

(iii) Special provisions for manufacturers using the Temporary Leadtime 

Allowance Alternative Standards. (A) Credits generated by vehicles subject to the fleet 

average CO2 standards specified in §86.1818-12(c) may only be used to offset a deficit 

generated by vehicles subject to the Temporary Leadtime Allowance Alternative 

Standards specified in §86.1818-12(e). 

(B) Credits generated by a passenger automobile or light truck averaging set 

subject to the Temporary Leadtime Allowance Alternative Standards specified in 

§86.1818-12(e)(4)(i) or (ii) of this section may be used to offset a deficit generated by an 

averaging set subject to the Temporary Leadtime Allowance Alternative Standards 

through the 2015 model year. 

(C) Credits generated by an averaging set subject to the Temporary Leadtime 

Allowance Alternative Standards specified in §86.1818-12(e)(4)(i) or (ii) of this section 
689 

may not be used to offset a deficit generated by an averaging set subject to the fleet 

average CO2 standards specified in §86.1818-12(c)(2) or (3) or otherwise transferred to 

an averaging set subject to the fleet average CO2 standards specified in §86.1818-12(c)(2) 

or (3). 

(D) Credits generated by vehicles subject to the Temporary Leadtime Allowance 

Alternative Standards specified in §86.1818-12(e)(4)(i) or (ii) may be banked for use in a 

future model year (to offset a deficit generated by an averaging set subject to the 

Temporary Leadtime Allowance Alternative Standards), except that all such credits shall 

expire at the end of the 2015 model year. 

(E) A manufacturer with any vehicles subject to the Temporary Leadtime 

Allowance Alternative Standards specified in §86.1818-12(e)(4)(i) or (ii) of this section 

in a model year in which that manufacturer also generates credits with vehicles subject to 

the fleet average CO2 standards specified in §86.1818-12(c) may not trade or bank credits 

earned against the fleet average standards in §86.1818-12(c) for use in a future model 

year. 

(8) The following provisions apply if debits are accrued: 

(i) If a manufacturer calculates that it has negative credits (also called “debits” or 

a “credit deficit”) for a given model year, it may carry that deficit forward into the next 

three model years. Such a carry-forward may only occur after the manufacturer exhausts 

any supply of banked credits. At the end of the third model year, the deficit must be 

covered with an appropriate number of credits that the manufacturer generates or 

purchases. Any remaining deficit is subject to a voiding of the certificate ab initio, as 

described in this paragraph (k)(8). Manufacturers are not permitted to have a credit deficit 

for four consecutive years. 

(ii) If debits are not offset within the specified time period, the number of vehicles 

not meeting the fleet average CO2 standards (and therefore not covered by the certificate) 

must be calculated. 

(A) Determine the gram per mile quantity of debits for the noncompliant vehicle 

category by multiplying the total megagram deficit by 1,000,000 and then dividing by the 

vehicle lifetime miles for the vehicle category (passenger automobile or light truck) 

specified in paragraph (k)(4) of this section. 

(B) Divide the result by the fleet average standard applicable to the model year in 

which the debits were first incurred and round to the nearest whole number to determine 

the number of vehicles not meeting the fleet average CO2 standards. 

(iii) EPA will determine the vehicles not covered by a certificate because the 

condition on the certificate was not satisfied by designating vehicles in those test groups 

with the highest CO2 emission values first and continuing until reaching a number of 

vehicles equal to the calculated number of noncomplying vehicles as determined in 

paragraph (k)(7) of this section. If this calculation determines that only a portion of 

vehicles in a test group contribute to the debit situation, then EPA will designate actual 

vehicles in that test group as not covered by the certificate, starting with the last vehicle 

produced and counting backwards. 

(iv)(A) If a manufacturer ceases production of passenger cars and light trucks, the 

manufacturer continues to be responsible for offsetting any debits outstanding within the 
690 

required time period. Any failure to offset the debits will be considered a violation of 

paragraph (k)(7)(i) of this section and may subject the manufacturer to an enforcement 

action for sale of vehicles not covered by a certificate, pursuant to paragraphs (k)(7)(ii) 

and (iii) of this section. 

(B) If a manufacturer is purchased by, merges with, or otherwise combines with 

another manufacturer, the controlling entity is responsible for offsetting any debits 

outstanding within the required time period. Any failure to offset the debits will be 

considered a violation of paragraph (k)(7)(i) of this section and may subject the 

manufacturer to an enforcement action for sale of vehicles not covered by a certificate, 

pursuant to paragraphs (k)(7)(ii) and (iii) of this section. 

(v) For purposes of calculating the statute of limitations, a violation of the 

requirements of paragraph (k)(7)(i) of this section, a failure to satisfy the conditions upon 

which a certificate(s) was issued and hence a sale of vehicles not covered by the 

certificate, all occur upon the expiration of the deadline for offsetting debits specified in 

paragraph (k)(7)(i) of this section. 

(9) The following provisions apply to CO2 credit trading: 

(i) EPA may reject CO2 credit trades if the involved manufacturers fail to submit 

the credit trade notification in the annual report. 

(ii) A manufacturer may not sell credits that are not available for sale pursuant to 

the provisions in paragraph (k)(6) of this section. 

(iii) In the event of a negative credit balance resulting from a transaction, both the 

buyer and seller are liable. EPA may void ab initio the certificates of conformity of all 

test groups participating in such a trade. 

(iv) (A) If a manufacturer trades a credit that it has not generated pursuant to 

paragraph (k) of this section or acquired from another party, the manufacturer will be 

considered to have generated a debit in the model year that the manufacturer traded the 

credit. The manufacturer must offset such debits by the deadline for the annual report for 

that same model year. 

(B) Failure to offset the debits within the required time period will be considered 

a failure to satisfy the conditions upon which the certificate(s) was issued and will be 

addressed pursuant to paragraph (k)(7) of this section. 

(v) A manufacturer may only trade credits that it has generated pursuant to 

paragraph (k)(4) of this section or acquired from another party. 

(l) Maintenance of records and submittal of information relevant to compliance 

with fleet average CO2 standards —(1) Maintenance of records. (i) Manufacturers 

producing any light-duty vehicles, light-duty trucks, or medium-duty passenger vehicles 

subject to the provisions in this subpart must establish, maintain, and retain all the 

following information in adequately organized records for each model year: 

(A) Model year. 

(B) Applicable fleet average CO2 standards for each averaging set as defined in 

paragraph (i) of this section. 

(C) The calculated fleet average CO2 value for each averaging set as defined in 

paragraph (i) of this section. 

(D) All values used in calculating the fleet average CO2 values. 
691 

(ii) Manufacturers producing any passenger cars or light trucks subject to the 

provisions in this subpart must establish, maintain, and retain all the following 

information in adequately organized records for each passenger car or light truck subject 

to this subpart: 

(A) Model year. 

(B) Applicable fleet average CO2 standard. 

(C) EPA test group. 

(D) Assembly plant. 

(E) Vehicle identification number. 

(F) Carbon-related exhaust emission standard to which the passenger car or light 

truck is certified. 

(G) In-use carbon-related exhaust emission standard. 

(H) Information on the point of first sale, including the purchaser, city, and state. 

(iii) Manufacturers must retain all required records for a period of eight years 

from the due date for the annual report. Records may be stored in any format and on any 

media, as long as manufacturers can promptly send EPA organized written records in 

English if we ask for them. Manufacturers must keep records readily available as EPA 

may review them at any time. 

(iv) The Administrator may require the manufacturer to retain additional records 

or submit information not specifically required by this section. 

(v) Pursuant to a request made by the Administrator, the manufacturer must 

submit to the Administrator the information that the manufacturer is required to retain. 

(vi) EPA may void ab initio a certificate of conformity for vehicles certified to 

emission standards as set forth or otherwise referenced in this subpart for which the 

manufacturer fails to retain the records required in this section or to provide such 

information to the Administrator upon request, or to submit the reports required in this 

section in the specified time period. 

(2) Reporting. (i) Each manufacturer must submit an annual report. The annual 

report must contain for each applicable CO2 standard, the calculated fleet average CO2

value, all values required to calculate the CO2 emissions value, the number of credits 

generated or debits incurred, all the values required to calculate the credits or debits, and 

the resulting balance of credits or debits. 

(ii) For each applicable fleet average CO2 standard, the annual report must also 

include documentation on all credit transactions the manufacturer has engaged in since 

those included in the last report. Information for each transaction must include all of the 

following: 

(A) Name of credit provider. 

(B) Name of credit recipient. 

(C) Date the trade occurred. 

(D) Quantity of credits traded in megagrams. 

(E) Model year in which the credits were earned. 

(iii) Manufacturers calculating early air conditioning leakage and/or efficiency 

credits under paragraph (b) of this section shall report the following information for each 
692 

model year separately for passenger automobiles and light trucks and for each air 

conditioning system used to generate credits: 

(A) A description of the air conditioning system. 

(B) The leakage credit value and all the information required to determine this 

value. 

(C) The total credits earned for each averaging set, model year, and region, as 

applicable. 

(iv) Manufacturers calculating early advanced technology vehicle credits under 

paragraph (c) of this section shall report, for each model year and separately for 

passenger automobiles and light trucks, the following information: 

(A) The number of each model type of eligible vehicle sold. 

(B) The cumulative model year production of eligible vehicles starting with the 

2012 model year. 

(C) The carbon-related exhaust emission value by model type and model year. 

(v) Manufacturers calculating early off-cycle technology credits under paragraph 

(d) of this section shall report, for each model year and separately for passenger 

automobiles and light trucks, all test results and data required for calculating such credits. 

(vi) Unless a manufacturer reports the data required by this section in the annual 

production report required under §86.1844–01(e) or the annual report required under 

§600.512-12, a manufacturer must submit an annual report for each model year after 

production ends for all affected vehicles produced by the manufacturer subject to the 

provisions of this subpart and no later than May 1 of the calendar year following the 

given model year. Annual reports must be submitted to: Director, Compliance and 

Innovative Strategies Division, U.S. Environmental Protection Agency, 2000 

Traverwood, Ann Arbor, Michigan 48105. 

(vii) Failure by a manufacturer to submit the annual report in the specified time 

period for all vehicles subject to the provisions in this section is a violation of section 

203(a)(1) of the Clean Air Act (42 U.S.C. 7522 (a)(1)) for each applicable vehicle 

produced by that manufacturer. 

(viii) If EPA or the manufacturer determines that a reporting error occurred on an 

annual report previously submitted to EPA, the manufacturer's credit or debit calculations 

will be recalculated. EPA may void erroneous credits, unless traded, and will adjust 

erroneous debits. In the case of traded erroneous credits, EPA must adjust the selling 

manufacturer's credit balance to reflect the sale of such credits and any resulting credit 

deficit. 

(3) Notice of opportunity for hearing. Any voiding of the certificate under 

paragraph (l)(1)(vi) of this section will be made only after EPA has offered the affected 

manufacturer an opportunity for a hearing conducted in accordance with §86.614–84 for 

light-duty vehicles or §86.1014–84 for light-duty trucks and, if a manufacturer requests 

such a hearing, will be made only after an initial decision by the Presiding Officer. 

31. A new section 86.1866-12 is added to subpart S to read as follows: 

§86.1866-12 CO2 fleet average credit programs. 
693 

(a) Incentive for certification of advanced technology vehicles. Electric vehicles, 

plug-in hybrid electric vehicles, and fuel cell electric vehicles, as those terms are defined 

in §86.1803-01, that are certified and produced in the 2012 through 2016 model years 

may be eligible for a reduced CO2 emission value under the provisions of this paragraph 

(a) and under the provisions of part 600 of this chapter. 

(1) Electric vehicles, fuel cell electric vehicles, and plug-in hybrid electric 

vehicles may use a value of 0 grams/mile to represent the proportion of electric operation 

of a vehicle that is derived from electricity that is generated from sources that are not 

onboard the vehicle. 

(2) The use of 0 grams/mile is limited to the first 200,000 combined electric 

vehicles, plug-in hybrid electric vehicles, and fuel cell electric vehicles produced and 

delivered for sale in the 2012 through 2016 model years, except that a manufacturer that 

produces and delivers for sale 25,000 or more such vehicles in the 2012 model year shall 

be subject to a limitation on the use of 0 grams/mile to the first 300,000 combined 

combined electric vehicles, plug-in hybrid electric vehicles, and fuel cell electric vehicles 

produced and delivered for sale in the 2012 through 2016 model years. 

(b) Credits for reduction of air conditioning refrigerant leakage. Manufacturers 

may generate credits applicable to the CO2 fleet average program described in §86.1865-

12 by implementing specific air conditioning system technologies designed to reduce air 

conditioning refrigerant leakage over the useful life of their passenger cars and/or light 

trucks. Credits shall be calculated according to this paragraph (b) for each air 

conditioning system that the manufacturer is using to generate CO2 credits. 

Manufacturers may also generate early air conditioning refrigerant leakage credits under 

this paragraph (b) for the 2009 through 2011 model years according to the provisions of 

§86.1867-12(b). 

(1) The manufacturer shall calculate an annual rate of refrigerant leakage from an 

air conditioning system in grams per year according to the provisions of §86.166-12. 

(2) The CO2-equivalent gram per mile leakage reduction to be used to calculate 

the total credits generated by the air conditioning system shall be determined according to 

the following formulae, rounded to the nearest tenth of a gram per mile: 

(i) Passenger automobiles: 

⎥

⎦

⎤ ⎢

⎣

⎡

⎟

⎟

⎠

⎞

⎜

⎜

⎝

⎛ ⎟×

⎠

⎞ ⎜

⎝

⎛ = × −

HFC a

NEW

GWP

Leakage GWP L MaxCredit

134 16.6 eakage credit 1

Where: 

MaxCredit is 12.6 (grams CO2-equivalent/mile)for air conditioning systems using 

HFC 134a, and 13.8 (grams CO2-equivalent/mile) for air conditioning systems using a 

refrigerant with a lower global warming potential. 

Leakage means the annual refrigerant leakage rate determined according to the 

provisions of §86.166-12(a), except if the calculated rate is less than 8.3 grams/year (4.1 

grams/year for systems using electric compressors) the rate for the purpose of this 

formula shall be 8.3 grams/year (4.1 grams/year for systems using electric compressors); 

The constant 16.6 is the average passenger car impact of air conditioning leakage 

in units of grams/year; 
694 

GWPNEW means the global warming potential of the refrigerant, if such 

refrigerant is not R134a, as determined by the Administrator; 

GWPHFC134a means the global warming potential of HFC 134a, which shall be 

equal to 1430 unless determined otherwise by the Administrator. 

(ii) Light trucks: 

⎥

⎦

⎤ ⎢

⎣

⎡

⎟

⎟

⎠

⎞

⎜

⎜

⎝

⎛ ⎟×

⎠

⎞ ⎜

⎝

⎛ = × −

HFC a

NEW

GWP

Leakage GWP L MaxCredit

134 20.7 eakage credit 1

Where: 

MaxCredit is 15.6 (grams CO2-equivalent/mile) for air conditioning systems 

using HFC 134a, and 17.2 (grams CO2-equivalent/mile) for air conditioning systems 

using a refrigerant with a lower global warming potential. 

Leakage means the annual refrigerant leakage rate determined according to the 

provisions of §86.166-12(a), except if the calculated rate is less than 10.4 grams/year (5.2 

grams/year for systems using electric compressors) the rate for the purpose of this 

formula shall be 10.4 grams/year (5.2 grams/year for systems using electric 

compressors); 

The constant 20.7 is the average passenger car impact of air conditioning leakage 

in units of grams/year; 

GWPNEW means the global warming potential of the refrigerant, if such 

refrigerant is not HFC 134a, as determined by the Administrator; 

GWPR134a means the global warming potential of HFC 134a, which shall be equal 

to 1430 unless determined otherwise by the Administrator. 

(3) The total leakage reduction credits generated by the air conditioning system 

shall be calculated separately for passenger cars and light trucks according to the 

following formula: 

Total Credits (megagrams) = (Leakage x Production x VLM) ÷ 1,000,000 

Where: 

Leakage = the CO2-equivalent leakage credit value in grams per mile determined 

in paragraph (b)(2) of this section. 

Production = The total number of passenger cars or light trucks, whichever is 

applicable, produced with the air conditioning system to which to the leakage credit value 

from paragraph (b)(2) of this section applies. 

VLM = vehicle lifetime miles, which for passenger cars shall be 195,264 and for 

light trucks shall be 225,865. 

(4) The results of paragraph (b)(3) of this section, rounded to the nearest whole 

number, shall be included in the manufacturer’s credit/debit totals calculated in 

§86.1865-12(k)(5). 

(c) Credits for improving air conditioning system efficiency. Manufacturers may 

generate credits applicable to the CO2 fleet average program described in §86.1865-12 by 

implementing specific air conditioning system technologies designed to reduce air 

conditioning-related CO2 emissions over the useful life of their passenger cars and/or 

light trucks. Credits shall be calculated according to this paragraph (c) for each air 

conditioning system that the manufacturer is using to generate CO2 credits. 

Manufacturers may also generate early air conditioning efficiency credits under this 
695 

paragraph (c) for the 2009 through 2011 model years according to the provisions of 

§86.1867-12(b). For model years 2012 and 2013 the manufacturer may determine air 

conditioning efficiency credits using the requirements in paragraphs (c)(1) through (4) of 

this section. For model years 2014 and later the eligibility requirements specified in 

paragraph (c)(5) of this section must be met before an air conditioning system is allowed 

to generate credits. 

(1) Air conditioning efficiency credits are available for the following technologies 

in the gram per mile amounts indicated: 

(i) Reduced reheat, with externally-controlled, variable-displacement compressor: 

1.7 g/mi. 

(ii) Reduced reheat, with externally-controlled, fixed-displacement or pneumatic 

variable displacement compressor: 1.1 g/mi. 

(iii) Default to recirculated air with closed-loop control of the air supply (sensor 

feedback to control interior air quality) whenever the ambient temperature is 75 °F or 

higher: 1.7 g/mi. Air conditioning systems that operated with closed-loop control of the 

air supply at different temperatures may receive credits by submitting an engineering 

analysis to the Administrator for approval. 

(iv) Default to recirculated air with open-loop control air supply (no sensor 

feedback) whenever the ambient temperature is 75 °F or higher: 1.1 g/mi. Air 

conditioning systems that operate with open-loop control of the air supply at different 

temperatures may receive credits by submitting an engineering analysis to the 

Administrator for approval. 

(v) Blower motor controls which limit wasted electrical energy (e.g. pulse width 

modulated power controller): 0.9 g/mi. 

(vi) Internal heat exchanger: 1.1 g/mi. 

(vii) Improved condensers and/or evaporators with system analysis on the 

component(s) indicating a coefficient of performance improvement for the system of 

greater than 10% when compared to previous industry standard designs): 1.1 g/mi. 

(viii) Oil separator: 0.6 g/mi. The manufacturer must submit an engineering 

analysis demonstrating the increased improvement of the system relative to the baseline 

design, where the baseline component for comparison is the version which a 

manufacturer most recently had in production on the same vehicle design or in a similar 

or related vehicle model. The characteristics of the baseline component shall be 

compared to the new component to demonstrate the improvement. 

(2) Air conditioning efficiency credits are determined on an air conditioning 

system basis. For each air conditioning system that is eligible for a credit based on the 

use of one or more of the items listed in paragraph (c)(1) of this section, the total credit 

value is the sum of the gram per mile values listed in paragraph (c)(1) of this section for 

each item that applies to the air conditioning system. If the sum of those values for an air 

conditioning system is greater than 5.7 grams per mile, the total credit value is deemed to 

be 5.7 grams per mile. 

(3) The total efficiency credits generated by an air conditioning system shall be 

calculated separately for passenger cars and light trucks according to the following 

formula: 
696 

Total Credits (Megagrams) = (Credit x Production x VLM) ÷ 1,000,000 

Where: 

Credit = the CO2 efficiency credit value in grams per mile determined in 

paragraph (c)(2) or (c)(5) of this section, whichever is applicable. 

Production = The total number of passenger cars or light trucks, whichever is 

applicable, produced with the air conditioning system to which to the efficiency credit 

value from paragraph (c)(2) of this section applies. 

VLM = vehicle lifetime miles, which for passenger cars shall be 195,264 and for 

light trucks shall be 225,865. 

(4) The results of paragraph (c)(3) of this section, rounded to the nearest whole 

number, shall be included in the manufacturer’s credit/debit totals calculated in 

§86.1865-12(k)(5). 

