# Light

- Duty Vehicle Greenhouse Gas Emission Standards and Corporate Average Fuel Economy Standards

EPA Response to Comments Document for Joint RulemakingEPA-420-R-10-012 April 2010 Assessment and Standards Division Office of Transportation and Air Quality U.S. Environmental Protection Agency 

# Light

- Duty Vehicle Greenhouse Gas Emission Standards and Corporate

Average Fuel Economy Standards

EPA Response to Comments Document for Joint RulemakingIntroduction

The following is the Environmental Protection Agency’s (EPA) Response to Comments document for the EPA and National Highway Tr affic Safety Administration (NHTSA) Joint Rulemaking: Light-Duty Vehicl e Greenhouse Gas Emission Standards and Corporate Average Fuel Economy Standards. The following doc ument contains verbat im excerpts of the commenter’s text followed by EPA’s responses . Citizen comments that raised unique substantive issues are include d. In addition, several thousand citizens commented through mass e-mail campaigns; these comments are not includ ed individually, but ra ther examples are provided. The comments and responses are organized by topic (see Table of Contents prior to each section) to help the reader find comments and responses of interest. An index of commenters and the associated docket numbers is also provided.

This is an EPA document and does not contai n NHTSA’s responses to comments. NHTSA’s responses to comments are contained in the joint preamble and the NHTSA Final Regulatory Impact Analysis (RIA) for the rule.

iiTABLE OF CONTENTS

Index of Proposal Commenters

1. General Comments 1-1 2. Reserved 2-1 3. EPA CO 2 Standards 3-1 4. EPA Response to Comments on Joint Issues and Technical Work 4-1 5. EPA Vehicle Program and Estimated Impacts 5-1 6. Reserved 6-1 7. Other Comments 7-1

iiiIndex of Proposal Commenters Proposed Rulemaking To Estab lish Light-Duty Vehicle Greenhouse Gas Emission Standards and Corporate Average Fuel Economy Standards

Commenter Abbreviation Docket ID Number(s) Adcock, James OAR-2009-0472-5385 Air Permitting Forum OAR-2009-0472-0128, 7253 NHTSA-2009-0059-0128
Alliance of Automobile Manuf acturers Alliance OAR-2009-0472-6952
Aluminum Association NHTSA-2009-0059-0067.1, 0067.2, 0067.3, 0067 American Chemical Society OAR-2009-0472-3985 American Chemistry Council ACC OAR-2009-0472-8259 American Chemistry Council, American Iron and Steel Institute, American Meat Institute, Corn Refiners Association, National Oilseed Processors Association NHTSA-2009-0059-0094.1, 0094

American Council for an Energy Efficient Economy OAR-2009-0472-7260

American Farm Bureau Federation AFBF OAR-2009-0472-7172, 7171 American Forest and Paper Association AF&PA OAR-2009-0472-7126
American Iron and Steel Institute OAR-2009-0472-7088 American Lung Association of California OAR-2009-0472-7216
American Petroleum Institute OAR-2009-0472-0089.1, 0089, 7143 NHTSA-2009-0059-0089.1, 0089
Arizona Public Service APS OAR-2009-0472-7107 Artega Automobil GmbH & Co. KG OAR-2009-0472-7481
Arthur G. Randol OAR-2009-0472-7254
Association of International Automobile Manufacturers AIAM OAR-2009-0472-0084.1, 0084, 7123 NHTSA-2009-0059-0084.1, 0084 Aston Martin Lagonda OAR-2009-0472-7217 Automotive Aftermarket Industry Association AAIA; et.al OAR-2009-0472-7057

BCCA Appeal Group the Group OAR-2009-0472-7505 Bieling, Andrea OAR-2009-0472-8704 BiotectConnect, Inc. OAR-2009-0472-7203 BMW of North America, LLC BMW OAR-2009-0472-0092.1, 0092, 7145 NHTSA-2009-0059-0092.1, 0092 BorgWarner OAR-2009-0472-0076, 7289

ivNHTSA-2009-0059-0076 Brick Industry Association OAR-2009-0472-11279 Brooks, Dawn OAR-2009-0472-3851
California Air Resources Board OAR-2009-0472-7189
California Cotton Ginners A ssociation CCGA OAR-2009-0472-7139
California State Senate OAR-2009-0472-7532 Center for Auto Safety OAR-2009-0472-0117.1, 0117, 7259 NHTSA-2009-0059-0117.1, 0117 Center for Biological Divers ity OAR-2009-0472-0053.1, 0053, 0090.1, 0090, 0104.1, 0104.2, 0104.3, 0104.4, 0104.5, 0104.6, 0104.7, 0104.8, 0104, 0105.1, 0105.2, 0105, 0110.1, 0110.2, 0110.3, 0110.4, 0110.5, 0110.6, 0110.7, 0110, 0115.1, 0115.2, 0115.3, 0115.4, 0115.5, 0115.6, 0115.7, 0115.8, 0115, 0118.1, 0118.2, 0118.3, 0118.4, 0118.5, 0118, 7269 NHTSA-2009-0059-0053.1, 0053, 0090.1, 0090, 0104.1, 0104.2, 0104.3, 0104.4, 0104.5, 0104.6, 0104.7, 0104.8, 0104, 0105.1, 0105.2, 0105, 0110.1, 0110.2, 0110.3, 0110.4, 0110.5, 0110.6, 0110.7, 0110, 0115.1, 0115.2, 0115.3, 0115.4, 0115.5, 0115.6, 0115.7, 0115.8, 0115, 0118.1, 0118.2, 0118.3, 0118.4, 0118.5, 0118
Chamber of Commerce of the United States of America OAR-2009-0472-7233

Charleston Metro Chamber of Commerce OAR-2009-0472-7061 Chew, Yuli OAR-2009-0472-7042 Chrysler Group LLC Chrysler NHTSA-2009-0059-0124 Clark, Roy OAR-2009-0472-7257 Clean Energy Fuels OAR-2009-0472-7220 Coalition for Responsible Regulation OAR-2009-0472-7164 Competitive Enterprise Institute OAR-2009-0472-7281 Congress of Racial Equality OAR-2009-0472-7506
Consumer Federation of America OAR-2009-0472-7272 Consumers Energy OAR-2009-0472-7264
Council of Industrial Boiler Owners CIBO OAR-2009-0472-7271 County of Greenville NHTSA-2009-0059-0101 County of Greenville, SC OAR-2009-0472-8346
Cummins Inc. OAR-2009-0472-0077.1, 0077, 0080, 7205 NHTSA-2009-0059-0077.1, 0077, 0080 Custom Lights and Iron OAR-2009-0472-7110

vDenso International America, Inc. OAR-2009-0472-8765 Devon Energy Corporation OAR-2009-0472-10450 Dillard, Joyce OAR-2009-0472-7226 Dinter, Bridget OAR-2009-0472-7250 Dow Chemical Company Dow OAR-2009-0472-7221 Duke Energy OAR-2009-0472-7136 Dynamic Research, Inc OAR-2009-0472-0112.1, 0112, 7238 NHTSA-2009-0059-0112.1, 0112 Ecology Center OAR-2009-0472-4068
Edison Electric Institute OAR-2009-0472-7212 Energy, Environmental & Public Utility Practice Group OAR-2009-0472-8884

Energy-Intensive Manufacturers Working Group OAR-2009-0472-11276

Environmental Defense Fund OAR-2009-0472-7285
eTec OAR-2009-0472-7670 European Automobile Manufacturer's Association OAR-2009-0472-7444

European Small Volume Car Manufacturers' Alliance ESCA OAR-2009-0472-7287

Ferrari S.p.a OAR-2009-0472-7230, 7214
Fertilizer Institute OAR-2009-0472-7279 Fisker Automotive, Inc. OAR-2009-0472-8732 Ford Motor Company OAR-2009-0472-0063.1, 0063, 0068.1, 0068, 7082 NHTSA-2009-0059-0063.1, 0063, 0068.1, 0068 Ford, Jonathan L. OAR-2009-0472-7674 Fraas, Arthur, G. OAR-2009-0472-7523
Fran Jackson OAR-2009-0472-4064 Fuji Heavy Industries USA, Inc. Subaru NHTSA-2009-0059-0070.1, 0070
General Motors OAR-2009-0472-6953 Georgia Department of Natu ral Resources OAR-2009-0472-7150 Georgia-Pacific GP OAR-2009-0472-7122 Gluckstern, Henry OAR-2009-0472-5258 Guardian Industries Corp. OAR-2009-0472-7124 Hagen, David L. OAR-2009-0472-7218 Hartung, Lynn OAR-2009-0472-4070 Heritage Foundation OAR-2009-0472-7052 Herzlich Consulting, Inc. OAR-2009-0472-4567

viHonda Motor Company NHTSA-2009-0059-0095.1, 0095 Honeywell International, Inc. OAR-2009-0472-7206 Honeywell Transportation Systems OAR-2009-0472-7248 Hyde, James OAR-2009-0472-7258 Hyundai Motor Company OAR-2009-0472-0103.1, 0103, 7231 NHTSA-2009-0059-0103.1, 0103 IMPCO Technologies, Inc. OAR-2009-0472-7282 Industry Coalition OAR-2009-0472-7673
INRIX NHTSA-2009-0059-0079.1, 0079 Institute for Energy Research OAR-2009-0472-7225 Institute for Liberty OAR-2009-0472-7284 Institute for Policy Integrity at New York University School of Law and Environmental Defense Fund OAR-2009-0472-0114.1, 0114.2, 0114, 7246 NHTSA-2009-0059-0114.1, 0114.2, 0114

Insurance Institute for Highway Safety IIHS NHTSA-2009-0059-0125.1, 0125
International Council on Clean Transportation OAR-2009-0472-0093.1, 0093, 7156 NHTSA-2009-0059-0093.1, 0093
Investor Network on Climate Risk OAR-2009-0472-7243 Jaguar Land Rover OAR-2009-0472-0081, 7504 NHTSA-2009-0059-0081 Johnson, Kenneth C. OAR-2009-0472-0134.1, 0134, 7135 NHTSA-2009-0059-0134.1, 0134 Karplus, Valerie J. OAR-2009-0472-7280 Kleinbaum, Rob OAR-2009-0472-4074 Koenigsegg Automotive AB OAR-2009-0472-7194 KTM-Sportsmotorcycle AG OAR-2009-0472-7183
Lance Tunick OAR-2009-0472-7293, 7208 Lawrence Berkeley National Laboratory OAR-2009-0472-0060.1, 0060, 6696 NHTSA-2009-0059-0060.1, 0060 League of Women Voters of South Carolina LWVSC OAR-2009-0472-0137, 11309 NHTSA-2009-0059-0137
Lotus Cars Ltd. OAR-2009-0472-0066, 7249 NHTSA-2009-0059-0066
Manufacturers of Emission Controls Association OAR-2009-0472-7108

Mass Comment Campaign (13,829, Union of Concerned Scientists) OAR-2009-0472-3906

Mass Comment Campaign (18,583, unknown organization) OAR-2009-0472-3907

viiMass Comment Campaign (19, unknown organization) OAR-2009-0472-5748

Mass Comment Campaign (2,332, unknown organization) OAR-2009-0472-5747

Mass Comment Campaign (27,307, Alliance for Climate Protection) OAR-2009-0472-7295

Mass Comment Campaign (32,918, Sierra Club) OAR-2009-0472-5749

Mass Comment Campaign (326, Student PIRGs) OAR-2009-0472-11293

Mass Comment Campaign (48 unknown organization) OAR-2009-0472-10556

Mass Comment Campaign (7,239, unknown organization) OAR-2009-0472-3905

Massachusetts Department of Environmental Protection OAR-2009-0472-7195

MD McLaren Automotive Ltd. OAR-2009-0472-0078, 7288 NHTSA-2009-0059-0078
Mercedes-Benz Daimler AG OAR-2009-0472-7204 Mindful Consumption, Inc. OAR-2009-0472-5327 Mississippi Department of Environmental Quality OAR-2009-0472-7102

Missouri Department of Natural Resources, Air Pollution Control Program OAR-2009-0472-0051.1, 0051, 7480 NHTSA-2009-0059-0051.1, 0051
Mitsubishi Motors R & D of Am erica MRDA OAR-2009-0472-0085.1, 0085, 0127.1, 0127.2, 0127, 7125 NHTSA-2009-0059-0085.1, 0085, 0127.1, 0127.2, 0127 Morgan Motor Company Ltd. OAR-2009-0472-7190 Morton, Jim OAR-2009-0472-3639 Motor and Equipment Manufacturers Association OAR-2009-0472-0083.1, 0083, 7121 NHTSA-2009-0059-0083.1, 0083 National Asphalt Pavement Association OAR-2009-0472-7224
National Association of Clean Air Agencies NACAA OAR-2009-0472-7071

National Association of Home Builders NAHB OAR-2009-0472-11278
National Association of Ma nufacturers OAR-2009-0472-0082, 7215 NHTSA-2009-0059-0082
National Automobile Dealers Association NADA OAR-2009-0472-7182
National Climate Coalition NHTSA-2009-0059-0086.1, 0086

viiiNational Cotton Ginners Association OAR-2009-0472-7209 National Mining Association NMA OAR-2009-0472-7237
National Petrochemical & Refiners Association OAR-2009-0472-7234

National Renewable Energy Laboratory OAR-2009-0472-4798
National Rural El ectric Cooperative Association OAR-2009-0472-7252

Natural Resources Defense Council OAR-2009-0472-0129, 7530, 7274 NHTSA-2009-0059-0129 New York City Law Department OAR-2009-0472-0091.1, 0091, 7240 NHTSA-2009-0059-0091.1, 0091 New York State Department of Environmental Conservation OAR-2009-0472-7454

New York State Department of Transportation NYSDOT OAR-2009-0472-0098, 7531 NHTSA-2009-0059-0098 New York University School of Law, Institute for Policy Integrity IPI OAR-2009-0472-0111.1, 0111.2, 0111, 7232 NHTSA-2009-0059-0111.1, 0111.2, 0111
NGVAmerica OAR-2009-0472-7236 NISEI Farmers League OAR-2009-0472-7142
Nissan North America OAR-2009-0472-6798
Northeast States for Coordinated Air Use Management OAR-2009-0472-7235

Pacific Unitarian Church, Green Sanctuary Project OAR-2009-0472-7241

Peabody Energy Company OAR-2009-0472-7223 Pendleton, Tom OAR-2009-0472-2094 People's Republic of China OAR-2009-0472-0135.1, 0135, 11269 NHTSA-2009-0059-0135.1, 0135
Pew Center OAR-2009-0472-7239 Pittsburgh Glass Works OAR-2009-0472-0109.1, 0109, 7244 NHTSA-2009-0059-0109.1, 0109 Porsche Cars North America, Inc. OAR-2009-0472-7431
Portland Cement Association OAR-2009-0472-7207 Process Engineers OAR-2009-0472-7166
Public Citizen and Safe Clim ate Campaign OAR-2009-0472-0071.1, 0071, 7050 NHTSA-2009-0059-0071.1, 0071 Public Hearing Transcript, Detroit OAR-2009-0472-6185 Public Hearing Transcript, Los Angeles OAR-2009-0472-7283 Public Hearing Transcript, New York OAR-2009-0472-4621

ixPurigeN98 OAR-2009-0472-7201 Recreational Vehicle Industry A ssociation RVIA NHTSA-2009-0059-0107 Rose, Stephen OAR-2009-0472-0106.1, 0106, 7276 NHTSA-2009-0059-0106.1, 0106
Saab Automobile AB Saab OAR-2009-0472-7103
SABIC Innovative Plastic OAR-2009-0472-7090 SCANA Corporation OAR-2009-0472-7316 Schade, Michael T. OAR-2009-0472-7261.1 Seeds of Hope OAR-2009-0472-7111 Shaw, Donald F. OAR-2009-0472-7270
Sierra Club OAR-2009-0472-7635
Sierra Research Inc. OAR-2009-0472-7977 Society of Motor Manufacturers and Traders Limited OAR-2009-0472-7229

South Carolina Chamber of Commerce OAR-2009-0472-7298 South Carolina Department of Health and Environmental Control OAR-2009-0472-0075, 7202

NHTSA-2009-0059-0075
South Carolina Manufacturers Alliance SCMA OAR-2009-0472-7296 South Carolina Pulp & Paper Association SCPPA OAR-2009-0472-7479
South Carolina Wildlife Federation OAR-2009-0472-0136, 11303 NHTSA-2009-0059-0136
Southeastern States Air Resource Managers, Inc. SESARM OAR-2009-0472-7137

Spurgeon, C. M. OAR-2009-0472-7092 Spyker Cars OAR-2009-0472-7277 Stanton, Neil OAR-2009-0472-10169
State of California NHTSA-2009-0059-0087.1, 0087
State of Connecticut OAR-2009-0472-0120, 7499 NHTSA-2009-0059-0120 State of Connecticut Department of Environmental Protection OAR-2009-0472-0097, 7301 NHTSA-2009-0059-0097 State of New Jersey OAR-2009-0472-0073, 0074, 7109 NHTSA-2009-0059-0073, 0074 State of Washington Department of Ecology OAR-2009-0472-7299

Steiner, John OAR-2009-0472-8705
Stockholm Environment Institute-US Center OAR-2009-0472-7432

xTexas Chemical Council TCC OAR-2009-0472-7294, 7290
Texas Commission on Environmental Quality OAR-2009-0472-7180

Texas Cotton Ginners Association OAR-2009-0472-7081 Texas Department of Agri culture OAR-2009-0472-0102, 7300 NHTSA-2009-0059-0102 Texas Industry Project TIP OAR-2009-0472-7430
Texas Oil and Gas Association OAR-2009-0472-11275 Toyota Motor North America OAR-2009-0472-7291
U.S. Coalition for Advanced Diesel Cars OAR-2009-0472-0113.1, 0113, 7496 NHTSA-2009-0059-0113.1, 0113 U.S. EPA, Office of Enforcement and Compliance Assurance, Office of Federal Activities NHTSA-2009-0059-0052.1, 0052

Union of Concerned Scientists OAR-2009-0472-0096, 7181 NHTSA-2009-0059-0096
United Auto Workers OAR-2009-0472-7056 University of California, Los Angeles School of Law OAR-2009-0472-7263

University of California, Santa Barbara, Bren Working Group on Vehicle Fuel Economy OAR-2009-0472-7188

University of Miami, School of Law OAR-2009-0472-6770 University of Michigan Transportation Research Institute UMTRI OAR-2009-0472-6802

University of Pennsylvania, Environmental Law Project OAR-2009-0472-7286

US Steel Corporation OAR-2009-0472-7197 Utility Air Regulatory Group OAR-2009-0472-0116.1, 0116, 7262 NHTSA-2009-0059-0116.1, 0116
Vehicles Services Consu lting, Inc OAR-2009-0472-0064, 7292, 7083 NHTSA-2009-0059-0064 Volkswagen Group of America Volkswagen OAR-2009-0472-7210 Volvo Car Corporation OAR-2009-0472-0119, 7168 NHTSA-2009-0059-0119 Weber, Dave OAR-2009-0472-1410 Western Agricultural Processors Association OAR-2009-0472-7140

Wiesmann GmbH OAR-2009-0472-7198 Wood, John S. OAR-2009-0472-7157.1x

xiZaski, Frank OAR-2009-0472-3769

xiiGeneral Comments

1. General Comments............................................................................................................ ...... 2 1.1 General Support ................................................................................................................... 2 1.2. General Opposition ............................................................................................................ 57

1-1EPA Response to Comments

1. General Comments

1.1 General Support

Organization: Alliance of Automobile Manufacturers (Alliance) Aluminum Association American Chemical Society American Council for an Energy Efficient Economy American Lung Association of California Association of Intern ational Automobile Manufacturers (AIAM) Bieling, Andrea Biotect Connect, Inc. BMW of North America, LLC (BMW) BorgWarner Bright Automotive California Air Resources Board California State Senate Cambell, Bruce Chamber of Commerce of the United States of America Chew, Yuli Chrysler Group LLC (Chrysler) Clarke, Darrell Clean Energy Fuels Coalition for Clean Air Consumer Federation of America County of Greenville, SC Cummins Inc. Dewey, Scott Eadie, R. Frank Ecology Center Environment Michigan Environment New Jersey Environmental Defense Fund Epps, Jennifer Ford Motor Company General Motors Georgia Department of Natural Resources Glasser, Mark Honda Motor Company Honeywell International, Inc. Honeywell Transportation Systems Hyundai Motor Company Insurance Institute for Highway Safety (IIHS) International Council on Clean Transportation Kia Motors Lance Tunic

1-2General Comments

League of Women Voters of South Carolina (LWVSC) Lee Auto Components Magavern, Bill Manufacturers of Emission Controls Association Mass Comment Campaign (13,829) (Union of Concerned Scientists) Mass Comment Campaign (18,583) (unknown organization) Mass Comment Campaign (19) (unknown organization) Mass Comment Campaign (2,332) (unknown organization) Mass Comment Campaign (27,307) (Alliance for Climate Protection) Mass Comment Campaign (32,918) (Sierra Club) Mass Comment Campaign (326) (Student PIRGs) Mass Comment Campaign (7,239) (unknown organization) Mercedes-Benz (Daimler AG) Mitsubishi Motors R & D of America (MRDA) Motor and Equipment Manufacturers Association Mr. Richter - Environmental Capital Partners National Asphalt Pavement Association National Association of Cl ean Air Agencies (NACAA) National Association of Manufacturers National Automobile Dealers Association (NADA) Natural Resources Defense Council New York City Law Department Northeast States for Coordinated Air Use Management New York State Department of Environmental Conservation New York State Department of Transportation (NYSDOT) New York University School of Law, Institute for Policy Integrity (IPI) NGVAmerica Nissan North America Pacific Unitarian Church, Green Sanctuary Project Peters, Doug Pavely, Fran, Califor nia State Senate Physicians for Social Responsibility, Los Angeles Public Citizen and Safe Climate Campaign Sack, Emily Seal, Kathy Sierra Club South Carolina Department of Health and Environmental Control South Carolina Pulp & Pa per Association (SCPPA) South Carolina Wildlife Federation South Coast Air Quality Management District Southeastern States Air Res ource Managers, Inc. (SESARM) State of California State of Connecticut State of Connecticut Department of Environmental Protection State of New Jersey State of Washington Department of Ecology

1-3EPA Response to Comments

Steiner, John Toyota Motor North America Transportation and Buildings Policy for the State of Massachusetts Executive Office of Energy and Environmental Affairs U.S. Coalition for Advanced Diesel Cars Union of Concerned Scientists United Auto Workers University of Miami, School of Law University of Michigan Transpor tation Research Institute (UMTRI) University of Pennsylvania, Environmental Law Project US Steel Corporation Volkswagen Group of America (Volkswagen) Washington State Depa rtment of Commerce Webb, Alysha Weiner, Jill Winograd, Marcy

Comment:

Alliance of Automobile Manufacturers (Alliance)

First, we want to commend EPA and NHTSA for th e effort invested in putting this complex joint rulemaking together and for taking the lead in harmonizing the CAFE and Greenhouse Gas programs into a workable set of requirements. The Alliance supports the overall rule and in particular supports the agencies’ coordina ted attribute-based a pproach. [OAR-2009-0472-6952.1, p.1]

[[These comments were submitted as testimony at the Detroit public hearing. See docket number OAR-2009-0472-6185, pp. 83-86.]]

While this proposal covers model years 2012-2016, we agree with EPA and NHTSA that it is important to create a strong coordinated Nationa l Program that continues to provide a national standard for light-duty vehicles in model ye ars beyond 2016. This is a key to reducing the impact of vehicle greenhouse gases on our global climate.

The proposal provides manufacturers with a roadma p for meeting significan t increases for model years 2012-2016. It calls for an increase in th e average fuel economy in new vehicles by 40 percent to a combined 35.5 miles per gallon. As EPA and NHTSA have stated, final rulemaking prior to April 2010 is essential to providing ma nufacturers with the certainty and lead time necessary to plan for the future and to cost effectively add new technology.

The Alliance members are committed to continuously improving fuel economy and thereby reducing our greenhouse gas emissions. In fact, the motor vehicle industry has committed to reduce greenhouse emissions more than any other sect or of the U.S. economy. By the Agencies' own estimates, these new standards would lead to reductions of 62 billion gallons of fuel, or CO2 emissions totaling 656 million metric tons, dur ing the useful lives of vehicles 2012 - 2016

1-4General Comments

vehicles. The elements of the proposal before us -- a harmonized and coordinated National Program, attribute-based approach, the avai lable compliance mechanisms and general implementation elements provide this industry with certainty and flex ibility necessary for achieving ambitious reductions in greenhouse gase s and significant savings in oil consumption proposed by the rule.

In going forward to 2017 and beyond, this join t coordinated effort by EPA and NHTSA on a national plan is a process we endorse for the future well-being of the industry. It is important to include all key stakeholders incl uding California and states adopti ng the California standards into this process. A goal for going beyond 2017 woul d be to achieve even greater harmonization between the EPA and NHTSA program. Already th e auto industry is tr ansforming itself and reinventing the automobile. Automakers have ma de major investments into developing new fuel efficient technologies, and the resu lts are continuing to show in th e marketplace. More than 50 technologies offered in vehicles for sale toda y reduce emissions, increase mileage, and allow these vehicles to run on cleaner fuels. Toda y consumers can buy more than 130 models that achieve 30 mpg or more on the highway, and they can choose from more than 27 models of hybrids and 8 models of clean diesels.

As we stated in our May 18th le tter of commitment, the Alliance fully supports the adoption of a National Program to address both greenhouse ga ses and fuel economy, and further we commend the Federal Government for taking a leadership role. By eliminating unnecessary complexity and providing flexibility for the development of individual manufacturers compliance plans, the proposed rule will allow manufact urers to develop products that consumers will want to buy and only enhance vehicle performance with respect to greenhouse gas reductio ns and oil savings.

In closing, the time has come to move all stakehol ders forward. The Alliance believes that any effective, efficient program to address climat e change must be built on a single strong national framework administered by the Federal Government. This framework should acknowledge the specific product and sales structur e of individual manufacturers' fleet s, and be designed in a way that challenges all manufacturers fairly by in cluding appropriate implementation and compliance flexibilities without negatively aff ecting overall greenhouse gas reductions.

To this end, we encourage EPA and NHTSA to work closely with all stakeholders, to refine the technical framework of the program.

Aluminum Association

The aluminum industry congratulat es NHTSA on its continued relian ce on a size-based approach to setting CAFE standards since there is ample ev idence to confirm that that size is the vehicle attribute that can best assure design and structure consistency across model years and preserve safety. Increased use of high strength, low weight materials like aluminum will increase vehicle fuel economy, reduce tailpipe emissions and improve safety as manufacturers strive to meet ever more challenging fuel economy requirements. [NHTSA-2009-0059-0067, p.1]

American Chemical Society

1-5EPA Response to Comments

The American Chemical Society is pleased by the Obama Administration’s recently announced plan to increase and standardiz e automobile fuel standards. ACS is a long-time proponent of increased automotive efficiency standards and previously supported le gislation to increase Corporate Average Fuel Economy. As such, we are gratified to s ee this move by the Administration. [OAR-2009-0472-3985.1, p. 1]

Increasing automobile efficiency is an important, and long-overdue, step towards improving the sustainability and security of our energy enterpri se. Improving the efficiency of the national fuel economy standard is a short-term, relatively inexpensive, and effective way of reducing greenhouse gas emissions. Cars emit approxim ately a quarter of overall emissions, and automotive efficiency has actually fallen over th e last two decades. Your initiative is an important step not only in making our nation mo re sustainable, but it will help reduce our dependence on foreign oil, which represents th e vast bulk of our imported energy. We also applaud the decision to standardize the polic y nationwide and send th e appropriate market signals necessary for industry capital investments. [OAR-2009-0472-3985.1, p. 1]

Again, thank you for your forward-thinking policy. As America’s oldest and largest scientific society, we look forward to working with you to ensure America’s sustainability. [OAR-2009­ 0472-3985.1, p. 1]

American Council for an Energy Efficient Economy

ACEEE applauds USEPA and NHTSA for taking the enormous step towards energy security and environmental protection that this joint rulema king represents. The proposed rule offers very substantial increases in fuel economy and reducti ons in vehicles’ greenhouse gas emissions.

The rule also reflects important analytical im provements over the approach taken in previous rulemakings, especially the more thorough and tran sparent analysis of th e technical potential to reduce emissions and fuel consumption, and the a ssociated costs. In addition, the agencies’ use of a publicly available data set fully describi ng the reference fleet, rather than confidential manufacturer product plans, to develop the rule a llows the public to understand in detail the basis for the standards. [OAR-2009-0472-7260.1, p.1]

[ACEEE also submitted these comments as testimony at the New York public hearing, See docket number OAR-2009-0472-4621, pp. 138.]

American Lung Association of California

The American Lung Association in California applauds the Obama ad ministration for this truly historic agreement to adopt rules that mi rror California's clean air standards and move the nation forward toward a clean er transportation future.

The joint proposal by EPA and NHTSA to establish greenhouse gas ve hicle standards and improve fuel economy in motor vehicles across th e nation is an important step in the fight against global warming, air po llution, and the serious public health impacts of petroleum consumption.

1-6General Comments

The American Lung Association of California urge s the federal EPA to move forward to adopt the proposed clean air standard and to adopt the strengthening changes recommended by the California Air Resources Board today.

These recommendations include, one, adding an automaker-specific backstop to ensure that the expected level of greenhouse gas emission reduc tions are achieved; and, two, to ensure that credit calculations for electric- or hydrogen- powered vehicles include upstream emissions.

In the future, the American Lung Association would also urge EPA to adopt additional measures to tighten vehicle tailpipe sta ndards for smog-forming pollutants.

[ALAC submitted these comments as testimony at the Los Angeles public hearing. See docket number OAR-2009-7283, pp. 39-44]

Association of International Au tomobile Manufacturers (AIAM)

AIAM and our member companies fully support a single national program to address these two overlapping programs, and we commend the agenci es for their efforts to develop a harmonized program as much as possible. We look forward to working with the agencies as you finalize this rulemaking early in 201 0. [OAR-2009-0472-7123.1, p.1]

The core element of these proposals is for EPA and NHTSA to each separately adopt standards under each agency’s enabling statute that will be of roughly equivalent stringency. The goal is, to the extent possible, to craft standards that w ould “allow auto manufact urers to build a single national light-duty fleet that would comply w ith both the GHG and the CAFE standards.” Notice of Upcoming Joint Rulemaking to Establish Vehicle GHG Emissions and CAFE Standards, 74 FR 24007, 24009 (May 22, 2009). AIAM supports this proposal and agrees that doing so is consistent with both the Clean Air Act and EPCA. [OAR-2009-0472-7123.1, p.4]

These NHTSA/EPA proposed regulations are an important step in implementing the new, harmonized national program for regulating mo tor vehicle fuel economy and greenhouse gas emissions that was announced by the Ob ama Administration on May 19, 2009. [OAR-2009­ 0472-7123.1, p.19]

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

Bieling, Andrea

I applaud the Environmental Protection Agency and the National Highway Traffic Safety Administration for proposing standards that will make our cars and trucks cleaner and more efficient. The proposed rules will help reali ze President Obama's historic commitment, saving 1.8 billion barrels of oil and $193 billion in consumer gasoline costs, and significantly reducing our global warming emissions.

1-7EPA Response to Comments

I applaud the Environmental Protection Agency and the National Highway Traffic Safety Administration for proposing standards that will make our cars and trucks cleaner and more efficient. The proposed rules will help reali ze President Obama's historic commitment, saving 1.8 billion barrels of oil and $193 billion in consumer gasoline costs, and significantly reducing our global warming emissions.

I strongly support cleaner cars a nd thank the Administration for proposing standards that are a win for consumers, automakers, and the environm ent alike. Strong final rules will launch vehicle standards into the 21st century, help make Detroit a leader in green vehicles, laying a strong foundation for the cleaner vehicles we need to significantly reduce our reliance on oil and curb global warming. [OAR-2009-0472-8704 p.1]

BiotectConnect, Inc.

I fully support efforts to improve fuel efficiency. [OAR-2009-0472-7203, p.1]

BMW of North America, LLC (BMW)

The proposal will permit auto manufacturers to build a single light-duty national fleet, satisfying the requirements of each agency program. In keeping with our corporate commitment to reducing greenhouse gases, BMW commends both EPA and NHTSA for listening to and collaborating with auto makers in their effort s toward developing this complex proposal covering model years 2012 through 2016. Additionally, we commend the State of California Air Resources Board for their collaboration with EPA and NHTSA toward a single national standard that includes their aggressive targets. [OAR-2009-0472-7145.1, p.1]

In order to provide product planning certainty for the auto industry, whil e continuing to reduce greenhouse gas emissions and improve fleet fuel economy, BMW strongly recommends a comparable collaboration toward a national program in the model years beyond 2016. This would also help ensure wise financial and res ource investments, as well as increased energy security for the nation. [OAR-2009-0472-7145.1, p.1]

Now, in keeping with our corporate commit ment to reducing greenhouse gases, we commend both the U.S. Environmental Protection Agency and the National Highway Traffic Safety Administration for their enormous efforts in deve loping this complex proposal that will permit auto manufacturers to build a single light-duty national fleet which will satisfy the requirements of each agency's program. [These comments were submitted as testimony at the New York public hearing. See docket number EPA-HQ-OAR-2009-0472-4621, pp. 131.]

BorgWarner

BorgWarner would first like to commend the EPA, NHTSA and the State of California for their combined efforts to harmonize the standards in this very thorough joint proposal. [NHTSA2009-0059-0076, p.1]

1-8General Comments

BorgWarner is very supportive of EPA, NHTSA and the State of Ca lifornia's efforts and sees the joint proposal as a major step forward in our de sire for energy independence and reduced CO2 emissions. [OAR-2009-0472-7289, p.3]

Bright Automotive

[These comments were submitted as testimony at the Los Angeles public hearing. See docket number OAR-2009-0472-7283 p.175]

So we're here to support this and say that there ar e innovators in this countr y ready to meet this challenge, and so we fully s upport the joint and harmonized regulations. I'm not here to comment on whether it's sufficien t, but it's definitely necessary.

Another thing we'd like to say is we also believ e in the business model that is proposed in the regulation, that this will actually save si gnificantly more money than it will cost.

California Air Resources Board

CARB strongly supports the join t proposed action, most importan tly the stringency of the greenhouse gas emission standards as proposed for each year in the 2012 through 2016 model years. Those standards align very well with Ca lifornia’s adopted and now enforceable Pavley greenhouse gas emissions standards for those m odel years, ultimately arriving at the same stringency as California’s standards in 2016. Th e proposed standards are the result of the agencies’ thorough review and study of technical, engineering, a nd cost studies and a reasonable weighing of their respective statutory directives . The proposal also cont ains several provisions that will help to ensure no credit windfall occu rs that could undermine the standards and reduce their cumulative greenhouse gas reductions. However, CARB has tw o critical concerns, stringency and the upstream emission factor for zero-emission vehicles (ZEVs), which must be addressed in the Final Rule to ensure California’s continued support for the National Program. Other CARB concerns and responses to questions posed by EPA and NHTSA then follow. [OAR-2009-0472-7189.1, p.1]

[CARB also submitted these comments as test imony at the Los Angeles public hearing. See docket number OAR-2009-7283, pp. 21-27]

California State Senate

I applaud the Obama Administrati on for forging a truly historic agreement to increase fuel economy and set the nation’s first greenhouse gas standard for new passenger cars and light trucks. The National Clean Vehi cles Program, using separate, but complementary fuel economy and tailpipe greenhouse gas emissi on standards, is set to achieve a fleetwide average of an equivalent 35.5 miles per gallon by model year 2016. [OAR-2009-0472-7275.1, p.4]

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

1-9EPA Response to Comments

Cambell, Bruce

[These comments were submitted as testimony at the Los Angeles public hearing. See docket number EPA-HQ-OAR-2009-0472-7283, p.199]

And I support the Obama, EPA, NHTSA call for c onsiderably better gas mileage. And I urge that you get as clean a rule as possible w ithout complicated car bon credit loopholes and moving-the-problem-around type thing.

So please proceed with as clean as possible around 35 miles per gallon and then improve from there.

Chamber of Commerce of the United States of America

The U.S. Chamber of Commer ce strongly supports reducing em issions from automobile tailpipes. The Chamber supports improving vehi cle fuel economy to 35.5 miles per gallon, a standard that will also reduce vehicle greenhouse gas emissions to 250 grams of CO2 per mile. The Chamber has serious concerns, however, w ith the regulatory framework through which EPA intends to achieve thes e goals. [OAR-2009-0472-7233.1, p.1]

Chew, Yuli

Though the results from the use of the MAGICC model only shows small, but quantifiable, reductions in the atmospheric CO2 concentratio n, , I support EPA’s efforts of regulating the greenhouse gas from vehicles no matter how insigni ficant the benefits will be. In the Supreme Court’s decision ion MASSACHUSETTS ET AL. v. ENVIRONMENTAL PROTECTION AGENCY ET AL. on April 2, 2007, it noted: “Agenc ies, like legislatur es, do not generally resolve massive problems in one fell swoop, ...., but instead whittle away over time, refining their approach as circumstances change and they develop a mo re nuanced understanding of how best to proceed, ...... That a first step might be tentative does not by itself negate federal-court jurisdiction. And reduc ing domestic automobile emissions is hardly tentative. Leaving aside the other greenhouse gases, the record indicates th at the U. S. transportation sector emits an enormous quantity of carbon dioxide into the atmosphere. “ [OAR-2009-0472-7042.1, p.5]

I believe that the 2003 Kahane Study (in which NHTSA adopted) for 1995 – 1998 Model Year cars and 1995 – 1997 trucks, in which all 2-door car s, or 20% of registered vehicles were excluded was statically biased. The informa tion was based on outdated technologies, bad rollover rates for trucks at that time. It s hould be reviewed along with 2005 DRI Study (DRI-TR05-01). In “Increasing the Fuel Economy and safe ty of New Light-Duty Ve hicles” by Lawrence Berkeley National Laboratory on September 18, 2006, the final conclusion was “However, recent research indicates that mass is merely a proxy for other characteristics that are more important for crashes between cars and trucks, su ch as frontal heights and stiffness.” [OAR2009-0472-7042.1, p.5]

Chrysler Group LLC (Chrysler)

1-10General Comments

Chrysler supports the efforts of the United Stat es Environmental Protection Agency ('EPA') and the National Highway Traffic Safety Administration ('NHTSA') to establish a National Program for the regulation of vehicle greenhouse gas emissions and fuel economy. As EPA and NHTSA have noted, the National Program 'hold[s] out the promise of delivering environmental and energy benefits, cost savings, and administrative efficiencies that might not be available under a less coordinated approach. The efforts to craf t standards have largely succeeded in 1) harmonizing Corporate Average Fuel Economy (' CAFE') and vehicle greenhouse gas emissions ('GHG') attribute-based standards; 2) replacing state standards with a single federal standard; and 3) focusing on performance requirements rather than technology mandates. The rules proposed by this NPRM for the 2012-2016 model years ('MY') will reduce greenhouse gas emissions, enhance energy security, and offer greater regu latory certainty for ve hicle manufacturers. [NHTSA-2009-0059-0124, p.1]

Chrysler strongly believes that a single na tional fuel economy and greenhouse gas program will place more clean and efficient vehicles on the road quickly and at lower costs. Our resources are best utilized when applied to one, single, nati onal standard versus diffe ring state-level fuel economy and greenhouse gas requirements. [NHTSA-2009-0059-0124, p.1]

The proposed rules are an important step toward s the achievement of th e goals of the National Program. They reflect the substantial efforts that EPA and NHTSA have made to provide 'consistent, harmonized, and streamlined requirem ents. EPA and NHTSA ha ve recognized that those efforts are complicated by the fact that EP A and NHTSA have differe nt authorizing statues with requirements that are not identical. The prim ary effect of those differences is that EPA can grant some compliance flexibilitie s - for example, in trading cr edits - that NHTSA cannot. As a result, the joint standards themselves cannot be identical, but 'the goal is providing regulatory compatibility that allows auto manufacturers to build a single light-duty fleet that would comply with both the GHG and the CAFE sta ndards.' [NHTSA-2009-0059-0124, pp.1-2]

Chrysler agrees that regulatory compatibility is an important and achievable goal. If the regulations are wholly compatib le. a fleet that complies with the GHG rules will also comply with the CAFE standards. In these comments. Chry sler suggests some changes to ensure that the final rule will meet the goal of regulatory compatibility. We believe that these changes can be accommodated in the final rule without compromising the environmental goals of the National Program. We will continue working with EPA and NHTSA to ensure these and our other concerns are resolved. [NHTSA-2009-0059-0124, p.2]

[[These comments were submitted as testimony at the Detroit public hearing. See docket number OAR-2009-0472-6185, pp. 46-48]]

We believe it's important to observe that the 2016 model year standard of 250 g/mi carbon dioxide or 35.5 mpg represent an historic and unprecedented challenge for our industry. Translating this into more easily understood terms, this is a 10 mpg or 40 percent increase in the entire fleet's fuel economy from today's level wi thin six years.

Chrysler confirmed support for this histor ic program in the May 19th, 2009 White House ceremony with President Obama. Our current CEO, Sergio Marchionne is also the CEO of Fiat,

1-11EPA Response to Comments

the fuel economy leader in Europe. He unders tands and endorses these commitments and is determined to implement the product actions necessary for Chrysler to meet those 2016 standards. In fact, Chrysler and Fiat conti nue to progress towards those product actions, and work is already underway on developing new e nvironmentally friendly, fuel-efficient, high quality vehicles that we intend to beco me the hallmark of Chrysler's product line.

We have significantly revised our five-year plan to meet these new standards. Chrysler's compliance requires successful application of a broad range of technologies from advanced technology ICE all the way through electrification in an unprecedented time. This means that Chrysler's vehicles will adopt Fiat's world-class technology, plat forms and powertrains for small and medium sized vehicles, allowing us to offer an expanded product lineup including environmentally friendly vehicles with these rule s and, also, by increasing demand to consumers.

One type of technology is multi-ai r technology, an electrohydraulic va riable valve lift system for internal combustion engines. It controls air flow and combustion cylinde r by cylinder, stroke by stroke, improving both fuel efficiency and performance in our engines.

Chrysler is also working with the Department of Energy to improve the commercial viability of our plug-in hybrid programs through the electrifica tion grant that we recei ved earlier this year.

In addition to these steps that are primarily pow ertrain efficiency actions , Chrysler will also continue to lessen the vehicle energy demands through actions such as improved aerodynamics, reduced loading resistance, and also material substitution, lightweighting while maintaining overall strength and safety of our products.

Chrysler believes that reduci ng vehicle mass without reducing the size of the vehicle or the structural integrity is technically feasible in the rulemaking time frame on these products.

Clarke, Darrell

[These comments were submitted as testimony at the Los Angeles public hearing. See docket number OAR-2009-0472-7283 p.187]

I'm just going to say for starters this is only the most important step for us to take as a nation about global warming and oil dependence. To put it rather succinctly, I'll point to some charts. [The commenter provides extensive testimony unrelated to the ruling]

Clean Energy Fuels

Clean Energy supports GHG regulation of motor vehicles and would like to thank both EPA and NHTSA staff for their hard work and foresight used in the development of this important rulemaking. [OAR-2009-0472-7220.1, p.5]

1-12General Comments

[[These comments were submitted as testimony at the Detroit public hearing. See docket number OAR-2009-0472-6185, p. 141.]]

And I'd like to say there's a lot of hard work put into this rulemaking, and we appreciate it. We're very supportive of, you probably are new to our company, Clean Energy, we are mostly a California -- although we are nationally based, bu t we are extremely supportive of EPA's efforts to curb greenhouse gas emissions in the transporta tion sector, and we are just looking for ways that we can get to the same conclusion with mo re flexibility, using low carbon fuels and, also, seeing if there are ways to combine efficiency strategies with our te chnology as well. We believe that ultimately by employing progressive st rategies like bio-methane, hybrid drivetrains, plug- in hybrid drivetrains, we can achi eve 2015 emission targets for greenhouse gases.

[[Clean Energy also submitted these comments as testimony at the Detr oit public hearing, See docket number OAR-2009-0472-6185, p. 131.]]

Coalition for Clean Air

[Following comments are from LA Testimony, OAR-2009-0472-7283, pp.134-137]

That is why today we applaud the Obama admini stration for forging a historic agreement with industry to adopt rules that mirror Calif ornia's groundbreaking Clean Cars Law.

When we adopted our standards in 2004, we kne w that automakers could make clean cars that consumers want and need. We are confident that they will devise ways to make even cleaner cars in the future.

So given California's dire need to continue im proving our air quality, we cannot take our chances and assume that after President Obama's admini stration or administrations, we will have other administrations who agree with us in the need to reduce global warming gases specifically here in California.

And having said that, we cannot rely on others ou t of the state to protect our residence, our children, our families, and our workers.

Consumer Federation of America

THE IMPORTANCE OF THIS GROUNDBREAKI NG RULEMAKING In many ways, this is the most important change in the Corporate Av erage Fuel Economy (CAFE) program since its inception three and a half decades ago.

• This rulemaking unifies the regulation of th e energy and environmenta l standards for motor vehicles in the U.S.

• It embodies one of the largest increases in fu el economy over a four-year period in the history of the program.

1-13EPA Response to Comments

• It resolves a major dispute over federal and st ate shared authority by ordering improvements in the environmental impact of automobiles, a nd thereby preserving the most important dynamic characteristics of federalism.

• It is based on a consensus agreement that includes the automakers.

• It incorporates new methodology for analyzin g potential CAFE and greenhouse gas emissions standards that is more transparent, rep licable, and accurate than the prior methodology.

At the same time, this rulemaking reflects the fact that it is a transition regulation that demands a more effective process for setting fu el economy standards in the future.

• The transition requires the Environmental Pr otection Agency (EPA) and the National Highway Traffic Safety Administration (NHTSA) to harmonize and reconcile their statutes.

• The rulemaking recognizes the dire circumstan ces of the auto industry and allows it some breathing space to redefine itself and retool be fore a more rigorous and demanding regime of fuel economy improvement is required. Thus, the ultimate success of this landmark rulemaking will be in the framework of standa rd setting that it creates for the future. There are many critical issues that will have to be resolved in order to ensure that the standard setting process provides the maximum benefits for consumers, the nation and the environment.

[[Consumer Federation of America also submitte d these comments as testimony at the Detroit public hearing, See docket number EPA-HQ-OAR-2009-0472-6185, pp. 104-105.]]

County of Greenville, SC

We commend the EPA and the NHTSA for working together to devel op a rule that will result in significant improvements in fuel economy. Ou r nation needs reduced emissions and energy security and we support these goals. In a ddition to reducing greenhouse gas emissions, improving fuel economy will have the very impor tant benefit of reducing emissions of air pollution . These reductions will help areas m eet the 2008 or a new national ambient air quality standards resulting from the revi sions currently underw ay at EPA for pollutants including ozone and particulate matter 2.5 and will also reduce urba n air toxics . This will have a very positive impact on public health and the environment. [OAR-2009-0472-8346 p.1]

As such, we support NHTSA moving forward at th is time with the CAFE standards as proposed. It is important to note that vi rtually all of the greenhouse gas em ission reductions and air quality benefits will occur from the new CAFE standards proposed by NHTSA. [OAR-2009-0472-8346, p.1]

Cummins Inc.

Cummins Inc. (“Cummins”) supports the propos ed joint rulemaking by the National Highway Transportation Safety Admini stration (NHTSA) and the Envi ronmental Protection Agency (EPA) to reduce greenhouse gas (GHG) emissions and improve fuel economy of new cars and

1-14General Comments

light-duty trucks sold in the United States. Cum mins is committed to help meet these goals in vehicles powered by our engines. Cummins is al so working closely with the National Academy of Sciences (NAS) on developing a framework for a fuel efficiency improvement and GHG program for heavy-duty commercial vehicles in th e United States. We view the development of technology and responsible regulations as one of our core corporate resp onsibilities. [OAR-2009­ 0472-7205.1, p.2]

Cummins supports the overall framework of the proposed regulation by EPA and NHTSA to harmonize the agencies’ programs. However, Cummins urges EPA to take a more holistic approach that reflects upstream CO2 impacts in the development of GHG emission standards. [OAR-2009-0472-7205.1, p.2]

Dewey, Scott

[These comments were submitted as testimony at the Los Angeles public hearing. See docket number EPA-HQ-OAR-2009-0472-7283 p.149-159]

It would be hard to overemphasize the importan ce of this issue for our nation and the world. Our survival as a species may actually de pend on it, getting global warming under control. Unfortunately, for various politic al reasons, we are about 20 y ears late in developing policies to confront global warming. The problem has grown larger in the meantime, meaning it's particularly critical that we now act swiftly and effectively to confront this problem. It really is urgent.

By reducing oil consumption and importation, by reducing greenhouse gas emissions, and by reducing motorists' fuel costs, the President's national program will enhance national security, energy independence, and economic stability, making us less vulnera ble to energy price shocks and supply disruption while also helping to c ontrol the number one globa l environmental threat. It's the proverbial win-win. It's not the total answer to the whole complicated problem, but it's a good start.

Eadie, R. Frank

The -- so we're more than grateful to see the EPA at very long last and, you know, it's -- I can't count the number of years that I've been involved in promoting better CAFE standards for the country, and it's -- you know, I'm really, really gratef ul that finally the President has decided that we're going to have that happen, at least -- and we want to make sure that it does happen, so let me applaud that standard over miles per gallon and that's a giant, a r eal important change, it probably is not nearly [OAR-2009-0472-4621, p.169] enough, but it's a major improvement, and it's something that we're all very grateful for the President's action and your following up on it. [OAR-2009-0472-4621, p.170]

Ecology Center

1-15EPA Response to Comments

The Ecology Center is pleased to be here today and to provide support for the proposed rule making to establish Light-Duty Vehicle Gree nhouse Gas Emission Standards and Corporate Average Fuel Economy Standards. [OAR-2009-0472-4068,p.1]

The Ecology Center has for many years been an advocate for strong fuel economy standards for cars and light trucks. But we have also advocated that such standa rds be developed in a way that helps advance new investments in U.S.-manufacturing, protects jobs, and fairly distributes the costs across the industry. We believe this approach is the best way to achieve a sustainable policy that builds public support while also pr otecting the environment and improving energy security. [OAR-2009-0472-4068,p.1]

The Ecology Center committed itself to these ideal s when it created a special project called the Green Machines Tour, which was aimed at building public awareness about the many positive benefits of new investments in advanced fuel economy technologies. We focused on the auto producing region here in the Midwest, and spent many hours on the road speaking with community members, union leaders, and elected officials about the fuel-efficient technologies that were either already being us ed in today's vehicles, or that were on the drawing boards, and how they were helping their communities. We identified billions of dollars in new or planned investments, and the creation or retention of thousands of auto sector jobs. We also discussed how new policies to require impr oved vehicle fuel economy coul d help ensure even greater opportunities for new jobs and economic development in this vital industry. [OAR-2009-0472­ 4068, p.1]

Almost without exception, the people we talked with were in support of advancing new fuel economy policies. However, they did want assura nces that the rules would be developed in a way that was fair for their community and thei r industry, and that protection of existing jobs would be strongly considered. [OAR-2009-0472-4068, p.1]

In summary, the Ecology Center supports the pr oposed rules and believes that they achieve the desired balancing of interests for fairness and co st-effectiveness, while al so requiring significant and meaningful reductions of CO2 emissions and petroleum use. It is our hope that these new rules can help to set the U.S. au tomobile industry on a ne w course for success-at least in terms of improved fuel economy. [OAR-2009-0472-4068, p.2]

Environment Michigan

[[These comments were submitted as testimony at the Detroit public hearing. See docket number OAR-2009-0472-6185, pp. 64-67.]]

The administration deserves great credit for taki ng this historic step to cut global warming pollution, make America more energy independent , and help make Detroi t a leader in clean vehicle technology. We applaud the administ ration's overall effort and your individual contributions.

I'll make three main points in my testimony. First, oil dependence and global warming are urgent and interrelated problems that demand bol d policy solutions. Second, this proposal is a

1-16General Comments

good first step but must be strengthened to m eet President Obama's goals for reducing pollution and saving oil. And, third, the pr oposal is evidence that the Clean Air Act works in addressing global warming pollution.

America is at an energy crossroad. As a nation, we are heavily reliant on oil and other fossil fuels at a time of growing demand a nd dwindling supply. Our dependence on fossil fuels continues to impose massive environmental, economic, and se curity costs. Now our country must choose between paying to continue the status quo and investing in a clean energy future.

America spends nearly $1 billion each day importi ng oil. Those funds are a direct transfer of wealth from America's pocketbooks to oil comp anies and foreign governments. These figures do not include the untold damages to our environmen t, health, and security resulting from the production and use of oil. A report released th is week by the National Academies of Sciences quantifies just a portion of these damages; it estimated th at energy use in motor vehicles produced $56 billion in health and othe r nonclimate-related damages in 2005 alone.

Light-duty vehicles alone account for about 40 percent of all U.S. oil consumption.

At the same time, pollution from the production and use of oil is a leading source of air pollution, water pollution from spills, and global warming pollution.

With respect to global warming, the impacts on human and natural systems are now being observed nearly everywhere. In 2007, the Nobel Prize- winning U.N. Intergovernmental Panel on Climate Change predicted serious risks and damages to livelihoods, human infrastructure, societies, species, and ecosystems unless future warming is substantially reduced. So far this decade emissions, warming, and impacts, such as i ce melt and sea level rise, have all been at the upper end of IPCC projections.

To meet the challenge of global warming, we must transform the ways America and the rest of the world produce and use energy, achieving drama tic improvements in the efficiency with which we use energy in our ve hicles, homes, and businesses and moving to clean, renewable energy, such as wind solar power.

This challenge also brings enormous opportuni ty. Vastly improving the efficiency of our economy and moving to renewable energy will reduce our dependence on oil, help revive our economy, and create millions of gr een-collar jobs in many fields, including in th e auto industry.

Mobile sources emitted more than 30 percent of all U.S. global warming emissions in 2006 and have been the fastest-growing source of U.S. global warming emissions since 1990. Light-duty vehicles are responsible for nearly 60 percen t of all global warming emissions from mobile

sources.

As a first step to address America's oil depe ndence and global warming, these proposed vehicles standards are a good beginning. The proposal w ill raise the fuel economy of the passenger vehicle fleet to an average of 34.1 by 2016, accelera ting the goals in the 2007 energy bill by four years. In addition, the proposal sets the first-ever Federal st andards to reduce global warming

1-17EPA Response to Comments

emissions from new passenger vehicles -- requir ing a fleet average of 250 grams carbon dioxide equivalent per mile in 2016. Importantly, thes e standards establish a foundation for more stringent standards in the future that will do even more to curb global warming and to wean the country from its dependence on oil.

The proposal makes clear that auto manufacturers can meet these proposed standards by utilizing technologies that are already available today. Requiring the more widesp read adoption of clean technologies will help spark the technology innova tion necessary for automakers to successfully compete in the global economy and thereby cont ribute to a strong local and domestic economy.

[[These comments were submitted as testimony at the Detroit public hearing. See docket number OAR-2009-0472-6185, pp. 69-70.]]

Finally, I want to point out that this proposal is strong eviden ce that the Clean Air Act is effective in addressing global wa rming pollution from vehicles.

The Clean Air Act allows California to set auto emission standards that ar e stronger than Federal standards and other states to adopt California's auto emission standa rds. Over the last 40 years, California has consistently demonstrated leadership in developing and implementing standards to curb pollution from motor vehicles, as is the case with the state's first-of-their-kind standards to reduce global warming emissions from new vehicles.

Thirteen other states and th e District of Columbia adopt ed these California standards representing about 40 percent of the light-duty market. And the stat es' program gave rise to the proposal that is before us today.

We applaud the states that spearheaded the drive for cleaner cars. We wouldn't be here today if it weren't for their trailblazing efforts to reduce our oil dependence and curb global warming.

This process worked for conventional pollutants, and it works for the pollutants that are fueling global warming.

In closing, we commend the ad ministration for proposing these historic standards to reduce global warming pollution, make Am erica more energy independent, and help our country regain its edge as a technology leader. We urge you to strengthen an d finalize the rule.

Environment New Jersey

I definitely appreciate the opportu nity to testify today. The Obam a Administration deserves great [OAR-2009-0472-4621, p.66] credit for taking this histor ic step to cut global warming pollution, to make this country more energy independent a nd finally to make America a leader in clean vehicle technology. We applaud the Administra tion's overall effort and your individual contributions. [OAR-2009-0472-4621, p.67]

Environmental Defense Fund

1-18General Comments

I. THE PROPOSED STANDARDS ARE A VI TAL STEP IN FORGING COMMON GROUND AMONG DIVERSE INTEREST S AND MOVING THE NATI ON FORWARD TO ADDRESS GREENHOUSE GASES AND IMPROVE FUEL ECONOMY.

There are dual national securi ty benefits from EPA’s proposed action: reducing America's reliance on foreign oil and beginning to address cl imate-disrupting emissions that will exacerbate geopolitical instability. Military experts have pointedly recogni zed these dual policy imperatives. A report commissioned by the Pentagon states that “I t is quite plausible that within a decade the evidence of an imminent abrupt climate shift may become clear a nd reliable. . . . Disruption and conflict will be endemic features of life.” Commander Jeffrey W. Eggers, former director for combating terrorism at the National Security C ouncil, stated that “the seemingly intractable problem of U.S. dependence on foreign oil is a pre- eminent national security threat . . . .” A CNA Military Advisory Board report came to a simila r conclusion, finding that “[o]ur dependence on foreign oil reduces our international leverage, places our troops in dangerous global regions, funds nations and individuals who wish us harm, and weakens our economy; our dependency and inefficient use of oil also puts our troops at risk.” The Government Accountability Office has also sounded the alarm, warning that “without dramatic change, the nation will become ever more reliant on imported oil and natural gas with attendant threats to national security.” [OAR2009-0472-7285.1, pp. 3-4]

The national security risks created by heavy dependence on foreign oil require broadscale changes throughout the economy. Speaking before the Senate Foreign Relations Committee, Retired Vice Admiral Dennis McGinn declared: Energy security and a so und response to climate change cannot be achieved by pursuing more fossil fuels. Our nation requir es diversification of energy sources and a serious commitment to rene wable energy. Not simply for environmental reasons—for national security reasons. [OAR-2009-0472-7285.1, p. 4]

As our military leaders have noted, “[o]ur only choice is whether we’re going to make the decisions [on reducing our dependence on oil] for cefully and in a timely manner. We could lag and then we’ll find ourselves in a much more se rious situation, when all of these other costs come on us.” [OAR-2009-0472-7285.1, p. 4]

The cost of delaying action is high: “We will pay to reduce greenhouse gas emissions today . . . [o]r we will pay the price later in military te rms. And that will involve human lives.” The proposed regulations are an important part of necessary, immediate action to reduce emissions. “Each of us can help end America’s addiction to oil. Using less fuel in our cars and trucks reduces overall demand . . . . These steps, taken individually, may seem small. Collectively, they can make us more secure .” [OAR-2009-0472-7285.1, p. 4]

[Following comments are from LA Testimony, OAR-2009-0472-7283 p.72-79]

There is good reason for hope. The proposal for cl eaner cars at issue today represents an important step forward in addressing the grim impacts of a changing cl imate, but to secure these critical benefits, the final standards mu st be rigorous and well designed. We examine some elements of the proposal that warrant close attention.

1-19EPA Response to Comments

[[These comments were submitted as testimony at the Detroit public hearing. See docket number EPA-HQ-OAR-2009-0472-6185, pp. 114-117]]

America is a vast and diverse nation. But desp ite our differences, we are united by unyielding and common bonds. We are united in a commitment to our nation's security. We stand together in our quest to realize a shared prosperity for all Americans. And we ar e steadfast -- as a nation of mothers, fathers, grandparent s, uncles and aunts -- in our vi gilance for a safe and healthy future for America's children.

On May 19th the President of the United States ch arted a path forward fo r our nation that ended years of discord and division. The President forg ed an accord on cleaner cars to begin breaking our addiction to foreign oil, to pioneer the clean energy technologies that will lead the way in the 21st Century global marketplace, and to start re ducing the global warming pollution that imperils our planet.

We sincerely thank the President and the leader s in labor, business, and state government who worked together to break this logjam -- the Unit ed Auto Workers, the Alliance of Automobile Manufacturers, and the numerous states involved from California to Maine.

By virtually any metric, the benefits of the EP A and Department of Transportation proposal to implement the Presidential accord measure up.

The proposed standards strengthen our national security. The vehi cles subject to these proposed standards are responsible for about 40 percent of all U.S. oil consumption. The standards would reduce our consumption of oil by 1.8 billion ba rrels while achieving a 5 percent annual improvement in fuel efficiency for the nation's passenger vehicle fleet.

The proposed standards reduce global warming po llution from a significa nt and rapidly rising sector. The vehicles covered by the proposed standard s account for 60 percen t of heat-trapping emissions from the transportation sector and abou t 20 percent of all U.S. heat-trapping gases. These emissions have steadily increased by more than 1 percent annually. The EPA estimates the proposed standards would cut car bon dioxide pollution from passenger vehicles approximately 21 percent by 2030, reducing emissions by 950 million tons.

The proposed standards will provide dividends in fuel savings at the pump for America's families. The estimated overall cost savings ove r the life of the vehicle are more than $3,000. And families who finance a new vehicle purchase are expected to save estimated $12 to $14 a month over the duration of the loan.

While these numbers mark progress for our nation, the benefits of the proposed standards are farreaching in their measure.

The proposal embodies the first national sta ndards to limit global warming pollution. We applaud the President and the leadership at the Environmental Protec tion Agency for taking landmark steps to reduce heat-trapping gases an d for following the law enunciated by the United States Supreme Court.

1-20General Comments

The proposal weaves the innovative state clean car programs, the nation's clean air laws, and the nation's fuel economy laws into a single nationa l policy that reduces global warming pollution and improves fuel efficiency through the clarit y and certainty of an integrated program.

The proposal provides compliance flexibility that will ensure consumers will have a full range of vehicle choices.

And while the proposed standards can be achie ved with today's available technologies, the proposal also lays the foundation for new innova tive technologies that will pave the way for additional progress in the next pha se of clean car standards. A nd it is these advanced clean car technologies that will position our nation as a leader in the global economy.

We recognize the challenges ahead in completing this proposal to ensure a rigorous and balanced outcome. Environment Defense Fund, respectful ly, will submit written comments offering our recommendations to ensure the final sta ndards are protective and well-designed. The fundamental promise of the Presidential accord and the charge for the Environmental Protection Agency and Department of Transpor tation in finalizing the proposed standards -- is to strengthen our nation's common bond by uniting America to achieve profound and lasting progress in national security, climate stabili ty and economic opportunity. We hope this policy initiative is the first of many steps in realizing that promise.

[Environmental Defense Fund also submitted these comments as testimony at the New York public hearing, See docket number EPA-HQ-OAR-2009-0472-4621, pp. 118-119.]

Epps, Jennifer

[These comments were submitted as testimony at the Los Angeles public hearing. See docket number OAR-2009-0472-7283, pp.205-206]

I think we desperately need clean, fuel-effici ent vehicles, and I th ink we deserve them. Taxpayers fund the construction of roads and high ways. We fund the maintenance of those roads and highways. We fund the admi nistration of them through the DMV. We fund the policing of them.

So I think it's high time; we've waited long enou gh. Automakers have been dragging their feet for about 25 years, and these new proposals woul d be the first serious improvements to fuel economy in two decades.

Ford Motor Company

Ford supports the overall manner in which th e agencies have proposed to harmonize the greenhouse gas emissions and CAFE regulatory framework. The proposal brings together a range of compliance mechanisms such as impr ovements to vehicle fuel economy, improvements in air-conditioning systems designed to minimize re frigerant leakage (anothe r potential source of greenhouse gases) and advanced technology vehicles that can r un on biofuels and electricity. Taken together, the broader elements of this harmonized national program provide a more

1-21EPA Response to Comments

efficient compliance framework compared to individual state pr ograms or potentially overlapping federal and state programs. [OAR-2009-0472-7082.1, Cover letter, p. 1]

[Following comments are from LA Te stimony, OAR-2009-0472-7283, pp.90-96] [Following comments are also from Detroit Te stimony, OAR-2009-0472-6185 p.13-17] [Ford also submitted these comments as testimony at th e New York public hearing, See docket number OAR-2009-0472-4621, pp. 26-31.]

We commend the efforts of bot h agencies in this difficult task to develop harmonized greenhouse gas emissions and CAFE standards fo r passenger cars and light -duty trucks, and we are committed to working with you to finalize these regulations.

Turning now to the proposed rulemaking, Ford supports the manner in which the agencies have proposed to harmonize the greenhouse gas emissions and CAFE regulatory framework which is a broader program compared to what was outlined in the 2007 Energy Independence and Security Act.

It brings together a range of compliance mech anisms such as improvements to vehicle fuel economy, improvements in air-conditioning systems designed to minimize refrigerant leakage, another potential source of gr eenhouse gas emissions, and advanced technology vehicles that can run on biofuels and electricity.

It also maintains separate car and truck footprin t-based targets which Ford and the industry have supported given that cars and trucks have different functional char acteristics whether they have the same footprint or not.

Taken together, the broader elements of this one national program provide a more efficient compliance framework compared to individual state pr ograms or potentially overlapping federal and state programs.

General Motors

GM supports the joint proposal from EPA a nd NHTSA to address 2012 to 2016 model year vehicles. We commend the techni cal staffs of both agencies w ith working together on this highly complex issue to produce what appears to us to be a very harmonized approach with the two Federal programs that will regulate fuel economy and greenhouse gas emissions. We also want to thank the agencies for leadership that the Federal Government is showing in trying to minimize the disruptive impacts of having multiple programs at State and Federal levels. (OAR2009-0472-6185, p.10)

It is our view that this rule represents a dramatic opportunity to advance our mutual goals of CO2 reduction and increased energy diversity while resp ecting customer choice. But even after this rule is finalized, more work will remain on th e policy front. This rule only gets us to 2016. (OAR-2009-0472-6185, p.12)

1-22General Comments

We do urge both EPA and NHTSA to keep all stak eholders at the table and immediately begin work on the next phase of what we would cal l an ongoing national strong program. And I will tell you right now from a GM pers pective, we are prepared to engage in that process today. (OAR-2009-0472-6185, p.12)

General Motors (GM) supports the joint proposal from EPA a nd NHTSA to address the fuel economy and greenhouse gas emissions of 2012-2016 model year vehicles. The proposal is consistent with the intent of the May agreem ents with the administ ration. We commend the technical staffs of both agencies for worki ng together on this highly complex issue, and appreciate their efforts to produce a harmonized a pproach for federal regulation of vehicle fuel economy and greenhouse gas emissions. We further commend the agencies for the leadership that the federal government has shown in trying to minimize the disruptive impacts of having multiple programs at the federal and state leve ls. While this rule represents a dramatic opportunity to advance our mutual goals of CO 2 reduction, increased energy diversity and respecting customer choice, even after this rule is completed, more work will remain on the policy front. We urge both EPA and NHTSA to move quickly to keep all stakeholders at the table and work on the next phase of an ongoing, st rong National program. A ll voices -- the states, the automakers, the environmental organizations , and the energy providers -- are essential for this to happen. Ultimately, we will need strong leadership at the fe deral level with an integrated and coordinated approach that ad dresses infrastructure, vehicles, fuels and consumer behavior, as well as all other sectors of the economy. This proposal is a positive first step and a good foundation on which we can all build, but we cannot rest on our laurels. [OAR-2009-0472­ 6953.1, pp.2-3]

[The following is from LA Te stimony, OAR-2009-0472-7283, pp.55-59]

First, let me underscore that GM supports th e joint proposal from EPA and NHTSA to address the 2012 to 2016 model year vehicles . We commend the technical sta ffs of both the agencies for working together on this highly co mplex issue to produce what appears to be a very harmonized approach for the two federal programs that w ill regulate vehicle fuel economy and greenhouse gas emissions.

We also want to thank the agencies for the lead ership that the federal government is showing in trying to minimize the disruptive impacts of having multiple programs at both the federal and state levels. We are especially pl eased that we are able to testif y today in support of the approach that is being proposed rather than sayi ng no to a patchwork of state programs.

Among the highlights of the proposal are, one, the coordinated attribut e-based approach of the two programs; and, two, the recognition of th e need for mechanisms that provide for compliance flexibility in the f ace of uncertainty over future technology developments and costs, customer acceptance of these tec hnologies, and the price of fuels that consumers may see in the marketplace.

This proposal is a positive fi rst step and a good foundation on which we can all build, and GM intends to provide some de tailed technical written commen ts to enhance the clarity and harmonization of this joint effort and program. And as we have from the start, we just would like

1-23EPA Response to Comments

to reiterate our commitment to working with the agencies, the states, and other interested parties to make this a success.

Georgia Department of Natural Resources

We commend the U.S. Environmental Protection Agency (EPA) for working closely with the National Highway Traffic Safety Ad ministration (NHTSA) to develop a rule that will result in significant improvements in fuel economy. Ou r nation needs energy se curity and reduced emissions and we support thes e goals. [OAR-2009-0472-7150.1, p.1]

Glasser, Mark

[These comments were submitted as testimony at the Los Angeles public hearing. See docket number OAR-2009-0472-7283, pp.201-205]

And so I bring these personal things up just to note the importance of what you're doing and the wonderful job that has been started here, a nd I do thank you guys for coming here and for listening to all of us.

Honda Motor Company

American Honda Motor Co., Inc. (“Honda”) appreciates the effo rts made by EPA and NHTSA to develop a single national program to address motor vehicle greenhouse gas emissions and fuel economy and welcomes the opportunity to provide its comments on the Notice of Proposed Joint Rulemaking (the “NPRM”), dated Se ptember 28, 2009. [NHTSA-2009-0059-0095.1, p.2]

Honda supports the overarching goal of the NPRM , which is to establ ish a “coordinated and harmonized approach” to implementing the Clean Air Act’s mandate that EPA regulate motor vehicle emissions, and the mandate in the Ener gy Policy and Conservation Act (EPCA) that NHTSA regulate motor vehicle fuel economy. [NHTSA-2009-0059-0095.1, p.2]

[Following comments are from LA Testimony, OAR-2009-0472-7283, pp.96-103]

This NPRM represents a significant, positive st ep forward, and we appreciate the efforts of everyone involved to create more harmonized na tional standards. Honda has long advocated for higher fuel economy standards and, by inferen ce, lower greenhouse gas emissions as well as a single national standard.

Until the White House agreement, the automobile industry was facing fragmented, conflicting, and burdensome regulation of fuel economy and greenhouse gases. The regulations in California and adopted by 12 states and the District of Columbia compared to NHTSA's CAFE regulations differed in terms of testing re quirements, vehicle cat egory definitions, and stringency.

The White House agreement, in Honda's view, re presents a great step forward in the much needed regulation of greenhouse gases. The agreem ents signal wide consensus that the interests

1-24General Comments

of the country are best served by starting a greenhouse gas regulation and by a national implementation of that regulation.

Honeywell International, Inc.

Honeywell supports EPA and NHTSA in its historic effort and has offered the agencies solutions to better reflect the direct a nd indirect emissions associated with mobile A/C Systems. [OAR2009-0472-7206.1, p.10]

Honeywell Transportation Systems

HTS commends the Environmental Protection Agen cy ('EPA') and the National Highway Traffic and Safety Administration ('NHTSA') in their hi storic effort to reduce greenhouse gas ('GHG') emissions from mobile sources and reduce oi l consumption through improvements in fuel economy. We recognize the vast challenge befo re the two organizati ons and applaud the development of a workable solution that protec ts the environment while providing flexibilities important to maintaining a viable automotive industry. The Proposed Rulemaking presents a framework that should be economically practicable and successful in achieving these challenging goals. Please continue this important work and ensure a harmonized national standard is maintained to secure the future health of an industry that is so integral to domestic and global economies. [OAR-2009-0472-7165.1, p.2]

We respectfully submit comments with the view that the Proposed Rules should encourage compliance with rules and policy objectives while remaining technologically neutral. We believe that the enacted rules should en sure fair treatment of innovators , foster the development of new and more effective technologies, and not simp ly favor currently popul ar technologies. Setting clear standards and selection criteria without prescribing sp ecific solutions will inspire innovation that will stand the te st of time. [OAR-2009-0472-7165.1, p.2]

We urge EPA and NHTSA to ensure that decisions taken pursuant to the final Rule incorporate the best available data on technology performance, vehicle usage, and geographic considerations. Through these comments and suggestions, we str ongly encourage measurable, efficient solutions that improve fuel economy and re duce GHG emissions. [OAR-2009-0472-7165.1, p.2]

Hyundai Motor Company

The improvement of fuel economy and control of GHG are very important issues to Hyundai. In our 2008 comments on the proposed NHTSA MY 2011 through 2015 CAFE standards Hyundai recognized California for beginn ing a critical national debate on fuel economy and GHG policy. Moreover, we supported early implementation and a faster ramp up to NHTSA's then 2020 fleet fuel economy target of 35.0 miles per gall on (mpg) under the 2007 Energy Independence and Security Act. That same year, Hyundai became the first automaker to pledge to achieve 35 mpg by 2015 . On November 20, 2009, EPA's 2009 Fuel Economy Trends Report 2 shows that Hyundai is now the industry leader in bra nd fuel economy performance for MY 2008 and 2009.

[Following comments are from LA Testimony, OAR-2009-0472-7283, pp.67-72]

1-25EPA Response to Comments

[[These comments were submitted as testimony at the Detroit public hearing. See docket number OAR-2009-0472-6185, pp. 79-80.]

First I want to clearly state th at the improvement of fuel econo my and the control of greenhouse gases are very important issues for Hyundai, a nd we appreciate the opport unity to testify here today.

That same year, we became the first automaker in America to pledge that we would meet the then 35-mile-per-gallon rule by 2015, not 2020. The fuel economy regulations have now changed, but our goal remains the same. We've become the industry's fuel economy leader propelled by our Hyundai Blue Drive initiative.

Hyundai applauds this joint NHTSA-EPA rulemaking exercise here. It repr esents unprecedented regulatory cooperation. It seeks a national soluti on for reducing greenhouse gas emissions and improving fuel economy of motor vehicles, and it works toward a global solution for addressing climate change.

A unified program allows manufacturers to de velop a concerted and cost-effective way to work in the development of advanced technologies. We believe that a single national program is the most efficient and practical approach now a nd in the future. This is a global and a national problem and should be addressed on a national basis.

Insurance Institute for Highway Safety (IIHS)

IIHS supports NHTSA’s efforts to increase fuel economy while maintaining vehicle safety through the use of an attribute-ba sed system. [NHTSA-2009-0059-0125.1, p.1]

International Council on Clean Transportation

This proposed rule takes a giant step towards catching up with vehicle efficiency in Europe, Japan, and other nations (see graphic below) and will enhance U.S. credibility worldwide. We applaud EPA and NHTSA, along with Californ ia, the Administration, and the vehicle manufacturers, for taking the first steps al ong the road to a sustainable transportation system. There are tremendous opportunities to dr amatically reduce climate change emissions from passenger vehicles in the coming years and it is essential to continue this progress in the future. Long-term goals need to be set, so that manufacturers have consis tent, long-term signals to help them develop future technologies and pro duct plans. This is espe cially important in the context of the recession, with companies reorganizing and in vestment dollars in short supply. ICCT supports a strong Federal ru le and recognizes and applauds the constructive role that California has played in building the technical and public support for th is critical rulemaking. We urge all parties to conti nue the process and set aggres sive standards for 2017 and beyond.

ICCT strongly supports the proposed program stringency.

[OAR-2009-0472-7156.1, pp.1-2]

1-26General Comments

Kia Motors

[These comments were submitted as testimony at the Los Angeles public hearing. See docket number OAR-2009-0472-7283, pp.169-170]

The joint EPA/NHTSA proposal is also impor tant to Kia because it works towards the only meaningful resolution of these issues, whic h is a global solution of addressing climate change and energy security.

Kia strongly believes that a single national program to regulate greenhouse gas emissions and improve the fuel economy of motor vehicles is the most efficient way and practical approach now and in the future.

We strongly encourage dialogue between Califor nia, EPA, and NHTSA on the creation of post2016 model year national standards and look forw ard to participating in such discussions.

In addition to supporting an overall goal of a national program, we also support the various compliance flexibilities outlined in the joint proposal, includi ng credit transfers and trading, credit for advanced t echnologies, and early credits.

These mechanisms are important to provide a cost-effective means of achieving the standards. This is of particular importance to Kia due to our specific customer need for affordable quality vehicles with long-term warranties.

Lance Tunick

[[These comments were submitted as testimony at the Los Angeles public hearing. See docket number OAR-2009-0472-7283, pp. 140]]

I would also like to start off by saying that I fully support a GHG standard that makes SVMs do their fair share and that does not give them a free ride.

Such an approach is already taken by both NHT SA in its CAFE program as well as by the European Union where, in both cases, an SVM can obtain an alternative standard determined on a case-by-case basis and based on feasibility.

League of Women Voters of South Carolina (LWVSC)

Thank you for the opportunity to share our viewpoi nts on this very important matter. We fully support and appreciate your efforts by request ing that the new rules and standards be implemented as soon as possibl e. [NHTSA-2009-0059-0137, p. 2]

Please allow this letter to se rve as a comment on the above matter from the League of Women Voters of South Carolina (LWVSC). Though we understand fully that th e comment period on the above issues ended in late November we are nonetheless compelled to share our voice on this issue. [NHTSA-2009-0059-0137, p. 1]

1-27EPA Response to Comments

LWVSC is very disappointed that South Caroli na Department of Health and Environmental Control (SCDHEC), our state's own environmental protection agency, failed to take sufficient care in expressing their concerns and disagreement with the fe deral rules to control greenhouse gas pollution that contribute to clim ate change. [NHTSA-2009-0059-0137, p. 1]

Some of SCDHEC's concerns related to progr am implementation costs may be legitimate. However, LWVSC believes that program costs should be weighed against what South Carolina could face in terms of environmental and public health consequences should the new rule not become law. As a coastal state we are con tinuously challenged by extreme weather conditions such as hurricanes, tornadoes, drought, and rising sea levels. LWVSC would also argue that SCDHEC's comments regarding th e program's potential impact on the South Carolina economy is neither evidence-based nor within SCDHEC's scope of res ponsibility for comment. [NHTSA2009-0059-0137, p. 1]

LWVSC is unsure whether SCDHEC's comments do or do not support consideration of the regulatory action, or even whether they support any action to control greenhouse gas emissions. If the intent of SCDHEC's co mments is to be non-supportive of the final rule for the Endangerment and Cause or Contribute Findi ngs for the Greenhouse Gases Under Section 202 (a) of the clean Air Act (Federal Regist er, December 15,2009), then LWVSC believes that SCDHEC has made a serious mistake and it s comments are unacceptable for protecting the public health and environment of So uth Carolina. [NHTSA-2009-0059-0137, p. 1]

While LVWSC supports new federa l legislation on greenhouse gase s, there is no assurance at this writing that such legislati on will pass in the near future. In short, the only protection we can expect for the residents of South Carolina will be the minimum federal environmental and health standards passed down to the respective states becau se of our own state agency as shown in their comments to you, will not adopt any stronger regulations even when negative outcomes are so evident. [NHTSA-2009-0059-0137, p. 2]

Lee Auto Components

[[These comments were submitted as testimony at the Detroit public hearing. See docket number EPA-HQ-OAR-2009-0472-6185, pp. 123-124.]]

After all these years, I couldn't be more believed and proud that Detroit finally stands with the Obama administration in an effort to raise fuel economy standards and restrict greenhouse gas emissions.

Magavern, Bill

[These comments were submitted as testimony at the Los Angeles public hearing. See docket number OAR-2009-0472-7283, p.180]

So I see this as being a huge step forward for our country as we grappl e with global warming and decreasing our energy dependence. And I say this as someone who has been involved in this issue for over 20 years now.

1-28General Comments

So we really thank President Obama for taking the bold action he did earlier this year in basically aligning national standards with California stan dards, recognizing California's leadership, bringing the automakers into the tent, and movi ng forward on this very important regulation.

I'm very impressed in your analysis that you're s howing a benefit-to-cost ra tio of over four to one from this rule, which is very impressive, and we actually think it could be higher because we think that your analysis unde rstates the social cost of car bon. We do urge you to do another assessment because we think you're underestimating the social cost of carbon.

Manufacturers of Emission Controls Association

In conclusion, MECA commends EPA for taki ng important steps to reduce greenhouse gas emissions and improve fuel economy from light-dut y vehicles. MECA believes that a variety of advanced powertrain options ar e available for reducing carbon dioxide emissions from passenger vehicles and light-duty trucks. [OAR-2009-0472-7108.2, p.11]

MECA believes that EPA should include black ca rbon emissions as part of its overall greenhouse gas emission control strategy. [OAR-2009-0472-7108.2, p.7]

Mass Comment Campaign (13,829) (Union of Concerned Scientists)

I applaud your combined efforts to implement the national clean car standards announced by President Obama. These standards are a win for U.S. drivers, whose gasoline savings will outweigh any increased costs fo r vehicle technology developmen ts. Indeed, your own analysis shows that automakers could reach significantly higher efficiency standards than those proposed and still save consumers money. [OAR-2009-0472-3906, p.1]

But 30 years without any significant change in fuel economy standards has shown that only a strong rule will ensure that clean car choices be come a reality. Past loopholes to fuel economy rules, such as allowing automakers to reclassify cars as 'light trucks' to decrease fuel economy requirements and incorporating weight thresholds that allowed gas guzzlers like the Hummer to evade all fuel economy regulations, helped to create the current envi ronmental and economic predicament the automobile industry finds itself in. [OAR-2009-0472-3906, p.1]

The final clean car rule must guard against any potential loopholes or other efforts to weaken the effectiveness of the standards. Creating a st rong national program will fulfill the president's commitment, provide U.S. consumers with clean vehicle choices, and allo w the struggling auto industry to emerge as the model for a clean energy economy. [OAR-2009-0472-3906, p.1]

Mass Comment Campaign (18,583) (unknown organization)

I support the proposed EPA - NHTSA rule to set strong global warming pollution standards for personal vehicles. This landmark rule would:

-- Limit greenhouse gas pollution from automobiles; -- Improve fuel efficiency by about 5% annually;

1-29EPA Response to Comments

-- Reduce fleet-wide greenhouse gases 19% by 2030; and -- Cut carbon dioxide emissions by an estimate d 950 million metric tons and 1.8 billion barrels of oil over the lifetime of the vehicles sold under the program (model years 2012-2016). [OAR2009-0472-3907, p.1]

Global warming is the most serious environmental threat facing the planet today. Americans face a wide variety of public health threats, from the spread of infectious diseases to worsening air quality to more intense w eather events heat waves, floods, droughts. [OAR-2009-0472-3907, p.1]

I applaud EPA and NHTSA for setting the first greenhouse gas emissions limits in American history and encourage the Obama administration to continue to find ways to curb the pollution that causes global warming. [OAR-2009-0472-3907, p.1]

Mass Comment Campaign (19) (unknown organization)

Thank you for your efforts to implement the na tional unified fuel economy standards announced by President Obama. I applaud your efforts to issu e strong standards while al so protecting jobs in the domestic auto industry. We must design these regulations in a wa y that fairly distributes the burdens across the industry so we can create new jobs while we move forward with reducing carbon pollution and enhancing ener gy security. [OAR-2009-0472-5748, p.1]

Also, the final rule must guard against any poten tial loopholes or other efforts to weaken the effectiveness of the standards. Creating a str ong national program will provide U.S. consumers with clean vehicle choices and allow the struggli ng auto industry to emerge as the model for a clean energy economy. [OAR-2009-0472-5748, p.1]

Mass Comment Campaign (2,332) (unknown organization)

I urge that you protect the greenhouse gas and fuel economy standards for passenger cars and light trucks from being undermined by the various credits being offered. [OAR-2009-0472-5747, p.1]

Automakers have been dragging their feet in making improvements in fuel economy for 25 years. There is ample technology ?on the shelf? to meet the proposed standards without unduly burdening the industry. If automakers had acted to build more efficient cars and trucks, consumers would not have been hit as hard by $4-a -gallon gas a little over a year ago. It is time to put fuel efficient vehicles people wa nt to buy on the market. [OAR-2009-0472-5747, p.1]

President Obama set a goal in May to put us on a path towards reduced greenhouse gas emissions and oil consumption. I urge that every effort be made to ensure the president's goal comes to fruition. [OAR-2009-0472-5747, p.1]

Mass Comment Campaign (27,307) (A lliance for Climate Protection)

1-30General Comments

The Alliance for Climate Protection commends th e Environmental Protection Agency (EPA) and National Highway Traffic Safety Administration ( NHTSA) in their efforts to propose regulations to limit greenhouse gas emissions and improve fuel economy from automobiles and light trucks . These measures are important to limit global warming pollution, reduce America's dependence on foreign oil, revitalize the US auto industr y, and save consumers money at the gas pump. [OAR-2009-0472-7295, p.1]

The Alliance informed its members about this proposed rule, and provided them with an opportunity to support the draf t regulation. Interested memb ers expressed support for the proposal by submitting signing on to a shared statem ent to serve as public comments to EPA and NHTSA. [OAR-2009-0472-7295, p.1]

The statement is: 'I support efforts to strengthen fuel efficiency standa rds that will reduce pollution and revitalize our auto industry.' [OAR-2009-0472-7295, p.1]

In total, 27,307 Alliance members e ndorsed the petition. [OAR-2009-0472-7295, p.1]

The Alliance for Climate Protecti on supports the intent of the pr oposed rule and encourages EPA and NHTSA to finalize a rule that includes th e most stringently constructed fuel economy standards and mandatory greenhous e gas tailpipe limits that wi ll maximize fuel savings and minimize greenhouse gas pollution. [OAR-2009-0472-7295, p.1]

Mass Comment Campaign (32,918) (Sierra Club)

I applaud Environmental Protection Agency and National Highway Traffic Safety Administration for proposing standards that will make our cars and trucks cleaner and more efficient. The vehicles sold under these standa rds will carry out President Obama's historic announcement and save 1.8 billion barrels of oil, $193 billion in consumer gasoline costs, and significantly reduce our greenhouse gas emissions. [OAR-2009-0472-5749, p.1]

I urge the EPA and the Department of Transporta tion not to let excessive credits and unneeded flexibility keep us from reaching oil savings a nd emission reduction goals. Both agencies should include a backstop that will ensure the auto indu stry meets the 2016 targets. As it stands now, if automakers simply produce more gas guzzling truc ks than the proposal predicts, we could end up with more pollution and less oil savings. [OAR-2009-0472-5749, p.1]

These standards will help Detroit become a leader in green vehicles by putting the best of today's technology to work and investing in future technologies, such as electric vehicles. But we need to ensure that electric vehicle credits don't allow automakers to fa il to clean up other vehicles in their fleet. While electric vehicles don't have a tailpipe, produci ng the electricity used to power an electric vehicle does emit greenhouse gases. The standards should treat electric vehicles accurately. [OAR-2009-0472-5749, p.1]

I am excited about cleaner cars and applaud the Administration for proposi ng standards that are a win for consumers, automakers, and the enviro nment. Strong final rules will take vehicle standards out of the 1970s and into the 21st century, laying a strong foundation for the cleaner

1-31EPA Response to Comments

vehicles we need to end our reliance on oil and curb global warming. [OAR-2009-0472-5749, p.1]

Mass Comment Campaign (326) (Student PIRGs)

Thank you for the leading the way on global wa rming by proposing the first-ever federal standards to reduce global warmi ng pollution from cars and light tr ucks. This historic action will reduce our nation's oil dependence, save consum ers money at the pump, and cut global warming pollution. [EPA-HQ-OAR-2009-0472-11293, p. 1]

Mass Comment Campaign (7,239) (unknown organization)

The president's 35 mpg by 2016 target will help me and all Ameri cans play a stronger role in curbing oil dependence and global warming po llution, and help in the transformation and revitalization of our struggling auto indus try. [OAR-2009-0472-3905, p.1]

As we know from 30 years of stagnation on national fuel economy, your plan will be the key to ensuring that the president's stated goal -- 35 mpg by 2016 -- becomes reality. [OAR-2009­ 0472-3905, p.1]

Significant past loopholes, such as allowing automakers to reclassi fy cars as 'light trucks' to decrease fuel economy requirements and incorpor ating weight threshol ds that allowed gas guzzlers like the Hummer to evade all fuel econo my regulations, helped to create the current environmental and economic predicament th e industry finds itself in. [OAR-2009-0472-3905, p.1]

Only a strong final plan that ensures the pres ident's targets are met will deliver the clean car choices, oil savings, and jobs that a transf ormed auto industry can bring. [OAR-2009-0472-3905, p.1]

I look forward to seeing the Environmental Protection Agency and the Department of Transportation working together to deliver and implement strong national clean car standards. [OAR-2009-0472-3905, p.1]

Mercedes-Benz (Daimler AG)

We agree with the conclusion that the nation can 't wait for the automobile industry to recover before pushing forward on greenhouse gas reductions . In fact, our chairman often describes the current crisis as an opportunity for strong companie s like ours to refocus their investment and be even stronger in a post crisis world, and so for that reason our [These comments were submitted as testimony at the New York public hear ing. See docket number OAR-2009-0472-4621, p. 48.] company, Daimler, is moving full steam ahead, we have not reduced our i nvestments in any way and we expect to have significant improvements in our entire fleet across a ll of our vehicles in the coming years. In this spirit, we are pleased to participate in this forum and lend our support to this proposed rule. [These comments were submitted as testimony at the New York public hearing. See docket number OAR-2009-0472-4621, p. 49.]

