## Friday,

May 7, 2010



# Part II



# Environmental Protection Agency
Department of Transportation

National Highway Traffic Safety

Administration
40 CFR Parts 85, 86, and 600; 49 CFR Parts 531, 533, 536, et al.
Light-Duty Vehicle Greenhouse Gas Emission Standards and Corporate Average Fuel Economy Standards; Final

Rule


### 25324 Federal Register / Vol. 75, No. 88 / Friday, May 7, 2010 / Rules and Regulations

1 ‘‘ Light-duty vehicle, ’’ ‘‘ light-duty truck, ’’ and

‘‘ medium-duty passenger vehicle ’’ are defined in 40 CFR 86.1803–01. Generally, the term ‘‘ light-duty
vehicle ’’ means a passenger car, the term ‘‘ light-duty
truck’’ means a pick-up truck, sport-utility vehicle, or minivan of up to 8,500 lbs gross vehicle weight rating, and ‘‘ medium-duty passenger vehicle ’’ means a sport-utility vehicle or passenger van from 8,500to 10,000 lbs gross vehicle weight rating. Mediumduty passenger vehicles do not include pick-up

trucks.

2 ‘‘ Passenger car ’’ and ‘‘ light truck’’ are defined in 49 CFR part 523. **ENVIRONMENTAL PROTECTION**
**AGENCY**

**40 CFR Parts 85, 86, and 600**

**DEPARTMENT OF TRANSPORTATION**

**National Highway Traffic Safety**
**Administration**

**49 CFR Parts 531, 533, 536, 537 and**

**538**

**[EPA–HQ–OAR–2009–0472; FRL–9134–6; NHTSA–2009–0059]** 

**RIN 2060–AP58; RIN 2127–AK50**

**Light-Duty Vehicle Greenhouse Gas Emission Standards and Corporate**  **Average Fuel Economy Standards;**
**Final Rule**

**AGENCY :**  Environmental Protection Agency (EPA) and National Highway Traffic Safety Administration (NHTSA).

**ACTION :**  Final rule.

**SUMMARY :**  EPA and NHTSA are issuing this joint Final Rule to establish a National Program consisting of new standards for light-duty vehicles that will reduce greenhouse gas emissions and improve fuel economy. This joint
Final Rule is consistent with the National Fuel Efficiency Policy announced by President Obama on May 19, 2009, responding to the country’s critical need to address global climate change and to reduce oil consumption. EPA is finalizing greenhouse gas
emissions standards under the Clean Air Act, and NHTSA is finalizing Corporate Average Fuel Economy standards under the Energy Policy and Conservation Act, as amended. These standards apply to passenger cars, light-duty trucks, and medium-duty passenger vehicles, covering model years 2012 through 2016, and represent a harmonized and consistent National Program. Under the National Program, automobile
manufacturers will be able to build a single light-duty national fleet that satisfies all requirements under both programs while ensuring that consumers still have a full range of
vehicle choices. NHTSA’s final rule also constitutes the agency’s Record of Decision for purposes of its National Environmental Policy Act (NEPA) analysis.

**DATES :**  This final rule is effective on July

6, 2010, sixty days after date of publication in the Federal Register. The incorporation by reference of certain publications listed in this regulation is approved by the Director of the Federal Register as of July 6, 2010.

**ADDRESSES :**  EPA and NHTSA have
established dockets for this action under Docket ID No. EPA–HQ–OAR–2009– 0472 and NHTSA–2009–0059, respectively. All documents in the
docket are listed on the http:// www.regulations.gov Web site. Although listed in the index, some information is not publicly available, e.g., CBI or other
information whose disclosure is restricted by statute. Certain other material, such as copyrighted material, is not placed on the Internet and will be publicly available only in hard copy form. Publicly available docket
materials are available either electronically through http:// www.regulations.gov or in hard copy at the following locations: EPA: EPA Docket Center, EPA/DC, EPA West, Room 3334, 1301 Constitution Ave., NW., Washington, DC. The Public Reading Room is open from 8:30 a.m. to 4:30 p.m., Monday through Friday, excluding legal holidays. The telephone number for the Public Reading Room is (202) 566–1744. NHTSA: Docket Management Facility, M–30, U.S. Department of Transportation, West Building, Ground Floor, Rm. W12–140, 1200 New Jersey Avenue, SE., Washington, DC 20590. The Docket Management Facility is open between 9 a.m. and 5 p.m. Eastern Time, Monday through Friday, except Federal holidays.

**FOR FURTHER INFORMATION CONTACT :** 

EPA: Tad Wysor, Office of Transportation and Air Quality, Assessment and Standards Division, Environmental Protection Agency, 2000 Traverwood Drive, Ann Arbor MI 48105; telephone number: 734–214– 4332; fax number: 734–214–4816; e-mail
address: wysor.tad@epa.gov, or Assessment and Standards Division Hotline; telephone number (734) 214– 4636; e-mail address asdinfo@epa.gov.

NHTSA: Rebecca Yoon, Office of Chief Counsel, National Highway Traffic Safety Administration, 1200 New Jersey Avenue, SE., Washington, DC 20590. Telephone: (202) 366–2992.

**SUPPLEMENTARY INFORMATION :** 
Does this action apply to me?

This action affects companies that manufacture or sell new light-duty vehicles, light-duty trucks, and medium-duty passenger vehicles, as defined under EPA’s CAA regulations, 1 and passenger automobiles (passenger cars) and non-passenger automobiles (light trucks) as defined under NHTSA’s CAFE regulations. 2 Regulated categories
and entities include:

Category NAICS codes AExamples of potentially regulated entities

Industry .............. 336111, 336112 ...................................... Motor vehicle manufacturers. Industry .............. 811112, 811198, 541514 ........................ Commercial Importers of Vehicles and Vehicle Components.

A North American Industry Classification System (NAICS).

This list is not intended to be exhaustive, but rather provides a guide regarding entities likely to be regulated by this action. To determine whether particular activities may be regulated by this action, you should carefully examine the regulations. You may direct questions regarding the applicability of this action to the person listed in **FOR**

**FURTHER INFORMATION CONTACT**

**.** Table of Contents

I. Overview of Joint EPA/NHTSA National Program
A. Introduction 1. Building Blocks of the National Program 2. Public Participation B. Summary of the Joint Final Rule and

Differences From the Proposal 1. Joint Analytical Approach

2. Level of the Standards

3. Form of the Standards 4. Program Flexibilities 5. Coordinated Compliance C. Summary of Costs and Benefits of the

National Program 1. Summary of Costs and Benefits of

NHTSA’s CAFE Standards 2. Summary of Costs and Benefits of EPA’s

GHG Standards D. Background and Comparison of NHTSA

and EPA Statutory Authority II. Joint Technical Work Completed for This
Final Rule


### 25325 Federal Register / Vol. 75, No. 88 / Friday, May 7, 2010 / Rules and Regulations

A. Introduction B. Developing the Future Fleet for

Assessing Costs, Benefits, and Effects 1. Why did the agencies establish a

baseline and reference vehicle fleet? 2. How did the agencies develop the

baseline vehicle fleet? 3. How did the agencies develop the

projected MY 2011–2016 vehicle fleet? 4. How was the development of the

baseline and reference fleets for this
Final Rule different from NHTSA’s historical approach? 5. How does manufacturer product plan

data factor into the baseline used in this
Final Rule? C. Development of Attribute-Based Curve

Shapes D. Relative Car-Truck Stringency E. Joint Vehicle Technology Assumptions 1. What technologies did the agencies

consider? 2. How did the agencies determine the

costs and effectiveness of each of these technologies? F. Joint Economic Assumptions G. What are the estimated safety effects of

the final MYs 2012–2016 CAFE and GHG
standards? 1. What did the agencies say in the NPRM

with regard to potential safety effects? 2. What public comments did the agencies

receive on the safety analysis and
discussions in the NPRM? 3. How has NHTSA refined its analysis for

purposes of estimating the potential safety effects of this Final Rule? 4. What are the estimated safety effects of

this Final Rule? 5. How do the agencies plan to address this

issue going forward?
III. EPA Greenhouse Gas Vehicle Standards

A. Executive Overview of EPA Rule
1. Introduction 2. Why is EPA establishing this Rule? 3. What is EPA adopting?
4. Basis for the GHG Standards Under

Section 202(a) B. GHG Standards for Light-Duty Vehicles,

Light-Duty Trucks, and Medium-Duty Passenger Vehicles
1. What fleet-wide emissions levels

correspond to the CO 2 standards?
2. What are the CO 2 attribute-based

standards?
3. Overview of How EPA’s CO 2 Standards

Will Be Implemented for Individual
Manufacturers 4. Averaging, Banking, and Trading

Provisions for CO 2 Standards

5. CO 2 Temporary Lead-Time Allowance

Alternative Standards
6. Deferment of CO 2 Standards for Small

Volume Manufacturers With Annual Sales Less Than 5,000 Vehicles
7. Nitrous Oxide and Methane Standards 8. Small Entity Exemption C. Additional Credit Opportunities for CO 2

Fleet Average Program 1. Air Conditioning Related Credits
2. Flexible Fuel and Alternative Fuel

Vehicle Credits 3. Advanced Technology Vehicle

Incentives for Electric Vehicles, Plug-in Hybrids, and Fuel Cell Vehicles 4. Off-Cycle Technology Credits 5. Early Credit Options D. Feasibility of the Final CO 2 Standards 1. How did EPA develop a reference

vehicle fleet for evaluating further CO 2 reductions?
2. What are the effectiveness and costs of

CO 2 -reducing technologies? 3. How can technologies be combined into

‘‘ packages ’’ and what is the cost and effectiveness of packages? 4. Manufacturer’s Application of

Technology 5. How is EPA projecting that a

manufacturer decides between options to improve CO 2 performance to meet a fleet average standard? 6. Why are the final 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

Emission-Related Components

Provisions 11. Light Duty Vehicles and Fuel Economy

Labeling
F. How will this Final Rule reduce GHG

emissions and their associated effects? 1. Impact on GHG Emissions 2. Overview of Climate Change Impacts

From GHG Emissions 3. Changes in Global Climate Indicators

Associated With the Rule’s GHG
Emissions ReductionsG. How will the standards impact nonGHG emissions and their associated
effects? 1. Upstream Impacts of Program 2. Downstream Impacts of Program
3. Health Effects of Non-GHG Pollutants
4. Environmental Effects of Non-GHG

Pollutants 5. Air Quality Impacts of Non-GHG

Pollutants H. What are the estimated cost, economic,

and other impacts of the program? 1. Conceptual Framework for Evaluating

Consumer Impacts
2. Costs Associated With the Vehicle

Program 3. Cost per Ton of Emissions Reduced 4. Reduction in Fuel Consumption and Its

Impacts 5. Impacts on U.S. Vehicle Sales and

Payback Period 6. Benefits of Reducing GHG Emissions
7. Non-Greenhouse Gas Health and

Environmental Impacts 8. Energy Security Impacts 9. Other Impacts 10. Summary of Costs and Benefits I. Statutory and Executive Order Reviews 1. Executive Order 12866: Regulatory

Planning and Review 2. Paperwork Reduction Act 3. Regulatory Flexibility Act
4. Unfunded Mandates Reform Act 5. Executive Order 13132 (Federalism) 6. Executive Order 13175 (Consultation

and Coordination With Indian Tribal Governments)
7. Executive Order 13045: ‘‘ Protection of

Children From Environmental Health Risks and Safety Risks ’’ 8. Executive Order 13211 (Energy Effects) 9. National Technology Transfer

Advancement Act
10. Executive Order 12898: Federal Actions

To Address Environmental Justice in Minority Populations and Low-Income Populations J. Statutory Provisions and Legal Authority
IV. NHTSA Final Rule and Record of Decision for Passenger Car and Light
Truck CAFE Standards for MYs 2012–

2016 A. Executive Overview of NHTSA Final

Rule
1. Introduction 2. Role of Fuel Economy Improvements in

Promoting Energy Independence, Energy Security, and a Low Carbon Economy 3. The National Program 4. Review of CAFE Standard Setting

Methodology per the President’s January 26, 2009 Memorandum on CAFE Standards for MYs 2011 and Beyond 5. Summary of the Final MY 2012–2016

CAFE Standards B. Background 1. Chronology of Events Since the National

Academy of Sciences Called for Reforming and Increasing CAFE
Standards 2. Energy Policy and Conservation Act, as

Amended by the Energy Independence and Security Act C. Development and Feasibility of the Final

Standards
1. How was the baseline and reference

vehicle fleet developed? 2. How were the technology inputs

developed? 3. How did NHTSA develop the economic

assumptions? 4. How does NHTSA use the assumptions

in its modeling analysis? 5. How did NHTSA develop the shape of

the target curves for the final standards? D. Statutory Requirements 1. EPCA, as Amended by EISA
2. Administrative Procedure Act 3. National Environmental Policy Act
E. What are the final CAFE standards?
1. Form of the Standards 2. Passenger Car Standards for MYs 2012–

2016 3. Minimum Domestic Passenger Car

Standards 4. Light Truck Standards
F. How do the final standards fulfill

NHTSA’s statutory obligations? G. Impacts of the Final CAFE Standards 1. How will these standards improve fuel

economy and reduce GHG emissions for
MY 2012–2016 vehicles?2. How will these standards improve fleetwide fuel economy and reduce GHG emissions beyond MY 2016?


### 25326 Federal Register / Vol. 75, No. 88 / Friday, May 7, 2010 / Rules and Regulations

3 President Obama Announces National Fuel Efficiency Policy, The White House, May 19, 2009.
Available at: http://www.whitehouse.gov/
the

_ press

_ office/President-Obama-AnnouncesNational-Fuel-Efficiency-Policy/. Remarks by the President on National Fuel Efficiency Standards, The White House, May 19, 2009. Available at: http://www.whitehouse.gov/the

_ press

_ office/Remarks-by-the-President-on-national-fuelefficiency-standards/.

4 74 FR 24007 (May 22, 2009).

5 Available at: http://www.whitehouse.gov/the

_ press

_ office/Presidential

_Memorandum

_Fuel

_Economy/. 6 ‘‘ Technical Support Document for Endangerment and Cause or Contribute Findings for Greenhouse Gases Under Section 202(a) of the
Clean Air Act’’ Docket: EPA–HQ–OAR–2009–0472–

11292, http://epa.gov/climatechange/ endangerment.html.

7 U.S. Environmental Protection Agency. 2009. Inventory of U.S. Greenhouse Gas Emissions and
Sinks: 1990–2007. EPA 430–R–09–004. Available at http://epa.gov/climatechange/emissions/
downloads09/GHG2007entire

_report-508.pdf.

8 U.S. EPA. 2009 Technical Support Document for Endangerment and Cause or Contribute Findings for Greenhouse Gases under Section 202(a) of the Clean Air Act. Washington, DC. pp. 180–194. Available at http://epa.gov/climatechange/endangerment/ downloads/Endangerment%20TSD.pdf.

9 U.S. Environmental Protection Agency. 2009. Inventory of U.S. Greenhouse Gas Emissions and
Sinks: 1990–2007. EPA 430–R–09–004. Available at http://epa.gov/climatechange/emissions/
downloads09/GHG2007entire

_report-508.pdf.

10 U.S. Environmental Protection Agency. RIA, Chapter 2. 3. How will these final standards impact

non-GHG emissions and their associated
effects?
4. What are the estimated costs and

benefits of these final standards? 5. How would these standards impact

vehicle sales? 6. Potential Unquantified Consumer

Welfare Impacts of the Final Standards 7. What other impacts (quantitative and

unquantifiable) will these final standards
have?
H. Vehicle Classification I. Compliance and Enforcement

1. Overview
2. How does NHTSA determine

compliance? 3. What compliance flexibilities are

available under the CAFE program and
how do manufacturers use them?
4. Other CAFE Enforcement Issues—

Variations in Footprint
5. Other CAFE Enforcement Issues—

Miscellaneous J. Other Near-Term Rulemakings Mandated

by EISA 1. Commercial Medium- and Heavy-Duty

On-Highway Vehicles and Work Trucks
2. Consumer Information on Fuel

Efficiency and Emissions
K. NHTSA’s Record of Decision L. Regulatory Notices and Analyses
1. Executive Order 12866 and DOT

Regulatory Policies and Procedures 2. National Environmental Policy Act 3. Clean Air Act (CAA)
4. National Historic Preservation Act

(NHPA) 5. Executive Order 12898 (Environmental

Justice)
6. Fish and Wildlife Conservation Act

(FWCA) 7. Coastal Zone Management Act (CZMA) 8. Endangered Species Act (ESA) 9. Floodplain Management (Executive

Order 11988 & DOT Order 5650.2)
10. Preservation of the Nation’s Wetlands

(Executive Order 11990 & DOT Order 5660.1a) 11. Migratory Bird Treaty Act (MBTA),

Bald and Golden Eagle Protection Act (BGEPA), Executive Order 13186 12. Department of Transportation Act

(Section 4(f)) 13. Regulatory Flexibility Act 14. Executive Order 13132 (Federalism) 15. Executive Order 12988 (Civil Justice

Reform)
16. Unfunded Mandates Reform Act 17. Regulation Identifier Number
18. Executive Order 13045 19. National Technology Transfer and

Advancement Act
20. Executive Order 13211 21. Department of Energy Review 22. Privacy Act

I. Overview of Joint EPA/NHTSA National Program

A. Introduction

The National Highway Traffic Safety Administration (NHTSA) and the Environmental Protection Agency (EPA) are each announcing final rules whose benefits will address the urgent and closely intertwined challenges of energy independence and security and global warming. These rules will implement a strong and coordinated Federal greenhouse gas (GHG) and fuel economyprogram for passenger cars, light-dutytrucks, and medium-duty passenger vehicles (hereafter light-duty vehicles), referred to as the National Program. The
rules will achieve substantial reductions of GHG emissions and improvements in fuel economy from the light-duty vehicle part of the transportation sector, based on technology that is already being commercially applied in most cases and that can be incorporated at a
reasonable cost. NHTSA’s final rule also constitutes the agency’s Record of Decision for purposes of its NEPA analysis.

This joint rulemaking is consistent
with the President’s announcement on May 19, 2009 of a National Fuel Efficiency Policy of establishing consistent, harmonized, and streamlined requirements that would reduce GHG emissions and improve fuel economy for all new cars and light-duty
trucks sold in the United States. 3 The National Program will deliver additional environmental and energy benefits, cost savings, and administrative efficiencies on a nationwide basis that would likely
not be available under a less coordinated approach. The National Program also represents regulatory convergence by making it possible for
the standards of two different Federal agencies and the standards of California
and other states to act in a unified fashion in providing these benefits. The National Program will allow automakers to produce and sell a single fleet nationally, mitigating the additional
costs that manufacturers would otherwise face in having to comply with multiple sets of Federal and State standards. This joint notice is also consistent with the Notice of Upcoming Joint Rulemaking issued by DOT and EPA on May 19, 2009 4 and responds to the President’s January 26, 2009
memorandum on CAFE standards for model years 2011 and beyond, 5 the details of which can be found in Section IV of this joint notice.

Climate change is widely viewed as a significant long-term threat to the global
environment. As summarized in the Technical Support Document for EPA’s Endangerment and Cause or Contribute Findings under Section 202(a) of the Clear Air Act, anthropogenic emissions of GHGs are very likely (90 to 99 percent probability) the cause of most of the observed global warming over the last 50 years. 6 The primary GHGs of concern are carbon dioxide (CO 2 ), methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, and sulfur
hexafluoride. Mobile sources emitted 31 percent of all U.S. GHGs in 2007 (transportation sources, which do not include certain off-highway sources, account for 28 percent) and have been the fastest-growing source of U.S. GHGs

since 1990. 7 Mobile sources addressed in the recent endangerment and contribution findings under CAA section 202(a)—light-duty vehicles, heavy-duty trucks, buses, and motorcycles—accounted for 23 percent
of all U.S. GHG in 2007. 8 Light-duty
vehicles emit CO 2 , methane, nitrous oxide, and hydrofluorocarbons and are responsible for nearly 60 percent of all
mobile source GHGs and over 70 percent of Section 202(a) mobile source GHGs. For light-duty vehicles in 2007,

CO 2 emissions represent about 94 percent of all greenhouse emissions (including HFCs), and the CO 2 emissions measured over the EPA tests used for fuel economy compliancerepresent about 90 percent of total lightduty vehicle GHG emissions. 9 10

Improving energy security by reducing our dependence on foreign oil has been a national objective since the first oil price shocks in the 1970s. Net petroleum imports now account for approximately 60 percent of U.S.


### 25327 Federal Register / Vol. 75, No. 88 / Friday, May 7, 2010 / Rules and Regulations

11 Panel on Policy Implications of Greenhouse Warming, National Academy of Sciences, National Academy of Engineering, Institute of Medicine,

‘‘ Policy Implications of Greenhouse Warming: Mitigation, Adaptation, and the Science Base, ’’ National Academies Press, 1992. p. 287. 12 Although EPCA does not require the use of 1975 test procedures for light trucks, those procedures are used for light truck CAFE standard testing purposes.

13 This is the method that EPA uses to determine compliance with NHTSA’s CAFE standards.

14 549 U.S. 497 (2007).

15 68 FR 52922 (Sept. 8, 2003). 16 549 U.S. at 531–32.

17 For further information on Massachusetts v. EPA see the July 30, 2008 Advance Notice of Proposed Rulemaking, ‘‘ Regulating Greenhouse Gas
Emissions under the Clean Air Act’’ , 73 FR 44354 at 44397. There is a comprehensive discussion of the litigation’s history, the Supreme Court’s findings, and subsequent actions undertaken by the
Bush Administration and the EPA from 2007–2008 in response to the Supreme Court remand. Also see 74 FR 18886, at 1888–90 (April 24, 2009).

18 74 FR 32744 (July 8, 2009). petroleum consumption. World crude oil production is highly concentrated, exacerbating the risks of supply disruptions and price shocks. Tight global oil markets led to prices over $100 per barrel in 2008, with gasoline reaching as high as $4 per gallon in many parts of the U.S., causing financial hardship for many families. The export of U.S. assets for oil imports continues to be an important component of the historically unprecedented U.S. trade deficits. Transportation accounts for about two-thirds of U.S. petroleum consumption. Light-duty vehicles account for about 60 percent of transportation oil use, which means that they alone account for about 40 percent of all U.S. oil consumption.

1. Building Blocks of the National Program

The National Program is both needed and possible because the relationship between improving fuel economy and reducing 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. 11 While there are emission control technologies that reduce the pollutants ( e.g., carbon monoxide) produced by imperfect combustion of fuel by capturing or converting them to other compounds, there is no such technology for 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 Conservation Act (EPCA), mandating that NHTSA establish and implement a regulatory program for motor vehicle fuel economy to meet the
various facets of the need to conserve energy, including ones having energy independence and security, environmental and foreign policy implications. Fuel economy gains since 1975, due both to the standards and market factors, have resulted in saving billions of barrels of oil and avoiding
billions of metric tons of CO 2 emissions. In December 2007, Congress enacted the Energy Independence and Securities Act (EISA), amending EPCA to require substantial, continuing increases in fuel economy standards.

The CAFE standards address most, but not all, of the real world CO 2 emissions because a provision in EPCA as originally enacted in 1975 requires the use of the 1975 passenger car test procedures under which vehicle air conditioners are not turned on during fuel economy testing. 12 Fuel economy is determined by measuring the amount of

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 precision. The carbon
content of the test fuel 13 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 also 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 GHG Standards for Light-duty
Vehicles

Under the Clean Air Act EPA is responsible for addressing air pollutants from motor vehicles. On April 2, 2007, the U.S. Supreme Court issued its opinion in Massachusetts v. EPA, 14 a case involving EPA’s a 2003 denial of a petition for rulemaking to regulate GHG
emissions from motor vehicles under section 202(a) of the Clean Air Act (CAA). 15 The Court held that GHGs fit within the definition of air pollutant in
the Clean Air Act and further held that
the Administrator must determine
whether or not emissions from new
motor vehicles cause or contribute to air pollution which may reasonably be anticipated to endanger public health or welfare, or whether the science is too
uncertain to make a reasoned decision. The Court further ruled that, in making these decisions, the EPA Administrator is required to follow the language of section 202(a) of the CAA. The Court rejected the argument that EPA cannot regulate CO 2 from motor vehicles
because to do so would de facto tighten fuel economy standards, authority over which has been assigned by Congress to
DOT. The Court stated that ‘‘ [b]ut that DOT sets mileage standards in no way
licenses EPA to shirk its environmental responsibilities. EPA has been charged with protecting the public’s ‘health’ and ‘welfare’, a statutory obligation wholly independent of DOT’s mandate to promote energy efficiency. ’’ The Court
concluded that ‘‘ [t]he two obligations may overlap, but there is no reason to think the two agencies cannot both administer their obligations and yet avoid inconsistency. ’’ 16 The case was remanded back to the Agency for reconsideration in light of the Court’s
decision. 17

On December 15, 2009, EPA published two findings (74 FR 66496):
That emissions of GHGs from new
motor vehicles and motor vehicle engines contribute to air pollution, and that the air pollution may reasonably be anticipated to endanger public health
and welfare.

c. California Air Resources Board Greenhouse Gas Program

In 2004, the California Air ResourcesBoard approved standards for new lightduty vehicles, which regulate the emission of not only CO 2 , but also other GHGs. Since then, thirteen states and the District of Columbia, comprisingapproximately 40 percent of the lightduty vehicle market, have adopted
California’s standards. These standards apply to model years 2009 through 2016 and require CO 2 emissions for passenger cars and the smallest light trucks of 323 g/mi in 2009 and 205 g/mi in 2016, and for the remaining light trucks of 439 g/ mi in 2009 and 332 g/mi in 2016. On June 30, 2009, EPA granted California’s request for a waiver of preemption
under the CAA. 18 The granting of the waiver permits California and the other states to proceed with implementing the
California emission standards.