(5) Use of the Air Conditioning Idle Test Procedure is required after the 2013 

model year as specified in this paragraph (c)(5). 

(i) After the 2013 model year, for each air conditioning system selected by the 

manufacturer to generate air conditioning efficiency credits, the manufacturer shall 

perform the Air Conditioning Idle Test Procedure specified in §86.165-14 of this part. 

(ii) Using good engineering judgment, the manufacturer must select the vehicle 

configuration to be tested that is expected to result in the greatest increased CO2

emissions as a result of the operation of the air conditioning system for which efficiency 

credits are being sought. If the air conditioning system is being installed in passenger 

automobiles and light trucks, a separate determination of the quantity of credits for 

passenger automobiles and light trucks must be made, but only one test vehicle is 

required to represent the air conditioning system, provided it represents the worst-case 

impact of the system on CO2 emissions. 

(iii) For an air conditioning system to be eligible to generate credits in the 2014 

and later model years, the increased CO2 emissions as a result of the operation of that air 

conditioning system determined according to the Idle Test Procedure in §86.165-14 must 

be less than 21.3 grams per minute. 

(A) If the increased CO2 emissions determined from the Idle Test Procedure in 

§86.165-14 is less than or equal to 14.9 grams/minute, the total credit value for use in 

paragraph (c)(3) of this section shall be as determined in paragraph (c)(2) of this section. 

(B) If the increased CO2 emissions determined from the Idle Test Procedure in 

§86.165-14 is greater than 14.9 grams/minute and less than 21.3 grams/minute, the total 

credit value for use in paragraph (c)(3) of this section shall be as determined according to 

the following formula: 

⎥

⎦

⎤ ⎢

⎣

⎡ ⎟

⎠

⎞ ⎜

⎝

⎛ − = × − 6.4

14.9 1 1

ITP TCV TCV

Where: 

TCV=The total credit value for use in paragraph (c)(3) of this section; 

TCV1=The total credit value determined according to paragraph (c)(2) of this 

section; and 
697 

ITP= the increased CO2 emissions determined from the Idle Test Procedure in 

§86.165-14. 

(iv) Air conditioning systems with compressors that are solely powered by 

electricity shall submit Air Conditioning Idle Test Procedure data to be eligible to 

generate credits in the 2014 and later model years, but such systems are not required to 

meet a specific threshold to be eligible to generate such credits, as long as the engine 

remains off for a period of at least 2 minutes during the air conditioning on portion of the 

Idle Test Procedure in §86.165-12 (d). 

(6) The following definitions apply to this paragraph (c): 

(i) Reduced reheat, with externally-controlled, variable displacement compressor

means a system in which compressor displacement is controlled via an electronic signal, 

based on input from sensors (e.g. position or setpoint of interior temperature control, 

interior temperature, evaporator outlet air temperature, or refrigerant temperature) and air 

temperature at the outlet of the evaporator can be controlled to a level at 41 °F, or higher. 

(ii) Reduced reheat, with externally-controlled, fixed-displacement or pneumatic 

variable displacement compressor means a system in which the output of either 

compressor is controlled by cycling the compressor clutch off-and-on via an electronic 

signal, based on input from sensors (e.g. position or setpoint of interior temperature 

control, interior temperature, evaporator outlet air temperature, or refrigerant 

temperature) and air temperature at the outlet of the evaporator can be controlled to a 

level at 41 °F, or higher. 

(iii) Default to recirculated air mode means that the default position of the 

mechanism which controls the source of air supplied to the air conditioning system shall 

change from outside air to recirculated air when the operator or the automatic climate 

control system has engaged the air conditioning system (i.e. evaporator is removing heat), 

except under those conditions where dehumidification is required for visibility (i.e. 

defogger mode). In vehicles equipped with interior air quality sensors (e.g. humidity 

sensor, or carbon dioxide sensor), the controls may determine proper blend of air supply 

sources to maintain freshness of the cabin air while continuing to maximize the use of 

recirculated air. At any time, the vehicle operator may manually select the nonrecirculated air setting during vehicle operation but the system must default to 

recirculated air mode on subsequent vehicle operations (i.e. next vehicle start). The 

climate control system may delay switching to recirculation mode until the interior air 

temperature is less than the outside air temperature, at which time the system must switch 

to recirculated air mode. 

(iv) Blower motor controls which limit waste energy means a method of 

controlling fan and blower speeds which does not use resistive elements to decrease the 

voltage supplied to the motor. 

 (v) Improved condensers and/or evaporators means that the coefficient of 

performance (COP) of air conditioning system using improved evaporator and condenser 

designs is 10 percent higher, as determined using the bench test procedures described in 

SAE J2765 “Procedure for Measuring System COP of a Mobile Air Conditioning System 

on a Test Bench,” when compared to a system using standard, or prior model year, 

component designs. SAE J2765 is incorporated by reference; see §86.1. The 
698 

manufacturer must submit an engineering analysis demonstrating the increased 

improvement of the system relative to the baseline design, where the baseline 

component(s) for comparison is the version which a manufacturer most recently had in 

production on the same vehicle design or in a similar or related vehicle model. The 

dimensional characteristics (e.g., tube configuration/thickness/spacing, and fin density) of 

the baseline component(s) shall be compared to the new component(s) to demonstrate the 

improvement in coefficient of performance. 

(vi) Oil separator means a mechanism which removes at least 50 percent of the 

oil entrained in the oil/refrigerant mixture exiting the compressor and returns it to the 

compressor housing or compressor inlet, or a compressor design which does not rely on 

the circulation of an oil/refrigerant mixture for lubrication. 

(d) Credits for CO2-reducing technologies where the CO2 reduction is not 

captured on the Federal Test Procedure or the Highway Fuel Economy Test. With prior 

EPA approval, manufacturers may optionally generate credits applicable to the CO2 fleet 

average program described in §86.1865-12 by implementing innovative technologies that 

have a measurable, demonstrable, and verifiable real-world CO2 reduction. These 

optional credits are referred to as “off-cycle” credits and may be earned through the 2016 

model year. 

(1) Qualification criteria. To qualify for this credit, the following must be true: 

(i) The technology must be an innovative and novel vehicle- or engine-based 

approach to reducing greenhouse gas emissions, and not in widespread use. 

(ii) The CO2 -reducing impact of the technology must not be significantly 

measurable over the Federal Test Procedure and the Highway Fuel Economy Test. The 

technology must improve CO2 emissions beyond the driving conditions of those tests. 

(iii) The technology must be able to be demonstrated to be effective for the full 

useful life of the vehicle. Unless the manufacturer demonstrates that the technology is not 

subject to in-use deterioration, the manufacturer must account for the deterioration in 

their analysis. 

(2) Quantifying the CO2 reductions of an off-cycle technology. The manufacturer 

may use one of the two options specified in this paragraph (d)(2) to measure the CO2-

reducing potential of an innovative off-cycle technology. The option described in 

paragraph (d)(2)(ii) of this section may be used only with EPA approval, and to use that 

option the manufacturer must be able to justify to the Administrator why the 5-cycle 

option described in paragraph (d)(2)(i) of this section insufficiently characterizes the 

effectiveness of the off-cycle technology. The manufacturer should notify EPA in their 

pre-model year report of their intention to generate any credits under paragraph (d) of this 

section. 

(i) Technology demonstration using EPA 5-cycle methodology. To demonstrate 

an off-cycle technology and to determine a CO2 credit using the EPA 5-cycle 

methodology, the manufacturer shall determine 5-cycle city/highway combined carbonrelated exhaust emissions both with the technology installed and operating and without 

the technology installed and/or operating. The manufacturer shall conduct the following 

steps, both with the off-cycle technology installed and operating and without the 

technology operating or installed. 
699 

(A) Determine carbon-related exhaust emissions over the FTP, the HFET, the 

US06, the SC03, and the cold temperature FTP test procedures according to the test 

procedure provisions specified in 40 CFR part 600 subpart B and using the calculation 

procedures specified in §600.113-08 of this chapter. 

(B) Calculate 5-cycle city and highway carbon-related exhaust emissions using 

data determined in paragraph (d)(2)(i)(A) of this section according to the calculation 

procedures in paragraphs (d) through (f) of 40 CFR 600.114-08. 

(C) Calculate a 5-cycle city/highway combined carbon-related exhaust emission 

value using the city and highway values determined in paragraph (d)(2)(i)(B) of this 

section. 

(D) Subtract the 5-cycle city/highway combined carbon-related exhaust emission 

value determined with the off-cycle technology operating from the 5-cycle city/highway 

combined carbon-related exhaust emission value determined with the off-cycle 

technology not operating. The result is the gram per mile credit amount assigned to the 

technology. 

(ii) Technology demonstration using alternative EPA-approved methodology. In 

cases where the EPA 5-cycle methodology described in paragraph (d)(2)(i) of this section 

cannot adequately measure the emission reduction attributable to an innovative off-cycle 

technology, the manufacturer may develop an alternative approach. Prior to a model year 

in which a manufacturer intends to seek these credits, the manufacturer must submit a 

detailed analytical plan to EPA. EPA will work with the manufacturer to ensure that an 

analytical plan will result in appropriate data for the purposes of generating these credits. 

The alternative demonstration program must be approved in advance by the 

Administrator and should: 

(A) Use modeling, on-road testing, on-road data collection, or other approved 

analytical or engineering methods; 

(B) Be robust, verifiable, and capable of demonstrating the real-world emissions 

benefit with strong statistical significance; 

(C) Result in a demonstration of baseline and controlled emissions over a wide 

range of driving conditions and number of vehicles such that issues of data uncertainty 

are minimized; 

(D) Result in data on a model type basis unless the manufacturer demonstrates 

that another basis is appropriate and adequate. 

(iii) Calculation of total off-cycle credits. Total off-cycle credits in Megagrams of 

CO2 (rounded to the nearest whole number) shall be calculated separately for passenger 

automobiles and light trucks according to the following formula: 

Total Credits (Megagrams) = (Credit x Production x VLM) ÷ 1,000,000 

Where: 

Credit = the 5-cycle credit value in grams per mile determined in paragraph 

(d)(2)(i)(D) or (d)(2)(ii) of this section. 

Production = The total number of passenger cars or light trucks, whichever is 

applicable, produced with the off-cycle technology to which to the credit value 

determined in paragraph (d)(2)(i)(D) or (d)(2)(ii) of this section applies. 
700 

VLM = vehicle lifetime miles, which for passenger cars shall be 195,264 and for 

light trucks shall be 225,865. 

(3) Notice and opportunity for public comment. The Administrator will publish a 

notice of availability in the Federal Register notifying the public of a manufacturer’s 

proposed alternative off-cycle credit calculation methodology. The notice will include 

details regarding the proposed methodology, but will not include any Confidential 

Business Information. The notice will include instructions on how to comment on the 

methodology. The Administrator will take public comments into consideration in the 

final determination, and will notify the public of the final determination. Credits may not 

be accrued using an approved methodology until the model year following the final 

approval. 

32. A new §86.1867-12 is added to subpart S to read as follows: 

§86.1867-12 Optional early CO2 credit programs. 

Manufacturers may optionally generate CO2 credits in the 2009 through 2011 

model years for use in the 2012 and later model years subject to EPA approval and to the 

provisions of this section. Manufacturers may generate early fleet average credits, air 

conditioning leakage credits, air conditioning efficiency credits, early advanced 

technology credits, and early off-cycle technology credits. Manufacturers generating any 

credits under this section must submit an early credits report to the Administrator as 

required in this section. 

(a) Early fleet average CO2 reduction credits. Manufacturers may optionally 

generate credits for reductions in their fleet average CO2 emissions achieved in the 2009 

through 2011 model years. To generate early fleet average CO2 reduction credits, 

manufacturers must select one of the four pathways described in paragraphs (a)(1) 

through (4) of this section. The manufacturer may select only one pathway, and that 

pathway must remain in effect for the 2009 through 2011 model years. Fleet average 

credits (or debits) must be calculated and reported to EPA for each model year under 

each selected pathway. Early credits are subject to five year carry-forward restrictions 

based on the model year in which the credits are generated. 

(1) Pathway 1. To earn credits under this pathway, the manufacturer shall 

calculate an average carbon-related exhaust emission value to the nearest one gram per 

mile for the classes of motor vehicles identified in this paragraph (a)(1), and the results of 

such calculations will be reported to the Administrator for use in determining compliance 

with the applicable CO2 early credit threshold values. 

(i) An average carbon-related exhaust emission value calculation will be made for 

the combined LDV/LDT1 averaging set. 

(ii) An average carbon-related exhaust emission value calculation will be made 

for the combined LDT2/HLDT/MDPV averaging set. 

(iii) Average carbon-related exhaust emission values shall be determined 

according to the provisions of 40 CFR 600.510-12, except that: 

(A) Total U.S. model year sales data will be used, instead of production data; 
701 

(B) The average carbon-related exhaust emissions for alcohol fueled model types 

shall be calculated according to the provisions of 40 CFR 600.510-12(j)(2)(ii)(B), 

without the use of the 0.15 multiplicative factor. 

(C) The average carbon-related exhaust emissions for natural gas fueled model 

types shall be calculated according to the provisions of 40 CFR 600.510-12(j)(2)(iii)(B), 

without the use of the 0.15 multiplicative factor. 

(D) The average carbon-related exhaust emissions for alcohol dual fueled model 

types shall be the value measured using gasoline or diesel fuel, as applicable, and shall be 

calculated according to the provisions of 40 CFR 600.510-12(j)(2)(vi), without the use of 

the 0.15 multiplicative factor and with F=0. For the 2010 and 2011 model years only, if 

the California Air Resources Board has approved a manufacturer’s request to use a nonzero value of F, the manufacturer may use such an approved value. 

(E) The average carbon-related exhaust emissions for natural gas dual fueled 

model types shall be the value measured using gasoline or diesel fuel, as applicable, and 

shall be calculated according to the provisions of 40 CFR 600.510-12(j)(2)(vii), without 

the use of the 0.15 multiplicative factor and with F=0. For the 2010 and 2011 model 

years only, if the California Air Resources Board has approved a manufacturer’s request 

to use a non-zero value of F, the manufacturer may use such an approved value. 

(F) Carbon-related exhaust emission values for electric, fuel cell electric, and 

plug-in hybrid electric model types shall be included in the fleet average determined 

under paragraph (a)(1) of this section only to the extent that such vehicles are not being 

used to generate early advanced technology vehicle credits under paragraph (c) of this 

section. 

 (iv) Fleet average CO2 credit threshold values. 

Model year LDV/LDT1 LDT2/HLDT/MDPV 

2009 321 437 

2010 299 418 

2011 265 388 

(v) Credits are earned on the last day of the model year. Manufacturers must 

calculate, for a given model year, the number of credits or debits it has generated 

according to the following equation, rounded to the nearest megagram: 

CO2 Credits or Debits (Mg) = [(CO2 Credit Threshold - Manufacturer's Sales 

Weighted Fleet Average CO2 Emissions) × (Total Number of Vehicles Sold) × (Vehicle 

Lifetime Miles)] ÷ 1,000,000 

Where: 

CO2 Credit Threshold = the applicable credit threshold value for the model year 

and vehicle averaging set as determined by paragraph (a)(1)(iv) of this section; 

Manufacturer's Sales Weighted Fleet Average CO2 Emissions = average 

calculated according to paragraph (a)(1)(iii) of this section; 

Total Number of Vehicles Sold = The number of vehicles domestically sold as 

defined in 40 CFR 600.511-80; and 
702 

Vehicle Lifetime Miles is 195,264 for the LDV/LDT1 averaging set and 225,865 

for the LDT2/HLDT/MDPV averaging set. 

(vi) Deficits generated against the applicable CO2 credit threshold values in 

paragraph (a)(1)(iv) of this section in any averaging set for any of the 2009-2011 model 

years must be offset using credits accumulated by any averaging set in any of the 2009-

2011 model years before determining the number of credits that may be carried forward 

to the 2012. Deficit carry forward and credit banking provisions of §86.1865-12 apply to 

early credits earned under this paragraph (a)(1), except that deficits may not be carried 

forward from any of the 2009-2011 model years into the 2012 model year, and credits 

earned in the 2009 model year may not be traded to other manufacturers. 

(2) Pathway 2. To earn credits under this pathway, manufacturers shall calculate 

an average carbon-related exhaust emission value to the nearest one gram per mile for the 

classes of motor vehicles identified in paragraph (a)(1) of this section, and the results of 

such calculations will be reported to the Administrator for use in determining compliance 

with the applicable CO2 early credit threshold values. 

(i) Credits under this pathway shall be calculated according to the provisions of 

paragraph (a)(1) of this section, except credits may only be generated by vehicles sold in 

a model year in California and in states with a section 177 program in effect in that model 

year. For the purposes of this section, “section 177 program” means State regulations or 

other laws that apply to vehicle emissions from any of the following categories of motor 

vehicles: Passenger cars, light-duty trucks up through 6,000 pounds GVWR, and 

medium-duty vehicles from 6,001 to 14,000 pounds GVWR, as these categories of motor 

vehicles are defined in the California Code of Regulations, Title 13, Division 3, Chapter 

1, Article 1, Section 1900. 

(ii) A deficit in any averaging set for any of the 2009-2011 model years must be 

offset using credits accumulated by any averaging set in any of the 2009-2011 model 

years before determining the number of credits that may be carried forward to the 2012 

model year. Deficit carry forward and credit banking provisions of §86.1865-12 apply to 

early credits earned under this paragraph (a)(1), except that deficits may not be carried 

forward from any of the 2009-2011 model years into the 2012 model year, and credits 

earned in the 2009 model year may not be traded to other manufacturers. 

(3) Pathway 3. Pathway 3 credits are those credits earned under Pathway 2 as 

described in paragraph (a)(2) of this section in California and in the section 177 states 

determined in paragraph (a)(2)(i) of this section, combined with additional credits earned 

in the set of states that does not include California and the section 177 states determined 

in paragraph (a)(2)(i) of this section and calculated according to this paragraph (a)(3). 

(i) Manufacturers shall earn additional credits under Pathway 3 by calculating an 

average carbon-related exhaust emission value to the nearest one gram per mile for the 

classes of motor vehicles identified in this paragraph (a)(3). The results of such 

calculations will be reported to the Administrator for use in determining compliance with 

the applicable CO2 early credit threshold values. 

 (ii) An average carbon-related exhaust emission value calculation will be made 

for the passenger automobile averaging set. The term “passenger automobile” shall have 
703 

the meaning given by the Department of Transportation at 49 CFR 523.4 for the specific 

model year for which the calculation is being made. 

(iii) An average carbon-related exhaust emission value calculation will be made 

for the light truck averaging set. The term “light truck” shall have the meaning given by 

the Department of Transportation at 49 CFR 523.5 for the specific model year for which 

the calculation is being made. 

(iv) Average carbon-related exhaust emission values shall be determined 

according to the provisions of 40 CFR 600.510-12, except that: 

(A) Total model year sales data will be used, instead of production data, except 

that vehicles sold in the section 177 states determined in paragraph (a)(2)(i) of this 

section shall not be included; 

(B) The average carbon-related exhaust emissions for alcohol fueled model types 

shall be calculated according to the provisions of 40 CFR 600.510-12(j)(2)(ii)(B), 

without the use of the 0.15 multiplicative factor. 

(C) The average carbon-related exhaust emissions for natural gas fueled model 

types shall be calculated according to the provisions of 40 CFR 600.510-12(j)(2)(iii)(B), 

without the use of the 0.15 multiplicative factor. 

(D) The average carbon-related exhaust emissions for alcohol dual fueled model 

types shall be calculated according to the provisions of 40 CFR 600.510-12(j)(2)(vi), 

without the use of the 0.15 multiplicative factor and with F=0. 

(E) The average carbon-related exhaust emissions for natural gas dual fueled 

model types shall be calculated according to the provisions of 40 CFR 600.510-

12(j)(2)(vii), without the use of the 0.15 multiplicative factor and with F=0. 

(F) 40 CFR 600.510-12(j)(3) shall not apply. Electric, fuel cell electric, and plugin hybrid electric model type carbon-related exhaust emission values shall be included in 

the fleet average determined under paragraph (a)(1) of this section only to the extent that 

such vehicles are not being used to generate early advanced technology vehicle credits 

under paragraph (c) of this section. 

(v) Pathway 3 fleet average CO2 credit threshold values. 

(A) For 2009 and 2010 model year passenger automobiles, the fleet average CO2 

credit threshold value is 323 grams/mile. 

