EPA CO 2 Standards

3.0 EPA CO2 Standards ...................................................................................................... 2
3.1 National versus state standards and ha rmonization of EPA and NHTSA standards 6
3.2 Form of the standards .............................................................................................. 21 3.3 Stringency of the standards ..................................................................................... 53

3-1EPA Response to Comments

3.0 EPA CO2 Standards

Several commenters provided comments whic h touch upon two or more aspects of the proposed EPA GHG standards, as they are broken out in this Section of the RTC document. Splitting these comments apart acco rding to the organization of this section might have caused a loss of the context of the specific comment. Citing the entire
comment in each relevant subsection would have produced significant duplication. In lieu of either of these approaches, we pres ent these integrated comments at a relatively high point in the organization of this section (e.g., Section 3.0 ) where all of the relevant specific aspects of the comment are addresse d either at that le vel or at a more disaggregated level (e .g., Section 3.1).

Organization: Ford Motor Company National Automobile Dealers Association (NADA) New York State Department of Environmental Conservation University of Miami, School of Law Dr. Walter McManus, Ph.D., of the University of Michigan Transportation Research Institute (UMTRI) Transportation and Buildings Policy for the State of Massachusetts Executive Office of Energy and Environmental Affairs

Comment:

Ford Motor Company

Ford supported the President's initiative to br ing together key stakeh olders and work out a solution to enable a single national program for motor vehicle greenhouse gas and fuel economy standards. A state-by-state approach to such standards is unworkable for a variety of reasons, and would impose hardships on consumers, dealers, and manufacturers. [ OAR-2009-0472-7082.1, p.1]

[Ford also submitted these comments as te stimony at the Detroit public hearing, See docket number EPA-HQ-OAR-2009-0472-6815, pp. 16.]

[Ford also submitted these comments as testimony at the New York public hearing, See docket number EPA-HQ-OAR-2009-0472-4621, pp. 32.]

National Automobile De alers Association (NADA)

Above all else, the final rule must encomp ass a single national light-duty vehicle fuel economy/GHG program that avoi ds any unworkable patchwork of state laws. The EISA
mandate for a fleet-wide combined fuel econom y average of at least 35 miles per gallon (a 40% increase) by 2020, with a commensurate reduction in GHGs of at least 30 percent, was Congress’ clear guidance on what a National Program should achieve. Notably, EISA’s ambitious Congressional mandate resu lted from vigorous public debate and, in the end, received virtually unive rsal support from all interested parties. Unfortunately, the

3-2EPA CO 2 Standards

proposed National Program downplays EISA’s landmark mandates, opting instead for a bureaucratic cobbling of new NHTSA CAFE sta ndards together with separate and largely redundant EPA GHG standards. [OAR-2009-0472-7182.1, p.3]

As the National Program proposal states, “CAF E standards address most, but not all, of
the real world C02 emissions because EPCA requires the use of 1975 passenger car test procedures under which vehicl e air conditioners are not turned on during fuel economy testing.” 74 Fed. Reg. 49458. EPA’s test procedur es used to calculate CAFE standards are based on equations involving a carbon ba lance technique where fuel economy is
calculated from the measurement of exhaus t emissions and an assumption that the quantity of carbon in a vehicle’s exhaust gas is equal to the quantity of carbon consumed by the engine as fuel. The physics and chemistry involved spell a direct relationship; controlling fuel economy controls GHGs and c ontrolling GHGs controls fuel economy. Clearly, the most straightforward and eleg ant National Program would be one with NHTSA regulating tailpipe GHGs through its long-establishe d, Congressionallymandated CAFE standards, supplemented by a few appropriately tailored EPA rules governing vehicle air conditioning (under Title VI of the CAA), fuel design, and vehicle use. Several of the comments below point to areas where EPA’s tortured attempt to overlay GHG rules on top of NHTSA’s CAFE standards raise significant issues of concern. [OAR-2009-0472-7182.1, p.3]

In any event, NADA strongly objects to the proposal’s admitted attempt to incorporate the fuel economy/GHG rules promulgated by Ca lifornia’s unelected Air Resources Board (CARB). CARB’s long history of appropriately addressing m obile source criteria and hazardous pollutants, in no way justifies in corporation of its GHG rules as they are neither practically necessary to nor legally appropriate for a well-designed National Program. It is in this light that NADA recen tly challenged EPA’s reversal of its prior denial of CARB’s request for authority to regulate motor vehicle fuel economy and GHGs. NADA ‘s legal challenge has nothing to do with the propr iety of raising fuel economy standards, but rather arises fr om the unworkable impact on dealership new
vehicle commerce that would result from a “patchwork of state—based regulations. Notably, nothing in EISA changed EPCA’s explicit preemption of the adoption or
enforcement of laws “related to” fuel economy by states, an express preemption necessary to ensure nationa l uniformity and to avoid a patchwork of state-by-state mandates. CARBs “flat standard” approach to regulating motor vehicle fuel economy and GHGs clearly fails to account for all relevant criteria necessary to a National Program, directly relates to and conf licts with the federal CAFE standards, and unquestionably undermines the safety. job loss, equity. and consumer choice considerations mandated by EPCA. [OAR-2009-0472-7182.1, p.3]

The National Program very ambitiously propos es to pull forward EISA’s 2020 target by four years. Recently, a top EPA official stated that EPA and NHTSA have “put together a single national standard with one implementation.” Cobbled togetherand christened the “National Program,” the proposal in reality is not a “single national standard,” but three fuel economy standards separately admi nistered by NHTSA, EPA and CARB. The proposal claims that the National Program will be “harmonized” and “consistent, “ yet it

3-3EPA Response to Comments

is virtually impossible for the CAFE pr ogram, the CAA, and CARB’s regulations (designed to regulate GHGs only from light dut y vehicles produced for sale in California) to be so as each agency must follow se parate statutory frameworks. The National Program is in fact three different fuel economy standards, set by three different agencies, governed by three different laws. [OAR-2009-0472-7182.1, p.5]

Automakers producing light-duty vehicles for sale in MYs 2012-2016 will have to comply with all three standards, even whentheir mandates and policies conflict. This makes for an unnecessarily complex and costlyregulatory program with scant (if any)
commensurate additional benefits. While the proposal gives lip service to harmonizing these three mandates, in reality it falls far s hort in that regard. For example, it fails to adequately rationalize and equalize GHG ta ilpipe emissions between the NHTSA and EPA standards. Perhaps one solution to this specific issue would be for NHTSA to adjust its curves downward to better reflect the contribution A/C improvements will make to overall GHG reductions. [OAR-2009-0472-7182.1, pp.5-6]

Curiously, the proposal fails to establish a “r atable” ramp-up of fuel economy targets. The worst example of this is the unjus tifiably large jump between MYs 2011 and 2012. Put simply, the proposal’s standards require too much, too soon. Given the unprecedented targets proposed for MY 2016, the National Pr ogram should adopt a more equitable and
linear rate of annual increase for MYs 2011-2016, and even should consider back loading higher increases into the later model year s. NADA does not suggest what targets are feasible or practicable for any given model year, as such determinations depend on an appropriate evaluation of vast amounts of often confidential business data viewed in the light of statutory criteria and numerous a ssumptions. Of course, an ongoing evaluation of manufacturer product plan information is e ssential, as exemplified by NHTSA’s recent request for future data. The feasibility and practicability of compliance changes with time for many reasons, not the least of which is th e ability of economically constrained vehicle manufacturers to develop and implement ne w technologies, and the willingness of the motoring public to pay for those new technol ogies if and when they choose to buy or lease a new vehicle. [OAR-2009-0472-7182.1, p.6]

Ultimately, any National Program cannot impos e standards beyond those deemed to be “maximum feasible.” “Economic practicality” is one key criterion for making that statutory determination, and any analysis of su ch must recognize, preserve, and capitalize on consumer choice and affordability. Again, unless and until vehicles covered by CAFE standards are actually purc hased, projected fuel economy and GHG reduction benefits will be illusory. Moreover, all three standards must take into account impacts on new passenger car and light truck dealerships. Dealerships directly purchase the vehicles produced by manufacturers. If the Nationa l Program mandates vehicles that are unacceptable to the motoring public for cost or performance reasons, potential new vehicle customers predictably will hold on to thei r existing vehicles longer or will turn to the used vehicle marketplace. The result: unwanted new vehicles languishing on dealership lots, with a decline in dealership sales, income, profits, and employment, and a predictable rise in busine ss failures. [OAR-2009-0472-7182.1, p.6]

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[National Automobile Dealers Association also submitted these comments as testimony at the New York public hearing, See docket number EPA-HQ-OAR-2009-0472-4621, pp. 80-84, 88-89.]

New York State Department of Environmental Conservation

New York will deem vehicles that comply with the new federal standards to be in compliance with its adopted state standards from 2012 through 2016. We wish to emphasize that the Clean Air Act provision of states' rights to adopt motor vehicle
standards - for California under Section 209 a nd for other states under Section 177 - was crucial in allowing New York and other states to lay th e groundwork and create the
momentum for this national vehicle GHG em issions reduction program, as it was for many other previous ground-breaking mobile source regulatory programs. Therefore, our statutory right to adopt mo re rigorous motor vehicle st andards than the federal government's proved to be a valuable cat alyst for innovation and progress. [OAR-2009- 0472-7454, cover page 2] [New York State Department of Environm ental Conservation also submitted these comments as testimony atthe New York public hearing, See docket number EPA-HQ-OAR-2009-0472-4621, pp. 13-16]

The New York State Department of Environmental Conservation (Department) agrees with EPA's stated goal of increasing th e stringency of greenhouse gas emissions
standards at a rate such that manufacture rs can comply by making emissions reductions as part of regularly scheduled vehicle redesi gns. We believe that the proposed standards are reasonably achievable, and are phased in at an appropriate pace. [OAR-2009-0472- 7454, p.1]

University of Miami, School of Law

The time frame of the proposed rule nevertheless poses some concern. The standards should not cease to apply in 2016, but should rema in in effect until a comparable or more stringent standard is permanently in place. Before drafting the rule, the EPA should make sure to explore other related transportation-emitters that could be regulated as part of this effort. In this way, the standards can be a pplied to more than 60% of emissions from transportation. [OAR -2009-0472-6770, p. 1]

Dr. Walter McManus, Ph.D., Research Sc ientist, University of Michigan Transportation Resear ch Institute (UMTRI)

EPA and NHTSA have proposed a new methodology for analyzing potential CAFE and GHG emissions standards that is more transpar ent, replicable, and accu rate that the prior methodology. [OAR-2009-0472-3651.1, p.3]

Among other objectives, Congress wants fuel economy standards that balance the benefits from reducing negative external effects of fuel consumption with the costs of improving vehicle fuel economy. The benefits can generally be estimated with public data, but to estimate the costs it would be helpful to use private information on costs

3-5EPA Response to Comments

known only to the automakers. This informati on asymmetry has the po tential to introduce “gaming” into the process. [OAR-2009-0472-3651.1, p.3]

[[Dr. McManus, also submitted these comments as testimony at the Detroit public hearing, See docket number EP A-HQ-OAR-2009-0472-6185, pp. 36-37.]

Transportation and Buildings Policy for th e State of Massachusetts Executive Office of Energy and Environmental Affairs

As a result of the differences in the EPA and NHTSA statutes, there are two key areas that I would like to highli ght. First, in the proposed rulemakings, the GHG benefits estimated from the EPA-proposed, footprint-ba sed standard, expressed as grams per mile or CO2 are slightly higher than what NHTSA 's proposing for CAFE. This is primarily because the CAFE standards do [EPA -HQ-OAR-2009-0472-4621, p.24] not account for greenhouse gas emissions from vehicle air cond itioning systems. In contrast, EPA gives the automobile manufacturers the ability to obtain credit for reducing CO2 and hydrofluorocarbon emissions from air conditioning systems. We believe EPA's approach is correct; requiring additiona l reductions from air conditioning systems represents, quote, a whole vehicle approach which is appropriate. [E PA-HQ-OAR-2009-0472-4621, p.25]

EPA Response:

As indicated by the organization of Section 3, there are many important aspects of the EPA GHG standards for motor vehicles. We have attempted to separate the comments received according to their primary focu s and address each group of similar or comparable comments together in a cohesive manner. The comments cited above in Section 3.0 interweave many of these aspects in a way that was not easily separable. Rather than repeating these comments in tw o or more of the following sub-sections of Section 3.0, we present these comments here together. The issues which they raise, including the interaction between state and federal programs, the overlap of the NHTSA and EPA standards, the overall stringencyof the NHTSA and EPA standards, the stringency of the 2012-2016 standards (includi ng the issue of EISA’s direction to
NHTSA for a ratable increase in the standards through 2020) and the desirability of carrying the current approach to standard setting forward beyond the 2016 model year will be addressed as each of these issues is focused on more specifically in the various
sub-sections of Section 3.0 of this RTC document.

3.1 National versus state standards and harmonization of EPA and NHTSA

standards

Organization: Center for Biological Diversity
Environmental Defense Fund Alliance of Automobile Manufacturers (Alliance) New York University School of Law, Institute for Policy Integrity (IPI)
General Motors

3-6EPA CO 2 Standards

Volkswagen Group of America (Volkswagen) BMW of North America, LLC (BMW) National Association of Manufacturers (NAM) Senator Fran Pavley, California State Senate
Consumer Federation of America University of California, Los Angeles School of Law State of New Jersey State of Washington Department of Ecology Environment New Jersey

Comment:

Center for Biological Diversity

C. The Effect of Other Motor Vehicle St andards on Fuel Economy Supports More Stringent Standards

California has consistently led the way in seeking to set higher mileage standards, and is a leader in the regulation of GHG emissions . Undoubtedly, this trend will continue. Thus, the ability of California to seek additional wa ivers in the future to continue in this leadership role argues for the setting of more stringent national standards as well. [OAR2009-0472-7265.1, p. 19]

Alliance of Automobile Manufacturers (Alliance)

In addition, the Alliance supports creation of an effective si ngle, national program that automakers can plan to meet and that will minimize the disruptions of multiple programs on vehicle choice and availability. The Administration fundamentally has accomplished this objective for the 2012- 2016 timeframe. Beyond 2016, this goal must still be pursued. It is important that all key stakeholders , including California and states adopting California standards, be include d in this process. It is al so critical that the Federal government continue working to develop anintegrated approach that addresses infrastructure, vehicles, fuels and fuel quality, and consumer behavior, as well as all other sectors of the economy. [OAR-2009-0472-6952.1, pp.1-2]

Harmonization of EPA and NHTSA S-Curves

Harmonization between the EPA and NHTSA programs is critical to meeting the National Program’s target of 250g CO2/mile by MY 2016. Both agencies stress the importance of harmonization in the May 22, 2009 Notice of Intent, where the word
harmonization is mentioned nine times. The No tice of Intent describes key elements of the National Program as follows:

EPA and NHTSA intend to propose two separate sets of standards, each under their respective statutory authoritie s. EPA expects to propose a na tional CO2 vehicle emissions

3-7EPA Response to Comments

standard ....NHTSA expects to propose appr opriate related CAFE standards. [OAR2009-0472-6952.1, p.31]

EPA standards recognize the CO2 benefit fr om investing in air conditioning technology improvements, whereas NHTSA’s standards are constrained from doing so. Since the agencies are taking different approaches to reaching the same 2016 goals, the National Agreement states that a manuf acturer should be able to bu ild a single national fleet of light-duty vehicles that simu ltaneously satisfy the requirements of both programs. For a single product plan to meet both the EPA and NHTSA approach es, the stringency of the tailpipe CO2 standards must be equivalent between the two programs. However, the stringencies of the tailpipe standards are not equivalent in the proposed rule. A primary reason for this lack of equivalency is the air conditioning assumptions being made in the
translation between the NHTSA and EPA standard curves. [OAR-2009-0472-6952.1, pp.31-32]

Manufacturers that employ a higher level of A/C system advancements will not realize
the benefit under the NHTSA CA FE program. If the NHTSA cu rves fail to recognize the A/C system improvements a manufacturer may make under the EPA framework, the
curves could have the unintended cons equence of discouraging A/C system improvements. This disconnect, effectively leads to a more stringent overall National Program than is contemplated by th e Notice of Intent. [OAR-2009-0472-6952.1, pp.33- 34]

As an example, one manufacturer may want to implement alternative refrigerants as quickly as possible. EPA recognizes the bene fits of low GWP refrigerants and rewards this with 14.9 g/mi credit. If the manufacturer’s strategy was to do this on half of its vehicle fleet in MY 2012, the manufacturer would earn 14.9 g/mi CO2e divided by two, or 7.5 g/mi CO2e credits for the refrigerant portion alone (plus othe r indirect credits). This is more than twice the average credit level assumed. A strategy like this may be the most technologically feasible way to overcome the steep n ear term increase in the MY 2011-2012 standards, while the ma nufacturer is implementing the longer lead time fuel efficiency strategies. [OAR-2009-0472-6952.1, p.34]

This same manufacturer may determine that the best and most economically practicable way (given the capital constraints currently f aced by the industry) for complying with this rule is to maximize A/C improvements in combination with fuel economy improvements.
The current NHTSA S-curve translation w ould penalize this approach even though equivalent GHG reductions would be achieved. [OAR-2009-0472-6952.1, p.34]

The issue here has to do with harmonizing th e two rules – a key objective of a successful National Program. Manufacturers still have to meet the overall stringency of the joint program. [OAR-2009-0472-6952.1, p.34]

Recommendation

3-8EPA CO 2 Standards

NHTSA needs to adjust the S-curves downw ard for 2012-16 model years to allow for the potential strategy of pursu ing maximum A/C improvement s to lower GHG emissions. The Alliance’s proposed adjustments can be accomplished without backsliding from the MY 2011-15 fuel economy standards publishe d in the April 2008 NHTSA NPRM (and later withdrawn). 73 Fed. Reg. 24,352 (M ay 2, 2008). [OAR-2009-0472-6952.1, p.34]

The table below quantifies the difference in CO2e between the Apr il 2008 NPRM and the September 2009 NPRM. The difference in CO2e quantity (shown in column E) could be used without backsliding fr om the April 2008 NPRM. NHTSA should re-translate the EPA S-Curves by the amount in Column G. There would be no environmental loss with such an approach because a manufacturer that does not pursue maximum air conditioning credits would be required to achieve the necessary CO2 reductions through tailpipe emissions. [OAR-2009-0472-6952.1, p.34]

Consideration of EPA's 2012- 2016 Model Year GHG Standards

With respect to EPA's 2012-2016 GHG standards, it is important to not e that the current joint NPRM is the result of an agreement in principle between the federal government, California, and the automakers in support of one national program for GHG and fuel economy standards for model years 2012-2016. U nder the agreement in principle, EPA and NHTSA are working together to ensure that their respective standards are harmonized as closely as possible, in k eeping with the joint rulemaking notice. Obviously, the harmonization effort requires both agencies to be aware of and 'consider' what the other is doing, so they can make ad justments that align the requirements of both the GHG and fuel economy programs. As evidenced by the NPRM, NHTSA and EPA have been engaged in the harmonization effort for some time now, and they should
continue in that effort to the conclusion of the joint rulemaking process. This will fulfill NHTSA's obligation to 'consider' EPA's GH G rules under Section 32902(f). Of course, the process of 'considering' and harmonizing with EPA's GHG rules does not eliminate NHTSA's obligation to set standards that conf orm to the other criteria set forth in EPCA. For example, NHTSA must see to it that nothing resulting from the harmonization effort, or any other aspect of the standard-setting pr ocess, will result in fuel economy standards that are not technologically feasible or economically practicable. NHTSA has an independent obligation under EPCA to make sure that those crite ria are satisfied under any final rule. Likewise, any regulations adopted by EPA under the Clean Air Act for model years beyond the scope of the current prop osal must be consistent with the goals and purposes of EPCA and must respect NHTSA ’s primary role in setting fuel economy
standards in consultation with EPA and other agencies. [OAR-2009-0472-6952.1, p.66]

Consideration of Ca lifornia's 2012-2016 Model Year GHG Standards

Under the agreement in principle mentioned above, the California Air Resources Board is expected to promulgate amendments to its re gulations providing that compliance with the federal GHG/fuel economy program is deemed to satisfy compliance with the California program. Under this framework, as the A lliance understands it, the California GHG standards will have no independe nt practical impact on fleet-wide fuel economy in the

3-9EPA Response to Comments

2012-2016 time frame. Assuming that the agre ement in principle is carried out as anticipated, the existence of California GHG regulations for the 2012-2016 model years should therefore not have any impact on NHT SA's standard-setting process. [OAR-2009- 0472-6952.1, p.66]

Consideration of EPA or CARB GHG Standards for the 2017 Model Year and Beyond

The Alliance and all stakeholders have agreed that the best approach to control mobile source GHG emissions is through a national pr ogram. The Alliance supports the concept of a national program beyond the 2016 model year and urges all other stakeholders to do
likewise. The Alliance is confident a national approach can and will be achieved for the post-MY 2016 time frame, and we will work diligently towards that goal. Assuming the 'one national program' approach continues beyond 2016, and the standard-setting process for 2017 and beyond is conducted under a joint rulemaking much like the current one, NHTSA's obligation to consider EPA's GHG rules under Section 32902(f) would be
similar to what is outlined above for the 2012-2016 time period. [OAR-2009-0472- 6952.1, pp.66-67]

New York University School of Law, Institute for Policy Integrity (IPI)

(3) Program Choice

The program proposed by EPA builds largely on the structure of its previous regulatory programs, taking the form of traditional command-and-control regulation. [OAR-2009- 0472-7232.3, p. 14]

EPA has submitted its positive endangerment finding on greenhouse gas pollutants under Section 202 of the Clean Air Act (CAA) to the White House Office of Management and Budget for final approval. Once that findi ng is finalized, the CAA requires EPA to promulgate regulations. As explained in IP I’s report, The Road Ahead, the statutory language in Title II of the CAA limits EPA in its choices to regulate under this section; regulations must be in the form of emissi ons standards mandating some type of limit on GHG emissions. These types of command-and-c ontrol regulations will be detrimental to any subsequent cap-and-trade system that covers GHG emissions from vehicle fuel, whether created by Congress or by EPA. [OAR-2009-0472-7232.3, pp. 14-15]

Assuming California’s existing standards fo r motor vehicle emissions are close to efficient, EPA’s attempt to harmonize its proposed GHG standards with Californian policy is the optimal regulatory choice. Th is harmonization will minimize any inefficient
interaction of the standards with a subs equently enacted cap-and-trade system, by creating a single uniform regulatory regime. Through this method, EPA avoids increasing regulatory obligations on (or creating regulat ory uncertainty for) car manufacturers, as manufacturers already need to comply with si milar regulations for cars sold in California
and the seventeen other states that have adopted California’s standards. [OAR-2009- 0472-7232.3, p. 15]

3-10EPA CO 2 Standards

Although the proposed GHG regulations fulfil l EPA’s legal duty under Section 202, the program does not reach an efficient level of GHG reductions in the transportation sector. The proposal does not create a uniform regulat ory framework applicable to all mobile sources and does not effectively maximize social welfare or minimize costs. In April 2009, IPI submitted a rulemaking petition to EPA requesting the creation of a comprehensive cap-and-trade system under Sect ion 211 of the CAA for vehicle fuel used in all mobile sources. A cap-and-trade rulema king would be more effective at addressing GHG emissions of all mobile sources, includi ng sources such as off-road vehicles and marine vessels, which are not subject to a sim ilar statutory scheme as light-duty vehicles. It would also allow EPA to regulate emissions at the source of fuel sale, manufacture, and import rather than requiring piecemeal co mmand-and-control regulation of various vehicle sectors. The outlines of such a pr ogram, and the statutory authority for the program under the CAA, are more clearly outl ined in IPI’s petition and IPI’s report The Road Ahead, included as attachments to these comments. [OAR-2009-0472-7232.3, p. 15]

General Motors

Our working together in a common direc tion on a single national approach could accomplish much more, consistent with the ener gy needs and the environmental priorities of the country. We knew then only about th e framework for the proposed regulations. But we made clear that we were prepared to work with EPA and NHTSA, and in that regard, I appreciate this opport unity to testify today to reaffirm GM's commitment from last May and to comment briefly on the propos ed rules of the two agencies. [OAR-2009- 0472-6185, pp.9-10]

Volkswagen Group of America (Volkswagen)

Volkswagen has concern that the relativ e stringency between the EPA GHG proposed regulation and the NHTSA CAFE: regulation is not equivalent. It is our understanding that the EPA regulation would be more stri ngent than the NHTSA regulation due to the credit flexibility offered under the EPA GHG proposal. The preamble speaks at length
about the need for harmonization and the e ffort spent to harm onize the NHTSA CAFE program and the EPA GHG requirements unde r a National program. We expected the stringency published for the EPA GHG as the 250 gram/mile combined car and truck fleet target as outlined by the President's announcement on May 19, 2009 was a given value that the collective automotive companies and other stakeholders could agree to. In the joint NPRM, however, we were surprised to see the stringency of the NHTSA curves when they are converted to a CO2 basis. Th e NHTSA curves match the stringency of the EPA targets, especially in th e earlier years of the regula tion. In particular, the 2012 MY curves are essentially the same when the NHTSA curve is converted to a CO2 basis. This is troubling because we do not believe this increased stringency of the NHTSA targets allows manufacturers complete confidence th ey can build a single fleet that complies with both regulations. During negotiations earlier this year leading up to the announcement of the National agreement it was thought that if a ma nufacturer complied with the EPA GHG regulation that in turn meant that the manufacturer also complied

3-11EPA Response to Comments

with the NHTSA CAFE regulation. Based on th e current CAFE targ ets published in the NPRM we see the possibility that manufactur ers can achieve the EPA targets but not the NHTSA targets, leading to the situation wh ere a manufacturer could comply with the EPA regulation but still pay a CAFE penalty. We ask the agencies to examine this possibility and adjust the NHTSA targets to allow the regulations to be better
harmonized. As discussed in the Alliance comments , we agree that this issue is due to the air conditioning credit NHTSA is assuming as they establish their curves. We
recommend that the offset between the EPA and NHTSA curves should be constant and
should be based on the maximum A/C cred it that can be real ized under the CO2 compliance requirements. This provides in centive to reduce GHG em issions through the use of improved A/C system. As is mentione d several times in the regulation, the goal is to set the relative levels of the standard to, 'represent a harmonized approach that will allow industry to build a single national fleet that will satisfy both the GHG requirement under the CAA and CAFE requirements under EP CAIEISA' (Federal Register, Monday, September 28, 2009, page 49468, Section 2, Level of the Standards). [OAR-2009-0472- 7210.1, pp.4-5]

CO2 uses a sales-weighted fleet averag e calculation. CAFE uses a harmonic salesweighted fleet average calcul ation. We only note that a c onsistent calculation method between the two regulations may be preferre d. If changes are made to harmonize the calculation method, however, th e relative stringency of the regulations must be maintained. [OAR-2009-0472-7210.1, p.9]

BMW of North America, LLC (BMW)

[These comments were submitted as testimony at the New York public hearing. See docket number EPA-HQ-OAR-2009-0472-4621, pp. 136.]

We also would like to mention 25 that we verymuch appreciate the collaboration of the State of California in helping to make this National Program a reality. The greenhouse reduction targets of California have been me t with a single national standard. [These comments were submitted as testimony at the New York public hearing. See docket number EPA-HQ-OAR-2009-0472-4621, p. 137.]]

National Association of Manufacturers (NAM)

NAM supports the Administration’s broader policy objectives of harmonizing vehicle emission standards under a National Program an d promotion of energy efficiency through enhanced CAFE standards through the Department of Transportation (DOT). Not only does establishment of national, uniform standards have the poten tial - if implemented correctly- to create a climat e of investment certainty necessary to make long-term business decisions, but stronger energy effici ency objectives will also enhance domestic energy security, which is a ke y policy priority for manufacturers. The NAM applauds the Administration’s objective to mitigate the additional costs that manufacturers would otherwise face in having to comply with multiple sets of federal and state standards. [OAR-2009-0472-7215.1, p.1]

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The NAM supports the Administration’s goal to harmonize fuel efficiency standards by implementing a federal rule that will pre-em pt disparate state and regional programs. However, manufacturers believe that the proc ess established by EPA, by using the Clean Air Act as its primary statutory vehicle, is deeply flawed and will have the unintended and unmanageable consequence of triggering regulation of millions of stationary sources. By resorting to the CAA, the EPA has estab lished a process that will undermine private and public efforts to recover from the deepest economic downturn since the 1930s. Alternatively, the EPA should promulgate a ru le that adequately decouples the goal of achieving greater fuel efficiency and reduced light-duty vehicle GHG emissions from the consequence of regulating GHG emissions from millions of stationary facilities. Any
failure to do so will inflict harm on the manufacturing sector for which the NAM must seek appropriate remedies, legislativ e or otherwise. [OAR-2009-0472-7215.1, p.5]

Senator Fran Pavley, California State Senate

One of the cornerstones of the agreement unde rpinning these proposed regulations is that it strongly reiterates Ca lifornia’s authority under the Clean Air Act to set its own greenhouse gas standards as part of the natio nal program, and California will continue to
be able to set new standards once the program expires in 2016. It is absolutely essential that any ruling to extend the federal program beyond 2016 does not either consciously or inadvertently create de-facto preemption for Ca lifornia and other states to move forward with their own programs, including further re gulations for automobiles and trucks. State actions not only enable and accelerate progress toward emissions reduction goals, but also help spur technological innovation that will benefit the entire country. This is absolutely crucial because of California’s speci al challenges to meet air quality standards to protect our citizen s’ health and safet y. [OAR-2009-0472-7275.1, p.4]

[Senator Fran Pavley also submitted thes e comments as testimony at the Los Angeles public hearing. See docket LA EPA Hearing EPA-HQ-OAR-2009-0472-7283, pp. 13-20]

Consumer Federation of America

From a policy perspective, it is critically important that the Clean Air Act’s framing of standard setting, which allows EPA to take a long-term view and a technology-forcing role, is being joined to the NHTSA approach. It must shake the standard setting process out of its lethargy. The decision to join NHTSA and EPA creates the opportunity for a major improvement in the regulation of automobiles because the Clean Air Act allows EPA to take a longer-term view with greater flexibility. Moreover, the lengthy discussion of the failure of the market to yield an effi cient outcome with respec t to energy efficiency presented in Section II has two critical pur poses in these comments and the process of standard setting for both fuel economy and tailpipe emissions.

First, the explanation of why th e vehicle fleet is less efficient than it should be is critical to understanding why fuel economy standards ar e the right policy to address the problem
and how those standards should be set. The e xplanation of the “effici ency gap” (the gap between the optimal level of efficiency and the level the marketplace yields) involves a

3-13EPA Response to Comments

host of market imperfections , barriers and obstacles on both the supply and the demand side. Our analysis shows that setting fuel economy standard s is an ideal approach to addressing the market imperfections, barriers , flaws and obstacles that underlie the
market failure.

Second, and more importantly, the law and prac tice of setting fuel economy standards at NHTSA under the Energy Policy Conservation Act have severelyrestricted the ability of the agency to set fuel economy standards inthe public interest (see Exhibit II-13). Standards are the right policy instrument, and EP A is the right agency to take the lead for a variety of reasons

First, NHTSA is required to achieve only a 35-mile per gallon standard by 2020, but beyond that there is no mandate to achieve highe r levels of fuel economy. In contrast, as a result of a recent Supreme Court ruling, EPA is obligated under the Clean Air Act (CAA) to regulate tailpipe emissions of pollutants, such as carbon dioxide.

