Summary of Interagency Worki ng Comments Received on Draft Rule under EO 12866 Review. Subject to Further Policy Review

1 Below is a summary of interagency comments received during EO 12866 review of the draft proposed rule establishing GHG emissions standard s and fuel efficiency standards for medium and heavy duty trucks. They are for your cons ideration and subject to further policy review.

1. Two summary tables for executive summary of the NPRM and executive summary of the

RIA

Interagency commenters recommend that the agencies reproduce the following table from the recent light-duty rule for this NPRM and include this summary table in the executive summary of the RIA and NPRM.

Table I.C.2-1 EPA’s Estimated 2012-2016 M odel Year Lifetime Discounted Costs, Benefits, and Net Benefits assuming the $21/ton SCC Value a,b,c,d (2007 dollars) 3% Discount Rate $billions

Costs $51.5
Benefits $240
Net Benefits $189

7% Discount Rate

Costs $51.5
Benefits $192
Net Benefits $140

a Although EPA estimated the benefits associated with four different values of a one ton GHG reduction ($5, $21, $35, $65), for the purposes of this overview presentation of estimated costs and benefits EPA is showing the benefits associated with the marg inal value deemed to be central by the interagency working group on this topic: $21 per ton of CO2e, in 2007 dollars and 2010 emissions. The $21/ton value applies to 2010 CO 2 emissions and grows

over time.

b As noted in Section III.H, SCC increases over time. The $21/ton value applies to 2010 CO 2 emissions and grows larger over time.

c Note that net present value of reduced GHG emissions is calculated differently than other benefits. The same discount rate used to discount the value of damages from future emissions (SCC at 5, 3, and 2.5 percent) is used to calculate net present value of SCC for internal consistency. Refer to Section III.H for more detail.

Please also include another summary table that presents the annualized costs, benefits

and net benefits in 3% an d 7% discount rates.

2. Analysis of alternative levels of stringency.

Several interagency commenters recommend a clear summary of the net benefits of the

alternative levels that were analyzed. They suggest a full presentation of all monetized

costs and benefits of the various alternatives , and suggest that a ve rsion of Table VIII-28 be presented alongside Tables IX-2 and IX-3 (e.g., as ne w Table IX-4) so that the monetized costs and benefits (and net bene fits) of each alterna tive will be clearly presented for the lifetimes of model years 2014 to 2018 vehicles. In order to reduce the

amount of data in the added ta ble, the presentation of vari ous SCCs could be eliminatedSummary of Interagency Worki ng Comments Received on Draft Rule under EO 12866 Review. Subject to Further Policy Review

2 and the single interagency working group SCC value could be used for the summary. Further, this new table could break out tec hnology costs and fuel savings by regulatory category (as is currently done in Tables IX-2 and IX-3). In addition to these tables, please also include a table summarizing the annua lized costs, benefits, and net benefits of all alternatives analyzed in this NPRM.

Also, several commenters raised concerns with Tables IX-2 and IX-3 and the presentation of estimates of annual technology costs and reductions in emissions and oil use for 2030 and 2050. The emphasis on annual costs in 2030 and 2050 might be inappropriate for this analys is of alternatives for seve ral reasons, in cluding: the significant uncertainties associated with estim ating such distant impacts, the uncertainty about the appropriate ba seline (as raised in interagency di scussions), and the reality that

this rule is almost certain to be revisite d and revised long before 2030 (let alone 2050). Multiple interagency commenters recommend that Tables IX-2 and IX-3 be revised to present data for near-term model years that are specifically impacted by the standards, e.g., 2014 and 2018, and that the presentation of data for 2030 and 2050 be removed.

3. Treatment of Fuel Savings.

Interagency commenters recommend that the ag encies include the following statement in the Preamble and the RIA where fuel savings are first included in the cost category:

“Fuel savings are included in the cost categor y in the following tables instead of the benefits category to showcase the impacts fr om the manufacturers’ standpoint. From a social standpoint, these fu el savings are benefits.”

4. Discussion of penalties/alternative compliance fees.

Interagency commenter request that EPA/NHTSA place a refe rence to penalty discussion in the section on flexibilities (currently it is in its own subsection on penalties), noting that an alternative compliance fee could se rve as a cost containment mechanism and source of regulatory flexibility, although that in this rule EP A is statutorily limited in what types of “fine-based compliance mechanisms” it can offer.