In addition, to promote the National Program, in May 2009, California
announced its commitment to take several actions in support of the National Program, including revising its


### 25328 Federal Register / Vol. 75, No. 88 / Friday, May 7, 2010 / Rules and Regulations

program for MYs 2009–2011 to facilitate compliance by the automakers, and revising its program for MYs 2012–2016 such that compliance with the Federal
GHG standards will be deemed to be compliance with California’s GHG standards. This will allow the single national fleet produced by automakers to meet the two Federal requirements and to meet California requirements as well. California is proceeding with a rulemaking intended to revise its 2004 regulations to meet its commitments.
Several automakers and their trade
associations also announced their
commitment to take several actions in support of the National Program, including not contesting the final GHG
and CAFE standards for MYs 2012– 2016, not contesting any grant of a waiver of preemption under the CAA for
California’s GHG standards for certain model years, and to stay and then dismiss all pending litigation challenging California’s regulation of GHG emissions, including litigation concerning preemption under EPCA of
California’s and other states’ GHG
standards.

2. Public Participation

The agencies proposed their respective rules on September 28, 2009 (74 FR 49454), and received a large number of comments representing many perspectives on the proposed rule. The agencies received oral testimony at three public hearings in different parts of the country, and received written comments from more than 130 organizations, including auto manufacturers and suppliers, States, environmental and other non-governmental organizations (NGOs), and over 129,000 comments from private citizens.

The vast majority of commenters supported the central tenets of the proposed CAFE and GHG programs. That is, there was broad support from most organizations for a National Program that achieves a level of 250 gram/mile fleet average CO 2 , which would be 35.5 miles per gallon if the
automakers were to meet this CO 2 level solely through fuel economy improvements. The standards will be phased in over model years 2012 through 2016 which will allow
manufacturers to build a common fleet
of vehicles for the domestic market. In general, commenters from the automobile industry supported the proposed standards as well as the credit opportunities and other compliance provisions providing flexibility, while also making some recommendations for changes. Environmental and public interest non-governmental organizations (NGOs), as well as most States that commented, were also generally supportive of the National Program standards. Many of these organizations also expressed concern about the possible impact on program benefits, depending on how the credit provisions and flexibilities are designed. The agencies also received specific comments on many aspects of the proposal.

Throughout this notice, the agencies discuss many of the key issues arising from the public comments and the agencies’ responses. In addition, the agencies have addressed all of the public comments in the Response to
Comments document associated with
this final rule.

B. Summary of the Joint Final Rule and Differences From the Proposal

In this joint rulemaking, EPA is establishing GHG emissions standards under the Clean Air Act (CAA), and NHTSA is establishing Corporate Average Fuel Economy (CAFE) standards under the Energy Policy and Conservation Action of 1975 (EPCA), as amended by the Energy Independence and Security Act of 2007 (EISA). The intention of this joint rulemaking is to set forth a carefully coordinated and harmonized approach to implementing these two statutes, in accordance with all substantive and procedural requirements imposed by law.

NHTSA and EPA have coordinated closely and worked jointly in developing their respective final rules. This is reflected in many aspects of this joint rule. For example, the agencies have developed a comprehensive Joint Technical Support Document (TSD) that provides a solid technical underpinning for each agency’s modeling and analysis used to support their standards. Also, to the extent allowed by law, the agencies have harmonized many elements of program design, such as the form of the standard (the footprint-based attribute curves), and the definitions used for cars and trucks. They have developed the same or similar compliance flexibilities, to the extent allowed and appropriate under their respective statutes, such as averaging, banking, and trading of credits, and have harmonized the compliance testing and test protocols used for purposes of the fleet average standards each agency is finalizing. Finally, under their respective statutes, each agency is called upon to exercise its judgment and
determine standards that are an appropriate balance of various relevant statutory factors. Given the common technical issues before each agency, the similarity of the factors each agency is to consider and balance, and the authority of each agency to take into
consideration the standards of the other agency, both EPA and NHTSA are establishing standards that result in a harmonized National Program.

This joint final rule covers passengercars, light-duty trucks, and mediumduty passenger vehicles built in model years 2012 through 2016. These vehicle categories are responsible for almost 60 percent of all U.S. transportation-related
GHG emissions. EPA and NHTSA expect that automobile manufacturers will meet these standards by utilizing technologies that will reduce vehicle GHG emissions and improve fuel economy. Although many of these technologies are available today, the emissions reductions and fuel economy improvements finalized in this notice will involve more widespread use of these technologies across the light-duty
vehicle fleet. These include improvements to engines, transmissions, and tires, increased use of start-stop technology, improvements in air conditioning systems, increased use of hybrid and other advanced technologies, and the initial
commercialization of electric vehicles and plug-in hybrids. NHTSA’s and EPA’s assessments of likely vehicle technologies that manufacturers will employ to meet the standards are
discussed in detail below and in the Joint TSD.

The National Program is estimated to result in approximately 960 million
metric tons of total carbon dioxide equivalent emissions reductions and approximately 1.8 billion barrels of oil savings over the lifetime of vehicles sold in model years (MYs) 2012 through 2016. In total, the combined EPA and
NHTSA 2012–2016 standards will
reduce GHG emissions from the U.S. light-duty fleet by approximately 21 percent by 2030 over the level that
would occur in the absence of the National Program. These actions also will provide important energy security benefits, as light-duty vehicles are about 95 percent dependent on oil-based fuels. The agencies project that the total benefits of the National Program will be more than $240 billion at a 3% discount rate, or more than $190 billion at a 7%
discount rate. In the discussion that follows in Sections III and IV, each agency explains the related benefits for
their individual standards.

Together, EPA and NHTSA estimate that the average cost increase for a model year 2016 vehicle due to the National Program will be less than $1,000. The average U.S. consumer who purchases a vehicle outright is estimated to save enough in lower fuel costs over the first three years to offset


### 25329 Federal Register / Vol. 75, No. 88 / Friday, May 7, 2010 / Rules and Regulations

these higher vehicle costs. However, most U.S. consumers purchase a new vehicle using credit rather than paying cash and the typical car loan today is a five year, 60 month loan. These consumers will see immediate savings
due to their vehicle’s lower fuel consumption in the form of a net reduction in annual costs of $130–$180 throughout the duration of the loan (that is, the fuel savings will outweigh the increase in loan payments by $130–$180 per year). Whether a consumer takes out a loan or purchases a new vehicle outright, over the lifetime of a model year 2016 vehicle, the consumer’s net savings could be more than $3,000. The average 2016 MY vehicle will emit 16
fewer metric tons of CO 2 -equivalent emissions (that is, CO 2 emissions plus HFC air conditioning leakage emissions) during its lifetime. Assumptions that
underlie these conclusions are discussed in greater detail in the agencies’ respective regulatory impact analyses and in Section III.H.5 and

Section IV.

This joint rule also results in important regulatory convergence and certainty to automobile companies. Absent this rule, there would be three separate Federal and State regimes independently regulating light-duty vehicles to reduce fuel consumption
and GHG emissions: NHTSA’s CAFE standards, EPA’s GHG standards, and the GHG standards applicable in California and other States adopting the California standards. This joint rule will
allow automakers to meet both the NHTSA and EPA requirements with a single national fleet, greatly simplifying the industry’s technology, investment and compliance strategies. In addition, to promote the National Program,
California announced its commitment to take several actions, including revising its program for MYs 2012–2016 such that compliance with the Federal GHG
standards will be deemed to be compliance with California’s GHG standards. This will allow the single national fleet used by automakers to meet the two Federal requirements and to meet California requirements as well. California is proceeding with a rulemaking intended to revise its 2004 regulations to meet its commitments.
EPA and NHTSA are confident that
these GHG and CAFE standards will successfully harmonize both the Federal and State programs for MYs 2012–2016 and will allow our country to achieve the increased benefits of a single,nationwide program to reduce 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 depends upon, among other things, continuous technology innovation in general, and low GHG emissions and high fuel economy vehicles in particular. In this respect, this action will help spark the investment in technology innovation necessary for automakers to successfully compete in both domestic and export markets, and thereby continue to support a strong economy.

While this action covers MYs 2012– 2016, many stakeholders encouraged EPA and NHTSA to also begin working
toward standards for MY 2017 and beyond that would maintain a single nationwide program. The agencies recognize the importance of and are committed to a strong, coordinated national program for light-duty vehicles for model years beyond 2016.

Key elements of the National Program finalized today are the level and form of the GHG and CAFE standards, the available compliance mechanisms, and general implementation elements. These
elements are summarized in the following section, with more detailed discussions about EPA’s GHG program following in Section III, and about NHTSA’s CAFE program in Section IV. This joint final rule responds to the wide array of comments that the agencies received on the proposed rule. This section summarizes many of the major comments on the primary elements of the proposal and describes
whether and how the final rule has changed, based on the comments and additional analyses. Major comments and the agencies’ responses to them are
also discussed in more detail in later sections of this preamble. For a full summary of public comments and EPA’s and NHTSA’s responses to them, please see the Response to Comments
document associated with this final
rule.

1. Joint Analytical Approach

NHTSA and EPA have worked closely together on nearly every aspect of this joint final rule. The extent and results
of this collaboration are reflected in the elements of the respective NHTSA and EPA rules, as well as the analytical work contained in the Joint Technical Support Document (Joint TSD). The Joint TSD, in particular, describes important details of the analytical work that are shared, as well as any differences in approach. These include the build up of the baseline and reference fleets, the derivation of the shape of the curves that define the standards, a detailed description of the costs and effectiveness of the technology
choices that are available to vehicle manufacturers, a summary of the computer models used to estimate how technologies might be added to vehicles, and finally the economic inputs used to calculate the impacts and benefits of the rules, where practicable.

EPA and NHTSA have jointly developed attribute curve shapes that each agency is using for its final
standards. Further details of these
functions can be found in Sections III and IV of this preamble as well as Chapter 2 of the Joint TSD. A critical technical underpinning of each agency’s analysis is the cost and effectiveness of the various control technologies. These are used to analyze the feasibility and cost of potential GHG and CAFE standards. A detailed description of all of the technology information considered can be found in Chapter 3 of the Joint TSD (and for A/C, Chapter 2 of the EPA RIA). This detailed technology data forms the inputs to computer models that each agency uses to project how vehicle manufacturers may add those technologies in order to comply with the new standards. These are the OMEGA and Volpe models for EPA and NHTSA, respectively. The models and their inputs can also be found in the docket. Further description of the model and outputs can be found in Sections III and IV of this preamble, and Chapter 3 of the Joint TSD. This comprehensive joint analytical approach has provided a sound and
consistent technical basis for each agency in developing its final standards,
which are summarized in the sections
below.

The vast majority of public comments expressed strong support for the joint analytical work performed for the proposal. Commenters generally agreed with the analytical work and its results, and supported the transparency of the analysis and its underlying data. Where commenters raised specific points, the agencies have considered them and made changes where appropriate. The agencies’ further evaluation of various
technical issues also led to a limited number of changes. A detailed
discussion of these issues can be found in Section II of this preamble, and the Joint TSD.

2. Level of the Standards

In this notice, EPA and NHTSA are establishing two separate sets of standards, each under its respective statutory authorities. EPA is setting
national CO 2 emissions standards for light-duty vehicles under section 202(a)
of the Clean Air Act. These standards will require these vehicles to meet an


### 25330 Federal Register / Vol. 75, No. 88 / Friday, May 7, 2010 / Rules and Regulations

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

20 The agencies are using a common conversion factor between fuel economy in units of miles per gallon and CO 2 emissions in units of grams per mile. This conversion factor is 8,887 grams CO 2 per gallon 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.

21 See 49 CFR 523.2 for the exact definition of

‘‘ footprint. ’’

22 Because required CAFE levels depend on the mix of vehicles sold by manufacturers in a model year, NHTSA’s estimate of future required CAFE levels depends on its estimate of the mix of vehicles that will be sold in that model year. NHTSA currently estimates that the MY 2011 standards will require average fuel economy levels of 30.4 mpg for passenger cars, 24.4 mpg for light trucks, and 27.6 mpg for the combined fleet. estimated combined average emissions level of 250 grams/mile of CO 2 in model year 2016. NHTSA is setting CAFE standards for passenger cars and light
trucks under 49 U.S.C. 32902. These standards will require manufacturers of
those vehicles to meet an estimated combined average fuel economy level of 34.1 mpg in model year 2016. The standards for both agencies begin with the 2012 model year, with standards increasing in stringency through model year 2016. They represent a harmonized approach that will allow industry to build a single national fleet that will satisfy both the GHG requirements under the CAA and CAFE requirements
under EPCA/EISA.

Given differences in their respective statutory authorities, however, the agencies’ standards include some important differences. Under the CO 2 fleet average standards adopted under CAA section 202(a), EPA expects 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 developing its final

CO 2 standards. NHTSA did not do so
because EPCA does not allow vehicle manufacturers to use air conditioning credits in complying with CAFE standards for passenger cars. 19 CO 2 emissions due to air conditioning operation are not measured by the test procedure mandated by statute for use in establishing and enforcing CAFE standards for passenger cars. As a result, improvement in the efficiency of passenger car air conditioners is not considered as a possible control technology for purposes of CAFE.

These differences regarding the treatment of air conditioning improvements (related to CO 2 and HFC reductions) affect the relative stringency
of the EPA standard and NHTSA standard for MY 2016. The 250 grams per mile of CO 2 equivalent emissions limit is equivalent to 35.5 mpg 20 if the automotive industry were to meet this

CO 2 level all through fuel economy improvements. As a consequence of the prohibition against NHTSA’s allowing credits for air conditioning improvements for purposes of passenger car CAFE compliance, NHTSA is setting fuel economy standards that are estimated to require a combined (passenger car and light truck) average fuel economy level of 34.1 mpg by MY

2016.

The vast majority of public comments expressed strong support for the National Program standards, including the stringency of the agencies’ respective standards and the phase-in from model year 2012 through 2016.
There were a number of comments supporting standards more stringent than proposed, and a few others supporting less stringent standards, in particular for the 2012–2015 model years. The agencies’ consideration of comments and their updated technical analyses led to only very limited changes in the footprint curves and did not change the agencies’ projections that
the nationwide fleet will achieve a level of 250 grams/mile by 2016 (equivalent to 35.5 mpg). The responses to these
comments are discussed in more detail in Sections III and IV, respectively, and in the Response to Comments
document.

As proposed, NHTSA and EPA’s final standards, like the standards NHTSA promulgated in March 2009 for MY 2011, are expressed as mathematical functions depending on vehicle footprint. Footprint is one measure of vehicle size, and is determined by multiplying the vehicle’s wheelbase by the vehicle’s average track width. 21 The standards that must be met by each
manufacturer’s fleet will be determined by computing the sales-weighted average (harmonic average for CAFE) of the targets applicable to each of the manufacturer’s passenger cars and light trucks. Under these footprint-based standards, the levels required of individual manufacturers will depend, as noted above, on the mix of vehicles sold. NHTSA’s and EPA’s respective
standards are shown in the tables below. It is important to note that the standards
are the attribute-based curves established by each agency. The values in the tables below reflect the agencies’ projection of the corresponding fleet
levels that will result from these
attribute-based curves.

As a result of public comments and updated economic and future fleet projections, EPA and NHTSA have updated the attribute based curves for this final rule, as discussed in detail in Section II.B of this preamble and Chapter 2 of the Joint TSD. This update in turn affects costs, benefits, and other impacts of the final standards. Thus, the agencies have updated their overall projections of the impacts of the final rule standards, and these results are only slightly different from those presented in the proposed rule.

As shown in Table I.B.2–1, NHTSA’s fleet-wide CAFE-required levels for passenger cars under the final standards are projected to increase from 33.3 to 37.8 mpg between MY 2012 and MY 2016. Similarly, fleet-wide CAFE levels for light trucks are projected to increase from 25.4 to 28.8 mpg. NHTSA has also estimated the average fleet-wide required levels for the combined car and truck fleets. As shown, the overall fleet average CAFE level is expected to be 34.1 mpg in MY 2016. These numbers
do not include the effects of other flexibilities and credits in the program. These standards represent a 4.3 percent average annual rate of increase relative
to the MY 2011 standards. 22



### TABLE 

### I.B.2–1—AVERAGE 

### R EQUIRED 

### F UEL 

### E CONOMY 

### (mpg) U NDER 

### F INAL 

### CAFE S TANDARDS

2011-base 2012 2013 2014 2015 2016

Passenger Cars ....................................... 30.4 33.3 34.2 34.9 36.2 37.8 Light Trucks ............................................. 24.4 25.4 26.0 26.6 27.5 28.8

Combined Cars & Trucks ................. 27.6 29.7 30.5 31.3 32.6 34.1


### 25331 Federal Register / Vol. 75, No. 88 / Friday, May 7, 2010 / Rules and Regulations

23 The penalties are similar in function to essentially unlimited, fixed-price allowances.

24 NHTSA’s estimates account for availability of
CAFE credits for the sale of flexible-fuel vehicles (FFVs), and for the potential that some manufacturers will pay civil penalties rather than comply with the CAFE standards. This yields NHTSA’s estimates of the real-world fuel economy that will likely be achieved under the final CAFE standards. NHTSA has not included any potential impact of car-truck credit transfer in its estimate of
the achieved CAFE levels.

25 49 U.S.C. 32902(b)(4).

26 In the March 2009 final rule establishing MY 2011 standards for passenger cars and light trucks, NHTSA estimated that the minimum required CAFE standard for domestically manufactured passenger cars would be 27.8 mpg under the MY 2011 passenger car standard.

27 These levels do not include the effect of
flexible fuel credits, transfer of credits between cars and trucks, temporary lead time allowance, or any other credits with the exception of air conditioning. Accounting for the expectation that
some manufacturers could continue to pay civil penalties rather than achieving required CAFE levels, and the ability to use FFV credits, 23 NHTSA estimates
that the CAFE standards will lead to the following average achieved fuel economy levels, based on the projections of what each manufacturer’s fleet will comprise in each year of the

program: 24



### TABLE 

### I.B.2–2—P ROJECTED 

### F LEET 

### -W IDE 

### A CHIEVED 

### CAFE L EVELS 

### U NDER THE 

### F INAL 

### F OOTPRINT 

### -B ASED 

### CAFE
S TANDARDS 

### (mpg)

2012 2013 2014 2015 2016

Passenger Cars ................................................................... 32.3 33.5 34.2 35.0 36.2 Light Trucks ......................................................................... 24.5 25.1 25.9 26.7 27.5

Combined Cars & Trucks ............................................. 28.7 29.7 30.6 31.5 32.7

NHTSA is also required by EISA to set a minimum fuel economy standard for domestically manufactured passenger

cars in addition to the attribute-based passenger car standard. The minimum

standard ‘‘ shall be the greater of (A) 27.5 miles per gallon; or (B) 92 percent of the average fuel economy projected by the Secretary for the combined domestic and non-domestic passenger automobile
fleets manufactured for sale in the United States by all manufacturers in the model year.* * * ’’ 25

Based on NHTSA’s current market forecast, the agency’s estimates of these
minimum standards under the MY 2012–2016 CAFE standards (and, for comparison, the final MY 2011 standard) are summarized below in

Table I.B.2–3. 26 For eventual compliance calculations, the final

calculated minimum standards will be updated to reflect the average fuel economy level required under the final

standards.



### TABLE 

### I.B.2–3—E STIMATED 

### M INIMUM 

### S TANDARD FOR 

### D OMESTICALLY 

### M ANUFACTURED 

### P ASSENGER 

### C ARS 

### U NDER 

### MY

2011 AND 

### MY 2012–2016 CAFE S TANDARDS FOR 

### P ASSENGER 

### C ARS 

### (mpg)

2011 2012 2013 2014 2015 2016

27.8 30.7 31.4 32.1 33.3 34.7

EPA is establishing GHG emissions standards, and Table I.B.2–4 provides EPA’s estimates of their projected
overall fleet-wide CO 2 equivalent emission levels. 27 The g/mi values are

CO 2 equivalent values because they include the projected use of air conditioning (A/C) credits by manufacturers, which include both HFC

and CO 2 reductions.



### TABLE 

### I.B.2–4—P ROJECTED 

### F LEET 

### -W IDE 

### E MISSIONS 

### C OMPLIANCE 

### L EVELS 

### U NDER THE 

### F OOTPRINT 

### -B ASED 

### CO 2 

### S TANDARDS 

### (g/mi)

2012 2013 2014 2015 2016

Passenger Cars ................................................................... 263 256 247 236 225 Light Trucks ......................................................................... 346 337 326 312 298

Combined Cars & Trucks ............................................. 295 286 276 263 250

As shown in Table I.B.2–4, fleet-wide

CO 2 emission level requirements for cars are projected to increase in stringency from 263 to 225 g/mi

between MY 2012 and MY 2016. Similarly, fleet-wide CO 2 equivalent emission level requirements for trucks are projected to increase in stringency from 346 to 298 g/mi. As shown, the overall fleet average CO 2 level requirements are projected to increase in stringency from 295 g/mi in MY 2012 to 250 g/mi in MY 2016.

EPA anticipates that manufacturers will take advantage of program
flexibilities such as flexible fueled
vehicle credits and car/truck credit trading. Due to the credit trading between cars and trucks, the estimated improvements in CO 2 emissions are distributed differently than shown in Table I.B.2–4, where full manufacturer compliance without credit trading is assumed. Table I.B.2–5 shows EPA’s projection of the achieved emission levels of the fleet for MY 2012 through 2016, which does consider the impact of
car/truck credit transfer and the increase in emissions due to certain program flexibilities including flex fueled vehicle credits and the temporary lead
time allowance alternative standards. The use of optional air conditioning
credits is considered both in this analysis of achieved levels and of the


### 25332 Federal Register / Vol. 75, No. 88 / Friday, May 7, 2010 / Rules and Regulations

28 The close relationship between emissions of

CO 2—the most prevalent greenhouse gas emitted by motor vehicles—and fuel consumption, means that the technologies to control CO 2 emissions and to improve fuel economy overlap to a great degree. compliance levels described above. As can be seen in Table I.B.2–5, the projected achieved levels are slightly higher for model years 2012–2015 due to EPA’s assumptions about manufacturers’ use of the regulatory flexibilities, but by model year 2016 the achieved level is projected to be 250 g/
mi for the fleet.



### TABLE 

### I.B.2–5—P ROJECTED 

### F LEET 

### -W IDE 

### A CHIEVED 

### E MISSION 

### L EVELS 

### U NDER THE 

### F OOTPRINT 

### -B ASED 

### CO 2 

### S TANDARDS 

### (g/mi)

2012 2013 2014 2015 2016

Passenger Cars ................................................................... 267 256 245 234 223 Light Trucks ......................................................................... 365 353 340 324 303

Combined Cars & Trucks ............................................. 305 293 280 266 250

Several auto manufacturers stated that the increasingly stringent requirements for fuel economy and GHG emissions in the early years of the program should follow a more linear phase-in. The agencies’ consideration of comments and of their updated technical analyses did not lead to changes to the phase-in
of the standards discussed above. This
issue is discussed in more detail in Sections II.D, and in Sections III and IV.

NHTSA’s and EPA’s technology
assessment indicates there is a wide range of technologies available for manufacturers to consider in upgrading
vehicles to reduce GHG emissions and improve fuel economy. Commenters were in general agreement with this

assessment. 28 As noted, these include improvements to the engines such as use of gasoline direct injection and downsized engines that use turbochargers to provide performance similar to that of larger engines, the use of advanced transmissions, increased use of start-stop technology, improvements in tire rolling resistance, reductions in vehicle weight, increased use of hybrid and other advanced technologies, and the initial
commercialization of electric vehicles and plug-in hybrids. EPA is also projecting improvements in vehicle air conditioners including more efficient as well as low leak systems. All of these technologies are already available today,
and EPA’s and NHTSA’s assessments
are that manufacturers will be able to meet the standards through more widespread use of these technologies
across the fleet.

With respect to the practicability of the standards in terms of lead time, during MYs 2012–2016 manufacturers are expected to go through the normal automotive business cycle ofredesigning and upgrading their lightduty vehicle products, and in some cases introducing entirely new vehicles not on the market today. This rule
allows manufacturers the time needed to incorporate technology to achieve GHG reductions and improve fuel economy during the vehicle redesign process. This is an important aspect of the rule, as it avoids the much higher
costs that would occur if manufacturers needed to add or change technology at
times other than their scheduled redesigns. This time period also provides manufacturers the opportunityto plan for compliance using a multiyear time frame, again consistent with normal business practice. Over these five model years, there will be an opportunity for manufacturers to evaluate almost every one of their vehicle model platforms and add technology in a cost effective way to control GHG emissions and improve fuel economy. This includes redesign of the air conditioner systems in ways that
will further reduce GHG emissions.
Various commenters stated that the proposed phase-in of the standards should be introduced more aggressively, less aggressively, or in a more linear manner. However, our consideration of these comments about the phase-in, as well as our revised analyses, leads us to conclude that the general rate of
introduction of the standards as proposed remains appropriate. This conclusion is also not affected by the slight difference from the proposal in the final footprint-based curves. These
issues are addressed further in Sections
III and IV.

Both agencies considered other standards as part of the rulemaking analyses, both more and less stringent than those proposed. EPA’s and NHTSA’s analyses of alternative
standards are contained in Sections III and IV of this preamble, respectively, as well as the agencies’ respective RIAs.