1-32General Comments

Mitsubishi Motors R & D of America (MRDA)

Mitsubishi Motors strongly supports the develo pment of a National Program to regulate lightduty vehicle greenhouse gas emissions which re duces the regulatory burden upon Automakers while significantly decreasing li ght-duty vehicle greenhouse gas emi ssions. In order to continue Automakers’ efforts to comply with the Nati onal Program, Mitsubishi Motors urges EPA and NHTSA to continue to work together to extend the National Progr am beyond MY 2016. [OAR2009-0472-7125.1, p.1]

Mitsubishi Motors applauds the joint rulemaki ng efforts of EPA and NHTSA, and specifically supports the respective organization’s harmoniza tion efforts under the Na tional Program. [OAR2009-0472-7125.1, p.5]

[Following comments are from LA Testimony, OAR-2009-0472-7283, pp.85-87]

Mitsubishi Motors supports the efficient and pr actical approach to achieving true greenhouse gas reductions and fuel economy improve ments, a single national standard.

This joint rulemaking by EPA and NHTSA is an important step of establishing a cohesive national program to reduce greenhouse gases and improve fuel economy. This unified program should allow manufacturers to develop cost-effective processe s in meeting these standards and deploying adva nced technology vehicles.

Motor and Equipment Manufacturers Association

MEMA is encouraged by the collaborative effo rt between the National Highway Traffic Safety Administration (NHTSA) and the Environmental Protection Agency (EPA) to improve fuel economy and reduce emissions under one Natio nal Program. Compatible and consistent standards allow vehicle manuf acturers to focus their resources on investing in the best technologies, which in turn, feeds the ability of the supplier base to advance development and transfer research technologies into commercially viable pr oducts. MEMA a nd the supplier industry are committed to policies that enable th e introduction of new technologies needed to support sustainable mobility. [OAR-2009-0472-7121.1, cover page]

The state of the nation's economy has severely ch allenged the motor vehi cle industry and many suppliers are facing huge financia l shortfalls. MEMA is encouraged by the collaborative efforts between the National Highway Traffi c Safety Administration (NHTSA), Environmental Protection Agency (EPA), and the State of California to approach GHG emissions and fuel economy standards under one National Program with compatible, consistent standards. MEMA strongly supports a uniform National Program based on GHG reduction and increased fuel economy because it allows vehi cle manufacturers to focus their resources on investing in the best technologies available. This, in turn, feeds th e ability of the supplier base to advance development and turn research technolo gies into commercially viable products. [OAR2009-0472-7121.1, p.2]

1-33EPA Response to Comments

MEMA supports the approach taken by the Admi nistration to bring t ogether the light-duty vehicle fuel economy standards and emissions standards into a join t National Program. A uniform program not only allows vehicle manufactur ers to invest in the appropriate technologies their vehicles need to reach and exceed fuel eco nomy and emissions target s, but also helps the supplier base convert research technologies into commercia lly viable products. [OAR-2009­ 0472-7121.1, p.13]

[See docket OAR-2009-0472-7121.1, p. cover page-2 for detailed introdu ction and p.12 for detailed conclusion]

Mr. Richter - Environmental Capital Partners

The most obvious is environmental, which encomp asses human health and quality of life. It's fairly obvious if we drive the same number of miles and produce less ta ilpipe emissions, of course, we're going to help out the ecological syst ems and our societies in general. I think you've all seen the National Academy of Sciences recently released repor t describing it's estimated that $120 billion worth of health cost of burning fo ssil fuels. These are real dollars, they're real health concerns, and we can do an awful lot if we just eliminate a percentage of the transportation pollution. [Comment submitted as testimony at the New York public hearing EPA-HQ-OAR-2009-0472-4621, pp.159-160]]

So I will close in saying that raising CAFE sta ndards is not the only answer to the many deep and varied challenges that this nation and the world face, of course, but it is a simple proven, relatively low cost method of combatting globa l warming, improving our competitiveness in the auto industry, strengthen our energy securi ty, stimulating our economy, and reclaiming our moral standing in the international community. My suggestion and hope is that the EPA takes the most aggressive approach possi ble and demands the highest st andards in the world for the American car industry as quickly as possible. Decades of ignoring this responsibility has left us with no other choice but to learn from the past and much, much ups ide if we do. [OAR-2009­ 0472-4621, p.164-165]

National Asphalt Pavement Association

As the national association representing th e majority of asphalt pavement producers and contractors, we commend the EP A and the NHTSA for working toge ther to develop a rule that will result in significant improvement s in fuel economy. [OAR-2009-0472-7224.1, p.1]

National Association of Cl ean Air Agencies (NACAA)

Our association strongly supports timely and effective action to curb GHG emissions from lightduty vehicles and, therefore, supports this proposal. [OAR-2009-0472-7071.1, p.1]

Global warming is the most pressing global environmental issue facing our generation. The Intergovernmental Panel on Climate Change (IPCC) stated in 2007 that the evidence that global warming is already affecting our planet is “unequivocal, as is now evident from observations of increases in global average air and ocean temperat ures, widespread melting of snow and ice, and

1-34General Comments

rising global average sea level.” And since the IPCC report was released, even more compelling research and evidence have accumulated demonstrating that we need to act now to reduce GHG emissions. [OAR-2009-0472-7071.1, p.1]

As EPA data confirm, the mobile source sector is responsible for approximately 36 percent of total U.S. GHG emissions, taking into considera tion upstream transportation fuel emissions (such as those associated with extraction, shipping, refining and distribution), as well as nonroad mobile sources (including construction, farm an d lawn and garden equipment). This level exceeds electricity generation, which accounts for approximately 34 percent of total U.S. GHG emissions. Given this significant contribution, a comprehensive regulato ry strategy to reduce GHG emissions from the mobile sector must be developed and implemented without delay. [OAR-2009-0472-7071.1, p.1]

For this reason, NACAA applauds EPA and NHTSA for this landmark federal proposal which, in addition to improving the fuel economy of cars and light-duty trucks, puts in place the first ever national program for reducing motor vehi cle GHG emissions. The proposed standards to reduce GHG emissions from light-duty vehicles in model years 2012 through 2016 are a very commendable first step forward in what must be an ongoing effort to make light-duty vehicles and our nation’s entire mobile source fleet and fuels as clean and “green” as possible. [OAR2009-0472-7071.1, p.1]

We are confident that these standards can be implemented with success, given EPA’s proven 30­ year-plus track record of esta blishing and implementing motor ve hicle emissions standards under Title II of the Clean Air Act. The technical research and analysis that EPA has conducted illustrate the agency’s thoughtful deliberation of va rious approaches for this program, leading to a proposed set of national light-duty vehicle GHG em issions standards that can be achieved with known and available technologies. [OAR-2009-0472-7071.1, p.2]

Moreover, the automobile manufacturers have e ndorsed the establishment of a national program for vehicle GHG emissions standards and Corpor ate Average Fuel Economy standards. In commitment letters signed on May 18, 2009, automakers and the trade associat ions that represent them stated that they “recognize the benefit fo r the country of a National Program to address GHGs and fuel economy and the historic announcement of EPA and NHTSA’s intent to jointly propose a rule to set standards for both. They furt her stated that they “f ully support proposal and adoption of such a National Program,” that they “welcome this opportunity to be a partner in helping to advance a harmonized National Program” and that they “commit to working with EPA and NHTSA, the states, and other st akeholders to help our country address global climate change and the need to reduce oil consumption by devel oping this kind of strong, coordinated, national program for the model years after 2016.” [OAR-2009-0472-7071.1, p.2]

[NACAA also submitted these comments as test imony at the New York public hearing. See docket number OAR-2009-0472-4621, pp. 54-60.]

National Association of Manufacturers

1-35EPA Response to Comments

The NAM supports the Administration’s broade r 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 potential - if implemented correctly- to create a climate of investment certainty necessa ry to make long-term business decisions, but stronger energy efficiency objectives will also en hance domestic energy security, which is a key policy priority for manufacturers. The NAM applauds the Administration’s objective to “mitigate the additional costs that manufacturers would ot herwise face in having to comply with multiple sets of federal and state st andards.” [OAR-2009-0472-7215.1, p. 2]

National Association of Manufacturers

NAM supports the Administration’s broader policy objectives of harmonizing vehicle emission standards under a National Program and promoti on of energy efficiency through enhanced CAFE standards through the Department of Transpor tation (DOT). Not only does establishment of national, uniform standards have the potential - if implemented correctly- to create a climate of investment certainty necessary to make long-term business decisions, but stronger energy efficiency objectives will also enhance domestic energy security, which is a key policy priority for manufacturers. The NAM applauds the Admini stration’s objective to mitigate the additional costs that manufacturers would otherwise face in ha ving to comply with multiple sets of federal and state standards. [OAR-2009-0472-7215.1, p.1]

National Automobile De alers Association (NADA)

Ever since enactment of EPCA in 1975, NAD A has supported the goal of continuous fuel economy improvements, while recognizing the constr aints inherent in any “push” approach to improving motor vehicle fuel economy performance. Simply put, the ultimate success of any policy directed at improving new vehicle fuel economy and GHG performance rests with consumer new vehicle preferences. Unless and until consumers actually buy and use new vehicles, the fuel economy and GHG emissions be nefits associated with those vehicles cannot and will not be realized. Prospective purchasers in search of personal transportation have alternative choices to buying or leasing new vehicles. Specificall y, they always may elect to hold onto their existing vehicles longer or to turn to the used vehicle marketplace. Production mandates resulting in vehicles with performance c onstraints or high prices will lead to lower new vehicle sales. Thus, any National Program must incorporate feasibility and affordability as essential elements designed to achieve the energy and environmental benefits associated with fleet turnover. Of greatest importa nce for dealers, for energy securi ty, and for the environment is not what can be built, but what the motoring public is willing and able to buy. [OAR-2009-0472­ 7182.1, p.2]

[National Automobile Dealers Association also submitted these comments as testimony at the New York public hearing, See docket number OAR-2009-0472-4621, pp. 84-85.]

I'd like to commend you for working hard to tr y to design a single national fuel economy standard that aims to avoid an unworkable pa tchwork of state-based laws. Coordinating the regulatory efforts of two important federal agenci es is a challenging task, especially given the

1-36General Comments

important differences in each agency's statutory st ructures, mandates, goals and objectives. It is in this light that today I will present three major points. [These comments were submitted as testimony at the New York public hearing. See docket number OAR-2009-0472-4621, p. 80.]

Natural Resources Defense Council

[[These comments were submitted as testimony at the Detroit public hearing. See docket number EPA-HQ-OAR-2009-0472-6185, pp. 18-19.]

NRDC applauds the creation of the National Program. The program is a historic step forward for protecting the environment and he lping consumers save money at the pump. It secures the benefit of the California Vehicle Emissions Pr ogram while also giving consumers more clean vehicle choices. The program represents a path fo rward on new vehicle standa rds that is clearly a win for automakers, their workers, and the States. It's good for automakers because it gives them certainty and lays the foundation for them to be mo re sustainable businesses in a future world of volatile fuel prices and intens ifying global warming. It is good for auto workers because a stronger industry means more better paying jobs . The program is also good for the states because it preserves their right to act to protect their local inte rests and citizens and it upholds their tremendous value as laboratories for clean vehi cle policy.

The joint proposal establishes an important polic y partnership by aligning the fuel conservation directive of the Energy Policy and Conservation Ac t with the pollution and health protections of the Clean Air Act. The Supreme Court ruled in Massachusetts v EPA that the Clean Air Act is the appropriate law for controlling carbon polluti on and the Clean Air Act authority brings new important perspectives to standards that reduce ve hicle carbon emissions.

In addition to having health and welfare as prim ary drivers of the standards, the Clean Air Act provides technology enforcing standa rds, and it includes the flex ibility to set standards over longer time frames. Unlike EPCA, which limits NHTSA to setting standards just five years into the future, the Clean Air Act allows EPA to se t longer term standards based on advanced, not just incremental technologies. Th is approach increases regulator y certainty for automakers and enables them to more effectively plan ne w technology in this strategic manner.

New York City Law Department

In light of the City’s unique vulnerability to the impacts of climate change and its on-going efforts to reduce greenhouse gas emissions and impr ove air quality within the City, we write to provide these comments in support of the proposed rules, and to highlight the rules’ potential beneficial interaction with legi slation now pending before Congre ss that would allow states and municipalities to set fuel economy and emissions standards for their taxicabs and other for-hire fleets. [OAR-2009-0472-7240.1, p.1]

Northeast States for Coordinated Air Use Management

Thus, NESCAUM applauds EPA for taking an extremely important step towards reducing transportation-related GHG emissions. The pr oposed rule, once implemented, will reduce

1-37EPA Response to Comments

lightduty vehicle GHG emissions 21 percent by 2030. The rule will also increase energy security

— the U.S. currently consumes more than 18 m illion barrels of oil a day, and imports about 60 percent of total consumption. Of this, more than 8 million barrels a day are consumed in lightduty vehicles. The rule will reduce oil consumption by approximately 1.8 billion barrels over the lifetime of the vehicl es that will be sold in model years 2012 to 2016. [OAR-2009-0472­ 7235.1 p.1]

[Northeast States for Coordinated Air Use Management also submitted these comments as testimony at the New York public heari ng, See docket number EPA-HQ-OAR-2009-0472-4621, pp. 41-42.]

New York State Department of Environmental Conservation

The greenhouse gas (GHG) emission standards pr oposed here are an important step towards minimizing the risk to human health and envi ronmental quality posed by global warming. These risks include increases in heat related illness and increases in the range of disease vectors. Sea level rise and changes in rainfall patterns are also expected, with atte ndant risks to coastal infrastructure and agricultural production. There may be too much water in some places and not enough in others. These risks are too great to ignore. [OAR-2009-0472-7454, cover page 1]

This joint proposal is long overdue. Along with its neighbors, New York State has been at the forefront of efforts to combat global warming. Pursuant to Section 177 of the Clean Air Act (Act), New York has adopted California's gr eenhouse gas emission standards for light duty vehicles. New York has also acted, through th e Regional Greenhouse Gas Initiative, to reduce emissions from electric power generation. We appl aud EPA's decision to us e its authority, under the Act to reduce GHG emissions. [OAR-2009-0472-7454, cover page 1]

[New York State Department of Environmental Conservation also submitted these comments as testimony at the New York public heari ng, See docket number EPA-HQ-OAR-2009-0472-4621, pp. 15-18]

New York State Department of Transportation (NYSDOT)

NYSDOT commends the Obama Administration, NHT SA, and the EPA for their joint efforts to improve the fuel economy of the light duty vehi cle fleet. We also commend the Administration and the agencies for pursuing harmonized nationa l emissions and fuel economy standards that are consistent with the automotive emissions control program established by the State of California under the authority of Section 209 of the Clean Air Ac t and by several other states, including New York, under the authority of S ection 177 of the Clean Air Act. [OAR-2009-0472­ 7531.1, p.1]

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

The Institute for Policy Integrity strongly supports the efforts of the Environmental Protection Agency (EPA) and the National Highway Transpor tation and Safety Admi nistration (NHTSA) to address the problem of greenhouse gas (GHG) emissions from light-d uty vehicles in this joint

1-38General Comments

rulemaking. This joint proposal of new Corporat e Average Fuel Efficiency Standards (CAFE) from NHTSA and greenhouse gas emission standard s (GHG Standards) from EPA for light-duty motor vehicles is an important move toward m eeting EPA’s obligations under the Clean Air Act (CAA), as defined by the Supreme Court in Massachusetts v. EPA. [OAR-2009-0472-7232.3, p.1]

However, this is only the first step. Several petitions are pending before EPA to regulate a variety of other mobile sources that produce significant greenhouse gas emissions, including a petition from this Institute. In order to fully comply with its mandates under the Clean Air Act, EPA must address all significant sources of greenhouse gas emissi ons and must respond to these petitions. [OAR-2009-0472-7232.3, p.1]

We applaud the agencies efforts to respond to the legal obligations unde r Massachusetts v. EPA and to the growing risks associated with GHG emissions. The recommendations contained in these comments will allow EPA to more efficiently and effectively meet these goals. [OAR2009-0472-7232.3, p.18]

NGVAmerica

NGVAmerica supports the U.S. EPA effort to regulate greenhouse gas emission from motor vehicles. Regulating greenhouse gas emissions from transportation sources is an important part of the overall effort to reduce greenhouse gas emissions and help mitigate America’s impact on climate. Therefore, we agree with EPA’s assess ment that such emissions must be controlled. [OAR-2009-0472-7236.1, p.5]

Nissan North America

The Notice of Proposed Rulemaking is consistent with the National Progra m in terms of both the stringency of the standards and the structure of the two programs. More significantly, the proposed Joint Rulemaking is consistent w ith the overarching goal of encouraging and acknowledging investment in a zero emissi ons transportation system. [OAR-2009-0472-6798.1, p.1]

Pacific Unitarian Church, Green Sanctuary Project

Please support. [OAR-2009-0472-7241, p.1]

Pavley, Fran, California State Senate

In May of this year I had the honor of being pres ent in the Rose Garden with President Obama, Congressional leaders, and CE O’s from major automobile companies, EPA and California officials, and advocates for the passage of a comprehensive Federal program to reduce greenhouse gas emissions from passenger automobile s and light duty trucks. It was 7 years ago that California’s Clean Cars bill, AB 1493, was signed into law, and in 2004 the California Air Resources Board unanimously adopted the regula tions. The standards to reduce greenhouse gas emissions by 30% by 2016 were based on off-the- shelf, cost effective, and available

1-39EPA Response to Comments

technologies. Expert engineers were able to quantify greenhouse gas em ission reductions based on a package of technologies that could be used in different cl asses of vehicles, allowing for consumer choice. Independent public opini on polls each July from 2002-2009 by the PPIC shows that across geographic, demographic and political parties, Californians continue to strongly support these re gulations. In 2004, when these regulati ons were adopted, gas was nearly $1 dollar less per gallon, and globa l conflicts were less threateni ng to our economic security. In addition, in 2004 we did not incl ude our target greenhouse gas re ductions under AB 32, or even the alternative fueled vehicles, such as hybrids, that are on the market t oday. We certainly didn’t consider the public’s growing interest as we ll as the competitive race among automobile companies, to build electric vehicles and plug in hybrids. [OAR-2009-0472-7275.1, pp.1-2]

I am confident that automakers’ topnotch engineers will be able to design cleaner cars to meet these standards not just in Ca lifornia but also acro ss the nation. Rising gas prices, a growing public concern about the dependence of importing oil and how that affects our security, the health impacts of air polluti on, as well as the visible and gr owing impacts of global warming, have increased the publics demand for cleane r, more fuel-efficient cars. [OAR-2009-0472­ 7275.1, p.2]

In California, and many other Western states, we are in our record 3rd year of drought. We have documented evidence of an earlier melt of our snow pack, with more rain than snow at higher elevations, causing an unreliable water supply during our shorter spring s and long hot summers. Sea level rise along our coast as well as stat es like Florida are a gr owing concern. From salt water intrusion into our water supply, inabi lity to get insurance along low lying coastal properties as well as in our dry pa rched hillsides, and the potential to seriously impact our state’s coastal dependent tourism economy, we are very concerned about the cost of doing too little or nothing to address the impacts of gl obal warming. [OAR-2009-0472-7275.1, pp.2-3]

There is a compelling link betw een global warming and air pollution. Warmer temperatures increase our ozone and smog fo rming pollutants. We have al arming and growing respiratory illness, asthma and cancer rates occurring among our youth and the elderly. Several intense heat waves over weeks at a time have caused illne ss and deaths. Lower income neighborhoods that often lack air conditioning are pa rticularly at risk during heat episodes. Agricultural losses, increases in vector borne diseases, and a drama tic increase in loss of property and air pollution from costly wildfires have become the new nor mal. California is not the only state that is impacted by air polluti on. [OAR-2009-0472-7275.1, p.3]

From Denver, to Chicago, to Albuquerque New Mexico, air pollution is a serious health problem. Two years ago, I testifie d in Santa Fe, New Mexico as they were having a hearing on adopting California’s Clean Car standards. Seve ral doctors and pediat ricians, on their own initiative, came to support the policy because of their concerns of their patient’s health. For many, they said it was the first time they had ever testified at a gove rnment hearing. [OAR-2009­ 0472-7275.1, pp.3-4]

[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]

1-40General Comments

Peters, Doug

[The following comments were submitted as testimony at the Detroit public hearing. See docket number EPA-HQ-OAR-2009-0472-6185, p. 118-122.]

I felt personally compelled to come here today to support this regulation because of the national security aspects of climate change and our nation's dangerous depende nce on both foreign and domestic oil.

Oil dependence also threatens our economic stability. Everyone knows that. In the last year alone we have seen the price of oil in a very volatile manner go from approximately $140 a barrel down to $40 a barrel. We'll pay a much hi gher price in terms of American lives and our economy if we delay or fail to ac t to reduce our oil de pendence right now. Th is is the consensus among national security experts and retired generals and admirals. This is why this rule is so important. This regulation will be a tremendous first step. It is estimated this regulation will save 1.8 billion barrels of oil ove r the lives of the vehicles sold between 2012 and 2016. This is a very important step in a long road to the ener gy and climate security th at our nation needs and, most importantly, cannot be the last.

I spent five years in the Marine Corps. In that time I participated in both Afghanistan and Iraq invasions. On January 9, 2002 seven Marines from my squadron became the first Marines to die following the 9/11 attacks. Seven of my friends of which I left American soil with were the first Marine casualties suffered by this nation. I guess my time overseas, particularly the time I spent in Pakistan, Afghanistan, and the Mi ddle East in general served as a true wake-up call for me. I realized that the way America would have to inte ract with the world going forward had changed. I realized that new threats had emerged, unconven tional threats. I witnessed U.S. military go from old war style of fighting to that of asymmetric warfare practically overnight

. One of those new threats, as intangible as it ma y seem at times, is climate change or climate disruption. Climate disruption is obviously not one of your traditiona l military threats. It's what the military refers to as a threat multiplier. Clim ate change has the potential to destabilize fragile governments, turning those governments into faile d states, has potential to spark mass migration of populations, turning those popul ations into refugee populations , has the potential to spark conflicts over scarce water resources and scarce agricultural resources.

In these types of environments and scenarios the possibility exists for extremists to hide, the possibility exists for extremists to recruit and train desperate members of these populations and turn them against us. We've already seen this happen in Bangladesh, Darfur, Somalia, and other places in the Horn of Africa. Climate disruption is such a viable threat, the Pentagon has already started creating contingency scenarios for them. In fact, the Pentagon will focus on its issue in its 2010 quadrennial defense review as I believe the State Department will in its quadrennial diplomacy and development review. In other word s, U.S. military is going to be called upon to respond to such scenarios and threats. This is in addition to the pre-ex isting wars and challenges

1-41EPA Response to Comments

the U.S. military already faces. I believe one of the most misunders tood or underfelt aspects facing today's military is the continuous deployment cycles of U.S. troops overseas.

Now, the U.S. military will alwa ys step up, that's what we do, it's an honor and a privilege, but when troops are on their third, fourth, and even fi fth deployments overseas to either Afghanistan or Iraq, that places a tremendous burden on the troops themselves and on their family members. This burden will only be intensified if the military is forced to respond to such threats posed by climate change or climate disrup tion. Good examples of this scenario can be found in the 2004 Indonesia tsunami when the U.S. military was called in to provide aid. The U.S. military is the only organization in the world th at has the strength, the know-how , and the resources to respond to such conflicts or disasters. You can even take Hurricane Katrina as another example. For these reasons, implementation of this rule is vital to our national security. It is estimated that this rule will reduce greenhouse gas emissions by 950 million metric tons by 2016. Climate security, in other words, is our nation security.

Equally threatening to our nationa l security is America's dependence on oil. Now, obviously this is not a new threat, it's been around a while. It's been realized, but I don't believe it's been as recognized as it should be. As I mentioned, ou r military is already st retched very thin, and ensuring the constant flow of oil around the gl obe has become a constant if not secondary occupation and task of the U.S. military, yet this is another burden on top of the war fighting responsibilities and the preparation we ha ve to put in for future contingencies.

Because we simply do not have enough oil in the United States to meet our demand, we have to ­

- we are forced to rely on hostile regimes such as Iran or potentially Ve nezuela for our oil. Especially considering Iran and countries like Venezuela have nationalized their oil companies, so basically we're dealing directly with the nation-states themselves.

In 2008 we sent over $386 billion overseas for oil. That's over a billion dollars a day. When this amount of wealth is being transf erred to countries like Iran, we ar e basically -- we are actually funding both sides of the war ag ainst terror. Everybody knows that, it's well known that Iran has funded and trained and supported insurg ents in Iraq and in broader Midd le East in general. So as I said, we are actually paying people to fight against us.

I applaud the automakers for taking this step a nd their support of this re gulation, and I want to thank the EPA. It's been an honor to testify before another organizati on whose duty it is to protect the United States and its citizens.

Physicians for Social Responsibility, Los Angeles

[Following comments are from LA Testimony, OAR-2009-0472-7283 p.79-85]

Our organization believes this is a first good ste p, but it's just the beginning, and stronger action is needed to truly protect public he alth and create a fleet of vehicl es that we need for a greener, healthier future.

Public Citizen and Safe Climate Campaign

1-42General Comments

The commitment of EPA, NHTSA, CARB, and the auto industry to move forward with these standards to reach 250 grams of carbon dioxide pe r mile (gCO2/mi) by 2016 would be a historic achievement for climate protection. [OAR-2009-0472-7050.1, p.1]

The agencies? treatment of various details in knit ting the programs together will set an important precedent for future rulemakings. We urge the agenci es to give careful thought to the structure of this program, with an eye toward additiona l gains needed beyond th e 2016 model year. [OAR2009-0472-7050.1, p.1]

Sack, Emily

I applaud your work, I don't do technical work, I'm not a politician, but I thank you so much for what you're doing and keep it up. Thank you so much. [OAR-2009-0472-4621, p. 157]

[See Docket Number OAR-2009-0472-4621, pp.154-157 for detailed comments]

Seal, Kathy

[These comments were submitted as testimony at the Los Angeles public hearing. See docket number OAR-2009-0472-7283 p.147]

So I wanted to thank you for giving us some hope, for contemplating and proposing these standards, in the future for implementi ng them. I'm very happy that they will reduce greenhouse gas emissions equivalent to the shutti ng down of 200 more coal plants per year. I'm really thrilled about these standards that are being proposed. At the same time, I urge you to make them be implemented very, very strongly without loopholes, without watering them down.

Sierra Club

The Sierra Club, Safe Climate Campaign, Coali tion for Clean Air, Alliance for Climate Protection and Environment America appla ud EPA and NHTSA for proposing greenhouse gas and fuel economy standards the first outlined in President Obama’s historic announcement on May 19, 2009. Achieving the President’s goals w ill reduce America’s oil dependence, curb global warming, cut air pollution, save consumers money at the gas pump, and create new auto industry jobs. [OAR-2009-0472-7278.1, p.1]

We applaud the use of publicly available data as the basis for these proposed standards and the fresh look at technologies and cost s, which stands in stark contra st to NHTSA’s past reliance on confidential product plans and proprietary data . Additionally, we note EPA’s ability to set standards that address a range of greenhouse gases, including ai r conditioning systems and their potent refrigerants. EPA’s Clean Air Act author ity is an important complement to NHTSA’s energy conservation goals and more limited a ssessment of impacts on CO2 emissions. [OAR2009-0472-7278.1, p.2]

By accelerating compliance with the 2020 fuel economy target provided in EISA, EPA and NHTSA create the opportunity for going well beyond 35 mpg in 2020 and putting the US auto

1-43EPA Response to Comments

industry on a path for longer term transformation. This is the biggest single step we can take to curb global warming, reduce air pollution, cut Amer ica’s oil dependence, save consumers money at the gas pump, and create new au to industry jobs. [OAR-2009-0472-7278.1, p.2]

EPA and NHTSA have proposed standards for both cars and light trucks in response to the historic May 19th agreement. EP A’s proposal to achieve a 250 g/ mi CO2e standard is matched with NHTSA’s proposal to set CAFE standards. These are welcome standards that come after nearly 3 decades of complete inaction on car stan dards and incremental change for light trucks. This lack of standards has result ed in a technology backlog whic h the industry can be apply to cost-effectively meet (and exceed) these propos ed standards. Technologies, including highstrength and light weight materi als, transmissions, better engine s and even tires are available now to move standards higher, faster. [OAR-2009-0472-7278.1, p.2]

The technology exists today to significantly reduce greenhouse gas pollution from new cars and light trucks and to slash our a ddiction to oil. Existing and em erging technologies will enable automakers to make continuous improvement through 2016 and beyond, while improving safety and consumer choice. The Sierra Club, Safe Climate Campaign, Coalition for Clean Air, Alliance for Climate Protection and Environmen t America welcome the new National Program and the direction EPA has provided in establishi ng the first national greenhouse gas standards for cars and light trucks to complement NHT SA’s fuel economy program. The MY 2012-2016 standard is a robust start to moving vehicle stan dards out of the 1970’s and into the 21st century. This NPRM establishes a foundation for stronger standards after 2016 that will be put the auto industry on the path to continuous innovation in vehicle technology that will reduce greenhouse gas pollution, curb our addiction to oil and keep billions of dolla rs here in the US. Including a backstop, fairly considering electric vehicles to avoid the taint of FFV credits, ensuring flexibilities and credits are tied to real reduc tions, and ensuring standards for the future are technology forcing will help establish a final rule that achieves President Obama’s goals – and will both meet the need of the nation to save oi l and act swiftly to protect public health and welfare from greenhouse gases. [OAR-2009-0472-7278.1, p.19]

[[These comments were submitted as testimony at the Detroit public hearing. See docket number EPA-HQ-OAR-2009-0472-6185, pp. 26-27.]]

And perhaps most importantly for today, as we're in Detroit, these standards will provide automakers with the direction they need to become leaders in efficient vehicles and make Detroit the epicenter of a green indus try. These standards acknowledge that our automakers have technologies on the shelf to safely improve fu el economy. Technology such as Ford's EcoBoost engine, continuously variable transmissions, and high strength, lightweight materials will provide consumers with the safe, clean vehicles they deserve. The proposed standards will ensure that these technologies ar e put to work now and lead to the development and deployment of even more advanced technologies.

[[These comments were submitted as testimony at the Los Angeles public hearing. See docket number EPA-HQ-OAR-2009-0472-7283, pp. 137-138.]]

1-44General Comments

I would like to applaud the EPA and DOT on the new vehicle standards that will benefit consumers by allowing us to fill up less at the pump, that will benefit our nation by reducing our dependence on foreign oil, and will benefit the world by reducing pollutants that contribute to global warming.

The EPA and DOT's new vehicle st andards are a big step in the right direction. They promote exactly what the world needs right now, real progress towards livi ng without dirty, unlimited energy. Our reliance on polluting fuels now can only lead to disaster in the future.

South Carolina Department of He alth and Environmental Control

We commend the EPA and the NHTSA for working together to devel op a rule that will result in significant improvements in fuel economy. Ou r nation needs reduced emissions and energy security and we support these goals. In a ddition to reducing greenhouse gas emissions, improving fuel economy will have the very important benefit of reducing emissions and helping areas meet national ambient air quality standard s for pollutants including ozone and particulate matter 2.5 and will also reduce urban air toxics. Th ese air quality improvements will have a very positive impact on public health and the environment. [OAR-2009-0472-7202.1, p.1]

South Carolina Pulp & Paper Association (SCPPA)

SCPPA supports the National Highway Transpor tation Safety Administration (NHTSA) moving forward at this time with the Corporate Averag e Fuel Economy (CAFE) standards as proposed and commends the effort to develop a rule that will result in significant improvement in fuel economy. However, SCPPA has significant con cerns with the Greenhouse Gas Emission Standards provisions in the rule, primarily relate d to greenhouse gases tr iggering of Title V and New Source Review (NSR) permitting provision s of the Clean Air Act. [OAR-2009-0472-7479,
p. 1]

South Carolina Wildlife Federation

Thank you of the opportunity to comment on this extremely important action. We fully support your efforts and request that these new rules and standards be implemented as quickly as the law allows. [NHTSA-2009-0059-0136, p. 2]

Although the formal comment period on the Pro posed Rulemaking To Establish Light- Duty Vehicle Greenhouse Gas Emission Standards and Corporate Average Fuel Economy Standards closed on November 27,2009, a letter from R obert J Meyers, Principal Deputy Assistant Administrator, EPA to Governor John Engler, President and CEO, National Association of Manufactures, dated November 14,2008 indicates that closure of a formal comment period is not the end of the dialogue or opportunity to provide input on such important issues. We understand that EPA continues to post such comments to the docket and when moving forward with rule making or other actions under the Clean Air Ac t, will use the entire docket, including late comments, as a resource. [NHTSA-2009-0059-0136, p. 1]

1-45EPA Response to Comments

We wish to express our strong disagreemen t with specific comments critical of EPA transparency and the time allowed for public co mments expressed in a November 2 4 2009 letter from the South Carolina Department of Hea lth and Environmental Control (SCDHEC). South Carolina Wildlife Federation fully supports the proposed stan dards for reducing vehicle greenhouse gas emissions. [NHTSA-2009-0059-0136, p. 1]

We feel that it would be extrem ely short sighted to delay such regulations based on fear of the potential collateral impacts on state and local ai r permitting authorities, small business and other stationary sources as requeste d by SCDHEC. Additional time will not decrease but only serve to increase potential impacts on the economic well-bei ng of our state. It is difficult to understand the position that such regulations would have a detrimental effect on South Carolina's economy, a coastal state, considering the potential impact that increasing green house gases has on extreme weather events such as hurricanes and rising sea levels. [ NHTSA-2009-0059-0136, p. 2]

Increasing fees, revising state regulations, gettin g State legislation enacted, or increasing State employee workload and training expressed by SC DHEC pales in comparison to the troubles our State will face should the new rule not be promul gated. Such impacts are outlined in the final rule for the Endangerment and Cause or C ontribute Findings for Greenhouse Gases Under Section 202(a) of the Clean Air Act (Fed eral Register, December 15,2009). [NHTSA-2009­ 0059-0136, p. 2]

We find it ironic and unacceptable that SCDHEC, the agency charged with regulating and controlling health and environmental matters in th is state, would take su ch a cavalier attitude towards protecting the health and environment of our citizens. Although ne w federal legislation on greenhouse gasses may be a prefer red solution, there is no assurance that such legislation will pass in the near future. In ge neral terms, the minimum fede ral environmental and health standards passed down to the respect ive states is the only protection we can expect as citizens of South Carolina because of SCDHEC's historical reluctance to look at stronger requirements, even when threats are ob vious. [NHTSA-2009-0059-0136, p. 2]

South Coast Air Quality Management District

We would also like to urge that EPA and DOT co ntinue to support and strongly coordinate with ARB in the development of new emission st andards known in California as Pavley II.

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

Southeastern States Air Resource Managers, Inc. (SESARM)

We commend the U. S. Environmental Protecti on Agency (EPA) for working closely with the National Highway Traffic Safety Ad ministration (NHTSA) to develop a rule that will result in significant improvements in fuel economy. Ou r nation needs reduced emissions and energy security and we support these goals. Through gubernat orial and/or legislative mandates, some of our agencies are required to consider effective methods of mitigating greenhouse gas (GHG) emissions, provided the measures do not result in adverse impacts to the economy, environment,

1-46General Comments

or jobs. We support emission reduction programs that are well designed, complementary, and coordinated. [OAR-2009-0472-7137.1, p.1]

State of California

The attorney general of California is generally supportive of the proposed rulemaking and agrees with comments submitted by CARB. NHTSA a nd EPA are proposing to adopt California's GHG emission standards on a nationwide basis, and that can only be good for the Earth's Climate, our nation's energy security, and putting m oney back in consumer's pockets.

State of Connecticut

I write to congratulate you on your groundbreaking joint effort to c oordinate two very significant regulatory efforts on vehicle fuel efficiency requirements. (CAF E) and motor vehicle greenhouse gas (GHG) emission standards. Both of these e fforts are praiseworthy by themselves; in tandem, you have made a bold statement that energy, th e economy and the environment are closely and inexorably linked and our government's policies must reflect this unde niable fact. [OAR-2009­ 0472-7499, p.1]

State of Connecticut as a front runner in climate change, strongly supports the proposed rule and commends the interagency coordination efforts.

State of Connecticut Department of Environmental Protection

DEP congratulates the Environmental Protec tion Agency (EPA) and the National Highway Traffic Safety Administration (NHTSA) on your groundbreaking joint effort to coordinate two very significant regula tory efforts on motor vehicle greenhouse gas (GHG) emission standards and vehicle- fuel efficiency requirements (C APE). The mobile source sector represents a significant source of greenhouse ga s (GHG) emissions and in 2007 mobile sources contributed 4396 of GHG emissions in Connecticut. The emission reductions attributable to these rules are necessary for Connecticut to meet its GHG reducti on targets and will be si milarly critical in meeting national targets once adopted.

DEP believes the Clean Air Act is an appropria te mechanism for regulating GHG emissions. As such, it is critical to maintain the Clean Air Ac t provisions protecting states' rights to adopt motor vehicle standards - for Califor nia under Section 209 and for C onnecticut under Section 177. This effort created the technical ba sis and real world experience cr itical to the proposed national motor vehicle GHG emissions reduction proposal. Furthermore, as directed by Governor Reli and in accordance with a proposal now being developed by California, DEP will begin a rule making process next year intended to deem vehicl es that comply with the new federal standards to be in compliance with our adopted stat e standards from 2012 through 2016. [OAR-2009-0472­ 7301, p.1]

DEP also supports comments submi tted by NESCAUM. [OAR-2009-0472-7301, p.3]

State of New Jersey

1-47EPA Response to Comments

I would like to thank you for this opportunity to testify on the join t proposal of the United States Environmental Protection Agency and the National Highway Transportation Safety Administration to establish li ght-duty vehicle greenhouse gas em ission standards and corporate average fuel economy standards. The Department of Environmental Pr otection supports the proposed action as a first step in our efforts to co mbat climate change. New Jersey is a leader in addressing the [These comments were submitted as testimony at the New York public hearing. See docket number OAR-2009-0472-4621, p. 109.] c ontrol of air pollu tion, including greenhouse gases, and welcomes this opportunity to comment constructively to help advance a harmonization of the federal vehicle control program. [These comments were submitted as testimony at the New York public hearing. See docket number OAR-2009-0472-4621, p. 110.]

Although the Department is supportive of the proposed federal vehicle control program as a powerful first step in addressing greenhouse ga s emissions from motor vehicles, additional reductions will be needed for vehicles beyond th e model year 2016. New Jersey is committed to working with the U.S. EPA, NHTSA, California Air Resources Board, and other stakeholders to address global climate change and the need to reduce oil consumption by developing strong motor vehicle greenhouse gas standards for m odel years after 2016. [These comments were submitted as testimony at the New York public hearing. See docket number OAR-2009-0472­ 4621, p. 113.]

State of Washington Department of Ecology

Ecology especially acknowledges the Obama Admini stration's historic leadership of bringing together for the first time EPA, NHTSA, Calif ornia, and the auto industry to reduce this country's greenhouse gas emissions and their contribution to global warming. The proposed standards to reduce GHG emissions from light-d uty vehicles in model years 2012 through 2016 are a very critical and commendable first step to ward making light-duty vehicles in Washington and our nation as clean as possible. [OAR-2009-0472-7299, p.1]

Steiner, John

Your continued leadership in finalizing protective standards will help wean us off of foreign oil, reduce harmful greenhouse gases, and save families money at the gas pump. [OAR-2009-0472­ 8705 p.1]

Toyota Motor North America

Last May, Toyota executives joined Presiden t Obama, Cabinet members, governors, the California Air Resources Board, other CEOs and environmental leaders to support a commitment to establish a coordinated national program for fuel economy standards and greenhouse gas reductions from passenger cars and light trucks. We encouraged this agreement, which we had sought for a very long time. W ithout it, our industry would be subject to overlapping and potentially conflicting re gulations from two separate federa l agencies and over a dozen states. [OAR-2009-0472-7291, p.1]

1-48General Comments

The Environmental Protection Agency (EPA) and the National Highway Traffic Safety Administration (NHTSA) have jointly proposed a co mprehensive set of regul ations to implement this agreement. We support EPA and NHTSA's efforts to harmonize two programs under two quite different statutes and at the same time establish a completely new greenhouse gas (GHG) program for motor vehicl es. [OAR-2009-0472-7291, p.2]

Toyota is committed to addressing climate cha nge and oil dependence by increasing the fuel efficiency of our products, deve loping new markets for advan ced vehicle technologies, and reducing the greenhouse gas footprin t of our manufacturing and dist ribution operations. In fact, our top societal priority is sustainable m obility, a stance that transcends our regulatory obligations. To us, sustainable mobility means bu ilding vehicles that meet customer needs and expectations, while also being safe, durable, and better for the envi ronment. [OAR-2009-0472­ 7291, p.2]

To minimize our environmental footprint, we are accelerating the roll-out of conventional hybrids across our entire line-up. In addition, we are pursuing hydrogen fuel cells, plug-in hybrids, pure electrics and a dvanced batteries beyond lithium ion - all with the goal of overcoming the barriers that currently prevent their mass deployment. On the operational side, we've already cut carbon dioxide (C02) emissions and energy use from our manufacturing plants on a per vehicle produced basis by 19 % since 2000. [OAR-2009-0472-7291, p.2]

[[These comments were submitted as testimony at the Detroit public hearing. See docket number OAR-2009-0472-6185, pp. 51-54.]

We welcome the development of a single co ordinated fuel economy and greenhouse gas standard. This agreement is something we have encouraged and sought for a very long time, and it is a landmark achievement for all of us. Without it, we would be subject to overlapping and in places conflicting regulations from two separate Federal agencies and over a dozen states. In exchange for eliminating the patchwork, we agre ed to pull forward the ambitious fuel economy targets set by Congress for 2020 to 2016.

We applaud the efforts NHTSA and EPA have made to unify two programs under two quite different statutes, and to esta blish a completely new EPA program for motors vehicles. The proposed regulations appear to cap ture the key elements of our hi storic agreement, including the various compliance flexibilities that were integral to reaching a consensus. We therefore believe the proposal sets the stage for a successful final joint rulemaking that will provide certainty for our product planners and significan t environmental and energy be nefits for our nation and the world. We are now examining the details of this complex proposal, and to th e extent that issues need to be clarified we will be submitting written comments.

Make no mistake, meeting the overall fleet av erage of 35.5 mpg by 2016 w ill be a challenge for our engineers and product planners . It will require every ounce of their ingenuity and creativity. In the end, consumers will be the true beneficiaries of this prog ram. A unified national program ensures American consumers will have the choice of vehicles they need and want, as well as the fuel efficiency and low emissions they expect, without the confusion of multiple standards.

1-49EPA Response to Comments

That's why the process of collaboration must continue beyond 2016 and we must continue to seek additional areas of harmoni zation between the two programs.

Now I would like to step back and comment from a broader perspective just a moment. The fact that diverse groups could find common ground on th ese challenges is a notable example of how government and industry can -- and should -- work. It illustrates one of th e cornerstones of how Toyota approaches public policy, by fostering partnerships, with government, universities, nonprofits, and other companies. The other cornerst one is a long-range planni ng for and investing in the future. At Toyota, we don't stop at regula tory compliance nor do we wait for government regulation to address the challe nges of tomorrow's transportation.

Our top public policy priority is sustainable mobi lity. That means building vehicles that meet customer needs and expectations, while also bei ng safe, durable, and better for the environment. To minimize our environmental footprint, we are accelerating the roll-out of conventional hybrids across our entire vehicle lineup. In addition, we are pu rsuing hydrogen fuel cells, plugin hybrids, pure electrics, and advanced batter ies beyond lithium ion -- all with the goal of overcoming the barriers that curren tly prevent their mass deployment.

Sustainability mobility defines where we are today and where we plan to be in the future: We are the leader in fuel-efficient vehicles in th e U.S. We are the lead er in hybrid technology, having launched our first hybrid a dozen years ago and put more th an 2 million in the worldwide market to date. We are bringing a plug-in, a pur e EV, and other advanced technologies to market in the near future to complement our hybrid dominance. And we've already cut CO2 emissions and energy use from our manufacturing plants on a per vehicle produ ced basis by 19 percent since the year 2000. Just yesterday Toyota beca me the first car manuf acturer to join the SmartGridCity in Boulder, Colorado. 10 plug-in Pr ius hybrid electric vehicles will help teach us how to reduce carbon emissions and our dependence on foreign oil, while at the same time, not just meet, but exceed customer expectations.

We believe it is important to keep in mind that the road to sustainable mobility is a long one, and it is not one, but actually two separate and distinct ro ads traveling in the same direction. One road is the path to compliance. The other is the path to market preparedness. One is constructed to meet the priorities of government regulation. The other is construc ted to search out and respond to the specific needs a nd desires of the consumer.

I believe we need both of these roads to arrive together in the same place to realize the goal of sustainable mobility.

Transportation and Buildings Policy for the St ate of Massachusetts Executive Office of Energy and Environmental Affairs

The benefits of this proposal will be far-re aching: Significant reducti ons of greenhouse gases, improved fuel economy and lowered cost for the nation's drivers, reduced demand for imported oil and economic growth for the development of advanced vehicle technologies. [OAR-2009­ 0472-4621, p.19]

1-50General Comments

Thus, Massachusetts strongly supports the work of the federal agencies in moving forward with this proposed joint rulemaking. In addition to harmonizing federal regulations, this rulemaking would for the first time align the federal motor vehicle standards with the greenhouse gas [OAR2009-0472-4621, p.20] standards adopted by the California Air Resour ces Board and the Section 177 states, a group that includes Massachusetts a nd 13 other states which have adopted these more stringent standard s. [OAR-2009-0472-4621, p.21]

In conclusion, Massachusetts fully supports the Obama Administration and the proposed rulemaking of EPA and NHTSA. [OAR-2009-0472-4621, p.26]

I want to emphasize the importance of moving forw ard with national regulations at this time. Climate change is the most criti cal environmental issue of our tim e and the time is now to act to address it. [OAR-2009-0472-4621, p.26]

U.S. Coalition for Advanced Diesel Cars

The Coalition supports the twin national obj ectives of reducing green house gas (GHG) emissions and petroleum fuel consumption by the U. S. light duty vehicle fleet. To that end, the Coalition urges EPA to adopt fuel-neutral policie s, standards and reality-based vehicle ratingsthat will promote vigorous technology competition in the market place. Failure to adopt fuelneutral policies and reality-based vehicle ratings will undermine consumer choice and drive a systematic shortfall in achi eving the benefits promised by the new rulemaking. [OAR-2009­ 0472-7496, p.1]

The success of the new rules will ultimately be judged by reductions in real-world petroleum barrels and real -world GHG tons . Moreover, the recovering auto industry cannot afford to make investment decisions based on EPA data without an assurance that those decisions will make long-term business sense. This is in stark conflict with Presiden t Obama's call for rules that will 'give our auto companies some long-overdue cl arity, stability and pred ictability.' [OAR-2009­ 0472-7496, p.2]

Union of Concerned Scientists

UCS applauds the work of both agencies for mo ving quickly to issue th e proposed rulemaking to make President Obama’s commitment a reality. Over all, the proposed rule takes a dramatic step forward. However, certain aspects of the rule co uld erode the potential be nefits unless they are effectively implemented and enforced. In order to maximize the environmental, economic, and security benefits of this program, it is critic al that the 250 grams per mile goal is achieved. [OAR-2009-0472-7181.1, p.1]

We would like to commend the agencies in gene ral on their noticeable efforts to provide high levels of transparency in the proposed rulemaki ng, and particularly to laud EPA for its detailed and thoroughly credible assessments of technolog y availability and technology cost. We would like to compliment EPA on its approach of ba sing its finding not upon confidential business information, as has been the practice of NHTS A in recent rulemakings, but rather upon well documented, proven, and transparent findings. [OAR-2009-0472-7181.1, p.12]

1-51EPA Response to Comments

[Union of Concerned Scientists also submitted th ese comments as testimony at the New York public hearing, See docket number EPA-HQ-OAR-2009-0472-4621, pp. 91-92.]

United Auto Workers

The UAW commends both agencies and the Ob ama administration for putting forth a proposal that provides for a national system of fuel-economy and greenhouse gas emission regulations. This will avoid a confusing and costly patchwor k of federal and state regulation of light-duty vehicle fuel economy and greenhouse gas emissions. This proposal contains the features of the historic stakeholder agreement that that wa s announced by President Obama in May, 2009. It will benefit the nation by reducing oil consump tion and greenhouse gas emissions. In particular, it will save more fuel and avoid more greenhous e gas emissions than would have been the case under a state and federal regulat ory patchwork. This is because it extends tougher standards across the entire nation rather than having them lim ited to a minority of states that would have chosen to follow the standards promulgated by th e State of California. At the same time, by establishing a unified national system the regulations will make it easier for automakers to meet the tougher standards. This will fa cilitate investment and production in the auto sector, and help to preserve and create jobs for Am erican workers. [OAR-2009-0472-7056.1 p.1]

University of Miami, School of Law

We support the proposed EPA and NHTSA rule and encourage the Obama administration to continue to find ways to curb the polluti on that causes global warming. These proposed standards allow automobile manufactures to ut ilize technologies that will reduce vehicle GHG emissions and improve fuel economy. The EPA pr oposal would require vehicles to meet an estimated combined average emissions level of 250 grams/mile of CO2 in model year 2016. The NHTSA proposal would require car manufacturers to meet an estimated combined average fuel economy level of 34.1 mpg in model year 2016. [OAR-2009-0472-6770, p. 1]

University of Michigan Transporta tion Research Institute (UMTRI)

The National Program is supposed to establish strong and coordinated federal greenhouse gas and fuel economy standards for passenger cars , light-duty trucks, a nd medium-duty passenger vehicles. For the National Program to be successful, stakeholders with diverse interests and views need to cooperate. EPA, NHTSA, CARB, and the automakers are to be commended for the cooperative beginning of the joint rulemaking process for managing automotive CAFE and GHG emissions standards. [OAR-2009-0472-3651.1, p.1]

[[UMTRI also submitted these comments as test imony at the Detroit public hearing, See docket number OAR-2009-0472-6185, pp. 33.]

University of Pennsylvania, Environmental Law Project

Some of the changes brought about this legislation could supplant a regulatory scheme established by this rule by enfo rcing cap-and-trade strategies for carbon emissions across broad sectors of the economy. However, given that the Sena te has yet to act, there remains a great deal

1-52General Comments

of uncertainty in both timing of fi nal passage and the cont ent of specific provision s. This rule is a useful step forward in reducing GHGs, and mark s important redefinitions of the scope and relevance of existing statutory provisions. [OAR-2009-0472-7286.1, p. 4]

Undoubtedly, the United States must adopt policies that address global climate change and reduce its oil consumption. These proposed rules, developed in response to President Obama’s call for a National Fuel Efficiency Policy, consti tute a strong and coor dinated federal fuel economy and GHG program for passenger cars and li ght trucks. Since the proposed rules will provide regulatory certainty and consistenc y for the automobile industry while reducing greenhouse gas emissions based on t echnologies that can be incorpor ated at reasonable cost, the proposal represents an important effort to improve fuel eco nomy and reduce greenhouse gas emissions. [OAR-2009-0472-7286.1, p. 14]

It is critically important that the United States adopt policies that address global climate change and reduce its oil consumption. These proposed rule s constitute a strong a nd coordinated federal fuel economy and GHG program for passenger cars and light trucks. Since the proposed rules will provide regulatory certainty and consistenc y for the automobile industry while reducing greenhouse gas emissions based on t echnologies that can be incorpor ated at reasonable cost, the proposal represents an important effort to improve fuel eco nomy and reduce greenhouse gas emissions. [OAR-2009-0472-7286.1, pp. 21-22]

However, the proposal is not wit hout its flaws. Namely, the proposal fails to gradually reduce the disparity between efficiency requirements fo r 2012 and 2016 MYs. Additionally, the policy does not create mechanisms whereby minimum reductions are ensured, nor does it address the fiction of “zero emissions” electric vehi cles. Finally, the proposal fails to make a complete lifecycle impact analysis, and therefore may overlook de leterious consequences of its implementation. Thus, the proposal, while timely, would benefit from an enhanced discussion of these among other potentially problematic om issions. [OAR-2009-0472-7286.1, p. 22]

US Steel Corporation

U. S. Steel supports the intent of the Clean Air Act and the Energy Independence and Security Act (EISA) of 2007, which together have form ed the basis of this proposed rulemaking on greenhouse gas emissions and fuel economy st andards. We support EPA and NHTSA for proposing a common national standard for light-duty vehicles (passenger cars, light-duty trucks, and medium duty vehicles) and avoiding a patchwor k of state and federal regulations that would have added complexity and cost to compliance effo rts. The proposed rule is aimed at leading our nation to greater energy indepe ndence and our world to a condition of lower emissions and a cleaner environment. It is important, however, to carefully analyze the methodology selected for enforcement of the intended rules in order to ensure that the methods are technically sound, economically feasible, and of sufficient scope to avoid unintended cons equences that oppose the objectives of the regulations. The purpose of th ese comments is to place on the record our analysis concerning the likely impact of the proposed CAFE re gulations on the steel industry, on the economy, and on the emissions of CO2 and reduction of energy use. [OAR-2009-0472­ 7197.1 p.2]

1-53EPA Response to Comments

Volkswagen Group of America (Volkswagen)

First, as a general comment Volkswagen supports the framework of this proposed regulation and strongly supports GHG and CAFE regulations under a National structure. Volkswagen participated in the negotiations to make a National program a reality and believes a National solution to controlling both GHG emissions a nd fuel economy regulations is the best arrangement for all parties. Volkswagen apprecia tes the efforts of the White House, the Federal agencies, the state of California, the auto industry and other i nvolved stakeholders in making a National Program possible. [OAR-2009-0472-7210.1, p.2]

The proposed regulation is signifi cant and historic. With this jo int notice, EPA and NHTSA have proposed stringent standards that will be challe nging for the auto industry. The regulation is technology forcing and will increase the initial purchase cost of ve hicles in the future. It also represents a major change in the treatment of fuel economy regulations and GHG emissions from the light-duty transportation sect or. Despite the development task s and challenges the proposed regulation represents, Volkswagen supports the overall framework and balance of the regulation. [OAR-2009-0472-7210.1, p.2]

In addition, Volkswagen supports the conti nuation of a National Program beyond the 2016 MY limit of this NPRM and urges all stakeholders to work towards th at goal. Volkswagen pledges to support and contribute to efforts to put a Natio nal Program in place for 2017 model year and beyond. [OAR-2009-0472-7210.1, p.2]

Volkswagen supports the efforts of both agen cies to harmonize the GHG and the CAFE program as much as possible under the regulatory constr aints in place for both regulations. Volkswagen especially supports the work by both agencies to form their respective regulations to allow averaging, banking and trading as similar as possi ble in both programs, and to provide as many credit flexibilities as possible that accommodate the wide ra nge of manufacturers. [OAR-2009­ 0472-7210.1, p.2]

Volkswagen commends both NHTSA and EPA in their efforts to harmonize the GHG and CAFE programs in this joint notice. While stringent, we support the overall level of the standards proposed. We also support the efforts to allow as much flexibility as possible and we urge the agencies to maintain the credit flexibilities propo sed in the joint NPRM. Due to the major change to the treatment of GHG and CAFE regulations this regulation represents, we believe the flexibility in the proposed regula tions are essential to allowing all manufacturers the time and tools needed to adjust to th e new era of regulation for GHG em issions and fuel economy. [OAR2009-0472-7210.1, p.10]

Volkswagen remains committed to working with EPA and NHTSA staff to establish the best regulation possible to achieve the goals of the country in a fair and balanced manner. Volkswagen also supports efforts to con tinue a National program in 2017 MY and beyond. [OAR-2009-0472-7210.1, p.10]

[[These comments were submitted as testimony at the Detroit public hearing. See docket number OAR-2009-0472-6185, pp. 112-113.]

1-54General Comments

Make no mistake, this regulation is very ch allenging, but we support a national solution to greenhouse gas and fuel economy re gulation and we support the lead time and stability of the proposed regulation thr ough the 2016 model year.

The Volkswagen Group urges all stakeholders to continue developing this program and working towards a National Program for 2017 and beyond. In particular, Volkswagen supports the government's efforts and the NPRM to provide the flexibility to the regulation that helps manufacturers transition to the propose d national greenhouse gas/CAFE program.

The government correctly recogniz ed that auto manufacturers are a diverse group representing many different market segments and different sales volumes in the U.S. market. In recognizing these differences, the agencies were able to develop credit banking and trading schemes that offer real greenhouse gas reductions and provide all manufacturers fl exibility in complying with the regulation and with various credit pathways.

Washington State Department of Commerce

[Following comments are from LA Testimony, OAR-2009-0472-7283, pp.121-122]

The Washington State Depart ment of Commerce is really happy with EPA and NHTSA working together toward a national plan.

Almost half of the greenhouse gas emissions in the State of Washington come from transportation. Therefore, we view efficiency as a key tool for the mitigation of these emissions. We are therefore very supportive of the developm ent of the national plan, and we look forward to working with you on improving the proposed rule.

The State of Washington also recognizes the work that the car industry wi ll make to meet the new standards. We believe that st ates also have a role in helping the succe ss of this program by incentivizing the adoption of cleaner vehicles and partnering with i ndustry to help on the deployment of advanced technology vehicles.

Setting vehicle performance standards is one im portant step toward achieving our fuel economy and greenhouse gas emission goals. However, our in formation says that th is will not be enough to address the problems of greenhouse ga s emissions from road transportation.

Webb, Alysha

[Following comments are from LA Testimony, OAR-2009-0472-7283, pp.129-130]

And as I mentioned before, automakers have th e technology to achieve these standards. We've heard from a number of automakers here. They don't oppose them, but they need some certainty. So I think these standards are very important because they'r e going to give the automotive industry some certainty.

1-55EPA Response to Comments

So, again, I thank you for supporting the gree nhouse gas standards, but I urge you not to emasculate them by granting too many ta x credits or too many credits or making implementation too flexible.

There are a lot of areas in which I wish Ch ina would emulate U.S. policy more closely, but where greenhouse gas emission standards are con cerned, thankfully the U.S. is in some ways following China.

But, most importantly, I urge you to continue to follow California's example in this as you consider policies for the future.

Weiner, Jill

[Following comments are from LA Testimony, OAR-2009-0472-7283, pp.87-89]

I am happy that the Pavley standards are the basis for a new national standard, and I want to applaud the administration and the auto industry for working t ogether to reach an agreement.

I'm excited to see how the automakers will apply existing and new technologies to meet these standards, and I'm looking forward to re placing my 1998 model with a cleaner, more efficient car in the near future.

That being said, I urge you to make sure that th e details of the program are such that we do, in fact, meet the goals, both in terms of emission reductions a nd oil savings. Please do not allow loopholes or excessive credits to dilute the pr ogram's results. For elec tric vehicles, the EPA needs to consider the source of electricity and accurately account for how that power is generated just as the Pavley standards do.

Winograd, Marcy

[These comments were submitted as testimony at the Los Angeles public hearing. See docket number OAR-2009-0472-7283, pp.159-163]

I am here today to applaud the EPA and the Department of Transportation and encourage you to work vigorously and meaningfully to ach ieve significant reductio ns in global warming pollution.

While I am greatly encouraged by the proposed standards, we must be on guard to weed out the devil in the details that inevitabl y surface in situations like these.

EPA Response:

Many commenters expressed support for the program in general, as well as for various specific provisions the rule. Most of these commenters al so had concerns about so me relatively detailed provisions of the rule -- which we address elsewhere in this document and in the preamble to the rule -- but were supportive of the overall program.

1-56General Comments

These commenters were supportive of several ke y aspects of the rule including the following:

 The stringent level of the emission standa rds, which received support from states, environmental organizations, and many others for the large greenhouse gas emission reductions that will result,

 EPA's assessments of costs and GHG-reduci ng technologies, includ ing support from auto industry stakeholders,

 EPA's adopting of attribute-based standards, an d using footprint at the sole attribute,

 EPA's overall analytical approach to estab lishing the target emission levels, which the industry either supported or was silent about, and

 The successful effort to develop a coordinated single National Program that avoids the need for manufacturers to comply with separate NHTSA, EPA, and state emission requirements.

1.2. General Opposition

Organization:

American Chemistry Council (ACC) Arizona Public Service (APS) Devon Energy Corporation Duke Energy Fertilizer Institute Hagen, David L. Heritage Foundation Industry Coalition Mass Comment Campaign (48) (unknown organization) Mississippi Department of Environmental Quality National Automobile Dealers Association (NADA) National Climate Coalition Process Engineers Shaw, Donald F. Spurgeon, C. M. Texas Industry Project (TIP)

Comment:

American Chemistry Council (ACC)

The Associations acknowledge EPA‘s desire to address GHG emissions from mobile sources quickly, as well as NHTSA‘s need to set new fuel economy standards, which must be [OAR2009-0472-7148.1, p.1] promulgated at least 18 months be fore the affected model year (in this case the 2012 model year). 49 U.S.C. § 32902(g)(2 ). However, as proposed, the Motor Vehicle Rule ignores the enormous burdens the Rule w ould impose on stationary sources. This omission violates legal requirements for agency rulema king, constitutes arbitrar y and capricious action,

1-57EPA Response to Comments

and is simply bad policy. This is especially so because nearly all the environmental benefits EPA says will result from its promulgation of the Motor Vehicle Rule under CAA authority would also result from the NHTSA rule alone. Yet, unlike NHTSA action to raise corporate average fuel economy (CAFE) standards, the redundant EPA standards promulgated under the CAA would have regulatory impacts re aching far beyond the automotiv e industry and would impose billions of dollars in add itional permitting and complian ce costs. [OAR-2009-0472-7148.1, p.2]

Thus, although the Associations take no pos ition on NHTSA‘s proposal to increase CAFE standards, we vigorously object to EPA‘s proposal to finalize the superfluous Motor Vehicle Rule under CAA Section 202. EPA‘s failure to acc ount here for the PSD and Title V burdens it elsewhere acknowledges will flow from this rule making renders this rulemaking legally invalid. EPA must fully consider those burden s in this rulemaking. [OAR-2009-0472-7148.1, p.2]

[See Docket number OAR-2009-0472-7148.1, cover page 1-2 for deta iled comments]

Arizona Public Service (APS)

APS has significant concerns regarding the proposed Light-Duty Vehicle Greenhouse Gas Emission Standards and Corporate Average Fuel Economy Standards. Specifically, a comparison of the proposed benefits resulting from the EPA program to the NHTSA program reveals the programs to be virtually identical and that EP A's proposal provides no apparent additional benefit. For this reason, APS belie ves that EPA's action is simply a means to regulate greenhouse gas emissions from stationary sources through the Clean Air Act Prevention of Significant Deterioration (PSD) and Title V permit programs. As such, APS also believes the economic and environmental cost and benefits analysis of this joint proposal fails to assess impacts on stationary sources . [OAR-2009-0472-7107.1, p.1]

If this rule is finali zed, a significant number of stationary sources will become subject to PSD and Tide V permitting requirements. Howeve r, EPA did not include the economic and environmental consequences of triggering these rules. It is APS' position that EPA either withdraw its portion of the rule or perform a thorough economic and environmental cost and benefit analysis, and provide an adequate publ ic notice and comment period to address the impacts to stationary sources. [OAR-2009-0472-7107.1, p.1]

Devon Energy Corporation

Many scientists (myself included) doubt the “consensus” that CO 2 contributes significantly to atmospheric warming. The Earth has been warmi ng ever since the last ice age ended, roughly 12,000 years ago in fits and starts, and it is defi nitely not proven that man-made CO2 is a significant contributo r to the current warming trend (last 100 years or so). But, for the sake of argument, let’s assume that CO2 does matter. Fu rther, let’s assume that global warming is a problem (this is not proven either). Let us also assume that additional CO2 is not a benefit to plant life, this is crazy, since it is one of their main foods, but le t’s assume this. Even with these assumptions, the Environmental Protection Agency (EPA) is not justif ied in regulating carbon dioxide emissions from vehicles. These regulations will only increase the cost of our cars, harm

1-58General Comments

our economy, and limit our transportation options. We need efficient, affordable transportation to rebuild our economy and create American jobs.

According to the proposed regulations, EPA want s to regulate carbon dioxide emissions from cars and trucks, “because of the cr itical need to address global climate change.” (74 Fed. Reg. 49454).This regulation does not achie ve EPA’s stated goal because, according to EPA data, it does not reduce global warming or sea level rise in a meaningful way. The regulation states that the carbon dioxide reductions “are project ed to reduce global mean temperature by approximately 0.007–0.016°C by 2100, and global mean sea level rise is projected to be reduced by approximately 0.06–0.15 cm by 2100.” [OAR-2009-0472-10450 p.1]

Duke Energy

Duke Energy Business Services LLC (“Duke En ergy”), on behalf of Duke Energy Carolinas, LLC, Duke Energy Indiana, Inc., Duke Energy Ohio, Inc., Duke Energy Kentucky, Inc., and Duke Energy Generation Servi ces (“DEGS”), therefore submits the following comments on the Joint Motor Vehicle Proposal. Specifically, the significant flaws and shortcomings of the Joint Motor Vehicle Proposal necessitate the withdrawal of EPA’s portion of the proposed rule. Duke Energy continues to support the enactment of environmentally and economically sustainable federal climate change legislation. Regula ting GHGs under the CAA is the wrong approach. [OAR-2009-0472-7136.1, p.2]

The U.S. Environmental Protection Agency’s (“EP A”) has stated its view that promulgation of the GHG motor vehicle standards will subject GHGs to the CAA Prevention of Significant Deterioration (“PSD”) program and the permitting requirements of Title V of the CAA, potentially as soon as the date on which the rule becomes final and effective. Duke Energy believes, however, that EPA’s legal positions in this regard and the analysis presented in the proposed rule are seriously flawed an d must be corrected. [OAR-2009-0472-7136.1, p.2]

The Joint Motor Vehicle Proposal and its suppo rting documentation makes clear that EPA’s proposed GHG motor vehicle emission standards are largely duplicative of NHTSA’s proposed program and that EPA’s proposal will not add in any significant manner to the GHG reductions and associated impacts of NHTSA’s proposed CAFE standards. Therefore, EPA cannot properly reach an affirmative endangerment finding to sa tisfy the requirements of the CAA’s test for finding “endangerment,” rendering EPA’s propos ed GHG motor vehicl e emission [OAR-2009­ 0472-7136.1, p.2] standards legally (and scientifica lly) unjustified. Because an affirmative endangerment finding cannot be legally made, EPA lacks the authority to finalize its proposed GHG motor vehicle standards under section 202( a) of the CAA. [OAR-2009-0472-7136.1, p.3]

Fertilizer Institute

TFI supports the comments submitted by the National Mining Association on this NPRM. TFI believes that GHGs should be evaluated and, if necessary, regulate d under comprehensive climate change legislation and not under the piecemeal, command and control approach of the CAA and other existing statutor y programs. Finally, it appears the economic impacts of the rulemaking have not been fully evaluated. [OAR-2009-0472-7279.1, p.2]

1-59EPA Response to Comments

Hagen, David L.

I petition the Environmental Protection Agency (EPA) to reject re gulating carbon dioxide emissions from vehicles as unjustified. Such regulations unnecessarily harm the economy, limit transportation, increase the cost of vehicles and reduce jobs. EPA proposes to regulate carbon dioxide emissions from cars and trucks, “because of the critical need to address global climate change.” (74 Fed. Reg. 49454). This is a fals e very weakly founded basis. [OAR-2009-0472­ 7218.1, p. 1]

Futile regulation The proposed regulation will fail to achieve EPA’s stated goal. EPA’s regulation states that the car bon dioxide reductions “are proj ected to reduce global mean temperature by approximately 0.007–0.016°C by 2100, and global mean sea level rise is projected to be reduced by approximately 0.06–0.15 cm by 2100.” This is a ne gligible result will not affect global climate at all nor will they a ffect “public health and welfare” (See Clean Air Act Sec. 202). [OAR-2009-0472-7218.1, p. 3]

This will cause a massive constraint and financial impact. The National Highway Safety Administration (NHTSA) estimated that increas ing fuel economy standards to 35 miles per gallon by 2020 would cost the car companies $114 billion. (See De troit News, “Fuel Plan Would Cost Big Three” (March 1, 2007). EPA and NHTSA’s plan will incr ease costs for car companies and further reduce auto company jobs. Higher priced cars and truc ks will make life more difficult for American families who need affordab le transportation options. [OAR-2009-0472-7218.1, p. 3]

EPA would be forced to regulate greenhouse ga ses under Clean Air Act, sections 108, 111, and 112. This would seriously harm our economy, reduce American jobs, and worsen our employment situation. [OAR-2009-0472-7218.1, p. 3]

I pray the EPA not to regulat e carbon dioxide or greenhouse ga s emissions under the Clean Air Act. These regulations would severely wors en our economy, and massively increase our high unemployment. It would result in negligible re duction in global temp erature while diverting effort from the critical issue of providing alternative fuels to manage global peaking of light oil. [OAR-2009-0472-7218.1, p. 3]

Heritage Foundation

We are writing out of serious concern for the unintended consequences along with negligible environmental benefits likely to result if th e Environmental Protection Agency moves forward with its Proposed Rulemaking to Establish Light-Duty Vehicle Greenhouse Gas Emission Standards and Corporate Average Fuel Economy St andards. It is unnecessary to move up the timeframe to create a 35.5 miles per gallon vehi cle fleet from 2020 to 2016 - a standard initially put into place by Energy Independence and S ecurity Act of 2007. The new regulations will create headaches for struggling automakers, and those automakers will simply pass on higher costs to the consumers.

1-60General Comments

The EPA estimates that the averaged increase cost of a vehicle will be $1,300 in 2016 compared to today's prices but because consumers will save $2,800 on gas that will offset the increased purchase price. One senior manager from Gene ral Motors’ energy center said meeting the 2020 goal would cost $5,000 to $7,000 to make more fuel efficient cars and lig ht trucks. Moving the deadline up four years would only exacerbate these costs

The environmental benefits are dubious as well. Touted as a measure to curb global warming, fuel efficiency standards have very little e nvironmental impact. Newer vehicles with better efficiency standards may emit less carbon dioxide per mile, but increased fuel efficiency often leads to more driving and new cars constitute a miniscule source of overall carbon dioxide emissions. The EPA’s own regulation states that “the rule will l ead to global mean temperature being 16 thousandths of a degree Celsiu s lower (0.016°C) in 2100.” [OAR-2009-0472-7052.1, pp.1-2]

Industry Coalition

The Associations acknowledge EPA’s desire to address GHG emissions from mobile sources quickly, as well as NHTSA’s need to set new fuel economy standards, which must be [OAR2009-0472-7673.1, p.1] promulgated at least 18 months be fore the affected model year (in this case the 2012 model year). 49 U.S.C. § 32902(g)(2 ). However, as proposed, the Motor Vehicle Rule ignores the enormous burdens the Rule w ould impose on stationary sources. This omission violates legal requirements for agency rulema king, constitutes arbitrar y and capricious action, and is simply bad policy. This is especially so because nearly all the environmental benefits EPA says will result from its promulgation of the Motor Vehicle Rule under CAA authority would also result from the NHTSA rule alone. Yet, unlike NHTSA action to raise corporate average fuel economy (CAFE) standards, the redundant EPA standards promulgated under the CAA would have regulatory impacts re aching far beyond the automotiv e industry and would impose billions of dollars in add itional permitting and complian ce costs. [OAR-2009-0472-7673.1, p.2]

Thus, although the Associations take no pos ition on NHTSA’s proposal to increase CAFE standards, we vigorously object to EPA’s proposal to finalize the superfluous Motor Vehicle Rule under CAA Section 202. EPA’s failure to acc ount here for the PSD and Title V burdens it elsewhere acknowledges will flow from this rule making renders this rulemaking legally invalid. EPA must fully consider those burden s in this rulemaking. [OAR-2009-0472-7673.1, p.2]

Mass Comment Campaign (48) (unknown organization)

The Environmental Protection Agency (EPA) is not justified in regulating carbon dioxide emissions from vehicles. These regulations will only increase the cost of our cars, harm our economy, and limit our transportation options. We n eed efficient, affordable transportation to rebuild our economy and create American jobs.

According to the proposed regulations, EPA want s to regulate carbon dioxide emissions from cars and trucks, 'because of the critical need to address global climate change.'(74 Fed. Reg. 49454).This regulation does not achieve EPA's stat ed goal because, according to EPA data, it does not reduce global warming or sea level rise in a meaningful way. The regulation states that

1-61EPA Response to Comments

the carbon dioxide reductions 'are projected to reduce global mean temper ature by approximately 0.007-0.016°C by 2100, and global mean sea level rise is projected to be reduced by approximately 0.06-0.15 cm by 2100.'

To be clear, EPA is proposing to increase th e price of automobiles by $1,100 per car (74 Fed. Reg. 49460) in exchange for (according to EPA) a global temperature decrease of 16 thousandths of a degree Celsius in 90 years. Also, according to EPA, sea level won't rise by an extra 1.5 millimeters. These tiny amounts are so inconsequentia l that they will not affect global climate at all nor will they affect 'public health and welfare' (See Clean Air Act Sec. 202).

The proposed regulations will harm our economy. A few years ago, the National Highway Safety Administration (NHTSA) estimated that increas ing fuel economy standards to 35 miles per gallon by 2020 would cost the car companies $114 billion. (See De troit News, 'Fuel Plan Would Cost Big Three' (March 1, 2007). Inexplicably, today NHTSA claims that achieving the 35 miles per gallon fleetwide standard by 2016, four year s earlier, would cost on ly $60 billion. (75 Fed. Reg. 49479). This change from NHTSA is not credible. The cost of technology-forcing regulations do not decrease by half as a result of companies only having half the time to comply with the regulations.

EPA and NHTSA's plan will increase costs for car companies and further reduce auto company jobs. Higher priced cars and trucks will make lif e more difficult for American families who need affordable transportation options.

To make matters worse, these regulations woul d start a regulatory cascade. EPA would start regulating emissions from millions of sources, in cluding large buildings, churches, sports arenas, office buildings, farms, schools, hospitals' you name it. EPA will be forced to regulate greenhouse gases with many sections of the Cl ean Air Act, including sections 108, 111, and 112. This will further harm our economy, reduce American jobs, and worsen our employment situation. NHTSA already has the ability to regu late fuel economy wit hout EPA further harming the economy.

Lastly, we care about our families' safety as much as the Secret Service cares about the President's safety. There is a clear correlation be tween size and weight of a vehicle and its safety. That is why the President's limo only gets a reported 8 mpg, not 35 mpg. The Secret Service should not have to cut corners in keeping the Pres ident safe, just as we should not have to cut corners to keep our families safe.

EPA should not regulate carbon di oxide or greenhouse gas emissi ons under the Clean Air Act. These regulations will make our high unemploymen t even worse. It does not make sense for EPA to reduce American jobs, increase the pr ice of cars and trucks, and make America less economically competitive in exchange for an immeasurable and meaningless reduction in global temperature. [OAR-2009-0472-10556, pp.1-2]

Mississippi Department of Environmental Quality

1-62General Comments

In summary, it does not appear that EPA has properly evaluated the impacts of this rulemaking on state and local agencies and therefore faile d to meet the obligations of the Unfunded Mandates Reform Act. The potential effects of this rulemaking on state and local agencies as well as small business that would be subject to the CAA could be di sastrous, especially in today's economic climate. It also does not appear to be necessary to set GHG emissions standards to obtain the goals of reduced air emissions and in crease fuel economy. It is not necessary for EPA to act now to meet any statutory requirements . Therefore, EPA should not set the proposed GHG emission standards for Light Duty Vehicl es at this time. [OAR-2009-0472-7102.1, pp.1&5]

National Automobile De alers Association (NADA)

Since dealers are impacted directly by vehicle production mandates, a National Program must carefully account for potential dealership imp acts and concerns. In-use passenger car and light truck fuel economy and GHG performance will conti nue to improve as olde r, less fuel-efficient vehicles are replaced by newer ones offering comparable performance with improved fuel economy. To avoid impeding fleet turnover, a Na tional Program must no t unduly restrict product availability, reduce product performance, or increase product price. [OAR-2009-0472-7182.1, p.11]

National Climate Coalition

The Clean Air Act Is Flawed and National Legi slation Is The Best Mechanism For Regulating Greenhouse Gases

Stabilizing atmospheric greenhouse gas concentra tions will require the transformation of our energy, manufacturing and transportation systems. We believe that this is the work of Congress. Federal legislation should not only take a broad, fl exible multi-sector approach, but also must be designed to meet multiple objectives, including en ergy and transportation security, reliability and affordability; ensuring the economic competitiveness of United States businesses; energy conservation; strategic technology developmen t; and environmental performance. Such legislation should also allow fo r and define the appropriate i nvolvement of other departments and agencies with expertise in energy, environm ent, security and transportation in addition to EPA – something that is necessary yet not permitted under the Clean Air Act. Our highest priority must be for Congress to establish a unif orm national program that will be consistent with the emerging and overarching interna tional framework. [NHTSA-2009-0059-0086.1, p.4]

For a variety of reasons, the existing Clean Air Act is a poor mechanism for addressing climate change. Congressional intent in drafting the Clean Air Act was to identify and regulate sources based on their relatively large emissions. Such sour ces typically have also been financially able to bear the costs of regulation. By establishing major source thresholds, the Act excluded from regulation the large numbers of smaller sources that exist in the United States. The number of stationary sources subject to re gulation has thus historically been relatively small. By all estimates, however, this number could grow by at least an order of ma gnitude, perhaps two, and affect for the first time many previously unaffect ed sources (e.g., large retail establishments, schools, hospitals and government facilities) if greenhouse gase s are regulated in the same

1-63EPA Response to Comments

manner as criteria pollutants under NSR, and T itle V — let alone §112, which has even lower thresholds for regulatio n. [NHTSA-2009-0059-0086.1, pp.4-5]

The permitting thresholds under the Act, however , are keyed to emissions levels that are meaningful only in the context of regulating the local and regional health and welfare impacts of lower-emitting criteria or hazardous air pollutants. Even small sources have emissions of CO2 as a result of typical fuel use that would exceed current permitting thresholds on this basis. As EPA itself underscored in the ANPR and the Tailoring Rule Proposal, the PSD and Title V programs would sweep hundreds of thousands of sources no t previously subject to regulation into the scope of the Clean Air Act, at great cost and consequence for the functio ning of the economy and at great administrative burden on regulated source s, EPA, the states and local governments. EPA estimates that its approach in the Tailoring Ru le would avoid over $55.6 b illion in the first six years of regulation – or, stated differently, in the absence of th e Tailoring Rule, the cost of compliance for affected sources and permitting agencies will increase by more than $55.6 billion. [NHTSA-2009-0059-0086.1, p.5]

Paradoxically, forcing the square peg of gree nhouse gas emissions into the round hole of the existing Clean Air Act also has the potential to create adverse incentives that may stifle innovation and even increase greenhouse gas emissi ons. This could occur, for instance, if a company decides to delay improvements that wo uld otherwise reduce em issions intensity to avoid triggering regulatory requi rements, as we have seen occur time and time again under the New Source Review programs. A practical example of this situation is a turbine upgrade at an electric generating statio n. While the project results in more e fficient production of electricity, if that energy efficiency were proj ected to result in more criteria pollutant emissions on an annual basis due to increased operations , it is likely the project would not be pursued due to the time consuming and expensive requirements of the New Source Review programs, including the likely need to implement additional controls fo r all pollutants that exceed the NSR pollutant thresholds. That is contrary to th e desired outcome. [NHTSA-2009-0059-0086.1, p.5]

Regulation under the Clean Air Act has historically focused on cont rol of criteria and hazardous air pollutants to address the loca l or regional human health, welfare and environmental impacts. The architecture of the Clean Air Act is thus pr emised on the concept that state, regional and federal control of emissions will improve air quality in the corresponding area. This is not accurate as to greenhouse gases. The greenhouse eff ect is global -- and localized (or even United States-wide) emissions reductions will not result in environmental benefits to the United States in the absence of corresponding in ternational action. Moreover, gr eenhouse gases at current and projected atmospheric concentrations have no kn own direct adverse human health impacts to which to link standards, and any environmenta l and welfare impacts onl y occur over substantial time, due to the indirect effects of aggregate global levels of greenhous e gases. Thus, greenhouse gases present a particular regulatory challenge. Th e same requirements that apply to emissions of criteria pollutants from stationa ry sources are not likely optima lly to control and provide the most effective incentives to reduce gr eenhouse gases emissions. [NHTSA-2009-0059-0086.1, p.5]

Because the Clean Air Act is such a poor vehicle for addressing climate change, we believe that further federal legislation is the best approach to reduce emissions that may contribute to global

1-64General Comments

warming. We recognize that the Supreme Court’s decision in Massachusetts v. EPA may require the Agency to commence regulatory action in absence of, or in the face of delayed, Congressional action. Congress, how ever, is poised to act. Comprehensive climate change and energy legislation has been passed by the U. S. House of Representatives, H.R. 2454 - the American Clean Energy and Security Act of 2009 (Waxman-Markey), and the Senate is considering stand alone climate change legislation, the “Clean Energy Jobs and American Power Act” (Kerry-Boxer), and energy legislation, S. 1462 - the American Clean Energy Leadership Act of 2009 (ACELA). The NCC urges EPA and the Administration to work in support of prompt Congressional efforts, and exercise it s authority only where it can adopt flexible, appropriate measures to control greenhouse gases in a manner best designed to facilitate ultimate Congressional action. [ NHTSA-2009-0059-0086.1, pp.5-6]

The National Climate Coalition appreciates the opportunity to submit these comments and looks forward to providing further input. We encourag e EPA to work with Congress towards prompt national greenhouse gas legislati on. If EPA must continue to m ove ahead with rulemakings under the Clean Air Act, then we urge the Agency to exercise its discretio n to limit application of those sections of the statute that would impos e unintended economic harm and divert scarce public and private resources without commensurat e benefit in stabilizi ng global greenhouse gas concentrations. As appropriate, in the course of regulating greenhouse gases under the statute, EPA also should seek prompt Congressional conf irmation that such harmful provisions may be so limited or need not be implemented to address climate ch ange. [NHTSA-2009-0059-0086.1, p.8]

Process Engineers

With the confirmation of scientific fraud of AGW manifested world-wi de, any and all proposed regulations need to be suspended until after Congressional Inquiry is completed by Senator Inholf's committee. [OAR-2009-0472-7166, p.1]

Shaw, Donald F

. I oppose the implementation of the proposed requ irements. I request that you consider these comments and drop the proposed re quirements. [OAR-2009-0472-7270, p. 1]

I oppose the Environmental Protection Agency (EPA) proposal to regulate carbon dioxide emissions from vehicles. These regulations will si gnificantly increase the cost of our cars, harm our economy, and limit our transportation options . Significant hardships will be imposed on every family. We need efficient, affordable transportation to rebuild our economy and create American jobs. [OAR-2009-0472-7270.1, p. 1]

The $1100/car is prohibitive and will proba bly exceed that estimate. [OAR-2009-0472-7270.1, p. 2]

According to the proposed regulations, EPA want s to regulate carbon dioxide emissions from cars and trucks, “because of the cr itical need to address global climate change.” (74 Fed. Reg. 49454).This regulation does not achie ve EPA’s stated goal because, according to EPA data, it

1-65EPA Response to Comments

does not reduce global warming or sea level rise in a meaningful way. The regulation states that the carbon dioxide reductions “are project ed to reduce global mean temperature by approximately 0.007–0.016°C by 2100, and global mean sea level rise is projected to be reduced by approximately 0.06–0.15 cm by 2100.” [OAR-2009-0472-7270.1, p. 2]

The EPA is proposing to increase the price of automobiles by $1,100 per car (74 Fed. Reg. 49460) in exchange for (according to EPA) a globa l temperature decrease of 16 thousandths of a degree Celsius in 90 years. Also, according to EPA, sea level won’t rise by an extra 1.5 millimeters. These tiny amounts (assuming they will be realized) are so inconsequential that they will not affect global climate at all nor will they affect “public health and welfare” (See Clean Air Act Sec. 202). [OAR-2009-0472-7270.1, p. 2]

EPA should not regulate carbon di oxide or greenhouse gas emissi ons under the Clean Air Act. These regulations will make our high unemploymen t even worse. It does not make sense for EPA to reduce American jobs, increase the pr ice of cars and trucks, and make America less economically competitive in exchange for an immeasurable and meaningless reduction in global temperature.

I appreciate the opportunity to comment on the proposed rule making and recognize that many past efforts by the EPA have been beneficial to improve our e nvironment. This proposal will have no beneficial impact while having de structive impact on our economy. [OAR-2009-0472­ 7270.1, p. 3]

Spurgeon, C. M.