Also, the sections on penalties contains some language that initially appears contradictory, noting on page 295 that “NHTSA recognizes th at EPA also has authority to impose civil penalties for non-compliance with GHG regulations,” while also stating on the next page that “NCPs are authorized for heavy-duty engines and vehicles under section 206(g) of the Clean Air Act (CAA) as the only fine-based compliance mechanism

available to manufacturers.” Some further clarification in this section on agencies’ ability to impose civil pena lties would be helpful.

5. Welfare loss

Several commenters suggest the following edits:Summary of Interagency Worki ng Comments Received on Draft Rule under EO 12866 Review. Subject to Further Policy Review

3 “The costs estimates include the costs of holding other vehicle attributes, such as performance, constant. As discussed in the 2010 light-duty GHG/CAFE ru le, if other vehicle

attributes are not held constant , then the cost estimates do not capture the impacts of these changes. 1 The agencies seek comments and supporting data and analyses of any additional impacts of the proposed standards on vehicle attributes and performance not addressed in this analysis. The agencies also seek comment on whet her an analysis of welfare loss, as conducted in the light-duty GHG/CAFÉ rule, should be done for this rule at the final rule

stage. ”

6. Averaging, Banking and Trading Language.

We received the following suggested edits (in red) for your consideration:

“In the past, we have followed the practice of allowing averaging and trading between like products because we have recognized that the estimation of emissions credits is not an absolutely precise process, and actual emissions reducti ons or increases “in use” would vary due to differences in vehicle duty cycles, maintenance practices and any number of other factors. By restricting credit averaging a nd trading to only allow averag ing and trading between like products, the agencies gain some degree of assura nce that the operation and use of the vehicles generating credits and consuming credits would be similar. The agencies also note that some industry participants have expr essed concern that allowing cred it averaging, banki ng and trading across different products may cr eate an unlevel playing field for the regulated industry. Specifically, engine and truck manufacturers have commonly expr essed to us a concern that some manufacturers with a wide range of pr oduct offerings spanning a number of regulatory categories would be able to use the ABT program provisions to generate credits in regulatory class markets where they face less competition and then use those credits to compete unfairly in other regulatory categories where they face greater competition. Finally, in the context of regulating criteria pollutants that can have localized and regional impacts, we have been concerned about the unintended consequence of unr estricted credit averag ing or trading on local or regional concentrations of these pollutants, whereby emissions reductions might become concentrated in some localities or regions to th e detriment of other areas needing the reductions. The agencies are evaluating the possibility of plac ing fewer restrictions on averaging and trading because increasing the flexibility offered to manufacturers to average, bank, and trade credits across regulatory subcategories and categories c ould potentially significantly reduce the overall cost of the program. Specifically, we request co mment on the extent to which a difference – or unexpected difference -- in the marginal costs of compliance per gallon of fuel saved or ton of GHG reduced across categories or subcategories, combined with provision for averaging and trading across categories and subcategories, can allow manufacturers to achieve the same overall

reduction in fuel use and em issions at lower cost.Summary of Interagency Worki ng Comments Received on Draft Rule under EO 12866 Review. Subject to Further Policy Review

4 While trading restrictions in the context of past EPA rulemakings have been motivated in part by the local or regional nature of the pollutant be ing regulated, in this in stance, opportunities for greater flexibility may exist in light of the f act that greenhouse gases ar e a global pollutant for which local consequences are rela ted to global, not local or regi onal atmospheric concentrations. However, trading ratios may need to be established for averaging and trading across categories, and potentially across subcategories, to ensure that averaging and trading across categories and subcategories does not lead to a net increase in em issions or fuel use in light of differences in vehicle use patterns across categories and subcategor ies. Further, it is po ssible to design trading

ratios that ensure a net reduction in emissions and fuel use as a result of averagi ng and trading. The agencies also request comment on the potential additional savings in costs ( beyond those already calculated in this proposal ) that can be achieved by increasing flexibility in averaging and trading provisions, on how su ch averaging and trading flexib ilities could be designed to ensure environmental neutrality, on whether trad ing ratios should be designed to achieve a net reduction in emissions and fuel use as a result of trading , on the concerns that have been raised by some regarding impacts on intra-industry co mpetition, and on how to address the aboveidentified concerns about dissimilariti es in operation and use of vehicles.”