Response to Comments Received 7/19/11:

I. , p . 419 of Preamble : edits adopted with some modifications. II., p. 421 of Preamble, on positional goods: This was one of two additional hy potheses provided to the agencies. Because we sought comment and additional suggestions in the NPRM on the conceptual framework, we want to report the flavor of those comments. We agree that this argument is less relevant in the HD market than in the LD market, though it may

play some role in some segments (e.g., medium

- dut y trucks, which are close enough to the light

- dut y market that some may buy them as statements of status). The paragraph currently

states: “In a competitive business, cost reduction provides a major opportunity

cost to investing in status rather than in fuel

- saving technology ; thus, this argument may

play less of a role in the heavy

- dut y market than in the consumer market for vehicles.” We think this statement makes the same point that the comment raises. III., p. 422 of Preamble: The argument in the text raises a condition (limited capital markets) that might lead to “crowding

- out” of the purchase of f uel

- saving technology . We have no evidence, though, that limits on capital markets are an issue in this sector. We have added a sentence: “ The agencies received no comments indicating that constrained access to capital might explain the efficiency gap in this market.”
IV ., moving the Emplo yment I mpacts to Chapter 10: Because of the attention that employ ment impacts receive in the current economic context, we prefer to keep the employ ment analy sis in the preamble as well as the RIA. We also prefer to keep the employ ment anal ys is in Chapter 9 of the RIA, which is titled “Economic and Social Impacts.” Employ ment analy sis is generall y considered an economic impact; separating it from other economic inputs may cause confusion or difficulties in finding the anal ys is. If the underly ing concern is separating the employ ment anal ysis from the benefit

cost anal ys is, we have alread y sought to accomplish this goal, b y (a) putting it after the benefit

cost anal ys is summary

in the chapter, and (b) starting the emp loy ment analy sis with the statement, “ Although analy sis of employ ment impacts is not part of a cost

- benefit anal ys is (except to the extent that l abor costs contribute to costs). . . .” p. 3, proposed footnote: we added it, but to the paragraph dealing wi th full employ ment (where transition costs without notable effects on emplo yment levels are more relevant). We added to the note that employ

ment would not change “substantially ”: if there are effects on the overall wage level, then workers may voluntaril y enter or exit the workforce, affecting emplo ym ent levels while not changing the full emplo ym ent status. In addition, in response to suggested language received on 7/20, we reordered the language to put more emphasis on the transition costs than on labor market equilibrium.
p. 3 and subsequent comments to remove “second order effects”: we plan to keep the discussion of other impacts in the rule. We have sought to identify the sectors that are most likely to be significantly

affected by the rule. Our support for this notion is that the sectors we have discussed show up in some way in the benefit

- cost anal ys is: fuel suppliers and fuel savings because of the changes in fuel use ,and effects on the transport and shipping sectors as the sources of emissi ons (and thus emissions

reductions). In addition, stakeholder organizations associated with these sectors have commented on the rule, thus showing their interest in its effects. Because there may

be sectors that face significant impacts that we have not identified, we have added the following statement to highlight this concern , in the paragraph following the heading, “Overview of Affected Sectors” : “ We acknowledge that there may be impacts in other sectors that are not discussed here, but we have sought to include the sectors where we think the impacts are most direct.” We think more information is generall y preferable to less information. We have sought to provide balanced assessments of effects in the sectors where we believe the impacts will be most significant. An advantage of providing a qualitative perspective on these sectors is that we can generall y be reasonably confident of the direction of the effects that we will impose in these sectors, even if we do not have estimates of the magnitudes. Thus, we maintain the language highlighted in the comments on p. 3. p. 4. deleting discussion of UCS/Calstart study : Our intent in including reference to this study was to be responsive to comments. Inaddition, not discussing existing studies provides an incomplete picture of the context that drives our own employ ment anal ys is. Finally , reviewing existing studies provides an opportunity to critique the way s that employ ment analy sis is often done in policy

debates. In this paragraph, we point out the hi gh estimates, but also point out why the I/O model that produced these results is likely to have exaggerated them. At the same time, we recognize that including numbers in what is otherwise a qualitative anal ys is may

undul y focus readers on those number s. We have edited the text to say , “ tens of thousands of jobs between 2020 and 2030,” rather than the specific numbers. p. 5, reorganizing to follow the Morgenstern et al. framework: this suggestion is adopted. p. 7, comment on dropping discussion of profitability is adopted. p. 8, concluding paragraph: we have maintained the language on other sectors. We have added a (slightly modified) version of the sentence on possible crowding out of other investment. Response to Comments Received 7/20/11:
1. “Although anal ys is of employ ment impacts is not a standard part of a cost

- benefit anal ys is. . . .” This addition implies that it could be part of a BCA. We are unaware of any guidelines for BCA that suggest including emplo ym ent impacts. We think it is more appropriate to maintain a separation between BCA and employ ment anal ys is: they

are different analy ses for different purposes. Further edits in the lead paragraph adopted. 2. Suggested additional paragraph in the introduction to this section : We have modified the proposed language in the new second paragraph to summarize the effects that we provide here:

“ Our general conclusion is that employ ment impacts in the regulated sector (truck and engine manufacturing) and the parts sectors are likely to be positive; effects on employ ment in the transport and shipping sectors are ambiguous; the fuel supply ing sectors may face reducedemploy

ment; and there may

be increased general employ ment due to reduction in costs that may be passed along to the transport industry and thus to the public. Because we did not include employ ment anal ys is in the NPRM and provide opportunity for public comment on the methods, we here present a qualitative discussion. Because the discussion is qualitative, we do not sum the ne t effects on emplo yment in the econom y.”
3. L anguage associated with Jacobson et al. cite: combined with footnote recommended on 7/19 (see above , p. 3, proposed footnote ). 4. edits in next paragraph adopted.
5. , p. 3: We did not add “(and not merel y the magnitude) because magnitudes are more difficult than (and implicitly

include) directions. The remaining edits in that paragraph were adopted, with minor editing.