The CAFE and GHG standards
described above are based on determining emissions and fuel economy using the city and highway test procedures that are currently used in the CAFE program. Some environmental and other organizations commented that the test proceduresshould be improved to reflect more realworld driving conditions; auto manufacturers in general do not support such changes to the test procedures at this time. Both agencies recognize that these test procedures are not fully representative of real-world driving conditions. For example, EPA has adopted more representative test procedures that are used in determining compliance with emissions standards for pollutants other than GHGs. These test procedures are also used in EPA’s fuel economy labeling program. However, as discussed in Section III, the
current information on effectiveness of
the individual emissions control technologies is based on performance over the CAFE test procedures. For that reason, EPA is using the current CAFE test procedures for the CO 2 standards and is not changing those test procedures in this rulemaking. NHTSA, as discussed above, is limited by statute in what test procedures can be used for purposes of passenger car testing, although there is no such statutory limitation with respect to test procedures for trucks. However, the same reasons for not changing the truck test procedures apply for CAFE as well.

Both EPA and NHTSA are interested in developing programs that employ test procedures that are more representative of real-world driving conditions, to the extent authorized under their respective statutes. This is an important issue, and the agencies intend to continue to
evaluate it in the context of a future rulemaking to address standards for model year 2017 and thereafter. This could include consideration of a range of test procedure changes to better represent real-world driving conditions in terms of speed, acceleration, deceleration, ambient temperatures, use of air conditioners, and the like. With respect to air conditioner operation, EPA discusses the public comments on these issues and the final procedures for determining emissions credits for
controls on air conditioners in Section

III.


### 25333 Federal Register / Vol. 75, No. 88 / Friday, May 7, 2010 / Rules and Regulations

29 71 FR 17566 (Apr. 6, 2006).

30 74 FR 14196 (Mar. 30, 2009). 31 Based on vehicles produced for sale in the

United States.

32 The equations are equivalent but are specified differently due to differences in the agencies’ respective models. Finally, based on the information EPA developed in its recent rulemaking that updated its fuel economy labelingprogram to better reflect average realworld fuel economy, the calculation of fuel savings and CO 2 emissions reductions that will be achieved by the
CAFE and GHG standards includes adjustments to account for the difference between the fuel economy
level measured in the CAFE test procedure and the fuel economyactually achieved on average under realworld driving conditions. These adjustments are industry averages for the vehicles’ performance as a whole, however, and are not a substitute for the
information on effectiveness of individual control technologies that will be explored for purposes of a future GHG and CAFE rulemaking.

3. Form of the Standards

NHTSA and EPA proposed attributebased standards for passenger cars and light trucks. NHTSA adopted an attribute approach based on vehicle footprint in its Reformed CAFE program for light trucks for model years 2008–

2011, 29 and recently extended this approach to passenger cars in the CAFE rule for MY 2011 as required by EISA. 30 The agencies also proposed using vehicle footprint as the attribute for the GHG and CAFE standards. Footprint is
defined as a vehicle’s wheelbase multiplied by its track width—in other words, the area enclosed by the points at which the wheels meet the ground. Most commenters that expressed a view on this topic supported basing the standards on an attribute, and almost all of these supported the proposed choice of vehicle footprint as an appropriate attribute. The agencies continue to
believe that the standards are best expressed in terms of an attribute, and that the footprint attribute is the most appropriate attribute on which to base
the standards. These issues are further
discussed later in this notice and in Chapter 2 of the Joint TSD.

Under the footprint-based standards,
each manufacturer will have a GHG and CAFE target unique to its fleet, depending on the footprints of the vehicle models produced by that
manufacturer. A manufacturer will have separate footprint-based standards for cars and for trucks. Generally, larger vehicles ( i.e., vehicles with larger footprints) will be subject to less stringent standards ( i.e., higher CO 2 grams/mile standards and lower CAFE standards) than smaller vehicles. This is because, generally speaking, smaller vehicles are more capable of achieving
lower levels of CO 2 and higher levels of fuel economy than larger vehicles. While a manufacturer’s fleet average standard could be estimated throughout the model year based on projected production volume of its vehicle fleet,
the standard to which the manufacturer must comply will be based on its final model year production figures. A
manufacturer’s calculation of fleet average emissions at the end of the model year will thus be based on the production-weighted average emissions
of each model in its fleet.

The final footprint-based standards are very similar in shape to those proposed. NHTSA and EPA include more discussion of the development of the final curves in Section II below, with a full discussion in the Joint TSD. In addition, a full discussion of the equations and coefficients that define
the curves is included in Section III for
the CO 2 curves and Section IV for the mpg curves. The following figures illustrate the standards. First, Figure I.B.3–1 shows the fuel economy (mpg)
car standard curve.

Under an attribute-based standard, every vehicle model has a performance target (fuel economy for the CAFE standards, and CO 2 g/mile for the GHG emissions standards), the level of which depends on the vehicle’s attribute (for this rule, footprint). The manufacturers’ fleet average performance is determined by the production-weighted 31 average (for CAFE, harmonic average) of those targets. NHTSA and EPA are setting
CAFE and CO 2 emissions standards defined by constrained linear functions and, equivalently, piecewise linear
functions. 32 As a possible option for future rulemakings, the constrained linear form was introduced by NHTSA in the 2007 NPRM proposing CAFE
standards for MY 2011–2015.

NHTSA is establishing the attribute curves below for assigning a fuel economy level to an individual vehicle’s footprint value, for model years 2012 through 2016. These mpg values will be production weighted to determine each manufacturer’s fleet average standard for cars and trucks. Although the general model of the equation is the same for each vehicle category and each year, the parameters of the equation
differ for cars and trucks. Each parameter also changes on an annual basis, resulting in the yearly increases in stringency. Figure I.B.3–1 below illustrates the passenger car CAFE standard curves for model years 2012 through 2016 while Figure I.B.3–2 below illustrates the light truck standard curves for model years 2012–2016. The
MY 2011 final standards for cars and trucks, which are specified by a constrained logistic function rather than a constrained linear function, are shown for comparison.

**BILLING CODE 6560–50–P**


### 25334 Federal Register / Vol. 75, No. 88 / Friday, May 7, 2010 / Rules and Regulations


### 25335 Federal Register / Vol. 75, No. 88 / Friday, May 7, 2010 / Rules and Regulations


### 25336 Federal Register / Vol. 75, No. 88 / Friday, May 7, 2010 / Rules and Regulations

EPA is establishing the attribute curves below for assigning a CO 2 level to an individual vehicle’s footprint value, for model years 2012 through
2016. These CO 2 values will be production weighted to determine each manufacturer’s fleet average standard for cars and trucks. As with the CAFE curves above, the general form of the equation is the same for each vehicle category and each year, but the parameters of the equation differ for cars and trucks. Again, each parameter also changes on an annual basis, resulting in the yearly increases in stringency. Figure I.B.3–3 below illustrates the CO 2 car standard curves for model years 2012 through 2016 while Figure I.B.3–

4 shows the CO 2 truck standard curves for model years 2012–2016.


### 25337 Federal Register / Vol. 75, No. 88 / Friday, May 7, 2010 / Rules and Regulations

**BILLING CODE 6560–50–C**


### 25338 Federal Register / Vol. 75, No. 88 / Friday, May 7, 2010 / Rules and Regulations

33 49 CFR 523. NHTSA and EPA received a number of comments about the shape of the car
and truck curves. We address these
comments further in Section II.C below
as well as in Sections III and IV.

As proposed, NHTSA and EPA will use the same vehicle category definitions for determining which vehicles are subject to the car curve
standards versus the truck curve standards. In other words, a vehicle
classified as a car under the NHTSA CAFE program will also be classified as a car under the EPA GHG program, and likewise for trucks. Auto industry commenters generally agreed with this approach and believe it is an important aspect of harmonization across the two agencies’ programs. Some other commenters expressed concern about potential consequences, especially in how cars and trucks are distinguished. However, EPA and NHTSA are employing the same car and truck
definitions for the MY 2012–2016 CAFE and GHG standards as those used in the CAFE program for the 2011 model year
standards. 33 This issue is further
discussed for the EPA standards in Section III, and for the NHTSA standards in Section IV. This approach of using CAFE definitions allows EPA’s

CO 2 standards and the CAFE standards
to be harmonized across all vehicles for this program. However, EPA is not changing the car/truck definition for the purposes of any other previous rules.

Generally speaking, a smaller footprint vehicle will have higher fuel economy and lower CO 2 emissions relative to a larger footprint vehicle when both have the same degree of fuel efficiency improvement technology. In this final rule, the standards apply to a manufacturers overall fleet, not an individual vehicle, thus a manufacturers fleet which is dominated by small footprint vehicles will have a higher fuel economy requirement (lower CO 2 requirement) than a manufacturer whose fleet is dominated by large footprint vehicles. A footprint-based

CO 2 or CAFE standard can be relatively neutral with respect to vehicle size and consumer choice. All vehicles, whether smaller or larger, must make improvements to reduce CO 2 emissions or improve fuel economy, and therefore all vehicles will be relatively more expensive. With the footprint-based standard approach, EPA and NHTSA believe there should be no significant

effect on the relative distribution of different vehicle sizes in the fleet,

which means that consumers will still be able to purchase the size of vehicle that meets their needs. While targets are manufacturer specific, rather than vehicle specific, Table I.B.3–1 illustrates

the fact that different vehicle sizes will have varying CO 2 emissions and fuel economy targets under the final

standards.



### TABLE 

### I.B.3—1 M ODEL 

### Y EAR 

### 2016 CO 2 AND 

### F UEL 

### E CONOMY 

### TARGETS FOR 

### V ARIOUS 

### MY 2008 V EHICLE 

### 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 .................................................. 40 206 41.1

Midsize car ................................................ Ford Fusion .............................................. 46 230 37.1 Fullsize car ................................................ Chrysler 300 ............................................. 53 263 32. 6

**Example Light-duty Trucks**

Small SUV ................................................ 4WD Ford Escape .................................... 44 259 32.9

Midsize crossover ..................................... Nissan Murano ......................................... 49 279 30.6 Minivan ...................................................... Toyota Sienna .......................................... 55 303 28.2 Large pickup truck .................................... Chevy Silverado ....................................... 67 348 24.7

4. Program Flexibilities

EPA’s and NHTSA’s programs as established in this rule provide compliance flexibility to manufacturers, especially in the early years of the National Program. This flexibility is expected to provide sufficient lead time for manufacturers to make necessary technological improvements and reduce the overall cost of the program, without compromising overall environmental and fuel economy objectives. The broad goal of harmonizing the two agencies’ standards includes preserving manufacturers’ flexibilities in meeting the standards, to the extent appropriate and required by law. The following section provides an overview of this final rule’s flexibility provisions. Many
auto manufacturers commented in support of these provisions as critical to meeting the standards in the lead time provided. Environmental groups, some States, and others raised concerns about the possibility for windfall credits and loss of program benefits. The provisions
in the final rule are in most cases the same as those proposed. However consideration of the issues raised by
commenters has led to modifications in certain provisions. These comments and the agencies’ response are discussed in
Sections III and IV below and in the Response to Comments document.

a. CO 2 /CAFE Credits Generated Based on Fleet Average Performance

Under this NHTSA and EPA final rule, the fleet average standards that apply to a manufacturer’s car and truck fleets are based on the applicable footprint-based curves. At the end of each model year, when production of the model year is complete, a production-weighted fleet average will be calculated for each averaging set (cars and trucks). Under this approach, a
manufacturer’s car and/or truck fleet that achieves a fleet average CO 2 /CAFE
level better than the standard can generate credits. Conversely, if the fleet average CO 2 /CAFE level does not meet the standard, the fleet would incur debits (also referred to as a shortfall).

Under the final program, a manufacturer whose fleet generates credits in a given model year would have several options for using those credits, including credit carry-back, credit carry-forward, credit transfers, and credit trading. These provisions exist in the MY 2011 CAFE program under EPCA and EISA, and similar provisions are part of EPA’s Tier 2 program for light-duty vehicle criteria pollutant emissions, as well as many


### 25339 Federal Register / Vol. 75, No. 88 / Friday, May 7, 2010 / Rules and Regulations

34 49 U.S.C. 32903(a)(2). 35 49 U.S.C. 32903(g)(4).

36 49 U.S.C. 32903(f)(2). 37 EPCA provides a statutory incentive for production of FFVs by specifying that their fuel economy is determined using a special calculation procedure that results in those vehicles being assigned a higher fuel economy level than would

Continued other mobile source standards issued by
EPA under the CAA. The manufacturer will be able to carry back credits to
offset a deficit that had accrued in a prior model year and was subsequently carried over to the current model year. EPCA also provides for this. EPCA restricts the carry-back of CAFE credits to three years, and as proposed EPA is establishing the same limitation, in keeping with the goal of harmonizing
both sets of standards.

After satisfying any need to offset preexisting deficits, remaining credits can be saved (banked) for use in future years. Under the CAFE program, EISA allows manufacturers to apply credits earned in a model year to compliance in any of the five subsequent model

years. 34 As proposed, under the GHG program, EPA is also allowing
manufacturers to use these banked credits in the five years after the year in which they were generated ( i.e., five years carry-forward).

EISA required NHTSA to establish by regulation a CAFE credits transferring program, which NHTSA established in
a March 2009 final rule codified at 49 CFR Part 536, to allow a manufacturer
to transfer credits between its vehicle fleets to achieve compliance with the standards. For example, credits earned by over-compliance with a manufacturer’s car fleet average
standard could be used to offset debits
incurred due to that manufacturer’s not meeting the truck fleet average standard in a given year. EPA’s Tier 2 program also provides for this type of credit transfer. As proposed for purposes of this rule, EPA allows unlimited credit
transfers across a manufacturer’s cartruck fleet to meet the GHG standard. This is based on the expectation that this flexibility will facilitate manufacturers’ ability to comply with
the GHG standards in the lead time provided, and will allow the required
GHG emissions reductions to be achieved in the most cost effective way. Under the CAA, unlike under EISA,there is no statutory limitation on cartruck credit transfers. Therefore, EPA is not constraining car-truck credit transfers, as doing so would reduce the flexibility for lead time, and would increase costs with no corresponding
environmental benefit. For the CAFE program, however, EISA limits the amount of credits that may be transferred, which has the effects of limiting the extent to which a manufacturer can rely upon credits in lieu of making fuel economy improvements to a particular portion of its vehicle fleet, but also of potentially increasing the costs of improving the
manufacturer’s overall fleet. EISA also prohibits the use of transferred credits to meet the statutory minimum level for
the domestic car fleet standard. 35 These and other statutory limits will continue to apply to the determination of compliance with the CAFE standards.

EISA also allowed NHTSA to establish by regulation a CAFE credit trading program, which NHTSA
established in the March 2009 final rule at 40 CFR part 536, to allow credits to be traded (sold) to other vehicle manufacturers. As proposed, EPA allows credit trading in the GHG program. These sorts of exchanges are typically allowed under EPA’s current mobile source emission credit programs, although manufacturers have seldom made such exchanges. Under the NHTSA CAFE program, EPCA also allows these types of credit trades, although, as with transferred credits, traded credits may not be used to meet
the minimum domestic car standards specified by statute. 36 Comments discussing these provisions supported the proposed approach. These final provisions are the same as proposed.

As further discussed in Section IV of this preamble, NHTSA sought to find a way to provide credits for improving the efficiency of light truck air conditioners (A/Cs) and solicited public comments to that end. The agency did so because the power necessary to operate an A/C compressor places a significant additional load on the engine, thus reducing fuel economy and increasing

CO 2 tailpipe emissions. See Section III.C.1 below. The agency would have made a similar effort regarding cars, but a 1975 statutory provision made it unfruitful even to explore the possibility of administratively proving such credits for cars. The agency did not identify a workable way of providing such credits for light trucks in the context of this rulemaking.

b. Air Conditioning Credits Under the
EPA Final Rule

Air conditioning (A/C) systems
contribute to GHG emissions in two ways. Hydrofluorocarbon (HFC) refrigerants, which are powerful GHGs, can leak from the A/C system (direct A/ C emissions). As just noted, operation of the A/C system also places an additional load on the engine, which results in
additional CO 2 tailpipe emissions (indirect A/C related emissions). EPA is allowing manufacturers to generate credits by reducing either or both types
of GHG emissions related to A/C systems. Specifically, EPA is establishing a method to calculate CO 2 equivalent reductions for the vehicle’s full useful life on a grams/mile basis that can be used as credits in meeting the fleet average CO 2 standards. EPA’s analysis indicates that this approach provides manufacturers with a highly cost-effective way to achieve a portion
of GHG emissions reductions under the EPA program. EPA is estimating that manufacturers will on average generate 11 g/mi GHG credit toward meeting the 250 g/mi by 2016 (though some companies may generate more). EPA
will also allow manufacturers to earn early A/C credits starting in MY 2009 through 2011, as discussed further in a later section. There were many comments on the proposed A/C provisions. Nearly every one of these was supportive of EPA including A/C control as part of this rule, though there was some disagreement on some of the details of the program. The HFC crediting scheme was widely supported. The comments mainly were
concentrated on indirect A/C related
credits. The auto manufacturers and suppliers had some technical comments on A/C technologies, and there were many concerns with the proposed idle
test. EPA has made some minor adjustments in both of these areas that we believe are responsive to these
concerns. EPA addresses A/C issues in greater detail in Section III of this preamble and in Chapter 2 of EPA’s

RIA.

c. Flexible-Fuel and Alternative Fuel
Vehicle Credits

EPCA authorizes a compliance flexibility incentive under the CAFE program for production of dual-fueled or flexible-fuel vehicles (FFV) and
dedicated alternative fuel vehicles.
FFVs are vehicles that can run both on
an alternative fuel and conventional fuel. Most FFVs are E85 capable vehicles, which can run on either gasoline or a mixture of up to 85 percent ethanol and 15 percent gasoline (E85).
Dedicated alternative fuel vehicles are vehicles that run exclusively on an alternative fuel. EPCA was amended by EISA to extend the period of availability of the FFV incentive, but to begin phasing it out by annually reducing the
amount of FFV incentive that can be used toward compliance with the CAFE
standards. 37 Although NHTSA


### 25340 Federal Register / Vol. 75, No. 88 / Friday, May 7, 2010 / Rules and Regulations

otherwise occur. This is typically referred to as an
FFV credit.

38 Id. 39 EPCA does not permit such an allowance. Consequently, manufacturers who may be able to take advantage of a lead-time allowance under the GHG standards would be required to comply with the applicable CAFE standard or be subject to penalties for non-compliance. expressed concern about the non-use of alternative fuel by FFVs in a 2002 report to Congress (Effects of the Alternative
Motor Fuels Act CAFE Incentives Policy), EISA does not premise the availability of the FFV credits on actual use of alternative fuel by an FFV
vehicle. Under NHTSA’s CAFE program, pursuant to EISA, no FFV
credits will be available for CAFE compliance after MY 2019. 38 For dedicated alternative fuel vehicles, there are no limits or phase-out of the credits. As required by the statute, NHTSA will
continue to allow the use of FFV credits for purposes of compliance with the
CAFE standards until the end of the EISA phase-out period.

For the GHG program, as proposed,
EPA will allow FFV credits in line with EISA limits, but only during the period from MYs 2012 to 2015. After MY 2015, EPA will only allow FFV credits based
on a manufacturer’s demonstration that the alternative fuel is actually being
used in the vehicles and based on the vehicle’s actual performance. EPA
discusses this in more detail in Section III.C of the preamble, including a summary of key comments. These provisions are being finalized as proposed, with further discussion in
Section III.C of how manufacturers can
demonstrate that the alternative fuel is being used.

d. Temporary Lead-Time Allowance
Alternative Standards Under the EPA
Final Rule

Manufacturers with limited product lines may be especially challenged in the early years of the National Program,
and need additional lead time. Manufacturers with narrow product offerings may not be able to take full advantage of averaging or other program flexibilities due to the limited scope of the types of vehicles they sell. For example, some smaller volume manufacturer fleets consist entirely of vehicles with very high baseline CO 2 emissions. Their vehicles are above the

CO 2 emissions target for that vehicle footprint, but do not have other types of vehicles in their production mix with which to average. Often, these manufacturers pay fines under the CAFE program rather than meet the applicable CAFE standard. EPA believes that these technological circumstances
call for more lead time in the form of a more gradual phase-in of standards.

EPA is finalizing a temporary leadtime allowance for manufacturers that
sell vehicles in the U.S. in MY 2009 and for which U.S. vehicle sales in that model year are below 400,000 vehicles. This allowance will be available only during the MY 2012–2015 phase-in years of the program. A manufacturer
that satisfies the threshold criteria will
be able to treat a limited number of vehicles as a separate averaging fleet, which will be subject to a less stringent
GHG standard. 39 Specifically, a standard of 25 percent above the vehicle’s otherwise applicable foot-print target level will apply to up to 100,000 vehicles total, spread over the four year period of MY 2012 through 2015. Thus,
the number of vehicles to which the flexibility could apply is limited. EPA also is setting appropriate restrictions on credit use for these vehicles, as discussed further in Section III. By MY 2016, these allowance vehicles must be averaged into the manufacturer’s full fleet ( i.e., they will no longer be eligible for a different standard). EPA discusses
this in more detail in Section III.B of the preamble.

EPA received comments from several
smaller manufacturers that the TLAAS program was insufficient to allow manufacturers with very limited product lines to comply. These manufacturers commented that they
need additional lead time to meet the standards, because their CO 2 baselines are significantly higher and their vehicle product lines are even more limited, reducing their ability to average across their fleets compared even to other TLAAS manufacturers. EPA fully summarizes the public comments on the TLAAS program, including comments not supporting the program, in Section III.B. In summary, in response to the lead time issues raised by manufacturers, EPA is modifying the TLAAS program that applies to manufacturers with between 5,000 and 50,000 U.S. vehicle sales in MY 2009. EPA believes these provisions are necessary given that, compared with other TLAAS manufacturers, these
manufacturers have even more limited product offerings across which to average and higher baseline CO 2 emissions, and thus need additional
lead-time to meet the standards. These
manufacturers would have an increased allotment of vehicles, a total of 250,000, compared to 100,000 vehicles (for other TLAAS-eligible manufacturers). In addition, the TLAAS program for these manufacturers would be extended by one year, through MY 2016 for these vehicles, for a total of five years of eligibility. The other provisions of the TLAAS program would continue to apply, such as the restrictions on credit trading and the level of the standard. Additional restrictions would also apply to these vehicles, as discussed in Section III. In addition, for the smallest volume manufacturers, those with below 5,000 U.S. vehicle sales, EPA is not setting standards at this time but is instead deferring standards until a future rulemaking. This is essentially the same approach we are using for small businesses, which are exempted from this rule. The unique issues
involved with these manufacturers will be addressed in that future rulemaking. Further discussion of the public
comment on these issues and details on these changes from the proposed program are included in Section III.

e. Additional Credit Opportunities Under the Clean Air Act (CAA)

EPA is establishing additional opportunities for early credits in MYs 2009–2011 through over-compliance
with a baseline standard. The baseline standard is set to be equivalent, on a national level, to the California standards. Credits can be generated by over-compliance with this baseline in one of two ways—over-compliance by
the fleet of vehicles sold in California and the CAA section 177 States ( i.e., those States adopting the California program), or over-compliance with the
fleet of vehicles sold in the 50 States. EPA is also providing for early credits based on over-compliance with CAFE, but only for vehicles sold in States
outside of California and the CAA section 177 states. Under the early credit provisions, no early FFV credits would be allowed, except those achieved by over-compliance with the California program based on California’s provisions that manufacturers
demonstrate actual use of the alternative fuel. EPA’s early credits provisions are designed to ensure that there would be no double counting of early credits. NHTSA notes, however, that credits for overcompliance with CAFE standards during MYs 2009–2011 will still be
available for manufacturers to use toward compliance in future model years, just as before.

EPA received comments from some environmental organizations and States expressing concern that these early credits were inappropriate windfall credits because they provided credits for actions that were not surplus, that is
above what would otherwise be required for compliance with either
State or Federal motor vehicle
standards. This focused on the credits


### 25341 Federal Register / Vol. 75, No. 88 / Friday, May 7, 2010 / Rules and Regulations

for over-compliance with the California standards generated during model years 2009 and perhaps 2010, where according to commenters the CAFE requirements were in effect more stringent than the California standards. EPA believes that early credits provide
a valuable incentive for manufacturers that have implemented fuel efficient technologies in excess of their CAFE compliance obligations prior to MY 2012. With appropriate restrictions, these credits, reflecting over-compliance over a three model year time frame (MY 2009–2011) and not just over one or two model years, will be surplus reductions and not otherwise required by law. Therefore, EPA is finalizing these provisions largely as proposed, but in response to comments, with an additional restriction on the trading of
MY 2009 credits. The overall structure of this early credit program addresses concerns about the potential for
windfall credits in the first one or two model years. This issue is fully
discussed in Section III.C.

EPA is providing an additional temporary incentive to encourage the
commercialization of advanced GHG/ fuel economy control technologies—including electric vehicles (EVs), plugin hybrid electric vehicles (PHEVs), and fuel cell vehicles (FCVs)—for model years 2012–2016. EPA’s proposal included an emissions compliance value of zero grams/mile for EVs and FCVs, and the electric portion of PHEVs, and a multiplier in the range of 1.2 to 2.0, so that each advanced technology vehicle would count as greater than one
vehicle in a manufacturer’s fleetwide compliance calculation. EPA received many comments on the proposed incentives. Many State and environmental organization commenters
believed that the combination of these
incentives could undermine the GHG benefits of the rule, and believed the emissions compliance values should take into account the net upstream GHG
emissions associated with electrified vehicles compared to vehicles powered by petroleum based fuel. Auto manufacturers generally supported the incentives, some believing the incentives to be a critical part of the National Program. Most auto makers supported both the zero grams/mile emissions compliance value and the higher multipliers.

