OFFICE OF AIR AND RADIATION UNITED STATES ENVIRONMENTAL PROTECTION AGENCY

WASHINGTON, D.C. 20460

The Honorable James M. inhofe Ranking Member Committee on Environment and Public Works United States Senate Washington, D.C. 20510
Dear Senator Irthofe: Thank you for your February 28, 2012, letter regarding the U.S. Environmental Protection Agency's and the Department of Transportation's (DOT) proposal to improve fuel economy and reduce greenhouse gas emissions for model year 2017-2025 light-duty vehicles. The Administrator asked that I respond on her behalf. I welcome the opportunity to provide you with an overview of this proposed rulemaking and respond to your specific questions. Under the President's leadership, the EPA and DOT have developed a proposed rule, which is good for the American economy and consumers, improves our environment, reduces our dependence on foreign oil, and strengthens the nation's energy security. The first phase of the national program to improve fuel economy and reduce greenhouse gas emissions from passenger cars and light trucks, including SUVs, crossovers, and rninivans, for model years (MY) 2012-2016 was finalized in April, 2010. The MY 2017-2025 light-duty proposal, released on November 16, 2011, builds on the success of the 2012-20 16 program. This second phase is projected to save approximately 4 billion barrels of oil and 2 billion metric tons of greenhouse gas emissions over the lifetimes of those vehicles. Consumers purchasing MY 2017-2025 vehicles would also experience significant fuel savings at the pump, far outweighing higher vehicle cost. On average, consumers who buy a new MY 2025 vehicle will save $5,200 to $6,600 in fuel costs during the lifetime of the vehicle. These fuel savings more than offsets the higher lifetime costs for new vehicle technology (about $2,200 on average), for a net lifetime savings of $3,000 to $4,400. These important national programs have garnered wide-spread support as models for how government can effectively work with a wide range of stakeholders to develop thoughtful, data-driven standards, which are supported by the regulated industry, consumer groups, labor unions, states, environmental organizations, and industry suppliers. We are proud of how the EPA and DOT have successfully worked together to create common sense standards that benefit all Americans.

Internet Address LJRLI . htrp //WWWePa gay Recycled/Recyclable . Pnrrted wrttr Vegetable Oil Based Inks on 1OO Postconsumer Process ChIorrn Free Recycled PaperAs you are aware, the MY 2017-2025 light-duty proposed rule was released on November 16, 2011.

Between January 17 and 24, the EPA and the National Highway Traffic Safety Administration held three public hearings in Detroit, Philadelphia and San Francisco. Nearly 400 people testified and many more attended the hearings. The written comment period closed on February 13, 2012, and to date we have received more than 290,000 comments, including extensive written comments from more than 140 organizations. The agency is fully reviewing and analyzing the public comments as we work toward a final rule. Your letter posed five specific questions, and our responses are provided in the enclosure. Again, thank you for your letter. If you have further questions, please contact me or your staff may call Patricia Haman in EPA's Office of Congressional and Intergovernmental Relations at (202) 564-2806.

Gina McCarthy Assistant AdministratorResponses to Ouestions from Senator Inhofe's February 28. 2012 Letter

1. On what basis does EPA conclude that its proposed rule's deleterious effect on PM2.5 emissions will be offset within the proposed GHG regulations? In the Joint EPA/DOT rulemakin, the EPA proposed greenhouse gas emissions standards that will result in a net reduction of PM 2
, 5 . In 2030, the EPA estimates that the MY 20 17-2025 light-duty standards would reduce total PM inventories by 3,123 short tons. 2 The EPA analyzed the impact the proposed MY 2017-2025 light-duty vehicle GHG rule would have on PM 2.5 and other non-GHG pollutants in both 2020 and 2030. For PM 2.5 , the EPA estimates reductions in "upstream" PM2.5 emissions, including reductions from fuel refining, distribution and transport as a result of the proposed standards, We also estimated "downstream" increase in PM 2.5 due to people driving more. The rule effectively makes the cost per mile of driving lower for consumers, increasing the likelihood that they will drive more. This is known as the "rebound effect." Thus this downstream PM 2.5 increase is a result of a predicted change in driving behavior consistent with the economic literature, as well as the past four Corporate Average Fuel Economy (CAFE) rulemakings. In addition, we also estimate a small increase in PM 2
, 5 from power plants as electric powertrain vehicles increase in prevalence as a result of this rule. With regard to advanced engine technologies, such as "gasoline direct injection fuel systems" or GDI, there are various forms of this technology in production today. While some initial designs are not yet optimized for PM emissions performance, the EPA believes that industry will have adopted the cleanest forms of ODI by the timeframe of this rule, It should be noted that all light-duty vehicles must meet the same PM emissions standards under this proposed rule.
2. If the GHG regulations will not themselves offset EPA's own increase In PM 2 . 5emissions, then on what basis does EPA have authority to increase public exposure to this pollutant? As explained in our response to question 1, the EPA's proposed greenhouse gas emissions standards for MY 20 17-2025 light-duty vehicles will result in a net reduction 3,123 short tons of PM2.5.
3. How much of the PM 2 , 5emissions problem created by EPA's GHG standards will be offset by the proposed Tier 3 fuel regulations? As explained in response to question 1, the EPA estimates that the MY 2017-2025 proposed GHG standards will reduce total PM inventories. The vehicles we expect to be produced as a result of the MY 2017-2025 light-duty vehicle standards will not increase PM 2.5 ; all vehicles must meet the EPA's existing PM standards. The Tier 3 proposal would reduce motor vehicle emissions and help state and local areas attain and maintain the existing health-based air quality standards, including the National Ambient Air Quality Standard (NAAQS) for ozone, in a cost-effective and timely way.

4. On what basis can EPA guarantee that its GHG regulations, lacking a "0.15 multipLier" for CNG and alternative fuel vehicles, will not limit auto companies' utilization of NHTSA's own proposed 0.15 "multiplier?" The proposed greenhouse gas standards in no way limit the number of natural gas vehicles auto companies can introduce into the market. We proposed that compliance values for natural gas vehicles

'76 Fed. Reg. 74,854, 75,100-75,101 (Dec. 1,2011). 2 76 Fed. Reg. at 75,101.be based on their demonstrated emissions performance. Because of natural gas' fuel properties, natural

gas vehicles typically have lower greenhouse gas emissions (up to 25% lower) than a comparable gasoline vehicle. If the natural gas vehicle is optimized for the high octane of natural gas fuel, its greenhouse gas emissions could be even lower. It is true that this greenhouse gas emissions compliance benefit is not as great as the CAFE credits that are currently available to natural gas vehicles. The EPA has received public comments on this matter, and is considering whether to offer additional regulatory incentives in the final rule. 5. If there is a residual possibility for conflict between EPA's and NHTSA's proposed rules, with respect to NHTSA's 0.15 "multiplier," then on what basis does EPA have authority to limit NHTSA's implementation of Congress's statutes and policies favoring that incentive program for CNG and alternative fuel vehicles? The EPA's proposal to base greenhouse gas emissions compliance on actual emissions performance is based on our Clean Air Act authority. We believe that basing emissions compliance on demonstrated emissions performance is a reasonable exercise of our discretion under the Clean Air Act. We requested comments on mechanisms to create incentives for CNG and CNG vehicles in the proposal. As stated in question 4, the EPA has received public comments on this matter, and will be considering whether it is appropriate to grant additional regulatory incentives to CNG vehicles in the final MY 2017- 2025 greenhouse gas standards.