Second, NHTSA is severely constrained in the time frame for which it can set standards. It must give the automakers at least 18 mont hs advance notice of what the standard will
be and it cannot set standards more than 5 years in advance. This narrow window for standard setting is too short for effectiv e long term planning. The rulemaking period barely covers a full product design cycle. NHT SA has repeatedly said that the time frame is too short to ask the industry to do t oo much. The short time horizon shortchanges the public. EPA is not under this time constraint. Therefore, it can give the industry a longterm trajectory that promotes energy effi ciency and environmental clean-up. In other words, NHTSA has neither the le gal mandate nor the ability to take a long-term view of fuel economy, but EPA has the ability to do so for tailpipe emissions. [OAR-2009-0472- 7272.1, pp.35-36]

University of California, Los Angeles School of Law

As you work to finalize the proposed fe deral greenhouse gas emissions standards referenced above, I write to urge you to re sist any efforts restricting the right of California, after 2016 and under the Clean Air Act, to regulate automobile emissions more strictly than the federal government. [OAR-2009-0472-7263.1, p. 1]

For over 40 years, California has had the auth ority to set stricter standards than the federal government for automobile emissions under the Clean Air Act. For thirty years, other states have been permitted to adopt those tougher standards. The program has worked exceedingly well, with California’s re gulations often serving (as here) as a model for other states and even for national progr ams by showing what is possible. [OAR-2009- 0472-7263.1, p. 1]

The tradition of state innovation benefits the co untry as a whole. When the Clean Air Act was passed, California had already begun, by necessity, to regulate motor vehicle emissions in significant ways. Congress wiselyallowed California's program to remain and allowed other states to adopt California 's regulatory program. Over time, California

3-14EPA CO 2 Standards

has shown an ability and willingness to regulate creatively in the public interest in ways
that often lead to innovative so lutions. This very federal rulemaking would not have been possible without the leadership of the states , and it should not be used as a means to
restrict states’ abilities to continue to serve as lead ers in the future. [OAR-2009-0472- 7263.1, pp. 1-2]

Indeed, the national agreement paving the way for these regulations, signed onto by car manufacturers, states, and fede ral agencies, explicitly affirm s “that the proposed national program would not alter Califor nia’s longstanding authority under the Clean Air Act to
have its own motor vehicle emissi ons program.” [OAR-2009-0472-7263.1, p. 2]

It is especially important to continue to allow California, post-2016, to address the threat posed by emissions of greenhouse gases from cars. In part because of a strong history of energy conservation in the state, motor ve hicles are California’s largest source of greenhouse gas emissions and it will be difficu lt for the state to meet its GHG reduction requirements, enshrined in laws like California’s Global Wa rming Solutions Act, without maintaining flexibility in dealing with passenger vehicle GHG emissions. California’s greenhouse gas laws themselves have servedas models for th e nation, and many are looking to California’s implementation of these laws as indicators of the potential success of GHG emission reduction programs more gene rally. For this reason as well, it would be
a serious error for EPA to tie California’s hands in regulating its mo st significant source of GHG emissions going forward. [OAR-2009-0472-7263.1, p. 2]

State of New Jersey

These reductions are critical [These commen ts were submitted as testimony at the New York public hearing. See docket numbe r EPA-HQ-OAR-2009-0472-4621, pp. 113.] for the state to achieve its 2020 and 2050 gree nhouse gas goals. Future federal programs should not preempt the states from establishing appropriate greenhouse gas emission reduction programs, including additional motor ve hicle programs as they are provided for by federal law. [These comments were submitted as testimony at the New York public hearing. See docket number EP A-HQ-OAR-2009-0472-4621, p. 114.]

Several other northeastern states who lik e New Jersey have already adopted and implemented the low emission vehicle program, as well as California, we've heard from NESCAUM and NACAA earlier today, we suppor t their comments of the states and the regional groups and will highlight issues covered in their testimony in our written comments. [These comments were submitted as testimony at the New York public hearing. See docket number EP A-HQ-OAR-2009-0472-4621, p. 114.]

State of Washington Department of Ecology

The importance of preserving the Clean Air Ac t provision of state's rights to adopt motor
vehicle standards - for Calif ornia under Section 209 and fo r other states under Section
177 - cannot be overstated. The Federal Clean Air Act generally prohi bits states from adopting new motor vehicle emission sta ndards. However, C ongress specifically

3-15EPA Response to Comments

authorized California to estab lish its own emission standards for cars. Courts upheld this approach:

Congress intended California to continue and expand its pioneering efforts at adopting and enforcing motor vehicle emission standard s different from and in large measure more advanced than the corresponding federal program. [OAR-2009-0472-7299, p.1] Motor & Equipment Mfrs. Ass'n v. EPA ('MEMA I'), 627 F 2d 1095, 110-11 (D.C. Cir. 1979). [OAR-2009-0472-7299, p.2]

According to the National Academies' National Research Council, California has used its authority as Congress intended, by implementing more aggressive measures than the rest of the country and serving as a laboratory for technological innovation. California's action paved the way for other states across the country to exerci se their statutory authority under Section 177 of the Clean Air Act; 14 other states have adopted
California's standards. As one of the first states to follow California's lead, Washington adopted California's GHG regulatio ns on May 6, 2005. [OAR-2009-0472-7299, p.2]

The federal government has been a followe r, not a leader, in vehicle emissions improvements. [OAR-2009-0472-7299, p.2]

California's statutory right to adopt more rigorous motor vehicle standards than the federal governments, and other states' rights to opt in to California's programs, must be acknowledged as the catalyst for this national vehicle GHG emissions reduction program. [OAR-2009-0472-7299, p.2]

EPA should join state and local clean air agencies as anactive proponent for the full preservation of these stat es' rights. [OAR-2009-0472-7299, p.2]

Environment New Jersey

For most of this decade, you know, unfortunately, we've had to look to the states on clean car legislation, clean car advocacy. Now it's time as we grapple with this crisis finally to give the green light to clean cars on the national level and nowhere is that more appreciated than in states like New Jersey and the other states which Steve [Steve Flint of
the Mobil Sources and Fuels Committee of the National Association of Clean Air Agencies (NACAA) EPA-HQ-OAR-2009-0472-4621, p.53-65] mentioned and that have
become leaders on this issue. We believe firm ly in the adage from Supreme Court Justice Louis Brandeis, the states are the laborato ries of democracy, and I believe that wasespecially proven from the advocacy work over the course of this decade. [EPA-HQOAR-2009-0472-4621, p.67]

Second, specifically on the rule proposal, that it's a first strong step but must be strengthened to meet President Ob ama's proposals. [EPA-HQ-OAR-2009-0472-4621, p.68]

3-16EPA CO 2 Standards

And then finally I want to point out the proposal is certa inly strong evidence that the
Clean Air Act is effective in addressi ng global warming pollution. California has obviously been the leader on adopting emissi on standards than are stronger than the federal regulations, and they have led the way, but they have allowed states like New Jersey that have similar needs and similar air pollution problems to opt in to those programs. We believe firmly as I stated before that states should have that right, states are the laboratories of democracy. We certainly encourage that provision to remain. [EPAHQ-OAR-2009-0472-4621, p.77]

EPA Response:

As described in Section III.D.1 of the pream ble to the final rule, EPA and NHTSA have worked extensively with the st ate of California and other st ates which have adopted the California GHG emission standards, as we ll as many other stakeholders, to craft a national fuel economy and GHG emission pr ogram which allows manufacturers to build a single national fleet that will co mply with EPA’s GHG and NHTSA’s CAFE standards, and avoids the s ituation where manufacturers' sales must comply with different standards in individual states, each with their own sales mix, etc. We believe
that we have succeeded in this task. .

EPA’s final rule does not change California ’s authority to establish GHG standards for MY 2017 and beyond and to request a waiver of preemption under section 209 of the Clean Air Act for such standards, nor othe r states from adopti ng California standards
which receive such a waiver.

Regarding the interaction between the NHT SA fuel economy standards and the EPA GHG standards, there are two reasons why EP A projects greater GHG benefits and fuel savings for its standards. One reason, as ci ted by the State of Massachusetts in Section 3.0, is the inclusion of reduc tions in GHG emissions from the air conditioning units present on motor vehicles. Credits for GHG improvements in air conditioning leakage and air conditioning efficiency are not considered under CAFE because they are not measured by the test procedures used (and for passenger automobiles, mandated) to measure fuel economy. Certain measures avai lable under the CAFE program which have the effect of reducing fuel economy (and incr easing GHG emissions), such as the use of automatic FFV credits through MY2020 and th e option of paying fines in lieu of compliance, are either not being allowed or are impermissible under the Clean Air Act and the GHG rules. The difference in expe cted GHG reductions and fuel savings from
EPA’s GHG standards and NHTSA’s CAFE standards can be seen in Tables I.C.1-2 and I.C.2-1 of the preamble to the final rule.

NADA commented (cited in Section 3.0 above ) that NHTSA fuel economy standards should be used to regulate CO2 emissions fr om the tailpipe as measured over the two cycle test procedure and EPA should only establish supplemental standards to address air conditioning related emissions. EPA disagrees with this approach for several reasons. One, the NHTSA fuel economy standards appr opriately focus on the conservation of fuel consumption by the nation, which has many benefits beyond GHG emission control. As

3-17EPA Response to Comments

such, the CAFE standards do not distinguishbetween the carbon intensity of various fuels. For example, vehicles fueled with gaso line and diesel fuel can have the same fuel economy, yet have different CO2 emissions. Thus, it is appropriate for the CAFE program to focus on the volume of petroleum-based fuel consumed in each case, while also appropriate for EPA to distinguish betweenthe two fuels due to their distinct carbon (and thus, tailpipe CO2 emissions) per gall on. Two, other GHGs are emitted from the tailpipe besides CO2, such as methane and nitrous oxide, which are not currentlycontrolled by the CAFE program per EPCA and EISA. Three, the combination of twocycle tailpipe emissions and air conditio ning-related emissions in one program provides manufacturers greater flexibility to sele ct the most cost effective combination of control technology for their part icular vehicles. This woul d not be possible with two separate programs due to the current inability of the CAFE program to accept increased air conditioning related controls in lieu of compliance with the CAFE standards (including the statutory prohi bition on such consideration for passenger automobiles). Four, the Clean Air Act is more flexible with respect to test procedures. In particular, EPA may find it desi rable in the future to expand the test procedures used to measure GHG emissions beyond the current FT P and HFET test cycles in order to
obtain more realistic estimates of the bene fits of GHG emission control technology. Fifth, the CAA is more flexible than EPCA with regard to providing compliance flexibilities, which may allow opportunities for more cost -effective regulatory approaches for GHG reductions. Finally, the commitment by Calif ornia to accept compliance with federal standards for purposes of its state GHG pr ogram is premised on issuance of EPA GHG
standards as described in the Joint Notice of Intent, and compliance by the automobile manufacturers with EPA’s GHG standards. Compliance with NHTSA CAFE standards for just these 5 model years would not lead to this result, nor would compliance with the much more limited GHG standards suggested by NADA. This would lead to the loss of this important benefit of a national program. EPA believes that these reasons amply justify the inclusion of CO2 emissions as measured over the current two cycle test procedure in its final GHG standards.

In the example above given by AAM, a manufact urer generating a greater level of direct (i.e., refrigerant emission related) air conditioning emission cr edit relative to EPA's projection would be able to use this “extra” credit to reduce the re quisite degree of CO2 emission control over the two-cycle test procedure under the EPA program, but not under the NHTSA program. AAM recommends that the stringency of the CAFE standards be
relaxed so that this situa tion could never occur.

As mentioned above, although as a practical matter, the means of achieving requirements of the CAFE and GHG programs overlap to a larg e degree, they in fact have two distinct purposes. One focuses on fuel consumption, while the other focuses on GHG emissions. Because of these distinct goals, it is perfec tly reasonable for a manufacturer to continue to have to reduce the fuel consumption of its fleet despite implementing non-fuel related GHG emission controls at a greaterrate than projected by EPA. In any case, that is an
issue of how to set the CAFE standard under EPCA, which is under NHTSA’s authority,
and not how to set the GHG standard under the CAA.

3-18EPA CO 2 Standards

That said, the two agencies have attempted to craft their final standards in such a way as to ensure that the additional stringency of one program relative to the other results in valuable benefits to the nation, either interms of fuel conservation or GHG emission reduction. Any over-compliance with NHTSA's fuel economy standard would clearly be applicable to compliance with EPA GHG standa rds. In contrast, a manufacturer which implemented more than our projected level of air conditioning controls in the early years of the program would still be required to comp ly with NHTSA's fuel economy standards. This is essentially the is sue raised by NADA in Section 3.0 above and by AAM and VW in this section. EPA acknowledges that so me manufacturers could choose to generate
more A/C credits than what we estimated in the rule for MY 2012-2015. However, the agency believes that the differences will be small for the fleet as a whole. The agency
does not feel that this will cause any disharmony or inc onsistency between the EPA and NHTSA programs, or devalue such cr edits, as manufacturers can bank any overcompliance credits for the next model year (or beyond). The compliance situation for the next model year may be quite diffe rent depending on that company’s compliance burden and the ramp up rate of its standa rds (both CAFE and GHG). Therefore, EPA disagrees with the Alliance comment that the standards are structured in a way that can discourage A/C improvements. The EPA has every reason to believe that all manufacturers will take advantage of thes e cost effective tec hnologies to reduce GHG emissions from light-duty vehicles.

We disagree with NADA that this rule wi ll have a negative impact on automotive dealerships. The two agencies appreciate the economic difficulties currently faced by many automobile dealerships and the fact that many have or could soon be forced to close. However, we believe that this is due to the current national and global economic downturn and the resulting decrea se in vehicle sales and fina ncial difficulties of several automotive manufacturers. The analysis supporting this rule clearly indicate s that the fuel savings resulting from meeting the fi nal standards far exceed the cost of the technology needed to achieve the standards. Th ese costs include the costs of maintaining vehicle performance, utility, safety, and other ch aracteristics, so that vehicles should be as acceptable to consumers as current mode ls. (EPA did this by building technology packages for each vehicle type (see Chapter 1 of EPA’s RIA) that maintained the key performance characteristic. Each subsequent package generally costs more, provides greater fuel efficiency, and ma intains performance relative to the package before it and, hence, the baseline or current vehicle.) Mo reover, our analyses also reasonably project increased vehicle sales, and do not project that the rule will be the cause of any loss of
sales. This calculation was done assuming that consumers consider only five years of fuel savings when buying vehicles, an assu mption endorsed by NADA. That, coupled with the avoidance of the cited "patchwork" of state standards is expected to avoid any negative impact on automotive sales.

The analysis in section 3.1 of the RIA describes how the EPA 250 g/mi CO 2 equivalent
fleetwide standard for 2016 achieves the le vel of control which would have been achieved by the California GHG standards in th e State of California. However, that equivalency is not the basis for our selection of this level of control for the final EPA GHG standards, and we thus cannot accept the comment by NADA cited in Section 3.0.

3-19EPA Response to Comments

See section III.D (and in particular III.D. 6) of the preamble to the final rule which discusses the basis for the GHG standards and their feasibility. The basis for the final standards is a balance of the technical feasibility of the standards, the cost of this technology and the lead time needed to impl ement it, considerations of costs to consumers, the cost-effectiveness of need ed technology, and the benefits which will accrue from the standards (among other factors), as described particular ly in section III.D of the preamble to the final rule. Although th e level of the Californi a standards, and the technical analysis underlying those standards, was a reasonable starting point for evaluating a national GHG standar d, the California standards ar e not the justification for
the federal standards. See section III.D.1 of the preamble to the final rule. Achieving some degree of equivalence with the benefits of the Californi a standards was an important aspect of obtaining cooperation from the state of California and the other states which had adopted California's standards to a ccept compliance with the EPA standards as compliance with their own standards. However, the standards reflect consideration of the relevant factors under section 202 (a) (1) and are justified on that basis.

With respect to the comment that the EPA GHG standards for motor vehicles will be detrimental under a broader cap and trade regulation, this issue is currently not ripe as no such cap and trade program exists; nor has one been proposed by the agency. EPA will carefully consider the intera ction between the final motor vehicle GHG standards and any future cap and trade program if and when a national cap and trade program exists.

With respect to IPI's recommendation that EP A establish a broad re gulation covering all mobile source GHG emissions, EPA is taking this initial action with respect to automobiles alone due to the impending tim ing of both California GHG standards and NHTSA CAFE standards. It is highly desirable that nati onal GHG standards be
coordinated with these other actions now vers us the necessarily later date when more comprehensive regulations covering additiona l mobile sources could be established. EPA is currently working on GHG emission contro ls from other mobile sources, again in coordination with NHTSA fuel economy regula tion as appropriate. We will take IPI's
recommendations under consideration as the extent of GHG emission control from mobile sources expands. See State of Massachusetts v. EPA , 549 U.S. at 533 (EPA retains significant discretion as to timing of regulation).

We do not understand the purported distinct ion being made by VW regarding the methodologies used to determine the fleet average fuel economy and GHG emissions under the two programs. The harmonic averag ing of fuel economy essentially means the simple sales-weighted averagi ng of fuel consumption per mile. As fuel consumption per mile is proportional to CO2 emissions per mile for a given fuel, the two programs perform their sales-weighting consistently. Th ere exist several statut ory restrictions on the trading of car and truck credits under th e CAFE program which cannot be avoided. EPA chose not to impose those restrictions, as it is not required by law to do so. This simply makes compliance with the EPA G HG standards somewhat more flexible. However, the analyses conducted by NHTSA demonstrate that the CAFE standards are feasible for the vast majority of sales under the final provisions of that program. In fact, VW is one of the manufacturers which has historically paid CAFE fines in lieu of

3-20EPA CO 2 Standards

compliance. EPA analyses indicate that VW may need to utilize more advanced technology on a greater percentage of its sales than most manufacturers in order to comply with the two programs. EPA analyses in dicate that this is at least partly due to the fact that VW vehicles are heavier than other vehicles in their size classes. See Fig. III-D.6-1 and surrounding text in the preamble to the final rule. VW has not provided any information to demonstrate why this needs to be the case currently or in the future. VW has also not provided any information i ndicating that they ar e unable to implement for their U.S. sales volumes the types of advanced technologies which are already commercially available.

EPA recognizes that several an alyses have indicated that new vehicle purchasers do not always choose technology which pays for its elf in terms of fuel savings. See chapter 8.1.2 of the RIA and section III.H.1 to the preamble to the final rule. There are several possible reasons for this, but no consensus exists concerning the actual cause. We will continue to study this issue, along with others in the scientific and economic community. We believe that the implementation of the types of fuel savings and emission control technology projected in the analyses supporting these rules will provide direct consumer benefits far exceeding their cost, as well as important emission reduction related benefits for the national and global communities.

3.2 Form of the standards

Organization: Mercedes-Benz (Daimler AG) International Council on Clean Transportation European Small Volume Car Manufacturers' Alliance (ESCA)

Comment:

Mercedes-Benz (Daimler AG)

By choosing footprint as the attribute to appl y in the joint rulemaking, the agencies have, indeed, created a mechanism for encouragi ng weight reduction in light trucks while maintaining vehicle size and functionality. The safety of the light truck fleet is enhanced by encouraging light trucks with lower centers of gravity, thereby reducing rollover risks. Functionality is maintained even as weight is reduced because the footprint system encourages lightweight materials. While trad itionally changes in mass and size have been directionally consistent from a compatibili ty standpoint, with the advent of crash avoidance systems, expansion of crash en ergy distribution techniques and continued improvement in behavioral safety, smaller vehi cles with advanced emissions controls can be safely incorporated into the current vehicle mix.

That the relative stringency of the passenge r car and light truck fleet has been quite stable, moreover, does not appear to reflect a policy determination as much as the fact that the standards for many years remained e ither frozen or moved in increments which would not have had a significant impact on the relative apportionment of the standards. The passenger car standard has remained at 27.5 mpg since 1990, and the light truck

3-21EPA Response to Comments

standard remained at 20.7 from 1996 thr ough 2004, when NHTSA began to increase it incrementally. When NHTSA set new standard s for MY 2011, the agency readjusted the
curves to account for its decision to reclas sify 2wd SUVs and crossovers as passenger
cars and thus retained the traditional relative apportionment. See 74 Fed. Reg. 14196 (March 30, 2009). NHTSA did not, however, co nsider the relative apportionment of stringency as between light trucks and passenger cars as a matter of policy.

This rulemaking represents the first opport unity for the agencies to consider the comprehensive policy objectives of the joint proposal while establishing standards for passenger cars and light trucks . The agencies can achieve this objective, and promulgate
a final rule that is in fact “as substantiall y described in the May, 2009 Notice of Intent to conduct rulemaking,” by setting the stringency of the passe nger car standards for the model years leading up to MY 2016 according to a “generally linear phase-in.” Doing so
would also be consistent w ith the goal of the rulemaking to adjust the fleet mix to improve emissions and fuel economy performa nce without affecti ng safety. [OAR-2009- 0472-7193.2, p.2-4]

International Council on Clean Transportation (ICCT)

We commend EPA and NHTSA fo r proposing a footprint-based adjustment to the CAFE standards instead of weight -based adjustments. Footpr int-based adjustments fully encourage manufacturers to introduce lightweig ht materials, which can improve vehicle efficiency by 20% or more in the long run. Li ghtweight materials also extend the electric drive range of electric and pl ug-in vehicles by a similar am ount. This is one area of policymaking where the U.S. is ahead of the rest of the world. Japan, Europe, and China have all adopted standards with weight-based adjustments that eff ectively discourage the use of lightweight materials. NHTSA pioneer ed the footprint conc ept with the 2011 light truck rule and we urge EPA and NHTSA to continue its use in the future.

We also support the proposed change to the sh ape of the footprint ad justments. The linear slope for all but the largest and smallest vehi cles provides a consiste nt signal to improve efficiency for all vehicles within this range, while the flat line for largest vehicles creates an incentive to make the largest vehicles smaller.

The proposed rule maintains separate footprint curves for cars and light trucks. This subjects light trucks with the same footprint to much less stringent standards and gives
manufacturers a tremendous incentiv e to reclassify cars as lighttrucks. In the past this has brought us such notable trucks as the S ubaru Outback, Chrysler PT Cruiser, Dodge Magnum, Mazda 5, Chevrolet HHR, Porsche Cayenne, and BMW X6, which BMW describes as a Sports Activity Coupe. In the fu ture it is likely to cause manufacturers to drop many 2wd versions of their small SUVs and make less efficient 4wd versions standard, so that they can be classified as lig ht trucks instead of cars. This will actually increase overall real world fuel consumpti on and CO2 emissions in two ways. First, it will increase 4wd installation and directly in crease the fuel consumption of the fleet. Second, it makes it easier for manufacturers to meet the standards, so that they do not have to implement as much technology on other vehicles.

3-22EPA CO 2 Standards

The large majority of light trucks toda y are based on car platforms with unibody construction. All minivans use unibody constr uction and cab-and-chassis construction for SUVs is rapidly disappearing. Except for pi ckup trucks and a few relatively low volume SUVs, such as the Jeep Wrangler and the S uburban, in the 2016 timeframe of the rule all light trucks will be based on car platforms. In addition, due to the empty pickup bed, pickup trucks are considerable lighter than truck-based SUVs with the same footprint and fit much better on a single foot print line. Thus, there is no technical reason to maintain separate footprint lines for cars and light trucks.

EPA recognized the importance of this issue when it established a single Tier 2 emission standard for all cars and light tr ucks. The issue here is just as important. It is time to also
end this artificial distinct ion between cars and light truc ks for fuel efficiency and greenhouse gas emissions. A single footprint function will still gi ve larger trucks a less stringent target to meet, while avoiding ve hicle classification games and helping to ensure fuel consumption and GHG em ission goals are actually met.

[OAR-2009-0472-7156.1, pp.2-3]

Organization: Toyota Motor North America

EPA also requests comments on combining the entire fleet into a single compliance category, with a single target curve for the fl eet each model year. If faced with just one federal program with which to comply, T oyota may not object to a combined fleet standard, since it would arguably provide manufacturer's with the greatest level of flexibility to comply and it would remove any concerns a bout vehicle classifications . However, due to the lack of harmonization with NHTSA's program that would result, and the inflexibility afforded NHTSA in the exis ting CAFE statute, Toyota would not support EPA setting a single target curv e for the entire fleet of cars and trucks even though it would result in the greatest leve l of flexibility. [OAR-2009-0472-7291, p.7] EPA

EPA Response:

EPA appreciates the comments concerning th e relative stringencies of the NHTSA CAFE standards for cars and light trucks prior to MY2012. There is no need to evaluate or to respond to these comments, however, as they are not germane to the EPA standards being proposed for 2012 and beyond.

EPA also understands ICCT’s concern thatmanufacturers may have an incentive to convert two-wheel drive (2WD) vehicles SUVs to all-wheel drive (AWD) or four-wheel drive (4WD) in order to have these vehicles cl assified as trucks instead of cars, and thus reduce their applicable corporate fuel econom y standard and increase their applicable corporate GHG standard. NHTSA modified its definition of trucks in its rule implementing the MY 2011 CAFE standards in order to counter manufacturers' actions which shifted vehicles with many car-like desi gns to the truck fleet. On the one hand , since the vast majority of the SUVs newly clas sified as cars are also available in AWD or 4WD versions, manufacturers face few if any redesign hurdles in shifting these vehicles

3-23EPA Response to Comments

back to the truck fleet by emphasizing AWD or 4WD sales through sales incentives or by simply offering these vehicles in only AWD or 4WD versions. On the other hand, AWD or 4WD vehicles cost more to produce than 2WD versions and usually have lower fuel economy and higher CO2 emissions (though to a much lesser degree than the difference between the car and truck standard curves). Thus 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. The agencies note that many luxury SUVs are only offered with AWD or 4WD func tionality, so vehicle purchasers appear to value these options. EPA will monitor this situation and assess the degree to which manufacturers attempt to relax the stringency of their applicable fuel economy and GHG standards by shifting sa les of 2WD SUVs from their car fleets to their truck fleets. Should this occur, the agencies will evaluate further changes to the definition of cars and light trucks, as well as the rela tive stringency of their respecti ve standards to address this
situation in the future.

Regarding the comment that the agencies s hould move towards si ngle footprint-based standards for both cars and trucks, NHTSA addr esses this issue with respect to the CAFE standards in section IV of the preamble to the final rule. Regarding the GHG standards,
EPA believes that it is appropriate for the 2012-20 16 MY period to utilize NHTSA's definition of cars and trucks to maximize consistency betw een the two sets of standards. For the purpose of this rule, the levels of the car and truck GHG curves are closely connected to the 2011 NHTSA definitions of cars and trucks. Were EPA to either
utilize a different set of vehicle definitions or establish a single standard curve,
the overall level of GHG control would be r oughly the same given the same level of technology application. However, the imp acts on specific manufacturers of doing so would be very large in some instances. EPA believes that more leadtime should be available before such dramatic changes to the relative stringencyof the GHG standards
across manufacturers should be effected.

EPA notes that the incremental cost for a larg er light truck to achie ve the Tier 2 emission
standards relative to that for a car is much smaller than the incremental cost for a large
truck to achieve the fuel economy or GHG emission level of a car. In part that is because tailpipe emissions of the criteria pollutant s are largely driven by the after treatment catalyst and related technology, while the factors that aff ect GHG emissions are much
more varied and involve a much wider variety of systems in the vehicle. This leads to larger differences between vehicles as far as baseline technology that impacts GHG levels and GHG controls. Thus, while the equivalent tr eatment of cars and trucks in EPA's Tier 2 emission control program is an appropriate analogy with respect to this GHG program, the technology and economic implications are much greater and we believe that further study would be necessary to justify suchlarge relative economic impacts across
manufacturers.

3.2.1 Choice of footprint as the attribute and international harmonization

3-24EPA CO 2 Standards

Organization: General Motors Ferrari S.p.a Toyota Motor North America Northeast States for Coordinated Air Use Management BMW of North America, LLC (BMW) Lawrence Berkeley National Laboratory
SABIC Innovative Plastic
International Council on Clean Transportation National Automobile Dealers Association (NADA)
Lotus Cars Ltd.
Cummins Inc. Porsche Cars North America, Inc. Fisker Automotive, Inc. European Automobile Manufacturer's Association New York State Department of Environmental Conservation Ecology Center Bright Automotive Johnson, Kenneth C.

Comment:

General Motors

Among the highlights of the proposal is the c oordinated attribute-based approach of the two programs. [OAR-2009-0472-6185, p.11]

GM especially supports: 1) the coordinate d attribute based approach of the two harmonized programs; and 2) the recognition of the need for mechanisms to provide for compliance flexibility in the face of great uncertainty over future technology developments and costs, customer acceptance of these technologies, and the price of fuels that consumers may see in the marketplace. All of these factors make it critical that automakers have some ability to cope with changes or unexpected outcomes, and we believe the proposed rules provide es sential flexibility. [OAR-2009-0472-6953.1, p.2]

Ferrari S.p.a

Ferrari concurs with EPA and NHTSA that the method to classify vehicles should be as simple as possible, and based on reliable and stable attributes. Mo reover, we support the
harmonization of the EPA and NHTSA rules inthe National Program. Nonetheless, we are concerned that the footpr int alone does not take into account many of a vehicles’ other characteristics that great ly affect the fuel economy. For example characteristics like the engine, transmission, curb weight, aerodynami cs, etc. We treat this topic with more details in the comments to the proposed NHT SA CAFE rule. We support the adoption of
a constrained linear rather than a constrained logist ic function. We think it is not necessary to put a “backstop” for both CO2 and CAFE standards. [OAR-2009-0472- 7214.1, p.3]

3-25EPA Response to Comments

Toyota Motor North America

EPA requests comments on its proposal to use a footprint-based attr ibute approach for regulating GHG emissions. Toyota supports EPA's selection of footprint, subject to the additional comments below regardin g Emissions Covered. Toyota supports harmonization of the EPA and NHTSA programs to the greatest extent practicable. Since NHTSA has already established footprint as the attribute upon which the CAFE program is based, and they have continued use of f ootprint in the subject proposal, Toyota agrees with EPA's selection of footprint as the attr ibute for its program. This approach will result in harmonization of the two regulatory program s in terms of the attribute upon which the standards are based. [OAR-2009-0472-7291, p.6]

Northeast States for Coordinated Air Use Management

NESCAUM concurs with and supports the EP A and DOT decision to use an attributebased standard rather than an industry-wide average standard.

Footprint-based standard: NESCAUM agrees with EPA’s approach to regulate vehicle footprint. Consistent with the model year 2011 CAFE standards, EPA and DOT are proposing to use footprint as the attribute for the mode l year 2012-2016 CAFE standards and CO2 emissions standards. Footprint-based standards provide an incentive to use new and advanced lightweight materi als and structures that coul d otherwise be discouraged by weight-based standards. Manufacturers can use them to improve a vehicle’s fuel economy without necessarily result ing in a change in the vehi cle’s target level of fuel economy or CO2 emissions and without a substa ntial impact on the safety (in terms of crashworthiness) of that vehicle.

EPA has crafted the proposal in a way that ensures consumers will continue to have the variety and choice in vehicle models they have come to expect. The size-based standard provides manufacturers with significant flexibility in meeting the proposed GHG reductions. Furthermore, as mentioned above, technologies to reduce vehicle GHG emissions exist in the market today. The phase-in of the standards between 2012 and
2016 allows manufacturers six years to incorporate these technologies into greater numbers of vehicles. [OAR-2009-0472-7235.1, p.4]

[Northeast States for Coordinated Air Use Management also submitted these comments as testimony at the New York public hearing, See docket number OAR-2009-0472-4621, p. 43.]

BMW of North America, LLC (BMW)

With respect to one national program. BMW fully supports an attribute-based program for passenger cars and light trucks as pr oposed by EPA and NHTSA. Compared to a uniform standard for passenger cars and light trucks, an attribute-based standard drives fuel efficiency and GHG reduction in all segments while taking into account the manufacturer's product portfolio. However, because BMW offers a worldwide product

3-26EPA CO 2 Standards

portfolio and most of the C02 and fuel economy regulations worldwide are based on vehicle weight instead of footprint, BM W recommends that these regulations be harmonized as much as possible. [OAR-2009-0472-7145.1, pp.4-5]

[BMW of North America also submitted these comments as testimony at the New York public hearing, See docket number EPA-HQ-OAR-2009-0472-4621, p. 133.]

Lawrence Berkeley National Laboratory

Comments are directed at the choice of vehicle footprint as the attribute by which to vary fuel economy and greenhouse gas emission standard s, in the interest of protecting vehicle occupants from death or se rious injury. Comments are summarized below:

Analysis of casualty risk finds that, after accounting for drivers and crash location, there is a wide range in casualty risk for vehicles with the same weight or footprint. This suggests that reducing vehicle weight or footprint will not necessarily result in increased fatalities or serious injuries.

Indeed, the recent safety record of crossover SUVs indicates that weight reduction in this class of vehicles resulted in a reduction in fatality risks.

Computer crash simulations can pinpoint the effect of specific de sign changes on vehicle safety; these analyses are preferable to re gression analyses, whic h rely on historical vehicle designs, and cannot fully isolate the e ffect of specific design changes, such as weight reduction, on crash outcomes.