Upon considering the public comments on this issue, EPA is finalizing an advanced technology vehicle incentive program that includes a zero gram/mile emissions compliance value for EVs and FCVs, and the electric portion of PHEVs, for up to the first 200,000 EV/PHEV/FCV vehicles produced by a given manufacturer during MY 2012–2016 (for a manufacturer that produces less than 25,000 EVs, PHEVs, and FCVs in MY 2012), or for up to the first 300,000 EV/ PHEV/FCV vehicles produced during MY 2012–2016 (for a manufacturer that produces 25,000 or more EVs, PHEVs, and FCVs in MY 2012). For any production greater than this amount, the compliance value for the vehicle will be greater than zero gram/mile, set at a
level that reflects the vehicle’s net increase in upstream GHG emissions in comparison to the gasoline vehicle it replaces. In addition, EPA is not finalizing a multiplier. EPA will also allow this early advanced technology incentive program beginning in MYs 2009–2011. The purpose of these provisions is to provide a temporary incentive to promote technologies which have the potential to produce very large GHG reductions in the future. The tailpipe GHG emissions from EVs, FCVs, and PHEVs operated on grid electricity are zero, and traditionally the
emissions of the vehicle itself are all that EPA takes into account for purposes of compliance with standards set under section 202(a). This has not raised any issues for criteria pollutants, as upstream emissions associated with production and distribution of the fuel are addressed by comprehensive regulatory programs focused on the upstream sources of those emissions. At this time, however, there is no such comprehensive program addressing upstream emissions of GHGs, and the upstream GHG emissions associated with production and distribution of electricity are higher than the corresponding upstream GHG emissions of gasoline or other petroleum based fuels. In the future, vehicle fleet
electrification combined with advances in low-carbon technology in the electricity sector have the potential to transform the transportation sector’s contribution to the country’s GHG
emissions. EPA will reassess the issue of how to address EVs, PHEVs, and FCVs in rulemakings for model years 2017 and beyond, based on the status of advanced vehicle technology commercialization, the status of upstream GHG control programs, and
other relevant factors. Further discussion of the temporary advanced technology vehicle incentives, including more detail on the public comments and EPA’s response, is found in Section

III.C.

EPA is also providing an option for manufacturers to generate credits for employing new and innovative technologies that achieve GHG reductions that are not reflected on current test procedures, as proposed. Examples of such ‘‘ off-cycle ’’ technologies might include solar panels on hybrids, adaptive cruise control, and active aerodynamics, among other technologies. These three credit provisions are discussed in more detail

in Section III.

5. Coordinated Compliance

Previous NHTSA and EPA regulations and statutory provisions establish ample examples on which to develop an effective compliance program that achieves the energy and environmental
benefits from CAFE and motor vehicle
GHG standards. NHTSA and EPA have developed a program that recognizes, and replicates as closely as possible, the compliance protocols associated with the existing CAA Tier 2 vehicle emission standards, and with CAFE standards. The certification, testing, reporting, and associated compliance activities closely track current practices
and are thus familiar to manufacturers. EPA already oversees testing, collects and processes test data, and performs calculations to determine compliance
with both CAFE and CAA standards. Under this coordinated approach, the compliance mechanisms for bothprograms are consistent and nonduplicative. EPA will also apply the CAA authorities applicable to its separate in-use requirements in this

program.

The compliance approach allows manufacturers to satisfy the new program requirements in the same general way they comply with existing applicable CAA and CAFE requirements. Manufacturers woulddemonstrate compliance on a fleetaverage basis at the end of each model year, allowing model-level testing to continue throughout the year as is the current practice for CAFE determinations. The compliance program design establishes a single set of manufacturer reporting requirements and relies on a single set of underlying data. This approach still allows each agency to assess compliance with its respective program under its respective statutory authority.

NHTSA and EPA do not anticipate any significant noncompliance under the National Program. However, failure to meet the fleet average standards (after credit opportunities are exhausted) would ultimately result in the potential for penalties under both EPCA and the
CAA. The CAA allows EPA
considerable discretion in assessment of penalties. Penalties under the CAA aretypically determined on a vehiclespecific basis by determining the


### 25342 Federal Register / Vol. 75, No. 88 / Friday, May 7, 2010 / Rules and Regulations

40 NHTSA’s analysis estimates multi-year planning effects within a context in which each model year is represented explicitly, and technologies applied in one model year carry forward to future model years. NHTSA does not currently have a reasonable basis to estimate how a manufacturer might, for example, weigh the transfer of credits from the passenger car to the light truck fleet in MY 2013 against the potential to carry light truck technologies forward from MY 2013 through MY 2016. number of a manufacturer’s highest emitting vehicles that caused the fleet average standard violation. This is the
same mechanism used for EPA’s
National Low Emission Vehicle and Tier 2 corporate average standards, and to
date there have been no instances of noncompliance. CAFE penalties are specified by EPCA and would be assessed for the entire noncomplying fleet at a rate of $5.50 times the number of vehicles in the fleet, times the number of tenths of mpg by which the fleet average falls below the standard. In the event of a compliance action arising out of the same facts and circumstances, EPA could consider CAFE penalties when determining appropriate remedies
for the EPA case.

Several stakeholders commented on the proposed coordinated compliance approach. The comments indicated broad support for the overall approach EPA proposed. In particular, both regulated industry and the public interest community appreciated the attempt to streamline compliance by adopting current practice where possible and by coordinating EPA and NHTSA compliance requirements. Thus the final compliance program design is largely unchanged from the proposal. Some commenters requested additional
detail or clarification in certain areas and others suggested some relatively narrow technical changes, and EPA has responded to these suggestions. EPA
and NHTSA summarize these comments and the agencies’ responses in Sections III and IV, respectively, below. The Response to Comments document
associated with this document includes all of the comments and responses received during the comment period.

C. Summary of Costs and Benefits of the National Program

This section summarizes the projected
costs and benefits of the CAFE and GHG emissions standards. These projections helped inform the agencies’ choices among the alternatives considered and provide further confirmation that the final standards are an appropriate choice within the spectrum of choices allowable under their respective statutory criteria. The costs and benefits projected by NHTSA to result from these CAFE standards are presented first, followed by those from EPA’s analysis of the GHG emissions
standards.

For several reasons, the estimates for costs and benefits presented by NHTSA and EPA, while consistent, are not directly comparable, and thus should not be expected to be identical. Most important, NHTSA and EPA’s standards would require slightly different fuel efficiency improvements. EPA’s GHG standard is more stringent in part due to its assumptions about manufacturers’ use of air conditioning credits, which
result from reductions in air conditioning-related emissions of HFCs
and CO 2 . NHTSA was unable to make assumptions about manufacturers’ improving the efficiency of air conditioners due to statutory limitations. In addition, the CAFE and GHG standards offer different program flexibilities, and the agencies’ analyses differ in their accounting for these flexibilities (for example, FFVs), primarily because NHTSA is statutorily prohibited from considering some flexibilities when establishing CAFE standards, while EPA is not. These
differences contribute to differences in the agencies’ respective estimates of costs and benefits resulting from the
new standards.

NHTSA performed two analyses: a primary analysis that shows the estimates of costs, fuel savings, and related benefits that the agency considered for purposes of establishing new CAFE standards, and a supplemental analysis that reflects the agency’s best estimate of the potential
real-world effects of the CAFE standards, including manufacturers’ potential use of FFV credits in accordance with the provisions of EISA concerning their availability. Because EPCA prohibits NHTSA from considering the ability of manufacturers
to use of FFV credits to increase their fleet average fuel economy when establishing CAFE standards, the agency’s primary analysis does not include them. However, EPCA does not prohibit NHTSA from considering the fact that manufacturers may pay civil penalties rather than complying with CAFE standards, and NHTSA’s primary analysis accounts for some manufacturers’ tendency to do so. In addition, NHTSA’s supplemental analysis of the effect of FFV credits on
benefits and costs from its CAFE standards, demonstrates the real-world impacts of FFVs, and the summary estimates presented in Section IV include these effects. Including the useof FFV credits reduces estimated pervehicle compliance costs of the program. However, as shown below, including FFV credits does not significantly change the projected fuel savings and CO 2 reductions, because FFV credits reduce the fuel economy
levels that manufacturers achieve not only under the standards, but also under
the baseline MY 2011 CAFE standards.

Also, EPCA, as amended by EISA,
allows manufacturers to transfer credits between their passenger car and light truck fleets. However, EPCA also prohibits NHTSA from considering manufacturers’ ability to increase their average fuel economy through the use of CAFE credits when determining the stringency of the CAFE standards. Because of this prohibition, NHTSA’s primary analysis does not account for
the extent to which credit transfers might actually occur. For purposes of its supplemental analysis, NHTSA considered accounting for the possibility that some manufacturers might utilize the opportunity under
EPCA to transfer some CAFE credits between the passenger car and light truck fleets, but determined that in NHTSA’s year-by-year analysis,
manufacturers’ credit transfers cannot be reasonably estimated at this time. 40

EPA made explicit assumptions about
manufacturers’ use of FFV credits under
both the baseline and control alternatives, and its estimates of costs
and benefits from the GHG standards reflect these assumptions. However, under the GHG standards, FFV credits would be available through MY 2015; starting in MY 2016, EPA will only
allow FFV credits based on a
manufacturer’s demonstration that the alternative fuel is actually being used in
the vehicles and the actual GHG performance for the vehicle run on that
alternative fuel.

EPA’s analysis also assumes that
manufacturers would transfer credits
between their car and truck fleets in the MY 2011 baseline subject to the maximum value allowed by EPCA, and
that unlimited car-truck credit transfers
would occur under the GHG standards. Including these assumptions in EPA’s analysis increases the resulting estimates of fuel savings and reductions in GHG emissions, while reducing EPA’s estimates of program compliance

costs.

Finally, under the EPA GHG program, there is no ability for a manufacturer to intentionally pay fines in lieu of meeting the standard. Under EPCA, however, vehicle manufacturers are allowed to pay fines as an alternative to compliance with applicable CAFE standards. NHTSA’s analysis explicitly estimates the level of voluntary fine payment by individual manufacturers,
which reduces NHTSA’s estimates of


### 25343 Federal Register / Vol. 75, No. 88 / Friday, May 7, 2010 / Rules and Regulations

41 These figures do not account for the compliance flexibilities that NHTSA is prohibited from considering when determining the level of new CAFE standards, because manufacturers’ decisions to use those flexibilities are voluntary.

42 NHTSA also estimated the benefits associated
with three more estimates of a one ton GHG reduction in 2010 ($5, $35, and $65), which will likewise grow thereafter. See Section II for a more

detailed discussion of the social cost of carbon. both the costs and benefits of its CAFE standards. In contrast, the CAA does not allow for fine payment (civil penalties) in lieu of compliance with emission standards, and EPA’s analysis of
benefits from its standard thus assumes full compliance. This assumption results in higher estimates of fuel savings, of reductions in GHG emissions, and of manufacturers’ compliance costs to sell fleets that comply with both NHTSA’s CAFE program and EPA’s GHG program.

In summary, the projected costs and benefits presented by NHTSA and EPA are not directly comparable, because the GHG emission levels established by EPA include air conditioning-related improvements in equivalent fuel efficiency and HFC reductions, because of the assumptions incorporated in EPA’s analysis regarding car-truck credit transfers, and because of EPA’s projection of complete compliance with
the GHG standards. It should also be expected that overall, EPA’s estimates of GHG reductions and fuel savings achieved by the GHG standards will be slightly higher than those projected by NHTSA only for the CAFE standards
because of the reasons described above. For the same reasons, EPA’s estimates of manufacturers’ costs for complying with the passenger car and light trucks GHG standards are slightly higher than NHTSA’s estimates for complying with
the CAFE standards.

A number of stakeholders commented on NHTSA’s and EPA’s analytical assumptions in estimating costs and benefits of the program. These comments and any changes from the proposed values are summarized in Section II.F, and further in Sections III (for EPA) and IV (for NHTSA); the Response to Comments document presents the detailed responses to each
of the comments.

1. Summary of Costs and Benefits of
NHTSA’s CAFE Standards

NHTSA has analyzed in detail the
costs and benefits of the final CAFE standards. Table I.C.1–1 presents the total costs, benefits, and net benefits for
NHTSA’s final CAFE standards. The values in Table I.C.1–1 display the total
costs for all MY 2012–2016 vehicles and the benefits and net benefits represent the impacts of the standards over the full lifetime of the vehicles projected to be sold during model years 2012–2016. It is important to note that there is significant overlap in costs and benefits for NHTSA’s CAFE program and EPA’s GHG program and therefore combined program costs and benefits, which together comprise the National Program,
are not a sum of the two individual

programs.



### TABLE 

### I.C.1–1—NHTSA’ S 

### E STIMATED



### 2012–2016 M ODEL 

### Y EAR 

### C OSTS



### , B ENEFITS



### , AND 

### N ET 

### B ENEFITS 

### U NDER THE 

### CAFE S TANDARDS 

### B E



### FORE 

### FFV C REDITS

[2007 dollars]

3% Discount Rate: $billions

Costs ....................................... 51.8
Benefits ................................... 182.5
Net Benefits ............................ 130.7
7% Discount Rate:

Costs ....................................... 51.8
Benefits ................................... 146.3
Net Benefits ............................ 94.5 NHTSA estimates that these new CAFE standards will lead to fuel savings totaling 61 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 resulting from those fuel savings is $143 billion. At a 7% discount rate, the present value of the economic benefits resulting from those fuel savings is $112

billion. 41

The agency further estimates that

these new CAFE standards will lead to corresponding reductions in CO 2 emissions totaling 655 million metric tons (mmt) during the useful lives of

vehicles sold in MYs 2012–2016. The present value of the economic benefits from avoiding those emissions is $14.5 billion, based on a global social cost of carbon value of approximately $21 per metric ton (in 2010, and growing thereafter). 42 It is important to note that

NHTSA’s CAFE standards and EPA’s GHG standards will both be in effect,

and each will lead to increases in average fuel economy and CO 2 emissions reductions. The two agencies’ standards together comprise the National Program, and this discussion of

costs and benefits of NHTSA’s CAFE standards does not change the fact that both the CAFE and GHG standards, jointly, are the source of the benefits and costs of the National Program.



### TABLE 

### I.C.1–2—NHTSA F UEL 

### S AVED 

### (B ILLION 

### G ALLONS 

### ) AND 

### CO 2 

### E MISSIONS 

### AVOIDED 

### (mmt) U NDER 

### CAFE
S TANDARDS 

### (W ITHOUT 

### FFV C REDITS 

### )

2012 2013 2014 2015 2016 Total

Fuel (b. gal.) ................................. 4 .2 8 .9 12 .5 16 .0 19 .5 61 .0
CO 2 (mmt) .................................... 44 94 134 172 210 655

Considering manufacturers’ ability to earn credit toward compliance by selling FFVs, NHTSA estimates very little change in incremental fuel savings

and avoided CO 2 emissions, assuming FFV credits would be used toward both

the baseline and final standards:



### TABLE 

### I.C.1–3—NHTSA F UEL 

### S AVED 

### (B ILLION GALLONS 

### ) AND 

### CO 2 

### E MISSIONS 

### AVOIDED 

### (M ILLION 

### M ETRIC 

### T ONS



### , MMT 

### )
U NDER 

### CAFE S TANDARDS 

### (W ITH 

### FFV C REDITS 

### )

2012 2013 2014 2015 2016 Total

Fuel (b. gal.) ............................................. 4.9 8.2 11.3 15.0 19.1 58.6


### 25344 Federal Register / Vol. 75, No. 88 / Friday, May 7, 2010 / Rules and Regulations

43 CO 2 benefits for purposes of these tables are calculated using the $21/ton SCC values. Note that net present value of reduced GHG emissions is calculated differently than other benefits. The same discount rate used to discount the value of damages from future emissions (SCC at 5, 3, and 2.5 percent) is used to calculate net present value of SCC for internal consistency. 

### TABLE 

### I.C.1–3—NHTSA F UEL 

### S AVED 

### (B ILLION GALLONS 

### ) AND 

### CO 2 

### E MISSIONS 

### AVOIDED 

### (M ILLION 

### M ETRIC 

### T ONS



### , MMT 

### )
U NDER 

### CAFE S TANDARDS 

### (W ITH 

### FFV C REDITS 

### )—Continued

2012 2013 2014 2015 2016 Total

CO 2 (mmt) ................................................ 53 89 123 163 208 636

NHTSA estimates that these fuel economy increases would produce other benefits both to drivers ( e.g., reduced time spent refueling) and to the U.S. ( e.g., reductions in the costs of petroleum imports beyond the direct savings from reduced oil purchases, as well as some disbenefits ( e.g., increase traffic congestion) caused by drivers’ tendency to travel more when the cost of driving declines (as it does when fuel economy increases). NHTSA has estimated the total monetary value to society of these benefits and disbenefits,
and estimates that the standards will produce significant net benefits to society. Using a 3% discount rate, NHTSA estimates that the present value
of these benefits would total more than $180 billion over the useful lives of vehicles sold during MYs 2012–2016. More discussion regarding monetized

benefits can be found in Section IV of this notice and in NHTSA’s Regulatory Impact Analysis. Note that the benefit calculation in Tables I.C.1–4 through 1– 7 includes the benefits of reducing CO 2 emissions, 43 but not the benefits of reducing other GHG emissions.



### TABLE 

### I.C.1–4—NHTSA D ISCOUNTED 

### B ENEFITS 

### ($ BILLION 

### ) U NDER THE 

### CAFE S TANDARDS 

### (B EFORE 

### FFV C REDITS



### , U SING 

### 3 P ERCENT 

### D ISCOUNT 

### R ATE 

### )

2012 2013 2014 2015 2016 Total

Passenger Cars ....................................... 6.8 15.2 21.6 28.7 35.2 107.5 Light Trucks ............................................. 5.1 10.7 15.5 19.4 24.3 75.0

Combined .......................................... 11.9 25.8 37.1 48.0 59.5 182.5

Using a 7% discount rate, NHTSA estimates that the present value of these benefits would total more than $145 billion over the same time period.



### TABLE 

### I.C.1–5—NHTSA D ISCOUNTED 

### B ENEFITS 

### ($ BILLION 

### ) U NDER THE 

### CAFE S TANDARDS 

### (B EFORE 

### FFV C REDITS



### , U SING 

### 7 P ERCENT 

### D ISCOUNT 

### R ATE 

### )

2012 2013 2014 2015 2016 Total

Passenger Cars ....................................... 5.5 12.3 17.5 23.2 28.6 87.0 Light Trucks ............................................. 4.0 8.4 12.2 15.3 19.2 59.2

Combined .......................................... 9.5 20.7 29.7 38.5 47.8 146.2

NHTSA estimates that FFV credits could reduce achieved benefits by about 3.8%:



### TABLE 

### I.C.1–6 A

### —NHTSA D ISCOUNTED 

### B ENEFITS 

### ($ BILLION 

### ) U NDER THE 

### CAFE S TANDARDS 

### (W ITH 

### FFV C REDITS 

### , U SING

A 

### 3 P ERCENT 

### D ISCOUNT 

### R ATE 

### )

2012 2013 2014 2015 2016 Total

Passenger Cars ....................................... 7.6 13.7 19.1 25.6 34.0 100.0 Light Trucks ............................................. 6.4 10.4 14.6 19.8 24.4 75.6

Combined .......................................... 14.0 24.1 33.7 45.4 58.4 175.6



### TABLE 

### I.C.1–6 B

### —NHTSA D ISCOUNTED 

### B ENEFITS 

### ($ BILLION 

### ) U NDER THE 

### CAFE S TANDARDS 

### (W ITH 

### FFV C REDITS 

### , U SING

A 

### 7 P ERCENT 

### D ISCOUNT 

### R ATE 

### )

2012 2013 2014 2015 2016 Total

Passenger Cars ....................................... 6.1 11.1 15.5 20.7 27.6 80.9 Light Trucks ............................................. 5.0 8.2 11.5 15.6 19.3 59.7


### 25345 Federal Register / Vol. 75, No. 88 / Friday, May 7, 2010 / Rules and Regulations

TABLE 

### I.C.1–6 B

### —NHTSA D ISCOUNTED 

### B ENEFITS 

### ($ BILLION 

### ) U NDER THE 

### CAFE S TANDARDS 

### (W ITH 

### FFV C REDITS 

### , U SING

A 

### 7 P ERCENT 

### D ISCOUNT 

### R ATE 

### )—Continued

2012 2013 2014 2015 2016 Total

Combined .......................................... 11.2 19.3 27.0 36.4 46.9 140.7

NHTSA attributes most of these benefits—about $143 billion (at a 3% discount rate and excluding consideration of FFV credits), as noted
above—to reductions in fuel consumption, valuing fuel (for societal purposes) at the future pre-tax prices projected in the Energy Information Administration’s (AEO’s) reference case forecast from the Annual Energy Outlook (AEO) 2010 Early Release. NHTSA’s Final Regulatory Impact Analysis (FRIA) accompanying this rule presents a detailed analysis of specific
benefits of the rule.



### TABLE 

### I.C.1–7—S UMMARY OF 

### B ENEFITS 

### F UEL 

### S AVINGS AND 

### CO 2 

### E MISSIONS 

### R EDUCTION 

### D UE TO THE 

### R ULE 

### (B EFORE 

### FFV C REDITS 

### )

Amount Monetized value (discounted)

3% discount rate 7% discount rate

Fuel savings ......................................... 61.0 billion gallons ............................... $143.0 billion ......... .............................. $112.0 billion.

CO 2 emissions reductions ................... 655 mmt .............................................. $14.5 billion ...................... ................... $14.5 billion.

NHTSA estimates that the increases in technology application necessary to achieve the projected improvements in fuel economy will entail considerable monetary outlays. The agency estimates that incremental costs for achieving its standards—that is, outlays by vehicle
manufacturers over and above those required to comply with the MY 2011 CAFE standards—will total about $52 billion ( i.e., during MYs 2012–2016).



### TABLE 

### I.C.1–8—NHTSA I NCREMENTAL 

### T ECHNOLOGY 

### O UTLAYS 

### ($ BILLION 

### ) U NDER THE 

### CAFE S TANDARDS 

### (B EFORE 

### FFV
C REDITS 

### )

2012 2013 2014 2015 2016 Total

Passenger Cars ....................................... 4.1 5.4 6.9 8.2 9.5 34.2 Light Trucks ............................................. 1.8 2.5 3.7 4.3 5.4 17.6

Combined .......................................... 5.9 7.9 10.5 12.5 14.9 51.7

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



### TABLE 

### I.C.1–9—NHTSA I NCREMENTAL 

### T ECHNOLOGY 

### O UTLAYS 

### ($ BILLION 

### ) UNDER 

### CAFE S TANDARDS 

### (W ITH 

### FFV
C REDITS 

### )

2012 2013 2014 2015 2016 Total

Passenger Cars ....................................... 2.6 3.6 4.8 6.1 7.5 24.6 Light Trucks ............................................. 1.1 1.5 2.5 3.4 4.4 12.9

Combined .......................................... 3.7 5.1 7.3 9.5 11.9 37.5

The agency projects that
manufacturers will recover most or all of these additional costs through higher selling prices for new cars and light
trucks. To allow manufacturers to recover these increased outlays (and, to a much lesser extent, the civil penalties that some companies are expected to pay for noncompliance), the agency
estimates that the standards would lead to increases in average new vehicle prices ranging from $457 per vehicle in MY 2012 to $985 per vehicle in MY

2016:



### TABLE 

### I.C.1–10—NHTSA I NCREMENTAL 

### I NCREASES IN 

### AVERAGE 

### N EW 

### V EHICLE 

### C OSTS 

### ($) U NDER 

### CAFE S TANDARDS 

### (B EFORE 

### FFV C REDITS 

### )

2012 2013 2014 2015 2016

Passenger Cars ................................................................... 505 573 690 799 907 Light Trucks ......................................................................... 322 416 621 752 961


### 25346 Federal Register / Vol. 75, No. 88 / Friday, May 7, 2010 / Rules and Regulations

TABLE 

### I.C.1–10—NHTSA I NCREMENTAL 

### I NCREASES IN 

### AVERAGE 

### N EW 

### V EHICLE 

### C OSTS 

### ($) U NDER 

### CAFE S TANDARDS 

### (B EFORE 

### FFV C REDITS 

### )—Continued

2012 2013 2014 2015 2016

Combined ...................................................................... 434 513 665 782 926

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



### TABLE 

### I.C.1–11—NHTSA I NCREMENTAL 

### I NCREASES IN 

### AVERAGE 

### N EW 

### V EHICLE 

### C OSTS 

### ($) U NDER 

### CAFE S TANDARDS 

### (W ITH 

### FFV C REDITS 

### )

2012 2013 2014 2015 2016

Passenger Cars ................................................................... 303 378 481 593 713 Light Trucks ......................................................................... 194 260 419 581 784

Combined ...................................................................... 261 333 458 589 737

NHTSA estimates, therefore, that the
total benefits of these CAFE standards
will be more than three times the magnitude of the corresponding costs. As a consequence, its standards would produce net benefits of $130.7 billion at a 3 percent discount rate (with FFV credits, $138.2 billion) or $94.5 billion at a 7 percent discount rate over the useful lives of vehicles sold during MYs

2012–2016.

2. Summary of Costs and Benefits of
EPA’s GHG Standards

EPA has analyzed in detail the costs
and benefits of the final GHG standards.
Table I.C.2–1 shows EPA’s estimated lifetime discounted cost, benefits and net benefits for all vehicles projected to be sold in model years 2012–2016. It is important to note that there is significant overlap in costs and benefits for NHTSA’s CAFE program and EPA’s GHG program and therefore combined program costs and benefits are not a sum of the individual programs.



