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

To: William Charmley/AA/USEPA/US@EPA, <rebecca.yoon@dot.gov>, Maureen 

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

Robin Moran/AA/USEPA/US@EPA 

Date: 03/29/2010 06:27 PM 

Subjec

t: 

Summary of Interagency working comments on draft rule under EO 12866 

Please find attached a summary of interagency working comments received on the draft final

rule under EO 12866 review. They are for your consideration and subject to further policy

review.  

  

Thanks. [attachment "Summary of Interagency working comments on draft final rule under EO

1286603.29.pdf" deleted by Tad Wysor/AA/USEPA/US]  
Summary of Interagency Working Comments on Draft rule under EO 12866 review. 

Subject to further policy review. 

1 

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

draft rule “Joint Rulemaking to Establish Light-Duty Vehicle Greenhouse Gas Emission 

Standards and Corporate Average Fuel Economy Standards”. They are for your 

consideration and subject to further policy review. 

General Comments 

 Please add discussion and caveats of 41 sq ft curve in both agencies’ RIA 

discussion of safety as well as the Preamble discussion. 

 Rebound effect: “In summary, the 10 percent value was not derived from a single 

point estimate from a particular study, but instead represents a reasonable 

compromise between the historical estimates and the projected future estimates. 

The Agencies will continue to review this assumption in the estimate of rebound 

effect for future rulemakings.” 

 TSD ch 4: The value of increased driving range 

“Should manufacturers choose to downsize fuel tanks, and all other factors have been 

estimated with no error, the current estimates of refueling benefits would be overstated

and could even out to zero.. Should manufacturers downsize tanks to fully offset any 

increase in vehicle range, there would be no extension in driving range and no resultant 

benefit to consumers. However, should fuel tank sizes be reduced, vehicle space, utility 

and value would increase and vehicle weight and production costs would decrease, 

improving fuel economy and CO2 emissions.” 

Revised Preamble Sections I-III: 

 Page 9 of the revised:

“Improving energy security by reducing our dependence on foreign oil has been a 

national objective since the first oil price shocks in the 1970s.” 

 Page 13:

“The agencies project that the benefits of the National Program will total more 

than $240 billion at a 3% discount rate, or more than $190 billion at a 7% discount rate. 

 In the discussion that follows in Sections III and IV, each agency explains the related 

benefits for their individual standards. “ 

Comment [A1]: Some manufacturers are 

planning to comply with increased hybrid sales, 

some of which have smaller (and none have larger) 

tanks than their non-hybrid counterparts. Thus any 

claim that there would be an offsetting savings in 

fuel tank size/space in all cases necessarily implies 

the agencies did not accurately estimate the cost of 

hybrids. 

We recommend this discussion on tank size 

reduction clearly acknowledge that some will occur 

and is already accounted for in other calculations.

Comment [A2]: We try to eliminate this 

descriptor whenever possible since oil is a world 

market for a homogenous product, you can only 

choose to reduce oil use, much of it is imported. 

Comment [A3]: Are these net benefits? 
Summary of Interagency Working Comments on Draft rule under EO 12866 review. 

Subject to further policy review. 

2 

 Page 40:

1. Summary of Costs and Benefits of NHTSA's CAFE

Standards

“Without accounting for the compliance flexibilities that NHTSA is 

prohibited from considering when determining the level of new CAFE 

standards, since manufacturers’ decisions to use those flexibilities are 

voluntary, NHTSA estimates that these fuel economy increases would lead to 

fuel savings totaling 61 billion gallons throughout the useful lives of vehicles 

sold in MYs 2012-2016. At a 3% discount rate, the present value of the 

economic benefits resulting from those fuel savings is $143 billion. “ 

 Page 105:

“Consumer valuation of fuel economy and payback period – In estimating the 

impacts on vehicle sales, the agencies assume that potential vehicle buyers value 

the fuel savings improvements that would result from alternative CAFE and GHG 

standards over only part of the expected lifetime of the vehicles they purchase. 