There is evidence that automakers planned to bu ild more large light trucks in response to the footprint-based light truck CAFE standards. Such an incr ease in the number of large light trucks on the road may decrease, rath er than increase, overall safety. [NHTSA2009-0059-0060.1, p.1]

See all the casualty analysis related to vehicle footprint in pp.2-11 of the docket.

SABIC Innovative Plastic

SABIC-IP supports the foot print-based regulatory program proposed because it encourages both appropriate materials s ubstitution on existing products and the development of a safe, lighter-weight vehicle fleet. [OAR-2009-0472-7080.1, p.2]

International Council on Clean Transportation

[[These comments were submitted as testim ony at the Detroit public hearing. See docket number EPA-HQ-OAR-2009-0472-6185, p. 58.]]

We commend EPA and NHTSA fo r proposing a footprint based adjustment to the CAFE standards instead of weight based adjustments. Footprint based adjustments fully

3-27EPA Response to Comments

encourage manufacturers to introduce lightweig ht materials, which can improve vehicle efficiency by 20 percent or more in the l ong run. Lightweight mate rials also extend the electric drive range of electric and plug-in vehicles by a similar amount.

This is one area where the U.S. is ahead of the rest of the world. Japan, Europe, and China have all adopted standards with weight -based adjustments that discourage the use of lightweight materials. NHTSA pioneered the footprint concep t with the 2011 Light Truck Rule, and we urge EPA and NHTSA to continue its use in the future.

National Automobile De alers Association (NADA)

The proposal’s vehicle attribute-based framework is essential to driving fuel economy performance improvements while allowing dealer s to access a mix of cars and trucks that meet their customer needs. As recognized by EISA, attribute-based standards offer at
least four critical benefits over “flat” standards. Firs t, greater fuel economy and GHG emission benefits can be expected as con tinuous improvements are encouraged across all vehicle types, regardless of product mix. Second, if set co rrectly, an incentive to the inexpensive downsizing or downw eighting of vehicles is eliminated, helping to preserve passenger safety. Third, an attribut e based approach inherently is more equitable in that it is largely product plan neutra l, acting to spread complia nce costs broadly across all regulated vehicle manufacturers. Finally, and perhaps most importantly, by avoiding mandated fleet mixes, an attribute-based a pproach recognizes and capitalizes on the
critical consumer choice f actors that drive a successful fuel economy/GHG improvement program. As stated above, hoped-for fuel ec onomy and GHG benefits simply will not be realized until consumers pur chase and use the regulated vehicles in question. [OAR2009-0472-7182.1, p.4]

The National Program proposal’s standards are based on a footprint (average track width times average wheelbase) attribute and a con tinuous function (vs. step function) curve similar to that first used in the 2006 lighttruck CAFE rule. Appropriate dispensation must be allowed to help ensure the final National Program does not frustrate customer demand for new light trucks as their maximum towing, car go-hauling, and four-wheel drive (4WD)/all-wheel drive (A WD) capabilities are essential to certain vocational and
recreational demands. Business and consumer purchasers focused on vehicle utility and durability buy light trucks for their capabi lity and performance characteristics and 4WD and AWD options are popular for off-road commercial and recreational use and for onroad handling benefits. Tow-capable configur ations or “packages” are essential to many uses. Having a wide variety of vehicles availa ble for use in trade or business particularly is essential to the small business community which drives the U.S. economy. Large and powerful light trucks are esse ntial to many business purchaser s (e.g., farmers, contractors, etc.), and larger vans and SUVs are often the first choice of growing families and carpoolers. The stringency of the light truck curve must not constrain the ability of
vehicle manufacturers to meet these market needs, as it would leav e the motoring public no choice but to keep older, less efficient vehi cles longer or to turn to the used vehicle marketplace. [OAR-2009-0472-7182.1, pp.4-5]

3-28EPA CO 2 Standards

The attribute-based, continuous curve framework is designed to foster real world fuel economy improvements and GHG reductions by maintaining consumer choice, by protecting safety, by distributi ng costs more equitably, and by reducing the overall cost of regulation. These same benefits also argue for downward sloping curves without any flattening at the lower asymptote. Any constant value or “clip” applied to the end of a curve could serve to severely limit the availability or perf ormance of vehicles demanded by the motoring public, especially light truc ks, effectively imposing an unwarranted “backstop” compliance overlay. [OAR-2009-0472-7182.1, p.5]

Lotus Cars Ltd.

The proposed legislation attempts to account for differing vehicle segments with sizebased standardization; however such an approach can only work together with fleet averaging if the fleet itself can be considered 'average'. The footprint of a vehicle does not differentiate to a sufficient degree betw een vehicle segments for this approach to work with small volume manufacturers. In practi ce, it is quite possible for a sports car to have the same footprint size as a compact saloon vehicle, which would result in the applicability of a similar gree nhouse gas target. [OAR-2009-0472-7249, p.6]

Cummins Inc.

Cummins supports the attribute-based standards for setti ng CAFE and GHG standards; however, we urge EPA and NHTSA to consid er a secondary attribute for light-duty trucks (with significant hauli ng and towing capacity as well as off road capabilities) for determining the target fuel economy/CO2 emissions. Trucks primarily used for work purposes (e.g. trucks equipped w ith diesel engines), are engi neered for heavier use (more capable components) resulting in lower fuel economy than similar truck meant for lightload use. Cummins supports a proposal for cr eating a separate classification for heavytow, highly capable trucks wh ich would provide a more equ itable framework for vehicles meant for towing and cargo-hauling. Th e SAE J2807 recommended practice provides a robust framework to define a tow rating for vehicles and eliminates potential gaming, as noted by NHTSA in an earlier NPRM. [OAR-2009-0472-7205.1, p.4]

Porsche Cars North America, Inc.

Porsche's sport car average footprint (the basis for our target standards) is:

• The smallest in the industry

• 14% less than the industry average

• considerably smaller than companies known for producing small cars (e.g., Honda, Toyota, Suzuki, etc.)

Because the standards proposed are entirely ba sed on footprint and because our footprint is the smallest, the proposed standards for Porsche are the most stringent. While we do

3-29EPA Response to Comments

not believe that it is the intent of EPA/ DOT to make Porsche the world's most fuel efficient passenger car manufactur er or to punish Porsche, this is the consequence of the footprint-based concep t. While there is a reasonable co rrelation between footprint and fuel economy and C02 for the average fleet of cars there are cars for which this does not apply. Sports cars, especially Porsche cars have a very short wheelbase for handling reasons in combination with high performance, which is an attribute associated with sports cars and a selling point. Unfortunately th e standard in this f ootprint category is set by small, low priced sedans, a category where fuel economy is an important selling attribute rather than performance.

In proposing to establish standards based en tirely on vehicle footprint, EPA and DOT have proposed a set of standards that would perversely require Porsche (a company predominantly manufacturing high-powered spor ts cars) to become the fuel efficiency
leader in the United States.

In Figure 1 [OAR-2009-0472-7431.1, p.5] below, using the proposed standards shown in the tables above, we have plotted the per cent improvement required for compliance for each manufacturer. We show the percent improvement required relative to 2008MY performance since this is th e most recent model year for which complete fuel economy model year data was available at the time at which these comments were initially drafted.

It should be understood that, according to the pr oposal, Porsche is expected to achieve a passenger car fuel economy level of 41.4 m pg (or 204 g/mi C02) by 2016MY. This is by far the highest mpg value demanded of any auto maker affected by the proposal. [OAR2009-0472-7431.1, pp.1-6]

Fisker Automotive, Inc.

Fisker Automotive recommends a flat standard to avoid irrational trends to certain vehicle sizes or types. That is, the standard’s emissions allowance should not correlate to footprint or separate passenger cars from lightduty trucks. The regulation, as proposed, appropriates more credits to larger vehicl es and trucks, causing an economic incentive not only to increase fuel economy, but to increa se vehicle footprint and to classify as a
truck as well. The market should decide vehicle sizes and types. [OAR-2009-0472- 8732.1, p.5]

Automakers have many options available to de crease emissions, incl uding electr ification, powertrain efficiency increase, weight re duction, and aerodynamic drag reduction, etc. Regulation should remain neutral to allo w all methods of improvement. Averaging, banking, and trading methods are sufficient to maintain diverse consumer choice of vehicles. [OAR-2009-0472-8732.1, p.5]

The Fisker Karma, for example, will do unusually well under the proposed footprint method because it has a very large footprint and superb fuel economy, well beyond 2016 targets. If we chose to make a version of the Karma with a smaller footprint, it would actually do worse under the proposed regulation, even if the utility (e.g. seating, storage

3-30EPA CO 2 Standards

space, and performance) and fuel economy remained exactly the same. This does not make sense. In a competitive market, automakers will be driven to sell larger vehicles and
trucks for the increased credits. We woul d like the freedom to design our vehicles
without concern for these footprint and classificati on metrics. [OAR-2009-0472-8732.1, pp.5-6]

While larger vehicles can be made safer, th is is not always the case. For example, many large SUVs are considerably more dangerous than smaller vehicles due to rollover concerns. NHTSA can (and does) implement safetyregulations to directly address safety issues. We consider it best to handle safety in this manner, separately from emissions. A flat standard would remain neutral to size, as consumer demand will remain for large vehicles. Furthermore, hybrid and electric vehicles do not suffer in fuel economy from weight increase nearly as much as traditional vehicles due to their regenerative braking capability. This will also serve to maintain diverse consumer choice of vehicles. [OAR2009-0472-8732.1, p.6]

Finally, causing a trend towards larger vehicle footprints can have adverse environmental affects. Material requirements would increa se, and unless automakers take considerable effort to avoid it, environmental impact (e.g. CO2 emissions) of vehicle production would increase in step. The regulation should serve to put a market value only on metrics of concern to the regulation— GHGs and fuel. [OAR-2009-0472-8732.1, p.6]

European Automobile Manufacturer's Association

ACEA emphasizes that any le gislation should in principle not be technology prescriptive. Also, efforts with a view to increasing in ternational harmonization of motor vehicle regulations should be maintained wh ere appropriate. [OAR-2009-0472-7444.1, p.1]

New York State Department of Environmental Conservation

Use of Footprint as a Basis for Stan dards (Preamble Section III.B.2) EPA proposes an attribute based greenhouse gas standard, using vehicle footprint as the basis. NHTSA is required by statute to establish attribute based CAFE standards. The benefit of harmony between the CAFE and greenhouse gas standards outweighs any potential benefits an alternate form of greenhouse gas standard might have, and we believe that footprint is atleast as valid as any other attribute. [OAR-2009-0472-7454, p.1]

Ecology Center

One key aspect of the proposed rules is the attribute-based system for determining fuel economy standards. This approach ensures that fuel-economy progress will be made across the broad spectrum of ve hicle types and sizes, rather than just through downsizing or by certain manufacturers. In the past, the fleet average approach has tended to put fullline manufacturers with market share in th e larger vehicle segments at a significant disadvantage. Now all manufacturers will share the burden of improving the fuel

3-31EPA Response to Comments

economy of their vehicles. The Ecology Center also believes that using the vehicle footprint attribute is the most preferable from an environmental and safety perspective to a weight-based approach . [OAR-2009-0472-4068, pp.1-2]

Bright Automotive

[These comments were submitted as testimony at the Los Angeles public hearing. See docket number EPA-HQ-OAR-2009-0472-7283, pp.173-179]

I'd like to also applaud the footprint standard because, again, we do not want to force a single solution into downsized vehicles. We wa nt to be able to allow our customers and Americans to drive vehicles in the size they want.

That being said, lightweighti ng is an extremely important driver for electrification in meeting these standards and importantly for the safety concerns as well. There is a strong correlation between wei ght and size for safety, but there's even -- I'm sorry. Weight and safety. There's a stronger correlation between size and safety.

So if you can decouple weight and size, what you can get are vehicles that are large like our 63-square-foot light truck that are safe and not just sa fe to the occupants but safe to other drivers and pedestrians.

Johnson, Kenneth C.

These comments are respectfully submitted in response to the following request, on page 49685 of the Notice of Proposed Rulemaking (NPRM):

... while NHTSA tentatively concludes that f ootprint is the most appropriate attribute upon which to base the proposed standards ... we seek comment on whether the agency should consider setting standards for the fina l rule based on another attribute or another
combination of attribut es. [OAR-2009-0472-7135.1, p.1]

One of the key recommendations of the 2002 NAS Report was the following:

Recommendation 3. Considera tion should be given to de signing and evaluating an approach with fuel economy targets that ar e dependent on vehicle attributes, such as vehicle weight, that inherentlyinfluence fuel use. Any such system should be designed to have minimal adverse safety consequen ces. (emphasis added) [OAR-2009-0472- 7135.1, p.1]

The NPRM deviates from this recommendati on by adopting a footprint attribute, which does not inherently influence fuel use. In c ontrast to weight, there is no clear causal connection between footprint and fuel econom y, as evidenced by thei r poor correlation. [OAR-2009-0472-7135.1, p.1]

3-32EPA CO 2 Standards

The poor correlation is clearly evident from the current fuel economy and footprint data provided in the NPRM, Tables IV.C.1–2 and IV.C.1–4a. This data is plotted in the attached Figure 1. (Each data point represen ts a particular manufacturer; and the X’s and O’s represent passenger cars and light trucks , respectively.) By c ontrast, weight is strongly correlated to fuel economy across a ll manufacturers and vehicle classes (Table IV.C.1–5a, attached Figure 2). Furthermore, the weight correlation is st ronger than that of power-to-weight ratio, even though the latter is also causa lly related to fuel economy (Table IV.C.1–6a, attached Fi gure 3). [OAR-2009-0472-7135.1, pp.1-2]

The policy rationale for favori ng a footprint attribute over weight is based on the two competing objectives of disc ouraging weight-changing compliance strategies that would adversely impact safety or consumer choi ce, and also encouraging weight-changing strategies that would improve fuel economy without adversely affecting consumer welfare. The NPRM recognizes that the ru lemaking does not effectively balance these objectives. As noted on pages 49462-49463, “... even under attribute-based standards,
there is still risk that manufacturers will rely on downweighting to improve their fuel economy (for a given vehicle at a given footprint target) in ways thatmay reduce safety”. Furthermore (page 49725), “NHTSA cautions that vehicle footprint is not synonymous with vehicle size. Since the footprint is only that portion of th e vehicle bounded by the front and rear axles and by the wheels, footprint based standards do not discourage downsizing the portions of a vehicl e in front of the front axle and to the rear of the rear axle ... The crush space provided by those por tions of a vehicle can make important contributions to managing crash energy.” [OAR-2009-0472-7135.1, p.2]

The NPRM suggests that a weight-based stan dard would create pe rverse incentives to increase weight. As noted on page 49685, “it is relatively easy for a manufacturer to add enough weight to a vehicle to decrease its applic able fuel economy target.” However, it is not easy to add weight withoutalso compromising fuel ec onomy, and thereby nullifying the advantage of a less stringent target. A weight-based standard would, by design,
neutralize – not increase – wei ght-changing incentives. It woul d nullify the large weightreduction incentive of an attribut e-neutral standard, but would not reverse that incentive. [OAR-2009-0472-7135.1, p.2]

The primary drawback of a weight-based standard is that it would create no incentive for beneficial weight-changing compliance strate gies. But since the regulatory incentive would be substantially wei ght-indifferent, the standard would also not incentivize detrimental weight changes; and it would not conflict with complementary policies that are targeted specifically at creating favorable (e.g., safety -enhancing) weight-changing incentives. [OAR-2009-0472-7135.1, p.3]

The proposed footprint attribute cannot optima lly balance the tradeoff between favorable and unfavorable weight changes because it does not discriminate between the two. For example, the NPRM states on page 49685 th at “footprint-based standards provide an incentive to use advanced lightweight material s and structures that would be discouraged by weight-based standards”. But the standards would not incen tivize downweighting exclusively by such means. As stated on page 49727, “... weight can be removed by

3-33EPA Response to Comments

downsizing, rather than material substitution, even while maintaining footprint”. [OAR2009-0472-7135.1, p.3]

How can the weight-change conundrum be resolved? The solution can be illustrated by analogy with a similar problem in the electricity industry. [OAR-2009-0472-7135.1, p.3]

A power utility can reduce emissions by usi ng cleaner energy-generation technology (i.e. reducing GHG emissions per generated kWh). It can also reduce emissions by investing in energy efficiency (i.e. re ducing kWh consumption per unit of consumer utility). For example, it could finance or subsidize home weatherization programs, efficient lights and appliances, etc. But an emission performa nce standard based on GHG emissions per kWh would, in effect, award emission allowan ces in proportion to energy generation, and would therefore provide no incentive for reducing energy consumption. How can this problem be resolved? [OAR-2009-0472-7135.1, p.3]

One approach would be to award emission allowances in relati on to some kind of attribute, such as a generating facility’s “footprint,” which would somehow balance the competing incentives. But a more practical ap proach would be to simply recognize that promoting clean energy generation and ener gy efficiency are independent, separable problems that can be addressed with sepa rate, complementary policies. A GHG-per-kWh performance standard could effectively indu ce clean energy generation, while a separate regulatory measure would be employed to promote energy efficiency. [OAR-2009-0472- 7135.1, p.3]

Similarly, the vehicle regulation problem can be efficiently partitioned into two separate problems: one of minimizing emissions per unit weight, and one of minimizing weight per unit of consumer utility. Furthermore, safe ty could also be addressed as a separate regulatory problem – the regulati ons should not, in effect, use weight (or footprint) as a proxy for safety. Trying to solve all of these problems with one standard, as the NPRM proposal does, leads to regulations th at are over-constrained and therefore suboptimal. [OAR-2009-0472-7135.1, p.4]

The NPRM notes, on page 49724, that “The question of the eff ect of changes in vehicle weight on safety in the context of fuel ec onomy is a complex question that poses serious analytic challenges ...,” but th ese complexities can be circ umvented by using a weightbased standard that would, by design, create no significant weight-changing incentives. Instead, the “serious analytic challeng es” would be locali zed in a separate, complementary regulatory measure, which woul d be specifically and exclusively targeted on motivating optimal weight-c hanging strategies. This m easure, unlike the proposed footprint-based standard, would discriminate between strategies based on their consumerwelfare impacts; and it would preferentially and selectively focus incentives on beneficial strategies. [OAR-2009-0472-7135.1, p.4]

In one approach, optimal weight reduction could be incentivized by a crediting system somewhat analogous to air conditioning cred its. “Weight credits” would be awarded for the use of qualified engineering materials based on their equivalent utility characteristics.

3-34EPA CO 2 Standards

For example, if a vehicle manufacturer re places 1000 lbs of steel with 600 lbs of functionally equivalent, high- strength composite material , then the 400-lb difference would be added to the vehicle weight for the purpose of determining its compliance requirement under a weight-based standard. [OAR-2009-0472-7135.1, p.4]

Safety concerns could similarly be addre ssed through regulatory measures that apply specifically to safety-related vehicle attribut es. For example, vehicle safety regulations might specify a minimum vehicle footprint-to-weight ratio, or a maximum center-ofgravity height as a proportion of track width. [OAR-2009-0472-7135.1, p.4]

A weight-based standard, complemented w ith optimal weight-re duction incentives and safety-related regulations, would achieve all of the objectives that the footprint-based
standard is intended to achiev e, but without the tradeoffs i nherent in a one-size-fits-all regulatory approach. The benefits of this ap proach would include some or all of the following: (1) less disparity in manufacturer s’ and consumers’ compliance costs, (2) improved economic feasibility (and consequent ly, potentially more stringent emission targets), (3) better preservati on of consumer choice, and (4) enhanced safety. [OAR2009-0472-7135.1, p.4]

The separate, but complementary, regulati on of fuel economy and emissions by NHTSA and EPA argues in favor of a similar se paration of weight-changing and safety regulations; and a weight-based standard would represent a step toward harmonized international standards. (China, Japan, and the European Union use weightbased standards.) Inasmuch as this approach has not been identified as a regulatory option in the NPRM and appears not to have been considered by the agencies, I encourage the agencies to do at least a cursory comparative analysis of this appr oach and to objectively consider its merits, and then to reeval uate the policy rati onal underlying NHTSA’s selection of footprint as “the most appropriate attribute upon which to base the proposed standards”. [OAR-2009-0472-7135.1, pp.4-5]

EPA Response:

Most of the comments received on this issue sup port the use of footprint as the sole or at least one of the attributes upon which to ba se the fuel economy and GHG standards. Most of those disagreeing with the use of footprint support the subs titution of vehicle weight for footprint for two primary reasons. One reason is harmoni zation with the fuel economy, fuel consumption, CO2, or GHG emis sion standards of other nations. The other is the fact that vehicle weight is a much better predictor of fuel economy and CO2 emissions than footprint. Starting with in ternational harmonization, EPA agrees that the use of vehicle weight as the primary attri bute upon which to base the final standards would result in standards that, in that respect, appear to be more closely harmonized with the standards of several nations, namely Eur ope, Japan, and China. However, we believe
that the benefits of this harmonization c ould be minimal, and in any event, do not outweigh the detriments at this time.

3-35EPA Response to Comments

First, establishing a weight based standard inthe U.S. would not gua rantee that the same
vehicles could or would be sold in all of the nations with weight based standards presently; indeed, there is little, if any, evidence that wei ght-based fuel consumption and GHG emissions standards in place in Eu rope, Japan, and China are leading to significantly more similar new ve hicle fleets in those regions. Even if the standard curve were the same in two or more nations, the mi x of vehicles sold would likely vary across
national boundaries. Manufacturer s comply with their applicab le sales-weighted standard by balancing the number of vehicles sold wh ich are above and below the standard (and the degree to which they are above and belo w the standard, of course). Setting the appropriate level of a fuel economy or GHG st andard depends on many factors, including fleet mix and other regulations ( e.g. , safety requirements, NO Xand PM emissions standards). Fleet mix varies widely across national boundaries, and some other regulations are not as stringentin other countries as in th e United States. Thus, it may not be appropriate for all nations to set th e same level of fuel economy or GHG emission standard. In fact, harmonization of fuel economy or CO2 standards internationally is most practically achieved when roughly th e same level of fuel conserving and CO2 reducing technologies can be marketed in ternationally. The fact that many of technologies projected to be used to meetthe final standards are already utilized commercially in Europe and Japan is an indication that the final standards are harmonized to some extent internationally. In addition, because the focus of EPA’s
standards are GHG emissions and not fuel c onsumption, manufacturers have the option (and are expected to take a dvantage) of generating credit s through the use of low leak A/C systems, which are not presently incorpor ated into other nations’ fuel conservation

programs.

Second, as mentioned by several commenters, setting a weight-based GHG standard
eliminates the incentive for manufacturers to us e weight saving material s or techniques to reduce fuel consumption and CO2 emissions . As one commenter points out, fuel consumption and CO2 emissions are highly corre lated with weight. As described in the Joint TSD, there are numerous ways that vehi cle weight could be reduced in the future while maintaining vehicle safety and utility. A weight based standa rd (where the slope was set to neither promote mass increases or decreases) would simply remove these techniques from consideration.

The fact that vehicle weight correlates much better than footprint with fuel consumption and CO2 emissions is, however, not the mo st relevant factor when selecting the attribute to use when developing the standard curve. In its 2002 report on the CAFE program, NAS recommended that NHTSA adoptweight-based standards in order to discourage manufacturers from responding to CAFE standards by reducing vehicle mass in ways that would compromise highway sa fety. However, NHTSA has concluded and EPA agrees that a size-based system not only more equitably distributes compliance burdens than a flat standard, but also that, compared to a weight-based system, a sizebased system encourages further penetration of high-strength light weight materials and, importantly, incurs less risk that energy and environmental benefits will be lost to “gaming” (it being much easier to increase a ve hicle’s mass than to increase its footprint).

3-36EPA CO 2 Standards

In another comment, Cummins recommends that towing capacity be added as a secondary attribute to the proposed truck cat egory, as greater towing capacity increases vehicle utility in a manner si milar to greater footprint. Cummins suggests that such vehicles be granted a numeri cally higher CO2 standard thanother trucks. We believe that towing capacity is already implicitly f actored into the proposed (and final) car and truck curves. Towing capacity tends to be highe r for trucks than for cars and trucks are in fact allowed to emit more CO2 than cars (at a given footprint) under the final standard which was developed based on analysis of the agencies’ forecast of vehicle models expected to be present in the future light truc k market. We also believe that larger trucks tend to have higher towing capaci ties than smaller trucks and again, larger trucks are allowed to emit more CO2 than smaller trucks, up to a footprint of 66 square feet. In other words, differences in towing capacity are part of the reason why the GHG standard
curve increases with vehicle size and is higher for trucks than fo r cars. It is possible that EPA would consider adding additional attri butes like towing capacity to its standard setting function in the future.

Several manufacturers make a similar suggestion for engine size or power (or multiple attributes). Vehicles with higher engine power tend to have higher CO2 emissions due to the fact that the engines operate at lower aver age loads over the two-cy cle test procedure. Unlike passenger and cargo capacity, however, th e societal benefit of higher engine power is less clear. The analysis sup porting this rule assumes no change in the acceleration performance of vehi cles due to the rule (and the agencies’ cost analysis includes the costs for preservi ng acceleration performance). In other words, we have included performance vehicles in our analys is and we have evaluated the various GHG reducing technologies in such a way to main tain acceleration performance as much as possible. EPA did this by building technol ogy packages for each vehicle type (see Chapter 1 of EPA’s RIA) that were designed to maintain key performance characteristics (e.g., effective engine displacement consid ering turbocharging, estimated acceleration performance, etc.) to the fullest extent possibl e. Each subsequent package generally costs more, provides greater fuel efficiency, and ma intains performance relative to the package before it and, hence, the baseline or curre nt vehicle. We have explicitly excluded projecting increased sales of lower powered engines as a method of reducing CO2
emissions even in those cases where a manuf acturer currently markets the same vehicle with two or more sized engines. To base the GHG standard on engine size or power would encourage manufacturers to increase engi ne size or power and thus, decrease fuel economy and CO2 emissions, while discouraging smaller engine size or power with their attendant benefits. Although safety concerns support the adoption of a system that discourages vehicle downsizing as a comp liance strategy, they do not support the adoption of a system that discourages reducti ons in the size and/or power of engines in performance vehicles.

Porsche, for example, states that the purpos e of their small sports cars is to provide performance, while that of other small vehicles is to provide fuel economy (and commensurately, low CO2 emissions). As stated above, we have included high performance vehicles when developing the standard curve shapes, as well as their absolute levels and have maintained the pe rformance levels of these vehicles when

3-37EPA Response to Comments

applying fuel-saving and CO2-reducing technol ogy. However, we believe that it would be inappropriate to base th e GHG standard using engine si ze or power as an explicit attribute. Such engines inherently operate at a low level of fuel efficiency at normal highway speeds. Thus, to include engine pow er or vehicle performance as an attribute upon which to set the GHG standard would be to encourage vehicles with inherently high CO2 emissions, which is directlycounter to the expressed goal s of the final rule. Also, since it takes more power to move a larger ve hicle, the use of footprint as the attribute upon which to base the GHG standard indirectly includes the impact of a larger engine on the GHG standard. However, this is done to en able the utility of the larger vehicle with larger passenger and cargo capacity.

Porsche further states that they would be required to be the most fuel efficient
manufacturer in the U.S. due to their sm all average footprint. However, other manufacturers of small vehicles must achieve the same fuel efficiency. Porsche did not assert, nor establish that the proposed standard s were more stringent for smaller footprint vehicles than for larger footprint vehicles. Thus, the fact that th eir overall average fuel efficiency would be required to be higher than other manufacturers does not mean that the proposed, nor final standards are more stringent for Porsche than for other manufacturers. (Note further that the final GHG rules contain an alternative standard for
manufacturers with domestic sales of 2009 MY light duty vehicles of less than 50,000 allowing such manufacturers to select any combination of 2012 through 2015 MY light duty vehicles to meet the Temporary Lead Ti me Allowance alternat ive standard, up to a cumulative total of 200,000 vehicles. An additional 50,000 2016 MY vehicles may be
included under this alternativ e as well. Section 86.1818-12 (e ) (3). Porsche may choose this alternative (assuming it meets the various e ligibility criteria in the rule) to obtain needed leadtime to ultimately meet the main CO2 standards for its fleet.)

BMW commented that there is evidence that th e footprint-based standards are leading to increased sales of large trucks. We are not aware of such evidence. EPA's projection of future sales of large trucks and SUVs inthe NPRM did show relatively large sales volumes. However, as discussed in the Joint TSD, this was due primarily to the mistaken inclusion of vehicles over 8,500 pounds GVWR which are not subject to the final
standards. We believe that any remaining increase in future large truck sales is due primarily to the anticipated rebound in the econo my and not to the footprint standards. The design of the final foot print standards is intende d to avoid incentives for
manufacturers to increase or de crease the size of their vehicles.

Comments concerning the flatte ning of the standard curves at low and high footprint
values will be addressed in section 3.2.2 below.

3.2.2 Mathematical shape of th e footprint-based standards

Organization: General Motors Ford Motor Company Honda Motor Company Alliance of Automobile Manufacturers (Alliance)

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Toyota Motor North America University of California, Santa Barb ara, Bren Working Group on Vehicle Fuel Economy University of Pennsylvania, Environmental Law Project
Recreational Vehicle Industry Association (RVIA)

Comment:

General Motors

The agencies “seek comment on the ... methodology for apportioning the fleet stringencies to relative car and truck standards for 2012-2016.” GM recommends: 1) modifying the slope of the truck curves such that large pickups have a lesser obligation, and 2) changing the large footprint “cut points” or “clips” from 66 ft 2 to 72 ft 2 to parallel the methodology applied to passenger cars (i.e. to affect only models with “extremely low sales volumes”) The statistical applic ation of an un-weighted mean absolute deviation places inappropriate and additional burden on large pickups and full line manufacturers. Using a sales-weighed least square regression (as shown below) more appropriately applies the overall industrygoal across the entire fleet. [OAR-2009-0472- 6953.1, p.27]

Further, the agencies propose “to “cut off” the linear portion of the passenger car function at 56 square feet” primarily because of “ex tremely low sales volumes” for passenger cars are larger than this footprint. This treatment of the data is equitable and appropriate; however the agencies discard this equitable appr oach in the treatment of larger trucks. In fact as shown in the table below (shown for 2016 MY but likewis e applicable to all model years of the program), th e agencies’ arbitrary “cut point” for large trucks affects a much larger volume of th e fleet. [OAR-2009-0472-6953.1, p.27]

To propose a specific solution to the curve fitting methodology, it is helpful to re-iterate the parameters that EPA uses to define the curve:

EPA mathematically defines the pie cewise linear curves as follows:

Target = a, if x ≤ l

Target = cx + d, if l < x ≤ h

Target = b, if x > h I

in the constrained linear form applied by NHTSA, this equation takes the simplified
form:

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

Where:

3-39EPA Response to Comments

Target = the CO 2 target value for a given footprint (in g/mi)

a = the minimum target value (in g/mi CO 2 )

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 inte rmediate sloped line (in sq ft)

Specifically, GM recommends: 1) Modifying the slope of the truck curves such that large pickups have a lesser obligation; specif ically increase (in EPA metric of g/mi CO 2 ) “c” parameter 2) Changing the large foot print “cut points” or “clips” from 66 ft 2 to 72 ft 2 to parallel the methodology applied to passenge r cars; specifically increase (in EPA metric of g/mi CO 2 ) the “b” parameter. [OAR-2009-0472-6953.1, p.28]

Ford Motor Company

Fitting the Curves

Ford recommends that the agencies use the same approach when setting the truck piecewise linear curve lower limit that was us ed for setting the car and truck upper limit and the car lower limit. For example, Ford ag rees with the methodology used to establish the car upper limit that took into account th e volume of vehicles (less than 10%) represented below a certain foot print and also the unique char acteristics of those vehicles. The agencies state that the cars below a certain footprint have 'char acteristics that could make it infeasible to achieve the very challe nging targets that could apply in the absence of a constraint'. Further the agency noted the maximum value for passenger cars was determined based on extremely low vol ume sales of four luxury vehicles.

The agency noted that there is limited public information regarding the sales volumes of many different configurations (cab designs and bed sizes) of pickup trucks, most of the largest pickups (e.g., the Ford F-150, GM Sierra/Silvera do, Nissan Titan, and Toyota Tundra) appear to fall just above 66 square feet in footprint. NHTSA is therefore proposing to 'cut off' the linear portion of the light truck function at 66 square feet. Ford disagrees with this assessment. Ford agrees with the Alliance assessment that a large volume of the trucks are between 68-72 square feet. This significan t volume of trucks above the 66 square foot limit, makes th is limit function more as a 'backstop.'