(B) For 2009 model year light trucks the fleet average CO2 credit threshold value 

is 381 grams/mile, or, if the manufacturer chose to optionally meet an alternative 

manufacturer-specific light truck fuel economy standard calculated under 49 CFR 533.5 

for the 2009 model year, the gram per mile fleet average CO2 credit threshold shall be 

the CO2 value determined by dividing 8887 by that alternative manufacturer-specific fuel 

economy standard and rounding to the nearest whole gram per mile. 

(C) For 2010 model year light trucks the fleet average CO2 credit threshold value 

is 376 grams/mile, or, if the manufacturer chose to optionally meet an alternative 

manufacturer-specific light truck fuel economy standard calculated under 49 CFR 533.5 

for the 2010 model year, the gram per mile fleet average CO2 credit threshold shall be 

the CO2 value determined by dividing 8887 by that alternative manufacturer-specific fuel 

economy standard and rounding to the nearest whole gram per mile. 
704 

(D) For 2011 model year passenger automobiles the fleet average CO2 credit 

threshold value is the value determined by dividing 8887 by the manufacturer-specific 

passenger automobile fuel economy standard for the 2011 model year determined under 

49 CFR 531.5 and rounding to the nearest whole gram per mile. 

(E) For 2011 model year light trucks the fleet average CO2 credit threshold value 

is the value determined by dividing 8887 by the manufacturer-specific light truck fuel 

economy standard for the 2011 model year determined under 49 CFR 533.5 and rounding 

to the nearest whole gram per mile. 

(vi) Credits are earned on the last day of the model year. Manufacturers must 

calculate, for a given model year, the number of credits or debits it has generated 

according to the following equation, rounded to the nearest megagram: 

CO2 Credits or Debits (Mg) = [(CO2 Credit Threshold - Manufacturer's Sales 

Weighted Fleet Average CO2 Emissions) × (Total Number of Vehicles Sold) × (Vehicle 

Lifetime Miles)] ÷ 1,000,000 

Where: 

CO2 Credit Threshold = the applicable credit threshold value for the model year 

and vehicle averaging set as determined by paragraph (a)(3)(vii) of this section; 

Manufacturer's Sales Weighted Fleet Average CO2 Emissions = average 

calculated according to paragraph (a)(3)(vi) of this section; 

Total Number of Vehicles Sold = The number of vehicles domestically sold as 

defined in 40 CFR 600.511-80 except that vehicles sold in the section 177 states 

determined in paragraph (a)(2)(i) of this section shall not be included; and 

Vehicle Lifetime Miles is 195,264 for the LDV/LDT1 averaging set and 225,865 

for the LDT2/HLDT/MDPV averaging set. 

(vii) Deficits in any averaging set for any of the 2009-2011 model years must be 

offset using credits accumulated by any averaging set in any of the 2009-2011 model 

years before determining the number of credits that may be carried forward to the 2012. 

Deficit carry forward and credit banking provisions of 86.1865-12 apply to early credits 

earned under this paragraph (a)(3), except that deficits may not be carried forward from 

any of the 2009-2011 model years into the 2012 model year, and credits earned in the 

2009 model year may not be traded to other manufacturers. 

(4) Pathway 4. Pathway 4 credits are those credits earned under Pathway 3 as 

described in paragraph (a)(3) of this section in the set of states that does not include 

California and the section 177 states determined in paragraph (a)(2)(i) of this section and 

calculated according to paragraph (a)(3) of this section. Credits may only be generated by 

vehicles sold in the set of states that does not include the section 177 states determined in 

paragraph (a)(2)(i) of this section. 

(b) Early air conditioning leakage and efficiency credits. (1) Manufacturers may 

optionally generate air conditioning refrigerant leakage credits according to the 

provisions of paragraph (b) of §86.1866-12 and/or air conditioning efficiency credits 

according to the provisions of §86.1866-12(c) in model years 2009 through 2011. The 

early credits are subject to five year carry forward limits based on the model year in 

which the credits are generated. Credits must be tracked by model type and model year. 
705 

(2) Manufacturers that are required to comply with California greenhouse gas 

requirements in model years 2009-2011 (for California and section 177 states) may not 

generate early air conditioning credits for vehicles sold in California and the section 177 

states as determined in paragraph (a)(2)(i) of this section. 

(c) Early advanced technology vehicle incentive. Vehicles eligible for this 

incentive are electric vehicles, fuel cell electric vehicles, and plug-in hybrid electric 

vehicles, as those terms are defined in §86.1803-01. If a manufacturer chooses to not 

include electric vehicles, fuel cell electric vehicles, and plug-in hybrid electric vehicles in 

their fleet averages calculated under any of the early credit pathways described in 

paragraph (a) of this section, the manufacturer may generate early advanced technology 

vehicle credits pursuant to this paragraph (c). 

(1) The manufacturer shall record the sales and carbon-related exhaust emission 

values of eligible vehicles by model type and model year for model years 2009 through 

2011 and report these values to the Administrator under paragraph (e) of this section. 

(2) Manufacturers may use the 2009 through 2011 eligible vehicles in their fleet 

average calculations starting with the 2012 model year, subject to a five-year carryforward limitation. 

(i) Eligible 2009 model year vehicles may be used in the calculation of a 

manufacturer’s fleet average carbon-related exhaust emissions in the 2012 through 2014 

model years. 

(ii) Eligible 2010 model year vehicles may be used in the calculation of a 

manufacturer’s fleet average carbon-related exhaust emissions in the 2012 through 2015 

model years. 

(iii) Eligible 2011 model year vehicles may be used in the calculation of a 

manufacturer’s fleet average carbon-related exhaust emissions in the 2012 through 2016 

model years. 

(3)(i) To use the advanced technology vehicle incentive, the manufacturer will 

apply the 2009, 2010, and/or 2011 model type sales volumes and their model type 

emission levels to a manufacturer’s fleet average calculation. 

(ii) Early advanced technology vehicle incentive must be used to offset a deficit in 

one of the 2012 through 2016 model years, as appropriate under paragraph (c)(2) of this 

section. 

(iii) The advanced technology vehicle sales and emission values may be included 

in a fleet average calculation for passenger automobiles or light trucks, but may not be 

used to generate credits in the model year in which they are included or in the averaging 

set in which they are used. Use of early advanced technology vehicle credits is limited to 

offsetting a deficit that would otherwise be generated without the use of those credits. 

Manufacturers shall report the use of such credits in their model year report for the model 

year in which the credits are used. 

(4) Manufacturers may use zero grams/mile to represent the carbon-related 

exhaust emission values for the electric operation of 2009 through 2011 model year 

electric vehicles, fuel cell electric vehicles, and plug-in hybrid electric vehicles subject to 

the limitations in 86.[insert cite]. The 2009 through 2011 model year vehicles using zero 
706 

grams per mile shall count against the 200,000 or 300,000 caps on use of this credit 

value, whichever is applicable. 

(d) Early off-cycle technology credits. Manufacturers may optionally generate 

credits for the implementation of certain CO2-reducing technologies according to the 

provisions of §86.1866-12(d). 

(e) Early credit reporting requirements. Each manufacturer shall submit a report 

to the Administrator, known as the early credits report, that reports the credits earned in 

the 2009 through 2011 model years under this section. 

(1) The report shall contain all information necessary for the calculation of the 

manufacturer’s early credits in each of the 2009 through 2011 model years. 

(2) The early credits report shall be in writing, signed by the authorized 

representative of the manufacturer and shall be submitted no later than 90 days after the 

end of the 2011 model year. 

(3) Manufacturers using one of the optional early fleet average CO2 reduction 

credit pathways described in paragraph (a) of this section shall report the following 

information separately for the appropriate averaging sets (e.g. LDV/LDT1 and 

LDT2/HLDT/MDPV averaging sets for pathways 1 and 2; LDV, LDT, LDV/LDT1 and 

LDT2/HLDT/MDPV averaging sets for Pathway 3; LDV and LDT/MDPV averaging sets 

for Pathway 4): 

(i) The pathway that they have selected (1, 2, 3, or 4). 

(ii) A carbon-related exhaust emission value for each model type of the 

manufacturer’s product line calculated according to paragraph (a) of this section. 

(iii) The manufacturer’s average carbon-related exhaust emission value calculated 

according to paragraph (a) of this section for the applicable averaging set and region and 

all data required to complete this calculation. 

(iv) The credits earned for each averaging set, model year, and region, as 

applicable. 

(4) Manufacturers calculating early air conditioning leakage and/or efficiency 

credits under paragraph (b) of this section shall report the following information for each 

model year separately for passenger automobiles and light trucks and for each air 

conditioning system used to generate credits: 

(i) A description of the air conditioning system. 

(ii) The leakage credit value and all the information required to determine this 

value. 

(iii) The total credits earned for each averaging set, model year, and region, as 

applicable. 

(5) Manufacturers calculating early advanced technology vehicle credits under 

paragraph (c) of this section shall report, for each model year and separately for 

passenger automobiles and light trucks, the following information: 

(i) The number of each model type of eligible vehicle sold. 

(ii) The carbon-related exhaust emission value by model type and model year. 

(6) Manufacturers calculating early off-cycle technology credits under paragraph 

(d) of this section shall report, for each model year and separately for passenger 

automobiles and light trucks, all test results and data required for calculating such credits. 
707 

PART 600—FUEL ECONOMY AND CARBON-RELATED EXHAUST 

EMISSIONS OF MOTOR VEHICLES 

33. The authority citation for part 600 continues to read as follows: 

Authority: 49 U.S.C. 32901—23919q, Pub. L. 109–58. 

34. The heading for Part 600 is revised as set forth above. 

Subpart A—Fuel Economy and Carbon-related Exhaust Emission Regulations for 

1977 and Later Model Year Automobiles—General Provisions 

35. The heading for subpart A is revised as set forth above. 

36. A new § 600.001-12 is added to subpart A to read as follows: 

§ 600.001-12 General applicability. 

(a) The provisions of this subpart are applicable to 2012 and later model year 

automobiles and to the manufacturers of 2012 and later model year automobiles. 

(b) Fuel economy and related emissions data. Unless stated otherwise, references 

to fuel economy or fuel economy data in this subpart shall also be interpreted to mean the 

related exhaust emissions of CO2, HC, and CO, and where applicable for alternative fuel 

vehicles, CH3OH, C2H5OH, C2H4O, HCHO, NMHC and CH4. References to average fuel 

economy shall be interpreted to also mean average carbon-related exhaust emissions. 

References to fuel economy data vehicles shall also be meant to refer to vehicles tested 

for carbon-related exhaust emissions for the purpose of demonstrating compliance with 

fleet average CO2 standards in 40 CFR 86.1818-12. 

37. Section 600.002-08 is amended as follows: 

a. By adding the definition for “Base tire.” 

b. By adding the definition for “Carbon-related exhaust emissions.” 

c. By adding the definition for “Electric vehicle.” 

d. By adding the definition for “Footprint.” 

e. By adding the definition for “Fuel cell.” 

f. By adding the definition for “Fuel cell electric vehicle.” 

g. By adding the definition for “Hybrid electric vehicle.” 

h. By revising the definition for “Non-passenger automobile.” 

i. By revising the definition for “Passenger automobile.” 

j. By adding the definition for “Plug-in hybrid electric vehicle.” 

k. By adding the definition for “Track width.” 

l. By adding the definition for “Wheelbase.” 

§ 600.002-08 Definitions. 

* * * * * 
708 

Base tire means the tire specified as standard equipment by the manufacturer. 

* * * * * 

Carbon-related exhaust emissions (CREE) means the summation of the carboncontaining constituents of the exhaust emissions, with each constituent adjusted by a 

coefficient representing the carbon weight fraction of each constituent, as specified in 

§600.113-08. 

* * * * * 

Electric vehicle has the meaning given in §86.1803-01 of this chapter. 

* * * * * 

Footprint has the meaning given in §86.1803-01 of this chapter. 

* * * * * 

Fuel cell has the meaning given in §86.1803-01 of this chapter. 

Fuel cell electric vehicle has the meaning given in §86.1803-01 of this chapter. 

* * * * * 

Hybrid electric vehicle (HEV) has the meaning given in §86.1803-01 of this 

chapter. 

* * * * * 

Non-passenger automobile has the meaning given by the Department of 

Transportation at 49 CFR 523.5. This term is synonymous with “light truck.” 

* * * * * 

Passenger automobile has the meaning given by the Department of 

Transportation at 49 CFR 523.4. 

* * * * * 

Plug-in hybrid electric vehicle (PHEV) has the meaning given in §86.1803-01 of 

this chapter. 

* * * * * 

Track width has the meaning given in §86.1803-01 of this chapter. 

* * * * * 

Wheelbase has the meaning given in §86.1803-01 of this chapter. 

* * * * * 

38. Section 600.006-08 is amended as follows: 

a. By revising the heading. 

b. By revising paragraph (b)(2)(ii). 

c. By revising paragraph (b)(2)(iv). 

d. By revising paragraph (c) introductory text. 

e. By adding paragraph (c)(5). 

f. By revising paragraph (e). 

g. By revising paragraph (g)(3). 

§ 600.006-08 Data and information requirements for fuel economy data vehicles. 

* * * * * 

(b) * * * 

(2) * * * 
709 

(ii) In the case of electric vehicles, plug-in hybrid electric vehicles, and hybrid 

electric vehicles, a description of all maintenance to electric motor, motor controller, 

battery configuration, or other components performed within 2,000 miles prior to fuel 

economy testing. 

* * * * * 

(iv) In the case of electric vehicles, plug-in hybrid electric vehicles, and hybrid 

electric vehicles, a copy of calibrations for the electric motor, motor controller, battery 

configuration, or other components on the test vehicle as well as the design tolerances. 

 * * * * * 

(c) The manufacturer shall submit the following fuel economy data: 

* * * * * 

(5) Starting with the 2012 model year, the data submitted according to paragraphs 

(c)(1) through (c)(4) of this section shall include total HC, CO, CO2, and, where 

applicable for alternative fuel vehicles, CH3OH, C2H5OH, C2H4O, HCHO, NMHC and 

CH4. Manufacturers incorporating N2O and CH4 emissions in their fleet average carbonrelated exhaust emissions as allowed under 86.1818(f)(2) shall also submit N2O and CH4

emission data where applicable. The fuel economy and CO2 emission test results shall be 

adjusted in accordance with paragraph (g) of this section. 

* * * * * 

(e) In lieu of submitting actual data from a test vehicle, a manufacturer may 

provide fuel economy values derived from a previously tested vehicle, where the fuel 

economy and carbon-related exhaust emissions are expected to be equivalent (or less 

fuel-efficient and with higher carbon-related exhaust emissions). Additionally, in lieu of 

submitting actual data from a test vehicle, a manufacturer may provide fuel economy and 

carbon-related exhaust emission values derived from an analytical expression, e.g., 

regression analysis. In order for fuel economy values derived from analytical methods to 

be accepted, the expression (form and coefficients) must have been approved by the 

Administrator. 

* * * * * 

(g) * * * 

(3)(i) The manufacturer shall adjust all fuel economy test data generated by 

vehicles with engine-drive system combinations with more than 6,200 miles by using the 

following equation: 

FE4,000mi= FET[0.979 + 5.25×10−6

(mi)]−1

Where: 

FE4,000mi= Fuel economy data adjusted to 4,000-mile test point rounded to the 

nearest 0.1 mpg. 

FET= Tested fuel economy value rounded to the nearest 0.1 mpg. 

mi = System miles accumulated at the start of the test rounded to the nearest 

whole mile. 

(ii)(A) The manufacturer shall adjust all CO2 exhaust emission test data generated 

by vehicles with engine-drive system combinations with more than 6,200 miles by using 

the following equation: 

CO24,000mi= CO2T[0.979 + 5.25×10−6

(mi)] 
710 

Where: 

CO24,000mi= CO2 emission data adjusted to 4,000-mile test point. 

CO2T= Tested emissions value of CO2 in grams per mile. 

mi = System miles accumulated at the start of the test rounded to the nearest 

whole mile. 

(B) Emissions test values and results used and determined in the calculations in 

paragraph (g)(3)(ii) of this section shall be rounded in accordance with 40 CFR 86.1837-

01 as applicable. CO2 values shall be rounded to the nearest gram per mile. 

* * * * * 

39. Section 600.007-08 is amended as follows: 

a. By revising paragraph (b)(4) through (6). 

b. By revising paragraph (c). 

c. By revising paragraph (f) introductory text. 

§ 600.007-08 Vehicle acceptability. 

* * * * * 

(b) * * * 

(4) Each fuel economy data vehicle must meet the same exhaust emission 

standards as certification vehicles of the respective engine-system combination during the 

test in which the city fuel economy test results are generated. This may be demonstrated 

using one of the following methods: 

(i) The deterioration factors established for the respective engine-system 

combination per §86.1841–01 of this chapter as applicable will be used; or 

(ii) The fuel economy data vehicle will be equipped with aged emission control 

components according to the provisions of 86.1823-01 of this chapter. 

(5) The calibration information submitted under §600.006(b) must be 

representative of the vehicle configuration for which the fuel economy and carbon-related 

exhaust emissions data were submitted. 

(6) Any vehicle tested for fuel economy or carbon-related exhaust emissions 

purposes must be representative of a vehicle which the manufacturer intends to produce 

under the provisions of a certificate of conformity. 

* * * * * 

(c) If, based on review of the information submitted under §600.006(b), the 

Administrator determines that a fuel economy data vehicle meets the requirements of this 

section, the fuel economy data vehicle will be judged to be acceptable and fuel economy 

and carbon-related exhaust emissions data from that fuel economy data vehicle will be 

reviewed pursuant to §600.008. 

* * * * * 

(f) All vehicles used to generate fuel economy and carbon-related exhaust 

emissions data, and for which emission standards apply, must be covered by a certificate 

of conformity under part 86 of this chapter before: 

* * * * * 
711 

40. Section 600.008-08 is amended by revising the heading and paragraph (a)(1) to read 

as follows: 

§ 600.008-08 Review of fuel economy and carbon-related exhaust emission data, 

testing by the Administrator. 

(a) Testing by the Administrator. (1) (i) The Administrator may require that any 

one or more of the test vehicles be submitted to the Agency, at such place or places as the 

Agency may designate, for the purposes of conducting fuel economy tests. The 

Administrator may specify that such testing be conducted at the manufacturer's facility, in 

which case instrumentation and equipment specified by the Administrator shall be made 

available by the manufacturer for test operations. The tests to be performed may comprise 

the FTP, highway fuel economy test, US06, SC03, or Cold temperature FTP or any 

combination of those tests. Any testing conducted at a manufacturer's facility pursuant to 

this paragraph shall be scheduled by the manufacturer as promptly as possible. 

(ii) Starting with the 2012 model year, evaluations, testing, and test data described in this 

section pertaining to fuel economy shall also be performed for carbon-related exhaust 

emissions, except that carbon-related exhaust emissions shall be arithmetically averaged 

instead of harmonically averaged, and in cases where the manufacturer selects the lowest 

of several fuel economy results to represent the vehicle, the manufacturer shall select the 

highest of the carbon-related exhaust emissions test results to represent the vehicle. 

* * * * * 

41. Section 600.010-08 is amended by revising paragraph (d) to read as follows: 

§ 600.010-08 Vehicle test requirements and minimum data requirements. 

* * * * * 

(d) Minimum data requirements for the manufacturer's average fuel economy and 

average carbon-related exhaust emissions For the purpose of calculating the 

manufacturer's average fuel economy and average carbon-related exhaust emissions 

under §600.510, the manufacturer shall submit FTP (city) and HFET (highway) test data 

representing at least 90 percent of the manufacturer's actual model year production, by 

configuration, for each category identified for calculation under §600.510–08(a). 

* * * * * 

42. Section 600.011-93 is amended by revising paragraph the table in paragraph (b)(3) by 

adding two new rows to the bottom of the table to read as follows: 

§ 600.011-93 Reference materials. 

* * * * * 
712 

Document No. and name 40 CFR part 600 reference 

* * * * * 

SAE J1634, May 1993, Electric Vehicle 

Energy Consumption and Range Test 

Procedure 

600.113-12 

SAE J2841, March 2009, Utility Factor 

Definitions for Plug-In Hybrid Electric 

Vehicles Using 2001 U.S. DOT National 

Household Travel Survey Data 

600.113-12 
713 

Subpart B—[Amended] 

43. A new § 600.101-12 is added to subpart B to read as follows: 

§ 600.101-12 General applicability. 