### TABLE 

### I.C.2–1—EPA’ S 

### E STIMATED 

### 2012–2016 M ODEL 

### Y EAR 

### L IFETIME 

### D ISCOUNTED 

### C OSTS 

### , B ENEFITS



### , AND 

### N ET 

### B ENEFITS 

### A SSUMING THE 

### $21/

T ON 

### SCC V ALUE abcd

[2007 dollars]

3% Discount rate $Billions

Costs ....................................... 51 .5
Benefits ................................... 240 

### TABLE 

### I.C.2–1—EPA’ S 

### E STIMATED 

### 2012–2016 M ODEL 

### Y EAR 

### L IFETIME 

### D ISCOUNTED 

### C OSTS 

### , B ENEFITS



### , AND 

### N ET 

### B ENEFITS 

### A SSUMING THE 

### $21/

T ON 

### SCC V ALUE abcd

### —Continued

[2007 dollars]

3% Discount rate $Billions

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 thepurposes of this overview presentation of estimated costs and benefits EPA is showing the benefits associated with the marginal valuedeemed 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. d Monetized GHG benefits exclude the value of reductions in non-CO 2 GHG emissions (HFC, CH 4 and N 2 O) expected under this final rule. Although EPA has not monetized the benefits of reductions in these non-CO 2 emissions, the value of these reductions should not be interpreted as zero. Rather, the reductions in non-CO 2 GHGs will contribute to this rule’s climate benefits, as explained in SectionIII.F.2. The SCC TSD notes the difference between the social cost of non-CO 2 emissions and CO 2 emissions, and specifies a goal to develop methods to value non-CO 2 emissions in future analyses.

Table I.C.2–2 shows EPA’s estimated lifetime fuel savings and CO 2 equivalent
emission reductions for all vehicles sold in the model years 2012–2016. The values in Table I.C.2–2 are projected lifetime totals for each model year and
are not discounted. As documented in EPA’s Final RIA, the potential credit transfer between cars and trucks may change the distribution of the fuel savings and GHG emission impacts
between cars and trucks. As discussed above with respect to NHTSA’s CAFE standards, it is important to note that
NHTSA’s CAFE standards and EPA’s GHG standards will both be in effect,
and each will lead to increases in average fuel economy and reductions in

CO 2 emissions. The two agencies’ standards together comprise the National Program, and this discussion of
costs and benefits of EPA’s GHG standards does not change the fact that both the CAFE and GHG standards, jointly, are the source of the benefits and costs of the National Program.



### TABLE 

### I.C.2–2—EPA’ S 

### E STIMATED 

### 2012–2016 M ODEL 

### Y EAR 

### L IFETIME 

### F UEL 

### S AVED AND 

### GHG E MISSIONS 

### AVOIDED

2012 2013 2014 2015 2016 Total

Cars .................. Fuel (billion gallons) ...................................... 4 .0 5 .5 7 .3 10 .5 14 .3 41 .6 Fuel (billion barrels) ...................................... 0 .10 0 .13 0 .17 0 .25 0 .34 0 .99

CO 2 EQ (mmt) .............................................. 49 .3 68 .5 92 .7 134 177 521


### 25347 Federal Register / Vol. 75, No. 88 / Friday, May 7, 2010 / Rules and Regulations

TABLE 

### I.C.2–2—EPA’ S 

### E STIMATED 

### 2012–2016 M ODEL 

### Y EAR 

### L IFETIME 

### F UEL 

### S AVED AND 

### GHG E MISSIONS 

### AVOIDED 

### — Continued

2012 2013 2014 2015 2016 Total

Light Trucks ...... Fuel (billion gallons) ...................................... 3 .3 5 .0 6 .6 9 .0 12 .2 36 .1 Fuel (billion barrels) ...................................... 0 .08 0 .12 0 .16 0 .21 0 .29 0 .86
CO 2 EQ (mmt) .............................................. 39 .6 61 .7 81 .6 111 147 441

Combined .. Fuel (billion gallons) ...................................... 7 .3 10 .5 13 .9 19 .5 26 .5 77 .7 Fuel (billion barrels) ...................................... 0 .17 0 .25 0 .33 0 .46 0 .63 1 .85
CO 2 EQ (mmt) .............................................. 88 .8 130 174 244 325 962

Table I.C.2–3 shows EPA’s estimated
lifetime discounted benefits for all vehicles sold in model years 2012–2016. Although EPA estimated the benefits
associated with four different values of a one ton GHG reduction ($5, $21, $35, $65), for the purposes of this overview presentation of estimated benefits EPA is showing the benefits associated with one of these marginal values, $21 per
ton of CO 2 , in 2007 dollars and 2010 emissions. Table I.C.2–3 presents benefits based on the $21 value. Section III.H presents the four marginal values
used to estimate monetized benefits of
GHG reductions and Section III.H presents the program benefits using each of the four marginal values, which represent only a partial accounting of
total benefits due to omitted climate change impacts and other factors that are not readily monetized. The values in
the table are discounted values for each model year of vehicles throughout their projected lifetimes. The benefits include all benefits considered by EPA such as fuel savings, GHG reductions, PM benefits, energy security and other externalities such as reduced refueling and accidents, congestion and noise.

The lifetime discounted benefits are

shown for one of four different social cost of carbon (SCC) values considered by EPA. The values in Table I.C.2–3 do

not include costs associated with new technology required to meet the GHG

standard.



### TABLE 

### I.C.2–3—EPA’ S 

### E STIMATED 

### 2012–2016 M ODEL 

### Y EAR 

### L IFETIME 

### D ISCOUNTED 

### B ENEFITS 

### A SSUMING THE 

### $21/T ON 

### SCC V ALUE abc

[Billions of 2007 dollars]

Discount rate Model year

2012 2013 2014 2015 2016 Total

3% ............................................................ $21.8 $32.0 $42.8 $60.8 $83.3 $240

7% ............................................................ 17.4 25.7 34.2 48.6 66.4 192

a The benefits include all benefits considered by EPA such as the economic value of reduced fuel consumption and accompanying sav ings in refueling time, climate-related economic benefits from reducing emissions of CO 2 (but not other GHGs), economic benefits from reducing emissions of PM and other air pollutants that contribute to its formation, and reductions in energy security externalities caused b y U.S. petroleum consumption and imports. The analysis also includes disbenefits stemming from additional vehicle use, such as the economic damagescaused by accidents, congestion and noise.

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

c Monetized GHG benefits exclude the value of reductions in non-CO 2 GHG emissions (HFC, CH 4 and N 2 O) expected under this final rule. Although EPA has not monetized the benefits of reductions in these non-CO 2 emissions, the value of these reductions should not be interpreted as zero. Rather, the reductions in non-CO 2 GHGs will contribute to this rule’s climate benefits, as explained in Section III.F.2. The SCC TSD notes the difference between the social cost of non-CO 2 emissions and CO 2 emissions, and specifies a goal to develop methods to value non-CO 2 emissions in future analyses. Also, as noted in Section III.H, SCC increases over time. The $21/ton value applies to 2010 emiss ions and grows larger over time.

Table I.C.2–4 shows EPA’s estimated lifetime fuel savings, 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.C.2–4 are totals for the five model years throughout their projected lifetime and are not
discounted. The monetized values
shown in Table I.C.2–4 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

monetized values in Table I.C.2–4 reflect both a 3 percent and a 7 percent

discount rate as noted.



### TABLE 

### I.C.2–4—EPA’ S 

### E STIMATED 

### 2012–2016 M ODEL 

### Y EAR 

### L IFETIME 

### F UEL 

### S AVINGS 

### , CO 2 

### E MISSION 

### R EDUCTIONS



### , AND 

### D ISCOUNTED 

### M ONETIZED 

### B ENEFITS AT A 

### 3% D ISCOUNT 

### R ATE

[Monetized values in 2007 dollars]

Amount $ value (billions)

Fuel savings ...................................................................................................... 1.8 billion b arrels ................................. $182, 3% discount rate. $142, 7% discount rate.


### 25348 Federal Register / Vol. 75, No. 88 / Friday, May 7, 2010 / Rules and Regulations

TABLE 

### I.C.2–4—EPA’ S 

### E STIMATED 

### 2012–2016 M ODEL 

### Y EAR 

### L IFETIME 

### F UEL 

### S AVINGS 

### , CO 2 

### E MISSION 

### R EDUCTIONS



### , AND 

### D ISCOUNTED 

### M ONETIZED 

### B ENEFITS AT A 

### 3% D ISCOUNT 

### R ATE 

### —Continued

[Monetized values in 2007 dollars]

Amount $ value (billions)

CO 2e emission reductions (CO 2 portion valued assuming $21/ton CO 2 in

2010). 962 MMT CO 2e ................................... $17 a b

.

a $17 billion for 858 MMT of reduced CO 2 emissions. As noted in Section III.H, the $21/ton value applies to 2010 emissions and grows larger over time. Monetized GHG benefits exclude the value of reductions in non-CO 2 GHG emissions (HFC, CH 4 and N 2 O) expected under this final rule. Although EPA has not monetized the benefits of reductions in these non-CO 2 emissions, the value of these reductions should not be interpreted as zero. Rather, the reductions in non-CO 2 GHGs will contribute to this rule’s climate benefits, as explained in Section III.F.2. The SCC TSD notes the difference between the social cost of non-CO 2 emissions and CO 2 emissions, and specifies a goal to develop methods to value non-CO 2 emissions in future analyses.

b Note that net present value of reduced CO 2 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 int ernal consistency. Refer to Section III.H for more detail.

Table I.C.2–5 shows EPA’s estimated incremental and total technology outlays for cars and trucks for each of the model years 2012–2016. The technology outlays shown in Table I.C.2–5 are for the industry as a whole and do not account for fuel savings associated with the program.



### TABLE 

### I.C.2–5—EPA’ S 

### E STIMATED 

### I NCREMENTAL 

### T ECHNOLOGY 

### O UTLAYS

[Billions of 2007 dollars]

2012 2013 2014 2015 2016 Total

Cars .......................................................... $3.1 $5.0 $6.5 $8.0 $9.4 $31.9

Trucks ...................................................... 1.8 3.0 3.9 4.8 6.2 19.7

Combined .......................................... 4.9 8.0 10.3 12.7 15.6 51.5

Table I.C.2–6 shows EPA’s estimated incremental cost increase of the average new vehicle for each model year 2012–
2016. The values shown are incremental
to a baseline vehicle and are not cumulative. In other words, the estimated increase for 2012 model year cars is $342 relative to a 2012 model year car absent the National Program.
The estimated increase for a 2013 model year car is $507 relative to a 2013 model year car absent the National Program (not $342 plus $507).



### TABLE 

### I.C.2–6—EPA’ S 

### E STIMATED 

### I NCREMENTAL 

### I NCREASE IN 

### AVERAGE 

### N EW 

### V EHICLE 

### C OST

[2007 dollars per unit]

2012 2013 2014 2015 2016

Cars ...................................................................................... $342 $507 $631 $749 $869 Trucks .................................................................................. 314 496 652 820 1,098

Combined ...................................................................... 331 503 639 774 948

D. Background and Comparison of NHTSA and EPA Statutory Authority

Section I.C of the proposal contained
a detailed overview discussion of the NHTSA and EPA statutory authorities.
In addition to the discussion in the proposal, each agency discusses comments pertaining to its statutory authority and the agency’s responses in Sections III and IV of this notice, respectively.

II. Joint Technical Work Completed for
This Final Rule

A. Introduction

In this section NHTSA and EPA discuss several aspects of the joint technical analyses on which the two agencies collaborated. These analyses are common to the development of each agency’s final standards. Specifically we discuss: the development of the vehicle market forecast used by each agency for assessing costs, benefits, and effects, the development of the attribute-based standard curve shapes, the determination of the relative stringency

between the car and truck fleet standards, the technologies the agencies

evaluated and their costs and effectiveness, and the economic assumptions the agencies included in their analyses. The Joint Technical Support Document (TSD) discusses the agencies’ joint technical work in more

detail. B. Developing the Future Fleet for Assessing Costs, Benefits, and Effects

1. Why did the agencies establish a
baseline and reference vehicle fleet?

In order to calculate the impacts of the EPA and NHTSA regulations, it is necessary to estimate the composition of
the future vehicle fleet absent these regulations, to provide a reference point relative to which costs, benefits, and effects of the regulations are assessed. As in the proposal, EPA and NHTSA have developed this comparison fleet in two parts. The first step was to develop a baseline fleet based on model year 2008 data. The second step was to project that fleet into model years 2011–
2016. This is called the reference fleet.


### 25349 Federal Register / Vol. 75, No. 88 / Friday, May 7, 2010 / Rules and Regulations

44 That is, the manufacturers who have traditionally paid fines under EPCA instead of complying with the CAFE standards were

‘‘ allowed, ’’ for purposes of the reference fleet, to reach only the CAFE level at which paying fines became more cost-effective than adding technology,
even if that fell short of the MY 2011 standards.

45 40 CFR 600.512–08, Model Year Report. 46 The agencies have also looked at the impact of the rule in EIA’s projection, and concluded that the impact was small. EPA and NHTSA have evaluated the differences between the AEO 2010 (early draft)
and AEO 2009 and found little difference in the fleet projections (or fuel prices). This analysis can be found in the memo to the docket: Kahan, A. and Pickrell, D. Memo to Docket EPA–HQ–OAR–2009–
0472 and Docket NHTSA–2009–0059. ‘‘ Energy Information Administration’s Annual Energy
Outlook 2009 and 2010. ’’ March 24, 2010.

47 See, e.g., 74 FR 49484. The third step was to modify that MY
2011–2016 reference fleet such that it had sufficient technology to meet the
MY 2011 CAFE standards. This finalversion of the reference fleet is the lightduty fleet estimated to exist in MY 2012–2016 in the absence of today’s standards, based on the assumption that
manufacturers would continue to meet the MY 2011 CAFE standards (or pay civil penalties allowed under EPCA 44 )
in the absence of further increases in the stringency of CAFE standards. Each agency used this approach to develop a
final reference fleet to use in its modeling. All of the agencies’ estimates of emission reductions, fuel economy improvements, costs, and societal impacts are developed in relation to the respective reference fleets.

EPA and NHTSA proposed a transparent approach to developing the baseline and reference fleets, largely working from publicly available data. This proposed approach differed from previous CAFE rules, which relied on confidential manufacturers’ product plan information to develop the baseline. Most of the public comments to the NPRM addressing this issue supported this methodology for developing the inputs to the rule’s analysis. Because the input sheets can be made public, stakeholders can verify
and check EPA’s and NHTSA’s modeling, and perform their own analyses with these datasets. In this final rulemaking, EPA and NHTSA are using an approach very similar to that proposed, continuing to rely on publicly
available data as the basis for the
baseline and reference fleets.

2. How did the agencies develop the
baseline vehicle fleet?

At proposal, EPA and NHTSA developed a baseline fleet comprised of model year 2008 data gathered from
EPA’s emission certification and fuel economy database. MY 2008 was used
as the basis for the baseline vehicle fleet
because it was the most recent model year for which a complete set of data is publicly available. This remains the case. Manufacturers are not required to submit final sales and mpg figures for MY 2009 until April 2010, 45 after the
CAFE standard’s mandated promulgation date. Consequently, in this final rule, EPA and NHTSA made no changes to the method or the results of the MY 2008 baseline fleet used at proposal, except for some specific corrections to engineering inputs for
some vehicle models reflected in the market forecast input to NHTSA’s CAFE
model. More details about how the agencies constructed this baseline fleet can be found in Chapter 1.2 of the Joint TSD. Corrections to engineering inputs
for some vehicle models in the market forecast input to NHTSA’s CAFE model are discussed in Chapter 2 of the Joint

TSD.

3. How did the agencies develop the projected MY 2011–2016 vehicle fleet?

EPA and NHTSA have based the projection of total car and total light
truck sales for MYs 2011–2016 on projections made by the Department of Energy’s Energy Information Administration (EIA). EIA publishes a mid-term projection of national energy use called the Annual Energy Outlook (AEO). This projection utilizes a number
of technical and econometric models which are designed to reflect both economic and regulatory conditions expected to exist in the future. In support of its projection of fuel use by light-duty vehicles, EIA projects sales of new cars and light trucks. In the proposal, the agencies used the three reports published by EIA as part of the AEO 2009. We also stated that updated versions of these reports could be used in the final rules should AEO timely issue a new version. EIA published an early version of its AEO 2010 in December 2009, and the agencies are making use of it in this final rulemaking. The differences in projected sales in the 2009 report (used in the NPRM) and the early 2010 report are very small, so NHTSA and EPA have decided to simply scale the NPRM volumes for cars and trucks (in the aggregate) to match those in the 2010 report. We thus employ the sales projections from the scaled updated 2009 Annual Energy Outlook, which is equivalent to AEO 2010 Early Release, for the final rule. The scaling factors for each model year are presented in Chapter 1 of the Joint TSD for this final
rule.

The agencies recognize that AEO 2010 Early Release does include some impacts of future projected increases in CAFE stringency. We have closely
examined the difference between AEO 2009 and AEO 2010 Early Release and
we believe the differences in total sales and the car/truck split attributed to
considerations of the standard in the
final rule are small. 46 In the AEO 2010 Early Release, EIA projects that total light-duty vehicle sales will gradually recover from their currently depressed levels by around 2013. In 2016, car sales are projected to be 9.4 million (57 percent) and truck sales are projected to be 7.1 million (43 percent). Although the total level of
sales of 16.5 million units is similar to pre-2008 levels, the fraction of car sales is projected to be higher than that existing in the 2000–2007 timeframe. This projection reflects the impact of higher fuel prices, as well as EISA’s requirement that the new vehicle fleet average at least 35 mpg by MY 2020. The agencies note that AEO does not represent the fleet at a level of detail sufficient to explicitly account for the reclassification—promulgated as part of
NHTSA’s final rule for MY 2011 CAFE
standards—of a number of 2-wheel drive sport utility vehicles from the
truck fleet to the car fleet for MYs 2011 and after. Sales projections of cars and trucks for future model years can be found in the Joint TSD for these final
rules.

In addition to a shift towards more car sales, sales of segments within both the
car and truck markets have been changing and are expected to continue to change. Manufacturers are introducing more crossover models which offer much of the utility of SUVs but use more car-like designs. The AEO 2010 report does not, however, distinguish such changes within the car
and truck classes. In order to reflect these changes in fleet makeup, EPA and
NHTSA considered several other available forecasts. EPA purchased and
shared with NHTSA forecasts from two well-known industry analysts, CSM Worldwide (CSM), and J.D. Powers.
NHTSA and EPA decided to use the forecast from CSM, modified as described below, for several reasons presented in the NPRM preamble 47 and draft Joint TSD. The changes between company market share and industry market segments were most significant from 2011–2014, while for 2014–2015 the changes were relatively small. Noting this, and lacking a credible forecast of company and segment shares after 2015, the agencies assumed 2016 market share and market segments to be
the same as for 2015.


### 25350 Federal Register / Vol. 75, No. 88 / Friday, May 7, 2010 / Rules and Regulations

48 GM argued that the unusually large volume of large pickups led to higher overall requirements for those vehicles. As discussed below, the agencies’ analysis for the final rule corrects the number of large pickups. With this correction and other updates to the agencies’ market forecast and other analytical inputs, the target functions defining the final standards (and achieving the average required performance levels defining the national program) are very similar to those from the NPRM, especially for light trucks, as illustrated below in Figures II.C–
7 and II.C–8.

49 These include the Ford F–250 & F–350, Econoline E–250, & E–350; Chevy Express, Silverado 2500, & 3500; GMC Savana, Dodge 2500, & 3500; among others.

50 The CSM Sales Forecast Excel file ( ‘‘ CSM North America Sales Forecasts 2Q09 3Q09 4Q09 for the

Docket’’ ) is available in the docket (Docket EPA– HQ–OAR–2009–0472). CSM Worldwide provides quarterly
sales forecasts for the automotive industry. In the NPRM, the agencies
identified a concern with the 2nd quarter CSM forecast that was used as a basis for the projection. CSM projections at that time were based on an industry that was going through a significant financial transition, and as a
result the market share forecasts for some companies were impacted in surprising ways. As the industry’s
situation has settled somewhat over the past year, the 4th quarter projection appears to address this issue—for example, it shows nearly a two-fold increase in sales for Chrysler compared to significant loss of market share shown for Chrysler in the 2nd quarter projection. Additionally, some commenters, such as GM, recognized that the fleet appeared to include an unusually high number of large pickup
trucks. 48 In fact, the agencies discovered (independently of the comments) that
CSM’s standard forecast included all vehicles below 14,000 GVWR, including class 2b and 3 heavy duty vehicles, which are not regulated by this final
rule. 49 The commenters were thus correct that light duty reference fleet projections at proposal had more full
size trucks and vans due to the mistaken inclusion of the heavy duty versions of those vehicles. The agencies requested a separate data forecast from CSM that filtered their 4th quarter projection to exclude these heavy duty vehicles. The agencies then used this filtered 4th quarter forecast for the final rule. A detailed comparison of the market by
manufacturer can be found in the final TSD. For the public’s reference, copies of the 2nd, 3rd, and 4th quarter CSM forecasts have been placed in the docket for this rulemaking. 50

We then projected the CSM forecasts for relative sales of cars and trucks by manufacturer and by market segment
onto the total sales estimates of AEO
2010. Tables II.B.3–1 and II.B.3–2 show the resulting projections for the reference 2016 model year and compare
these to actual sales that occurred in baseline 2008 model year. Both tables show sales using the traditional definition of cars and light trucks.



### TABLE 

### II.B.3–1—A NNUAL 

### S ALES OF 

### L IGHT 

### -D UTY 

### V EHICLES BY 

### M ANUFACTURER IN 

### 2008 AND 

### E STIMATED FOR 

### 2016

Cars Light trucks Total

2008 MY 2016 MY 2008 MY 2016 MY 2008 MY 2016 MY

BMW ................................................................................ 291,796 424,923 61,324 171,560 353,120 596,4 82 Chrysler ............................................................................ 537,808 340,908 1,119,397 525,128 1,657,205 866,037 Daimler ............................................................................. 208,052 272,252 79,135 126,880 287,187 399, 133 Ford .................................................................................. 709,583 1,118,727 1,158,805 1,363,256 1,8 68,388 2,481,983 General Motors ................................................................ 1,370,280 1,283,937 1,749,227 1,585,828 3,119,5072,869,766 Honda ............................................................................... 899,498 811,214 612,281 671,437 1,511,779 1 ,482,651 Hyundai ............................................................................ 270,293 401,372 120,734 211,996 391,027 613, 368 Kia .................................................................................... 145,863 455,643 135,589 210,717 281,452 666,360 Mazda .............................................................................. 191,326 350,055 111,220 144,992 302,546 495, 047 Mitsubishi ......................................................................... 76,701 49,914 24,028 88,754 100,729 138,668 Porsche ............................................................................ 18,909 33,471 18,797 16,749 37,706 50,220 Nissan .............................................................................. 653,121 876,677 370,294 457,114 1,023,415 1 ,333,790 Subaru .............................................................................. 149,370 230,705 49,211 95,054 198,581 325,7 60 Suzuki .............................................................................. 68,720 97,466 45,938 26,108 114,658 123,574 Tata .................................................................................. 9,596 65,806 55,584 42,695 65,180 108,501 Toyota .............................................................................. 1,143,696 2,069,283 1,067,804 1,249,719 2,2 11,500 3,319,002 Volkswagen ...................................................................... 290,385 586,011 26,999 124,703 317,384 710,011

Total .......................................................................... 7,034,997 9,468,365 6,806,367 7,112,689 13,841,3 64 16,580,353



### TABLE 

### II.B.3–2—A NNUAL 

### S ALES OF 

### L IGHT 

### -D UTY 

### V EHICLES BY 

### M ARKET 

### S EGMENT IN 

### 2008 AND 

### E STIMATED FOR 

### 2016

Cars Light trucks

2008 MY 2016 MY 2008 MY 2016 MY

Full-Size Car ..................................... 829,896 530,945 Full-Size Pickup ............................... 1,331,989 1,37 9,036 Luxury Car ........................................ 1,048,341 1,548,242 Mid-Size Pickup ............................... 452,013 332 ,082 Mid-Size Car ..................................... 2,166,849 2,550,561 Full-Size Van .................................... 33,384 65 ,650 Mini Car ............................................. 617,902 1,565,373 Mid-Size Van .................................... 719,529 839,194 Small Car .......................................... 1,912,736 2,503,566 Mid-Size MAV * ................................ 110,353 116 ,077 Specialty Car ..................................... 459,273 769,679 Small MAV ....................................... 231,265 62,51 4 Full-Size SUV * ................................. 559,160 232,619 Mid-Size SUV ................................... 436,080 162,502 Small SUV ........................................ 196,424 108,858 Full-Size CUV * ................................. 264,717 260,662 Mid-Size CUV ................................... 923,165 1,372,200 Small CUV ........................................ 1,548,288 2,181,296


### 25351 Federal Register / Vol. 75, No. 88 / Friday, May 7, 2010 / Rules and Regulations

51 Note : In the NPRM, Ford’s 2008 sales per segment, and the total number of cars was different than shown here. The change in values is due to a correction of vehicle segments for some of Ford’s
vehicles.