Ford strongly supports the Alliance recommen dation for the agencies to move the lower limit for the truck piecewise linear curve to 72 square feet to recogni ze where the fleet is

3-40EPA CO 2 Standards

at today and avoid both mark et distortions and the GHG/CA FE backstop effect it could impose. Ford further recommends that the agencies use the same methodology applied to both the car upper and lower limit and the truck upper limit, which takes into account not only the volume of vehicles affected by th e limit, but more importantly the unique characteristics (towing capacity and/or cargo hauling capability) of those vehicles that could make it infeasible to achieve the verychallenging targets that would apply in the absence of the constraint adjustment. [OAR-2009-0472-7082.1, p. 4]

Honda Motor Company

Honda notes that the passenger car GHG a nd MPG attribute curve stringencies are capped for vehicles with footprints smaller than 41 square feet. The 41 square foot cap roughly aligns with the smallest 10% of the passenger car market. This cap will create the possibility that OEMs can offer consumer s lower cost solutions to greenhouse gas reduction and higher fuel economy. In other word s, as the stringency increases each year, the only solution for OEMs to meet these toughe r standards is to in crease the technology
– and therefore the costs – that are applied to vehicles of the same footprint. Vehicles small enough to fit under the footprint cap will be able to meet the increased stringency simply by being small, and potentially less t echnology – and costs – need to be applied.
Consumers who choose to downsize to these smaller vehicles can benefit from the lower greenhouse gas emissions and increased fu el economy of these vehicles while minimizing the cost impact. [NHTSA-2009-0059-0095.1, pp.5-6]

Honda strongly supports the creation of a similar cap for the truck GHG and MPG attribute curves. Currently the 41 square foot cap is applied to both passenger cars and trucks, however, the 41 square foot cap fo r trucks does not corre spond to any current trucks on the market, so it is effectively meaningless. A similar cap for trucks would set the cap approximately where the smallest 10% of the truck fleet can be found. According to data from the 2011 MY CAFE NPRM, the sm allest 10% of the truck fleet is found at approximately 46 square feet (see Attachment 1). Trucks provide consumers with increased functionality, and as such, not all consumers can dow nsize from trucks to cars. By enabling truck customers to downsize with in the truck category, customer choice will be protected. [NHTSA-2009-0059- 0095.1, p.6] [See [NHTSA-2009-0059-0095.1, p.14 for Attachment 1]]

Alliance of Automobile Manufacturers (Alliance)

Truck Clip

With vehicle size-based standards (i.e., footpr int) based on a continuous curve, all models have a specific target fuel economy and CO2 emissions level. Larger vehicles receive a standard that reflects a fundamental of physics: that a larger vehicle requires more energy than a smaller one (with equivalent technology levels). 74 Fed. Reg. 49470. [OAR-2009- 0472-6952.1, p. 30]

3-41EPA Response to Comments

This scientific relationship holds true for a continuous footprint function until clips are imposed. A “clip” is defined as a region wh ere the footprint-fuel economy (or CO2) relationship is replaced with a constant (“ clipped”) value for fuel economy (or CO2) regardless of footprint. [OAR-2009-0472-6952.1, p. 30]

The Alliance notes the high-side clip regions could force manufacturers to limit production of vehicles that ar e above the high-side clip or cause manufacturers who currently produce more vehicles above the hi gh-side clip region to drastically change their products whereas other manufacturers woul d not be required to make such changes. Also, this option may deny customers the full range of vehicles that meet their needs within the clip region – this is especia lly true on the truck fleet. [OAR-2009-0472-6952.1, pp.30-31]

The high-side clip on the car fl eet affects significantly less th an 1% of the fleet but the high-side clip on the truck fl eet is centered on the volume of the full size pickup trucks. [OAR-2009-0472-6952.1, p.31]

It appears EPA and NHTSA assumed that thes e full size pickup trucks were at or about 66 square feet, when in fact a large volume of them are at 68-72 square foot footprint. 74 Fed. Reg. 49,472. This significant volume of tr ucks above the clip, make this clip function more as a “backstop.” [OAR-2009-0472-6952.1, p.31]

NHTSA cannot subject a vehicle to both a class standard and an overall standard. This is contrary to the legislative sc heme of placing a vehicle is placed in a single compliance fleet, and contrary to NHTSA’s past inte rpretations. During the time when NHTSA set 2WD and 4WD/AWD CAFE standards for light trucks, the “combined standard” was an option (i.e. an alternative to compliance with the class standard), and NOT an additional requirement. Subjecting manu facturers to a CAFE back stop would perpetuate the anticompetitive and antisafety c onsequences of the fleet average system that Congress abandoned with the passage of the Energy Independence and Security Act of 2007, Pub. L. 110-140 (EISA). [OAR-2009-0472-6952.1, p.31]

If the objective of the footprint system is to develop a re gulatory framework that is superior to the non-attribute-ba sed fleet average system, the high-side truck clip acts as a 'GHG/CAFE backstop' and simply places a new layer of regulations on top of the footprint curve, creating more complexity for both manufacturers and the two agencies. [OAR-2009-0472-6952.1, p.31]

The Alliance recommends that the agencies m ove the high-side clip on the truck curve to 72 square feet to recognize where the fleet is at today and avoid both market distortions and the GHG/CAFE backstop effect it could im pose. This would reflect a consistent approach with the methodology that the agen cies employed in setting the passenger car high-slide clip. [OAR-2009-0472-6952.1, p.31]

Toyota Motor North America

3-42EPA CO 2 Standards

Shape of Target Curves

The agencies requested comment on several aspe cts of the proposed target curves and the manner in which the curves were developed. [OAR-2009-0472-7291, p.11]

In general, Toyota supports th e overall shape of the proposed target curves. In particular, the proposed car target curves represent animprovement over NHTSA's 2011 model year
final rule car curve. In that rulemaki ng, the car curve adopted by NHTSA was quite 'steep' in the middle footprint ranges. Th e steepness of that curve had two possible negative effects. First, from a competitiv e standpoint, competing vehicles in the marketplace with slightly diffe rent footprints could have m eaningfully different targets, which could provide an advantage for certainmanufacturers in certain market segments. Second, a steep curve could provi de an incentive to upsize a m odel in order to secure a relaxed target. [OAR -2009-0472-7291, pp.11-12]

The proposed car curves are 'flatter' than th e 2011 model year curve as shown in Figure 5 below, particularly in the early model ye ars. Note the figure shows the NHTSA car curves in MPG space, and compares the 2012 and 2016 model year slopes to the 2011 model year curve. Toyota supports this trend in flattening the car target curves. [OAR2009-0472-7291, p.12]

With respect to the truck curves, the slope of the proposed curves is very similar to the 2011 model year truck curve adopted by NHTSAas shown in Figure 6. Again, the figure shows the NHTSA truck curves in MPG space, and compares the 2012 and 2016 model year slopes to the 2011 model year curve. Toyota supports the gene ral continuation of this slope for the truck curves. [OAR-2009-0472-7291, p.12]

Another key aspect of the proposed target curv es is the 'cut-off' (or clip) at footprints below 41 square feet and above 56 square f eet for cars and above 66 square feet for trucks. A comparison of the final 2011 model year car and truck curves and the proposed 2012 and 2016MY curves is shown in Figures 7 and 8. While the constrained logistic function used for 2011 model year doe s not have a true clip from a mathematical viewpoint, the 2411 model year target curves for both cars and trucks largely flatten out to form effective clip s at both ends of the curve. [OAR-2009-0472- 7291, pp.12-13]

For smaller footprint vehicles, the current pr oposal extends the effe ctive clip down to 41 square feet, requiring additional improvements in smaller cars and trucks . At the same time, maintaining some level of clip also ensu res that the smallest and most fuel efficient vehicles are not unduly penalized by setting targets so high as to price these vehicles out of the most price-sensitive market segment. Toyota supports the clip at the smaller footprint range, and would not support eliminating the clip (requiring ever increasing target for smaller vehicles). For larger f ootprint vehicles, Toyota has no comment other than to recognize the current proposal clips both the car a nd truck curves at nearly the same footprint as the 201 1 model year car and tr uck curves. [OAR-2009-0472-7291, p.13]

3-43EPA Response to Comments

University of California, Santa Barbara, Bren Working Group on Vehicle Fuel Economy

A second issue concerns the shape of the fu el economy curves. The reason for using a curve instead of a single fuel economy target as in the original CAFÉ standards is to prevent excessive downsizing as a strategy fo r meeting fuel economy targets. However some downsizing is appropriate if it is done gradually. It makes little sense to structure the regulation to actively discourage downsiz ing. We recommend that the slope of the curve be made shallower over time. Making the slope flatter w ould raise the fuel economy standard at the 'backstop' of 56 square feet (or 66 square feet for light trucks). The flattening of the slope coincides with the consideration that new innovations will be developed between now and when the enforcements are enacted. [OAR-2009-0472- 7188.1, p. 4]

It should be recognized that the stated purpose of the slope of the curve is to ensure that there would be 'no significant effect on the re lative 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'. The sloping curve al lows for regulators to apply targets to
vehicles of all sizes with re latively equal stringency. It is predicted that this equal distribution of stringency will result in relative ly similar increases in vehicle efficiency in vehicles of all footprints, inorder to prevent the proposed regulation from influencing
consumer choice and market-dri ven forces. [OAR-2009-0472-7188.1, p. 4]

If the manufacturer succeeds in increasing a vehicle model's footprint while minimizing
its decline in fuel ec onomy, they may obtain emission cred its that they would not have otherwise earned, undermining the regulation’s core purpose. Since th e slope of the curve currently does not change as it increases annually, this incentive will be present throughout the 2012-2016 period. [OAR-2009-0472-7188.1, p. 5]

Therefore, we recommend an incremental increa se in stringency of the footprint curve which takes technology-forcing into account by gradually flattening the slope of the curve, possibly attaining a flat, fleet wide fuel economy target in the future. The flattening of the curve will pose a greater obsta cle for larger, less fuel efficient cars to meet the proposed standards, and at the same time assure the antic ipated market shift toward vehicles with smaller footprints, re sulting in higher fuel economy. In addition to efficiency innovations, this shift toward smalle r, more fuel-efficient cars is a critical factor in making significant, tangible natio n-wide reductions in vehicle greenhouse gas emissions. By meeting and exceeding more stringent curves, American manufacturers will place themselves at the forefront of the global technology frontier, thus helping to regain our role as an economi c leader. [OAR-2009-0472-7188.1, p. 5]

Moreover, we recommend that the method with which the curves were drawn be made transparent in the support documentation. Any eq uations and formulae utilized to derive the curve should be made publicly availabl e. We attempted to use the VOLPE model output data from NHTSA's website to reproduce the f ootprint curve, in or der to assess the
method with which the curve was drawn. Acco rding to the technical support document,

3-44EPA CO 2 Standards

the mean absolute deviation (MAD) regression was used to draw the slope between the maximum and the minimum footprints (41sq ft to 56 sq ft for passenger vehicles). However, we were unable to reproduce th e maximum technology curve and, therefore, could not compare the MAD methodology to alternative regressions. [OAR-2009-0472- 7188.1, p. 5]

Despite direct communication with NHTSA, we were unable to clarify these questions and replicate the exact slope and intercept given in the VOLPE model output. According to testimony at the Los Angeles hearings, th e Environmental Defense Fund similarly had difficulty replicating the NHTSA analysis. This is a crucial piece of information, as the
curve is the central tool with which the fuel economy targets are assigned. If the method is made transparent, then commentat ors could also make better informed recommendations to the pr oposal. [OAR-2009-0472-7188.1, p. 5]

University of Pennsylvania, Environmental Law Project

While it is important that the regulation avoid providing perv erse incentives to vehicle manufacturers, predictabilityand gradualness are also important features of the regulation. These features ensure that the cost of complian ce will be relatively low, as auto manufacturers are given time to incor porate improvements into the standard design timeline. Thus, we recommend that the regulation gradually reduce the disparity between the efficiency requirements for larger and smaller vehicles such that it is significantly reduced between model years 2012 and 2016. This reduction would take the form of a decreasing slope in the standard curves between 2012 and 2016, as well as a
decrease in the difference be tween the height of the car and truck curves. [OAR-2009- 0472-7286.1, pp. 17-18]

Recreational Vehicle Indus try Association (RVIA)

The NPRM proposes fuel economy/CO2 target curv es for light trucks which flatten out atthe 66 square feet footprint value. It is our understanding, however, that there are lightduty vehicle tow vehicles currently in the marketplace which have a volume [sic: footprint] in the range of 68 to 72 square feet. In flattening out the curve at 66 square feet, vehicles up to 72 square feet footprint range will be expected to achieve the same fuel efficiency as vehicles having a footprint of 66 square feet. We urge EPA and NHTSA to correct this oversight and adjust the target curv es so that these larger vehicles, especially since they are used for towing, are not penalized by the standards. Failing to do so risks manufacturers downsizing these tow vehicles or eliminating them altogether from the product mix. Either of these actions will be de trimental to highway safety and to the RV industry and individual who tow RVs. [NHTSA-2009-0059-0107, p.5]

EPA Response:

There are several key aspects to the mathematical form of the footprint-based standards which were commented upon. These were: 1) th e statistical methods used to develop the slope of the car and truck curv es, including the resultant slopes of these curves, and 2) the

3-45EPA Response to Comments

lower and upper footprint values where the curves flatten out. We address each of these aspects below.

The slopes of the footprint-based standard curves in the NPRM were based on a
minimization of the sum of the absolute diffe rences between the i ndividual vehicle data points and the curve, often referred to as minimum mean absolute deviation or MMAD. Each vehicle's data point was assigned th e same "weight" in this summation. The primary alternatives to this technique would be to 1) use least-square regression and 2) sales-weight each vehicle's data point. GM, for example, recommended that both
alternatives be used inlieu of the non-sales we ighted MMAD regression.

The MMAD regression technique differs from l east square regression primarily in that it reduces the influence of data points which devi ate the most from the curve. Least square regression by definition squares this devi ation before summing, while MMAD simply
adds the deviation to the sum of differences. Examination of the vehicle data used to develop the curves indicates that the fuel consumption and CO2 emission levels of individual vehicles having similar footprints vary widely, of ten by as much as 50%. This
extreme variation can indicate the absence of a normally distributed dataset, often indicating the need to use a statistical technique that reduces the influence of outlying data points. 1

With respect to recommendations that NHT SA and EPA use weighted least-squares analysis, the agencies find that the market fo recast used for analys is supporting both the
NPRM and the final rule exhibits the two ke y characteristics that previously led NHTSA to use minimization of the unweighted rather than sales-weighted analysis. The agencies’
intention is to fit a curve that describes a technical re lationship between fuel economy and footprint, given comparable levels of technology, and this supports weighting discrete vehicle models equally. However, there are some aspects of vehicle design which are known to influence fuel consumption and CO2 emissions, such as acceleration performance and amenities which can increase vehicle weight. To the extent that the distribution of these preferences is not equa lly distributed across the range of footprint values, vehicles with relatively extreme attri butes and low sales leve ls could affect the slope of the curves.

1 In the case of a dataset not drawn from a sample with a Gaussian, or normal, dist ribution, there is often a need to employ robust estimation met hods rather than rely on least-squa res approach to curve fitting. The least-squares approach has as an underlying assumption that the data are drawn from a normal distribution, and hence fits a curve using a sum-of-squares method to minimize errors. This ap proach will, in a sample drawn from a non-normal distribution, give excessive weight to outliers by making their presence felt in proportion to the square of their distance from the fitte d 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 , 3 rd edition, 1992, MIT Press, Cambridge, MA).

3-46EPA CO 2 Standards

In conducting analysis to support its rulemaking for MY2011 CAFE standards, NHTSA
evaluated several combinations of these two aspects of th e curve setting techniques. Most combinations yielded slopes for the car curve that were believed to give manufacturers too great an incentive to upsize their vehicles. In other words, the change in allowed fuel consumption or CO2 emissions with an increase in size was deemed to be greater than that which woul d inherently result from a larger vehicle platform, as supported by Toyota. This belief was despit e the fact that the sl opes of these curves reflected the change in fuel consumption or CO2 emissions with a change in vehicle footprint. Considering this, and consider ing the technical issues discussed above, NHTSA selected techniques that yielded a car curve with what it believed to be an acceptable slope. NHTSA and EPA have continued to apply those techniques in
connection with the final rule , though with a constrained li near curve as opposed to a constrained logistic curve, whic h in part resulted in a car curve slope lower than that in the middle of the 2011 MY constrained logistic curve.

This choice of statistical tec hniques also yielded a slightly lower slope for the truck curve
than several other combinations of the available statistical techniques. A lower truck slope increases the stringency of the standard for larger trucks relative to smaller trucks. This appears to be GM's concern, as GM's truck sales are oriented towards the larger truck segment of the market. GM's sugges tion to use sales weighted least square regression is not supported by any additional information beyond that provided by the two agencies in the proposed rule. GM and Ford did challenge the two agencies' projections that their larger trucks could meet the proposed standards. These comments
are addressed in section 3.3 of this RTC docum ent. GM did not address the issue of the increased slope for cars, which would accompany their recommended statistical technique. Overall, the two agencies continue to believe that the use of unweighted MMAD regression produces the bestresults for this dataset and that no arguments exist which clearly indicate that th is approach should be rejected. Thus, the two agencies fitted the car and truck curves us ing the same statistical techniques as those used in the NPRM. It is possible that EP A and NHTSA would recons ider the statistical techniques used to develop the stan dard curves in future rulemaking.

Regarding the lower and upper footprint values where the standard curves flatten out, GM recommends that the upper footprint value for trucks be increased to 72 square feet from 66 square feet. Their argument is based on the fact that the uppe r footprint value for cars of 56 square feet affects very few sales. Thus, the upper footprint value for trucks
should do the same.

This argument does not address the interaction between the ca r and truck curves and how they together regulate the light vehicle fleet . For example, the lower limit of the car curve was set at 41 square feet. Roughly 10% of car sales fall below this level. Were the
lower limit of the truck curve to be set at footprint value where 10% of truck sales fell below its value, the lower limit of the truck curve would have been well above 41 square
feet. The truck curve is alrea dy well above the car curve in terms of fuel consumption or CO2 emissions at lower footprint values. If the truck curve were to flatten out at a footprint value of, for example, 46 square feet as suggested by Honda, the difference

3-47EPA Response to Comments

between the two curves would become even gr eater for vehicles below 46 square feet.
The incentive to convert cars w ith footprints below 46 square feet to trucks would have been extremely large. Thus, even though few current trucks are so ld with footprints below 41 square feet, protecting the overall goal of the two program s makes it clear that the lower footprint limit of the truck curve should be the same as or very similar to that for the car curve. Thus, Honda's comment thatthe 41 square foot cutpoint for the truck curve is meaningless is not correct.

Since trucks tend to have larger footprints than cars, it makes similar sense to set the upper limit of the truck curve in the same way as the lower limit of the car curve (i.e., at the point where roughly 10% of sales exceed the limit). This is roughly 66 square feet. Analogous to the setting of the lower limit of the truck curve at the same level as the lower limit of the car curve, we could have set the upper limit of the car curve at 66 square feet. However, there are very few car sales above 56 square feet, so the point is essentially moot as to setting the upper limit of the car curve at 56 or 66 square feet. GM's arguments starts by setting of the upper limit of the car curve and then setting that of truck curve to the same level. This is incorrect from a policy perspective. The
lower limit of the two curves is set based on that vehicle class with the smaller vehicles (i.e., cars) and the upper limit of the curves is set based on that vehicle class with the larger vehicles (i.e., trucks).

While GM, Ford and AAM assert that a large vo lume of truck sales exist with footprints between 68 and 72 square feet, detailed data supporting this clai m, which could have been incorporated into the two agencies' an alyses, were not provide d. As discussed in section 3.4 of this RTC document, there is va lue from a policy pers pective for a backstop
which increases the like lihood that the projected benefits of these rules actually occurs. Thus, the fact that the upper limit on the tr uck curve serves to a small degree as an indirect backstop on fuel consumption and CO2 emissions is not in itself a problem. We
also note that most vehicles which are market ed as "low-priced" or "economical" are very small in size. This implies that sales of th ese vehicles would be the most sensitive to
increases in cost due to the addition of fuel saving technol ogy. Trucks above 66 square feet in footprint do not fall into this category. In contrast, these vehicles are typically on the high end of the market in many respects and should be in a good position to absorb the cost of the technologies which the agencies project will enable th eir compliance.

Toyota suggests reducing the slop es of the car and truck curv es over time to encourage a gradual downsizing of both the car and truck fl eets. The two agencies did not decide to do this at the present time, primarily because the agencies are attempting use attributebased standards to discourage downsizing thatmight compromise highway safety and to more equitably distribute compliance burde ns, not to encourage vehicle downsizing beyond levels consistent with normal market demands. Of course, the agencies will reconsider appropriate ways to fit the car and truck curves for purposes of subsequent rulemakings.

Since the fitted slopes of the two curves we re based on vehicle data which reflected the use of all available technologies other th an diesel and strong hybridization, we do not

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believe that there is an inappropriate incenti ve for manufacturers to upsize their vehicles
in order to reduce the need to add fuel saving and CO2 reducing technology.

As described in section II.C of the preamble to the final rule, NHTSA did correct several errors in its analysis used to fit the sl opes of the curves, allowing the commenters to reproduce the results. The refitted passenger car curve is similar to that presented in the NPRM, and the refitted light truck curve is ne arly identical to the corresponding curve in the NPRM. However, the slope of the refi tted passenger car curv e is about 27 percent steeper (on a gram per mile per square foot basis) than the curve presented in the NPRM,
and would increase stringency for the smallest cars, decrease stringency for the largest cars, and provide a greater in centive to increase vehicle size throughout the range of footprints within which NHTSA and EPA projectmost 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 feasible and cost-e ffective energy and environmental benefits by increasing incentives for the passenger car market to shift toward larger vehicles.

Considering NHTSA’s and EPA’s concerns re garding the change in incentives that would result from a refitted curve for passe nger cars, the agencies are finalizing CAFE and GHG standards based on the curves presented in the NPRM.

3.2.3 Relative stringency of the car and truck standards

Organization: General Motors Northeast States for Coordinated Air Use Management
International Council on Clean Transportation University of California, Santa Barb ara, Bren Working Group on Vehicle Fuel Economy University of Pennsylvania, Environmental Law Project South Coast Air Quality Management District

Comment:

General Motors

The overall industry goal of 250 CO 2 g/mile (35.5 mpg equivalent) by 2016 model year is tough, but reasonable. This target can, however , be distributed between the separate car
and truck fleets in an infinite number of co mbinations. In our comments, we provide an analysis for adjusting the proposed distributi on to achieve a more equitable burden on the truck fleet. Our analysis shows that today’ s most efficient, segment leading cars and small trucks already meet the 2016 model year targets, but the segment leading and most efficient large pickups are required to improve by 20% to meet their 2016 MY requirements. Our analysis shows that over estimated benefits of added fuel economy technology and future pickup truck volumes re sult in a disproportionate burden being placed upon large pickups. GM recommends that in each year of the rule, the agencies better balance the respective ob ligations of passenger cars and trucks – while still

3-49EPA Response to Comments

reaching the same end point for the car a nd truck fleets combined in 2016. [OAR-2009- 0472-6953.1, p.2]

GM recommends that in each year of the ru le, the agencies better balance the obligation for large pickups as compared to passenger vehicles. Today’s most efficient, segment leading cars and small trucks already meet the 2016 model year targets but the segment leading, most efficient large pickups are required to improve by 20% to meet their 2016 MY requirements. [OAR-2009-0472-6953.1, p.4] [[See pp.4-8 of OAR-2009-0472- 6953.1 for a discussion on GM's analys is of the truck efficiencies]]

Northeast States for Coordinated Air Use Management

Separate footprint curves for cars and li ght trucks: NESCAUM encourages EPA and DOT to maintain a single footpr int curve for cars and light tr ucks in the final regulation. By establishing two curves as EPA and DOT have proposed, there is a significant risk that automobile manufacturers will “game” th e standard. This can be done, for example, by making four wheel drive small SUVs rather than two wheel drive small SUVs so that
cars become classified as trucks. If manufactur ers reclassify cars as light trucks as has happened before, GHG emissions and fu el consumption could increase significantly. [OAR -2009-0472-7235.1, p.4]

[Northeast States for Coordinated Air Use Management also submitted these comments as testimony at the New York public hearing, See docket number OAR-2009-0472-4621, p. 43.]

International Council on Clean Transportation

[[These comments were submitted as testim ony at the Detroit public hearing. See docket number EPA-HQ-OAR-2009-0472-6185, p. 59.]]

We also support the proposed change to the sh ape of the footprint ad justments. Target standards versus the vehicle footprint provide consistent signals to improve efficiency for most vehicles while preserving incentives to make the largest vehicles smaller.

[[These comments were submitted as testim ony at the Detroit public hearing. See docket number EPA-HQ-OAR-2009-0472-6185, pp. 61-62.]]

First, the proposed rule maintains separate f ootprint curves for cars and light trucks. This subjects light trucks with the same footprint to much less stringent standards and gives
manufacturers a tremendous incentiv e to reclassify cars as light trucks. In the past this has brought us such notable trucks as the S ubaru Outback, Chrysler P.T. Cruiser, Dodge Magnum, Mazda 5, Porsche and BMW X6, BMW de scribes as a sports activity coupe.

In the future it is likely to cause manufactur ers to drop many 2-wheel drive versions of their small sport utilities and make less effici ent 4-wheel drive versions standard so that they can be classified as light trucks instead of cars. Each car to light truck sales shift

3-50EPA CO 2 Standards

results in easier compliance for manufactur ers but higher in use fuel consumption and greenhouse gas emissions in use.

EPA recognized the importance of this issue when it established a single tier 2 emissions standard that applied to all cars and light trucks. It is time to do the same for fuel efficiency and greenhouse gas emissions and en d this artificial di stinction. A single footprint function will still give larger trucks a less stringent targetwhile avoiding vehicle classification games.

University of California, Santa Barbara, Bren Working Group on Vehicle Fuel Economy

While the proposed rule itself will not alte r fleet composition, the EPA and NHTSA have projected a market-driven shift from the cu rrent mix of vehicles (51% passenger cars, 49% light trucks) towards a vehicle mix of 67% passenger cars and 33% light trucks by 2016. However, the market simply may not respond in the manner projected in the proposal, or the shift may not occur with market power alone. The Union of Concerned
Scientists contend that vehicles slated to be reclassified as passenger vehicles (e.g. 2- wheel drive SUVs) could be equi pped with other light truck attributes to qualify for light truck classification. As long as there is a separate, less stringent foot print-curve for light trucks, there will be a strong incentive on th e part of auto-makers to classify their vehicles as light trucks. While the curve evenly distributes the penalties, it also rewards vehicles with larger footprints, which inhe rently tend to have a lower fuel economy. Not only does the footprint-based curve discourage downsizing of vehicles, it introduces
incentives for manufacturers to maximize the f ootprint for a given model, so that a model will have a less stringent target fuel economy. This may include shifting the wheelbase to a wider, boxy shape, or elongating the vehicle. [OAR-2009-0472-7188.1, p. 4]

University of Pennsylvania, Environmental Law Project

While it is important that the regulation avoid providing perv erse incentives to vehicle manufacturers, predictabilityand gradualness are also important features of the regulation. These features ensure that the cost of complian ce will be relatively low, as auto manufacturers are given time to incor porate improvements into the standard design timeline. Thus, we recommend that the regulation gradually reduce the disparity between the efficiency requirements for larger and smaller vehicles such that it is significantly reduced between model years 2012 and 2016. This reduction would take the form of a decreasing slope in the standard curves between 2012 and 2016, as well as a
decrease in the difference be tween the height of the car and truck curves. [OAR-2009- 0472-7286.1, pp. 17-18]

South Coast Air Quality Management District

Third, the South Coast AQMD staff shares the c oncern that the attribute basis of the EPA program may provide certain in centives to up-weight vehicles.

3-51EPA Response to Comments

For example, the EPA's program may result in auto manufacturer compliance strategies which involve up-weighting of vehicles from two-wheel drive to four-wheel drive SUV configurations. For this reason, the South Coast AQMD st aff recommend that EPA consider establishing some form of backstop mechanism to ensure that the vehicle fleet is not dramatically distorted by perverse incentives occurring by selecting different vehicle weight categories.

In conclusion, the AQMD staff certainly appr eciate this opportunity to provide comment. We compliment the EPA and NHTSA and DOT staffs for their diligent analysis. The standards proposed by both of your organiza tions will significantly reduce greenhouse gas emissions as well as criteria pollutants. We are very pleased to stand here and strongly endorse the standards as they will provide meaningful national benefits for
decades to come.

[Comments are from LA Testimony, OAR-2009-0472-7283, pp.59-67]

EPA Response:

GM's basic comment that the burden of the standards can be more equitably distributed
between cars and trucks is a function of th ree aspects of the car and truck standard curves: 1) their relative slopes, 2) their relative inte rcepts at zero footprint (ignoring their flattening at a footprint value of 41 square feet), and 3) the lo wer and upper footprint values where the curves flatten out (and for GM , their primary focus is the 66 square foot cutpoint for the truck curve). The issues of th e relative slopes of th e car and truck curves and the lower and upper footprint cutpoints were addressed is section 3.2.2 above. The remaining issue to be addressed here is how the two agencies set the intercepts of the two curves, or in other words, the degree to whic h the truck curve was above the car curve in terms of fuel consumption and CO2 emissions.

This distance between the car and truck curves was based on setting each curve at the
level where estimated net societ al benefits were maximized (a s described in section II of the preamble). These two curves were th en adjusted upwards (in terms of fuel consumption or CO2 emissions) to the pointwhere the desired fleet-average fuel consumption or CO2 targets were achieved. Thus, this analysis reflects the cost of adding technology to both cars and trucks, smal ler and larger vehicles, as well as the benefits accruing from this technology. GM has not shown why this approach produces a greater burden on large trucks versus smaller cars. Simply comparing current vehicles, even "market leading" vehicles, to the proposed standards does not establish the capability of adding additional, cost beneficial technology. Current market forces, including forces in overseas markets for some manufacturers, can lead to the uneven addition of technology to current vehicles. Without assessing the degree to which available technology has alrea dy been added to current vehicles, any such comparison can be misleading. We believe that the appro ach of adding all cost beneficial technology to all vehicles provides a reas onable balance of regulatory bu rden across the wide variety of vehicles currently being sold in the U.S. market.

3-52EPA CO 2 Standards

Regarding NESCAUM's suggestion for a single curve for both cars and light trucks and other comments indicating a risk that manufact urers will shift car sales to trucks, we believe that there are several reasons to rej ect this approach for the present rule. As discussed above in section 3.0, EPCA require s NHTSA to set separate standards for passenger cars and light trucks. Also, some trucks, at least, provide utility not available from cars. These include cargo and towing cap acity. The vehicle features required to provide this utility inherently increase fu el consumption and CO2 emissions relative to vehicles without such utility. Therefore, some distinction between car and truck standards appears justif iable. As also discussed in section 3.0 above, we acknowledge
that there is some risk that manufactur ers will increase the sale of AWD and 4WD
versions of their smaller SUVs relative to 2WD versions of these vehicles, thereby leading to increased levels of fleetwide fuel consumption and CO2 emissions. As indicated above, we will monitor this situation and take necessary action as we develop standards for 2017 and beyond. At the present tim e, a shift from the historical approach of setting separate standards for cars and trucks to one that would tgreat them the same or much more similarly would lead to a large differential regulatory impact on several
manufacturers. The current state of the auto industry and the fact that the time frame of these rules only extends 6 years from today ar gue against such a dramatic change at this
time.