(a) The provisions of this subpart are applicable to 2012 and later model year 

automobiles and to the manufacturers of 2012 and later model year automobiles. 

(b) Fuel economy and carbon-related emissions data. Unless stated otherwise, 

references to fuel economy or fuel economy data in this subpart shall also be interpreted 

to mean the related exhaust emissions of CO2, HC, and CO, and where applicable for 

alternative fuel vehicles, CH3OH, C2H5OH, C2H4O, HCHO, NMHC and CH4. References 

to average fuel economy shall be interpreted to also mean average carbon-related exhaust 

emissions. 

44. Section 600.113-08 is amended as follows: 

a. By revising the introductory text. 

b. By revising paragraph (a)(1). 

c. By revising paragraph (b)(1) and (2). 

d. By revising paragraph (c)(1). 

e. By revising paragraph (d)(1) and (2). 

f. By revising paragraph (e). 

g. By revising paragraphs (f)(1)(i) through (iii). 

h. By revising paragraphs (f)(2)(i) through (iii). 

i. By revising paragraphs (f)(3)(i) through (iii). 

g. By adding paragraph (f)(4). 

h. By revising paragraphs (g) through (l). 

i. By adding paragraphs (m) and (n). 

 

§ 600.113-08 Fuel economy calculations for FTP, HFET, US06, SC03 and cold 

temperature FTP tests. 

The Administrator will use the calculation procedure set forth in this paragraph 

for all official EPA testing of vehicles fueled with gasoline, diesel, alcohol-based or 

natural gas fuel. The calculations of the weighted fuel economy values require input of 

the weighted grams/mile values for total hydrocarbons (HC), carbon monoxide (CO), and 

carbon dioxide (CO2); and, additionally for methanol-fueled automobiles, methanol 

(CH3OH) and formaldehyde (HCHO); and, additionally for ethanol-fueled automobiles, 

methanol (CH3OH), ethanol (C2H5OH), acetaldehyde (C2H4O), and formaldehyde 

(HCHO); and additionally for natural gas-fueled vehicles, non-methane hydrocarbons 

(NMHC) and methane (CH4). Emissions shall be determined for the FTP, HFET, US06, 

SC03 and cold temperature FTP tests. Additionally, the specific gravity, carbon weight 

fraction and net heating value of the test fuel must be determined. The FTP, HFET, 

US06, SC03 and cold temperature FTP fuel economy and carbon-related exhaust 

emission values shall be calculated as specified in this section. An example fuel economy 

calculation appears in Appendix II of this part. 
714 

(a) * * * 

(1) Calculate the weighted grams/mile values for the FTP test for CO2, HC, and 

CO, and where applicable, CH3OH, C2H5OH, C2H4O, HCHO, NMHC, N2O and CH4 as 

specified in §86.144(b) of this chapter. Measure and record the test fuel's properties as 

specified in paragraph (f) of this section. 

* * * * * 

(b) * * * 

(1) Calculate the mass values for the highway fuel economy test for HC, CO and 

CO2, and where applicable, CH3OH, C2H5OH, C2H4O, HCHO, NMHC, N2O and CH4 as 

specified in §86.144(b) of this chapter. Measure and record the test fuel's properties as 

specified in paragraph (f) of this section. 

(2) Calculate the grams/mile values for the highway fuel economy test for HC, 

CO and CO2, and where applicable CH3OH, C2H5OH, C2H4O, HCHO, NMHC, N2O and 

CH4 by dividing the mass values obtained in paragraph (b)(1) of this section, by the 

actual distance traveled, measured in miles, as specified in §86.135(h) of this chapter. 

* * * * * 

(c) * * * 

(1) Calculate the weighted grams/mile values for the cold temperature FTP test 

for HC, CO and CO2, and where applicable, CH3OH, C2H5OH, C2H4O, HCHO, NMHC, 

N2O and CH4 as specified in §86.144(b) of this chapter. For 2008 through 2010 dieselfueled vehicles, HC measurement is optional. 

* * * * * 

(d) * * * 

(1) Calculate the total grams/mile values for the US06 test for HC, CO and CO2, 

and where applicable, CH3OH, C2H5OH, C2H4O, HCHO, NMHC, N2O and CH4 as 

specified in §86.144(b) of this chapter. 

(2) Calculate separately the grams/mile values for HC, CO and CO2, and where 

applicable, CH3OH, C2H5OH, C2H4O, HCHO, NMHC, N2O and CH4, for both the US06 

City phase and the US06 Highway phase of the US06 test as specified in §86.164 of this 

chapter. In lieu of directly measuring the emissions of the separate city and highway 

phases of the US06 test according to the provisions of §86.159 of this chapter, the 

manufacturer may, with the advance approval of the Administrator and using good 

engineering judgment, optionally analytically determine the grams/mile values for the 

city and highway phases of the US06 test. To analytically determine US06 City and 

US06 Highway phase emission results, the manufacturer shall multiply the US06 total 

grams/mile values determined in paragraph (d)(1) of this section by the estimated 

proportion of fuel use for the city and highway phases relative to the total US06 fuel use. 

The manufacturer may estimate the proportion of fuel use for the US06 City and US06 

Highway phases by using modal CO2, HC, and CO emissions data, or by using 

appropriate OBD data (e.g., fuel flow rate in grams of fuel per second), or another 

method approved by the Administrator. 

* * * * * 

(e) Calculate the SC03 fuel economy. 
715 

(1) Calculate the grams/mile values for the SC03 test for HC, CO and CO2, and 

where applicable, CH3OH, C2H5OH, C2H4O, HCHO, NMHC, N2O and CH4 as specified 

in §86.144(b) of this chapter. 

(2) Measure and record the test fuel's properties as specified in paragraph (f) of 

this section. 

(f) * * * 

(1) * * * 

(i) Specific gravity measured using ASTM D 1298–85 (Reapproved 1990) 

“Standard Practice for Density, Relative Density (Specific Gravity), or API Gravity of 

Crude Petroleum and Liquid Petroleum Products by Hydrometer Method” (incorporated 

by reference at §600.011-93). 

(ii) Carbon weight fraction measured using ASTM D 3343–90 “Standard Test 

Method for Estimation of Hydrogen Content of Aviation Fuels” (incorporated by 

reference at §600.011-93). 

(iii) Net heating value (Btu/lb) determined using ASTM D 3338–92 “Standard 

Test Method for Estimation of Net Heat of Combustion of Aviation Fuels” (incorporated 

by reference at §600.011-93). 

(2) * * * 

(i) Specific gravity using either: 

(A) ASTM D 1298–85 (Reapproved 1990) “Standard Practice for Density, 

Relative Density (Specific Gravity), or API Gravity of Crude Petroleum and Liquid 

Petroleum Products by Hydrometer Method” (incorporated by reference at §600.011-93) 

for the blend, or: 

(B) ASTM D 1298–85 (Reapproved 1990) “Standard Practice for Density, 

Relative Density (Specific Gravity), or API Gravity of Crude Petroleum and Liquid 

Petroleum Products by Hydrometer Method” (incorporated by reference at §600.011-93) 

for the gasoline fuel component and also for the methanol fuel component and combining 

as follows. 

SG = SGg× volume fraction gasoline + SGm× volume fraction methanol. 

(ii)(A) Carbon weight fraction using the following equation: 

CWF = CWFg× MFg+ 0.375 × MFm 

Where: 

CWFg= Carbon weight fraction of gasoline portion of blend measured using 

ASTM D 3343–90 “Standard Test Method for Estimation of Hydrogen Content of 

Aviation Fuels” (incorporated by reference at § 600.011-93). 

MFg=Mass fraction gasoline=(G × SGg)/(G × SGg+ M × SGm) 

MFm=Mass fraction methanol=(M × SGm)/(G × SGg+ M × SGm) 

Where: 

G=Volume fraction gasoline. 

M=Volume fraction methanol. 

SGg=Specific gravity of gasoline as measured using ASTM D 1298–85 

(Reapproved 1990) “Standard Practice for Density, Relative Density (Specific Gravity), 

or API Gravity of Crude Petroleum and Liquid Petroleum Products by Hydrometer 

Method” (incorporated by reference at §600.011-93). 
716 

SGm=Specific gravity of methanol as measured using ASTM D 1298–85 

(Reapproved 1990) “Standard Practice for Density, Relative Density (Specific Gravity), 

or API Gravity of Crude Petroleum and Liquid Petroleum Products by Hydrometer 

Method” (incorporated by reference at §600.011-93). 

(B) Upon the approval of the Administrator, other procedures to measure the 

carbon weight fraction of the fuel blend may be used if the manufacturer can show that 

the procedures are superior to or equally as accurate as those specified in this paragraph 

(f)(2)(ii). 

(iii) Net heating value (BTU/lb) measured using ASTM D 240–92 “Standard Test 

Method for Heat of Combustion of Liquid Hydrocarbon Fuels by Bomb Calorimeter” 

(incorporated by reference at §600.011-93). 

(3) * * * 

(i) Fuel composition measured using ASTM D 1945–91 “Standard Test Method 

for Analysis of Natural Gas By Gas Chromatography” (incorporated by reference at 

§600.011-93). 

(ii) Specific gravity measured as based on fuel composition per ASTM D 1945–

91 “Standard Test Method for Analysis of Natural Gas by Gas Chromatography” 

(incorporated by reference at §600.011-93). 

(iii) Carbon weight fraction, based on the carbon contained only in the 

hydrocarbon constituents of the fuel. This equals the weight of carbon in the hydrocarbon 

constituents divided by the total weight of fuel. 

(iv) Carbon weight fraction of the fuel, which equals the total weight of carbon in 

the fuel (i.e , includes carbon contained in hydrocarbons and in CO2) divided by the total 

weight of fuel. 

(4) Ethanol test fuel shall be analyzed to determine the following fuel properties: 

(i) Specific gravity using either: 

(A) ASTM D 1298–85 (Reapproved 1990) “Standard Practice for Density, 

Relative Density (Specific Gravity), or API Gravity of Crude Petroleum and Liquid 

Petroleum Products by Hydrometer Method” (incorporated by reference at §600.011-93) 

for the blend. or: 

(B) ASTM D 1298–85 (Reapproved 1990) “Standard Practice for Density, 

Relative Density (Specific Gravity), or API Gravity of Crude Petroleum and Liquid 

Petroleum Products by Hydrometer Method” (incorporated by reference at §600.011-93) 

for the gasoline fuel component and also for the methanol fuel component and combining 

as follows. 

SG = SGg× volume fraction gasoline + SGm× volume fraction ethanol. 

(ii)(A) Carbon weight fraction using the following equation: 

CWF = CWFg× MFg+ 0.375 × MFe 

Where: 

CWFg= Carbon weight fraction of gasoline portion of blend measured using 

ASTM D 3343–90 “Standard Test Method for Estimation of Hydrogen Content of 

Aviation Fuels” (incorporated by reference at §600.011-93). 

MFg=Mass fraction gasoline=(G × SGg)/(G × SGg+ E × SGm) 

MFe=Mass fraction methanol=(E × SGm)/(G × SGg+ E × SGm) 
717 

Where: 

G=Volume fraction gasoline. 

E=Volume fraction ethanol. 

SGg=Specific gravity of gasoline as measured using ASTM D 1298–85 

(Reapproved 1990) “Standard Practice for Density, Relative Density (Specific Gravity), 

or API Gravity of Crude Petroleum and Liquid Petroleum Products by Hydrometer 

Method” (incorporated by reference at §600.011-93). 

SGm=Specific gravity of methanol as measured using ASTM D 1298–85 

(Reapproved 1990) “Standard Practice for Density, Relative Density (Specific Gravity), 

or API Gravity of Crude Petroleum and Liquid Petroleum Products by Hydrometer 

Method” (incorporated by reference at §600.011-93). 

(B) Upon the approval of the Administrator, other procedures to measure the 

carbon weight fraction of the fuel blend may be used if the manufacturer can show that 

the procedures are superior to or equally as accurate as those specified in this paragraph 

(f)(2)(ii). 

(iii) Net heating value (BTU/lb) measured using ASTM D 240–92 “Standard Test 

Method for Heat of Combustion of Liquid Hydrocarbon Fuels by Bomb Calorimeter” 

(incorporated by reference at §600.011-93). 

* * * * * 

(g) Calculate separate FTP, highway, US06, SC03 and Cold temperature FTP fuel 

economy and carbon-related exhaust emissions from the grams/mile values for total HC, 

CO, CO2 and, where applicable, CH3OH, C2H5OH, C2H4O, HCHO, NMHC, N2O, and 

CH4, and the test fuel's specific gravity, carbon weight fraction, net heating value, and 

additionally for natural gas, the test fuel's composition. 

(1) Emission values for fuel economy calculations. The emission values (obtained 

per paragraph (a) through (e) of this section, as applicable) used in the calculations of fuel 

economy in this section shall be rounded in accordance with §86.094–26(a)(6)(iii) or 

§86.1837–01 of this chapter as applicable. The CO2 values (obtained per this section, as 

applicable) used in each calculation of fuel economy in this section shall be rounded to 

the nearest gram/mile. 

(2) Emission values for carbon-related exhaust emission calculations. 

(i) If the emission values (obtained per paragraph (a) through (e) of this section, 

as applicable) were obtained from testing with aged exhaust emission control components 

as allowed under §86.1823-08, then these test values shall be used in the calculations of 

carbon-related exhaust emissions in this section. 

(ii) If the emission values (obtained per paragraph (a) through (e) of this section, 

as applicable) were not obtained from testing with aged exhaust emission control 

components as allowed under §86.1823-08, then these test values shall be adjusted by the 

appropriate deterioration factor determined according to §86.1823-08 before being used 

in the calculations of carbon-related exhaust emissions in this section. For vehicles within 

a test group, the appropriate NMOG deterioration factor may be used in lieu of the 

deterioration factors for CH3OH, C2H5OH, and/or C2H4O emissions. 

(iii) The emission values determined in paragraph (g)(2)(A) or (B) of this section 

shall be rounded in accordance with §86.094–26(a)(6)(iii) or §86.1837–01 of this chapter 
718 

as applicable. The CO2 values (obtained per this section, as applicable) used in each 

calculation of carbon-related exhaust emissions in this section shall be rounded to the 

nearest gram/mile. 

(iv) For manufacturers selecting the fleet averaging option for N2O and CH4 as 

allowed under 40 CFR 86.1818-12(f)(2), and for the 2012 through 2014 model years 

only, manufacturers may use one of the two options in this paragraph (g)(2)(D) for 

determining N2O emission values for use in the calculation of carbon-related exhaust 

emissions in this section. 

(A) The manufacturer may use FTP and HFET test values determined for the 

emission data vehicle according to the provisions of 86.1835-01. These values shall apply 

to all vehicles tested under this section that are included in the test group represented by 

the emission data vehicle and shall be adjusted by the appropriate deterioration factor 

determined according to §86.1823-01 before being used in the calculations of carbonrelated exhaust emissions in this section. 

(B) The manufacturer may use an assigned value of 0.010 g/mi for N2O FTP and 

HFET test values. This value is not required to be adjusted by a deterioration factor. 

(3) The specific gravity and the carbon weight fraction (obtained per paragraph (f) 

of this section) shall be recorded using three places to the right of the decimal point. The 

net heating value (obtained per paragraph (f) of this section) shall be recorded to the 

nearest whole Btu/lb. 

(4) For the purpose of determining the applicable in-use emission standard under 

§86.1818-12(d), the combined city/highway carbon-related exhaust emission value for a 

vehicle subconfiguration is calculated by arithmetically averaging the FTP-based city and 

HFET-based highway carbon-related exhaust emission values, as determined in 

§600.113(a) and (b) of this section for the subconfiguration, weighted 0.55 and 0.45 

respectively, and rounded to the nearest tenth of a gram per mile. 

(h)(1) For gasoline-fueled automobiles tested on test fuel specified in §86.113–

04(a), the fuel economy in miles per gallon is to be calculated using the following 

equation and rounded to the nearest 0.1 miles per gallon: 

mpg = (5174 × 104

 × CWF × SG)/[((CWF × HC) + (0.429 × CO) + (0.273 × 

CO2)) × ((0.6 × SG × NHV) + 5471)] 

Where: 

HC = Grams/mile HC as obtained in paragraph (g) of this section. 

CO = Grams/mile CO as obtained in paragraph (g) of this section. 

CO2= Grams/mile CO2 as obtained in paragraph (g) of this section. 

CWF = Carbon weight fraction of test fuel as obtained in paragraph (g) of this 

section. 

NHV = Net heating value by mass of test fuel as obtained in paragraph (g) of this 

section. 

SG = Specific gravity of test fuel as obtained in paragraph (g) of this section. 

(2)(A) For 2012 and later model year gasoline-fueled automobiles tested on test 

fuel specified in §86.113–04(a), the carbon-related exhaust emissions in grams per mile is 

to be calculated using the following equation and rounded to the nearest 1 gram per mile: 

CREE = CWF*HC + 1.571*CO + CO2
719 

Where: 

CREE means the carbon-related exhaust emissions as defined in § 600.002-08. 

HC = Grams/mile HC as obtained in paragraph (g) of this section. 

CO = Grams/mile CO as obtained in paragraph (g) of this section. 

CO2= Grams/mile CO2 as obtained in paragraph (g) of this section. 

CWF = Carbon weight fraction of test fuel as obtained in paragraph (g) of this 

section. 

(B) For manufacturers selecting the fleet averaging option for N2O and CH4 as 

allowed under 40 CFR 86.1818-12(f)(2), the carbon-related exhaust emissions in grams 

per mile for 2012 and later model year gasoline-fueled automobiles tested on test fuel 

specified in §86.113–04(a) is to be calculated using the following equation and rounded 

to the nearest 1 gram per mile: 

CREE = CWFNMHC×NMHC + 1.571×CO + CO2 + 298×N2O + 25×CH4

Where: 

CREE means the carbon-related exhaust emissions as defined in § 600.002-08. 

NMHC = Grams/mile NMHC as obtained in paragraph (g) of this section. 

CO = Grams/mile CO as obtained in paragraph (g) of this section. 

CO2= Grams/mile CO2 as obtained in paragraph (g) of this section. 

N2O= Grams/mile N2O as obtained in paragraph (g) of this section. 

CH4= Grams/mile CH4 as obtained in paragraph (g) of this section. 

CWFNMHC = carbon weight fraction of the non-methane HC constituents in the 

fuel as determined from the speciated fuel composition per paragraph (f)(3) of this 

section. 

(i)(1) For diesel-fueled automobiles, calculate the fuel economy in miles per 

gallon of diesel fuel by dividing 2778 by the sum of three terms and rounding the 

quotient to the nearest 0.1 mile per gallon: 

(i)(A) 0.866 multiplied by HC (in grams/miles as obtained in paragraph (g) of this 

section), or 

(B) Zero, in the case of cold FTP diesel tests for which HC was not collected, as 

permitted in §600.113–08(c); 

(ii) 0.429 multiplied by CO (in grams/mile as obtained in paragraph (g) of this 

section); and 

(iii) 0.273 multiplied by CO2 (in grams/mile as obtained in paragraph (g) of this 

section). 

(2)(A) For 2012 and later model year diesel-fueled automobiles, the carbonrelated exhaust emissions in grams per mile is to be calculated using the following 

equation and rounded to the nearest 1 gram per mile: 

CREE = 0.866*HC + 1.571*CO + CO2

Where: 

CREE means the carbon-related exhaust emissions as defined in § 600.002-08. 

HC = Grams/mile HC as obtained in paragraph (g) of this section. 

CO = Grams/mile CO as obtained in paragraph (g) of this section. 

CO2= Grams/mile CO2 as obtained in paragraph (g) of this section. 
720 

(B) For manufacturers selecting the fleet averaging option for N2O and CH4 as 

allowed under 40 CFR 86.1818-12(f)(2), the carbon-related exhaust emissions in grams 

per mile for 2012 and later model year diesel-fueled automobiles is to be calculated using 

the following equation and rounded to the nearest 1 gram per mile: 

CREE = 0.866×NMHC + 1.571×CO + CO2 + 298×N2O + 25×CH4

Where: 

CREE means the carbon-related exhaust emissions as defined in § 600.002-08. 

NMHC = Grams/mile NMHC as obtained in paragraph (g) of this section. 

CO = Grams/mile CO as obtained in paragraph (g) of this section. 

CO2= Grams/mile CO2 as obtained in paragraph (g) of this section. 

N2O= Grams/mile N2O as obtained in paragraph (g) of this section. 

