From: William Charmley/AA/USEPA/US To: "Achanta, Chandana L." <Ch andana_L._Achanta@ omb.eop.gov> Cc: Moran.robin@epa.gov, james.tamm@dot.gov, Steve.Wood@dot.gov, Ed Nam/AA/USEPA/US@EPA, Steve.Wood@dot.gov Date: 03/29/2010 02:47 PM Subject

: 2 items for LD GHG/CAFE rule: TSD referenc e to other rulemaking discussion on fuel savings, and high-level summary of costs and benefits

Chandana -

here are two items for the package from Friday.

1. Insert at TSD Ch. 4, p. 6, at end of 4.2.2 Fuel prices and value of fuel savings

In the estimates of costs and benefits presented in the Preamble and the agencies’ RIAs, the agencies have included the full fuel savings over vehicles’ expected lifetimes, discounted to their present val ues using both 3 and 7 percent discount rates. More detailed discussion of this approach can be found in Preamble Sections III.H.1 and IV.G.6, in Section 8.1 of EPA’s RIA, and in Chapter VIII of NHTSA’s RIA.

2. Table for EPA high-level costs and benefits of the rule. This is in Section I.C.2. We will put the same table with very similar text into the Executive Summary of the EPA RIA [attachment "EPA Table I.C.2-1.doc " deleted by Tad Wysor/AA/USEPA/US]2. Summary of Costs and Benefits of EPA's GHG Standards

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

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

Costs $51.5 Benefits $240 Net Benefits $189 7% Discount Rate

Costs $51.5 Benefits $192 Net Benefits $140

a Although EPA estimated the benefits asso ciated with four different values of a one ton GHG reduction ($5, $21, $35, $65), for the purposes of this overview presentation of estimated costs and benefits EPA is showing the benefits associated with one of these marginal values, $21 per ton of CO 2 , in 2007 dollars and 2010 emissions. As noted in Section III.H, S CC increases over time . The $21/ton value applies to 2010 CO 2 emissions and grows larger over time.

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

c Monetized GHG benefits exclude the value of reductions in non-CO2 GHG emissions (HFC, CH4 and N2O) expected under this final rule. Although EPA has not monetized the benefits of reductions in these non-CO2 emissions, the value of these reductions should not be interpreted as zero. Rather, th e reductions in nonCO2 GHGs will contribute to this rule’s c limate benefits, as explained in Section III.F.2. The SCC TSD notes the differenc e between the social cost of non-CO2 emissions and CO2 emissions, and specifies a goal to develop methods to value non-CO2 emissions in future analyses.