3.3 Stringency of the standards

Organization: General Motors Northeast States for Coordinated Air Use Management Public Citizen and Safe Climate Campaign American Council for an Energy Efficient Economy
Sierra Club
California Air Resources Board
International Council on Clean Transportation US Steel Corporation University of Pennsylvania, Environmental Law Project Eadie, R. Frank Sack, Emily

Comment:

General Motors

The overall industry goal of 250 CO 2 g/mile (35.5 mpg equivalent) by 2016 model year is tough,

but reasonable. [OAR-2009-0472-6953, p.2]

The proposed standards are not easy, nor will th ey be inexpensive, but we are up to the challenge. The success of our current offeri ngs in the marketplace like the Chevy Malibu and the Equinox and the enthusiasm over s oon-to-be released pr oducts like the Chevy
Cruze convince us that we will be able to do our part, and even before this rule becomes effective, we will have introduced the Chevy Volt, which is scheduled to start production

3-53EPA Response to Comments

in late 2010 as a 2011 model year vehicle, and it will be GM's first extended range electric vehicle. [OAR-2009-0472-6185, p.11]

Public Citizens and Safe Climate Campaign

The agencies have not outlined an approach to setting standards that sets a precedent for how the agencies would approach this task the next time around. The agencies have engaged in economic hand waving, estimat ing that more stringent standards would be cost-effective, but then appealing to the fi nancial state of the auto industry in choosing the level of standards. For example, EPA disc usses other rates at wh ich to ramp down the CO2 standards, looking at two options: lo wering allowable CO2 emissions by four percent per year and six pe rcent per year. These options are not indicated by any technological or economic criteria, but me rely establish a range within which the agency’s proposal fails. EPA proposes that CO2 emissions decline at approximately 4.2 percent per year for passenge r cars and 4.5 percent per year for light trucks. [OAR-2009- 0472-7050.1, p.9]

EPA then discusses the relative cost of compliance with stan dards in each scenario, and explains that the cost savings for setting standards at four percent instead of the proposed level would be $73 per vehicle, whereas the si x percent alternative w ould incur additional costs of $493 per vehicle on average. EPA appeal s to the financial stat e of the industry in influencing its decision: “EPAis not concluding that the 6% per year alternative standards are technologically infeasible, but EPA believes such standards for this time frame would be overly stringent given the significant strain it would place on the resources of the industry under current conditions. EPA believes this degree of stringency
is not warranted at this time . Therefore EPA does not believe the 6% per year alternative would be an appropriate balance of various relevant factors for model years 2012–2016.”
EPA does not substantiate this claim with an analysis that evaluates the tradeoff in terms of public health and we lfare. [OAR-2009-0472-7050.1, p.9]

Science dictates that to avoid the worst c onsequences of global warming that we must reduce emissions of greenhouse gases to 83 percent below 1990 levels by 2050. In order for the U.S. light duty transportation sector to get there, EPA must set standards that cross multiple product cycles and allow for much more significant transformative changes in the light duty vehicle fleet. The CAA requires EPA to issue standards that protect public health and welfare. The Supreme Court in Massachusetts v. EPA affirmed CAA authority to regulate greenhouse gases, and EPA has asse rted that greenhouse gases pose a threat to public health and welfare through its pr oposed endangerment finding. The agency’s approach to setting standards must reflect its responsibility to set protective standards
consistent with its statutor y mandate. [OAR-2009-0472-7050.1, p.9]

EPA’s consideration of health and the environment are paramount to economic considerations in setting standards under CAA. NHTSA has significant discretion to
balance the four factors under EPCA for setting st andards, and could choose technological feasibility and th e need of the nation to conserve energy as the paramount factors in standard setting. The agency’s assessment of the industry’s capacity and

3-54EPA CO 2 Standards

willingness to raise fuel economy and cut gr eenhouse gas emissions does not reflect
current trends. Consumer demand for fuel effi cient cars has increased significantly in light of gas price spikes in 2005 and 2008, and increased public awareness of global warming. Major automakers have been making announcements for over a year about ambitious plans to raise vehicle fuel ec onomy, roll out new efficiency technology, and move more rapidly than expected into hybri d, plug-in hybrid, and fully electric vehicles. Both agencies’ assumptions about technology adoption and willingness to increase fleet fuel economy seem unjustifiably constr ained by outdated as sumptions. [OAR-2009- 0472-7050.1, p.10]

In establishing this new program, the ag encies should develop a standard-setting methodology that satisfies each agency’s statutor y requirements, as well as the intent of both laws. EPCA aims to stabilize energy pr ices through conservati on efforts. It was passed to establish a national energy policy that protects consumers against future price shocks and puts the nation in a more competitive position globally by making the nation less sensitive to price volatility. This vision was undermined by inconsistency in standard setting, and when oil prices rose sharpl y in 2005 and 2008, consumers were subject to prices shocks similar to those experiencedin the 1970s. EPA has a responsibility to protect public health and welfare by setti ng standards under the CAA. The threat of global warming is clearer today than previous ly, and the agency’s authority to regulate greenhouse gas emissions to fulfill its mission of protecting public health and welfare has been affirmed. [OAR-2009-0472-7050.1, p.10]

Both agencies should start the standard se tting process by establishing oil savings and greenhouse gas reduction goals based on assessments of national needs. From these estimates, the agencies must then apply cons iderations appropriate to their respective statutes, including technologica l feasibility, economic consid erations, and the needs of the nation to conserve oil and reduce gree nhouse gas emissions. This would result in setting levels of stringency consistent w ith the needs of the nation that are the maximum feasible, as required by EPCA, and that are as technology-forcing as practicable, consistent with EPA’s charge to place public health and welfare above economic concerns. [OAR-2009-0472-7050.1, p.11]

American Council for an Energy Efficient Economy

Recommendations:

Establish in the final rule that light-duty vehicle standards in subsequent rules shall be set to achieve medium- and long-term emissi ons goals for the transportation sector
commensurate with the need for emissions reductions overall.

Ensure that required emissions levels are su fficiently stringent to ensure that, at a minimum, any incremental reductions with positive net benefits are implemented.

The stringency of the proposed rule is well below the maximum cost-effective level, as the agencies clearly demonstrate. Tabl e IV.F.2 (p.49700) shows that the proposed

3-55EPA Response to Comments

standards would save 62 billion gallons per year, while a more stri ngent standard that maximizes net benefit would save 90 billion ga llons, or almost 50 percent more fuel (and CO2 emissions). Choosing one level of standards over another that is superior on both environmental and economic grounds is a decisi on that calls for a clear explanation. The agencies’ rationale for doing so is not compelling, however.

In Section III.D., EPA compares the manuf acturers’ likely response to the proposed standards to what would be required to ach ieve a 4 percent per year reduction in CO2 (slightly less stringent than the standards) and to achieve a 6 per cent per year reduction (substantially more than the standards). EP A notes that, according to its model, the requisite application of adva nced technologies to achieve 6 percent reductions would increase fleetwide, necessitating for example an 8 percent increase in the application of start-stop technology. Furthermore, for BMW an d Daimler, for example, increases of up to 42 percent in hybrid production could be necessary to meet the standard. (p.49557) These observations do not support the view that a 6 percent per year rate is too ambitious. Moreover, the concern over BMW and Daimle r is reminiscent of NHTSA earlier, illadvised “least-capable manufacturer” approach(to nonattribute- base d standards), except
that EPA has cited manufacturers less likel y to elicit sympathy than those to which NHTSA applied its approach.

EPA goes on to state that as the annual per cent reduction increases fr om 4 to 6 percent, “[c]ompliance costs are entering the region of non-linearity. The $73 cost savings of the 4 percent per year standards re lative to the proposal represents $18 per g/mi CO2 increase. The $493 cost increase of the 6 percent per year standards relative to the proposal represents $25 per g/mi CO2 increase.” (p.49557 ) It is not clear why EPA regards this increase in cost-per-ton as dramatic and ex cessive. EPA also fails to discuss whether a CO2 reduction rate of 5 percent per year, for example, would be feasible. EPA proposes no objective measure of what is sufficientl y stringent. Indeed, NHTSA’s subsequent discussion of the various rates of improvement the agencies considered indicates that even a 6 percent rate of improvement is we ll below the optimal rate, even from a purely economic perspective, without prio ritization of environmental goals.

NHTSA presents stringency options in the form of annual percent increases in fuel economy, with the proposed sta ndards corresponding to a 4.3 percent pe r year increase. In IV.F., NHTSA argues that 5 percent w ould be too aggressive, because it would increases the per vehicle incremental cost by 30 percent while reducing fuel consumption by only 3 percent (p. 49704). This comparison in fact provides no basis for comparison between the proposed standard and a 5 per cent annual reduction, and certainly does not demonstrate that the higher ra te of reduction is excessively costly. If several very lowcost technologies exist to reduce fuel consumption, the next technologies on the cost curve might cost many times more per gall on saved while still being highly costeffective.

The ad hoc and narrow arguments advanced by th e agencies to show that standards more stringent than those proposed would not be reasonable are for the most part unconvincing, especially given that the proposed standards are far below the level that

3-56EPA CO 2 Standards

maximizes net benefits. The perilous condition of the domestic auto industry may in fact imply that the proposed standards are th e best choice for the current rulemaking. However, the reasons for this must be clearl y articulated and formulated in a way that
makes clear how “maximum feas ible” levels are to be determined in the future. The inadequate explanation for the stringency of the proposed rule could have negative implications for subsequent rulemakings.

The governing statutes grant the agencies subs tantial discretion in se tting stringency, and ACEEE does not support the application of a rigid economic test to determine the appropriate levels of the st andards. However, recommendi ng a standards even below the
maximum net benefit in economic terms calls for a special explanation. A standard that falls below the point on the technology cost curve where marginal costs equal marginal benefits would be widely acknowledged to fall short of the “max imum feasible” and “economically practicable” standard required under the CAFE statute. Under the Clean Air Act, for which economic considerations are secondary to environmental protection needs, the appropriate standard can only be more stringent. Maximum net benefits should
therefore be considered a lower boun d for stringency of the standards.

The final rule should set out the principles by which stringencies will be determined in future rulemakings in order to ensure that standards will continue to support expeditious reduction of fuel use and greenhouse emissions. The ability of the st andards to promote the development and deployment of new efficiency technologies is central to their role in national climate and energy security policy, so EPA and NHTSA should make clear how this aspect of the program will be preserved and strengthened over time.

Given that the purpose of the EPA rule is to help achieve the reductions in GHG emissions necessary to reach sustainable at mospheric concentrations of carbon, those emissions reduction goals should inform the setting of standards in a quantitative way. This general approach was introduced inEPA’s GHG NPRM in 2008 and begins with certain assumptions about the percent re duction in GHG emissions, relative to 2005 levels, required in milestone years out to 2050. A default assumption that sectors and
subsectors must reduce emissions in proportion to their contri bution to total emissions is appropriate, at least until the potential fo r some sectors to do more is verified.

In such an approach, aggressive measures will be needed for the transportation sector, going well beyond the standards proposed in the ru le, to achieve the sector’s share of the necessary reductions. Therefore, ACEEE belie ves that GHG reduction targets should be the principal determinant of the stringency of vehicle emissions rules in the future.

[ACEEE also submitted these comments as te stimony at the New York public hearing, See docket number EPA-HQ- OAR-2009-0472-4621, pp. 139, 144-146.]

Sierra Club

The proposed National Program combines the first national greenhouse gas standards for
vehicles under the Clean Ai r Act with energy saving Corporate Average Fuel Economy

3-57EPA Response to Comments

(CAFE) standards, all while ensuring the nation benefits from the precedent set by California’s Pavley standards. The propos ed National Program is expected reduce greenhouse gas emissions by 950 million metric tons, equivalent of 205 coal plants shutting for one year, and reduce oil consumption by 1.8 bil lion barrels, resulting in consumer savings at the pump of $193 billion. These standa rds must ensure the nation benefits from the precedent set by California’s Pavley standards to achieve a 30% reduction in greenhouse gas pollution from new ve hicles in 2016. A strong final rule is needed to deliver on President Obama’s promis e and to pull vehicle standards out of the 1970s and into the 21st century. [OAR-2009-0472-7278.1, p.2]

This NPRM includes many elements that are identified as transitional – as both agencies work to create a new National Program for greenhouse gas and fuel economy standards. While the 250 g/mi CO2e standard in the NPRM is significant, we urge that both agencies definitively end “tra nsitional” elements in 2016 and indicate an intent to launch a standard setting process for 2017 and beyond that will meet the urgent need of the United States to dramatically reduce gr eenhouse gas pollution and conserve oil and [OAR-2009-0472-7278.1, p.2] meet the growing demand of American consumers for vehicles that go farther on a gallon of gas. [OAR-2009-0472-7278.1, p.3]

[[These comments were submitted as testim ony at the Detroit public hearing. See docket number OAR-2009-0472-6185, pp. 30-31.]]

EPA and NHTSA should clarify the approach to setting standards. As we know, the proposed standards of 250 g/mi and 34.1 mpg are the result of an agreement; however, future rounds of standards will likely not be bound by a similar agreement and, in fact, both agencies should ensure that future st andards maximize the application of costeffective technologies to vehi cles and consumer savings at the pump. The Clean Air Act is a technology forcing statute, and we urge EPA to clearly no te the transitional aspect of
these standards in the final rule.

These standards will move us from one standard aimed at reducing oil consumption, to a broader National Program that also guarantees greenhouse gas emissions reductions. The proposed National Program sets the table for future standards that can finally break our dependence on oil and create subs tantially cleaner vehicles.

California Air Resources Board

First, the Final Rule needs to maintain the proposed standards’ stri ngency in each model year 2012 through 2016. It appears that a pr incipal industry trade group has proposed reducing the stringency of the proposed fu el economy standards for model year 2012- 1015, arguing that, as currently proposed the standards do not meet EISA’s requirement for the standards to increase “ratably.” See Alliance of Auto mobile Manufacturers (Alliance) Document ID EPA-HQ-OA R-2009-0472-6952.1. CARB strongly opposes the Alliance proposal.

3-58EPA CO 2 Standards

California committed to adopt the national program for model years 2012-2016 with the understanding that it would provide equivalent or be tter overall greenhouse gas
reductions nationwide than Ca lifornia’s own program coupled with its adopting sister states; the Alliance proposal threatens that equation. First, the proposed fuel economy and greenhouse gas requirements were designed to establish a nationa l program with a consistent and harmonized approach that would reduce greenhouse gas emissions and improve fuel economy from light-duty ve hicles. Because the Alliance is also recommending that EPA’s GHG standards be simultaneously stepped, the greenhouse gas reductions projected for the national program would be significantly reduced. Second, the proposed fuel economy and greenhouse gas requ irements were establ ished after a joint effort by both agencies to determine standard s that were technically feasible and costeffective in the timeframe proposed. We do not believe that a case has been made to refute the agencies’ analyses. These and other Alliance recommendations need careful review to ensure that they do not reduce the stringency and consequent cumulative greenhouse gas reductions California exp ected in committing to the National Program. [OAR-2009-0472-7189.1, p.2]

[CARB also submitted these comments as te stimony at the Los A ngeles public hearing. See docket number OAR-2009-0472-7283, pp. 21-27]

International Council on Clean Transportation

The technical analyses conducted by EPA and NHTSA are sound and demonstrate that the proposed standards are feasib le and the benefits of the rule far outweigh the costs. The analytical framework also provides a good base for further reductions in fuel consumption and greenhouse gas emissions beyond 2016.

US Steel Corporation

Consider the regulation target s for the year 2016 for both agen cies. The target for EPA is 250 g/mile CO2 fleet average, equivalent to 35.5 mpg with allowa ble air conditioning
and flex fuel credits. The NHTSA combined fl eet target is roughly equivalent to EPA’s standard and requires 34.1 mpg combined fl eet average, but without air conditioning credits. Should carmakers comply with thes e rules, the previous goal of Congress (2007 CAFE Law previously specifying 35 mpg by 202 0) will have been met four years ahead
of schedule. This acceleration places the car companies in a difficult position to satisfy the regulations by making major technical and manufacturing decisions in order to be compliant, some of which could have ne gative consequences. The National Program similarly compresses the time frame for steel suppliers and other ma terials suppliers to develop and produce those new materials, such as the required grades of advanced highstrength steels and ultra high-strength st eels, which will help build the required improvements into cars and trucks during this period.

The overly aggressive schedule proposed by this joint NPRM may cause car companies to select low density materials at a faster ra te than would be the case if a more extended time period were applied. The harm suffered by the steel industry, th e risk to national

3-59EPA Response to Comments

energy security through acceleration in the us e of high-energy materials for vehicle mass reduction, in addition to the harm to the e nvironment and the harm to the economy could be accelerated by this decision. The risk of selecting high energy use and high CO2
emissions materials to adhere to the st andard during the 2012-2016 time period would be significant. Our recommendation is to consider reducing the rate of improvement to the time frame originally defined by Congress (35 mpg by 2020) or to ensure that appropriate credits, such as those which may be associat ed with low energy, low emissions materials (such as steel) in the manufacturing of the vehicle be included in the CAFE/emissions formulae. In this way car companies will have additional time to work with suppliers and their own development teams to acquire the best technologies for the required improvements in fuel economy. [OAR-2009-0472-7197.1, p.7]

University of Pennsylvania Environmental Law Project

We agree with the EPA’s response under the Proposed Rule in setting strict minimum compliance levels for carbon dioxide (CO2) emissions. [OAR-2009-0472-7286.1, p. 11]

Sack, Emily

I urge you to find the strongest possible regu lations to protect, to begin to reduce the devastating impact that the po llution -- the pollutant s have had on our air and our water and our quality of life. [EPA-HQ-OAR-2009-0472-4621, p.157]

[See Docket Number EPA-HQ-OA R-2009-0472-4621, pp.154-157 for detailed comments]

EPA Response:

As discussed in the proposal, section 202(a )(1) provides EPA broad discretion in setting
emissions standards for new motor vehi cles. 74 FR 49454, 49464-5 (September 28, 2009).

Section 202 (a) (1) of the CleanAir Act (CAA) states that “the Administrator shall by regulation prescribe (and from time to time re vise)...standards applicable to the emission of any air pollutant from any class or cla sses of new motor vehicles ..., which in his judgment cause, or contribute to, air polluti on which may reasonably be anticipated to endanger public health or welfare.” If EP A makes the appropriate endangerment and cause or contribute findings, then section 202(a) authorizes EPA to issue standards applicable to emissions of those pollutants.

Any standards under CAA section 202(a)(1) “shall be applicable to such vehicles ... for
their useful life.” Emission standards set by the EPA under CAA section 202(a)(1) are technology-based, as the levels chosen must be premised on a finding of technological feasibility. Thus, standards promulgated unde r CAA section 202(a) are to take effect only “after providing such peri od as the Administrator finds necessary to permit the development and application of the requisite technology, giving appropr iate consideration

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to the cost of compliance within su ch period” (section 202 (a)(2); see also NRDC v. EPA

, 655 F. 2d 318, 322 (D.C. Cir. 1981)). EPA is afforded considerable discretion under section 202(a) when assessing issu es of technical feasibility and availability of lead time to implement new technology. Such determinations are “subject to the restraints of reasonableness”, which “does not open th e door to ‘crystal ball’ inquiry.” NRDC , 655 F. 2d at 328, quoting International Harvester Co. v. Ruckelshaus , 478 F. 2d 615, 629 (D.C. Cir. 1973). Also see NRDC, 655 F. 2d at 333- 34. In developing such technology-based standards, EPA has the discretion to cons ider different standards for appropriate groupings of vehicles (“class or classes of new moto r vehicles”), or a single standard for a larger grouping of motor ve hicles (NRDC, 655 F. 2d at 338).

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

In addition, EPA has clear authority to set standards under CAA section 202(a) that are technology forcing when EPA considers that to be appropriate, but is not required to do so (as compared to standards set under provi sions such as secti on 202(a)(3) and section 213(a)(3)). EPA has interpreted a simila r statutory provision, CAA section 231, as
follows:

While the statutory language of section 231 is not identical to other provisions in
title II of the CAA that direct EPA to establish technology- based standards for various types of engines, EPA interpre ts its authority under section 231 to be somewhat similar to those provisions thatrequire us to id entify a reasonable balance of specified emissions reduction, cost, safety, noise, and other factors. See, e.g., Husqvarna AB v. EPA

, 254 F.3d 195 (DC Cir. 2001) (upholding EPA’s promulgation of technology-based standa rds for small non-road engines under section 213(a)(3) of the C AA). However, EPA is not compelled under section 231 to obtain the ‘‘greatest degree of emission reduction achievable’’ as per sections 213 and 202 of the CAA, and so EPA does notinterpret the Act as requiring the agency to give subordinate status to factors such as cost, safety, and noise in determining what standards are reasonable for aircraft engines. Rather, EPA has greater flexibility under section 231 in determining what standard is most reasonable for aircraft engines, and is not required to achieve a ‘‘technology forcing’’ result. 2

2 70 FR 69664, 69676, November 17, 2005.

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This interpretation was upheld as reasonable in NACAA v. EPA , (489 F.3d 1221, 1230 (D.C. Cir. 2007)). CAA section 202(a) does no t specify the degree of weight to apply to each factor, and EPA accordingly has discre tion in choosing an appropriate balance among factors. See Sierra Club v. EPA , 325 F.3d 374, 378 (D.C. Cir. 2003) (even where a provision is technology-for cing, the provision “does not re solve how the Administrator should weigh all [the statutory] factors in the process of finding th e 'greatest emission reduction achievable’”). Also see Husqvarna AB v. EPA , 254 F. 3d 195, 200 (D.C. Cir. 2001) (great discretion to balance statutory factors in cons idering level of technologybased standard, and statutory requirement “to [give appropriate] consideration to the cost of applying ... technology” does not mandate a sp ecific method of cost analysis); see also
Hercules Inc. v. EPA , 598 F. 2d 91, 106 (D.C. Cir. 1978) (“In reviewing a numerical standard we must ask whether the agency’s num bers are within a zone of reasonableness, not whether its numbers are precisely right”); Permian Basin Area Rate Cases , 390 U.S. 747, 797 (1968) (same); Federal Power Commission v. Conway Corp. , 426 U.S. 271, 278 (1976) (same); Exxon Mobil Gas Marketing Co. v. FERC , 297 F. 3d 1071, 1084 (D.C. Cir. 2002) (same).

As described above, EPA has br oad discretion in determining the appropriate standards to adopt under section 202(a)(1), based on a reas onable consideration and balancing of
various factors relevant under that provision. As discussed in the preamble, including section III.D., EPA did consider and balance all of the factors discussed by commenters – the GHG reductions achieved by the various pr oposed and alterna tive standards, the technology to achieve such standards, lead ti me, cost of achieving th e standards, as well as other factors such as safety impacts. EPA explained that the final standards will achieve very large and significant reductions in GHGs, as well as very significant fuel savings. EPA identified a technology pa thway by which manufacturers could achieve these reductions, modeling in detail each manuf acturer's fleet of cars and trucks. The technology pathway calls for the widespread introduction across the fleet of several different kinds of technology that are curren tly available but with much more limited usage, as well as an expectation of a limited use of some more costly technology, such as HEVs. For the near term model years at issu e in this rulemaking, EP A expects that there will only be a very limited use of advanced technologies such as EVs and PHEVs. EPA
evaluated the cost of this spread in technology and found it reasonable both from the perspective of costs per vehicl e as well as the total benefits of the rule far outweighing
the total costs. Lead time is a critical c onsideration and EPA determined that there is adequate lead time to employ the financial, engineering, and other resources needed to achieve the standards, recogni zing that a significant portion of these human and capital resources would need to be expended during the next few years. Lead time is somewhat constrained for these model years, as it is now 2010 and MY 2012 is only a number of months away. The farthest model year, 2016, also is not many years from now, given the time needed for redesigning cars and trucks for new production. EPA also took into account that the automobile manufacturing industry has been and continues to face serious economic and other constraints, st emming from the recent economic problems in the U.S. and around the world. This is an impor tant context to EPA’s evaluations of cost
and lead time considerations.

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The final standards will achieve very signi ficant reductions in GHG emissions and fuel savings, the technology to achieve these redu ctions is identified and commercially available, and the costs are reasonable. EPA also recognizes that the standards will be difficult for the manufacturers to achieve and present major hurdles for them to overcome. While the technology is genera lly well understood and can be implemented over these model years, the lead time to do so is relatively short and the capital and human resources that must be employed are larg e, especially in the next few years, and
must occur in the context of current seri ous economic strain on this industry. Considering all of these factors, EPA determin ed that the final standards are a reasonable and appropriate balance of the relevant factors under se ction 202(a)(1). US Steel commented that the rate of improve ment associated with the final standards could force the use of low density, high ener gy (required for producti on) materials before the steel industry had time to ramp up th e production capacity of high strength, low energy (required in production) steel. We do not agree that the rate at which the final standards require improvement will result in the permanent reduction in the use of high strength steel. First, the overall weight reduc tion projected for the final standards is only 4%. As discussed in the Joint TSD, severa l manufacturers have already announced plans to achieve weight reductions approaching th is level. Second, several manufacturers already utilize high strength steel compone nts, indicating some production capacity and general engineering awareness of its benefits. Third, give n this awareness, we do not believe that it is likely that manufacturers w ould lock themselves into vehicle designs which precluded future use of the benefits of high strengthsteel, even if they should
decide to use another materi al in the very near term due to capacity constraints.

US Steel specifically suggested that we slow the rate of improvement in the fuel economy
and CO2 standards to that desc ribed in EISA. Again, we do notagree that this would be acceptable. First, the 35 mpg fleet-wide fuel economy mentioned in EISA is a minimum requirement, not a mandated target. Sec ond, with the exception of several smaller manufacturers, the final standards are not projected to re quire the substantial use of hybrid or diesel technology. To promulgate more relaxed standards would reduce the use
of much more conventional technology. If manufacturers are con cerned about supply of high strength steel, which is US Steel’s ma in concern, we believe that manufacturers have several options available to compensa te, one being increased use of hybrid and diesel technology in market segments where they have experience with these technologies and where consumer acceptance has been demonstrated.

EPA also considered standards that were le ss stringent and more stringent than those adopted. EPA took a similar approach in ev aluating these alternative standards. EPA considered and balanced all of the statutorilyrelevant factors, co mparing and contrasting these to the final standards. For example, EP A rejected an alternative of more stringent
standards that would achieve anaverage 6% per year increase . EPA’s rejection of the 6% alternative was based largely on concerns over the adequacy of the lead time in a context of a significant increase in technology and cost s, and a significant incr ease in the risk of non-compliance by manufacturers. These real world concerns indicate that the 6% per year alternative is not an appropriate standard for the MY 2012-2016 time frame, even

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though it would by definition achie ve greater GHG reductions and fuel savings than the
final standards.

With respect to the 6 percent pe r year standards, the levels of requisite co ntrol technology increased substantially relative to those under the final standards, as would be expected. Industry-wide, the largest increase was a 25 per cent increase in the application of startstop technology and 13-17 percent increases in the use of gasoline direct injection engines, turbo charging and dual clutch transmissions. Our projections for BMW, Porsche, Tata and Volkswagen continue to show they are unable to comply with the CO 2 standards in 2016, so our projections for thes e manufacturers do not differ relative to the final standards, though the amount of short- fall for each firm increases significantly, by an additional 20 g/mi CO 2 per firm. However, Ford and Mi tsubishi join this list. Five manufacturers are projected to need to incr ease their use of start-stop technology by at least 30 percent.

The 6% per year alternative represents a si gnificant fleetwide increase in both the technology required and the overall costs compared to the final standards. In absolute percent increases in the technology penetrati on, compared to the final standards the 6% per year alternative requires for the industry as a whole: an 18% increase in GDI fuel systems, an 11% increase in turbo-downsize systems, a 6% increase in dual-clutch automated manual transmissions (DCT), and a 9% increase in start-stop systems. For a
number of manufacturers the expected increase in t echnology is greater, as noted in the paragraph above. For the industry as a whole, the per-vehicle cost increase for the 6% per year alternative is nearly $500 greater than the per vehicle cost of the final standard. On average this is a 50% increase in costs comp ared to the final standards. At the same time, CO 2 emissions would be redu ced by about 8%, compared to the 250 g/mi target level. These incremental costs are out of pr oportion to those of the final standards.

As noted in the preamble and earlier in this response, EPA’s OMEGA model predicts that for model year 2016, Ford, Mitsubishi, Merc edes, BMW, Volkswagen, Jaguar-Landover,
and Porsche do not meet their target under the 6 percent per y ear scenario. In addition, Chrysler, General Motors, Suzuki and Nissan all are within 2 grams/mi CO 2 of maximizing the applicable technology allo wed under EPA’s OMEGA model – that is, these companies have almost no head-room for compliance. In total, these 11 companies represent more than 58 percent of total 2016 projected U.S. light -duty vehicle sales. This provides a strong indication that the 6 percent per year standa rd is much more stringent than the final standards, and presents a signi ficant risk of non-compliance for many firms, including four of the seven largest firms by U.S. sales.

These technology and cost increases are si gnificant, given the amount of lead-time between now and model years 2012-2016. In or der to achieve the levels of technology penetration for the final standards, the indus try needs to invest significant capital and product development resources right away, in particular for the 2012 and 2013 model year, which is only 2-3 years from now. For the 2014-2016 MY time frames, significant product development and capital investments will need to occur over the next 2-3 years in order to be ready for launching these new pr oducts for those model years. Thus, a major

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part of the required capital and resource inve stment will need to occur now and over the next few years, under the final standards. EPA believes that the final rule (a target of 250 gram/mile in MY 2016) already requires signi ficant investment and product development costs for the industry, focused on the next few years.

It is important to note, as discussed in the preamble, as well as in the Joint Technical Support Document and the EPA Regulatory Impact Analysis document, the average model year 2016 per-vehicle cost increase of roughly $950 includes an estimate of both the increase in capital investments by the auto companies and the suppliers as well as the increase in product development costs. These co sts can be significant, especially as they must occur over the next 2-3 years. Both the domestic and transplant auto firms, as well as the domestic and world-wide automotive supp lier base, is experiencing one of the most difficult markets in the U.S. and internationally that has been seen in the past 30 years. One major impact of the global downturn in th e automotive industry and certainly in the U.S. is the significant reduction in product de velopment engineers and staffs, as well as a tightening of the credit markets which allow auto firms and suppliers to make the nearterm capital investments nece ssary to bring new technology into production. The 6% per year alternative standard w ould impose significantly increa sed pressure on capital and other resources, indicating that it is too stringent for this time frame, given both the relatively limited amount of lead-time between now and model years 2012-2016, the
need for much of these resources over the next few years, as well as the current financial
and related circumstances of the automotive i ndustry. EPA is not concluding that the 6% per year alternative standards are technologically infeas ible, but EPA believes such
standards for this time frame would be overl y stringent given the significant strain it would place on the resources of the industry und er current conditions. EPA believes this degree of stringency is not warranted at this time. Therefore, EPA does not believe the 6% per year alternative would be an appropriate balance of various relevant factors for model years 2012-1016.

There is particular sensitivity to predi cating these standards on more aggressive penetration of strong hybrid technologies. The more stringent al ternatives are all projected to necessitate more extensive use of hybrid t echnologies. Several hybrid technologies have already been commercially demonstrated and their use could clearly be expanded. (Several manufacturers may even require extensive use of hybrid technology
to meet the final standards due to certain char acteristics of their vehicles which lead to unusually high fuel consumption and CO2 emi ssions.) However, while a couple of
manufacturers have extensive experience with high volume hybrid production and use in smaller cars, some large volume manufacturers have minimal experience. No manufacturer has extensive experience across all of the market segments believed to be suitable for hybridization. Current worl d-wide production capacity for hybrid components is relatively small. Thus, the application of hybrid technology to a significant fraction of U.S. sales in the 2012-2016 time fram e would require extensive new resources at every level: design, co mponent production, vehicle integration, and vehicle production. In addition, since the el ectric components and batteries in a fully optimized hybrid design (capable of achievi ng the CO2 emission reduc tions projected in the Joint TSD) usually require significant ch anges to the vehicle design, hybrids will

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likely require separate safety assessments, in creasing the need for e ngineering and testing resources during a time of economic challenge.

Moreover, one of the key components of the hybrid technology is the battery or other type of device to store energy and battery te chnology is developing rapidly. Establishing MY 2012-2016 standards which necessitate extensive use of hybrid technology each model year would 1) require dramatic capital investment in plants needed to produce the hybrid components, and 2) would commit manufacturers to large investments in specific battery technologies which may notbe the technology of choice in just a few years. We believe that it is much more prudent to give this particular tec hnology a few more years of development before basing standards on its wi despread use. We believe that the final standards are sufficiently stri ngent that hybrid technology will still be used on significant numbers of vehicles and encourage the c ontinued development of this technology.

