1

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 86 and 600

DEPARTMENT OF Transportation National Highway Traffic Safety Administration

49 CFR Parts 531, 533, and 537

[EPA–HQ–OAR–2009–0472; FRL_XXXX-X ; NHTSA-2009-0059 ]

RIN 2060-AP58 ; RIN 2127-AK90

Proposed Rulemaking to Establish Light-Duty Vehicle Greenhouse Gas Emission Standards and Corporate Average Fuel Economy Standa rds

AGENCIES: Environmental Protection Agency (EPA) and Nationa l Highway Traffic Safety Administration (NHTSA).

ACTION: Proposed Rule.

SUMMARY: EPA and NHTSA are issuing this joint proposal to es tablish a National Program consisting of new standards for light-duty vehicles that will reduce greenhouse gas emissions and improve fuel economy. This joint proposed rulemaking 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 proposing greenhouse gas emissions standards under the Clean Air Act, and NHTSA is proposing Corporate Ave rage Fuel Economy standards under the Energy Policy and Conservation Act, as am ended. These standards apply to passenger cars, light-duty trucks, and medium-duty passenger vehicles, covering model years 2012 through 2016. They require these vehicle s to meet an estimated combined average emissions level of 250 grams of CO 2 per mile in MY 2016 under EPA’s GHG program, and 34.1 mpg in MY 2016 under NHTSA’s CAFE program and represent a harmonized and consistent national program (Nationa l Program). Under the National Program, the overall light-duty vehicle fleet would reach 35.5 mpg in MY 2016, if all reductions were made through fuel economy improveme nts. The Program would result in approximately 950 million metric tons of CO 2 emission reductions and approximately 1.8 billion barrels of oil savings over the lifetim e of vehicles sold in model years 2012 through 2016.

The vehicle categories covered by this rulemaking are responsible for almost 60 percent of all U.S. transportation-related greenhou se gas emissions and include cars, sport utility vehicles, minivans, and pickup trucks used for personal transportation. Transportation related emissions are responsible fo r approximately 30 percent of total U.S. greenhouse gas emissions. Under the National Program, automobile manufacturers2

would be able to build a single light-duty national fleet that satisfies all requirements under both programs while ensuring that consumers s till have a full range of vehicle

choices.

DATES : Comments : Comments must be received on or before [INSERT DA TE], 2009. Under the Paperwork Reduction Act, comments on the information collection provisions must be received by the Office of Management and Bu dget (OMB) on or before [INSERT DATE ], 2009. See the SUPPLEMENTARY INFORMATION section on “Public Participation” for more information about w ritten comments.

Hearings: NHTSA and EPA will jointly hold two public hearin gs on the following dates: October XX, 2009, in Detroit, Michigan, and October YY, 2009, in Sacramento, California The hearings will start a t 9 a.m. local time and continue until everyone has had a chance to speak. See the SUPPLEMENTARY INFORMATION section on “Public Participation.” for more information about the publ ic hearings.

ADDRESSES : Submit your comments, identified by Docket ID No. EPA-HQ-OAR2009-0472 and/or NHTSA-2009- XXXX 0059 , by one of the following methods:

• www.regulations.gov: Follow the on-line instruction s for submitting comments.

• Email: a-and-r- d D ocket@epa.gov

• Fax: EPA : (202) 566–1741; NHTSA : (202) 493-2251.

• Mail:

o EPA: Environmental Protection Agency, EPA Docket Cente r (EPA/DC), Air and Radiation Docket, Mail Code 2822T, 1200 Pen nsylvania Avenue, NW., Washington, DC 20460, Attention Docket ID No. EPA-HQ-OAR2009-0472 . In addition, please mail a copy of your comments on the information collection provisions to the Office of Information and Regulatory Affairs, Office of Management and Budget (OMB), Attn: Desk Officer for EPA, 725 17th St., NW., Washington , DC 20503.

o NHTSA: Docket Management Facility, M-30, U.S. Department of Transportation, West Building, Ground Floor, Rm. W1 2-140, 1200 New Jersey Avenue, SE, Washington, DC 20590.

• Hand Delivery:

o EPA: Docket Center, (EPA/DC) EPA West, Room B102, 1301 Constitution Ave., NW., Washington, DC, Attention D ocket ID No. EPAHQ-OAR-2009-0472 . Such deliveries are only accepted during the Docket’s normal hours of operation, and special arr angements should be

made for deliveries of boxed information.

o NHTSA: West Building, Ground Floor, Rm. W12-140, 1200 Ne w Jersey Avenue, SE, Washington, DC 20590, between 9 a.m. an d 5 p.m. Eastern Time, Monday through Friday, except Federal Holiday s.

Instructions : Direct your comments to Docket ID No. EPA-HQ-OAR-2009-0472

and/or NHTSA-2009- XXXX 0059

. See the SUPPLEMENTARY INFORMATION Comment [CY1]: placeholder

Comment [CY2]: placeholder

Comment [CY3]: placeholder

Comment [CY4]: placeholder3

section on “Public Participation” for more informat ion about submitting written

comments.

Public Hearing : NHTSA and EPA will jointly hold two public hear ings at the following locations: October XX, 2009, [LOCATION & ADDRESS], Detroit, Michigan; and October YY, 2009, [LOCATION & ADDRESS], Sacramento, California. See the

SUPPLEMENTARY INFORMATION section on “Public Participation” for more information about the public hearings.

Docket : All documents in the dockets are listed in the www.regulations.gov index. Although listed in the index, some information is n ot publicly available, e.g., confidential business information (CBI) or other information who se disclosure is restricted by statute. Certain other material, such as copyrighted materia l, will be publicly available only in hard copy. Publicly available docket materials are available either electronically in www.regulations.gov or in hard copy at the following locations: EPA: EPA Docket Center, EPA/DC, EPA West, Room 3334, 1301 Constitut ion 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 num ber 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. W1 2-140, 1200 New Jersey Avenue, SE, Washington, DC 20590. The Docket Management Fa cility is open between 9 a.m. and 5 p.m. Eastern Time, Monday through Friday, exc ept Federal holidays.

FOR FURTHER INFORMATION CONTACT: EPA: Tad Wysor, Office of Transportation and Air Quality, Assessment and Stan dards Division, Environmental Protection Agency, 2000 Traverwood Drive, Ann Arbor MI 48105; telephone number: 734-214-4332; fax number: 734-214-4816; email addr ess: wysor.tad@epa.gov

, or Assessment and Standards Division Hotline; telephon e number (734) 214-4636; e-mail address asdinfo@epa.gov

. NHTSA: [insert name]

, [insert office name] , National Highway Traffic Safety Administration, 1200 New Jer sey Avenue, SE, Washington, DC 20590. Telephone: (202) 366- [insert #]

_____.

SUPPLEMENTARY INFORMATION:

A. 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 vehicl es, as defined under EPA’s CAA regulations, 1 and passenger automobiles (passenger cars) and non -passenger automobiles

1 “Light-duty vehicle,” “light-duty truck,” and “med ium-duty passenger vehicle” are defined in 40 CFR 86.1803-01. Generally, the term “light-duty vehicl e” means a passenger car, the term “light-duty truc k” means a pick-up truck, sport-utility vehicle, or mi nivan of up to 8,500 lbs gross vehicle weight ratin g, and “medium-duty passenger vehicle” means a sport-utili ty vehicle or passenger van from 8,500 to 10,000 lb s gross vehicle weight rating. Medium-duty passenger vehicles do not include pick-up trucks. Comment [CY5]: placeholder

Comment [CY6]: placeholder

Comment [CY7]: placeholders

Comment [CY8]: placeholder4

(light trucks) as defined under NHTSA’s CAFE regula tions. 2 Regulated categories and

entities include:

Category NAICS Codes A Examples of Potentially Regulated Entities
Industry 336111

336112 Motor vehicle manufacturers.

Industry 811112

811198

541514 Commercial Importers of Vehicles and Vehicle Compon ents.

A North American Industry Classification System (NAICS)

This list is not intended to be exhaustive, but ra ther 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 careful ly examine the regulations. You may direct questions regarding the applicability of thi s action to the person listed in FOR

FURTHER INFORMATION CONTACT

.

B. Public Participation

NHTSA and EPA request comment on all aspects of thi s joint proposed rule. This section describes how you can participate in t his process.

How Do I Prepare and Submit Comments?

In this joint proposal, there are many issues commo n to both EPA’s and NHTSA’s proposals. For the convenience of all part ies, comments submitted to the EPA

docket will be considered comments submitted to the NHTSA docket, and vice versa. An exception is that comments submitted to the NHTSA d ocket on the Draft Environmental Impact Statement will not be considered submitted t o the EPA docket. Therefore, the public only needs to submit comments to either one of the two agency dockets. Comments that are submitted for consideration by on e agency should be identified as such, and comments that are submitted for considera tion by both agencies should be identified as such. Absent such identification, e ach agency will exercise its best judgment to determine whether a comment is submitte d on its proposal.

Further instructions for submitting comments to eit her the EPA or NHTSA docket

are described below.

EPA: Direct your comments to Docket ID No EPA-HQ-OAR-2009-0472

. EPA’s policy is that all comments received will be included in the public docket without change and may be made available online at www.regu lations.gov , including any personal information provided, unless the comment i ncludes information claimed to be Confidential Business Information (CBI) or other in formation whose disclosure is restricted by statute. Do not submit information th at you consider to be CBI or otherwise

2 “Passenger car” and “light truck” are defined in 4 9 CFR Part 523.5

protected through www.regulations.gov or e-mail. The www.regulations.gov Web site is an ‘‘anonymous access’’ system, which means EPA wil l not know your identity or contact information unless you provide it in the bo dy of your comment. If you send an email comment directly to EPA without going through www.regulations.gov your e-mail address will be automatically captured and included as part of the comment that is placed in the public docket and made available on the Inte rnet. If you submit an electronic comment, EPA recommends that you include your name and other contact information in the body of your comment and with any disk or CD–RO M you submit. If EPA cannot read your comment due to technical difficulties and cannot contact you for clarification, EPA may not be able to consider your comment. Elect ronic files should avoid the use of special characters, any form of encryption, and be free of any defects or viruses. For additional information about EPA’s public docket vi sit the EPA Docket Center homepage at http:// www.epa.gov/epahome/dockets.htm

.

NHTSA: Your comments must be written and in English. To e nsure that your comments are correctly filed in the Docket, please include the Docket number NHTSA2009- XXXX 0059 in your comments. Your comments must not be more than 15 pages long. 3 NHTSA established this limit to encourage you to write your primary comments in a concise fashion. However, you may attach nece ssary additional documents to your comments. There is no limit on the length of the a ttachments. If you are submitting comments electronically as a PDF (Adobe) file, we a sk that the documents submitted be scanned using the Optical Character Recognition (OC R) process, thus allowing the agencies to search and copy certain portions of you r submissions. 4 Please note that pursuant to the Data Quality Act, in order for the substantive data to be relied upon and used by the agencies, it must meet the information quality standards set forth in the OMB and Department of Transportation (DOT) Data Quality Act guidelines. Accordingly, we encourage you to consult the guidelines in preparin g your comments. OMB’s guidelines may be accessed at http://www.whitehouse.gov/omb/fe dreg/reproducible.html. DOT’s guidelines may be accessed at http://www.dot.gov/da taquality.htm.

Tips for Preparing Your Comments

When submitting comments, remember to:

• Identify the rulemaking by docket number and other identifying information (subject heading, Federal Register date and page number).

• Follow directions - The agency may ask you to respo nd to specific questions or organize comments by referencing a Cod e of Federal Regulations (CFR) part or section number.

• Explain why you agree or disagree, suggest alternat ives, and substitute language for your requested changes.

3 See 49 CFR 553.21.

4 Optical character recognition (OCR) is the process of converting an image of text, such as a scanned paper document or electronic fax file, into compute r-editable text.6 • Describe any assumptions and provide any technical information and/or data that you used.

• If you estimate potential costs or burdens, explain how you arrived at your

estimate in sufficient detail to allow for it to be reproduced.

• Provide specific examples to illustrate your concer ns, and suggest

alternatives.

• Explain your views as clearly as possible, avoiding the use of profanity or personal threats. Make sure to submit your comments by the comment pe riod deadline identified in the

DATES section above.

How Can I be Sure That My Comments Were Received?

NHTSA: If you submit your comments by mail and wish Dock et Management to notify you upon its receipt of your comments, enclo se a self-addressed, stamped postcard in the envelope containing your comments. Upon rec eiving your comments, Docket Management will return the postcard by mail.

How Do I Submit Confidential Business Information?

Any confidential business information (CBI) submit ted to one of the agencies will also be available to the other agency. However, as with all public comments, any CBI information only needs to be submitted to either on e of the agencies’ dockets and it will be available to the other. Following are specific instructions for submitting CBI to either

agency.

EPA : Do not submit CBI to EPA through www.regulations .gov or e-mail. Clearly mark the part or all of the information tha t you claim to be CBI. For CBI information in a disk or CD ROM that you mail to EP A, mark the outside of the disk or CD ROM as CBI and then identify electronically with in the disk or CD ROM the specific

information that is claimed as CBI. In addition to one complete version of the comment that includes information claimed as CBI, a copy of the comment that does not contain

the information claimed as CBI must be submitted fo r inclusion in the public docket. Information so marked will not be disclosed except in accordance with procedures set

forth in 40 CFR Part 2.

NHTSA : If you wish to submit any information under a cl aim of confidentiality, you should submit three copies of your complete sub mission, including the information you claim to be confidential business information, to the Chief Counsel, NHTSA, at the address given above under FOR FURTHER INFORMATION CONTACT . When you send a comment containing confidential business inf ormation, you should include a cover letter setting forth the information specified in o ur confidential business information regulation. 5

5 See 49 CFR Part 512. Formatted: Font: 12 pt7

In addition, you should submit a copy from which y ou have deleted the claimed confidential business information to the Docket by one of the methods set forth above.

Will the Agencies Consider Late Comments?

NHTSA and EPA will consider all comments received before the close of business on the comment closing date indicated abov e under DATES . To the extent practicable, we will also consider comments receive d after that date. If interested persons believe that any new information the agency places in the docket affects their comments, they may submit comments after the closing date con cerning how the agency should

consider that information for the final rule. Howe ver, the agencies’ ability to consider any such late comments in this rulemaking will be l imited due to the time frame for issuing a final rule.

If a comment is received too late for us to practi cably consider in developing a final rule, we will consider that comment as an inf ormal suggestion for future rulemaking

action.

How Can I Read the Comments Submitted By Other Peop le?

You may read the materials placed in the docket fo r this document (e.g

. , the comments submitted in response to this document by other interested persons) at any time by going to http://www.regulations.gov. Follow the online instructions for accessing the dockets. You may also read the materials at th e EPA Docket Center or NHTSA Docket Management Facility by going to the street a ddresses given above under

ADDRESSES

.

How do I participate in the public hearings?

NHTSA and EPA will jointly host two public hearing s on the dates and locations

described in the DATES and ADDRESSES sections above.

If you would like to present testimony at the publi c hearings, we ask that you notify the EPA and NHTSA contact persons listed und er FOR FURTHER

INFORMATION CONTACT at least ten days before the hearing. Once EPA an d NHTSA learn how many people have registered to spea k at the public hearing, we will allocate an appropriate amount of time to each part icipant, allowing time for lunch and necessary breaks throughout the day. For planning purposes, each speaker should anticipate speaking for approximately ten minutes, although we may need to adjust the time for each speaker if there is a large turnout. We suggest that you bring copies of your

statement or other material for the EPA and NHTSA panel s and the audience. It would also be helpful if you send us a copy of your state ment or other materials before the hearing. To accommodate as many speakers as possibl e, we prefer that speakers not use technological aids (e.g., audio-visuals, computer s lideshows). However, if you plan to do so, you must notify the contact persons in the FOR FURTHER INFORMATION8

CONTACT section above. You also must make arrangements to provide your presentation or any other aids to NHTSA and EPA in advance of the hearing in order to facilitate set-up. In addition, we will reserve a block of time for anyone else in the audience who wants to give testimony.

The hearing will be held at a site accessible to i ndividuals with disabilities. Individuals who require accommodations such as sign language interpreters should contact the persons listed under FOR FURTHER INFORMATION CONTACT

section above no later than ten days before the date of the hearing.

NHTSA and EPA will conduct the hearing informally, and technical rules of evidence will not apply. We will arrange for a wri tten transcript of the hearing and keep the official record of the hearing open for 30 days to allow you to submit supplementary information. You may make arrangements for copies of the transcript directly with the

court reporter.