### TABLE 

### II.B.3–2—A NNUAL 

### S ALES OF 

### L IGHT 

### -D UTY 

### V EHICLES BY 

### M ARKET 

### S EGMENT IN 

### 2008 AND 

### E STIMATED FOR 

### 2016—
Continued

Cars Light trucks

2008 MY 2016 MY 2008 MY 2016 MY

Total Sales ** ............................. 7,034,997 9,468,365 ........................................................... 6,806, 367 7,079,323

* MAV—Multi-Activity Vehicle, SUV—Sport Utility Vehicle, CUV—Crossover Utility Vehicle. ** Total Sales are based on the classic Car/Truck definition.

Determining which traditionallydefined trucks will be defined as cars for purposes of this final rule using the revised definition established by NHTSA for MYs 2011 and beyond requires more detailed information
about each vehicle model. This is described in greater detail in Chapter 1
of the final TSD.

The forecasts obtained from CSM provided estimates of car and truck sales by segment and by manufacturer, but not by manufacturer for each market segment. Therefore, NHTSA and EPA
needed other information on which to base these more detailed projected market splits. For this task, the agencies used as a starting point each manufacturer’s sales by market segment from model year 2008, which is the baseline fleet. Because of the larger number of segments in the truck market, the agencies used slightly different methodologies for cars and trucks.

The first step for both cars and trucks
was to break down each manufacturer’s 2008 sales according to the market segment definitions used by CSM. For example, the agencies found that
Ford’s 51 cars sales in 2008 were broken
down as shown in Table II.B.3–3:



### TABLE 

### II.B.3–3—B REAKDOWN OF 

### F ORD 

### ’ S 

### 2008 C AR 

### S ALES

Full-size cars ....................... 160,857 units. Mid-size Cars ...................... 170,399 units. Small/Compact Cars ........... 180,249 units. Subcompact/Mini Cars ........ None. Luxury cars .......................... 87,272 units. Specialty cars ...................... 110,805 units.

EPA and NHTSA then adjusted each
manufacturer’s sales of each of its car segments (and truck segments, separately) so that the manufacturer’s total sales of cars (and trucks) matched
the total estimated for each future model year based on AEO and CSM forecasts. For example, as indicated in Table II.B.3–1, Ford’s total car sales in 2008 were 709,583 units, while the agencies project that they will increase to 1,113,333 units by 2016. This represents an increase of 56.9 percent. Thus, the agencies increased the 2008 sales of each Ford car segment by 56.9 percent. This produced estimates of future sales
which matched total car and truck sales per AEO and the manufacturer breakdowns per CSM. However, the sales splits by market segment would not necessarily match those of CSM (shown for 2016 in Table II.B.3–2).

In order to adjust the market segment mix for cars, the agencies first adjusted sales of luxury, specialty and other cars.
Since the total sales of cars for each manufacturer were already set, any changes in the sales of one car segment had to be compensated by the opposite change in another segment. For the luxury, specialty and other car segments, it is not clear how changes in sales would be compensated. For example, if luxury car sales decreased, would sales of full-size cars increase, mid-size cars, and so on? The agencies have assumed that any changes in the sales of cars within these three segments were compensated for by proportional changes in the sales of the other four car segments. For example, for 2016, the figures in Table II.B.3–2 indicate that luxury car sales in 2016 are 1,548,242 units. Luxury car sales are 1,048,341 units in 2008. However, after adjusting 2008 car sales by the change in total car sales for 2016 projected by EIA and a change in manufacturer market share per CSM, luxury car sales decreased to 1,523,171 units. Thus, overall for 2016, luxury car sales had to increase by 25,071 units or 6 percent. The agencies accordingly increased the luxury car sales by each manufacturer by this percentage. The absolute decrease in luxury car sales was spread across sales of full-size, mid-size, compact and subcompact cars in proportion to each manufacturer’s sales in these segments in 2008. The same adjustment process was used for specialty cars and the

‘‘ other cars ’’ segment defined by CSM.

The agencies used a slightly different approach to adjust for changing sales of the remaining four car segments. Starting with full-size cars, the agencies again determined the overall percentage change that needed to occur in future year full-size car sales after 1) adjusting for total sales per AEO 2010, 2) adjusting for manufacturer sales mix per CSM and 3) adjusting the luxury, specialty and other car segments, in order to meet the segment sales mix per CSM. Sales of each manufacturer’s large cars were adjusted by this percentage. However, instead of spreading this change over the remaining three segments, the agencies assigned the entire change to mid-size vehicles. The agencies did so because the CSM data followed the trend of increasing volumes of smaller cars while reducing volumes of larger cars. If a consumer had previously purchased a full-size car, we thought it unlikely that their next purchase would decrease by two size categories, down to a subcompact. It seemed more reasonable to project that they would drop one vehicle size category smaller. Thus, the change in
each manufacturer’s sales of full-size cars was matched by an opposite change (in absolute units sold) in mid-size cars.

The same process was then applied tomid-size cars, with the change in midsize car sales being matched by an opposite change in compact car sales. This process was repeated one more time for compact car sales, with changes in sales in this segment being matched by the opposite change in the sales of subcompacts. The overall result was a projection of car sales for model years
2012–2016—the reference fleet—which matched the total sales projections of
the AEO forecast and the manufacturer and segment splits of the CSM forecast. These sales splits can be found in Chapter 1 of the Joint TSD for this final
rule.

As mentioned above, the agencies applied a slightly different process to truck sales, because the agencies could not confidently project how the change in sales from one segment preferentially went to or came from another particular segment. Some trend from larger
vehicles to smaller vehicles would have been possible. However, the CSM forecasts indicated large changes in total sport utility vehicle, multi-activity
vehicle and cross-over sales which could not be connected. Thus, the


### 25352 Federal Register / Vol. 75, No. 88 / Friday, May 7, 2010 / Rules and Regulations

52 Note : In the NPRM this example showed 29 percent instead of 7 percent. The significant decrease was due to using the filtered 4th quarter CSM forecast. Commenters, such as GM, had commented that we had too many full-size trucks and vans, and this change addresses their comment. 53 Note that WardsAuto.com is a fee-based service, but all information is public to subscribers.

54 Motortrend.com and Edmunds.com are free,
no-fee Internet sites. agencies applied an iterative, but straightforward process for adjusting
2008 truck sales to match the AEO and
CSM forecasts.

The first three steps were exactly the
same as for cars. EPA and NHTSA broke
down each manufacturer’s truck sales into the truck segments as defined by CSM. The agencies then adjusted all manufacturers’ truck segment sales by
the same factor so that total truck sales in each model year matched AEO projections for truck sales by model year. The agencies then adjusted each manufacturer’s truck sales by segment proportionally so that each manufacturer’s percentage of total truck sales matched that forecast by CSM. This again left the need to adjust truck sales by segment to match the CSM forecast for each model year.

In the fourth step, the agencies adjusted the sales of each truck segment by a common factor so that total sales for that segment matched the
combination of the AEO and CSM forecasts. For example, projected sales of large pickups across all manufacturers were 1,286,184 units in 2016 after adjusting total sales to match AEO’s forecast and adjusting each
manufacturer’s truck sales to match
CSM’s forecast for the breakdown of sales by manufacturer. Applying CSM’s forecast of the large pickup segment of
truck sales to AEO’s total sales forecast indicated total large pickup sales of 1,379,036 units. Thus, we increased each manufacturer’s sales of large pickups by 7 percent. 52 The agencies applied the same type of adjustment to all the other truck segments at the same
time. The result was a set of sales projections which matched AEO’s total truck sales projection and CSM’s market segment forecast. However, after this step, sales by manufacturer no longer met CSM’s forecast. Thus, we repeated step three and adjusted each manufacturer’s truck sales so that they
met CSM’s forecast. The sales of each truck segment (by manufacturer) were adjusted by the same factor. The resulting sales projection matched AEO’s total truck sales projection and CSM’s manufacturer forecast, but sales by market segment no longer met CSM’s forecast. However, the difference between the sales projections after this fifth step was closer to CSM’s market segment forecast than it was after step three. In other words, the sales projection was converging to the desired result. The agencies repeated these adjustments, matching manufacturer sales mix in one step and then market segment in the next a total of 19 times. At this point, we were able to match the market segment splits exactly and the manufacturer splits were within 0.1 percent of our goal, which is well within the needs of this analysis.

The next step in developing the
reference fleets was to characterize the
vehicles within each manufacturersegment combination. In large part, this
was based on the characterization of the specific vehicle models sold in 2008— i.e., the vehicles comprising the baseline
fleet. EPA and NHTSA chose to base our
estimates of detailed vehicle
characteristics on 2008 sales for several reasons. One, these vehicle
characteristics are not confidential and can thus be published here for careful review by interested parties. Two, because it is constructed beginning with actual sales data, this vehicle fleet is
limited to vehicle models known to satisfy consumer demands in light of price, utility, performance, safety, and
other vehicle attributes.

As noted above, the agencies gathered
most of the information about the 2008
baseline vehicle fleet from EPA’s emission certification and fuel economy
database. The data obtained from this source included vehicle production volume, fuel economy, engine size, number of engine cylinders, transmission type, fuel type, etc. EPA’s
certification database does not include a detailed description of the types of fuel economy-improving/CO 2 -reducing technologies considered in this final rule. Thus, the agencies augmented this description with publicly available data which includes more complete technology descriptions from Ward’s Automotive Group. 53 In a few instances when required vehicle information (such as vehicle footprint) was not available from these two sources, the agencies obtained this information from publicly accessible Internet sites such as
Motortrend.com and Edmunds.com. 54

The projections of future car and truck sales described above apply to each manufacturer’s sales by market segment. The EPA emissions
certification sales data are available at a much finer level of detail, essentially vehicle configuration. As mentioned above, the agencies placed each vehicle
in the EPA certification database into one of the CSM market segments. The agencies then totaled the sales by each manufacturer for each market segment.
If the combination of AEO and CSM
forecasts indicated an increase in a given manufacturer’s sales of a particular market segment, then the
sales of all the individual vehicle configurations were adjusted by the same factor. For example, if the Prius represented 30 percent of Toyota’s sales of compact cars in 2008 and Toyota’s sales of compact cars in 2016 was projected to double by 2016, then the sales of the Prius were doubled, and the Prius sales in 2016 remained 30 percent of Toyota’s compact car sales.

The projection of average footprint for both cars and trucks remained virtually constant over the years covered by the final rulemaking. This occurrence is strictly a result of the CSM projections.
There are a number of trends that occur in the CSM projections that caused the average footprint to remain constant. First, as the number of subcompacts increases, so do the number of 2-wheel drive crossover vehicles (that are regulated as cars). Second, truck volumes have many segment changes during the rulemaking time frame. There is no specific footprint related trend in any segment that can be linked to the unchanging footprint, but there is a trend that non-pickups’ volumes will move from truck segments that areladder frame to those that are unibodytype vehicles. A table of the footprint projections is available in the TSD as well as further discussion on this topic.

4. How was the development of the
baseline and reference fleets for this
Final Rule different from NHTSA’s historical approach?

NHTSA has historically based its analysis of potential new CAFE standards on detailed product plans the agency has requested from manufacturers planning to produce light
vehicles for sale in the United States. Although the agency has not attempted to compel manufacturers to submit such information, most major manufacturers
and some smaller manufacturers have voluntarily provided it when requested.

The proposal discusses many of the advantages and disadvantages of the market forecast approach used by the agencies, including the agencies’ interest in examining product plans as a check on the reference fleet developed by the agencies for this rulemaking. One of the primary reasons for the request
for data in 2009 was to obtain permission from the manufacturers to make public their product plan information for model years 2010 and
2011. There are a number of reasons that this could be advantageous in the development of a reference fleet. First,


### 25353 Federal Register / Vol. 75, No. 88 / Friday, May 7, 2010 / Rules and Regulations

55 An example of this is in the GM Pontiac line, which is in the process of being phased out during the course of this rulemaking. GM has similar vehicles within their other brands (like Chevy) that

will ‘‘ presumably ’’ pick up the loss in Pontiac share. We model this simply by leaving the Pontiac brand

in. some known changes to the fleet may not be captured by the approach of solely using publicly available information. For example, the agencies’
current market forecast includes some
vehicles for which manufacturers have announced plans for elimination or drastic production cuts such as the Chevrolet Trailblazer, the Chrysler PT Cruiser, the Chrysler Pacifica, the Dodge Magnum, the Ford Crown Victoria, the Mercury Sable, the Pontiac Grand Prix,
the Pontiac G5 and the Saturn Vue. These vehicle models appear explicitly in market inputs to NHTSA’s analysis, and are among those vehicle models included in the aggregated vehicle types appearing in market inputs to EPA’s analysis. However, although the agencies recognize that these specific vehicles will be discontinued, we
continue to include them in the market forecast because they are useful as a surrogate for successor vehicles that may appear in the rulemaking time frame to replace the discontinued vehicles in that market segment. 55

Second, the agencies’ market forecast does not include some forthcoming vehicle models, such as the Chevrolet Volt, the Ford Fiesta and several publicly announced electric vehicles, including the announcements from Nissan regarding the Leaf. Nor does it
include several MY 2009 or 2010 vehicles, such as the Honda Insight, the Hyundai Genesis and the Toyota Venza, as our starting point for defining specific vehicle models in the reference
fleet was Model Year 2008. Additionally, the market forecast does not account for publicly announced technology introductions, such as Ford’s EcoBoost system, whose product plans specify which vehicles and how many are planned to have this technology. Chrysler Group LLC has announced plans to offer small- and medium-sized cars using Fiat powertrains. Were the agencies to rely on manufacturers’ product plans (that were submitted), the
market forecast would account for not only these specific examples, but also for similar examples that have not yet been announced publicly.

Some commenters, such as CBD and NESCAUM, suggested that the agencies’
omission of known future vehicles and technologies in the reference fleet causes inaccuracies, which CBD further suggested could lead the agencies to set lower standards. On the other hand, CARB commented that ‘‘ the likely impact of this omission is minor. ’’ Because the agencies’ analysis examines the costs and benefits of progressively adding technology to manufacturers’ fleets, the omission of future vehicles and technologies primarily affects how much additional technology (and, therefore, how much incremental cost and benefit) is available relative to the point at which the agencies’ examination of potential new standards begins. Thus, in fact, the omission only reflects the reference fleet, rather than the agencies’ conclusions regarding how stringent the standards should be. This is discussed further below. The agencies
believe the above-mentioned comments by CBD, NESCAUM, and others are based on a misunderstanding of the agencies’ approach to analyzing potential increases in regulatory stringency. The agencies also note that manufacturers do not always use technology solely to increase fuel economy, and that use of technology to
increase vehicles’ acceleration performance or utility would probably make that technology unavailable toward more stringent standards. Considering the incremental nature of the agencies’ analysis, and the counterbalancing aspects of potentially omitted technology in the reference fleet, the agencies believe their determination of the stringency of new standards has not been impacted by any
such omissions.

Moreover, EPA and NHTSA believe that not including such vehicles after MY 2008 does not significantly impact our estimates of the technology required to comply with the standards. If included, these vehicles could increase the extent to which manufacturers are,in the reference case, expected to overcomply with the MY 2011 CAFE standards, and could thereby make the new standards appear to cost less and yield less benefit relative to the reference case. However, in the agencies’ judgment, production of the most advanced technology vehicles, such as the Chevy Volt or the Nissan Leaf (for example), will most likely be too limited during MY 2011 through MY 2016 to significantly impact manufacturers’ compliance positions. While we are projecting the characteristics of the future fleet by extrapolating from the MY 2008 fleet, the primary difference between the
future fleet and the 2008 fleet in the same vehicle segment is the use of
additional CO 2 -reducing and fuel-saving technologies. Both the NHTSA and EPA models add such technologies to evaluate means of complying with the standards, and the costs of doing so. Thus, our future projections of the vehicle fleet generally shift vehicle designs towards those more likely to be typical of newer vehicles. Compared to using product plans that show continued fuel economy increases planned based on expectations that
CAFE standards will continue to increase, this approach helps to clarify
the costs and benefits of the new standards, as the costs and benefits of all fuel economy improvements beyond those required by the MY 2011 CAFE standards are being assigned to the final rules. In some cases, the ‘‘ actual ’’ (vs. projected or ‘‘ modeled ’’ ) new vehicles being introduced into the market by
manufacturers are done so in anticipation of this rulemaking. On the other hand, manufacturers may plan to continue using technologies to improve vehicle performance and/or utility, not just fuel economy. Our approach prevents some of these actual technological improvements and their associated cost and fuel economy improvements from being assumed in the reference fleet. Thus, the added technology will not be considered to be free (or having no benefits) for the purposes of this rule.

In this regard, the agencies further
note that manufacturer announcements regarding forward models (or future vehicle models) need not be accepted automatically. Manufacturers tend to limit accurate production intent
information in these releases for reasons such as: (a) Competitors will closely
examine their information for data in their product planning decisions; (b) the press coverage of forward model announcements is not uniform, meaning highly anticipated models have more coverage and materials than models that may be less exciting to the public and consistency and uniformity cannot be ensured with the usage of press information; and (c) these market projections are subject to change (sometimes significant), and manufacturers may not want to give the appearance of being indecisive, or
under/over-confident to their shareholders and the public with premature release of information.

NHTSA has evaluated the use of public manufacturer forward model press information to update the vehicle fleet inputs to the baseline and reference fleet. The challenges in this approach are evidenced by the continuous stream of manufacturer press releases throughout a defined rulemaking period. Manufacturers’ press releases suffer from the same types of inaccuracies that many commenters believe can affect product plans.


### 25354 Federal Register / Vol. 75, No. 88 / Friday, May 7, 2010 / Rules and Regulations

56 A full-size pickup might be offered with various combinations of cab style ( e.g., regular, extended, crew) and box length ( e.g., 5 1 ⁄ 2 ′ , 6 1 ⁄ 2 ′ , 8 ′ ) and, therefore, multiple footprint sizes. CAFE compliance data for MY 2008 data does not contain footprint information, and does not contain information that can be used to reliably identify which pickup entries correspond to footprint values estimable from public or commercial sources. Therefore, the agencies have used the known production levels of average values to represent all variants of a given pickup line ( e.g., all variants of the F–150 and the Sierra/Silverado) in order to calculate the sales-weighted average footprint value for each pickup family. Again, this has no impact on the results of our modeling effort, although it would require re-estimation if we were to examine light truck standards of a different shape. In the extreme, one single footprint value could be used for every vehicle sold by a single manufacturer as long as the fuel economy standard associated with this footprint value represented the sales-weighted, harmonic average of the fuel economy standards associated with each vehicle’s footprint values. 57 49 U.S.C. 32902(a)(3)(A). Manufacturers can often be overly optimistic in their press releases, both on projected date of release of new
models and on sales volumes.

More generally and more critically, as discussed in the proposal and as endorsed by many of the public comments, there are several advantages to the approach used by the agencies in this final rule. Most importantly, today’s
market forecast is much more transparent. The information sources used to develop today’s market forecast are all either in the public domain or available commercially. Another significant advantage of today’s market forecast is the agencies’ ability to assess more fully the incremental costs and benefits of the proposed standards. In addition, by developing baseline and reference fleets from common sources, the agencies have been able to avoid some errors—perhaps related to interpretation of requests—that have been observed in past responses to NHTSA’s requests. An additional advantage of the approach used for this rule is a consistent projection of the change in fuel economy and CO 2 emissions across the various vehicles from the application of new technology. With the approach used for this final rule, the baseline market data comes from actual vehicles (on the road today) which have actual fuel economy test data (in contrast to manufacturer estimates of future product fuel economy)—so there is no question what is the basis for the fuel economy or CO 2 performance of the baseline market data

as it is.

5. How does manufacturer product plan
data factor into the baseline used in this
Final Rule?

In the spring and fall of 2009, many manufacturers submitted product plans in response to NHTSA’s recent requests that they do so. NHTSA and EPA both have access to these plans, and both agencies have reviewed them in detail. A small amount of product plan data was used in the development of the baseline. The specific pieces of data are:

• Wheelbase.

• Track Width Front.

• Track Width Rear.

• EPS (Electric Power Steering).

• ROLL (Reduced Rolling Resistance).

• LUB (Advance Lubrication i.e. low weight oil).

• IACC (Improved Electrical Accessories).

• Curb Weight.

• GVWR (Gross Vehicle Weight Rating).

The track widths, wheelbase, curb weight, and GVWR for vehicles could have been looked up on the Internet (159 were), but were taken from the product plans when available for convenience. To ensure accuracy, a sample from each product plan was used as a check against the numbers
available from Motortrend.com. These numbers will be published in the baseline file since they can be easily looked up on the internet. On the other hand, EPS, ROLL, LUB, and IACC are difficult to determine without using manufacturer’s product plans. These items will not be published in the baseline file, but the data has been aggregated into the agencies’ baseline in the technology effectiveness and cost effectiveness for each vehicle in a way
that allows the baseline for the model to be published without revealing the
manufacturer’s data.

Also, some technical information that manufacturers have provided in product plans regarding specific vehicle models is, at least insofar as NHTSA and EPA have been able to determine, not available from public or commercial sources. While such gaps do not bear significantly on the agencies’ analysis, the diversity of pickup configurations necessitated utilizing a sales-weighted average footprint value 56 for many manufacturers’ pickups. Since our modeling only utilizes footprint in order
to estimate each manufacturer’s CO 2 or fuel economy standard and all the other
vehicle characteristics are available for each pickup configuration, this approximation has no practical impact on the projected technology or cost associated with compliance with the various standards evaluated. The only impact which could arise would be if the relative sales of the various pickup configurations changed, or if the agencies were to explore standards with a different shape. This would necessitate recalculating the average footprint value in order to maintain

accuracy.

Additionally, as discussed in the NPRM, in an effort to update the 2008 baseline to account for the expected changes in the fleet in the near-term model years 2009–2011 described above, NHTSA requested permission
from the manufacturers to make this limited product plan information public. Unfortunately, virtually no manufacturers agreed to allow the use of their data after 2009 model year. A few manufacturers, such as GM and Ford, stated we could use their 2009 product plan data after the end of production (December 31), but this would not have
afforded us sufficient time to do the analysis for the final rule. Since the agencies were unable to obtain consistent updates, the baseline and reference fleets were not updated beyond 2008 model year for the final
rule. The 2008 baseline fleet and projections were instead updated using
the latest AEO and CSM data as
discussed earlier.

NHTSA and EPA recognize that the approach applied for the current rule gives transparency and openness of the vehicle market forecast high priority,
and accommodates minor inaccuracies that may be introduced by not accounting for future product mix changes anticipated in manufacturers’ confidential product plans. For any future fleet analysis that the agencies are required to perform, NHTSA and EPA plan to request that manufacturers submit product plans and allow some public release of information. In performing this analysis, the agencies plan to reexamine potential tradeoffs between transparency and technical reasonableness, and to explain resultant
choices.

C. Development of Attribute-Based Curve Shapes

In the NPRM, NHTSA and EPA proposed to set attribute-based CAFE
and CO 2 standards that are defined by
a mathematical function for MYs 2012– 2016 passenger cars and light trucks. EPCA, as amended by EISA, expressly requires that CAFE standards for passenger cars and light trucks be based
on one or more vehicle attributes related to fuel economy, and be expressed in
the form of a mathematical function. 57 The CAA has no such requirement, though in past rules, EPA has relied on
both universal and attribute-based standards ( e.g., for nonroad engines, EPA uses the attribute of horsepower). However, given the advantages of using attribute-based standards and given the


### 25355 Federal Register / Vol. 75, No. 88 / Friday, May 7, 2010 / Rules and Regulations

58 See 74 FR 14359 (Mar. 30, 2009).

59 Production for sale in the United States. 60 The equations are equivalent but are specified differently due to differences in the agencies’ respective models. 61 This function is linear in fuel consumption but not in fuel economy. goal of coordinating and harmonizing

CO 2 standards promulgated under the CAA and CAFE standards promulgated under EPCA, EPA also proposed to issue
standards that are attribute-based and defined by mathematical functions. There was consensus in the public comments that EPA should develop
attribute-based CO 2 standards.

Comments received in response to the agencies’ decision to base standards on vehicle footprint were largely supportive. Several commenters (BMW, NADA, NESCAUM) expressed support for attribute-based (as opposed to flat or universal) standards generally, and agreed with EPA’s decision to harmonize with NHTSA in this respect. Many commenters (Aluminum Association, BMW, ICCT, NESCAUM, NY DEC, Schade, Toyota) also supported the agencies’ decision to continue setting CAFE standards, and begin setting GHG standards, on the basis of vehicle footprint, although one commenter (NJ DEP) opposed the use of footprint due to concern that it encourages manufacturers to upsize vehicles and undercut the gains of the standard. Of the commenters supporting the use of footprint, several focused on
the benefits of harmonization—both between EPA and NHTSA, and between
the U.S. and the rest of the world. BMW commented, for example, that many other countries use weight-based standards rather than footprint-based. While BMW did not object to NHTSA’s and EPA’s use of footprint-based standards, it emphasized the impact of
this non-harmonization on
manufacturers who sell vehicles globally, and asked the agencies to consider these effects. NADA supported the use of footprint, but cautioned that the agencies must be careful in setting the footprint curve for light trucks to
ensure that manufacturers can continue to provide functionality like 4WD and towing/hauling capacity.

Some commenters requested that the agencies consider other or more attributes in addition to footprint, largely reiterating comments submitted to the MYs 2011–2015 CAFE NPRM. Cummins supported the agencies using a secondary attribute to account for towing and hauling capacity in large trucks, for example, while Ferrari askedthe agencies to consider a multiattribute approach incorporating curb weight, maximum engine power or torque, and/or engine displacement, as it had requested in the previous round of CAFE rulemaking. An individual, Mr. Kenneth Johnson, commented that weight-based standards would be preferable to footprint-based ones, because weight correlates better with fuel economy than footprint, because the use of footprint does not necessarily guarantee safety the way the agencies say it does, and because weight-based
standards would be fairer to
manufacturers.