All of these factors apply even more strongl y to the more advanced plug-in hybrid and fully electric vehicle technologi es. These vehicles require much larger battery capacity and are much more likely to require use of the new lithium-based materials. Significant application of these two tec hnologies would not only requir e substantial increases in lithium battery production, but would require entirely new mining production capacity as
well.

In short, EPA believes that it has made an informed and reasoned choice in rejecting the 6% alternative, and does not accept the commen ter’s characterization that the basis for the choice is unsubstantiated or otherwise arbitrary.

Certain commenters rejected EPA’s approach to considering and ba lancing the relevant factors under section 202( a)(1). They argued that this approach was ad hoc and narrow, and that EPA should announce and apply a differentapproach to standard setting for this rulemaking. In their view, EPA should first determine a specific goal of GHG reductions and oil savings, based on an a ssessment of national needs, and then apply considerations of technological feasibility and cost, in orde r to be as technology forcing as possible or practicable. One suggestion wa s to have a quantitative goal – identify the country's goal for reducing GHGs and then assign a proportionate share to the transportation sector as a default position. Commenters also sugge sted that EPA should assign more priority to achieving an envi ronmental goal and thereby prioritizing public health and welfare, placing that above econom ic or other consider ations. Commenters suggested this was required under both “the agency’s ... resp onsibility to set protective standards consistent with its statutory ma ndate” (Public Citizen) and with the CAA’s mandate to “be as technology-forcing as possibl e” (Public Citizen; see also Sierra Club). Other commenters suggested th at the decision making criteri a should call for a standard no less stringent than one that maximizes net be nefits, or that this should be a presumed
minimum.

The comments appear to mischaracterize C AA section 202 (a) (1), and the discretion Congress provided to EPA under that provisi on. Commenters appear to read this provision as a mandate from Congress that EPA place the greatest emphasis on achieving

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a desired environmental goal, with secondary emphasis on other factors such as economic
considerations or considerati ons of lead time and technolog ical feasibility. However, Congress clearly provided very broad discreti on to EPA and did not direct its discretion in the ways suggested. For example, sect ion 202(a) is not a provision where reducing risk is the only or the highest priorityassigned by Congress. Compare, e.g., CAA sections 109(b) and 112(f)(2). It is also not a provision where Congress mandated a certain minimum degree of technology or emissions reduction. See CAA section 112(d)(3). It is not a provision where C ongress directed EPA to be technology forcing and achieve the greatest achie vable reductions from technolo gy that will be available in the future. See CAA sections 202(a)(3) a nd 213(a)(3). Instead, Congress referred to
consideration of available tec hnology, its effectiveness and cost, the lead time necessary for compliance. See generally 74 FR at 49464-65. Although section 202 (a) (1) standards may be technology-forcing, they are not required to be. 74 FR at 49464-65. As discussed above with respect to s ection 231(a), CAA section 202(a)(1) does not specify the degree of weight to apply to eachfactor, and EPA accordingly has discretion in choosing an appropriate balance among the rele vant factors. Thus EPA rejects that the approach taken in this rule of considering and balancing the various relevant factors is inconsistent with the discretion provide d by Congress under CAA section 202(a)(1).

EPA also disagrees that a more determinativ e or approach to sta ndard setting or more specific or objective decision making criteria are either required or called for in this rulemaking. For example, EPA does not believ e it is appropriate fo r this rulemaking to try and determine a free standing national goal for reducing GHGs and saving oil, and either assigning a specific share to these light -duty sources or using the goal as a measure of some sorts for standard setting. In the re latively short timeframe for this rulemaking, it would be unrealistic to try and develop sucha goal, given the great complexity and national input that this would involve. In a ddition, it is not at all clear that for this specific rulemaking that such a goal would be of any more use than a more general and qualitative goal of achieving significant reductions, given the recognized need for significant reductions and taking into account the limited scope of the near-term model years covered by this rulemaking. In the c ontext of this short term rulemaking, covering just the next handful of model years, with limited lead time to implement changes in technology, EPA does not believe that a more specific and quantitative goal of longer
term GHG reductions for the nation and this sector would provide any better guidance to the agency than the more qualitative but no less important goal EPA has employed - achieving significant reductions by moving the i ndustry to the point wh ere available nearterm technology is broadly employed across th e fleet, over the next few model years, taking into consideration the lead time needs of the indus try and other factors.

EPA also disagrees that this amounts to a fa ilure to place the proper priority on achieving the health and welfare prot ection called for by the CAA. CAA Section 202(a)(1) provides the guide to Congress’ intent on this issue, a nd EPA has employed the broad discretion provided by that provis ion to aim for and achieve very significant reductions in GHGs, after taking careful consideration of th e factors relevant unde r that provision, as described above. This approach is fully c onsistent with CAA s ection 202(a)(1), and EPA’s consideration and balancing of th e factors in this rulemaking gives full

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consideration of the need to achieve signifi cant GHG reductions to help reduce the risk to public health and welfare from global climate change.

EPA also disagrees that it s hould use specific criteria for considering cost, using the
maximization of net benefits as a minimum. As explained above and in the preamble, EPA has very good reasons for rejecting the 6% alternative, and that alternative is still significantly below the level that NHTSA ha s estimated would maximize net benefits. The alternative standards evaluated by NHT SA as providing the maximum net benefits (given all of the market, technological, economic, and other input s to the agencies’ analyses) are even more string ent and less supportable than th e 6% alternative rejected by EPA. While the relationship of marginal cost s to marginal benefits is certainly a factor for EPA to consider, and EPA has considered it, the currently-estim ated relationship of marginal costs to benefits does not, by itself, adequately determine the appropriate
balance of the several factors EPA must cons ider, such as consideration of lead time, overall cost, and technological f easibility. It also assumes th at all costs an d befits have been fully and accurately identified, and that is certainly not the case. Even so, per NHTSA’s analysis of this scenario, the in cremental cost of th e maximum net benefit
scenario exceeds that of the final st andards by $700 per ca r for only a 2.5 mpg improvement and $1100 per truck for a two mpg improvement. These incremental costs are far out of proportion to those of the fina l standards. Numerous manufacturers were projected to be required to exceed the 15% cap on hybridization, particularly for their
truck lines. EPA believes it is better in this rulemaking to consider this factor as one of several factors, but not to c onsider it as a single or pre dominant criterion for setting the
standards in this rulemaki ng under CAA section 202(a)(1).

As discussed above, EPA is not required under CAA section 202(a)(1) to set standards that are technology forcing, as under CAA s ection 202(a)(3) or s ection 213(a)(3). However, the final standards are readily justifiable under CAA provisions which are technology-forcing (allowing c onsiderations of future advances in emission control capability as well as those already in existe nce and application). Neither CAA section 202 (a) (1) nor provisions which are explic itly technology-forcing (e.g. section CAA 202 (a)(3) requiring “the greatestdegree of emission reducti on achievable”) specify the weight to accord each relevant decision fact or, leaving EPA with great discretion in determining an appropriate balance. See Sierra Club v. EPA , 325 F. 3d 374, 378 (D.C. Cir. 2003). And although the commenters are correct that the statute’s environmental goals are a dominant consideration in weighing the relevant factors, Husqvarna AB v.

EPA , 254 F. 3d 195, 200 (D.C. Cir. 2001), EPA re tains great discre tion to weigh the relevant factors so long as its resolution is w ithin a zone of reasonable values. See, e.g.
Hercules Inc. v. EPA , 598 F. 2d 91, 106 (D.C. Cir. 1978). As discussed in detail in section III.D. of the preamble to the final ru le (and in particular, in sections III.D.6 and 7), the final standards are proj ected to require very significant penetration of technologies throughout the fleet and already raise challenging issues of sufficient lead time at the selected level of stringency. As further disc ussed in the preamble and in later responses in this comment response section, EPA reasona bly considers more stringent standards to be inappropriate

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Several commenters were also concerned th at the approach taken in this rulemaking
would limit EPA’s discretion in future rule makings for this or other sectors, and recommended that EPA announce its approach for future rulemakings. As described above, EPA does not believe it is appropriate to identify a more precise or quantitative approach to standard setting for this rulema king. These same reasons lead EPA to not announce such an approach for a future rulemaking concerning later light-duty model years. The discussion above and in the prea mble makes it clear that the specific facts before the agency are critical in determining the appropria te balance of the relevant factors. It is useful to preserve the di scretion to address the issues that must be considered in standard setting under section 202(a)(1) without a pred etermined approach. That preserves EPA’s discretion to take into account the detail ed circumstances before it. For example, if longer lead time is involved in a future rulemaking this could lead to consideration of greater cha nges in technology, leading to greater reductions. Section 201 (a) (1) provides EPA great flexibility to ta ilor standards to circumstances, and EPA sees no advantage in a priori limiting that desirable degr ee of regulatory discretion.

Several commenters suggest that the proposed standards were insufficiently stringent due to the public's demonstrated shift towards smaller vehicles and away from trucks. However, as fuel prices have stabilized atlevels below $3 per ga llon, truck sales have rebounded to some extent and sales of hybrids ha ve fallen as a percentage of overall sales from their highs in 2008. Thus, it is not prude nt to base long term purchasing trends on potentially short term market perturbati ons. See 74 FR at 14317-318 (March 30, 2009) (inappropriate to estimate future price of petroleum based on then-current high market fluctuations). We believe that the technol ogy needed to meet the final standards will provide fuel savings which more than pay fo r itself over the life of the vehicle under essentially any realistic future fuel price sc enario. Again, we also believe that the technological improvements which will occur over the 2012-2016 time period will provide a solid foundation for further improvements in the future.

One commenter suggested that standards which reflected 5% per year reductions in CO2 emissions should have been analyzed and pot entially selected. Of course, numerous
additional alternative standards can be identi fied in addition to those analyzed. We believe that standards beyond those bei ng promulgated would have pushed most manufacturers to greater hybrid use. For example, per NHTSA’s analysis of this scenario, the incremental cost of the 5% per year reduction scenario exceeds that of the final standards by $200 per car for only a 1.1 mpg improvement and $400 per truck for a 0.8 mpg improvement. These incremental costs are much greater than those of the final standards. From this NHTSA analysis, it app ears that the standards being promulgated in this rule require the use of nearly all of the non-hybr id and non-diesel technology projected to be available in this timeframe for many of the large vol ume manufacturers. While hybrid and diesel t echnologies are technically feasible and have been commercialized in several applications, the investment costs for these technologies far
exceeds those of the other t echnologies. The technology projected to be required to enable compliance with the final standards already requires significant new investment for dual clutch transmissions and start stop sy stems. Given the current economic climate, we are concerned that manufacturers and majo r suppliers may not have sufficient capital

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to build the capacity for large volumes of el ectric motors, batteries, transmission control systems, diesel engines, nor the engineeri ng resources to begin designing these systems essentially immediately. We believe that the substantive addition of these major technologies is best left to the post-2016 time period.

We appreciate the comments mentioning conc ern about the need to make near term decisions about the use of weight saving materi als. However, the projected reductions in vehicle mass projected for the final standards are relatively sma ll (e.g., 4% on average, although some vehicles are projected to apply more mass reduction and some less).
While manufacturers are free to choose from a variety of technology with which to meet the final standards, we believe that such weight reductions can be achieved by choosing methods which will prove to be beneficial beyond 2016.

3.3.1 2016 Standard and selection of proposed standards versus 4% per year and 6% per year alternative standards

Organization: Center for Biological Diversity Toyota Motor North America New York State Department of Transportation (NYSDOT)
Consumer Federation of America

Comment:

Center for Biological Diversity

III. The Proposed Rule Sets Impermissi bly Low Mileage and GHG Emission Standards By Arbitrarily and Capriciously Undervaluing the Benefits and Overvaluing the Costs of More Stringent Standards and Failing to Adhere to the Ov erriding Goal of Conserving Energy

When Congress enacted EPCA, it specified its goals: to decrease the nation’s dependence on foreign oil imports, to enhance national secur ity and to achieve the efficient utilization of scarce resources. Center for Biological Diversity, 508 F.3d at 514. To achieve these goals, EPCA expressly demands that NHTSA set the maximum feasible fuel economy standards. 49 U.S.C. § 32902(a). In doi ng so, NHTSA must we igh four factors: technological feasibility, economic practicab ility, the effect of other motor vehicle standards on fuel economy, and the need of the United States to conserve energy. 49 U.S.C. § 32902(f). In balancing these factors, NHTSA “cannot set fuel economy
standards that are c ontrary to Congress’s purpose in enacting the EPCA – energy conservation,” it cannot act arbitrarily and capriciously; it cannot advance conclusions unsupported by the evidence; if it conducts cost -benefit analyses, it may not assign values
of zero to benefits that can be ascertained within a range; and it cannot bias its costbenefit analysis. Center for Biological Diversity, 508 F.3d at 531, 534. As set forth above, Section 202(a) of the Clean Air Act re quires a similar analys is, setting control
standards no later than th e availability of control technology allows, while giving appropriate consideration to compliance cost s. The Proposed Rule fails to meet the

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requirements of the law because none of th e relevant factors support its conclusions. [OAR-2009-0472-7265.1, p. 5]

A. Technological Feasibility Supports More Stringent Standards

The Proposed Rule admits that “all” of the technology to improve fuel efficiency is commercially available today:

NHTSA’s and EPA’s technology assessment i ndicates there is a wide range of technologies available for manu facturers to consider in upgrading vehicles to reduce GHG emissions and improve fuel economy . . . All of these technologies are already available today, and EPA’s and NHTSA’s asse ssment is that manufacturers would be able to meet the proposed standards through mo re widespread use of these technologies across the fleet. 74 Fed. Reg. 49470 (emphasis added).

This is a stunning conclusion, as it means that if deployed, technology already in use today could allow the U.S. li ght-duty vehicle fleet to meet the Agencies’ 2016 mileage standard of 34.1 miles per gallon and gree nhouse gas emission standards of 250 grams per mile in 2009, seven years earlier than here projected. Plainly, one of the four factors
NHTSA must consider – technol ogical feasibili ty – points in only one direction: much more stringent standards. Indeed, the Ag encies could not defend any claim that technological constraints prevent the achieveme nt of much higher standards. This is so because the average fuel economy of the ve hicle fleets presently on the roads in the European Union (at 41.8 mpg in 2008) and Japan (at 40.6 in 2007) already far exceed the standards the Agencies are proposing for 2016.6 China’s fleet, at 32.9 mpg in 2008, and South Korea’s, at 31.0 mpg in 2008, are curren tly not far behind the U.S. proposal for 2016. The following graph quickly illust rates the point: [See OAR-2009-0472-7265.1, p. 7 for the graph] [OAR-2009-0472-7 265.1, pp. 5-7] [See OAR-2009-0472-7265.1, pp. 5-
8 for a detailed discussion of technological feasibility.]

D. The Need of the United States to Cons erve Energy Supports More Stringent Standards

It should go without saying that the last of the factors to be considered under EPCA, the United States’ need to conserve energy, s upports setting more stringent mileage and tailpipe GHG emission standards. “Motor ve hicles are the second largest greenhouse gasemitting sector in the U.S., after electricitygeneration, and accounted for 24 percent of total U.S. GHG emissions in 2006.” Propos ed Rule, 74 Fed. Reg. 49632. The light duty vehicles that are the subject of this rulemaking account fo r fully 40% of all U.S. oil consumption. Id., 74 Fed. Reg. 49459. Increasing m ileage standards for this vehicle fleet is the single most effective and quickest ava ilable step the U.S. cantake to conserve energy and to reduce the U.S. dependence on fo reign oil, and also has an immediate and highly significant effect on total U.S. GHG emissions. Indeed, it would be difficult to overemphasize the critical impact on vital nationa l interests that could be achieved if the Proposed Rule would simply set its 2016 st andards at the fuel efficiency and GHG emission reduction levels the European Union or Japan implement today.[OAR-2009-

3-71EPA Response to Comments

0472-7265.1, pp. 19-20] [See OAR-2009-0472-7265.1, pp. 20-25 for an extensive discussion of this issue.]

Toyota Motor North America

In general, the overall level of the standards in 2016 model year is consistent with Toyota's expectation, the agreements signed last May, and the join t Notice of Intent (NOI) published last spring. Additional comments and responses to specific questions posed by the agencies are covered below. Wher e appropriate, we have identified to which agency's portion of the joint proposal our comments are directed. [OAR-2009-0472-7291, p.6]

In general, the proposed standards in 2016 mode l year (a new vehicle fleet-wide level of 250 grams of C02 per mile - equivalent to 35.5 mile per gallon) are consistent with Toyota's expectation, the agreements signed last May, and the join t Notice of Intent (NOI) published last spring. While meeting thes e levels will be a serious challenge for our engineers and product planners, we rema in committed to the agreement and will make every effort to meet the challenge. [OAR-2009-0472-7291, p.7]

New York State Department of Transportation

The baseline condition used in the analysis of alternatives for the previous CAFE proposals was based on manufacturers' confid ential plans for each model year, whereas the baseline in this proposal is based on eachmanufacturer's actual MY 2008 fleet. We agree that this approach will result in more complete market data and is more transparent than relying on manufacturers' c onfidential plans. It is also illustrative. While the results vary somewhat among manufacturers, the current MY 2011 baseline fuel economy is slightly better than the baseline fuel economy that was assumed in the MY 2011 final
rule. This fact indicates that the auto indus try as a whole is capable of achieving progress in improving fuel economy more rapidly than the rate that would be required by the proposed rule. [OAR-2009-0472-7531.1, p.2]

Since the actual MY 2011 baseline is more fu el efficient than the previously assumed baseline, it is difficult to understand why th e fuel economy projections for many of the alternatives that were considered in developi ng this proposed rule ar e less stringent than
similar alternatives that were evalua ted in the development of the MY 2011-2015 standards. For example, the 'Total Costs = Total Benefits (TCTB)' alternative that was evaluated in the previous CA FE proposal was projected to result in a required fuel economy of 43.3 mpg for MY 2015 passenger ve hicles and 33.1 mpg for MY 2015 light trucks. Conversely, the TCTB a lternative in today's proposal is projected to only achieve 40.8 mpg for MY 2015 passenger vehicles and 30.9 mpg for MY 2015 light trucks. We request that NHTSA and EPA provi de an explanation as to w hy this 'backsliding' of the
effectiveness of similar a lternatives has occurred between the 2008 and 2009 proposals. [OAR-2009-0472-7531.1, p.2]

Consumer Federation of America

3-72EPA CO 2 Standards

[These comments were submitted as testim ony at the Detroit public hearing. See docket number OAR-2009-0472-6185, pp. 106-107.]

In particular, EPA and NHTSA should balance the three goals in the underlying statutes of technical feasibility, econom ic practicability, and the need to conserve energy, and the statutes really are in agreement here, by setti ng the standard at the mid point of the range
between maximum economic benefit and maxi mum practicable environmental benefit.

EPA Response:

The Center for Biological Diversity states that the agencies arbitrarily “do not analyze the costs and benefits of requiring manufacturer s to abandon the [5-year] redesign cycle in favor of much quicker and more nimble te chnology implementation” (comment p. 14). They argue further that “strict adherence to th is [5-year] cycle is baked into each analysis the Agencies present”, and that this analysis is therefore arbitrary.

The Center’s reference to “much quicker and more nimble technology implementation” glosses over many critical c onsiderations. Manufacturers adding substantial amounts of new technology to an existing vehicle woul d need to go through a redesign of that vehicle, in the sense that all of the step s undertaken during the st andard redesign cycle
would be needed to be undertaken earlier. For example, manufact urers would have to
assure that the new technol ogy features are properly ca librated with other vehicle systems, that all safety standards are satis fied, that emission standards can be met, etc

. Vehicle platforms may need to be modified, as well. The up shot is that manufacturers cannot bypass a redesign process as the Center assumes. They essentially have to redesign in a more rapid timef rame – i.e. to accelerate the redesign cycle process.

This is not a mere semantic distinction. As just explained, all of the collateral design steps that go with redesign would need to be undertaken. The next paragraph notes the resource implications involved in doing so. Manufacturers could avoid the most drastic of these implications by addi ng less technology, but this woul d defeat the purpose of the rule to force more widespread penetr ation of the more significant GHG control technologies and not to forego ultimate feasib le and cost-effective emission reductions in favor of quicker implementation of less technology. (EPA already assumes that the most easily applied technology can be applied in the 2012 MY to all vehicles.)

If full scale redesigns are attempted earlier, then manufacturers would have to ramp up resources drastically in order to do so. As a simple example, if a redesign cycle is shortened from five years to four, 25% more engineers would be required. Furthermore, redesigns require a significant outlay of cap ital from the manufacturer. This includes research and development, material and e quipment purchasing, overhead, benefits, etc. These costs are significant and are included in the cost estimates for the technologies in this rule. Because of the manpower and financial capital constraint s, it would only be possible to redesign all the vehicles across a manufacturer’s line si multaneously if the
manufacturer has access to tremendous amount s of ready capital and an unrealistically large engineering staff. However no majo r automotive firm in the world has the

3-73EPA Response to Comments

capability to undertake such an effort, and it is unlikely that the supplier basis could support such an effort if it was required by all major automotive firms. The commenter provides no information to challenge this conclusion. 3 Even if this unlikely condition were possible, the large engineering staff would then have to be downsized once the entire fleet had been redesigned at this faster pace. The overall effect would be to significantly increase the co st of the vehicles.

Moreover, there is much evidence to indicate that the average redesign cycle in the industry is about 5 years. 4 There are some manufacturer s who have longer cycles, and there are others who have shorter cycles for some of their products. EPA believes that
there are no full line manufacturer s who can maintain significant redesigns of vehicles (with relative large sales) in 1 or 2 year s, and CBD has provided no evidence indicating this is technically feasible.

Accordingly, the agencies have not provided quantified estimates of the costs of massive, industry-wide acceleration of the redesign pr ocess but note that such an undertaking raises the most basic issues of feasibility coupled with enormous increase in costs.

The Center also comments that because the standards are based on performance of technology already in existence, this indicate s that much more stri ngent standards should be adopted, and even that the MY 2016 standards are immediately feasible. The Center also points to fuel economy standards of other industrialized nati ons as support for its proposition that much more stringe nt standards should be adopted.

As explained in section III.D. 7 of the pream ble to the final rule, existence of technology cannot be equated with its fleet -wide application. Significant i ssues of lead time exist to allow the large-scale penetration of tec hnology throughout the fleet to meet the final standards, much less more stringent alternatives. Among the critical issues (largely ignored by the commenter) are the availabil ity of sufficient capital and technical personnel. In addition, it takes several years to redesign a vehicle, and several more to design an entirely new vehicle not based on anexisting platform. Thus, redesign cycles are an inextricable component of adequate lead time under the Act. Other lead time and cost issues are raised as well, such as the issue of stranded capital both for the original equipment manufacturer (OEM), but up and down the OEM supply chain.

Nor is the comparison with other nations’ fuel economy standards proper, given (among other things) the different fleet mixes involved and the different test procedures utilized. In fact, as explained in th e preamble discussion, these nati ons’ standards are predicated

3 The commenter states that the redesign cycle has vanish ed altogether in some instances, citing to 74 FR at 49488. This passage, however, describes vehicle mode ls for which production has ceased altogether or has been drastically curtailed. The co mmenter also states, correctly, that some vehicle models are redesigned and refreshed more frequently in some years than in others (citing to 74 FR at 49654), but this only indicates that the typical 5-year redesi gn cycle occurs at different times fo r different vehicles. The fact that redesign cycles are staggered throws no light on th e issue raised by the commenter of the feasibility and costs of drastically accelerating th e redesign process industry-wide.

4 See for example “Car Wars 2010-2013, The U.S. au tomotive product pipeline”, John Murphy, Research Analyst, Bank of America/Merrill Lync h research paper, July 15, 2009.

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on use of the same technologies projected for the final GHG standards. Moreover, if one is to compare these standards with those of another entity, the most directly relevant comparison is with the GHG standards for light duty vehicles of the State of California. The federal standards are of comparable stringency.

A comparison of the 2011 MY fuel economy and CO2 emission levels projected in NHTSA's 2011 MY CAFE rule (including the proposed rule which c ontained projections through 2016) and those projected is only minima lly relevant to the projection of feasible
and cost effective standards in MY 2016. Firs t, the sales of specifi c vehicle models and vehicle segments differ significantly betw een the two rulemaking analyses. The projections for the NHTSA 2011 CAFE rule we re based in large part on manufacturer product plans which are now several years old. Those for the current rule are based on projections made by an industry analyst, CSM International. Differences in projected fleetwide fuel economy and CO2 emission le vels would be prim arily a function of
relative car and trucks sales and relative size of these vehicles. Both of these factors change between MYs 2011 and 2016 in both sets of projections. Thus, few legitimate
inferences can be drawn from the differen ce between the MY 2011 rule projections about MY 2016 and the analysis for this final rule.

The specific cost and effectiveness of a number of technologies has also changed between the two rule making analyses. Future fuel prices also differ, as do a number of other important factors, such as annual VM T per vehicle, the re bound rate, etc. Thus, again, the comparison being made by NYDOT between the CAFE 2011 MY fuel economy levels in previous rules to that ma de in the NPRM is not reliable, and the comparison is particularly misplaced regarding those projections based on economic criteria, such as standards projected to maximize net quantifiable benefits.

NYDOT also recommends that EPA implemen t CO2 standards equivalent to the fuel economy standards resulting from NHTSA’s 'T otal Costs Equal Total Benefits (TCTB)' alternative for passenger vehicles and the 'Technology Exhaustion' alternative for light duty trucks. These two scenarios require th e application of even more technology and involve even higher costs than that of the 6% reduction per year scen ario. Thus, the same concerns presented above for the 6% reducti on per year standards apply to an even greater extent here. This is sufficient reason to reject NYDOT’s recommendation.

3.3.2 2012-2015 Standards 75

Organization: Mercedes-Benz (Daimler AG) Chrysler Group LLC (Chrysler) Mitsubishi Motors R & D of America (MRDA) Volkswagen Group of America (Volkswagen) Toyota Motor North America
Recreational Vehicle Industry Association (RVIA)

Mercedes-Benz (Daimler AG)

3-75EPA Response to Comments

The passenger car standards should be set to reach the MY 2016 goals through a generally linear stringen cy level phase-in through MYs 2012-2015. Using a generally linear phase-in is both consistent with the agencies’ Notice of Intent and with the overarching policy of transitioning to a U. S. vehicle fleet. [OAR-2009-0472-7193.2, p.1]

[The following comments are nearly the en tirety of the statement for the above subheading, from [OAR-2009-0472-7193.2, p.2-4]

In the Notice of Intent published on May 22, 2009 and announcing EPA and NHTSA’s intention to publish joint rulemaking, the agenci es made clear their intentions to propose GHG standards capable of achievi ng on average 250 g/mile of CO 2 in model year 2016, and further that “[t]he standards for earlier years would begin withthe 2012 model year, with a generally linear phase-in from MY 2012 through to model year 2016. NHTSA expects to propose appropriate relate d CAFE standards.” 74 Fed. Reg. 24007, 24008 (May 22, 2009) (emphasis added).

Rather than following the foregoing guideline, the proposed st andards place a substantial amount of emphasis on passenger car improveme nt in the earlier model years. This creates additional challenges, not anticipate d at the time of the Notice of Intent, for manufacturers whose fleets are primarily comp osed of passenger cars , and in particular for limited-line, lower-volume manufacturers who were to be provi ded lead time through
the TLAAS.

These additional challenges not only make th e flexibilities and credits proposed in the GHG program more significant, th ey also mandate careful co nsideration by the agencies of additional flexibilities, such as in cluding air conditioning credits in the CAFE program. Further, placing anearlier and larger burdenon the light-duty vehicle population, as opposed to equalizing the annual increases, raises serious questions as to whether the regulatory policy of this proposal is encouraging th e appropriate type of fleet mix to redress the serious public health and welfare and energy security concerns leading to this rulemaking.

As noted above, the Notice of Intent expre ssed an intention to design a program that would equal the levels in the California progr am at the end of the rulemaking period, or by MY 2016. The Notice of Intent clearly indicate s not that California levels were to be achieved each year, but rather that theywould be reached by MY 2016 and that the interim years would be generally linear. DAG submitted a letter to Secretary LaHood and Administrator Jackson making clear its co mmitments based on EPA proposing national GHG standards and NHTSA proposing CA FE standards for MYs 2012-2016 “as substantially described in the May, 2009 Notice of Intent to conduct rulemaking” and
certain additional actions. See DAG Co mmitment Letter, available at http://www.epa.gov/otaq/climate/regulati ons.htm#1a. While DAG nonetheless remains committed to meeting the standards, DAG cons iders the movement away from generally linear stringency changes to those focusing on MYs 2012 and 2013 to be a substantial deviation from the description provide d in the May 2009 Notice of Intent.

3-76EPA CO 2 Standards

Chrysler Group LLC (Chrysler)

The endpoint 2016 model year EPA greenhouse ga s industry fleet average standard of 250 g/mile was as expected, based on the Notice of Intent. The Notice of Intent states that 'the standards for earlier y ears (pre-2016) would begin withthe 2012 model year, with a generally linear phase-in from MY 2012 thr ough to model year 2016' (emphasis added). However, the Proposed Rules shows that the intermediate 2012-15 MY standards increase in a significantly non-lin ear fashion at the start of the program - front loading a disproportionate amount of the task to the ea rly years of the program. In particular, the passenger car standard incr ease between the 2011 and 2012 model years is more aggressive than necessary. [NHTSA-2009-0059-0124, p.8] [[Chrysler also submitted these comments as testimony at the Detroi t public hearing, See docket number EPA-HQOAR-2009-0472-6185, p. 49.]