The Environmental Protection Agency (EPA) is not justified in re gulating carbon dioxide emissions from vehicles. These regulations will only increase the cost of our cars, harm our economy, and limit our transportation options. We n eed efficient, affordable transportation to rebuild our economy and create Am erican jobs. [OAR-2009-0472-7092.1, p. 1]

According to the proposed regulations, EPA want s to regulate carbon dioxide emissions from cars and trucks, “because of the cr itical need to address global climate change.” (74 Fed. Reg. 49454).This regulation does not achie ve EPA’s stated goal because, according to EPA data, it does not reduce global warming or sea level rise in a meaningful way. The regulation states that the carbon dioxide reductions “are project ed to reduce global mean temperature by approximately 0.007–0.016°C by 2100, and global mean sea level rise is projected to be reduced by approximately 0.06–0.15 cm by 2100.” [OAR-2009-0472-7092.1, p. 1]

EPA should not regulate carbon di oxide or greenhouse gas emissi ons under the Clean Air Act. These regulations will make our high unemploymen t even worse. It does not make sense for EPA to reduce American jobs, increase the pr ice of cars and trucks, and make America less economically competitive in exchange for an immeasurable and meaningless reduction in global temperature. [OAR-2009-0472-7092.1, p. 2]

Texas Industry Project (TIP)

1-66General Comments

Global climate change is a serious issue that is best addressed through concerted international action and/or comprehensive fede ral legislation, rather than th rough unilateral agency regulation under the current Clean Air Act (“CAA” or the “Act”). Not only did th e Supreme Court make clear in Massachusetts v. EPA that the U.S. Environmental Protection Agency (“EPA” or the “Agency”) has substantial discreti on regarding the timing of any rules, but the Court of Appeals for the District of Columbia (“D.C. Circuit”) subsequently denied a petition to compel EPA action in response to Massachuse tts v. EPA. [OAR-2009-0472-7430.1, p. 1]

More importantly, Congress is moving forward qui ckly on comprehensive legislation that would address the problem of climate chan ge outside of the structure of the current Act. Despite a clear need to proceed with the utmost caution in th is important area, EPA has proposed to regulate GHG emissions from motor vehicles in the Pr oposed Rulemaking to Establish Light-Duty Vehicle Greenhouse Gas Emission Standards and Corporate Average Fuel Economy Standards (the “Motor Vehicle GHG Rule”) . Under EPA’s current interpre tation of the CAA, the Motor Vehicle GHG Rule may (as EPA has stated in the Proposed PSD and Title V GHG Tailoring Rule (the “PSD Tailoring Rule”) trigger re gulation of GHG emissions from millions of stationary sources, incl uding hundreds of thousands of Texas sources, many of which have never before been regulated under the Clea n Air Act (“CAA”). [OAR-2009-0472-7430.1, p. 1]

The Motor Vehicle GHG Rule, as well as its companion, the PSD Tailoring Rule, are fundamentally flawed, both procedurally and subs tantively, and Texas, as the nation’s leading energy producer and a leader in chemical manuf acturing and agriculture, could be significantly impacted by these federal rulemakings. Most not ably, EPA completely failed to evaluate the burdens of triggering PSD and Title V for GHG emissions under the required federal regulatory review statutes and Executive Orders. Furtherm ore, even had the Agency conducted the required burden analysis, the rule is unlaw ful, would devastate the Texas and national economies, and the burdens of regulating GHGs under CAA S ection 202 far outweigh the insignificant environmental benefits of the GHG emission standards. [OAR-2009-0472-7430.1, pp. 1-2]

Accordingly, for all of the reasons discusse d in these comments, EPA should withdraw the Motor Vehicle GHG Rule, and proceed with caution going forward by allowing both the international community and Congress time to de velop a comprehensive and sensible approach to the global problem of climate chan ge. [OAR-2009-0472-7430.1, p. 2] [See OAR-2009-0472­ 7430.1, pp. 2-11 for specific comments related to PSD and NSR for stationary sources in Texas.]

EPA Response:

EPA received several comments opposing the proposed rule, some opposing the overall program and other opposing various specific aspects of th e rule. These comments are addressed generally here, and in detail in the respective sections of this Response to Comments document and elsewhere in the rulemaking documents.

Commenters opposing the overall program raised i ssues of EPA's statutory authority, comments related to the EPA's separate action on "endangerment," and th e relationship commenters see between this action and the permitting of stationary sources of GHGs. (See Section 7.1 of this document and the preamble for our discussion of permitting issues.) Many of these comments

1-67EPA Response to Comments

request that EPA forego action un til such a time when Congress enacts comprehensive climate and energy legislation. Some commenters support a national pr ogram that would involve new NHTSA CAFE standards but not EPA GHG standards. Some commenters also express concerns about whether the projected climate benefits of th e program are as important and as large as EPA projects, and are concerned about recent attention to interna tional climate science. Some commenters (although none from the auto industry) believe that the ec onomic impacts of the program on the industry and consumers are too hi gh; some of these commenters believe there will be impacts on vehicle performance and vehicle choice.

EPA has extensively evaluated each of these con cerns about the program, and, as stated above, address them elsewhere in this document and the rule. We have made some relatively minor but important improvements to the proposed progr am in response to comments; our overall conclusions in the NPRM remain the same:

 That the rule represents very important publ ic policy that the Clean Air requires EPA to take action on,

 That our action is fully authorized by and m eets all requirements of the Clean Air Act,

 That our overall assessments of the costs a nd benefits of program are well documented and sound, and

 That increased vehicle costs will be offset by fuel savi ngs, and vehicle choice and performance will not be negatively affected.

1-68General Comments

1-69Section 2 Reserved

2. Reserved

2-1EPA Response to Comments

2-2EPA 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

..................................................................................... 52

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 tu rned 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 releva nt 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 implementa tion.” Cobbled together and 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 econom y 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 when their mandates and policies conflict. This makes for an unnecessarily complex and costly regulatory 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 practicalit y” 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 standa rds 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]

3-4EPA CO 2 Standards

[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 at the 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 nevert heless 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 met hodology 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 stringency of 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 sta ndards 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) Volkswagen Group of America (Volkswagen)

3-6EPA CO 2 Standards

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 an integrated approach that addresses infrastructure, vehicles, fuels and fuel qualit y, 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 standard ....NHTSA expects to propose appr opriate related CAFE standards. [OAR2009-0472-6952.1, p.31]

3-7EPA Response to Comments

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

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

3-8EPA CO 2 Standards

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 not hing 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 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

3-9EPA Response to Comments

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]

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.

3-10EPA CO 2 Standards

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]

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 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 penalt y. 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

3-11EPA Response to Comments

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 prefe rred. 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 very much 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 sta ndards 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]

The NAM supports the Administ ration’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 stationa ry facilities. Any

3-12EPA CO 2 Standards

failure to do so will inflict harm on the ma nufacturing 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 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 severely restricted the ability of the agency to set fuel economy standards in the 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

3-13EPA Response to Comments

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 rest ricting 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 wisely allowed California's program to remain and allowed other states to adopt California 's regulatory program. Over time, California 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 wa y 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]

3-14EPA CO 2 Standards

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 la ws 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 served as 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 ha nds 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 authorized California to estab lish its own emission standards for cars. Courts upheld this approach:

Congress intended California to continue a nd 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

3-15EPA Response to Comments

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 an active 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]

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 simila r 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:

3-16EPA CO 2 Standards

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. NHTSA curren tly declines to allow credits for GHG reductions due to improvements in air conditi oning efficiency or leakage that are not accounted for under EPA’s 1975 passenger car and lig ht truck test procedures for CAFE. The other reason is that manufacturers lack certain flexibilities under EPA’s GHG standards that are avai lable under the CAFE standards, such as the use of automatic FFV credits through in MY2020 and the option of pa ying fines in lieu of compliance, which is permitted by the Energy Policy and Conservation Act. The difference in expected 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 such, the CAFE standards do not distinguish between 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 between the 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

3-17EPA Response to Comments

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 ma tter, 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 greater rate 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.

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 in terms 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

3-18EPA CO 2 Standards

NHTSA programs, or devalue such credit s, as the 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 th e different CAFE and GHG standard curves can discourage A/C improvements. The EP A has every reason to believe that all manufacturers will take advantage of thes e cost effective tec hnologies to reduce GHG emissions from automobiles.

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 a nd 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 models. Moreover, our analyses also reasonably project increased vehicle sales, and do not proj ect loss of sales attributable to the rule. This calculation was done assuming that consum ers consider only five years of fuel savings when buying vehicles, an assumpti on 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. 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 standa rds, 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 accept compliance with the EPA standards as compliance with their own standards. Ho wever, the standards reflect consideration of the relevant factors under sect ion 202 (a) (1) and are jus tified on that basis.

3-19EPA Response to Comments

With respect to the comment that the EPA GHG standards for motor vehicles will be detrimental under a broader cap a nd 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 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 are 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

3-20EPA CO 2 Standards

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 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 appor tionment. 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 join t 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]

3-21EPA Response to Comments

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 footprin t curves for cars and light trucks. This subjects light trucks with the same footprin t 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 PT Cruiser, Dodge Magnum, Mazda 5, Chevrolet HHR, Porsche Cayenne, and BMW X6, which BMW describes as a Sports Activity Coupe. In the future 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.

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.

3-22EPA CO 2 Standards

[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 argua bly 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 MY 2012. 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 that manufacturers 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 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 concer ns about cost premium and additional maintenance requirements; conversely, ma ny 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.

3-23EPA Response to Comments

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 of 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 stringency of 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 econom y 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 treatment 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 such large relative economic impacts across manufacturers.

3.2.1 Choice of footprint as the attribute and international harmonization

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

3-24EPA CO 2 Standards

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, a nd 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 in the 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 ra ther 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]

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

3-25EPA Response to Comments

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 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:

3-26EPA CO 2 Standards

Analysis of casualty risk finds that, after accounting for drivers a nd 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 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

3-27EPA Response to Comments

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 light truck 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]

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 consta nt 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 a pproach can only work together with fleet

3-28EPA CO 2 Standards

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. The 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 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 standa rds that would perversely require Porsche (a company

3-29EPA Response to Comments

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 au to 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 light�duty 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 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 safety regulations 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

3-30EPA CO 2 Standards

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 esta blish attribute based CAFE standards. The benefit of harmony between the CAFE a nd greenhouse gas standards outweighs any potential benefits an alternate form of greenhouse gas standard might have, and we believe that footprint is at least as valid as any ot her 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 ap proach 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 economy of their vehicles. The Ecology Center also believes that using the vehicle footprint attribute is the most preferable from an environmen tal 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.

3-31EPA Response to Comments

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 inherently influence 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 contrast 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]

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 t hough 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 complia nce strategies that would adversely impact safety or consumer choi ce, and also encouraging weight-changing strategies that would improve fuel econom y without adversely affecting consumer welfare. The NPRM recognizes that the ru lemaking does not effectively balance these

3-32EPA CO 2 Standards

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 footprin t target) in ways that may 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 without also 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 standa rd 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 standa rds would not incen tivize downweighting exclusively by such means. As stated on page 49727, “... weight can be removed by 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]

3-33EPA Response to Comments

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. 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 footprin t-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)

3-34EPA CO 2 Standards

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 standa rd 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 summari zed received on this issue sup port the use of footprint as the sole or at least one of the attributes upon which to base the fuel economy and GHG standards. Most of those disa greeing with the use of footpr int support the substitution of vehicle weight for footprint for two primary reasons. One reason is harmonization with the fuel economy, fuel consumption, CO2, or GHG emission standards of other nations. The other is the fact that ve hicle weight is a much better predictor of fuel economy and CO2 emissions than footprint. Starting w ith international harmonization, EPA agrees that the use of vehicle weight as the pr imary attribute upon which to base the final standards would result in sta ndards that, in that respect, appear to be more closely harmonized with the standards of several na tions, namely Europe, Japan, and China. However, we believe that the benefits of th is harmonization could be minimal and in any event do not outweigh the detriments at th is time. First, establishing a weight based standard in the U.S. would not guarantee that the same vehicles could or would be sold in all of the nations with weight based st andards presently; indeed, there is little, if any, evidence that fuel consumption and GHG emissions standards in place in Europe, Japan, and China are leading to significantl y more similar new vehicle fleets in those regions. Even if the standard curve were the same in two or more nations, the mix of vehicles sold would likely vary across natio nal boundaries. Manufacturers comply with their applicable sales-weighted standard by ba lancing the number of vehicles sold which are above and below the standard (and the de gree to which they are above and below the standard, of course). Setting the appr opriate level of a fuel economy or GHG standard depends on many factors, incl uding fleet mix and other regulations ( e.g. , safety requirements, NO X and PM emissions standards). Flee t mix varies widely across national boundaries, and some other regula tions are not as stringent in other countries as in the United States. Thus, it may not be appropriate for all nations to set the same level of fuel economy or GHG emission standard. In fact , harmonization of fuel economy or CO2 standards internationally is mo st practically achieved when r oughly the same level of fuel conserving and CO2 reducing techno logies can be marketed inte rnationally. The fact that many of technologies projected to be used to meet the final standards are already utilized

3-35EPA Response to Comments

commercially in Europe and Japan is an i ndication of 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 advantage) of generating credits through the use of high efficiency and low leak A/C systems, which are not presently incorporated 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 utilit y. A weight based standard 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 standa rd curve. In its 2002 report on the CAFE program, NAS recommended that NHTSA adopt weight-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 high-strength lightwe ight materials and incurs less risk that energy and environmental benefits will be lo st to “gaming” (it being much easier to increase a vehicle’s mass than to increase its footprint).

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 than other 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 under the final standard. We also believe that larger trucks tend to have higher towing capac ities than smaller trucks and again, larger trucks are allowed to emit more CO2 than sma ller trucks. In other words, differences in towing capacity are part of the reason w hy the GHG standard curve increases with vehicle size and is higher for trucks than for cars. It is possible that EPA would consider adding additional attributes like towing capacity to its standard setting function in the future.

Several manufacturers make a similar suggestion for engine size or pow er. Vehicles with higher engine power tend to have higher CO2 emissions due to the fact that the engines operate at lower average loads over the two- cycle test procedure. Unlike passenger and cargo capacity, however, the societal benefit of higher engine power is less clear. The analysis supporting this rule assumes no ch ange in the accelerat ion performance of

3-36EPA CO 2 Standards

vehicles due to the rule (and the agencies’ cost analysis includes the costs for preserving acceleration performance). In ot her words, we have included performance vehicles in our analysis and we have evaluated the various GHG reducing technologies in such a way to maintain acceleration performance as much as possible. 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. However, to base the GHG standard on engine size or power would allow manufacturers to increase engine size or power with no compensating use of emission control technology to hold emi ssions constant. It is not clear that a vehicle fleet with higher accel eration performance would pr ovide a societal benefit, particularly for vehicles whose performance is already well above the mean. However, although safety concerns support the adoption of a system that disc ourages downsizing as a compliance strategy, they do not support the adoption of a system that discourages reductions in the size and/or power of engine s in performance vehicles. Porsche, for example, states that the purpose of their sm all sports cars is to provide performance, while that of other small vehicles is to provide fuel economy (and commensurately, low CO2 emissions). Porsche's argument fails to co nsider the fact that the express purpose of these fuel economy and GHG standards is to reduce fuel consumption and GHG emissions. Therefore, we do not believe that it would be appropriate to base the GHG standard using engine size or power as an expl icit attribute. In fact, since it takes more power to move a larger vehicle, the use of footprint as the attri bute upon which to base the GHG standard indirectly includes the impact of a larger engine on the GHG standard. However, this is done to enable the utility of the larger vehicle w ith larger passenger and cargo capacity. Porsche states that they woul d 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 in the 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. The design of the final footprint standards is in tended to avoid incentives for manufacturers to increase or de crease the size of their vehicles.

3-37EPA Response to Comments

BMW's safety related comments are addressed in section xx.

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) 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 Indust ry 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 industry goal 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 fit ting 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

3-38EPA CO 2 Standards

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:

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 squa re 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.

3-39EPA Response to Comments

The agency noted that there is limited public information regarding the sales volumes of many different configurations (cab designs a nd 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 linea r 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 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 very challenging 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 bot h 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]]

3-40EPA CO 2 Standards

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]

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

3-41EPA Response to Comments

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

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 an improvement 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 certain manufacturers 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 suppor ts 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 NHTSA as 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]

3-42EPA CO 2 Standards

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 segmen t. 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 cu rrent 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]

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, in order 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

3-43EPA Response to Comments

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, 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, predictability and 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 regula tion 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 ou t 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

3-44EPA CO 2 Standards

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 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 in lieu 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 tech nique 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

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, distor t 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).

3-45EPA Response to Comments

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, th ere 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 extrem e attributes and low sales levels.

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 incen tive 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 cu rve 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 4.6 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 best results 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 would reconsider the statistical techniques used to develop the standard curves in fu ture rulemaking based on differences in the projected characteristic s of future vehicle designs and sales.

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

3-46EPA CO 2 Standards

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 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 that the 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.

3-47EPA Response to Comments

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 truc k fleets. Such downsizing would clearly reduce fleet fuel consumption and CO2 emissions , the two main goals of these rules. The two agencies did not decide to do this at th e present time for seve ral reasons. One was leadtime, as the latest standard being set (i .e., 2016) was only 6 model years out. Another was the fact that reliable consumer choice m odels for new vehicle purchase are still under development. We were not able to confidently predict the impact of such a flattening of the standard curves at this time. This mean t that it would have been possible to over-do the flattening and perturb the desirability of larger vehicle to a greater degree than desired. The two agencies remain open to such a policy when se tting standards beyond MY 2016.

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 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 th at 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 project most passenger car models will be sold through MY 2016. The agencies are concerned that these changes would make it unduly difficult for manufacturers to introduce new small passenger cars in the United States, and unduly risk losses in feasible and cost-e ffective energy and environmental benefits by increasing incentives for the passenger car ma rket 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:

3-48EPA CO 2 Standards

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 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 ta rgets 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.

3-49EPA Response to Comments

[[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 footprin t 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 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 target while 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 ma rket 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 sepa rate, 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, predictability and 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 regula tion gradually reduce the disparity between

3-50EPA CO 2 Standards

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.

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 footprin t 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 cu rves was based on setting each curve at the level where estimated net societ al benefits were maximized. These two curves were then adjusted upwards (in terms of fuel consump tion or CO2 emissions) to the point where 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, smaller and larger vehicles, as well as the benefits accruing from th is technology. GM has not shown why this

3-51EPA Response to Comments

approach produces a greater burden on larg e trucks versus smaller cars. Simply comparing current vehicles, even "market l eading" 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 ve hicles. Without assessing the degree to which available technology has already been added to current vehicles, any such comparison can be misleading. We believe that the approach of adding all cost beneficial technology to all vehicles pr ovides a reasonable balance of regulatory burden across the wide variety of vehicles currently being sold in the U.S. market.

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, it may be diffi cult under current legisl ation for NHTSA to utilize a single attribute cu rve to regulate fuel economy of both cars and trucks. Also, some trucks, at least, provide utility not available from cars . These include cargo and towing capacity. The vehicle features requ ired to provide this utility inherently increase fuel consumption and CO2 emissions relative to vehicles wi thout such utility. Therefore, some distinction be tween car and truck standards a ppears justifiable. As also discussed in section 3.0 above, we acknowle dge that there is some risk that manufacturers will increase the sale of AW D 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 time, a shift from the historical appr oach of setting separate standards for cars and trucks to one that would tgreat them the sa me or much more similarly would lead to a large differential regulatory impact on severa l manufacturers. The current state of the auto industry and the fact that the time frame of these ru les only extends 6 years from today argue 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:

3-52EPA CO 2 Standards

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 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 sta ndards 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: “EPA is 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

3-53EPA Response to Comments

to regulate greenhouse gases, and EPA has asse rted that greenhouse ga ses 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 st andards under CAA. NHTSA ha s 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 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 ma king 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 experienced in 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:

3-54EPA CO 2 Standards

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 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 represen ts $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 percen t 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

3-55EPA Response to Comments

between the proposed standard and a 5 per cent annual reduction, a nd 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 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 in EPA’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

3-56EPA CO 2 Standards

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 (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 sta ndard 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 fu ture standards that can finally break our dependence on oil and create subs tantially cleaner vehicles.

California Air Resources Board

3-57EPA Response to Comments

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.

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 a nd manufacturing decisions in order to be compliant, some of which could have ne gative consequences. The National Program

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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 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 Clean Air 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

3-59EPA Response to Comments

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 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 determina tions 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 necessary for 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 that require 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

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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 not interpret 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

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

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

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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.

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 releva nt 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 strength steel, 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 not agree 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 sta ndards 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 conven tional technology. If manufacturers are conc erned 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.

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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 relevant factors, comparing and contrasting these to the final standards. For example, EPA rejected an alternative of mo re stringent standards that would achieve an average 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 indica te that the 6% per year alternative is not an appropriate standard for the MY 2012-2016 time frame, even 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 alternativ e represents a significant increase in both the technology required and the overall costs compared to th e final standards. In absolute percent increases in the technology pene tration, compared to the fina l 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 in crease in technology is greate r. For the industry as a whole, the per-vehicle cost increase for the 6% per year alternative is nearly $500. On average this is a 50% increase in costs compar ed 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.

As noted in the preamble, EPA’s OMEGA model predicts that for model year 2016, Ford, Mitsubishi, Mercedes, BMW, Volksw agen, Jaguar-Landover, and Porsche do not meet their target under the 6 percent per year scenario. In addition, Chrysler, General Motors, Suzuki and Nissan a ll are within 2 grams/mi CO 2 of maximizing the applicable technology allowed 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-dut y vehicle sales. Th is provides a strong indication that the 6 percent pe r year standard is much more stringent than the final standards, and presents a si gnificant risk of non-compliance for many firms, including four of the seven largest firms by U.S. sales.

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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 time frames, significant product development and capital investments will need to occur over the next 2-3 year in order to be ready for launching these new pr oducts for those model years. Thus a major 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 2016) already requires signifi cant 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 it is too stringent for this time frame, given both the relatively limited amount of lead-time between now a nd model years 2012-2016, the need for much of these resources over the next few years, as well the current financial and related circumstances of the automotive industry. EP A is not concluding that the 6% per year alternative standards are tec hnologically infeasible, but EP A believes such standards for this time frame would be overly stringent gi ven the significant stra in 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 2012-1016.

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 h ybrid production and use in smaller cars, some large volume manufact urers have minimal experience. No

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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 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 2012-2016 standards which necessitate extensiv e 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 not be the technology of choice in just a few years. We believe that it is much more prudent to give this particular technology a few more years of development before basing standards on its wide spread 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 ters’ 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 different approach to standard setting for this rulemaking. EPA should first determine a specific goal of GHG reductions and oil savings, based on an assessment of national n eeds, and then apply considerations of technological feasibility and cost, in order to be as techno logy forcing as possible or practicable. One suggestion was to have a quantitative goal – identify the country's goal for reducing GHGs and then assign a proportionate share to the transp ortation sector as a default position. Commenters al so suggested that EPA shoul d assign more priority to achieving the environmental goal and thereby prioritizing public health and welfare, placing that above economic or other consid erations. Commenters suggested this was required under both “the agency’s ... responsibil ity to set protective standards consistent with its statutory mandate” (Public Citizen ) and with the CAA’s mandate to “be as

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technology-forcing as possible” (Public Citizen; see also Sie rra Club). Other commenters suggested that the decision maki ng criteria should call for a standard be no less stringent than one that maximizes net benefits, or th at this should be a pr esumed 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 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 priority a ssigned by Congress. Co mpare, e.g., sections 109(b) and 112(f)(2). It is also not a provision where Congress mandated a certain minimum degree of technology or emissions reduc tion. See section 112(d)(3). It is not a provision where Congress directed EPA to be technology forcing and achieve the greatest achievable reductions from technology that will be available in the future. See section 202(a)(3) and 213(a)(3). Inst ead Congress referred to consideration of available technology, its effectiveness and cost, the l ead time necessary for compliance. See generally 74 FR at 49464-65. Although section 202 (a) (1) st andards may be technologyforcing, they are not required to be. 74 FR at 49464-65. As discussed above with respect to section 231(a), CAA section 202(a)(1) does not specify the degree of weight to apply to each factor, and EPA accordingly has discretion in choosing an appropriate balance among the relevant factors. Thus EPA rejects that the approach taken in this rule of considering and balancing the va rious relevant factors is inconsistent with the discretion provided by Congress unde r 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 such a 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 cont ext 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.

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EPA also disagrees that this amounts to a fa ilure to place the proper priority on achieving the health and welfare protect ion called for by the CAA. Section 202(a)(1) provides the guide to Congress’ intent on this issue, and EPA has employed the broad discretion provided by that provision to aim for and ach ieve very significan t reductions in GHGs, after taking careful considerati on of the factors relevant unde r that provision, as described above. This approach is fully consistent w ith section 202(a)(1), and EPA’s consideration and balancing of the factors in this rulemaking gives full c onsideration of the need to achieve significant GHG reductions to help redu ce 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 rulema king under section 202(a)(1).

As discussed above, EPA is not required under section 202(a)(1) to set standards that are technology forcing, as under section 202(a)(3) or section 213(a)(3). However, the final standards are readily justifiable under C AA provisions which ar e technology-forcing (allowing considerations of future advances in emission control capability as well as those already in existence a nd application). Neither sec tion 202 (a) (1) nor provisions which are explicitly technology-forcing (e.g. section 202 (a)(3) requiring “the greatest degree of emission reduction achievable”) spec ify the weight to accord each relevant decision factor, leaving EPA with great discretion in determini ng 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 retains great discretion to weigh the relevant factors so long as its resolution is within 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

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the final rule (and in particul ar, in sections III.D. 6 a nd 7), the final standards are projected to require very si gnificant penetration of technol ogies throughout the fleet and already raise challenging issues of sufficient lead time at the selected level of stringency. As further discussed in the preamble and in later responses in this comment response section, EPA reasonably considers more st ringent standards to be inappropriate

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 de sirable degree 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 at levels 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 perturbations. We believe that the technology needed to meet the final standards will provide fuel sa vings which more than pay for itself over the life of the vehicle under essent ially any realistic future fuel price scenario. Again, we also believe that the te chnological improvements which will occur over the 2012-2016 time period will provide a solid foundation fo r 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

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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 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 this 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 standa rds are relatively sma ll (e.g., 4% on average, although some vehicles are projected to a pply 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 Over valuing 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 cost3-69EPA Response to Comments

benefit 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 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 electricity generation, 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. can take 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

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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 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 each manufacturer'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 capa ble 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 a nd 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

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effectiveness of similar a lternatives has occurred between the 2008 and 2009 proposals. [OAR-2009-0472-7531.1, p.2]

Consumer Federation of America

[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:

Citizens for Biological Diversit y (CBD) comments that because the standards are based on performance of technology already in exis tence, this indicates that much more stringent standards should be adopted, a nd even that the MY 2016 standards are immediately feasible. CBD also points to fuel economy standards of other industrialized nations as support for its proposition that much more stringent standards should be adopted.

As explained in section III.D. 7 of the preamble to the final rule, existence of technology cannot be equated with its fleet-wide application. Significant issues of lead time exist to allow the large- scale penetration of technology throughout the fleet to meet the final standards, much less more stringen t alternatives. Among the critical issues (largely ignored by the commenter) are availa bility 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 an existing platform. Thus, redesign cycles are an inextricable component of adequate lead time under the Act consideration of the time needed to design. Other lead time and cost issues are raised as well, such as the issue of stranded capital both for the original equipment ma nufacturer (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 util ized. In fact, as explained in the preamble discussion, these nations’ standards are predicat ed on use of the same technol ogies projected for the final GHG standards. Moreover, if one is to comp are these standards with those of another entity, the most directly relevant compar ison is with the GHG standards for light duty vehicles of the State of Calif ornia. The federal standards are of comparable stringency, and the California Air Resources Board in th eir public comments deemed their level of stringency to be appropriate.

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

3-72EPA CO 2 Standards

vehicle segments differ significantly betw een the two rulemaking analyses. The projections for the NHTSA 2011 CAFE rule we re based in large pa rt on manufacturer product plans which are now several years old. Those for the current rule are based on projections made by an industr y 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, little inference can be drawn from MY 2011 comparisons about MY 2016.

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 of the CAFÉ 2011 MY fu el economy levels in previous rules to that made in the NPRM being made by NYDOT is not a reliable indi cator of projections for later model years, particularly those ba sed on economic criteria, such as standards projected to maximize net quantifiable benefits.

NYDOT,also recommends that EPA implement 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 this recommendation on the part of NYDOT.

3.3.2 2012-2015 Standards

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 Indust ry Association (RVIA)

Mercedes-Benz (Daimler AG)

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]

3-73EPA Response to Comments

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 with the 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 cr edits 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 an earlier and larger burden on 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 they would 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 a nd 2013 to be a substantial deviation from the description provide d in the May 2009 Notice of Intent.

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 with the 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

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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 sta ndards 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 utility vehicles from the light-duty truck category to the passenger car category, subjecting them to more st ringent 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 la rge 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% 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

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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 pa rticularly 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 in stringency 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

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]

3-76EPA CO 2 Standards

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:

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

3-77EPA Response to Comments

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 their preamble IV and RIA. As to meeting the 2012 MY GHG sta ndards, EPA notes further that the various flexibility mechanisms in the rule (e.g. TLAAS, early generation of credits for outperforming California standards, averaging, ba nking and trading with carry backward of credits if needed) ) provide ready means for manufacturers to comply with the MY 2012 GHG standard. In one example of early credits, since the NPRM, it has come to light that some manufacturers may be implementing more air conditioner leakage reduction technologies than EPA had anticipated (see sect ion III.C.1.a of the final preamble). This would result in additional early credits that could be carried forw ard to help meet 2012 standards. Because of these arguments, and due to the support for the phase-in of the standards from other stakeholders (includi ng the California Air Re sources Board) the agency is not making significant change s to the MY 2012-2016 GHG standards. For further discussion on the feasibility of the EP A standards, see secti on 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 a nd 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 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]

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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% - but notes 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 more 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

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,

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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]

State of Connecticut Department of 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

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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 str ong 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 achiev e 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

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

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

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Comment:

Ford Motor Company

Backstops

Backstops should not be combined with at tribute-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 manufact urers 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 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

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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., minimum 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 a nd 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 not hing more should be required in terms of a backstop. [OAR-2009-0472-7123.1, p.18]

[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]

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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 a nd 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 about widespread 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 necessa rily 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 st ringent 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.

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

3-85EPA Response to Comments

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 even half 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 ta rgets become constant or “clipped” as vehicle footprint continues to increase. Therefore, the target curves already help guard against any loss of benefit from theoretically upsizing 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’ statutor y 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 in the March 2009 final CAFE rule for 2011 MY. 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]

3-86EPA CO 2 Standards

Expanding Anti-Backsliding Standa rds 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 an ti-backsliding standards for the domestic car fleet. As such, EPCA requires NHTSA to establish anti-backsliding sta ndards for domestic passenger cars and does not authorize NHTSA to establish additional anti-backsliding standards for import cars a nd 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 a ny 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 a nd 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 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

3-87EPA Response to Comments

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 previously categorized 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 that get 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 in 2011–2012 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]

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 to

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undermine 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 LA Testimony, OAR-2009-0472-7283, pp.103-113 (p.6)]

First, a backstop is necessary to meet California's standards. By 2016, new cars under the California program are expected to emit an average 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 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 grea ter proportion of light trucks, resulting in

3-89EPA Response to Comments

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 a nd 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 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.

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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 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]

3-91EPA Response to Comments

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 been predicted. 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 from any 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 prescrib e 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 already described the acute da ngers 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

3-92EPA CO 2 Standards

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 what 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 past 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 write 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.]

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

3-93EPA Response to Comments

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 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]

3-94EPA CO 2 Standards

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 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]

3-95EPA Response to Comments

State of New Jersey

In several places throughout the proposal, th e Agencies request commenter input on their determination to use attribute-based standa rds. 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 that a 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.

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 year s, 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 re move 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.

3-96EPA CO 2 Standards

[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 in the 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 minimu m 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]

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.

3-97EPA Response to Comments

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.”

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).

3-98EPA CO 2 Standards

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 Depa rtment of Ecology, University of Pennsylvania/Environmental Law Project, American Lung Association of California, Environment Michigan, Envir onment New Jersey, and citizen 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 cha nges 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 a nd Toyota said that upsizing would not necessarily make compliance with applicable standa rds 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 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

3-99EPA Response to Comments

agencies acknowledge that based on economic and consumer demand factors that are external to this rule, the dist ribution 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 transparent inform ation currently available. Moreover, recent market trends are consistent with EPA’s fu ture fleet projections, showing shifts from light trucks to passenger 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 was based on a foreca st 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 m pg, and 27.3 mpg, respectively, for passenger cars, light trucks, and the overall 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, resp ectively; 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 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

3-100EPA CO 2 Standards

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 footprin t curve, the actual slope of fuel economy with respect to footprint, if f it to that data by itself, is a bout 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 incrementall y increase or reduce ve hicle 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 3 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 a ny 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 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 industr y 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 than offset by shifts the other way in another manufacturer's fleet. However, in this respect, a traditiona l backstop acts as a manufacturer specific standard.

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

3-101EPA Response to Comments

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 industr y 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.

While 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.

3-102EPA Responses on Joint Issues and Technical Work

4. EPA Response to Comments on Joint Issues and Technical Work

............................... 2 4.1. Baseline Market Forecast

......................................................................................... 2 4.2 Reserved

.................................................................................................................. . 7 4.3 Reserved

.................................................................................................................. . 7 4.4. Joint Vehicle Technology Assumptions

................................................................. 7 4.5 Economic Assumptions

......................................................................................... 28 4.6. Safety and Mass Reduction

.................................................................................... 81 4.7. Endangered Species Act

........................................................................................ 94

4-1EPA Response to Comments

4. EPA Response to Comments on Joint Issues and Technical Work

4.1. Baseline Market Forecast

Organization: International Council on Clean Transportation

Comment:

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

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

EPA Response:

The EPA appreciates the positive feedback on the methodology used in the proposal. We continue to believe to that our methodology is a transparent way to accurately assess the costs and benefits of the rule.

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

Comment:

NHTSA has historically based its analysis of potential new CAFE standards heavily on private information—extensive and detailed product plans for vehicles, engines, and transmissions. This private information is obtained voluntarily, and NHTSA is obligated to prevent its public disclosure. [OAR-2009-0472-3651.1, p.3] The new approach is more transparent. The information sources (with few exceptions), are all either in the public domain, availabl e to the public upon request, or available commercially. This is arguably the most profound change in the methodology. In the past, the process was essentia lly immune from rigorous review. In the new process, anyone can repeat and review the analys es done by the agencies. [OAR-2009-0472

- 3651.1, p.3] Transparency produces some tangible benef its to consumers and automakers. The new approach reduces the potentia l for errors (whether of omission and/or commission) that have been observed in past responses to NHTSA’s requests. The new approach more accurately measures the incremental costs a nd benefits of the proposed standards. The product plans submitted recently show a significant increase over prior plans in applications of technology to improve fuel economy. To the extent that improvements have been planned in anticipation of future increases in CAFE standards, they should not be in the baseline. They would be in the old process. [OAR-2009-0472-3651.1, p.3]

4-2EPA Responses on Joint Issues and Technical Work

[[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.]

EPA Response:

The EPA appreciates the positive feedback on the methodology used in the proposal. We continue to believe to that our methodology is a transparent way to accurately assess the costs and benefits of the rule.

Organization: Public Citizens and Safe Climate Campaign

Comment: We appreciate and support the agencies’ use of publicly availabl e information about technology adoption. NHTSA’s previous appr oach, using confidential product plans made it impossible for the public to verify NHTSA’s technology forecast. It also introduced the potential for automakers to game the standard-setting process by providing incomplete or misleading product plans. Using publicly available data makes the standards more transparent and provides th e opportunity for broa der participation in estimating the technological feasibility of improving vehicle efficiency. [OAR-2009

- 0472-7050.1, p.10]

EPA Response:

The EPA appreciates the positive feedback on the methodology used in the proposal. We continue to believe to that our methodology is a transparent way to accurately assess the costs and benefits of the rule.

Organization: New York State Department of Transportation

Comment:

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 each manufacturer'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' conf idential plans. [OAR-2009-0472-7531.1, p.2]

EPA Response:

The EPA appreciates the positive feedback on the methodology used in the proposal. We continue to believe to that our methodology is a transparent way to accurately assess the costs and benefits of the rule.

Organization: Kleinbaum, Rob

Comment:

4-3EPA Response to Comments

As Ronald Reagan used to say, we need to tr ust but verify. And that, it seems, is exactly what the new rule does. Central to the succe ss of both the rule a nd the automakers, is transparency. [OAR-2009-0472-4074, p.2]

Much of the debate on the impact of fuel ec onomy has been clouded by the fact that data and assumptions are not disclosed. NHTSA has hi storically based its analysis of potential new CAFE standards heavily on private info rmation-extensive and detailed product plans for vehicles, engines, and transmissions. This private information is obtained voluntarily, and NHTSA is obligated to prevent its public disclosure. [OAR-2009-0472-4074, p.2]

The new rule's proposed approach is more tr ansparent, with most sources in the public domain or readily available. This is a cr itically important change in the methodology since, in the new process, anyone can re peat and review the analyses done by the agencies. [OAR-2009-0472-4074, p.2]

EPA Response:

The EPA appreciates the positive feedback on the methodology used in the proposal. We continue to believe to that our methodology is a transparent way to accurately assess the costs and benefits of the rule.

Organization: American Council for an Energy Efficient Economy

Comment:

ACEEE applauds USEPA and NHTSA for taking the enormous step towards energy security and environmental protection that th is joint rulemaking represents. The proposed rule offers very substantial increases in fuel economy and reductions in vehicles’ greenhouse gas emissions. The rule also reflects important analytical improvements over the approach taken in previous rulemakings, especially the more thorough and transparen t analysis of the technical potential to reduce emissions and fuel consumption, and the associated costs. In addition, the agencies’ use of a publicly availa ble data set fully describing the reference fleet, rather than confidential manufacturer product plans, to develop the rule allows the public to understand in detail the basi s for the standards. [OAR-2009-0472-7260.1, p.1] [ACEEE also submitted these comments as te stimony at the New York public hearing, See docket number OAR-2009-0472-4621, pp. 138.]

EPA Response:

The EPA appreciates the positive feedback on the methodology used in the proposal. We continue to believe to that our methodology is a transparent way to accurately assess the costs and benefits of the rule.

4.1.1. 2008 Baseline Fleet

4-4EPA Responses on Joint Issues and Technical Work

Organization: Ford Motor Company

Comment:

Pursuant to the National Highw ay Traffic Safety Administ ration's (NHTSA's) September 22nd, 2009 Request for Product Plan Information (74 FR 48192) to acquire new and updated information regarding vehicle manuf acturers' future product plans to aid in establishing model year 2012-2016 passenger car and light truck average fuel economy standards, Ford Motor Company (Ford) conduc ted an assessment of its future product plans and concluded that they are materially unchanged from our May 1, 2009 submission. Ford requests that NHTSA and EPA continue to reference the Ford submission to the NHTSA Office of the Ch ief Counsel Docket Number NHTSA-2009

- 0042, Docket ID: NHTSA-2009-0042-0006.1. Ford requested and was granted confidential treatment for designated informati on in that submittal. Confidential treatment of such information continues to be appropriate until the end of the specified or applicable model year identified in the subm ittal, for the reasons outlined in the May I cover letter. Should the agency have any questions regarding Ford's product plan information, please contact Cynthia Williams. In the event of any questions about the confidential nature of the May 1 submittal, please contact Mark Edie, Office of the General Counsel, Ford Motor Company, Suite 450, 1350 I St. NW, Washington D.C. 20005. [NHTSA-2009-0059-0063.1, p. 1]

EPA Response:

The EPA appreciates the update on the status of Ford's product plan. The agency has treated all manufacturers' product plans as c onfidential business info rmation and has not released or otherwise divulged any confidential information in the baseline fleet utilized for analytical purposes in each agency’s rule s. Also, it is import ant to note that the baseline fleet was not updated to reflect inform ation that would have been available at the end of the 2009 model year. The baseline fleet continued to be constructed from publicly available data, and based on 2008 model year vehicles for the final rulemaking. The agencies’ reasons for doing so are set out in section II.B.4 of the preamble to the final rule.

Organization: General Motors

Comment:

On May 1, 2009, GM responded to a NHTSA reque st for a detailed product plan (EPA was subsequently copied). As part of that submission, GM provided very detailed product information, aligned with the restructuring pl an submitted to the Treasury Department in February 2009. Since that time, GM has gone through bankruptcy reorganization and has updated its restructuring plan accordingly. Ra ther than recompiling the entire detailed product plan spreadsheets for September 2009, below we have outlined the major changes that have occurred since our prior submission and provide data as appropriate. The changes can be summarized as follows:

4-5EPA Response to Comments

Discontinuation of GM Brands

The most notable change to the GM product plan is the discontinuation of 4 of our brands and the associated models. The previous submission had included a longer wind-down of Saturn, Saab and HUMMER, and did not anticip ate the closing of P ontiac. Pontiac, Saturn, Saab and HUMMER will no longer be part of GM in the future. Pontiac production has already been discontinued, a nd we are still awaiting resolution on the sale/disposition of Saab and HUMMER. GM is not planning on any significant 2010 MY volume for Saturn, Saab and HUMMER and most of Pontiac (Pontiac Vibe and G6 have 2010 MY volume). [OAR-2009-0472-6953.1, p.32]

EPA Response:

The EPA appreciates the update on the status of GM's product plan. It is important to note that the baseline fleet was not updated to reflect the new information from GM. One reason for doing so, as noted in the preambl e to the final rule, is that “although the agencies recognize that these specific vehi cles will be discontinued, we continue to include them in the market forecast because they are useful as a surrogate for successor vehicles that may appear in the rulema king time frame to replace the discontinued vehicles in that market segment. ”

Market share in our reference fleet are based on CSM's 4th quarter forecast that takes into account changes to GM's brand lineup. The projections distribute GM's market share across all of GM's 2008 model year brands. For a complete explanation of methodology used to create the projections and fleet file for modeling, see the firs t chapter of the joint technical support document.

4.1.2. 2012 - 2016 Reference Fleet

Organization: California Air Resources Board

Comment:

The agencies have requested comment on their use of publicly available data to determine the baseline fleet for model year s 2012-2016. CARB agrees with the agencies that this approach provides greater transpar ency to the process and avoids some of the inherent problems noted in the NPRM from relying on incomplete and limited data from manufacturers’ future production plans. Th e NPRM acknowledges that because future fleet projections are based on the model year 2008 fleet some vehicles models manufacturers have already a nnounced for production in the near future are not included in the analysis. We agree with the agencies that the likely impact of this omission is minor. [OAR-2009-0472-7189.1, p.10]

[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]

4-6EPA Responses on Joint Issues and Technical Work

EPA Response:

The EPA appreciates the positive feedback on the methodology used in the proposal. We continue to believe to that our methodology is a transparent way to accurately assess the costs and benefits of the rule.

Organization: General Motors

Comment:

GM recommends that the agencies reduce the projections for large pickup volume in the future fleet in every model year, thus loweri ng the requirements for large pickups yet still maintaining the overall industry goal of 250 CO 2 g/mile (35.5 mpg equivalent) by 2016 model year. From a baseline vehicle fleet , the agencies developed a methodology to project the size, composition, volume and footpr int of the segments of the future fleet. The methodology projects an unc haracteristically la rge volume of large pickup trucks in the future and therefore compels the results to require more reductions from this segment of the fleet. The agencies used a forecas t from CSM and added some of their own modifications. In searching for explanations for these discrepancies, we note that the agencies’ forecast could possibly have errone ously included some volume of unregulated pickups. Regardless, the agencies’ projections of large pickups lead to higher overall requirements for those vehicles. [OAR-2009-0472-6953.1, p.25]

EPA Response:

GM correctly posits that the 2011 and 2016 refe rence fleets used by the agencies in the proposed rule over-project the number of large pickup trucks. EPA in fact came to this same conclusion after issuing the NPRM, but before the comment period started. The over-estimate at proposal occu rred because the standard CSM forecast included heavy duty class 2b and class 3 vehicles (which are not light duty vehicles, and so are not subject to the rule). This had the effect of increasing the volumes of large pickup trucks and full size vans disproportionately to th e other truck classes. To correct the overestimate, EPA used a custom forecast from CSM in projecting the reference fleets used for analytical purposes for the final rule. This custom forecast had all class 2b and 3 vehicles that did not qualify as medium duty passenger vehicles removed from the forecast.

4.2 Reserved

4.3 Reserved

4.4. Joint Vehicle Technology Assumptions

Organization: California Air Resources Board

4-7EPA Response to Comments

Comment:

The agencies requested comment on the jo int technology analysis and assumptions, including new types of analys es introduced in this jo int proposal. CARB believes the joint technological and cost analyses ar e fundamentally sound. CARB supports the agencies methodology for determining component technology costs. Clearly, component teardown costs as determined by FEV are the most reliable method for assessing technology costs. Absent such detailed cost data , the next best option is a bill of materials approach – used by CARB in determini ng costs for California’s GHG standards – supplemented by cost data from manufacturer s, component suppliers, and public sources. As additional teardown cost data becomes available, the agencies should include those costs in the final rule. Given the uncertainties in the model inputs raised in our previous comment on EPA’s estimate of future fl eet mix, EPA’s use of the OMEGA model appears to be a reasonable methodology to determine manufacturers’ technology implementation and costs for complian ce with the proposed GHG requirements. Although CARB used a different methodology to determine the cost-effectiveness of its GHG requirements, it is not surprising that EPA has arrived at the same conclusion regarding what levels of GHG emission reductio ns are reasonable and achievable in the same timeframe.

EPA requested comment on their estimates for diesel cost, mass reduction and material substitution generally (techniques, costs, and effectiveness), and re vised hybrid system costs. EPA’s technology costs and effectiv eness estimates generally match those determined by CARB for the same technologies . This is not surprising because most of the technologies are well known and are either already being implement ed in vehicles or are at the prototype stage. Concerning hybrid systems, CARB does not believe they are required to meet the proposed standards. Noneth eless, the costs cited in the DRIA may be reasonable when considered in the timefra me of the proposed GHG program. However, we would note that the costs cited for power sp lit systems seem high in light of Ford and Toyota’s statements that they have made si gnificant cost improvements in their hybrid systems and are curren tly making some profit from their hybrid vehicles. In addition, as hybrid drive systems and batteries undergo furt her refinement, their co sts are expected to decrease near and beyond 2016.

EPA also requested specific comment on th eir mark-up factor of between 1.11 and 1.64, depending on the technology. As noted in our response above, CARB supports the methodology used by the agencies to determine component costs. CARB is also supportive of the comprehensive analysis EPA undertook to determine indirect component costs to the manufacturer resulti ng from production and retail related costs. EPA noted in its DRIA that cost multipli ers will vary between components depending on the complexity of the technology and th e timeframe. CARB agrees with EPA’s analysis that less complex and/or more mature technologies would incur lower production and retail costs. [OAR-2009-0472-7189.1, p.10]

[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]

4-8EPA Responses on Joint Issues and Technical Work

EPA Response:

EPA appreciates CARB's comments and agrees with them. As regards the comment on power-split hybrid cost estimates being too high, both agencies continue to believe that the cost estimates used in the proposal and fi nal rules are the best estimates available at this time. Although the agencies agree that some manufacturers have made statements recently about improvements to their systems having resulted in cost reductions, we prefer instead to base estimates on engin eering analysis. Note also that recent manufacturer statements pertain to existi ng hybrid systems based on nickel-metal hydride battery technology while the co st estimates in our rules are based on Li-Ion battery technology. This adds another level of uncerta inty to the press release type statements made recently by auto makers.

Organization: BorgWarner

Comment:

(1) The need for technology-neutral legisla tion. As a supplier of multiple advanced technologies named in the joint proposal for improving fuel economy and emissions, BorgWarner supports technology neutrality. We be lieve there is no single 'silver bullet' technology that meets the American consumers va ried driving behavior s. It will take a combination of several advanced technologies to meet the needs of automakers and consumers seeking more fuel efficient vehicles . However, the joint proposal falls short of achieving technology neutrality in several areas: the delay in the adoption of real-world driving data in vehicle ratings, offering larg e credits for a select few technologies, and using models that discourage the use of other effective technologies. [OAR-2009-0472

- 7289], p.1

Our primary concern is the delay in adop ting fuel economy and CO2 rating calculations that are closer to the real world driv ing behaviors. According to a 2006 EPA study, American consumers accumulate 57% of their miles on the highway and 43% in the city. However, the proposed rule continues to ba se fuel economy and CO2 ratings on outdated 1975 data that showed the American consum er accumulated 45% of their miles on the highway and 55% in the city. As a result, existing and proposed vehicle fuel economy and CO2 ratings are inaccurate measures of today's real-world fuel economy and CO2 production. Continuing to rate vehicles with th is inaccurate data essentially discourages any technologies that excel in highway driving conditions (speeds over 45 mph) and may encourage an unintended bias toward vehicl es that perform bette r in city driving conditions. If not addressed now, the auto i ndustry will continue to invest and make decisions based on outdated information for another seven years. Decisions based on outdated calculations may not lead Americans or the auto industry to the right choices to reduce oil dependence and real-world CO2 emissions. [OAR-2009-0472-7289, pp.1-2]

Significant long-term technology and capital decisions are being made now, and regulations need to properly tie these decisions to real-world benefits as best as possible. This is one of the key principles outlined in the 'Bellagio Memorandum on Motor Vehicle

4-9EPA Response to Comments

Policy,' which suggests policies should be ba sed on real-world performance compared to societal objectives, and not given special cons ideration for specific fuels, technologies, or vehicle type. Since the EPA already uses the revised driving cycles of 57% highway and 43% city in other areas such as the 'Fuel Ec onomy Trends Report,' if should be relatively simple to change the formulas for the upfront calculations to provide a consistent measure. No testing protocol is changed, only the weigh ting calculations. Implementing this calculation change now brings us a step closer to utilizing real world measures to provide real world results. This also supports President Obama's desire for the joint proposal to provide clar ity, stability and predictability and the EPA's own desire to tie technologies to real-world results. [OAR-2009-0472-7289, p.2]

EPA Response:

EPA interprets the reference to “1975 data” to mean the Federal Test procedure used to implement the standard (which reflects th e relative proportions of highway/city driving referenced in the comment). EPA believes it is premature to use diffe rent test procedures to evaluate performance at this time as virtually all current data on technology performance is based on 2-cycle testing. More over, as a matter of law, CAFE standards for passenger cars (although not lig ht trucks) must be establis hed using the FTP. 42 USC section 32904 (c). At the same time, the agencies have accounted for the difference in real world performance in assessing the result s of their respective rules, adjusting fuel economy results by 20% to account for the difference.

4.4.1. Technologies Considered

Organization: International Council on Clean Transportation

Comment:

EPA and NHTSA conclude that ‘the application of diesel engines on sm all vehicles is not a viable or cost effective option’. Thus, th e cost and effectiveness estimates did not include the technology of a diesel engine with lean NOx trap (LNT) catalyst aftertreatment on a small car.

While the market share of diesel passenger cars in general is currently at a very low level in the US (<1%), the technology should not be completely ignored for the following reasons: (1) Volkswagen and Mercedes have a history of selling diesel cars in the US, with regular customers eager to buy diesel cars in the future. (2) Average market share of diesel passenger cars in Europe is about 50% . European manufacturers are interested in exporting some of their diesel models to the US to establish an additional business segment. (3) Diesel engines are able to m eet Tier 2 standards in small cars without needing a deNOx catalyst or urea injecti on (Selective Cataly tic Reduction – SCR), making compliance easier and cheaper th an for larger diesel vehicles.

4-10EPA Responses on Joint Issues and Technical Work

Volkswagen’s success in selling smaller dies el cars in the US supports this assumption. Volkswagen of America recently announced that 5,072 diesel vehicles were sold in June 2009, representing 26% of total sa les for the month. Diesel engines accounted for 81% of Jetta SportWagen sales, and 40% of Jetta sedan sales. For 2010 VW is introducing a diesel version of the Golf and expects that 30% of all Golf hatchbacks sold in 2010 will be equipped with a turbocharged diesel engine.

Given this background, ICCT suggests considering diesel technology for small passenger cars and assessing their cost and effectiveness.

[OAR-2009-0472-7156.1, pp.22-23]

EPA Response:

The final standards, of course, do not mandate any particular technology path. Manufacturers remain free to use any pack age of technologies (and other compliance strategies, such as use of credits) to ach ieve their fleetwide average. The OMEGA modeling is used by EPA to forecast potentia l compliance paths, not to determine the level of the standard. That being said, EPA at proposal evaluated di esel technology in its consideration of potential techno logy packages for all vehicles other than small cars, and in the final rule, included diesel technology in the technology packages for small cars as well. EPA is not predicting that manufacturers will utilize diesel technology to comply with the model year 2012-2016 standards becaus e it is considerably more expensive and less cost effective than other potential techno logies. Specifically, the diesel package was not as cost effective as other packages in th e compact car vehicle ty pe (vehicle type 2) and was not, therefore, chosen by the OMEGA m odel. This does not mean that diesel technology is not a viable technology for small cars, but rather that using the metrics used by the OMEGA model and the model inputs used by EPA, it was not considered to be as cost effective as other technol ogies. If the consumer dema nds diesel technology in this market segment, a manufacturer will probably offer it, and nothing in the rule prevents manufacturers from doing so.

Organization: University of California, Santa Barbara, Bren Working Group on Vehicle Fuel Economy, University of Miami, School of Law

Comment:

Stringency of Targets

The stringency of the footprint-fuel econom y curve at the year 2016 represents fuel efficiencies attainable ut ilizing maximum technology availa ble at present. NHTSA and EPA’s interpretation of 'maximum technology' is crucial to the annual increase in stringency of this curve; this underscores the importance of assumptions pertaining to technological advancement. According to the NHTSA/EPA joint technical support document, many of the technologies included in the proposed ruling are currently 'well known' and 'readily available'. Technologies presently in the research and development

4-11EPA Response to Comments

phase were not considered because of uncertainty surrounding implementation. [OAR

2009-0472-7188.1, p. 3]

We feel that it is inappropriate to ba se regulations for the year 2016 solely on technologies that are available today. T echnologies currently in the research and development phase should be considered in setting the standards for the latter years of this proposed ruling. [OAR-2009-0472-7188.1, p. 4]

We maintain that the fuel economy curves need to be more stringent as an incentive for manufacturers to innovate and devote more capital to the research and development of fuel saving technologies. Similar technology- forcing occurred in the 1970s during the phase-in of catalytic converters in all automobiles. At that time, automakers unanimously maintained that the high cost of phase-in exceeded the overall benefit and high uncertainty in performance effects. In 1975, emissions standards necessitated automakers to adopt these technologies though they previously deemed them undesirable. We recommend that the fuel economy curves be stringent enough to encourage manufacturers to reach for forthcom ing technologies. [OAR-2009-0472-7188.1, p. 4]

Although many of these technologies are ava ilable today, the emissions reductions and fuel economy improvements proposed would i nvolve more widespread use of these technologies across the light-dut y vehicle fleet, which account for about 40% of all U.S. oil consumption, and about 60% of transportation sector oil use. Ultimately, the greenhouse gas emission reductions this program would bring about are equivalent to the emissions of 42 million ca rs. [OAR-2009-0472-6770, p. 1]

When considering technological feasibility, th e agencies should give consideration to more than just currently applied tech nology, including experimental and developing technology. Of course, the economic costs to manufacturers and consumers of this potentially expensive technology must be given due weight. Technology that would create prohibitive costs for manufacturers and/or consumers should not be required. However, this should not imply that such technology be permanen tly overlooked [OAR

2009-0472-6770, p. 1]

EPA Response:

Availability of adequate lead time is an essential component of both agencies’ statutory mandates. EPA indeed has sound reasons for rejecting a standard based on increasing stringencies of 6%, and the type of a pproach advocated by the commenter forcing aggressive use of still-to-be-developed tec hnologies would be more stringent still and hence inappropriate. See preamble sec tion III.D.7 and comment response 3.3.3.3.1. Even for technologies that ar e well known and readily availa ble, there are two underlying issues that affect the time frame during which these technologies can be adopted by manufacturers. EPA determined that there is adequate lead time to employ the financial, engineering, and other resources needed to achieve the standards, recognizing that a significant portion of these human and capit al resources would need to be expended during the next few years. Lead time is al ready somewhat constrained for these model

4-12EPA Responses on Joint Issues and Technical Work

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. More specifica lly, the first set of factors related to adequacy of lead time is manufacturers’ production capacity and the ability of automobile manufacturers and suppliers to produce these technologies in sufficient volumes to support all applicati ons. For example, even though the capacity of dual clutch transmissions continues to increase, there wi ll not be sufficient volume to supply every vehicle sold in the United States in the 2016 MY. The second issue concerns coordination of technology additions with ma nufacturers’ design cycles. It takes several years to redesign a vehicle, and several more to design an entirely new vehicle not based on an existing platform. Thus, redesign cycles, i.e. considerat ion of the time needed to design, are an inextricable component of ade quate lead time under the Act. As noted in section III.D.6 of the preamble to the final rule, Vehicle manufacturers typically redesign their vehicles every five years and it take s several years to redesign a vehicle. Furthermore, redesigns require a significan t outlay of capital from the manufacturer. This includes research and development, material and equipment purchasing, overhead, benefits, etc. These costs are significant a nd are included in the cost estimates for the technologies in this rule. Because of the ma npower and financial capit al constraints, it would only be possible to redesign all th e vehicles across a manufacturer’s line simultaneously if the manufacturer has acce ss to tremendous amounts of ready capital and an unrealistically large e ngineering staff. However no major automotive firm in the world has the 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.

Consequently, EPA believes that the level of st ringency chosen for the final rule is sound and reasonable, and based on proper considera tion not only of availa ble technologies but the costs and necessary lead time for its introduction throughout the vehicle fleet.

Organization: BorgWarner

Comment:

Finally, through the issues mentioned above a nd in some of the Volpe modeling, we find the proposal offers limited credits and incentive s for advanced clean diesel technologies. The Volpe model only considers diesel tec hnologies for vehicles with engines of 6 cylinders or more. The model does not apply diesel technologies to 4-cylinder engines, even though these vehicles are very efficien t for highway driving. In fact, clean diesels vehicles that are emissions certified in 50 stat es are selling well in the US, where they are available, as a result of their fuel efficien cy. Over the next five years 4-cylinder diesel engines will have the highest compounded annual gr owth rate within diesel engines in the United States. Looking at global trends, in five years 4-cylinder diesels will account for 87% of the diesel market, and solid diesel gr owth is expected in even smaller engines such as 2 and 3-cylinder engine. In 2009, th e percentage of consumers selecting dean diesel vehicles actually surpa ssed the percentage of consumer s selecting hybrid electric powertrain vehicles. As we transition to more fuel efficient vehicles, there is a role for advanced light-duty diesels. Therefore, all technologies need to be on equal ground and

4-13EPA Response to Comments

evaluated/incentivized based on their r eal-world performance. [OAR-2009-0472-7289, pp.2-3]

EPA Response:

Regarding Borg Warner's comment on clean diesels and, in partic ular, 4-cylinder clean diesels, the agencies appreciate the views la id out by Borg Warner but emphasize that the modeling done to support the proposed and fina l rules does not limit what can and cannot be done by manufacturers to comply with th e standards. Instead, the modeling done is meant to evaluate the feasibility of, and the most cost effective means of complying with, the new standards. In other words, the modeling done does not in any way prohibit the technologies manufacturers may choose to us e or that consumers may choose to buy. Should manufacturers and/or consumers prefer diesel technology to other technologies (downsized/turbocharged gasoline engines, hybrids, etc.), these technologies can be utilized so long as a manufacturer meets its fleetwide standard.

Organization: American Iron and Steel Institute

Comment:

[[These comments were submitted as testim ony at the Detroit public hearing. See docket number EPA-HQ-OAR-2009-0472-6185, pp. 70-77.]

Steel is the basis for modern vehicles in the U.S. and around the world. Recent studies over the last three years have found that the average light vehicle in North America contains about 60 percent steel. Our goal, of course, in the steel industry is to keep steel in the vehicle, to preserve and grow this vital market. Let me explain why this steel industry objective supports th e goals of EPA and NHTSA; th at is, why steel technology helps to reduce emissions associated with vehicles.

I would like to make three poi nts today. One on reinventing steel, one on the importance of collaboration, and the third on steel's gr eenness as measured by lifecycle analysis.

Now, first, the steel industry has reinvented its automotive steel products in the past and must continue to do so in the future if it is to continue to prov ide safe, practical and affordable means of reducing vehicle mass, which leads to emissions reductions. For example, in my experience working in programs with GM, Ford, and Chrysler as well as the new North American domestics incl uding Toyota, Honda, Nissan, Hyundai, BMW, Mercedes and others, I can tell you that al l of these companies, which do manufacture vehicles in North America, make use of st ate-of-the-art high-st rength steel grades manufactured by domestic steel mills. Now, this proposed rule on light-duty vehicle emissions clearly reports the consensus by EP A and NHTSA that reducing vehicle weight is an effective part of the overall strategy for meeting the proposed emissions and fuel economy standards. EPA further has asked for comment on its conclusion that it is 'technically feasible to reduce vehicle weight without reducing vehicle size or footprint or structural strength.' I would like to say that AISI does agree with this statement since that

4-14EPA Responses on Joint Issues and Technical Work

is exactly what is accomplished by the effectiv e use of advanced high-strength steels or 'AHSS.' And I will explain this a little further.

These new steels have helped car makers to achieve 5-star crash ratings in their latest models without increasing vehi cle mass. This is consistent with EPA comments written in the Weight Reduction and Vehicle Safety Draft on the Regulatory Impact Analysis, talking mainly by reducing ve hicle mass and including comments like the substitution of lower density and/or higher strength material s -- going on to explai n that including highstrength steels, aluminum, ma gnesium, or composite materials for components currently fabricated from mild steels. In fact, it is these AHSS grades in today's cars and trucks, and their growth over the last 10 years, that have made steel bodies and chassis components considerably stronge r and lighter, and mo re crashworthy than ever before. Such grades include 'dual phase' and 'TRIP' st eels, grades that are new to these -- these new grades now add up to about 15 percent of the average vehicle, new vehicle now made in the U.S., and are the fastest growing materials, by the way, in today's vehicles. These materials have already proven to reduce the mass of body structures by up to 25 percent or even more in some cases, and can do this more affordably than any other materials considered for mass reduction. AISI believes there is more weight savings to be gained by further using these materials in future vehicles.

My second point has to do with collaboration. AISI believes co llaboration is essential for both the steel and automotive industries to m ove forward and implement the technologies that drive down emissions. Our partneri ng together is well known for achieving productive results. In 1987, the Auto/Steel Pa rtnership was formed with Chrysler, Ford, and General Motors, and the major domestic st eel mills and still operates today. In the 1990s the domestic steel companies organize d with a global consortium to form the ULSAB-ARV and Ultra-Light Steel Auto Body, consortium of those groups, that released a study that showed the power of advanced computer-aided design or CAE analysis coupled with advanced high strength steels could lead to weight reduction, mass reduction, and safe and fuel efficient vehicles. One case study done by the Auto/ Steel Partnership examined mass reduction and safety together and did this with folks on the vehicle front rails, an important load path in determining vehicle crash performance. Before ULSAB -- these rails were mainly made of mild steel. Af ter that study on ultra light vehicles was released with the help of the Auto/Steel Partnership project reengineering the front rails, almo st all front rails today in vehi cles have been converted to advanced high strength steel, AHSS. The project, in fact, demonstrated that front rails can be built 25 percent lighter with AHSS and ab sorb the same crash energy. This was engineered on the computer, of course, and validated, though, with actual frontal crash
tests.

My third point is that steel is a green mate rial, in fact, greener than most people think, particularly with respect to th e emissions associated with ever y phase of a vehicle's life. For example, did you know that steel has a much lower energy content per ton and energy intensity and less CO2 emissions, theref ore, than most other automotive structural materials? This is particularly important in containing emissions in the manufacture of vehicles.

4-15EPA Response to Comments

For example: If you compared steel to aluminum, you'd find that aluminum has over 8 times the energy intensive, magnesium 7 to 14 times, and carbon fiber over 10 times the energy intensity of steel. Additionally, our domestic steel mills have the lowest energy intensity per ton produced of any steel sector in the world and the domestic industry has reduced its energy intensity by 33 percent by improvements in steel making from 1990 to 2007.

Finally, steel is really the most recycled ma terial in the world a nd averages 97 percent recycling rate, and that's the tons of automotiv e steel recycled divide d by the tons used to make new cars and trucks each year, and has done that for the last 20 year s. This is really why steel has such extremely low emissions when the full life cycle of the automotive products are considered.

Therefore, let's consider really how steel cont ributes to emissions in three ways. In fact, through the manufacturing phase because of its low energy emissions, in use phase because of its ability to reduce mass, and at the end-of-life because of its high recycling
rate.

So in conclusion, the steel industry has a rich and productive history of working with its automotive customers over the years towards objectives like mass reduction and safety -- objectives which I believe are fully consistent with those of EPA and NHTSA. Even in these very difficult times, I can report to you th at our collaborative work is going strong, mainly because we are working on important issu es for future vehicles which will lead to vehicle emissions reductions. AISI recommends that there be serious consideration given to the LCA or life cycle performance of mate rials in the manufacturi ng of light vehicles in the future, mainly I mean beyond 2016. We should evaluate possible credits or allowances for those materials which provide bona fide reduction s in emissions over a vehicle's full life. In this way all factors will be considered towards the goal of continuous reduction of vehicle emissions.

EPA Response:

EPA agrees with AISI that there are ways of reducing vehicle mass without negatively affecting the vehicle’s functi onal objectives, including safety. As AISI also noted, there are many vehicles currently being manufactur ed and operated within the United States that make use of high strength steel, and that high strength steel now makes up about 15 percent of the average vehicle. This furt her supports the EPA positi on that it is critical that assessments of the relationship between vehicle mass and safety be performed, to the extent possible, on data which reflects th e safety performance of current production vehicles. EPA also agrees that the issu e of lifecycle emission s accounting may be appropriate to consider for subsequent ru lemakings. See also preamble discussion in sections III.C.2.b.ii and III.C. explaining those limited instances where EPA is considering issues of vehicles’ life cycle emissions in this rulemaking.

Organization: Motor and Equipment Manufacturers Association

4-16EPA Responses on Joint Issues and Technical Work

Comment:

Standards Must Be Technology-Neutral MEMA supported attribute-based standards, as prescribed in the Energy Independence and Security Act of 2007 (EISA), allowing cha nges to a vehicle's fuel economy that do not come at the expense of safety. Incentive language in EISA noted the important role suppliers play in research and development of the advanced technologies necessary to meet the fuel economic goals. No specific vehicle technology will meet all of America's driving needs. All options must be availabl e in order to achieve our legislative and societal objectives of improving fuel economy, reducing emissions, and advancing energy independence. [OAR-2009-0472-7121.1, p.3]

The supplier industry innovates, creates, a nd integrates many types of components and technologies for vehicles and helps vehicl e manufacturers accel erate the sort of modifications required to get more fuel effi cient, lower emitting vehicles into the hands of consumers. The variety of means to achieve marked improvements in fuel economy and reduced emissions is why MEMA believes it is so important for any requirements not only to be attribute-based, but also technology-neutral. Otherwis e, the risk of establishing requirements that may tend to favor one or two types of vehicle technologies over a myriad of other competing technologies (with equal or better perfor mance) is too great and is counter to the intent of EISA. In addition, favor ing certain technologies may foreclose even greater opport unities for fuel savings and em issions reductions that are available from developments in other ' non-favored' technologies or in combining technologies. Since a true attr ibute-based system is not a 'one-size-fits-all' approach, it encourages more innovation in various vehi cle types to improve fuel economy and emissions in all vehicle classes. Unfairly favoring one or two types of technology over others also inhibits indu stry innovation and limits consumer choice. [OAR-2009-0472

- 7121.1, p.3]

Over time, complex combinations of vehicle technologies will increase and improve fuel efficiency and emissions. The NHTSA Volpe m odel adequately addresses the synergistic effects relating to the engine, transmission, electrification, hybrid s, and other vehicle technologies. Positive synergies, for example, can be found with light weight materials (see Section III.A. [OAR-2009-0472-7121.1, pp.4-5]). However, the EPA proposal does not fully consider possible synergies that c ould be derived in air conditioning component technologies relative to the credits system (See Section IV [OAR-2009-0472-7121.1, pp.7-10]). All synergies must be full y examined and developed. [OAR-2009-0472

- 7121.1, p.3]

EPA Response:

MEMA’s comments support several facets of the rule. First, the agencies believe that considering technologies across the entire vehicle is required in the regulation of fuel economy and CO2 emissions. Many factors out side of the powertrain affect fuel consumption and CO2 emissions, including aero dynamic drag, tire rolling resistance, and electrical accessory loads and only be addressing all of them from a system perspective

4-17EPA Response to Comments

can the stringency required by this rule be obtained. Hence the us e of a whole vehicle approach in the standard-setting process. See, e.g. the introduction to section III.D in the preamble to the final rule. With regard to the footprint base d attribute curve not providing a technology preference, the agencies worked to prov ide an attribute curve that accomplished just that, and acknowledge MEMA's endorsement of such.

Organization: Recreational Vehicle Indust ry Association (RVIA)

Comment:

a. Application of Technologies to Tow Vehicles

In RVIA's July 1, 2008, comments to NHTSA regarding the 2011-2016 CAFE proposal (NHTSA - 2008-0089), we urged NHTSA to in corporate a 'heavy-tow capable' vehicle classification so as not to negatively impact safely towing or st opping recreation vehicle trailer combinations. While we regret that NHTSA did not incorporate this recommendation, we appreciate th e fact that the Draft Join t Technical Support Document (TSD) prepared by EPA and DOT for this rule making addresses the issue of towing with regard to the following technol ogies: [NHTSA-2009-0059-0107, p.2]

In discussing hybrid technologies, the draft joint TSD included th e following discussion (from pp.3-50):

Some manufacturers choose not to down size the engine when applying hybrid technologies. In these cases, performance is vastly improved, while fuel efficiency improves significantly less than if the engi ne was downsized to maintain the same performance as the conventional version. While th is approach has been used in cars such as the Honda Accord Hybrid (now discontinued), it is more likely to be used for vehicles like trucks where towing and/or hauling is an integral part of their performance requirements. In these cases, if the engine is downsized, the battery can be quickly drained during a long hill climb with a heavy load, leaving only a downsized engine to carry the entire load. Because towing capabi lity is currently a heavily-marketed truck attribute, manufacturers are he sitant to offer a truck with downsized engine which can lead to a significantly diminished towing pe rformance with a low battery, and therefore engines are traditionally not downsized for these vehicles. [NHTSA-2009-0059-0107, p.2]

In discussing electrically-driven accessories, the draft joint TSD included the following discussion (from pp.3-60):

Indirect benefit may be obtained by reducing the flow from the water pump electrically during the engine warm-up period, allowing the engine to heat more rapidly and thereby reducing the fuel enrichment needed during co ld starting of the e ngine. Further benefit may be obtained when electrification is combined with an improved, higher efficiency engine alternator. Intelligent cooli ng can more easily be applied to vehicles that do not typically carry heavy payloads, so larger vehi cles with towing capacity

4-18EPA Responses on Joint Issues and Technical Work

present a challenge, as these vehicles have high cooling fan loads. [NHTSA-2009-0059

- 0107, pp.2-3]

In discussing integrated motor assist/cra nk integrated starter generator technology, the draft joint TSD included the following discussion (from pp.3-63):

EPA relied on a combination of certification da ta (comparing vehicles available with and without a hybrid system and backing out other components where appropriate) and manufacturer-supplied information to determine that the effec tiveness of these systems in terms of CO2 reduction is 30% for small cars, 25% for large cars, and 20% for minivans and small trucks similar to the range estim ated by NHTSA for the respective vehicle classes.. The effectiveness for small cars assumes engine downsizing to maintain approximately equivalent performance. The large car, minivan, and small truck effectiveness values assume less engine downsizing in order to improve vehicle performance and/or maintain towing a nd hauling performance. [NHTSA-2009-0059

- 0107, p.3]

In discussing 2 mode hybrid technology, th e draft joint TSD included the following discussion (from pp.3-66):

For this proposal the CAFE model considered a range of 23 to 33 percent with a midpoint of 28 percent, assuming no engine downsizing to preserve the utility nature of medium and large trucks (e.g., maintaining full towi ng capability even in situations with low battery charge) and EPA estimates CO2 em issions reduction effectiveness to be 25 percent for large trucks (LDT3 and LDT4 cate gories) based on vehi cle certification data. EPA estimates an effectiveness of 40 pe rcent for smaller vehicles. [NHTSA-2009-0059

- 0107, p.3]

In discussing weight reduction, the draft joint TSD included the following discussion (from pp.3-74):

NHTSA and EPA estimate that a 10 percent re duction in mass results in a 6.5 percent reduction in fuel consumption while maintaini ng equivalent vehicle performance (i.e. 0- 60 mph time, towing capacity, et c.) which is consistent w ith estimates in the 2002 NAS report. [NHTSA-2009-0059-0107, p.3]

In discussing the full series hydraulic hybrid technology, the draft joint TSD included the following discussion (from pp.3-81):

A Full Series Hydraulic Hybrid Vehicle (HHV) is somewhat similar in concept to a full series electric hybrid vehicle, except that the energy is stored in the form of compressed nitrogen gas and the power is transmitted in the form of hydraulic fluid. Series HHV technology currently under development by EPA is capable of a 40% decrease in tailpipe CO2 emissions in the small car, large car, minivan, and small truck classes. In the large truck class, a 30% CO2 reduction is possible. The large truck benefit is somewhat lower than the other classes because it is a ssumed that a large truck requires a larger

4-19EPA Response to Comments

engine to maintain towing and hauling perfor mance after the energy in the high pressure hydraulic accumulator is exhausted. This tec hnology is still under development and not yet commercialized however there are technology demonstration vehicles in service with UPS in daily package delivery service. [NHTSA-2009-0059-0107, pp.3-4]

RVIA commends the agencies for taking to wing into consideration in conducting its technology review. We encourage you to contin ue doing so and to incorporate provisions that allow for the continued availability of sa fe, effective tow vehicles as you proceed in finalizing the standards. [NHTSA-2009-0059-0107, p.4]

EPA Response:

First, many of the vehicles addressed by the comm enter are not subject to this rule at all. This rule only applies to light duty vehicles of less th an 8500 lbs. GVWR and mediumduty passenger vehicles less than 10,000 lbs. For those light trucks subject to the rule, EPA recognizes that light duty vehicles specifically design ed for towing must not be compromised due to advanced GHG reducing technologies. EPA thus took care in its analyses to recognize the utility to consum ers of towing capacity and in its engine packages used for modeling did not downsize en gines (i.e. so that EPA did not seek to evaluate the standard’s feasib ility by downsizing engines). See RIA chapter 1 Tables 1

- 11 and 1-12.

4.4.2. Costs and Effectiveness of Technologies

Organization: Honeywell Transportation Systems

Comment:

Honeywell seeks clarifica tion from EPA and NHTSA on the assumptions made in determining the cost and efficiency benefits of turbocharged engines. We offer the agencies additional information herein for cons ideration in refining its assumptions. It is now well accepted that turboc harging enables en gine downsizing by allowing a smaller engine to satisfy the power requirements typi cally derived only from larger engines. The downsized engine can now meet consumer expectations while improving fuel economy of gasoline powered passenger vehicles. [OAR-2009-0472-7165.1, p.3]

EPA and NHTSA estimate the fuel efficiency advantage [or CO2] of a turbocharged and downsized engine to be in th e range of 3 to 6 percent comp ared to a naturally aspirated engine of comparable performance and estim ate the cost of implementing the technology to be in the range of $1,100. HTS would like to submit the following to show that the benefit to fuel economy is more in the range of 15 to 20 percent and implementing the technology is not as costly as describe d within the Proposed Rule. [OAR-2009-0472

- 7165.1, p.3]

Conventionally, large displacement, naturally aspirated gasoline engines are used to get high power and torque ratings. This results in the engine being operated in a throttled

4-20EPA Responses on Joint Issues and Technical Work

condition most of the time, negatively imp acting fuel economy. Downsizing the engine results in less throttling and higher operat ing efficiency, improving the overall fuel economy of the vehicle by 15 to 20 percent. For example, in its marketing materials, Ford claims that the 'primary benefits deli vered by the Ford EcoBoost design approach include: optimized engine efficiency - fuel consumption and CO2 emissions reduced by up to 20 per cent; greater driving enjoymen t - strong low-end torque and responsive performance across the full rev range; and th e opportunity to downsize - large-engine performance, but with the si ze, weight and fuel economy of a much smaller unit. The technology featured in Ford EcoBoost e ngines builds on existi ng petrol engine knowledge, and offers customers a more affordable alternative to reduce carbon emissions than equivalent hybrid or di esel engine designs .' [OAR-2009-0472-7165.1, p.3]

Turbocharging enables this downsizing by rest oring horsepower and to rque rating. It is estimated that turbocharging enables about 30 to 40 percent e ngine downsizing, yet delivers enhanced performance from a smalle r engine with fewer cylinders than is possible with a non-turbocharged engine. If cy linder count is reduced, the cost savings in parts and assembly offset the costs of turbocharging. Replacing a 6-cylinder dual overhead cam engine with a 4-cylinder turb ocharged engine may be cost neutral. Consideration of the potentia l to decrease cylinder count and offset costs should be included in calculations for fleet fuel economy and implementation costs. [OAR-2009

- 0472-7165.1, p.3]

HTS used four different methods to estimat e the fuel economy benefits and degree of engine downsizing made possible by gasoline engine turbocharging.

(1) Production Vehicle Data - US Market: HTS se lected vehicles for sale in the U.S. for comparison when turbocharged, downsized engi nes were offered as an option instead of larger, non-turbocharged engines. HTS used data published on manufacturers' websites for comparison. For example, we compared the fuel economy of the following vehicles when offered for sale with and without tu rbo option: Passat, Passat Wagon, Mercedes E and C class as well as CLK, and Audi A4. The scatter in the data is wide because turbocharging is sometimes used for 'driva bility' and sometimes for fuel economy. Also, this is not a strictly 'back to back' comp arison because other changes such as direct injection instead of port injection are also sometimes made. Nevert heless, the data is illustrative because engine downsizing and turbocharging are the primary fuel economy mechanisms. The data from these six vehicl es show about 40 pe rcent downsizing and about 20 percent fuel economy improvement. [OAR-2009-0472-7165.1, p.4]

(2) Production Vehicle Data - E.U. Market: We similarly analyzed the cost and fuel economy results from vehicles for sale in Europe, including Renault Clio, Volvo S80, VW Golf, Opel Astra, and Audi A6. When comparing turbo and non- turbo options, it was seen that fuel economy improvement was 12 to 18 percent with 20 to 25 percent downsizing when the turbo option was selected. [OAR-2009-0472-7165.1, p.4]

(3) Back-to-Back Comparison - FEV St udy: A study published by the power train consulting firm FEV supports HTS' s asserti on that fuel economy improvement is in the

4-21EPA Response to Comments

range of 15 percent when turbocharging a nd downsizing are employed by vehicles. The variation in production vehicle data due to changes in several design parameters and due to different design objectives has already b een noted. HTS offers to EPA and NHTSA for their consideration a study performed by FEV which tested specifically the fuel economy improvements utilizing downsized engines with turbocharging. In the study FEV replaced the original, nontur bocharged engine with a 20 percent and then a 40 percent downsized, turbocharged engine. FEV observed a 13 percent and 18 percent improvement in fuel economy from these downsizing steps. FEV observed this improvement even though the compression ra tio was reduced to enable high engine boosting. This study is the closest 'back to back' comparison that appears to be available. [OAR-2009-0472-7165.1, p.4]

(4) Vehicle Simulation: HTS conducted a me thodical simulation of the effects of downsizing to illustrate the benefits of turboc harged engines. First, HTS collected data on fuel consumption maps of conventional, non- turbocharged and turbocharged engines. HTS then averaged, normalized, and inter polated these data to construct fuel consumption maps of a large displacement, non-turbocharged engine and two downsized, turbocharged engines of the same power rati ng. Significantly, HTS analysis of this data established that the fuel consumption of gaso line engines rises sharpl y as load is reduced. In downsized, turbocharged engines this rise is below the majority of operating points for typical drive cycles, resulti ng in significant fuel c onsumption reduction. [OAR-2009

- 0472-7165.1, pp.4-5]

HTS selected a state of the art vehicle for this simulation. HTS did not change vehicle specifications when it replaced the original, non-turbocharged engine with progressively downsized turbocharged engines. We used simple equations for aerodynamic drag, rolling resistance, and accel eration losses, along with a fixed passenger compartment load, to calculate the engine speed and tor que at each point of the FTP-75 cycle. HTS then used this data to obtain the fuel cons umption values from engine data maps second

by-second through the FTP cycle. The consumption was summed to determine the total fuel used over the cycle, resulting in 13 percent fuel economy improvement for 20 percent engine downsizing and 23 percent improvement for 40 percent downsizing. [OAR-2009-0472-7165.1, p.5]

Each of these four methods s hows consistently that 15 to 20 percent improvement in fuel economy and 30 to 40 percent reduction in engi ne displacement are po ssible with the use of turbocharging. HTS plotted all four data sets on the same graph and fitted a curve through the combined set. This graph is show n in Figure 1 and confirms the benefits of turbocharging, i.e. downsizing, and fu el economy improvement. [OAR-2009-0472

- 7165.1, p.5]

These four methods all produce similar results : that turbo downsizing enables significant fuel economy improvement when engine perf ormance is maintained. HTS encourages EPA and NHTSA to accurately reflect the true benefit of turbocharging in published data. We believe these benefits to be in the ra nge of 13 to 20 percent for 20 to 40 percent engine downsizing. [OAR-2009-0472-7165.1, p.6]

4-22EPA Responses on Joint Issues and Technical Work

HTS supports EPA's current designation of the turbocharger as an emission related part under section 207 of the Clean Air Act as described by EPA in Federal Guidance. EPA identifies turbochargers as an example of other parts of your vehicle which have a primary purpose other than emissions contro l but which nevertheless have significant effects on your vehicle's emissions.' CO2 emissi on reduction is achieve d as a direct result of the possibility to downsi ze a turbo boosted engine, and not due to the turbocharger itself. [OAR-2009-0472-7165.1, p.7]

EPA Response:

Turbocharged and downsized engines are c onsidered an important technology for the reduction of greenhouse gas emissions. Th e effectiveness of this technology will continue to be evaluated as certification data is collected.

Organization: National Automobile Dealers Association (NADA)

Comment:

When calculating technology cost s, all dealer costs-of—sales should be accounted for in “dealer profit.” The finance costs paid by ove r 90% of consumers also must be properly accounted for, as should unique costs characte ristics associated w ith leases and fleet purchases. [OAR-2009-0472-7182.1, p.10]

Costs associated with design changes nece ssary to maintain vehicle performance, capability, and utility in conjunction with fuel economy/GHG technology improvements must be accurately accounted for. Monetizing these costs captures the degree to which consumers will forgo new vehicle purchases that fail to meet their n eeds and instead elect to hold onto older vehicles longer, or to acce ss the used vehicle marketplace. Importantly, these marginal costs will result in marg inal decreases in energy security and environmental benefits. [OAR-2009-0472-7182.1, p.10]

Future fuel price projections are the most critical lynchpin to determining the value of fuel savings and the benefits of National Program. NHTSA and EPA should continue to rely on the U.S. Energy Information Administ ration’s (EIA) most recent reference case fuel price projections. Of course, as de monstrated by the many years where EIA’s projections fell above or below reality, forecasting future fuel prices is far from an exact science. Despite the inherent volatility a nd uncertainty of fuel prices, the National Program would be remiss to not use the very best models and data available or to rely on “high” or “low” price case pr ojections that are inherently not probabilistic. [OAR-2009

- 0472-7182.1, p.10]

Criteria pollutant reduction bene fits associated with the proposed National Program may be overstated as the negative impact of inhi bited fleet turnover doe s not appear to be accounted for. 74 Fed. Reg. 49674-5. With resp ect to GHGs, only any domestic impacts of reducing the social costs of motor vehi cle CO2, should considered given that EPCA focuses on U.S. energy security, and all other co sts and benefits evaluated with respect to

4-23EPA Response to Comments

CAFE standards are domestic only. NHTSA is not justified in moving away from its prior practice in this re gard. [OAR-2009-0472-7182.1, p.10]

A discount rate of at least seven percent (o r higher) should be used to estimate future prospective benefits of the National Program. Financing rate s on motor vehicle loans are indicative of appropriate discount rates since they reflect the real-world oppor tunity costs faced by consumers when buying vehicles with greater fuel economy costs associated with them. An accurate analysis of historic loan rates and a justifiable projection of retail loan rates for MY 2012-26 should be conducted and used. Importantly, using too low of a discount rate, like using too high fuel price pr ojection, will result in an overly ambitious National Program, depressed new motor vehicl e sales, and lower than projected fuel savings and GHG reduction bene fits. [OAR-2009-0472-7182.1, p.11]

EPA Response:

Regarding the NADA comment that dealer cost s-of-sales should be accounted for in "dealer profit", the agencies have included d ealer costs-of-sales (selling costs) in the indirect cost multiplier (ICM)—which makes up part of the final technology costs—as a unique element. There is no compelling reas on to include those costs in the “dealer profit” element of the ICM. As for the finance costs paid by consumers, it is important to note that from a social pe rspective, the costs of the rule are the technology costs themselves and do not include the finance costs. While those costs are incurred by consumers, they are merely transfer cost s from the perspective of regulatory cost analysis. We have included financing costs in our vehicle sales impacts analysis since costs there are not social cost s but rather personal costs.

Regarding NADA's comment on vehicle utility, it is important to note that the agencies have made every effort to craft a national program that will have no impact on vehicle utility. Vehicle performance characteristics shou ld not change as a result of this rule. As noted elsewhere (see, e.g. comment response 5.13), EPA accounted for costs needed to preserve existing vehicle utility in its analys es, for example by retaining features relating to performance in the baseline vehicle packages used as the basis for analyzing technology cost and effectiveness. That sa id, vehicle performance characteristics may well change due to consumer demand, but th at would not be the result of the rule. 1 In fact, EPA's analysis of the rule's impact on vehicle sales suggests that sales will increase as a result of the rule because consumers will find the new, more efficient vehicles more attractive than older vehicles. In short, we disagree with this comment and the premise that compliant vehicles will have less utility and/or be less attractive to consumers.

Organization: General Motors

Comment:

1 We note that CARB in its public comments “agrees with the agencies’ assumpti on that vehicle attributes of performance, carrying capacity, safety, or comfort would not change under this regulation.”

4-24EPA Responses on Joint Issues and Technical Work

The agencies developed a baseline fleet fo r cars and trucks and then applied fuel economy technologies to the fleet to create the most cost eff ective set of standard curves. In this assessment, assumptions are made about the effectiveness of each applied technology. Included herein is a detailed analysis of the t echnologies applied to large pickups. The analysis shows th at the effectivenes s of many of these technologies is significantly overstated. Therefore GM recommends that the obligation fo r large pickups, in each year of the rule, be redu ced. [OAR-2009-0472-6953.1, p.9] [[See pp.9-16 of OAR-2009-0472-6953.1 for a detail analysis of the following technologies: Engine Downsizing and Boosting (Turbocharging) applie d to a Full-Size Truck; Variable Valve Timing or Valve Lift; 12V Flywheel Stop/ Start System; and, Dual-Clutch Automatic Shift Manual Transmission (DCT)]]

EPA Response:

Based on a careful review of GM’s entire submission, EPA believes that the GM analysis is largely consistent with EPA’s analysis and publically data cited within Chapter 3 of the Technical Support Document for this rule, when GM’s analytical results are compared on the basis of similar curb-weight and similar ve hicle performance to what was used within EPA’s analysis. In the specific case of tur bocharged gasoline direct injection engines, EPA estimates of CO2 reduction are less th an publically available data for some turbocharged direct-injected engines for future light- truck applicati ons (see TSD Chapter 3). We agree with GM’s comments that it is unlikely that dry-DCTs will be used in lighttruck applications.

EPA’s estimated effectiveness for start-stop systems is relatively conservative when compared to publically available data and app ears to be generally consistent with GM’s analysis.

EPA’s estimated effectiveness of variable valve timing and lift is similar to or in some cases overlaps GM’s analysis. Insufficient de tail was provided within GM’s analysis to determine the reason for any differences.

We continue to believe that wet-DCTs provi de CO2 benefit, based on the results in our analysis within Chapter 3 of the TSD and the 2008 EPA Staff Report.

Organization: International Council on Clean Transportation

Comment:

EPA and NHTSA used different models to a ssess costs and benefits. NHTSA used the Volpe model, which they have evolved over their last several CA FE rulemakings. EPA has developed an independent model with some significant simplifications and that does not depend on confidential manufacturer product plans. While both models are capable of

4-25EPA Response to Comments

properly assessing costs and bene fits, ICCT prefers the overall EPA approach because of its relative simplicity and better transparency.

ICCT is generally in favor of simplifying m odels, as long as accuracy is maintained. For example, the EPA model assesses technology ove r 5 year redesign periods, instead of for each model year. This is a good simplification, as manufacturers’ redesign plans change frequently and annual assessments are likel y to be no more accurate than assessing technology over redesign periods.