CH4= Grams/mile CH4 as obtained in paragraph (g) of this section. 

(j)(1) For methanol-fueled automobiles and automobiles designed to operate on 

mixtures of gasoline and methanol, the fuel economy in miles per gallon is to be 

calculated using the following equation: 

mpg = (CWF × SG × 3781.8)/((CWFexHC× HC) + (0.429 × CO) + (0.273 × CO2) 

+ (0.375 × CH3OH) + (0.400 × HCHO)) 

Where: 

CWF = Carbon weight fraction of the fuel as determined in paragraph (f)(2)(ii) of 

this section. 

SG = Specific gravity of the fuel as determined in paragraph (f)(2)(i) of this 

section. 

CWFexHC= Carbon weight fraction of exhaust hydrocarbons = CWFg as 

determined in (f)(2)(ii) of this section (for M100 fuel, CWFexHC= 0.866). 

HC = Grams/mile HC as obtained in paragraph (g) of this section. 

CO = Grams/mile CO as obtained in paragraph (g) of this section. 

CO2= Grams/mile CO2as obtained in paragraph (g) of this section. 

CH3OH = Grams/mile CH3OH (methanol) as obtained in paragraph (d) of this 

section. 

HCHO = Grams/mile HCHO (formaldehyde) as obtained in paragraph (g) of this 

section. 

(2)(A) For 2012 and later model year methanol-fueled automobiles and 

automobiles designed to operate on mixtures of gasoline and methanol, the carbon-related 

exhaust emissions in grams per mile is to be calculated using the following equation and 

rounded to the nearest 1 gram per mile: 

CREE = (CWFexHC× HC) + (1.571 × CO) + (1.374 × CH3OH) + (1.466 × HCHO) 

+ CO2

Where: 

CREE means the carbon-related exhaust emission value as defined in § 600.002-

08. 

CWFexHC= Carbon weight fraction of exhaust hydrocarbons = CWFg as 

determined in (f)(2)(ii) of this section (for M100 fuel, CWFexHC= 0.866). 

HC = Grams/mile HC as obtained in paragraph (g) of this section. 

CO = Grams/mile CO as obtained in paragraph (g) of this section. 
721 

CO2= Grams/mile CO2as obtained in paragraph (g) of this section. 

CH3OH = Grams/mile CH3OH (methanol) as obtained in paragraph (d) of this 

section. 

HCHO = Grams/mile HCHO (formaldehyde) as obtained in paragraph (g) of this 

section. 

(B) For manufacturers selecting the fleet averaging option for N2O and CH4 as 

allowed under 40 CFR 86.1818-12(f)(2), the carbon-related exhaust emissions in grams 

per mile for 2012 and later model year methanol-fueled automobiles and automobiles 

designed to operate on mixtures of gasoline and methanol is to be calculated using the 

following equation and rounded to the nearest 1 gram per mile: 

CREE = (CWFexHC× HC) + (1.571 × CO) + (1.374 × CH3OH) + (1.466 × HCHO) 

+ CO2 + 298×N2O + 25×CH4

Where: 

CREE means the carbon-related exhaust emission value as defined in § 600.002-

08. 

CWFexHC= Carbon weight fraction of exhaust hydrocarbons = CWFg as 

determined in (f)(2)(ii) of this section (for M100 fuel, CWFexHC= 0.866). 

HC = Grams/mile HC as obtained in paragraph (g) of this section. 

CO = Grams/mile CO as obtained in paragraph (g) of this section. 

CO2= Grams/mile CO2as obtained in paragraph (g) of this section. 

CH3OH = Grams/mile CH3OH (methanol) as obtained in paragraph (d) of this 

section. 

HCHO = Grams/mile HCHO (formaldehyde) as obtained in paragraph (g) of this 

section. 

N2O= Grams/mile N2O as obtained in paragraph (g) of this section. 

CH4= Grams/mile CH4 as obtained in paragraph (g) of this section. 

(k)(1) For automobiles fueled with natural gas, the fuel economy in miles per 

gallon of natural gas is to be calculated using the following equation: 

( )( )( ) ( ) ( ) NMHC NG

HC NG NG

e CH CWF NMHC CO CO CO

CWF D

mpg

4 2 2

/

0.749 0.429 0.273

121.5

× + × + × + × −

× × =

Where: 

mpge=miles per equivalent gallon of natural gas. 

CWFHC/NG=carbon weight fraction based on the hydrocarbon constituents in the 

natural gas fuel as obtained in paragraph (g) of this section. 

DNG=density of the natural gas fuel [grams/ft3

 at 68 °F (20 °C) and 760 mm Hg 

(101.3 kPa)] pressure as obtained in paragraph (g) of this section. 

CH4, NMHC, CO, and CO2 = weighted mass exhaust emissions [grams/mile] for 

methane, non-methane HC, carbon monoxide, and carbon dioxide as calculated in 

§600.113. 

CWFNMHC = carbon weight fraction of the non-methane HC constituents in the 

fuel as determined from the speciated fuel composition per paragraph (f)(3) of this 

section. 
722 

CO2NG = grams of carbon dioxide in the natural gas fuel consumed per mile of 

travel. 

CO2NG = FCNG × DNG × WFCO2

Where: 

( )( ) ( ) ( )

NG NG

4 NMHC 2

NG CWF D

0.749 CH CWF NMHC 0.429 CO 0.273 CO FC ×

× + × + × + × =

= cubic feet of natural gasfuel consumed per mile

Where: 

CWFNG = the carbon weight fraction of the natural gas fuel as calculated in 

paragraph (f) of this section. 

WFCO2 = weight fraction carbon dioxide of the natural gas fuel calculated using 

the mole fractions and molecular weights of the natural gas fuel constituents per ASTM 

D 1945–91 “Standard Test Method for Analysis of Natural Gas by Gas Chromatography” 

(incorporated by reference at § 600.011-93). 

(2)(A) For automobiles fueled with natural gas, the carbon-related exhaust 

emissions in grams per mile is to be calculated for 2012 and later model year vehicles 

using the following equation and rounded to the nearest 1 gram per mile: 

CREE = 10.916 × CH4 + CWFNMHC × NMHC + 1.571 × CO + CO2

Where: 

CREE means the carbon-related exhaust emission value as defined in § 600.002-

08. 

CH4 = Grams/mile CH4 as obtained in paragraph (g) of this section. 

NMHC = Grams/mile NMHC as obtained in paragraph (g) of this section. 

CO = Grams/mile CO as obtained in paragraph (g) of this section. 

CO2= Grams/mile CO2 as obtained in paragraph (g) of this section. 

CWFNMHC=carbon weight fraction of the non-methane HC constituents in the fuel 

as determined from the speciated fuel composition per paragraph (f)(3) of this section. 

(B) For manufacturers selecting the fleet averaging option for N2O and CH4 as 

allowed under 40 CFR 86.1818-12(f)(2), the carbon-related exhaust emissions in grams 

per mile for 2012 and later model year automobiles fueled with natural gas is to be 

calculated using the following equation and rounded to the nearest 1 gram per mile: 

CREE = 10.916 × 25 × CH4 + CWFNMHC × NMHC + 1.571 × CO + CO2 + 

298×N2O 

Where: 

CREE means the carbon-related exhaust emission value as defined in § 600.002-

08. 

CH4 = Grams/mile CH4 as obtained in paragraph (g) of this section. 

NMHC = Grams/mile NMHC as obtained in paragraph (g) of this section. 

CO = Grams/mile CO as obtained in paragraph (g) of this section. 

CO2= Grams/mile CO2 as obtained in paragraph (g) of this section. 

CWFNMHC=carbon weight fraction of the non-methane HC constituents in the fuel 

as determined from the speciated fuel composition per paragraph (f)(3) of this section. 

N2O= Grams/mile N2O as obtained in paragraph (g) of this section. 
723 

 (l)(1) For ethanol-fueled automobiles and automobiles designed to operate on 

mixtures of gasoline and ethanol, the fuel economy in miles per gallon is to be calculated 

using the following equation: 

mpg = (CWF × SG × 3781.8)/((CWFexHC× HC) + (0.429 × CO) + (0.273 × CO2) 

+ (0.375 × CH3OH) + (0.400 × HCHO) + (0.521 × C2H5OH) + (0.545 × C2H4O)) 

Where: 

CWF = Carbon weight fraction of the fuel as determined in paragraph (f)(4) of 

this section. 

SG = Specific gravity of the fuel as determined in paragraph (f)(4) of this section. 

CWFexHC= Carbon weight fraction of exhaust hydrocarbons = CWFg as 

determined in (f)(4) of this section. 

HC = Grams/mile HC as obtained in paragraph (g) of this section. 

CO = Grams/mile CO as obtained in paragraph (g) of this section. 

CO2= Grams/mile CO2 as obtained in paragraph (g) of this section. 

CH3OH = Grams/mile CH3OH (methanol) as obtained in paragraph (d) of this 

section. 

HCHO = Grams/mile HCHO (formaldehyde) as obtained in paragraph (g) of this 

section. 

C2H5OH = Grams/mile C2H5OH (ethanol) as obtained in paragraph (d) of this 

section. 

C2H4O = Grams/mile C2H4O (acetaldehyde) as obtained in paragraph (d) of this 

section. 

(2)(A) For 2012 and later model year ethanol-fueled automobiles and automobiles 

designed to operate on mixtures of gasoline and ethanol, the carbon-related exhaust 

emissions in grams per mile is to be calculated using the following equation and rounded 

to the nearest 1 gram per mile: 

CREE = (CWFexHC× HC) + (1.571 × CO) + (1.374 × CH3OH) + (1.466 × HCHO) 

+ (0.955 × C2H5OH) + (0.999 × C2H4O) + CO2

Where: 

CREE means the carbon-related exhaust emission value as defined in § 600.002-

08. 

CWFexHC= Carbon weight fraction of exhaust hydrocarbons = CWFg as 

determined in (f)(4) of this section. 

HC = Grams/mile HC as obtained in paragraph (g) of this section. 

CO = Grams/mile CO as obtained in paragraph (g) of this section. 

CO2= Grams/mile CO2as obtained in paragraph (g) of this section. 

CH3OH = Grams/mile CH3OH (methanol) as obtained in paragraph (d) of this 

section. 

HCHO = Grams/mile HCHO (formaldehyde) as obtained in paragraph (g) of this 

section. 

C2H5OH = Grams/mile C2H5OH (ethanol) as obtained in paragraph (d) of this 

section. 

C2H4O = Grams/mile C2H4O (acetaldehyde) as obtained in paragraph (d) of this 

section. 
724 

(B) For manufacturers selecting the fleet averaging option for N2O and CH4 as 

allowed under 40 CFR 86.1818-12(f)(2), the carbon-related exhaust emissions in grams 

per mile for 2012 and later model year ethanol-fueled automobiles and automobiles 

designed to operate on mixtures of gasoline and ethanol is to be calculated using the 

following equation and rounded to the nearest 1 gram per mile: 

CREE = (CWFexHC× HC) + (1.571 × CO) + (1.374 × CH3OH) + (1.466 × HCHO) 

+ (0.955 × C2H5OH) + (0.999 × C2H4O) + CO2 + 298×N2O + 25×CH4

Where: 

CREE means the carbon-related exhaust emission value as defined in §600.002-

08. 

CWFexHC= Carbon weight fraction of exhaust hydrocarbons = CWFg as 

determined in (f)(4) of this section. 

HC = Grams/mile HC as obtained in paragraph (g) of this section. 

CO = Grams/mile CO as obtained in paragraph (g) of this section. 

CO2= Grams/mile CO2as obtained in paragraph (g) of this section. 

CH3OH = Grams/mile CH3OH (methanol) as obtained in paragraph (d) of this 

section. 

HCHO = Grams/mile HCHO (formaldehyde) as obtained in paragraph (g) of this 

section. 

C2H5OH = Grams/mile C2H5OH (ethanol) as obtained in paragraph (d) of this 

section. 

C2H4O = Grams/mile C2H4O (acetaldehyde) as obtained in paragraph (d) of this 

section. 

N2O= Grams/mile N2O as obtained in paragraph (g) of this section. 

CH4= Grams/mile CH4 as obtained in paragraph (g) of this section. 

(m) Carbon-related exhaust emissions for advanced technology vehicles. 

Manufacturers shall determine carbon-related exhaust emissions for electric vehicles, fuel 

cell electric vehicles, and plug-in hybrid electric vehicles according to the provisions of 

this paragraph (m). In lieu of the calculations described in paragraphs (m)(1) and (2) of 

this section, and subject to the limitations described in §86.1866-12(a), the manufacturer 

may be allowed to use a value of 0 grams/mile to represent the proportion of electric 

operation of a vehicle that is derived from electricity that is generated from sources that 

are not onboard the vehicle. 

(1) For 2012 and later model year electric vehicles, including fuel cell electric 

vehicles, the carbon-related exhaust emissions in grams per mile is to be calculated using 

the following equation and rounded to the nearest one gram per mile: 

CREE = CREEUP - CREEGAS

Where: 

CREE means the carbon-related exhaust emission value as defined in §600.002-

08, which may shall be set equal to zero for eligible 2012 through 2016 model year 

vehicles as described in §86.1866-12(a). 

CREEUP = EC × (0.642 / (0.93 × 0.90)), and 
725 

CREEGAS = TargetCO2 / (2208/8887), 

Where: 

EC = The vehicle energy consumption in watt-hours per mile. 

TargetCO2 = The CO2 Target Value determined according to §86.1818-12(c)(2) 

for passenger automobiles and according to §86.1818-12(c)(3) for light trucks. 

(2) For 2012 and later model year plug-in hybrid electric vehicles the carbonrelated exhaust emissions in grams per mile is to be calculated using the following 

equation and rounded to the nearest one gram per mile: 

(n) Equations for fuels other than those specified in paragraphs (h) through (l) of 

this section may be used with advance EPA approval. Alternate calculation methods for 

fuel economy and carbon-related exhaust emissions may be used in lieu of the methods 

described in this section if shown to yield equivalent or superior results and if approved 

in advance by the Administrator. 

45. Section 600.114-08 is amended as follows: 

a. By revising the heading. 

b. By revising the introductory text. 

c. By adding paragraphs (d) through (f). 

§ 600.114-08 Vehicle-specific 5-cycle fuel economy and carbon-related exhaust 

emission calculations. 

Paragraphs (a) through (c) of this section apply to data used for fuel economy 

labeling under Subpart D of this part. Paragraphs (d) through (f) of this section are used 

to calculate 5-cycle carbon-related exhaust emissions values for the purpose of 

determining optional technology-based CO2 emissions credits under the provisions of 

paragraph (d) of §86.1866-12 of this title. 

* * * * * 

(d) City carbon-related exhaust emission value. For each vehicle tested, determine 

the 5-cycle city carbon-related exhaust emissions using the following equation: 

(1) CityCREE = 0.905× ( ) StartCREE + RunningCREE

Where: 

(i) StartCREE = 

( )⎟

⎠

⎞ ⎜

⎝

⎛ × + × × 4.1

0.76 StartCREE 0.24 StartCREE 0.33 75 20

Where: 

( ) X X CREEX StartCREE = 3.6× Bag1CREE − Bag3

Where: 

Bag Y CREEX= the carbon-related exhaust emissions in grams per mile during 

the specified bag of the FTP test conducted at an ambient temperature of 75 °F or 20 °F. 

(ii) Running CREE = 
726 

[ ] ( ) ( ) ( )

[ ] ( )( )

0.144 [ ] SC03CREE ( ) ( )( ) 0.61 Bag3 CREE 0.39 Bag2 CREE

0.18 0.5 Bag2 CREE 0.5 Bag3 CREE

0.82 0.48 Bag2 CREE 0.41 Bag3 CREE 0.11 US06CityCREE

75 75

20 20

75 75

× − × + ×

× × + × +

× × + × + × +

Where: 

BagYXCREE =carbon-related exhaust emissions in grams per mile over Bag Y at 

temperature X. 

US06 City CREE = carbon-related exhaust emissions in grams per mile over the 

“city” portion of the US06 test. 

SC03 CREE = carbon-related exhaust emissions in grams per mile over the SC03 

test. 

(e) Highway carbon-related exhaust emissions. (1) For each vehicle tested, 

determine the 5-cycle highway carbon-related exhaust emissions using the following 

equation: 

HighwayCREE = 0.905× ( ) StartCREE + RunningCREE

Where: 

(i) StartCREE = 

 ( )⎟

⎠

⎞ ⎜

⎝

⎛ × + × = × 60

0.76 StartCREE 0.24 StartCREE 0.33 75 20

Where: 

( ) StartCREEX = 3.6× Bag1CREEX − Bag3CREEX

(ii) Running CREE = 

[ ] ( ) ( )

[ ] SC CREE ( ) ( )( ) Bag CREE Bag CREE

US HighwayCREE HFET CREE

75 39 275 0.045 03 0.61 3 0.

1.007 0.79 06 0.21

× − × + ×

× × + × +

Where: 

BagYXCREE =carbon-related exhaust emissions in grams per mile over Bag Y at 

temperature X, 

US06 Highway CREE = carbon-related exhaust emissions in grams per mile over 

the highway portion of the US06 test, 

HFET CREE = carbon-related exhaust emissions in grams per mile over the 

HFET test, 

SC03 CREE = carbon-related exhaust emissions in grams per mile over the SC03 

test. 

(f) Carbon-related exhaust emissions calculations for hybrid electric vehicles. 

Hybrid electric vehicles shall be tested according to California test methods which 

require FTP emission sampling for the 75 °F FTP test over four phases (bags) of the 

UDDS (cold-start, transient, warm-start, transient). Optionally, these four phases may be 

combined into two phases (phases 1 + 2 and phases 3 + 4). Calculations for these 

sampling methods follow. 

(1) Four-bag FTP equations. If the 4-bag sampling method is used, manufacturers 

may use the equations in paragraphs (a) and (b) of this section to determine city and 

highway carbon-related exhaust emissions values. If this method is chosen, it must be 

used to determine both city and highway carbon-related exhaust emissions. Optionally, 
727 

the following calculations may be used, provided that they are used to determine both 

city and highway carbon-related exhaust emissions values: 

(i) City carbon-related exhaust emissions. 

CityCREE = 0.905× ( ) StartCREE + RunningCREE

Where: 

(A) StartCREE = 

( )⎟

⎠

⎞ ⎜

⎝

⎛ × + × × 4.1

0.76 StartCREE 0.24 StartCREE 0.33 75 20

Where: 

(1) StartCREE75 = 

( ) ( ) 75 75 75 3.6× Bag1CREE − Bag 3CREE75 + 3.9× Bag 2CREE − Bag 4CREE

and 

(2) StartCREE20 = 

( ) 20 20 = 3.6× Bag1CREE − Bag 3CREE

 (B) RunningCREE = 

[ ] ( )( ) ( )

[ ] ( )( )

[ ] SC CREE ( ) ( )( ) Bag CREE Bag CREE

Bag CREE Bag CREE

Bag CREE Bag CREE US CityCREE

75 75

20 20

75 75

0.144 03 0.61 3 0.39 4

0.18 0.5 2 0.5 3

0.82 0.48 4 0.41 3 0.11 06

× − × + ×

× × + × +

× × + × + × +

Where: 

US06 Highway CREE = carbon-related exhaust emissions in grams per mile over 

the city portion of the US06 test. 

US06 Highway CREE = carbon-related exhaust emissions in miles per gallon 

over the Highway portion of the US06 test. 

HFET CREE = carbon-related exhaust emissions in grams per mile over the 

HFET test. 

SC03 CREE = carbon-related exhaust emissions in grams per mile over the SC03 

test. 

(ii) Highway carbon-related exhaust emissions. 

HighwayCREE = 0.905× ( ) StartCREE + RunningCREE

Where: 

(A) StartCREE = 

( )⎟

⎠

⎞ ⎜

⎝

⎛ × + × = × 60

0.76 StartCREE 0.24 StartCREE 0.33 75 20

Where: 

( ) ( ) 75 75 75 CREE75 StartCREE = 3.6× Bag1CREE − Bag3CREE75 + 3.9× Bag2CREE − Bag 4

and 

( ) 20 20 CREE20 StartCREE = 3.6× Bag1CREE − Bag3

(B) RunningCREE = 
728 

[ ] ( ) ( )

[ ] SC CREE ( ) ( )( ) Bag CREE Bag CREE

US HighwayCREE HFET CREE

75 39 475 0.045 03 0.61 3 0.