Moreover, President Obama's Rose Garden Remark s also noted that 'the goal is to set one national standard that will rapidly increase fuel efficiency ... by an average of five percent each year between 2012 and 2016, building on the 2011 standard ..., (emphasis added). Although 2012 is the first year of the EPA program, given the 'direct and close, relationship between tailpi pe greenhouse gas emissions and fuel economy, the 2011 NHTSA CAFE standards (and their equivale nt in greenhouse gas emissions terms) should have been used when determining the phase-in to the 2016 model year goal. [NHTSA-2009-0059-0124, p.8]

In the NPRM, excluding model years 2009- 2011, EPA and NHTSA propose a generally linear phase-in between the 2012 and 2016 model years, but th e passenger car greenhouse gas emission reduction of 11.2% between the 2011-2012 model years is extremely steep and unprecedented. The industry average truc k fleet also has the largest GHG emission
reduction of 4.6% between the 2011-2012 model years. [NHTSA-2009-0059-0124, p.8]

In addition to the numerically large increas e in passenger car standards between the 2011 and 2012 model years, manufacturers need to simultaneously accommodate changes tothe passenger car fleet definition. Beginning in the 2011 model year, certain 2WD lightduty trucks are reclassified as passenger cars. In the 2012 model year, additional lightduty trucks are re-classified as passenger cars based on a lack of 3-row standard seating. These reclassifications move truck-like utilityvehicles from the light-duty truck category to the passenger car category, subjecting them to more stringent standards and, as a result, they become relatively poorer fuel economy and greenhouse gas performers, reducing manufacturers' ability to comply with the more stringent passenger car standards. [NHTSA-2009-0059-0124, p.9]

While the ability to earn credits and the car ry-forward and carry-back credit flexibility helps manufacturers' ability to comply, the large jump in standards is at a time when manufacturers can do little to impact the actu al fleet performance. Given typical model year lead times, this setting of extremely aggressive 2012 model year standards does not allow for sufficient leadtime to re-engineer vehicles to meet this stringency increase. The type of major product changes necessary to increase vehicle efficiency by over 10%

3-77EPA Response to Comments

requires sufficient time to re-engineer vehicles. This type of change normally occurs during a product re-design or a new product re lease, not mid-model year modifications. [NHTSA-2009-0059-0124, p.9]

Recommendation:

Chrysler recommends that the agencies set passenger car and light -duty truck standards with a linear phase-in to the 2016 model year goals as envisioned during the signing of the May 2009 manufacturer and Ca lifornia Letters of Intent in response to the National Program. Chrysler supports the general methodology of linearizing the standards suggested by the Alliance of Automobile Manufacturers. [NHTSA-2009-0059-0124, p.9]

Mitsubishi Motors R & D of America (MRDA)

There are significant challeng es in the increased string ency between the 2011 and 2012 model years. The rate of this increase will li kely result in excessive costs and burdens as many vehicles are quickly reconfigured to comply with these new standards. [OAR-2009- 0472-7125.1, p.1]

Smaller Automakers need more time to de velop new technologies and to implement design changes. The proportional effort is mu ch greater to meet stringent standards and far less resources are available for long term R&D to develop and introduce new technologies. Further, smaller Automakers are unable to negotiate ti mely, cost effective supplier contracts – suppliers favor high vol ume Automakers and limit the technology available to smaller Automakers. Overall, it takes longer/costs more for limited line
vehicle manufacturers to introduce new technologies. [OAR-2009-0472-7125.1, p.2]

The proposed stringent standards are particularly challenging for limited line,
“intermediate volume” manufactur ers, especially considering that Mitsubishi Motors was not subject to the California AB1493 GHG regulations until the MY 2016. [OAR-2009- 0472-7125.1, p.5]

Volkswagen Group of America (Volkswagen)

In addition, Volkswagen questions the need for the large step instringency proposed from the 2011 MY CAFE regulation to the 2012 MY targets proposed in the NPRM. We believe the 2016 MY target combined fleet target of 250 gram/mile is achievable and that the targets for each model year can be adju sted to meet the same air quality targets without such a large jump in the requirement s in the first year of the regulation. [OAR2009-0472-7210.1, p.5]

Toyota Motor North America

Ramp Rate of the Target Curves

3-78EPA CO 2 Standards

The rate of increase in the proposed car ta rgets by both agencies is front-loaded and should be adjusted. As can be seen in Figures 1 and 2, the rate of increase in the car target
curves between 2011 MY and 2012MY is inconsistent with the rates of increase in subsequent model years. The largest increase in target values occurs in the first year of the proposed regulation, when manufacturer s have the least available lead time to integrate technology into the fleet. While th e curves are shown only for NHTSA's portion of the joint proposal (in MPG space), EPA's proposed target curves show the same trend. [OAR-2009-0472-7291,p.9]

Consistent with comments provided by T oyota in previous CAFE rulemakings, we suggest the rate of increase be 'smoothe d' between the existing 2011 model year car curves and the final 2016 model year proposed curves. Such an adjustment would align more closely with product planning cycl es and lead time requirements. [OAR-2009- 0472-7291,p.9] [See OAR-2009-0472-7291, pp.9-11 for a detailed discussion on this issue]

Recreational Vehicle Indus try Association (RVIA)

RVIA believes that with the non-linear st andards increase proposed, to achieve compliance, some manufacturers may opt to eliminate certain non- compliant vehicles from their product mix since compliance otherw ise may not be techno logically feasible.
We are concerned that tow vehi cles could be likely candidate s for such eliminations since the cost of technology to achieve such abrupt improvements may diminish their commercial viability. To ensure that highway safety and ai r quality are not negatively impacted by RV owners who tow their RV tr ailers with undersized vehicles or keep older, less environmentally friendly tow vehi cles on the road, we ask that you implement a more gradual rollout of the standards. [NHTSA-2009-0059-0107, p.5]

One of the key points found in the Genera l Motors comments dated November 20, 2009, is that the '... the car standard detailed in the NPRM does not even 'encourage' limited product line manufacturers to increase vehicle fuel econom y.' GM goes on to state,

'Because the NPRM curves require little improve ment from cars and small trucks, there is a lost opportunity for fuels savings for th e nation. As an example. increasing the stringency of the NPRM curves by 10% for the smallest vehicles and reducing the stringency by 5% for the largest trucks, woul d result in more energy savings, and enable more economically practical application oftechnology across the country.' [NHTSA2009-0059-0107, pp.5-6]

Given that small cars are essent ially already meeting the 2016 model year standards, such a trade off makes sense. RVIA would support such a measure and encourages a careful re-examination of the assigned mpg/C02 targets for both small vehicles and larger trucks. [NHTSA-2009-0059-0107, p.6]

EPA Response:

3-79EPA Response to Comments

EPA believes that the standards for MY 2012-2016 are consistent with the Notice of
Intent which stated that “ The standards for earlier yea rs would begin with the 2012 model year, with a generally linear phase- in from MY 2012 through to model year 2016 .” Those standards likewise represent a reasonabl e exercise of EPA's au thority under section 202 (a)(1) of the Act. See, e.g. section III.D of the preamble to the final rule; see also comment response 3.3.3.3.1. EPA acknowledges th at the standards for passenger cars have a higher rate of increase from MY 2011 CAFE standards to MY 2012 GHG standards; however there are several reasons th at this is a misleading comparison. First, the form of the 2011 standard (the footprint based curve) differs considerably from the form of the MY2012-2016 standards. The baseline and reference fleets and many of the underlying technical assumptions used to appr oximate the fleet targ ets and stringencies for the 2011 rulemaking also differ from the ones used for this rule. The automotive industry commenters above do not point to a specific technical issue with the standards,
but rather to their desire for a linear phase-in from the existing 2011 CAFE standards. These arguments are addressed in NHTSA’s re sponse to comments in section IV of the preamble to the final rule and in the NHT SA RIA. As to meeting the 2012 MY GHG standards, EPA notes further that the various flexibility mechanisms in the rule (e.g. TLAAS, early generation of credits for out-p erforming California standards, averaging, banking and trading with carry backward of credits if needed) ) provide ready means for manufacturers to comply with the MY 2012 GH G standard. For example, since issuance of the NPRM, it has come to light that so me manufacturers may be implementing more air conditioner leakage reduc tion technologies than EPA ha d anticipated (see section III.C.1.a of the final preamble; see also comm ent response 3.1). This would result in additional early credits that c ould be carried forward to help meet MY 2012 standards. Because of these arguments, and due to the support for the phase-in of the standards from other stakeholders (including the CaliforniaAir Resources Board) the agency is not making significant changes to the MY 2012-2016 GHG standards. For further discussion on the feasibility of the EPA standards, see section III.D of the final preamble.

3.3.3 Post 2016 standards

Organization: Sierra Club
Ford Motor Company Northeast States for Coordinated Air Use Management BMW of North America, LLC (BMW) New York State Department of Environmental Conservation State of Connecticut Departme nt of Environmental Protection
Union of Concerned Scientists

Comment:

The industry, however, needs a longer term and stronger direction to be able to produce dramatically cleaner vehicles. We urge EPA to move swiftly to set standards that will apply to vehicles beyond 2017 and to consider a longer time horizon to ensure that lead time is not a constraint on the “technology fo rcing” authority EPA can exercise under the

3-80EPA CO 2 Standards

Clean Air Act. As soon as the endangerme nt finding is final, EPA will have the obligation to set standards fo r greenhouse gas pollutants that protect public health and welfare. To do this effectively, EPA should mo del where vehicle standards need to be in 2050 to achieve an 80% reduction (or the approp riate science-based emissions reductions needed) in vehicle emissions. Starting in 2017, EPA should give a clear “technology forcing” path to the auto industry. [OAR-2009-0472-7278.1, p.13]

A longer term approach is consistent with EPA’s authority and statutory obligation under the Clean Air Act and with the analysis of the industry’s ability to achieve higher standards in this NPRM. In this NPRM EPA considers three options. EPA identifies the annual 4.3% decrease in g/mi CO2e as the pr eferred option – the op tion that yields the 250 g/mi CO2 standard President Obama a nnounced in May 2009. The agency considers a lower 4% and higher 6% option. EPA notes that that the 4% option 'forgoes CO2
reductions which can be achieved at reasonable cost.” EPA also notes that this lower option would be too weak to achieve equi valence with Californi a’s Pavley [OAR-2009- 0472-7278.1, p.13] standards and would, therefor e violate the agreement. The 6%
increase would increase the cost of a ne w vehicle by an average $500 with additional greenhouse gas reductions. EPA determines that this level is not “technically infeasible” but that it would be “overly stringent” given the condition of the indus try and lack of lead time. EPA concludes that the preferred opti on demands enough of the industry in terms of technology change an d cost. [OAR-2009-0472-7278.1, p.14]

EPA seeks comment on its judgment regarding the three options. In sum, EPA concludes
that it “does not believe the 6% per year alternative would be an appropriate balance of various relevant factors for model years 2012–1016.” We applaud EPA for ensuring that equivalence with California’s standards are me t in this first National Program, but urge the agency to ensure that its next stan dards do not leave greenhouse gas reductions and consumer savings unrealized. To do this EPA must look at the longer term and push the industry’s best technologies into new cars and light trucks that both force technology forward and maximize their greenhouse gas potential. [OAR-2009-0472-7278.1, p.14]

NHTSA provides a slightly differe nt approach to a range of fr om a 3% per year increase in fuel economy to 7% - butnotes that the 4.3 % preferred option ach ieves the 250 g/mi CO2 needed for equivalence with CA’s progr am and yields a fleetwide average fuel economy of 34.1 mpg (equivalent to 250 g/ CO2e). NHTSA, based on its statutory obligation to consider the need of the nation to conserve oil, concludes that weaker increases – 3 or 4% would “not produce the reductions in fuel savings and CO2
emissions that the Nation needs at this time. ” NHTSA’s conclusion that weaker standards
leave substantial benefits on the table is not matched by the rationale for picking the preferred option over the somewhat stronger choices. “NHTSA determined that it would be inappropriate to propose any of the other mo re stringent alternatives due” to lead time issues and “economically critical state of the industry.” NHTSA diverges from past proposals which considered setting the standard s at a level that maximizes societal net benefits. [OAR-2009-0472-7278.1, p.14]

Ford Motor Company

3-81EPA Response to Comments

Above all, Ford strongly believes that measures need to be put in place to ensure that the national program approach outlined in this rulemaking continues beyond 2016. We were pleased when the President brought the stakeh olders together to agree on a roadmap for harmonizing greenhouse gas emissions and CAFE standards at the federal level. The EPA and NHTSA proposal gives us greater clarity, certainty and flexibility to achieve the aggressive greenhouse gas emissions reduction go als that we all shar e. Most importantly, it avoids the patchwork and overlapping requ irements that we would have faced under the status quo. Nonethele ss, it is only a first step, and it is critical that we avoid returning to the patchwork approach after 2016. We look forward to working with the same stakeholders toward a permanent na tional program for 2017 and beyond. [OAR-2009- 0472-7082.1, Cover letter, p.2]

. Although the national program created by this rule covers the 2012-2016 model years, it
is critical that measures be put in place to establish a permanent national program for the 2017 model year and beyond. [OAR-2009-0472-7082.1, p.1]

Northeast States for Coordinated Air Use Management

NESCAUM is very supportive of the proposed federal vehicle control program as a powerful first step in addressing GHG em issions from motor vehicles. However,
additional reductions will be needed for vehicles beyond model ye ar 2016. NESCAUM is committed to working with the EPA, NHTSA, the California Air Resources Board, and
other stakeholders to addr ess global climate change and the need to reduce oil consumption by developing strong motor vehi cle GHG standards for model years after
2016. These additional reductions will be critical for the states in the Northeast to achieve their 2020 and 2050 GHG goals. [OAR-2009-0472-7235.1, p.7]

BMW of North America, LLC (BMW)

To ensure future regulatory stability for th e auto industry while continuing to reduce greenhouse gas emissions and improve fuel fleet economy, BMW strongly recommends a comparable National Program in the mode l years beyond 2016. We are very, very happy with the way the negotiations, discussions, collaboration and cooperation have gone to come up with this single nati onal standard and we very, ve ry strongly support the same process for the years 2016 and beyond. [These comments were submitted as testimony at the New York public hearing. See docket number EPA-HQ-OAR-2009-0472-4621, p. 132.]

New York State Department of Environmental Conservation

We do not believe that the 2016 model year standards proposed here represent the ultimate, lowest limit for light duty vehicl e greenhouse gas emissions. We believe that lower emissions will be possible in the future without sacrificing the utility these vehicles provide their owners. We urge EPA and NHTSA to continue to evaluate the feasibility of more stringent regulations. We do hope the nation will not have to wait another 30 years for the next step. [OAR-2009-0472-7454, cover page 2]

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State of Connecticut Departmentof Environmental Protection

Any standards developed for 2016 and later sh ould comprehensively evaluate the need for and benefits of a multi-po llutant perspective, including criteria and air toxics along with GHGs, that views vehicles and fuels as a system. Assuming additional standards are warranted, the next phase of light duty vehi cle standards should view the transportation system in a holistic manner that takes into account vehicles, fuels and the transportation
infrastructure that can be desi gned to enable greater levels of pollution or to minimize it. [OAR-2009-0472-7301, p.2]

Union of Concerned Scientists

Finally, I wanted to discuss the importance of establishing a strong regulatory framework for future rulemakings as part of this pr ocess. While the immediate focus of this rulemaking is achieving the President's goals through model year 2016, it will also set the precedent for future standards beyond that date. [These comments were submitted as testimony at the New York public hearing. See docket number EPA-HQ-OAR-2009- 0472-4621, p. 101.]

It is critical that future standards achieve the maximum feasible [These comments weresubmitted as testimony at the New York public hearing. See docket number EPA-HQOAR-2009-0472-4621, p. 101.] level of energy savi ngs as required by EPAct and EISA as well as fulfill EPA's obligations under th e Clean Air Act. Under this rulemaking, EPA
and DOT have set standards that fall below th e economically practicab le levels indicated by the agencies' own analysis. This means that Americans will not realize the full benefits of the Nation Program through 2016. UCS recognizes that the current standards were set at a more modest level to help automakers achieve the standards given the financial problems facing the industry and the challenges of navigating a new regulatory structure. However, it's critical that future standards are set at levels that achieve the maximum benefits of the National Program. These standards should be based on sound modeling that uses accurate technology assessments, ve rified costs and tran sparent input. [These comments were submitted as testimony at the New York public hearing. See docket number EPA-HQ-OAR-2009-0472-4621, p. 102.]

EPA Response:

EPA appreciates all of the comments expressing concern that 2017 and later GHG standards be set sufficiently soon so that the lack of available lead time does not limit the stringency of the standards. EPA is also sensitive to how comple x and undertaking this will be and that a new National Program w ill provide a level of certainty for the manufacturers so that they may modify their long term product planning. We will consider these issues seriously as we pr oceed to evaluate post 2016 GHG standards for light-duty vehicles.

3.3.4 GHG Emissions Backstops

3-83EPA Response to Comments

In the proposal, EPA and NHTSA recognized “tha t there is some possibility that low fuel prices during the years in which MY 2012-2016 ve hicles are in servi ce might lead to less than currently anticipated fuel savings and em issions reductions. One way to assure that
emission reductions are achieved in fact is through the use of explicit backstops, fleet average standards established at an absolute level.” EPA stated that a backstop “could be adopted under section 202(a) of the CAA assuming it could be justified under the relevant statutory criteria.” EPA did not propose backstop standards, but sought comment on possible backstop approaches.

EPA and NHTSA received many comments on back stops. In this section, EPA responds to both specific comments on GHG emissions b ackstops, as well as to general comments on backstops that were submitted to both EP A and NHTSA. In the latter case, where comments were made jointly on both EPA G HG emissions backstops and NHTSA CAFE backstops, EPA’s response only addresses the issue of GHG emissions backstops.

EPA received 26 public comments on the issue of GHG emissions backstops. There is significant overlap among the comments on this i ssue, and the structure of this section is to provide a comprehensive sampling of ex cerpts of these 26 comments, followed by an EPA response to the comments organized into 3 sections:

• Whether EPA has the statutory authorityto establish GHG emissions backstops

• Whether EPA should establish GHG emissions backstops

• Alternative backstop approaches to universal GHG emissions backstops

Organization: Alliance of Automobile Manufacturers (Alliance) American Council for an Energy Efficient Economy American Lung Association of California
Association of Intern ational Automobile Manufacturers (AIAM)
California Air Resources Board
California State Senate Center for Biological Diversity Connecticut Department of Environmental Protection Environment Michigan Environment New Jersey Ford Motor Company Mass Comment Campaign (2,322 comme nts) (unknown organization) Mass Comment Campaign (326 comments) (Student PIRGs) Massachusetts Department of Environmental Protection National Automobile Dealers Association (NADA)
Natural Resources Defense Council
Northeast States for Coordinate d Air Use Management (NESCAUM) Public Citizen Safe Climate Campaign Seal, Kathy
Sierra Club State of New Jersey Toyota Motor North America

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Union of Concerned Scientists
United Auto Workers University of Pennsylvania Environmental Law Project Washington Department of Ecology

Comment:

Ford Motor Company

Backstops

Backstops should not be combined with attribute-based standards unless specifically required by statute. Backstops are inefficient and force manu facturers to produce vehicles that consumers may not want. Moreover, th ey are unnecessary. The sloped portion of the piecewise linear curves takes into account size based product mix differences across the industry and adjusts automatically for cha nges in vehicle size mix in response to economic conditions and consumer preferences. The flattened portion of the car and truck
curves serves a function akin to a backst op by discouraging manufacturers from building larger vehicles. Moreover, NHTSA has commente d in past rulemakings that the curve of
an attribute-based standard has several f eatures that limit backsliding. 74 FR at 14410. [OAR-2009-0472-7082.1, pp. 2-3]

GHG Backstops

EPA also seeks comment on the concept of 'backstop' standards for GHG emissions. In the NPRM, EPA proposes to establish motor vehicle GHG standards in the form of the 'C02 curves.' The authority and justification for the establishment of any additional 'backstop' standards underlying the CO2 curves is highly questionable. First, the Clean Air Act (CAA) § 202(a) does not mention the co ncept of 'backstop' standards, let alone authorize EPA to promulgate them. The con cept of 'backstop' standards would involve promulgating two sets of standards (the main standards and the backstop standards) applicable to a given fleet of vehicles, and there is nothing in the CAA to suggest that Congress intended multiple 'layers' of standards to apply to vehicle emissions.

Second, EPA is presumably already taking the st atutory criteria in § 202(a) into account in its development of proposed CO2 curves. Backstop standards would need to meet the same criteria, and the agency would need to conduct a separate evaluation of both the backstop standards on their own, and the combination of the backstop and main standards, under those criteria. However, it is far from clear that the § 202 criteria would support a second set of standards for the same vehicles. Backstop standards would likely impact individual manufacturers very differe ntly. The most likely effect of backstop standards would be to prevent full-line manu facturers from building and selling vehicles
that the market wants and that could otherwis e be sold under the primary standards. This could have a significant financial impact on a few individual manufacturers most affected by the backstop standards, while having a negligible impact on overall projected concentrations of GHGs. A key purpose of the attribute based approach is to reduce the

3-85EPA Response to Comments

impact of vehicle mix and put manufacturers on a more level playing field; the addition of backstop standards would run counter to this goal. At present, the Administrator has no basis for concluding that back stop GHG standards are necessary to protect health and welfare. Given the potential costs and disparate competitive impacts that backstop standards may impose on individual manu facturers, EPA should not pursue such
standards.

Finally, as noted above, the intent of the joint EPA/NHTSA proposal is to ensure the greatest possible level of c onsistency between fuel economy standards issued by NHTSA and CO2 emission standards established by EP A. Even if EPA had the authority under the CAA to independently establish backst op standards, any EPA-issued CO2 emission standards would only serve to create new inconsistencies between the two programs, rather than further the goal of harmoni zation. Ford supports the harmonization of the
EPA and NHTSA standards to the maximum extent possible, consistent with the Massachusetts v. EPA decision directing the fe deral agencies 'avoid inconsistency' in regulating greenhouse gas and fuel economy. The be st way to 'avoid inconsistency' in this
case is to allow NHTSA to establish the one backstop required by law for CAFE, and avoid any other backstops in the CA FE or GHG regulations. [OAR-2009-0472-7082.1, pp. 3-4]

Association of International Au tomobile Manufacturers (AIAM)

AIAM opposes the adoption of an additional “backstop” (i.e., mi nimum conventional) standard as a means of preventing market shifts toward larger vehicles. A backstop standard would defeat the purpose of the attribute format by limiting the flexibility of manufacturers to respond to shifts in market demand. Moreover, when Congress considered the need for a backstop standard in the similar contex t of CAFE standards under EISA, it adopted a limited “minimum standard” for domestic passenger automobiles. The EISA backstop provisions require that a manufacturer’s domestic passenger auto fleet must comply with th e greater of 27.5 mpg and 92 percent of the combined domestic/import average fuel economy of all manufacturers. See EISA, section 102(b)(4). An additional backstop standard in an EPA greenhouse gas regulatory program would be inconsistent with Congress’ intent and would be unnecessary and inappropriate. [OAR-2009-0472-7123.1, p.18]

In Center for Biological Dive rsity v. NHTSA, the Ninth Circuit held that “neither the EPCA’s language nor structure explicitly re quires NHTSA to adopt a backstop.” Rather, the court held that NHTSA had abused its discretion in failing to adequately consider the
“need of the nation to cons erve energy,” as it was required to do under 49 USC § 32902(f), and did not show that a backstop w ould be technologically infeasible or economically impracticable. EISA did not e xpressly change this. The only backstops required are the requirements in EISA that the combined car-truck fuel economy values reach 35 mpg by MY2020 and that the regulations established between MY2011 and MY2020 increase ratably to that goal. So l ong as NHTSA makes the showing that the standards meet these requirements, then nothing more should be required in terms of a backstop. [OAR-2009-0472-7123.1, p.18]

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[AIAM also submitted these comments as testimony at the Los Angeles public hearing. See docket LA EPA Hearing EPA-HQ-OAR-2009-0472-7283, pp. 28-32]

Alliance of Automobile Manufacturers (Alliance)

EPA's Backstop Authority

As noted above, the intent of the joint EP A/NHTSA proposal is to ensure the greatest possible level of consistency between fuel economy standards issued by NHTSA and

CO 2 emission standards established by EPA. Ev en assuming EPA has the authority under the CAA to independently establish backst op standards, which is unclear, any EPAissued backstopped CO 2 emission standards would only se rve to create inconsistencies between the two programs, which would be c ontrary to the direc tive of the Supreme
Court in Massachusetts v. EPA that federal agencies “avoid inconsistency” in regulating GHGs and fuel economy. See Massachusetts v. EPA, 549 U.S. 497, 532 (2007).

Because of differences between EPCA and the CAA, NHTSA's proposed CAFE rules include domestic and import passenger car fleets, while EPA's proposed GHG rules do not include the domestic/import distinction fo r passenger cars. Under EISA, as explained above, only the domestic passenger car fleet is subject to a backstop under the NHTSA CAFE rules. EPA cannot duplicate this under its rules; any "backs top" standards EPA might seek to promulgate would presumably apply to all passenger cars. Were EPA to proceed with such backstop standards, it would impose a new set of regulatory requirements on a group of vehicles (imported passenger cars) that are not affected by the backstop under NHTSA's rules. Such an outco me would only add to the complexity of the manufacturers' task of producing a fleet of vehicles that complies with both sets of rules. Furthermore, backstops are unnece ssary. The concern aboutwidespread vehicle upsizing and a loss of anticipated benefits from the proposed standards is greatly overstated given practical design considerations and the shape of th e proposed attribute

curves.

First, upsizing doesn’t necessarily present an easier compliance path. The basic concern about upsizing is that manufacturers will be mo tivated to increase the footprint of their fleet since larger vehicles have a less stringent standard under a size-based attribute system. This premise ignores that an increase in vehicle footprint ty pically results in an increase in vehicle weight. While ups izing may relax the fuel economy target, compliance may be just as difficult due to the loss of fuel economy from the added weight.

Second, increasing vehicle footprint may re quire vehicle platform changes. The opportunity to upsize a vehicle platform is limited by product planning cycles which have already been finalized in many cases for basic attributes such as ve hicle size. Further, changes in vehicle footprint and platform present practical design cons iderations such as vehicle styling and vehicle dynamics/handling. Lastly, these platform changes are not
without cost.

3-87EPA Response to Comments

Third, any erosion of the anticipated benefits is likely to be minimized by the substantial yearly increase in the target curves as well as the shape of the curves for any given year. For example, under the proposed standards, the efficiency of a car fleet with an average footprint of 45 sq ft is required to improve by 13 percent between 2012 and 2016. To completely negate this improvement, the footpr int for every vehicle in this example fleet would have to be increased by an average of 7 sq ft over that 4-year period. For all of the technical reasons mentioned above, such a scen ario is highly unlikely, if not impossible. Upsizing the footprint by evenhalf this amount, while stil l not a reasonable scenario, would net significant fuel economy improvement s. In fact, a backstop is already built
into the standard curves to the extent the targets become constant or “clipped” as vehicle footprint continues to increase. Therefore, the target curves already help guard against any loss of benefit from theoreticallyupsizing into the “clipped” regime.

From a policy perspective, a backstop introduces an unnecessary secondary standard that increases the complexity of the requirements and runs contrary to the intent of an attribute-based standard. For these policy reasons and in keepi ng with the Supreme
Court's admonishment to "avoid inconsistenc y," EPA should not seek to adopt backstop standards. [OAR-2009-0472-6952, pp 35-36]

Backstop Standards

The agencies note that NHTSA is required to set minimum “backstop” standards for domestically-manufactured passenger cars and request co mment 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 CO2 emissions reductions and fuel savings
under the attribute-based standards” for other categories of vehicles. Proposed Rulemaking To Establish Light-Duty Vehi cle Greenhouse Gas Emission Standards and Corporate Average Fuel Economy Standard s; Proposed Rule, 74 at 49,493. [OAR-2009- 0472-6952.1, p.37]

The agencies have not established that they ha ve authority to set b ack-stop standards that are not specifically authorized by Congress, and the Alliance is aware of no evidence indicating that such ba ck-stops are necessary to achiev e the goals and purposes of the national fuel economy and emissions programs. Such back-stops would unduly limit consumer choice and the industry’s ability to achieve the goals of the new national programs as cost-effectively as possible. [OAR-2009-0472-6952.1, p.37]

Toyota Motor North America

Anti-Backsliding Standards

Anti-backsliding or backstop standards curre ntly apply only to th e domestic passenger fleet under NHTSA's CAFE program. The Agen cies request comment on whether antibacksliding provisions should be expanded to all vehicle fl eets covered by the proposed
NHTSA and EPA standards. NHTSA additionall y proposes to revise the domestic car anti-backsliding standards that were set inthe March 2009 final CAFE rule for 2011 MY.

3-88EPA CO 2 Standards

Finally, NHTSA proposes to use projected ta rget fuel economy when establishing the minimum CAFE standard for the domestic passenger fleet. [OAR-2009-0472-7291, pp.14-15]

Expanding Anti-Backsliding Standards to All Cars and Trucks

Toyota opposes any expansion of anti-back sliding provisions beyond the domestic passenger car fleet in the CAFE program. The clear intent of Congress has been that NHTSA should only establish anti-backsliding standards for the domestic car fleet. As such, EPCA requires NHTSA to establish anti-backsliding standards for domestic passenger cars and does not authorize NHTSA to establish additional anti-backsliding standards for import cars and trucks. [OAR-2009-0472-7291, p.15]

In the case of EPA and CAA, there is no exp licit statutory authority that either compels
or authorizes EPA to establish anti-backsl iding standards for any class of light-duty vehicle. While EPA's authority may be ambi guous, it is clear that any EPA-issued antibacksliding standards would create new in consistencies between the NHTSA and EPA programs, rather than suppor t the goal of harmonizat ion. NHTSA anti-backsliding standards are limited to domestic passenge r cars, and the CAA cannot be used to duplicate a similar outcome since EPA's fleet definitions do not distinguish between domestic cars and import cars. The most 'harmonized' outcome is for NHTSA to proceed with the required domestic car anti-backslid ing standard for the CAFE program, and for EPA to forego any attempt to set anti-back sliding standards under the CAA. [OAR-2009- 0472-7291, p.15]

Notwithstanding the legal constraints descri bed above, anti-backsliding standards are unnecessary. The concern about widespread ve hicle upsizing and a loss of anticipated benefits from the proposed standards seems overstated given practical design considerations and the shape of the pr oposed attribute curves. [OAR-2009-0472-7291, p.15] [See OAR-2009-0472-7291, pp.15-16 for more discussion on this issue]

Northeast States for Coordinate d Air Use Management (NESCAUM)

NESCAUM urges EPA and DOT to include a ba ckstop mechanism for the standards. The shift in the market away from cars towards light trucks in the 1990s resulted in a decrease in the U.S. fleet average fuel economy. More re cently, there has been a dramatic shift in the market towards 4 and 6 cylinder engines and away from 8 cylinde r engines. This has been accompanied by a shift away from larger trucks and towards smaller trucks and cars. The technical analysis conducted for this proposal by EPA and DOT assumes that
this trend will continue. Should there be a sh ift back toward higher CO2 emitting vehicles (as was the case in the 1990s) the emissions reductions projected by the agency could be greatly overestimated. A backstop which sets a floor for reductions would address this potential problem. NESCAUM also urges the agencies to revisit the GHG standards and incorporate changes in the light-duty vehicl e fleet into baseline assumptions. NESCAUM believes this is an important element to in clude in the final rule. We encourage the

3-89EPA Response to Comments

agencies to revisit and revise the light-duty GHG standards to correct for mistaken future projections. [OAR-2009-0472-7235.1, p.6]

Public Citizen/Safe Climate Campaign

Reaching the agency’s proposed standard of 250 g CO2/mi is predicated on the fleet mix of 67 percent cars and 33 per cent light trucks in 2016, versus a fleet mix of 51 percent cars and 49 percent light trucks in 2008. Some of this shift in the market will result from the reclassification of a large number of vehicles that were previouslycategorized as light trucks to passenger cars, which will take e ffect in the 2011 model year, consistent with the final rule for 2011 fuel economy standards. Many of these affected vehicles are twowheel drive versions of vehicl es that are also sold in a four-wheel driv e configuration. [OAR-2009-0472-7050.1, p.2]

This creates a problem for automakers in manufacturing and marketing these vehicles.
Automakers would have to build a two-wheel drive version of a vehi cle to fit on the “car curve” or meet the footprint-ba sed target for fuel economy se t for the passenger car fleet versus the light truck fleet. There is signi ficant overlap of footprints which are on both curves. If automakers successfully build two-wh eel drive versions thatget the better fuel economy required on the car curve, it calls the two-fleet rule into question. Automakers may respond to reclassification by simply ceasin g to offer two-wheel drive configurations of certain SUVs, which would distort the fleet mix and ultimately result in lowering fuel economy and raising greenhouse ga s emissions. [OAR-2009-0472-7050.1, p.2]

For this reason, the new standards should incl ude backstops, or some other adjustment
mechanisms to ensure that there is a firm level below which individual automakers and the economy-wide [OAR-2009-0472-7050.1, p.2] fleet of vehicles could not fall. The agencies already build in an expectation value based on analys is of the extent to which it is estimated that automakers will apply cr edits. EPA discusses se veral backstop options in its Advanced Notice of Proposed Rulema king (ANPRM) on greenhouse gas regulation under the CAA. An approach that EPA outlines that could be most effective would have the standards automatically reset to account for increases in emissions that are inconsistent with agency projections at the time of promulgation: [OAR-2009-0472- 7050.1, p.3]

For example, at the time of promulgation, EP A could assume a certain average industrywide carbon dioxide g/mi emissions leve l for 2011–2012. If, in 2013, EPA found that the average industry-wide emissions level in2011–2012 was higher than projected in the final rule (and therefore the carbon dioxide emissions reductions were lower than projected because of higher than projected av erage footprint levels), then the backstop provisions would be triggered and the footprint curves fo r future years (say, 2016 and later) would be automatically ch anged to be more stringent an d/or flatter in shape. This approach would reframe the backstop issu e in terms of industry-wide emissions performance, rather than in terms of indi vidual automaker emissions performance. [OAR2009-0472-7050.1, p.3]

3-90EPA CO 2 Standards

A mechanism similar to this would prevent greenhouse gas emissions from rising because of unanticipated shifts in th e fleet mix. We urge EPA and NHTSA to adopt backstops for greenhouse gas emissions and oil consumption to ensure that the goals of the program are met, and to discourage manufacturers from continuing to use the light truck loophole toundermine advances in fuel economy and reductions in greenhouse gas emissions. [OAR2009-0472-7050.1, p.3]

Union of Concerned Scientists

Given the possibility that a fleet average of 250 g/mi may not be reached – either by renewed interest in light trucks or by industry gaming of light truck classifications – it is critical that the agencies add a backstop in order to guarantee that the President’s emissions reductions and energy savings goals are met. While a backstop could take numerous forms, UCS suggests one that includes an automatic re-computation or “ratchet” of stringencies fo r subsequent years, such that the National Program’s cumulative emissions reductions and oil savings goals are fully achieved in 2016, even if falling short in early years of the program. [OAR-2009-0472-7181.1, p.5]

[Following comments are from LATestimony, OAR-2009-0472-7283, pp.103-113 (p.6)]

First, a backstop is necessaryto meet California's standards. By 2016, new cars under the California program are expected to emit anaverage of 250 grams per mile of global warming pollution.