Specifically, we assume that buyers value fuel savings over the first five years of 

a new vehicle’s lifetime, and that buyers discount the value of these future fuel 

savings using rates of 3% and 7%. The five-year figure represents the current 

average term of consumer loans to finance the purchase of new vehicles. One 

commenter argued that higher-fuel-economy vehicles should have higher resale 

prices than vehicles with lower fuel economy, but did not provide supporting data. 

This revision, if made, would increase the net benefits of the rule. Another 

commenter supported the use of a five-year payback period for this analysis. In 

the absence of data to support changes, EPA and NHTSA have kept the same 

assumptions. In the analysis of net benefits, EPA and NHTSA assume that 

vehicle buyers benefit from 100 percent of the fuel savings over the vehicle 

lifetime.” 

 Page 383:

“If so, then no net private benefits would result from the program, because 

consumers would already buy vehicles with the amount of fuel economy that is optimal 

for them; requiring additional fuel economy would alter both the purchase prices of new 

cars and their lifetime streams of operating costs in ways that will inevitably reduce 

consumers’ well-being. If these conditions do not hold, then the private benefits and 

costs would both count toward the program’s net benefits. Section III.H.1 discusses this 

issue more fully.” 

Comment [A4]: This is a place where 7 percent 

npv should also be added. 

Comment [A5]: Suggested edits in accordance 

with understanding of how the 5-year payback 

period was used. 

Comment [A6]: We suggest removing some of 

EPA/NHTSA’s language changes along the 

following lines. In general, it is not accurate to say 

that if there are private benefits due to fuel savings, it 

is likely that they outweigh any welfare and upfront 

costs. While that is true in the case of this rule, we 

wouldn’t know which effect would dominate without 

doing the analysis. 
Summary of Interagency Working Comments on Draft rule under EO 12866 review. 

Subject to further policy review. 

3 

 Page 485:

EPA presumes a car has a defeat device that disables the emissions systems if CO 

emissions are greater than X. We recommend that EPA not include this presumption of 

the existence of a device based on a test, which is easy to check by the model. Perhaps 

this would be better if the test result triggered a mandatory design report from the 

manufacturer that would indicate whether such a device exists. 

EPA and DOT RIA Executive Summaries: 

 Please note in the Executive Summary that the SCC estimates center 

around the 3% average. Please use language from SCC document which 

explains this central value (“The central value is the average SCC across 

models at the 3 percent discount rate. For purposes of capturing the 

uncertainties involved in regulatory impact analysis, we emphasize the 

importance and value of considering the full range.”)

EPA’s Summary Table: 

 Please include this table in Section I and also in the RIA executive 

summary. For the RIA executive summary, please delete the current table 

1 and replace it with this table below. 

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 simple sum 

of the individual programs. 

Table I.C.2-1 EPA’s Estimated 2012-2016 Model Year Lifetime Discounted Costs, 

Benefits, and Net Benefits assuming the $21/ton SCC Valuea,b,c (2007 dollars) 

3% Discount Rate $billions 

Costs $51.5 

Benefits $240 

Net Benefits $189 

7% Discount Rate 

Costs $51.5 

Benefits $192 

Net Benefits $140 a

 Although EPA estimated the benefits associated with four different values of a 

Comment [A7]: Please include clarifications. At 

a minimum we recommend you delete “simple”. 
Summary of Interagency Working Comments on Draft rule under EO 12866 review. 

Subject to further policy review. 

4 

one ton GHG reduction ($5, $21, $35, $65), for the purposes of this overview 

presentation of estimated costs and benefits, EPA is showing the benefits 

associated with the marginal value deemed to be central by the interagency 

working group on this topic: $21 per ton of CO2, in 2007 dollars and 2010 

emissions. The $21/ton value applies to 2010 CO2 emissions and grows larger 

over time. 

b

 Note that net present value of reduced GHG emissions is calculated differently 

from 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. 

DOT’s Summary Table 

 Please include this table in the Preamble and also in 

the RIA executive Summary. It should be the first 

table in the Executive summary. Please note suggested 

text changes which are highlighted in yellow. 