Table of Contents I. Overview of Joint EPA/NHTSA National Program

A. Introduction

1. Building Blocks of the National Program 2. Joint Proposal for a National Program B. Summary of the Joint Proposal C. Background and Comparison of NHTSA and EPA Sta tutory Authority 1. NHTSA Statutory Authority 2. EPA Statutory Authority 3. Comparing the Agencies’ Authority D. Summary of the Proposed Standards for the Nation al Program 1. Joint Analytical Approach

2. Level of the Standards

3. Form of the Standards E. Summary of Costs and Benefits for the Joint Prop osal 1. Summary of Costs and Benefits of Proposed NHTSA CAFE

Standards 2. Summary of Costs and Benefits of Proposed EPA GH G

Standards F. Program Flexibilities for Achieving Compliance

1. CO 2 /CAFE Credits Generated Based on Fleet Average Perf ormance 2. Air Conditioning Credits

3. Flex-fuel and Alternative Fuel Vehicle Credits 4. Temporary Lead-time Allowance Alternative Standa rds 5. Additional Credit Opportunities under the CAA G. Coordinated Compliance

H. Conclusion9

II. Joint Technical Work Completed for This Proposa l

A. Introduction B. How did NHTSA and EPA Develop the Baseline Mark et Forecast? 1. Why do the Agencies Establish a Baseline Vehic le Fleet?

2. How do the Agencies Develop the Baseline Vehicle Fleet? 3. How is the Development of the Baseline Fleet for this Proposal Different from NHTSA’s Historical approach, and Why is this Approach Preferable?

4. How Does Manufacturer Product Plan Data Factor i nto the Baseline Used in this Proposal? C. Development of Attribute-Based Curve Shapes D. Relative Car-Truck Stringency E. Joint Vehicle Technology Assumptions

1. What Technologies do the Agencies Consider? 2. How did the Agencies Determine the Costs and Eff ectiveness of Each of these Technologies? F. Joint Economic Assumptions

III. EPA Proposal for Greenhouse Gas Vehicle Standa rds A. Executive Overview of EPA Proposal

1. Introduction 2. Why is EPA Proposing this Rule? 3. What is EPA Proposing? 4. Basis for the Proposed GHG Standards under Sect ion 202(a) B. Proposed GHG Standards for Light-duty Vehicles, Light-duty Trucks, and Medium duty Passenger Vehicles 1. What Fleet-wide Emissions Levels Correspond to t he CO 2 Standards?

2. What Are the CO 2 Attribute-based Standards? 3. Overview of How EPA’s Proposed CO 2 Standards Would Be Implemented for Individual Manufacturers 4. Averaging, Banking, and Trading Provisions for C O 2 Standards

5. CO 2 Temporary Lead-time Allowance Alternative Standard s 6. Proposed Nitrous Oxide and Methane Standards 7. Small Entity Deferment C. Additional Credit Opportunities for CO 2 Fleet Average Program 1. Air Conditioning Related Credits

2. Flex Fuel and Alternative Fuel Vehicle Credits 3. Advanced Technology Vehicle Credits for Electri c Vehicles, Plug- in Hybrids, and Fuel Cells 4. Off-cycle Technology Credits 5. Early Credit Options D. Feasibility of the Proposed CO 2 Standards 1. How Did EPA Develop a Reference Vehicle Fleet fo r Evaluating Further

CO 2 Reductions?

2. What are the Effectiveness and Costs of CO 2 -reducing Technologies?10 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 Would Decide Between Options to Improve CO 2 Performance to Meet a Fleet Average Standard? 6. Why are the Proposed CO 2 Standards Feasible?

7. What Other Fleet-Wide CO 2 Levels Were Considered? E. Certification, Compliance, and Enforcement 1. Compliance Program Overview 2. Compliance with Fleet-Average CO 2 Standards

3. Vehicle Certification 4. Useful Life Compliance 5. Credit Program Implementation

6. Enforcement

7. Prohibited Acts in the CAA

8. Other Certification Issues 9. Miscellaneous Revisions to Existing Regulations 10. Warranty, Defect Reporting, and Other Emissio n-related Components

Provisions 11. Light Vehicles and Fuel Economy Labeling F. How Would This Proposal Reduce GHG Emissions and Their Associated

Effects? 1. Impact on GHG Emissions 2. Overview of Climate Change Impacts from GHG Emi ssions 3. Changes in Global Mean Temperature and Sea-leve l Rise Associated with the Proposal’s GHG Emissions Reductions 4. Weight Reduction and Potential Safety Impacts G. How Would the Proposal 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 Proposal? 1. Costs Associated with the Vehicle Program 2. Cost per Ton of Emissions Reduced 3. Reduction in Fuel Consumption and its Impacts 4. Impacts on U.S. Vehicle Sales and Consumer Vehic le Choice Modeling 5. Economy-Wide Impacts of the Rule 6. Benefits of Reducing GHG Emissions 7. Non-GHG Health and Environmental Impacts 8. Energy Security Impacts 9. Other Impacts 10. Summary of Costs and Benefits11

I. Statutory and Executive Order Reviews 1. Executive Order 12866: Regulatory Planning and R eview 2. Paperwork Reduction Act 3. Regulatory Flexibility Act

4. Unfunded Mandates Reform Act 5. Executive Order 13132 (Federalism) 6. Executive Order 13175 (Consultation and Coordina tion with Indian Tribal Governments)

7. Executive Order 13045: “Protection of Children f rom 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 Addr ess Environmental Justice in Minority Populations and Low-Income Pop ulations J. Statutory Provisions and Legal Authority

IV. NHTSA Proposal for Passenger Car and Light Truc k CAFE Standards for

MYs 2012-2016 A. Executive overview of NHTSA proposal

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 Proposed MY 2012-2016 CAFE Stand ards B. Background 1. Chronology of Events since the National Academy of Sciences Called for Reforming and Increasing CAFE standards 2. NHTSA issues Final Rule Establishing Attribute-b ased CAFE Standards for MY 2008-2011 Light Trucks (March 2006)

3. Ninth Circuit Issues Decision re Final Rule for MY 2008-2011 Light Trucks (November 2007) 4. Congress Enacts Energy Security and Independence Act of 2007 (December 2007) 5. NHTSA Proposes CAFE Standards for MYs 2011-2015 (April 2008)

6. Ninth Circuit Revises its Decision re Final Rule for MY 2008-2011 Light Trucks (August 2008) 7. NHTSA Releases Final Environmental Impact Statem ent (October 2008) 8. Department of Transportation Decides not to Issu e MY 2011-2015 Final Rule (January 2009) 9. The President Requests NHTSA to Issue Final Rule for MY 2011 Only (January 2009) 10. NHTSA Issues Final Rule for MY 2011 (March 2009 )12 11. Energy Policy and Conservation Act, as Amende d by the Energy Independence and Security Act C. Development and Feasibility of the Proposed Stan dards 1. How was the Baseline Vehicle Fleet Developed? 2. How were the Technology Inputs Developed? 3. How did NHTSA Develop the Economic Assumption I nputs? 4. How does NHTSA use the Assumptions in its Modeli ng Analysis? 5. How did NHTSA Develop the Shape of the Target Cu rves for the Proposed Standards? D. Statutory Requirements 1. EPCA, as Amended by EISA

2. Administrative Procedure Act 3. National Environmental Policy Act E. What are the Proposed 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 St atutory Obligations? G. Impacts of the Proposed CAFE Standards 1. How would these Proposed Standards Improve Fuel Economy and Reduce

GHG Emissions for MY 2012-2016 Vehicles? 2. How would these Proposed Standards Improve Fleet -wide Fuel Economy and Reduce GHG Emissions Beyond MY 2016? 3. How would these Proposed Standards Impact Non-GH G Emissions and

their Associated Effects?

4. What are the Estimated Costs and Benefits of the se Proposed

Standards? 5. How would these Proposed Standards Impact Vehicl e Sales? 6. What are the Estimated Safety Impacts of these P roposed Standards? 7. What Other Impacts (Quantitative and Unquantifia ble) will these Proposed

Standards Have?

H. Vehicle Classification I. Compliance and Enforcement

1. Overview 2. How does NHTSA Determine Compliance? 3. What Compliance Flexibilities are Available unde r the CAFE Program

and How do Manufacturers Use Them?

4. Other CAFE Enforcement Issues—Variations in Foo tprint J. Other Near-term Rulemakings Mandated by EISA 1. Commercial Medium- and Heavy-duty On-highway Veh icles and Work

Trucks

2. Consumer Information K. Public Participation L. Regulatory Notices and Analyses13 1. Executive Order 12866 and DOT Regulatory Policie s 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 A ct
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 anno uncing proposed rules whose benefits would address the urgent and closely inter twined challenges of energy independence and security and global warming. Thes e proposed rules call for a strong and coordinated federal greenhouse gas and fuel eco nomy program for passenger cars, light-duty-trucks, and medium-duty passenger vehicl es (hereafter light-duty vehicles), referred to as the National Program. The proposed rules can achieve substantial reductions of greenhouse gas (GHG) emissions and im provements in fuel economy from the light-duty vehicle part of the transportation s ector, based on technology that is already being commercially applied in most cases and that c an be incorporated at a reasonable

cost.

This joint notice is consistent with the President’ s announcement on May 19, 2009 of a National Fuel Efficiency Policy of establ ishing consistent, harmonized, and streamlined requirements that would reduce greenhou se gas emissions and improve fuel economy for all new cars and light-duty trucks sold in the United States 6 The National Program holds out the promise of delivering additio nal environmental and energy benefits, cost savings, and administrative efficien cies on a nationwide basis that might

6 President Obama Announces National Fuel Efficienc y Policy, The White House, May 19, 2009. Available at: http://www.whitehouse.gov/the_press_ office/President-Obama-Announces-National-FuelEfficiency-Policy/ (last accessed August 18, 2009). Remarks by the President on National Fuel Efficie ncy Standards, The White House, May 19, 2009. Availabl e at: http://www.whitehouse.gov/the_press_office/Remarks- by-the-President-on-national-fuel-efficiencystandards/ (Last accessed August 18, 2009).14

not be available under a less coordinated approach. The proposed National Program also offers the prospect of regulatory convergence by ma king 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. This would allow automakers to produce and sell a single fleet nationally. Thus, it may also help to mitigate the additional costs that manufacturers would otherwise face in having to com ply with multiple sets of federal and state standards. This joint notice is also consist ent with the Notice of Upcoming Joint Rulemaking signed by DOT and EPA on May 19 7 and responds to the President’s January 26, 2009 memorandum on CAFE standards for m odel years 2011 and beyond, 8

the details of which can be found in Section IV of this joint notice.

1. Building Blocks of the National Program

The National Program is both needed and possible be cause the relationship between improving fuel economy and reducing CO 2 tailpipe emissions is a very direct

and close one. The amount of those CO 2 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 CO 2 it emits in traveling

that distance. 9 While there are emission control technologies tha t reduce the pollutants (e.g

. , carbon monoxide) produced by imperfect combustion of fuel by capturing or destroying them, there is no such technology for CO 2 . 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 CO 2 . Thus, there is a single pool of technologies for addressing these twin problems, i. e., those that reduce fuel consumption and thereby reduce CO 2 emissions as well.

a. DOT’s CAFE Program

In 1975, Congress enacted the Energy Policy and Con servation Act (EPCA), mandating that NHTSA establish and implement a regu latory program for motor vehicle fuel economy to meet the various facets of the need to conserve energy, including ones having energy independence and security, environmen tal and foreign policy implications. Fuel economy gains since 1975, due both to the stan dards and market factors, have resulted in saving billions of barrels of oil and a voiding billions of metric tons of CO 2 emissions. In December 2007, Congress enacted the Energy Independence and Securities Act (EISA), amending EPCA to require substantial, c ontinuing increases in fuel economy

standards.

7 74 FR 24007 (May 22, 2009).

8 Available at: http://www.whitehouse.gov/the_press_ office/Presidential_Memorandum_Fuel_Economy/ (last accessed on August 18, 2009)

9 Panel on Policy Implications of Greenhouse Warming , National Academy of Sciences, National Academy of Engineering, Institute of Medicine, “Policy Impl ications of Greenhouse Warming: Mitigation, Adaptation, and the Science Base,” National Academi es Press, 1992. p. 287.15 The CAFE standards address most, but not all, of th e real world CO 2 emissions because EPCA requires the use of 1975 passenger car test procedures under which vehicle air conditioners are not turned on during f uel economy testing. 10 Fuel economy is determined by measuring the amount of CO 2 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 p recision. The carbon content of the test

fuel 11 is then used to calculate the amount of fuel that had to be consumed per mile in order to produce that amount of CO 2. Finally, that fuel consumption figure is converted into a miles-per-gallon figure. CAFE standards als o do not address the 5-8 percent of

GHG emissions that are not CO 2 , i.e., nitrous oxide (N 2 O), and methane (CH 4 ) as well as

emissions of CO 2 and hydrofluorocarbons (HFCs) related to operation of the air conditioning system.

b. EPA’s Greenhouse Gas Standards for Light-duty V ehicles

Under the Clean Air Act EPA is responsible for addr essing air pollutants from motor vehicles. On April 2, 2007, the U.S. Supreme Court issued its opinion in

Massachusetts v. EPA

, 12 a case involving a 2003 order of the Environmental Protection Agency (EPA) denying a petition for rulemaking to r egulate greenhouse gas emissions from motor vehicles under section 202(a) of the Cle an Air Act (CAA). 13 The Court held that greenhouse gases were air pollutants for purpo ses 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 s cience is too uncertain to make a reasoned decision. The Court further ruled that, i n 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 regulat e CO 2 from motor vehicles because

to do so would de facto tighten fuel economy standards, authority over whic h 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 envir onmental responsibilities. EPA has been charged with protecting the public‘s ‘health’ and ‘welfare’, a statutory obligation wholly independent of DOT’s mandate to promote ener gy 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 obligations a nd yet avoid inconsistency.” 14 The Court remanded the case back to the Agency for reco nsideration in light of its findings. 15

10 EPCA does not require the use of 1975 test procedu res for light trucks.

11 This is the method that EPA uses to determine com pliance with NHTSA’s CAFE standards.

12 549 U.S. 497 (2007).

13 68 FR 52922 (Sept. 8, 2003).

14 549 U.S. at 531-32.

15 For further information on Massachusetts v. EPA see the July 30, 2008 Advance Notice of Proposed Rulemaking, “Regulating Greenhouse Gas Emissions un der the Clean Air Act”, 73 FR 44354 at 44397. There is a comprehensive discussion of the litigati on’s history, the Supreme Court’s findings, and subsequent actions undertaken by the Bush Administr ation and the EPA from 2007-2008 in response to the Supreme Court remand.16 EPA has since proposed to find that emissions of G HGs from new motor vehicles and motor vehicle engines cause or contribute to ai r pollution that may reasonably be anticipated to endanger public health and welfare. 16 This proposal represents the second phase of EPA’s response to the Supreme Court’s deci sion.

c. California Air Resources Board Greenhouse Gas P rogram

In 2004, the California Air Resources Board approve d standards for new lightduty vehicles, which regulate the emission of not o nly CO 2 , 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 Califor nia’s standards. These standards apply to model years 2009 through 2016 and require reductions in CO 2 emissions for passenger cars and some light trucks of 323 g/mil i n 2009 up to 205 g/mi in 2016 and 439 g/mi for light trucks in 2009 up to 332 g/mi in 201 6. On June 30, 2009, EPA granted California’s request for a waiver of preemption und er the CAA. 17 The granting of the waiver permits California and the other states to p roceed with implementing the

California emission standards.

2. Joint Proposal for a National Program

On May 19, 2009, the Department of Transportation a nd the Environmental Protection Agency issued a Notice of Upcoming Joint Rulemaking to propose a strong and coordinated fuel economy and greenhouse gas Nat ional Program for Model Year (MY) 2012-2016 light duty vehicles.

B. Summary of the Joint Proposal

In this joint rulemaking, EPA is proposing GHG emis sions standards under the Clean Air Act (CAA), and NHTSA is proposing Corpora te Average Fuel Economy (CAFE) standards under the Energy Policy and Conser vation Action of 1975 (EPCA), as amended by the Energy Independence and Security Act of 2007 (EISA). The intention of this joint rulemaking proposal is to set forth a ca refully coordinated and harmonized approach to implementing these two statutes, in acc ordance with all substantive and procedural requirements imposed by law.

Climate change is widely viewed as the most signif icant long-term threat to the global environment. According to the Intergovernme ntal Panel on Climate Change, anthropogenic emissions of greenhouse gases are ver y likely (90 to 99 percent probability) the cause of most of the observed glob al warming over the last 50 years. The primary GHGs of concern are carbon dioxide (CO 2 ), methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, and sulfur he xafluoride. Mobile sources emitted 31.5 percent of all U.S. GHG in 2006, and have been the fastest-growing source of U.S.

16 74 FR 18886 (Apr. 24, 2009).