In response, EPA and NHTSA
continue to believe that the benefits of footprint-attribute-based standards outweigh any potential drawbacks raised by commenters, and that
harmonization between the two agencies should be the overriding goal on this issue. As discussed by NHTSA in the MY 2011 CAFE final rule, 58 the agencies believe that the possibility of gaming is lowest with footprint-based standards, as opposed to weight-based
or multi-attribute-based standards. Specifically, standards that incorporate weight, torque, power, towing capability, and/or off-road capability in addition to footprint would not only be significantly more complex, but by providing degrees of freedom with respect to more easily-adjusted attributes, they would make it less
certain that the future fleet would actually achieve the average fuel economy and CO 2 levels projected by the agencies. The agencies recognize
that based on economic and consumer
demand factors that are external to this rule, the distribution of footprints in the future may be different (either smaller or larger) than what is projected in this rule. However, the agencies continue to believe that there will not be significant
shifts in this distribution as a direct consequence of this rule. The agencies are therefore finalizing MYs 2012–2016
CAFE and GHG standards based on footprint.

The agencies also recognize that there
could be benefits for a number of manufacturers if there was greater
international harmonization of fuel economy and GHG standards, but this is largely a question of how stringent standards are and how they are enforced. It is entirely possible that footprint-based and weight-based systems can coexist internationally and not present an undue burden for manufacturers if they are carefully crafted. Different countries or regions may find different attributes appropriate for basing standards, depending on the particular challenges they face—from fuel prices, to family size and land use, to safety concerns, to fleet composition and consumer preference, to other environmental challenges besides climate change. The agencies anticipate working more closely with other countries and regions in the future to consider how to mitigate these issues in a way that least burdens manufacturers while respecting each country’s need to meet its own particular challenges.

Under an attribute-based standard, every vehicle model has a performance target (fuel economy and CO 2 emissions
for CAFE and CO 2 emissions standards, respectively), the level of which depends on the vehicle’s attribute (for the proposal, footprint). The manufacturers’ fleet average performance is determined by the production-weighted 59 average (for CAFE, harmonic average) of those targets. NHTSA and EPA are promulgating CAFE and CO 2 emissions standards defined by constrained linear functions and, equivalently, piecewise
linear functions. 60 As a possible option for future rulemakings, the constrained linear form was introduced by NHTSA in the 2007 NPRM proposing CAFE
standards for MY 2011–2015. Described mathematically, the proposed
constrained linear function was defined according to the following formula: 61



### TARGET

MIN MAX c FOOTPRINT d, =

× + ⎛ ⎝ ⎜ ⎞ ⎠ ⎟ ⎡

⎣ ⎢ ⎤

⎦ ⎥ 1

1 1

a b ,

Where TARGET = the fuel economy target (in mpg) applicable to vehicles of a given footprint ( FOOTPRINT, in square feet), a = the function’s upper limit (in mpg),

b = the function’s lower limit (in mpg),


### 25356 Federal Register / Vol. 75, No. 88 / Friday, May 7, 2010 / Rules and Regulations

c = the slope (in gpm per square foot) of the sloped portion of the function,
d = the intercept (in gpm) of the sloped portion of the function (that is, the value the sloped portion would take if extended to a footprint of 0 square feet,
and the MIN and MAX functions take the minimum and maximum, respectively, of the included values; for example,

MIN (1,2) = 1, MAX (1,2) = 2, and

MIN[ MAX (1,2),3)]=2.

Because the format is linear on agallons-per-mile basis, not on a milesper-gallon basis, it is plotted as fuel consumption below. Graphically, the constrained linear form appears as shown in Figure II.C–1.

**BILLING CODE 6560–50–P**


### 25357 Federal Register / Vol. 75, No. 88 / Friday, May 7, 2010 / Rules and Regulations

62 These a, b, d coefficients differ from the a, b,
d coefficients in the constrained linear fuel economy equation primarily by a factor of 8887 (plus an additive factor for air conditioning). The specific form and stringency for each fleet (passenger car and light trucks) and model year are defined through specific values for the four
coefficients shown above.

EPA proposed the equivalent equation below for assigning CO 2 targets to an individual vehicle’s footprint value. Although the general model of the equation is the same for each vehicle category and each year, the parameters of the equation differ for cars and trucks and for each model year. Described mathematically, EPA’s proposed piecewise linear function was as
follows: Target = a, if x ≤ l Target = cx + d, if l < x ≤ h Target = b, if x > h

In the constrained linear form similar in form to the fuel economy equation above, this equation takes the simplified

form:

Target = MIN [ MAX (c * x + d, a), b]

Where
Target = the CO 2 target value for a given footprint (in g/mi) a = the minimum target value (in g/mi CO 2 ) 62 b = the maximum target value (in g/mi CO 2 ) c = the slope of the linear function (in g/mi per sq ft CO 2 ) d = is the intercept or zero-offset for the line (in g/mi CO 2 ) x = footprint of the vehicle model (in square feet, rounded to the nearest tenth) l & h are the lower and higher footprint limits or constraints or ( ‘‘ kinks ’’ ) or the boundary between the flat regions and the intermediate sloped line (in sq ft)
Graphically, piecewise linear form, like the constrained linear form, appears as shown in Figure II.C–2.


### 25358 Federal Register / Vol. 75, No. 88 / Friday, May 7, 2010 / Rules and Regulations

**BILLING CODE 6560–50–C**


### 25359 Federal Register / Vol. 75, No. 88 / Friday, May 7, 2010 / Rules and Regulations

63 The agencies excluded diesel engines and strong hybrid vehicle technologies from this exercise (and only this exercise) because the agencies expect that manufacturers would not need to rely heavily on these technologies in order to comply with the proposed standards. NHTSA and EPA did include diesel engines and strong hybrid vehicle technologies in all other portions of their analyses.

As for the constrained linear form, the specific form and stringency of the piecewise linear function for each fleet (passenger car and light trucks) and model year are defined through specific
values for the four coefficients shown
above.

For purposes of the proposed rules, NHTSA and EPA developed the basic curve shapes using methods similar to those applied by NHTSA in fitting the curves defining the MY 2011 standards. The first step involved defining the
relevant vehicle characteristics in the form used by NHTSA’s CAFE model ( e.g., fuel economy, footprint, vehicle class, technology) described in Section II.B of this preamble and in Chapter 1 of the Joint TSD. However, because the baseline fleet utilizes a wide range of available fuel saving technologies,
NHTSA used the CAFE model to develop a fleet to which all of the technologies discussed in Chapter 3 of the Joint TSD 63 were applied, except dieselization and strong hybridization. This was accomplished by taking the following steps: (1) Treating all manufacturers as unwilling to pay civil penalties rather than applying technology, (2) applying any technology at any time, irrespective of scheduled vehicle redesigns or freshening, and (3) ignoring ‘‘ phase-in caps ’’ that constrain the overall amount of technology that can be applied by the model to a given manufacturer’s fleet. These steps helped to increase technological parity among vehicle models, thereby providing a better basis (than the baseline or reference fleets) for estimating the statistical relationship between vehicle size and fuel economy.

In fitting the curves, NHTSA and EPA also continued to fit the sloped portion
of the function to vehicle models between the footprint values at which the agencies continued to apply
constraints to limit the function’s value for both the smallest and largest
vehicles. Without a limit at the smallest footprints, the function—whether logistic or linear—can reach values that would be unfairly burdensome for a
manufacturer that elects to focus on the market for small vehicles; depending on the underlying data, an unconstrained form, could result in stringency levels that are technologically infeasible and/ or economically impracticable for those manufacturers that may elect to focus on
the smallest vehicles. On the other side of the function, without a limit at the largest footprints, the function may provide no floor on required fuel economy. Also, the safety considerations that support the provision of a disincentive for downsizing as a compliance strategy apply weakly, if at all, to the very largest vehicles. Limiting the function’s value for the largest vehicles leads to a
function with an inherent absolute minimum level of performance, while remaining consistent with safety
considerations.

Before fitting the sloped portion of the constrained linear form, NHTSA and EPA selected footprints above and below which to apply constraints ( i.e., minimum and maximum values) on the function. The agencies believe that the linear form performs well in describing the observed relationship between footprint and fuel consumption or CO 2 emissions for vehicle models within the footprint ranges covering most vehicle models, but that the single (as opposed to piecewise) linear form does not perform well in describing this relationship for the smallest and largest vehicle models. For passenger cars, the agency noted that several manufacturers offer small, sporty coupes below 41 square feet, such as the BMW Z4 and Mini, Honda S2000, Mazda MX–5 Miata, Porsche Carrera and 911, and Volkswagen New Beetle. Because such vehicles represent a small portion (less than 10 percent) of the passenger car market, yet often have performance, utility, and/or structural characteristics that could make it technologically infeasible and/or economically impracticable for manufacturers focusing on such vehicles to achieve the very challenging average requirements that could apply in the absence of a constraint, EPA and NHTSA proposed

to ‘‘ cut off ’’ the linear portion of the passenger car function at 41 square feet. The agencies recognize that for
manufacturers who make small vehicles in this size range, this cut off creates some incentive to downsize ( i.e., further reduce the size, and/or increase the production of models currently smaller than 41 square feet) to make it easier to meet the target. The cut off may also
create the incentive for manufacturers who do not currently offer such models to do so in the future. However, at the same time, the agencies believe that
there is a limit to the market for cars smaller than 41 square feet—most consumers likely have some minimum expectation about interior volume, among other things. The agencies thus believe that the number of consumers
who will want vehicles smaller than 41 square feet (regardless of how they are priced) is small, and that the incentive to downsize in response to this final rule, if present, will be minimal. For consistency, the agency proposed to ‘‘ cut off ’’ the light truck function at the same footprint, although no light trucks are currently offered below 41 square feet. The agencies further noted that above 56 square feet, the only passenger car model present in the MY 2008 fleet were four luxury vehicles with extremely low sales volumes—the Bentley Arnage and three versions of the Rolls Royce Phantom. NHTSA and EPA therefore also proposed to ‘‘ cut off ’’ the linear portion of the passenger car function at 56 square feet. Finally, the agencies noted that although public information is limited regarding the sales volumes of the many different configurations (cab designs and bed sizes) of pickup trucks, most of the largest pickups ( e.g., the Ford F–150, GM Sierra/Silverado, Nissan Titan, and Toyota Tundra) appear to fall just above 66 square feet in footprint. EPA and NHTSA therefore proposed to ‘‘ cut off ’’ the linear portion of the light truck function at 66 square feet.

Having developed a set of vehicle emissions and footprint data which represent the benefit of all non-diesel, non-hybrid technologies, we determined the initial values for parameters c and
d were determined for cars and trucks separately. c and d were initially set at the values for which the average (equivalently, sum) of the absolute
values of the differences was minimized
between the ‘‘ maximum technology ’’ fleet fuel consumption (within the footprints between the upper and lower limits) and the straight line of the
function defined above at the same corresponding vehicle footprints. That is, c and d were determined by minimizing the average absolute residual, commonly known as the MAD (Mean Absolute Deviation) approach, of the corresponding straight line.

Finally, NHTSA calculated the values of the upper and lower parameters ( a and b ) based on the corresponding footprints discussed above (41 and 56 square feet for passenger cars, and 41 and 66 square feet for light trucks).

The result of this methodology is shown below in Figures II.C–3 and II.C– 4 for passenger cars and light trucks, respectively. The fitted curves are shown with the underlying ‘‘ maximum technology ’’ passenger car and light truck fleets. For passenger cars, the mean absolute deviation of the sloped portion of the function was 14 percent.


### 25360 Federal Register / Vol. 75, No. 88 / Friday, May 7, 2010 / Rules and Regulations

For trucks, the corresponding MAD was 10 percent.

**BILLING CODE 6560–50–P**


### 25361 Federal Register / Vol. 75, No. 88 / Friday, May 7, 2010 / Rules and Regulations

**BILLING CODE 6560–50–C**


### 25362 Federal Register / Vol. 75, No. 88 / Friday, May 7, 2010 / Rules and Regulations

64 For example, the agencies’ market forecast shows MY 2016 sales of 187,000 units for Toyota’s 2WD Sienna, and shows 27 model configurations
with MY 2016 sales of fewer than 100 units. Similarly, the agencies’ market forecast shows MY 2016 sales of 268,000 for the Toyota Prius, and shows 29 model configurations with MY 2016 sales of fewer than 100 units. Sales-weighted analysis would give the Toyota Sienna and Prius more than a thousand times the consideration of many vehicle model configurations. Sales-weighted analysis would, therefore, cause a large number of vehicle model configurations to be virtually ignored. See
discussion in NHTSA’s final rule for MY 2011 passenger car and light truck CAFE standards, 74 FR 14368 (Mar. 30, 2009), and in NHTSA’s NPRM for that rulemaking, 73 FR 24423–24429 (May 2, 2008).

65 Id. In the case of a dataset not drawn from a sample with a Gaussian, or normal, distribution, there is often a need to employ robust estimation methods rather than rely on least-squares approach to curve fitting. The least-squares approach has as an underlying assumption that the data are drawn The agencies used these functional forms as a starting point to develop mathematical functions defining the actual proposed standards as discussed above. The agencies then transposed these functions vertically ( i.e., on a gpm or CO 2 basis, uniformly downward) to produce the same fleetwide fuel economy (and CO 2 emission levels) for cars and light trucks described in the

NPRM.

A number of public comments generally supported the agencies’ choice
of attribute-based mathematical functions, as well as the methods applied to fit the function. Ferrari indicated support for the use of a
constrained linear form rather than a constrained logistic form, support for the application of limits on the functions’ values, support for a generally less steep passenger car curve compared to MY 2011, and support for
the inclusion of all manufacturers in the analysis used to fit the curves. ICCT also supported the use of a constrained linear form. Toyota expressed general support for the methods and outcome, including a less-steep passenger car curve, and the application of limits on fuel economy targets applicable to the
smallest vehicles. The UAW commented that the shapes and levels of the curves
are reasonable.

Other commenters suggested that changes to the agencies’ methods and results would yield better outcomes. GM suggested that steeper curves wouldprovide a greater incentive for limitedline manufacturers to apply technology to smaller vehicles. GM argued that steeper and, in their view, fairer curvescould be obtained by using salesweighted least-squares regression rather than minimization of the unweighted mean absolute deviation. Conversely,
students from UC Santa Barbara commented that the passenger car and light truck curves should be flatter and should converge over time in order to encourage the market to turn, as the agencies’ analysis assumes it will, away from light trucks and toward passenger

cars.

NADA commented that there should
be no ‘‘ cut-off ’’ points ( i.e., lower limits or floors), because these de facto

‘‘backstops ’’ might limit consumer choice, especially for light trucks—a possibility also suggested by the
Alliance. The Alliance and several
individual manufacturers also commented that the cut-off point for light trucks should be shifted to 72 square feet (from the proposed 66 square feet), arguing that the preponderance of high-volume light truck models with footprints greater than 66 square feet is such that a 72 square foot cut-off point makes it unduly challenging for manufacturers serving the large pickup market and thereby constitutes a de facto backstop. Also, with respect to the smallest light truck models, Honda commented that the cut-off point should be set at the point defining the smallest 10 percent of the fleet, both forconsistency with the passenger car cutoff point, and to provide a greater
incentive for manufacturers to downsize the smallest light truck models (which provide greater functionality than passenger cars).

Other commenters focused on whether the agencies should have separate curves for different fleets or whether they should have a single curve that applied to both passenger cars and light trucks. This issue is related, to some extent, to commenters who
discussed whether car and truck definitions should change. CARB, Ford, and Toyota supported separate curves for cars and trucks, generally stating that
different fleets have different functional
characteristics and these characteristics are appropriately addressed by separate curves. Likewise, AIAM, Chrysler, and NADA supported leaving the current
definitions of car and truck the same. CBD, ICCT, and NESCAUM supported a single curve, based on concerns about manufacturers gaming the system and reclassifying passenger cars as light
trucks in order to obtain the often-less stringent light truck standard, which
could lead to lower benefits than anticipated by the agencies.

In addition, the students from UC Santa Barbara reported being unable to reproduce the agencies’ analysis to fit curves to the passenger car and light truck fleets, even when using the model, inputs, and external analysis files posted to NHTSA’s Web site when the
NPRM was issued.

Having considered public comments,
NHTSA and EPA have re-examined the development of curves underlying the standards proposed in the NPRM, and are promulgating standards based on the same underlying curves. The agencies have made this decision considering that, while EISA mandates that CAFE standards be defined by a mathematical
function in terms of one or more attributes related to fuel economy, neither EISA nor the CAA require that
the mathematical function be limited to the observed or theoretical dependence of fuel economy on the selected attribute or attributes. As a means by
which CAFE and GHG standards are specified, the mathematical function can and does properly play a normative role. Therefore, NHTSA and EPA have concluded that, as supported by comments, the mathematical function can reasonably be based on a blend of analytical and policy considerations, as discussed below and in the Joint Technical Support Document.

With respect to GM’s
recommendation that NHTSA and EPA use weighted least-squares analysis, the agencies find that the market forecast used for analysis supporting both the
NPRM and the final rule exhibits the two key characteristics that previously
led NHTSA to use minimization of the unweighted Mean Absolute Deviation(MAD) rather than weighted leastsquares analysis. First, projected modelspecific sales volumes in the agencies’ market forecast cover an extremely wide range, such that, as discussed in NHTSA’s rulemaking for MY 2011,while unweighted regression gives lowselling vehicle models and high-sellingvehicle models equal emphasis, salesweighted regression would give some vehicle models considerably more emphasis than other vehicle models. 64 The agencies’ intention is to fit a curve that describes a technical relationship between fuel economy and footprint, given comparable levels of technology, and this supports weighting discrete vehicle models equally. On the other hand, sales weighted regression would
allow the difference between other
vehicle attributes to be reflected in the analysis, and also would reflect
consumer demand.

Second, even after NHTSA’s

‘‘ maximum technology ’’ analysis to increase technological parity of vehicle models before fitting curves, the agencies’ market forecast contains many significant outliers. As discussed in NHTSA’s rulemaking for MY 2011, MAD is a statistical procedure that has been demonstrated to produce moreefficient parameter estimates than leastsquares analysis in the presence of significant outliers. 65 In addition, the


### 25363 Federal Register / Vol. 75, No. 88 / Friday, May 7, 2010 / Rules and Regulations

from a normal distribution, and hence fits a curve using a sum-of-squares method to minimize errors.This approach will, in a sample drawn from a nonnormal distribution, give excessive weight to outliers by making their presence felt in proportion to the square of their distance from the fitted curve, and, hence, distort the resulting fit. With outliers in the sample, the typical solution is to use a robust method such as a minimum absolute deviation, rather than a squared term, to estimate the fit ( see,

e.g., ‘‘ AI Access: Your Access to Data Modeling, ’’ at http://www.aiaccess.net/English/Glossaries/
GlosMod/e

_ gm

_ O

_Pa.htm#Outlier ). The effect on the estimation is to let the presence of each observation be felt more uniformly, resulting in a curve more representative of the data ( see, e.g., Peter Kennedy, A Guide to Econometrics, 3rd edition, 1992, MIT Press, Cambridge, MA). agencies remain concerned that the steeper curves resulting from weighted least-squares analysis would increase the risk that energy savings and
environmental benefits would be lower than projected, because the steeper curves would provide a greater incentive to increase sales of larger vehicles with lower fuel economy
levels. Based on these technical
considerations and these concerns regarding potential outcomes, the agencies have decided not to re-fit curves using weighted least-squares analysis, but note that they may reconsider using least-squares regression in future analysis.

NHTSA and EPA have considered GM’s comment that steeper curves would provide a greater incentive for limited-line manufacturers to apply technology to smaller vehicles. While the agencies agree that a steeper curve would, absent any changes in fleet mix, tend to shift average compliance burdens away from GM and toward companies that make smaller vehicles, the agencies are concerned, as stated above, that steeper curves would
increase the risk that induced increases in vehicle size could erode projected energy and environmental benefits.

NHTSA and EPA have also considered the comments by the
students from UC Santa Barbara indicating that the passenger car and light truck curves should be flatter and should converge over time. The agencies
conclude that flatter curves would
reduce the incentives intended in shifting from ‘‘ flat’’ CAFE standards to
attribute-based CAFE and GHG standards—those being the incentive to respond to attribute-based standards in ways that minimize compromises in vehicle safety, and the incentive for more manufacturers (than primarily those selling a wider range of vehicles) across the range of the attribute to have to increase the application of fuel-saving technologies. With regard to whether the agencies should set separate curves or a single one, NHTSA also notes that EPCA requires NHTSA to establish standards separately for passenger cars and light trucks, and thus concludes
that the standards for each fleet should
be based on the characteristics of vehicles in each fleet. In other words, the passenger car curve should be based on the characteristics of passenger cars, and the light truck curve should be based on the characteristics of light
trucks—thus to the extent that those characteristics are different, an artificially-forced convergence would not accurately reflect those differences. However, such convergence could be appropriate depending on future trends in the light vehicle market, specifically
further reduction in the differences between passenger car and light truck
characteristics. While that trend was more apparent when car-like 2WD SUVs were classified as light trucks, it seems likely to diminish for the model year vehicles subject to these rules as the truck fleet will be more purely ‘‘ trucklike ’’ than has been the case in recent

years.

NHTSA and EPA have also
considered comments on the maxima and minima that the agencies have applied to ‘‘ cut off ’’ the linear function underlying the proposed curves for passenger cars and light trucks. Contrary to NADA’s suggestion that there should be no such cut-off points, the agencies conclude that curves lacking maximum fuel economy targets ( i.e., minimum

CO 2 targets) would result in average fuel economy and GHG requirements that would not be technologically feasible or economically practicable for manufacturers concentrating on those market segments. In addition, minimum fuel economy targets ( i.e., maximum

CO 2 targets) are important to mitigate the risk to energy and environmental benefits of potential market shifts toward large vehicles. The agencies also disagree with comments by the Alliance
and several individual manufacturers that the cut-off point for light trucks should be shifted to 72 square feet (from the proposed 66 square feet) to ease compliance burdens facing manufacturers serving the large pickup
market. Such a shift would increase the risk that energy and environmental
benefits of the standards would be compromised by induced increases in the sales of large pickups, in situations where the increased compliance burden is feasible and appropriate. Also, the agencies’ market forecast suggests that most of the light trucks models with footprints larger than 66 square feet have curb weights near or above 5,000 pounds. This suggests, in turn, that in terms of highway safety, there is little or no need to discourage downsizing of light trucks with footprints larger than 66 square feet. Based on these energy, environmental, technological feasibility, economic practicability, and safety considerations, the agencies conclude that the light truck curve should be cut off at 66 square feet, as proposed, rather than at 72 square feet. The agencies also disagree with Honda’s suggestion that the cut-off point for the smallest trucks be shifted to a larger footprint value, because doing so could potentially increase the incentive to reclassify vehicles in that size range as light trucks, and could thereby increase the possibility that energy and
environmental benefits of the rule would be less than projected.

Finally, considering comments by the UC Santa Barbara students regarding difficulties reproducing NHTSA’s analysis, NHTSA reexamined its analysis, and discovered some erroneous entries in model inputs underlying the analysis used to develop the curves proposed in the NPRM.
These errors are discussed in NHTSA’s final Regulatory Impact Analysis (FRIA) and have since been corrected. They include the following: Incorrect valvetrain phasing and lift inputs for many BMW engines, incorrect indexing for some Daimler models, incorrectly enabled valvetrain technologies for rotary engines and Atkinson cycle engines, omitted baseline applications of cylinder deactivation in some Honda and GM engines, incorrect valve phasing codes for some 4-cylinder Chrysler engines, omitted baseline applications of advanced transmissions in some VW models, incorrectly enabled advanced electrification technologies for several hybrid vehicle models, and
incorrect DCT effectiveness estimates for subcompact passenger cars. These errors, while not significant enough to impact the overall analysis of stringency, did affect the fitted slope for the passenger car curve and would have prevented precise replication of NHTSA’s NPRM analysis by outside parties.

After correcting these errors and repeating the curve development analysis presented in the NPRM,
NHTSA obtained the curves shown below in Figures II.C–5 and II.C–6 for passenger cars and light trucks, respectively. The fitted curves are shown with the underlying ‘‘ maximum technology ’’ passenger car and light truck fleets. For passenger cars, the mean absolute deviation of the sloped portion of the function was 14 percent. For trucks, the corresponding MAD was 10 percent.

**BILLING CODE 6560–50–P**


### 25364 Federal Register / Vol. 75, No. 88 / Friday, May 7, 2010 / Rules and Regulations


### 25365 Federal Register / Vol. 75, No. 88 / Friday, May 7, 2010 / Rules and Regulations


### 25366 Federal Register / Vol. 75, No. 88 / Friday, May 7, 2010 / Rules and Regulations

This refitted passenger car curve is similar to that presented in the NPRM, and the refitted light truck curve is nearly identical to the corresponding curve in the NPRM. However, the slope of the refitted passenger car curve is about 27 percent steeper (on a gpm per sf basis) than the curve presented in the NPRM. For passenger cars and light trucks, respectively, Figures II.C–7 and II.C–8 show the results of adjustment—
discussed in the next section—of the above curves to yield the average required fuel economy levels corresponding to the final standards.


### 25367 Federal Register / Vol. 75, No. 88 / Friday, May 7, 2010 / Rules and Regulations

**BILLING CODE 6560–50–C**

While the resultant light truck curves are visually indistinguishable from one another, the refitted curve for passenger cars would increase stringency for the smallest cars, decrease stringency for the largest cars, and provide a greater

incentive to increase vehicle size throughout the range of footprints within which NHTSA and EPA project most passenger car models will be sold through MY 2016. The agencies are concerned that these changes would make it unduly difficult for

manufacturers to introduce new small passenger cars in the United States, and unduly risk losses in energy and environmental benefits by increasing incentives for the passenger car market to shift toward larger vehicles.