 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.2-1 presents the total costs, benefits, 

and net benefits for NHTSA’s final CAFE standards. The values in 

Table I.C.2-1 display the total costs for all MY2012-2016 vehicles; 

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 are not a sum of the individual programs. 

Table I.C.2-1 NHTSA’s Estimated 2012-2016 Model Year Costs, 

Benefits, and Net Benefits under the CAFE Standards before FFV 

Credits ($billion) 

3% Discount Rate 

 Costs $51.8 

 Benefits $182.5 

 Net Benefits $130.7 

7% Discount Rate 

 Costs $51.8 

 Benefits $146.3 

 Net Benefits $94.5 

Comment [A8]: We recommend you delete this 

but if you strongly feel it must be included please 

include this revised sentence. 

Comment [A9]: We recommend you delete this 

because it is a little confusing. 
Summary of Interagency Working Comments on Draft rule under EO 12866 review. 

Subject to further policy review. 

5 

NHTSA estimates that these fuel economy increases would lead to 

fuel savings totaling 61 billion gallons throughout the useful lives of 

vehicles sold in MYs 2012-2016. At a 3% discount rate, the present 

value of the economic benefits resulting from those fuel savings is 

$158 billion. At a 7% discount rate, the present value of the 

economic benefits resulting from those fuel savings is $125 billion.1

 

The agency further estimates that these new CAFE standards 

will lead to corresponding reductions in CO2 emissions totaling 655 

million metric tons (mmt) during the useful lives of vehicles sold in 

MYs 2012-2016. The present value of the economic 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).2 It is important to note that NHTSA’s 

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

and each will lead to increases in average fuel economy and CO2

emissions reductions. The two agencies’ standards together comprise 

the National Program, and this discussion of costs and benefits of 

NHTSA’s CAFE standards does not change the fact that both the 

CAFE and GHG standards, jointly, are the source of the benefits and 

costs of the National Program. 

 

1

 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. 

2

 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. 

Comment [A10]: Please note deletion of 

preceding text. 

Comment [A11]: Please clarify. This is a bit 

confusing. They are not additive. 

Comment [A12]: This is a bit confusing. Aren’t’ 

the CAFÉ standards enough to produce benefits and 

costs as above? Would it be better just to say: “it is 

important to note that NHTSA’s CAFÉ standards 

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

that together, they comprise the National Program” 
Summary of Interagency Working Comments on Draft rule under EO 12866 review. 

Subject to further policy review. 

1 

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

draft rule “Joint Rulemaking to Establish Light-Duty Vehicle Greenhouse Gas Emission 

Standards and Corporate Average Fuel Economy Standards”. They are for your 

consideration and subject to further policy review. 

General Comments 

 Please add discussion and caveats of 41 sq ft curve in both agencies’ RIA 

discussion of safety as well as the Preamble discussion. 

 Rebound effect: “In summary, the 10 percent value was not derived from a single 

point estimate from a particular study, but instead represents a reasonable 

compromise between the historical estimates and the projected future estimates. 

The Agencies will continue to review this assumption in the estimate of rebound 

effect for future rulemakings.” 

 TSD ch 4: The value of increased driving range 

“Should manufacturers choose to downsize fuel tanks, and all other factors have been 

estimated with no error, the current estimates of refueling benefits would be overstated

and could even out to zero.. Should manufacturers downsize tanks to fully offset any 

increase in vehicle range, there would be no extension in driving range and no resultant 

benefit to consumers. However, should fuel tank sizes be reduced, vehicle space, utility 

and value would increase and vehicle weight and production costs would decrease, 

improving fuel economy and CO2 emissions.” 

Revised Preamble Sections I-III: 

 Page 9 of the revised:

“Improving energy security by reducing our dependence on foreign oil has been a 

national objective since the first oil price shocks in the 1970s.” 

 Page 13:

“The agencies project that the benefits of the National Program will total more 

than $240 billion at a 3% discount rate, or more than $190 billion at a 7% discount rate. 