17 74 FR 32744 (July 8, 2009).17

GHG since 1990. Light-duty vehicles emit four GHGs --CO 2 , methane, nitrous oxide, and hydrofluorocarbons--and are responsible for nearly 60 percent of all mobile source GHGs. For light-duty vehicles, CO 2 emissions represent about 95 percent of all greenhouse emissions, and the CO 2 emissions measured over the EPA tests used for fue l economy compliance represent over 90 percent of tot al light-duty vehicle greenhouse gas

emissions.

Improving energy security by reducing our dependen ce 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. pe troleum consumption. World crude oil production is highly concentrated, exacerbating the risks of supply disruptions and price shocks. Tight global oil markets led to pric es 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. ass ets for oil imports continues to be an important component of the U.S.’ historically unpre cedented trade deficits. Transportation accounts for about two-thirds of U.S . petroleum consumption. Light-duty vehicles account for about 60 percent of transporta tion oil use, which means that they alone account for about 40 percent of all U.S. oil consumption.

NHTSA and EPA have coordinated closely and worked j ointly in developing their respective proposals. This is reflected in many as pects of this joint proposal. For example, the agencies have developed a comprehensiv e joint Technical Support Document (TSD) that provides a solid technical unde rpinning for each agency’s modeling and analysis used to support their propose d standards. Also, to the extent allowed by law, the agencies have harmonized many e lements of program design, such as the form of the standard (the footprint-based attri bute curves), and the definitions used for cars and trucks. They have developed the same or si milar compliance flexibilities, to the extent allowed and appropriate under their respecti ve statutes, such as averaging, banking, and trading of credits, and have harmonize d the compliance testing and test protocols used for purposes of the fleet average st andards each agency is proposing. Finally, as discussed in Section I.C., under their respective statutes each agency is called upon to exercise its judgment and determine standar ds that are an appropriate balance of various relevant statutory factors. Given the comm on technical issues before each agency, the similarity of the factors each agency i s 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 proposing standards that result i n a harmonized National Program.

This joint proposal covers passenger cars, light-d uty-trucks, and medium-duty passenger vehicles built in model years 2012 throug h 2016. These vehicle categories are responsible for almost 60 percent of all U.S. trans portation-related GHG emissions. EPA and NHTSA expect that automobile manufacturers will meet these proposed standards by utilizing technologies that will reduce vehicle GHG emissions and improve fuel economy. Although many of these technologies are a vailable today, the emissions reductions and fuel economy improvements proposed w ould involve more widespread use of these technologies across the light-duty veh icle fleet. These include improvements18

to engines, transmissions, and tires, increased use of start-stop technology, improvements in air conditioning systems (to the extent currentl y allowed by law), increased use of hybrid and other advanced technologies, and the ini tial commercialization of electric vehicles and plug-in hybrids.

The proposed National Program would result in appro ximately 950 million metric tons of total carbon dioxide equivalent emissions r eductions and approximately 1.8 billion barrels of oil savings over the lifetime of vehicles sold in model years 2012 through 2016. In total, the combined EPA and NHTSA 2012-2016 standards would 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 proposals also provide important energy security be nefits, as light-duty vehicles are about 95 percent dependent on oil-based fuels. The combined benefits of the proposed CAFE

and GHG standards National Program would will total about $ XXX 250 billion at a 3% discount rate, or $195 billion at a 7% discount rat e . In the discussion that follows in Section III and IV, each agency explains the relate d benefits for their individual

standards.

Together, EPA and NHTSA estimate that the average c ost increase for a model year 2016 vehicle due to the proposed National Prog ram is less than $1,100. However, the typical driver would save enough in lower fuel costs over the first three years of use to offset the higher vehicle costs. U.S. consumers who purchase their vehicle outright would save enough in lower fuel costs over the firs t three years to offset these higher vehicle costs. However, most U.S. consumers purcha se a new vehicle using credit rather than paying cash and the typical car loan today is a five year, 60 month loan. These consumers would see immediate savings due to their vehicle’s lower fuel consumption in the form of reduced monthly costs of $12-$14 per mo nth throughout the duration of the loan (that is, the fuel savings outweigh the increa se in loan payments by $12-$14 per month). Whether a consumer takes out a loan or pur chases a new vehicle outright, over the lifetime of a model year 2016 vehicle, consumer s would save more than $3,000 due to fuel savings. The average 2016 MY vehicle will have emit Over the lifetime of a typical new vehicle, consumers are estimated to sav e approximately $ 2,800 and reduce

their vehicle 16 fewer metric tons of CO 2 emissions by XX [ metric tons during its lifetime

.

This joint proposal also offers the prospect of imp ortant regulatory convergence and certainty to automobile companies. Absent this proposal, there would be three separate federal and state regimes independently re gulating light-duty vehicles to reduce fuel consumption and GHG emissions: NHTSA’s CAFE s tandards, EPA’s GHG standards, and the GHG standards applicable in Cali fornia and other states adopting the California standards. This joint proposal would al low automakers to meet both the NHTSA and EPA requirements with a single national f leet, greatly simplifying the industry's technology, investment and compliance st rategies. In addition, in a letter dated May 18, 2009, California stated that it “recognizes the benefit for the country and California of a National Program to address greenho use gases and fuel economy and the

historic announcement of United States Environmenta l Protection Agency (EPA) and19

National Highway Transportation Safety Administrati on's (NHTSA) intent to jointly propose a rule to set standards for both. Californi a fully supports proposal and adoption of such a National Program.” To promote the Nation al Program, California announced its commitment to take several actions, including r evising its program for MYs 2012- 2016 such that compliance with the federal GHG stan dards would be deemed to be compliance with California's GHG standards. This w ould allow the single national fleet used by automakers to meet the two Federal requirem ents and to meet California requirements as well. This commitment was conditio ned on several points, including EPA GHG standards that are substantially similar to those described in the May 19, 2009 Notice of Upcoming Joint Rulemaking. Many automak ers and trade associations also announced their support for the National Program an nounced that day. 18 The manufacturers conditioned their support on EPA and NHTSA standards substantially

similar to those described in that Notice. NHTSA a nd EPA met with many vehicle manufacturers to discuss the feasibility of the Nat ional Program. EPA and NHTSA are confident that these proposed GHG and CAFE standard s, if finalized, would successfully harmonize both the federal and state programs for M Ys 2012-2016 and would allow our country to achieve the increased benefits of a sing le, nationwide program to reduce lightduty vehicle GHG emissions and reduce the country’s dependence on fossil fuels by improving these vehicles’ fuel economy.

A successful and sustainable automotive industry de pends upon, among other things, continuous technology innovation in general , and low greenhouse gas emissions and high fuel economy vehicles in particular. In t his respect, this proposal would help spark the investment in technology innovation neces sary for automakers to successfully compete in both domestic and export markets, and th ereby continue to support a strong

economy.

While this proposal covers MYs 2012-2016, EPA and N HTSA anticipate the importance of seeking a strong, coordinated nationa l program for light-duty vehicles in model years beyond 2016 in a future rulemaking.

Key elements of the proposal for a harmonized and c oordinated program are the level and form of the GHG and CAFE standards, the a vailable compliance mechanisms, and general implementation elements. These element s are outlined in the following

sections.

C. Background and Comparison of NHTSA and EPA Stat utory Authority

This section provides the agencies’ respective stat utory authorities under which CAFE

and GHG standards are established.

1. NHTSA Statutory Authority

18 These letters are available at www.epa.gov/otaq/c limate/regulations.htm.20

NHTSA establishes CAFE standards for passenger car s and light trucks for each model year under EPCA, as amended by EISA. EPCA ma ndates a motor vehicle fuel economy regulatory program to meet the various face ts of the need to conserve energy, including ones having environmental and foreign pol icy implications. EPCA allocates the responsibility for implementing the program bet ween NHTSA and EPA as follows: NHTSA sets CAFE standards for passenger cars and li ght trucks; EPA establishes the procedures for testing, tests vehicles, collects an d analyzes manufacturers’ data, and calculates the average fuel economy of each manufac turer’s passenger cars and light trucks; and NHTSA enforces the standards based on E PA’s calculations.

a. Standard Setting

We have summarized below the most important aspect s of standard setting under EPCA, as amended by EISA.

For each future model year, EPCA requires that NHTS A establish standards at “the maximum feasible average fuel economy level th at 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 nat ion 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 a ppropriate weighting based on the circumstances in each CAFE standard rulemaking. 19

For MYs 2011-2020, EPCA further requires that separ ate standards for passenger cars and for light trucks be set at levels high eno ugh 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 App ropriate Stringency of CAFE Standards

(1) Technological feasibility

“Technological feasibility” refers to whether a par ticular method of improving fuel economy can be available for commercial applic ation 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 c ommercially 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 tha t improve air conditioner efficiency

19 See Center for Biological Diversity v. NHTSA, 538 F.3d . 1172, 1195 (9 th Cir. 2008) (“The EPCA clearly requires the agency to consider these four factors, but it gives NHTSA discretion to decide how to bal ance the statutory factors—as long as NHTSA’s balancing does not undermine the fundamental purpose of the EPCA: energy conservation.”)21

because the air conditioners are not turned on duri ng testing under existing test procedures.

(2) Economic practicability

“Economic practicability” refers to whether a stand ard 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.” 20 This factor is especially important in the contex t of current events, where the automobile industry is facing significant ly 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 variet y of factors, including the annual rate at which manufacturers can increase the percen tage 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. N HTSA believes this approach is

reasonable for the MY 2012-2016 standards in view o f the facts before it at this time. NHTSA is aware, however, that facts relating to a v ariety of key issues in CAFE rulemaking are steadily evolving and seeks comments on the balancing of these factors in light of the facts available during the comment per iod.

At the same time, the law does not preclude a CAFE standard that poses considerable challenges to any individual manufactu rer. 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 gi ven level of average fuel economy.” 21 Instead, NHTSA is compelled “to weigh the benefit s to the nation of a higher fuel economy standard against the difficulti es of individual automobile

manufacturers.” Id. The law permits CAFE standards exceeding the proj ected capability of any particular manufacturer as long as the stand ard 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 competitiv e positioning of each particular company. Rather, it is intended to enhance fuel ec onomy of the vehicle fleet on American roads, while protecting motor vehicle safe ty 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

20 67 FR 77015, 77021 (Dec. 16, 2002).

21 CEI-I , 793 F.2d 1322, 1352 (D.C. Cir. 1986).22 “The effect of other motor vehicle standards of the Government on fuel economy,” involves an analysis of the effects of co mpliance with emission, 22 safety, noise, or damageability standards on fuel economy c apability 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 othe r motor vehicle standards on fuel economy. It said so because, from the CAFE program ’s earliest years 23 until present, the effects of such compliance on fuel economy capabili ty over the history of the CAFE program have been negative ones. For example, safe ty standards that have the effect of increasing vehicle weight lower vehicle fuel econom y capability and thus decrease the level of average fuel economy that the agency can d etermine to be feasible.

In the wake of Massachusetts v. EPA and of EPA’s proposed endangerment finding, granting of a waiver to California for its motor vehicle GHG standards, and its own proposal of GHG standards, NHTSA is confronted with the issue of how to treat

those standards under the “other motor vehicle stan dards” 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 th e same types of technologies used by manufacturers in complying with the CAFE standards. The primary exception would involve increases in the efficiency of air conditio ners.

Comment is requested on whether and in what way the effects of the California

and EPA standards should be considered under the “o ther 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 CAF E standards. The agency has already considered EPA’s proposal and the harmoniza tion benefits of the National Program in developing its own proposal.

(4) The need of the United States to conserve energ y

“The need of the United States to conserve energy” means “the consumer cost, national balance of payments, environmental, and fo reign policy implications of our need for large quantities of petroleum, especially impor ted petroleum.” 24 Environmental implications principally include reductions in emis sions of criteria pollutants and carbon dioxide. Prime examples of foreign policy implicat ions are energy independence and security concerns.

(a) Fuel prices and the value of saving fuel

Projected future fuel prices are a critical input i nto the preliminary economic analysis of alternative CAFE standards, because the y determine the value of fuel savings

22 In the case of emission standards, this includes standards adopted by the Federal government and can include standards adopted by the States as well, si nce in certain circumstances the Clean Air Act allo ws States to adopt and enforce State standards differe nt from the Federal ones.

23 42 FR 63184, 63188 (Dec. 15, 1977). See also 42 FR 33534, 33537 (Jun. 30, 1977).

24 42 FR 63184, 63188 (1977).23

both to new vehicle buyers and to society. In this rule, NHTSA relies on fuel price projections from the U.S. Energy Information Admini stration’s (EIA) Annual Energy Outlook (AEO) for this analysis. Federal governmen t agencies generally use EIA’s projections in their assessments of future energy-r elated policies.

(b) Petroleum consumption and import externalit ies

U.S. consumption and imports of petroleum products impose costs on the domestic economy that are not reflected in the mark et 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 suppl ies from unstable regions, and for maintaining the strategic petroleum reserve (SPR) t o 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 Age ncy 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 magn itude of these external economic costs, thus increasing the true economic cost of su pplying transportation fuels above the resource costs of producing them. Conversely, redu cing U.S. imports of crude petroleum or refined fuels or reducing fuel consumption can r educe these external costs.

(c) Air pollutant emissions

While reductions in domestic fuel refining and dist ribution that result from lower fuel consumption will reduce U.S. emissions of vari ous pollutants, additional vehicle use

associated with the rebound effect 25 from higher fuel economy will increase emissions o f 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 v ehicle use.

Fuel savings from stricter CAFE standards also resu lt in lower emissions of CO 2 , the main greenhouse gas emitted as a result of refi ning, distribution, and use of transportation fuels. Lower fuel consumption reduc es carbon dioxide emissions directly, because the primary source of transportation-relate d CO 2 emissions is fuel combustion in internal combustion engines.

NHTSA has considered environmental issues, both wit hin the context of EPCA and the National Environmental Policy Act, in makin g decisions about the setting of standards from the earliest days of the CAFE progra m. As courts of appeal have noted in

25 The “rebound effect” refers to the tendency of dri vers to drive their vehicles more as the cost of do ing so goes down, as when fuel economy improves.24

three decisions stretching over the last 20 years, 26 NHTSA defined the “need of the Nation to conserve energy” in the late 1970s as inc luding “the consumer cost, national balance of payments, environmental, and foreign pol icy implications of our need for large quantities of petroleum, especially imported petrol eum.” 27 Pursuant to that view, NHTSA declined in the past to include diesel engine s 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. 28 In 1988, NHTSA included climate change concepts in its CAFE notice s and prepared its first environmental assessment addressing that subject. 29 It cited concerns about climate change as one of its reasons for limiting the exten t of its reduction of the CAFE standard for MY 1989 passenger cars. 30 Since then, NHTSA has considered the benefits of reducing tailpipe carbon dioxide emissions in its f uel 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 co nsequences when in establishing CAFE standards. This practice is reco gnized approvingly in case law. 31

Under the universal or “flat” CAFE standards that N HTSA was previously authorized to establish, the primary risk to safety came from the possibility that manufacturers would respond to higher standards by building smaller, le ss safe vehicles in order to “balance out” the larger, safer vehicles that the public gen erally preferred to buy. Under the attribute-based standards being proposed in this ac tion, that risk is reduced because building smaller vehicles tends to raise a manufact urer’s overall CAFE obligation, rather than only raising its fleet average CAFE. However, even under attribute-based standards, there is still risk that manufacturers will rely on downweighting to improve their fuel economy (for a given vehicle at a given footprint t arget) in ways that may reduce safety.

26 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 t hat “NHTSA itself has interpreted the factors it mu st consider in setting CAFE standards as including env ironmental effects”); and Center for Biological Diversity v. NHTSA , 538 F.3d 1172 (9 th Cir. 2007).

27 42 FR 63184, 63188 (Dec. 15, 1977) (emphasis added )

28 For example, the final rules establishing CAFE sta ndards 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).

29 53 FR 33080, 33096 (Aug. 29, 1988).

30 53 FR 39275, 39302 (Oct. 6, 1988).