A simplification that does not work as well is that EPA appears to assign the same technology package improvements to each manufacturer. EPA’s model begins by determining the specific CO2 emission standard applicable for each manufacturer, based on the footprint and projected sales of each model, and accounts for differences in technology for the baseline model year. However, the model implicitly assumes that every manufacturer will implement the same t echnologies in the same order in the future based on industry $/kg estimates, without looking at the specific knowledge and experience base for each manufacturer. This simplification may be missing important differences between manufacturers. For ex ample, Volkswagen is unique in having heavily invested in diesel engines in the U. S. for decades and having a substantial share of diesel engine in their fleet, but is fa r behind some manufacturers in developing and introducing hybrid vehicles. Gi ven their existing investment s, Volkswagen’s future technology mix is likely to be very different from most manufactur ers. Similarly, Honda has been an industry leader in variable valve timing and cylinde r deactivation, Toyota a leader in hybrids, Nissan a leader in c ontinuously variable transmissions (CVTs), and Ford and a few other manufacturers have been especially aggressive in developing direct injection, turbocharged gaso line engines. NHTSA's mode l is capable of assessing leadtime, benefits, and costs independently for each manufacturer. While this is not critical for assessing overall costs and benefits, it does help to evaluate competitive impacts.

In the long run, the agencies should cooperate in developi ng a single model for setting vehicle standards, incorporating the best f eatures of each model while maintaining as much simplicity and transparency as possible.

EPA is implicitly applying a separate le arning curve to indirect costs, though the reduction in the long term multiplier. However, as indirect costs are a multiple of direct costs, learning curves applied to direct co sts also reduce indirect costs. How does the reduction in indirect costs due to learning for direct costs in teract with the reduction in the long-term multiplier?

[OAR-2009-0472-7156.1, pp.17-18]

EPA Response:

The intent of this rulemaking is to provide the most value to the consumer while still meeting the standard. A manufacturer has many choices to meet the standard based on

4-26EPA Responses on Joint Issues and Technical Work

many factors such as corporate expertise, innovative technologie s, consumer choice, etc. The goal of the EPA model is to define the lowest cost technology route for each baseline vehicle in order for the manufacturer to meet the standard. The manufactures may implement any common or proprietary technolog ies in any order they choose as long as the standard is met.

Regarding learning curves, mathematically, th e comment is not incorrect. The indirect cost multipliers are proxies for having more de tailed information about the indirect costs associated with a new technology. The me thod, derived from the longstanding use of retail price equivalent multipliers, estimates indirect costs as a proportion of direct costs. The learning curve effects are applied only to direct costs in our analysis. However, if direct costs go down, all else equal, the assumpti on of this approach is that indirect costs will go down as well.

Organization: Gluckstern, Henry

Comment:

There is ample technology on the shelf to meet the propos ed standards without unduly burdening the industry. If automakers had acted to build more efficient cars and trucks, consumers would not have been hit as hard by $4-a-gallon gas a little over a year ago. It is time to put fuel efficient vehicles peopl e want to buy on the market. No passenger car should be getting fewer than 50 miles to the ga llon in the year 2010, but precious little of the world's fleet achieves such a number. [OAR-2009-0472-5258, p. 2]

EPA Response:

EPA appreciates these comments as we move toward reducing greenhouse gasses and dependence on limited natural resources.

Organization: Eadie, R. Frank

Comment:

I do think that -- well, it's going to need to -- let me say that one thing that could be done and I would really like to ask that the EPA consider restrict ions on idling. Idling is a very, very large source of pollutants in Manhatta n, and because you spend so much time in traffic, there's vehicles spe nding so much time idling, especi ally buses and trucks which, of course, put out very toxic things along with the CO2 that they're admitting, and so it's

-

- you know, I would suggest that, for example, that there be automatic idle -- idling restrictors on vehicles and that that be mandated, say af ter 20 seconds of idling, the engine would automatically shut off on gasolin e, diesel and fossil fu el burning engines. That would save [EPA-HQ- OAR-2009-0472-4621, p.170] a lot of lives in a fairly short period of time, and certainly we have the technology nowadays that, for example, the engine could be restarted by simply pushing the accelerator. That happens in the hybrid vehicles now. So it should be mandatory on all new vehicles, maybe retrofitted after, you

4-27EPA Response to Comments

know, 2015 or something, that all vehicles be re trofitted with that kind of a thing. This is, of course, a major problem. It's not just Ne w York that has congestion problems. [EPA

HQ-OAR-2009-0472-4621, p.170]

So I have one other. I want to ask that you communicate with your l eaders at all levels about this new rule, that you seriously look at the new reports that are coming out and begin to think in a very friendly way, you ba sically have to -- I'm actually old enough to remember the Second World War, and, you know, what happened then is what has to happen now. We have to go on a war footing, a real war footing, not an Iraq war kind of footing, but a real footing wher e the President calls together the industry leaders and the best scientists and thinkers and organi zers and works out a reorganization of the economy. That really is what needs to happen, and nothing short of that is going to get us close to being able to survive, and that 's what I wanted to say. [EPA-HQ-OAR-2009

- 0472-4621, p.175]

EPA Response:

EPA has considered a technology that reduces CO2 emissions at idle and we anticipate that the technology will be applied in the timefr ame of the final rule. The technology is referred to as Start-Stop and is described in detail in the Jo int Technical Support Document (TSD). The following is an excer pt from the TSD and is a brief summary of how it works:

 12-volt micro-hybrid (MHEV) – also known as idle-stop or start stop and commonly implemented as a 12-volt belt-d riven integrated starter-generator, this is the most basic hybrid system th at facilitates idle-s top capability. Along with other enablers, this system re places a common alternator with an enhanced power starter-alternator, both belt driven, and a revised accessory drive system.

While this rule does not mandate the im plementation of any specific technology, we recognize that CO2 emissions at idle are a significant contri butor to a vehicle’s overall emissions performance. EPA modeling results show an overall penetr ation rate of this technology in the 2016 MY to be 2% for cars and 4% for trucks to meet the stringency set forth by this rule.

4.5 Economic Assumptions

4.5.1 Consumer Welfare and Valuation of Fuel Savings

Valuation of Fuel Savings

Organization: Consumer Federation of America Institute for Energy Research Mr. Richter – Environmental Capital Partners Union of Concerned Scientists

4-28EPA Responses on Joint Issues and Technical Work

United Auto Workers University of Michigan Transpor tation Research Institute (UMTRI) Investor Network on Climate Risk University of Pennsylvania, Environmental Law Project State of New Jersey James Adcock

Comment:

Consumer Federation of America

Our analysis of opinion polls and purchase d ecisions over the past ha lf-decade shows that consumers want a great deal more fuel econom y than automakers have been willing to supply (see Sections II and IV). The recen t economic analysis of fuel economy by NHTSA/EPA suggests why consumers want more fuel economy. The cost of increasing fuel economy to 38.1 miles per gallon by putting more fuel saving technology in cars and trucks is well below the amount consumer s are willing to pay and the cost of gasoline. [OAR-2009-0472-7272.1, p.5]

Our analysis of the failure of the market to yield an efficient outcome with respect to energy efficiency presented in Section III has four critical purposes in these comments and implications for the process of standard setting for both fuel economy and tailpipe emissions. First, it demonstrates that the consumer welfare gains, which account for almost 80 percent of the total societal welfare gains, should be included in the costbenefit analysis. Without these gains, a benef it cost framework would justify little if any increase in fuel economy standards. The nature and extent of the ma rket failure dictates the degree of confidence in the consumer welfare gains. [OAR-2009-0472-7272.1, p.6

- 7]

Exhibit I-1 also shows the large benefits that have been left on the table as a result of the dire circumstances of the industry. The proposed rule delivers far smaller benefits than could be achieved if the condition of the i ndustry were not holding the agencies back.

• The societal benefit would be $50 billi on larger. • The consumer pocketbook savings would be $37 billion larger. • Gasoline cons umption would be 32 billion gallon lower.• Greenhouse gas emissions would be 13 billion tons lower.

Our analysis of opinion polls and purchase d ecisions over the past ha lf-decade show that consumers want a great deal more fuel econom y than automakers have been willing to supply. The NHTSA/EPA analysis shows that the cost of hi gher fuel economy is well below the amount consumers are willing to pay given the cost of ga soline. The cost of saved energy, a concept frequently used in th e analysis of energy efficiency, is also far below the current cost of gasoline. [OAR-2009-0472-7272.1, p.10]

I want to briefly highlight today one issue th at I think is of paramount importance as we move forward. The agencies must adopt a fi rm analytic framework that recognizes that

4-29EPA Response to Comments

fuel economy standards enhance consumer welfar e. The billions of dollars of consumer welfare gains estimated by the agencies in thei r analysis are real and substantial. The final rule should clearly acknowledge not only the empirical estimates of these gains, it should also conclude that the theoretical jus tification for incorporating consumer welfare gains into the rulemaki ng is clear and solid.

Now, in the proposed rule the agency reje cted claims that consumer welfare gains shouldn’t be included on the basis of the empirical finding that the models are too imprecise. You’re perfectly right to say that, but that is too weak of a rationale.

These models have a fundamental theoretical fl aw. In order to conclude that consumers do not enjoy increased welfare as a result of fuel economy standards, one must assume that consumers have full information and pe rfect foresight in their vehicle purchase decisions, and that the supply side of the mark et gives them a full, balanced, and unbiased range of choices to meet their needs. None of these assumptions is correct, and that’s why we have a $100 billion market failure.

In fact, as we’ll show in our comments, ther e’s a broad range of th eoretical and empirical evidence to support the conclusion that there is a substantial market failure with respect to efficiency and that fuel economy standards enhance consumer welfare.

Institute for Energy Research

These estimates are flawed. For example, EPA is claiming consumers would save $90 [billion] in fuel costs because of these regulations. These savings should not be considered a benefit under this analysis because consumers’ voluntary, market choices illustrate they prefer other vehicle attributes more than fuel economy. [OAR-2009-0472

- 7225.1, p.9]

Consumers demand a certain fuel economy, but consumers also want to maximize other attributes such as performance and size (t hen again, maybe the fuel economy of these cars is actually higher than consumers’ actua l preferences because of CAFE standards). If consumers really demanded very fuel effici ent cars, Honda would still make a car today that gets better gas mileag e than the 1985 Honda Civic C oupe HF. The Civic Coupe HF got nearly 50 mpg on the highway a quarter century ago. Today, the Honda’s most fuel efficient car is a hybrid sedan Civic that gets 40 mpg in the city and 45 mpg on the highway. [OAR-2009-0472-7225.1, p.10]

Also, if there were greater consumer demand fo r fuel efficient cars, it is likely European versions of automakers’ cars would be sold in the United States. For example, in Europe, Ford sells the Fiesta ECOnetic wh ich gets 65 mpg. [OAR-2009-0472-7225.1, p.10]

Because U.S. consumers value other attribut es in their cars more highly than fuel economy, EPA’s cost-benefit analysis should no t include the $90 bill ion in savings from fuel economy as a benefit, or at the very leas t, it should include the $90 billion in savings,

4-30EPA Responses on Joint Issues and Technical Work

but offset it with an even larger negative figure to account for consumers’ unhappiness with the reduction in thei r options. [OAR-2009-0472-7225.1, p.10]

The issue of consumer welfare due to vehicl e attributes is crucia lly important: It may mean the difference between a program that confer s net benefits or net co sts. If the loss in consumer welfare (due to forced change in vehicle attributes) exceeds $3 billion by 2030, then the net social benefits of the proposed rule may be negative, because the low end of the estimated benefits (excluding fuel savings ) are $21 billion, while the other estimated costs of the program are $18 billion by 2030. [OAR-2009-0472-7225.1, p.10]

Mr. Richter - Environmental Capital Partners

Secondly, as was mentioned in th e earlier panel, cars that ge t better gas mileage save the consumer money in the long run. When o il prices soar, even a free car becomes unaffordable if you can’t pay to fill the car up. If you look at the Cash For Clunkers, for instance, the top ten models purchased get almost 30 miles to the gallon. The average mile traded in got 15.8. That’s a 58 percent improvement because those purchases got an average of 24.1 miles per gallon. Energy e fficient cars represent more than an environmental statement. For financially challenging times, they’re an economic necessity. [EPA-HQ-OAR-2009-0472-4621, p.163]

Union of Concerned Scientists

According to UCS analysis, the standards proposed in the NPRM will reduce oil consumption from U.S. light-duty vehicles by 1.3 million barrels per day in 2020. This translates into a savings of nearly 20 billion gallons of gasoline in just one year.

By reducing oil consumption, consumers will save money at the gas pump. Even if prices stay at current values, approximately $2.50 a gallon, consumers will save $32 billion in 2020. UCS calculates these savings on a net basis and includes the additional cost of fuel saving technology. This demonstrates consumer s still recognize additi onal benefits even with a significantly higher pur chase price of a new vehicle. If prices return to higher levels, such as $4 a gallon, savings would nearly double to over $61 billion. [These comments were submitted as testimony at the New York public hearing. See docket number EPA-HQ-OAR-2009-0472-4621, pp. 92-3.]

In addition to the consumer savings, these st andards will achieve a critical reduction in the heat-trapping gases that cause global warming. Currently, cars and light trucks account for nearly 20 percent of total U.S. global warming emissions. These standards will reduce greenhouse gas emissions from cars and light trucks by 215 million metric tons of carbon dioxide equi valent in 2020. That’s about the equivalent of taking 32 million vehicles off the road in that year. And as the fleet turns over, the benefits will only grow with time. [These comments were submitted as testimony at the New York public hearing. See docket number EPA-HQ-OAR-2009-0472-4621, pp. 93-94.]

4-31EPA Response to Comments

All of our analysis is based on assuming th e fleet achieves the 250 grams per mile fleetwide average in model year 2016, a level eq uivalent to approximately 35.5 miles per gallon and the NHTSA standard of 34.1 in that year. [These comments were submitted as testimony at the New York public h earing. See docket number EPA-HQ-OAR-2009

- 0472-4621, p. 94.]

United Auto Workers

Fourth, the UAW commends the agencies for the extended discussion of consumer benefits and losses in the Notice of Propos ed Regulation, the Draft Regulatory Impact Analysis, and the Draft Joint Technical S upport Document. The UAW agrees with the agencies that much more work must be done in this area, and believes that there is a major omission in the cost-benefit analysis because there is no value given to consumer and producer welfare losses. While the benefits of fuel savings to consumers are apparent and easily calculated, consumer and producer welfare losses, though apparent, are more difficult to assess. [OAR-2009-0472-7056.1, p.3]

Given that the benefits to consumers from reduced fuel expenditures, reduced fueling time, and increased driving together comprise fully 89 percent of the benefits from these proposed rules and dwarf the energy securi ty and environmental benefits, the UAW believes remedying this critical omission should be a top priority for future rulemakings. To have balanced rulemaking, it is importa nt that the obvious but unvalued losses for consumers and producers be included in any cost-benefit analyses. We appreciate the agencies’ willingness and stated commitment to attempt to develop methods to value both consumer and producer losses in futu re rulemakings. [OAR-2009-0472-7056.1, p.4]

The UAW would suggest that the most fruitf ul approach is a cl ose examination of consumer and producer behavior in the passenger car market. The existing CAFE standard of 27.5 miles per gallon has not been binding on the vast majority of producers for many years. This means that in all likelihood consumers have been demanding the full level of fuel economy that they value in relation to other vehicle characteristics, and that producers have been free to add featur es to vehicles that will maximize their profits. [OAR-2009-0472-7056.1, p.4]

Hence, any regulation that that forces producers to market and consumers to buy passenger cars with fuel economy that exceed s this “revealed pref erence” generates both consumer and producer losses. Consumers have losses because they are forced to have additional utility in the form of fuel effici ency when in most cases they have clearly chosen otherwise. Producers suffer losses becau se they are forced to offer additional utility in the form of fuel efficiency th at customers do not want and are therefore unwilling to pay the full cost of, and due to lo st profits from the opportunity cost of not being able to add features that provide utility for which consumers are willing to pay the full cost. [OAR-2009-0472-7056.1,p.4]

This logic gains considerable strength from the competitive nature of the passenger car market in the United States, and the fact that the market has become much more

4-32EPA Responses on Joint Issues and Technical Work

competitive over the last decade. Consumers ha ve a wide and growing range of choices, and any producer that saw a potential advant age to offering more fuel-efficient vehicles would do so. Indeed, many have, resulting in average fleet-wide passenger car fuel efficiency that exceeds the existing regulations, but is less than the levels in this proposed rule. Although the agencies performed the technology analysis in a manner that attempted to maintain current vehicle-class utility, th is only begs the question of what vehicle features consumers might prefer, besides addi tional fuel efficiency, for the extra cost associated with achieving that fuel efficiency. [OAR-2009-0472-7056.1,p.4]

University of Michigan Transporta tion Research Institute (UMTRI)

Over the past few years, I have authored or co-authored a number of research reports on the impacts of fuel economy regulations and fuel prices on automake r costs, profits, and employment. Today I want to bring your attention to two recent reports: [OAR-2009

- 0472-3651.1, p.1]

The first study, “CAFE and the U.S. Auto I ndustry Revisited” (wri tten in partnership with Citi Investment Research & Analysis, Ce res, the Investor Network on Climate Risk, the Planning Edge, and Meszler Engineering Services) was recently released by Citi Investment Research & An alysis. [OAR-2009-0472-3651.1, p.1]

The study analyzed two regulatory scenar ios for light vehicles: CAFE 2020—an industry-wide target of 35 mpg in 2020; and “n ational Pavley” (equivalent to the National Program)—an industry-wide target of 35 mpg in 2016. In each scenario, we estimated the impacts on sales, costs, and profits rela tive to a baseline forecast. [OAR-2009-0472

- 3651.1, p.1]

The analysis found that the proposed Nationa l Program is likely to benefit both the Detroit 3 and the Japan 3 by boosting profits, based on the re lative value consumers put on fuel costs compared to vehicle price, the future price of fuel, and the combined direct and indirect costs incurred to improve fuel economy. The study found that by producing more competitive, fuel-efficient fleets in the coming years the Detroit 3 would be able to slow or reverse their market share erosion that has accelerated in recent years. [OAR

2009-0472-3651.1, p.2]

According to the study, the National Program is likely to increase the Detroit 3’s profits by $3 billion per year, and to increase the Ja pan 3’s profits by $0.8 billion per year. Unit sales by the Detroit 3 are predicted to increa se by the equivalent of two large assembly plants, thereby saving U.S. auto worker jobs. [OAR-2009-0472-3651.1, p.2]

Consumers will also benefit, since the fuel savings from more efficient cars – even at the present gas price of $2.50 a gallon – will more than offset the higher prices for vehicles incorporating new fuel-saving technologies . Under the National Program, the present value of the fuel saved will be greater on aver age than the increase in purchase price on average associated with the new fu el saving technology. [OAR-2009-0472-3651.1, p.2]

4-33EPA Response to Comments

The second study, “Fixing Detroi t: How Far, How Fast, How Fu el Efficient” (which my colleague Rob Kleinbaum co-authored) was completed in June 2009. [OAR-2009-0472

- 3651.1, p.2]

The report modeled the impact of three diffe rent fuel economy standard increases—30 percent (35 mpg), 40 percent (37.7 mpg) and 50 percent (40.4 mpg)—on the profitability and sales of the auto industry. The mode l estimated the impact of improving fuel economy on the costs of producing vehicles, on the retail prices of vehicles, and on consumer demand. We used the most recent and accepted estimates of all the key parameters, but since there is debate on ma ny of these values, th e report conducts an extensive sensitivity analysis on the results. [OAR-2009-0472-3651.1, p.2]

Results indicated that the Detr oit 3 would have increased prof it (over the baseline) in all three scenarios, and their profit gains would be larger the more aggressively they pursue improvements in fuel economy. The Japan 3 (Toyota, Nissan, and Honda) would also gain profit from pursuing higher fuel economy, but their gains would be smaller than those of the Detroit 3. The profit gains are possible because higher fuel economy is worth more to consumers than it costs the automakers to provide. [OAR-2009-0472-3651.1,p.2]

The market for clean, fuel-efficient vehicles is not a perfectly competitive market in which consumers and automakers have perfect foresight and perfect computation ability. In a perfectly competitive market, produ cers would have complete knowledge of consumers’ willingness to pay for all vehicle at tributes as well as complete knowledge of all technologies to produce vehicles with a ny feasible combination of attributes.[OAR

2009-0472-3651.1, p.2]

However, recent events have demonstrated that automakers have neither complete knowledge not perfect foresight. The shifts in consumer demand toward wanting more fuel economy caught automakers by surprise , and significantly contributed to the financial failure of GM and Chrysler. Consumer demand began to shift at least as early as 2002, yet automakers, the Detroit 3 in partic ular, did not respond w ith new technologies and products until 2007. The failure to anticipa te and respond to the shift in consumer demand is clear evidence that automakers seriously underestimated the consumer value of fuel economy. [OAR-2009-0472-3651.1, p.2]

The scenario with 30 percent improvement in fuel economy (to 35 mpg) is roughly equivalent to the proposed standards under the National Program. We estimated the average cost per vehicle of improving to 35 mpg to be $1,715 and the average consumer value added per vehicle to be $2,578. [OAR-2009-0472-3651.1, p.3]

[UMTRI also submitted these comments as te stimony at the Detroit public hearing, See docket number EPA-HQ-OAR-2009-0472-6185, pp. 33-36.]

Investor Network on Climate Risk

4-34EPA Responses on Joint Issues and Technical Work

As long-term investors, and as members of the Investor Network on Climate Risk (INCR), which represents over $8 trillion in asse ts, we are writing to express our strong support for the National Program (the propos ed fuel economy/GHG emissions standards). The proposed regulation essentially adopts th e GHG emissions standards that CA had proposed, and will require a fleetwide av erage of approximately 35.5 mpg in 2016, representing an approximately 40% increase in fuel economy over present standards.

In particular, we would like to bring your at tention to the findings of the Citi report, published on October 13, 2009. This report wa s produced in partnership with INCR, Ceres, and the University of Michigan Tran sportation Research In stitute (UMTRI), and addresses the impacts of the National Program on automakers. The Citi report finds that the recently proposed vehicle CAFE/GHG standa rds will likely boost pr ofits and slow the loss of market share of Detr oit’s Big Three automakers.

Key findings of the report include the follo wing: Automakers’ variable profits will be greater (as compared to the case under no new regulation) under the National Program.:

The standards are likely to increase Detroit’ s competitiveness: 1. The Detroit Three will be able to mitigate market share erosion by producing more competitive fuel-efficient fleets in the coming years. 2. The Detroit Th ree do better than Japanese Three under the National Program under most scenarios. 3. Sa les by the Detroit Thre e are expected to increase by the equivalent of two large asse mbly plants, thereby saving U.S. autoworker jobs.

Consumers will benefit as well since fuel savings from more efficient cars – even at the present gas price of $2.50 a gallon – will more than offset slightly higher prices for vehicles incorporating new fuel-sav ing technologies. [OAR-2009-0472-7243.1, p.1]

[Investors Network on Climate Risk also s ubmitted these comments as testimony at the New York public hearing, See doc ket number EPA-HQ-OAR-2009-0472-4621, pp. 34

- 36.]

University of Pennsylvania, Environmental Law Project

3. Expected Costs of Implemen tation of the Proposed Rule As previously mentioned, some groups worry about the economic costs of rule implementation. They argue that the proposed rule could add too much to the price of new cars. This will lead, they say, to people sticking with their older, gas-guzzling cars instead of buying new ones, thereby undermining the primary goal of the rule of lowering vehicle emissions [OAR-2009-0472-7286.1, pp. 20-21].

However, most stakeholders, including the au to industry and Auto Dealers Association support the rule and agree that this standard can be met without undue costs. They also point to the benefits of a pred ictable national standard that will help to lessen uncertainty for the auto industry when they develop new models, and lower compliance costs by avoiding a patchwork of rules be tween the states. Furthermore, it will allow them time to

4-35EPA Response to Comments

build improvements into new models duri ng the normal production and design process, which will minimize the additional co sts imposed. [OAR-2009-0472-7286.1, p. 21]

Consumers also will not only be spared from extra costs, but will save money in the long run because of the fuel efficiencies of their new cars. [OAR-2009-0472-7286.1, p. 21]

State of New Jersey

Finally, we agree with the federal gove rnment’s assessment that under realistic assumptions, the private gains to the consumer from the joint proposal (e.g., savings in fuel economy), together with th e social gains (e.g., reduced he alth costs associated with pollution, reduced reliance of foreign oil s ources, etc.), will significantly outweigh the incremental initial costs of providing these newer advan ced technology vehicles. [OAR

2009-0472-7109.1, pp.5-6]

Union of Concerned Scientists

It was disconcerting to read in the NPRM that there was some debate about the role of private benefits in assessing the total bene fits and costs of the program. The argument against including these benefits boils down to an attempt to force the assumption of a perfect free market on to a situation that is fa r from it. As noted in the NPRM, if the car market had all the features of a perfect free market (e.g. full information, perfect foresight, perfect substitutes, etc.) then th ere would be an argument for excluding the private benefits. But we know that consumer s can not have full information and perfect foresight. For example, EPA window sticke rs and the EPA Fuel Economy Guide note that “Your Fuel Economy Will Vary.” Further, not even the government’s Energy Information Agency can accurately predict gasoline prices. Consumers also cannot predict future traffic patterns, changes in job location and many other factors that will influence how much they could save on ga soline from various vehicle choices. [OAR

2009-0472-7181.1, p.15]

Union of Concerned Scientists

Further, consumers save money under these standards from the minute a new vehicle is purchased. Currently approximately 70 per cent of consumers purchase a new vehicle using loans. Assuming a typical five year loan at 6 percent interest, savings at the gas pump due to higher fuel economy are greater than the additional cost of technology each and every month the consumer owns the vehicl e, even if gas prices were to fall to a modest $2 a vehicle. In other words, our an alysis shows that consumers will save money from the moment they roll off the lot under these standards. [These comments were submitted as testimony at the New York public hearing. See docket number EPA-HQ

OAR-2009-0472-4621, p. 93.]

James Adcock

4-36EPA Responses on Joint Issues and Technical Work

Does CAFE in fact represent a negative to consumer utility or rather a protection of the consumer's interests in the face of irrati onal discounting by the consumer? Also, the utility of higher fuel economy DOES pass on to secondary owners - NHTSA also needs to represent the intere sts of secondary owners who are even more unable to bear the burden of high fuel costs.

EPA Response:

While most of these commenters argue that th is rule will save consumers money, because the present value of fuel savings greatly out weighs the technology cost s, the Institute for Energy Research and the UAW ar gue that, if consumers wanted more fuel savings, the market would have provided them. These tw o commenters suggest th at there must be a loss associated with improving fuel econom y, because many consumers do not purchase highly fuel-efficient vehicles already on the market.

EPA distinguishes between the fuel savi ngs that consumers consider when buying vehicles and the fuel savings that consum ers will get after the purchase. These two values need not be the same. As disc ussed in Section 5.13.1 of this Response to Comments document, as well as Section III.H.1 of the Preamble and Section 8.1.2 of the RIA, a number of reasonable explanations ha ve been offered for the possible divergence between these two approaches to valuing fuel savings.

OMB Circular A-4 notes that “Economists ordina rily consider market prices as the most accurate measure of the marginal value of goods and services to society.” The fuel savings that consumers will receive are directly measurable using market prices for fuel, while the values that consumers reveal th rough their purchase deci sions are indirect measures and may therefore be less reliable.

EPA, along with most commenters on the rule , find that there are cost-effective fuel savings that the market has not at this time provided to consumers and includes those benefits in our analysis.

As discussed more in Section 5.13.1 of this Response to Comments document, as well as Preamble III.H.1 and RIA Section 8.1.2, EPA belie ves that any adverse effects on vehicle characteristics due to the rule are best considered in the context of the technology costs to achieve the standards, not the fuel savings.

The University of Michigan Transportation Re search Institute and the Investor Network on Climate Risk argues that the Detroit auto makers, as well as consumers, will benefit from improved fuel economy in vehicles. Wh ile EPA’s analysis of vehicle sales impacts (Preamble Section III.H.5 and RIA Section 8.1.1 ) is not able to distinguish effects for individual auto makers, EPA estimates that ve hicle sales will increa se in response to the rule.

Quantification of Consumer Welfare Impacts

4-37EPA Response to Comments

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

Comment:

Once an agency undertakes a cost-benefit anal ysis and relies on th at analysis in its rulemaking, it cannot perform the cost-benefit analysis in an arbitrary and capricious manner. If a cost-benefit analysis used in ru lemaking “fail[s] to consider an important aspect of the problem” or “runs counter to the evidence before the agency,” a reviewing court will invalidate the rule under the Administrative Proced ure Act. Perhaps crucially, NHTSA has clearly identified the potential lo st consumer welfare as “an important component of the total private costs and benefits.” [OAR-2009-0472-7232.3, p. 4]

Failing to quantify an important element in a cost-benefit analysis can constitute arbitrary and capricious action. A cost-benef it analysis must be as accura te as reasonably possible, and agencies must estimate costs and benef its in a responsible manner. Courts have criticized Department of Transportation rule makings in the past for trying to justify a failure to quantify by citing un certainty. In Public Citizen v. FMCSA, the court warned that:

The agency’s job is to exercise its expert ise to make tough choices about which of the competing estimates is most plausible, and to hazard a guess as to which is correct... Regulators by nature work under conditions of serious uncertainty, and regulation would be at an end if uncertainty alone were an excuse to ignore a congressional command. [OAR-2009-0472-7232.3, p. 4]

Similarly, in Center for Bi ological Diversity v. NHTSA, NHTSA believed the economic models on the benefits of reducing greenhous e gas emissions were too uncertain and inconsistent to support an exp licit valuation. The Ninth Circuit Court of Appeals held that NHTSA’s reasoning was arbitrary and capricious because “while the record shows that there is a range of values, th e value...is certainly not zero.” In the present rulemaking, the agencies also fail to quantify an important el ement of the cost-benefit analysis and thus unnecessarily expose themselves to legal challenges. [OAR-2009-0472-7232.3, p. 4]

EPA Response:

EPA does not accept the premise that a court mu st invalidate a rule as arbitrary if any cost-benefit analysis accompanying the rule fails to consider some important aspect of the problem. The uses to which cost-benefit analysis is put during the rulemaking determines the degree of judicial scrutiny to which such analysis is subject – a distincti on overlooked by the commenter. Nor does EPA accept the pr emise that it has ignored some significant element – evaluation of consumer welfare costs and benefits – in establishing the standards.

In Center for Biological Diversity v. NHTSA , 538 F. 3d 1172 (9 th Cir. 2008), the court was reviewing a rule where the standard was established using a type of marginal costbenefit analysis such that individual input s became output determinative. 538 F. 3d at

4-38EPA Responses on Joint Issues and Technical Work

1199. Under such circumstances, the agency’s failure to assign any value to a critical factor (valuation of reduced carbon emissions) was deemed arbitrary. Id . at 1202. (noting that the omission was both arb itrary and that the omission a ffected the stringency of the standard). In Public Citizen v. FMCSA , 374 F. 3d 1209 (D.C. Cir. 2004) the court found that the agency had outright failed to consider a critical statutory decision factor – driver safety – and so had acted arbitrarily. Id . at 1216-17. In dicta , the court also noted that a decision not to require use of a device to monitor co mpliance on cost-benefit grounds appeared arbitrary when the agency had ma de no attempt to quantify or otherwise estimate either the costs or be nefits of using the devices. Id . at 1221-22.

These cases are readily dis tinguishable from the situation here. Although EPA has conducted a cost-benefit analys is for purposes of Executive Order 12866, and notes that the results of that analysis support the overall reasonableness of the standards, the costbenefit analysis is not the ma in, much less sole, decision cr iterion. Pursuant to section 202 (a) (1) of the Act, EPA has considered su ch factors as availa ble technology and its level of performance, lead time necessary to install the technology, the costs of doing so to both manufacturers and consumers, the cost-e ffectiveness of the c ontrols, implications for vehicle safety, and other considerations. See e.g. section III.D of the preamble to the final rule. Thus, EPA is accorded the cu stomary broad latitude in assessing and considering costs in adopting tec hnology-based standards. See e.g. Kennecott v. EPA

, 780 F. 2d 445, 456 (4 th Cir. 1985).

Nor has EPA ignored the issue of consumer welf are. The issue is discussed at length at proposal at 74 FR 49602 and in the final rule and record in Preamble III.H.1 and RIA Section 8.1.2. If the commenter’s point is th at EPA has not monetized consumer welfare penalties, EPA’s analysis argues that such penalties are estimated by the cost of additional technology. Any possible unquantified effects would affect estimation of the technology costs, which already take into account (by holding constant) effects on performance, safety, utility, a nd other attributes. Moreover, the value of the monetized fuel savings is a consumer welfare benefit. These benefits and costs are included in EPA’s benefit-cost analysis set out in Preamble Section II I.H. Consequently, EPA has considered and evaluated the e ffects of this rule on consum er welfare in a reasonable and non-arbitrary manner.

Consumer Vehicle Choice Modeling

Organization: American Council for an Energy Efficient Economy California Air Resources Board Institute for Energy Research International Council on Clean Transportation Natural Resources Defense Council Union of Concerned Scientists James Adcock New York University School of Law, Institute for Policy Integrity (IPI)

American Council for an Energy Efficient Economy

4-39EPA Response to Comments

The use of consumer choice models calibrated to historical sales data, as discussed in the proposal, is a sure recipe for the creati on of a backward-looking policy and one that threatens the viability of auto companies. This approach ignores important factors such as past correlation between low fuel economy and desirable design f eatures, the role of manufacturer advertising and consumer vehicl e selection and evidence of recent shifts in consumer preferences as shown, for exampl e, in the Cash For Clunkers Program. The discussion of consumer welfare in the agenci es' proposal appears to raise a possibility that future progress in fuel economy coul d be jeopardized by improperly formulated economic concerns. Indeed, rapid progress towa rd a sustainable transportation sector is an economic imperative. This is a time for cr eative thinking as to how federal standards can best contribute to achieving the cruc ial and very challenging goals of major reductions in greenhouse gas emissions and in reliance on unsustainable sources of energy. [These comments were submitted as testimony at the New York public hearing. See docket number EPA- HQ-OAR-2009-0472-4621, pp. 147-148.]

Recommendations: 1. Acknowledge that the standa rd model of individuals’ behaviors is deeply flawed, and apply it only when it is cl ear that it offers real insights to actual behavior; 2. Expand the investiga tion of consumer welfare to include up-to-date findings, including: work showing that consumers do not necessarily maximize utility, even absent evident barriers to doing so; impacts of advertising and incentives on vehicle choice; changing consumer valuation of vehicle charac teristics; 3. Unless and until this research can be adequately incorporated in a qua ntitative model and peer-reviewed, exclude intangibles from the quantification of consumer welfare impacts; 4. Consistently represent in the rule and accompanying docum ents NHTSA’s estimates that both sales and automotive jobs will increase as a result of the proposed standards.

California Air Resources Board

CARB agrees with the agencies’ assumpti on that vehicle attributes on performance, carrying capacity, safety, or comfort would not change under this regulation. In response to the request for comment on how to explicit ly estimate changes in consumer welfare, we believe it is possible to use consum er choice modeling to obtain a reasonable estimate. While EPA’s DRIA thoroughly desc ribes the variation in model types and results as well as the issue of consumer valuation of fu el savings, we support EPA’s efforts to continue investigation of this type of methodology. Assu mptions, data sources and collection methods, and model specification clearly drive many of the differences in model results. EPA’s conclusion th at the literature is inconsiste nt does not seem to have controlled for these varying factors. We believe a closer look will reveal that when models have similar objectives and specificati ons, they will produce repeatable results. EPA also questions the reliability of consum er choice models for their predictive power of future vehicle choices. While this is certainly a limitation of any forecast model, this can be mitigated by including stated preference data for technologies that are currently not in the marketplace, e.g. plug-in hybr ids, fuel cell vehicles. [OAR-2009-0472-7189.1 p.6]

4-40EPA Responses on Joint Issues and Technical Work

[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]

Institute for Energy Research

Another problem with empirically second-gue ssing consumers’ valuations of fuel economy is the crudeness of mo st modeling techniques. The es timated valuations vary by an order of magnitude, suggesting that the econometricians do not understand this issue very well. In practice, there are no 'controll ed experiments' where consumers are offered the choice between two otherwis e identical vehicles, where one is more expensive yet has better fuel economy. On the contrary, in th e real world there are tradeoffs between vehicles that simultaneously differ on vehicle size, acceleration, price, safety, and finally fuel economy. More recent modeling has done a better job capturing these nuances, but economists have still not reached a consensus on exactly what motivates consumers when making vehicle purchases. [OAR-2009-0472-7225.1, p.13]

Another problem with the entire approach is to assume that consumers have identical tastes regarding fuel economy. In reality, so me consumers may be very concerned, while others may not be. Thus even if the proposed rule made the “representative consumer” better off, in practice it woul d still harm those consumers who (for whatever reason) do not place a high subjective value on fuel economy. [OAR-2009-0472-7225.1, p.14]

International Council on Clean Transportation

EPA asked for comments “on the usefulness of consumer choice modeling results and the consistency and reliability of results from these models.” The usefulness of consumer choice models depends on establishing an appr opriate consumer discount rate for the fuel savings. As discussed, above, there are num erous unresolved questions related to consumer welfare that reflect the lack of clarity and understanding of this issue in general. There is no point in trying to use a consumer choice model until the issue of consumer welfare is resolved and an appr opriate discount rate established. [OAR-2009

- 0472-7156.1, pp.4-5]

Natural Resources Defense Council

Consumer Vehicle Choice Models Are Not Appropriate for Welfare Analysis EPA and NHTSA have solicited feedback on the future use of consumer vehicle choice models to estimate welfare impacts associat ed with new standards. We believe such models have a role in estima ting the outcome of particular market-based policies (e.g., feebates, consumer incentives) or the ma rket driven penetration rates of new technologies. However, such models are not useful when evaluating the consumer welfare impacts of new GHG or CAFE standards. [OAR-2009-0472-7141.1, p. 25]

The basic framework of the model, consumer utility maximization, suffers from the identical weaknesses of using a “revealed” or “implicit” discount rate to quantify the benefits of fuels savings. That is, the coefficients for the consumer vehicle choice models

4-41EPA Response to Comments

must be estimated using existing market data (i.e., “revealed preferences”) or data from surveys (i.e., “stated preferences”). The models simply assume, without any empirical foundation, that the consumers are already ma ximizing their utility with their current decisions. Thus, the use of such models to es timate consumer welfare impacts leads to a circular conclusion that any changes in vehicle attributes (including fuel efficiency) decrease consumer welfare. Clearly, given th e robust discussions in the NPRM and in the energy efficiency literature and the accepted use of low discount rate for appliance efficiency standards, there is strong basis for the conclusion that market intervention in the form of efficiency standards can lead to significant increases in consumer welfare by overcoming market barriers to efficiency. [OAR-2009-0472-7141.1, p. 25]

Furthermore, we concur with the EPA discussi on of the limitations of such models since they must be estimated using existing vehicl es choices which clearly do not represent a full set of choices the consumer could face for fuel efficiency, especially in the future market place with new technologies. The ne w standards have the potential to bring significant changes to the vehicle market with improvements in fuel economies that have not been seen for 20 years. Additionally, safety features continue to improve. Advanced electric-drive vehicles that bear little resemblance to their conventional gasoline counterparts are also poised to enter the market in significant numbers. The changes in vehicle choices available by the new confi guration of the vehicle market cannot be reliably predicted by consumer choice models. [OAR-2009-0472-7141.1, p. 26]

Finally, the consumer vehicle choice models assume fixed consumer preferences and do not consider the reality of today’s market place which clearly has demonstrated large shifts in consumer preferences away from larg e, fuel inefficient vehicles. The oil shock of 1973 serves as a historical refe rence for past large vehicle ma rket changes. As EPA notes, consumer choice modeling efforts to predict shif ts in the vehicle market were ineffective. Similarly the oil price shocks of 2007 a nd 2008 have also fundamentally reshaped consumer preferences for vehicles. Future changes in consumer attitudes towards global warming, energy security as well as oil pri ces will likely have an ongoing impact on reshaping consumer preferences, rendering any model which explicitly or implicitly depends on an assumption of fixed pref erences obsolete. [OAR-2009-0472-7141.1, p. 27]

[Note that since the above comments a pply to both EPA and NHTSA, they also appear under comment summary outline heading 4.5.5.2]

Union of Concerned Scientists

The agencies should continue including the private benefits when calculating the total benefits of the program and should not shift to a system that would include consumer choice models in the benefits assessments. It was those same consumer choice models that led many companies to dismiss hybrid-ele ctric vehicles like the Prius, airbags, and many other innovations that have seen significant market success. [OAR-2009-0472

- 7181.1, p.16]

James Adcock

4-42EPA Responses on Joint Issues and Technical Work

In general consumers with diffe ring projections of th e "true" future cost of SCC and fuel prices will make differing estimat es of the utility of the purch ase of a particular vehicle. Analysis that assumes one particular "US-wi de" value of SCC or fuel costs will thus reach erroneous conclusions about vehicl es Mfgs should be offering consumers – consumers hold a wide variety of beliefs on th ese subjects and thus Mfgs should, if "free market" forces are at work [which they aren't , due to huge barriers to entry into the Auto Industry -- due in part to NHTSA regulations] provide a wide variety of fuel efficiency vehicles to consumers. But the market doesn't actually work that way. For example Toyotas' great success with the Prius makes it LESS likely not more that other Mfgs will attempt to compete in that segment of the market.

We support the EPA contract with RFF to de velop a better model and understanding of the vehicle market.

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

Consumers can expect either increased vehicle purchase prices or different vehicle design features (or some combination thereof). In the former case, consumers could experience lost welfare if the fuel savings and other private benefits from greater fuel efficiency do not fully compensate them for the increased pur chase price. In the latter case, consumers could experience lost welfare if they do not value the new fu el efficiency as highly as they value the design features that have b een sacrificed. Three economic concepts will affect the measurement of consumer valu ations: the Energy Efficiency Paradox, the Positional Goods Effect, and the Ba ndwagon Effect. [OAR-2009-0472-7232.3, p. 5]

EPA Response:

Consumer vehicle choice models estimate wh at vehicles consumers buy based on vehicle and consumer characteristics. In principle, they could provide a means of understanding both the role of fuel economy in consumers’ purchase decisions and the effects of this rule on the benefits that consumers will get from vehicles. The NPRM included a discussion of the wide variati on in the structure and results of these models. Models or model results have not frequently been systematically compared to each other. When they have, the results show large variation over, for instance, the value that consumers place on additional fuel economy. As a result, EPA found that further assessment needed to be done before adopting a consumer vehicle choice model. In the NPRM, EPA asked for comment on the state of the art of consum er vehicle choice modeling and whether it is sufficiently developed for use in regulatory analysis.

EPA has not used a consumer vehicle choice model for the final rule analysis, due to concerns discussed in Chapter 8.1.2 of the RIA, and because no new information became available, during the public comment period or afterward, to resolve those concerns. In fact, a recent review commissioned by EPA sup ports the finding of great variability, by looking at one key parameter: the role of fuel economy in consumers’ vehicle purchase

4-43EPA Response to Comments

decisions. 2 It finds no consensus on the role of fuel economy in consumer purchase decisions. Of 27 studies, a pproximately equal numbers fi nd that consumers undervalue, overvalue, or value approximately correctly the fuel savings that they will receive from improved fuel economy. The variation in the valu e of fuel economy in these studies is so high that it appears to be inappropriate to iden tify one central estimate from the literature. Thus, estimating consumer response to highe r vehicle fuel economy is still unsettled science. It is likely that this variation exis ts as well in measuring consumer response to changes in other vehicle characteristics, su ch as performance. Thus, there does not appear to be evidence at this time to devel op robust estimates of consumer welfare effects of changes in vehicle attributes. 3

Nonetheless, because there are potential adva ntages to using consumer vehicle choice models if these difficulties can be addresse d, EPA is continuing to explore options for including consumer and pr oducer choice in modeling th e impacts of fuel economyrelated regulations. This effort includes further review of exis ting consumer vehicle choice models and the estimates of consumers’ willingness to pay for increased fuel economy. We are exploring (and will continue to explore) the implications of behavioral economics for this modeling. In addition, EP A is developing capacity to examine the factors that may affect the results of consumer vehicle choice models, and to explore their impact on analysis of regulatory scenarios. Under contract with EPA, Resources for the Future (RFF) is developing a model of the vehi cle market that can be used to evaluate different policy designs and comp are regulatory scenarios on th e basis of changes in cost, changes in the prices paid by consumers, ch anges in consumer welfare, and changes in industry profits. It should help to shed light on whether it is more cos tly to rely solely on the application of technologies to vehicles to meet a given fuel standard than when consumer and producer behavior is taken into account. EPA plans to evaluate this work within the context of the overall literature on consumer vehicle choices, to determine its usefulness in informing the analysis for future rules. EPA agrees with the California Air Resources Board that stated preference info rmation may be useful for evaluating new technologies not currently in the marketplace.

Economic theory provides insight into how to consider consumer welfare implications in the absence of the use of consumer vehicle c hoice models. As discussed in Section III.D of this preamble, the technology cost estimate s developed here take into account the costs to hold other vehicle attributes, such as size and performance, constant. Thus, if auto makers decide to change these characteristic s, they are likely to do so only if consumers are likely to prefer these changes to the incr eased vehicle costs. In addition, the analysis assumes that the full technology costs are pa ssed along to consumers. With these assumptions, because welfare losses are m onetary estimates of how much consumers would have to be compensated to be made as well off as in the absence of the change, 4

2 Greene, David L. “How Consumers Value Fuel Economy: A Literature Review.” EPA Report EPA-420

- R-10-008, March 2010.
3 As noted in the previous response, the decision not to use these uncertain valuation methodologies is both reasonable and was not determinative in the ultimate decision as to what standard to adopt.
4 This approach describes the economic concept of compensating variation, a payment of money after a change that would make a consumer as well off after the change as before it. A related concept, equivalent

4-44EPA Responses on Joint Issues and Technical Work

the price increase measures the loss to the consumer. 5 Assuming that the full technology cost gets passed along to the consumer as an increase in price, th e technology cost thus measures the welfare loss to the consumer. Increasing fuel economy would have to lead to other changes in the vehicl es that consumers find undesirable for there to be additional losses not included in th e technology costs. At this time EPA has no available methods to identify or estimate potential additiona l effects on consumers not included in the technology cost estimates, e.g., due to cha nges in vehicles that consumers find undesirable, shifts in consumer demand for other attributes, and uncertainties about the long term reliability of new technologies. Comments on the rule generally supported EPA’s analysis of the technology costs and the assumption that other vehicle characteristics were not advers ely affected, and EPA adheres to that analysis in adopting the final rule.

EPA’s assessment is that vehicle sales may in crease as a result of this rule (see Preamble III.H.5 and RIA 8.1.1), because the fuel savi ngs exceed technology costs even when only a five-year payback period for those savings is considered.

EPA considers the energy efficiency pa radox, the positional goods effect, and the bandwagon effect as some of the potential explanations for why consumers do not buy the cost-effective amount of fuel economy and discusses those in Preamble III.H.1 and RIA 8.1.2, along with Section 5.13.1 of this Response to Comments document. EPA continues to explore the implications of thes e and other hypotheses (such as those cited by the Consumer Federation of America’s comments) for consumer vehicle choice modeling and welfare analysis.

4.5.2 The on-road fuel economy “gap”

No comments were received on either the de rivation or use of th e on-road fuel economy
gap.

4.5.3 Fuel prices and the value of saving fuel

No comments were received on the da ta sources used for fuel prices.

4.5.4. Benefits of Reducing GHG Emissions (Social Cost of Carbon)

variation, estimates the income chan ge that would be an alternative to the change taking place. The difference between them is whether the consumer’s po int of reference is her welfare before the change (compensating variation) or after the change (equivalent variation). In practice, these two measures are typically very close together.
5 Indeed, it is likely to be an overestimate of the lo ss to the consumer, because the consumer has choices other than buying the same vehicle with a higher price; she could choose a different vehicle, or decide not to buy a new vehicle. The consumer would choose one of those options only if the alternative involves less loss than paying the higher price. Thus, the increase in price that the consumer faces would be the upper bound of loss of consumer welfare, unless there are other changes to th e vehicle due to the fuel economy improvements that make the vehi cle less desirable to consumers.

4-45EPA Response to Comments

EPA RESPONSE A

Organizations: See table below.

Commenter Affiliation Document ID Number California Air Resources Board EPA-HQ-OAR-2009-0472-7189.1 Center for Biological Di versity EPA-HQ-OAR-2009-0472-7265.1 Connecticut DEP EPA-HQ-OAR-2009-0472-7301.1 Environmental Defense Fund EPA-HQ-OAR-2009-0472-7246.1 Ford Motor Company EPA-HQ-OAR-2009-0472-7082.1 Institute for Energy Research EPA-HQ-OAR-2009-0472-7225.1 Institute for Policy Integrity at EPA-HQ-OAR-2009-0472-7246.1 New York University School of Law National Association of Clean EPA-HQ-OAR-2009-0472-7071.1 Air Agencies Natural Resources Defense EPA-HQ-OAR-2009-0472-7274.1 Council National Rural Electric EPA-HQ-OAR-2009-0472-7252.1 Cooperative Association New Jersey DEP EPA-HQ-OAR-2009-0472-7093.1 Northeast States for EPA-HQ-OAR-2009-0472-7235.1 Coordinated Air Use Management Pew Center EPA-HQ-OAR-2009-0472-7239.1 Physicians for Social EPA-HQ-OAR-2009-0472-7283, pg 81 Responsibility, Los Angeles Private Citizen (Adcock, James) EPA-HQ-OAR-2009-0472-5385 Private Citizen (Chew, Yuli) EPA-HQ-OAR-2009-0472-7042.1 Private Citizen (Magavern, Bill) EPA-HQ-OAR-2009-0472-7283, pg 179-186 Private Citizen (Rose, Stephen) EPA-HQ-OAR-2009-0472-7276.1 Private Citizen (Steiner , John) EPA-HQ-OAR-2009-0472-8705 Sierra Club EPA-HQ-OAR-2009-0472-6185, p. 31 Stockholm Environment EPA-HQ-OAR-2009-0472-7432.1 Institute-US Center Union of Concerned Scie ntists EPA-HQ-OAR-2009-0472-7181.1 University of California Santa EPA-HQ-OAR-2009-0472-7188.1 Barbara Bren Working Group

Comments:

Commenters presented extensive methodologi cal input and discussed various issues, including discount rate, uncertain ty and risk, and magnitude and uses of the social cost of carbon.

4-46EPA Responses on Joint Issues and Technical Work

Comments on Discount Rate

These comments identified concerns about the discount rates applied to SCC estimates and provided different recommenda tions about issues such as the approach used to select discount rates, the magnitude of the discount rate, and ways to account for uncertainty in discount rates. Many comment ers emphasized the ethical issues embedded in the selection (e.g., 7246.1, 7239.1, and 7274.1).

In general, commenters recommended different approaches and lower rates to give more weight to climate damages experienced by future generations. Some commenters recommended that EPA develop a social discount rate on the basis of detailed consideration of the scientif ic, ethical, and economic implications of discounting (e.g., 7246.1 and 7274.1); several commented on using the Ramsey framework in particular to derive the discount rate (e.g., 7432.1, 7246.1, 7274.1) . Some commenters did not think it was appropriate to infer rates from observed market behavior when considering the long time horizons for climate damages (e.g., 7265.1, 7246.1, 7274.1). For example, the Environmental Defense Fund and the NYU Institute for Policy Integrity stated in a joint letter that a “simple application of a market rate of return is not justified” because of the “special relationship of GHGs to the market ra te of return and to a large range of goods and services (both market and non-market)” (7246.1, pg 15). They noted, however, that if EPA opted to use market rates of retur n, it should also analyze and consider the underlying complexities in greater detail , such as the relationship between GHG reductions and economic growth, and presen t a robust discussion about GHG reductions “fit into an optimal portfolio of investments” (7246.1, pg 15).

In addition, two commenters suggested that EPA should not disc ount the SCC (7265.1, 7274.1). That is, they stated that EPA should use a discount rate of zero, thereby making the present value of damages in the future equivalent to their value in the future, effectively making the net presen t value of damages infinite.

Many of the commenters stated that the di scount rates applied to the interim SCC estimates were too high and therefore resulted in underestimates of SCC that fail to adequately capture the value of damages experienced by future generations (e.g., 7265.1, 7246.1, 7274.1, 7239.1). In particular, some commen ters disagreed with the rationale given for use of a 5 percent discount rate. Dr. Rose stated that “a 5 percent discount rate is inconsistent with risk-free consumption trade-offs within the current generation,” further noting that the intergenerationa l timeline for GHG emissions “implies even greater uncertainty than that reflected in in tragenerational interest rates” (7276.1, pg 4). That is, GHG mitigation represen ts a different kind of invest ment than intragenerational investments analyzed with higher discount ra tes like 5 percent. The Environmental Defense Fund and the NYU Institute for Policy Integrity concluded that there are “strong reasons for concluding that a substantial fraction of the benefits from abatement are uncorrelated or even negatively correlated with the returns to the economy as a whole” (7246.1, pg 15). Other commenters agreed with this view and concluded that it would be appropriate to view investment in GHG mitigation from a risk-averse perspective—i.e.,

4-47EPA Response to Comments

investment in mitigation as a form of insurance against uncertain future climate damages—rather than a risky investme nt in mitigation technology (7274.1, 7432.1).

Furthermore, some commenters disagreed w ith the proposed rule’s statement that 5 percent is consistent with the Ramsey fr amework, based on standard estimates of the Ramsey parameters (e.g., 7239.1, 7276.1, 7246.1, 7432.1). First, the Stockholm Environment Institute noted that controvers y about appropriate estimates of Ramsey parameters has thus far prevented standardi zation of the framework values. Similarly, Environmental Defense Fund and NYU Institute for Policy Integrity stated that “[t]he claim that 5% is ‘near the middle of the range of values that are able to be derived from the Ramsey equation’ is in fact meaningl ess—there is no theoretical lower or upper bound to values that could possibly be de rived from the Ramsey equation” (7276.1, pg 8). Second, several commenters pointed out that the Ramsey framework normally assumes perfect certainty about the future a nd needs to be adjusted to account for the significant uncertainty inherent in GHG emissions; this would result in a lower estimate of the discount rate (e.g., 7432.1, 7239.1). Third, the Stockholm Environment Institute concluded that the derivation of the 5 pe rcent discount rate from Ramsey “does not appear to be based on a caref ul reading of the sources cited in supporting footnotes” (7432.1, pg 11). 6

In addition, many commenters no ted that the range of discount rates used in the proposed rule did not include low enough rates and recommended using lower rates in the final rule (e.g., 7239.1, 7432.1, 7188.1). Several specifically suggested using 2 percent and lower and one recommended setting an upper bound that did not exceed 4 percent (7246.1, 7274.1).

The commenters presented multiple sources to support their recommendation for lower rates. For example, several commenters stated that consideration of rates below 3 percent would fulfill OMB Circular A-4 guidance to cond uct sensitivity analysis at such rates for intergenerational problems (e.g., 74 32.1, 7274.1, and 7239.1). The Environmental Defense Fund and NYU Institute for Policy Inte grity presented evidence of lower rates that the interagency group should consid er, including a 2009 Na tional Academy of Science study that reporting discount rates of 1.5, 3, and 4.5 percent for SCC estimates (7246.1).

Finally, some commenters recommended that EPA account for discount rate uncertainty and adjust the rates in the final rule (e.g., 7246.1, 7274.1, 7432.1). The Stockholm Environment Institute disagreed with the proposed rule’s statem ent that the literature on techniques to account for discount rate uncertainty, in particular time-varying discount rates, is relatively recent. This commenter cited several papers, including a literature review published in 2002 in AEA’s Journal of Economic Literature; the review discussed

6 The Stockholm Environment Institute determined that four of the five sources cited in the proposal as the basis for the Ramsey parameter estimates are inconsistent with the numerical estimates presented in proposed rulemaking. See OAR-2009-0472-7432.1, pg 11.

4-48EPA Responses on Joint Issues and Technical Work

numerous arguments for time-varying disc ount rates dating back to a 1937 paper. 7 Likewise, the Environmental Defense Fund a nd the NYU Institute for Policy Integrity pointed out the qualitative conclusions of th e work by Newell and Pizer are “reinforced in a general theoretical setting by Gollier and Weitzman” (7246.1, pg 21). 8

Likewise, the Environmental Defense F und and NYU Institute for Policy Integrity supported the adjustment of di scount rates for uncertainty and recommended that EPA do so to determine the principal SCC estimates, ra ther than limit it to sensitivity analysis. These commenters described the choice between the Weitzman and Newell-Pizer approaches, which define discount rate uncer tainty in different ways, as a false one because each approach supports the same conc lusion: “in the presence of uncertainty over the appropriate discount rate, fu ture costs and benefits should be discounted at a rate that declines over time” (7246.1, pg 21). However, they noted that if forced to choose one or the other, they would advise Newell and Pizer because of “its careful use of historical data, its demonstration that ti me-varying discount rates are rigo rously justified on strictly descriptive grounds, and its de velopment of a rigorous analytical methodology that can be readily applied to the computation of SCC values in the cu rrent context” (7246.1, pg 20-21).

Another commenter identified the potential time inconsistency as an issue to consider when applying Newell and Pizer (2003) to S CC estimates. Specifically, Dr. Rose stated that the Newell and Pizer discounting framework may present values that are inconsistent with various alternative futures; he further no ted that such inconsis tencies would likely be greater if climate impacts affect future economic growth (7276.1).

The Environmental Defense Fund and NYU Ins titute for Policy Integrity addressed the critique that rank ordering of present value and future value of benefits may produce different results when using time-differential discount rates. They maintained that the timing of the investment decision is not arbitrary—it is made by individuals in the present under known certainties. Rather, concerns about time inconsistency center on “a certain pattern of discount rates (“high today, low tomorrow”) th at the planne r nonetheless systematically fails to anticipate, ” but that time-declining rates (e.g., Newell-Pizer) involve a “discrete investment decision [that] must be made today, in the absence of full information about the future discount rate, that will continue to yiel d returns far into the future” (7246.1, pg 21-22). In sum, they conclu ded that no time inconsistency arises in the latter case because “by the time we reach the future the deci sion will have already been made. Declining discount rates merely provide an aid to current decision-making in the face of risk” (7246.1, pg 21-22).

Comments on Uncertainty and Risk

7 Shane Frederick, George Loewenstein, and Ted O’Donoghue, “Time discounting and time preference: A critical review,” Journal of Economic Literature (2002) 40:351-401.
8 See, for example, Martin L. Weitzman, Why the Far Distant Future Should Be Discounted at Its Lowest Possible Rate, 36 Journal of Environmental Economics and Management, 201 (1998); Christian Gollier & Martin L. Weitzman, How Should the Distant Future Be Discounted When Discount Rates Are Uncertain? (Working Paper, Nov. 2009), http://www.economics.harvard.e du/faculty/weitzman/files/di scountinglongterm(2).pdf

.

4-49EPA Response to Comments

Many commenters discussed the limitations of the SCC estimates, in particular the treatment of uncertainty, catastrophic impacts, and omitted impacts, and the implications for the benefits assessment. For example, several commenters noted that the reliance on model-weighted averages in the proposed rule failed to capture the uncertainty in climate impacts. The Environmental Defense Fund and NYU Institute for Policy Integrity recommended the final rule better account for the upward skew of uncertainty by, for example, applying an upward adjustment to the SCC estimates.

Commenters from various environmenta l organizations and state and regional government agencies observed that the models do not capture numer ous and significant climate impacts, in particular potentially catastrophic events, whic h contributes to the underestimation of GHG mitigation benefits . The Union of Concerned Scientists’ conclusion that the interim SCC estimates fe ll “far short of captu ring the potentially immense impacts of climate change” was echoed by many other commenters (e.g., 7265.1, 7235.1, and 7274.1).

The Natural Resources Defense Council (NRD C) elaborated on the treatment of catastrophic impacts, stating that the “SCC estimates [used in the proposed rule] are systematically biased downward, in large part because they do not adequately reflect the most critical issue in climate change: non-zero probabilities of extremely high and potentially catastrophic damages” (7274.1, p. 3). NRDC observed that the set of interim SCC estimates misrepresented the probability distribution of climate damage estimates, which includes “a ‘fat’ right tail (low to medium probabilities of relatively high damages), extending toward infinity (very low probabilities of profound catastrophes)” (7274.1, pg 12). Specifically, NRDC noted th at while the lower bound of the interim SCC estimates was representative of the left ta il of the distribution of damage estimates, the upper bound was not. NRDC recommended that SCC estimates instead go to the right of the central estimates to better represent the right-s kew of the distribution. NRDC further supports this recommendation by refe rring to Weitzman’s ( 2009) observation that “climate change presents a l ong chain of tenuous inferences with huge uncertainties in every link that undermine the capability of [i ntegrated assessment models] to estimate damages” (7274.1, pg 14).

Comments on Magnitude and Uses of Social Cost of Carbon

Many commenters stated that the interim SCC estimates were too low (e.g., 7301.1, 7181.1, 7093.1, 7239.1), although one commenter said SCC overstates the benefits of GHG mitigation (7225.1). Some commenters e xpressed concern that EPA is using an underestimate of the SCC to determine th e stringency of the vehicle rule’s GHG standards (e.g., 7239.1, 7265.1, 7093.1). Commente rs recommended that EPA consider higher values in the analysis to better represent the possibility of catastrophic climate damages; some recommended specific num bers to use as the upper bound (e.g., 7189.1) or other analyses to set a minimum lower bound (7181.1).

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Commenters discussed additional uses of SCC in rulemaking analyses as well as presentation. For example, the Environmental Defense Fund and NYU Institute for Policy Integrity recommended that the intera gency group specify how agencies should use SCC in traditional regulatory impact analysis and agency rulemaking. The Stockholm Environment Institute also comm ented on the use and purpose of SCC, and noted that policies designed from an insurance perspective “would not be framed in terms of cost-benefit calcula tions,” but that economic analysis would inform selection of a least-cost strategy for meeting a risk-based standard (7432.1, pg 13).

Other recommendations regarding the us e and presentation of SCC included:

 Present an even number of SCC estimates (7276.1)

 Expand the presentation of informati on about the basis for the estimates, including discussion about omitted impacts, a broader set of descriptive statistics, and probability density functions (e.g., 7274.1, 7246.1)

 Considering using CO 2 mitigation cost in lieu of SCC estimates (7082.1)

 Incorporate a broader range of SCC estimates into the benefits analysis rather than rely on central estimates (e.g., 7246.1).

EPA Response A:

As discussed in preamble III.H.6, EPA and NHTSA used new SCC estimates in this final rule that were recently developed by an in teragency process, in which both agencies participated. EPA and NHTSA critically evaluated the decisions of the interagency group and the new SCC estimates and endorsed th em as reasonable for this final rule for the reasons presented in preamble III.H.6. Th e remainder of this response discusses EPA’s consideration of and response to th e comments on discount ra te, uncertainty and risk, and magnitude and uses of the social cost of carbon, and, as relevant, how the interagency modeling exercise addr essed the methodological comments.

EPA has responded to the commenters’ other SCC comments elsewher e. Specifically, refer to Response [B] for EPA’s response to comments regarding the interim SCC estimates and methodology, the use of inte grated assessment models, and equityweighting, and to Response [C] for EPA’s re sponse to comments regarding global and domestic valuations of SCC.

Discount rate

Many of the comments on SCC identified concerns about the discount ra tes applied to the interim SCC estimates and provided different recommendations about: (i) approach used to select discount rates; (ii) the magnitude of the discount rate, and; (iii) ways to account for uncertainty in discount rates.

EPA’s continued assessment of the SCC literature and review of the extensive public comments about discount rate selection reaffi rms the complexity and sensitivity of this task. Recognizing the lack of consensus about an appropriate discount rate to use in this

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context and uncertainty regarding how inte rest rates might change over time, EPA selected three rates to span a plausible range of certainty-equivale nt constant discount rates: 2.5, 3, and 5 percent per year. A lthough EPA selected discount rates for this exercise that differed from some of those recommended by commenters, the agency regards its approach as defensible and tran sparent given its consistency with current benefit-cost analysis principles as well as OMB’s gui delines for such analysis as embodied in OMB Circular A-4. The Technical Support Document, Social Cost of Carbon for Regulatory Impact Analysis Under Executive Order 12866 (hereafter, "SCC TSD"), discusses in detail the basis for the discount rate selection. 9

(i) Response to Comments on the Appr oach Used to Select Discount Rates

EPA considered the comments and recomm endations regardi ng both prescriptive approaches for discount rate selection and descriptive approaches that infer discount rates from observed market behavior. As stated in the SCC TSD, the selection of discount rates drew on both approaches but relied primarily on the descriptive approach.

In sum, average returns on l onger-term investments were us ed to inform selection of certainty-equivalent discount rate s. This approach was consistent with the comments on consumption-based rates as well as the lite rature. EPA recognizes its limitations but finds this approach to be the most defensib le and transparent give n its consistency with the standard contemporary theo retical foundations of benefit-cost analysis and with the approach outlined in OMB’s existing guidance. See the SCC TSD for a detailed explanation.

Prescriptive Approaches. EPA considered all recommendations for prescriptive approaches, including selection of rates at 2 percent and lower within the Ramsey framework and use of a zero discount rate (i .e., not discounting). As noted in the SCC TSD, Ramsey (1928) argued that it is “ethi cally indefensible” to apply a positive pure rate of time preference to discount values across generations. After considering the comments and relevant literature, however, EP A ultimately decided that within the time constraints of this rulemaking, use of observe d market behavior was a more transparent and defensible approach consistent with th e federal government’s current guidelines on intergenerational discounti ng. See the SCC TSD for th e detailed rationale and discussion.

NRDC presented an interesting observation regarding the relationship between damage functions and growth rates, and maintained that declining econo mic growth requires a negative discount rate. However, negative gr owth does not automatically imply negative discount rates because the discount rate is a function of both rho and the product of eta

9 Interagency Working Group on Social Cost of Carbon, U.S. Government, with participation by Council of Economic Advisers, Council on Environmental Quality, Department of Agriculture, Department of Commerce, Department of Energy, Department of Transportation, Environmental Protection Agency, National Economic Council, Office of Energy and Climate Change, Office of Management and Budget, Office of Science and Technology Policy, and Department of Treasury, “ Social Cost of Carbon for Regulatory Impact Analysis Under Executive Order 12866 ,” February 2010. EPA-HQ-OAR-2009-0472

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and growth. Therefore, one could have low, but positive discounting depending on the value of rho.

Regardless of the relationship between econom ic growth and discount rate, the modeling exercise supporting the final rule could not allow for negative discount rates because it used constant discount rates. Moreover, ne gative discount rates canno t be justified using EPA’s current discounting appr oach—reliance on observed market behavior to infer discount rate. Application of a negativ e discount rate would involve explicit consideration of ethical asp ects of intergenera tional discounting and ultimately the selection of an appropriate social discount rate.

EPA agrees with the NYU Institute for Polic y Integrity and the Environmental Defense Fund (IPI, EDF) that use of prescriptive approaches would necessitate explicit consideration of philosophi cal and legal issues (7 246.1, pg 4). While EPA has considered these comments and remains keen ly aware of the normative dimensions of discount rate selection, the se lection of discount rates in the recent modeling exercise focused primarily on economic considerations and the guidelines for intergenerational discounting specified in OMB Circul ar A-4 and EPA’s guidance.

Using Market Rates to Inform Discount Rates. Several commenters expressed a preference for explicitly pres criptive approaches but also provided comments for the agency to consider if it used market rates to inform discount rate selection (e.g., see IPI, EDF, NRDC). EPA agrees with IPI and ED F’s clarification that regardless of the approach, the choice of a disc ount rate is not a “value-fre e ‘objective’ decision” and involves “deep ethical and moral judgment s” (7246.1, pg. 4). While using observed market behavior was the best approach feas ible for this analysis, EPA recognizes its limitations and will continue to seek opport unities, such as convening workshops to explore economic and non-economic aspects of discounting, to aid ou r understanding of the relevant issues. The S CC TSD explains in greater de tail the rationale for using market rates to inform discount rate selection.

EPA concurs with the comments regarding the need to carefully select an appropriate market rate, given the numerous rates available, as well as the comments on consumption-based discount rates. EPA carefully reviewed the literature and considered various complexities involved in discounti ng over long time horizons. For example, IPI and EDF noted that it would be difficult to justify the select ion of high rates on the basis that the returns from alternate investments would be available as compensation for those impacted by climate change because this is unlikely to be feasible over long time horizons. As discussed in the SCC TSD, EPA opted to use aver age returns on longerterm investments rather than short term rates.

In addition, IPI and EDF stated that if EPA us es market rate of returns, it should also analyze and consider the underlying complex ities in greater detail, such as the relationship between GHG reductions and economi c growth. In particular, IPI and EDF referred to Weitzman’s observati ons about a limitation of integrated assessment models: the models’ assumption of perfect corre lation between GHG dama ge and aggregate

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economic activity is a function of the mode l design, not “the result of any reasoned argument” (Weitzman 2007) (as quoted in 7246. 1, pg 15). Indeed, the modeling exercise has raised questions about the relationshi p between mitigation benefits and economic growth in the models. While more analysis is required before EPA can reach definitive conclusions, the agency recognizes this as a key issue that should be explored when refining SCC or applying it to benefit analyses.

(ii) Magnitude of Discount Rate

EPA determined lower rates are appropriate and used rates of 2.5 and 3 percent. Consistent with the rationale presented by several commenters , risk-free rates of return informed the selection of discount rates. However, average returns on longer-term investments rather than short-term rates were used. The lower rates are also consistent with the comments suggesting that mitigation should be viewed as a form of insurance against climate damages rather than a ra te of return on ris ky assets (e.g., NRDC, Stockholm Environment Institute).

Many commenters disagreed with the rationale fo r and use of a 5 percent discount rate in the proposed rule. In particular, seve ral commenters stated that GHG mitigation represents a different kind of investment than intragener ational investments analyzed with higher discount rates like 5 percent. IPI and EDF conc luded that there are “strong reasons for concluding that a substantial fraction of the benefits from abatement are uncorrelated or even negatively correlated wi th the returns to the economy as a whole.” Other commenters agreed with this view and concluded that it woul d be appropriate to view investment in GHG mitigation from a risk-averse perspective—i.e., investment in mitigation as a form of insurance against uncertain future climate damages—rather than a risky investment in mitigation technology. Consideration of SCC estimates based on a 5 percent discount rate could not be ruled out, however, and wa s included to represent the view that climate damages are highly correla ted with market retu rns, under which the appropriate discount rate would be expected to ex ceed the risk-free rate.

In addition, IPI and EDF recommended 4 pe rcent as an appropriate upper bound. While EPA agrees with IPI and EDF that “the un certainty (more properl y the risk) over the temperature changes resulting from a ton of GHG emissions does not justify a higher discount rate,” it is not clear how this concern argues for setti ng 4 rather than 5 percent as the upper bound (7246.1, pg 24).

In sum, EPA applied three constant certa inty-equivalent discount rates (2.5, 3, and 5 percent) to the SCC estimates to account for various perspectives about risk and uncertainty. The upper value of 5 percent acc ounts for the view that there may be a high correlation between climate damages and mark et returns while the rest of the SCC analysis centers on a discount rate consistent with concerns about risk aversion. See SCC TSD for more details about the rationale for using 5 percent.

(iii) Uncertainty in discount rates

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The comments informed the ongoing considera tion of how GHG benefits analysis could account for discount rate uncertainty thr ough differential discounting. The SCC TSD presents the basis for EPA’s decision to account for discount rate uncertainty by using certainty-equivalent constant di scount rates, in particular inclusion of 2.5 percent to incorporate the concern that interest rates are highly uncertain over time.

The SCC TSD also summarizes the consid eration of the appr oaches discussed by commenters (e.g., Newell and Pizer (2003), Weitzman (2001), and the UK’s “Green Book” for regulatory analysis) and concludes that the proper way to model discount rate uncertainty remains an active area of research.

In particular, key questions a bout potential time inconsistencies arising with differential discounting remain unresolved. For example, in its 2008 critique of the EPA Economic Guidelines, the EPA Science Advisory Board (SAB) found that in cases with uncertain discount rates, “rank ordering of policies by pres ent values and future value may differ.” The SAB advised EPA to use caution when in terpreting the results of time differential discounting and noted that more research is warranted. Similarly, Dr. Rose noted that there is an inconsistency between the Newe ll and Pizer (2003) discounting and various alternative futures.

Several commenters considered the potential for and implications of time inconsistency issues. For example, the Stockholm Environmen t Institute stated that “there is minimal risk” of time inconsistency problems and th at regardless, “no one...has the life span or resources to arbitrage against multi-cent ury public policies” (7432.1, pg 12). IPI and EDF noted that the timing of the investment decision is not arbitrary—it is made by individuals in the present under known certainti es. They maintain that concerns about time inconsistency center on “a certain pattern of discount rates (‘high today, low tomorrow’) that the planner nonetheless systematically fails to anticipate, ” but that timedeclining rates (e.g., Newell-Pizer) involve a “discrete investment decision [that] must be made today, in the absence of full informati on about the future discount rate, that will continue to yield returns far into the futu re” (7246.1, pg 22). IPI and EDF conclude that no time inconsistency arises in the latter case because “by the time we reach the future the decision will have already been made. D eclining discount rates merely provide an aid to current decision-making in the fa ce of risk” (7246.1, pg 22). Although the commenters presented a valid point, in light of uncertainty about how interest rates may change over time, EPA uses a low certainty-e quivalent discount rate to incorporate the concern that interest rates are highly uncertain over time.

IPI and EDF also point out that the “c hoice of starting point cannot be made independently of the underlyi ng financial instrument used to estimate real returns over time. The simulated paths are extensions of a particular time series, and thus correspond to a particular financial instrument” (7246.1, pg 23). They state that the time-differential discounting literature, which ha s thus far relied on lower discount rates as the starting point, provides sufficient empirical evidence fo r EPA to use a similar starting point. IPI and EDF suggest that the agency would first need to gather empirical evidence before using alternative starting points, in light of the likely differences that would result from

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instruments with different risk levels. However, given the lack of agreement about the starting point and prope r adjustment to use in differe ntial discounting, EPA could not justify relying on this technique.

EPA agrees with a comment from Dr. Rose that clarifies the difference between dynamic discount rates and uncertain rates. The SCC modeling exer cise supporting the benefits analysis in this rulemaking used certainty-e quivalent constant disc ount rates and did not change over time. The SCC TSD discusses in greater detail how the discount rates accounted for uncertainty.

Uncertainty and Treatment of Impacts in the Models

Many commenters discussed the limitations of the SCC estimates, in particular the treatment of uncertainty, catastrophic imp acts, and omitted impacts, as well as the implications for the benefits assessment . EPA has responded to these concerns by providing a more robust discus sion about these important issues that complements the SCC estimates and better informs policy makers.

EPA considered these limitations and, as a par ticipant in the interagency group, used best available information and techniques to quant ify such impacts as feasible and supplement the SCC with qualitative assessments. Overall, presentation of the revised SCC estimates in the final rule responds more fully the un certainties and ri sks associated with climate change (see the SCC TSD for discussion).

In particular, the revised estimates more fully capture uncertainty through Monte Carlo analysis and are accompanied by a fuller discussion of the uncertainties and risks associated with climate change, as well as th e limitations of SCC. In addition to the uncertain parameters in each model, EPA a ssessed three parameters—climate sensitivity, socioeconomic and emissions trajectories, and discount rate—and sought to model them probabilistically for purposes of formal uncertainty analysis in the interagency modeling exercise. A probability distribution was specifi ed for climate sensitivity and used as an input in the three models. A probability dist ribution was not specified for the other two parameters because of uncertainty about how to model them probabilistically for purposes of formal uncertainty analysis. Fo r example, while models can project potential emissions pathways, assigning probability weight s to different states of the world in an analytically rigorous way pr oved challenging given the de arth of information on the likelihood of a full range of future socio-ec onomic pathways. Therefore, the modeling exercise used multiple scenarios that span a range of socio-economic parameters and multiple values for the discount rate.

Consistent with the commenter’s recomm endations, EPA has provided much more information about the SCC estimates and the un derlying parameters in the record to the final rule. For example, the SCC TSD shows how SCC values for 2010 vary across model, scenario, and discount rate; it also presents the distribution of SCC estimates, including benefit estimates at the 95th and 99th percentiles. However, EPA believes that it is more appropriate to place the technical information in the rulemaking’s technical

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supporting documents, rather than in the pr eamble text, which is intended to provide a high-level discussion of the policy issues rela ted to the economic analysis. Therefore, EPA has presented a summary of the SCC results in the preamble along with references to the other rulemaking documents that provide data and methodological details necessary to replicate the analysis.

EPA also considered the emerging literature a bout the treatment of risk of catastrophic impacts and commenters’ recomm endations on this issue. For example, EPA considered the findings from Weitzman (2009) suggesting that catastrophic damages are so large that they would dominate the eff ect of the discount rate in a present value calculation and result in an infinite willingness-to-pay for GHG mitigation today. However, EPA determined that this research requires furthe r exploration before its generality is known and the optimal way to incorporate it into regulatory reviews is understood. EPA also considered ways to account for risk aversion in the SCC estima tes, such as inclusion of a risk premium, suggested by IPI, EDF, and the Pew Center on Global Climate Change. The review showed that further research in this area is needed to develop a reasonable approach to account for catastrophic risks in regulatory analyses. In addition, an adder was not used given the lack of a rigorous me thod to select the number; choosing an adder value would at this point amount to an arbitrary decision. Finally, available information did not support rigorous inclusion of an op tion value, as recommended by the IPI and EDF. See the SCC TSD for more about the consideration of catastrophic risk.

Instead, low probability, high impact events ar e incorporated into the SCC values through explicit consideration of their effects in two of the three models as well as the use of a probability density function for equilibrium climate sensitivity (see the SCC TSD). Treating climate sensitivity probabilistically results in more high temperature outcomes than analyzing climate sensitivities of specifi c values (e.g., 1.5 or 4.5), which in turn lead to higher projections of damages. EPA has also presented a detailed qualitative assessment of potential catastrophic damages and the implications for SCC estimates in the SCC TSD. EPA remains interested in re search about practical and robust methods to address this important consideration.

The SCC TSD further emphasizes the need to explore the sensitivity of the results to other aspects of the models, in particul ar how the damage functions incorporate adaptation, technological change, and catastrophic damages. While it is not possible at this time to provide a precise list of each model’s treatment (i.e., included, excluded) of climate impacts, EPA has presented a robust di scussion of this key analytical issue and placed more detailed model information in the docket.

In particular, the SCC TSD discusses in deta il how each model estimates climate impacts, the known parameters and assumptions underlyi ng those models, and the implications of incomplete treatment of impacts (cat astrophic and non-catastrophic) for the SCC estimates. This discussion underscores the di fficulty in accurately distilling the models’ treatment of impacts in table-form. Mo st notably, the use of aggregate damage functions—which consolidate information a bout impacts from multiple studies—in two of the models poses a challenge in listing included impacts. For example, within the

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broad agricultural impacts category, some of the sub-grouped impacts are not explicitly modeled but are highly correlated to other s ubcategories that are explicitly modeled. Therefore, it may be misleading to identify these kinds of impacts as either “included” or “omitted” from the model. Along those lines, impacts may be included in models but not directly; the Dynamic Integrated Climat e and Economy (DICE) model represents adaptation implicitly through the choice of studies used to ca librate the aggregate damage function, and the Climate Framework for Uncertainty, Negotiation, and Distribution (FUND) model includes adaptation both implic itly and explicitly (see the SCC TSD for details).

Accordingly, EPA recognizes the need for a thorough review of damage functions—in particular, how the models incorporate adapta tion, technological ch ange, and catastrophic damages. EPA has considered the Pe w Center on Global Climate Change’s recommendation to conduct an expert elicitation on the value of omitted impacts, but determined that conducting a rigorous and complete expert elicitat ion was not possible within the rulemaking timeline. However, the Federal government is committed to exploring these models—e.g., determining which impacts are included and omitted—and how they can be modified to produce more accu rate estimates of the SCC. EPA regards the SCC TSD as a starting point in the inquiry into the models’ treatment of impacts and to motivate new research.

Regarding recommendations to modify model pa rameters that were not adjusted in this exercise, see Response B for EPA’s response.

Magnitude and Uses of th e Social Cost of Carbon

EPA considered various comments about the magnitude of SCC estimates (e.g., interim SCC was too low). Many commenters recommended that EPA consider higher values in the analysis to better represent the possibi lity of catastrophic c limate damages; some recommended specific numbers to use as th e upper bound (e.g., CARB) or other analyses to set a minimum lower bound (e.g., Union of Co ncerned Scientists). In response, EPA has focused on developing a rigorous methodol ogy to improve its characterization of SCC rather than selecting estimates from the published literature. Accordingly, EPA continued to review the SCC literature, partic ipated in the interagency review of SCC, and conducted the modeling exercise (see the SCC TSD for detailed discussion about the basis for the modeling exercise, the met hodology, and results). Consistent with recommendations to justify any weighting schemes used, the SCC TSD explains why each model and two of the parameters (socioeconomic emissions trajectories and discount rates) are weighted equally; it also presents the rationale for the probability distribution for climate sensitivity.

EPA disagrees with one commenter who said that SCC overstates the benefits of mitigation and attributed it to emissions leakage, i.e., shifting emissions from the region subject to the GHG mitigation requirements to a location without such requirements. Emissions leakage could reduce or negate the net reduction in global emissions. However, emissions leakage would affect the estimate of total emissions and it is not

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relevant to the value of a one ton reduction in CO 2 emissions (i.e., SCC) in this case. As discussed in the SCC TSD, we have assume d that this rule would result in small (marginal) impacts on cumulative global emissi ons. Even in the unlikely event that emissions leakage occurred under this ru lemaking, it would not alter the cumulative global emissions trajectory underlying the S CC estimates. Regarding the potential for leakage under this rule, EPA finds the commen ter’s suggestion that people will move to other countries to avoid purch asing cars with higher fu el economy standards highly implausible. See Preamble III.H.5 for further discussion about considerations of turnover rate for the vehicle fleet and th e implications thereof. See al so the prior sections of this response for detailed discussion about treatment of uncertainty in SCC estimates, in particular the treatment of omitted impacts, and the implications for the benefits
assessment.

On the other hand, the SCC TSD does not, as another commenter recommended, explicitly direct agencies to view the SCC as a minimum value for GHG reduction benefits. Instead, the SCC TSD presents detailed methodological information and a discussion of the SCC limitations, thereby enabli ng interpretation of the estimates as they are used in this analysis.

EPA also considered comments about the us e and presentation of SCC in rulemaking analyses. For example, IPI and EDF reco mmended that the interagency group specify how agencies should use SCC in traditional regulatory impact analysis and agency rulemaking. In response, the SCC TSD identif ies the purpose of SCC and details how to use it to estimate the benefits of policie s resulting in marginal reductions in CO 2 emissions. The SCC TSD further notes that th ere is a separate question of whether the SCC is an appropriate tool for calculating the benefits of reduced emissions from policies that have a large (non-margi nal) impact on global cumula tive emissions. The analysis supporting this final rule does not attempt to answer that question.

Overall, EPA recognizes the importance of trad itional regulatory imp act analyses and the EPA Regulatory Impact Analysis (RIA) pres ents four new SCC estimates used to estimate benefits of the marginal reductions in CO 2 emissions under this final rule (see EPA RIA 7.5).

In response to Ford’s recomm endation to consider using CO 2 mitigation cost in lieu of SCC estimates, EPA has determined that doi ng so would eliminate useful information from the economic analysis about the CO 2 benefits of the standards. Indeed, Executive Order 12866 states that agencies are required, to the extent permitted by law, “to assess both the costs and the benefits of the intended regulation a nd, recognizing that some costs and benefits are difficult to quantify, propose or adopt a re gulation only upon a reasoned determination that the benefits of the intended regulation justify its costs.” Other sections of the economic analysis consider the costs to achieve the standards in this final rule (e.g., see Preamble Section III.H.3 for discussi on about the annual cost per ton of GHG reduction).

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In addition, SEI commented that policies desi gned from an insurance perspective “would not be framed in terms of cost-benefit cal culations,” but that economic analysis would inform selection of a least-cost strategy for meeting a risk-bas ed standard. EPA continues to recognize that th e estimates do not include all significant climate changes damages and are therefore underestimates. As a result, EPA has supplemented the quantified benefit estimates with a qu alitative discussion about benefits.

It is also useful to recognize the somewhat limited role that the monetary value placed on the SCC plays in the determination of what em issions standards should be adopted in this final rule. EPA used the benefit-cost an alysis as one consideration among many to evaluate the overall reasonabl eness of the emissions standards chosen. See preamble section III.D for a complete discussion of the various factors analyzed and balanced by EPA in determining the stringency of the final standard. In this case, the benefits of the standards are significantly greater than the co sts, and this would be the case whether EPA considered the domestic value for the SCC, the global value for the SCC, or a range of values including higher SCC values. The specifi c range or values used in this analysis are therefore not outcome determinative as fa r as deciding what em issions standards to adopt, as the standards adopted by EPA would still be reasonable from a net benefits perspective under a wide range of SCC.

EPA considered Dr. Rose’s comments about the number of SCC estimates presented and basis for deciding on an appropr iate SCC estimate. In response, EPA has presented four SCC estimates and calculated benefits at ea ch SCC value. The SCC TSD discusses in detail the methodological soundness of and treatment of uncertainty a nd risk in the four SCC estimates. In sum, the four SCC estimat es are considered to capture many of the uncertainties involved in regulatory impact analysis.

Regarding the commenters’ concerns about omitted impacts and recommendations to expand the presentation of information about the estimates, see above section, Uncertainty and Treatment of Impacts in Models , for EPA’s response. In addition, the SCC TSD presents the distribution of SCC es timates, including benefit estimates at the 95 th and 99 th percentiles. Variation in climate se nsitivity is reflected, along with other parameters that are treated as uncertain in the models, in differences between SCC estimates for a given socio-economic trajector y and discount rate. EPA has also made the full model results available in the docket for this rule; see OAR-2009-0472.

In addition, EPA notes IPI and EDF’s recomm endation for the interagency group to “give explicit direction to agencies on how to account for ancillary benefits associated with GHG reductions” (7246.1, pg 42). As noted above, the SCC TSD reiterates the need to document more thoroughly omitted impacts a nd monitor the literature for emerging research. As the research evolves, the Fe deral government, including EPA, is committed to exploring how modeling can be improved so that these aspects are better reflected in the SCC.

EPA agrees with the Center for Biological Diversity’s observa tion that omission of impacts from the SCC estimates effectively assigns such impacts a value of zero, but

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disagrees with the Center’s in terpretation of the Ninth Circ uit’s decision that agencies must quantify non-zero benefits. First, EP A has provided a non-zero estimate of the benefits of this rulemaking’s reduction in CO 2 emissions. As discussed at length above and in the SCC TSD, some of the benefits cannot currently be qua ntified in a rigorous manner and were therefore presented in a qua litative manner. Both the qualitative and quantitative presentation of benefits incorpor ates the results of the Federal government’s extensive review of SCC and recent mode ling exercise, which was based on best available information. Second, the Center fo r Biological Diversity’s argument applies most directly to rulemakings in which the ec onomic analysis determin es the stringency of the standard. See 538 F. 3d at 1201-02 (cour t found arbitrary NHTSA’s determination not to monetize social cost of carbon when util izing a marginal cost benefit analysis and where this decision directly influenced the st ringency of the standard). Moreover, that case involved a situation where the agency assigned no monetary value to the social cost of carbon, clearly not the case here. As noted above and in our other comment responses, the stringency of this rulemaking’s standard, in fact, is not determined by the monetized benefits of GHG reductions. As discussed furt her below, the benefit-cost analysis used for this rule played a part in EPA’s overall conclusion that the rule is reasonable, but did not determine the standard’s stringency. See, for example, preamble section III.D, which discusses the basis for EPA’s determinat ion and notes that issues of technology availability, cost (to both ma nufacturers and consumers), and available leadtime are the critical decision factors.

EPA RESPONSE B

Organization: See table below.