1.007 0.79 06 0.21

× − × + ×

× × + × +

Where: 

US06 Highway CREE = carbon-related exhaust emissions in grams per mile over 

the Highway portion of the US06 test, 

HFET CREE = carbon-related exhaust emissions in grams per mile over the 

HFET test, 

SC03 CREE = carbon-related exhaust emissions in grams per mile over the SC03 

test. 

(2) Two-bag FTP equations. If the 2-bag sampling method is used for the 75 °F 

FTP test, it must be used to determine both city and highway carbon-related exhaust 

emissions. The following calculations must be used to determine both city and highway 

carbon-related exhaust emissions: 

(i) City carbon-related exhaust emissions. 

CityCREE = 0.905× ( ) StartCREE + RunningCREE

Where: 

(A) StartCREE = 

( )⎟

⎠

⎞ ⎜

⎝

⎛ × + × = × 4.1

0.76 StartCREE 0.24 StartCREE 0.33 75 20

Where: 

( ) 75 75 CREE75 StartCREE = 3.6× Bag1/2CREE − Bag3/4

and 

( ) 20 20 CREE20 StartCREE = 3.6× Bag1CREE − Bag3

Where: 

Bag Y FE20= the carbon-related exhaust emissions in grams per mile of fuel 

during Bag 1 or Bag 3 of the 20 °F FTP test, and 

Bag X/Y FE75= carbon-related exhaust emissions in grams per mile of fuel during 

combined phases 1 and 2 or phases 3 and 4 of the FTP test conducted at an ambient 

temperature of 75 °F. 

(B) RunningCREE = 

[ ] ( )( )

[ ] ( )( )

0.144 [ ] SC03CREE ( ) Bag3/4 CREE

0.18 0.5 Bag2 CREE 0.5 Bag3 CREE

0.82 0.90 Bag3/4 CREE 0.10 US06CityCREE

75

20 20

75

× −

× × + × +

× × + × +

Where: 

US06 City CREE = carbon-related exhaust emissions in grams per mile over the 

city portion of the US06 test, and 

SC03 CREE = carbon-related exhaust emissions in grams per mile over the SC03 

test, and 

Bag X/Y FE75= carbon-related exhaust emissions in grams per mile of fuel during 

combined phases 1 and 2 or phases 3 and 4 of the FTP test conducted at an ambient 

temperature of 75 °F. 

(ii) Highway carbon-related exhaust emissions. 
729 

HighwayCREE = 0.905× ( ) StartCREE + RunningCREE

Where: 

(A) StartCREE = 

( )⎟

⎠

⎞ ⎜

⎝

⎛ × + × × 60

0.76 StartCREE 0.24 StartCREE 0.33 75 20

Where: 

( ) 75 75 CREE75 StartCREE = 7.5× Bag1/2CREE − Bag3/4

and 

( ) 20 20 CREE20 StartCREE = 3.6× Bag1CREE − Bag3

(B) RunningCREE = 

[ ] ( ) ( )

0.045 [ ] SC03CREE Bag3/4 CREE

1.007 0.79 US06HighwayCREE 0.21 HFETCREE

× − 75

× × + × +

Where: 

US06 Highway CREE = carbon-related exhaust emissions in grams per mile over 

the city portion of the US06 test, and 

SC03 CREE = carbon-related exhaust emissions in gram per mile over the SC03 

test, and 

Bag Y FE20= the carbon-related exhaust emissions in grams per mile of fuel 

during Bag 1 or Bag 3 of the 20 °F FTP test, and 

Bag X/Y FE75= carbon-related exhaust emissions in grams per mile of fuel during 

phases 1 and 2 or phases 3 and 4 of the FTP test conducted at an ambient temperature of 

75 °F. 
730 

Subpart C—Procedures for Calculating Fuel Economy and Carbon-related Exhaust 

Emission Values for 1977 and Later Model Year Automobiles 

46. The heading for subpart C is revised as set forth above. 

47. A new § 600.201-12 is added to subpart C to read as follows: 

§ 600.201-12 General applicability. 

The provisions of this subpart are applicable to 2012 and later model year 

automobiles and to the manufacturers of 2012 and later model year automobiles. 

48. A new § 600.206-12 is added to subpart C to read as follows: 

§ 600.206-12 Calculation and use of FTP-based and HFET-based fuel economy and 

carbon-related exhaust emission values for vehicle configurations. 

(a) Fuel economy and carbon-related exhaust emissions values determined for 

each vehicle under §600.113(a) and (b) and as approved in §600.008–08 (c), are used to 

determine FTP-based city, HFET-based highway, and combined FTP/Highway-based 

fuel economy and carbon-related exhaust emission values for each vehicle configuration 

for which data are available. 

(1) If only one set of FTP-based city and HFET-based highway fuel economy 

values is accepted for a vehicle configuration, these values, rounded to the nearest tenth 

of a mile per gallon, comprise the city and highway fuel economy values for that 

configuration. If only one set of FTP-based city and HFET-based highway carbon-related 

exhaust emission values is accepted for a vehicle configuration, these values, rounded to 

the nearest gram per mile, comprise the city and highway carbon-related exhaust 

emission values for that configuration. 

(2) If more than one set of FTP-based city and HFET-based highway fuel 

economy and/or carbon-related exhaust emission values are accepted for a vehicle 

configuration: 

(i) All data shall be grouped according to the subconfiguration for which the data 

were generated using sales projections supplied in accordance with §600.208(a)(3). 

(ii) Within each group of data, all fuel economy values are harmonically averaged 

and rounded to the nearest 0.0001 of a mile per gallon and all carbon-related exhaust 

emission values are arithmetically averaged and rounded to the nearest tenth of a gram 

per mile in order to determine FTP-based city and HFET-based highway fuel economy 

and carbon-related exhaust emission values for each subconfiguration at which the 

vehicle configuration was tested. 

(iii) All FTP-based city fuel economy and carbon-related exhaust emission values 

and all HFET-based highway fuel economy and carbon-related exhaust emission values 

calculated in paragraph (a)(2)(ii) of this section are (separately for city and highway) 

averaged in proportion to the sales fraction (rounded to the nearest 0.0001) within the 

vehicle configuration (as provided to the Administrator by the manufacturer) of vehicles 

of each tested subconfiguration. Fuel economy values shall be harmonically averaged and 
731 

carbon-related exhaust emission values shall be arithmetically averaged. The resultant 

fuel economy values, rounded to the nearest 0.0001 mile per gallon, are the FTP-based 

city and HFET-based highway fuel economy values for the vehicle configuration. The 

resultant carbon-related exhaust emission values, rounded to the nearest tenth of a gram 

per mile, are the FTP-based city and HFET-based highway carbon-related exhaust 

emission values for the vehicle configuration. 

(3)(i) For the purpose of determining average fuel economy under §600.510–08, 

the combined fuel economy value for a vehicle configuration is calculated by 

harmonically averaging the FTP-based city and HFET-based highway fuel economy 

values, as determined in §600.206(a)(1) or (2) of this section, weighted 0.55 and 0.45 

respectively, and rounded to the nearest 0.0001 mile per gallon. A sample of this 

calculation appears in Appendix II of this part. 

(ii) For the purpose of determining average carbon-related exhaust emissions 

under §600.510–08, the combined carbon-related exhaust emission value for a vehicle 

configuration is calculated by arithmetically averaging the FTP-based city and HFETbased highway carbon-related exhaust emission values, as determined in §600.206(a)(1) 

or (2) of this section, weighted 0.55 and 0.45 respectively, and rounded to the nearest 

tenth of gram per mile. 

(4) For alcohol dual fuel automobiles and natural gas dual fuel automobiles the 

procedures of paragraphs (a)(1) or (2) of this section, as applicable, shall be used to 

calculate two separate sets of FTP-based city, HFET-based highway, and combined fuel 

economy and carbon-related exhaust emission values for each configuration. 

(i) Calculate the city, highway, and combined fuel economy and carbon-related 

exhaust emission values from the tests performed using gasoline or diesel test fuel. 

(ii) Calculate the city, highway, and combined fuel economy and carbon-related 

exhaust emission values from the tests performed using alcohol or natural gas test fuel. 

(b) If only one equivalent petroleum-based fuel economy value exists for an 

electric vehicle configuration, that value, rounded to the nearest tenth of a mile per 

gallon, will comprise the petroleum-based fuel economy for that configuration. 

(c) If more than one equivalent petroleum-based fuel economy value exists for an 

electric vehicle configuration, all values for that vehicle configuration are harmonically 

averaged and rounded to the nearest 0.0001 mile per gallon for that configuration. 

49. A new § 600.208-12 is added to subpart C to read as follows: 

§ 600.208-12 Calculation of FTP-based and HFET-based fuel economy and carbonrelated exhaust emission values for a model type. 

(a) Fuel economy and carbon-related exhaust emission values for a base level are 

calculated from vehicle configuration fuel economy and carbon-related exhaust emission 

values as determined in §600.206–08(a), (b), or (c) as applicable, for low-altitude tests. 

(1) If the Administrator determines that automobiles intended for sale in the State 

of California are likely to exhibit significant differences in fuel economy and carbonrelated exhaust emission values from those intended for sale in other states, she will 

calculate fuel economy and carbon-related exhaust emission values for each base level 
732 

for vehicles intended for sale in California and for each base level for vehicles intended 

for sale in the rest of the states. 

(2) In order to highlight the fuel efficiency and carbon-related exhaust emission 

values of certain designs otherwise included within a model type, a manufacturer may 

wish to subdivide a model type into one or more additional model types. This is 

accomplished by separating subconfigurations from an existing base level and placing 

them into a new base level. The new base level is identical to the existing base level 

except that it shall be considered, for the purposes of this paragraph, as containing a new 

basic engine. The manufacturer will be permitted to designate such new basic engines 

and base level(s) if: 

(i) Each additional model type resulting from division of another model type has a 

unique car line name and that name appears on the label and on the vehicle bearing that 

label; 

(ii) The subconfigurations included in the new base levels are not included in any 

other base level which differs only by basic engine (i.e., they are not included in the 

calculation of the original base level fuel economy values); and 

(iii) All subconfigurations within the new base level are represented by test data 

in accordance with §600.010–08(c)(1)(ii). 

(3) The manufacturer shall supply total model year sales projections for each car 

line/vehicle subconfiguration combination. 

(i) Sales projections must be supplied separately for each car line-vehicle 

subconfiguration intended for sale in California and each car line/vehicle 

subconfiguration intended for sale in the rest of the states if required by the Administrator 

under paragraph (a)(1) of this section. 

(ii) Manufacturers shall update sales projections at the time any model type value 

is calculated for a label value. 

(iii) The provisions of paragraph (a)(3) of this section may be satisfied by 

providing an amended application for certification, as described in §86.1844–01. 

(4) Vehicle configuration fuel economy and carbon-related exhaust emission 

values, as determined in §600.206–08 (a), (b) or (c), as applicable, are grouped according 

to base level. 

(i) If only one vehicle configuration within a base level has been tested, the fuel 

economy and carbon-related exhaust emission values from that vehicle configuration will 

constitute the fuel economy and carbon-related exhaust emission values for that base 

level. 

(ii) If more than one vehicle configuration within a base level has been tested, the 

vehicle configuration fuel economy values are harmonically averaged in proportion to the 

respective sales fraction (rounded to the nearest 0.0001) of each vehicle configuration 

and the resultant fuel economy value rounded to the nearest 0.0001 mile per gallon; and 

the vehicle configuration carbon-related exhaust emission values are arithmetically 

averaged in proportion to the respective sales fraction (rounded to the nearest 0.0001) of 

each vehicle configuration and the resultant carbon-related exhaust emission value 

rounded to the nearest gram per mile. 
733 

(5) The procedure specified in paragraph (a)(1) through (4) of this section will be 

repeated for each base level, thus establishing city, highway, and combined fuel economy 

and carbon-related exhaust emission values for each base level. 

(6) For the purposes of calculating a base level fuel economy or carbon-related 

exhaust emission value, if the only vehicle configuration(s) within the base level are 

vehicle configuration(s) which are intended for sale at high altitude, the Administrator 

may use fuel economy and carbon-related exhaust emission data from tests conducted on 

these vehicle configuration(s) at high altitude to calculate the fuel economy or carbonrelated exhaust emission value for the base level. 

(7) For alcohol dual fuel automobiles and natural gas dual fuel automobiles, the 

procedures of paragraphs (a)(1) through (6) of this section shall be used to calculate two 

separate sets of city, highway, and combined fuel economy and carbon-related exhaust 

emission values for each base level. 

(i) Calculate the city, highway, and combined fuel economy and carbon-related 

exhaust emission values from the tests performed using gasoline or diesel test fuel. 

(ii) Calculate the city, highway, and combined fuel economy and carbon-related 

exhaust emission values from the tests performed using alcohol or natural gas test fuel. 

(b) For each model type, as determined by the Administrator, a city, highway, and 

combined fuel economy value and a carbon-related exhaust emission value will be 

calculated by using the projected sales and fuel economy and carbon-related exhaust 

emission values for each base level within the model type. Separate model type 

calculations will be done based on the vehicle configuration fuel economy and carbonrelated exhaust emission values as determined in §600.206–08 (a), (b) or (c), as 

applicable. 

(1) If the Administrator determines that automobiles intended for sale in the State 

of California are likely to exhibit significant differences in fuel economy and carbonrelated exhaust emission values from those intended for sale in other states, she will 

calculate fuel economy and carbon-related exhaust emission values for each model type 

for vehicles intended for sale in California and for each model type for vehicles intended 

for sale in the rest of the states. 

(2) The sales fraction for each base level is calculated by dividing the projected 

sales of the base level within the model type by the projected sales of the model type and 

rounding the quotient to the nearest 0.0001. 

(3)(i) The FTP-based city fuel economy values of the model type (calculated to 

the nearest 0.0001 mpg) are determined by dividing one by a sum of terms, each of which 

corresponds to a base level and which is a fraction determined by dividing: 

(A) The sales fraction of a base level; by 

(B) The FTP-based city fuel economy value for the respective base level. 

(ii) The FTP-based city carbon-related exhaust emission value of the model type 

(calculated to the nearest gram per mile) are determined by a sum of terms, each of which 

corresponds to a base level and which is a product determined by multiplying: 

(A) The sales fraction of a base level; by 

(B) The FTP-based city carbon-related exhaust emission value for the respective 

base level. 
734 

(4) The procedure specified in paragraph (b)(3) of this section is repeated in an 

analogous manner to determine the highway and combined fuel economy and carbonrelated exhaust emission values for the model type. 

(5) For alcohol dual fuel automobiles and natural gas dual fuel automobiles, the 

procedures of paragraphs (b)(1) through (4) of this section shall be used to calculate two 

separate sets of city, highway, and combined fuel economy values and two separate sets 

of city, highway, and combined carbon-related exhaust emission values for each model 

type. 

(i) Calculate the city, highway, and combined fuel economy and carbon-related 

exhaust emission values from the tests performed using gasoline or diesel test fuel. 

(ii) Calculate the city, highway, and combined fuel economy and carbon-related 

exhaust emission values from the tests performed using alcohol or natural gas test fuel. 
735 

Subpart D—Fuel Economy Regulations for 1977 and Later Model Year 

Automobiles—Labeling 

50. A new § 600.301-12 is added to subpart D to read as follows: 

 

§ 600.301-12 General applicability. 

(a) Unless otherwise specified, the provisions of this subpart are applicable to 

2012 and later model year automobiles. 

(b) [Reserved] 
736 

Subpart F—Fuel Economy Regulations for Model Year 1978 Passenger 

Automobiles and for 1979 and Later Model Year Automobiles (Light Trucks and 

Passenger Automobiles)—Procedures for Determining Manufacturer's Average 

Fuel Economy and Manufacturer’s Average Carbon-related Exhaust Emissions 

51. The heading for subpart F is revised as set forth above. 

52. A new § 600.501-12 is added to subpart F to read as follows: 

§ 600.501-12 General applicability. 

The provisions of this subpart are applicable to 2012 and later model year 

passenger automobiles and light trucks and to the manufacturers of 2012 and later model 

year passenger automobiles and light trucks. The provisions of this subpart are applicable 

to medium-duty passenger vehicles and to manufacturers of such vehicles. 

53. A new § 600.507-12 is added to subpart F to read as follows: 

§ 600.507-12 Running change data requirements. 

(a) Except as specified in paragraph (d) of this section, the manufacturer shall 

submit additional running change fuel economy and carbon-related exhaust emissions 

data as specified in paragraph (b) of this section for any running change approved or 

implemented under §§86.079–32, 86.079–33, or 86.082–34 or 86.1842–01 as applicable, 

which: 

(1) Creates a new base level or, 

(2) Affects an existing base level by: 

(i) Adding an axle ratio which is at least 10 percent larger (or, optionally, 10 

percent smaller) than the largest axle ratio tested. 

(ii) Increasing (or, optionally, decreasing) the road-load horsepower for a 

subconfiguration by 10 percent or more for the individual running change or, when 

considered cumulatively, since original certification (for each cumulative 10 percent 

increase using the originally certified road-load horsepower as a base). 

(iii) Adding a new subconfiguration by increasing (or, optionally, decreasing) the 

equivalent test weight for any previously tested subconfiguration in the base level. 

(iv) Revising the calibration of an electric vehicle, fuel cell electric vehicle, 

hybrid electric vehicle, plug-in hybrid electric vehicle or other advanced technology 

vehicle in such a way that the city or highway fuel economy of the vehicle (or the energy 

consumption of the vehicle, as may be applicable) is expected to become less fuel 

efficient (or optionally, more fuel efficient) by 4.0 percent or more as compared to the 

original fuel economy label values for fuel economy and/or energy consumption, as 

applicable. 

(b)(1) The additional running change fuel economy and carbon-related exhaust 

emissions data requirement in paragraph (a) of this section will be determined based on 

the sales of the vehicle configurations in the created or affected base level(s) as updated 

at the time of running change approval. 
737 

(2) Within each newly created base level as specified in paragraph (a)(1) of this 

section, the manufacturer shall submit data from the highest projected total model year 

sales subconfiguration within the highest projected total model year sales configuration in 

the base level. 

(3) Within each base level affected by a running change as specified in paragraph 

(a)(2) of this section, fuel economy and carbon-related exhaust emissions data shall be 

submitted for the vehicle configuration created or affected by the running change which 

has the highest total model year projected sales. The test vehicle shall be of the 

subconfiguration created by the running change which has the highest projected total 

model year sales within the applicable vehicle configuration. 

(c) The manufacturer shall submit the fuel economy data required by this section 

to the Administrator in accordance with §600.314(b). 

(d) For those model types created under §600.208–08(a)(2), the manufacturer 

shall submit fuel economy and carbon-related exhaust emissions data for each 

subconfiguration added by a running change. 

54. A new § 600.509-12 is added to subpart F to read as follows: 

§ 600.509-12 Voluntary submission of additional data. 

(a) The manufacturer may optionally submit data in addition to the data required 

by the Administrator. 

(b) Additional fuel economy and carbon-related exhaust emissions data may be 

submitted by the manufacturer for any vehicle configuration which is to be tested as 

required in §600.507 or for which fuel economy and carbon-related exhaust emissions 

data were previously submitted under paragraph (c) of this section. 

(c) Within a base level, additional fuel economy and carbon-related exhaust 

emissions data may be submitted by the manufacturer for any vehicle configuration 

which is not required to be tested by §600.507. 

55. A new § 600.510-12 is added to subpart F to read as follows: 

§ 600.510-12 Calculation of average fuel economy and average carbon-related 

exhaust emissions. 

(a)(1) Average fuel economy will be calculated to the nearest 0.1 mpg for the 

categories of automobiles identified in this section, and the results of such calculations 

will be reported to the Secretary of Transportation for use in determining compliance 

with the applicable fuel economy standards. 

(i) An average fuel economy calculation will be made for the category of 

passenger automobiles as determined by the Secretary of Transportation. For example, 

categories may include, but are not limited to domestically manufactured and/or nondomestically manufactured passenger automobiles as determined by the Secretary of 

Transportation. 

(ii) [Reserved] 
738 

(iii) An average fuel economy calculation will be made for the category of trucks 

as determined by the Secretary of Transportation. For example, categories may include, 

but are not limited to domestically manufactured trucks, non-domestically manufactured 

trucks, light-duty trucks, medium-duty passenger vehicles, and/or heavy-duty trucks as 

determined by the Secretary of Transportation. 