31 See, e.g., Center for Auto Safety v. NHTSA (CAS), 793 F. 2d 1322 (D.C. Cir. 1986) (Administra tor’s consideration of market demand as component of econ omic practicability found to be reasonable); Public Citizen 848 F.2d 256 (Congress established broad gu idelines in the fuel economy statute; agency’s deci sion

to set lower standard was a reasonable accommodatio n of conflicting policies). As the United States C ourt of Appeals pointed out in upholding NHTSA's exercis e of judgment in setting the 1987-1989 passenger ca r standards, “NHTSA has always examined the safety co nsequences of the CAFE standards in its overall

consideration of relevant factors since its earlies t rulemaking under the CAFE program.” Competitive Enterprise Institute v. NHTSA (CEI I), 901 F.2d 107, 120 at n.11 (D.C. Cir. 1990 ).25 In addition, the agency considers consumer demand i n establishing new standards and in assessing whether already established standa rds remained feasible. In the 1980’s, the agency relied in part on the unexpected drop in fuel prices and the resulting unexpected failure of consumer demand for small car s 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 f rom Considering in Setting

Standards

EPCA provides that in determining the level at whic h it should set CAFE standards for a particular model year, NHTSA may no t consider the ability of manufacturers to take advantage of several EPCA pro visions that facilitate compliance with the CAFE standards and thereby reduce the cost s of compliance. 32 As noted below in Section IV, manufacturers can earn compliance cr edits by exceeding the CAFE

standards and then use those credits to achieve com pliance in years in which their measured average fuel economy falls below the stand ards. Manufacturers can also increase their CAFE levels through MY 2019 by produ cing alternative fuel vehicles. EPCA provides an incentive for producing these vehi cles by specifying that their fuel economy is to be determined using a special calcula tion 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 f actors in determining the average fuel economy level that the manufacturers c an achieve. Congress “specifically delegated the process of setting ... fuel economy sta ndards with broad guidelines concerning the factors that the agency must conside r. The breadth of those guidelines, the absence of any statutorily prescribed formula f or balancing the factors, the fact that the relative weight to be given to the various fact ors 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 t oward 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 “conflict ing policies that were committed to the agency's care by the statute.’”

Thus, EPCA does not mandate that any particular num ber be adopted when

NHTSA determines the level of CAFE standards. Rath er, any number within a zone of reasonableness may be, in NHTSA’s assessment, the l evel 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 standard we must a sk whether the agency’s numbers are within a zone of reasonableness, not whether it s numbers are precisely right”).

32 49 U.S.C. 32902(h).26 v. Other Requirements Related to Standard Setting

The standards for passenger cars and those for ligh t trucks must increase ratably each year. This statutory requirement is interpret ed, in combination with the requirement to set the standards for each model year at the lev el determined to be the maximum

feasible level that manufacturers can achieve for t hat 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 m ust be based on one or more vehicle attributes, like size or weight, that corre late with fuel economy and must be expressed in terms of a mathematical function. Fue l economy targets are set for

individual vehicles and increase as the attribute d ecreases and vice versa. For example, size-based (i.e., size-indexed) standards assign hi gher fuel economy targets to smaller (and generally, but not necessarily, lighter) vehic les 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 achie ve depends on the size mix of its fleet, i.e., the proportion of the fleet that is small-, m edium- 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 econom y of all the vehicles in its fleet. Further, this approach can do so without creating a n incentive for manufacturers to make small vehicles smaller or large vehicles larger, wi th attendant implications for safety.

b. Test Procedures for Measuring Fuel Economy

EPCA provides EPA with the responsibility for estab lishing CAFE test procedures. Current test procedures measure the ef fects of nearly all fuel saving technologies. The principal exception is improveme nts 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 du ring fuel economy testing. See Section

I.C.2 for details.

The fuel economy test procedures for light trucks c ould be amended through rulemaking to provide for air conditioner operation during testing and to take other steps for improving the accuracy and representativeness o f fuel economy measurements. Comment is sought by the agencies regarding impleme nting such amendments beginning

in MY 2017 and also on the more immediate interim a lternative step of providing CAFE program credits under the authority of 49 U.S.C. 32 904(c) for light trucks equipped with relatively efficient air conditioners for MYs 2012- 2016. These CAFE credits would be earned by manufacturers on the same terms and under the same conditions as EPA is proposing to provide them under the CAA, and additi onal detail is on this request for comment for early CAFE credits is contained in Sect ion IV of this preamble.27

Modernizing the passenger car test procedures, or e ven providing similar credits, would not be possible under EPCA as currently written.

c. Enforcement and Compliance Flexibility

EPA is responsible for measuring automobile manufac turers’ CAFE so that NHTSA can determine compliance with the CAFE standa rds. 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 t enths of a mpg by which a manufacturer exceeds a standard for a particular ca tegory 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) credit s 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 exa mine and determine whether to approve the plan.

In the event that a manufacturer does not comply wi th a CAFE standard, even after the consideration of credits, EPCA provides f or the assessing of civil penalties, unless, as provided below, the manufacturer has ear ned credits for exceeding a standard in an earlier year or expects to earn credits in a later year. 33 The Act specifies a precise formula for determining the amount of civil penalti es 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), manufactur ed for that model year. The amount of the penalty may not be reduced except under the unu sual or extreme circumstances specified in the statute.

Unlike the National Traffic and Motor Vehicle Safe ty Act, EPCA does not provide for recall and remedy in the event of a non compliance. The presence of recall and remedy provisions 34 in the Safety Act and their absence in EPCA is bel ieved to arise from the difference in the application of the safet y standards and CAFE standards. A safety standard applies to individual vehicles; tha t is, each vehicle must possess the requisite equipment or feature that must provide th e requisite type and level of performance. If a vehicle does not, it is noncompl iant. Typically, a vehicle does not entirely lack an item or equipment or feature. Ins tead, the equipment or features fails to perform adequately. Recalling the vehicle to repai r or replace the noncompliant equipment or feature can usually be readily accompl ished.

In contrast, a CAFE standard applies to a manufactu rer’s entire fleet for a model year. It does not require that a particular indivi dual vehicle be equipped with any

33 EPCA does not provide authority for seeking to enj oin violations of the CAFE standards.

34 49 U.S.C. 30120, Remedies for defects and noncompl iance.28

particular equipment or feature or meet a particula r 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 econo my 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 fue l economy, it will need to design other vehicles that exceed their targets if the manufactu rer’s overall fleet average is to meet the applicable standard.

Thus, under EPCA, there is no such thing as a nonco mpliant vehicle, only a noncompliant fleet. No particular vehicle in a non compliant fleet is any more, or less, noncompliant than any other vehicle in the fleet.

2. EPA Statutory Authority

Title II of the Clean Air Act (CAA) provides for c omprehensive regulation of mobile sources, authorizing EPA to regulate emissio ns of air pollutants from all mobile source categories. Pursuant to these sweeping gran ts of authority, EPA considers such issues as technology effectiveness, its cost (both per vehicle, per manufacturer, and per consumer), the lead time necessary to implement the technology, and based on this the feasibility and practicability of potential standar ds; the impacts of potential standards on emissions reductions of both GHGs and non-GHGs; the impacts of standards on oil conservation and energy security; the impacts of st andards on fuel savings by consumers; the impacts of standards on the auto industry; othe r energy impacts; as well as other relevant factors such as impacts on safety.

As a result of EPA rules implementing Title II, ne w cars and SUVs sold today have emissions levels of hydrocarbons, oxides of ni trogen, and carbon monoxide that are 98-99% lower than new vehicles sold in the 1960s, o n a per mile basis. Similarly, standards established for heavy-duty highway and no nroad sources require emissions rate reductions on the order of 90% or more for particul ate matter and oxides of nitrogen. Overall ambient levels of automotive-related pollut ants are lower now than in 1970, even as economic growth and vehicle miles traveled have nearly tripled. These programs have resulted in millions of tons of pollution reduction and major reductions in pollutionrelated deaths (estimated in the tens of thousands per year) and illnesses. The net societal benefits of the mobile source programs are enormous . In its annual reports on federal regulations, the Office of Management and Budget re ports that many of EPA’s mobile source emissions standards typically have projected benefit-to-cost ratios of 5:1 to 10:1 or

more. Title II emission standards have also stimul ated the development of a much broader set of advanced automotive technologies, su ch as on-board computers and fuel injection systems, which are at the core of today’s automotive designs and have yielded not only lower emissions, but improved vehicle perf ormance, reliability, and durability.29

This proposal implements a specific provision from Title II, section 202(a). 35

Section 202 (a) (1) of the Clean Air Act (CAA) stat es 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 n ew motor vehicles ..., which in his judgment cause, or contribute to, air pollution whi ch may reasonably be anticipated to endanger public health or welfare.” If EPA makes t he appropriate endangerment and cause or contribute findings, then section 202(a) a uthorizes EPA to issue standards applicable to emissions of those pollutants.

Any standards under CAA section 202(a)(1) “shall be applicable to such vehicles

... for their useful life.” Emission standards set by the EPA under CAA section 202(a)(1) are technology-based, as the levels chose n must be premised on a finding of technological feasibility. Thus, standards promulg ated under CAA section 202(a) are to take effect only “after providing such period as th e Administrator finds necessary to permit the development and application of the requi site technology, giving appropriate consideration to the cost of compliance within such period” (section 202 (a)(2); see also

NRDC v. EPA , 655 F. 2d 318, 322 (D.C. Cir. 1981)). EPA is aff orded considerable discretion under section 202(a) when assessing issu es of technical feasibility and availability of lead time to implement new technolo gy. Such determinations are “subject to the restraints of reasonableness”, which “does n ot open the door to ‘crystal ball’ inquiry.” NRDC , 655 F. 2d at 328, quoting International Harvester Co. v. Ruckelshaus

, 478 F. 2d 615, 629 (D.C. Cir. 1973). However, “EP A is not obliged to provide detailed solutions to every engineering problem posed in the perfection of the trap-oxidizer. In the absence of theoretical objections to the techno logy, the agency need only identify the major steps necessary for development of the device , and give plausible reasons for its belief that the industry will be able to solve thos e problems in the time remaining. The EPA is not required to rebut all speculation that u nspecified factors may hinder ‘real world’ emission control.” NRDC, 655 F. 2d at 333-3 4. In developing such technologybased standards, EPA has the discretion to consider different standards for appropriate groupings of vehicles (“class or classes of new mot or vehicles”), or a single standard for a larger grouping of motor vehicles (NRDC, 655 F. 2d at 338).

Although standards under CAA section 202(a)(1) are technology-based, they are not based exclusively on technological capability. EPA has the discretion to consider and weigh various factors along with technological feas ibility, such as the cost of compliance (see section 202(a) (2)), lead time necessary for c ompliance (section 202(a)(2)), safety (see NRDC , 655 F. 2d at 336 n. 31) and other impacts on cons umers, and energy impacts associated with use of the technology. See George E. Warren Corp. v. EPA , 159 F.3d 616, 623-624 (D.C. Cir. 1998) (ordinarily permissib le for EPA to consider factors not specifically enumerated in the Act). See also Ente rgy Corp. v. Riverkeeper, Inc. , 129 S.Ct. 1498, 1508-09 (2009) (congressional silence d id not bar EPA from employing costbenefit analysis under Clean Water Act absent some other clear indication that such analysis was prohibited; rather, silence indicated discretion to use or not use such an approach as the agency deems appropriate).

35 42 U.S.C. 7521 (a)30

In addition, EPA has clear authority to set standa rds under CAA section 202(a) that are technology forcing when EPA considers that to be appropriate, but is not required to do so (as compared to standards set under provis ions such as section 202(a)(3) and section 213(a)(3)). EPA has interpreted a similar statutory provision, CAA section 231,

as follows:

While the statutory language of section 231 is not identical to other provisions in

title II of the CAA that direct EPA to establish te chnology-based standards for various types of engines, EPA interprets its author ity under section 231 to be somewhat similar to those provisions that require u s to identify a reasonable balance of specified emissions reduction, cost, saf ety, noise, and other factors. See, e.g., Husqvarna AB v. EPA

, 254 F.3d 195 (DC Cir. 2001) (upholding EPA’s promulgation of technology-based standards for smal l non-road engines under section 213(a)(3) of the CAA). However, EPA is not compelled under section 231 to obtain the ‘‘greatest degree of emission reducti on achievable’’ as per sections 213 and 202 of the CAA, and so EPA does not interpr et the Act as requiring the agency to give subordinate status to factors such a s cost, safety, and noise in determining what standards are reasonable for aircr aft engines. Rather, EPA has greater flexibility under section 231 in determinin g what standard is most reasonable for aircraft engines, and is not require d to achieve a ‘‘technology forcing’’ result. 36

This interpretation was upheld as reasonable in NAC AA v. EPA , (489 F.3d 1221, 1230 (D.C. Cir. 2007)). CAA section 202(a) does n ot specify the degree of weight to apply to each factor, and EPA accordingly has discr etion in choosing an appropriate balance among factors. See Sierra Club v. EPA , 325 F.3d 374, 378 (D.C. Cir. 2003) (even where a provision is technology-forcing, the provision “does not resolve how the Administrator should weigh all [the statutory] fact ors in the process of finding the 'greatest emission reduction achievable’”). Also s ee Husqvarna AB v. EPA , 254 F. 3d 195, 200 (D.C. Cir. 2001) (great discretion to bala nce statutory factors in considering level of technology-based standard, and statutory r equirement “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 Co mmission 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).

a. EPA’s Testing Authority

Under section 203 of the CAA, sales of vehicles are prohibited unless the vehicle is covered by a certificate of conformity. EPA iss ues certificates of conformity pursuant

36 70 FR 69664, 69676, November 17, 2005.31

to section 206 of the Act, based on (necessarily) p re-sale testing conducted either by EPA or by the manufacturer. The Federal Test Procedure (FTP or ‘‘city’’ test) and the Highway Fuel Economy Test (HFET or ‘‘highway’’ test ) are used for this purpose. Compliance with standards is required not only at c ertification but throughout a vehicle’s useful life, so that testing requirements may conti nue post-certification. Useful life standards may apply an adjustment factor to account for vehicle emission control deterioration or variability in use (section 206(a) ).

Pursuant to EPCA, EPA is required to measure fuel e conomy for each model and to calculate each manufacturer’s average fuel econo my. 37 EPA uses the same tests – the FTP and HFET – for fuel economy testing. EPA estab lished the FTP for emissions measurement in the early 1970s. In 1976, in respon se to the Energy Policy and Conservation Act (EPCA) statute, EPA extended the u se of the FTP to fuel economy

measurement and added the HFET. 38 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. Under EPCA, EP A is required to use these procedures (or procedures which yield comparable re sults) for measuring fuel economy for cars for CAFE purposes, but not for labeling pu rposes. 39 EPCA does not pose this restriction on CAFE test procedures for light truck s, but EPA does use the FTP and HFET for this purpose. EPA determines fuel economy by measuring the amount of CO 2 and all other carbon compounds (e.g. total hydrocar bons (THC) and carbon monoxide (CO)), and then, by mass balance, calculating the a mount of fuel consumed.

b. EPA Enforcement Authority

Section 207 of the CAA grants EPA broad authority t o require manufacturers to remedy vehicles if EPA determines there are a subst antial number of noncomplying vehicles. In addition, section 205 of the CAA auth orizes EPA to assess penalties of up to $37,500 per vehicle for violations of various prohi bited acts specified in the CAA. In determining the appropriate penalty, EPA must consi der a variety of factors such as the gravity of the violation, the economic impact of th e violation, the violator’s history of compliance, and “such other matters as justice may require.” Unlike EPCA, the CAA does not authorize vehicle manufacturers to pay fin es in lieu of meeting emission

standards.

3. Comparing the Agencies’ Authority

As the above discussion makes clear, there are both important differences between the statutes under which each agency is act ing as well as several important areas of similarity. One important difference is that EP A’s authority addresses various GHGs, while NHTSA’s authority addresses fuel economy as m easured under specified test procedures. This difference is reflected in this ru lemaking in the scope of the two

37 See 49 U.S.C. 32904(c).

38 See 41 FR 38674 (Sept. 10, 1976), which is codified at 40 CFR Part 600.

39 See 49 U.S.C. 32904(c).32

standards: EPA’s proposal takes into account air co nditioning related reductions, as well as proposed standards for methane and N 2 O, but NHTSA’s does not. A second important difference is that EPA is proposing certain complia nce flexibilities, and takes those flexibilities into account in its technical analysi s and modeling supporting its proposal. EPCA places certain limits on compliance flexibilit ies for CAFE, and expressly prohibits NHTSA from considering the impacts of the complianc e flexibilities in setting the CAFE

standard so that the manufacturers’ election to ava il themselves of the permitted flexibilities remains strictly voluntary. 40 The Clean Air Act, on the other hand, contains no such prohibition. These considerations result i n some differences in the technical analysis and modeling used to support EPA’s and NHT SA’s proposed standards.

These differences, however, do not change the fact that in many critical ways the two agencies are charged with addressing the same b asic issue of reducing GHG emissions and improving fuel economy. Given the di rect relationship between emissions

of CO 2 and fuel economy levels, both agencies are looking at the same set of control technologies (with the exception of the air conditi oning related technologies). The standards set by each agency will drive the kind an d degree of penetration of this set of technologies across the vehicle fleet. As a result , each agency is trying to answer the same basic question – what kind and degree of techn ology penetration is necessary to achieve the agencies’ objectives in the rulemaking time frame, given the agencies’ respective statutory authorities?