Commenter Affiliation Document ID Number California Air Resources Board EPA-HQ-OAR-2009-0472-7189.1 Center for Biological Di versity EPA-HQ-OAR-2009-0472-7265.1 Environmental Defense Fund EPA-HQ-OAR-2009-0472-7246.1 Ford Motor Company EPA-HQ-OAR-2009-0472-7082.1 Institute for Policy Integrity at EPA-HQ-OAR-2009-0472-7246.1 New York University School of Law Natural Resources Defense EPA-HQ-OAR-2009-0472-7274.1 Council New Jersey DEP EPA-HQ-OAR-2009-0472-7093.1 Pew Center EPA-HQ-OAR-2009-0472-7239.1 Private Citizen (Adcock, James) EPA-HQ-OAR-2009-0472-5385 Private Citizen (Rose, Stephen) EPA-HQ-OAR-2009-0472-7276.1 Stockholm Environment EPA-HQ-OAR-2009-0472-7432.1 Institute-US Center Union of Concerned Scie ntists EPA-HQ-OAR-2009-0472-7181.1 University of California Santa EPA-HQ-OAR-2009-0472-7188.1 Barbara Bren Working Group

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Comments:

EPA received extensive comments about the me thodology used to derive the interim SCC estimates as well as comments on the use of integrated assessment models, and equityweighting.

Comments on the Methodology Used for Interim SCC Estimates

While the Ford Motor Company noted that the interim methodology was acceptable given available data, many commenters—representing academic and environmental organizations—expressed concerns that the filte rs were too narrow and stated that modelweighting averaging was inappropriate. In general, the latter group of commenters observed that averaging and model-weighting th e filtered estimates further restricted the SCC dataset and obscured the variability among published SCC estimates.

For example, the Stockholm Environment In stitute (SEI) characterized the interim methodology as biased and reflective of an inco mplete reading of th e economic literature, and stated that other studies and models shoul d have been included (7432). In particular, SEI identified the peer-review filter as problem atic because it resulted in the exclusion of SCC estimates from the heavily scrutinized Stern Review, which “o ffered an innovative, rigorous analysis leading to a relatively high estimate of the SCC, $85 per ton of CO 2 ” (7432.1, pg 3). Although the Stern Review author s did not release thei r results in a peerreviewed journal, their study received a le vel of scrutiny “far beyond the normal peer review process for articles published in academic journals” (7432.1, pg 3).

Similarly, Dr. Rose identified reliance on th e most recent versions of each model as problematic. He stated that because there has been little change in SCC modeling since 2001, it was incorrect to assume that the mo st recent estimates are superior. The commenter concluded that limiting considerat ion to “the most recent results reduces sample size and makes results highly conti ngent on most recent applications and assumptions used” (7276.1, pg 1-2).

Moreover, the Natural Resources Defense Council (NRDC) described the interagency group’s reliance on model-weighted averages, which further compounded this distortion and failed to capture estimates for extreme climate events, as “astonishing,” based on the current understanding of climate science ( 7274.1, pg 14). Other commenters likewise concluded that the filters and model-weight ing procedures exacerbated what is widely understood to be a partial accounting of mitigation benefits (e.g., 7432.1, 7276.1).

Several commenters expressed concerns about averaging SCC estimates from different discount rates; one commenter clarified that this is incorrect because the discount rates represent different judgments about “the value of temporal trade-offs” (7276.1, pg 3; see also 7188.1, 7208.1). That is, estimates from each discount rate encompass inconsistent

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assumptions about the type of investments ma de and how their value changes over time. In addition, EPA received extensive comments about the selection of discount rates, which is discussed separately in Response to Comments [A].

Finally, one commenter recommended an alternat ive approach to monetize the benefits of reductions in CO 2 emissions (see 5385, pg 3). Specifically, this commenter recommended extrapolating the results of local-scale ecosys tem service valuations, such as one for Puget Sound, to a global estimate of SCC.

Comments on Use of Integrated Assessment Models

Three commenters discussed the limitations of the integrated assessment models, concluding that the interagenc y group’s selection of mode ls and reliance on the model authors’ datasets contributed to the downward bias of the interim SCC estimates (7432.1, 7239.1, 7274.1). One commenter observed that th e integrated assessment models rely heavily on projections of GHG emissions and temperatures from the Intergovernmental Panel on Climate Change (IPCC) to estimate the value of economi c damages and cited evidence to support the view that th ese projections are conservative. 10

Indeed, the Stockholm Environm ent Institute characterized all three models’ default datasets as “embody[ing] controversial judgments” (7432.1, pg 4). The Stockholm Environment Institute presented numerous ex amples of such judgments, including the “surprisingly low” estimate of climate da mages in DICE. The Stockholm Environment Institute clarified that DICE relies on estimates of agricultural impacts developed in the 1990s that were “excessively optimistic a bout potential benefits from warming, and contained some basic analytical errors ” (7432.1, pg 6). The Stockholm Environment Institute further noted that a UC-Berkeley economist has run DICE using the current data and found that climate damages in the U.S. coul d be four times greater than those derived using the DICE default dataset (7432.1, pg 6).

Accordingly, these commenters recommended the agencies run the models with other datasets and also modify some of the models ’ assumptions. For example, they suggested modifying certain model parameters in the exer cise—e.g., global value of a statistical life (VSL), an adaptation function, and damage functions allowing cross-sectoral impacts (7274.1, 7432.1).

Comments on Equity Weighting

EDF and IPI discussed an inconsistency betw een the discounting approach used in the proposed rule, which applies differential equity weights on a timescale, and “the decision

10 Commenter stated that “following every IPCC assessment report (four to date), many predictions have turned out worse than expected. Each IPCC assessmen t report is grimmer than the previous. There are already signs that the last assessment report of 2007 (the Fourth Assessment Report, FAR) had overly optimistic ‘best guesses.’” Commenter cited findings published after release of the FAR, including evidence that summer sea ice could disappear by 203 0, much sooner than the IPCC’s projection of disappearance by the end of the century. See Science Magazine 326(5955): 926-928. (OAR-2009-0472

- 7274.1, pg 10).

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not to apply differential equity weights to the impacts on different income groups within a single generation” (7276.1, pg 8). They cl arified the point “is not necessarily to recommend that equity weights be applied for intratemporal transfers: although there would appear to be strong ethical grounds for such an approach, the determination of those equity weights would be an enorm ous challenge in itself” (7276.1, pg 8).

NRDC likewise noted an inconsistency and stated that “failing to weigh damages by income levels is inconsiste nt with economic theory” (7274.1, page 5). NRDC further noted it is “difficult to justify [not using e quity weights] on ethical grounds: most of the world’s poor neither emitted the CO 2 emissions responsible for current atmospheric concentration levels, nor economically benef ited from them—resulting in the poor having the least ability to absorb climate damages” (7274.1, page 6). NRDC recommended that EPA apply equity-weights to the SCC estim ates by taking into account the relative reductions in wealth in different regions of the world and use a number for the VSL that is equal between all countries and p opulations. See EPA- HQ-OAR-2009-0472-7274.1 for further discussion.

EPA Response B:

The commenters’ input informed the development of the new SCC estimates. This response addresses the following issues id entified by the commenters: the methodology used to derive the interim estimates, the use of integrated assessment models, and equityweighting (see letters from California Ai r Resources Board, Center for Biological Diversity, Ford, NJ DEP, Natural Resources Defense Council, Pew Center on Climate, Dr. Rose, Stockholm Environment Institute, Univ ersity of California Santa Barbara Bren Working Group, and Union of Concerned Scient ists). EPA has responded elsewhere to the commenters’ other comments related to S CC. Specifically, refer to Response [A] for EPA’s response to comments regarding di scount rate, uncertain ty and risk, and magnitude and uses of the social cost of carbon, and to Response [C] for EPA’s response to comments regarding global and domestic valuations of SCC.

Methodology Used to Derive Interim Estimates

EPA received and considered extensive comm ents about the methodology used to derive the interim SCC estimates. EPA recognized the limitations of the interim approach—a meta-analysis that relied on published SCC estimates—but judged it as the best option given the limited time available to coordina te among federal agencies and develop SCC estimates for the proposed rule. However, EPA did not continue with its interim approach and instead developed new SCC es timates for this rule. Specifically, the interagency SCC group, in which EPA partic ipated, reconvened on a regular basis to generate improved SCC estimates that respond to the concerns raised by commenters. As noted in Preamble III.H.6, EPA has critically evaluated the decisions of the group and the new SCC estimates and endorses them as reasonable for this final rule.

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The revised SCC methodology responds to comm ents in several key ways. First, we agree with the commenters’ concerns about the use of model-weighted means (e.g., see NRDC, SEI, Dr. Rose). The new results are weighted equally by model because the exercise produced an equal number of estimates for each model. Second, we agree that it is inappropriate to combine SCC estimates acr oss discount rates. None of the revised SCC estimates has been averaged across di scount rates. (See Response to Comment A for consideration of comments about the rati onale for discount rates, approach used to select rates, the magnitude of rates, and tr eatment of uncertainty.) The Technical Support Document, Social Cost of Carbon for Regulatory Impact Analysis Under Executive Order 12866 (hereafter, "SCC TSD"), also responds to these comments by presenting the rationale for discount rate selection. 11 Third, as discussed further in Response to Comment A, the modeling exercise resulted in a fuller distribution of SCC estimates and better accounted for uncertainty through a Monte Carlo analysis. See the SCC TSD for detailed explanation about probabilistic trea tment of climate sensitivity in the modeling exercise.

The commenters also had concerns about th e filters used to narrow down the pool of existing SCC estimates for consideration in the proposed rule, noting that they were overly restrictive, or that the sample othe rwise excluded key studies (e.g., Dr. Rose, SEI, UC-Santa Barbara Bren Working Group). In re sponse, EPA notes that the approach used in this final rule—conducting new model runs—has avoided this particular challenge. As noted in the SCC TSD, the modeling exerci se produced a vast amount of data for consideration.

In addition, EPA considered comments about th e selection of a growth rate applied to climate damages for the interim SCC estimates (CARB, Center for Biological Diversity). Rather than assuming a constant annual growth rate, we estimated the growth rate of the SCC directly using the Dynamic Integrat ed Climate and Economy (DICE), Policy Analysis of the Greenhouse Effect (PAGE), and Climate Framework for Uncertainty, Negotiation, and Distribution (F UND) models. This approach helped to ensure that the estimates are internally consistent with other modeling assumptions. See the SCC TSD for a table that illustrates how the growth ra te for these four SCC estimates varies over time; the SCC TSD also presents the full set of annual SCC estimates between 2010 and 2050.

The California Air Resources Board presente d a valid critique about the non-trivial variation in climate scenar ios underlying the interim SCC estimates; Dr. Rose also described the selection of socioeconomic emissions scenarios for the interim estimates as limited. For the new SCC estimates, we used socio-economic and emission trajectories that span a range of plausible scenarios. Fi ve trajectories were selected from the recent

11 Interagency Working Group on Social Cost of Carbon, U.S. Government, with participation by Council of Economic Advisers, Council on Environmental Qua lity, Department of Agriculture, Department of Commerce, Department of Energy, Department of Transportation, Environmental Protection Agency, National Economic Council, Office of Energy and Climate Change, Office of Management and Budget, Office of Science and Technology Policy, and Department of Treasury, “ Social Cost of Carbon for Regulatory Impact Analysis Under Executive Order 12866 ,” February 2010. EPA-HQ-OAR-2009-0472

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Stanford Energy Modeling Forum exercise , EMF-22; each trajectory was used consistently in the three models. Four traj ectories represent poten tial business-as-usual (BAU) growth in population, wealth, and emissions and are associated with CO 2 (only) concentrations ranging from 612 to 889 ppm in 2100. The fifth trajectory represents an emissions pathway that achie ves stabilization at 550 ppm CO 2 e (i.e., CO 2 -only concentrations of 425 – 484 ppm or a radiative forcing of 3.7 W/m 2 ) in 2100, a lowerthan-BAU trajectory.

We note Dr. Rose’s comment that “it would be arbitrary to use SCC estimates off of aspirational pathways for policies that generate small net changes in global emissions. Instead, estimates off of base line projections are more c onsistent with current policy decisions with marginal global GHG emi ssions implications, as well as a risk management approach designed to internali ze risks that the USG wishes to avoid or hedge against” (7276.1, pg 2). However, as explained in the SCC TSD, the modeling exercised relied primarily on BAU trajecto ries but also included a lower-than-BAU trajectory that would be cons istent with widespread acti on by countries to mitigate GHG emissions. The lower-than-BAU trajectory wa s chosen because it represents the most stringent case analyzed by the EMF-22 where all the models converge: a 550 ppm, not to exceed, full participation scenario. See the SCC TSD for complete discussion.

Regarding Dr. Rose’s question about why the Hope (2006) estimates were labeled as 5 percent: One common equation used to calculate the disc ount rate is the Ramsey equation: r = ρ + g* η , where ρ is the pure rate of time pref erence, g is the growth rate, and η is the elasticity of the marginal utility of consum ption. The pure rate of time preference cited in the Hope ( 2006) article is 3% per year. Wh ile the actual discount rate varies over time, it is relatively common to refe r to the discount rate as the pure rate of time preference plus 2%, where the 2% is rough ly the growth rate tim es the elasticity of the marginal utility of consumption. A more accurate categorization would be “approximately 5%” or “a pure rate of time pr eference of 3%.” As noted in Response A, EPA used a different approach to disc ount SCC estimates in the final rule.

Dr. Rose also requested more information to understand the application of Newell and Pizer discounting to the interi m SCC estimates. The undiscounted stream of benefits was not available for each of the studies included in this analysis. The way that the Newell and Pizer (2003) findings were adapted for the interim values was to apply the adjustment factors implied by either their preferred ra ndom walk model or mean-reverting model. According to the random walk model, SCC es timates based on a 3% or 5% discount rate are increased by 70.733% and 89.8%, respective ly. The mean-rev erting model implies increases of 10.733% and 16.8% for estimates based on a 3% or 5% discount rate.

Note Newell and Pizer based adjustment fact ors were not applied to estimates from Guo et al. (2006) that use a diffe rent approach to account fo r discount rate uncertainty.

EPA notes Dr. Rose’s recommendation to en sure consistency in presenting the SCC analysis in each agency’s section of the jo int rule. Tables in the proposed rule, for example, used different dollar years to report the same SCC estimates (e.g, 2007$ in

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EPA’s preamble section and 2006$ in NHTSA’s preamble section). The agencies agree with the commenter’s recommendation and have ensured to the extent possible that the sections in this rule are consistent. Mo reover, the same detailed analysis of SCC presented in the SCC TSD supports the entire rulemaking.

In response to Dr. Rose’s request for inform ation about base years and Newell and Pizer discounting, please see the table below.

Model Study Base year (Best available info) Year Dollars (Best available info) FUND Anthoff et al. 2009 2000 2000 FUND Link and Tol 2004 1995 1995 FUND Guo et al. 2006 1995 1995

PAGE Wahba & Hope 2006 2000 2000 PAGE Hope 2006 2000 2000 DICE Nordhaus 2008 2005 2005

Additionally, the commenter requested a complete list of references. The references are as follows:

 Anthoff, D., C. Hepburn, and R. Tol. 2009. Equity weighting and the marginal damage costs of climate change. Ecological Economics 68: 836:849.

 Guo, J., C.J. Hepburn, R. Tol, and D. An toff. 2006. Discounting and the social cost of carbon: a closer l ook at uncertainty. Environm ental Science and Policy 9: 205-216.

 Hope, Chris. 2008. Optimal carbon emissions and the social cost of carbon over time under uncertainty. The Integrated Assessment Journa l 8(1): 107-122.

 Hope, Chris. 2006. The Marginal Impact of CO2 from PAGE2002: An Integrated Assessment Model Incorpor ating the IPCC’s Five Reasons for Concern. The Integrated Assessment Journal 6(1): 19-56.

 Link, P.M., and R. Tol. 2004. Possible economic impacts of a shutdown of the thermohaline circulation: an application of FUND. Portuguese Economic Journal 3: 99-114.

 Newell, R., and W. Pizer. 2003. Discoun ting the distant future: how much do uncertain rates increase valuations? J ournal of Environmental Economics and

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Management 46: 52-71.

 Nordhaus, William. 2008. A Question of Balance: Weighing the Options on Global Warming Policies. New Haven, CT: Yale University Press.

 Tol, R. 2008. The Social Cost of Carbon: Trends, Outliers and Catastrophes. Economics: The Open-Access, Open-Assessment E-Journal 2(25): 1-24.

 Wahba, Mohammed, and Chris Hope. 2006. The marginal impact of carbon emissions under two scenarios of future emissions. Energy Policy 34: 3305-3316.

Other Methodology Comments. Consistent with Dr. Rose’s recommendation to “strive for an enduring and transparent methodology that can be readily and transparently updated,” the SCC TSD presents a detailed discussion of the development of the interagency modeling exercise and the resulting SCC estimates. As noted in the SCC TSD, the main objective of this process was to develop a range of SCC values using a defensible set of input assumptions grounde d in the existing scie ntific and economic literatures. In this way, key uncertainties and model differences transparently and consistently inform the range of SCC estim ates used in this rulemaking process.

Furthermore, the Federal government has committed to updating the new SCC estimates as the science and economic understanding of climate change and its impacts on society improves over time. The interagency group se t a preliminary goal of revisiting the SCC values within two years or at such time as substantially updated models become available, and to continue to support research in this area.

EPA notes with interest the valuation of P uget Sound ecosystem services identified by commenter 5385, but regards the commenter’s sugge stion to extrapolate these results to a national or global SCC as problematic. In particular, the commenter’s recommendation does not incorporate findings from the exis ting scientific and economic literature about climate change impacts on other sectors. Furthermore, while the estimated value of ecosystem services in Puget Sound could info rm assessments of the monetized value of climate change impacts in that region, it doe s not assign a dollar value to the impacts associated with a marginal unit of CO 2 emissions. In short, it lacks a defensible approach that accounts for the various comple xities involved in projecting CO 2 emissions and associated climate impacts on global scale.

In contrast, the integrated assessment models used to estimate the new SCCs combine climate processes, economic growth, and f eedbacks between the climate and the global economy into a single modeling framework. As discussed in the SCC TSD, these models translate emissions into changes in atmos pheric greenhouse concentrations, atmospheric concentrations into changes in temperature, and changes in temperature into economic damages. The emissions projections used in the models are based on specified socio

economic (GDP and population) pathways. These emissions are translated into concentrations using the carbon cycle built in to each model, and concentrations are

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translated into warming based on each model’ s simplified representation of the climate and a key parameter, climate sensitivity.

Use of Integrated Assessment Models

Several commenters discussed the use of the integrated assessment models, concluding that the interagency group’s selection of models and reliance on the model authors’ datasets contributed to the downward bias of the interim SCC estimates.

Model choice . EPA agrees with SEI that DICE , FUND, and PAGE are not the only relevant climate economics models and has clar ified its characteriza tion of these models as well as its rationale for c ontinuing to use them in the final rule. Overall, we find DICE, FUND, and PAGE useful because th ey combine climate processes, economic growth, and feedbacks betw een the climate and the gl obal economy into a single modeling framework, but we recognize that th is advantage comes at the expense of a more detailed representation of the underlyi ng climatic and economic systems. However, as noted by SEI, these models have “been wi dely used by other investigators, precisely because of their simplicity and transparency ” (7432.1, pg 4). Moreover, other integrated assessment models have not linked physical impacts to economic damages. The limited amount of research linking climate impacts to economic damages makes this exercise even more difficult (see the SCC TSD for more information).

Others commented on the version of the models used to derive the interim SCC estimates. Pew noted that few studies have been published using the most recent version, but identified several expected to be released by the time of the final rule and encouraged EPA to account for those. As discussed in the SCC TSD, EPA used SCC estimates from new model runs rather than selecting from t hose in the literature; EPA has continued to review developments in the SCC literature.

We note that Pew’s comments about the values resulting from the most recent version of FUND are incorrect. According to EPA’s March 2010 communication with Dr. Anthoff, all of the deterministic SCC estimates were pos itive for the discount ra tes investigated in a paper that he prepared fo r Pew using FUND 3.5; this does not mean that FUND 3.5 produces positive SCCs for any discount rate. Also, FUND uses a Major.Minor numbering system rather than calendar year to label the versions. EPA used the latest version of this model, FUND 3.5, that was availa ble at the time of th e modeling exercise.

Datasets used in models . NRDC observed that the inte grated assessment models rely heavily on projections of GHG emissions and temperatures from the Intergovernmental Panel on Climate Change (IPCC) to estimate the value of economi c damages and cited evidence to support the view that these projections are conservative. Also, SEI characterized all three models’ default datasets as “embody[ing] controversial judgments” (7432.1, pg 5). SEI presented numerous examples of such judgments, including the “surprisingly low” estimate of climate damages in DICE, and clarified that DICE relies on estimates of agricultural impacts developed in the 1990s that were “excessively optimistic about potential benefits from warming, and contained some basic

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analytical errors” (7432.1, pg 6). SEI furthe r noted that a UC-Berkeley economist has run DICE using the current data and found that climate damages in the U.S. could be four times greater than those derived using the DICE default dataset (7432.1, pg 6).

EPA regards with interest the commenters’ specific recommendations to modify model parameters that were not adjusted in the ex ercise—e.g., global value of a statistical life (VSL), an adaptation function, and damage functions allowing cross-sectoral impacts (e.g., NRDC and SEI). Research gaps and pr actical constraints required us to limit modification of the models to socioeconomic and emissions scenarios, climate sensitivity, and discount rate. Therefore, the modeling exer cise relied on the default values in the latest available version of each model fo r the remaining parameters. Moreover, continuing to use the models’ default values fo r some parameters allowed the exercise to account for different approaches to quantifyi ng damages. While EPA recognizes that the models’ translations of physical impacts to economic values are incomplete, approximate, and highly uncertain, it regards them as the best available representations.

As noted in Response A, the SCC TSD furt her emphasizes the need to explore the sensitivity of the results to other aspects of the models, in particular how the damage functions incorporate adaptation, technologica l change, and catastrophic damages. The Federal government is committed to supporting new research and exploring how to value the benefits of reduced GHG em issions. As the research ev olves, the Federal government is also committed to exploring how modeling can be improved so that these aspects are better reflected in the SCC. The interagenc y group plans to revisit the SCC estimates within two years.

Equity weighting and value of statistical life

NRDC recommended that EPA apply equity-wei ghts to the SCC estimates by taking into account the relative reductions in wealth in different regions of the world and use a number for the VSL that is equal between all countries and populations. As noted in the SCC TSD, we recognize the inconsistency between accounting for wealth differences over time through the discount rate and dec lining to do so on a geographical scale. However, after considering the literature on equity-weighting, we decided not to use equity-weights because putting it into pract ice and defending it for domestic regulatory analysis would raise complex conceptual, empirical, and normative problems (see the SCC TSD).

As discussed in Response A, the modeling exer cise relied on the default values for VSL because it was not one of the parameters chos en to be held constant across all three models.

EPA RESPONSE C

Organization: See Table below.

Commenter Affiliation Document ID Number

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Environmental Defense Fund EPA-HQ-OAR-2009-0472-7246.1 Georgia-Pacific EPA-HQ-OAR-2009-0472-7122.1 National Automobile Dealers EPA-HQ-OAR-2009-0472-7182.1 Association (NADA) National Petrochemical & EPA-HQ-OAR-2009-0472-7234.1 Refiners Association Natural Resources Defense EPA-HQ-OAR-2009-0472-7274.1 Council NYU Institute for Policy EPA-HQ-OAR-2009-0472-7246.1 Integrity Pew Center EPA-HQ-OAR-2009-0472-7239.1 Private Citizen (Adcock, James) EPA-HQ-OAR-2009-0472-5385 Private Citizen (Rose, Stephen) EPA-HQ-OAR-2009-0472-7276.1 Texas Chemical Council EPA-HQ-OAR-2009-0472-7290 University of California Santa EPA-HQ-OAR-2009-0472-7188.1 Barbara Bren Working Group

Comment Summary:

Seven commenters, representing academia and environmental organizations, supported the proposed rule’s preference for global SCC estimates while several industry groups stated that under the Clean Air Act, EPA is prohibited from using global estimates. The commenters supporting a global SC C described it as the most appropriate way to account for the public good aspects of GHG emi ssions and climate protection.

The Environmental Defense Fund and NYU In stitute for Policy Integrity described climate stability as a special public good case because it is a global one, meaning that no single actor can provide clim ate stability. Maintaining or achieving the public good— climate stability—must involve coordination of many sovereign countries, all of which have an incentive to do nothing and enjoy globa l benefits when othe r countries incur the costs of GHG mitigation (7246.1, pg 37).

Moreover, the Environmental Defense F und and NYU Institute for Policy Integrity maintained that consideration of domesti c SCC does not solve the global public good problem. These commenters stated that if all countries based GHG reductions on domestic SCC values, it would “result in sub-optimal protection of climate stability [because] the global SCC is not a population- weighted average of domestic SCCs, but instead the aggregate of all of the harms a ssociated with climate change” (7246.1, pg 37). For more details regarding comments that support use of a global SCC, see EPA-HQ

OAR-2009-0472-7246.1, -7274.1, -7239.1, -7276.1, -7188.1, and -5385.

One commenter who supported use of global S CC estimates stated that it was unclear how the agencies planned to use domestic estimates, thereby making it difficult to comment on domestic SCC estimates (7276.1). NRDC also noted a lack of clarity regarding the agencies’ intent ions for domestic SCC estimates but concluded that it would be inappropriate to use domestic estimates in any situation (7274.1).

4-71EPA Response to Comments

NRDC based its support for use of a global SCC on the global, public goods aspect of GHG emissions as well as ethical considerations. Specifically, NRDC stated that from an ethical standpoint, it cannot support a U.S. SCC estimate, wh ich would effectively assign a value of zero to the damages imposed on other countries by U.S. emissions. NRDC found this particularly troubling because “ma ny countries, especially poor ones, did not contribute to the current CO 2 levels in the atmosphere, yet will suffer the worst consequences. Perversely, developed countries obtained their income status by emitting greenhouse gases, and as a result have more re sources to absorb climate damages, while the opposite is true of the poor countries” (7274.1, pg 24).

The commenters that disagreed with use of a global SCC argued that EPA cannot permissibly consider a global value because it la cks authority to consider the international effects of domestic emissions in crafting emi ssion standards under section 202 (a). These commenters further argued that Congress was ex plicit when it wanted such effects to be considered, referring to secti on 115 of the Act, which author izes regulation of domestic pollutant emissions due to their internationa l effect under specified circumstances. The commenters also referred to the general presum ption that Federal statutes are presumed not to have extra-territorial effect. For more details, see EPA-HQ-OAR-2009-0472

- 7234.1, -7290, -7182.1, and -7122.1.

EPA Response C:

This response presents EPA’s consideration of and response to comments from regarding the use of global and domestic valuations of SCC (see comments from Dr. Rose, National Automobile Dealers Association, NYU Institute for Policy Integrity and Environmental Defense Fund, University of California Sant a Barbara Bren Working Group, Pew Center on Climate, Natural Resources Defense Council, and Texas Chemical Council).

In sum, the final rule continues to focus on global SCC values because of the global, public good aspects of greenhouse gas emissions . EPA prefers a global measure of GHG mitigation benefits because of the unusual aspects of the climate change problem—i.e., GHG emissions cause the same damage regard less of the location of their emission; climate change occurs over ve ry long time horizons, and it re presents a problem that the United States cannot solve independently (see the Technical Support Document, Social Cost of Carbon for Regulatory Impac t Analysis Under Executive Order 12866 (hereafter, "SCC TSD")). 12

Several commenters argued that EPA cannot pe rmissibly consider a global value because it lacks authority to consider the internati onal effects of domestic emissions in crafting emission standards under secti on 202 (a) (1). These commenters further argued that

12 Interagency Working Group on Social Cost of Carbon, U.S. Government, with participation by Council of Economic Advisers, Council on Environmental Qua lity, Department of Agriculture, Department of Commerce, Department of Energy, Department of Transportation, Environmental Protection Agency, National Economic Council, Office of Energy and Climate Change, Office of Management and Budget, Office of Science and Technology Policy, and Department of Treasury, “ Social Cost of Carbon for Regulatory Impact Analysis Under Executive Order 12866 ,” February 2010. EPA-HQ-OAR-2009-0472

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Congress was explicit when it wanted such eff ects to be considered, referring to section 115 of the Act, which authorizes regulation of domestic pollutant emissions due to their international effect under specified circumstan ces. The commenters also referred to the general presumption that Federal statutes ar e presumed not to have extra-territorial effect.

The commenters have misapprehended the analys is of global and domestic SCC. First, EPA’s regulation does not exercise extraterrito rial effect. The regulation sets standards for new motor vehicles produced or imported in to the United States; hence, the activity it regulates is domestic activit y. The issue here is not the extraterritorial exercise of regulatory authority over conduct occurring over seas, but how to place a monetary value on a reduction in domestic emissions, with the commenter arguing that EPA may not consider effects occurring outsi de the borders of the US wh en valuing the benefits of reductions achieved under section 202(a) (1). In this case, the emissions reductions will marginally reduce the overall global contribu tion of GHG emissions to the atmosphere, affecting the global atmospheric concentrations of GHGs. This will then have a marginal effect on global climate change, with resulti ng impacts both inside the US and around the world. There is no issue that the impacts from global climate change that occur in the US are appropriate to consider in valuing the benefits of these domestic GHG reductions.

However, there is also a value to the US from domestic emissions reductions that reduce the harm occurring globally. First, impacts from climate change occurring overseas can create economic, trade, humanitarian and national security issues for the US. For example, climate change may exacerbate proble ms (e.g., food security or water supply) in relatively poor and politically volatile countries that rais e humanitarian issues and national security issues for the United States. 13 Second, the US will gain the greatest benefit from reducing domestic emissions of GHGs if there is a global response to the global problem of climate change. Given the na ture of the public good at issue, a global response would maximize the benefits the US receives from reducing GHGs. Using a global SCC in valuing the domestic reductions from this final rule is most consistent with this outcome, while using a domestic SCC is not. For both of these reasons, considering the global SCC is an appropriate way to valu e the benefits to the US from domestic GHG reductions under section 202(a) (1).

Second, this situation is not an alogous to section 115 of the Act, which calls for control of domestic emissions if certain conditions are met concerning emissions in the U.S. causing or contributing to ai r pollution that is reasonabl y anticipated to endanger public health or welfare in a foreign count ry. Mandating control of domestic emissions in certain circumstances based on the impact of those emissions on a foreign country does not indicate any intention by C ongress on the very different is sue involved here. Use of the global SCC in the benefits analysis for this rule is not an issue of the authority or the obligation to regulate domestic emissions of GHGs from new motor vehicles. Our authority to adopt standards stems from th e endangerment and contribution findings that

13 See US EPA, Technical Support Document, Endangerment and Cause or Contribute Findings for Greenhouse Gases under Section 202(a) of the Clean Air Act , December 8, 2009, for a complete discussion about the implications of international climate im pacts for the US, in dock et EPA-HQ-OAR-2009-0171.

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have been made under section 202(a) (1). Th e issue here is how to value those domestic emissions reductions in considering the benefits of the reductions. Th at is not the issue Congress addressed in section 115, when it au thorized regulatory c ontrols if certain conditions were met. Congress’ decisions on that issue in section 115 do not limit or take away any of EPA’s discretion on how to valu e the benefits of GHG reductions from the emissions standards adopted under section 202(a). 14

Finally, it is useful to recogni ze the somewhat limited role that the monetary value placed on the SCC plays in the determination of wh at emissions standards should be adopted. As noted above, the value of the SCC is not relevant to whether EPA has the authority or the obligation to adopt emissions standards, as that stems from the endangerment and contribution findings. In addition, the levels of the standards adopted by EPA have been determined based on the effectiveness of the technology that will be available, their cost, and the appropriate leadtime for incorporati on of that technology in the light-duty vehicle fleet. See the detailed explanation in section III. D of the preamble to the final rule for further discussion of this issue. The cost-ben efit analysis is used to help evaluate the overall reasonableness of the emissions sta ndards chosen by EPA. In this case, the benefits of the standards are si gnificantly greater than the co sts, and (as noted earlier in this response) this would be the case whet her EPA considered the domestic value for the SCC, the global value for the SCC, or a rang e of values including higher SCC values. The specific range or values used in this an alysis are therefore not outcome determinative as far as deciding what emissions standard s to adopt, as the standards adopted by EPA would still be reasonable from a net benef its perspective under a wide range of SCC.

Nonetheless, EPA considered the available estimates of domestic SCC values to determine how global SCC values could be adju sted to national or regional levels. As explained further in the SCC TSD, EPA regards this approach as highly speculative and recognizes that there is no a priori reason why domestic benef its should be a constant fraction of net global benefit estimate. Wh ile there is compelling evidence suggesting that the US represents a non-constant fract ion of global values, a rigorous manner to quantify that fraction in has not emerged. Indeed, current models do not quantify many of the spillover effects iden tified by commenters IPI, EDF, and NRDC, such as the U.S. military position in the world. Accordingl y, the final rule presents only global SCC values; the SCC TSD presents a range of values that should be used to adjust the global SCC to calculate domestic effects.

4.5.5 Vehicle Sales Assumptions

14 The commenters are also incorrect in maintaining that because Congress addressed in section 115 the issue of an obligation to adopt emissions controls ba sed on the effect domestic emissions have outside the US, it necessarily precluded consideration of those effects under section 202(a). See Catawba County v. EPA, 571 F. 3d 20, 34 (D.C. Cir. 2009) (a congressional mandate in one section and silence in another often “suggests not a prohibition but simply a decision not to mandate any solution in the second context, i.e., to leave the question to agency discretion.’ (internal citation omitted, emphasis original)). In any case, as explained above, section 115 addresses the different issue of authority to regulate, and does not address how to value a reduction of domestic emissions for purposes of evaluating the costs and benefits of an otherwise authorized regulation.

4-74EPA Responses on Joint Issues and Technical Work

Organization: National Automobile Dealers Association

Comment:

The National Program proposal reasonably a ssumes buyers will value any fuel savings associated with the purchase of a new motor vehicle over a five-year period, rather than over a vehicle’s full useful life. 74 Fe d. Reg. 49669-70. Even at high fuel prices, consumers who view fuel economy as an importa nt purchase criteria will be hard pressed to make the case for buying a more fuel effici ent new vehicle if the up-front capital costs associated with doing so cannot be recouped in short order. Of course, for purposes of calculating payback, real-world purchaser finance costs, opportunity costs, and additional maintenance costs all should be accounted for.

EPA Response:

EPA has continued to use the assumption that consumers will consider fuel savings over a five-year period for its vehicle sales impact analysis. The payback analysis in Preamble Section III.H.5 has included additional purchasing costs, such as sales tax, insurance, and financing costs, as detailed in EPA’s RIA Section 8.1.3. As discussed in Preamble Sections III.D. and III.H.1, the opportunity costs of these standards are addressed through cost estimation based on holding vehicle performance, utility, safety, and other attributes constant while improving fuel economy.

Organization: James Adcock

Comment:

Assuming a 5-year horizon for the consumer's valuation of MPG improvements is the same as assuming vehicle purchasers assume that they will sell their vehicles in 5 years and be able to receive no premium on that sale for high MPG. But, on the contrary consumer are well-aware and it has been we ll-reported that highe r MPG vehicles hold their resale value better than lower MPG vehi cles - and that low MPG SUVs and Trucks are hard to unload at all! Thus the need for the "Cash for Clunkers" program to allow owners of low MPG vehicles to unload thes e vehicles on the US government since there was no other willing buyer. Setting these low MPG standards simply is setting up the US Government for "Cash for Clunkers 2 .0" in another decade's time! In general NHTSA's leniency towards large trucks negates the current administration's investment in "Cash for Clunkers" -- the one hand works against the other.

E-134: 5-year cutoff on payback period on th e assumption that consumers only value a vehicles' MPG technology on the first five ye ars - is not a rational assumption because consumer well-know how hard it is to unloa d gas guzzlers - hence the need for a "Cash for Clunkers" program. Choosing this irrati onal 5-year cutoff assumption in turn represents a large reduction in "duration" effectively causi ng a much higher depreciation rate than the claim 3% societal discount rate.

4-75EPA Response to Comments

EPA Response:

EPA’s five-year payback period is for average consumer behavior. Some consumers will put more emphasis on fuel economy when buying vehicles, and others may use shorter payback periods. The analysis does not adjust vehicle resale value for the fuel economy of the vehicle, based on uncertainty of th e role of fuel economy in vehicle purchase decisions (discussed in RIA Chapter 8.1). The analysis does include resale value as a proportion of initial vehicle price; if vehi cles with more fuel economy are more expensive, their resale values will be higher.

4.5.6 Vehicle survival assumptions

No comments were received on vehicle surv ival assumptions. Several comments on total lifetime VMT are found in Sect ion 5.3.2 of this document.

4.5.7. Total Vehicle Use

Organization: New York State Department of Environmental Conservation

Comment:

Vehicle Lifetime Mileage (Preamble page 49521) EPA and NHTSA use 190,971 miles as the lif etime for cars and 221,199 miles, for light trucks. The derivation of these lifetimes is unclear to us, as is the rationale for a difference between cars and light, trucks . The composition of the light truck fleet, as well as the use these vehicles see, has changed significantly in the past 30 years, to more closely resemble the passenger car fleet. The source of these lifetime mileages should be discussed in the rulemaking documents, a nd available for public review. [OAR-2009

- 0472-7454, p.1]

EPA Response:

The procedures used by EPA and NHTSA to de rive their estimates of expected lifetime VMT for passenger cars and light trucks, as we ll as the agencies’ estimates of the total number of miles driven by model year 2012-16 cars and light trucks during each year of their lifetimes, were described in detail in the rulemaking documents and available for public review. Specifically, th e methodologies and assumptions used in developing these estimates were described in detail in EPA and NHTSA’s Draft Join t Technical Support Document, Section 4.2.4, pp. 4-7 to 4-15. The updated FRM analysis is available in EPA and NHTSA’ Joint Technical Support Docu ment Section 4.2.3. The lifetime VMT numbers used in the final rulemaking increa sed slightly because of a decrease in projected fuel prices between AEO 2009 and AEO 2010. The resulting values are 195,264 miles for cars and 225,865 miles for trucks.

As noted in the documentation, the anal ysis is based upon the January 2006 NHTSA report “Vehicle Survivability and Travel Mileage Schedules,” (Docket ID: EPA-HQ

4-76EPA Responses on Joint Issues and Technical Work

OAR-2009-0472-0126) which incorporates the be st available data on fleet composition and use.

4.5.8. Accounting for the rebound effect of higher fuel economy

Organization: State of New Jersey

Comment:

The fuel economy rebound effect refers to the fraction of fuel savings expected to result from an increase in vehicle fuel economy - particularly one required by higher fuel efficiency standards -that is offset by additi onal vehicle use. The Department believes the rebound rate of 10 percent used by the USEPA in the proposal is justified given the historical decline in the ma gnitude of the rebound effect. The Department also supports the proposal's findings regarding vehicle sale s whereby the proposal projects a positive impact on vehicle sales due to reduced fuel costs outweighing the costs of meeting the new emission standard s. [OAR-2009-0472-7109.1, p.10]

EPA Response:

EPA appreciates New Jersey's comments suppor ting our proposed value of 10 percent for the rebound effect. Based in part on these comm ents, we have decided to maintain the 10 percent rebound value for the final rulemaking.

Organization: California Air Resources Board International Council on Clean Transportation Missouri Department of Natura l Resources, Air Pollution Control Program

Comment:

CARB supports the decision to reduce the rebound effect to 10% from previous analyses using 15%. As previously commented (Document ID No. NHTSA-2008-0089-0173), CARB believes 10% to be the upper bound fo r the rebound effect. Thus, the agencies may wish to consider further reducing this eff ect to 5%, which is more consistent with the latest results from Small (2009) on the projected dynamic rebound effect accounting for fuel economy regulations. NHTSA’s sensitivity analysis shows that this adjustment in rebound effect would increase fuel savi ngs and emission reductions by 5% and discounted benefits by 4%. (PRIA p.456) Thus, the regulation impacts are somewhat sensitive to the assumption on the magnitude of the rebound effect and a lower value could be justifie d [OAR-2009-0472-7189.1, p.16]

[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]

4-77EPA Response to Comments

The agencies used a fixed estimate of 10% for the rebound effect . A wide range of historical studies was considered by the agen cies in arriving at th is estimate and NHTSA conducted some modeling of their own. Recen t studies by Small and VanDender (2007) and Greene (2009) demonstrate th at the rebound effect is linked to personal income and vehicle efficiency, as well as fuel pr ices, and has been declining over time.

EPA stated that if they used a dynamic es timate of the future rebound effect based upon the Small and VanDender work, they would us e a value of 5% or lower. EPA invited
comments:

-“on other alternatives for estimating the rebound effect”.

- “on the extent to which the short run elasticity of demand for gasoline with respect to its price can provide useful information about the size of th e rebound effect”.

- “on whether it would be appropriate to use the price elasticity of demand for gasoline, or other alternative approach es, to guide the choice of a value for the rebound effect”.

The Small and VanDender work is the prope r basis for calculating the rebound effect. Small and VanDender made a major contribu tion to the field by incorporating economic impacts and the cost of driving into calcula tions of price elasticity of demand. This is much more appropriate than assuming a fixed 10% rebound effect that does not take into account future changes in vehicle efficienc y, fuel prices, and future income. Dynamic estimates should be used to cal culate the future rebound effect.

ICCT believes that estimates of the short run elasticity of demand for gasoline with respect to price can provide a useful point of comparison for rebound estimates derived by other methodologies, but should not be used to guide the choice of a value for the rebound effect.

[OAR-2009-0472-7156.1, pp.14-15]

Although it is somewhat reasonable to assume that some people will drive more if their vehicles get better gas mileage, there is no evidence presented in the report showing that the average consumer automatically increases the amount they drive when they get more miles per gallon. Nor does the report fully explain why 10% is assumed to be the estimated increase. In addition, the report's assumption that the rebound effect will result in no overall emissions reductions from the actual driving of vehi cles appears to be extremely conservative in the estimation of emissions reductions resulting from higher CAFE standards. In the notice, EPA acknowle dges that some recent studies have shown that as time goes on, the rebound effect is actua lly lower than 10%, especially in future years: Therefore, using an across the board 10% value should be reconsidered. Another important consideration should be the price of gasoline. Regardless of the increase' in miles per gallon for a vehicle, gasoline prices have been shown to have a very significant impact on miles driven. The negative effects of gasoline prices on driving was clearly

4-78EPA Responses on Joint Issues and Technical Work

shown in the summer of 2008, when gas prices climbed to record rates, and drivers nationwide dramatically decreased their driving. [OAR-2009-0472-7480, p.2]

EPA Response:

Although CARB supported EPA's use of a 10 pe rcent rebound effect, CARB stated that 10 percent represented the upper bound fo r the rebound effect. CARB, Missouri DNR, and ICCT all suggested that EPA shoul d consider a rebound effect that is lower than 10 percent. All three commentors referenced the recent work by Small & Van Dender as justification for using a lower rebound effect . The Small & Van Dender methodology estimates a dynamic rebound effect that varies over time, taking into account expected future changes in factors such as income, fuel prices, and urbanization. Based on these variables, the Small & Van Dender methodology projects that the rebound effect will decline significantly over time. The hypothesis that the rebound effect is declining over time is also supported by recent work by Dr. David Greene. See TSD Chapter 4 for additional deta ils on these studies.

EPA agrees with the commenters that the mo st recently published literature supports a lower rebound effect, which is one of the reasons we have a adopted a value of 10 percent, which is lower than the 15 pe rcent used by NHTSA in its previous rulemaking. While EPA appreciates the i nput provided by commenters, we did not receive any new data or analysis to justif y revising our initial estimates of the rebound effect at this time. Based on the positive comments we received, we will continue using the dynamic rebound effect to help inform our estimate of the rebound effect in future rulemakings. However, given the relatively ne w nature of this anal ytical approach, EPA believes the larger body of histor ical studies should also be considered when determining the value of the rebound effect. As we descri bed in the Chapter 4 of the joint Technical Support Document, the more recent literature suggests that the rebound effect is 10% or lower, whereas the larger body of historical studies suggests a hi gher rebound effect. Therefore, we will continue to use the 10% rebound effect for this rulemaking. However, we plan to update our estimate of the re bound effect in future rulemakings to further consider the newer work of Small and Van Dender and David Greene.

EPA also appreciates ICCT's co mments discouraging the use of the short run elasticity of demand for gasoline with respec t to price as a proxy for the rebound effect. Based in part on these comments, we have not used this metric as a replacement for the estimates of the rebound effect.

Organization: Hyde, James

Comment:

Rebound Effect: The proposal assumes a 10% rebound effect. The increased VMT attributed to this rebound is sufficient to o ffset the pollutant decreases derived from the reduced production and distri bution of fuels. The discus sions of the upstream and downstream emissions highlights some shortcom ing of the available data and models to

4-79EPA Response to Comments

compute impacts. The assumption that the 'rebound effect' 'conti nues throughout the life of the vehicle' [DRIA, pS17] is unfounde d. If these is a 'rebound effect' it is a psychological phenomenon which can last only as long as the original owner can remain aware of the fuel economy change AND as long as the fuel economy change is not overwhelmed by increases in the cost per gallon or other expenses. Fuel cost is only one component, and not a large component, of the cost of operating a motor vehicle. [OAR

2009-0472-7258.1, p. 1]

EPA Response:

While the response of consumers to an increa se in fuel economy may vary depending on the individual, this analysis of the rebound e ffect generally relies on aggregate changes in VMT based on historical national or state-level data. Many hi storical studies have shown a correlation between change s in total VMT and changes in fuel economy, even when other factors such as gasoline prices are taken into account. EPA agrees with the commenter that fuel costs are only one component of the full cost of driving. Therefore, EPA's analysis takes into account future projec tions of other factors such as income, fuel prices, and congestion when estimati ng the potential future rebound effect.

4.5.9 Benefits from Increased Vehicle Use

No comments were received on the be nefits from increased vehicle use.

4.5.10. The Value of Increased Driving Range

Organization: Washington State Depa rtment of Commerce

Comment:

[Following comments are from LA Testimony, OAR-2009-0472-7283, p.125]

We urge, however, EPA and NHTSA to include two additional costs related to the reduction in driving costs brought about by increased standards: A, the increase in permile fuel consumption resulting from driving in heavier traffic conditions, which is partly a consequence of the rebound effect; and, B, th e increase in urban sprawl by incentivizing low-density urbanization, partly a root of the rebound effect.

The latter is particularly important as it counters efforts to reduce VMT and may contribute to the carbon impact s of land-use change from new urban developments

EPA Response:

In both proposal and final rule, EPA include d the cost of increa sed congestion-related delays in its analysis of the program. As discussed in Section II. F of the preamble, and Chapter 4.2.10 of the Joint TSD, this cost is approximately $0.05 per rebound mile. The agency did not account for a potential partial offs et of the real world GHG benefits due to

4-80EPA Responses on Joint Issues and Technical Work

altered drive cycles (increas ed delay due to increased c ongestion). We believe these potential losses to be minimal.

Any reduction in the cost of intra-urban trav el (whether by auto, tr ansit, or any other mode) provides some incentive for households a nd businesses to locate farther from their workplaces and other frequently-visited dest inations (in the case of households), or farther from sources of raw ma terials, labor, and final market s (in the case of businesses). In comparison to the effects of infrastructure investment and financ ing decisions, together with pricing policies (indirec t pricing of highway use thr ough fuel taxes, and heavilysubsidized transit fares), the effect of maki ng vehicles more fuel-efficient and thus less costly to operate on the cost of urban travel is likely to be trivial. This effect is unlikely to offset more than a small fraction of benefits from reducing fuel consumption.

The relationship between vehicle CO 2 standards, fuel economy, travel patterns, and land use change is a complex and emerging science. The agency may evaluate this relationship further in future rulemakings.

4.6. Safety and Mass Reduction

Organization: US Steel Corporation

Comment:

The economic impact of the proposed new CAFE rules will be affect ed by at least two competing factors. Initial response to the new regulation by automakers will change the mix of vehicles, typically growing the sma ller and lighter C-segment and, perhaps, Bsegment vehicles in place of more standard or larger-footprint cars and trucks. Smaller vehicles use less steel, and the reduction in demand for automotive steel could have a negative effect on the health of the North American steel i ndustry. Also, the tendency to assign more expensive lower density material s to satisfy the regul ation could exacerbate the harm. Smaller vehicles reduce steel demand, steel jobs, and the profitability necessary for steel companies to conti nue to invest in new products and new process technology. Additionally, a CAFE law focused only on use phase fuel economy invites consideration of low density materials that will lessen the demand for automotive steels and reduce the profitability of automotive st eelmakers. [OAR-2009-0472-7197.1, pp.6-7]

Much has been written about the impact of vehicle size a nd weight on passenger injury severity. Recent summary data suggest that the daily toll on worldwide roadways is 3,000 deaths and 30,000 serious injuries. Because of technological advancement in vehicle engineering, including optimized crumpl e zones, rigid passenger compartments, strengthened side structures, air bags, electroni c stability control, antilock brakes and so forth, the historical relationship between vehi cle size, weight, and collision severity may be certainly influenced by design and stru ctural improvements over time. Efforts to standardize bumper heights to prevent large vehicles from overriding smaller passenger cars in collisions are also important.

4-81EPA Response to Comments

In spite of all these advances designed to protect occupants, it is clear that large, heavy vehicles are preferred to smaller ones in h ead-to-head collisions. Work by Desapriya and others have demonstrated that occupants in passenger sedans are more than two times likely to be injured than drivers or passengers in larger pickup tr ucks and SUVs. Resent testing conducted by the Insurance Institute of Highway Safety (IIHS) concluded that in head on collisions between small and large cars, the small car sustains significantly more damage, even though it has been rated as “G ood” in the standard IIHS testing. The new NPRM, because of its schedule, assures that car makers will be manufacturing smaller, lighter vehicles in order to comply. This is likely to occur while significant large volumes of heavy trucks and SUVs are still on the roa d. There is a high probabi lity that the rate of serious injury will increase because of the in crease in the proportion of smaller vehicles and the higher probability that smaller cars will collide with the larger vehicles.

U. S. Steel research with the Auto/Steel Pa rtnership and in program s supported by the U. S Department of Energy, that the use of ne w AHSS steel grades can enable the mass of critical crash structures, such as front rails and bumper systems, to be reduced in weight by 25 percent. Such vehicle structures with reduced mass can perform as well as their heavier counterparts in standard NHTSA frontal or IIHS offset instrumented crash tests. However these tests do not address relative vehicle size, hence in spite of these accomplishments with high-strength steels, it is unlikely that the “vehicle footprint” formula will totally negate the disadvantage that drivers of smaller vehicles have in collisions with heavier vehicles like pickup trucks and SUVs.

U. S. Steel believes that more time is needed to allow powertrain development to occur in order to achieve the targeted higher fuel ec onomy. The development of electrification in powertrains (like in battery-el ectric vehicles or plug-in hybrid s), more efficient internal combustion engines, and alternative energy sources (such as biofuels or hydrogen) requires time. The extension of the CAFE ti metable to pace the required fuel economy targets according to technological capability of carmakers will prevent a rush to smaller vehicles that are less safe on roadways al so populated by vehicles twice their mass or more. [OAR-2009-0472-7197.1, pp.7-8]

[[These comments were submitted as testim ony at the Detroit public hearing. See docket number EPA-HQ-OAR-2009-0472-6185, pp. 97-102.]]

The core of my message today is that steel can play an important role in reducing the energy consumption and CO2 emissions in all phases of a vehicle's life, the manufacturing phase, driving pha se, and end-of-life recovery. Over the past few decades working with our automotive customers I have seen a remarkable evolution of both the materials we supply and their application that have positiv ely impacted the vehicle and meeting the NHTSA and EPA regulations. Hist orically the focus of CAFE regulations has been the use of the driving phase of the automobile. Fuel has been and will remain important to automakers' efforts to improve fu el economy. Steel's role is to enable mass production while maintaining safety and affo rdability. Today steel is the dominant material in the vehicle in the United Stat es and around the world representing 60 percent of the vehicle material content. We have maintained that dominance for the last 100

4-82EPA Responses on Joint Issues and Technical Work

years of the vehicle. However, it's not b een the same steel. In the 60s and 70s we replaced cold walled steels that rust with zi nc coated steels, in the 80s and 90s, replaced mild steels with high-strength steels. Th is decade we are replacing the high-strength steels with lightweighting advanced high- st rength steels, and a decade from now we will be replacing those steels with new advanced lightweighting products. Today the advanced high-strength steels are the fastest growing materi al in vehicle designs -- whereas in 1999 there were nearly no applica tions of advanced high-strength steels, today they represent 15 percent of the vehicle steel content. Each and every new vehicle launch increases the content of these grades with the vehicle makers expected to reach 50 percent within the next decade. Our customer s' demand for these products is a result of their lightweighting capability that enable affordable designs within their existing manufacturing facilities.

The need for these materials has come to re sult in the increase in crash requirements which have changed the vehicle structure from a stiffness-dominated design to a strengthdominated design. Strength is where steel performs better than any other automotive material. Advanced high-strength steels are four, five, and six tim es stronger than the steels that they are replacing. What has this meant to lightweighting of the vehicle? Material lightweighting is a function of design flexibility, strength, and density. What steel lacks in low density relative to competi ng materials, it more than compensates for with strength and design flexibility. To dem onstrate that capability, the steel industry has invested in many projects demonstrating 25 to 30 percent mass reduction. We have worked with our customers to incorporate that technology in each and every new vehicle being launched today. These new vehicle st ructures are twice as strong as previous designs with mass reductions in excess of 20 percent while meeting the increased crash requirements and maintaining affordability.

And, remember, this technology is not yet fully integrated. Advan ced high-strength steel content will increase from 15 percent today to 50 percent in the next decade, enabling additional mass savings on future vehicles.

Clearly steel is and will con tinue to play a role in re ducing the energy used in CO2 emissions of the vehicle in its driving pha se.

However, as I mentioned at the outset, steel can also play an important role in reducing the energy use in CO2 emissions in the other ph ases of a vehicle's lif e, in particular, the manufacturing phase, and end-of -life recovery.

EPA and NHTSA have an important opportunity to use this rulemaking to formulate policy guidance that best encompasses the en tire environmental impact associated with the vehicle, and, consequentl y, encourages vehicle manufactur ers to choose the materials that result in the lowest environmental impact over the entire vehicle life. The advanced high-strength steels energy, and CO2 intensity is the same as conventional steels. So in the manufacturing phase, a 25 to 30 percent mass reduction enabled by these materials means we produce 25, 30 percent less steel fo r each vehicle, with the accompanying reduction in raw material use, energy use, and CO2 emissions. This mass reduction then

4-83EPA Response to Comments

improves fuel economy reducing energy use an d CO2 emissions in the driving phase. Then at the end of a vehicle's life, 100 percent of th e vehicle is recycled back in the very same steel products or future steel products for the next generation of vehicles.

In contrast, the low-density competing metals such as aluminum or magnesium have a much different story. On a per-pound basis, the energy and CO2 in tensities of these materials are 7 to 18 times more than steel, resulting in a corr esponding increase in the vehicle's manufacturing energy and CO2 intens ity. These materials may provide a mass advantage. Unfortunately, what is gained in fuel economy in the driving phase through the weight reduction can be easily overcome by the se lection of high-energy, CO2

- intensive, low-density materials. And this concept goes beyond mate rial selection. It applies to many technology options that ma y perform well within the envelope of regulated tailpipe emissions, but perform poorly when that boundary is expanded to address the total life cycle. To address these unintended consequences, a life cycle assessment approach is needed that cons iders all the phases of a vehicle's life.

EPA Response:

As stated in several places in the rule, th e footprint curves es tablished by NHTSA and EPA are designed to minimize the incentive fo r reducing vehicle size to meet stringency. EPA recognizes that based on economic and c onsumer demand factors that are external to this rule, the distribution of footprints in the future may be different (either smaller or larger) than what is projected in this rule. However, the agencies continue to believe that there will not be significant shif ts in this distribution as a di rect consequence of this rule.

With regard to mass reduction and the prope nsity of manufactur ers to apply more expensive, lower density materials: EPA has partially based its position on information provided by AISI that the mass of a vehicle may be reduced through the application of High Strength (HSS) and Advanced High Streng th Steels (AHSS). In AISI's comments, they noted that the mass of certain stru ctures could be reduced by 25% through the application of AHSS. Given the magnitude of the mass reduction an ticipated in support of this rule, the majority of the ma ss reduction could and most likely will be accomplished through additional applica tions of HSS and AHSS. These premium steel products are also more e xpensive than mild steel at a given weight. As a result, even though the application requires less st eel by weight, the end product could be profit neutral to the steel companies.

During the Public Hearing, U.S. Steel co mmented that new vehicle structures incorporating high-strength st eel would twice as strong as previous designs and were capable reducing mass by 20 percent while still meeting increased crash safety requirements and maintaining affordability. This appears to contradict their written comments that heavy vehicles would always be preferable to lighter vehicles in frontal collisions. The written comments also appear to ignore the fatalities in lighter vehicles struck by heavy vehicles. The 2010 Kahane Report, i 2005 DRI studies ii

, iii and 2006 work by Robertson iv indicate that reducing the mass of the heaviest light-duty trucks can result in an overall reduction of fatalities due to redu ced fatalities in lighter vehicles struck by

4-84EPA Responses on Joint Issues and Technical Work

light-duty trucks. The results from EPA's modeling also show a higher mass reduction is expected for larger vehicles and as such s hould help to alleviate the in vehicle weight disparity and crash incompatibil ity in small vs. large vehicles. See RIA chapter 7.6.1 and RIA chapter 4.7 table 4-14.

Organization: Spurgeon, C. M. Shaw, Donald F. Wood, J.S.

Comment:

Lastly, we care about our families’ safety as much as the Secret Service cares about the President's safety. There is a clear correlati on between size and weight of a vehicle and its safety. That is why the President's limo only gets a reported 8 mpg, not 35 mpg. The Secret Service should not have to cut corners in keeping the President safe, just as we should not have to cut corners to keep our families safe. [OAR-2009-0472-7092.1, p. 2]

The safety of vehicles meeting this requi rement will be significantly reduced with increased deaths and inju ry. [OAR-2009-0472-7270.1, p. 1]

Lastly, we care about our families. There is a clear correlation between size and weight of a vehicle and its safety. That is why the President’s limo only gets a reported 8 mpg, not 35 mpg. The Secret Service should not have to cut corners in keepi ng the President safe, just as we should not have to cut corn ers to keep our families safe. [OAR-2009-0472

- 7270.1, p. 3]

EPA Response:

In the proposed rule EPA made reference to two major studies on the effects of vehicle mass and fatalities. The first was an an alysis completed in 2003 by NHTSA which determined that vehicle fatalities increased with a reduction in curb weight. The second analysis was performed by Dynamics Research Incorporated (DRI) and determined that there were other factors involved other than just the curb weight of the vehicle. Specifically, they determined that a reducti on in curb weight w ithout a reduction in a vehicle's footprint will improve a vehicl e's ability to avoid a crash, improve the survivability in the impacted vehicle, and reduce fatalities in rollovers. The EPA has studied these reports as well as input from automotive manufact urers, material suppliers, and government laboratories and believes th at mass can be removed from a vehicle without adversely affecting safety. In fact , mass reduction technique s have already been employed in most, if not all, light duty vehi cles to meet current FMVSS regulations and increase feature content.

The 2010 Kahane Report, 2005 DRI studies a nd 2006 work by Roberts on indicate that reducing the mass of the heaviest light-duty trucks can result in an overall reduction of fatalities due to reduced fatalities in lighter vehicles by struck by light-duty trucks. The results from EPA's modeling of how ve hicle manufacturers may respond to GHG

4-85EPA Response to Comments

regulations also show a higher mass reduction is expected for la rger vehicles and as such should help to alleviate the in-vehicle weight disparity and crash incompatibility in small vs. large vehicles.

With regard to specific comments about th e Presidential limousine, this vehicle was reportedly built using a GMC Topkick/Chevr olet Kodiak heavy-duty truck platform v

, which is rated at 19,500 lbs. GVWR and thus is classified as a heavy-duty vehicle. This final rule only applies to passenger cars and light-duty trucks (<8,500 lbs. GVWR) and thus does not include heavy-duty vehicles. The regulation also does not specifically mandate any changes in vehicle mass, although it is likely that small reductions in vehicle mass that maintain safety will occur as detailed in EPA’s regulatory impact analysis due to the cost effectiveness of curb weight reductions of less than 10% in reducing CO 2
. Organization: State of Connecticut Department of Environmental Protection

Comment:

DEP is not expert in the economic analysis of safety considerations that influenced the development of the proposed CAFE and GHG emission standards. We note, however, differing conclusions reached by EPA and NHT SA on safety issues. DEP requests that EPA and NHTSA work to resolve these differen ces using the latest science, most recent available data and a forward look ing approach that balances th e safety interests of drivers and passengers with the protec tion of public health and the environment for all. [OAR

2009-0472-7301, p.2]

EPA Response:

The Connecticut Department of Environmenta l Protection is correct in their assessment of the respective positions of NHTSA and EPA regarding mass reduction and safety in the NPRM. The two agencies are working clos ely to resolve these differences with the understanding that we both hold public safety in the highest regard. The agencies discussion is focused on not only the historic al analyses, but also the engineeing and science behind vehicular safety as it relate s to mass reduction. For the final rule, EPA and NHTSA have added a joint se ction on safety within section II of the final preamble.

Organization: Competitive Enterprise Institute

Comment:

Fuel economy mandates lead to redu ctions in vehicle size and weight.

Downsizing, however, has a direct negative impact on vehicle crashworthiness. In general, there is a positive correlation be tween vehicle size and safety, and between vehicle weight and safety. Fu el economy, on the other hand, is negatively correlated with size and weight. For this reas on, there is a clear tension between crashworthiness and efforts to improve fuel economy. Given the direct connection between fuel economy and

4-86EPA Responses on Joint Issues and Technical Work

CO2 emissions, EPA’s proposed rule raises th is very same safety problem. [OAR-2009

- 0472-7281.1, p.4]

New technologies and “attribute-based” regulatio n will not eliminate the safety trade-off.

Although EPA acknowledges that CAFE regulation in the past has diminished auto safety by decreasing vehicle mass, EPA assures us that this time things will be different, because the GHG standards will not lead to downsizing. Under the Energy Independence and Security Act (EISA), enacted in 2007, fu el economy targets vary according to a vehicle’s “footprint” (the area formed by multiplying the wheelbase by the vehicle’s track width). NHTSA and EPA have “carefully chos en” the “footprint curv e (or function)” so that it “neither encourages manufacturers to increase nor decrease th e footprint of their fleet.” Consequently, says EPA, automakers will have no incentive to reduce a vehicle’s “crush and crumple zones.” Yet on the very same page, EPA acknowledges that, “EPA’s modeling projects that vehicle manufacturers wi ll reduce the weight of their vehicles by 4% on average between 2011 and 2016 although indi vidual vehicles may have a greater or smaller weight reduction...”

In short, the average vehicle will have less ma ss to absorb collision forces than would be the case absent the rule. On average, each vehicle will be less safe than it would otherwise be. Despite being “attribute-based,” the rule will limit production of heavier, safer vehicles. Consumers will not be able to buy all the safety they are willing to pay for. [OAR-2009-0472-7281.1, p.5]

EPA Response:

The Competitive Enterprise Institute (CEI), in their comments to the proposed rule, stated that vehicle downsizing and weight reduction, while being effective at reducing fuel consumption, will reduce the safety of vehicl es. The two terms, downsizing and weight reduction, are used somewhat interchangeably in their comments when in fact these are two distinct attributes which must be addressed separately.

In an effort to discourage and otherwise el iminate incentives to downsize vehicles to meet the standards, NHTSA and EPA have crea ted a footprint based attribute curve as the form of the standards. CEI was incorrect in their statement that the Energy Independence and Security Act (EISA) enacted a footprint based strategy. EISA mandates that the stringency be controlled by a ve hicle attribute. NHTSA and EPA chose footprint as that attribute. EPA believes that the slope of the footprint attribute standard has been designed to minimize the incentive for manu facturers to make smaller vehicles (minimizing any regulatory benefit from do wnsizing by flattening the curve only for the smallest vehicles of 41 sq. ft. and lower footprin t). In this effort the agencies feel they have been successful in addressing vehicle downsizing concerns. EPA recognizes that based on economic and consumer demand factor s that are external to this rule, the distribution of footprints in the future may be different (either smaller or larger) than what is projected in this rule. However, th e agencies continue to believe that there will not be significant shifts in this distribution as a direct consequence of this rule.

4-87EPA Response to Comments

Weight reduction as a cost effective means of improving fuel economy and reducing CO2 emissions has been adopted by both NHTSA and EPA in their projections of technologies which could be utilized in a cost-effective manner to meet the standards. While the agencies differ slightly in their application of mass reduction, both agencies believe that it may be accomplished without sacrificing ve hicle safety. Mass reduction can be accomplished through several mechanisms without changing a vehicle's impact performance and/or size. They include: Material Substitution, where a lower density material replaces a higher density material; Smart Design, which consists of optimizing designs to minimize mass and/or combining functions of co-located components; and finally, Mass Compounding which allows for re sizing ancillary systems that are directly dependent on vehicle mass, such as brakes and suspension components.

Organization: University of Pennsylvania, Environmental Law Project

Comment:

While a number of studies have found that smaller vehicles are less safe for their occupants, many researchers have calle d this conclusion into question. The evidence indicates, instead, that disparities in vehicles size are likely to lead to injuries. Further, there is strong evidence that larger vehicles such as SUVs and light trucks impose significant safety risks on the drivers of other cars. Thus, despite claims that safety is served by maintaining vehicle size, the evidence is, at best, ambiguous on this point. Given evidence that larger vehicles impose high safety risks on non-occupants, and that large size disparities crea te the greatest risks, there is significant reason to question the disparate efficiency and emissions standards imposed on large and small vehicles. While there are clear reasons to maintain th e market’s role in providing consumers with choices, there are also clear reasons why the regulations propagated by EPA and NHTSA should not greatly encourage the manufacture of larger vehicles, which both impose greater safety risks and emit more greenhouse gases. [OAR-2009-0472-7286.1, pp. 16

- 17]

EPA Response:

EPA agrees with the University of Pennsyl vania Environmental La w Project's comments regarding the rule’s effect on ve hicle safety. The rule is spec ifically designed to create no incentive to produce either larger or smalle r vehicles. The results from EPA's modeling show a higher mass reduction is expected for la rger vehicles and as such should help to alleviate the disparity in vehicle we ight in small vs. large vehicles.

Organization: American Iron and Steel Institute

Comment:

Further, in Section III-f-4 (Weight Reduc tion and Potential Safety Impacts), p. 49589

- 49590, Federal Register) and in the recently re leased Draft Regulation Impact Analysis (DRIA), Section 3.2.1.2, there is discussion about weight reduction (mass reduction) as a

4-88EPA Responses on Joint Issues and Technical Work

technology that supports fuel economy. Rega rding the methodology, the document states 'A footprint attribute also w ould not discourage the use of lightweight materials, as a lighter vehicle with no change in footprin t would more easily comply with its CO2 target'. The proposed rule documents identify two paths to the achievement of materialsbased mass reduction, one based on the use of low density materials and the second based on the use of high-strength materials like high-strength steels in place of mild steel grades. AISI supports this clas sification and considers both ap proaches equally viable to increasing fuel economy for a carmaker within the proposed standard. However, if mass reduction is achieved through materials substitut ion of certain 'lower density materials' the total life cycle en ergy use and OHO emissions may not be equivalent to reducing mass (vehicle weight) with high-strength stee ls. This is of significant concern if the EPA/NHTSA objective is to reduce the to tal energy use and OHO footprint of the automotive fleet. [OAR-2009-0472-7088.1, p.4]

By using conventional high-strength steels (HSS), advanced high st rength steels (AHSS), and ultra-high-strength steels (UHSS) together with modem structural computer-aided design and engineering (CAD, CAE), mass reduc tions of over 25 % have been realized both in research studies and in actual app lications. The use of HSS and AHSS simply reduces the amount of steel required to do the same job in the vehicle. This mass reduction achieved by using steel more effici ently benefits fuel economy (driving cycle emissions reduction) equivalent to the ma ss reduction accomplished by application of a lower density material (such as aluminum, composites, or magnesium). However, the substitution of low-density materials can l ead to increases in the energy and greenhouse gas emissions associated with manufacturing such materials. Comparative charts of the greenhouse gas emissions and the energy asso ciated with making specific automotive materials are shown in Figures 3a and 3b, respectively. Here it is easily seen that alternative structural materials considered as possible substitutes for steel can produce 6 to 17 times the GHG emissions and consume 8 to 15 more energy as steel while achieving mass reduction in a vehicle. Unfortuna tely, what is gained in fuel economy in the driving phase of the ve hicle life through weight reduc tion can be easily lost by selection of such high-energy, GHG-intensi ve, low-density materials. [OAR-2009-0472

- 7088.1, pp.4-5]

Much has been written about the impact of vehicle size a nd weight on passenger injury severity. Recent summary data suggest that the daily toll on worldwide roadways is 3,000 deaths and 30,000 serious injuries. Because of technological advancements in vehicle engineering, including optimized crumpl e zones, rigid passenger compartments, strengthened side structures, air bags, electroni c stability control, antilock brakes and so forth, the historical relationship between vehi cle size, weight, and collision severity may be influenced by design and structural impr ovements over time. Efforts to standardize bumper heights to prevent large vehicles from overriding smaller passenger cars in collisions are also impor tant. [OAR-2009-0472-7088.1, pp.7-8]

In spite of all these advances designed to protect occupants, it is clear that large, heavy vehicles are preferred to smaller ones in h ead-to-head collisions. Work by Desapriya and others have demonstrated that occupants in passenger sedans are more than two times

4-89EPA Response to Comments

likely to be injured than drivers or passengers in larger pickup tr ucks and SUVs. Resent testing conducted by the Insurance Institute for Highway Safety (IIHS) concluded in head-on collisions between sm all and large cars, small cars sustained significantly more damage, despite a 'Good' in the standard IIHS testing [which really only tests a vehicle against standard barriers and not against larger vehicles]. [OAR-2009-0472-7088.1, p.8]

The aggressive schedule for implementing the proposed rule assures that carmakers will be manufacturing smaller, lighter vehicles in order to comply. This is likely to occur while a high percentage of heavier SUVs and light trucks are still on the road. We believe there is a high probability the rate of serious injury will increase because of the increase in the percentage of smaller vehicles and th e higher probability that smaller cars will collide with the larger vehicles. [OAR-2009-0472-7088.1, p.8]

AISI has shown in its research with the Auto /Steel Partnership and in programs supported by the U. S Department of Energy, the use of new AHSS steel grades can enable the mass of critical crash structures, su ch as front rails and bumper systems, to be reduced by 25 percent. Such vehicle structures with redu ced mass can perform as well as their heavier counterparts in standard NHTSA frontal or IIH S offset instrumented crash tests. However these tests do not address rela tive vehicle size, hence in sp ite of these accomplishments with high-strength steels, it is unlikely that the 'vehicle footprint' formula will totally negate the disadvantage drivers of smaller ve hicles have in collisions with trucks and SUVs. [OAR-2009-0472-7088.1, p.8]

AISI believes more time is needed to allo w powertrain developmen t to occur to help achieve higher fuel economy. The development of electrification in powertrains (such as in battery-electric vehicles or plug-in hybrids), more e fficient internal combustion engines, and alternative energy sources [bio fuels and hydrogen] will take time. Matching the compliance timetable for this rule to technological capability of carmakers will prevent a rush to smaller vehicles that are less safe on roadways also populated by vehicles twice their mass or more. [OAR-2009-0472-7088.1, p.8]

EPA Response:

See also the earlier response to similar comm ents by U.S. Steel Corporation in this same RTC section. AISI also noted that: “ AISI has shown in its rese arch with the Auto/Steel Partnership and in programs supported by the U.S. Department of Energy, the use of new (Advanced High Strength Steel) AHSS steel gr ades can enable mass of critical crash structures, such as front rails and bumper sy stems, to be reduced by 25 percent. Such vehicle structures with reduced mass can perf orm as well as their he avier counterparts in standard NHTSA frontal or IIHS offs et instrumented crash tests .” This is exactly the type of material substitution that EPA noted in the NPRM. In this case a vehicle can be made lighter without a concomitant decrea se in crush and crumple zones.

On the other hand, AISI also commented that “ the aggressive schedul e for implementing the proposed rule assures that carmakers will be manufacturing sma ller, lighter vehicles in order to comply ”. Porsche and IIHS had similar comments implying that footprint

4-90EPA Responses on Joint Issues and Technical Work

standards will increase the risk that manufactur ers will make vehicles smaller. In section II.C and III.D of the preamble to the final rule, the EPA describes in detail why we disagree with these statements. EPA believe s that the slope of the footprint attribute standard has been designed to minimize the incentive for manufacturers to make smaller vehicles (minimizing any regulatory benefit fr om downsizing by flattening the curve only for vehicles with the small 41 sq. ft. and lower f ootprint). In this effo rt the agencies feel they have been successful in addressing ve hicle downsizing concerns. EPA recognizes that based on economic and consumer demand f actors that are external to this rule, the distribution of footprints in the future may be different (either smaller or larger) than what is projected in this rule. However, th e agencies continue to believe that there will not be significant shifts in th is distribution as a direct c onsequence of this rule. EPA believes that manufacturers will make vehicles lighter for increased fuel efficiency, but are not likely to reduce vehicle footprint to make them significantly smaller in response to the GHG standards containe d in this final rule.

Organization: Dynamic Research, Inc

Comment:

The Proposed Rule contains a number of statem ents in its Section IIIF.4 with respect to DRI’s research. A few of these statements c ontain misstatements or misinterpretations. The following text first quotes each such mi sstatement or misinterpretation and then presents DRI’s comments on it. [OAR-2009-0472-7238.1, p.5]

1. “The DRI work focused on four major points...:

1. 2–Door vehicles represented a significant po rtion of the light duty fleet and should not be ignored; 2. Directional control and therefore crash a voidance improves with a reduction in curb weight; 3. The occupants of the impacted vehicle, or ‘‘collision partner’’ benefit from being impacted by a lighter vehicle; 4. Rollover fatalities are reduced by a reduction in curb weight due to lower centers of gravity and lower loads on the roof structures.”

The four major points listed in Section III.F.4 of the Proposed Rule are only some of the points and conclusions in DRI’s work. The DR I work focused on the effects of vehicle size and weight (i.e., curb weight, wheelba se, and track) on vehicle crash avoidance, crash-worthiness, and compatibility, based on accident and fatality data. There were numerous conclusions in additi on to those listed, including th e benefits of both increased size and reduced weight . [OAR-2009-0472-7238.1, pp.5-6]

For example, Tables 1 and 2 summarize the DRI results that for both the passenger car fleet and light truck and van fleet, weight reduction produces a statistically significant decrease in estimated fatalities , while track reduction results in a statistically significant increase in estimated fatalities. In add ition, for the passenger car fleet, wheelbase

4-91EPA Response to Comments

reduction also produces a statis tically significant increase in fatalities. Overall these results indicate a consistent trend for both fleet s. These trends are also consistent with the DRI results for the “1991-1998 4-door non-pol ice passenger car only” fleet preferred by NHTSA, as shown subsequently in Table 4. It is unknown why NHTSA was unable to reproduce these results, however several possible reasons are discussed herein. [OAR

2009-0472-7238.1, p.6]

2. “Directional control and therefore crash avoidance impr oves with a reduction in curb weight.”

This is an accurate but incomplete summary of one of DRI’s conclusions. The empirical results in Table 3 of the 2005 DRI report indi cated that crash avoidance improves with reduction in curb weight a nd/or with increases in wh eelbase and track. The 2005 DRI also offered possible explanations for these re sults in Section III of the report, noting that “Crash avoidance can depend, amongst other fa ctors, on the vehicle directional control and rollover characteristics.” As just one example, wheelbase is a parameter in the quasisteady vehicle directional equa tions of motion. These equatio ns “indicate that passenger cars with shorter wheelbases tend to have smaller characteristic speeds, resulting in higher [yaw rate] natural frequency and less damping, based on analys is of quasi-steady vehicle equations-of-motion.” Therefore, ba sed on various theoretical models and empirical crash data, DRI concluded that “T hese results indicate that vehicle weight reduction tends to decrease fatalities, but vehicle wheelbase and track reduction tends to increase fatalities.” [OAR-2009-0472-7238.1, p.8]

3. “...when DRI and NHTSA separately analyzed individual vehicle attributes of mass, wheelbase and track width, DRI and NHTSA obtained different results for passenger cars.”

This is an accurate statement which warra nts further explanation. The differences found may be due to the different assumptions about the linearity of the cu rb weight effect and control variables for driver age, vehicle age, road conditions, and ot her factors. NHTSA's analysis was based on a bi-linear model for curb weight with two diffe rent weight groups (less than 2950 lbs, and greater than or e qual to 2950 lbs). The DRI analysis assumed a linear model for curb weight with a singl e weight group. The bi-linear model used by NHTSA may be over-parameterized because it ha s one additional curb weight coefficient to be estimated as well as a smaller curb weight range to estimate each curb weight coefficient, compared to the DRI analysis. NHT SA also used 8 different control variables for driver age instead of th e three variables used in th e 1997 NHTSA analysis and DRI analyses. It is also unclear what other control variables we re used in the comparison to the DRI results. The control variables in the DRI analyses were originally those selected by Kahane. This bi-linear approach used by NHTSA approach and possible differences in the control variables could explain th e 'widely differing results.' [OAR-2009-0472

- 7238.1, pp.8-9]

This difference between the NHTSA and DRI me thods seems to be related to differences in the basic research question and related assumptions and the available data used. A

4-92EPA Responses on Joint Issues and Technical Work

brief chronology of the NHTSA and DRI reports is listed in Table x, for reference. The objective of the DRI study was to estimate the first-order (i.e., linea r) independent effects of vehicle curb weight, wheelbase, and track on safety (i.e., assuming that these effects are linear). The objective of the NHTSA study appears to be to estimate both the firstorder and the second-order (i.e ., non-linear) effects of curb weight (which was assumed to be a surrogate for both vehicle size and we ight) on safety (i.e., assuming that the size and weight effects are fully correlated with each other and inseparable). In our opinion it is not possible to estimate both the first-orde r (i.e., linear) and the second-order (i.e., bi

linear) effects of vehicle curb weight, wheelba se, and track on safe ty, and at the same time to have both the first-order and second-orde r terms be statistically significant, given the available historical data. Therefore, th e NHTSA objective appears to have been selfdefeating from the start. [OAR-2009-0472-7238.1, pp.9-10]

EPA Response:

EPA acknowledges that the points listed in the preamble to the proposed rule, cited in the DRI comment, were not comprehensive, and we re better interpreted as some of the major contrasts between Kahane’s and DRI’s met hodology and results. The four points are as follows, with #1 and #4 discusse d in greater detail below.

1. 2-Door vehicles represented a significan t portion of the light duty fleet and should not be ignored.

2. Directional control and theref ore crash avoidance impr oves with a reduction in curb weight and/or increase s in wheel base and track.

3. The occupants of the impacted ve hicle, or “collision part ner” benefit from being impacted by a lighter vehicle.

4. Rollover fatalities are reduced by a reduction in curb wei ght due to potentially lower center of gravity and lower loads on the roof structures.

In addition to DRI’s comments on EPA’s resu lts summary, DRI identified a clarification required for the second point (as it was stat ed in the NPRM). DRI commented that a decrease in wheel base or trac k could result in an increase in fatalities. DRI offered results from the application of the “quasi -steady vehicle direc tional equations of motion”. These results show “that passenger cars with shorter wheelbases tend to have smaller characteristic speeds, resulting in hi gher [yaw rate] natura l frequency and less damping, based on analysis of quasi-steady vehicle equations of motion”. The EPA concurs with DRI’s analysis and has adjust ed point #2 accordingly in the discussion in section 7.6.1 in the final RIA.

Organization: Honda Motor Company

Comment:

4-93EPA Response to Comments

[Following comments are from LA Testimony, OAR-2009-0472-7283, pp.96-103]

Safety and downsizing. Much has been writte n and researched about the impact of size, weight, and fuel econom y regulation on safety.

As we have previously testified, Honda beli eves that size is a much better attribute than weight, and we believe that the argumen t over the safety differences between a sizebased attribute and a we ight-based attribute misses a larger point. The larger issue, it seems to us, is the need to downsize the fleet.

The size-based attribute introduced as an option in 2008 and mandatory from 2011 essentially reduces incentives to downsize from the current fleet mix. This means that the only way to improve fuel economy is th rough the application of technology and, therefore, higher costs.

In the previous regulation, consumers coul d downsize their vehicles and save money. Downsizing the fleet with an intelligent approach to safety has the salutary effect of greatly lowering the cost of greenhouse gas redu ctions. We believe that , as the fleet size and weight trend down, safety can be improve d on a fleet-wide basis and efficiency can be improved at a lower overall cost to consumers.

Towards that end, the cap on passenger car re quirements below 41 square feet, roughly the smallest 10 percent of the market, is an important step in the right direction. We recommend that a similar cap be set on the sm allest 10 percent of the truck market as well.

Overall consideration should be given towards encouraging more fleet downsizing in order to promote safety and lower the cost of greenhouse gas reductions.

EPA Response:

The agencies acknowledge Honda's position in support of the footprint based attribute curve, and the relationship between vehicle si ze and safety. Both NHTSA and EPA offer this statement as corroborat ing and validating the agencies ’ goal of developing standards based on the footprint attribute in a ma nner which provides no encouragement or incentives to produce sma ller vehicles as a compliance strategy.

4.7. Endangered Species Act

Organization: Center for Biological Diversity

Comment:

As noted in our previous comments on the DE IS, incorporated here in by reference, the agencies must also conduct an Endangered Species Act Section 7 consultation to fully inform their decision making prior to i ssuing final standards. [OAR-2009-0472-7265.1, p.

4-94EPA Responses on Joint Issues and Technical Work

25] Previous comments submitted on the DEIS review Endangered Species Act requirements; assert that di rect, indirect and cumulative emissions from regulated vehicles “may affect” listed species and that NHTSA must therefore initiate consultation under Section 7; refer to seve ral listed species (including polar bears and listed coral species) and include an exhibit identifying 143 listed species for which a recovery plan has been adopted that references climate cha nge or a projected impact of climate change as a threat to the species; and assert that the rule will impact species in ways beyond global warming and ocean acidification with a re ference to vehicles as a primary source of excess nitrogen which contributes to se veral environmental issues. [NHTSA-2009

- 0059-0053.1, p. 9; NHTSA-2009-0059-0090.1]

EPA Response:

EPA has considered the commenter’s refe rence to Endangered Species Act (ESA) Section 7 consultation as well as the separa te comment addressing ESA issues submitted by the same commenter and others (which is incorporated by re ference into this comment) on NHTSA’s DEIS for their CAFE Standards. EPA has worked with NHTSA to assess ESA requirements and develop the agencies’ responses to these comments. EPA notes that NHTSA’s response to the comment submitted on its DEIS is found in Appendix G of its Final EIS. As set forth below, EPA adopts the reasoning of NHTSA’s response as applied to EPA’s rulemaking action.

ESA Section 7(a)(2)

Section 7(a)(2) of the ESA requires federal agencies, in consultation with the National Oceanic and Atmospheric Administration Fisher ies Service (NOAA Fisheries) and/or the U.S. Fish and Wildlife Service (FWS, and, with NOAA Fisheries, the Se rvices), to ensure that actions they authorize, fund or carry out are not likely to jeopardize the continued existence of federally-listed threatened or enda ngered species, or re sult in the destruction or adverse modification of de signated critical habitat of such species. 16 U.S.C. § 1536(a)(2). Under relevant implementing regul ations, consultation is required only for actions that “may affect” listed species or critical habitat. 50 CF R § 402.14. Consultation is not required where the action has “no effect” on such listed species or critical habitat. Under this standard, it is the federal agency taking the action that evaluates the action and determines whether consultation is required. See 51 FR 19926, 19949 (June 3, 1986). The effects of the action are defined by regula tion to include both the direct and indirect effects on species or critical habitat. 50 CFR § 402.02. Indirect effects are those that are caused by the action and are later in time, but still are reasonably certain to occur. Id.; Cf., 51 FR at 19932-19933 (discussing “reasonably certain to occur” in the context of cumulative effects analysis and noting that only matters that are like ly to occur – and not speculative matters – are includ ed within the standard).

Pursuant to Section 7(a)(2) of the ESA, EPA ha s considered the effect s of its rule and has reviewed applicable ESA regulations, case la w, and guidance to determine what, if any, impact there may be to listed species or desi gnated critical habitat. EPA has considered issues relating to emissi ons of carbon dioxide (CO 2 ) and other greenhouse gases (GHGs)

4-95EPA Response to Comments

as well as issues relating to emissions of non-GHG air pollutants. Based on this assessment, EPA has determined that the agency’s rulemaking action, which, as described below, will generally result in em issions reductions from what would otherwise occur in the absence of the rule, does not require consul tation with the Services under Section 7(a)(2) of the ESA.

Department of the Interior Views Regarding ESA Requirements and GHG Emissions

The FWS and Department of the Interior ( DOI) have considered issues concerning ESA Section 7(a)(2) requirements in the context of federal agency actions relating to sources of GHG emissions on a number of occasions. In the context of the final listing of the polar bear as a threatened species under the ESA (73 FR 28212 (May 15, 2008)), FWS determined, with supporting analysis provide d by the U.S. Geological Survey, that the best currently available scientific data do not support drawing a causal connection between GHG emissions from particular sour ces and effects on listed species or their habitats, for ESA purposes. In addition, FWS explained that it does not believe there is sufficient data to establish that any such im pacts are reasonably certain to occur, for ESA purposes. Based on these conclusions, FWS dete rmined that federal action agencies need not consult under Section 7(a )(2) of the ESA with resp ect to any such impacts. 15

As FWS explained in the fi nal polar bear listing:

Formal consultation is required for proposed Federal actions that “may affect” a listed species, which requires an examina tion of whether the direct and indirect effects of a particular action meet th is regulatory threshold. GHGs that are projected to be emitted from a facility would not, in and of themselves, trigger formal section 7 consultation for a part icular licensure action unless it is established that such emissions constitu te an “indirect effect” of the proposed action. To constitute an “indirect effect,” the impact to the species must be later in time, must be caused by the proposed action, and must be “reasonably certain to occur” .... [T]he best scientific data available today are not sufficient to draw a causal connection between GHG emissions fr om a facility in the conterminous 48 States to effects posted to polar bears or their habitat in the Arctic, nor are there sufficient data to establish that such imp acts are “reasonably certain to occur” to polar bears. Without suffi cient data to establish th e required causal connection – to the level of “reasonable certainty” – between a new facility’s GHG emissions and impacts to polar bears, section 7 consultation would not be required to address impacts to polar bears.

15 See Memorandum from H. Dale Hall, Director, U.S. Fish and Wildlife Service re: “Expectations for Consultation on Actions that Would Emit Greenhouse Gases” (May 14, 2008), Docket No. EPA-HQ-OAR

2009-0472-11676; Memorandum from Mark D. Myers, Director, U.S. Geological Survey re: “The Challenges of Linking Carbon Emissions, Atmospheric Greenhouse Gas Concentrations, Global Warming, and Consequential Impacts” (May 14, 2008), Docket No. EPA-HQ-OAR-2009-0472-11677.

4-96EPA Responses on Joint Issues and Technical Work

73 FR at 28300. Subsequent to the final pol ar bear listing, DOI issued a Solicitor’s Opinion explaining DOI’s view that actions that involve the emission of GHGs do not meet the “may affect” threshold set forth in the ESA regulations and therefore do not trigger the consultation requirement s of Section 7(a)(2) of the ESA. 16 The Solicitor’s Opinion explains that, for purposes of the ES A “may affect” test, neither direct effects nor indirect effects would re sult from GHG emissions from particular sources. The Opinion concludes that where the effect at i ssue is climate change, proposed actions that involve the emission of GHGs cannot pass the “may affect” test and therefore are not subject to ESA consultation.