 In the discussion that follows in Sections III and IV, each agency explains the related 

benefits for their individual standards. “ 

Comment [A1]: Some manufacturers are 

planning to comply with increased hybrid sales, 

some of which have smaller (and none have larger) 

tanks than their non-hybrid counterparts. Thus any 

claim that there would be an offsetting savings in 

fuel tank size/space in all cases necessarily implies 

the agencies did not accurately estimate the cost of 

hybrids. 

We recommend this discussion on tank size 

reduction clearly acknowledge that some will occur 

and is already accounted for in other calculations.

Comment [A2]: We try to eliminate this 

descriptor whenever possible since oil is a world 

market for a homogenous product, you can only 

choose to reduce oil use, much of it is imported. 

Comment [A3]: Are these net benefits? 
Summary of Interagency Working Comments on Draft rule under EO 12866 review. 

Subject to further policy review. 

2 

 Page 40:

1. Summary of Costs and Benefits of NHTSA's CAFE

Standards

“Without accounting for the compliance flexibilities that NHTSA is 

prohibited from considering when determining the level of new CAFE 

standards, since manufacturers’ decisions to use those flexibilities are 

voluntary, NHTSA estimates that these fuel economy increases would lead to 

fuel savings totaling 61 billion gallons throughout the useful lives of vehicles 

sold in MYs 2012-2016. At a 3% discount rate, the present value of the 

economic benefits resulting from those fuel savings is $143 billion. “ 

 Page 105:

“Consumer valuation of fuel economy and payback period – In estimating the 

impacts on vehicle sales, the agencies assume that potential vehicle buyers value 

the fuel savings improvements that would result from alternative CAFE and GHG 

standards over only part of the expected lifetime of the vehicles they purchase. 

Specifically, we assume that buyers value fuel savings over the first five years of 

a new vehicle’s lifetime, and that buyers discount the value of these future fuel 

savings using rates of 3% and 7%. The five-year figure represents the current 

average term of consumer loans to finance the purchase of new vehicles. One 

commenter argued that higher-fuel-economy vehicles should have higher resale 

prices than vehicles with lower fuel economy, but did not provide supporting data. 

This revision, if made, would increase the net benefits of the rule. Another 

commenter supported the use of a five-year payback period for this analysis. In 

the absence of data to support changes, EPA and NHTSA have kept the same 

assumptions. In the analysis of net benefits, EPA and NHTSA assume that 

vehicle buyers benefit from 100 percent of the fuel savings over the vehicle 

lifetime.” 

 Page 383:

“If so, then no net private benefits would result from the program, because 

consumers would already buy vehicles with the amount of fuel economy that is optimal 

for them; requiring additional fuel economy would alter both the purchase prices of new 

cars and their lifetime streams of operating costs in ways that will inevitably reduce 

consumers’ well-being. If these conditions do not hold, then the private benefits and 

costs would both count toward the program’s net benefits. Section III.H.1 discusses this 

issue more fully.” 

Comment [A4]: This is a place where 7 percent 

npv should also be added. 

Comment [A5]: Suggested edits in accordance 

with understanding of how the 5-year payback 

period was used. 

Comment [A6]: We suggest removing some of 

EPA/NHTSA’s language changes along the 

following lines. In general, it is not accurate to say 

that if there are private benefits due to fuel savings, it 

is likely that they outweigh any welfare and upfront 

costs. While that is true in the case of this rule, we 

wouldn’t know which effect would dominate without 

doing the analysis. 
Summary of Interagency Working Comments on Draft rule under EO 12866 review. 

Subject to further policy review. 

3 

 Page 485:

EPA presumes a car has a defeat device that disables the emissions systems if CO 

emissions are greater than X. We recommend that EPA not include this presumption of 

the existence of a device based on a test, which is easy to check by the model. Perhaps 

this would be better if the test result triggered a mandatory design report from the 

manufacturer that would indicate whether such a device exists. 

EPA and DOT RIA Executive Summaries: 

 Please note in the Executive Summary that the SCC estimates center 

around the 3% average. Please use language from SCC document which 

explains this central value (“The central value is the average SCC across 

models at the 3 percent discount rate. For purposes of capturing the 

uncertainties involved in regulatory impact analysis, we emphasize the 

importance and value of considering the full range.”)