In making the determination of what standards are a ppropriate under the CAA and EPCA, each agency is to exercise its judgment and b alance many similar factors, such as the availability of technologies, the appropriate l ead time for introduction of technology, and based on this the feasibility and practicabilit y of their standards; the impacts of their standards on emissions reductions (of both GHGs and non-GHGs); the impacts of their standards on oil conservation; the impacts of their standards on fuel savings by consumers; the impacts of their standards on the au to industry; as well as other relevant factors such as impacts on safety. Conceptually, th erefore, each agency is considering and balancing many of the same factors, and each ag ency is making a decision that at its core is answering the same basic question of what k ind and degree of technology penetration is it appropriate to call for in light of all of the relevant factors. Finally, each agency has the authority to take into consideration impacts of the standards of the other agency. EPCA calls for NHTSA to take into consider ation the effects of EPA’s emissions standards on fuel economy capability (see 49 U.S.C. 32902 (f)), and EPA has

the discretion to take into consideration NHTSA’s C AFE standards in determining appropriate action under section 202(a). This is c onsistent with the Supreme Court’s statement that EPA’s mandate to protect public heal th and welfare is wholly independent from NHTSA’s mandate to promote energy efficiency, but there is no reason to think the two agencies cannot both administer their obligatio ns and yet avoid inconsistency.

Massachusetts v. EPA , 549 U.S. 497, 532 (2007).

40 74 FR 24009 (May 22, 2009).33 In this context, it is in the Nation’s interest for the two agencies to work together in developing their respective proposed standards, and they have done so. For example, the agencies have committed considerable effort to develop a joint Technical Support Document that provides a technical basis underlying each agency’s analyses. The agencies also have worked closely together in devel oping and reviewing their respective modeling, to develop the best analysis and to promo te technical consistency. The agencies have developed a common set of attribute-b ased curves that each agency supports as appropriate both technically and from a policy perspective. The agencies have also worked closely to ensure that their respe ctive programs will work in a coordinated fashion, and will provide regulatory co mpatibility that allows auto manufacturers to build a single national light-duty fleet that would comply with both the GHG and the CAFE standards. The resulting overall close coordination of the proposed GHG and CAFE standards should not be surprising, ho wever, as each agency is using a jointly developed technical basis to address the cl osely intertwined challenges of energy security and climate change. As discussed above, i n determining the standards to propose the agencies are called upon to weigh and b alance various factors that are relevant under their respective statutory provision s. Each agency is to exercise its judgment and balance many similar factors, such as the availability of technologies, the appropriate lead time for introduction of technolog y, and based on this, the feasibility and practicability of their standards; and the impacts of their standards on the following: emissions reductions (of both GHGs and non-GHGs); o il conservation; fuel savings by consumers; the auto industry; as well as other rele vant factors such as safety. Conceptually, each agency is considering and balanc ing many of the same factors, and each agency is making a decision that at its core i s answering the same basic question of what kind and degree of technology penetration is a ppropriate and required in light of all

of the relevant factors. Each Administrator is cal led upon to exercise judgment and propose standards that the Administrator determines are a reasonable balance of these

relevant factors.

As set out in detail in Sections III and IV of this notice, both EPA and NHTSA believe the agencies’ proposals are fully justified under their respective statutory criteria. The proposed standards can be achieved within the l ead time provided, based on a projected increased use of various technologies whi ch in most cases are already in commercial application in the fleet to varying degr ees. Detailed modeling of the technologies that could be employed by each manufac turer supports this initial conclusion. The agencies also carefully assessed t he costs of the proposed rules, both for the industry as a whole and per manufacturer, as we ll as the costs per vehicle, and

consider these costs to be reasonable and recoverab le (from fuel savings). The agencies recognize the significant increase in the applicati on of technology that the proposed standards would require across a high percentage of vehicles, which will require the manufacturers to devote considerable engineering an d development resources before 2012 laying the critical foundation for the widespr ead deployment of upgraded technology across a high percentage of the 2012-201 6 fleet. This clearly will be challenging for automotive manufacturers and their suppliers, especially in the current34

economic climate. However, based on all of the ana lyses performed by the agencies, our judgment is that it is a challenge that can reasona bly be met.

The agencies also evaluated the impacts of these st andards with respect to the expected reductions in GHGs and oil consumption and , found them to be very significant in magnitude. The agencies considered other factor s such as the impacts on noise, energy, and vehicular congestion. The impact on sa fety was also given careful consideration. Moreover, the agencies quantified t he various costs and benefits of the proposed standards, to the extent practicable. The agencies’ analyses to date indicate that the overall quantified benefits of the proposed sta ndards far outweigh the projected costs. All of these factors support the reasonableness of the proposed standards.

The agencies also evaluated alternatives which were less and more stringent than those proposed. Less stringent standards, however, would forego important GHG emission reductions and fuel savings that are techn ically achievable at reasonable cost in the lead time provided. In addition, less stringen t GHG standards would not result in a harmonized National Program for the country. Based on California’s letter of May 18, 2009, the GHG emission standards would not result i n the State of California revising its regulations such that compliance with EPA’s GHG sta ndards would be deemed to be compliance with California’s GHG standards for thes e model years. The substantial cost advantages associated with a single national progra m discussed at the outset of this section would then be foregone.

The agencies are not proposing any of the more stri ngent alternatives analyzed largely due to concerns over lead time and economic practicability. The proposed standards already require aggressive application of technologies, and more stringent standards which would require more widespread use ( including more substantial implementation of advanced technologies such as str ong hybrids) raise serious issues of adequacy of lead time, not only to meet the standar ds but to coordinate such significant changes with manufacturers’ redesign cycles. At a time when the entire industry remains in an economically critical state, the agencies bel ieve that it would be unreasonable to propose more stringent standards. Even in a case w here economic factors were not a consideration, there are real-world time constraint s which must be considered due to the short lead time available for the early years of th is program, in particular for model years 2012 and 2013. The physical processes which the au tomotive industry must follow in order to introduce reliable, high quality products require certain minimums of time during the product development process. These include tim e needed for durability testing which requires significant mileage accumulation under a r ange of conditions ( e.g. , high and low temperatures, high altitude, etc.) in both real-wor ld and laboratory conditions. In addition, the product development cycle includes a number of pre-production gateways on the manufacturing side at both the supplier leve l and at the automotive manufacturer level that are constrained by time. Thus adequate lead-time is an important factor that the agencies have taken into consideration in evalu ating the proposed standards as well as

the alternative standards.35

As noted, both agencies also considered the overal l costs of their respective proposed standards in relation to the projected ben efits. The fact that the benefits are estimated to considerably exceed their costs suppor ts the view that the proposed standards represent a reasonable balance of the rel evant statutory factors. In drawing this conclusion, the agencies acknowledge the uncertaint ies and limitations of the analyses. For example, the analysis of the benefits is highly dependent on the estimated price of fuel projected out many years into the future. The re is also significant uncertainty in the potential range of values that could be assigned to the social cost of carbon. There are a variety of impacts that the agencies are unable to quantify, such as non-market damages, extreme weather, socially contingent effects, or th e potential for longer-term catastrophic events, or the impact on consumer choice. The agen cies also note the need to consider factors such as the availability of technology with in the lead time provided and many of

the other factors discussed above. The cost-benefi t analyses are one of the important things the agencies consider in making a judgment a s to the appropriate standards to propose under their respective statutes. Considera tion of the results of the cost-benefit analyses by the agencies, however, includes careful consideration of the limitations

discussed above.

One important area where the two agencies’ authori ties are similar but not

identical involves the transfer of credits between a single firm’s car and truck fleets.

EISA revised EPCA to allow for such credit transfer s, but with a cap on the amount of

CAFE credits which can be transferred between the c ar and truck fleets. 49 U.S.C. 32903(g)(3). Under CAA section 202(a), EPA is prop osing to allow CO2 credit transfers between a single manufacturer’s car and truck fleet s, with no corresponding limits on such transfers. In general, the EPCA limit on CAFE credit transfers is not expected to have the practical effect of limiting the amount of CO2 emission credits a manufacturer s may be able to transfer under the CAA program, reco gnizing that manufacturer s must comply with both the proposed CAFE standards and th e proposed EPA standards. However, it is possible that in some specific circu mstances the EPCA limit on CAFE credit transfers could constrain the ability of a m anufacturer to achieve cost savings through unlimited use of GHG emissions credit trans fers under the CAA program.

The agencies request comment on the impact of the EISA credit transfer caps on the implementation of the proposed CAFE and GHG sta ndards, including whether it would impose such a constraint and the impacts of a constraint on costs, emissions, and fuel economy. In addition, the agencies invite com ment on approaches that could assist in addressing this issue, recognizing the importanc e the agencies place on harmonization, and that would be consistent with their respective statutes. For example, any approach must be consistent with both the EISA transfer caps and the EPCA requirement to set

annual CAFE standards at the maximum feasible avera ge fuel economy level that

NHTSA decides the manufacturers can achieve in that model year, based on the agency’s consideration of the four statutory factors. Manuf acturers should submit publicly available evidence supporting their position on thi s issue so that a well informed decision can be made and explained to the public.36 D. Summary of the Proposed Standards for the Nation al Program

1. Joint Analytical Approach

NHTSA and EPA have worked closely together on near ly every aspect of this joint proposal. The extent and results of this col laboration is reflected in the elements of the respective NHTSA and EPA proposals, 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 s hared, as well as any differences in approach. These includes the build up of the basel ine and reference fleets, the derivation of the shape of the curve that defines the standard s, a detailed description of the costs and effectiveness of the technology choices that are av ailable 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 c alculate the impacts and benefits of the rules, where practicable. Some of these are highli ghted below.

EPA and NHTSA have jointly developed attribute cur ve shapes that each agency is using for its proposed standards. Both agencies reviewed the shape of the attributebased curve used for the model year 2011 CAFE stand ards. After a new and thorough analysis of current vehicle data and the comments r eceived from previous two CAFE rules, the two agencies improved upon the constrain ed logistic curve and developed a similarly shaped piece-wise linear function. Furth er details of these functions can be found in Sections III and IV of this preamble as we ll as Chapter 2 of the Joint TSD.

A critical technical underpinning of each agency’s proposal is the cost and effectiveness of the various control technologies. These are used to analyze the feasibility and cost of potential GHG and CAFE stan dards. The technical work reflected in the joint TSD is the culmination of over 3 years of literature research, consultation with experts, detailed computer simulations, vehicl e tear-downs and engineering review,

all of which will continue into the future as more data becomes available. To promote transparency, the vast majority of this information is collected from publically available sources, and can be found in the docket of this rul e. Non-public (i.e., confidential manufacturer) information was used only to the limi ted extent it was needed to fill a data void. A detailed description of all of the technol ogy information considered can be found in Chapter 3 of the Joint TSD (and for A/C, C hapter 2 of the EPA RIA).

This detailed technology data forms the inputs to c omputer models that each agency uses to project how vehicle manufacturers ma y add those technologies in order to comply with new standards. These are the OMEGA and Volpe models for EPA and NHTSA respectively. The Volpe model is tailored fo r NHTSA’s EPCA and EISA needs,

while the OMEGA model is tailored for EPA’s CAA nee ds. In developing the National Program, EPA and NHTSA have worked closely to ensur e that consistent and reasonable

results are achieved from both models. This fruitf ul collaboration has resulted in the improvement of both approaches and now, far from be ing redundant, these models serve37

the purposes of the respective agencies while also maintaining an important validating role. The models and their inputs can also be foun d in the docket. Further description of the model and outputs can be found in Sections II a nd IV of this preamble, and Chapter 3

of the Joint TSD.

This comprehensive joint analytical approach has pr ovided a sound and consistent technical basis for each agency in developing its p roposed standards, which are

summarized in the sections below.

2. Level of the Standards

In this notice, EPA and NHTSA are proposing two sep arate sets of standards, each under its respective statutory authorities. E PA is proposing national CO 2 emissions standards for light-duty vehicles under section 202 (a) of the Clean Air Act. These standards would require these vehicles to meet an e stimated combined average emissions level of 250 grams/mile of CO 2 in model year 2016. NHTSA is proposing CAFE standards for passenger cars and light trucks under 49 U.S.C. 32902. These standards would require them to meet an estimated combined av erage fuel economy level of 34.1 mpg in model year 2016. The proposed standards for both agencies begin with the 2012 model year, with standards increasing in stringency through model year 2016. They represent a harmonized approach that will allow ind ustry to build a single national fleet that will satisfy both the GHG requirements under t he CAA and CAFE requirements

under EPCA/EISA.

Given differences in their respective statutory aut horities, however, the agencies’ proposed standards include some important differenc es. Under the CO 2 fleet average standard proposed under CAA section 202(a), EPA exp ects manufacturers to take advantage of the option to generate CO 2 -equivalent credits by reducing emissions of hydrofluorocarbons (HFCs) and CO 2 through improvements in their air conditioner systems. EPA accounted for these reductions in dev eloping its proposed CO 2 standard.

EPCA does not allow vehicle manufacturers to use ai r conditioning credits in complying with CAFE standards for passenger cars. 41 CO 2 emissions due to air conditioning operation are not measured by the test procedure ma ndated by statute for use in establishing and enforcing CAFE standards for passe nger cars. As a result, improvements in the efficiency of passenger car air conditioners would not be considered as a possible control technology for purposes of CA FE.

These differences regarding the treatment of air co nditioning improvements (related to CO 2 and HFC reductions ) affect the relative stringency of the EPA standard and NHTSA standard. The 250 grams per mile of CO 2 equivalent emissions limit is equivalent to 35.5 mpg 42 if the automotive industry were to meet this CO 2 level all

41 There is no such statutory limitation with respect to light trucks.

42 The agencies are using a common conversion factor between fuel economy in units of miles per gallon

and CO 2 emissions in units of grams per mile. This conver sion factor is 8,887 grams CO 2 per gallon38

through fuel economy improvements. As a consequenc e of the prohibition against NHTSA’s allowing credits for air conditioning impro vements for purposes of passenger car CAFE compliance, NHTSA is proposing fuel econom y standards that are estimated to require a combined (passenger car and light truck) average fuel economy level of 34.1 mpg by MY 2016.

NHTSA and EPA’s proposed standards, like the standa rds NHTSA promulgated in March 2009 for model year 2011 (MY 2011), are ex pressed as mathematical functions depending on vehicle footprint. Footprint is one m easure of vehicle size, and is determined by multiplying the vehicle’s wheelbase b y the vehicle’s average track

width. 43 The standards that must be met by the fleet of ea ch manufacturer would be determined by computing the sales-weighted harmonic average of the targets applicable to each of the manufacturer’s passenger cars and li ght trucks. Under these proposed footprint-based standards, the levels required of i ndividual manufacturers depend, as noted above, on the mix of vehicles sold. NHTSA and EPA’s respective proposed standards are shown in the tables below. It is imp ortant to note that the standards are the attribute-based curves proposed by each agency. Th e values in the tables below reflect the agencies’ projection of the corresponding fleet levels that would result from these

attribute-based curves.

As shown in Table I.D.2-1, NHTSA’s proposed fleet- wide CAFE-required levels for passenger cars under the proposed standards are projected to increase from 33.6 to 38.0 mpg between MY 2012 and MY 2016. Similarly, f leet-wide CAFE levels for light trucks are projected to increase from 25.0 to 28.3 mpg. These numbers do not include the effects of other flexibilities and credits in the p rogram. 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 standards represent a 4.3 percent average annual ra te of increase relative to the MY 2011

standards. 44

Table I.D.2-1 Average Required Fuel Economy (mpg) under Proposed CAFE Standards

2011-base 2012 2013 2014 2015 2016 Passenger Cars 30.2 33.6 34.4 35.2 36.4 38.0 Light Trucks 24.1 25.0 25.6 26.2 27.1 28.3

Combined Cars & Trucks 27.3 29.8 30.6 31.4 32.6 34. 1

gasoline fuel. Diesel fuel has a conversion factor of 10,180 grams CO 2 per gallon diesel fuel though for the purposes of this calculation, we are assuming 100% gasoline fuel.

43 See 49 CFR 523.2 for the exact definition of “footprin t.”

44 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 dep ends on its estimate of the mix of vehicles that wi ll be sold in that model year. NHTSA currently estima tes that the MY 2011 standards will require average fuel economy levels of 30.5 mpg for passenger cars, 24.2 mpg for light trucks, and 27.6 mpg for the

combined fleet.39 Accounting for the expectation that some manufactur ers would continue to pay civil penalties rather than achieving required CAFE levels, and the ability to use FFV credits, NHTSA estimates that the proposed CAFE sta ndards would 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: 45

Table I.D.2-2 Projected Fleet-Wide Achieved CAFE Le vels under the Proposed

Footprint-Based CAFE Standards (mpg)

2012 2013 2014 2015 2016 Passenger Cars 32.5 33.4 34.3 35.3 36.5 Light Trucks 24.1 24.6 25.3 26.3 27.0

Combined Cars & Trucks 28.7 29.6 30.4 31.6 32.7

NHTSA is also required by EISA to set a minimum fue l economy standard for domestically manufactured passenger cars in additio n to the attribute-based passenger car standard. The minimum standard “shall be the great er of (A) 27.5 miles per gallon; or (B) 92 percent of the average fuel economy projecte d by the Secretary for the combined domestic and non-domestic passenger automobile flee ts manufactured for sale in the United States by all manufacturers in the model yea r....” 46

Based on NHTSA’s current market forecast, the agenc y’s estimates of these minimum standards under the proposed MY 2012-2016 C AFE standards (and, for comparison, the final MY 2011 standard) are summari zed below in Table I.D.2-3. 47 For eventual compliance calculations, the final calcula ted minimum standards will be updated to reflect any changes in the average fuel economy level required under the final

standards.