FWS also addressed this issue in finalizing a special rule to protect the polar bear under Section 4(d) of the ESA, 16 U.S.C. § 1533(d). 73 FR 76249, 76265-76266 (December 16, 2008). At that time, FWS again considered whether federal actions associated with GHG emissions require consul tation under ESA Section 7(a)(2). As FWS stated:

We have specifically considered whet her a Federal action that produces GHG emissions is a “may affect” action that re quires section 7 cons ultation with regard to any and all species that may be imp acted by climate change. As described above, the regulatory analysis of indirect effects of the proposed action requires the determination that a causal linkage exists between the proposed action, the effect in question (climate change), a nd the listed species. There must be a traceable connection from one to the next , and the effect must be “reasonably certain to occur.” This causation linkage narrows Sec tion 7 consultation requirements to listed species in the “action area” rather than to all listed species. Without the requirement of a causa l connection between the action under consultation and effects to species, litera lly every agency action that contributes greenhouse gases to the atmosphere woul d arguably result in consultation with respect to every listed species that ma y be affected by climate change. This would render the regulatory concept of “action area” meaningless. There is currently no way to determine how the emissions from a specific action both influence climate change and then subseque ntly affect specific listed species. As we now understand them, the best scientific data currently available do not draw a causal connection between GHG emissions resulting from a specific Federal action and effects on listed species or critical habitat by climate change.

73 FR at 76266. FWS also cited to th e October 3, 2008, DOI Solicitor’s Opinion confirming the conclusions that, given the curren t state of available science, a causal link cannot be made between GHG emissions associ ated with a proposed federal action and specific effects on a listed speci es. Id. FWS thus concl uded that GHG emissions from such actions cannot pass the “may affect” te st and are not subject to consultation under the ESA and its implementation regulations. Id.

16 See Memorandum from David Longly Bernhardt, Solicitor, U.S. Department of the Interior re: “Guidance on the Applicability of the Endangered Sp ecies Act’s Consultation Requirements to Proposed Actions Involving the Emission of Greenhouse Gases” (Oct. 3, 2008), Docket No. EPA-HQ-OAR-2009

- 0472-11678.

4-97EPA Response to Comments

The FWS’ final rule under Section 4(d) became effective on January 15, 2009. Following the change in administration, FWS revi ewed and retained th e 4(d) rule without alteration. As FWS stated during that review:

It is currently not possible to directly link the emission of greenhouse gases from a specific power plant, etc. to effects on specific bears or bear populations. This direct “connect the dots” st andard is required under th e Act and court rulings. Therefore, Fish and Wildlife Service’s polic y guidance to its fiel d staff is not to require such consultations....Pending furthe r review and analysis, the Department does not believe that a project-by-project ESA review of proposed actions that have the potential to increase greenhouse gas emissions, regard less of where they occur or how much they contribute to global greenhouse gas emissions, is the appropriate tool for addressi ng climate change impacts.

U.S. Department of the Interior, Polar B ear 4(d) rule – Q’s and A’s (May 8, 2009). 17

Consistent with FWS’ and DOI’s guidance, EPA agrees that there must be a causal connection between a federal act ion and a potential effect on listed species or designated critical habitat for Section 7(a)(2) consultation requirements to apply, and that the potential effect must be r easonably certain to occur. EPA believes that any possible impacts on listed species or cr itical habitat of changes in GHG emissions associated the light duty motor vehicle rule fall within th e analytical framework laid out in the polar bear documents and Solicitor’s Opinion, in which FWS concluded that consultation under Section 7(a)(2) of the ESA was not required.

EPA’s Prior Analysis of ESA Requirements and GHG Emissions

EPA has also previously considered issues relating to GHG emissions from stationary sources in connection with the requirements of ESA Section 7(a)(2). In correspondence to the Services, EPA has acknowledged that the legal and technical analysis undertaken by FWS and DOI concludes that Section 7(a)(2) consultation on single-source GHG emissions is not required due to an absen ce of causation and reasona bly certain effects, for ESA purposes. 18 As an additional basis for cons idering Section 7( a)(2) obligations,

17 Available at: http://www.fws.gov/ home/feature/2009/pdf/Q andApolarbear4drule.pdf (last accessed Feb. 19, 2010). FWS has continued to consistently state this view of ESA requirements in connection with GHG emissions, including in its recent proposal of designated critical habitat for the polar bear. See 74 FR 56058, 56070 (Oct. 29, 2009) (stating that the underlying causes of climate change are complex global issues beyond the scope of the ESA); Polar Bear Proposed Critical Habitat Questions & Answers (reaffirming that the current state of the science is un able to connect a particular source of GHG emissions to effects on listed species or critical habitat). Available at: http://alaska.fws.gov/fisheries/mmm/polarbear/pdf/PB%20PropCH.QsAs.Final.pdf (last accessed February 18, 2010).

18 See Letter from Robert J. Meyers, Principal Deputy Assistant Administrator, Office of Air and Radiation re: “Endangered Species Act and GHG Emitting Activ ities (Oct. 3, 2008), Docket No. EPA-HQ-OAR

2009-0472-11679.

4-98EPA Responses on Joint Issues and Technical Work

EPA also conducted a modeling analysis of single-source GHG emissions to assess the potential risk of harm to listed species – in cluding the polar bear and listed coral species under NOAA Fisheries’ jurisdiction. In light of EPA’s considerable expertise in global climate change research and experience in utilizing available m odels to analyze GHG emissions, EPA believes that this prior analys is remains both relevant and instructive to our determination that the light duty motor vehicle rule is outside the scope of ESA consultation.

In this prior analysis, EPA noted that to date, research on how emissions of CO 2 and other GHGs influence global climate change and associated effects has focused on the overall impact of emissions from aggregate global sources. EPA al so stated that the climate change research community has not ye t developed tools specifically intended for evaluating or quantifying end-poi nt impacts attributable to th e emissions of GHGs from a single source, and that EPA was not aware of any scientific literature regarding the climate effects of individual, facility-level GHG emissions . Additionally, because the global and regional-scale models lack the capability to represent explicitly many important small-scale processes, EPA further noted that confidence in regional- and subregional-scale projections is lower than at the global scale. There is thus limited scientific capability in assessing, detecting, or measuri ng the relationship between singlesource emissions of GHGs and any localized im pact on a listed species, its habitat, or its members for ESA purposes. EPA affirmed that its understanding of the available modeling tools was consistent with statemen ts made by the U.S. Geological Survey ( see footnote 1 above) in the contex t of the polar bear listing ( i.e., that it is beyond the scope of existing science to identify a specific sour ce of CO2 emissions and designate it as the cause of specific biological responses).

Notwithstanding the inherent uncertainties associated with modeling single-source emissions and localized regional or sub-regi onal end-point impacts, EPA analyzed the potential effect on temperature and tropical ocean pH of emissions from a hypothetical single source, which, as describe d in EPA’s letter, was a subs tantially larger source of emissions than any actual facility then awaiting permitting action by EPA. 19 EPA’s analysis projected at most only extremely small impacts on average global temperature and global atmospheric CO 2 concentrations over and be yond the anticipated functional lifetime of the hypothetical source. A lthough regional modeling and associated downscaling introduced untested approach es and additional uncertainties, EPA downscaled the projected global temperature ch anges to the Arctic and Caribbean regions in light of expected higher relative temper ature increases at the poles. Ultimately, EPA concluded that any temperature and ocean acid ification outputs from the modeled source would be extremely small, beyond physical me asurement or detection in the habitat of listed corals or polar bears, and at a scal e below any specific adverse temperature or

19 For GHGs, EPA’s analysis used emissions estimates of 14,132,586 metric tons per year of CO 2 , 273.6 metric tons per year of nitrous oxide, and 136.8 metric tons per year of methane. With regard to non-GHG pollutants, the analysis used: Ozone (180.7 metric t ons per year of volatile organic compounds); Carbon monoxide (6019 metric tons per year); Sulfur dioxide (3609 metric tons per year); and Nitrogen oxides (3018.5 metric tons for first five years, then 2326.2 annual metric tons for the remaining 45 years). In addition, EPA assumed that the model facility would ha ve a useful life of approximately 50 years.

4-99EPA Response to Comments

acidification effects identified in the scientif ic literature for those species. Because the principal climate model used in the analysis would be the first step in any similar assessment for any species, EPA determined th at similar conclusions would also apply to other species and locations. EPA concluded:

In these circumstances, and al so in light of the uncertainties in attempting to use the models’ outputs to predict impacts at a local level, EPA has determined that the risk of harm to any listed species, in cluding the listed corals or polar bears, or to the habitat of such species based on the anticipated emissions of the model facility as described above, or any facility with lowe r emissions, is too uncertain and remote to trigger ESA section 7(a)(2 ) obligations. Sectio n 7(a)(2)’s purpose of ensuring no likely jeopardy to listed species and no destruction or adverse modification of designated critical hab itat is not implicated by such remote potential risks. See

, e.g. , Ground Zero Center for N on-Violent Action v. U.S. Department of the Navy , 383 F.3d 1082 (9th Cir. 2004) (where the likelihood of jeopardy to a species is extremely remote , consultation is not required). This reasoning is consistent with the c onclusion reached by FWS and DOI that consultation under ESA section 7(a)(2) is not required for GHG emissions from a single source. 20

EPA’s ESA Analysis Re: GHGs

The comment states that EPA must c onduct ESA Section 7 consultation on its rulemaking action. Among other things, the comment submitted on NHTSA’s DEIS (which is incorporated by reference in th e comment submitted on the rules) identifies 143 listed species for which, the comment asserts, “a recovery plan has been adopted that specifically identifies climate change or a proj ected impact of climate change as a direct or indirect threat to the species, as a critical impact to be mitigated, as a critical issue to be monitored, and/or as a component of th e recovery criteria.” See Docket No. NHTSA

2009-0059-0090.1. Although EPA agrees that clim ate change and related issues are relevant considerations in regard to the rec overy of many species, in cluding species listed under the ESA, EPA believes that, as a pplied to EPA’s rulemaking, the comment generally misunderstands the effect of EPA’s action, and misapplies ESA Section 7(a)(2)’s requirements.

For instance, the comment appears to attribut e the entire volume of emissions from the regulated sector – including a reference at one point to “increased greenhouse gas emissions” – to the current actions. Id. EPA notes, however, that at present, there are no federal restrictions on GHG emissions from new light duty motor vehicles. In fact, EPA’s light duty vehicle GHG rule, for the fi rst time, adopts federal controls on those emissions. It does not license, issue permits fo r, or otherwise allow emissions to occur. Rather, the rule controls emissions of GHGs pursuant to, and subject to the requirements

20 See supra footnote 4.

4-100EPA Responses on Joint Issues and Technical Work

of, section 202(a)(1) of the Clean Air Act. 21 EPA has consequently analyzed the rule’s impacts in terms of the GHG emissi on reductions achieved by the rule. 22 Because EPA’s rule results in the reduction of GHG emissions from the regulated sector, the rule would reduce the severity of climate change as analy zed at a global scale and can, therefore, be expected to have a beneficial effect with respect to global climate change (and therefore could not have an adverse effect on listed sp ecies that are negatively affected by climate change). The comment presents no information and raises no issue with regard to these potential effects and ESA considerations.

EPA is also mindful of the significant lega l and technical analys is undertaken by FWS and DOI as well as EPA’s prior analysis re garding GHG emissions and the ESA. With regard to the light duty motor vehicle rule, EP A’s analysis determined that the rule would reduce GHG emissions over the lifetime of MY 2012-2016 passenger cars and light trucks in the amount of 962.0 million metric tons of CO 2 equivalent. RIA Table 5-3. Based on these reductions, EPA modeled the anticipated potential effect on climate change and found that in year 2100, the rule would reduce temperature increases by 0.006-0.015 degrees Celsius, and the reduc tion in sea-level rise would be 0.06-0.14 centimeters. EPA has also projected a reduction in CO 2 concentration of 2.9 parts per million in 2100, which corresponds to a projected ocean pH increase of 0.0014 units in 2100. See RIA chapter 7.4.2. Thus, EPA expects the agency’s action would have a beneficial overall effect on temperature, sea level rise and ocean acidification by decreasing the severity of climate change and CO 2 concentration as assessed on a global scale. However, as described above in the prior analyses undertak en by FWS, DOI, and EPA, any efforts to translate these small global changes to effects in the specific habitats of any listed species or to effects on such species is problematic.

For instance, as noted above, EPA believes that changes in GHG emissions associated with the rule are within the framework of the FWS/DOI analysis, which concluded that Section 7(a)(2) consultation is not required due to the abse nce of a causal connection and reasonably certain effects on listed species. Although this rule involves GHG emissions reductions from mobile sources rather than fr om a single stationary source, EPA believes that FWS’/DOI’s analysis regarding causation would be identical for the mobile sources regulated by the rule. In this regard, FWS’ /DOI’s analysis and c onclusion that it is impossible, for ESA purposes, to trace a causa l link between a single stationary source’s GHG emissions and any reasonabl y certain effect on a specifi c species in a specific habitat would apply equally to the reductions of emissions from this rule relating to mobile sources. The commenter presents no information to the contrary.

21 That provision requires, for instance, that EPA’s standards be premised on a finding of technological feasibility, taking costs into consideration, and that there be sufficient lead time “to permit the development and application of the requisite technology.” See generally 74 FR at 49464-65. This means, among other things, that EPA cannot adopt such infeasible an d cost-prohibitive measures as prohibiting all GHG emissions from the regulated vehicles. Nor can EPA’s rule force the use of c ontrol technologies beyond the point of their availability, taking costs into account, during model years 2012-2016. The basis for the stringency of the standard is set out in section III.D of the preamble to the final rule.

22 EPA analyzed impacts on criteria pollutants in the same manner. See Preamble section III.G.

4-101EPA Response to Comments

In addition, as EPA has previously done in the context of stationa ry sources, EPA has considered the magnitude of change to GHG emissions resulting from implementation of the rule. As described above, notwith standing uncertainties and novel model applications, EPA previously attempted to analyze the emissions of a single large stationary source with respect to impacts on temperature a nd tropical ocean pH. EPA’s conclusion was that any such potential effect s would be so small as to be beyond physical measurement or detection in the habitats of listed species and outside the scope of any potential effect on such species/habitat identi fied in the scientific literature that EPA reviewed. EPA has determined that the same conclusion applies to changes in GHG emissions associated with the light du ty motor vehicle GHG rule. The commenter presents no information to the contrary.

EPA notes that the predicted changes in gl obal mean temperature and oceanographic pH attributable to this rule ar e roughly one to one and one-half orders of magnitude greater than those evaluated by EPA in the Oct ober 3, 2008, Meyers letter, and are also directionally different – i.e. , improvements in climate-related effects rather than decrements. These slight differences in th e climate signal do not change EPA's ultimate conclusion. The predicted effects remain directionally important, yet small and attenuated in time. EPA knows of no mode ling tool which can link these small, timeattenuated changes in global metrics to particular effects on listed species in particular areas. Extrapolating from global metric to local effect with such small numbers, and accounting for further links in a causativ e chain, remain beyond current modeling capabilities. EPA has particularly evalua ted the potential effect of the predicted improvement in oceanographic pH on listed co rals, since the chain of causation between CO 2 concentration and corals is somewhat less i ndirect than chains of causation for other listed species ( e.g. , climate effects on polar bears which, among other things, involve assessments of additional complex factors rela ting to the life histor y of the species and polar sea ice dynamics). Even in this instan ce, the predicted improvements in pH are so small that there is no evidence in the literatur e that there would be an effect on listed coral species. The commenter presents no information to the contrary.

Based on these results, and consistent with EPA’s prior analysis and the Ground Zero decision noted above, EPA also believes that an y potential for a specific impact to listed species in their habitats associated with these very small changes in average global temperature and ocean pH is too remote to trigger the threshold for ESA Section 7(a)(2) consultation.

EPA’s Analysis Re: Other Air Pollutant Emissions

EPA has also carefully considered issues relating to changes in non-GHG emissions expected to result from implementation of th e rule. As part of its rulemaking, EPA has estimated the total changes in national criteria and air toxi c pollutant emissions annually to 2030. For most pollutants, there is a ne t decrease in emissions as the rule is implemented. For other pollutants, there are small emissions increases as the rule is implemented over time. For all of the non-GHG pollutants, the estimated national reductions – and, for a few pollutants, the estim ated potential increases – are of extremely

4-102EPA Responses on Joint Issues and Technical Work

small magnitudes (substantially smaller by seve ral orders of magnitude than estimated reductions in GHG emissions). The following chart provides EPA’ s estimated changes for each of the non-GHG pollutants.

Impacts of Program on Non-GHG Emissions (Short Tons per year)

POLLUTANT CALENDAR YEAR

2020 % CHANGE VS. 2020 REFEREN CE CALEND AR YEAR 2030 % CHANGE VS. 2030 REFEREN CE Δ 1,3-Butadiene -95.1 -0.38% -21.1 -0.10% Δ Acetaldehyde 760.0 2.26% 668.1 2.18% Δ Acrolein 0.8 0.01% 4.7 0.07% Δ Benzene -889.9 -0.48% -523.1 -0.29% Δ Carbon Monoxide 3,980.3 0.01% 170,648.6 0.56% Δ Formaldehyde -49.4 -0.06% 15.1 0.02% Δ Oxides of Nitrogen -5,916.1 -0.02% -21,845.0 -0.07% Δ Particulate Matter (below 2.5 micrometers) -2,402.9 -0.03% -4,574.8 -0.05% Δ Oxides of Sulfur -13,853.4 -0.42% -27,492.8 -0.82% Δ Volatile Organic Compounds -60,305.4 -0.51% -115,816.5 -1.02%

Source: RIA Table 5-2

EPA has carefully considered the potential e ffects of these pollutant s and is unaware of information identifying any effects on listed species from such small fluctuations in pollutant amounts. 23 Further, EPA notes that the modeling tools available for EPA’s regulatory analysis are not desi gned to trace fluctuations in ambient concentration levels to potential impacts on particular species. EPA believes that such models do not, therefore, attribute any biol ogical response or impact on li sted species to the ambient concentration changes with the degree of r easonable certainty required under the ESA. The commenter again has presented no inform ation challenging this conclusion. For similar reasons as explained above regardi ng GHG emission changes, EPA thus believes that ESA consultation is not required with respec t to non-GHG emission changes attributable to the light duty motor vehicle rule.

23 Among other things, EPA’s review included consideration of the information contained in the Integrated Science Assessments for both Particulate Matter and Ozone ( see U.S. EPA 600/R-08/139F, “Integrated Science Assessment for Particulate Matter” (2009), Docket No. EPA-HQ-OAR-2009-0472-11295; US EPA, 600/R-05/004aF-cF “Air Quality Criteria for Ozone and Other Photochemical Oxidants” (2006), Docket Nos. EPA-HQ-OAR-2009-0472-0099, -0100, - 0101). These documents are developed pursuant to section 108(a)(2) of the Clean Air Ac t, and “accurately reflect the latest scientific knowledge useful in indicating the kind and extent of all identifiable effects on public ... welfare which may be expected from the presence of such pollutant in the ambient air.”

4-103EPA Response to Comments

i “Relationships Between Fatality Risk, Mass, and Foot print in Model Year 1991-1999 and Other Passenger Cars and LTVs,” Charles J. Kahane, NCSA, NHTSA, March 2010, available within Docket NHTSA-2009

- 0059. We note that this report has not yet been ex ternally peer-reviewed, but that NHTSA has begun the process for peer review in accordance with OMB guidance by the time of publication of this final rule. The results of the peer review and any subsequent revisions to the report will be made available in a public docket and on NHTSA’s website as they are completed.
ii “Supplemental Results on the Independent Effects of Curb Weight, Wheelbase and Track on Fatality Risk”, Dynamic Research, In c., DRI-TR-05-01, May 2005.
iii “An Assessment of the Effects of Vehicle Weight an d Size on Fatality Risk in 1985 to 1998 Model Year Passenger Cars and 1985 to 1997 Model Year Light Trucks and Vans”, Van Auken, M., Zellner J.W., SAE Technical Paper Number 2005-01-1354, 2005.
iv “Blood and Oil: Vehicle Characteristics in Relation to Fatality Risk and Fuel Economy”, L.S. Robertson, American Journal of Public Health , Vol. 96, No. 11, November 2006.

v “2009 Cadillac Presidential Limousine” David Gluckman, Car and Driver Magazine, January 2009.

4-104EPA Vehicle Program, Feasibility, and Estimated Impacts

5. EPA Vehicle Program, Feasibility, and Estimated Impacts

....................................................... 2 5.1 Vehicle Categories and Test Procedures

.............................................................................. 2 5.2 Reserved

............................................................................................................................. 17 5.3. EPA Averaging, Banking, and Trading Provisions

........................................................... 17 5.4 Temporary Lead-time and Small Volume Manufacturers

................................................. 36 5.5. N2O and CH4 standards

.................................................................................................... 91 5.6. EPA Small Entity Exemption

.......................................................................................... 120 5.7 EPA Additional Credit Opportunities for CO 2 Fleet Averaging Program

....................... 123 5.8 Feasibility of the CO 2 Standards

...................................................................................... 280 5.9. Reserved

........................................................................................................................... 288 5.10. EPA Certification, Compliance, and Enforcement

........................................................ 288 5.11. EPA Estimates of GHG Emissions Reductions and Their Associated Effects

.............. 385 5.12. EPA Estimated Impact on Non-GHG Emissions and Their Associated Effect

............. 395 5.13 EPA Estimated Cost, Economic, and Other Impacts

..................................................... 403 5.14. Statutory and Executive Order Reviews

........................................................................ 447 5.15. Comments on EPA Regulatory Text

.............................................................................. 457

5-1EPA Response to Comments

5. EPA Vehicle Program, Feasibility, and Estimated Impacts

5.1 Vehicle Categories and Test Procedures

5.1.1. Vehicle Categories

Organization: Ford Motor Company Hyundai Motor Company California Air Resources Board National Association of Cl ean Air Agencies (NACAA) National Automobile Dealers Association (NADA) Toyota Motor North America

Comment:

Ford Motor Company

Ford supports the use of footprin t-based standards with separate car and truck fleets based on NHTSA vehicle definitions for both the GHG and CAFE programs. Ford and the auto industry have long supported separate car and truck attribute-based sta ndards because cars and trucks have different functional characteri stics even if they have the sa me footprint. For example, the Edge and the Taurus have the same footprint (and base curb weights within 100 lbs), but significantly different towing capab ilities. The Edge can tow up to 3500 lbs with the trailer tow package, but the Taurus can only tow 1000 lbs. So me of the key features incorporated on the Edge that enable the larger tow capability incl ude an engine oil cooler , larger radiator, and updated cooling fans. This is one of many exampl es that show the functional difference between car and truck and further support the need to ma intain separate car a nd truck attribute-based standards. [OAR-2009-0472-7082.1, p. 2]

Hyundai Motor Company

NHTSA is required by the Energy Independence and S ecurity Act to maintain separate passenger car and truck CAFE compliance ca tegories, but EPA has authority to implement a single fleet program. We would support a single fleet program, because it would provide greater compliance flexibility for manufacturers, while maintaining energy and environmental benefits.

Of course, for the two agencies to dive rge on compliance categories would reduce the harmonization between the two programs. Thus, it would be optimal if the statutory inconsistencies could be resolved to allow a si ngle national program w ith a single fleet. If statutory inconsistencies are not resolve d, then harmonization between EPA and NHTSA programs should remain a priority. Regardless, a ny future changes to compliance categories and vehicle classifications within those categories should provide ample lead time prior to adoption. [OAR-2009-0472-7231.1, p.3]

California Air Resources Board

5-2EPA Vehicle Program, Feasibility, and Estimated Impacts

EPA requested comment on whether the proposed separate car and light truck standards are sufficient to avoid concerns over emission reductions that could be lost if vehicles are upsized. CARB supports separate greenhouse gas standards for passenger ca rs and light-duty trucks as proposed. As noted in the Joint Proposal, vehicl e attributes such as load carrying and towing capacity differ between these two categories a nd, therefore, are appr opriately addressed by separate fleet average requi rements. [OAR-2009-0472-7189.1, p.10]

[CARB also submitted these comments as test imony at the Los Angeles public hearing. See docket number OAR-2009-0472-7283, pp. 21-27]

National Association of Cl ean Air Agencies (NACAA)

Finally, in November 26, 2008 comments to EP A on the agency’s Advance Notice of Proposed Rulemaking on regulating GHG emissions under the Clean Air Act, NACAA encouraged EPA to develop and enforce GHG standards for all key vehi cle, engine and equipment subsectors within the overall transportation sector. We reiterate th is recommendation now, especially with respect to onroad heavy-duty engines for which EPA should develop federal regulations without delay in close cooperation with the states. States are keen ly aware of the pressing environmental need to garner GHG emissions reductions from onroad hea vy-duty engines. In the absence of federal action, states will be pressed to move ahead us ing other authorities under the Clean Air Act so that emissions reductions from this sector can be achieved as soon as possible. [OAR-2009­ 0472-7071.1, p.4]

National Automobile Dealers Association (NADA):

The National Program should only apply to passenge r cars and light trucks with a gross vehicle weight rating (GVWR) of up to 10,000 lb. (excepting large pick-up trucks a nd cargo vans (“work trucks”) and certain vehicles manufactured in two or more stages). Existing definitions set out in 49 CFR Part 523 should be retaine d. EISA did not make, let alone suggest changes to existing vehicle classification defini tions, least of all that certain SUVs and all minivans be reclassified as passenger cars”. Moreover, for purposes of the National Progra m, EPA must harmonize its definitions to those set out in 49 CFR Part 523. [OAR-2009-0472-7182.1, p.9]

Toyota Motor North America:

As required by law, NHTSA proposes to set CA FE standards for three regulated fleets - domestically produced passenger vehicles (domestic cars), non-domestically produced passenger vehicles (import cars), and non- passenger vehicles (trucks) . Under NHTSA's CAFE proposal, the footprint-based attribute curve for both domes tic cars and import cars in a given model year is based on a single maximum feasible target cu rve when considering the combined fleet of import and domestic cars . While there is but a single target curve established for cars each model year, compliance with the ta rget curve must be calculated separately for import cars and domestic cars (in addition to a separate dom estic car anti-backslidi ng standard). [OAR-2009­ 0472-7291, p.6]

5-3EPA Response to Comments

Unlike NHTSA, EPA is not required by law to re gulate vehicle GHGs or ta ilpipe CO2 using any predetermined vehicle fleets. As such, EPA proposes to regulate based on two vehicle fleets - cars and trucks. For the purpose of regulati ng GHGs, EPA also proposes to use the same regulatory definition for 'cars' and 'trucks' as used by NHTSA in the CAFE program, albeit without the distincti on between import and domestic car for compliance calculations. [OAR2009-0472-7291, p.6]

Toyota supports EPA's proposal to regulate base d on two fleets (cars and trucks), as well as EPA's proposal to use the same definitions of 'car' and 'truck' as NHTSA. While EPA's proposal is not perfectly harmonized with NHTSA's three-fleet approach, both agencies are, in fact, setting just two sets of targ et curves - one for cars and one for trucks. The harmonization difference lies in the compliance calculations, an d the fact that NHTSA is forced by statute to require separate calculations fo r import cars and domestic ca rs. Toyota supports EPA's use of two fleets for its program because it provides gr eater compliance flexibility for manufacturers without creating additional burden. [OAR-2009-0472-7291, pp.6-7]

EPA also requests comments on combining the enti re fleet into a single compliance category, with a single target curve for the fleet each mode l year. If faced with just one federal program with which to comply, Toyota 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 about vehicl e classifications . However, due to the lack of harmonization with NHTSA's program that would result, and th e inflexibility afforded NHTSA in the existing CAFE statute, Toyota would not support EPA setti ng a single target curve for the entire fleet of cars and trucks even though it w ould result in the greatest le vel of flexibility. [OAR-2009-0472­ 7291, p.7]

Concerning EPA's adoption of NHTSA's car and truck definitions for the purpose of vehicle GHG regulations, Toyota supports this approach in order to maintain harmonization and avoid complex bookkeeping requirements that would be needed in the absence of harmonized definitions. The issue of whether NHTSA (and by extension EPA) should revise the current definitions of cars and trucks for fuel econom y and GHG regulation purposes is addressed later in these comments. [OAR-2009-0472-7291, p.7]

EPA Response:

In general there was widespread support for se parate car and truck at tribute-based standards based on harmonized definitions of car and tr uck between the EPA and NHTSA programs. Although Hyundai commented that “We would support a single fleet program, because it would provide greater compliance flexibility for manufacturers, while maintaining energy and environmental benefits,” they acknowledged that there were statutory c onstraints that would prohibit a harmonized program based on a single fleet. Hyundai concluded that harmonization of the two programs was the first priority, and th us in the absence of statutory changes there should be separate but harmonized fleets.

As explained in section III.B.1 of the preambl e to the proposed rule (74 FR at 49516/2), and reiterated in the preamble to the final rule and supported by many of the public comments, EPA

5-4EPA Vehicle Program, Feasibility, and Estimated Impacts

is not finalizing a single fleet sta ndard. First, some vehicles classi fied as trucks (such as pick-up trucks) have certain attri butes not common on cars which contribute to higher CO 2 emissions— notably high load carrying capability and/or high towing capability. Due to these differences, it is reasonable to separate the automobile fleet in to two segments. Second, the segmentation of the automobile fleet is a key program design el ement of the GHG standa rds that EPA believes should be harmonized with NHTSA’s CAFE prog ram. NHTSA is required by statute to set separate standards for passenger cars and for non- passenger cars. Finally, because manufacturers are able to transfer credits between their car and truck fleet s under both the NHTSA and EPA programs, most of the advantages raised by co mmenters of a single fleet standard for all automobiles are also present in the two-fleet program being finalized. Because EPA is allowing credit transfers between a manuf acturer’s car and truck fleets, th e two fleets can effectively be viewed as a single fleet when manufacturers consid er compliance strategies . The one benefit of a single light-duty fleet not captured by a two-fleet approach is that a single fleet prevents potential “gaming” of the car and truck definitions, wher eby manufacturers might tr y to design vehicles most similar to passenger cars but which meet th e regulatory definition of trucks. EPA does not believe at this time that concern is sufficient to outweigh the other reason s for separate car and truck fleet standards.

Consistent with the comment from NADA, EP A is finalizing as pr oposed the overall fleet covered by the standards, i.e., all vehicles up to 8500 pounds GVWR plus the limited category of passenger vehicles between 8500 and 10,000 pounds GVWR known as medium-duty passenger vehicles. These are the vehicles to which th e current Tier 2 emission standards apply, and, starting with the 2011 model year, to which the CAFE program will apply (the CAFE program expands to cover the medium-duty passenger vehi cles starting in the 2011 model year).

The National Association of Clean Air Agenci es (NACAA) recommended that EPA regulate GHG emissions for all key engine and equipment subsections within the overall transportation sector, “especially for onroad heavy-duty engines for which EPA should develop federal regulations without delay in cl ose cooperation with the states.....I n the absence of federal action, states will be pressed to move ahead using other authorities u nder the Clean Air Act so that emissions reductions from this sector can be achieved as soon as possible.”

On October 20, 1999, the International Center for Technology Assessment (ICTA) and 18 other environmental and renewable en ergy industry organizations file d with EPA a “Petition for Rulemaking and Collateral Relief Seeking th e Regulation of Greenhouse Gas Emissions from New Motor Vehicles under Section 202 of the Clean Air Act.” As discussed in the proposal (74 FR 49507, September 28, 2009), on April 2, 2007, the U.S. Supreme Court held in Massachusetts v. EPA that greenhouse gases were air po llutants under the Clean Air Act and remanded the case to the U.S. Court of Appeals fo r the District of Columbia Circuit for further action. Heavy-duty vehicles are among the vehicl e classes addressed by the petition and it is likely that EPA will respond to the petition as part of a future rulemaking.

In addition, EISA added a new provision, 49 U. S.C. 32902 (k), requiring DOT, in consultation with DOE and EPA, to examine the fuel effici ency of commercial medium- and heavy-duty onhighway vehicles and work trucks and dete rmine the appropriate test procedures and methodologies for measuring their fuel efficien cy, as well as the appropriate metric for

5-5EPA Response to Comments

measuring and expressing their fuel efficiency performance and the range of factors that affect their fuel efficiency. DOT is authorized to develop fuel economy standards for these vehicles as part of this effort. Work on addres sing these requirements is on-going.

5.1.2. Test Procedures

Organization: Association of Intern ational Automobile Manufacturers (AIAM) Manufacturers of Emission Controls Association National Renewable Energy Laboratory American Council for an Energy Efficient Economy Sierra Club Cummins Inc. Fisker Automotive, Inc. University of California, Santa Barbar a, Bren Working Group on Vehicle Fuel Economy U.S. Coalition for Advanced Diesel Cars Hyde, James

Comment:

Association of International Au tomobile Manufacturers (AIAM):

AIAM does not support fundamentally changi ng the fuel economy/greenhouse gas test procedures at this time. Our reluctance to support such changes is due to the impact that such changes could have on the effective stringency of the standards. Any future changes should be accompanied by offsetting changes in the stri ngency of the standards and should provide adequate lead-time for manufacturers to make n ecessary changes to test equipment and reflect the new procedures in their co mpliance plans. [OAR-2009-0472-7123.1, p.17]

It is necessary to have consistent and similar testprocedures for battery electric vehicles, plug-in hybrids, and fuel cell vehicles. AIAM urges EP A to pursue the development of such test procedures in conjunction with the Society of Automotive Engineers. [OAR-2009-0472-7123.1, p.17]

[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]

Manufacturers of Emission Controls Association:

MECA supports 5-cycle approach : MECA believes that any regulatory requirements associated with greenhouse gas emissions shou ld be based on real-world drivi ng or usage patterns in order to ensure that regulatory sta ndards reflect actual vehicle ope rations and deliver the greenhouse gas emission reductions that are needed. [OAR-2009-0472-7108.2, p.6]

National Renewable Energy Laboratory:

5-6EPA Vehicle Program, Feasibility, and Estimated Impacts

In the alternate SCO3 test proced ure, there is only a 10 minute soak with solar lamps. This is not a sufficient duration for thermal load reduction technologies to have a significant impact on interior temperatures. A longer thermal soak period with lamps is recommended. [OAR-2009­ 0472-4798.1, p.1]

Thermal preconditioning of the passenger compartm ent is being considered to reduce A/C fuel use in PHEVs and EVs. When using grid power , this strategy effectively reduces vehicle powered A/C usage and eliminates the cool down A/ C fuel use. It is not clear if this strategy would be allowed under the proposed test procedure. It is recommended th at the test procedure allow the use of cabin thermal preconditioning as a method to reduce A/C fuel use. [OAR-2009­ 0472-4798.1, p.1]

American Council for an En ergy Efficient Economy:

EPA should take the opportunity offered by the ne w regulatory regime for GHGs to establish an emissions test that reflects real-world emissions to the extent possible. As EPA demonstrated in its rulemaking to update fuel economy labels, th e best available estimate of real world fuel economy is some twenty percent lower on aver age than the CAFE value. The discrepancy between label values and CAFE values is a co nstant source of confusion to consumers and legislators, and may also cons titute an obstacle to achievi ng fuel use and GHG emissions reductions in a timely fashion [OAR-2009-0472-7260.1, p.14]

While NHTSA cannot change fuel economy test procedures for cars without a change in law, this need not hinder EPA’s adopt ion of realistic test methods. EPA and NHTSA standards could still be harmonized with the use in the near term of a “correct ion factor” to reconcile test differences, just as EPA has allo wed manufacturers to generate label values on an interim basis through calculations using th e outdated city and highway test values. [OAR-2009-0472-7260.1, pp.14-15]

Further work beyond that done for EPA’s labe ling rule may be warranted to produce a satisfactory vehicle testing protoc ol update. If this work cannot be completed before the light duty vehicle GHG rule is finalized, EPA should state in the rule a date certain, within the next few years, by which the switch to a more accura te testing protocol will be adopted. [OAR-2009­ 0472-7260.1, p.15]

Recommendation: Include in the final rule a statement that GHG emissions testing will be improved to represent real-world emissions and provide a date by which this improvement will occur. [OAR-2009-0472-7260.1, p.15]

Sierra Club:

Finally, the need for off-cycle credits highlight s the inadequacy of current test procedures. Although the 5-cycle test is a much improved appr oach, compared to the FET and HFET, there is a clear need to update ce rtification test procedures to accoun t for all available technologies as well as current driving conditions and behaviors. Updating test procedures will allow for broader

5-7EPA Response to Comments

integration of “off-cycle” technologies in fu ture rounds of standards. We discuss updating certification test procedures later in our comments. [OAR-2009-0472-7278.1, p.15]

Cummins Inc.:

Cummins recommends that EPA and NHTSA adopt test procedures and methodology to measure fuel economy and GHG emissions that are more re flective of real-world conditions. This would ensure a fair and level playing field for all t echnologies based on their inherent strengths, and above all ensure that the proposed regulations maximize the societal benefits. [OAR-2009-0472­ 7205.1, p.2]

Cummins urges EPA to update its test procedure and calculations to reflect real-world driving. EPA has adopted a 5-cycle fuel economy test fo r fuel economy labeling pu rposes, but for CAFE, the Agency still uses the 2-cycl e test made up of the Federal Te st Procedure-75 (FTP, or “city” driving) and the Highway Fuel Economy Test (HFET, or “highway” driving). In order to maximize the societal benefits the standard s are meant to produce, EPA and NHTSA should adopt test cycles and procedures which reflect realworld driving. Administering standards based on test cycles the agencies know are not reality-based will le ad to the design of vehicles according to artificial standards and will fail to maximize the societal benefits. [OAR-2009­ 0472-7205.1, p.2]

Fisker Automotive, Inc.:

Fisker Automotive recommends the following pro cess to calculate emissions and fuel economy. [OAR-2009-0472-8732.1, p.7]

1. Collect data directly from a ra nge of vehicles to assess driver behavior specific to vehicle class. Data should come directly from vehicl es—via data loggers and GPS— rather than via survey methods, in order to yield reliable data an d reduce costs.

2. Define drive cycles that characterize a vehicl e. For example, sweep through the full range of acceleration profiles and speeds possible by the vehicle at various loads and conditions.

3. Digitally map the test results of #2 to the clas s-specific driver behavior data of #1. This will yield how the tested vehicle will perform as drivers of that class will use them.

4. Report the average of these #3 results onto th e fuel economy label, as shown in Figure 3. Make additional data available online.

5. Allow automakers to submit their own data on how their specific vehicle is being used and actually performing. This data would supplant data from #1 and 2, respectively. This will encourage a plethora of fuel-s aving and behavior-changing practi ces and technologies that fall outside possible drive cycles. Some examples include the following.

a. Displays that communicate and reward efficient driving b. Automaker promotion of efficient driving

5-8EPA Vehicle Program, Feasibility, and Estimated Impacts

c. GPS route optimization, including traffic d. More convenient charging me thods for plug-in vehicles

e. Photovoltaics (solar panels) [OAR-2009-0472-8732.1, p.7]

Drive cycles that attempt to imitate average driver behavior encourage automakers to design for the drive cycles, which inevitably disregards a great deal of vehicle operation. Corrective calculations which aim to adjust the cycle data to approximate reality further distance these figures from the original intent , and do not apply well to dive rse technologies. For example, electric, hybrid, and gasoline powertrains have wild ly different efficiency maps. Even within the same category, these efficiency maps vary wide ly depending on the specif ic architecture and components used. Correction calculations based on the US light duty vehicle fleet may apply moderately well for the most common types of vehicles, but vehicles that fall outside the majority will be unjustly rewarded or penalized by calculations that do not apply well to the specific vehicle. [OAR-2009-0472-8732.1, p.7]

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

Current Emissions Testing Protocols We commend the EPA’s efforts to develop tests that provide an accurate method for anticipating fuel economy achieved in real worl d driving; however, we have found some areas of concern in the current testing procedures and we see pot ential for improvement in methodology. Our first concern is the discrepancy betw een testing procedures for cars versus light trucks. We propose that cars and light truc ks be tested using as similar a me thodology as possible. There are also concerns over the brief testing time of 10 mi nutes, which does not reflect the average US commute times of 24.3 minutes. We encourage the EPA to increase the length of testing time to reflect these figures and allow more opportunity for variable c onditions during testing. Another area where we would like to s ee increased testing is in the number of new vehicles lines analyzed. The EPA reports that 30 percent of ne w vehicle models are tested. To get the best measure of total fleet efficiency, we think that a greater percentage of models should be tested off the line. Additional concerns include constant temperature, pressure and engine fluid volume assumptions that likely do not re flect real world conditions. We s uggest more variation be added to these tests to cover a more accurate ra nge of on-road vehicle conditions. [OAR-2009-0472­ 7188.1, p. 9]

[University of California, Santa Barbara, Br en Working Group on Vehicle Fuel Economy also submitted these comments as testimony at the Los Angeles public hearing. See docket number OAR-2009-0472-7283, pp.119-121]

U.S. Coalition for Advanced Diesel Cars:

The Coalition takes note of EP A's conclusion, based on a computer simulation, that light duty diesels are not a 'viable or cost effective opti on.' EPA makes this statement even as 2009 demand for diesel engines by American consumers is st rong on vehicles where a powertrain choice is available. In fact, after only a year in the mark et, the percent of customer s selecting clean diesel engines has already matched or ec lipsed the percent selecting ga soline hybrids on vehicles that offer consumers a choice . Further, EPA's comput er-model driven conclusions are completely at

5-9EPA Response to Comments

odds with market realities in Europe, a carbon-constrained region where advanced diesel technology continues to set the ba r for drivability, fuel consumption and GHG emissions in realworld driving. In fact, for the Top 10 vehicles sold in Europe last year, diesel-powered versions delivered 17 percent lower GHG emissions than the nearest comparable gasoline engine available. [OAR-2009-0472-7496, p.4]

The Coalition urges EPA to reflect on a few fundamental questions:

-How would the agency's conclusion on diesel technology change if its modeling functions were not anchored on obsolete driving patterns? -How would it change if the model comprehende d off cycle emissions holistically across all technologies, rather than the narrow and sele ctive treatment found in the proposed rules? -How would it change if the Agency factored in the off-cycle performance of technologies on light duty vehicles American's use to earn a living? [OAR-2009-0472-7496, p.4]

Each day in our country, millions of Americans use their vehicles to load, haul and tow and they are the backbone of our economy. We urge EPA to bring this real-world perspective into the rulemaking so Americans have an opportunity to buy vehicles that deliver the best fuel-saving performance in real-world duty cycles. And th e best cost/benefit equa tion for real-world American families. [OAR-2009-0472-7496, p.4]

The Coalition believes Congress has made its inte nt clear: sharply redu ce light duty petroleum consumption and GHG emissions by 2020 while protec ting the consumer's right to affordable and safe products without systematically dimini shing consumer choice. The intent of Congress will be frustrated by a regulatory approach that is reliant on paper-based fleet reduction calculations versus one th at is built atop real-world conditions where American fuel is consumed and GHG emissions ar e created. [OAR-2009-0472-7496, pp.4-5]

To better understand driving habits of U.S. consumers, EPA proceeded to complete an exhaustive analysis of real-world driving patterns in the U.S. a nd the impact of driving patterns and off-cycle energy consumption (e.g., mobile ai r conditioners) on real-world fuel consumption. This authoritative analysis resulted in the promulgation of new rules in 2006, in which EPA asserted:

'A fundamental issue with today's fuel econom y estimates is that th e underlying test and calculation procedures do not fully represent current real-world driving conditions.' [OAR-2009­ 0472-7496, p.5]

Changing the test cycle weighting based on EPA data is a step in the right di rection to reality that can and should be done now. The Collation believes it is EPA's obligation: (1) To provide the automotive industry with a reality-based cal culation procedure on which to compare the effectiveness of technology choices to regulated parties under rapi dly changing limits, and (2) to align these choices with a r easonable estimate of the petroleum fuel and GHG emissions reductions policy makers can expect to achieve as a result of the Admini stration's rules. [OAR2009-0472-7496, p.5]

5-10EPA Vehicle Program, Feasibility, and Estimated Impacts

[[See Docket Number OAR-2009-0472-7496, pp.5-7 fo r a background discussion on CAFE and Label Fuel Economy.]]

Maximize Fuel and GHG Efficiency for Highe st Per Capita Fuel Users is Vital

According to data compiled by the U.S. Departme nt of Transportation, th e average owner of a new passenger car accumulates 14,200 miles per year while the average light truck owner accumulates 16,100 miles per year. These values for the 'average' American connect to the EPA's 2006 analysis that proved 57 percent of national vehicle miles traveled were at speeds akin to highway conditions, or above a speed cut point of 45 mph. DOT's analysis shows a substantial share of the American driving publ ic is accumulating miles at a ra te above the national average. In fact, the data shows 25 per cent of all light vehicle owners accumulate more than 18,000 miles per year with nearly 9 percent accumulating mo re than 36,000 miles per year. The Coalition urges EPA to recognize the following:

-Above average American drivers, in all likelihood, ar e accumulating more than 57 percent of their annual miles in highway conditions. -These Americans are the highest per capita cons umers of petroleum fuel in the nation where consumption is a function of vehicle effici ency and distance traveled. [OAR-2009-0472-7496, p.7]

We believe EPA should embrace rules, policie s and procedures that do not penalize manufacturers that choose to commercialize ve hicle technologies that maximize fuel and GHG efficiency in higher speed, higher load operati ng conditions. EPA should not deter manufacturers from commercializing fuel and GHG reducing technol ogies that appeal to the highest per capita users of fuel in the U.S. Clearly, vehicle fuel economy and GHG certifica tion calculations that over-weight stop-and-go city driving by 28 perc ent and understate highway driving by 27 percent (55/45 vs. 43/57) will bias manufact urer technology implementation away from operating conditions in which the majority of U.S. fuel is consumed. [OAR-2009-0472-7496, p.7]

EPA Proposes Continued Inconsistencies Through 2016

In summary, EPA is employing entirely incons istent calculation met hods as it embarks on ground-breaking GHG regulations th at will fundamentally govern forward research, technology implementation, capital investment, and job creation in the automobile industry.

-For purposes of regulating vehi cles and manufacturers as we ll as for educating American consumers, EPA proposes to maintain a test cy cle weighting that places the primary emphasis on city driving (55/45) -For purposes of measuring national fuel c onsumption and GHG emissions reductions - the benefits to be delivered by its rules - EPA is utilizing a mileage weighting that places the emphasis on highway driving ( 43/57). [OAR-2009-0472-7496, pp.7-8]

Mr. James Hyde:

5-11EPA Response to Comments

Temperature Impacts: All the testing done for the proposed CAFE and C02 standards would be done at in the specified temperat ure range for EPA testing of 68 to 86°F. The origin of this temperature range is somewhat obscure, but orig inated when the testing was done primarily for purposes related to summertime ozone problems and to easily accommodate test cell controls. EPA has espoused the concept of 'proportional be nefits'. That is, a reduction of a certain magnitude in the test would be reflected by a r eal-world reduction of ab out the same magnitude. Perhaps this assumption was valid in the past. Ther e is amble evidence that this does not apply in all circumstances with regard to technologies incorporated for fu el economy increases. There is currently a cold (20° F) standard for ca rbon monoxide; and this will be extended to hydrocarbons. Regulating and meas uring C02 and fuel economy at reduced temperatures is important as most driving is done at temperat ures outside the EPA ce rtification temperature range. [OAR-2009-0472-7258.1, p. 1]

It has also been well established that not all fuel economy and emission control measures are as effective at lower (or higher) temperatures as they are at the current test temperatures. This is very clear for hybrid electric vehicle (HEV ) technology which is often disabled at low temperatures as an element of the vehicle's design. Design elements which are less effective outside standard test temperatur es should not be credited with fuel or C02 reductions which the vehicles do not achieve in actual year-round operation. [OAR-2009-0472-7258.1, p. 1]

C02 Measurement Issues: The current proposal would result in a fleet average C02 level of 250 g/mi by 2016. Based on EPA's assumption that th e 250-g/mi standard would be met by passenger cars achieving an average of224 g/mi and light trucks an average of302 g/mi, and assuming that City emissions are 1.5 times Highway emi ssions 1 , the expected emissions of C02 are shown in Table 2. [OAR-2009-0472-7258.1, p. 4] [See OAR-2009-0472-7258.1, p. 4 for Table 2]

These averages can only be achieved by having a substantial number of vehicles with C02 emissions below the average. But the averages themselves are extremely low compared to the C02 emissions currently measured. For model year 2009 the fleet average was 440 g/mi compared to the expected 2016 average of 250 g/mi. In fact for all the ve hicle tests reported for model year 2009 only four had City emissions at or below 264 g/mi; and only six had Highway emissions below 176 g/mi. This indicated that what is now a rare occurrence will be commonplace in 2016. [OAR-2009-0472-7258.1, p. 4]

The ability of the test procedures in 40 CFR Part 86 to measure C02 accurately and precisely at these levels needs to be investigated. Becau se of the reciprocal relationship between C02 emissions and fuel economy, the uncertainly in fuel economy measurements increases dramatically as the C02 level is reduced. This is illust rated in figure below. [OAR-2009-0472­ 7258.1, p. 4] [See OAR-2009-0472-7258.1, p. 4 for the figure]

The larger, red triangles on the base are the observed average for MY2009 and the two standard deviation range boundaries. About 95% of the observe d values were in this range. To achieve an average of 250 g/mi the center re d triangle would need to move from its current location at 440 g/mi to the smaller green triangl e on the left. [OAR-2009-0472-7258.1, p. 5]

5-12EPA Vehicle Program, Feasibility, and Estimated Impacts

In the new range of C02 measurements the chan ge in mpg resulting from a 1.0 g/mi C02 change would be about 0.1 to 0.3 mpg instead of th e 0.02 to 0.15 mpg now encountered. When EP A regulated the impacts of certification gasolin e on fuel economy they stated: [OAR-2009-0472­ 7258.1, p. 5]

EPA believes that test fuel spec ifications, are sufficiently tight when changes in fuel property values within the specified tole rance do not change fuel economy test results by more than 0.01 miles per gallon (mpg). This is the degree of precis ion EPA has used in determining the effect of other test procedure changes on CA FE. This precision is necessary since as little as 0.01 mpg can affect manufacturers' CAFE as rounded o ff to the nearest 0.1 mpg. [OAR-2009-0472-7258.1, p. 5]

Clearly this goal cannot be met with cu rrent measurement methods. [OAR-2009-0472-7258.1, p. 5]

EPA Response:

Major Test Procedure Changes

Many commenters supported using the current city and highway test procedure for CAFE and greenhouse gas emissions. 1 However, comments from the American Council for an Energy Efficient Economy, Cummins, Fisker Automotive, Sierra Club, U.S. Coalition for Advanced Diesel Cars and the University of California, Santa Barbara recommended that EPA make major changes to test procedures so that the tests woul d more accurately reflect real-world conditions.

For example, the American Council for an En ergy Efficient Economy recommended that EPA “Include in the final rule a statement that GHG emissions testing will be improved to represent real-world emissions and provide a date by which this improvement will occur.”

The Manufacturers of Emission Controls Asso ciation “supports a 5- cycle approach.”

Fisker recommended that EPA “Define drive cycles that characterize a vehicle. For example, sweep through the full range of acceleration pr ofiles and speeds possi ble by the vehicle at various loads and conditions. Digita lly map the test results to the class-specific driver behavior data. Allow automakers to submit their own data on how their specific vehi cle is being used and actually performing. This will encourage a plet hora of fuel-saving and behavior-changing practices and technologies that fall outside possible drive cycles.”

1 Comments from the Alliance did not directly address the city/highway test procedure, but did indirectly support the use of the current city and highway test procedures. Fo r example, Alliance comments indicated that “The Alliance supports the joint rulemaking, including the proposed coordinated framework and structure. Further, the Alliance supports the proposal that both NHTSA and EPA use an attribute-based approach.” AIAM indicate that “AIAM does not support fundamentally changing th e fuel economy/greenhouse test proced ures at this time. Our reluctance to support such changes is due to the impact that such changes could have on the effective stringency of the standards.”

5-13EPA Response to Comments

Mr. James Hyde (public citizen) commented that it may not be appropriate for EPA to require proposed CAFE and CO2 testing to be conducted at the EPA certification temperature range of 68 to 86 degrees F. Mr. Hyde co mmented that “There is currently a cold (20°F) standard for carbon monoxide; and this will be extended to hydrocarbons. Regulating and measuring CO2 and fuel economy at reduced temp eratures is important as most driving is done at temperatures outside the EPA certification temperature range .” Regarding hybrid vehicles, Mr. Hyde’s comments indicate that hybrid elect ric vehicle technology “is often di sabled at low temperatures as an element of the vehicle’s design. Design el ements which are less effective outside standard test temperatures should not be credited with fuel or CO2 re ductions which the vehicles do not achieve in actual y ear-round operation.”

The U.S. Coalition for Advanced Diesel Cars commented that “We believe EPA should embrace rules, policies and procedures that do not pe nalize manufacturers that choose to commercialize vehicle technologies that maximize fuel and GHG efficiency in higher speed, higher load operating conditions.” Their comments also i ndicated that “Further, EPA's computer-model driven conclusions are completely at odds with market realities in Europe, a carbon-constrained region where advanced diesel technology cont inues to set the bar for drivability, fuel consumption and GHG emissions in real-world driv ing. In fact, for the T op 10 vehicles sold in Europe last year, diesel-power ed versions delivered 17 percent lower GHG emissions than the nearest comparable gasoline engine available.”

University of California, Santa Barbara comm ented that “We commend the EPA’s efforts to develop tests that provide an accurate method for anticipating fuel economy achieved in real world driving.” However, their comments also provided several recommendations including increasing the length of the tes ting time to “allow more opportunity for variable conditions during testing;” to increase the number of vehicl es tested by EPA, and suggested that “more variation be added to these test s to cover a more accurate range of on-road vehicle conditions.”

The American Council for an Energy-Efficient Economy (ACEEE), Cummins, and Sierra Club all suggested using more real -world test procedures.

It is not feasible at this time to base the final CO 2 standards on EPA’s five-cycle fuel economy formulae. Consistent with its name, these formulae require vehicle testing over five test cycles, the two cycles associated with the CO 2 standards, plus the cold temperature FTP, the US06 high speed, high acceleration cycle a nd the SC03 air conditioning test . EPA considered employing the five-cycle calculation of fuel economy and GHG emissions for this rule, but there were a number of reasons why this was not practical or otherwise appropr iate. As discussed extensively in the Joint TSD, setting the appropriate levels of CO 2 standards requires extensive knowledge of the CO 2 emission control effectivene ss over the certification test cycles. Such knowledge has been gathered over the FTP and HFET cycles for decades, but is severely lacking for the other three test cycles. EPA simply lacks the techni cal basis to project th e effectiveness of the available technologies over these three test cycles, and therefor e could not adequately support a rule which set CO 2 standards based on the five-cycle formulae. The benefits of today’s rule do presume a strong connection between CO 2 emissions measured over the FTP and HFET cycles and onroad operation. Since CO 2 emissions determined by the fi ve-cycle formulae are believed to correlate reasonably with onroad emissions , this implies a strong connection between

5-14EPA Vehicle Program, Feasibility, and Estimated Impacts

emissions over the FTP and HFET cycles and the five cycle formulae. However, while we believe that this correlation is reasonable on average for the vehicle fleet, it may not be reasonable on a per vehicle basis, nor for any si ngle manufacturer’s vehicles. Thus, we believe that it is reasonable to project a direct relationship between the percentage change in CO 2 emissions over the two certification cycles and on road emissions (a surrogate of which is the five-cycle formulae), but not reasonable to base the certification of specific vehicles on that untested relationship. Furthermore, EPA is allowing for off-cycle credits to encourage technologies that may not be not properly captured on the 2-cycl e city/highway test procedure (although these credits could appl y toward compliance with EPA' s standards, but not toward compliance with the CAFE standards for the reasons given in the next paragraph). For future analysis, EPA will consider examining new drive cycles and test procedures for fuel economy

Second, any possible revision to th e existing test procedures w ould also need to consider potential implications for othe r programs, including the stringen cy of EPA emission standards (for criteria pollutants and CO2 emissions); fuel economy labeling requirements, and notably, CAFE requirements and gas guzzler requirements. In addition, for CAFE testing of passenger cars EPA is required by statute to “use the same procedures for passenger automobiles the Administrator used for model year 1975 (wei ghted 55 percent urban cycle and 45 percent highway cycle), or procedures that give comp arable results;” Section 49 USC 32904(c) and 40 CFR 600.510-08. Although EPA is not prohibited from developing a different test procedure to evaluate fuel economy of light duty trucks, doi ng so would yield a mismatch in testing procedures (an undesirable result, as noted by the University of California Working Group in their comments), and would lead to disharm onized programs, undermining a key and legitimate objective of the joint rule making effort. In any case, doing so in this rulemaking is well beyond its scope as explained above and in section III.B.1.

Third, to revise the city and highway test proced ures would be expected to increase the burden on the automobile industry substa ntially. Thus, EPA would need to consider appropriate lead time for automakers to address changes in test procedures.

Fourth, the 43/57 weighting factor s developed during the 5-cycle fu el economy labeling rule are directly and inherently connected with the use of five-cycle es timates for both city and highway driving the resulting fuel economy values. Th ese weighting factors ar e not independent and should not be applied to city and highway fuel economy estimates (or CO2 emission values) based solely on the FTP and HFET test cycles. For example, when the methodology used to develop the 43/57 weighting factor s is applied to city and high way driving based on the FTP and HFET test cycles, respectively, the result is e ssentially 55/45, not 43/57. Thus, it would not be consistent with the technical underpinnings of th e 5-cycle fuel economy label rule to change the weighting factors used in the present rule.

In summary, EPA considers any major revisions to city and highway test procedures to be outside of the scope of this GHG rule. Howeve r, EPA will consider test procedures in the context of future rules setting standards for GHG emissions.

Note that additional information about test pr ocedures is contained in section 5.10.2 of this Response to Comments document.

5-15EPA Response to Comments

Test Procedures for Advanced Technology Vehicles

AIAM commented that “It is necessary to have c onsistent and similar test procedures for battery electric vehicles, plug-in hybrids, and fuel cell vehicles. AIAM urges EPA to pursue the development of such test procedures in conjunc tion with the Society of Automotive Engineers.”

Although EVs and FCVs will have compliance va lues of zero grams/mile, PHEV compliance values will be determined by combining zero gram s/mile for grid electricity operation with the GHG emissions from the 2-cycle test results dur ing operation on liquid fuel, and weighting these values by the percentage of miles traveled that EPA believes will be performed on grid electricity and on liquid fuel, which will vary for different PHEVs. EPA is currently considering different approaches for determining the weighti ng factor to be used in calculating PHEV GHG emissions compliance values. EPA will consider the work of the Society of Automotive Engineers Committee J1711, as well as other relevant factors. EPA will issue a final rule on this methodology by the fall of 2010, when EPA expects so me PHEVs to initially enter the market.

Accuracy of the CO2 Test Procedure

Mr. James Hyde (public citizen) commented that in the future model years, the CO2 levels of some vehicles will become much lower than the CO2 levels of current vehicles, e.g. less than 176 grams/mile. Mr. Hyde recommended that “The abil ity of the test procedures in 40 CFR Part 86 to measure CO2 accurately and pr ecisely at these levels needs to be investigated. Because of the reciprocal relationship betw een CO2 emissions and fuel economy, the uncertainty in fuel economy measurements increases dramati cally as the CO2 level is reduced.”

EPA Response:

EPA is confident that the current CO2 analyz ers are more than adequate to measure CO2 emissions at these levels. The same general t ype of analyzers which are used to measure CO2 emissions are also used to measure carbon m onoxide (CO) emissions. We note typical CO emission levels on the city and highway tests are approximately two to three orders of magnitude lower than typical CO2 emissions. For exampl e, the current Tier 2 Bin 5 (50,000/120,000 mile useful life) emission standards for CO on th e FTP (city) test are 3.4 and 4.2 grams/mile, respectively. Typical CO emission levels range from 0.1 to 4.2 grams/mile on the city and highway tests.

Beyond the accuracy of the equipment used to m easure CO2 emissions, EPA is concerned, as a matter of principle moving into a new era of greenhouse gas control, that greenhouse gas reductions reported for purposes of compliance with the standards adopted in this rule will be reflected in the real world and not just as calc ulated fleet average emission levels or measured certification test results. Therefore EPA will pa y close attention to technical details behind manufacturer reports. For example, EPA inte nds to look closely at each manufacturer’s certification testing procedures , GHG calculation procedures, and laboratory correlation with EPA’s laboratory, and to carefu lly review manufacturer pre- production, production, and in-use testing programs. In addition, EPA plans to monitor GHG performance through its own in-use

5-16EPA Vehicle Program, Feasibility, and Estimated Impacts

surveillance program in the coming years. This will ensure that the environmental benefits of the rule are achieved as well as ensure a level playing field for all.

5.2 Reserved

5.3. EPA Averaging, Banking, and Trading Provisions Organization: Alliance of Automobile Manufacturers General Motors Corporation Toyota Motor North America Hyundai Mercedes-Benz USA Volkswagen Ford Motor Company Ferrari S.p.a Environmental Defense Fund Public Citizen and Safe Climate Campaign Sierra Club Bright Automotive Porsche

Comment:

Alliance of Automobile Manufacturers

Compliance flexibilities are ab solutely necessary to meet the challenging fuel economy and greenhouse gas emissions standards that are being proposed. The flexibilities are crucial because they enable companies to choose diffe rent paths for achieving the same CO 2 reductions and fuel economy improvements. As a result, the anticipate d benefits of the proposed standards will be realized while enabling companies to comply in the most efficient way given specific product plans and business circumstances. EPA has long recognized that flexible compliance mechanisms such as those being proposed ar e a necessity for achieving both environmental protections and economic growth, and for this reason have been a staple of EPA emissions regulations.

It is precisely this combination of environmen tal benefit and implementation efficiency that made the proposed compliance flexibilities integral to the various stakeholders being able to reach consensus on the National Program. [OAR-2009-0472-6952.1, p. 7]

General Motors Corporation

GM especially supports: ... the recognition of the need for mechanisms to provide for compliance flexibility in the f ace of great uncertainty over futu re 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 cr itical that automakers have some ability to cope with changes or unexpected outcomes, and we believe the proposed ru les provide essential flexibility. [OAR-2009-0472-6953.1, p. 2]

5-17EPA Response to Comments

Toyota Motor North America

The agencies propose a variety of credit progr ams and compliance flexibilities, which Toyota generally supports. Not only are th ese credits and flexibilities c onsistent with the agreements signed last May and the joint NOI published last spring, but they were integral to Toyota's decision to enter into a commitment. Flexible credit programs allow manufacturers to better manage technology investment and deployment while achieving overall environmental goals. [OAR-2009-0472-7291.1, p. 14]

Toyota generally supports EPA's proposed credit trading program, although it remains unclear, for competitive or other reasons, the extent to which manufacturers will engage in trading with one another or in trading thr ough a third party. Nonetheless, th is uncertainty does not argue against establishing such a progr am in the event credit trading makes sense for the parties involved. [OAR-2009-0472-7291, p.19]

Hyundai

Hyundai is pleased that EPA proposed various form s of credits for complia nce flexibility in the joint proposal. Credits can be important for pr oviding a cost-effective means of achieving the standards. [OAR-2009-0472-7231.1, p. 3]

Mercedes-Benz U.S.A

The flexibilities and credits proposed for the greenhouse gas pr ogram are essential to allow limited-line manufacturers, such as DAG, to meet these dual responsibilities. They are the only mechanism through which companies in DAG’s pos ition can meet the proposed requirements for these model years and continue to invest in adva nced technologies that will significantly reduce greenhouse gas emissions over the longer term. [OAR-2009-0472-7193.1, p. 2]

Volkswagen

Volkswagen especially supports th e work by both agencies to form their respective regulations to allow averaging, banking, and tradin g as similar as possible in both programs, and to provide as many credit flexibilities as possible that accommoda te the wide range of manufacturers. [OAR2009-0472-7210.1, p. 2]

Ford Motor Company

CO2 Averaging, Banking and Trading Program

Part §86.1865-12, 'How to comply with the fleet aver age CO2 standards,' states that 'there are no property rights associated with CO2 credits generated under th is subpart. Credits are a limited authorization to emit the designa ted amount of emissions. Nothing in this part or any other provision of law should be construed to limit EPA's authority to terminate or limit this authorization through a ru lemaking'. 74 FR at 49761.

5-18EPA Vehicle Program, Feasibility, and Estimated Impacts

The need for this provision is unclear, and it should be dropped. Compliance planning is a complex coordinated process that consider s many factors including vehicle refreshening cadence, manufacturability and credit management. The availability of credits is an important part of a manufacturer's plan to comply with the regulations, and ma nufacturers rely on the existing rules and credit pr ovisions in their planning process. Ab rupt changes in the credit system could upend a manufacturer's pl ans, potentially making complia nce impossible or necessitating drastic, costly actions in order to maintain compliance. The regulations should be designed to prevent the occurrence of such situ ations. If the agency decides to terminate or limit any flexible mechanisms, then the rules should require adequa te lead time for a manufacturer to develop alternative credit schemes and to make the nece ssary adjustments to its compliance plan. Since manufacturers typically begin to firm up their product plans roughl y five years in advance of actual production, the regul ation should be amended to allow at least 5 years' lead-time in advance of any changes to the credit provi sions of the rules. [OAR-2009-0472-7082.1, p. 10]

Ferrari S.p.a

Ferrari strongly supports the Averaging, Banking, and Trading (ABT) program for CO2 emissions credits, because this approach gives mo re flexibility to comply without any negative effects for the National Program final target to reduce GHGs. [OAR-2009-0472-7214.1, p.7]

Environmental Defense Fund

You asked a question about all of the various flexibility proposals. We support them all, including obviously trading among manufacturers. The more flexible the better, so long as the accounting is good, the reporting, the monitoring is good and the enforcing is good, but there are cost differences that ought to be respected. [T hese comments were submitted as testimony at the New York public hearing. See doc ket number EPA-HQ-OAR-2009-0472-4621, p. 124.]

Public Citizen and Safe Climate Campaign

Banking, borrowing, transfer and trading also obfuscates automakers’ compliance with the program. In the fuel economy program, ba nking and borrowing alone, without transfer and trading, make it nearly impossibl e to know whether a manufacturer has complied in a particular model year. The long window in which automakers can trade credits back and forth obscures compliance in a given model year, impeding clear reporting of whether automakers are meeting or falling short of standards. Ba sed on publicly available data, Public Citizen was not able to verify that Ford, GM, Chrysler and Nissan had complied with standards for several model years from 1978-2007. An analysis of records of auto maker use of carry-forward and carry-back credits used from 1978-2008 Public Citizen ob tained from NHTSA through a Freedom of Information Act (FOIA) request, revealed that Detroit manufacturers avoided $3.1 billion in CAFE fines that otherwise would have been pa id, and delayed oil savi ngs associated with these shortfalls. [OAR-2009-0472-7050.1, p.4]

Sierra Club

5-19EPA Response to Comments

Ensure that credits do not undermine oil savings and emissions reduction goals. History has shown that credits weaken the standards and erode oil savings. We urge that the agencies avoid repeating this history by establishing credits th at will undermine needed oil savings and pollution reductions. EPA proposes a range of new cr edits that [OAR-2009-0472-7278.1, p.14] can be banked, borrowed and traded to increase flexibil ity. We are concerned that a broad range of credits may erode oil savings and cause emission reductions to go unrealized. To achieve the oil savings and greenhouse gas emission reductions goals President Obama announced, credits (if awarded) must be tied to actual emission reductions and be part of a transparent system that is publicly reviewable. [OAR-2009-0472-7278.1, p.15]

It is critical that the credits banked, borrowed an d traded within this system represent actual emissions reductions. To ensure emission reduc tions, credits that do not represent actual reductions, including FFV credits and advanced t echnology vehicle credits, should not be traded or transferred. Additionally, manuf acturers should not be allowed to trade or transfer borrowed credits. The vast array of credits and the wi de flexibilities proposed for credit banking, borrowing, and trading create a compelling need for compliance transparency. [OAR-2009-0472­ 7278.1, p.16]

Bright Automotive

Number two is the trading co mponent of this could be a significant incentive or driver, particularly if trading is harmonized. Ther e's one series of product to be traded, not one for NHTSA and not one for EPA, to be able to decide and meet th e overall oil and carbon production objectives at the least cost so a comp any like Bright Automotive would be to able to receive credits to incentivize mo re production of our vehicles a nd accelerate their development.

Porsche

Fourth, EPA should modify the credit program so that deficits reflect re al world manufacturerspecific lifetime vehicle miles traveled. As proposed by EPA, debits are to be calculated based on a fleet average vehicle miles traveled figure for all of industry as follows:

Debits = [mfr's CO2 deficit x vehicles sold x vehicle lif etime miles)/1,000,000

Where, for passenger cars, vehicle lifetime m iles = 190,971 for light trucks, vehicle lifetime miles = 221,199

If a manufacturer can demonstrat e to EPA that its passenger car or light truck fleet vehicle lifetime mile numbers are less than the industry averages proposed for inclusion in the above formula, then the deficit should be reduced accordingly.

EPA Response:

Averaging, Banking and Trading Flexibilities

5-20EPA Vehicle Program, Feasibility, and Estimated Impacts

In general, there was considerable support for the proposed averaging, banking and trading flexibilities. Manufacturers ge nerally view these provisions as essential for implementing the GHG standards.

EPA is finalizing an overall credit program whic h is very similar to that proposed (although we are finalizing a number of detailed changes to the individual credit programs for advanced technology vehicles, alternative fuel vehicles , air conditioning leakage, air conditioning efficiency, and off-cycle technology credits). In the main ABT cr edit program, the manufacturer will average the CO 2 emissions within each of the two aver aging sets (passenger cars and trucks) for each model year’s production and compare that with its respective fleet average standards (which in turn will have been de termined from the appropriate foot print curve applicable to that model year and averaging set) . In addition to this with in-company averaging, when a manufacturer’s fleet average CO 2 values of vehicles produced in an averaging set over-complies compared to the applicable fleet average standard , the manufacturer could ge nerate credits that it could save for later use (banking) or could sell or otherwise distribute to another manufacturer (trading). Implementation of the cr edit program generally involves two steps: calculation of the credit amount and reporting the amount and the associated data and calculations to EPA.

EPA continues to believe the ABT provisions are an essential part of the overall program. As noted in section III. C of the preamble to the fi nal rule, ABT is important because it can help to address many issues of technological feasibility and lead-time, as we ll as considerations of cost. For the GHG standards, which include consideration of credit availability and use, ABT is an integral part of the standard se tting itself, and is not just an add-on to help reduce costs. See Husqvarna AB v. EPA, 254 F. 3d 195, 202 (D.C. Cir. 2001) (use of ABT as a factor in providing proper consideration of cost and lead time)In ma ny cases, ABT resolves issues of lead-time or technical feasibility, allowing EPA to set a standard that is either numerically more stringent or goes into effect earlier than could have been justified otherwise. This provides important environmental benefits and at the same time it increases flexibility and reduces costs for the regulated industry.

Averaging, Banking, and Trading (ABT) of emissions credits have been an important part of many mobile source programs under CAA Title II, bot h for fuels programs as well as for engine and vehicle programs. These programs have op erated successfully and without incident for many years with some degree of transparency, and EPA continues to work to improve the transparency of these programs. For example, EPA routinely publishes vehicle emission test results that are associated with the manufacturer s’ compliance with the Tier 2 ABT program, and in recent years an annual compliance report ha s provided details regard ing the fleet average emissions achieved by manufacturers under the Tier 2 emissions program. Given the successful operation of existing ABT programs, EPA is c onfident that modeling the new GHG program on these programs is appropriate. EPA will track the use of ABT through its certification and compliance program and, in response to commenters ’ concerns regarding transparency, plans to make compliance information publicly available, as discussed below. EPA believes that ABT provisions will help manufacturers comply with emissions standards and achieve the emissions reductions associated with the standards.

Credits Must be Tied to Actual Emission Reductions

5-21EPA Response to Comments

The Sierra Club commented that EPA should ensu re that credits do not undermine oil savings and emissions reduction goals and recommends that “credits (if awarded) mu st be tied to actual emission reductions and be part of a transparent system that is publicly reviewable.” Public Citizen and Safe Climate Campaign recommende d that EPA limit the level by which credit transfers and credit trades may reduce a manufac turer’s standard, in line with the limitations contained in the fuel economy program.

EPA is finalizing several key changes to the cr edit programs which we believe will address the comments of the Sierra Club. We believe that these changes (combine d with the limitations being finalized on credit transfers and trades) will also address th e concerns of Public Citizen and Safe Climate Campaign. 2 For example, EPA is finalizing the following provisions: (1) the phase-out in the 2016 model year of the credit program for flexible -fueled vehicles (FFVs) that are based on the EISA calculation methodology (c onsistent with EPA’s proposal); (2) the phaseout in the 2016 model year of the credit program using the EISA methodology for dedicated alternative fuel vehicles (again, as EPA proposed ); (3) changes in the imp lementation of the offcycle technology credit program; and (4) change s to the provisions for advanced technology vehicle incentives for electric vehicles, plug-in hybrids, and fuel cell ve hicles, as outlined below.

Flexible Fueled Vehicles : EPA acknowledges that prior to MY 2016, FFV credits may not necessarily represent real -world emissions reductions. Howe ver, as EPA noted in the proposal (74 FR 49531), and as many automotive manufacturers confirmed and documented in their public comments, it is necessary to retain th ese credit opportunities through MY 2015 because automakers have acted in reliance upon them an d would lack needed lead time to meet the standards without these o pportunities. See also th e discussion in section III.C.2 of the preamble to the final rule.

As proposed, in the 2016 and later model year s, the calculation of FFV emissions differ substantially from prior years in that the determination of the CO 2 value to represent an FFV model type will be based upon the actual use of the alternative fuel and on actual emissions while operating on that fuel. In essence, these ve hicles will largely be evaluated like all others for purposes of ABT starting with MY 2016, so that actual emissions performance will determine potential credit generation. EPA’s defa ult assumption in the regulations is that the alternative fuel is used negligibly, and the CO 2 value that will apply to an FFV by default would be the value determined for operation on convent ional fuel. However, if the manufacturer believes that the alternative fuel is used in re al-world driving and that accounting for this use could improve the fleet average, the manufacturer has two options. First, the regulations allow a manufacturer to request that EPA determine an appropriate weighting value for an alternative fuel to reflect the degree of national use of that fuel in FFVs relative to real-world use of the conventional fuel. Section III.C of the preamble describes how EPA might make this determination. Any value determined by EPA will be published by EPA, and that weighting value would be available for all manufacturers to use for that fuel. The second option allows a manufacturer to determine the degree of altern ative fuel use for their own vehicle(s), using a

2 EPA is not finalizing credit transfer and trading limits similar to those contained in the fuel economy program as recommended by Public Citizen and Safe Climate Campaign. However EPA is finalizing several key changes to EPA’s credit programs and several proposed limitations on buying and selling credits to better assure that any credits transfers or trades are tied to actual in-use GHG emission reductions.

5-22EPA Vehicle Program, Feasibility, and Estimated Impacts

variety of potential methods. Both the method a nd the use of the final results must be approved by EPA before their use is allowed. In either case, whether EPA supplies the weighting factors or EPA approves a manufacturer’s altern ative fuel weighting factors, the CO 2 emissions of an FFV in 2016 and later would be based on real-world emissions, as follows (assuming non-zero use of the alternative fuel):

(W1×CO 2 conv)+(W2×CO 2 alt),

where W1 and W2 are the proportion of miles dr iven using conventional fuel and alternative fuel, respectively, CO 2 conv is the CO 2 value while using conventional fuel, and CO 2 alt is the CO 2 value while using the alternative fuel. Comments on the FFV credits provisions are discussed in detail in section 5.7.2.

Dedicated alternative fueled vehicles : For MY 2016 and later, like the FFV credit program described above, these credits will be treated differently in the firs t years of the program than in the 2016 and later model years. In fact, these credits are essentia lly identical to the FFV credits except for two things: (1) there is no need to average CO 2 values for gasoline and alternative fuel; and (2) in 2016 and later there is no dem onstration needed to get a benefit from the alternative fuel. The CO 2 values are essentially determined the same way they are for FFVs operating on the alternative fuel.

Off-Cycle Technology Credits : For off-cycle credits, EPA has ta ken steps to ensure that credits are based on real-world emissions reductions. Indeed, the real issue is transparency of documentation. As proposed, off-cycle technology credits will be available for certain new or innovative technologies that achieve real-world CO 2 reductions that aren’t adequately captured on the city or highway test cycles used to determ ine compliance with the fleet average standards. Like the air conditioning credits, these credits are i ndependent of the fleet average calculation. EPA finalized two options for generating these cr edits: either using EPA’s 5-cycle fuel economy labeling methodology, or if that method fails to capture the CO 2 -reducing impact of the technology, the manufacturer could propose and use, with EPA approval, a different analytical approach to determining the credit amount. Like the air conditioning credits, these credits will have to be determined separately for cars and trucks because of the differing lifetime mileage assumptions between cars and trucks.

Using the 5-cycle approach is relatively stra ightforward, and because the 5-cycle formulae account for nationwide variations in driving cond itions, no additional adjustments to the test results would be necessary. The manufacturer would simply calculate a 5-cycle CO 2 value with the technology installed and operating and compare it with a 5-cycle CO 2 value determined without the technology installed and/ or operating. Existi ng regulations describe how to calculate 5-cycle fuel economy values, and the GHG regulati ons contain provisions th at describe how to calculate 5-cycle CO 2 values (see section 600.114-08 (to be codified in 40 CFR)). The manufacturer will have to design a test program that accounts for vehicle differences if the technology is installed in different vehicle types, and enough data wi ll have to be collected to address data uncertainty issues. Manufacturers seeking to generate off-cycle credits based on a 5-cycle analysis will be required to submit a desc ription of their test pr ogram and the results to

5-23EPA Response to Comments

EPA for approval. Given that this procedure will involve applicati on of an existing test procedure, EPA does not believe public notice and comment would be necessary.

As discussed in Section 5.7.4, the manufacturer-dev eloped testing, data co llection, and analysis program will require additional EPA approval. EPA received considerable comment from environmental and public interest organizations , as well as from Honda, suggesting that EPA’s decisions about which technologies merit off-cycle credit and th e amount of such credit should be subject to public notice and comment. Environm ental organizations were generally concerned about ensuring that credits under this program are associated with real-world emission reductions, while Honda expressed an interest in maintaining fairness among auto manufacturers. EPA agrees that a public process will help ensu re a fair review and al leviate concerns about potential problems with the off-cycle credit calculation and accoun ting methodology. Therefore EPA intends provide public notice and to seek public comment whenever manufacturers apply for off-cycle credit and do not use the 5-cycle ap proach to quantify emission reductions. In such instances, EPA will consider any comments it re ceives in determining whether and how much credit is appropriate. Manufact urers should submit proposals well in advance of their desired decision date to allow time for these public and EPA reviews.

Advanced Technology Vehicle Incentives for Elect ric Vehicles, Plug-in Hybrids, and Fuel Cell Vehicles : Comments and responses on advanced tec hnology vehicle incentives are provided in section 5.7.3.

Transparency

In general, EPA agrees with Sierra Club’s comments that GHG compliance information should be part of a transparent system that is publicly reviewable. EPA’s response to comments related to program transparency is provided in section 5.10.1.

EPA’s Ability to Terminate or Limit Credit Provisions

The proposed regulations contained text about the credit process, st ating that “Nothing in this part or any other provis ion of law should be construed to lim it EPA’s authority to terminate or limit authorization through a rulemaking.” ( 74 FR 49761). Ford Motor Company commented that this statement should be dropped because of lead-time concerns. Ford stated that “Since manufacturers typically begin to firm up their product plans roughl y five years in advance of actual production, the regul ation should be amended to allo w at least 5 years lead-time in advance of any changes to the cr edit provisions of the rules.”

This language, which has been in corporated in every light-duty ABT program to date, ensures that EPA has the regulatory authority to make appropriate determinations regarding credit balances when issuing new regulations. For example, if EPA were to issue another GHG regulation taking effect in 2017, the incorporation of this regulatory language would allow EPA to decide the extent to which manufacturers may or may not continue to hold or use credits from the prior GHG program. However we believe that the rulemaking process is quite robust in nature and more than adequate to consider ma nufacturers’ lead-time needs. Indeed, as noted above and in section III. C.2 of the preamble, legitimate considerations of lead time are the reason

5-24EPA Vehicle Program, Feasibility, and Estimated Impacts

EPA is not adjusting FFV credits until model year 2016. While each rulemaking involves a unique set of circumstances, EPA has historically attempted to balance the genuine concerns and needs of the automobile industry as part of its consideration of av ailability of control technology, cost, necessary lead time and ot her factors relevant under section 202 (a) (1) consis tent with the ultimate statutory objective of improved health and welfare of the American public. In summary, EPA understands the concerns of the co mmenter, but continues to believe that our cautionary statement is both needed and appropriate.

Manufacturer-Specific Lifetime VM T for Credit Calculations

Porsche recommended that “EPA should modify the credit process so that deficits reflect real world manufacturer-specific life time vehicle miles traveled.”

As explained in the proposal, th e purpose of assigning lifetime VMT va lues to credits is to allow fungible credit transferring (from car to truck programs and vice-versa) and fungible credit trading programs between manufacturers, given the fact that trucks are typically driven more miles than cars. It is important for the regul ations to account for the difference in expected lifetime vehicle miles traveled (VMT) between cars and trucks in order to preserve CO 2 reductions when credits are transferred betw een cars and trucks. Assigning lifetime VMT values to car/truck credits and de bits thus enables an important flexibility to manufacturers – the ability to transfer cred its across fleets. For example, as stated in the proposal (74 FR 49516) “Because EPA is proposing to allow unlimited cred it transfer between a manufacturer’s car and truck fleets, the two fleets can essentially be viewed as a single fleet when manufacturers consider compliance strategies. Manufacturers ca n thus choose on which vehicles within their fleet to focus GHG reducing technology and then us e credit transfers as n eeded to demonstrate compliance, just as they would if th ere was a single fleet standard.”

Regarding Porsche’s request to allow the use of manufacturer-specific VMT, such an approach would introduce an immense level of complexity into the process of buying and selling credits and raises significant questions and concerns about implemen tation and transparency. For example, if EPA were to consider such a request, the next logical step wo uld be to differentiate VMT by vehicle models, or by technologies. For ex ample, are Ford Mustangs driven more miles than Chevrolet Corvettes? Or are convertibles dr iven fewer miles than non -convertibles? Is there a difference in VMT between minivans and two-door sedans? Or between one person and their neighbor? The answer to all of these questions may be yes (or ‘sometimes’), but EPA simply does not have the capacity to readily, accurately, and fairly consider these issues at this point in time or to include such consideration in the final rule. If EPA were to entertain Porsche’s concept, EPA would be obligated to evaluate the driving behavior of all manufacturers’ vehicles to ensure a level playing field between manufact urers whose vehicles are driven more miles and those whose vehicles are driven fewer miles.

Additionally, if EPA were to allow such an optio n, manufacturers would only request use of this option if it were to their benef it. In other words, manufacturers earning deficits would seek to use lower VMT values so that they would have to offset a smaller deficit (as is the case with Porsche; the specifically stated that they beli eve their vehicles are driven fewer miles), and manufacturers earning credits woul d seek to enhance their earni ngs by requesting to use higher

5-25EPA Response to Comments

VMT values. Thus the only equitable way to account for differing VMT across manufacturers would be to require every ma nufacturer to provide EPA with a rigorous and statistically significant analysis that would estimate the lifet ime VMT of their fleet. Continual updates would be required to reflect changes to a manufacturer’s fleet that occur with each model year, as well as changing driving behavior and conditions . Such a program would quickly become unmanageable and unduly complicated from a bookk eeping and transparency perspective. EPA recognizes that fundamentally any vehicle make or model may be driven more or less than another make or model, and that the use of an average lifetime VMT factor will, by definition, not represent the specific experience of every manuf acturer, make, or model. However, as noted above, the purpose of the lifetime VMT factor is to preserve emission reductions when transferring vehicles between car and truck fleets, and EPA believes that this purpose is served adequately by the use of aver age lifetime VMT values.

EPA and NHTSA Credit Programs

Bright Automotive suggests that there should not be separate and independent credits systems for the EPA and NHTSA programs. EPA understands th at one system might offer advantages for manufacturers but EPA believes that the two prog rams must remain separate. The two programs have been carefully constructed to achieve similar objectives from a fuel economy and CO 2 reduction stand-point. However, the two agencies ’ programs have several differences, due to differences in statutory author ity and EPA’s program includes se veral credit programs that are not part of the NHTSA program. This and ot her differences make the suggested approach unworkable.

5.3.1. Five Year Carry-forward/Three Year Carry-back

Organization: Hyundai Motor Company Center for Biological Diversity Toyota Motor North America Natural Resources Defense Council United Auto Workers Kia Motors Chew, Yuli

Comment:

Hyundai Motor Company

EPA will use the same five-year carry-forward and three-year carry-back time periods for credits allowed under NHTSA's CAFE program. Additionally, we support a phase-out or discounting of credits under EPA's GHG program after the five-y ear carry-forward peri od. To align with the California GHG program in this area, we recommend that EPA adopt the credit discounting permitted under California's GHG program as follows: [OAR-2009-0472-7231.1, p.3]

[Following comments are from LA Testimony, OAR-2009-0472-7283 p.67-72]

5-26EPA Vehicle Program, Feasibility, and Estimated Impacts

[[These comments were submitted as testimony at the Detroit public hearing. See docket number EPA-HQ-OAR-2009-0472-6185, pp. 80-81.]]

More specifically, we support th e proposed credit carry-forward and carry-back time periods under both EPA and NHTSA programs.

In addition, we would support expanding the ca rry-forward provisions under the GHG program to include a phase-out or discounting of credits after the five-year pe riod. This practice was permitted under the California regulations and woul d provide even further compliance flexibility.

Center for Biological Diversity

Third, deficit “carry-back” credits must be avoided. As proposed, manufacturers who fail to comply with the standards for up to three years co uld earn credits if they exceed the standards in the following year, and use these credits to avoi d penalties for having failed to comply in the preceding years. “Carry-back” credits, however, undermine the purpose of the Agencies’ efforts not only because they would incentivize delays in investment and technological innovation and thus undercut EPCA’s intent, but also because th e benefits of avoiding the emission of a ton of GHGs today exceed the benefits of avoiding the release of the sa me ton of GHGs several years from now. In fact, the Proposed Rule already rec ognizes this fact but fails to apply it. As the Proposed Rule correctly notes, GHGs remain in th e atmosphere for decades and, in the case of CO2, for millenia. Proposed Rule, 74 Fed. Re g. 49583. “A substantial portion of CO2 emitted into the atmosphere is not removed by natural processes for millennia, each unit of CO2 not emitted into the atmosphere avoids essentially permanent climate change on centennial time scales.” 74 Fed. Reg. 49589. As a consequence, reme dial efforts get more expensive the longer they are delayed: "SCC is expected to increase over time, because future emissions are expected to produce larger incremental damages as physic al and economic systems become more stressed as the magnitude of climate change increases. Indeed, an implied growth rate in the SCC can beproduced by most of the models that es timate economic damages caused by increased GHG emissions in future years." 74 Fed. Reg. 49613. Or, as stated elsewhere in the Proposed Rule, “[d]elaying mitigation efforts could result in substantially higher costs of stabilizing CO2 concentrations.” 74 Fed. Reg. 49613. Even setting as ide the potential of triggering catastrophic events and assuming arguendo that the SCC grows by no more than a linear 3% per annum as EPA assumes, it is undoubtedly vastly preferable to remove a given ton of carbon in Year 1 rather than in Year 4, when it has wrought th at much more damage.23 Moreover, also as acknowledged elsewhere in the Proposed Rule, “voluntary non-compliance is impermissible for the GHG standards proposed under the CAA,” 74 Fed. Reg. 49522; thus, a rule allowing manufacturers to choose not to comply with a st andard in any given year is illegal. In sum, deficit “carry back” credits are bad economic and environmental policy as we ll as in violation of EPCA and the CAA.