(iv) [Reserved] 

(2) Average carbon-related exhaust emissions will be calculated to the nearest one 

gram per mile for the categories of automobiles identified in this section, and the results 

of such calculations will be reported to the Administrator for use in determining 

compliance with the applicable CO2 emission standards. 

(i) An average carbon-related exhaust emissions calculation will be made for 

passenger automobiles. 

(ii) An average carbon-related exhaust emissions calculation will be made for 

light trucks. 

(b) For the purpose of calculating average fuel economy under paragraph (c) of 

this section and for the purpose of calculating average carbon-related exhaust emissions 

under paragraph (j) of this section: 

(1) All fuel economy and carbon-related exhaust emissions data submitted in 

accordance with §600.006(e) or §600.512(c) shall be used. 

(2) The combined city/highway fuel economy and carbon-related exhaust 

emission values will be calculated for each model type in accordance with §600.208–12 

of this section except that: 

(i) Separate fuel economy values will be calculated for model types and base 

levels associated with car lines for each category of passenger automobiles and light 

trucks as determined by the Secretary of Transportation pursuant to paragraph (a)(1) of 

this section. 

(ii) Total model year production data, as required by this subpart, will be used 

instead of sales projections; 

(iii) [Reserved] 

(iv) The fuel economy value will be rounded to the nearest 0.1 mpg; 

(v) The carbon-related exhaust emission value will be rounded to the nearest gram 

per mile; and 

(vi) At the manufacturer's option, those vehicle configurations that are selfcompensating to altitude changes may be separated by sales into high-altitude sales 

categories and low-altitude sales categories. These separate sales categories may then be 

treated (only for the purpose of this section) as separate configurations in accordance 

with the procedure of §600.208–12(a)(4)(ii). 

(3) The fuel economy and carbon-related exhaust emission values for each vehicle 

configuration are the combined fuel economy and carbon-related exhaust emissions 

calculated according to §600.206–08(a)(3) except that: 

(i) Separate fuel economy values will be calculated for vehicle configurations 

associated with car lines for each category of passenger automobiles and light trucks as 

determined by the Secretary of Transportation pursuant to paragraph (a)(1) of this 

section. 
739 

(ii) Total model year production data, as required by this subpart will be used 

instead of sales projections; and 

(iii) The fuel economy value of diesel-powered model types will be multiplied by 

the factor 1.0 to convert gallons of diesel fuel to equivalent gallons of gasoline. 

(c) Except as permitted in paragraph (d) of this section, the average fuel economy 

will be calculated individually for each category identified in paragraph (a) of this section 

as follows: 

(1) Divide the total production volume of that category of automobiles; by 

(2) A sum of terms, each of which corresponds to a model type within that 

category of automobiles and is a fraction determined by dividing the number of 

automobiles of that model type produced by the manufacturer in the model year; by 

(i) For gasoline-fueled and diesel-fueled model types, the fuel economy calculated 

for that model type in accordance with paragraph (b)(2) of this section; or 

(ii) For alcohol-fueled model types, the fuel economy value calculated for that 

model type in accordance with paragraph (b)(2) of this section divided by 0.15 and 

rounded to the nearest 0.1 mpg; or 

(iii) For natural gas-fueled model types, the fuel economy value calculated for 

that model type in accordance with paragraph (b)(2) of this section divided by 0.15 and 

rounded to the nearest 0.1 mpg; or 

(iv) For alcohol dual fuel model types, for model years 1993 through 2019, the 

harmonic average of the following two terms; the result rounded to the nearest 0.1 mpg: 

(A) The combined model type fuel economy value for operation on gasoline or 

diesel fuel as determined in §600.208(b)(5)(i); and 

(B) The combined model type fuel economy value for operation on alcohol fuel as 

determined in §600.208(b)(5)(ii) divided by 0.15 provided the requirements of 

§600.510(g) are met; or 

(v) For natural gas dual fuel model types, for model years 1993 through 2019, the 

harmonic average of the following two terms; the result rounded to the nearest 0.1 mpg: 

(A) The combined model type fuel economy value for operation on gasoline or 

diesel as determined in §600.208(b)(5)(i); and 

(B) The combined model type fuel economy value for operation on natural gas as 

determined in §600.208(b)(5)(ii) divided by 0.15 provided the requirements of paragraph 

(g) of this section are met. 

(d) The Administrator may approve alternative calculation methods if they are 

part of an approved credit plan under the provisions of 15 U.S.C. 2003. 

(e) For passenger categories identified in paragraphs (a)(1) and (2) of this section, 

the average fuel economy calculated in accordance with paragraph (c) of this section 

shall be adjusted using the following equation: 

AFEadj= AFE[((0.55 × a × c) + (0.45 × c) + (0.5556 × a) + 0.4487) / ((0.55 × a) + 

0.45)] + IW 

Where: 

AFEadj= Adjusted average combined fuel economy, rounded to the nearest 0.1 

mpg; 
740 

AFE = Average combined fuel economy as calculated in paragraph (c) of this 

section, rounded to the nearest 0.0001 mpg; 

a = Sales-weight average (rounded to the nearest 0.0001 mpg) of all model type 

highway fuel economy values (rounded to the nearest 0.1 mpg) divided by the salesweighted average (rounded to the nearest 0.0001 mpg) of all model type city fuel 

economy values (rounded to the nearest 0.1 mpg). The quotient shall be rounded to 4 

decimal places. These average fuel economies shall be determined using the methodology 

of paragraph (c) of this section. 

c = 0.0014; 

IW = (9.2917 × 10−3 × SF3IWC× FE3IWC) − (3.5123 × 10−3 × SF4ETW× FE4IWC).

Note: Any calculated value of IW less than zero shall be set equal to zero. 

SF3IWC= The 3000 lb. inertia weight class sales divided by total sales. The 

quotient shall be rounded to 4 decimal places. 

SF4ETW= The 4000 lb. equivalent test weight category sales divided by total sales. 

The quotient shall be rounded to 4 decimal places. 

FE4IWC= The sales-weighted average combined fuel economy of all 3000 lb. 

inertia weight class base levels in the compliance category. Round the result to the 

nearest 0.0001 mpg. 

FE4IWC= The sales-weighted average combined fuel economy of all 4000 lb. 

inertia weight class base levels in the compliance category. Round the result to the 

nearest 0.0001 mpg. 

(f) The Administrator shall calculate and apply additional average fuel economy 

adjustments if, after notice and opportunity for comment, the Administrator determines 

that, as a result of test procedure changes not previously considered, such correction is 

necessary to yield fuel economy test results that are comparable to those obtained under 

the 1975 test procedures. In making such determinations, the Administrator must find 

that: 

(1) A directional change in measured fuel economy of an average vehicle can be 

predicted from a revision to the test procedures; 

(2) The magnitude of the change in measured fuel economy for any vehicle or 

fleet of vehicles caused by a revision to the test procedures is quantifiable from 

theoretical calculations or best available test data; 

(3) The impact of a change on average fuel economy is not due to eliminating the 

ability of manufacturers to take advantage of flexibility within the existing test 

procedures to gain measured improvements in fuel economy which are not the result of 

actual improvements in the fuel economy of production vehicles; 

(4) The impact of a change on average fuel economy is not solely due to a greater 

ability of manufacturers to reflect in average fuel economy those design changes 

expected to have comparable effects on in-use fuel economy; 

(5) The test procedure change is required by EPA or is a change initiated by EPA 

in its laboratory and is not a change implemented solely by a manufacturer in its own 

laboratory. 

(g)(1) Alcohol dual fuel automobiles and natural gas dual fuel automobiles must 

provide equal or greater energy efficiency while operating on alcohol or natural gas as 
741 

while operating on gasoline or diesel fuel to obtain the CAFE credit determined in 

paragraphs (c)(2)(iv) and (v) of this section or to obtain the carbon-related exhaust 

emissions credit determined in paragraphs (j)(2)(ii) and (iii). The following equation must 

hold true: 

Ealt/Epet> or = 1 

Where: 

Ealt= [FEalt/(NHValt× Dalt)] × 106

 = energy efficiency while operating on 

alternative fuel rounded to the nearest 0.01 miles/million BTU. 

Epet= [FEpet/(NHVpet× Dpet)] × 106 = energy efficiency while operating on gasoline 

or diesel (petroleum) fuel rounded to the nearest 0.01 miles/million BTU. 

FEaltis the fuel economy [miles/gallon for liquid fuels or miles/100 standard cubic 

feet for gaseous fuels] while operated on the alternative fuel as determined in §600.113–

08(a) and (b); 

FEpetis the fuel economy [miles/gallon] while operated on petroleum fuel 

(gasoline or diesel) as determined in §600.113(a) and (b); 

NHValt is the net (lower) heating value [BTU/lb] of the alternative fuel; 

NHVpet is the net (lower) heating value [BTU/lb] of the petroleum fuel; 

Dalt is the density [lb/gallon for liquid fuels or lb/100 standard cubic feet for 

gaseous fuels] of the alternative fuel; 

Dpet is the density [lb/gallon] of the petroleum fuel. 

(i) The equation must hold true for both the FTP city and HFET highway fuel 

economy values for each test of each test vehicle. 

(ii)(A) The net heating value for alcohol fuels shall be premeasured using ASTM 

D 240–92 “Standard Test Method for Heat of Combustion of Liquid Hydrocarbon Fuels 

by Bomb Calorimeter” (incorporated by reference at §600.011-93). 

(B) The density for alcohol fuels shall be premeasured using ASTM D 1298–85 

(Reapproved 1990) “Standard Practice for Density, Relative Density (Specific Gravity), 

or API Gravity of Crude Petroleum and Liquid Petroleum Products by Hydrometer 

Method” (incorporated by reference at §600.011-93). 

(iii) The net heating value and density of gasoline are to be determined by the 

manufacturer in accordance with §600.113(f). 

(2) [Reserved] 

(3) Alcohol dual fuel passenger automobiles and natural gas dual fuel passenger 

automobiles manufactured during model years 1993 through 2019 must meet the 

minimum driving range requirements established by the Secretary of Transportation (49 

CFR part 538) to obtain the CAFE credit determined in paragraphs (c)(2)(iv) and (v) of 

this section. 

(h) For model years 1993 and later, and for each category of automobile identified 

in paragraph (a) of this section, the maximum increase in average fuel economy 

determined in paragraph (c) of this section attributable to alcohol dual fuel automobiles 

and natural gas dual fuel automobiles shall be as follows: 

Model Year Maximum Increase (mpg) 

1993-2014 1.2 
742 

2015 1.0 

2016 0.8 

2017 0.6 

2018 0.4 

2019 0.2 

2020 and later 0.0 

(1) The Administrator shall calculate the increase in average fuel economy to 

determine if the maximum increase provided in paragraph (h) of this section has been 

reached. The Administrator shall calculate the average fuel economy for each category of 

automobiles specified in paragraph (a) of this section by subtracting the average fuel 

economy values calculated in accordance with this section by assuming all alcohol dual 

fuel and natural gas dual fuel automobiles are operated exclusively on gasoline (or diesel) 

fuel from the average fuel economy values determined in paragraphs (b)(2)(vi), 

(b)(2)(vii), and (c) of this section. The difference is limited to the maximum increase 

specified in paragraph (h) of this section. 

(2) [Reserved] 

(i) For model years 2012 through 2015, and for each category of automobile 

identified in paragraph (a)(2) of this section, the maximum decrease in average carbonrelated exhaust emissions determined in paragraph (j) of this section attributable to 

alcohol dual fuel automobiles and natural gas dual fuel automobiles shall be calculated 

using the following formula, and rounded to the nearest tenth of a gram per mile: 

Maximum Decrease = FltAvg

MPG

FltAvg MAX

−

⎥

⎦

⎤ ⎢

⎣

⎡ − 8887

8887

Where: 

FltAvg = The fleet average CREE value for passenger automobiles or light trucks 

determined for the applicable model year according to paragraph (j) of this section, 

except by assuming all alcohol dual fuel and natural gas dual fuel automobiles are 

operated exclusively on gasoline (or diesel) fuel. 

MPGMAX = The maximum increase in miles per gallon determined for the 

appropriate model year in paragraph (h) of this section. :(1) The Administrator shall 

calculate the decrease in average carbon-related exhaust emissions to determine if the 

maximum decrease provided in paragraph (i) of this section has been reached. The 

Administrator shall calculate the average carbon-related exhaust emissions for each 

category of automobiles specified in paragraph (a)(2) of this section by subtracting the 

average carbon-related exhaust emission values determined in paragraph (j) of this 

section from the average carbon-related exhaust emission values calculated in accordance 

with this section by assuming all alcohol dual fuel and natural gas dual fuel automobiles 
743 

are operated exclusively on gasoline (or diesel) fuel. The difference is limited to the 

maximum decrease specified in paragraph (i) of this section. 

(2) [Reserved] 

(j) The average carbon-related exhaust emissions will be calculated individually 

for each category identified in paragraph (a)(2) of this section as follows: 

(1) Divide the total production volume of that category of automobiles into: 

(2) A sum of terms, each of which corresponds to a model type within that 

category of automobiles and is a product determined by multiplying the number of 

automobiles of that model type produced by the manufacturer in the model year by: 

(i) For gasoline-fueled and diesel-fueled model types, the carbon-related exhaust 

emissions value calculated for that model type in accordance with paragraph (b)(2) of this 

section; or 

(ii)(A) For alcohol-fueled model types, for model years 2012 through 2015, the 

carbon-related exhaust emissions value calculated for that model type in accordance with 

paragraph (b)(2) of this section multiplied by 0.15 and rounded to the nearest gram per 

mile; or 

(B) For alcohol-fueled model types, for model years 2016 and later, the carbonrelated exhaust emissions value calculated for that model type in accordance with 

paragraph (b)(2) of this section; or 

(iii)(A) For natural gas-fueled model types, for model years 2012 through 2015, 

the carbon-related exhaust emissions value calculated for that model type in accordance 

with paragraph (b)(2) of this section multiplied by 0.15 and rounded to the nearest gram 

per mile; or 

(B) For natural gas-fueled model types, for model years 2016 and later, the 

carbon-related exhaust emissions value calculated for that model type in accordance with 

paragraph (b)(2) of this section; or 

(iv) For alcohol dual fuel model types, for model years 2012 through 2015, the 

arithmetic average of the following two terms, the result rounded to the nearest gram per 

mile: 

(A) The combined model type carbon-related exhaust emissions value for 

operation on gasoline or diesel fuel as determined in §600.208(b)(5)(i); and 

(B) The combined model type carbon-related exhaust emissions value for 

operation on alcohol fuel as determined in §600.208(b)(5)(ii) multiplied by 0.15 provided 

the requirements of §600.510(g) are met; or 

(v) For natural gas dual fuel model types, for model years 2012 through 2015, the 

arithmetic average of the following two terms; the result rounded to the nearest gram per 

mile: 

(A) The combined model type carbon-related exhaust emissions value for 

operation on gasoline or diesel as determined in §600.208(b)(5)(i); and 

(B) The combined model type carbon-related exhaust emissions value for 

operation on natural gas as determined in §600.208(b)(5)(ii) multiplied by 0.15 provided 

the requirements of paragraph (g) of this section are met. 
744 

(vi) For alcohol dual fuel model types, for model years 2016 and later, the 

combined model type carbon-related exhaust emissions value determined according to 

the following formula and rounded to the nearest gram per mile: 

CREE = (F × CREEalt) + ( (1-F) × CREEgas ) 

Where: 

F = 0.00 unless otherwise approved by the Administrator according to the 

provisions of paragraph (k) of this section; 

CREEalt = The combined model type carbon-related exhaust emissions value for 

operation on alcohol fuel as determined in §600.208(b)(5)(ii); and 

CREEgas = The combined model type carbon-related exhaust emissions value for 

operation on gasoline or diesel fuel as determined in §600.208(b)(5)(i). 

(vii) For natural gas dual fuel model types, for model years 2016 and later, the 

combined model type carbon-related exhaust emissions value determined according to 

the following formula and rounded to the nearest gram per mile: 

CREE = (F × CREEalt) + ( (1-F) × CREEgas ) 

Where: 

F = 0.00 unless otherwise approved by the Administrator according to the 

provisions of paragraph (k) of this section; 

CREEalt = The combined model type carbon-related exhaust emissions value for 

operation on natural gas as determined in §600.208(b)(5)(ii); and 

CREEgas = The combined model type carbon-related exhaust emissions value for 

operation on gasoline or diesel fuel as determined in §600.208(b)(5)(i). 

 (k) Alternative in-use weighting factors for dual fuel model types. Using one of 

the methods in either paragraph (k)(1) or (2) of this section, manufacturers may request 

the use of alternative values for the weighting factor F in the equations in paragraphs 

(j)(2)(vi) and (vii) of this section. Unless otherwise approved by the Administrator, the 

manufacturer must use the value of F that is in effect in paragraphs (j)(2)(vi) and (vii) of 

this section. 

(1) Upon written request from a manufacturer, the Administrator will determine 

and publish by written guidance an appropriate value of F for each requested alternative 

fuel based on the Administrator’s assessment of real-world use of the alternative fuel. 

Such published values would be available for any manufacturer to use. The 

Administrator will periodically update these values upon written request from a 

manufacturer. 

(2) The manufacturer may optionally submit to the Administrator its own 

demonstration regarding the real-world use of the alternative fuel in their vehicles and its 

own estimate of the appropriate value of F in the equations in paragraphs (j)(2)(vi) and 

(vii) of this section. Depending on the nature of the analytical approach, the manufacturer 

could provide estimates of F that are model type specific or that are generally applicable 

to the manufacturer’s dual fuel fleet. The manufacturer’s analysis could include use of 

data gathered from on-board sensors and computers, from dual fuel vehicles in fleets that 

are centrally fueled, or from other sources. The analysis must be based on sound 

statistical methodology and must account for analytical uncertainty. Any approval by the 
745 

Administrator will pertain to the use of values of F for the model types specified by the 

manufacturer. 

56. A new § 600.512-12 is added to subpart F to read as follows: 

§ 600.512-12 Model year report. 

(a) For each model year, the manufacturer shall submit to the Administrator a 

report, known as the model year report, containing all information necessary for the 

calculation of the manufacturer's average fuel economy and all information necessary for 

the calculation of the manufacturer’s average carbon-related exhaust emissions. 

(1) The results of the manufacturer calculations and summary information of 

model type fuel economy values which are contained in the average fuel economy 

calculation shall also be submitted to the Secretary of the Department of Transportation, 

National Highway and Traffic Safety Administration. 

(2) The results of the manufacturer calculations and summary information of 

model type carbon-related exhaust emission values which are contained in the average 

calculation shall be submitted to the Administrator. 

(b)(1) The model year report shall be in writing, signed by the authorized 

representative of the manufacturer and shall be submitted no later than 90 days after the 

end of the model year. 

(2) The Administrator may waive the requirement that the model year report be 

submitted no later than 90 days after the end of the model year. Based upon a request by 

the manufacturer, if the Administrator determines that 90 days is insufficient time for the 

manufacturer to provide all additional data required as determined in §600.507, the 

Administrator shall establish an alternative date by which the model year report must be 

submitted. 

(3) Separate reports shall be submitted for passenger automobiles and light trucks 

(as identified in §600.510). 

(c) The model year report must include the following information: 

(1)(i) All fuel economy data used in the FTP/HFET-based model type calculations 

under §600.208–12, and subsequently required by the Administrator in accordance with 

§600.507; 

(ii) All carbon-related exhaust emission data used in the FTP/HFET-based model 

type calculations under §600.208–12, and subsequently required by the Administrator in 

accordance with §600.507; 

(2) (i) All fuel economy data for certification vehicles and for vehicles tested for 

running changes approved under §86.1842–01 of this chapter; 

(ii) All carbon-related exhaust emission data for certification vehicles and for 

vehicles tested for running changes approved under §86.1842–01 of this chapter; 

(3) Any additional fuel economy and carbon-related exhaust emission data 

submitted by the manufacturer under §600.509; 

(4)(i) A fuel economy value for each model type of the manufacturer's product 

line calculated according to §600.510(b)(2); 
746 

(ii) A carbon-related exhaust emission value for each model type of the 

manufacturer's product line calculated according to §600.510(b)(2); 

(5)(i) The manufacturer's average fuel economy value calculated according to 

§600.510(c); 

(ii) The manufacturer's average carbon-related exhaust emission value calculated 

according to §600.510(j); 

(6) A listing of both domestically and nondomestically produced car lines as 

determined in §600.511 and the cost information upon which the determination was 

made; and 

(7) The authenticity and accuracy of production data must be attested to by the 

corporation, and shall bear the signature of an officer (a corporate executive of at least the 

rank of vice-president) designated by the corporation. Such attestation shall constitute a 

representation by the manufacturer that the manufacturer has established reasonable, 

prudent procedures to ascertain and provide production data that are accurate and 

authentic in all material respects and that these procedures have been followed by 

employees of the manufacturer involved in the reporting process. The signature of the 

designated officer shall constitute a representation by the required attestation. 