Table I.D.2-3 Estimated Minimum Standard for Domest ically Manufactured Passenger Cars under Final MY 2011 and Proposed MY 2012-2016 CAFE Standards for Passenger Cars (mpg)

2011 2012 2013 2014 2015 2016

28.0 30.9 31.6 32.4 33.5 34.9

45 NHTSA’s estimates account for availability of CAFE credits for the sale of flexibly-fuel vehicles (FF Vs), and for the potential that some manufacturers would pay civil penalties rather than complying with the proposed CAFE standards. This yields NHTSA’s estim ates of the real-world fuel economy that could be achieved under the proposed CAFE standards. NHTSA has not included any potential impact of car-truck

credit transfer in its estimate of the achieved CAF E levels.

46 49 U.S.C. 32902(b)(4).

47 In the March 2009 final rule establishing MY 2011 standards for passenger cars and light trucks, NHTS A estimated that the minimum required CAFE standard f or domestically manufactured passenger cars would be 27.8 mpg under the MY 2011 passenger car standar d. Based on the agency’s current forecast of the M Y 2011 passenger car market, NHTSA now estimates that the minimum required CAFE standard will be 28.0 mpg in MY 2011.40 EPA is proposing GHG emissions standards, and Table I.D.2-4 provides EPA’s estimates of their projected overall fleet-wide CO 2 equivalent emission levels. 48 The g/mi values are CO 2 equivalent values because they include the project ed use of A/C credits by manufacturers.

Table I.D.2-4 Projected Fleet-Wide Emissions Compli ance Levels under the Proposed

Footprint-Based CO 2 Standards (g/mi)

2012 2013 2014 2015 2016 Passenger Cars 261 253 246 235 224 Light Trucks 352 341 332 317 302

Combined Cars & Trucks 295 286 276 263 250

As shown in Table I.D.2-4, projected fleet-wide CO 2 emission level requirements for cars under the proposed approach are projected to increase in stringency from 261 to 224 grams per mile between MY 2012 and MY 2016. Si milarly, fleet-wide CO 2 equivalent emission level requirements for trucks a re projected to increase in stringency from 352 to 302 grams per mile. As shown, the over all fleet average CO 2 level requirements are projected to be 250 g/mile in 2016

.

EPA anticipates that manufacturers will take advan tage of program flexibilities such as flex fueled vehicle credits, and car/truck credit trading. Due to the credit trading between cars and trucks, the estimated improvements in CO 2 emissions are distributed differently than shown in Table I.D 2-4, where full manufacturer compliance is assumed. Table I.D.2-5 shows EPA projection of the achieved emission levels of the fleet for MY 2012 through 2016, which does consider the impact of car/truck trading credit transfer and the increase in emissions due to program flexibilit ies including flex fueled vehicle

credits

, and the temporary leadtime allowance alternative stand ards

. and the impact of car/truck trading

. The use of optional air conditioning credits is c onsidered both in this analysis of achieved levels and of the projected le vels described above. which does consider the increase in emissions due to program f lexibilities such as the flex fueled vehicle credits, as well as the impact of car/truck trading and optional air conditioning

credits . As can be seen in Table I.D.2-5, the projected a chieved levels are slightly higher for model years 2012-2015 due to the projected use of the proposed flexibilities, but in model year 2016 the achieved value is projected to be 250 g/mi for the fleet.

Table I.D.2-5 Projected Fleet-Wide Achieved Emissio n Levels under the Proposed

Footprint-Based CO 2 Standards (g/mi)

2012 2013 2014 2015 2016 Passenger Cars 264 254 245 232 220 Light Trucks 365 355 346 332 311
Combined Cars & Trucks 302 291 281 267 250

48 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.41 NHTSA’s and EPA’s technology assessment indicates t here is a wide range of technologies available for manufacturers to conside r in upgrading vehicles to reduce GHG emissions and improve fuel economy. 49 As noted, these include improvements to the engines such as use of gasoline direct injectio n and downsized engines that use turbochargers to provide performance similar to tha t of larger engines, the use of advanced transmissions, increased use of start-stop technology, improvements in tire performance, reductions in vehicle weight, increase d 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 technolo gies are already available today, and

EPA’s and NHTSA’s assessment is that manufacturers would be able to meet the proposed standards through more widespread use of t hese technologies across the fleet.

With respect to the practicability of the standard s in terms of lead time, during MYs 2012-2016 manufacturers are expected to go thro ugh the normal automotive business cycle of redesigning and upgrading their l ight-duty vehicle products, and in some cases introducing entirely new vehicles not on the market today. This proposal would allow manufacturers the time needed to incorp orate technology to achieve GHG reductions and improve fuel economy during the vehi cle redesign process. This is an important aspect of the proposal, 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 would also provide man ufacturers the opportunity to plan for compliance using a multi-year time frame, again con sistent with normal business practice. Over these five model years, there would 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 imp rove fuel economy. This includes redesign of the air conditioner systems in ways tha t will further reduce GHG emissions.

Both agencies considered other standards as part of the rulemaking analyses, both more and less stringent than those proposed. EPA’s and NHTSA’s analysis of alternative

standards are contained in Sections III and IV of t his notice, respectively.

The CAFE and GHG standards described above are base d on determining emissions and fuel economy using the city and highw ay test procedures that are currently used in the CAFE program. Both agencies recognize that these test procedures are not fully representative of real world driving conditio ns. For example EPA has adopted more representative test procedures that are used in det ermining compliance with emissions standards for pollutants other than GHGs. These te st procedures are also used in EPA’s fuel economy labeling program. However, as discuss ed in Section III, the current

information on effectiveness of the individual emis sions control technologies is based on performance over the two CAFE test procedures. For that reason EPA is proposing to use the current CAFE test procedures for the propos ed CO 2 standards and is not

49 The close relationship between emissions of CO 2 – the most prevalent greenhouse gas emitted by mot or vehicles--and fuel consumption, means that the tech nologies to control CO 2 emissions and to improve fuel economy overlap to a great degree42

proposing to change those test procures in this rul emaking. NHTSA, as discussed above, is limited by statute in what test procedures can b e used for purposes of passenger car testing; however there is no such statutory limitat ion 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 pro grams that employ test procedures that are more representative of real wor ld driving conditions, to the extent authorized under their respective statutes. This i s an important issue, and the agencies

intend to address it in the context of a future rul emaking to address standards for model year 2017 and thereafter. This could include a ran ge 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 procedures it intends to use for determining

emissions credits for controls on air conditioners in Section III. Comment is also invited in Section IV on the issue of providing air conditi oner credits under 49 U.S.C. 32902 and/or 32904 for light-trucks in the model years co vered by this proposal.

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 CO 2 emissions reductions obtained by the proposed CAFE and GHG standards includes adjustment s 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 wor ld driving conditions. These adjustments are industry averages for the vehicles’ performance as a whole, however, and

are not a substitute for the information on effecti veness of individual control technologies that will be explored for purposes of a future GHG and CAFE rulemaking.

3. Form of the Standards

In this rule, NHTSA and EPA are proposing attribute -based standards for passenger cars and light trucks. NHTSA adopted an attribute standard based on vehicle footprint in its Reformed CAFE program for light tr ucks for model years 2008-2011, 50
and recently extended this approach to passenger ca rs in the CAFE rule for MY 2011 as required by EISA. 51 EPA and NHTSA are proposing vehicle footprint as the attribute for the GHG and CAFE standards. Footprint is defined a s a vehicle’s wheelbase multiplied by its track width -- in other words, the area encl osed by the points at which the wheels meet the ground. The agencies believe that the foo tprint attribute is the most appropriate

attribute on which to base the standards under cons ideration, as further discussed later in this notice and in Chapter 2 of the joint TSD.

Under the proposed footprint-based standards, each manufacturer would have a GHG and CAFE target unique to its fleet, depending on the footprints of the vehicle

50 71 FR 17566 (Apr. 6, 2006).

51 74 FR 14196 (Mar. 30, 2009).43

models produced by that manufacturer. A manufactur er would have separate footprintbased standards for cars and for trucks. Generally, larger vehicles (i.e., vehicles with larger footprints) would be subject to less stringe nt standards (i.e., higher CO 2 grams/mile standards and lower CAFE standards) than smaller ve hicles. This is because, generally speaking, smaller vehicles are more capable of achi eving higher standards than larger vehicles. While a manufacturer’s fleet average sta ndard could be estimated throughout the model year based on projected production volume of its vehicle fleet, the standard to which the manufacturer must comply would be based o n its final model year production figures. A manufacturer’s calculation of fleet ave rage emissions at the end of the model year would thus be based on the production-weighted average emissions of each model in

its fleet.

In designing the footprint-based standards, the age ncies built upon the footprint standard curves for passenger cars and light trucks used in the CAFE rule for MY 2011. 52
EPA and NHTSA worked together to design car and tru ck footprint curves that followed from logistic curves used in that rule. The agenci es started by addressing two main concerns regarding the car curve. The first concer n was that the 2011 car curve was relatively steep near the inflection point thus cau sing concern that small variations in footprint could produce relatively large changes in fuel economy targets. A curve that was directionally less steep would reduce the poten tial for gaming. The second issue was that the inflection point of the logistic curve was not centered on the distribution of vehicle footprints across the industries’ fleet, th us resulting in a flat (universal or unreformed) standard for over half the fleet. The proposed car curve has been shifted and made less steep compared to the car curve adopted b y NHTSA for 2011, such that it better aligns the sloped region with higher product ion volume vehicle models. Finally,

both the car and truck curves are defined in terms of a constrained linear function for fuel consumption and, equivalently, a piece-wise linear function for CO 2 . NHTSA and EPA include a full discussion of the development of the se curves in the joint TSD and a summary is found in Section II below. In addition, a full discussion of the equations and

coefficients that define the curves is included in Section III for the CO 2 curves and Section IV for the mpg curves. The following figur es illustrate the standards. First Figure I.D.3-1 shows the fuel economy (mpg) car sta ndard curve.

Under an attribute-based standard, every vehicle mo del has a performance target (fuel economy for the CAFE standards, and CO 2 g/mile for the GHG emissions standards), the level of which depends on the vehic le’s attribute (for this proposal, footprint). The manufacturers’ fleet average perfo rmance is determined by the production-weighed 53 average (for CAFE, harmonic average) of those targ ets. NHTSA and EPA are proposing CAFE and CO 2 emissions standards defined by constrained linear functions and, equivalently, piecewise linear funct ions. 54 As a possible option for future

52 74 FR 14407-14409 (Mar. 30, 2009).

53 Production for sale in the United States.

54 The equations are equivalent but are specified dif ferently due to differences in the agencies’ respec tive

models.44

rulemakings, the constrained linear form was introd uced by NHTSA in the 2007 NPRM proposing CAFE standards for MY 2011-2015.

NHTSA is proposing the attribute curves below for a ssigning a fuel economy level to an individual vehicle’s footprint value, f or model years 2012 through 2016. These mpg values would be production weighted to de termine 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 p arameters 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.D.3-1 below illu strates the passenger car CAFE standard curves for model years 2012 through 2016 w hile Figure I.D.3-2 below illustrates the light truck standard curves for model years 201 2-2016. The MY 2011 final standards for cars and trucks, which are specified by a const rained logistic function rather than a constrained linear function, are shown for comparis on.4520253035404535 40 45 50 55 60 65 70Footprint (sf)

Target (mpg)201120162015201420132012Figure I.D.3-1 Final MY 2011 and Proposed MY 2012-2016 Passenger Car Fuel Economy Targets4620253035404535 40 45 50 55 60 65 70Footprint (sf)

Target (mpg)201120162015201420132012Figure I.D.3-2. Final MY 2011 and Proposed MY 2012-2016 Light Truck Fuel Economy Targets47

EPA is proposing the attribute curves below for as signing a CO 2 level to an individual vehicle’s footprint value, for model yea rs 2012 through 2016. These CO 2 values would be production weighted to determine ea ch 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 b asis, resulting in the yearly increases in stringency. Figure I.D.3-3 below illustrates th e CO 2 car standard curves for model years 2012 through 2016 while Figure I.D.3-4 shows the CO 2 truck standard curves for

Model Years 2012-2016.4820025030035040030 35 40 45 50 55 60 65 70Footprint (sq feet)

CO2 (grams per mile)20122016`Figure I.D.3-3. CO2 (g/mi) Car standard curves.4920025030035040030 35 40 45 50 55 60 65 70Footprint (sq feet)

CO2 (grams per mile)20122016Figure I.D.3-4. CO2 (g/mi) Truck standard curves.5051 NHTSA and EPA propose to use the same vehicle categ ory definitions for determining which vehicles are subject to the car f ootprint curves versus the truck curve standards. In other words, a vehicle classified as a car under the NHTSA CAFE program

would also be classified as a car under the EPA GHG program, and likewise for trucks. EPA and NHTSA are proposing to employ the same car and truck definitions for the MY

2012-2016 CAFE and GHG standards as those used in t he CAFE program for the 2011 model year standards. 55 This proposed approach of using CAFE definitions allows EPA’s proposed CO 2 standards and the proposed CAFE standards to be ha rmonized across all vehicles. EPA is not changing the car/t ruck definition for the purposes of any other previous rule.

Generally speaking, a smaller footprint vehicle wil l have lower CO 2 emissions relative to a larger footprint vehicle. A footprin t-based CO 2 standard can be relatively neutral with respect to vehicle size and consumer c hoice. All vehicles, whether smaller or larger, must make improvements to reduce CO 2 emissions, and therefore all vehicles will be relatively more expensive. With the footpr int-based standard approach, EPA and

NHTSA believe there should be no significant effect on the relati ve distribution of different vehicle sizes in the fleet, which means t hat consumers will still be able to purchase the size of vehicle that meets their needs . Table I.D.3-1 illustrates the fact that different vehicle sizes will have varying CO 2 emissions and fuel economy targets under the proposed standards.

Table I.D.3-1 Model Year 2016 CO 2 and Fuel Economy Targets for Various MY 2008 Vehicle Types

Vehicle Type Example

Models Example Model

Footprint (sq. ft.) CO 2 Emissions

Target (g/mi) Fuel Economy

Target (mpg) Example Passenger Cars Compact

car Honda Fit 40 214 41.4

Midsize

car Ford Fusion 46 237 37.3

Fullsize car Chrysler 300 53 270 32.8

Example Light-duty Trucks

Small SUV 4WD Ford

Escape 44 269 32.8

Midsize

crossover Nissan Murano 49 289 30.6 Minivan Toyota Sienna 55 313 28.2 Large pickup Chevy

Silverado 67 358 24.7

55 49 CFR Part 523.52 truck

E. Summary of Costs and Benefits for the Joint Prop osal

This section summarizes the projected costs and be nefits of the proposed CAFE and GHG emissions standards. These projections hel ped inform the agencies’ choices among the alternatives considered and provide furth er confirmation that proposed standards fall within the spectrum of choices allow able under their respective statutory

criteria. The costs and benefits projected by NHTSA to result from NHTSA’s proposed CAFE standards are presented first, followed by tho se from EPA’s analysis of the proposed GHG emissions standards.

The agencies recognize that there are uncertainties regarding the benefit and cost values presented in this proposal. Some benefits a nd costs are not quantified. The values

of other benefits and costs could be too low or too high.