Fourth, while over-compliance “carry forward” credits (i.e., the ab ility to apply credits for overcompliance in Year 1 to remedy compliance failure s in Year 1+n) are commendable within limits because they indeed incentivize early technolog ical investment and innovation, and initially accelerate the rate of removal of GHGs from th e atmosphere, allowing such “carry forward” credits for a period of five year s is excessive. A five year “car ry forward” period would remove

5-27EPA Response to Comments

the incentive to incorporate newl y developed technology into the na tion’s vehicle fleet for far too long, and, after the initial spurt, stagnate rather than drive progress. These detriments could be balanced against the evident benefits of limited “carry forward” credits by selecting a shorter application period, such as one or two years. Mo reover, no such credits should be allowed unless a manufacturer can demonstrate additionality and quantify and verify the amount by which its performance actually exceeded the standard. [EPA-OAR-HQ-0472-7265.1]

Toyota Motor North America

As directed by EISA and interpreted by NHTSA in previous rulemakings, CAFE credits earned by a manufacturer in a model year after 2007 can be applied (subject to certain adjustments and limits) for a period of up to five model years afte r the year in which they were earned. This 5­ year 'carryforward' provision is also proposed by EPA, although subject to different adjustments and limits . Further, EISA provides manufacturer s the flexibility to 'borrow' credits up three years into the future (again, with certain adjustments and limits) to address potential compliance shortfalls in a given model year. This 3-year 'carryback' provision is also proposed by EPA, although subject to different adjust ments and limits. [OAR-2009-0472-7291, p.18]

Notwithstanding the comments above concerning the adjustment factors proposed by the agencies for transferring credits, Toyota supports the 5-year carryforward and 3-year carryback proposals by EPA in order to maintain consiste ncy between the two progr ams for the purpose of technology and product pla nning. [OAR-2009-0472-7291, pp.18-19]

Natural Resources Defense Council

Restrictions on Average, Banking, and Trading Provisions for GHG Standa rds are Necessary to Preserve Environmental Benefits and Avoi d Delays in Adoption of New Technologies

NRDC does not oppose EPA’s proposal for MYs 2012 to 2016 to limit credit banking to five years and deficit carry-forward to three years. We recommend, however, that EPA evaluate the credit banking and deficit carry-forward time periods to determine if they can be reduced for MY 2017 and subsequent model years. Long banking a nd borrowing periods have the potential delay deployment of cost-effective GHG control t echnologies. As MY 2012-2016 vehicles are produced and sold, EPA should carefully evaluate whether or not the allotted banking and deficit carry-forward time periods are necessary for cost-effective achievement of the GHG emissions standards. [OAR-2009-0472-7141.1, p. 9]

Finally to prevent any credit “shell games” from delaying the adopti on of new technologies, manufacturers should also be prev ented from banking, transferring or trading credits in any given year if they are running deficit [sic] in either th eir car or truck fleet in that year. This prevents, for example, any manufacturer from simultaneously banking credits while carrying forward a deficit. [OAR-2009-0472-7141.1, p. 10]

United Auto Workers

5-28EPA Vehicle Program, Feasibility, and Estimated Impacts

Third, the UAW supports the proposals in the regul ations for program flexibilities to help automakers achieve compliance w ith the tougher standards. These provide a sensible transition to a regime of annual increases in light-duty vehicle fuel efficiency afte r a long period of regulatory inaction. We believe th at EPA made the correct deci sion that it should limit its proposal for carry-back and carry-f orward credits to the limits es tablished by the Energy Policy and Conservation Act for the CAFE program. [OAR-2009-0472-7056.1, p.3]

Kia Motors

[These comments were submitted as testimony at the Los Angeles public hearing. See docket number EPA-HQ-OAR-2009-0472-7283, p.172]

While we fully support the five -year carry-forward period for credits under both the greenhouse gas and fuel economy programs, we would al so support the addition of a phase-out or discounting of credits under the greenhouse gas program after the fi ve-year carry-for ward period.

Chew, Yuli

For EISA transfer caps issue, I notice that the limit of 1-year carry-forward and 3-year carrybackward is different from what had been adopted in CARB’s Greenhouse Gas Regulation. While the Regulation is stricter than CARB ’s, it will create confus ion among CA and other Section 177 States. I support that GHG standard should have a 5-y ear carry-forward as specified by CARB for Large Volume Manufacturers to allow for advance notice period. [OAR-2009­ 0472-7042.1, p.1]

As consistent in California’s Greenhouse Gas Standards, I support that the carry-forward of GHG credits be allowed for Small Volume a nd Independent Volume Manufacturers until 2016 Model Year or 3 Model Years after their size ca tegory classification changed to Large Volume Manufacturers. [OAR-2009-0472-7042.1, p.1]

I support harmonization with California’s Standa rd of using a 5-years fleet average method, which means, 5 years carry-back provision as co mpared to 3 year carry-back provision as in EISA. Any deficit at the end of 5 years will have to be made whol e or face CAA violation at the end of the following year. [OAR-2009-0472-7042.1, p.1]

I am concerned that the two fleet approach wi ll result in some manu facturers would begin producing bigger trucks and thus able to gain a lot of credits to subsidize the deficiency in the passenger car standard. I would suggest that the credits from trucks have a useful lifespan of just 2 years if they are use to equalize the deficits in the passenger cars. This will maintain the stricter standard of passenger car and redu cing the incentives of “gaming” the benefits of gaining large quantities of credits from trucks which ar e based on looser standards. [OAR-2009-0472-7042.1, pp.2-3]

For the compliance program, I am concerned about the divergence from CARB’s Regulation on the time limit on the compliance, such as based on 5-year Fleet Average as in CARB as expressed in. I am also concerne d that Intermediate Volume Manufacturers is treated the same

5-29EPA Response to Comments

way for compliance, 1-year carry forward credits and 3-year ca rry backward provisions without given them sufficient time to comply. [OAR-2009-0472-7042.1, p.4]

EPA Response:

EPA received a number of comments regardi ng the credit carry-back and carry-forward provisions. Many supported the proposed consistency of these provisions with EISA and the flexibility provided by these provisions, and severa l offered qualified or tentative support. For example, NRDC encouraged EPA to consider further restrictions in the 2017 and later model years. Public Citizen expressed concern regard ing the complexity of the program and how these provisions might obscure a stra ightforward determination of compliance in any given model year. The Center for Biological Diversity expressed concerns re garding the provisions, particularly with respect to allowing manufacturers to carry a deficit forward. At least two automobile manufacturers suggested modeling the program after California, which allows credits to be carried forward for 5-years, plus a phase-out or discounting of credits in the 6 th year (discounted to 50%) and the 7 th year (discounted to 25%). In the California program, any unused credits would expire after th e end of the seventh year.

For other of its Title II emission control programs, EPA has sometimes initially restricted credit life to allow time for the Agency to assess whethe r the credit program is f unctioning as intended. When EPA first offered averaging and banking pr ovisions in its light-d uty emissions control program (the National Low Emission Vehicle Program), credit life was restricted to three years. The same is true of EPA’s early averaging a nd banking program for heavy-duty engines. As these programs matured and were subsequent ly revised, EPA became confident that the programs were functioning as intended and that the standards were sufficiently stringent to remove the restrictions on credit life. EPA ha s also previously allowe d a limited deficit carryforward, for example in the NLEV and Tier 2 pr ograms. EPA is therefore acting consistently with our past practice in finaliz ing reasonable restrictions on cr edit life and a limited deficit carry-forward in this new progr am. Section 202(a)(1) of the Clean Air Act clearly allows EPA the discretion to include provisions such as these, and as noted above EPA has used these provisions in the past in program s that have significantly advanced environmental protection and air quality improvements.

The inclusion of these provisions in these regulations accounts for the ability of credit generation as well as limited deficit carry-forward to address lead time issues such as a variation in the percentage of models th at are redesigned each year by a manufacturer, as discussed in Section III.D of the preamble, and to address in accuracies that can occur in a manufacturer’s projections for future vehicle sales for any give n model year, leading to not achieving the fleet average for that model year. For example, fuel price fluctuations and ot her factors can influence consumer attitudes and buying behavior. By the ti me it becomes clear at the end of a model year that the manufacturer did not achieve their fleet average standard, their product line for the next model year is essentially locked in and the subsequent model y ears are already well along in the development process. EPA believes that allowing a deficit carry-forward of three years gives manufacturers enough time to adequately respond to variations in a model year with appropriate limitations that provide for continued improvements in emissions. In particular, note that the regulations provide restrictions on carrying deficits forward th at prevent a “shell game” of

5-30EPA Vehicle Program, Feasibility, and Estimated Impacts

continually moving deficits forw ard and never actually being in compliance. These provisions require that manufacturer s not have a deficit in any year in which they are paying off a deficit from a prior year. For example, if a manufacturer incurs a deficit in three consecutive model years, then they have to “pay off” all three year s of deficits. They are not allowed to pay off the deficit from three years in the past and carry forward the deficit forward from the other past years; allowing this would clearly allow a contin ual shifting forward of deficits that would be unacceptable. (See the following response for the a pplicable regulatory cita tions.) In addition, the long term nature of the greenhouse gases at issue means that th ere is no significant environmental difference by allowing this limite d carry-forward. EPA believes that this and other provisions provide effectiv e protections and that the envir onmental benefits of the program are not at risk as a result of the deficit/credit provisions. Finally, EPA notes that this is also consistent with the CAFE program being adopted by NHTSA.

The Agency believes that a credit life of five y ears represents an appropriate balance between promoting orderly redesign and upgrade of the emissions control technology in the manufacturer’s fleet and the pol icy goal of preventing large numbers of credits accumulated early in the program from interf ering with the incentive to devel op and transition to other more advanced emissions control tec hnologies. Early credits genera ted by a manufacturer are also subject to the five year credit carry-forward restriction based on the year in which they are generated. This limits the effect of the early credits on the long-term emissions reductions anticipated to result from the new standards. EP A continues to believe that the approach of five year carry-forward and three year carry -back of credits is appropriate.

Banking and Trading Restrictions:

The National Resources Defense Council (NRDC) recommended th at manufacturers should “be prevented from banking, transferring or trading cr edits in any given year if they are running [a] deficit in either their car or truck fleet in that year. This prevents, for example[,] any manufacturer from simultaneously banking cr edits while carrying fo rward a deficit.”

Regarding the NRDC comments, EPA proposed th at the manufacturer mu st use any credits earned to offset any deficit that had accrued in the curr ent year or in a prior model year that had been carried over to the current model year. T hus EPA proposed, and is finalizing, exactly what NRDC recommended. Specifically, section 86.1865-12( k)(7)(i) in the final regulations states: “Before trading or carry ing over credits to the next mode l year, a manufacturer must apply available credits to offset any deficit, where the deadline to offset that cr edit deficit has not yet passed.” NRDC also commented that such a pr ovision is necessary to prevent credit “shell games” from delaying the adoption of new technologies. EPA’s Tier 2 program includes such a restriction, and EPA is applying an identical re striction to the GHG program. Simply stated, a manufacturer may not bank (or carry forward) cr edits if that manufactur er is also carrying a deficit. In such a case, the manufacturer is obl igated to use any current model year credits to offset that deficit. Specifically, section 86.1865-12( k)(8)(i) of the final regul ations addresses this concern by requiring that “Manufacturers are not permitted to have a credit deficit for four consecutive years.” In other word s, if they have carried a defici t forward for three years after the year in which it is generated, as allowed by the regulations, they can not have a deficit in the

5-31EPA Response to Comments

following model year. This prevents the “shell ga me” approach of continually being in a deficit situation.

5.3.2. Credit Transfers

Organization: Ford Motor Company Alliance of Automobile Manufacturers (Alliance) Toyota Motor North America State of New Jersey Chew, Yuli

Comment:

Ford Motor Company

Ford supports EPA's streamlined megagram appro ach to account for expe cted vehicle lifetime miles traveled (VMT) betw een cars and trucks in order to preserve CO 2 reductions when credits are transferred between cars a nd trucks. [OAR-2009-0472-7082.1, p. 9]

Alliance of Automobile Manufacturers (Alliance)

Vehicle Miles Traveled Adjustment Factors

In NHTSA’s MY 2011 final rule, the agency requir es an adjustment to credits for lifetime vehicle miles traveled (VMT). NHTSA’s fina lized adjustment factors are 152,000 miles for domestic and imported passenger cars and 179,000 miles for light trucks. 74 Fed. Reg. at 14,432. [OAR-2009-0472-6952.1, p.53]

In the joint 2012-2016 proposal, EPA proposes that VMT adjustment factors should be 190,971 for cars and 221,199 for trucks. 74 Fed. Reg. 49,572. [OAR-2009-0472-6952.1, p.54]

Recommendation:

These adjustment factors are almost identic al. To better harmonize the 2012-2016 regulations, the Alliance recommends that the agencies ag ree upon one set of VMT adjustment factors for use in credit calculations for both EPA and NHTSA. [OAR-2009-0472-6952.1, p.54]

Toyota Motor North America

NHTSA's existing CAFE regulations specify th e method by which credit s (or deficits) are calculated for a regulated fleet in a given mode l year. In its rulemaking establishing 2011 model year CAFE standards, NHTSA established an adju stment factor to be applied when credits are transferred from one fleet into another. The pr ocedure takes into account the difference in base fuel economy of the fleet generating the credits an d the fleet to which cred its are transferred, and also takes into account the different lifetime mileage accumulation between cars and trucks (when credits are transferred betw een one of the car fleets and the truck fleet, or vice-versa).

5-32EPA Vehicle Program, Feasibility, and Estimated Impacts

These adjustments are intended to 'balance' the fuel savings when credits are transferred, and are intended to address the sales-weighted harmoni c averaging basis of CAFE compliance. [OAR2009-0472-7291, p.18]

Because CO2 emissions are mass-based, EPA proposes that credits (or deficits) be calculated on the basis of a sales-weighted arithmetic averaging of emissions within a fleet, expressed in mega grams. Toyota supports this approach. Because these credits (or deficits) are mass-based, the only adjustment needed when transferring between fleets is to account for differences in lifetime mileage accumulation between the fleets in wh ich credits are earned and used. EPA proposes lifetime mileage accumulation rates for cars and trucks this purpose. [OAR-2009-0472-7291, p.18]

In essence, both agencies are seeking to accomplis h the same objective - that is, to base credits transferred between fleets on 'consumption' in order to value credits on a one-to-one basis, regardless of the fleet in which the credit is ge nerated or the base fuel economy (or emission) level of the fleet. Toyota recognizes the rationale for this approach, but ur ges the agencies to use the same mileage accumulation rates for cars and truc ks in order to maintain relative equivalency in each program for credits transferred between fleets. Toyota has no pref erence concerning the use of EPA's mileage accumulation rates or NHTSA 's rates, but common values should be used for cars and trucks in both programs. [OAR-2009-0472-7291, p.18]

Credit Transfers Between Fleets

Toyota fully supports EPA's proposal to allow unlimited credit transfers between the car and truck fleets (subject to the carryforward and carryback provisions). From an environmental viewpoint, offsetting a compliance shortfall in one fleet with over compliance in another fleet achieves the same result as marginal complia nce in both fleets. The atmosphere does not recognize the difference between a ton of carbon saved from a car or from a truck, nor is there a difference between saving a gallon of gasoline fr om a car or truck - both have equal energy security benefits. Toyota has long held the view that artificial limits on credit transfers between regulated fleets in the CAFE program are counterproductive, serve to reduce manufacturer flexibility and increase costs for consumers. [OAR-2009-0472-7291, p.19]

State of New Jersey

The Department supports the proposal's determ ination to express credits based on vehicle lifetime mileage estimates . [OAR-2009-0472-7109.1, p.8]

Chew, Yuli

I would suggest limit the usefulness of cred its obtained from trucks for MY 2012-2016 to equalize the deficits of passenger cars to just tw o years or less. After which, these credits can only be used for trucks only. [OAR-2009-0472-7042.1, p.6]

In the final rule, I suggest limit th e usefulness of the credits from truc ks to be able to counter the deficits from the passenger cars to just, say 3 y ears or less; alternativel y, slowly phrase down the

5-33EPA Response to Comments

percentage of deficits from pa ssenger cars that can be balanced by credits from trucks over a period, e.g. reducing 20% per year from 2012 and thes e trucks credits cannot be used to average out the deficits in the pass enger cars. [OAR-2009-0472-7042.1, p.6]

Public Citizen and Safe Climate Campaign

The agencies both propose to a llow manufacturers to bank, borrow, transfer and trade credits. Automakers have availed themselves of the opti on to bank and borrow credits for their respective car and light truck fleets sin ce the fuel economy program star ted in 1978. EPCA, as amended by EISA, provides clear restrictions on the extent to which credit transfer and trading can degrade the level of fuel economy a manufacturer ach ieves in a given model year. Although the CAA does not have a specific restriction regarding credit transfer and trading, EPA does not propose limiting it. EPA also proposes to adopt the thr ee years of carry-back and five-years of carryforward from the fuel economy standards in the interest of harmonizing the two programs. EPA need not water down the stronge r statutory authority of the CAA to suit NHTSA’s standard setting under EPCA. The CAA expressly requires th at EPA issue protective standards to ensure public health and welfare. It is particularly egregious to then extend the weaknesses of EPCA further than NHTSA has in its standards. [OAR-2009-0472-7050.1, p3]

EISA extended the carry-forwar d window from three to five years, and allowed for credit transfer between fleets and tr ading among manufacturers. Thes e changes were made based on recommendations in the 2002 National Academy of Sciences (NAS) evaluation of the fuel economy program. Since credit trading and tran sfer will not occur under the fuel economy program until the 2011 model year, we have no data on how manufacturers might use this program. There is significant unc ertainty about whether automakers would actually trade credits and the implications of creating a market for thes e credits. To the extent that credits are traded among manufacturers in both programs, we urge th at EPA limit the level by which credit transfer and trading may reduce a manufact urer’s standard, in line with the limitation contained in the fuel economy program. [OAR-2009-0472-7050.1, p.3]

EPA Response:

Overall Credit Transfer Approach

Ford, Toyota and the State of New Jersey supported the proposed unlimited credit transfers between car and truck programs. They also s upported EPA’s proposed megagram approach to account for expected vehicle lifet ime miles traveled (VMT) differences when transferring credits between cars and trucks (and visa-versa), whic h is discussed below. EPA is finalizing these approaches with very little change from the proposal.

Mr. Yuli Chew recommended “limiting the usefulne ss of credits obtained from trucks for MY 2012-2016 to equalize the deficits of passenger cars to just two year s or less. After which, these credits can only be used for trucks only.” Regarding Mr. Chew’s recommendation, EPA finalized averaging, banking, and trading prov isions which are generally cons istent with those included in the CAFE program, with a few notable exceptions . As with EPA’s approach, the CAFE rules allow five year carry-forward of credits and three year carry-b ack. Under CAFE, transfers of

5-34EPA Vehicle Program, Feasibility, and Estimated Impacts

credits across a manufacturer’s car and truck av eraging sets are also allowed, but with limits established by EISA on the use of transferred credits. The amount of transferred credits that can be used in a year is limited, and transferred cr edits may not be used to meet the CAFE minimum domestic passenger car standard. CAFE rules al low credit trading, but again, traded credits cannot be used to meet the minimum domestic passenger car standard. EPA did not propose, and is not adopting, these constraints on the use of transferred credits. Commenters did not submit any analysis justifying such rest rictions, and EPA continues to be lieve that such restrictions would be inappropriate, addi ng costs to the CAA program by reducing manufacturers’ flexibilities, and would do so without corres ponding environmental bene fit since the overall stringency of the GHG standards could be affected.

Mr. Chew’s recommendation was not adopted in th e final rule because EPA continues to believe that the proposed approach is reasonable and does not believe there is a reason provided that would justify making a change to the program.

In general, EPA is also not adopt ing the limits on credit transfers and trading that are contained in the NHTSA program. EPA historically has not placed limits on the amount of credits that may be transferred or traded in light-duty vehi cle programs such as Tier 2 and does not believe such limits are necessary for the GHG program. Where needed, EPA is placing restriction on certain credit provisions such as MY2009 early credits, as describe d in section 5.7. EPA is also finalizing certain credit restricti ons in the TLAAS program as described in 5.4. EPA believes it is appropriate to narrowly tailor credit restrictions where necessa ry to address specific issues rather than a general restriction on how credits may be transferred or traded.

VMT Adjustment Factors for Passenger Car and Truck Credits

The Alliance, AIAM and Toyota commented th at the NHTSA and EPA should use the same lifetime vehicle miles traveled (VMT) adjustment factors to facilitate GHG cr edit transfers between car and trucks. EPA is promulgating VMT values that differ from the proposal. The difference is attributable to lower projected fuel prices relative to those used in the NPRM analysis. EPA’s proposed and finalized VMT values are as follows:

Vehicle Type Proposed VMT Finalized VMT Car 190,971 195,264 Truck 221,199 225,865

The regulations use these VMT values to ac count for the difference in expected lifetime vehicle miles traveled (VMT) between car s and trucks in order to preserve CO 2 reductions when credits are transferred between cars and trucks. As directed by EISA, NHTSA accomplishes this in the CAFE program by using an adjustment fact or that is applied to credits when they are transferred between car and truc k compliance categories. Rather than use a conversion factor that would apply to credit transactions, EPA is expressing credits when they are generated in total lifetime Megagrams (metric tons). In this way credits may be freely exchanged between car and truck compliance categories wi thout the need for adjustment. A discussion of the derivation of the estimated expected vehicle lifetime miles traveled can be found in Chapter 4 of the Joint

5-35EPA Response to Comments

Technical Support Document. NHTS A’s response to this issue can be found in Chapter VIII of NHTSA’s Final Regulatory Impact Analysis.

5.4 Temporary Lead-time and Small Volume Manufacturers

5.4.1 Temporary Lead-time Program

Organization: Jaguar Land Rover Mercedes-Benz (Daimler AG) Association of Intern ational Automobile Manufacturers (AIAM) Alliance of Automobile Manufacturers (Alliance) Volkswagen Group of America (Volkswagen) Toyota Motor North America BMW of North America, LLC (BMW) Center for Biological Diversity Public Citizen and Safe Climate Campaign Union of Concerned Scientists American Council for an Energy Efficient Economy Sierra Club National Automobile Dealers Association (NADA) Society of Motor Manufacturers and Traders Limited Porsche Cars North America, Inc. New York State Department of Environmental Conservation Mass Comment Campaign (2,332) (unknown organization) Pendleton, Tom

Comment:

Jaguar Land Rover

Following separation from Ford Motor Company in June 2008, JLR has become a low volume niche manufacturer producing on average 60,000 vehi cles (per model year) across both brands for the US market. In California JLR is recogni zed as an Intermediate Volume Manufacturer and consequently adheres to alternative emissions regulations. Prior to separation, JLR comprised just 3% of Ford's US Passenger Car and Li ght Duty Truck fleet. [OAR-2009-0472-7504, p.2]

The Temporary Lead-Time Allowance Alternative Standard enables qualif ying manufacturers to achieve a target which is 125% of the footprint based target for a limited number of vehicles between 2012 and 2015. This flexibility was reco gnized and supported by the wider industry in the Alliance of Automobile Manufacturers comments on this rule. [OAR-2009-0472-7504, p.6]

JLR also submitted substantial information regard ing their product plans and emissions reduction capabilities. This information was subm itted as confidential business information.

Mercedes-Benz (Daimler AG)

5-36EPA Vehicle Program, Feasibility, and Estimated Impacts

The Temporary Lead Time Allowance Alternative St andards (TLAAS) is critical to ensuring that the National Program actually works. EPA has carefully constructed the TLAAS to provide essential lead time for limited-line, lower-volum e manufacturers to transition to a GHG program that is devoid of the compliance alternative available in the CA FE program. As a mechanism to provide lead time to a defined s ubset of manufacturers, the TLAAS falls squarely within and is an appropriate exercise of EPA’s discretion.

When prescribing regulations to reduce air polluta nts, the Clean Air Act directs EPA to consider the time “necessary to permit the development a nd application of the re quisite technology.” 42 U.S.C. § 7521(a)(2). The Clean Ai r Act entrusts the scope of l ead-time allowances to the sound discretion of EPA. See, e.g., Husqvarna AB v. EPA, 254 F.3d 195, 202 (D.C. Cir. 2001) (showing lead-time provisions evaluated by co urts for “substantial evidence”); Natural Resources Defense Council, Inc. v. EPA, 22 F.3d 1125, 1137-40 (D.C. Cir. 1994) (acknowledging that EPA has authority to sele ct implementation deadlines where statute does not specify deadlines explicitly).

Courts have repeatedly deferred to the Agency’s evaluation of the time needed to implement the technology contemplated in a new rule. See Nati onal Resources Defense Council, Inc. v. EPA, 655 F.2d 318, 331 (D.C. Cir. 1981). This is largely because courts have recognized that the Agency is best placed to evaluate the various fa ctors that tell in favor of lead time. See, e.g., Geier v. American Honda Motor Co., Inc ., 529 U.S. 861, 879 (2000) (acknowledging four factors cited by NHTSA justifying the lead-time pe riod for passive restraints in automobiles); Sierra Club v. EPA, 325 F.3d 374, 378 (D.C. Cir. 2003) (acknowledging the Agency’s discretion to consider various factors in fashioning lead-time provisions).

Indeed, EPA has previously implemented or suppor ted targeted lead-time provisions, similar to the TLAAS, with the approval of the federal courts. When promulgating new levels of acceptable lead additives in gasoline, for example, EPA “exempted small refiners from the lead content rules . . . in recognition of the special lead-time problem s faced by this group.” Similarly, EPA’s 1997 Rule concerning Compliance Assu rance Monitoring (CAM) incorporated a staggered lead-time provision that afforded diffe rent “sources” different amounts of time to comply.

EPA has properly recognized the need for lim ited-line, lower-volume manufacturers to be accorded sufficient lead time to enable their fleets to transition to the structure of the GHG program. Significantly, the TLAAS does not alter thes e companies’ responsibi lity to comply, but rather makes allowance so that the standard ap plicable to these companies better reflects the traditional composition of their fleets in the U.S. market during the model years covered by this regulation. The necessity and structure of the TLAAS fall squarely within the types of lead time allowances EPA has adopted and the federal courts have previously appr oved as an appropriate exercise of agency authority under the Clean Air Act.

Just as with the passive restra int phase-in upheld in Geier, various considerations support the TLAAS. First, the proposed standards are aggressi ve and will require not only the provision of various new technologies, but al so a transition of the fleet. Th is transition requires additional

5-37EPA Response to Comments

flexibilities for limited-line manufacturers with fewer vehicles and lower-volumes able to be transitioned in the shorter term.

Second, the program eliminates the traditional compliance alternative av ailable to limited-line manufacturers in the CAFE program. Companies that have previously met their obligations through monetary payment in order to continue to offer substantially advanced vehicles must transition to a new regulatory regime in which that option is no longer available.

Third, the TLAAS helps to provide leeway for in dustry leaders such as DAG to continue to pioneer advanced technologies, such as fuel cell and full battery electric vehicles, while simultaneously meeting the aggressive standards applicable to their lower-volume fleets. As such, the TLAAS continues to facilitate the development of new technology.

Fourth, recognizing that the companies entitled to the TLAAS have also been technology leaders, the TLAAS promotes further public acce ptance of new powertrains and furthers the commercialization of new vehicle types. This is particularly significant since DAG’s consumer base (like that of similarly situated companies) is often more able and more willing to try new technology – and especially new vehicle technologies – than the majority of the public.

Finally, the benefits far outweigh the costs. EPA’s own data confirms that any adverse environmental impact from these lead-time provi sions will be negligible. The agency estimates that the maximum potential impact of the TLAAS is for GHG emissions to increase by no more than 0.4% over the lifetime of the affected vehicles. Yet, by encouraging the further commercialization of more advanc ed powertrains during the same time frame, the longer term GHG benefits are substantial. See Blue water Network, 372 F.3d at 412. [OAR-2009-0472­ 7193.2, p.5]

[Mercedes-Benz also submitted these comments as testimony at the New York public hearing. See docket number EPA- HQ-OAR-2009-0472-4621, pp. 51-52.]

Alliance of Automobile Manufacturers (Alliance)

In general the Alliance supports all aspects of the flexibilities that EPA has proposed for compliance, including the provisions of the Temporary Lead-time Allowance Alternative Standards (TLAAS). Some Alliance member co mpanies intend to file separate comments regarding additional flexibilities beyond TLAAS for very small volume manufacturers (below 100.000 units/year). [OAR-2009-0472-6952.1, p.8]

Volkswagen Group of America (Volkswagen)

An important aspect of the EPA proposal is the EPA's Temporary Lead-time Allowance Alternative Standard (TLAAS) fleet. Volkswag en supports this con cept and believes the Administration and the EPA realized that so me manufacturers may need additional time and flexibility to adjust their produc t plans to a new regulation admini stered under the Clean Air Act. The TLAAS provision will allow smaller vehicle manuf acturers that have paid CAFE fines in the past or smaller manufacturers with a limited pr oduct line additional time and flexibility to

5-38EPA Vehicle Program, Feasibility, and Estimated Impacts

prepare for a new era of fuel economy and GHG control. We support th e EPA and the White House efforts to create a fair and balanced tr ansitional period that allows all manufacturers the ability to react to these ve ry challenging and historic proposed regulations. [OAR-2009-0472­ 7210.1, p.3]

[[Volkswagen also submitted these comments as testimony at the Detroit public hearing, See docket number EPA-HQ-OAR-2009-0472-6185, p. 113.]]

With regards to the additional restrictions the EPA has applied to the TLAAS pathway, Volkswagen believes that these restrictions are co ntrary to the concept of providing flexibility to the regulation for smaller volume automake rs. The EPA has proposed that manufacturers choosing to utilize the TLAAS provision can on ly do so if all existing banked credit is transferred within the manufactur er's fleets to minimize debits and all banked credit available within the manufacturer's fleet is exhausted. Volk swagen does not believe that the restrictions are necessary. Our understanding is that the EP A already accounted for the GHG impact of the TLAAS fleet assuming that all manufacturers that qualified for the provisi on utilized it to the maximum extent possible. It is also our understa nding that the air quality impact is negligible even if the TLAAS provision is fully utilized by all manufacturers qualifie d to use it. Per the EPA's calculation cited on page 49522 of the noti ce, if every manufacturer eligible for the TLAAS utilized the option to the fullest extent, the increase on the total fleet GHG emissions is less that 0.4 percent. Due to th is small impact we do not see the need to place additional restrictions on the use of a potentia l TLAAS fleet. [OAR -2009-0472-7210.1, p.3]

Toyota Motor North America

Toyota understands that additional lead time through relaxed standards may be necessary for the unique circumstances described in the proposal. To ensure the provisions are limited to the intended purpose and to avoid potential gami ng, Toyota agrees that robust conditions and restrictions must govern access to and continued use of the program. In particular, Toyota fully supports the requirement that a ll credits must be exhausted before entering the TLAAS program and that credits may not be banked while particip ating in the program. The ability to participate in the program while having a positive credit balance would indicate th e TLAAS provision is unnecessary. To ensure a level pl aying field, it is critical that the TLAAS program encourages the proper investment in CO 2 compliance technologies and a ti mely exit from the program. [OAR-2009-0472-7291, p.32]

BMW of North America, LLC (BMW)

BMW sells neither pickup trucks nor lightweight large-wheelbase vehicles that receive special flexibility in the calculation method and curv es. Based on a projection of the composition of BMW's fleet in model year 2016, EPA estimates using the footprint-ba sed calculation that BMW's fleet average will need to meet a nearly 4% more stringent fl eet standard than the projected combined US fl eet average of 250 grams CO 2 /mile. At an average 4% reduction per year for the US fleet, this means BMW will have to meet an extra year's worth of reductions by 2016. Other limited-line manufactur ers are in the same situati on. Therefore, the greenhouse gas

5-39EPA Response to Comments

and CAFE compliance options for flexibility outlined in this proposal are, in our view, essential to the successful and fair implementation of a national program. [OAR-2009-0472-7145.1, p.5]

In particular, the proposed optional temporary l ead-time allowance altern ative standards that would be available in model years 2012-2015 for auto manufacturers such as BMW with model year 2009 U.S. vehicle sales of less than 400,000 is a fair option for manufacturers who sell 'feature-dense' vehicles and no pickup trucks. Furthermore, it wi ll be limited to a maximum of 100,000 vehicles total for 4 years, and ends in mode l year 2015, before the most stringent target year of 2016. This flexibility is needed because most of the companies with limited lines will have to meet a more stringent fleet standa rd by 2016 than full-line manufacturers. [OAR-2009­ 0472-7145.1, p.5]

[BMW of North America also submitted these comments as testimony at the New York public hearing, See docket number EP A-HQ-OAR-2009-0472-4621, pp. 133-135.]

Now, TLAAS may seem unusual to some, but it must be re membered that many of the companies with limited lines will have to meet a more stringent fleet standard by 2016 than full line manufacturers. TLAAS is so constructed and the other components of flexibility are so designed that no one gets a free ride. Every manufacturer contri butes their fair share to the improvement. [These comments were submitted as testimony at the New York public hearing. See docket number EPA- HQ-OAR-2009-0472-4621, p. 135.]

National Automobile De alers Association (NADA)

The proposed TLAAS provides additional compliance lead time for certain manufacturers that historically may have paid penalties in lie u of compliance under CA FE. The necessity for TLAAS demonstrates the folly of trying to regul ate fuel economy under the CAA, a statute that was not designed for that purpose. Since, as is discussed below, the CAA’s mobile source penalty structure is particular ly ill-suited for fuel economy re gulation, the TLAAS was devised to avoid driving certain automakers out of the U.S. market. Importantly, manufacturers who will qualify for this program are committed to continuous fuel economy improvements, but tend to be narrow line manufacturers with generally heavier and more powerful vehicles. [OAR-2009­ 0472-7182.1, p.7]

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

Society of Motor Manufacturers and Traders Limited

The proposed temporary lead-time alternative a llowance standard and small entity conditional exemption will not, in their proposed format, of fer a suitable solution for UK based niche and small volume manufacturers. SMMT fully expect s its individual members to be making more detailed submissions to EPA/NHTSA to set out some possible solutions. SMMT hopes that these can be developed by the stakeholders to ensure challenging yet achievabl e long term targets for manufacturers can be set. [OAR-2009-0472-7229.1, p.1]

5-40EPA Vehicle Program, Feasibility, and Estimated Impacts

Within the EPA/NHTSA proposal the ‘Temporary Lead-time Alternative Allowance Standard’ (TLAAS) to 2016 is welcome. This allows ma nufacturers selling less than 400,000 cars to apply for a target of 125% of proposed industry-wide footprint target le vel. However, due to the high initial target faced by UK niche/SV Ms this flexibility is insuffici ent to enable them to comply with the standard. The benefit of TLAAS to ni che manufacturers is al so limited by the 100,000 volume cap on eligible vehicles, compelling su ch manufacturers to use their 100,000 allowance in the early years of the rule, t hus increasing the shortfall in la ter years. SMMT would therefore support an increase in this cap to 200,000 over the same period. In addition, the unrealistically high footprint based target for niche manufacturers would remain unachievable once the benefit of the TLAAS has ended. SMMT would therefore support an extension in the provision of the TLAAS or an equivalent for a further pe riod to be agreed wi th the regulatory authorities. [O AR-2009-0472-7229.1, pp.3-4]

An alternative approach to provide additional fl exibilities for niche manufacturers would be to adopt a similar mechanism to the EU CO 2 legislation within th e existing TLAAS provision. SMMT would support such a provi sion, providing an alternative CO 2 reduction target for manufacturers who utilize the TLAAS but may still need additional flexibility to comply. Such a target would exceed the estimated industry aver age reduction requirement of 22% but be lower than the fleet based target faced by qualifying ma nufacturers. This target could be available for manufacturers responsible for fewer than 100,000 new Passenger Car and Li ght Duty Truck sales in the US per model year in order to minimi ze the impact on the overall US car fleet. [OAR2009-0472-7229.1, p.4]

The proposed TLAAS allowance is also only availa ble to vehicle manufacturers with vehicles for sale in MY 2009. Some SVMs are not currently se lling into the US market, in part due to the current economic climate. They would therefore be excluded from being able to use the TLAAS in future. [OAR-2009-0472-7229.1, p.4]

Porsche Cars North America, Inc

Unlike the situation with CAFE where a manufacturer has the abil ity to pay a CAFE penalty for failure to comply with the fleet average require ment, this is not the case with the C02 rule proposed by EPA. As discussed in the NPRM, if a manufacturer does not meet the fleet average standard and the manufacturer is unable to ac quire credits to offset its debits, then the manufacturer will likely pay civil penalties and certificates for ve hicles in production or already sold with be voided. Absent credits, some modi fication to the credit pr ogram, deficit reduction measures, or an alternative standard, the imposition of these enforcement measures will almost certainly force Porsche out of the U.S. market . There is simply no business case to support buying back vehicles or paying la rge civil penalties. And since the footprint approach makes compliance not feasible for many years, we would anticipate a ratcheting up of the civil penalties to a point where in a short period of time they c ould be far larger than any profit associated with selling the vehicle. As a result, we believe that the rule as pro posed, absent some modification to the rule or a merger with a larger multi-line manufacturer, we would be forced us out of the market. Based on today's numbers, this could re sult in the closure of 86 standalone Porsche dealers who employ 4,049 persons. It could also negatively impact another 115 dualed dealers who employ 9,933 persons. Two hundred fifty plus persons employed by Porsche Cars North

5-41EPA Response to Comments

America, Inc. would also lose th eir jobs. Port jobs and shipping jobs would also be lost. These are the direct job losses that could be expected. There are cert ainly many more indirect supplierrelated jobs linked to Porsche both in the U.S. and abroad that would be lost as well. [OAR2009-0472-7431.1, pp.8-9]

First, for small limited-line manufacturers like Porsche, the required cumulative percent improvement relative to a manufacturer's curre nt baseline performance should not exceed the annual percent improvement which the agencies' are using to establish standards for larger multiline manufacturers. In other words, if EP A and DOT finalize standards based on a goal of improving fuel economy annually by 5%, the pe rcent improvement required of small niche limited-line manufacturers like Porsche shoul d then also not exceed the 5% per year improvement which EPA and DOT believe to be the maximum feasible improvement practicable. Hence, for the 2012MY to 2016MY pe riod, relative to our current baseline performance, the improvement required of sma ll niche limited-line manufacturers like Porsche should not exceed 25% (5% times five model year s). This limit would serve to correct for the fact that the assumed relationship of FE/C02 vs. footprint does not work well for our sports carbased passenger car fleet, and im portantly, the limit would not re duce the burden on Porsche in a way that is inconsistent w ith the goal of the regulation.

Second, as an alternative to the modification ab ove, we would recommend that EPA modify the proposed Temporary Lead-time Allowance Alternative Standards (TLAAS) provision by establishing standards for small limited line manufact urers that are consistent with the 5% per year limit. Given that it is EPA's intention to eventually establis h standards through the 2020 model year, we recommend that the TLAAS prov ision be made available until that time.

Third, EPA should modify the credit program so as to provide manufact urers greater certainty that credits will actually be avai lable. Because our competitors are unlikely to help us stay in the market by selling us credits, we recommend that EPA modify the rule to specify that manufacturers' expiring credits, which would otherwise be worthle ss, be sent to an EPA credit pool account for acquisition by those companies with deficits. We would recommend that manufacturers tasked with implementing the larg est percent improvements be given priority in acquiring credits from this account. Manufacturers with credit balances should not be permitted to use this pool to acquire additional credits. Also, to assist manufacturers in future compliance planning, EPA/DOT should publish a nnual reports online showing the credit/deficit balances for each manufacturer. [OAR-2009-0472-7431.1, pp.9-11]

Center for Biological Diversity

The Agencies propose an exception that would provide for an additional temporary leadtime allowance for manufacturers that produce less than 400,000 vehicle sales per year and make “high performance” vehicles with high CO 2 emissions, but sell no high mileage cars against which to balance those emissions. Proposed Rule, 74 Fed. Reg. 49483. 20 No such exception is allowed under either EPCA or the Clean Air Act. Moreover, it would reward manufacturers flouting the rules while penalizing those that have complied and indeed surpassed past standards. In addition, such manufacturers ha ve other options: they could begi n to offer vehicles that truly are “high performance” in terms of fuel effici ency; they could “decreas[e] the mass of the

5-42EPA Vehicle Program, Feasibility, and Estimated Impacts

vehicles and/or decreas[e] the power output of the engines,” 74 Fe d. Reg. 49554; they could purchase credits from other manufacturers; or they could take advantage of “off-cycle technical credits” the Agencies intend to introduce – i.e., those that improve fuel efficiency but are not captured by current testing methodologies, such as so lar panels, adaptive crui se control, or active aerodynamics. In short, this proposal is bad public policy, unnecessary, and illegal. [OAR-2009­ 0472-7265.1, p. 15]

Public Citizen and Safe Climate Campaign

EPA proposes to allow all but the six largest manuf acturers to create a se parate averaging fleet for up to a total of 100,000 vehicles for m odel years 2012-2015. Currently, the six largest manufacturers are Toyota, GM, Ford, Honda, Ch rysler and Nissan, meaning that manufacturers like BMW and Daimler are given this dispensa tion even though they produce 400,000 vehicles per year. Companies like BMW and Daimler, wh o pride themselves on being technologically advanced, should be subject to the same standard s as Ford, GM, and Toyota. EPA explains that the purpose of providing additiona l lead time is to permit manufact urers who have traditionally met their CAFE obligations by paying fines to come into compliance with the greenhouse gas emissions program. The CAA does not have a mechan ism for manufacturers to pay fines to come into compliance, and the CAA penalties are mu ch steeper than the CAFE fines. [OAR-2009­ 0472-7050.1, p.7]

We urge the EPA to retain its po sition on trading from a company’s special averaging fleet to it's primarily fleet. If the agency does not explicitly prohibit such trades, it might create an incentive for manufacturers to take advantage of the TLAAS system to generate additional credits. [OAR2009-0472-7050.1, p.7]

Union of Concerned Scientists

While consumers and the environment would be better off if all automakers had to meet EPA’s standards on the same schedule, we acknowledge the EPA’s rationale for this allowance because its effect will be to phase out NHTSA’s system of fines that allow some manufacturers to pay to avoid meeting fuel economy standards. Manuf acturers that have pr eviously relied on the payment of fines as a regulato ry compliance option no longer have that option under the Clean Air Act, and limited interim year leniency at the level proposed will help transition those manufacturers to the more stringent system. That said, in order to prevent this flexibility from becoming simply another loophole eroding energy a nd emissions savings, it is critical that the temporary lead-time allowance alte rnative standards be kept at th e proposed levels and, further, kept as a temporary measure. This is a transition mechanism that will allow certain manufacturers to shift from one form of compli ance to another; broadening the scope of these [OAR-2009-0472-7181.1, p.11] allowances or exte nding their use beyond this period would undermine the goal of assisting in a swift transition to adopti on of clean technologies. [OAR2009-0472-7181.1, p.12]

Additionally, with respect to EPA’s proposal to restrict the use of ba nking and trading between companies of credits in the primary program in years in which the TLAAS is being used, UCS concurs and supports such a re striction. [OAR-2009-0472-7181.1, p.12]

5-43EPA Response to Comments

American Council for an Energy Efficient Economy

The Temporary Lead Time Allowance Alternativ e Standards (TLAAS) should be eliminated, or at least more carefully tailored to meet the needs of low-volume manufacturers. The suggested sales cutoff of 400,000 is too high and allows cert ain manufacturers that fall just below that cutoff to shirk their fuel economy and GHG reduc tion responsibilities. It also discriminates against U.S. manufacturers by providing luxury Eu ropean manufacturers with more lead time to adapt to new fuel economy and GHG standa rds. These manufacturers face ambitious GHG reduction standards in their primary (EU) markets, and permitting them to delay their responses to new standards on either side of the Atlantic will not serve any parties well.

ACEEE’s estimates of possible per-vehicle emissi ons increases resulting from the TLAAS start at 2.4 grams per mile in 2012 and decline to 0.5 grams per mile in 2016. These figures are very close to the Upper Bound Scenario provided by EPA (DRIA p.5-43). EPA estimates that the actual values will be only 15-20 percent of thes e upper bounds, but it is unclear how the agency arrived at those estimates.

Recommendations: 1. Exclude the TLAAS from the final rule. 2. If the TLAAS are included, reevaluate the criteria for eligib ility and ensure that no extension of the program occurs in future rulemakings. EPA should also justify its estimat e of the likely impact of the alternative standards.

[ACEEE also submitted these comments as testimony at the New York public hearing, See docket number EPA-HQ-OAR-2009-0472-4621, pp. 139-140.]

Sierra Club

Under the Clean Air Act, automakers will no longer be able to pay fines as a compliance option. EPA’s proposal for Temporary Lead-time Allowan ce Alternative (TLAA) St andards, if included in the final rule, should contain the limitations in the proposed rule and EPA should be clear that TLAA Standards are temporary and will not be revived in standards beyond 2016. Many automakers who stand to benefit from this program already meet more stringent standards in the European Union. We support the EPA proposal to restrict the use of banking and trading of credits between companies in the primary pr ogram during the TLAA Standards timeframe. [OAR-2009-0472-7278.1, p.15]

New York State Department of Environmental Conservation

EPA proposes an interim program for intermedia te volume manufacturers, the Temporary Leadtime Allowance Alternative Standards, which al lows some vehicles to be certified to a significantly less stringent stan dard: Manufacturers making use of these provisions [OAR-2009­ 0472-7454, p.1] should not be accumulating credit bala nces else where in the model years in which they are utilizing the Temporary Lead- time Allowance Alternative Standards. [OAR2009-0472-7454, p.2]

Mass Comment Campaign (2,332) (unknown organization)

5-44EPA Vehicle Program, Feasibility, and Estimated Impacts

The 'luxury loophole' for small volume manufacture rs must not become a boon to manufacturers currently meeting or exceeding standards. Any manufacturer taking advantage of extra lead time must be barred from trad ing credits. [OAR-2009-0472-5747, p.1]

Pendleton, Tom

The proposed rules provide that automakers th at sell fewer than 400,000 vehicles in the United States would be allowed to meet a weaker standard to keep per-unit costs down. This group includes Mercedes-Benz, BMW, Volkswagen and Subaru.

Mercedes Benz should NOT be eliminated from this standard as they also have a diesel powered high mileage vehicle in their "A" series that should do well here. Subaru could also easily meet the new standards even if forced to do so by bouncing the Tribeca and improving the remainder of the fleet. BMW and VW both have high mileage di esels and should also be forced to adhere to the new standards...

The BMW, Ford, Mercedes-Benz, Subaru and VW co mpanies operate in the EU with those strict standards so why can't they do the same here in the USA? Is this political gamesmanship or something uglier? [OAR-2009-0472-2094, pp. 2-3]

EPA Response:

Base TLAAS Program

After carefully considering the public comments, EPA continues to believe that the TLAAS program is essential in providing necessary lead time and flexibil ity to eligible manufacturers in the early years of the standards. First, EPA believes that it is acting well within its legal authority in adopting the various TLAAS provisions. EPA is requi red to provide sufficient lead time for industry as a whole for standards unde r section 202 (a) (1), which mandates that standards are to take effect only “after providing such period as the Administrator finds necessary to permit the development and appl ication of the requisite technology, giving appropriate consideration to the cost of compliance within such period.” Thus, although section 202 (a)(1) does not explicitly authorize this or an y other specific lead time provision, it affords ample leeway for EPA to craft pr ovisions designed to provide ade quate lead time, and to tailor those provisions as appropriate. See Husqva rna AB v. EPA, 254 F. 3d 195, 202 (D.C. Cir. 2001) (upholding provisions adopted under s ection 213 (b) (a provision wo rded nearly identically to section 201 (a) (2) with respect to considerati on of cost and lead time) which allowed for additional lead time for manufacturers with sma ller production levels). The types of technology penetrations required for TLAAS-eligible vehicles in the program’s earlier years raise critical issues as to adequacy of lead time. As discu ssed in the EPA feasibility analysis provided in preamble section III.D.6 and III.D.7, several manuf acturers eligible for TLAAS are projected to face a compliance shortfall in MY2016 without the TLAAS program. This is projected to occur even with the full applicati on of technologies assumed by th e OMEGA Model, including hybrid use of up to 15 percent. These manufacturer s include BMW, Daimler, Jaguar Land Rover, Porsche, and Volkswagen In addition, the sm aller volume manufacturers of this group (i.e., Jaguar Land Rover and Porsche) face the greatest shortfall (see preamble Ta ble III.D.6-4). Even

5-45EPA Response to Comments

with TLAAS, these manufacturers will need to take technology steps above and beyond those of other manufacturers to comply with standards. These manufacturers have relatively few models with high baseline emissions and this flexibility allows them additional lead time to adapt to a longer term strategy of meeting the final standards within their vehicle rede sign cycles. Also, for CAFE, they have paid fines occasionally, and th erefore have greater emissions reductions to achieve in order to comply with standards.

Second, EPA has carefully evaluated other means that eligible manufacturers can use to meet the standards, such as utilizing available credit oppor tunities. Indeed, eligibility for the TLAAS, and for temporary deferral of regulation for very sm all volume manufacturers, is conditioned on first exhausting the various programmatic flexibilities in cluding credit utilization. At the same time, a basic reason certain manufacturer s are faced with specia l lead time difficulties is their inability to generate credits which can be then be aver aged across their fleet because of limited product lines. And although purchasing credits is an op tion under the program, th ere are no guarantees that credits will be available. Historic practi ce in fact suggests that manufacturers do not sell credits to competitors. Although some of th e smaller manufacturers covered by the TLAAS program may be in a position to obtain credits, they are not likely to be available for the TLAAS manufacturers across the board in the volume need ed to comply without the TLAAS provisions. At the same time the TLAAS provisions have been structured such that any credits that do become available would need to be used before a manufacturer would turn to the more restricted and limiting TLAAS provisions.

As discussed in preamble Section III.C., off-cycle credits are available if manufacturers are able to employ new and innovative technologies not alr eady in widespread use, which provide realworld emissions reductions not captured on the curre nt test cycles. Furt her, these credits are eligible only for technologies th at are newly introduced on just a few vehicle models, and are not yet in widespread use across the fleet. The magnitude of these credits are highly uncertain because they are based on new technologies, and EPA is not aware of any such technologies that would provide enough credits to bring these manuf acturers into compliance without TLAAS lead time flexibility. Manufacturers first must develo p these technologies and then demonstrate their emissions reductions capabilities, which will require lead time . Moreover, the technologies mentioned in the proposal which are the most lik ely to be eligible ba sed on present knowledge, including solar panels and ac tive aerodynamics, are likely to provide only small incremental emissions reductions.

We agree with the comment from Citizens for Bi odiversity that reducing vehicle mass or power are potential methods for reducing emissions that should be employed by TLAAS-eligible manufacturers to help th em meet standards. However, base d on our assessment of the lead time needed for these manufacturers to comply with th e standards, especially given their more limited product offerings and higher baseline emissions, we believe that additional time is needed for them to come into compliance. EPA can permissibly consider the TLAAS and other manufacturers’ lead time, cost, and feasibility issues in develo ping the primary standards and has discretion in setting the overall st ringency of the standards to acc ount for these factors. Natural Resources Defense Council v. Thomas , 805 F. 2d 410, 421 (D.C. Cir. 1986) (even when implementing technology-forcing provisions of Title II, EPA may base standards on an industrywide capability “taking into account the broad sp ectrum of technological capabilities as well as

5-46EPA Vehicle Program, Feasibility, and Estimated Impacts

cost and other factors” across the industry). EP A is not legally required to set standards that drive these manufacturers or thei r products out of the market, nor is EPA legally required to preserve a certain product line or vehicle characteristic. Inst ead, EPA has broad discretion under section 202(a)(1) to set standards that reasonably balance lead tim e needs across the industry as a whole and that consider vehicle availabilit y. In this rulemaking, EPA has consistently emphasized the importance of obtaining very signif icant reductions in emissions of GHGs from the industry as a whole, and obtai ning those reductions through re gulatory approaches that avoid limiting the ability of manufacturer s to provide model availability and choice for consumers. The primary mechanism to achieve this is the us e of a footprint attribute curve in setting the increasingly stringent model ye ar standards. The TLAAS provisions are a temporary and strictly limited modification to these attribute standards allowi ng the TLAAS manufacturers lead time to upgrade their product lines to meet th e 2016 MY GHG standards. EPA has made a reasonable choice here to preserve the overall stringency of the program, and to afford increased flexibility in the program’s early years to a limited class of vehicles to assure adequate lead time for all manufacturers to meet the st rictest of the standards by MY 2016.

DAG comments that the TLAAS program also allows them and other smaller volume manufacturers to continue to pi oneer advanced technologies, such as fuel cell and full battery electric vehicles, while simultaneously meeting the aggressive standards applicable to their lower-volume fleets. As such, the TLAAS conti nues to facilitate the development of new technology. EPA understands that some smaller vol ume manufacturers are developing advanced technologies to achieve future emissions reducti ons and the TLAAS program provides them with more time to continue with the development of technology.

EPA agrees with comments that the program should remain limited and temporary. Although EPA has added some limited additional flexibility and lead-time for manufacturers with annual sales below 50,000 vehicles, EPA has tailored the program as narrowly as possible to address lead-time concerns and the program will be phased-out by MY 2016 for most eligible manufacturers.

With regard to the 400,000 unit eligibility cut-po int, ACEEE comments that the cut-point is too high and “allows certain manufactur ers that fall just below that cu toff to shirk their fuel economy and GHG reduction responsibilities. It also discriminates against U.S. manufacturers by providing luxury European manufact urers with more lead time to adapt to new fuel economy and GHG standards.” EPA continues to believe th e 400,000 unit cut-point is appropriate and is retaining it. For reasons descri bed above, manufacturers falling below this threshold need the additional lead-time provided by TLAAS. EPA re viewed the sales volu mes of manufacturers over the last few years, and determined that manufacturers below this level typically fit the characteristics discussed above, and manufacturers above this le vel did not. Thus, EPA chose this level because it functionally identifies the group of manufacturers (i.e., manufacturers who have traditionally paid CAFE fi nes instead of complying with th e CAFE fleet average, and as a result at least part of their vehicle pr oduction currently has significantly higher CO 2 and lower fuel economy levels than the industry average), re cognizing that there is no thing intrinsic in the sales volume itself that warrants this allowanc e. EPA was not able to identify any other objective criteria that would more appropriately identify the manufacturers and vehicle fleets described above.

5-47EPA Response to Comments

This approach seeks to balance the need to provide additional lead-t ime without reducing the environmental benefits of the proposed progr am. EPA believes that 100,000 units over four model years achieves an appropriate balance as the emissions impact is quite small, but does provide companies with some flexibility during MY 2012 – 2015. For example, for a manufacturer producing 400,000 vehi cles per year, this would be a total of up to 100,000 vehicles out of a total production of up to 1.6 milli on vehicles over the four year period, or about 6 percent of total production. In addition, EP A has quantified the pot ential impact of the program (see RIA chapter 5A). As shown there, th e likely impact of the program is less than a 1% loss of emission reductions (assuming feasibili ty in early model years for all manufacturers – an unlikely assumption) and less than 3% even a ssuming the unrealistic possibility of completely maximized use of the program. Given the very cons iderable issues relating to needed lead time for TLAAS-eligible manufacturers and these modest emission increases associated with the provision, EPA believes it a reasonable balance of c onsiderations of technol ogical feasibility and lead-time to provide the temporary al lowance. See Sierra Club v. EPA, 325 F. 3d 374, 378 (D.C. Cir. 2003) (weighing of statutory factors of cost and lead time in determining stringency and phasing in of technology-forcing standards). EPA al so notes that the provisions apply not only to European manufacturers but to all manufact urers below the eligibility cut-point.

In response to comments that certain TLAAS-elig ible manufacturers could meet standards by selling diesels, EPA reco gnizes that diesels offer CO 2 emissions reductions. However, due to the high cost of diesel technology, EP A is not projecting significant ma rket penetration for diesels. EPA also notes that diesel fuel has a higher carb on concentration than ga soline and so diesels are not as effective from a CO 2 stand-point as they are from a fuel economy perspective.

EPA does not agree with NADA comments that th e “necessity for TLAAS demonstrates the folly of trying to regulate fuel economy unde r the CAA”. The CAA provides broad discretion for EPA to consider the lead-time needed by manu facturers and the ability to provide additional flexibility as needed. Provisions are often incl uded in CAA-based mobile source rulemaking to address lead-time issues and these provisions are tailored to the particular needs for the rule.

Additional Flexibility for Smaller Volume Manufacturers

EPA received extensive comments that the TLAAS program would not provide sufficient lead time and flexibility for companies with sales of significantly less than 400,000 vehicles. Jaguar Land Rover, which separated from Ford in 2008, commented that it sells products only in the middle and large vehicle segments and that its total product range rema ins significantly more limited in terms of segments in comparison with its main competitors which typically have approximately 75% of their passenger car fleet in the small and middle segments. Jaguar Land Rover also commented that it has already committed $1.3 billion of investment to reducing CO 2 from its vehicle fleet and that this investment is already deliv ering a range of technologies to improve the fuel economy and CO 2 performance of its existing vehicles. Jaguar Land Rover submitted confidential business information regarding their future product plans and emissions performance capabilities of their vehicles which documents their assertions.

5-48EPA Vehicle Program, Feasibility, and Estimated Impacts

Porsche commented that their passenger car foot print-based standard is the most stringent of any manufacturer and this, co mbined with their high baseline emissions level, means that it would need to reduce emissions by about 10 percent per year over the 2012 – 2016 time-frame. Porsche commented that such reductions were not feasible. They commented that their competitors will be able to continue to offer their full line of products because the competitors have a wider range of products with which to av erage. Porsche further commented that their product development cycles are longer than larg er competitors. Porsche recommended for small limited line niche manufacturers th at EPA require an annual 5 pe rcent reduction in emissions from baseline up to a total reduc tion of 25 percent, or to modify the TLAAS program to require such reductions. Porsche noted th at this percent reduction would be in line with the average emissions reductions required for larger manufacturers.

EPA also received comments from several very sm all volume manufacturers that, even with the TLAAS program, the proposed standards are not feasible for them, certainly not in the MY 2012-2016 MY time frame. These comments are addressed in Section 5.4.2

EPA carefully considered the comments of smaller volume manufacturers and believes additional lead time is needed. After assessing the issues ra ised by commenters, EPA believes there are two groups of manufactur ers that need additional lead time. The first group includes manufacturers with annual U.S. sales of less th an 5,000 vehicles per year . Comments regarding these small volume manufacturers are addresse d in Section 5.4.2, below. The second group includes manufacturers with MY 2009 U.S. sales of less than 50,000 vehicles but above the 5,000 vehicle threshold being established for sma ll volume manufacturers. EPA has selected a cut point of 50,000 vehicles in order to limit th e additional flexibility to only the smaller manufacturers with much more limited product line s over which to average. EPA has tailored additional TLAAS flexibility for these manuf acturers as narrowly as possible to provide additional lead time only as needed by these smaller manufacturers. We estimate that the TLAAS program, including the changes below, will result in a total decrease in overall emissions reductions of about one percent of the total pr ojected GHG program emission benefits. The basis for these estimates is provided in RIA Chapter 5 Appendix A.

As discussed in the EPA feasibility analysis provided in section III.D.6 and III.D.7 of the preamble several manufacturers eligible for TLAAS are projected to face a compliance shortfall in MY2016 without the TLAAS progra m, even with the full applic ation of technologies assumed by the OMEGA Model, including hybrid use of up to 15 percent. These include BMW, Daimler, Jaguar Land Rover, Porsche, and Volkswagen In addition, the smaller vo lume manufacturers of this group (i.e., Jaguar Land Rover and Porsche) face the greatest shortfall (see preamble Table III.D.6-4). Even with TLAAS, these manufacturer s will need to take technology steps to comply with standards above and beyond those of othe r manufacturers. Th ese manufacturers have relatively few models with high baseline emissions and this flexibility allows them additional lead time to adapt to a longer term strategy of meeting the final standard s within their vehicle redesign cycles.

For some of the companies such as Jaguar Land-R over and Porsche, the reduction from baseline CO 2 emissions required to meet the standards is clearly greater than for other TLAAS-eligible manufacturers (to say nothing of other manufacturers). Compar ed with other TLAAS-eligible

5-49EPA Response to Comments

manufacturers, these companies also have more limited fleets across which to average the standards. These companies have only a few vehicl e models all of a simila r utility, and thus their averaging abilities are extremely limited posing lead time issues of greater severity than other TLAAS-eligible manufacturers. In addition, with fewer models with which to average, there is a higher likelihood that phase-in re quirements may conflic t with normal product redesign cycles. EPA’s feasibility analysis provided in preamble Section III.D. shows that these companies face a compliance shortfall significantly greater than other TLAAS companies (see preamble Table III.D.6-4). .

Therefore, for manufacturers with MY2009 U.S. sales of less than 50,000 vehicles, EPA is finalizing additional TLAAS compliance fl exibility through model year 2016. These manufacturers will be allowed to place up to 200,000 vehicles in the TLAAS program in MY2012-2015 and an additional 50,000 vehicles in MY2016. To be eligible for the additional allotment above the base TLAAS level of 100,000 vehicles, manufacturer s must demonstrate each year that they have diligently make a good faith effort to purchase credits from other manufacturers in order to comply with the base TLAAS program, but that sufficient credits were not available. Manufacturers must secure credits to the extent they are reasonably available from other manufacturers to offset the difference between their emissions reduc tions obligations under the base TLAAS program and the expanded TL AAS program. Manufacturers must document their efforts to purchase credits as part of their end of year comp liance report. All other aspects of the TLAAS program, including the 1.25x adjustment to the standards and the credits provision restrictions, remain the same as described above for the same reasons. This will still require the manufacturers to reduce emissi ons significantly in the 2012-2016 time-frame and to meet the final emissions standards in MY2017. The standards remain very challenging for these manufacturers but these additiona l provisions will allow them the necessary lead time for implementing their strategy for compliance with the final, most stringent standards.

The eligibility limit of 50,000 vehicles will be tr eated in a similar way as the 400,000 vehicle eligibility limit is trea ted, as described above. Manufacturers with model year 2009 U.S. sales of less than 50,000 vehicles are eligible for the e xpanded TLAAS flexibility. Manufacturers whose sales grow in later years above 50,000 vehicles wit hout merger or acquisition will continue to be eligible for the expanded TLAAS program. However, manufacturers that exceed the 50,000 vehicle limit through mergers or acquisitions w ill not be eligible for the expanded TLAAS program in the model year following the merger or acquisition, but may con tinue to be eligible for the base TLAAS program if the MY2009 sales of the new company would have been below the 400,000 vehicle eligibility cut point. The use of TLAAS by all the entities within the company in years prior to the merger must be counted against the 100,000 vehicle limit of the base program. If the 100,000 vehicle limit has been exceeded, the company is no longer eligible for TLAAS.

Porsche commented that EPA should modify the cr edits program to provide manufacturers with greater certainty that credits will be available to purchase from ot her manufacturers. EPA is not finalizing any mechanisms that wo uld compel manufacturers with cred its to sell those credits to other manufacturers. It is not clear how to implement such mechanisms, but EPA will monitor the credits market, and EPA plans to make this type of information available to the public.

5-50EPA Vehicle Program, Feasibility, and Estimated Impacts

Please see Section 5.10.1 for EPA’s full response to comments regarding data transparency and availability.

In response to smaller volume manufacturer l ead-time concerns, EPA is modifying the TLAAS program to provide smaller manufacturers with more lead-time, as noted above.

Credit Restrictions

EPA received several comments in support of the proposed credit restrictions for the TLAAS program including from Toyota, Public Citi zen and Safe Climate Campaign, Union of Concerned Scientists, and Sierra Club. On the negative side, Volkswagen commented that the restrictions were not necessa ry, saying that the restrict ions are counter to providing manufacturers with flexibility and that the emi ssions impacts estimated by EPA due to the full use of the program are small. However, EPA c ontinues to believe that the restrictions are appropriate to prevent the poten tial gaming described below, a nd to ensure that the TLAAS program is used only by those manufacturers that have exhausted all ot her readily available compliance mechanisms and consequently have legitimate lead time issues.

EPA is thus finalizing a number of restrictions on credit trading within the TLAAS program, as proposed. EPA is concerned that if credit use in the TLAAS program were unrestricted, some manufacturers would be able to place relatively clean vehicles in the TLAAS fleet, and generate credits for the primary program fleet. Firs t, credits generated under TLAAS may not be transferred or traded to the primary program. A consequence of this re striction is that any unused credits under TLAAS expire after m odel year 2015 (or 2016 for manufacturers with annual sales less than 50,000 vehicles). EPA believes that this is necessary to limit the program to situations where it is needed and to pr event the allowance from being inappropriately transferred to the long-term primary program where it is not needed.

Second, EPA is finalizing two additional restrict ions on the use of TLAAS by requiring that for any of the 2012-2015 model years for which an e ligible manufacturer would like to use the TLAAS, the manufacturer must use two of the ava ilable flexibilities in th e GHG program first in order to try and comply with the primary sta ndard before accessing the TLAAS -- i.e., TLAAS eligibility, which is premised on the need for a dditional lead time, is not available to those manufacturers with other readily-available means of compliance . Specifically, before using the TLAAS a manufacturer must: (1) use any banked em ission credits from previous model years; and, (2) use any available credits from the companies’ car or truck fleet for the specific model year (i.e., use credit transfer from cars to trucks or from trucks to cars). That is, before using the TLAAS for either the car fleet or the truck flee t, the company must make use of any available intra-manufacturer credit transfers first. Fi nally, EPA is restricti ng the use of banking and trading between companies of credits in the pr imary program in years in which the TLAAS is being used. No such restriction is in place fo r years when the TLAAS is not being used. EPA continues to believe this provisi on is necessary to prevent credits from being earned simply by removing some high-emitting vehicles from the primary fleet. Absent this restriction, manufacturers would be able to c hoose to use the TLAAS for these vehicles and also be able to earn credits under the primary program that c ould be banked or traded under the primary program without restriction.

5-51EPA Response to Comments

Emissions Impact Calculations

ACEE expresses two concerns regarding EPA’s anal ysis of emissions impacts associated with the TLAAS program: 1) that EPA did not provide documentation of the impact calculations for the TLAAS program, and 2) that EPA underest imated the impact of the program.

Regarding the first point, a detailed methodology of the impact calculations concerning TLAAS was made available in DRIA chapter 5, Appendix A. In this final rule, similar calculations are documented in RIA Chapter 5, Appendix A. As in the proposal, the cal culations are also separately available in the docket, in a spreadsheet titled “Achieved CO 2 standards worksheet.”

While ACEE provided contrasting estimates of TLAAS impacts, it did not provide its calculations. EPA disagrees with the commenter ’s estimates of the impacts from the TLAAS program, and is concerned that several errors may have been made. It appears that the commenter may have projected the TLAAS imp acts ending in MY 2016, but in fact the TLAAS program, for most eligible manufacturers (those above 50,000 vehicle sales but below 400,000 sales) ends in 2015. Further, ACEE projected impacts that are near or above EPA’s highly unlikely “upper bound scenario” where every eligible manufacturer is project ed to fully utilize the TLAAS program for the full program allotment, and place its largest vehicles in the program (RIA Chapter 5A). This would require companies such as Porsche and BMW to sell specific vehicle models (such as the Boxster and Phantom) in unprecedented numbers.

EPA’s analysis shows that even if the TLAAS pr ogram was fully utilized, the emission impacts are still slight relative to the overall benefits of the program. Further, EPA considers it highly unlikely that every manufacturer will utilize the full TLAAS progr am for each year which the manufacturer is eligible. Se veral manufacturers which are el igible for the TLAAS program currently produce vehicle fleets with fuel economy ratings which are highe r than required by the MY 2008 or MY 2011 standards.

Further, utilizing the TLAAS program potentially offers several distinct disadvantages. The manufacturers with vehicles in the TLAAS program will need to be in compliance with the main program when the TLAAS program ends, and c onsequently need to be making continual progress toward meeting the MY2016 standard. Further, manufacturers utilizing the TLAAS program will be subject to several rest rictions on credit banking and trading.

EPA therefore disagrees with the commenter on both points.

TLAAS Eligibility Comments

Organization: Association of International Au tomobile Manufacturers (AIAM) Ford Motor Company National Automobile Dealers Association (NADA) Saab Automobile AB (Saab) Volvo Car Corporation Cummins Inc.

Comment:

5-52EPA Vehicle Program, Feasibility, and Estimated Impacts

Association of International Au tomobile Manufacturers (AIAM)

AIAM has one other serious concern with the TLAAS program as it is proposed by EPA. As proposed, “manufacturers with no U.S. sales in model year 2009 would not qualify for the . . . program.” See 74 FR at 49523. This criterion is patently unfair to manufacturers which may decide to market vehicles in the U.S. in the fu ture but did not do so in the 2009 MY. EPA should redefine the program to allow such manufacturers to qualify for this program. Additionally, any new SVMs entering the market should be treated si milarly as SVMs currently marketing vehicles in the U.S. [OAR-2009-0472-7123.1, p.11]

[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]

National Automobile De alers Association (NADA)

The TLAAS should not be limited only to manuf acturers with sales in the US in MY 2009. [OAR-2009-0472-7182.1, p.7]

Ford Motor Company

Temporary Lead-time Allowance Alternative Standards

EPA proposes to allow 'temporary lead-time a llowance alternative standards' (TLAAS) for manufacturers who sell vehicles in the U.S. in MY 2009 whose vehicle sales in that model year are below 400,000 vehicles. According to the proposal, total sales of would be aggregated in the same manner as CAFE, and '[c]orporate ownershi p or control relationships would be based on determinations made under CAFE for model year 2009.' Based on our understanding of the preamble and the proposed rule at 86.1818-12(e) there would be a onetime determination of eligibility for TLAAS based on the relations hips that exist in the 2009 model year.

A one-time determination of eligibility for TLAAS would base future regu latory obligations on a snapshot of the industry as it exists in the 2009 model year. It would not take into account the fact that corporate relationships in the auto indu stry are in flux, and will continue to change in the 2010 model year and beyond. To the extent that further changes in co rporate relationships result in the creation or spin-off of new entit ies with vehicle sales below 400,000-unit cut-point prior to the 2016 model year, th ese entities should qualify for TLAAS as well. Such entities would have 'a limited line of vehicles' and be ' unable to take advantage of averaging emissions performance across a full line of production,' c ited by EPA as the reasons for allowing TLAAS in the first place. To deny such entities access to TLAAS would be to place them at a regulatory disadvantage vis-a-vis their direct competitors . Likewise, a smaller-volume manufacturer that becomes part of a larger one should not cont inue to qualify for TLAAS. A more flexible provision is needed to allow for changes to the industry over time.

Ford has two recommendations here. First, the initial determination of eligibility for TLAAS should be based on corporate determinations for CAFE in the 2010 model year, not the 2009 model year. The GHG rules will not be final until approximately April 1 of 2010, when the 2010

5-53EPA Response to Comments

model year is well underway and manufacturers will already be selling some 2011 model year vehicles. Corporate relationships that existed in the 2009 model year may already be outdated by the time these rules are finalized. Second, Ford recommends that qualifica tion for the alternative standard should be reassessed in each model year subsequent to the 2010 model year based on control relationships in existence during each m odel year. A small manufacturer spun off from a larger one in 2010 should have the same co mpliance opportunities as any other small manufacturer. Likewise, if a sm all manufacturer becomes part of a larger one, it should not continue to qualify for a compliance option that other similarly-situated manufacturers cannot utilize. It may be appropriate to pro-rate the total of 100,000 vehicl es that are subject to the new standards based on the total numbe r of model years that the manufacturer is eligible for TLAAS. [OAR-2009-0472-7082.1, pp. 24-25]

Saab Automobile AB (Saab)

Saab appreciates that the EPA recognizes th e difficulties of a lower volume limited line manufacturer in meeting the requirements of the proposed rule by providing the flexibility inherent in the Temporary Lead-Time Allowance Alternative Standards (TLAAS). Unfortunately due to the proposed definition of a TLASS “qualifying manufacturer”, Saab would be excluded from utilizing the flexibility of this provision. [OAR-2009-0472-7103.1, p.1]

The proposal applies the definition to the 2009 model year, even though many manufacturing relationships will be radically different when the rule takes effect. For example, in the 2009 model year Saab was owned by General Motors (GM). Due to this ownership, Saab would be excluded as a TLAAS qualifying manufacturer. Ho wever, in February 2009 GM announced that it was selling or closi ng Saab by the end of the 2009 calenda r year. That sale is nearing completion and when final will create a small fully independent Saab that under the proposed definition would still be excluded from utilizing the TLAAS. Following is Saab’s recommendation:

In §86.1818-12 (e) (i) EPA proposed the definiti on of a qualifying manufacturer as: A qualifying manufacturer is a ma nufacturer with sales of 2009 model year combined passenger automobiles and light trucks in the United St ates of less than 400,000 vehicles, except that manufacturers with no U.S. sales in the 2009 model year do not qualify for the optional interim standards. [OAR-2009-0472-7103.1, p.1]

Saab recommends the following addition to §86.1818-12 (e) (i):

A qualifying manufacturer may include a manufac turer that during the 2009 model year was wholly owned by a large volume manufacturer and as a result of a change in corporate relationship reported to the NHTSA pursuant to 49 CFR Part 534, subsequently separated from the larger manufacturer before the end of calenda r year 2010, provided that the branded sales of the smaller manufacturer for 2009 model year comb ined passenger automob iles and light trucks in the United States would have been less than 400,000 vehicles if said manufacturer sales were totaled separately. [OAR-2009-0472-7103.1, p.1]

5-54EPA Vehicle Program, Feasibility, and Estimated Impacts

This addition to the definiti on of qualifying manufacturer ac commodates the extraordinary developments that have been occurring in th e US automotive industry. By incorporating this addition, a more equitable application of the TLAAS will be possible while maintaining and strengthening its original intent. [OAR-2009-0472-7103.1, p.2]

Volvo Car Corporation

The discussion in the preamble further explains that “the total sales number applies at the corporate level, so if a corporation owns seve ral vehicle brands the aggregate sales of the corporation would be used . . . In other words, corporations grouped together for purposes of meeting CAFE standards, would be grouped togeth er for determining whether or not they are eligible under the 400,000 vehicle cut point.” 1 Based on our understand ing of the preamble, EPA’s current assumption is that there would be a one-time determination of eligibility for TLAAS based on the corporate relationships and production volumes that exist in the 2009 model year. This approach is ar bitrary and it is not consistent with either the stated purpose behind TLAAS, or the regulatory language propo sed for codification at section 86.1818-12(e). As explained below under I. B, the proposed regu latory language can be reconciled with the purpose and intent behind TLAAS, even if EPA c hooses not make appropriate clarifications, and in spite of the way EPA describes the criteria in the preamble.

A one-time determination of eligibility for TLAAS would base future regu latory obligations on a snapshot of the industry as it exists in the 2009 model year. It would not take into account the fact that corporate relationships in the auto indu stry are in flux, and will continue to change in the 2010 model year and beyond. To the extent that further changes in co rporate relationships result in the creation or spin-off of new entit ies with vehicle sales below 400,000-unit cut-point prior to the 2016 model year, th ese entities should qualify for TLAAS as well. Such entities would have 'a limited line of vehicles' and be ' unable to take advantage of averaging emissions performance across a full line of production,' c ited by EPA as the reasons for allowing TLAAS in the first place. To deny such entities acce ss to TLAAS would place them at a regulatory disadvantage vis-à-vis their direct competitors.

VCC fits squarely within the ca tegories of manufacturer that TLAAS was designed to address. EPA’s proposal expressly recognizes the need for additional lead-time requirements for companies with fleets traditionally subject to CAFE penalties and/or companies with a limited line of vehicles unable to take advantage of av eraging emissions performance across a full line of products. Consistent with the purposes of TLAAS , the allowance should be made available to manufacturers whose products have been sold in the U.S. but which have previously been aggregated into the fleet of a full-line, larger-volume manufacturer.

Access to TLAAS is especially appropriate for a newly independent company that has traditionally been a leader in bringing advan ced safety technology to the market, like Volvo. Such access will allow VCC to continue that l eadership while simultaneously working towards full compliance with the GHG program. TLAAS would not change VCC’s responsibility to comply with the program on the same timeframe as other similarly sized manufacturers. Instead it would simply establish a standard for VCC that better reflects the composition of its fleet as a

5-55EPA Response to Comments

stand-alone manufacturer a nd the fact that has previously been aggregated into a larger fleet with the other brands of its parent company.

EPA has also correctly recognized that the ability of a manufacturer to succ essfully implement new technologies necessary to meet increased em issions standards is pr oportional to the size a manufacturer’s total annual production of vehicles. In light of th is fact, it would be arbitrary and inappropriate to allow manufactures with 2009 sales of up to 400,000 vehicles to use TLAAS, while prohibiting significantly smaller volume pr oducers like VCC from participating in the program. As noted above, VCC’s recent annual U.S. sales of approximately 100,000 are only 25% of the maximum threshold for TLAAS.

The special circumstances of a newly independe nt manufacturer fall squarely within EPA’s discretion under the Clean Air Act to consider a nd adjust appropriate lead-time allowances. See 42 U.S.C. § 7521(a)(2). Similar lead time provi sions have been provided and upheld by the federal courts. See, e.g., Et hyl Corp. v. EPA, 541 F.2d 1

VCC recommends the following regarding TLAAS:

First, the initial de termination of eligibility for TLAAS s hould be based on the actual corporate status and relationship in th e calendar year in which the GHG regulations apply (2012-2016). Alternatively, at the very soonest, eligibility sh ould be based on actual corporate status and relationships that exis t in calendar year 2010, when the fina l regulations are adopted, not the 2009 model year as proposed. The GHG rules will not be final until approximately April 1 of 2010, when the 2010 model year is well underway and manufacturers will already be selling some 2011 model year vehicles. Corporate relati onships that existed for the 2009 model year may already be completely outdated by the time these rules are finalized. As explained above, the arbitrary selection of mode l year 2009 would be especially harmful to VCC. Similarly, the initial fleet size determination should be based on the 2010 model year at the earliest, which will be the current model year at the time the fina l regulation is publishe d, and not the 2009 model year as proposed.

Second, the qualification for the al ternative standard should be reassessed in each model year subsequent to the 2010 model year based on contro l relationships in existence during each model year. A small manufacturer spun off from a larger one in 2010 should have the same compliance opportunities as any other small manufacturer. Likewi se, if a small manufacturer becomes part of a larger one, it should not cont inue to qualify for a complian ce option that other similarlysituated manufacturers cannot utilize.

Finally, EPA should clarify the regulations a nd preamble discussion to make it clear that manufacturers that meet the definition of “manufacturer” under the CAFE program qualify for TLAAS, regardless of whether their vehicles were aggregated with another manufacturer’s fleet under the definition of “automobiles manuf actured by a manufacturer.” [OAR-2009-0472­ 7168.1, pp.2-6]

Cummins Inc.

5-56EPA Vehicle Program, Feasibility, and Estimated Impacts

Cummins supports the temporary lead time allo wance alternative sta ndards (TLAAS) proposed by EPA as a mechanism to provide lead time to certain manufacturers (e.g. small volume manufacturers with a very limited range of vehicles). The environmental impact of such provision is expected to be sm all and at the same time provides the necessary lead time for manufacturers to comply with strict GHG st andards in the MY 2012-2016 timeframe. However, EPA is proposing that a manuf acturer with no U.S. sales in MY 2009 does not qualify for TLAAS. Cummins strongly urges EPA to revise this proposal. New manufacturer s entering the U.S. market are likely to have relatively sm all fleets (footprint range) and would face the same challenge as other existing sma ll volume manufacturers with limite d product line-up. Hence, it is reasonable to extend the TLAAS to new manuf acturers. Such provision would support new manufacturers entering the market with pr omising GHG reduction technologies. [OAR-2009­ 0472-7205.1, p.5]

EPA Response:

EPA received several comments on its proposed approach of basing eligibility on MY2009, including comments that there are companies in th e U.S. market are in the process of becoming independent and should be eligib le and comments that companie s entering the market later should be eligible. EPA also received comments th at companies that are initially eligible should lose eligibility if they merge with larger companies

EPA understands the concerns raised by Volvo a nd Saab that basing eligibility strictly on MY2009 sales would be problematic for these comp anies, which are being spun-off from larger manufacturer in the MY2009 time frame due to th e upheaval in the auto industry over the past few years. They offer a variety of suggestions including using MY2010 as the eligibility cut-off instead of MY2009, reassessing elig ibility on a year-by-year basi s as corporate relationships change, or allowing companies separated from a la rger parent company by the end of 2010 to use their MY2009 branded U.S. sales to qualify for TLAAS. In response to these concerns, EPA recognizes that these companies currently being so ld by larger manufacturer will share the same characteristics of the manufacturers for which th e TLAAS program was designed and is needed. As newly independent companies, these firms will face the challenges of a narrower fleet of vehicles across which to average, and may potentially be in a situ ation, at least in the first few years, of paying fines under CAFE. Lead time concerns in the progr am’s initial years are in fact particularly acute for these manufacturers since they will be newly inde pendent, and thus would have even less of an opportunity to modify their ve hicles to meet the standards. Therefore, EPA is finalizing an approach that allows manufacturers with U.S. “branded sales” in MY2009 under the umbrella of a larger manuf acturer that become independent by the end of calendar year 2010 to use their MY2009 branded sales to qualify fo r TLAAS eligibility. In other words, a manufacturer will be eligible for TLAAS if it pr oduced vehicles for the U.S. market in MY 2009, its branded sales of U.S. vehicles were le ss than 400,000 in MY2009 but whose vehicles were sold as part of a larger manu facturer, and it becomes independe nt by the end of calendar year 2010, if the new entity has sales below 400,000 vehicles . This approach is consistent with the recommendations provided by SAAB, and we believe addresses Volvo’s concerns as well, and EPA believes it is a reasonable approach to addressing the issue.

5-57EPA Response to Comments

EPA does not support comments fr om Ford, AIAM, NADA, and Cu mmins suggestion of a yearby-year eligibility determination because it opens up the TLAAS program to an unknown universe of potential eligible manufacturers, with the potential for gaming. Year-by-year eligibility determinations woul d open the program to post-2009 MY new entrants to the U.S. market, such EPA does not believe the TLAAS program should be available to new entrants since these manufacturers are not transitioning fro m the CAFE regime which allows fine paying as a means of compliance to a CAA regime wh ich does not, and hence do not present the same types of lead time issues. Manufacturers entering the U.S. market for the first time thus will be fully subject to the GHG fleet -average standards.

Ford also commented that a smaller-volume manu facturer that becomes part of a larger one should not continue to qualify for TLAAS. EPA agrees with this comment. EPA recognizes the dynamic corporate restructuring o ccurring in the auto i ndustry and believes it is important to structure additional provisions to ensure there is no ability to game the TLAAS provisions and to ensure no unintended loss of feasible environmen tal benefits. Therefore, EPA is finalizing a provision that if two or more TLAAS eligible companies are later merged, with one company having at least 50% or more ownership of the ot her, or if the companies are combined for the purposes of EPA certification a nd compliance, the TLAAS allotm ent is not additive. The merged company will only be allowed the allotmen t for what is considered the parent company under the new corporate structure. Further, if the newly formed company would have exceeded the 400,000 vehicle cut point based on combined MY2009 sales, the new entity is not eligible for TLAAS in the model year following the merger. EPA believes that such mergers and acquisitions would give the parent company additi onal opportunities to average across its fleet, eliminating one of the primary needs for th e TLAAS program. This provision will not be retroactive and will not affect the TLAAS program in the year of the merger or for previous model years. EPA believes these additional provisions are essential to ensure the integrity of the TLAAS program by ensuring that it does not be come available to la rge manufacturers through mergers and acquisitions.

Additional TLAAS Comments

Organization: Mitsubishi Motors R & D of America (MRDA)

Comment:

Limited line manufacturers specifically need ad ditional lead-time and compliance flexibility, especially considering that Mitsubishi Motors was not subject to the California AB1493 GHG regulations until the MY 2016. [OAR-2009-0472-7125.1, p.1]

Mitsubishi Motors supports the Temporary Lead-time Allo wance Alternative Standards (TLAAS) program to remedy the unique concerns of all limited line manufacturers. [OAR-2009­ 0472-7125.1, p.2]

Market fluctuations cause grea ter risk of noncompliance for limited line manufacturers. For instance, for a manufacturer with few models, what if consumer acceptance of a particular model is much lower than its projected sales? As explained to industry, the TLAAS program was

5-58EPA Vehicle Program, Feasibility, and Estimated Impacts

intended to help reduce limited line manufacturer s’ costs and burdens to meet the new GHG emissions standards. [OAR-2009-0472-7125.1, p.3]

EPA should craft the TLAAS program to be bene ficial to all limited line manufacturers as indicated in the Notice of Intent (NOI). TLAAS as currently drafted has limited flexibility to account for unanticipated market fluctuations. As currently proposed, some limited line manufacturers will not use TLAAS and only Auto makers who traditionally pay CAFE fines will use it. [OAR-2009-0472-7125.1, p.4]

TLAAS should accomplish two tasks:

1. Allow limited additional time for resource co nstrained, limited line manufacturers to cost effectively develop and produce low GHG emissi on vehicles to comply with the proposed standards, and

2. Provide some protection against mark et fluctuations [OAR-2009-0472-7125.1, p.4]

The NOI indicated that the TLAAS program woul d be available to manufacturers producing a specific number of vehicles, i.e. 400,000 in a predetermined MY, i.e. MY 2008 or MY 2009. The NPRM introduced new threshold criteria - eligible manufacturers must first demonstrate that they have tried to use banked or transferred credits and are sti ll unable to meet the standard. [OAR-2009-0472-7125.1, p.4]

As written, TLAAS severely restri cts the ability of limited line manufacturers to utilize the TLAAS program. Interpretation of the NPRM sugge sts that eligible manuf acturers, prior to the start of a model year, must determine whether or not to participate in the TLAAS program. For example, due to market fluctuations, manufact urers committing to using the TLAAS program, in a year in which it is not actually needed, coul d result in the loss of credits. Alternatively, manufacturers committing to forgo the use of the TLAAS program may be subject to noncompliance due to market fluctuations. EPA should carefully review the regulatory language to clearly allow limited line manu facturers to “opt-in” or “opt- out” of the TLAAS program at the conclusion of the model year. [OAR-2009-0472-7125.1, p.4]

Another concern with the TLAAS program as described in the NPRM is the complete loss of credits in the primary fleet, i.e. the non-TL AAS fleet, whenever a manufacturer chooses to participate in the TLAAS program. This leaves limited line manufacturer s again at significant risk of noncompliance from market fluctuations . Given this particular restriction on banking credits, the TLAAS program does not effectively pr ovide relief to all limited lane manufacturers. [OAR-2009-0472-7125.1, p.4]

Mitsubishi Motors recommends that upon exiting the TLAAS program, Automakers should be allowed to carry forward only th e primary fleet credits the Automaker earns in its last TLAAS program year. Given EPA’s own estimates, the impact of the TLAAS program upon GHG reductions is minimal and will not impact the National Program’s overall GHG reduction goals, and therefore should be allowed. [OAR-2009-0472-7125.1, p.4]

5-59EPA Response to Comments

[The following comments are from LA Testimony, OAR-2009-0472-7283, pp.85-87]

Intermediate volume manufacturers like Mitsubishi face additional challenges in attaining these standards. Smaller companies have less financial resources and fewer vehicle lines to implement cost-effective major changes. This makes the credit flexibilities outlined in the NPRM very important, easing the transi tion to these new standards.

I remind you that this is especially important co nsidering that Mitsubishi Motors was not subject to California AB 1493 regulations until the 2016 time frame. Therefore, one of the important methods to ease this transition is the temporar y lead-time allowance EPA is proposing to help smaller manufacturers adapt to these new regulations.

EPA Response:

Mitsubishi commented that the program is restri ctive due to the requirement that manufacturers must decide prior to the star t of the model year whether or not and how to use the TLAAS program. EPA did not intend for manufactures to ha ve to make this determination prior to the start of the model year. EPA e xpects that manufacturers will pr ovide a best estimate of their plans to use the TLAAS program during certification based on proj ected model year sales, as part of their pre model year report projecting their overall plan for compliance (as required by
§ 600.514-12 of the regulations). Manufacturer must determine the TLAAS program’s actual use at the end of the model year during the proce ss of demonstrating year-end compliance. EPA recognizes that depending on actual sales for a given model year, a manufacturer’s use of TLAAS may change from the projections used in the pre-model year report. Also, manufacturers can make an annual decision on whether or not to use the TLAAS program for that year at the end of the model year.