To meet this level of emissi ons, the NPRM projects that in model year 2016 the fleet will consist of approximately two-thirds passenge r cars and one-third light trucks. But in today's new vehicle fleet, nearly half of the vehicles sold in the U.S. are light trucks.

While there has been a recent market trend away from light trucks towards cars, it is questionable whether market pressure alon e will achieve such an overall notable shift by 2016. Additionally, automakers might strategi cally redesign vehicles in some classes so they might meet higher emissions limits.

EPA and NHTSA should include a backstop in th e final regulations to ensure that the
fleet-wide standards are achieved in each mode l year and that by 2016 the fleet average is indeed 250 grams per mile.

[Union of Concerned Scientists also submitte d these comments as testimony at the New York public hearing, See docke t number OAR-2009-0472-4621, pp. 95-98.]

Natural Resources Defense Council

GHG Standards Need “Backstop” Standards to Ensure Environmental Objectives Are Not Undermined by Shifts in Sales Mix The proposed GHG standards lack a regulator y “backstop” mechanism to ensure the National Program goals for model year 2016 fl eetwide average emission levels and the

3-91EPA Response to Comments

cumulative greenhouse gas and oil consumption reductions are met (see section I for the list of program goals). Such mechanisms ar e necessary because under an attribute-based system that has separate car and light truck standards, the fleet sales mix could shift to larger, higher-emitting vehicles and to a greater proportion of light trucks, resulting in greater fleetwide emissions and oil consump tion thus undermining the achievement of the program goals. [OAR-2009-0472-7141.1, p. 8]

In the proposal, the agencies recognize that attribute-base d standards of the proposed standards do not guarantee that specific fl eetwide GHG emission and fuel economy levels will be achieved. Achieving the pollution and oil reduction goals of the program are dependent on the overall market achieving th e agencies’ forecasted sales and size mixes. To reach a fleetwide average of 250 g/mi in model year (MY) 2016, the agencies have set the individual car and light truck standards on the assumption of a specific car/light truck sales split. However, if the au tomakers shift their product mix to more light trucks or if they change the vehicle designs to classify fe wer models as cars and more models as light trucks, this car/light truck split would be changed and the GHG and oil savings goals of the program would be undermined. This is of particular concern since the agencies’
forecast assumes a substantial increase in ca r sales share, from today’s 50.3 percent to 66.5 percent by MY 2016.5 Starting in MY 2011, 2WD SUVs will be reclassified as cars, which could potentially increase the ca r portion by 10 percent. However to avoid the reclassification, automakers could simply cut back their 2WD SUV offerings. As a consequence, the car sales share could be lo wer than forecast and the National Program’s GHG and oil reduction goals would be missed. [OAR-2009-0472-7141.1, pp. 8-9]

To prevent intentional and unintentional market shifts from undermining the environmental and oil savings benefits of the Program, we recommend EPA and NHTSA adopt manufacturer-specific backstop combined car and light truck standards that bar an individual automaker from exceeding its fore cast GHG emission levels by more than 2 gCO2-equivalent/mi (henceforth referred to as gCO2e/mi). Manufacturer-specific backstop standards would ensure that specifi c manufacturers can be held accountable if the overall fleet emission targets are misse d. A manufacturer should be allowed no more than three years to make up any exceed ance in its manufacturer-specific backstop standard. [OAR-2009-0472-7141.1, p. 9]

[NRDC also submitted these comments as te stimony at the Detroit public hearing, See docket number EPA-HQ-OAR-2009-0472-6185, pp. 20-21.]

American Council for an Energy Efficient Economy

The rule should include a provision to en sure that savings are not substantially undermined by discrepancies between the future vehicle market and the vehicle market projected by the agencies. The extent to wh ich the standards coul d promote upsizing or downsizing of vehicles depends in part upon th e shape of the attribute curve. In reducing the steepness of the car curve, the agencies have reduced the incentive to upsize vehicles, because upsizing a vehicle will not increase the emissions target enough to offset the natural tendency of the larger vehicle to consume more fuel (although some distortion of

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the market through wheelbase manipulation could still occur). At the same time, the new standard is not flat enough to promote downs izing, except at the upper and lower ends of the size spectrum, which covers a neg ligible percent of vehicle models.

The better choice of slope does not however ad dress the issue of car/truck split, which presents perhaps the principal way in which the rule could fail to deliver the promised emissions reductions. If, for example, instea d of reaching 67 percent of the market in 2016 as the agencies predict, cars remain at the 58 percent share projected for 2011, savings attributable to the 2016 standards w ould be more than 10 percent less than the agencies have claimed.

ACEEE recommends the addition of a “ratchet ” mechanism that auto matically increases the stringency of standards across the board, should emissions reductions fall below a predetermined percentage of projected reductions. Such a mechanism would be completely compatible with the flexibility o ffered by an attribute-based system. The need for a backstop will be even more evident if th e agencies’ approach to setting the level of standards is changed to reflect the need to achieve certain levels of GHG emissions, as
ACEEE recommends.

Recommendation: Set an upper bound for the level of emissions and fuel consumption that can be associated with new light-duty vehicles in a given year. Any exceedence of
that amount should result in an automatic ti ghtening of the standard to ensure that vehicles in the next year will achieve the intended reductions.

[ACEEE also submitted these comments as te stimony at the New York public hearing,
See docket number EPA- HQ-OAR-2009-0472-4621, p. 139.]

California State Senate

I would like the EPA and DOT to develop polices to ensure this program meets its stated goals. For example, what happens if a carmake r fails to meet your requirement and can’t meet the 2016 target? We are counting on you to achieve the emissions reductions and oil savings that we expect from this rule. [OAR-2009-0472-7275.1, p.5]

[Fran Pavley also submitted these comments as testimony at the Los Angeles public hearing. See docket LA EPA Hearing EPA-HQ-OAR-2009-0472-7283, pp. 13-20]

Sierra Club

Both agencies should include a backstop in th e final rule and we welcome the opportunity
to comment on this essential el ement of a strong program. We are concerned that the joint proposal’s reliance upon attribute-based curv es, whose efficacy will vary with the composition of the fleet, imperils the Pres ident’s goal of “establishing consistent, harmonized, and streamlined requirements” to reduce greenhouse gas emissions and improve fuel efficiency. We suggest adopting a backstop rule to prev ent shifts of fleet composition from undermining the standard s and now renew that recommendation. A

3-93EPA Response to Comments

backstop will address weaknesses in the attr ibute based system and problems that may arise with credits – making sure the program stays on course. [OAR-2009-0472-7278.1, p.3]

But the attribute approach, on its own, is impe rfect for at least two substantial reasons: First, the ultimate effect of the curves is dependent upon the fleet mix. Both agencies
have assumed a MY 2016 sales fleet mix of 67% cars and 33% trucks, which is a dramatic shift from the current 50/50 fleet mix. If assumptions regarding fleet mix underestimate the number of larger vehicles sol d, then net benefits across the curves will be smaller than estimated. According to the Union of Concerned Scientists, a more truck heavy fleet mix (42%) would miss the 250 g/mi target by 7 g/mi or nearly 1 mpg and if the fleet mix in 2016 is similar to today’s mix, the standard will be missed by 13 g/mi or as much as 1.7 mpg. [OAR-2009-0472-7278.1, p.3]

Second, because the attribute curves for light tr ucks are set at consis tently less ambitious levels than those for cars, manufacturers have a strong incentive to attempt to classify their cars as ‘light trucks’, thereby escap ing the more stringent car curves. As we documented in our July 1, 2008, comments on NHTSA’s then-proposed 2011-15 vehicle standards, several common vehi cles, including the PT Cruise r and Subaru Outback, have been so misclassified. While many two-wheel drive compact SUVs will be reclassified beginning in MY 2011, manufacturers may opt to shift compact two- [OAR-2009-0472- 7278.1, p.3] wheel drive SUVs to a 4-wheel drive platform keep them on the truck curve, affecting the outcome of th e program. [OAR-2009-0472-7278.1, p.4]

To ensure that we achieve 250 g/mi and 34.1 mpg in MY 2016, both agencies should include manufacturer-specific, automatic ratchet ‘b ackstops’ – esse ntially hard fleetwide limits that would undergird the at tribute curves, thereby accounting for fleet
mixes and classifications that had not beenpredicted. The propos ed rule recognizes the potential of backstops, acknowledging that “[o]ne way to assure that
emissions reductions are achieved is thr ough the use of explicit backstops, fleet average standards established at an abso lute level.” Another option would be to require automakers who miss the 2016 target s make up that difference with banked
credits. Banked credits would be turned in to EPA and NHTSA and therefore retired from the system and make up for shortfalls. Ye t, both EPA and NHTSA fail to adopt this simple fail-safe approach save for in the li mited case of mileage standards for domestic cars. We urge the agencies to reconsider this choice. Below are detailed comments on both agencies authority to adopt b ackstop standards. [OAR-2009-0472-7278.1, p.4]

The Clean Air Act affords EPA broad discre tion to shape its rulemakings to be as effective as possible. Section 202(a) of the Act provides that EPA shall propose “standards applicable to the emi ssion of any air pollutant fromany class of classes of new motor vehicles or new motor vehicle engine s, which in [EPA’s] judgment cause, or contribute, to air pollution whic h may reasonably be anticipated to endanger public health or welfare.28 It gives EPA si gnificant authority to prescribe the precise form of these standards, as the proposed rule rightly stat es.29 So, as the proposed rule states, “[a] backstop . . . could be adopted under section 202(a) of the [Clean Air Act].”30 EPA has

3-94EPA CO 2 Standards

already described the acute dangers of allowing continued increases in greenhouse gases in its proposed endangerment and cause or c ontribute findings.31 Give n that the statute’s “primary goal” is “pollution prevention,” ( 42 U.S.C. §7401(c)), EPA should be taking every measure to ensure that its proposed rule successfully drives reductions in the vehicular greenhouse gas emissions it has identif ied as an acute threat to public health
and welfare.

EPA’s prior work on setting greenhouse gas st andards for vehicle referenced a possible
“automatic ratchet.” EPA should determine wh at appropriate annual targets for cars and light trucks would be base d upon a steady increase to meet the 2016 standards – and, indeed, it has already done th is in the process of developi ng its attribute-based curves. Second, EPA would include a ‘ratchet’ mechanism in the rule that worked as follows: At the end of every year, EPA would determine wh ether the actual fleet produced in that year was consistent with its original predic tions. If not, EPA would automatically revise the attribute-based curves for the next y ear to make up the difference. Manufacturers would respond by either meeting the new sta ndards directly or by disgorging any credits they had earned through over-compliance in pa st years. In this way, the ‘backstop’ acts solely through adjustments in the attribute-based curves.

For the reasons we have already discussed in these comments, backstop standards help ensure that EPA’s goals will be met, acting to buffer the attribute-based curve system from unanticipated problems. EPA should adopt this valuable tool. It is, moreover, particularly important the EPA do so if NHTSA ultimately does not. Because EPA’s rules intertwine with NHTSA’s, EPA could be badl y undermined if neither it nor NHTSA put a backstop in place. In sum, backstop standard s are not hard to writ e and, if the systemfunctions properly, may never need to be implemented. They are a valuable form of lowcost insurance, available to both agencies as they work to help America solve the “urgent and closely intertwined challenges of energy independence and global warming.”

28 42 U.S.C. § 7521(a)(1).

29 See 74 Federal Register at 49,464 (collecting cases, including NRDC v. EPA , 655 F.2d 318 (D.C. Cir. 1981)).

30 74 Federal Register at 49,493; see also id. at 49,513 (describing, correctly, EPA’s broad authority to design effective rules).

31 See generally 74 Federal Register 18,886 (Apr. 24, 2009) at 49,458. We urge EPA and NHTSA to take the prudent course and put manufacturer specific, automatic ratchet backstops in place.

[See docket number [OAR-2009-0472-7278.1, pp.10-11]

[Sierra Club also submitted these comments as testimony at the De troit public hearing,
See docket number EPA- HQ-OAR-2009-0472-6185, p. 27.]

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United Auto Workers

The EPA requested comments on the desirabil ity of establishing alternative backstop standards for greenhouse gas emissions. The UA W believes that this is undesirable and unnecessary. Doing so would je opardize the carefully crafte d harmonization the agencies have achieved under these proposed regulations , eliminating or severely limiting the benefits of a unified national program and ra ising the cost of any particular level of regulation. [OAR-2009-0472-7056.1, p.2]

California Air Resources Board

The agencies sought comment on whether a ba ckstop should and can be implemented to guarantee emission reductions from these attr ibute-based standards. CARB strongly urges the EPA to include a backstop measure in the final rule. The fleet composition in model year 2008 – the baseline model y ear used by the agencies to project fleet composition in future years – demonstrated a significant shif t in consumer preference to smaller, more efficient passenger cars due to an unfores een increase in fuel prices and a declining economy. This shift in consumer preference wa s also noticeable in the recent “cash for clunkers” program. Additional uncertainties in the analysis of future fleet composition include: the methodology used by the agencies to project future fleet composition; the impact of early credits; future oil pr ices; and the impact of changing economic conditions. A backstop measur e would provide assurance that, regardless of any unforeseen changes in fleet mix, the GHG emission reductions expected from the program would be achieved.

Contrary to the Alliance’s argument (Document ID EPA-HQ-OAR-2009-0472-6952.1), Massachusetts et al. v. EPA said very little about EPA’s and NHTSA’s respective duties, did not direct the agencies to avoid inc onsistency, and does not preclude EPA from promulgating a backstop. 549 U.S. 497, 532 (2007) . Rather, the Court merely stated that the agencies could fulfill their respective ob ligations while avoidi ng the inconsistency. This nuanced distinction is important, as the Central Valley and Green Mountain further delineated those obligations and found that EP A can fulfill its public health and welfare mandate – which a backstop could serve to ensure – while NHTSA fulfills its fuel economy mandate.

In addition, the Alliance’s pr actical considerations, suggesting a backstop is unnecessary, are less than reassuring. First, manufacturers can increase ve hicle footprints and offset their supposed increased wei ght penalty by down weighting. Second, manufacturers need not change vehicle platforms mid-stream if thei r sales were originally targeted to larger
vehicle models than those estimated in th e joint proposal. Third, their extreme case of offsetting any increase in car efficiency by in creasing vehicle footprin t is a red herring; backstops typically under disc ussion instead are proposed (a s noted above) to preserve the greenhouse gas reductions envisioned for this program should any unforeseen changes in fleet mix occur. So rather than rely on an industry that has deftly exploited regulatory loopholes and marketing tricks to sell larger and heavier vehicles, EPA has an

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opportunity to ensure that the greenhouse gas emissions it is mandated to achieve actually come to fruition. [OAR-2009-0472-7189.1, pp.3-4]

[CARB also submitted these comments as te stimony at the Los A ngeles public hearing. See docket number OAR-2009-0472-7283, pp. 21-27]

Center for Biological Diversity

The Proposed Rule Should Include Backstops to Assure That Minimum Mileage and
GHG Emission Standards Are Met

As the court in Center for Biological Diversity determined, although EPCA does not explicitly require a backstop to assure that minimu m feasible average fuel economy standards are met for each model year, the Agen cies cannot act arbitrarily or capriciously in not adopting a backstop. Id. , 508 F.3d at 537-538. See also 49 U.S.C. § 32902(a)(6). Moreover, voluntary non-compliance with air pollution standards set under the Clean Air Act is not permitted. Proposed Rule, 74 Fed. Reg. 49522. In other words, the failure to meet a minimum “backstop” pollution standard vi olates the CAA. Here, the Proposed Rule contemplates so many credit swaps, special programs and other loopholes that it cannot predict what fuel efficiency standard or GHG emission st andard will actually be met in any given year....This outcome is impermissible under Center for Biological Diversity , 508 F.3d at

537-539. The Agencies should set backstops or el iminate all loopholes, credits and other
mechanisms that allow minimum standa rds to be flouted. [OAR-2009-0472-7265.1, p. 18]

National Automobile De alers Association (NADA)

EPA should defer to the CAFE program by not incorporating backstops into its GHG rules and by clarifying that it will adjust its mandates as necessary should initial feasibility and practicability calculations pr ove too ambitious. Any failure to do so would undermine the concept of a single National Program and, helping to prove the abovestated contention that the issuance of a duplicative EPA standard makes little sense. [OAR-2009-0472-7182.1, p.7]

Non-CO2 light-duty GHGs effectively are regul ated by CAFE and, to some extent, even by existing tailpipe standards. In light of their de minimis global warming potential compared to CO2 separate standards/b ackstops for non-CO2 GHGs are unnecessary and would be redundant. [OAR-2009-0472-7182.1, p.7]

Connecticut Department of Environmental Protection

First, DEP supports the proposed emissions st andards as cost eff ective and technically feasible. DEP also supports the use of flex ible individual manufacturer compliance plans as a cost mitigation policy, but believes such plans must- ultimately provide the anticipated fuel savings and GHG emission re ductions benefits associated with the

3-97EPA Response to Comments

proposed rules. In the event th at manufacturers default to wi despread vehicle upsizing as a compliance strategy, the proposed rules shou ld consider a trigger under which a back stop framework (either under the Clean Ai r Act, or the Energy Independence and Security Act) would be implemented. Lacki ng such a critical assurance, DEP believes future coordination among the states, the fe deral government and ve hicle manufacturers in the post 2016 timeframe will be di fficult to maintain. [OAR-2009-0472-7301, p.2]

State of New Jersey

In several places throughout the proposal, th e Agencies request commenter input on their
determination to use attribute-based standards. While we understand why the Agencies determined to rely on attribute-based sta ndards when establishing the federal motor vehicle control program, the Department is concerned with the attribute-based approach. By allowing manufacturers to meet less stringent fuel economy standards through expanding the vehicle's footprint, the at tribute-based approach could encourage manufacturers to produce larger vehicles.

If this were to occur, th e greenhouse gas reductions from the proposed standards may not be achieved. In addition, the impact of the ci vil penalty of $5.50 for each tenth of a mile per gallon is negligible for the manufacturers of trucks with larg er footprints. These
concerns could result in manu facturers * shifting to produce larger vehicles, which would significantly lessen the estimated greenhous e gas reductions estimated from the implementation of this proposal.

Because of these and other potential concer ns, the Department recommends that the Agencies establish a backstop measure in its final rulemaking to preserve the estimated reductions in greenhouse gas emissions. The ba ckstop could state thata certain fraction of the estimated greenhouse ga s emission reductions based on the current fleet mix must
he achieved under these rules or the backst op measure would become effective. [OAR2009-0472-7109.1, p.5]

Massachusetts Department of Environmental Protection

Shift of Light-Duty Trucks into the Car Category :A key element of the proposed rulemaking is that the increase in MPG and reduction in carbon emissions will be partly achieved by shifting most two-wheel drive S UV's into the car category, thereby falling under a requirement for higher MPG and lower carbon emissions. Thus, it is projected that cars, which are now around 50% of new car sales, will rise to 67% of such sales through this adjustment. However, it woul d be a relatively simple matter for manufacturers to avoid this shift by selling more four-wheel drive SUV's relative to two wheel-drive vehicles, and to provide consumers with incentives to make such purchases. Should this happen, the proportion of light-duty trucks in the fl eet might not fall nearly as much as EPA and NHTSA are projecting, and overall MPG could be substantially worse than the projections in the proposal.

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Massachusetts believes that EPA and NHTSA should take whatever steps are necessary to prevent such a result. One way to do th is would be to have a 'backstop' or recalculation of the MPG and emission requirement s every couple of years, so that if the fleet mix contains a higher pr oportion of light trucks than is currently forecasted, then separate requirements on both categories w ould be tightened. If this backstop were adopted in the final regulations, it could remove any incentive for the manufacturers to encourage shifts from two-wheel to four-wheel drive sales, thereby forestalling the need to implement the tightened standard.

[OAR-2009-0472-7195.1, p.2]

Washington Department of Ecology

Second, history shows that efficiency and em issions reduction gains from motor vehicle emission control can be offset by changes inthe fleet mix between passenger cars and light duty trucks. For example, the shift from cars to SUVs increased smog-forming emissions and led California and EPA to adopt uniform emission standards for most passenger vehicles. Ecology urges EPA and NH TSA to consider a potential backstop mechanism to preserve the projected GHG re ductions over time should the future fleet mix change significantly . [OAR-2009-0472-7299, p.2]

Mass Comment Campaign (2322, unknown organization)

The best defense would be the establishment of a 'backstop' to preserve oil savings and greenhouse gas reductions projected unde r this program. [OAR-2009-0472-5747, p.1]

University of Pennsylvania Environmental Law Project

Another significant problem with the proposed rule is that it is based on uncertain projections of future vehicle footprints, vehicle fleet comp osition, miles driven, and other relevant variables. While it is obviously unavoidable to base the policy on uncertain future outcomes to some degree, the po licy does not guarantee any reduction in greenhouse gas emissions. While it is desirable to maintain a degree of flexibility, it is also essential that greenhouse gas emissions are significantly curt ailed. Thus, the policy should create mechanisms whereby minimum reductions are ensured, even if the projections turn out to be in si gnificant error. [OAR-2009-0472-7286.1, p. 18]

American Lung Association of California

The American Lung Association of California urges the federal EPA to move forward to adopt the proposed Clean Cars standard, and to adopt the strengthening changes recommended by the Natural Resources Defe nse Council and the Union of Concerned Scientists. These recommendations include: 1) add an automaker specific backstop to ensure that the expected le vel of greenhouse gas emissions reductions are achieved. [OAR-2009-0472-7216, p. 2]

3-99EPA Response to Comments

Environment Michigan

[These comments were submitted as testim ony at the Detroit public hearing. See docket number EPA-HQ-OAR-2009-0472-6185, p. 69.]

In addition to addressing these specific issu es, we urge you to incl ude a backstop in the program that will ensure that the progra m meets the President's goals for reducing pollution and saving oil.

Environment New Jersey

And then, finally, we definitely want to make sure there is a back stop in the program to make sure the program meets the President' s goals for reducing pollution and saving oil. [EPA-HQ-OAR-2009-0472-4621, p.76]

Citizen Kathy Seal

[These comments were submitted as testimony at the Los Angeles public hearing. See docket number OAR-2009-0472-7283, p.148]

Please consider also the backstop measures to ensure that industry stays on track, the backstop measures that I believe other people have already described today on the panels.

Mass Comment Campaign (326, Student PIRGs)

President Obama has promised that the st andards will cut carbon dioxide pollution by 950 million metric tons and oil use by 1 .8 bill ion barrels of oil ove r the lifetime of the vehicles sold under the program. However, th e proposed standards include loopholes that put these goals at risk. To ensure that the President's goals for reducing pollution and cutting oil use are met, please include a b ackstop in the final rule. [EPA-HQ-OAR-2009- 0472-11293, p. 1]

EPA Response:

Whether EPA Has the Statutory Authority to Establish GHG Emissions Backstops

EPA received only a few comments that direct ly address the question of whether EPA has the statutory authority to establish one or more GHG emissions backstops. Ford claimed that EPA’s statutory authority is “highly questionable,” with its main legal arguments being that the Clean Air Act does not mention the concept of backstop standards, and that backstop standards would yiel d “two sets of standards” and that “there is nothing in the CAA to suggest that Congre ss intended multiple ‘layers’ of standards to apply to vehicle emissions.” The Alliance of Automobile Manufacturers stated that EPA authority was “unclear.” Toyota stated that “EPA’s authority may be ambiguous.”

3-100EPA CO 2 Standards

On the other hand, Sierra Club emphasized EP A’s “broad discretion” under the CAA and argued that EPA does have th e authority to es tablish GHG emissions backstops. Many other commenters (see next se ction) that endorsed GHG emissions backstops presumably
believe that EPA does have st atutory authority in this ar ea, though they did not address the legal arguments.

EPA agrees with the Sierra Club and strongly reaffirms its position from the proposal that EPA has the discretion to adopt GHG emissions backstops, where appropriate in light of
the factors relevant unde r section 202(a)(1).

Whether EPA Should Establish GHG Emissions Backstops

Most of the comments that EPA received on backstops pertained to whether EPA should or should not adopt GHG emissions backstops.

Many commenters supported the establishment of GHG emissions backstops: Northeast States for Coordinated Air Use Manageme nt, Public Citizen/Safe Climate Campaign, Union of Concerned Scientists, Natural Resources Defense Council, American Council for an Energy Efficient Economy, California State Senator Fran Pavley, Sierra Club, California Air Resources Board, Center for Bi ological Diversity, Connecticut Department of Environmental Protection, State of Ne w Jersey, Massachusetts Department of Environmental Protection, Washington Department of Ecology, University of Pennsylvania/Environmental Law Project, American Lung Association of California, Environment Michigan, Envir onment New Jersey, and citize n Kathy Seal. EPA also received short, “mass comments” from over 2000 private citizens supporting GHG emissions backstops. The primary argument of supporters was that backstops were necessary, as stated by the Natural Resources Defense Council, “to prevent intentional
and unintentional market shifts from underm ining the environmental and oil savings benefits of the Program.” The most comm on concern cited by many of the commenters was that the proposed truck footprint curves yield higher GHG emissi ons targets than the car footprint curves, for the same footprin t values, and that this could lead some
manufacturers to consider changes to increase truck market share and decrease car market share. Doing so would decrease the overall GHG savings associated with the standards. In addition, some commenters stated that manufacturers mi ght build larger vehicles (“upsize”) than EPA projects, for example, b ecause any amount of slope in target curves could encourage manufacturers to upsize.

Some commenters were opposed to GHG emissi ons backstops: Ford Motor Company,
Association of International Automobile Manufacturers, Alliance of Automobile Manufacturers, Toyota Motor North America, United Auto Workers, and the National Automobile Dealers Association. Opponent s of backstops argued that upsizing was unlikely and emphasized the anti-backsliding char acteristics of the target curves (i.e., the
Alliance of Automobile Manufacturers and Toyota said that upsizing would not necessarily make compliance with applicable standards easier, since larger vehicles tend
to be heavier and heavier vehi cles tend to achieve worse fuel economy/emissions levels). Backstop opponents also claimed that unive rsal backstop standards could restrict

3-101EPA Response to Comments

consumer choice of vehicles. Finally, oppone nts argued that if EPA were to adopt backstop standards while NHTSA did not, th is would create “new inconsistencies between the two programs, rather than furt her the goal of harmoni zation” (Ford Motor Company).

EPA is not finalizing GHG emissions back stop standards for the following reasons.

One, EPA is confident that our projections of the future fleet mix are reliable, and that future changes in the fleet mix of footprints a nd sales as a result of this rule are not likely to lead to more than modest changes in projected GHG emissions reductions. The agencies acknowledge that based on economic and consumer demand factors that are external to this rule, the distribution of footprints in the fu ture may be different (either smaller or larger) than what is projected in th is rule. However, the agencies continue to believe that there will not be significant shifts in this distribution as a direct consequence
of this rule.

As explained elsewhere in the rulemaking doc uments, EPA’s projections of the future fleet are based on the most reliable, transparent information currently available. Moreover, recent market trends are consiste nt with EPA’s future fleet projections, showing shifts from light trucks to passe nger cars and increased emphasis on higher fuel economy and lower greenhouse gas emissions. For example, NHTSA’s March 2009 final rule establishing MY 2011 CAFE standards wa s 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 ove rall light-duty fleet. Based on EPA and NHTSA’s 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, for passenger cars, light trucks, and the overall light-duty fleet.

Two, EPA does not believe that the risk of changing vehicle offerings to “game” the passenger car and light truck de finitions is as great as some commenters imply for the model years in question. NHTSA’s recent clar ification of the light truck definitions, which EPA is adopting in its vehicle clas sifications for the GHG program, has reduced the potential for gaming, and resulted in the reclassification of over a million vehicles from the light truck to the passenger car fl eet. The changes that commenters suggest manufacturers might make may not be 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 i nherently lower fuel economy than their 2WD equivalent models. Therefore, although th ere 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 additio nal maintenance requirements; conversely, many manufacturers often require the 2WD option to satisfy demand for base vehicle

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models. Additionally, increasing the footprint of vehicles involves platform changes, which usually requires a product redesign phase. 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, whic h also requires a significant change in the vehicle’s overall design.

Three, EPA believes that the shapes of the car and truck footprint curves, including the “flattening” at the largest footprint valu es, 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’ GHG emissions and fuel economy mapped against th eir footprint), the agencies believe that there is little real benefit to be gained by a manufacturer upsizing its vehicles. The agencies’ analysis indicates that, for passenge r car models with foot prints falling between the two flattened portions of the car footprint curve, the actual slope of fuel economy with respect to footprint, if f it to that data by itself, is about 27 percent steeper than the curve being promulgated today. This differe nce suggests that manu facturers would, if anything, ease their compliance burden by reduc ing vehicle footprint than by increasing vehicle footprint. For light trucks, the agenci es’ analysis indicates that, for models with footprints falling between the two flattened portions of the corres ponding curve, the slope of fuel economy with respect to footprin t is nearly identical to the curve being promulgated today. This suggests that, with in this range, manufacturers would typically have little incentive to either incrementally increase or reduce vehicle footprint. A number of commenters, including Honda , affirmed that this is the case.

At the same time, adding another backstop stan dard would have virtually no effect if the standard was weak, but a more stringent backstop could compromise the objectives served by attribute-based sta ndards – that they distribu te compliance burdens more equally among manufacturers, and at the same time encourage manufacturers to apply fuel-saving technologies rather than simply dow nsizing 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 irrespectiv e 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 proj ected 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 5 but resulting in an industry wide ba sis 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 w ould be above the backstop even if the performance of the entire industry remains fully consistent w ith the emissions and fuel economy levels projected for the final standards. For th ese manufacturers and any other manufacturers who were above the backstop, th e objectives of an attribut e 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 backst op standard such that costs are likely to be imposed on

5 Based on estimated standards presented in Preamble tables III.B.1-1 and III.B.1-2.

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manufacturers only when there is a failure to achieve the projected reductions across the industry as a whole. See comments from Ford Motor Company above supporting this reasoning. An example of this kind of industry wide situation could be when there is a significant shift to larger vehicl es across the industry as a whol e, 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 thanoffset by shifts the other way in another manufacturer's fleet. However, in this respect, a traditiona l backstop acts as a manufacturer specific standard.

While the simplest form of GHG emissions back stop is a universal stan dard, i.e., a single gram/mile level that no manufacturer c ould exceed, a few commenters suggested alternative GHG emissions backstop appr oaches. The most common alternative approach suggested by commenters was an industry-wide “trigger” or “ratchet” approach, whereby EPA would build into the standards an automatic lowering or flattening of the GHG-footprint curves if the industry-wide model mix and footprint characteristics changed sufficiently to reduce the actual GHG em issions savings relative to the projected GHG emissions savings. The concept of a ratchet mechanism recognizes the problem discussed above,, 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 su ch standards would still need to provide adequate lead time for the manufacturers. Given the short lead-time already before the 2012 model year, a ratchet mechanism in th is rulemaking that would automatically tighten the standards at some point after m odel year 2012 is finished and apply the new more stringent standards for model years 2016 or earlier, would fail to provide adequate lead time for any new, more stringent st andards. Since the GHG emissions standards remain in effect unless and until they are chan ged, there would be greater lead time for future years beyond model year 2016. Howeve r, as discussed below, EPA believes the
better course is to monitor model mix and f ootprint characteristics, and associated GHG emissions reductions, and recons ider this issue in the future if a problem arises.

EPA believes that it has ample reasons to choose not to exercise its discretion under section 202 (a) (1) to ad opt a backstop. EPA consequently disagrees with the Center for Biological Diversity that any choice not to adopt a backstop would be impermissibly arbitrary.

Although EPA is not adopting GHG emissions backstops, EPA plans to conduct and document retrospective analyses to evaluate the model mix and footprint characteristics of the future fleet during the rulemaking timef rame and to compare these characteristics to what EPA has projected in this rulemaking an alysis. If EPA determines that there is a significant shift in the industry’s product mix resulting in a relaxation of their estimated targets and overall GHG emissions savings, EPA will reconsider the relative merits of GHG emissions backstops in future rulemakings under the CAA.

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