For several reasons, the estimates for costs and b enefits 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 propose d standards would require slightly different fuel efficiency improvements. EPA’s prop osed 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 CO 2 . In addition, the proposed CAFE and GHG standards offer different program flexibilities, and the agencies’ analyses differ in their accounti ng for these flexibilities (for example, FFVs etc.) , primarily because NHTSA is statutorily prohibited from considering some flexibilities when establishing CAFE standards, whi le EPA is not. These differences contribute to differences in the agencies’ respecti ve estimates of costs and benefits resulting from the new standards

Because EPCA prohibits NHTSA from considering the use of FFV credits when establishing CAFE standards, the agency’s primary analysis of c osts, fuel savings, and related benefits from imposing higher CAFE standard s does not include them. However, EPCA does not prohibit NHTSA from considering the f act that manufacturers may pay civil penalties rather than complying with CAFE sta ndards, and NHTSA’s primary analysis accounts for some manufacturers’ tendency to do so. In addition, NHTSA performed a supplemental analysis of the effect of FFV credits on benefits and costs from its proposed CAFE standards, to demonstrate the rea l-world impacts of FFVs, and the summary estimates presented in Section IV include t hese effects. Including the use of FFV credits reduces estimated per-vehicle complianc e costs of the program. However, as shown below, including FFV credits does not signifi cantly change the projected fuel savings and CO 2 reductions, because FFV credits reduce the fuel ec onomy levels that manufacturers achieve not only under the proposed s tandards, but also under the baseline

MY 2011 CAFE standards.53 Also, EPCA, as amended by EISA, allows manufacturer s to transfer credits between their passenger car and light truck fleets. However, EPCA also prohibits NHTSA from considering manufacturers’ ability to us e CAFE credits when determining the stringency of the CAFE standards. Because of t his prohibition, NHTSA’s primary analysis does not account for the extent to which c redit transfers might actually occur. For purposes of its supplemental analysis, NHTSA co nsidered accounting for the fact that

EPCA allows some transfer of CAFE credits between t he passenger car and light truck fleets, but determined that in NHTSA’s year-by-year analysis, manufacturers’ likely credit transfers cannot be reasonably estimated at this time. 56

Therefore, NHTSA’s primary analysis shows the estim ates the agency considered for purposes of establishing new CAFE standards, an d its supplemental analysis including manufacturers’ potential use of FFV credi ts currently reflects the agency’s best estimate of the potential real-world effects of the proposed CAFE standards.

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 proposed GHG standards reflect these assumptions. However, under the proposed GHG standards, FFV credits would be available through M Y 2015 and starting 2016 would be available only upon a demonstration of the use of a lternative fuel.

EPA’s analysis also assumes that manufacturers wou ld 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 transf ers would occur under the proposed GHG standards. Including these assumptions in EPA’ s analysis increases the resulting estimates of fuel savings and reductions in GHG emi ssions, while reducing EPA’s estimates of program compliance costs.

Finally, under the proposed 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 f ines as an alternative to compliance with applicable CAFE standards. NHTSA’s analysis e xplicitly estimates the level of voluntary fine payment by individual manufacturers, which reduces NHTSA’s estimates of both the costs and benefits of its proposed CAFE standards. In contrast, the CAA does not allow for fine payment in lieu of compliance wi th emission standards, and EPA’s analysis of costs and benefits from its proposed st andard thus assumes full compliance. This assumption results in higher estimates of fuel savings, reductions in GHG emissions, and manufacturers’ compliance costs to sell fleets that comply with both NHTSA’s proposed CAFE program and EPA’s proposed GHG progra m.

56 NHTSA’s analysis estimates multi-year planning eff ects 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 basis to estimate h ow a manufacturer might, for example, weigh the transfer of credits from the passenger car to the l ight truck fleet in MY 2013 against the potential t o carry light truck technologies forward from MY 2013 throu gh MY 2016. The agency is considering the possibility of implementing such analysis for purpo ses of the final rule.54

In summary, the projected costs and benefits prese nted by NHTSA and EPA are not directly comparable, because the levels being p roposed by EPA include air conditioning-related improvements in equivalent fue l efficiency and HFC reductions, because the assumptions incorporated in EPA’s analy sis regarding car-truck credit transfers, and because of the projection by EPA of complete compliance with the proposed GHG standards. It should also be expected that overall EPA’s estimates of GHG reductions and fuel savings achieved by the pro posed 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 proposed passenger car and light trucks GHG standards are slightly higher than NHTSA’s estimates for complyin g with the proposed CAFE

standards.

1. Summary of Costs and Benefits of Proposed NHTSA CAFE

Standards

Without accounting for the compliance flexibilitie s 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 sav ings totaling 62 billion gallons throughout the useful lives of vehicles sold in MYs 2012-2016. At a 3% discount rate, the present value of the economic benefits resultin g from those fuel savings is $158

billion.

The agency further estimates that these new CAFE st andards would lead to corresponding reductions in CO 2 emissions totaling 656 million metric tons (mmt) d uring

the useful lives of vehicles sold in MYs 2012-2016. The present value of the economic benefits from avoiding those emissions is $16.4 bil lion, based on a global social cost of carbon value of $20 per metric ton, 57 although NHTSA estimated the benefits associated

with five different values of a one ton GHG reducti on ($5, $10, $20, $34, $56). 58 See

Section II for a more detailed discussion of the so cial cost of carbon. It is important to

note that NHTSA’s CAFE standards and EPA’s GHG stan dards will both be in effect, and each will lead to increases in average fuel eco nomy and CO 2 emissions reductions.

57 We have developed two interim estimates of the glo bal social cost of carbon (SCC) ($/tCO 2 in 2007 (2006$)): $33 per tCO 2 at a 3% discount rate, and $5 per tCO 2 with a 5% discount rate. The 3% and 5% estimates have independent appeal and at this time a clear preference for one over the other is not warranted. Thus, we have also included – and cente red our current attention on – the average of the estimates associated with these discount rates, whi ch is $19 (in 2006$) per ton of CO 2 emissions. When converted to 2007$ for consistency with other econo mic values used in the agency’s analysis, this figu re correspond to $20 per metric ton of CO 2 emissions occurring in 2007. This value is assume d to increase at 3% annually for emissions occurring after 2007.

58 The $10 and $56 figures are alternative interim es timates based on uncertainty about interest rates o f long periods of time. They are based on an approach tha t models discount rate uncertainty as something tha t evolves over time; in contrast, the preferred appro ach mentioned in the immediately preceding paragrap h assumes that there is a single discount rate with e qual probability of 3% and 5%.55

The two agencies’ standards together comprise the N ational Program, and this discussion

of costs and benefits of NHTSA’s CAFE standards doe s 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.E.1-1 NHTSA Fuel Saved (billion gallons) an d CO 2 Emissions Avoided (mmt)

under Proposed CAFE Standards (without FFV Credits)

2012 2013 2014 2015 2016 Total Fuel (b. gal.) 4 9 13 16 19 62 CO2 (mmt) 44 96 137 173 206 656

2012 2013 2014 2015 2016 Total
Fuel (b. gal.) 4

9

13

16

19

62
CO2 (mmt) 44

96

137

173

206

656

Considering manufacturers’ ability to earn credit toward compliance by selling FFVs, NHTSA estimates very little change in increme ntal fuel savings and avoided CO 2 emissions, assuming FFV credits would be used towar d both the baseline and proposed

standards:

Table I.E.1-2 NHTSA Fuel Saved (billion gallons) an d CO 2 Emissions Avoided (mmt)

under Proposed CAFE Standards (with FFV Credits)

2012 2013 2014 2015 2016 Total Fuel (b. gal.) 5 8 12 15 19 59 CO2 (mmt) 49 90 129 167 204 639

2012 2013 2014 2015 2016 Total
Fuel (b. gal.) 5

8

12

15

19

59
CO2 (mmt) 49

90

129

167

204

639

NHTSA estimates that these fuel economy increases w ould 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 congest ion) caused by drivers’ tendency to travel more when the cost of driving declines (as i t does when fuel economy increases). NHTSA has estimated the total monetary value to soc iety of these benefits and disbenefits, and estimates that the proposed standa rds will produce significant net benefits to society. Using a 3% discount rate, NHT SA estimates that the present value of these benefits would total more than $200 billion o ver the useful lives of vehicles sold during MYs 2012-2016. More discussion regarding mo netized benefits can be found in Section IV of this notice and in NHTSA’s Regulatory Impact Analysis.

Table I.E.1-3 NHTSA Discounted Benefits ($billion) under Proposed CAFE Standards (before FFV Credits , using 3 percent Discount Rate )

2012 2013 2014 2015 2016 Total Passenger Cars 7.6 17.0 24.4 31.2 38.7 119.1 Light Trucks 5.5 11.6 17.3 22.2 26.0 82.6

Combined 13.1 28.7 41.8 53.4 64.7 201.756 2012 2013 2014 2015 2016 Total
Passenger Cars 7.6

17.0

24.4

31.2

38.7

119.1 Light Trucks 5.5

11.6

17.3

22.2

26.0

82.6

Combined 13.1

28.7

41.8

53.4

64.7

201.7

Using a 7% discount rate, NHTSA estimates that the present value of these benefits would total more than $159 billion over the same ti me period.

Table I.E.1-4 NHTSA Discounted Benefits ($billion) under Proposed Standards (before FFV Credits, using 7 percent Discount Rate)

2012 2013 2014 2015 2016 Total Passenger Cars 6.0 13.6 19.5 25.0 31.1 95.3 Light Trucks 4.3 9.1 13.5 17.4 20.4 64.6

Combined 10.3 22.6 33.1 42.4 51.5 159.8

NHTSA estimates that FFV credits could reduce achi eved benefits by about 4.5%:

Table I.E.1- 5 4 NHTSA Discounted Benefits ($billion) under Proposed CAFE Standards (with FFV Credits , using a 3 percent Discount Rate )

2012 2013 2014 2015 2016 Total Passenger Cars 7.8 15.9 22.5 28.6 37.1 111.9 Light Trucks 6.1 10.2 15.9 22.1 26.3 80.5

Combined 13.9 26.1 38.4 50.7 63.3 192.5

2012 2013 2014 2015 2016 Total
Passenger Cars 7.8

15.9

22.5

28.6

37.1

111.9 Light Trucks 6.1

10.2

15.9

22.1

26.3

80.5

Combined 13.9

26.1

38.4

50.7

63.3

192.5

NHTSA attributes most of these benefits—about $158 billion, as noted above—to reductions in fuel consumption, valuing fuel (for s ocietal purposes) at the future pre-tax prices projected in the Energy Information Administ ration’s (EIA’s) reference case forecast from Annual Energy Outlook (AEO) 2009. Th e Preliminary Regulatory Impact Analysis (PRIA) accompanying this proposed rule pre sents a detailed analysis of specific benefits of the proposed rule.

Table I.E.1- 5 6 Summary of Benefits of the Proposed Rule

Benefit Amount $ Value

Fu el savings 62 billion gallons $158 billion

CO 2 emissions reductions 656 million metric tons (mmt) $16.4 billion

Amount $ Value Formatted: Font: Not Bold

Formatted: Font: Not Bold

Formatted: Font: Not Bold

Formatted: Font: Not Bold

Formatted: Font: Not Bold

Formatted: Font: Not Bold

Formatted: Font: 12 pt57

Fuel savings 61.6 billion gallons $158.0 billion

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

NHTSA estimates that the increases in technology ap plication necessary to achieve the projected improvements in fuel economy will entail considerable monetary outlays. The agency estimates that incremental cos ts for achieving its proposed standards – that is, outlays by vehicle manufacturers over an d above those required to comply with the MY 2011 CAFE standards – will total about $60 b illion (i.e., during MYs 2012- 2016).

Table I.E.1- 7 6 NHTSA Incremental Technology Outlays ($b)

under Proposed CAFE Standards (before FFV Credits)

2012 2013 2014 2015 2016 Total Passenger Cars 4.1 6.5 8.4 9.9 11.8 40.8 Light Trucks 1.5 2.8 4.0 5.2 5.9 19.4

Combined 5.7 9.3 12.5 15.1 17.6 60.2

2012 2013 2014 2015 2016 Total
Passenger Cars 4.1

6.5

8.4

9.9

11.8

40.8 Light Trucks 1.5

2.8

4.0

5.2

5.9

19.4

Combined 5.7

9.3

12.5

15.1

17.6

60.2

NHTSA estimates that use of FFV credits could sign ificantly reduce these outlays:

Table I.E.1- 8 7 NHTSA Incremental Technology Outlays ($b)

under Proposed CAFE Standards (with FFV Credits)

2012 2013 2014 2015 2016 Total Passenger Cars 2.5 4.4 6.1 7.4 9.3 29.6 Light Trucks 1.3 2.0 3.1 4.3 5.0 15.6

Combined 3.7 6.3 9.2 11.7 14.2 45.2

2012 2013 2014 2015 2016 Total
Passenger Cars 2.5

4.4

6.1

7.4

9.3

29.6 Light Trucks 1.3

2.0

3.1

4.3

5.0

15.6

Combined 3.7

6.3

9.2

11.7

14.2

45.2

The agency projects that manufacturers will recove r most or all of these additional costs through higher selling prices for new cars an d 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 noncomplianc e), the agency estimates that the proposed standards would lead to increases in avera ge new vehicle prices ranging from $421 per vehicle in MY 2012 to $1,076 per vehicle i n MY 2016:

Table I.E.1- 9 8 NHTSA Incremental Increases in Average New Vehicle Costs ($)

under Proposed CAFE Standards (before FFV Credits)

2012 2013 2014 2015 2016 Formatted: Font: 12 pt

Formatted: Font: 12 pt

Formatted Table58

Passenger Cars 591 735 877 979 1,127 Light Trucks 283 460 678 882 1,020

Combined 476 635 806 945 1,091

2012 2013 2014 2015 2016
Passenger Cars 498

674

820

930

1,085 Light Trucks 291

485

701

911

1,058

Combined 421

605

777

924

1,076

NHTSA estimates that use of FFV credits could sign ificantly reduce these costs, especially in earlier model years:

Table I.E.1- 9 10 NHTSA Incremental Increases in Average New Vehicle Costs ($)

under Proposed CAFE Standards (with FFV Credits)

2012 2013 2014 2015 2016 Passenger Cars 295 448 591 695 851 Light Trucks 231 347 533 758 895

Combined 271 411 571 716 866

2012 2013 2014 2015 2016
Passenger Cars 295

448

591

695

851 Light Trucks 231

347

533

758

895

Combined 271

411

571

716

866

NHTSA estimates, therefore, that the total benefit s of these proposed standards would be more than three times the magnitude of the corresponding costs. As a consequence, its proposed standards would produce n et benefits of $142 billion at a 3 percent discount rate (with FFV credits, $147 billion) or $100 billion at a 7 percent

discount rate over the useful lives of vehicles sold during MYs 2 012-2016.

2. Summary of Costs and Benefits of Proposed EPA GH G

Standards

EPA has conducted a preliminary assessment of the costs and benefits of the proposed GHG standards. Table I.E.2-1 shows EPA’s estimated lifetime fuel savings and

CO 2 equivalent emission reductions for all vehicles sold in the mo del years 2012-2016. The values in Table I.E.2-1 are projected lifetime totals for each model year and are not

discounted. As documented in DRIA C hapter 5, the potential credit trading 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 lea d to increases in average fuel economy

and CO 2 emissions reductions. The two agency’s 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. Formatted Table

Formatted Table

Formatted Table59 Table I.E.2-1 EPA’s Estimated 2012-2016 Model Year Lifetime Fuel Saved and CO 2 GHG Emissions Avoided

2012 2013 2014 2015 2016 Total

Cars Fuel (billion gallons) 4 6 8 11 14 43

Fuel (billion barrels) 0.1 0.1 0.2 0.3 0.3 1.0

CO 2 EQ (mmt) 51 74 98 137 179 539

Light Trucks Fuel (billion gallons) 2 4 6 9 12 33

Fuel (billion barrels) 0.1 0.1 0.1 0.2 0.3 0.8

CO 2 EQ (mmt) 30 51 77 107 143 408

Combined Fuel (billion gallons) 7 10 14 19 26 76

Fuel (billion barrels) 0.2 0.2 0.3 0.5 0.6 1.8

CO 2 EQ (mmt) 81 125 174 244 323 947

2012 2013 2014 2015 2016 Total Fuel (billion gallons) 7 10 14 19 26 76 Fuel (bi llion barrels) 0.2 0.2 0.3 0.5 0.6 1.8

CO 2 (mmt) 81 125 174 243 324 947

Table I.E.2-2 shows EPA’s estimated lifetime discou nted benefits for all vehicles sold in model years 2012-2016. Although EPA estima ted the benefits associated with five different values of a one ton GHG reduction ($ 5, $10, $20, $34, $56), for the purposes of this overview presentation of estimated benefits EPA is showing the benefits associated with one of these marginal values, $20 p er ton of CO 2 , in 2007 dollars and 2007 emissions, in this joint proposal. Table I.E. 2-2 presents benefits based on the $20 value. Section III.H.6 presents the five marginal values used to estimate monetized benefits of GHG reductions and Section III.H.10 pre sents the program benefits using each of the five marginal values, which represent o nly a partial accounting of total benefits due to omitted climate change impacts and other factors that are not readily monetized. These factors are being used on an inte rim basis while analysis is conducted to generate new estimates. The values in the table are discounted values for each model year throughout their projected lifetimes. The ben efits include all benefits considered by EPA such as fuel savings, GHG reductions, PM benefi ts, energy security and other externalities such as reduced refueling and acciden ts, congestion and noise. The lifetime

discounted benefits are shown for one of five diffe rent social cost of carbon (SCC) values considered by EPA. The values in Table I.E.2-2 do not include costs associated with new technology required to meet the proposal.