(8) For 2008–2010 light truck model year reports, the average fuel economy 

standard or the “required fuel economy level” pursuant to 49 CFR Part 533, as applicable. 

Model year reports for light trucks meeting required fuel economy levels pursuant to 49 

CFR 533.5(g) and (h) shall include information in sufficient detail to verify the accuracy 

of the calculated required fuel economy level. Such information is expected to include 

but is not limited to, production information for each unique footprint within each model 

type contained in the model year report and the formula used to calculate the required 

fuel economy level. Model year reports for required fuel economy levels shall include a 

statement that the method of measuring vehicle track width, measuring vehicle wheelbase 

and calculating vehicle footprint is accurate and complies with applicable Department of 

Transportation requirements. 

(9) For 2011 and later model year reports, the “required fuel economy level” 

pursuant to 49 CFR Parts 531 or 533, as applicable. Model year reports shall include 

information in sufficient detail to verify the accuracy of the calculated required fuel 

economy level, including but is not limited to, production information for each unique 

footprint within each model type contained in the model year report and the formula used 

to calculate the required fuel economy level. Model year reports shall include a statement 

that the method of measuring vehicle track width, measuring vehicle wheelbase and 

calculating vehicle footprint is accurate and complies with applicable Department of 

Transportation requirements. 

(10) For 2012 and later model year reports, the “required fuel economy level” 

pursuant to 49 CFR Parts 531 or 533 as applicable, and the applicable fleet average CO2 

emission standards. Model year reports shall include information in sufficient detail to 

verify the accuracy of the calculated required fuel economy level and fleet average CO2 

emission standards, including but is not limited to, production information for each 

unique footprint within each model type contained in the model year report and the 

formula used to calculate the required fuel economy level and fleet average CO2 
747 

emission standards. Model year reports shall include a statement that the method of 

measuring vehicle track width, measuring vehicle wheelbase and calculating vehicle 

footprint is accurate and complies with applicable Department of Transportation and EPA 

requirements. 

(11) For 2012 and later model year reports, a detailed (but easy to understand) list 

of vehicle models and the applicable in-use CREE emission standard. The list of models 

shall include the applicable carline/subconfiguration parameters (including carline, 

equivalent test weight, road-load horsepower, axle ratio, engine code, transmission class, 

transmission configuration and basic engine); the test parameters ( ETW and a, b, c, 

dynamometer coefficients) and the associated CREE emission standard. The 

manufacturer shall provide the method of identifying EPA engine code for applicable inuse vehicles.

57. A new § 600.514-12 is added to subpart F to read as follows: 

§ 600.514-12 Reports to the Environmental Protection Agency. 

This section establishes requirements for automobile manufacturers to submit 

reports to the Environmental Protection Agency regarding their efforts to reduce 

automotive greenhouse gas emissions. 

(a) General Requirements. (1) For each current model year, each manufacturer 

shall submit a pre-model year report. 

(2)(i) The pre-model year report required by this section for each model year must 

be submitted before the model year begins and before the certification of any test group, 

no later than December 31 of the calendar year two years before the model year. For 

example the pre-model year report for the 2012 model year must be submitted no later 

than December 31, 2010). 

(3) Each report required by this section must: 

(i) Identify the report as a pre-model year report; 

(ii) Identify the manufacturer submitting the report; 

(iii) State the full name, title, and address of the official responsible for preparing 

the report; 

(iv) Be submitted to: Director, Compliance and Innovative Strategies Division, 

U.S. Environmental Protection Agency, 2000 Traverwood, Ann Arbor, Michigan 48105; 

(v) Identify the current model year; 

(vi) Be written in the English language; and 

(vii) Be based upon all information and data available to the manufacturer 

approximately 30 days before the report is submitted to the Administrator. 

(b) Content of pre model year reports. (1) Each pre-model year report must 

include the following information for each compliance category for the applicable future 

model year and to the extent possible, two model years into the future: 

(i) the manufacturer’s estimate of it’s footprint-based fleet average CO2 standards 

(including temporary lead time allowance alternative standards, if applicable); 

(ii) projected total and model-level production volumes for each applicable 

standard category; 
748 

(iii) projected fleet average CO2 compliance level for each applicable standard 

category; and the model-level CO2 emission values which form the basis of the 

projection; 

(iv) projected fleet average CO2 credit/debit status for each applicable standard 

category; 

(v) a description of the various credit, transfer and trading options that will be 

used to comply with each applicable standard category, including the amount of credit the 

manufacturer intends to generate for air conditioning leakage, air conditioning efficiency, 

off-cycle technology, and various early credit programs; and 

(vi) the methodology which will be used to comply with N2O and CH4 emission 

standards. 

(2) Manufacturers must submit, in the pre-model year report for each model year 

in which a credit deficit is generated (or projected to be generated), a compliance plan 

demonstrating how the manufacturer will comply with the fleet average CO2 standard by 

the end of the third year after the deficit occurred. 
749 

National Highway Traffic Safety Administration 

49 CFR Chapter V 

In consideration of the foregoing, under the authority of 49 U.S.C. 32901, 32902, 32903, 

and 32907, and delegation of authority at 49 CFR 1.50, NHTSA amends 49 CFR Chapter 

V as follows: 

PART 531—PASSENGER AUTOMOBILE AVERAGE FUEL ECONOMY 

STANDARDS

 1. The authority citation for part 531 continues to read as follows: 

Authority: 49 U.S.C. 32902; delegation of authority at 49 CFR 1.50. 

 2. Amend § 531.5 by redesignating paragraph (d) as paragraph (e), revising the 

introductory text of paragraph (a), revising paragraph (c) , and adding a new paragraph 

(d) to read as follows: 

§ 531.5 Fuel economy standards.

 (a) Except as provided in paragraph (e) of this section, each manufacturer of 

passenger automobiles shall comply with the average fuel economy standards in Table I, 

expressed in miles per gallon, in the model year specified as applicable: 

* * * * * 

 (c) For model years 2012-2016, a manufacturer’s passenger automobile fleet 

shall comply with the fuel economy level calculated for that model year according to 

Figure 2 and the appropriate values in Table III. 

Where: 

CAFErequired is the required level for a given fleet (domestic passenger 

automobiles or import passenger automobiles), 

Subscript i is a designation of multiple groups of automobiles, where each group’s 

designation, i.e,, i = 1, 2, 3, etc., represents automobiles that share a unique model 

type and footprint within the applicable fleet, either domestic passenger 

automobiles or import passenger automobiles. 

Productioni is the number of passenger automobiles produced for sale in the 

United States within each ith designation, i.e., which shares the same model type 

and footprint. 
750 

TARGETi is the fuel economy target in miles per gallon (mpg) applicable to the 

footprint of passenger automobiles within each ith designation, i.e., which shares 

the same model type and footprint, calculated according to Figure 3 and rounded 

to the nearest hundredth of a mpg, i.e., 35.455 = 35.46 mpg, and the summations 

in the numerator and denominator are both performed over all models in the fleet 

in question. 

Figure 3: 1

1 1

, ,

TARGET

MIN MAX c FOOTPRINT d

a b

= ⎡ ⎛ ⎞ ⎤ ⎜ ⎟ × + ⎢ ⎥ ⎣ ⎝ ⎠ ⎦

Where: 

TARGET is the fuel economy target (in mpg) applicable to vehicles of a given 

footprint (FOOTPRINT, in square feet), 

Parameters a, b, c, and d are defined in Table III, and 

The MIN and MAX functions take the minimum and maximum, respectively of 

the included values. 

TABLE III—PARAMETERS FOR THE PASSENGER AUTOMOBILE FUEL ECONOMY TARGETS

Model year Parameters 

a b c d 

2012................................. 36.23 28.12 0.0005308 0.005842 

2013................................. 37.15 28.67 0.0005308 0.005153 

2014................................. 38.08 29.22 0.0005308 0.004498 

2015................................. 39.55 30.08 0.0005308 0.003520 

2016................................. 41.38 31.12 0.0005308 0.002406 

 (d) In addition to the requirement of paragraphs (b) and (c) of this section, each 

manufacturer shall also meet the minimum standard for domestically manufactured 

passenger automobiles expressed in Table IV: 

TABLE IV 

Model year Minimum standard 

2011.......................................... 27.8 

2012.......................................... 30.7 

2013.......................................... 31.4 

2014.......................................... 32.1 

2015.......................................... 33.3 

2016.......................................... 34.7 
751 

* * * * * 

 3. Add Appendix A to Part 531 to read as follows: 

APPENDIX A TO PART 531 – EXAMPLE OF CALCULATING COMPLIANCE UNDER SECTION 

531.5 PARAGRAPH (B) 

Assume a hypothetical manufacturer (Manufacturer X) produces a fleet of 

domestic passenger automobiles in MY 2011 as follows: 

Appendix A, Table 1 

NOTE TO APPENDIX A, TABLE 1. Manufacturer X’s required corporate average fuel 

economy level standard under section 531.5(b) would first be calculated by determining 

the fuel economy targets applicable to each unique model type and footprint combination 

for model type groups 1-9 as illustrated in Appendix A, Table 2: 
752 

Appendix A, Table 2 

Manufacturer X calculates a fuel economy target standard for each unique model type 

and footprint combination. 

 

NOTE TO APPENDIX A, TABLE 2. With the appropriate fuel economy targets 

determined for each unique model type and footprint combination, Manufacturer X’s 

required fuel economy target standard would be calculated as illustrated in Appendix A, 

Figure 1. 

Appendix A, Figure 1 

Calculation of Manufacturer X’s target fuel economy standard 
753 

Fleet’s target fuel economy standard = 30.5 mpg 

Appendix A, Figure 2 

Calculation of Manufacturer X’s actual fuel economy value. 

Fleet’s actual fuel economy = 30.6 mpg 

NOTE TO APPENDIX A, FIGURE 2. Since the actual average fuel economy of Manufacturer 

X’s fleet is 30.6 mpg, as compared to its required fuel economy level of 30.5 mpg, 

Manufacturer X complied with the CAFE standard for MY 2011 as set forth in 

section 531.5(b). 

PART 533—LIGHT TRUCK FUEL ECONOMY STANDARDS

 4. The authority citation for part 533 continues to read as follows: 

Authority: 49 U.S.C. 32902; delegation of authority at 49 CFR 1.50. 

 5. Amend § 533.5 by adding Figures 2 and 3 and Table VI at the end of 

paragraph (a), and adding paragraph (i), to read as follows: 

§ 533.5 Requirements

 (a) * * * 

* * * * * 
754 

Where: 

CAFErequired is the required level for a given fleet, 

Subscript i is a designation of multiple groups of light trucks, where each group’s 

designation, i.e,, i = 1, 2, 3, etc., represents light trucks that share a unique model 

type and footprint within the applicable fleet. 

Productioni is the number of units of light trucks produced for sale in the United 

States within each ith designation, i.e., which share the same model type and 

footprint. 

TARGETi is the fuel economy target in miles per gallon (mpg) applicable to the 

footprint of light trucks within each ith designation, i.e., which shares the same 

model type and footprint, calculated according to Figure 3 and rounded to the 

nearest hundredth of a mpg, i.e., 35.455 = 35.46 mpg, and the summations in the 

numerator and denominator are both performed over all models in the fleet in 

question. 

Figure 3: 1

1 1

, ,

TARGET

MIN MAX c FOOTPRINT d

a b

= ⎡ ⎛ ⎞ ⎤ ⎜ ⎟ × + ⎢ ⎥ ⎣ ⎝ ⎠ ⎦

Where: 

TARGET is the fuel economy target (in mpg) applicable to vehicles of a given 

footprint (FOOTPRINT, in square feet), 

Parameters a, b, c, and d are defined in Table VI, and 

The MIN and MAX functions take the minimum and maximum, respectively of 

the included values. 

TABLE VI—PARAMETERS FOR THE LIGHT TRUCK FUEL ECONOMY TARGETS

Model year Parameters 

A b c d 

2012................................. 29.44 22.06 0.00004546 0.01533 

2013................................. 30.32 22.55 0.00004546 0.01434 

2014................................. 31.30 23.09 0.00004546 0.01331 

2015................................. 32.70 23.84 0.00004546 0.01194 

2016................................. 34.38 24.72 0.00004546 0.01045 

* * * * * 
755 

 (i) For model years 2012-2016, a manufacturer’s light truck fleet shall comply 

with the fuel economy level calculated for that model year according to Figures 2 and 3 

and the appropriate values in Table VI. 

6. Revise Appendix A to Part 533 to read as follows: 

APPENDIX A TO PART 533 -- EXAMPLE OF CALCULATING COMPLIANCE UNDER 

SECTION 533.5 PARAGRAPH (h) 

Assume a hypothetical manufacturer (Manufacturer X) produces a fleet of light 

trucks in MY 2011 as follows: 

Appendix A, Table 1 

NOTE TO APPENDIX A, TABLE 1. Manufacturer X’s required corporate average 

fuel economy level under section 533.5(h) would first be calculated by determining the 

fuel economy targets applicable to each unique model type and footprint combination for 

model type groups (1-11) illustrated in Appendix A, Table 2: 

Appendix A, Table 2 

Manufacturer X calculates a fuel economy target standard value for each unique model 

type and footprint combination. 
756 

NOTE TO APPENDIX A, TABLE 2. With the appropriate fuel economy targets 

determined for each unique model type and footprint combination, Manufacturer X’s 

required fuel economy target standard would be calculated as illustrated in Appendix A, 

Figure 1. 

Appendix A, Figure 1 

Calculation of Manufacturer X’s target fuel economy standard value. 

Fleet’s target fuel economy standard = 22.7 mpg 

Appendix A, Figure 2 

Calculation of Manufacturer X’s actual fuel economy value. 
757 

Fleet’s actual fuel economy value = 23.3 mpg 

NOTE TO APPENDIX A, FIGURE 2. Since the actual average fuel economy of 

Manufacturer X’s fleet is 23.3 mpg, as compared to its required fuel economy level of 

22.7 mpg, Manufacturer X did comply with the CAFE standard for MY 2011 as set forth 

in section 533.5(h). 

* * * * * 

PART 536—TRANSFER AND TRADING OF FUEL ECONOMY CREDITS

 7. The authority citation for part 563 continues to read as follows: 

Authority: Sec. 104, Pub. L. 110-140 (49 U.S.C. 32903); delegation of authority 

at 49 CFR 1.50. 

 8. Amend § 536.3 by revising the definition of “Transfer” in paragraph (b) to read 

as follows: 

Transfer means the application by a manufacturer of credits earned by that 

manufacturer in one compliance category or credits acquired be trade (and originally 

earned by another manufacturer in that category) to achieve compliance with fuel 

economy standards with respect to a different compliance category. For example, a 

manufacturer may purchase light truck credits from another manufacturer, and transfer 

them to achieve compliance in the manufacturer’s domestically manufactured passenger 

car fleet. Subject to the credit transfer limitations of 49 U.S.C. 32903 (g)(3), credits can 

also be transferred across compliance categories and banked or saved in that category to 

be carried forward or backwards later to address a credit shortfall. 

 9. Amend § 536.4 by revising the values for the lifetime vehicle miles traveled 

used in the terms VMTe and VMTu required to calculate the adjustment factor in 

paragraph (c) as follows: 
758 

VMTe = Lifetime vehicle miles traveled as provided in the following table for the 

model year and compliance category in which the credit was earned. 

VMTu = Lifetime vehicle miles traveled as provided in the following table for the 

model year and compliance category in which the credit is used for compliance. 

 

Model Year Lifetime Vehicle Miles Traveled (VMT) 

2012 2013 2014 2015 2016 

Passenger 

Cars 

177,238 177,366 178,652 180,497 182,134 

Light 

Trucks 

208,471 208,537 209,974 212,040 213,954 

* * * * * 

PART 537—AUTOMOTIVE FUEL ECONOMY REPORTS

 10. The authority citation for part 537 continues to read as follows: 

Authority: 49 U.S.C. 32907, delegation of authority at 49 CFR 1.50. 

 11. Amend § 537.5 by revising paragraph (c)(4) to read as follows: 

§ 537.5 General requirements for reports.

* * * * * 

 (c) * * * 

 (4) Be submitted in 5 copies to: Administrator, National Highway Traffic Safety 

Administration, 1200 New Jersey Avenue, SE, Washington, DC 20590, or submitted 

electronically to the following secure e-mail address: cafe@dot.gov. Electronic 

submissions should be provided in a pdf format. 

* * * * * 

 12. Amend § 537.6 by deleting paragraph (c)(1) and redesignating paragraph 

(c)(2) as paragraph (c). 

13. Amend § 537.7 by revising paragraphs (c)(4)(xvi)(A)(4) and (c)(4)(xvi)(B)(4) 

to read as follows: 

§ 537.7 Pre-model year and mid-model year reports.

* * * * * 

 (c) * * * 

 (4) * * * 

 (xvi)(A) * * * 

 (4) Beginning model year 2010, front axle, rear axle and average track width as 

defined in 49 CFR 523.2, 

* * * * * 
759 

 (B) * * * 

 (4) Beginning model year 2010, front axle, rear axle and average track width as 

defined in 49 CFR 523.2, 

* * * * * 

 14. Amend § 537.8 by deleting paragraph (c)(2) and revising paragraph (c)(1) to 

read as follows: 

§ 537.8 Supplementary reports.

* * * * * 

 (c)(1) Each report required by paragraph (a)(1), (2), or (3) of this section must be 

submitted in accordance with 537.5(c) not more than 45 days after the date on which the 

manufacturer determined, or could have determined with reasonable diligence, that a 

report is required under paragraph (a)(1), (2), or (3) of this section. 

* * * * * 

 15. Amend § 537.9 by revising paragraph (c) to read as follows: 

§ 537.9 Determination of fuel economy values and average fuel economy.

* * * * * 

 (c) Average Fuel Economy. Average fuel economy must be based upon fuel 

economy values calculated under paragraph (b) of this section for each model type and 

must be calculated in accordance with subpart F of 40 CFR part 600, except that fuel 

economy values for running changes and for new base levels are required only for those 

changes made or base levels added before the average fuel economy is required to be 

submitted under this part. 

* * * * * 

 

PART 538—MANUFACTURING INCENTIVES FOR ALTERNATIVE FUEL 

VEHICLES

16. The authority citation for part 538 continues to read as follows: 

Authority: 49 U.S.C. 32901, 32905, and 32906; delegation of authority at 49 

CFR 1.50. 

 17. Revise § 538.1 to read as follows: 

§ 538.1 Scope.

 This part establishes minimum driving range criteria to aid in identifying 

passenger automobiles that are dual-fueled automobiles. It also establishes gallon 

equivalent measurements for gaseous fuels other than natural gas. 

18. Revise § 538.2 to read as follows: 
760 

§ 538.2 Purpose.

 The purpose of this part is to specify one of the criteria in 49 U.S.C. chapter 329 

“Automobile Fuel Economy” for identifying dual-fueled passenger automobiles that are 

manufactured in model years 1993 through 2019. The fuel economy of a qualifying 

vehicle is calculated in a special manner so as to encourage its production as a way of 

facilitating a manufacturer’s compliance with the Corporate Average Fuel Economy 

standards set forth in part 531 of this chapter. The purpose is also to establish gallon 

equivalent measurements for gaseous fuels other than natural gas. 

 

19. Amend § 538.7(b)(1) by revising it to read as follows: 

§ 538.7 Petitions for reduction of minimum driving range

* * * * * 

 (b) Each petition shall: 

 (1) Be addressed to: Administrator, National Highway Traffic Safety 

Administration, 1200 New Jersey Avenue, SE, Washington, DC 20590. 

* * * * * 

Final Rulemaking to Establish Light-Duty Vehicle Greenhouse Gas Emission 

Standards and Corporate Average Fuel Economy Standards 

Page XXX/XXX 

Dated: March XX, 2010 

____________________ 

Ray LaHood, 

Secretary, Department of Transportation 

Dated: March XX, 2010 

____________________ 

Lisa P. Jackson, 

Administrator, Environmental Protection Agency