Also, the agencies note that the refitted passenger car curve produces only a slightly closer fit to the corrected
fleet than would the curve estimated in


### 25368 Federal Register / Vol. 75, No. 88 / Friday, May 7, 2010 / Rules and Regulations

66 ACEEE, American Lung Association, CARB, Christopher Lish, Environment America, EDF, MA DEP, NRDC, NESCAUM, Public Citizen, Sierra Club et al., SCAQMD, UCS, WA DE.

67 Commenters generally defined a ‘‘ ratchet
mechanism ’’ as an automatic re-calculation of stringency to ensure cumulative goals are reached by 2016, even if emissions reductions and fuel savings fall short in the earlier years covered by the rulemaking.

68 CBD, MA DEP, NJ DEP, Public Citizen, Sierra
Club et al., UCS. 69 CARB, Public Citizen, Sierra Club et al.

70 For example, the Alliance and Toyota said that upsizing would not be likely because (1) it would not necessarily make compliance with applicable standards easier, since larger vehicles tend to be
heavier and heavier vehicles tend to achieve worse fuel economy/emissions levels; (2) it may require expensive platform changes; (3) target curves become increasingly more stringent from year to year, which reduces the benefits of upsizing; and (4) the mpg floor and gpm ceiling for the largest vehicles (the point at which the curve is ‘‘ cut off ’’ ) discourages manufacturers from continuing to upsize beyond a point because doing so makes it increasingly difficult to meet the flat standard at that part of the curve.

71 AIAM, Alliance, Ford, NADA, Toyota.

72 Alliance, Ford, NADA, UAW. the NPRM; with respect to the corrected fleet (between the ‘‘ cut off ’’ footprint values, and after the ‘‘ maximum technology ’’ analysis discussed above),
the mean absolute deviation for the refitted curve is 13.887 percent, and that of a refitted curve held to the original slope is 13.933 percent. In other words, the data support the original slope very nearly as well as they support the refitted slope.

Considering NHTSA’s and EPA’s concerns regarding the change in
incentives that would result from a refitted curve for passenger cars, and considering that the data support the original curves about as well as they would support refitted curves, the agencies are finalizing CAFE and GHG standards based on the curves presented
in the NPRM.

Finally, regarding some commenters’ inability to reproduce the agencies’ NPRM analysis, NHTSA believes that its
correction of the errors discussed above and its release (on NHTSA’s Web site) of the updated Volpe model and all accompanying inputs and external analysis files should enable outside parties to independently reproduce the agencies’ analysis. If outside parties continue to experience difficulty in doing so, we encourage them to contact NHTSA, and the agency will do its best to provide assistance.

Thus, in summary, the agencies’approach to developing the attributebased mathematical functions for MY
2012–2016 CAFE and CO 2 standards represents the agencies’ best technical judgment and consideration of potential outcomes at this time, and we are
confident that the conclusions have resulted in appropriate and reasonable standards. The agencies recognize, however, that aspects of these decisions may merit updating or revision in future analysis to support CAFE and CO 2 standards or for other purposes. Consistent with best rulemaking practices, the agencies will take a fresh look at all assumptions and approaches to curve fitting, appropriate attributes,
and mathematical functions in the context of future rulemakings.

The agencies also recognized in the NPRM the possibility that lower fuel prices could lead to lower fleetwide fuel economy (and higher CO 2 emissions) than projected in this rule. One way of addressing that concern is through the use of a universal standard—that is, an average standard set at a (single)
absolute level. This is often described as

a ‘‘backstop standard. ’’ The agencies explained that under the CAFE program, EISA requires such a minimum average fuel economy standard for domestic passenger cars, but is silent with regard to similar backstops for imported passenger cars and light trucks, while under the CAA, a backstop could be adopted under section 202(a) assuming it could be justified under the relevant statutory criteria. NHTSA and EPA also noted that the flattened portions of the curves at the largest footprints directionally address the issue of a backstop ( i.e., the mpg ‘‘ floor ’’ or gpm

‘‘ ceiling ’’ applied to the curves provides
a universal and absolute value for that range of footprints). The agencies sought comment on whether backstop standards, or any other method within the agencies’ statutory authority, should and can be implemented in order to guarantee a level of CO 2 emissions reductions and fuel savings under the
attribute-based standards.

The agencies received a number of comments regarding the need for a backstop beyond NHTSA’s alternative
minimum standard. Comments were divided fairly evenly between support for and opposition to additional backstop standards. The following organizations supported the need for EPA and NHTSA to have explicit backstop standards: American Council for an Energy Efficient Economy (ACEEE), American Lung Association, California Air Resources Board (CARB), Environment America, Environment Defense Fund, Massachusetts Department of Environmental Protection, Natural Resources Defense Council (NRDC), Northeast States for Coordinated Air Use Management (NESCAUM), Public Citizen and Safe Climate Campaign, Sierra Club, State of Washington Department of Ecology, Union of Concerned Scientists, and a number of private citizens. Commenters in favor of additional backstop
standards for all fleets for both NHTSA
and EPA 66 generally stated that the emissions reductions and fuel savings expected to be achieved by MY 2016 depended on assumptions about fleet mix that might not come to pass, and that various kinds of backstop standards

or ‘‘ ratchet mechanisms ’’ 67 were necessary to ensure that those
reductions were achieved in fact. In addition, some commenters 68 stated that manufacturers might build larger vehicles or more trucks during MYs 2012–2016 than the agencies project, for example, because (1) any amount of slope in target curves encourages manufacturers to upsize, and (2) lower targets for light trucks than for passenger cars encourage manufacturers to find ways to reclassify vehicles as light trucks, such as by dropping 2WD versions of SUVs and offering only 4WD versions, perhaps spurred by NHTSA’s
reclassification of 2WD SUVs as passenger cars. Both of these
mechanisms will be addressed further
below. Some commenters also discussed EPA authority under the CAA to set backstops, 69 agreeing with EPA’s analysis that section 202(a) allows such
standards since EPA has wide discretion
under that section to craft standards.

The following organizations opposed a backstop: Alliance of Automobile Manufacturers (AAM), Association of
International Automobile Manufacturers (AIAM), Ford Motor Company, National
Automobile Dealers Association (NADA), Toyota Motor Company, and
the United Auto Workers Union. Commenters stating that additional backstops would not be necessary disagreed that upsizing was likely, 70 and emphasized the anti-backsliding characteristics of the target curves. Others argued that universal absolute standards as backstops could restrict
consumer choice of vehicles. Commenters making legal arguments
under EPCA/EISA 71 stated that Congress’ silence regarding backstops for imported passenger cars and light
trucks should be construed as a lack of authority for NHTSA to create further backstops. Commenters making legal arguments under the CAA 72 focused on the lack of clear authority under the CAA to create multiple GHG emissions
standards for the same fleets of vehicles based on the same statutory criteria, and opposed EPA taking steps that would
reduce harmonization with NHTSA in standard setting. Furthermore, AIAM indicated that EISA’s requirement that the combined (car and truck) fuel economy level reach at least 35 mpg by


### 25369 Federal Register / Vol. 75, No. 88 / Friday, May 7, 2010 / Rules and Regulations

73 NHTSA and EPA agree with AIAM that the EISA 35 mpg requirement in MY 2020 has a backstop-like function, in that it requires a certain level of achieved fleetwide fuel economy by a certain date, although it is not literally a backstop standard. Considering that NHTSA’s MY 2011 CAFE standards increased projected average fuel economy requirements (relative to the MY 2010 standards) at a significantly faster rate than would be required to achieve the 35-in-2020 requirement, and considering that the standards being finalized today would increase projected average combined fuel economy requirements to 34.1 mpg in MY 2016, four years before MY 2020, the agencies
believe that the U.S. vehicle market would have to shift in highly unexpected ways in order to put the 35-in-2020 requirement at risk, even despite the fact that due to the attribute-based standards, average fuel economy requirements will vary depending on the mix of vehicles produced for sale in the U.S. in each model year. The agencies further emphasize that both NHTSA and EPA plan to conduct and document retrospective analyses to evaluate how the market’s evolution during the rulemaking timeframe compares with the agencies’ forecasts employed for this rulemaking. Additionally, we emphasize that both agencies have the authority, given sufficient lead time, to revise their standardsupwards if necessary to avoid missing the 35-in2020 requirement.

74 Schade.

75 For reference, NHTSA’s March 2009 final rule establishing MY 2011 CAFE standards was based on a forecast that passenger cars would represent 57.6 percent of the MY 2011 fleet, and that MY 2011 passenger cars and light trucks would average 45.6 square feet (sf) and 55.1 sf, respectively, such that average required CAFE levels would be 30.2 mpg, 24.1 mpg, and 27.3 mpg, respectively, for passenger cars, light trucks, and the overall light-duty fleet. Based on the agencies’ current market forecast, even as soon as MY 2011, passenger cars will comprise

a larger share (59.2 percent) of the light vehicle market; passenger cars and light trucks will, on average, be smaller by 0.5 sf and 1.3 sf, respectively; and average required CAFE levels will be higher by 0.2 mpg, 0.3 mpg, and 0.3 mpg, respectively, forpassenger cars, light trucks, and the overall lightduty fleet. 76 Based on estimated standards presented in
Tables III.B.1–1 and III.B.1–2. 2020 itself constitutes a backstop. 73 One
individual 74 commented that while additional backstop standards might be necessary given optimism of fleet mix assumptions, both agencies’ authorities would probably need to be revised by Congress to clarify that backstop standards (whether for individual fleets or for the national fleet as a whole) were permissible.

In response, EPA and NHTSA remain confident that their projections of the future fleet mix are reliable, and that future changes in the fleet mix of footprints and sales are not likely to lead to more than modest changes in projected emissions reductions or fuel savings. 75 Both agencies thus remain confident in these fleet projections and the resulting emissions reductions and fuel savings from the standards. As explained in Section II.B above, the agencies’ projections of the future fleet are based on the most transparent information currently available to the agencies. In addition, there are only a relatively few model years at issue. Moreover, market trends today are consistent with the agencies’ estimates, showing shifts from light trucks to passenger cars and increased emphasis on fuel economy from all vehicles.

Finally, the shapes of the curves, including the ‘‘ flattening ’’ at the largest footprint values, tend to avoid or minimize regulatory incentives for manufacturers to upsize their fleet to change their compliance burden. Given the way the curves are fit to the data points (which represent vehicle models’ fuel economy mapped against their footprint), the agencies believe that there is little real benefit to be gained by a manufacturer upsizing their vehicles. As discussed above, the agencies’ analysis indicates that, for passenger car models with footprints falling between the two flattened portions of the corresponding curve, the actual slope of fuel economy with respect to footprint, if fit to that data by itself, is about 27 percent steeper than the curve the agencies are promulgating today. This difference suggests that manufacturers would, if anything, have more to gain by reducing vehicle footprint than by increasing vehicle footprint. For light trucks, the agencies’ analysis indicates that, for models with footprints falling between the two flatted portions of the corresponding curve, the slope of fuel economy with respect to footprint is nearly identical to the curve the agencies are promulgating today. This suggests that, within this range, manufacturers would typically have little incentive to either incrementally increase or reduce vehicle footprint. The agencies recognize that based on
economic and consumer demand factors that are external to this rule, the distribution of footprints in the future may be different (either smaller or larger) than what is projected in this rule. However, the agencies continue to believe that there will not be significant
shifts in this distribution as a direct consequence of this rule.

At the same time, adding another backstop standard would have virtually no effect if the standard was weak, but a more stringent backstop could compromise the objectives served by attribute-based standards—that they distribute compliance burdens more equally among manufacturers, and at the same time encourage manufacturers to apply fuel-saving technologies rather than simply downsizing their vehicles, as they did in past decades under flat standards. This is why Congress
mandated attribute-based CAFE standards in EISA. This compromise in objectives could occur for any manufacturer whose fleet average was above the backstop, irrespective of why they were above the backstop and irrespective of whether the industry as a whole was achieving the emissions and fuel economy benefits projected for the final standards, the problem the backstop is supposed to address. For example, the projected industry wide level of 250 gm/mile for MY 2016 is based on a mix of manufacturer levels, ranging from approximately 205 to 315 gram/mile 76 but resulting in an industry wide basis in a fleet average of 250 gm/ mile. Unless the backstop was at a very weak level, above the high end of this range, then some percentage of
manufacturers would be above the backstop even if the performance of the entire industry remains fully consistent with the emissions and fuel economy levels projected for the final standards. For these manufacturers and any other
manufacturers who were above the backstop, the objectives of an attribute based standard would be compromised and unnecessary costs would be imposed. This could directionally impose increased costs for some
manufacturers. It would be difficult if not impossible to establish the level of a backstop standard such that costs are likely to be imposed on manufacturers only when there is a failure to achieve the projected reductions across the industry as a whole. An example of this kind of industry wide situation could be when there is a significant shift to larger vehicles across the industry as a whole, or if there is a general market shift from cars to trucks. The problem the agencies
are concerned about in those circumstances is not with respect to any single manufacturer, but rather is based
on concerns over shifts across the fleet as a whole, as compared to shifts in one manufacturer’s fleet that may be more than offset by shifts the other way in another manufacturer’s fleet. However, in this respect, a traditional backstop acts as a manufacturer specific standard.

The concept of a ratchet mechanism recognizes this problem, and would impose the new more stringent standard only when the problem arises across the industry as a whole. While the new more stringent standards would enter into force automatically, any such standards would still need to provide adequate lead time for the
manufacturers. Given the limited number of model years covered by this rulemaking and the short lead-time already before the 2012 model year, a ratchet mechanism in this rulemaking that would automatically tighten the standards at some point after model year 2012 is finished and apply the new more stringent standards for model


### 25370 Federal Register / Vol. 75, No. 88 / Friday, May 7, 2010 / Rules and Regulations

77 We note that NHTSA’s recent clarification of the light truck definitions has significantly reduced the potential for gaming, and resulted in the
reclassification of over a million vehicles from the light truck to the passenger car fleet.

78 Increasing the GVWR of a light truck (assuming this was the only goal) can be accomplished in a number of ways, and must include consideration of: (1) Redesign of wheel axles; (2) improving the vehicle suspension; (3) changes in tire specification (which will likely affect ride quality); (4) vehicle dynamics development (especially with vehicles equipped with electronic stability control); and (5) brake redesign. Depending on the vehicle, some of these changes may be easier or more difficult than
others. 79 For example, since many 2WD SUVs are classified as passenger cars, manufacturers have already warned that high car standards relative to

truck standards could create an incentive for them to drop the 2WD version and sell only the 4WD

version. years 2016 or earlier, would fail to provide adequate lead time for any new, more stringent standards

Additionally, we do not believe that the risk of vehicle upsizing or changing vehicle offerings to ‘‘ game ’’ the passenger car and light truck definitions is as great as commenters imply for the model years in question. 77 The changes that commenters suggest manufacturers might make are neither so simple nor so likely to be accepted by consumers. For example, 4WD versions of vehicles tend to be more expensive and, other things being equal, have inherently lower fuel economy than their 2WD equivalent models. Therefore, although there is a market for 4WD vehicles, and some consumers might shift from 2WD
vehicles to 4WD vehicles if 4WD
becomes available at little or no extra cost, many consumers still may not desire to purchase 4WD vehicles because of concerns about cost premium
and additional maintenance requirements; conversely, many manufacturers often require the 2WD option to satisfy demand for base vehicle models. Additionally, increasing the footprint of vehicles requires platform changes, which usually requires a product redesign phase (the agencies estimate that this occurs on average once every 5 years for most models). Alternatively, turning many 2WD SUVs into 2WD light trucks would require manufacturers to squeeze a third row of seats in or significantly increase their GVWR, which also requires a significant change in the vehicle. 78 The agencies are confident that the anticipated increases in average fuel economy and reductions in average CO 2 emission rates can be achieved without backstops under EISA or the CAA. As noted above, the agencies plan to conduct retrospective analysis to monitor progress. Both agencies have the authority to revise standards if warranted, as long as sufficient lead time is provided.

The agencies acknowledge that the
MY 2016 fleet emissions and fuel economy goals of 250 g/mi and 34.1 mpg for EPA and NHTSA respectively are estimates and not standards (the MY 2012–2016 curves are the standards). Changes in fuel prices, consumer preferences, and/or vehicle survival and mileage accumulation rates could result in either smaller or larger oil and GHG savings. As explained above and elsewhere in the rule, the agencies believe that the possibility of not meeting (or, alternatively, exceeding) fuel economy and emissions goals exists, but is not likely. Given this, and given the potential complexities in designing an appropriate backstop, the agencies believe the balance here points to not adopting additional backstops at
this time for the MYs 2012–2016
standards other than NHTSA’s finalizing of the ones required by EPCA/ EISA for domestic passenger cars. Nevertheless, the agencies recognize there are many factors that are inherently uncertain which can affect projections in the future, including fuel price and other factors which are
unrelated to the standards contained in
this final rule. Such factors can affect consumer preferences and are difficult to predict. At this time and based on the available information, the agencies have not included a backstop for model years 2012–2016. However, if circumstances change in the future in unanticipated ways, the agencies may revisit the issue of a backstop in the context of a future rulemaking either for model years 2012–
2016 or as needed for standards for model years beyond 2016. This issue
will be discussed further in Sections III
and IV.

D. Relative Car-Truck Stringency

The agencies proposed fleetwide standards with the projected levels of stringency of 34.1 mpg or 250 g/mi in MY 2016 (as well as the corresponding intermediate year fleetwide standards) for NHTSA and EPA respectively. To determine the relative stringency of passenger car and light truck standards for those model years, the agencies were concerned that increasing the difference
between the car and truck standards (either by raising the car standards or lowering the truck standards) could encourage manufacturers to build fewer cars and more trucks, likely to the detriment of fuel economy and CO 2 reductions. 79 In order to maintain consistent car/truck standards, the agencies applied a constant ratio between the estimated average required performance under the passenger car and light truck standards, in order to
maintain a stable set of incentives regarding vehicle classification.

To calculate relative car-truck stringency for the proposal, the agencies explored a number of possible alternatives, and for the reasons described in the proposal used the Volpe model in order to estimate stringencies at which net benefits would be maximized. The agencies have followed the same approach in calculating the relative car-truck stringency for the final standards promulgated today. Further details of the development of this approach can be found in Section IV of this preamble as
well as in NHTSA’s RIA and EIS. NHTSA examined passenger car and light truck standards that would produce the proposed combined average fuel economy levels from Table I.B.2–2 above. NHTSA did so by shifting
downward the curves that maximize net benefits, holding the relative stringency of passenger car and light truck
standards constant at the level determined by maximizing net benefits, such that the average fuel economy required of passenger cars remained 31 percent higher than the average fuel economy required of light trucks. This methodology resulted in the average fuel economy levels for passenger cars and light trucks during MYs 2012–2016
as shown in Table I.B.1–1. The following chart illustrates this methodology of shifting the standards from the levels maximizing net benefits
to the levels consistent with the combined fuel economy standards in
this final rule.

**BILLING CODE 6560–50–P**


### 25371 Federal Register / Vol. 75, No. 88 / Friday, May 7, 2010 / Rules and Regulations

80 We assume slightly higher A/C penetration in 2012 than was assumed in the proposal only to

Continued **BILLING CODE 6560–50–C**

The final car and truck standards for EPA (Table I.B.1–4 above) were subsequently determined by first converting the average required fuel economy levels to average required CO 2 emission rates, and then applying the expected air conditioning credits for
2012–2016. These A/C credits are shown in the following table. Further

details of the derivation of these factors can be found in Section III of this preamble or in the EPA RIA.


### 25372 Federal Register / Vol. 75, No. 88 / Friday, May 7, 2010 / Rules and Regulations

correct for rounding that occurred in the curve setting process.

81 As NHTSA explained in the NPRM, the Conference Report for EPCA, as enacted in 1975, makes clear, and the case law affirms, ‘‘ a determination of maximum feasible average fuel economy should not be keyed to the single manufacturer which might have the most difficulty achieving a given level of average fuel economy. ’’
CEI–I, 793 F.2d 1322, 1352 (D.C. Cir. 1986). Instead, NHTSA is compelled ‘‘ to weigh the benefits to the nation of a higher fuel economy standard against the difficulties of individual automobile
manufacturers. ’’ Id. The law permits CAFE standards exceeding the projected capability of any particular manufacturer as long as the standard is economically practicable for the industry as a whole. Similarly, EPA is afforded great discretion under section 202(a) of the CAA to balance issues of technical feasibility, cost, adequacy of lead time, and safety, and certainly is not required to do so in a manner that imposes regulatory obligations uniformly on each manufacturer. See NRDC v. EPA, 655 F. 2d 318, 322, 328 (D.C. Cir. 1981) (wide discretion afforded by the statutory factors, and EPA predictions of technical feasibility afforded considerable discretion subject to constraints of reasonableness EPA predictions of technical feasibility afforded considerable discretion subject to constraints of reasonableness); and cf.

International Harvester Co. v. Ruckelshaus, 479 F. 2d 615, 640 (D.C. Cir. 1973) ( ‘‘ as long as feasible technology permits the demand for new passenger automobiles to be generally met, the basic requirements of the Act would be satisfied, even though this might occasion fewer models and a more limited choice of engine types ’’ ). 

### TABLE 

### II.D–1 E XPECTED 

### F LEET 

### A/C C REDITS 

### ( IN 

### CO 2 

### E QUIVALENT 

### g/mi) F ROM 

### 2012–2016

Average technology penetration (%) Average credit for cars Average credit for trucks Average credit for combined fleet

2012 ................................................................................................................. 80 28 3.4 3.8 3.5

2013 ................................................................................................................. 40 4.8 5.45.0

2014 ................................................................................................................. 60 7.2 8.1 7.5

2015 ................................................................................................................. 80 9.6 10. 8 10.0

2016 ................................................................................................................. 85 10.2 11 .5 10.6

The agencies sought comment on the use of this methodology for apportioning the fleet stringencies to
relative car and truck standards for
2012–2016. General Motors commented that, compared to the passenger car standard, the light truck standard is too stringent because ‘‘ the most fuel efficient cars and small trucks already meet the 2016 MY requirements ’’ but ‘‘ the most fuel efficient large trucks must increase fuel economy by 20 percent to meet the 2016 MY requirements. ’’ GM recommended that the agencies relax stringency specifically for large pickups,
such as the Silverado.

The agencies disagree with the premise of the comment that the standard is too stringent under the applicable statutory provisions because some existing large trucks are not already meeting a later model year standard. Our analysis shows that the standards are not too stringent for manufacturers selling these vehicles. The agencies’ analyses demonstrate a means by which manufacturers could apply cost-effective technologies in order to achieve the standards, and we have provided adequate lead time for the technology to be applied. More important, the agencies’ analysis
demonstrate that the fleetwide emission standards for MY 2016 are technically feasible, for example by implementing technologies such as engine downsizing, turbocharging, direct injection, improving accessories and tire rolling resistance, etc.

GM did not comment on the use of the methodology applied by the agencies to develop the gap between the passenger car and light truck standards—only on the outcome of the methodology. For the reasons discussed below, the agencies maintain that the methodology applied above provides an appropriate basis to determine the gap between the passenger car and light truck standards, and disagree with GM’s arguments that the outcome is unfair.

First, GM’s argument incorrectly suggests that every individual vehicle model must achieve its fuel economy and emissions targets. CAFE standards
and new GHG emissions standards apply to fleetwide average performance, not model-specific performance, even though average required levels are based on average model-specific targets, and the agencies’ analysis demonstrates that GM and other manufacturers of large trucks can cost-effectively comply with
the new standards.

Second, GM implies that every manufacturer must be challenged equally with respect to fuel economy and emissions. Although NHTSA and
EPA maintain that attribute-based CAFE
and GHG emissions standards can more evenly balance compliance challenges,
attribute-based standards are not
intended to and cannot make these challenges equal, and while the agencies are mindful of the potential impacts of
the standards on the relative competitiveness of different vehicle manufacturers, there is nothing in EPCA
or the CAA 81 requiring that these challenges be equal.

We have also already addressed and rejected GM’s suggestion of shifting the

‘‘ cut off ’’ point for light trucks from 66 square feet to 72 square feet, thereby

‘‘ dropping the floor ’’ of the target function for light trucks. As discussed in the preceding section, this is so as not to forego the rules’ energy and environmental benefits, and because there is little or no safety basis to discourage downsizing of the largest light trucks.

Finally, NHTSA and EPA disagree
with GM’s claim that the outcome of the agencies’ approach is unfairly burdensome for light trucks as compared to passenger cars. Based on the agencies’ market forecast, NHTSA’s analysis indicates that incremental technology outlays could, on average, be comparable for passenger cars and light trucks under the final CAFE standards,
and further indicates that the ratio of
total benefits to total costs could be greater under the final light truck standards than under the final passenger
car standards.

E. Joint Vehicle Technology Assumptions

Vehicle technology assumptions, i.e., assumptions about technologies’ cost, effectiveness, and the rate at which they can be incorporated into new vehicles, are often controversial as they have a significant impact on the levels of the standards. The agencies must, therefore, take great care in developing and justifying these estimates. In developing technology inputs for the analysis of the MY 2012–2016 standards, the agencies reviewed the technology assumptions that NHTSA used in setting the MY 2011 standards, the comments that NHTSA received in response to its May 2008 Notice of Proposed Rulemaking (NPRM), and the comments received in response to the NPRM for this rule. This review is consistent with the request by President Obama in his January 26 memorandum to DOT. In addition, the agencies reviewed the technology input