Table I.E.2-2 EPA’s Estimated 2012-2016 Model Year Lifetime Discounted Benefits

Assuming the $20/ton SCC Value a ($billions of 2007 dollars)

Assumed SCC Value Discount

Rate Model Year

2012 2013 2014 2015 2016 Total60 $20/ton CO2 in 2007 3% $20.4 $31.7 $44.9 $63.7 $87.2 $248

7% $15.8 $24.7 $34.9 $49.3 $67.7 $193

a The benefits include all benefits considered by EPA such as fuel savings, GHG reductions, PM benefits

, energy security and other externalities such as red uced refueling and accidents, congestion and noise.

Table I.E.2-3 shows EPA’s estimated lifetime fuel s avings, lifetime CO 2 emission reductions, and the monetized net present values of those fuel savings and CO 2 emission reductions. The gallons of fuel and CO 2 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 CO 2 shown in Table I.E.2-3 are totals for the five model years throughout thei r projected lifetime and are not

discounted. The monetized values shown in Table I. E.2-3 are the summed values of the discounted monetized-fuel savings and monetized-CO 2 reductions for the five model years 2012-2016 throughout their lifetimes. The mo netized values in Table I.E.2-3

reflect both a 3 percent and a 7 percent discount rate as noted

.

Table I.E.2-3 EPA’s Estimated 2012-2016 Model Year Lifetime Fuel savings, CO 2 Emission Reductions, and Discounted Monetized Benef its at a 3% Discount Rate (monetized values in 2007 dollars)

Amount $ value

(billions) Fuel savings 1.8 billion barrels $193 , 3% discount rate $151, 7% discount rate

CO 2 emission reductions (valued assuming $20/ton CO 2 in 2007) 947 MMT CO 2 e $21.0 , 3% discount rate $15.0, 7% discount rate

Table I.E.2-4 shows EPA’s estimated incremental te chnology outlays for cars and trucks for each of the model years 2012-2016. The total outlays are also shown. The technology outlays shown in Table I.E.2-4 are for t he industry as a whole and do not account for fuel savings associated with the propos al.

Table I.E.2-4 EPA’s Estimated Incremental Technolog y Outlays ($billions of 2007 dollars)

2012 2013 2014 2015 2016 Total Cars $3.5 $5.3 $7.0 $8.9 $10.7 $35.3
Trucks $2.0 $3.1 $4.0 $5.1 $6.8 $20.9
Combined $5.4 $8.4 $10.9 $13.9 $17.5 $56.1

Table I.E.2-5 shows EPA’s estimated incremental co st increase of the average new vehicle for each model year 2012-2016. The val ues shown are incremental to a

baseline vehicle and are not cumulative. In other words, the estimated increase for 2012 model year cars is $374 relative to a 2012 model ye ar car absent the proposal. The61

estimated increase for a 2013 model year car is $53 1 relative to a 2013 model year car absent the proposal (not $374 plus $531).

Table I.E.2-5 EPA’s Estimated Incremental Increase in Average New Vehicle Cost (2007 dollars per unit)

2012 2013 2014 2015 2016 Cars $374 $531 $663 $813 $968 Trucks $358 $539 $682 $886 $1,213 Combined $368 $534 $670 $838 $1,050

F. Program Flexibilities for Achieving Compliance

EPA’s and NHTSA’s proposed programs provide compli ance flexibility to manufacturers, especially in the early years of the National Program. This flexibility is expected to provide sufficient lead time for manufa cturers to make necessary technological improvements and reduce the overall c ost of the program, without compromising overall environmental and fuel economy objectives. The broad goal of harmonizing the two agencies’ proposed standards in cludes preserving manufacturers’ flexibilities in meeting the standards, to the exte nt appropriate and required by law. The following section provides an overview of the flexi bility provisions the agencies are proposing.

1. CO 2 /CAFE Credits Generated Based on Fleet Average Perf ormance

Under the NHTSA and EPA proposal the fleet averag e standards that apply to a

manufacturer’s car and truck fleets would be based on the applicable footprint-based curves. At the end of each model year, when produc tion of the model year is complete, a production-weighted fleet average would be calculat ed for each averaging set (cars and trucks). Under this approach, a manufacturer’s car and/or truck fleet that achieves a fleet average CO 2 /CAFE level better than the standard would generate credits. Conversely, if the fleet average CO 2 /CAFE level does not meet the standard the fleet wo uld generate debits (also referred to as a shortfall).

Under the proposed program, a manufacturer whose f leet generates credits in a given model year would have several options for usi ng those credits, including credit carry-back, credit carry-forward, credit transfers, and credit trading. These provisions exist in the MY 2011 CAFE program under EPCA and EI SA, 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 un der the CAA. EPA is proposing that the manufacturer would be able to carry-back c redits to offset any deficit that had accrued in a prior model year and was subsequently carried over to the current model year. EPCA already provides for this. EPCA restric ts the carry-back of CAFE credits to three years and EPA is proposing the same limitatio n, in keeping with the goal of harmonizing both sets of proposed standards.62

After satisfying any need to offset pre-existing d eficits, remaining credits could be saved (banked) for use in future years. Under the CAFE program, EISA allows manufacturers to apply credits earned in a model ye ar to compliance in any of the five subsequent model years. 59 EPA is also proposing, under the GHG program, to allow

manufacturers to use these banked credits in the fi ve years after the year in which they were generated (i.e., five years carry-forward).

EISA required NHTSA to establish by regulation a C AFE credits transferring program, which NHTSA established in a March 2009 fi nal rule codified at 49 CFR Part 536, to allow a manufacturer to transfer credits be tween its vehicle fleets to achieve compliance with the standards. For example, credit s 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 ave rage standard in a given year. EPA’s Tier 2 program also provides for this type of credi t transfer. For purposed of this NPRM, EPA proposes unlimited credit transfers across a ma nufacturer’s car-truck fleet to meet the GHG standard. This is based on the expectation that this kind of credit transfer provision will allow the required GHG emissions red uctions to be achieved in the most cost effective way, and this flexibility will facil itate the ability of the manufacturers to comply with the GHG standards in the lead time prov ided. Under the CAA, unlike under EISA, there is no statutory limitation on car-truck credit transfers. Therefore EPA is not proposing to constrain car-truck credit transfers a s doing so would increase costs with no corresponding environmental benefit. For the CAFE program, however, EISA limits the amount of credits that may be transferred, and also prohibits the use of transferred credits to meet the statutory minimum level for the domesti c car fleet standard. 60 These and other statutory limits would continue to apply to t he determination of compliance with

the CAFE standard.

Finally, EISA also allowed NHTSA to establish by r egulation a CAFE credit trading program, which NHTSA established in the Mar ch 2009 final rule at 40 CFR Part 536, to allow credits to be traded (sold) to other vehicle manufacturers. EPA is also proposing to allow credit trading in the GHG progra m. These sorts of exchanges are typically allowed under EPA’s current mobile source emission credit programs, although manufacturers have seldom made such exchanges. Und er the NHTSA CAFE program, EPCA also allows these types of credit trades, alth ough, as with transferred credits, traded credits may not be used to meet the minimum domestic car standards specified by

statute. 61

2. Air Conditioning Credits

Air conditioning (A/C) systems contribute to GHG e missions in two ways. Hydrofluorocarbon (HFC) refrigerants, which are pow erful GHG pollutants, can leak from the A/C system. Operation of the A/C system a lso places an additional load on the

59 49 U.S.C. 32903(a)(2).

60 49 U.S.C. 32903(g)(4).

61 49 U.S.C. 32903(f)(2).63

engine, which results in additional CO 2 tailpipe emissions. EPA is proposing an approach that allows manufacturers to generate credits by re ducing GHG emissions related to A/C systems. Specifically, EPA is proposing a test pro cedure and method to calculate CO 2 equivalent reductions for the full useful life on a grams/mile basis that can be used as credits in meeting the fleet average CO 2 standards. EPA’s analysis indicates 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 take advantage of 11 g/mi GHG credi t toward meeting the 250 g/mi by 2016 (though some companies may have more). EPA is also proposing to allow manufacturers to earn early A/C credits starting in MY 2009 through 2011, as discussed

further in a later section.

Comment is also sought on the more immediate interim alternative approach

solution of providing CAFE credits under 49 U.S.C. 32904(c) for light trucks e quipped with relatively efficient air conditioners for MYs 2012-2016. The agencies invite comment on allowing a manufacturer to generate addi tional CAFE credits from the reduction of fuel consumption from through the application of air conditioning efficiency improvement technologies to trucks. Currently, the CAFE program does not induce

manufacturers to install more efficient air conditi oners because the air conditioners are not turned on during fuel economy comp liance testing. The agencies note that if such credits were adopted, it may be necessary to reflec t them in the setting of the CAFE standards for light trucks for the same model years and invite comment on that issue

3. Flex-fuel and Alternative Fuel Vehicle Credits

EPCA authorizes an incentive under the CAFE programfor production of dualfueled or flexible-fuel vehicles (FFV) and dedicate d alternative fuel vehicles. FFVs are

vehicles that can run both on an alternative fuel a nd conventional fuel. Most FFVs are E85 capable vehicles, which can run on either gasoli ne or a mixture of up to 85 percent ethanol and 15 percent gasoline. Dedicated altern ative fuel vehicles are vehicles that run exclusively on an alternative fuel. EPCA was amend ed by EISA to extend the period of availability of the FFV incentive, but to begin pha sing it out by annually reducing the

amount of FFV incentive that can be used toward com pliance with the CAFE standards. 62
EPCA does not premise the availability of the FFV c redits on actual use of alternative fuel by an FFV vehicle. Under NHTSA’s CAFE program, pursuant to EISA, after MY 2019, no FFV credits will be available for CAFE com pliance. 63 For dedicated alternative fuel vehicles, there are no limits or p hase-out of the credits. Consistent with the statute, NHTSA will continue to allow the use o f FFV credits for purposes of compliance with the proposed standards until the en d of the phase-out period.

62 EPCA provides a statutory incentive for productio n of FFVs by specifying that their fuel economy is determined using a special calculation procedure th at results in those vehicles being assigned a highe r fuel economy level than would otherwise occur. This is typically referred to as an FFV credit.

63 Id.64 For the GHG program, EPA is proposing to allow FFV credits in line with EISA limits only during the period from MYs 2012 to 2015 . After MY 2015, EPA proposes to allow FFV credits only based on a manufacturer’s de monstration that the alternative fuel is actually being used in the vehicles. EPA is see king comments on how that

demonstration could be made. EPA discusses this i n more detail in Section III.C of the preamble.

4. Temporary Lead-time Allowance Alternative Standa rds

Manufacturers with limited product lines may be esp ecially challenged in the early years of the proposed program. 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 manufacturers focus on high performance vehicles wi th higher CO 2 emissions, above the

CO 2 emissions target for that vehicle footprint, but d o 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 meeting the applicable CAFE standard. EPA believes that these technological circumstances may call for a mo re gradual phase-in of standards so

that manufacturer resources can be focused on meeti ng the 2016 levels.

EPA is proposing a temporary lead-time allowance f or manufacturers who sell

vehicles in the U.S. in MY 2009 whose vehicle sales in that model year are below 400,000 vehicles. EPA proposes that this allowance would be available only during the MY 2012-2015 phase-in years of the program. A manu facturer that satisfies the

threshold criteria would be able to treat a limited number of vehicles as a separate averaging fleet, which would be subject to a less s tringent GHG standard. 64 Specifically, a standard of 125 percent of the vehicle’s otherwis e applicable foot-print target level would 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 whic h the flexibility could apply is limited. EPA also is proposing appropriate restrict ions on credit use for these vehicles, as discussed further in Section III. By MY 2016, thes e allowance vehicles must be averaged into the manufacturer’s full fleet (i.e., they are no longer eligible for a different standard).

EPA discusses this in more detail in Section III.B of the preamble.

5. Additional Credit Opportunities under the CAA

EPA is proposing additional opportunities for earl y credits in MYs 2009-2011 through over-compliance with a baseline standard. The baseline standard would be set to be equivalent, on a national level, to the Californ ia standards. Potentially, credits could be generated by over-compliance with this baseline in one of two ways – overcompliance by the fleet of vehicles sold in Califor nia and the CAA section 177 states (i.e., those states adopting the California program ), or over-compliance with the fleet of

64 EPCA does not permit such an allowance. Consequen tly, manufacturers who may be able to take advantage of a lead-time allowance under the propos ed GHG standards would be required to comply with the applicable CAFE standard or be subject to penal ties for non-compliance.65

vehicles sold in the 50 states. EPA is also propos ing early credits based on overcompliance with CAFE, but only for vehicles sold in states outside of California and the CAA section 177 states. Under the proposed early c redit provisions, no early FFV credits would be allowed, except those achieved by over-com pliance with the California program based on California’s provisions that manuf acturers demonstrate actual use of the alternative fuel. EPA’s proposed early credits options are designed to ensure that there would be no double counting of early credits. Consistent with this paragraph, NHTSA notes, however, that credits for overcomplian ce with CAFE standards during

MYs 2009-2011 will still be available for manufactu rers to use toward compliance in future model years, just as before.

EPA is proposing additional credit opportunities to encourage the commercialization of advanced GHG/fuel economy cont rol technologies, such as electric vehicles, plug-in hybrid electric vehicles, and fue l cell vehicles. These proposed advanced technology credits are in the form of a mu ltiplier that would be applied to the number of vehicles sold, such that each eligible ve hicle counts as more than one vehicle in the manufacturer’s fleet average. EPA is also p roposing to allow early advanced technology credits to be generated beginning in MYs 2009 through 2011.

EPA is also proposing an Option for manufacturers t o generate credits for employing technologies that achieve GHG reductions that are not reflected on current test procedures. Examples of such “off-cycle” technolog ies might include solar panels on hybrids, adaptive cruise control, and active aerody namics, among other technologies. EPA is seeking comments on the best ways to quantify such credits to ensure any offcycle credits applied for by a manufacturer are ver ifiable, reflect real-world reductions, based on repeatable test procedures, and are develo ped through a transparent process allowing appropriate opportunities for public comme nt.

G. Coordinated Compliance

Previous NHTSA and EPA regulations and statutory pr ovisions establish ample examples on which to develop an effective complianc e program that achieves the energy

and environmental benefits from CAFE and motor vehi cle GHG standards. NHTSA and EPA are proposing a program that recognizes, and re plicates as closely as possible, the compliance protocols associated with the existing C AA Tier 2 vehicle emission standards, and with CAFE standards. The certificati on, testing, reporting, and associated compliance activities closely track current practic es and are thus familiar to manufacturers. EPA already oversees testing, collec ts and processes test data, and performs calculations to determine compliance with both CAFE and CAA standards. Under this proposed coordinated approach, the compl iance mechanisms for both programs are consistent and non-duplicative. EPA w ill also apply the CAA authorities applicable to its separate in-use requirements in t his program.

The proposed approach allows manufacturers to satis fy the new program requirements in the same general way they comply wi th existing applicable CAA and66

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 determ inations. The proposed compliance program design establishes a single set of manufact urer 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 re spective statutory authority.

NHTSA and EPA do not anticipate any significant non compliance under the proposed program. However, failure to meet the fle et average standards (after credit opportunities are exhausted) would ultimately resul t in the potential for penalties under

both EPCA and the CAA. The CAA allows EPA consider able discretion in assessment of penalties. Penalties under the CAA are typicall y 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 i s 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 pena lties 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 tenth s of mpg by which the fleet average falls below the standard. In the event of a compliance a ction arising out of the same facts and circumstances, EPA could consider CAFE penalties wh en determining appropriate

remedies for the EPA case.

H. Conclusion

This joint proposal by NHTSA and EPA represents a s trong and coordinated National Program to achieve greenhouse gas emission reductions and fuel economy improvements from the light-duty vehicle part of th e transportation sector. EPA’s proposal for GHG standards under the Clean Air Act is discussed in Section III of this notice; NHTSA’s proposal for CAFE standards under E PCA is discussed in Section IV. Each agency includes analyses on a variety of relev ant issues under its respective statute, such as feasibility of the proposed standards, cost s and benefits of the proposal, and effects on the economy, auto manufacturers, and con sumers. This joint rulemaking proposal reflects a carefully coordinated and harmo nized approach to developing and implementing standards under the two agencies’ stat utes and is in accordance with all substantive and procedural requirements required by law.

NHTSA and EPA believe that the MY 2012 through 201 6 standards proposed would provide substantial reductions in emissions o f GHGs and oil consumption, with significant fuel savings for consumers. The propos ed program is technologically feasible at a reasonable cost, based on deployment of availa ble and effective control technology across the fleet, and industry would have the oppor tunity to plan over several model years and incorporate the vehicle upgrades into the norma l redesign cycles. The proposed program would result in enormous societal net benef its, including greenhouse gas emission reductions, fuel economy savings, improved energy security, and cost savings to

consumers from reduced fuel utilization.67