EPA’s Summary Table: 

 Please include this table in Section I and also in the RIA executive 

summary. For the RIA executive summary, please delete the current table 

1 and replace it with this table below. 

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 simple sum 

of the individual programs. 

Table I.C.2-1 EPA’s Estimated 2012-2016 Model Year Lifetime Discounted Costs, 

Benefits, and Net Benefits assuming the $21/ton SCC Valuea,b,c (2007 dollars) 

3% Discount Rate $billions 

Costs $51.5 

Benefits $240 

Net Benefits $189 

7% Discount Rate 

Costs $51.5 

Benefits $192 

Net Benefits $140 a

 Although EPA estimated the benefits associated with four different values of a 

Comment [A7]: Please include clarifications. At 

a minimum we recommend you delete “simple”. 
Summary of Interagency Working Comments on Draft rule under EO 12866 review. 

Subject to further policy review. 

4 

one ton GHG reduction ($5, $21, $35, $65), for the purposes of this overview 

presentation of estimated costs and benefits, EPA is showing the benefits 

associated with the marginal value deemed to be central by the interagency 

working group on this topic: $21 per ton of CO2, in 2007 dollars and 2010 

emissions. The $21/ton value applies to 2010 CO2 emissions and grows larger 

over time. 

b

 Note that net present value of reduced GHG emissions is calculated differently 

from 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. 

DOT’s Summary Table 

 Please include this table in the Preamble and also in 

the RIA executive Summary. It should be the first 

table in the Executive summary. Please note suggested 

text changes which are highlighted in yellow. 

 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.2-1 presents the total costs, benefits, 

and net benefits for NHTSA’s final CAFE standards. The values in 

Table I.C.2-1 display the total costs for all MY2012-2016 vehicles; 

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 are not a sum of the individual programs. 

Table I.C.2-1 NHTSA’s Estimated 2012-2016 Model Year Costs, 

Benefits, and Net Benefits under the CAFE Standards before FFV 

Credits ($billion) 

3% Discount Rate 

 Costs $51.8 

 Benefits $182.5 

 Net Benefits $130.7 

7% Discount Rate 

 Costs $51.8 

 Benefits $146.3 

 Net Benefits $94.5 

Comment [A8]: We recommend you delete this 

but if you strongly feel it must be included please 

include this revised sentence. 

Comment [A9]: We recommend you delete this 

because it is a little confusing. 
Summary of Interagency Working Comments on Draft rule under EO 12866 review. 

Subject to further policy review. 

5 

NHTSA estimates that these fuel economy increases would lead to 

fuel savings totaling 61 billion gallons throughout the useful lives of 

vehicles sold in MYs 2012-2016. At a 3% discount rate, the present 

value of the economic benefits resulting from those fuel savings is 

$158 billion. At a 7% discount rate, the present value of the 

economic benefits resulting from those fuel savings is $125 billion.1

 

The agency further estimates that these new CAFE standards 

will lead to corresponding reductions in CO2 emissions totaling 655 

million metric tons (mmt) during the useful lives of vehicles sold in 

MYs 2012-2016. The present value of the economic 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).2 It is important to note that NHTSA’s 

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

and each will lead to increases in average fuel economy and CO2

emissions reductions. The two agencies’ standards together comprise 

the National Program, and this discussion of costs and benefits of 

NHTSA’s CAFE standards does not change the fact that both the 

CAFE and GHG standards, jointly, are the source of the benefits and 

costs of the National Program. 

 

1

 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. 

2

 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. 

Comment [A10]: Please note deletion of 

preceding text. 

Comment [A11]: Please clarify. This is a bit 

confusing. They are not additive. 

Comment [A12]: This is a bit confusing. Aren’t’ 

the CAFÉ standards enough to produce benefits and 

costs as above? Would it be better just to say: “it is 

important to note that NHTSA’s CAFÉ standards 

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

that together, they comprise the National Program”