For reasons discussed above in th e previous response, EPA is reta ining the credit restrictions regarding earning credits in the primary program during years that the TLAAS program is being used. Credits generated in the primary program in years that a manuf acturer is using TLAAS may not be banked or traded. EPA continues to believe this provision is necessary to prevent credits from being earned simply by removing some high-emitting vehicles from the primary fleet.

Organization: Hyundai Motor Company Kia Motors

Comment:

Hyundai Motor Company

Under the California greenhouse gas (GHG) program , Hyundai was exempt from the early years of the program due to our status as an inte rmediate volume manufacturer (IVM). EPA also provides a relief mechanism in its proposed GHG program, the TLAAS, to assist intermediate and smaller automakers in achieving the Federal standards. However, Hyunda i is not eligible for relief through TLAAS. Despite the disparity in Hyundai's treatment betw een the California and

5-60EPA Vehicle Program, Feasibility, and Estimated Impacts

Federal programs, we do not seek pa rity with the relief we were afforded by California. As a fuel economy leader, Hyundai does not need special treatment. In addition, the use of a TLAAS-like provision would not be consistent with our over all corporate responsibil ity to address fuel efficiency, energy security and th e environment. [OAR-2009-0472-7231.1, p.7]

Kia Motor Company

[These comments were submitted as testimony at the Los Angeles public hearing. See docket number EPA-HQ-OAR-2009-0472-7283, p.172]

On the subject of alternative sta ndards, Kia does not expect to be eligible for the temporary leadtime allowance alternative standards as proposed in the EPA regulations. Although this does not provide us with the same relief afforded to us under the CARB regulations, we support the EPA proposal.

EPA Response:

EPA understands that the TLAAS program is st ructured differently than the California intermediate volume manufactur er provisions and that the commenters are not seeking harmonization. EPA appreciates the co mments supporting the proposed approach.

Organization: Chrysler Group LLC (Chrysler)

Comment:

EPA proposes a 'temporary lead-time allowance alternative standard' ('TLAAS') to address situations where 'more lead time is needed, ba sed on the level of emissions control technology and emissions control performance currently exhibited by certain ve hicles.' EPA envisions that this program will provide the additional lead tim e necessary for certain manufacturers 'who have traditionally paid CAFE fines' or 'who have a limited line of vehicles and are unable to take advantage of averaging emissions performance acr oss a full line of production.' While Chrysler supports the concept of this program, we disagree with its limitation to manufacturers with total 2009 model year U.S. sales of less than 400,000 vehicles. [NHTSA-2009-0059-0124, p.33]

Any loosening of the greenhouse gas standards for a limited number of manufacturers places the remaining manufacturers, the majority of which are domestic manufacturer s, at an economic and competitive disadvantage, especially in the ea rly program years where the proposed standards represent an extremely large pa ssenger car efficiency increase from the 2011 model year CAFE standards. EPA notes that 'Porsche, Tata, Mazd a, Mitsubishi, Suzuki, Daimler, Subaru, BMW, Volkswagen, Hyundai, and Kia' are potentially eligible for the TLAAS program. [NHTSA-2009­ 0059-0124, p.23]

All manufacturers will need to invest in greenhouse gas emission improvements; a competitive advantage is gained by those who are allowed add itional time to make the necessary investments. The TLAAS program allows those eligible manufacturers, many of which are the most profitable in the U.S. market, to defer some investments to later model years, whereas larger manufacturers

5-61EPA Response to Comments

must make the investments immediately to meet the aggressive 2012 and subsequent model year passenger car standards, immediately placing those manufacturers at an economic and competitive disadvantage. [NHTSA-2009-0059-0124, p.34]

Recommendation:

Chrysler recommends that the TLAAS programbe expanded to all manufacturers. [NHTSA2009-0059-0124, p.34]

An expansion of the TLAAS program to all manufact urers regardless of size will not result in a significant reduction in greenhouse gas benefits , but will remove the competitive inequity created by the program as currently proposed. The TL AAS program is very strictly proscribed to prevent a manufacturer who must use it from gaining greenhouse gas credit advantages by shifting a portion of their fleet to a lower standard. These me asures will effectively limit the programs use to only those manufacturers who abso lutely need the program to allow additional time to develop technologies to meet the norma l standards. Given current economic conditions within the automotive industry incl uding the recent bankruptcies of General Motors and Chrysler LLC, an expansion of the program to all manufacturers will level the playing field for larger manufacturers. [NHTSA-2009-0059-0124, p.34]

EPA Response:

EPA does not believe that it would be appropria te to allow large manufacturers to use the TLAAS program. EPA developed the wide range of flexibilitie s in the primary program with large full-line manufacturers in mind. Averaging, credit banking, and credit transfers, along with the opportunity to generate credit s such as early credits and FF V credits, will provide full-line manufacturers with sufficient flexibility to tran sition to the new standards. Smaller volume manufacturers have less ability to use some of these flexibilities due to their narrow product lines. For example, averaging and credit transf ers are less helpful to such manufacturers. In addition, as discussed in deta il above, smaller volume manufac turers have higher baseline emissions and therefore must achieve larger reduc tions to meet emissions standards. Finally, if all manufacturers were allowed to use the TLAAS program, the stringency of the overall program would be significantly reduced and EP A would forego emissions reductions that are feasible and cost effective duri ng the early years of the program.

5.4.2 Small Volume Manufacturer Provisions

Organization: Ferrari S.p.a Aston Martin Lagonda Association of Intern ational Automobile Manufacturers (AIAM) Volkswagen Group of America (Volkswagen) Vehicles Services Consulting, Inc National Automobile Dealers Association (NADA) Society of Motor Manufacturers and Traders Limited Lotus Cars Ltd.

5-62EPA Vehicle Program, Feasibility, and Estimated Impacts

Koenigsegg Automotive AB Lance Tunick MD McLaren Automotive Ltd. Morgan Motor Company Ltd. Spyker Cars KTM-Sportsmotoercycle AG European Small Volume Car Ma nufacturers' Alliance (ESCA) Artega Automobil GmbH & Co. KG Wiesmann GmbH

Comment:

Ferrari S.p.a

For small-volume niche manufacturers there has never been a bigger challenge than this proposed rule. Without some further flexibility for such manufacturers it will be extremely difficult to continue to certify vehicles in U.S.A. in the future. In fact, taking into account the technical (and economic) infeasibi lity of achieving the proposed sta ndards, even with the use of best availability technology that can be adopted in certain types of vehicles, along with the prerequisite of maintaining thei r distinctive characteristics (oth erwise they cannot be sold) and the great uncertainty regarding the availability on the market of CO 2 credits for small-volume manufacturers, Ferrari feels that further flexibilities must be present in this rule. The EPA assumptions that small-volume manufacturers ca n comply with the proposed standards are based on an optimistic forecast. EPA should also consid er a worst-case scenario where no credits will be available to offset debits. [OAR-2009-0472-7214.1, p.2]

Specific provisions for SVMs and small-volume te st groups should be part of the future EPA GHG final rule, to be consistent with the EP A (and CARB) longstanding policy to guarantee more flexibility for such categories of manuf acturers/vehicles on the grounds of technical feasibility, limited car lines, and negligible contribution to the annual GHG emissions, along with the gasoline consumed. Moreover it is well known that to comply with CO 2 standards is different to comply with criteria pollutants standards. [OAR-2009-0472-7214.1, p.5]

The category of small-volume manufacturers is cl early defined in both federal (EPA), California (ARB) regulations as well as in FMVSSs (NHTSA ). SVMs are typically those that within the criteria you have mentioned are much smaller th an intermediate or la rge manufacturers. The threshold of < 400,000 vehicle sold in U.S.A. in model year 2009 is two orders of magnitude larger than what the typical small-volume manuf acturer produces. In any case, we kindly point out that you cannot consider that really small companies like Ferrari co uld solve the compliance problem with the same temporary allowance for very big companies (based on worldwide production, and U.S. sales). In other words, we deem not fair to give the same temporary allowance for manufacturers that belong to co mpletely different categories. Both EPA and CARB have implemented rules with specific pr ovisions for small-volume manufacturers. CARB makes further distinctio ns of manufacturer categories: Sma ll, Independent-Low, IntermediateVolume, and Large. [OAR-2009-0472-7214.1, p.6]

5-63EPA Response to Comments

The Temporary Lead-time Allowance Alternative St andards (TLAAS) allows for up to a total of 100,000 vehicles in MYs 2012-2015 for manufacturers that sold less than 400,000 vehicles in U.S.A. in 2009 MY. This provision seems tailore d for intermediate and large manufacturers. Small-volume manufacturers can use it as well, but it does not solve the problem for them because:

• the 25% higher standards is not sufficient , taking into account the achievable CO 2 level of certain kinds of vehicles, likewise high-performance sports cars; and

• the compliance problem for small vehicle compan ies is not temporary, but strictly related to vehicle characteristics that cannot be completely changed.

Consequently, it cannot be fixed only by adding more lead-time. Now it seems that EPA’s position is that it is logical to offer the same temporary allowa nce of alternative standards for small and large companies. As noted in EP A’s analysis, the above mentioned temporary alternative higher standards could be used by real ly large or even giant manufacturers, simply because they sold less than 400,000 vehicle in U. S.A. in 2009 MY. Such manufacturers have a wide range of different types of vehicles, with many different engines, transmissions and footprints. We do not oppose to temporary m easures Docket No. EP A-HQ-OAR-2009-0472 and NHTSA-2009-0059 – NPRM GHG-CAFE MYs 2012-16 – Ferrari Comments. 7 for them, but we kindly request other more sp ecific provisions for the well de fined category of small-volume manufacturers. If all manufacturers eligible certify to these higher standards up to the max. 100,000 total sales during the firs t four model years of the rule, a few hundreds thousands vehicles could be certified with such hi gher stds. The related total increase of CO 2 emissions due to this allowance could correspond to the total CO 2 emissions of the entire small-volume manufacturer’s fleets for several model years in U.S.A. [OAR-2009-0472-7214.1, p.6]

In summary, Ferrari supports the following speci fic provisions for small- volume manufacturers:

a) Specific CO 2 standards, based on the average value of the most recent model years of the vehicles certified by SVMs in U.S.A., and on the feasible improvements that can be reasonably achieved, using the best technolog ies that can be adopted, taking into account the need to keep the distinctive characteristics of the affected vehicles. b) The specific CO 2 standards should be defined not only for the first model years of the proposed rule, but beyond the 2016 MY, because the technical infeasibility to respect the general st andards is related to th e vehicle characteristics. Eventually, the standards could be revised after a certain period. They could be higher in the first model years (2012-2016) a nd reduced later. c) Alternatively, instead of CO 2 standards equal for the categor y of small-volume manufacturers, EPA could define CO 2 standards tailored for each SVM, i.e. on a case-by-case basis. [OAR2009-0472-7214.1, p.10]

There is some inconsistency in the A/C effici ency leaks and maximum allowed credits. We caution EPA that, even with the be st solution that should be ava ilable to reduce both direct and indirect A/C system emissions, these contributes are not sufficient to comply for small-volume manufacturers, based on the present certification data . [OAR-2009-0472-7214.1, p.11]

Comments Submitted by Ferrari on 2/3/2010 via e-mail

5-64EPA Vehicle Program, Feasibility, and Estimated Impacts

Subject: Small Volume Manufact urer (SVM) Recommendations

Thank you for meeting with Ferrari SpA and Ferra ri North America, Inc. representatives on January 25, 2010 to discuss the issue of treatment of Ferrari as a "Small Volume Manufacturer" (SVM) under the proposed GHG rules. Ferrari pr oduces approximately 6000 vehicles per year worldwide. Ferrari's U.S. sales average about 1500 per year. As noted in previous comments submitted to EPA, Ferrari's operations are completely independent of any other vehicle manufacturer. Therefore, Ferrari believes it is critical to the company's survival to retain this status, as decided some time ago by EPA, CARB, NHTSA (Attached are two recent determinations NHTSA has made under the Safety Act regarding Ferrari vehicles). We also agree that a specific GHG standard should be set for Ferrari, as for other Small Volume Manufacturers. [ Redacted text]

As a result of this set of problems, Ferrari has examined the existing EPA SVM regulations, as well as directives by the European Union, th e text of EPCA, and California's A.B. 1493 regulations to determine an approach which could be implemented by EPA that would allow independent companies like Ferrari to remain in SVM status, while not having the unintended consequence of creating problems for other manufact urers. Ferrari believes a strict percentage ownership test does not fully r ecognize the independence of companies such as Ferrari from those who may have an ownership interest.

The existing EPA SVM regulati ons contain an aggregation of sales based primarily on a percentage ownership test. Ferrari proposes to keep this as a primary means, but to allow a manufacturer to apply to EPA to maintain (or establish) SVM status based on the independence of its R &D, testing, design and manufacturing fro m another firm that may have an ownership interest in the manufacturer. To establish th is status, a manufacturer would need to present information to EPA that demonstrates that its R & D and design efforts, testing and manufacturing/production f acilities are independent of another firm who may own an interest in the manufacturer.

In order to accomplish this, EPA could revi se the existing 40 CF R 1838-01(b)(3) to read:

(3) Sales aggregation for related manufacturers Except as provided in (v), the projected or actual sales from different firms shall be aggregated in the following situations: ...

(v) Upon application by any firm, the Admini strator may determine that such firm's sales shall not be aggregated with any other firm upon showing that it operates its research, development and design, testi ng and production facilities sepa rately from any other firm.

As noted above, this approach is consistent with the European Union EC 443 / 2009 Article 11 approach, and is consistent with determina tions NHTSA has made under the Safety Act. Further, it conforms with the structure in EPCA for small volume manufacturers contained in 49 USC 32902(d) and the definition in 49 USC 32901 (a )(4), which is based on control versus a percentage ownership test. Finally, California ha s chosen to defer the application of the A.B. 1493 GHG standards to small independent companies.

5-65EPA Response to Comments

[ Redacted text ]

You had asked at the meeting for a number of ve hicles that should be eligible for SVM status under the GHG rules. To retain a consistent ap proach with the European Union Directive and EPCA, Ferrari recommends a level of 10,000 vehicle sales per year (or a to tal of 30,000 per three consecutive years, which is current CARB practic e) in the U.S. However, it also recommends that the 15,000 level be retained for other emission standards.

In the event a manufacturer's st atus should change due to altere d circumstances, it is important that EPA provide some period during which that manufacturer can operate in the SVM status. An abrupt "light-switch" approach would cause huge disruption, and as noted above, could have serious unintended consequences for other manufacturers. Thus, a period of 5 years should be provided to allow both the SVM and any other manufacturer to accommodate this change in
status.

Finally, you have asked for a level that should apply to Ferrari a ssuming it retains SVM status. Since this information will contain CBI, we will submit this to you under separate cover.

Thank you for working with Ferrari on a matter that is critical to its U.S. operations. Ferrari will be happy to respond to any questions you may have regarding this matter.

Ferrari also submitted confidential business in formation regarding their product plans and emissions reduction capabilities.

Aston Martin Lagonda

Aston Martin is an independent automotive manuf acturer based in the UK, with a long history of specializing in the desi gn and manufacture of high-end luxur y sports cars. Aston Martin annual global volume prior to the economic downturn wa s circa 7,000 units (2007 calendar year), with exports forming approximately 75% of this output.

Aston Martin is committed to doing it s fair share in reducing overall CO 2 emissions. We are committed to reducing our fleet CO 2 emissions and between 2000 a nd 2008 have achieved a fleet average reduction of circa 25%. For compara tive purposes, this is approximately double the improvement found across the EU new car market over the same period. [OAR-2009-0472­ 7217.1, p.1]

It is the view of Aston Martin that the TLAAS does not provide sufficient lead times for SVMs and that EPA should defer SVM compliance wi th its GHG standards until MY 2016.2 EPA’s usual policy is to allow SVMs to defer complia nce with a new requirement until the end of a phase-in. See e.g. 40 CFR 1811-04. Under the proposed EPA CO 2 rule, the period 2012-2015 is analogous to a phase-in of the new GHG require ments, and accordingly, EPA should defer SVM compliance until after this period, i.e. until 2016 and later. [OAR-2009-0472-7217.1, p.3]

5-66EPA Vehicle Program, Feasibility, and Estimated Impacts

Aston Martin is committed to doi ng its fair share in reducing CO 2 emissions. As such, we support a consistent and harmonized national stan dard, whilst raising th e issue that such a standard should promote diversity of the i ndustry and maintain choice for the consumer.

Aston Martin recommends that Small Volume Manufacturers are deferred during the effective phase-in period (in line with the California SVM provisions), to allow sufficient time for product plans to be aligned with legislative requirements.

Aston Martin further recommends that the definition of a Small Volume Manufacturer, for the purposes of this legislation, is in accordance w ith the current EPA definition. The EPA definition of a Small Volume Manufacturer is one who sells fewer than 15,000 vehicles in all states and territories of the United States within a gi ven model year. Aston Martin believes that a manufacturer with sales figures a bove this threshold coul d reasonably be expected to meet either the large volume requirements, or such require ments adjusted by the TLAAS allowance. Aston Martin further believes that the application of such a threshold based on vehicle sales within US territories and states represent the best determin ation for whether to classify a manufacturer for small volume allowances. Manufacturers who sell ve hicles in other territo ries, which may have significantly differing regulatory requirements, are not necessarily better positioned to meet the legislative requirements of EPA and/or NHTSA.

Proposal in summary:

• SVM compliance starts at end of effective pha se-in period

• SVM definition as per EPA legislation

• SVM compliance through parall el referral to the stricter CARB GHG rule (enabling challenging yet fair options for SVM compliance)

The joint EPA/NHTSA legislative proposal s eeks to “achieve substantial reductions of greenhouse gas (GHG) emissions and improvements in fuel economy from the light-duty vehicle part of the transportation sector”. Due to the pa rticularly low volumes of vehicle involved, Aston Martin asserts that the above recommended ame ndments to the proposed regulations will not have any significant impact on th e ability of such legislation to achieve these aims within the transportation sector. [OAR-2009-0472-7217.1, p.6]

Aston Martin also submitted confidential business information regarding their product plans and emissions reduction capabilities.

Association of International Au tomobile Manufacturers (AIAM)

The proposed greenhouse gas regulatory progr am makes accommodations for two groups of smaller manufacturers. For mid-sized companie s (those with U.S. annual sales levels below 400,000 units), EPA has proposed “temporary lead-tim e allowance standards.” EPA states that these alternative standards provide additional compliance lead-time for mid-sized manufacturers that offer narrow product lines in the U.S. Some of these companies have traditionally paid

5-67EPA Response to Comments

CAFE civil penalties as an alternative to comp liance, but would not be able to follow that approach under greenhouse gas standards. Fo r these companies, EPA proposes to provide additional compliance lead-time for model years 2012-15. See proposed section 86.1818-12(e). EPA has also proposed to defer setting standard s for entities that meet “small business” size criteria under U.S. Small Business Administ ration (SBA) regulations, 13 CFR 121.201. See proposed section 86.1801-12(j). The small business en tities that would be exempted include two manufacturers, Saleen and Tesla, as well as independent commercial im porters and alternative fuel vehicle converters. See preamble at 49745. For a manufacturer to qualify as a small business, it must have no more than 1000 employ ees. EPA justifies this exemption based on the minimal greenhouse gas emissions of these companie s due to their very small volume. See, e.g., preamble at 49629. [OAR-2009-0472-7123.1, p.8]

There are a small number of ma nufacturers that fall between th e two size categories addressed by EPA and for whom no relief is proposed by EPA. These companies produce a very limited number of models consisting enti rely of luxury/high performance ve hicles that, because of their essential features would not be able to m eet greenhouse gas standards. Aston Martin and McLaren are examples of independent compan ies of this type. Fe rrari and Maserati are independently operated companies that also fall into this category. Thes e vehicles are very expensive, are sold in very small volumes , and are inherently unique and special high performance vehicles that typically accumulate few miles per year. As a result, their impact on total greenhouse gas emissions is negligible, as with the small business category. [OAR-2009­ 0472-7123.1, p.9]

While it is reasonable to proj ect some improvement in greenhouse gas emissions for this category of vehicles, it is unreal istic to project that these vehi cles could meet the generally applicable standards in the 2012-2016 period. Wh ile it is possible that these small volume manufacturers (SVMs) might be able to comp ly with greenhouse gas standards by purchasing credits from other manufacturers, this is far t oo speculative a solution. The market for credits is unpredictable at this point. Other than exiting the U.S. market, th erefore, the only other possible solution for an independent SVM would be to sell an equity interest in the company to a larger, full-line manufacturer, so that the emissions of the luxury vehicles could be averaged in with the much larger volume of other vehicles produced by the major manufacturer, This cannot possibly be the outcome EPA intends, especially when measured against the minimal, if any, environmental benefit that would result. The pro posed regulations recogn ize the acute difficulty which SVMs may face in complying with the fleet average emission and fuel economy requirements. In discussing the proposal for the Temporary Lead-Time Allowance Alternative Standards (TLAAS), EPA states:

Manufacturers with limited product lines may be esp ecially challenged in the early years of the proposed program. Manufacturers with narrow produc t offerings may not be able to take full advantage of averaging or other program flexibilities due to the limited scope of the types of vehicles they sell. For example, some smalle r volume manufacturers focus on high performance vehicles with higher CO 2 emissions, above the CO 2 emissions target for that vehicle footprint, but do not have other types of vehicles in th eir production mix with which to average. Often, these manufacturers pay fines under the CAFE pr ogram rather than meeting the applicable CAFE standard. See 74 FR at 49483. [OAR-2009-0472-7123.1, p.9]

5-68EPA Vehicle Program, Feasibility, and Estimated Impacts

AIAM believes that this assessment is correct and that either a more generous lead-time allowance or an alternative, relaxed standard wo uld be the appropriate so lution for these types of SVMs. [OAR-2009-0472-7123.1, p.9]

There is ample legal authority for EPA to provide SVMs a more generous lead-time allowance or an alternative standard. Indeed, EPA recognizes su ch authority in the proposal for a small entity deferment (for those companies defined under the Small Business Administration's regulations), see 74 FR at 49574, and in the TLAAS. These provi sions are consistent with previous EPA rulemaking under the Clean Air Act which offer re lief to SVMs. For example, in the Tier 2 program, EPA exempted SVMs from the phase-in re quirements in the early model years of the emission exhaust and evaporative standards. See 40 C.F.R. § 86.1811-04(k)(5). In doing so, EPA correctly found that “phase-in schedules, in genera l, add little flexibility for manufacturers with limited product offerings because a manufacturer with only one or two test groups can not take full advantage of a 25/50/75/100 percent or similar phase in.” See Control of Air Pollution From New Motor Vehicles: Tier 2 Motor Vehicle Emi ssions Standards and Gasoline Sulfur Control Requirements; Final Rule, 65 FR 6698, 6743 (February 10, 2000). Accordingly, “[f]or manufacturers meeting EPA’s definition of ‘s mall volume manufacturer,’ [EPA] proposed to exempt those manufacturers from the phase-in sc hedules and require them to simply comply with the final 100% compliance requirement.” Id. Other agencies likewise offer such relief for SVMs that may face particular compliance hurdles on account of their size. See, e.g., Nat’l Highway Traffic Safety Administration, Earl y Warning Reporting Regulations, 74 FR 47740 (September 17, 2009) (creating a small manufactur er exemption where the underlying statute was silent on the availability of such exemption). It should also be noted that the NHTSA CAFE program and the California greenhouse gas st andards program both provide relief for manufacturers in the size ra nge in question, although the NHT SA program is statutorily mandated. In fact, the California standards exempt SVMs (and intermediate sized manufacturers) until the 2016 MY. There is also nothing in the Clean Air Act that would prevent EPA from providing an alternative and more relaxed emissions standard for SVMs. Section 202(a) does not require a one-size-fits-all standard that would be applicable to each and every manufacturer. Rather, that section requires EPA to set “standard s applicable to the emission of any air pollutant from any class or classes of new motor vehi cles or new motor vehicle engines.” 42 USC § 7521(a) (emphasis added). The statute does not rest rict EPA’s discretion in how the “classes of new motor vehicles” should be defined. [OAR-2009-0472-7123.1, pp.9-10]

While AIAM believes the correct approach is for EPA to set an alternative, relaxed standard for SVMs, we recognize that there is insufficient time available in this rulemaking proceeding between now and the final rule projected for completion by March 31, 2009, for EPA to collect the relevant product plans and technology feasibility information from SVMs, conduct the necessary reviews and modeling th at may be needed, consult w ith the stakeholders, issue a supplemental proposal for an alternative, rela xed standard for SVMs for public comments, and then determine the appropriate final standard. Indeed, when California adopted its GHG vehicle standards in 2004 it recognized the difficulties in grouping all SVMs together and provided three compliance options for them. One California SVM compliance option is an alternative standard, but California, even then, recogni zed that lead-time would be need ed to develop an alternative standard and provided for development of an SVM standard by 2012 for compliance in 2016.

5-69EPA Response to Comments

Therefore, we believe it appropr iate for EPA to defer decisions on the SVM alternative standard to the next rulemaking for the 2017+ MY. [OAR-2009-0472-7123.1, p.10]

For these reasons, AIAM recommends that EP A adopt the same approach for SVMs as it proposed for the small business entities. EPA should defer setting standards for these companies now, but should consider setting standards in a fu ture proceeding. Conceptually, the future small volume standards should be set on a class basis for all vehicles produced by these companies. Such a standard could assure that these vehi cles make a contributi on to reducing overall greenhouse gas emissions, although their total emissi ons are extremely small. The nature of the small volume class standard shoul d reflect the fundamental nature of the vehicles. AIAM also urges EPA to apply the definition of SVM used in the EPA current small volume certification program of less than 15,000 annual U.S. sa les. See 40 CFR § 86.1838-01(b)(1)(i). [OAR-2009­ 0472-7123.1, p.10]

Volkswagen Group of America (Volkswagen)

An additional topic that could lend flexibility to the regulation is consideration of small volume test group or brands. EPA considered this pos sibility when it issued last year's ANPRM, 'Regulating GHG Emissions Under the Clean Air Act'. In an EPA document published June 23, 2008 entitled, 'Light-Duty Vehicle Greenhouse Gas (GHG) Certification and Compliance Program Options' (Karl Simon Memorandum - Docket 10 No. EPA-HQ-OAR-2008-0318), EPA discussed the possibility of allowing separate standards for a small volume of vehicles such as sports cars or exotic vehicles that do not have a large percentage of the market and have a small contribution to the GHG emission related to light duty vehicles. EPA ultimately concluded that the volume of vehicles allowed under the current small volume test provisions (15,000 vehicles) would result in a volume of vehicles not subject to fleet average standards that was excessive. The EPA also noted concern that a small volum e test group provision co uld result in gaming by manufacturers. Volkswagen recommends that EPA revisit this concept an d consider a permanent small volume of vehicles that are exempt from th e fleet average approach and that comply with a fixed value. As noted in the Karl Simon Memorandu m, the fixed standard w ould still ensure that even high performance exotic vehicles have a significant task to reduce GHG emissions. We believe the volume and gaming issues could be resolved by limiting the provision to existing small brands under the financial control of a parent company but with an independent business plan and independent styling and ma rketing functions. [OAR-2009-0472-7210.1, p.7]

Vehicles Services Consulting, Inc

This comment will address the proposed EPA GHG standard from the point of view of small volume automobile manufacturers (SVMs). The EPA proposal jeopardizes the stated goal of consumers having a full range of vehicle choice in that it endange rs the ability of certain SVMs to sell into the US ma rket. [OAR-2009-0472-7083.1, p.2]

As an initial matter, when VSCI uses the te rm “SVM”, we mean the definition of SVM as currently found in EPA’s regulatio ns, that is, a company with fewer than 15,000 USA sales per year, calculated in accordance with EPA’s “10% related-company aggregation rule”. [OAR2009-0472-7083.1, p.2]

5-70EPA Vehicle Program, Feasibility, and Estimated Impacts

EPA expressly solicited comment on the questio n of SVM lead-time. The proposal states:

'... EPA recognizes that [s ]ome ... companies ... are significantly smaller niche firms, with sales volumes closer to 10,000 vehicles per year worldwid e; an example of this type of firm is Aston Martin. EPA anticipates that there are a small number of such smaller volume manufacturers, which have claimed that they may face greater ch allenges in meeting the proposed standards due to their limited product lines across which to average. EPA requests comment on whether the proposed ...program ... provides sufficient lead-tim e for these smaller firms to incorporate the technology needed to comply with the proposed GHG standards.” [OAR-2009-0472-7083.1, p.2]

EPA SHOULD DEFER SVM COMPLIANCE UNTIL AFTER MY 2016

EPA should defer SVM compliance with its GHG standards until after 2016.3 EPA’s usual policy is to allow SVMs to defer compliance with a new requirement until the end of a phase-in. See e.g. 40 CFR 1811-04. Under the proposed EPA CO 2 rule, the period 2012-2016 is analogous to a phase-in of the new GHG requirements, and accordingly, EPA should defer SVM compliance until after this period, i.e. until 2017 and later. [OAR-2009-0472-7083.1, p.2]

EPA failed to include such an SVM deferral prov ision in its proposal. Ra ther, EPA proposed two provisions that addressed lead-time but faile d to provide the needed SVM flexibility:

-First, EPA proposed a temporary lead-time allowance for manufacturers whose MY 2009 vehicle sales are below 400,000 vehicles. This 400,000 unit per year proposal is certainly not an SVM proposal, since EPA defines SVM as a co mpany with fewer than 15,000 USA sales per year. See proposed regulation, se ction 86.1818-12(e). [OAR-2009-0472-7083.1, p.3]

-Second, EPA proposed a provision allowing a GHG exemption BUT ONLY FOR CERTAIN small businesses – those that meet the Small Busi ness Administration (SBA) criteria contained in 13 CFR 121.201.6 With this limitation, however, th e proposed exemption appears to apply only to USA companies. The “US only” limitation ma y be in violation of WTO requirements. In addition, the “small entity” provision is limite d to auto manufacturers with fewer than 1000 employees – a criterion that is irrelevant to a manufacturer’s ability to comply with emissions standards (whereas the factor hi storically determining SVM status – vehicle sales – does affect ability. [OAR-2009-0472-7083.1, pp.3-4]

SVMs Face Lead-Time Problems Meeting The Pr oposed Standards Due To Their Limited Product Lines Across Which To Average

EPA has acknowledged that SVMs face lead-time problems meeting the proposed standards due to their limited product lines acros s which to average. EPA stated:

Manufacturers with limited product lines may be esp ecially challenged in the early years of the proposed program. Manufacturers with narrow produc t offerings may not be able to take full advantage of averaging or other program flexibilities due to the limited scope of the types of vehicles they sell. For example, some smalle r volume manufacturers focus on high performance vehicles with higher CO 2 emissions, above the CO 2 emissions target for that vehicle footprint,

5-71EPA Response to Comments

but do not have other types of vehicles in th eir production mix with which to average. Often, these manufacturers pay fines under the CAFE pr ogram rather than meeting the applicable CAFE standard. See 74 Fed. Reg. at 49,483. [OAR-2009-0472-7083.1, p.4]

The simple fact is that an SV M whose product line consis ts of a single type of vehicle (such as sports cars) simply is not in a position to have a diverse fleet wh ich permits use of the averaging approach. [OAR-2009-0472-7083.1, p.4]

As recognized by California in its staff report supporting the California GHG rule, “low volume manufacturer offerings need to be preserved in the marketplace to ensure continued consumer choice of specialty vehicles. Give n their more limited resources to make major revisions to their powertrains, it was also important to provide such manufacturers wi th greater lead time to make improvements to their products. In addition, st aff needed to consider that major volume manufacturers could produce specialty offerings in direct competition with these smaller manufacturer offerings, but offset their pote ntially poorer GHG emission performance by making other easier to control cars in their fleet incrementally cl eaner.” See Exhibit 1. [OAR-2009-0472­ 7083.1, p.4]

Moreover, many SVMs are dependen t on large manufacturers for th eir powertrains and since the large manufacturer can take advantage of averag ing, an SVM is often unsure when the specific drivetrain that the SVM is usi ng will in fact on its own meet a given requirement. In addition, because the new CO 2 requirements are challenging – a fact acknowledged in the proposal -- major engine technology suppliers will concentr ate their efforts on working with large volume manufacturers, and, thus, SVMs will, at firs t, have limited access to advanced technology. Further complicating matters, because SVMs build so few vehicles, the costs of developing new engine systems compared to potential profits di scourages suppliers from cooperating with SVMs. [OAR-2009-0472-7083.1, p.5]

Additional Reasons Why Deferral Of The SVM Compliance Date Is Appropriate

There are three additional reasons why deferral of the SVM compliance date is appropriate:

1. The proposed EPA enforcement mechanism would render illegal the vehicl es of an SVM that could not comply with the CO 2 standard. This is a harsh pena lty (as compared to the CAFÉ enforcement mechanism whereby fines are imposed). EPA has explained that the structure of the Clean Air Act mandates the enforcement scheme EPA proposed. Assuming this to be the case, the equitable solution is to defer SVM compliance to allow EPA and SVMs more time to identify a reasonable compliance strategy.

2. The effect on the environment from an SVM deferral date would be de minimis – the net increase in greenhouse gas emissions would be le ss than 0.1%. See Lotus Cars Limited analysis attached as Exhibit 2. The vehicles of SVMs are typically very expensive, sold in very small volumes, and are inherently unique and special high performance vehicles that typically accumulate few miles per year. As a result, th eir impact on total greenhouse gas emissions is negligible.

5-72EPA Vehicle Program, Feasibility, and Estimated Impacts

3. The proposal’s credit provision s do not help SVMs during the period 2012- 2016. The credit provisions in EPA’s proposal are illusory as regards SVMs during the period MY 2012-2016. EPA provided no explanation of how credits will be available for purch ase during this period. Indeed, the whole reason for the EPA GHG proposal is that the national vehicle fleet is not sufficiently efficient, so it is difficult to understand how cred its would be generated for use during the period MY2012-2016. [OAR-2009-0472-7083.1, p.5]

EPA SHOULD ALSO PROMULGATE AN SVM HARDSHIP PROVISION, THE SAME AS WHAT WAS PROMULGATED IN THE FEBRUARY 2000 EP A TIER 2 RULE

In its February 2000 Tier 2 rule, EPA include d a hardship provision for SVMs (40 CFR 1811­ 04(q) which allowed, upon a showing of need, an ex tra year of lead-time on a case-by-case basis. EPA should adopt a similar provisio n in its GHG rule. [OAR-2009-0472-7083.1, p.6]

GHG AND SVMs FOR MY 2017 AND LATER : TWO POSSIBLE APPROACHES

Even with a deferral of the SVM GHG effectiv e date until MY 2017, the question remains “what is the appropriate SVM GHG regulatory strategy after MY 2016?” [OAR-2009-0472-7083.1, p.6]

The EPA proposal of September 28, 2009 is at time s described by the agenci es as covering only MY 2012-2016. For example, the Federal Register not ice states as follows: “This joint proposal covers passenger cars, light-dut y-trucks, and medium-duty passe nger vehicles built in model years 2012 through 2016. ... [The agencies will have] a future rulemaking to address standards for model year 2017 and therea fter.” [OAR-2009-0472-7083.1, p.6]

On the other hand, the preamble to the EPA propos ed regulations also st ates: “The 2016 CO[2] standards would remain in place for 2017 and late r model years, until revised by EPA in a future rulemaking.” [OAR-2009-0472-7083.1, p.6]

Indeed, the proposed regulatory language in 40 CFR 86.1818-12 sets a GHG standard for “MY 2016 and later”. [OAR-2009-0472-7083.1, p.7]

Taking the view that the EPA notice proposes to set GHG standards fo r the period after MY 2016, SVMs require one of two possibl e regulatory approaches to be included in the EPA final rule: either (1) finalize 40 CFR 1801 -12(j) so that it applies to a ll SVMs, not just “small entities”; or (2) include an SVM “Ca lifornia Compliance Option” in the final rule. [OAR-2009-0472­ 7083.1, p.7] [[See Docket Number OAR-2009-0472- 7083.1, pp.7-9 for a detailed discussion on the tow possible regulatory a pproaches mentioned above]]

National Automobile De alers Association (NADA)

EPA also proposes to completely exempt manu facturers with less than 1000 employees. This proposed exemption should be replaced with one exempting all manufacturers with less than

5-73EPA Response to Comments

15,000 annual U.S. vehicle sales. Note that CARB’s fuel economy/GFIG rules regulate only some 6—7 automakers and exempt all others. [OAR-2009-0472-7182.1, p.7]

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

Society of Motor Manufacturers and Traders Limited

SMMT is concerned that the proposed standard s will be impossible for niche and small volume manufacturers to meet. These manufacturers repr esent approximately 0.5% of US registrations. They typically have a limited model range, occupyi ng particular segments of the market, rather than the broad ranges of a volume manufacturer . They do not have the same economic or technical resources available to meet the sta ndards. They will be further penalized by the proposed footprint metr ic. [OAR-2009-0472-7229.1, p.1]

Niche and small volume manufacturers understand th ey have to make improvements in their environmental impact, and in many cases they are ve ry efficient in their own particular segments. If they were to be forced out of the US mark et along with their innovative technologies, this would have little environmental impact a nd would be to the detriment of market diversity/consumer choice and have a large economic impact: 10,000 US jobs, 80,000 UK jobs and £2bn export value. [OAR-2009-0472-7229.1, p.1]

SMMT is particularly concerned about how niche and small volume manufacturers (SVMs) will be treated within the proposed legislation. Definitions:

-In previous legislation the EPA defines SVMs as those sel ling less than 15,000 vehicles per annum in the USA (see EPA’s ‘10% relate d-company aggregati on rule’ - 40 CFR 86.1838­ 01). [OAR-2009-0472-7229.1, p.2]

-Niche manufacturers we would define as typically selling less than 100,000 units per year in the US. Such manufacturers do not operate in all segments of the mark et but primarily specialize in particular types of vehicle. They require specia l consideration as they can face more stringent targets and have less flexibility to meet them than competitors who happen to operate across all market segments. [OAR-2009-0472-7229.1, p.2]

SMMT is very mindful of the importance of the US market for UK producers and that failure to meet the proposed targets would exclude them from the US market. UK niche and small volume manufacturers employ almost 10,000 people in the USA, through headquarters, dealers and servicing centers. A further 80,000 plus jobs are dependent upon those manufacturers back in the UK. Approximately 25% of what is built by these manufacturers is exported to the USA, with a value of some £2 billion. If these UK manufacturers we re to be forced out of the US market this would jeopardize exports to othe r countries in North and Sout h America that are reliant upon linked export lines. Also, given the importance of US sales volum es, this would put the entire business case for those UK compan ies at risk. [OAR-2009-0472-7229.1, p.2]

5-74EPA Vehicle Program, Feasibility, and Estimated Impacts

UK niche/SVMs are independent companies, without the significant resour ces and economies of scale available to the volume manufacturers. They also have a limited model range (in some cases just one model) and predominantly occupy sp ecific market segments, such as sports cars and 4x4s, which tend to be higher CO 2 emitting. [OAR-2009-0472-7229.1, p.3]

These types of products may also be further penali zed by the footprint metric. Sports cars tend to be small, with powerful engines, while 4x4s often also have higher CO 2 emissions than standard saloon cars because they need more powerful e ngines to perform the off road tasks they are legitimately designed for. [OAR-2009-0472-7229.1, p.3]

Having a limited model range creat es less ability to spread the impact of the regulation. Given the limited resources low volume manufacturers may tend to also have longer model replacement cycles (needing greater time to recover invest ment costs), ensuring a more limited ability to develop the vehicles. Furthermore, as low volum e manufacturers often buy-in technologies from volume manufacturers there maybe be a tim e lag on when those technologies are available. [OAR-2009-0472-7229.1, p.3]

Independent SVMs are often competing against br ands that are part of larger manufacturer groups, who sell across a wider segment range. Thos e brands that are part of a wider group will be in a better position to off- set their performance than an independent manufacturer. They would also have the resources available to them of the larger manufactur ers, which a niche/SVM would not. [OAR-2009-0472-7229.1, p.3]

Whilst the trading element could provide a possible remedy for meeting the targets, this creates a large element of uncertainty: will allowances be available and at what price? This would be difficult to build into a business plan. These comp anies want to be able to comply. They do not want to be left with no option but to plan to buy credits from a co mpany that we must not forget is a competitor. SMMT believes it would be better regulation to structure the proposal to enable them to comply and make a direct cont ribution to its aims. [OAR-2009-0472-7229.1, p.3]

Exclusion from the US market would also lead to job losses in the US, th rough closure of dealer and servicing centres, as well as distribution and marketing companie s. It could also threaten the overall viability of those businesses in total, with the US representing up to 40% of their worldwide sales (average 25%). [OAR-2009-0472-7229.1, p.5]

Lotus Cars Ltd.

Lotus Cars is concerned that the costs gene rated by EPA and NHTSA for analysis are not applicable to small volume manufacturers. In eff ect, the engineering effort and development cost to re-engineer a part/system with the goal of in creased efficiency will likely remain relatively consistent irrespective of future production volume. However, when that cost is evaluated as a 'cost per vehicle', a small volume manufacturer has far fewer production vehicles over which to spread the cost, hence the cost per vehicle wi ll be dramatically higher. Lotus Cars does not believe that the EPA and NHTSA joint Technica l Support Document provides consideration of 'cost per vehicle' technology introduction w ith regard to small volume manufacturers.

5-75EPA Response to Comments

Furthermore, searches of the EPA and NHTSA joint Technical Support Document using terms such as 'small volume', 'SVM', 'niche', etc, yield zero results. This is understandable, as attempting to quantify the predicted cost effect s of the proposed legislation for small volume manufacturers would simply demonstrate that a 'one size fits all approach' is not appropriate for these manufacturers. The unique nature of sma ll volume manufacturers n ecessitates legislation that retains a sufficient degree of flexibility to maximize emissions improvements without regulating such manufacturers out of the market. [OAR-2009-0472-7249, pp.6-7]

TLAAS is effectively a flexible phase-in allowance on route to total compliance with the fleet average greenhouse gas emissions standards. EPA has requested comment from small volume manufacturers, as to whether TLAAS provides su fficient lead-time for achievement of the fleet average greenhouse gas standards. As the proposed legislation is not currently considered appropriate for small volume manuf acturers, Lotus Cars asserts that the TLAAS allowance is not conducive to effective greenhouse gas emission reductions from manufacturers within this classification. It is, however, important to note that small volume manufacturers are often reliant on inheriting new technology from large volume manufacturers. Such technology is generally only available for a small volume manufacturer to develop and incorporate into future products once one or more large volume manufacturers has the technology in full production. Therefore, lead-time allowances for small volume manufactur ers are an important co nsideration with all new legislation that is at least partially reliant upon newer technologies. Lotus Cars has previously found EPA's standard procedure for small volume manufacturers to be appropriate, whereby an exclusion from new legislation is permitted during any phase-in period. This is considered reasonable given the limited producti on volumes, access to new technology, and very limited number of models produced by such manufacturers.

Partial justification for the TLAAS allowance is attributed to the following statement: EPA projects that the environmental impact of the pr oposed TLAAS program will be very small. If all companies eligible to use the TLAAS use it to the maximum extent allowed, total GHG emissions from the proposal will increase by le ss than 0.4% over the lifetime of the MY 2012­ 2016 vehicles. This allows for a number of manufact urers (11 in total, based on 2008MY sales figures) to produce 100,000 vehicles each over a 4 model year period with significantly higher greenhouse gas emissions (total 1.1 million ve hicles). A small number of small volume manufacturers each producing less than 15,000 vehicles per annum with fleet average greenhouse gas emissions higher than the standa rds applicable for large volume manufacturer fleet averages, would clearly have a minute impact on total greenhouse gas emissions in comparison. Such figures could be used to dem onstrate that greenhouse gas limiting legislation is not appropriate in any way to small volume manu facturers, and that removing SVM's from all such legislative requirements would have no significant impact on total greenhouse gas emissions. However, Lotus Cars does not believe th at this sets an appropriate example, and as such seeks to achieve an appropriate level of legislation that would bot h encourage and require greenhouse gas emissions reductions, whilst stil l supporting both new and existing small volume manufacturers. [OAR -2009-0472-7249, pp.7-8]

Lotus recommends revisions to the proposed legisl ation that would provide similar small volume manufacturer provisions to current CAFE le gislation, whereby small volume manufacturers would have the ability to petition EPA/NHTSA with proposed green house gas fleet average

5-76EPA Vehicle Program, Feasibility, and Estimated Impacts

emissions targets. Such petitions should cont ain evidence as to the re levance of the proposed target (considering the vehicle type(s) in production), together with deta ils of the work a manufacturer is undertaking to reduce greenhouse gas emissions of its vehicles, ir respective of vehicle type(s). In accordance with EPA's standard procedure fo r new legislation, Lotus Cars recommends that small volume manufacturers are excluded from legislat ive requirements during the effective phase-in period, to allow sufficien t time for product plans to be aligned with legislative requirements. Lotus further recomm ends that the definition of a small volume manufacturer, for the purposes of this legisl ation, is in accordance with the current EPA definition. The EPA definition of a small volum e manufacturer is one who sells fewer than 15,000 vehicles in all states and te rritories of the United States within a given model year. Lotus Cars believes that it is correct to define a manuf acturer with sales figures below this threshold as a small volume manufacturer, given the differe nt product lines and development procedures employed. Lotus Cars further believes that the ap plication of such a threshold based on vehicle sales within US territories and states represents the best determination for whether to classify a manufacturer for small volume allowances. Manuf acturers who sell vehicles in other territories, which may have significantly differing regulato ry requirements, are not necessarily better positioned to meet the legislative requirements of EPA and/or NHTSA.

Proposal in summary: 'SVM complia nce starts at end of effectiv e phase-in period 'Manufacturer specific GHG emission targets for SVM's' Targ ets determined through manufacturer proposal, with administrator final decision 'SVM definition as per EPA legislation.

The joint EPA/NHTSA legislative proposal seek s to 'achieve substantial reductions of greenhouse gas (GHG) emissions and improvements in fuel economy from the light-duty vehicle part of the transportation sector'. Due to the pa rticularly low volumes of vehicle involved, Lotus Cars asserts that the above recommended amendm ents to the proposed regulations will not have any significant impact on the ability of such legislation to achieve these aims within the transportation sectors. Indeed, calculations using worst case emi ssions and sales figures show that the proposed amendments would affect ne t greenhouse gas emissions from new vehicles in the light-duty vehicle industry by le ss than 0.1%. [OAR-2009-0472-7249, p.9]

Lotus also submitted confidential business in formation regarding their product plans and emissions reduction capabilities.

Koenigsegg Automotive AB

We hereby support the comment filed by Vehicle Services Consulting, Inc. as regards the GHG proposal and small volume manufacturers. [O AR-2009-0472-7194.1, p.1] [See Vehicle Services Consulting, Inc.'s comments in outline section 5.4.2.]

Tunick, Lance

This comment is being filed on behalf of sm all volume specialty vehicle manufacturers who do not qualify as 'Small Volume Manufacturers' (SVM) under EPA regulations.

5-77EPA Response to Comments

This comment concerns EPA and NHTSA's join t proposal to establish a National Program consisting of new standards for light-duty vehicl es that will reduce green house gas emissions and improve fuel economy. 74 FR 49454, Septembe r 28, 2009 . EPA is proposing greenhouse gas emissions standards under the Clean Air Act, and NHTSA is proposing Corporate Average Fuel Economy standards under the Energy Policy and C onservation Act, as amended. These standards would apply to passenger cars, lig ht-duty trucks, and medium-dut y passenger vehicles, covering model years 2012 through 2016, and represent a ha rmonized and consistent National Program.

We address here the proposed EPA C02 standard from the point of view of a small volume test group (SVTG) of a small volume specialty vehicle manufacturer that: --does NOT qualify as an SVM under EPA regulations (40 CFR 86.1838) only due to the fact that it is part of a larger automobile group and hence lose SVM status unde r the EPA '10% aggregation rule' that governs how to calculate US sales when considering the 15,000/yr SVM limit, but --operates its own engineering center and production facilities.

In this comment, the above type of manufact urer will be referred to as a 'Operationally Independent Small Volume Manufacturer', 'OI-SMV'.

We fully support a GHG standard that makes OI-SV Ms do their fair share and that does not give them a 'free ride'. There is, however, a significant factor that must be considered when deciding what is 'fair share': OI-SVMs that manufacturer high performance specialty vehicles cannot, by virtue of their characteristics, meet the C02 requirements proposed by EPA.

We therefore propose that for a SV TG of an OI-SVM there be a special C02 rule as discussed below. There is already an important EPA pr ecedent for the idea of certain SVTG having a special rule allowing reduced compliance: in 40 CFR 86.1845, the in-use testing requirement, certain very low volume SVTG are exempt from such testing if th e annual US sales of the test group are below 5001. We propose a similar C02 rule for SVTG that have fewer than 5001 US sales.

A special SVTG rule as regards C02 could follow one of two possible paths: 1. The first path is the one already taken by the European Union (s ee Article 11 of Regulation (EC) No 443/2009). The essence of the rule would be that as rega rds an SVM or an OI-SVM having an SVTG with fewer than 5001 US sales, the SVM or OI-SVM would receive an alte rnative C02 standard determined on a case-by-case basis based on feas ibility. 1 2. The second possible path is to follow the theory behind EPA's entire C02 propos al - to reduce C02 emissions in MY 2016 by 20% as compared to MY 2008. To this end, EP A could calculate the average C02 emissions from MY 2008 SVTGs having fewer than 5001 US sales, and then require for MY 2016 a 20% reduction of the MY 2008 value for all such SVTG.

We further propose that final rule delay the e ffective date of the EPA C02 standard until MY 2016 for SVTG of OI-SVM that have fewer than 5001 US annual sales in order to allow an orderly compliance transition.

The joint proposal does not adequa tely address the needs of SVTG s of OI-SVM. To this end, the final rule should delay the effective date of the EPA C02 standard until MY 2016 for certain

5-78EPA Vehicle Program, Feasibility, and Estimated Impacts

SVTG as discussed above and should, as rega rds model years starting with 2016, adopt one of the SVTG strategies set forth above. [OAR-2009-0472-7208.1, pp.1-2]

[[These comments were submitted as testimony at the Los Angeles public hearing. See docket number EPA-HQ-OAR-2009-0472-7283, pp. 140-144]]

First, EPA's usual policy is to allow SVMs to defer compliance with a new requirement until the end of phase-in. In my opinion, under the proposed EPA rule, the period 2012 through 2015 is analogous to a phase-in, and, accordingly, EPA should defer SVM compliance until after this period, that is, until 2016. That is wh at California is doing in its GHG rule.

But, again, EPA failed to include any such deferral. Instead, EPA only proposed a temporary lead-time allowance for manufacturers w ith vehicle sales below 400,000. This 400,000-unitper-year proposal, however, is certainly not an SVM proposal.

Once again, we urge that the final rule defer SV M compliance until 2016 as California did in its rule.

And, in fact, EPA has acknowledged the potential n eed for this deferral. In the preamble, EPA recognized that some manufact urers are niche firms with sales volumes well below 10,000 vehicles per year worldwide. And, in fact , EPA gave the exam ple of Aston Martin.

EPA correctly anticipated that a number of SVMs will face greater challenges in meeting the proposed standards due to their limited product lines and limited with no ability to average.

EPA therefore requested comment on whethe r the proposed 400,000-unit-per-year program provided sufficient lead time for these SVMs in order for them to incorporate technology needed to comply with the proposed standards.

The California type of section that I am urging would require SVMs to meet, beginning in 2016, the average CO 2 equivalent emissions of all 2012-compa rable vehicles produced by the major vehicle manufacturers.

My third point today is that the SVM provision that EPA did include in its proposal concerns certain limited SVM exemptions, but the exemp tions are only for SVMs that meet the Small Business Administration criter ia contained in 13 CFR.

With this limitation, the proposed exemptions a ppear to apply only to American companies. This U.S.A-only limitation may very well r un afoul of the Worl d Trade Organization requirements.

Fourth, the credit provisions in EPA's propos al do not offer a solution for SVMs during the period 2012 to 2015. It is difficult to understand how credits will be available to SVMs in the short term, that is, during this 2012 to 2015 period.

5-79EPA Response to Comments

It is certainly risky at best for an SVM to pl an its compliance strategy around the possibility of such credits being available.

My fifth and last point is that the proposed EPA enforcement mechanism would render illegal SVM vehicles that did not comply with the CO 2 standard. This is a very harsh penalty as compared, for example, to the CAFE enforcement program that has monetary fines.

But EPA has explained that the structure of th e Clean Air Act mandates the enforcement scheme that EPA has proposed. Assuming this to be th e case, the equitable solution is to adopt a reasonable GHG standard for SVMs.

MD McLaren Automotive Ltd.

EPA proposed a temporary lead-time allowanc e for MY 2009 manufacturers based on vehicle sales below 400,000 vehicles. This 400,000 unit per year proposal is not consistent with an SVM proposal, because EPA defines SVM as a company with fewer than 15,000 USA sales per year. This proposal also states that this allowance is not applicable to new manufacturers introducing products to the market that did not sell vehicles under their nameplate in the US in MY 2009, a criterion that is not relevant to a manufacturer's ability to comply with emissions standards.

The EPA should consider that in the case of McLaren Automotive, we have been designing and producing cars that are homologa ted and sold in the US mark et since 2003, including MY 2009. However, since the 716 SLR McLaren cars sold dur ing this time in the US were sold under the Mercedes badge, we would not be eligible for any type of TLAAS. Additionally, we have been developing the MP4-12C model since well prior to this proposed rulemaking, investing capital with the anticipation of distributing, selling a nd servicing our cars th rough a U.S. distribution network that will employ over 200 people.

The TLAAS provision does not provide McLaren Au tomotive, as an SVM, with an achievable GHG limit: McLaren Automotive has a limited pr oduct line focused on the sports car segment and cannot therefore average. Large volume manuf acturers are able to of fset emissions from higher emission vehicle types, with lower emissi ons from lower performance vehicle types. In this way, several large manufacturers will be allowe d to sell cars in the marketplace that compete directly against our MP4-12C, but have much higher C02 emissions, while we would be excluded from the market. McLaren Automotive' s new models are class-leading and introduce new technologies into the auto indu stry, but no technologies exist, or will exist in the near future, that will permit the cars we produce to meet the cu rrent required fleet average. Any allowances or deferrals are currently not applicable to McLaren Automotive as we technically did not sell a car in the US in MY 2009 under our own nameplate.

As such, the proposed TLASS provision is in appropriate for both McLaren Automotive and other small volume manufacturers.

McLaren Automotive would like to propose that under the TLAAS rule, the period 2012-2016 is analogous to a phase-in of the new GHG require ments, and accordingly. EPA should defer SVM compliance until after this period (i.e. until 2017 a nd later)B. This would align with EPA's usual

5-80EPA Vehicle Program, Feasibility, and Estimated Impacts

policy to allow SVM's to defer compliance with a new requirement until the end of a phase-in. (See e.g. 40 CFR 1811-04).

The proposed provision allowing an SVM exemption for the peri od 2012-2016 is only for certain small businesses; those that meet the Small Bu siness Administration criteria contained in 13 CFR 121.201.10 . With this limitation, however, the pr oposed exemption appears to apply only to US companies, which would exclude the vast majority of SVM's. McLaren Automotive would like the rulemaking to clarify that this deferm ent applies to non-US companies or adopt an additional standard for a deferment that doe s apply to SVM companies such as McLaren Automotive that plan to distribute, sell and service their vehicles in the US.

In addition, the SBA provision is limited to auto manufacturers with fe wer than 1000 employees. McLaren Automotive believes that this criterion is not relevant to a manufacturer's ability to comply with emissions standards (as significant por tions of work could be outsourced to give an appearance of fewer than 1000 employees) and w ould propose that if EPA leaves in place the employee standard that it also incorporate an alte rnative standard that relates to vehicle sales. One such approach would be for EPA to consider the historically determining EPA SVM status of 15,000 vehicle sales as the standard.

Under the Small Entity Deferment, EPA embraced both the idea of omitting certain small entities from the final rule, as well as the idea that SVM's, such as McLaren Automotive, need a specially structured program. Since the total SVM GHG effect on the environment is minimal, it would be logical to follow this approach. McLaren Automotive pr oposes that the same statutory authority permitting the small entity exemption a pplies to SVM's and requests that EPA extends the idea to all SVM's, rather than only some. [NHTSA -2009-0059-0078, pp.6-7]

McLaren Automotive achieved class leading CO 2 and safety results without any assistance from large OEM's. We expect the 12C to sell be tween 250-350 cars annually into the US market. Moving forward, McLaren Automotive has planned a range of other models which will not only significantly reduce the price point of models av ailable with these technologies, but will also introduce (over the next 3-5 years) new, innovative technologies designed to improve efficiency even further. Over this time period, we hope to grow US sales annually through a US distribution system that will employ over 200 people. Thus, we are clearly in a class of small manufacturers that would be eliminated from the U. S. marketplace under the proposed rule.

The best approach to this issue is that taken by the State of California staff report supporting the California GHG rule: 'low volume manufacturer offerings need to be preserved In the marketplace to ensure continued consumer choice of specialty vehicles. Gi ven their more limited resources to make major revisions to their power trains, it was also important to provide such manufacturers with greater lead-t ime to make improvements to th eir products. In addition, staff needed to consider that major volume manufacture rs could produce specialty offerings in direct competition with these smaller manufacturer o fferings, but offset their potentially poorer GHG emission performance by making other easier to cont rol cars in their fleet incrementally cleaner The California SVM provisions provided an exem ption from the phases in period and proposed a methodology for an alternative SVM standard. [NHTSA-2009-0059-0078, p.5]

5-81EPA Response to Comments

EPA suggests that 'for a few very small volume manufacturers, EPA pr ojects that manufacturers will likely comply using a combination of credits and technology.'

The proposal's credit provisions do not help SVM's during the period 2012-2016. Large manufacturers may themselves need to balance the credits between their own fleets and there is no requirement for large manufacturers to sell credits , nor is there an agreed price or proposal of how the credits will be available for purchase du ring this period. A large ma nufacturer that also produces sports cars that compete directly agai nst McLaren Automotive would certainly prefer to exclude a competitor from the market rather than sell it credits at a fair price so that it could compete.

As such, the market for credits is unpredictabl e and there is no guarantee that credits will be available to an SVM during the period 2012-2016. [NHTSA-2009-0059-0078, p.7]

[The following is from NHTSA-2009-0059-0078, p.8]

McLaren Automotive proposes that EPA include the definition of an SVM within the new proposal. The EPA definition of a small volume manufacturer is one who sells fewer than 15,000 vehicles in all states and terr itories of the United States with in a given model year. EPA should then defer the GHG standards for SVM's to at least 2017 Model Year, considering the methods below:

1. Under the proposed TLAAS rule, the period 2 012-2016 is analogous to a phase-in of the new GHG requirements, and accordingly, EPA should defer SVM compliance until after this period, (i.e. until 2017 and later). This would align with EPA's usual policy to allow SVM's to defer compliance with a new requirement until the end of a phase-in.

2. Include the SVM definition in the conditi onal exemption from greenhouse gas emissions standards permitting the small entity exemption to all SVM's.

3. Deferrals included in the propos al should not be limited to sale s in any previous Model Year, but should be made available to all new en trants to encourage the introduction of new innovations.

4. EPA could then consider appropriate GHG standa rds for SVM's as part of a future regulatory action.

5. EPA should apply the histor ic definition of an SVM.

Note that during this period, Mc Laren Automotive, and other SVM ' s, would still be required to meet all NHTSA CAFE and CARB regulations.

In addition, McLaren Automotive proposes that the GHG standards should follow a similar process to the current NHTSA CAFE legislation. The SVM should have the ability to petition EPA with a proposed GHG fleet average target ba sed on the model mix. This will ensure that a vehicle from a SVM has a comparable GHG target when assessed against a comparable vehicle

5-82EPA Vehicle Program, Feasibility, and Estimated Impacts

from a large manufacturer. The petitions should contain evidence as to the relevance of the proposed target together with details of the work a manufact urer is undertaking to reduce greenhouse gas emissions of its vehicl es, irrespective of vehicle type.

A second approach to handling the post 2016 Model Year period for SVM's would be to adopt an SVM 'California Compliance Option' which w ould allow SVM's to comply with the SVM provisions in the California GHG standard as a means of achieving federal compliance. California, under CAA waivers, has routinely established SVM standards that differ from California standards for large volume manufacturers.

There is clear EPA precedent for a California Compliance Option approach such as the OBD requirements set forth in 40 CFR 1806-05. Under that section, compliance with California OBD regulation satisfies EPA requireme nts. The EPA has already consid ered the question of whether a 'California Compliance Option' is permissibl e under the CAA, and has, without hesitation, concluded that it is. The same rationale should apply here.

McLaren also submitted confidential business in formation regarding their product plans and emissions reduction capabilities.

Morgan Motor Company Ltd.

Morgan Motor Company Ltd files these comments as regards EPA and NHTSA's joint proposal to establish a National Program consisting of ne w standards for light-dut y vehicles that will reduce greenhouse gas emissions and improve fuel economy. 74 FR 49454, September 28, 2009.

We hereby support the comment filed by Vehicle Services Consulting, Inc. as regards the GHG proposal and small volume manufacturers.

Spyker Cars

We hereby support the comment filed by Vehicle Services Consulting, Inc. as regards the GHG proposal and small volume manufacturers. [See Vehi cle Services Consulting, Inc.'s comments in outline section 5.4.2.]

KTM-Sportsmotoercycle AG

We hereby support the comment filed by Vehicle Services Consulting, Inc. as regards the GHG proposal and small volume manufacturers. [See Vehi cle Services Consulting, Inc.'s comments in outline section 5.4.2.]

The temporary lead-time alternativ e allowance standard is more a pplicable to firms significantly larger than us, and that the proposed footprint me tric will further penalize our particular type of product. [OAR-2009-0472-7183, p.1]

We would like better provision for small volume manufacturers to be developed, as established in the European Union’s new car CO 2 regulation, so we can c ontribute to reducing CO 2

5-83EPA Response to Comments

emissions but in a manner that adequately refl ects our economic and ma rket potential and that also ensure diversity within the mark et place can continue. [OAR-2009-0472-7183, p.1]

There are several ways forward that we would s upport, such as developing specific emissions target reductions for small volume ma nufacturers as in the EU new car CO 2 regulation makes provision for. [OAR-2009-0472-7183, p.1]

KTM is developing a number of initiatives to reduce our CO 2 and other GHG emissions. However, we are a very low volume producer, wi th limited economic and technical resources, especially when compared with a vo lume manufacturer. [OAR-2009-0472-7183, p.1]

European Small Volume Car Manufacturers' Alliance (ESCA)

ESCA members represent less than 0.5% of US registrations. They typically have a limited model range, occupying particular se gments of the market, rather th an the broad ranges of a large volume manufacturer. They do not have the same economic or technical resources available to meet the standards. They will be further pena lized by the proposed footprint metric. Exclusion from the US market would lead to job losses in the US, through cl osure of dealer and servicing centers, as well as distribution and marketing co mpanies. It could also threaten the overall viability of those businesses in total, with th e US representing up to 40% of worldwide sales (average 25%). [OAR-2009-0472-7287.1, p.1]

ESCA member companies welcome challenging but achievable emissions reduction targets. European based manufacturers ha ve invested significant sums of money in developing lower emitting vehicles and low volume manufacturers in pa rticular have been innovative, particularly in terms of light-weighting products, such as us e of aluminum chassis, carbon fiber and bonded rather than welded stru ctures. [OAR-2009-0472-7287.1, p.1]

Access to the US market is crit ical for European SVMs. Failure to meet the proposed targets would exclude ESCA member companies entirely from selling automobiles in the US. Small volume manufacturers understand th e need for improvements in their environmental impact and in many cases they are very efficient in their own particular segments. If they were to be forced out of the US market along with their innova tive technologies, this would have little environmental impact and would be to the detr iment of market diversity/consumer choice and have a large economic impact namely, up to 10,000 US jobs, 100,000 EU jobs and up to € 21⁄2 billion export value. [OAR-2009-0472-7287.1, p.2]

ESCA is particularly concerned about how SVMs will be treated within the proposed legislation. In previous legislation the EPA defines SVMs as those selling less th an 15,000 vehicles per annum in the USA (see EPA’s ‘10% related- company aggregation ru le’ - 40 CFR 86.1838-01). The proposed temporary lead-time alternative a llowance standard and small entity conditional exemption will not, in their proposed format, offe r a suitable solution for European small volume manufacturers. ESCA hopes that solutions can be developed to en sure challenging yet achievable long term targets for manufacturer s. Our evaluation of the EPA/NHT SA proposal is attached as an annex. [OAR-2009-0472-7287.1, p.2]

5-84EPA Vehicle Program, Feasibility, and Estimated Impacts

ESCA companies are also now l ooking forward to complying with the requirements of the panEuropean new car CO 2 regulation, which begins in 2012. Arti cle 11 of this regulation makes a provision for SVMs to agree targets more appr opriate to their economic and technological potential (see Regulation 443/2009, Ar t. 11). ESCA is particularly concerned that in the current US proposal for lower volume manufacturers, th e temporary lead time allowance alternative standards and the small entity conditional exemption, do not offer a suitable provision for European SVMs. [OAR-2009-0472-7287.1, p.2]

ESCA member companies have limited ability to spread the impact of the proposed US regulation. Given limited resources low volume ma nufacturers may tend to also have longer model replacement cycles (needing greater time to recover investment costs), ensuring a more limited ability to develop vehicles. Furthermor e, as low volume manufacturers often buy-in technologies from volume manufact urers there may be a time lag for when those technologies are available. Also, we compete against brands th at are part of larger manufacturer groups, who sell across a wider segment range. Large manufacturers have resour ces available to them which SVMs do not. [OAR-2009-0472-7287.1, p.2]

Whilst the trading element could provide a possible remedy for meeting the targets, this creates a large element of uncertainty: will allowances be available and at what price? This would be difficult to build into a business plan. These comp anies want to be able to comply. They do not want to be left with no option but to plan to buy credits from a co mpany that we must not forget is a competitor. ESCA believes it would be better regulation to structure the proposal to enable them to comply and make a direct co ntribution to its ai ms. [OAR-2009-0472-7287.1, p.2]

Europe’s SVMs remain committed to lowering CO 2 emissions, improving fuel economy and providing consumers with choice and diversity. Eu ropean SVMs represent le ss than 0.5% of US sales, but are keen to participate. However, the limitations of their financial resources and ability to develop or access technology need to be taken into account. [OAR-2009-0472-7287.1, p.3]

Within the EPA/NHTSA proposal the ‘Temporary Lead-time Alternative Allowance Standard’ (TLAAS) to 2016 is welcome. This allows ma nufacturers selling less than 400,000 cars to apply for a target of 125% of proposed industry-wide footprint target le vel. However, due to the high initial target faced by European SVMs this flexibility is insuffici ent to enable them to comply with the standard. [OAR-2009-0472-7287.1, p.4]

The proposed TLAAS allowance is also only availa ble to vehicle manufacturers with vehicles for sale in MY 2009. Some SVMs are not currently se lling into the US market, in part due to the current economic climate. They would therefore be excluded from being able to use the TLAAS in future. [OAR-2009-0472-7287.1, p.4]

Artega Automobil GmbH & Co. KG

As an EU based small volume manufacturer we believe the proposed standards will be impossible to meet. We would like better prov ision for small volume manufacturers to be developed, as established in the European Union's new car CO 2 regulation, so we can contribute to reducing CO 2 emissions but in a manner that adequa tely reflects our economic and market

5-85EPA Response to Comments

potential and that also ensure diversity with in the market place can continue. [OAR-2009-0472­ 7481.1, p.1]

The temporary lead-time alternativ e allowance standard is more a pplicable to firms significantly larger than us, and that the proposed footprint me tric will further penalize our particular type of product. [OAR-2009-0472-7481.1, p.1]

There are several ways forward that we woul d support. such as extending the small entity conditional exemption to all small volume manufact urers, or developing sp ecific emissions target reductions for small volume manufactu rers as in the EU new car CO 2 regulation makes provision for. [OAR-2009-0472-7481.1, p.2]

Artega Automobil GmbH & Co. KG is developing a number of initiatives to reduce our CO 2 and other GHG emissions. However, we are a very low volume producer with limited economic and technical resources, especially when compar ed with a volume ma nufacturer. [OAR-2009-0472­ 7481.1, p.2]

Wiesmann GmbH

As an EU based small volume manufacturer we believe the proposed standards will be impossible to meet. We would like better prov ision for small volume manufacturers to be developed, as established in the European Union’s new car CO 2 regulation, so we can contribute to reducing CO 2 emissions but in a manner that adequa tely reflects our economic and market potential and that also ensure diversity with in the market place can continue. [OAR-2009-0472­ 7198, p.1]

The temporary lead-time alternativ e allowance standard is more a pplicable to firms significantly larger than us, and that the proposed footprint me tric will further penalize our particular type of product. [OAR-2009-0472-7198, p.1]

There are several ways forward that we would s upport, such as developing specific emissions target reductions for small volume ma nufacturers as in the EU new car CO 2 regulation makes provision for. [OAR-2009-0472-7198, p.1]

Wiesmann is developing a number of initiatives to reduce our CO 2 and other GHG emissions. However, we are a very low volume producer, wi th limited economic and technical resources, especially when compared with a vo lume manufacturer. [OAR-2009-0472-7198, p.1]

IMPCO Technologies, Inc.

EPA is proposing to defer setting greenhouse gas emissions standards for entities meeting the Small Business Administration criteria of a Small Business.

IMPCO falls under the definition of a “Small En tity”, however, because IMPCO is part of a larger holding company, the overall organization does not qualify as a Small Entity. Therefore, IMPCO would be subject to the same CH 4 , and N 2 O emissions standards as those for automotive

5-86EPA Vehicle Program, Feasibility, and Estimated Impacts

manufacturers. Given the relative size of IMPCO’ s U.S. operations and volume of fuel systems to be sold, this directly puts IMPCO at a tremendous disadvantage. [OAR-2009-0472-7282.1 p.3]

EPA Response:

EPA agrees with comments that the standards would be extremely challenging and potentially infeasible for very small volume manufactur ers, absent credits purchased from other manufacturers, and that such credit availability at this point is highly uncertain. Although these companies are planning to introduce significan t GHG-reducing technologies to their product lines, they are still highly unlikely to meet the standards by MY2016. Because the products produced by these manufacturers are essentially unique, these manufactur ers were not included in EPA’s OMEGA modeling assessment of the technology feasibility an d costs to meet the proposed standards. These manufacturers have on ly a few models and have very high baseline emissions. TLAAS manufacturers are projected to be required to reduce emissions by up to 39%, whereas SVMs in many cases would need to cut their emissions by more than half to comply with MY2016 standards (e.g., Base d on MY2009 CAFE levels, one of these manufacturers has baseline emissions of 468 g/mile).

Given the unique feasibility and related lead time issues raised for these manufacturers, EPA is deferring establishing CO 2 standards for manufacturers with MY2008 or MY2009 sales of less than 5,000 vehicles. This will provide EPA more time to consider the unique challenges faced by these manufacturers. The deferment only applies to CO 2 standards; SVMs must meet N 2 O and CH 4 standards. EPA plans to set standards fo r these manufacturers as part of a future rulemaking in the next 18 months. This future rulemaking will allow EPA to fully examine the technologies and emissions levels of vehicles offered by small manufacturers and to determine the potential emissions control capab ilities, costs, and necessary lead time. This timing may also allow a credits market to develop, so that EPA ma y consider the availabili ty of credits during the rulemaking process. See State of Mass. v. EPA , 549 U.S. at 533 (EPA retains discretion as to timing of any regulations addressing vehicula r GHG emissions under section 202 (a)(1)). We expect that standards would be gin to be implemented in th e MY2016 time frame. Several commenters supported the approach of deferring standards to a future rulemaking. This approach is also consistent with that envisioned by California for these manufacturers, as noted by several commenters. EPA estimates that eligible small volume manufacturers currently comprise less than 0.1 percent of the total light-duty vehicle sale s in the U.S., and therefore the deferment will have a very small impact on th e GHG emissions reductions from the standards.

In addition to the 5,000 vehicle pe r year cut point, to be eligible for deferment each year, manufacturers must also demonstr ate due diligence in attempting to secure credits from other manufacturers. Manufacturers must secure credits to the extent they are available at a reasonable price from other manufacturers to offset the difference between their baseline emissions and what their obligations would be under the TLA AS program starting in MY2012. Several small volume manufacturers commented that they woul d be willing to purchas e credits from other manufacturers as a way to comply with standard s, assuming that the credits are available at a reasonable cost.

5-87EPA Response to Comments

Several commenters noted in their recommendations that EPA has historically used an annual sales cut point of 15,000 vehicles in defining sma ll volume manufacturers in the past for Tier 2 and other rules. EPA, however, believes 5,000 ve hicles is sufficient to address small volume manufacturers and that usi ng 15,000 vehicles would not resu lt in covering additional manufacturers. Small volume manufacturers, including many of those that commented in support of additional leadtime, typically sell 1,000-2,000 vehicles per year and therefore the 5,000 vehicle cut point provides a reasonable margin for sales growth. In the interest of establishing the small volume manufacturer prov isions as narrowly as possible while still accomplishing the purpose of the provisions, EPA has decided to use a cut-point of 5,000 vehicles.

EPA received comment from Ferrari that EPA shoul d allow a manufacturer to apply to EPA to establish small volume manufacturer status based on the independence of its research, development, testing, design, and manufacturing from another firm that may have an ownership interest in that manufacturer. EPA has reviewed these comments, but is not finalizing such a provision at this time. EPA believes that this issue likely presents some competitive issues, which we would like to be fully considered th rough the public comment pr ocess. Therefore, EPA plans to consider this issue and seek public comments in our proposal for small volume manufacturer CO 2 standards, which we expect to comp lete within 18 months. In determining eligibility for SVM deferment, manufacturers must be aggregated according to the provisions of 40 CFR 86.1838-01(b)(3), which requires the sales of different firms to be aggregated in various situations, including where one firm has a 10% or more equity ownership of another firm, or where a third party has a 10% or more equ ity ownership of two or more firms.

Small Volume Test Groups

EPA received comments that EPA should consider exempting small volume test groups from the fleet average approach and allow them to comply w ith a fixed value. This concept is similar to establishing separate standards for small volume manufacturers, but would allow all manufacturers to use the separate standards for a subset of their fleet. EPA did not propose this concept and is not including such a provision in the final rule. Instead, EPA has included a wide range of flexibilities available to manufacturer s it believes will be sufficient to address issues with low volume test groups. These flexib ilities include averaging, TLAAS, and credits
programs.

Comments Concerning Natural Gas Vehicles

Organization: NGVAmerica Clean Energy Fuels

Comment:

NGV America

EPA’s notice exempts small volume manufacturer s and aftermarket conversion manufacturers who are small businesses from having to meet the new greenhouse gas emission regulations. See

5-88EPA Vehicle Program, Feasibility, and Estimated Impacts

EPA NPRM, p. 49629. The proposed rule also in cludes a phase-in period for small volume manufacturers. Aftermarket conversion ma nufacturers who satisfy the small volume manufacturer requirements potentially would qualify for the phase-in. There would be no exemption for aftermarket convers ion manufacturers who are not sm all businesses, however. See EPA NPRM, p. 49575. We agree with EPA’s assessment that exempting small businesses from the proposed regulation will have a negligib le impact on greenhouse gas emissions. [OAR-2009­ 0472-7236.1, p.11]

EPA should also exempt aftermarket conversion ma nufacturers of alternat ive fuel systems who are not small businesses from having to comp ly with the greenhouse gas regulations. These manufactures currently provide a valuable service by offering systems that enable vehicles to operate on alternative fuels. In the light duty ve hicle market, there are few original equipment manufacturer (OEM) options for consumers intere sted in acquiring natural gas fueled vehicles. The alternative fuels industry benefits from ha ving large businesses manufacture, certify and sell aftermarket conversion systems. Subjecting the larger businesses to requirements that are different from their smaller competitors c ould discourage such businesses from providing aftermarket alternative fuel syst ems. In addition, the new requirements will be equally difficult for both large and small aftermarket manufacturer s since both rely on the catalysts used by the original equipment manufacturer. EPA should exempt large businesses that provide aftermarket conversion systems for alternative fuel vehicles. [OAR-2009-0472-7236.1, p.11]

Clean Energy Fuels

EPA's notice exempts small volume manufacturer s and aftermarket conversion manufacturers who are small businesses from having to m eet the new GHG emission regulations. See EPA NPRM, p. 49629. The proposed rule also in cludes a phase-in period for small volume manufacturers. Aftermarket c onversion manufacturers who are not small businesses, however, are expected to comply with the new GH G emission requirements. See EPA NPRM, p. 49575. We agree with EPA's assessment that exempting small businesses from the proposed regulation will have a negligible impact on GHG emissions. [OAR-2009-0472-7220.1, p.9]

EPA and NHTSA should also exempt aftermarket conversion manufacturers of alternative fuel systems who are not small businesses from having to comply with the GHG regulations. These manufactures currently provide a valuable servic e in providing alternative fuel systems, which for the most part are not available from or iginal equipment manufacturers. We think the alternative fuels industry benefits from having large businesses manufacture, certify and sell aftermarket conversion systems. Subjecting the larger businesses to requirements that are different from their smaller competitors c ould discourage such businesses from providing aftermarket alternative fuel systems. Thus, EP A should exempt large businesses that provide aftermarket conversion systems for altern ative fuel vehicles. [OAR-2009-0472-7220.1, p.9]

EPA Response:

EPA is deferring standards for small volume manuf acturers with sales of less than 5,000 vehicles regardless of the size of the company, as discusse d above. EPA believes that it is appropriate for large companies producing more that 5,000 vehicl es to be covered by the program. Allowing

5-89EPA Response to Comments

natural gas vehicle manufacturers regardless of th e size of the business or the number of vehicles produced to be exempt from the standards is not warranted. Natural gas vehicle manufacturers raised concerns about meeting the proposed CH 4 standards, and while EPA believes the CH 4 standards are feasible, EPA nevertheless is allowi ng vehicles to comply with the standards on a CO 2 equivalent basis to address these concerns. (See Section 5.5). Therefore, EPA does not anticipate that natural gas vehicles will have difficulty meeting the standards.

Comments Concerning Manufacturers in Developing Countries

Organization: People's Republic of China

Comment:

It provides for the “Special and Differential Treatment of Developing Country Members” in Article 12 of the WTO/TBT Agreement, which st ipulates the obligation of developed Members in this respect. For manufacturers of developing countries, there is still a long way to go to meet the requirement of the notified regulation, requiring long-term a nd huge input in technical R&D and product test, etc. We suggest the United St ates considering providi ng developing countries with longer transition period and preparatory period, and offering technical assistance to developing countries, such as o ffering testing technology and testing equipment, etc. [OAR2009-0472-11269, p.3]

We note that, vehicles of the small entity are not subject to the rest riction of the notified regulation, and are deferred implementing GHG em issions reduction standards. We believe, small volume of import vehicles will have a ne gligible impact on the GHG emissions reductions, in order to reflect the sufficient competiti on of the market, and according to the National Treatment principle of WTO, small volume of im port vehicles should be treated according to relevant regulations for vehicles of small entity. It is suggested that small volume is defined as the annual import volume in a single model year is not greater than 0.01% of American annual total sales volume. [OAR-2009-0472-11269, p.3]

EPA Response:

Developing country members' automobile manuf acturers, as well as U.S. manufacturers that meet the small entity business size criteria are eligible for the small entity exemption. EPA is also deferring standards for sm all volume manufacturers with U.S sales of less 5,000 vehicles in MY2008 or MY2009, as discussed above. EPA does not believe it is appropriate to extend the SVM deferment to larger companies selling mo re than 5,000 vehicles or those not already established in the U.S. market . This would open up the deferment to an unknown universe of potential eligible manufacturers, with the potential for gaming. In addition, the TLAAS flexibilities would also apply to eligible developing country manu facturers. Lastly, the primary purpose of this program is to prot ect public health and we lfare. We do not believe it is therefore appropriate or necessary to provide any additi onal flexibilities beyond the ones included in the final program, similar to how we have treated th is issue under previously adopted mobile source
programs.

5-90EPA Vehicle Program, Feasibility, and Estimated Impacts

5.5. N2O and CH4 standards

Organization: Alliance of Automobile Manufacturers (Alliance) Association of Intern ational Automobile Manufacturers (AIAM) Yuli Chew, Private Citizen Center for Biological Diversity Chrysler Group LLC (Chrysler) Clean Energy Fuels Cummins Inc Environmental Defense Fund Ferrari S.p.a Ford Motor Company Georgia Department of Natural Resources Honda Motor Company IMPCO Technologies, Inc Manufacturers of Emission Cont rols Association (MECA) Mercedes-Benz (Daimler AG) Mississippi Department of Environmental Quality Mitsubishi Motors R & D of America (MRDA) National Association of Cl ean Air Agencies (NACAA) Natural Resources Defense Council Northeast States for Coordinate d Air Use Management (NESCAUM) New York University School of Law, Institute for Policy Integrity (IPI) NGV America State of New Jersey Toyota Motor North America University of California, Santa Barbar a, Bren Working Group on Vehicle Fuel Economy Volkswagen Group of America (Volkswagen) Volvo Car Corporation

Comment:

Alliance of Automobile Manufacturers (Alliance)

• EPA would not be saddled with establishing and maintaining “backst op” standards for CH4 and N2O that may or may not be applicable to all fuels and/or vehi cle technologies. [OAR-2009­ 0472-6952.1, p.44]

• Since EPA has already proposed an assigned DF for CO2, all other DF issues would be eliminated. [OAR-2009-0472-6952.1, p.44]

EPA should establish that the CH4+N2O factor be set equal to 1.9 gm/mile, which is the same as the factor that is allowed for California Air Reso urces Board CO2-equivalent calculations. If, in the future, EPA should determine that CH4 or N2O are becoming larger cont ributors to the CO2- equivalent value, they could simply increase the CH4+N2O factor to account for the change.

5-91EPA Response to Comments

This proposal would achieve the GHG reductions as the EPA proposal, but in a much more simplified and cost-effective fashion. [OAR-2009-0472-6952.1, p.44]

• N2O Is not currently measured in a high-produc tion certification-qualit y volume. To do so will require major test facility upgrades which will take several years to complete because of the technical challenges that have not yet been resolved with rega rd to the measurement of N2O. There is insufficient lead time to accomplish th ese tasks in time for MY 2013 implementation.

• The proposed “backstop” standard is too stringe nt and may preclude the introduction of some alternative technology vehicles.

• The proposal to have N2O be a useful life stan dard will require manufacturers to establish deterioration factors (DFs), and this will require manufacturers to rerun all forms of durability and data vehicle testing fo r MY 2013. [OAR-2009-0472-6952.1, p. 43]

• Manufacturers would not be required to upgrade all test facilities to measure N2O, thereby making the rule more cost-effective. [OAR-2009-0472-6952.1, p.44]

N2O Measurement Devices and Interference Verification for N2O Analyzers (Proposed regulations in 40 C.F.R. 86.167-12 and 86.168-12)

The proposed regulations contain multiple references to 40 C.F.R. Part 1065 (1065.145, 1065.205, 1065.275, 1065.307, 1065.342, 1065.750). These sections in turn reference other Part 1065 sections which affect other test site hard ware, software, calculati ons and procedures. One example of this can be found in 40 C.F.R. 86.167-12(a) which states:

General component requirements. We recommend that you use an anal yzer that meets the specifications in Table 1 of 40 C.F.R. 1065.205. Note that your syst em must meet the linearity verification in 40 C.F. R. 1065.307. [OAR-2009-0472-6952.1, p.44]

The linearity verification in 40 C.F.R. 1065.307 requires non-N2O chassis dynamometer gas analyzers to meet the heavy duty engine dynamome ter Part 1065 requirements. In addition, other chassis dynamometer systems will have to comply with Part 1065, including exhaust gas dilution systems (CFV’s) and their related pressures, te mperatures, and batch sampler flow rates; gas dividers, PM balance; barometer; exhaust back pressure; and stand-alone test cell pressures and temperatures. This reference may also bring in new requirements relating to the chassis dynamometer torque, speed and total work (e ven though these are listed for an engine dynamometer). [OAR-2009-0472-6952.1, pp.44-45]

Recommendation:

Making generic references to the heavy duty Pa rt 1065 procedures quickly affects most of today’s light-duty test cell systems, could affect stringency, and is contrary to Part 86, Part 600 and California ARB regulations. The Alliance th erefore recommends these 1065 references be deleted and replaced with speci fic language compatible with Parts 86, 600 and California ARB

5-92EPA Vehicle Program, Feasibility, and Estimated Impacts

regulations. In support of this approach recogn ize the small N2O contribution to GHG emissions as follows. [OAR-2009-0472-6952.1, p.45]

While CO2 represents 95% of transportati on GHG emissions (per GWP), EPA acknowledges that N2O only accounts for 1.6% of these tran sportation GHG emissions. Other studies also support this low number for N2O emissions. A 1999 study by Ford Motor Company (Environ. Sci. Technol., 1999, 33, 4134-4139) estimated that between 1-3% of the transportation greenhouse gases was attributable to N2O. In addition, a review of over 200 representative tests conducted by vehicle manufacturers on gaso line and E85 (shown in the summary chart below) shows that N2O emissions from cars and trucks are negligible in comparison to CO2. [OAR-2009-0472-6952.1, pp.45-46]

The Alliance acknowledges that more data is needed concerning N2O contribution and supports EPA’s efforts to expand the current N2O knowle dge base for inventory purposes. However, EPA’s proposed approach for generating the de sired N2O information during the emissions certification and fuel economy testing processes would enta il time and expense that is disproportionate to the overal l GHG contribution of N2O emissi ons. Instead, the Alliance urges EPA to enter into a joint test program with i ndustry as a cost-effective means to learn more about N2O emissions. The results of this test pr ogram could then be used to determine whether separate measurement of N2O emissions is warranted. [OAR-2009-0472-6952.1, pp.46-47]

Absent any new data from a joint test program, EPA is urged to considerallowing the use of a default value for N2O (0.006 grams per mile) in lieu of measuring N2O in the exhaust. This factor is identical to that allowed for use by ARB and can be further refined through future studies. [OAR-2009-0472-6952.1, p.47]

As for the proposed N2O measurement and reporti ng provisions, there is a high level of concern about incorporating the engine dynamometer test procedures speci fied in 40 C.F.R. §1065 into the chassis dynamometer test procedures for lig ht-duty vehicles, light- duty trucks, and mediumduty passenger vehicles. 40 C.F.R. §1065 is a complete rewrite of many engine dynamometer test procedures such as heavy-duty on and off road engines, locomotive, marine, small spark ignition, etc. Many of these proc edures, specifications, hardware requirements and equations are not compatible with current light-duty test sites and, in some cases, contradict current light- and medium-duty regulations. More specifically:

• Adopting 40 C.F.R. §1065 equipment requirements into the chassis-certified regulations could impact the stringency of current standards for the light-duty ve hicles, light-duty trucks, and medium-duty passenger vehicles that certify to cu rrent regulations with ex isting test facilities, equipment, procedures and diagnostics.

• The requirements of 40 C.F.R. §1065, will conf lict with the requirements of 40 C.F.R. §86 and §600 for light-duty vehicles, li ght-duty trucks, and medium -duty passenger vehicles. Specifically, the standard setting sections, 40 C.F.R. §86 Subparts A & S and 40 C.F.R. §600, require the use of the test procedures set forth in 40 C.F.R. §86 Subparts B & C for certification. In addition, the requirements of 40 C.F.R. §1065, will conflict with th e state of California

5-93EPA Response to Comments

regulations (and the regulations of other states “Cal LEV” st ates), because the California regulations base their test procedur es on those in 40 C.F.R. §86 and §6005.

• 40 C.F.R. §1065 provisions will require significant hardware, software, license and acquisition, and procedural and diagnostic modifications to existing chassis dynamome ter test facilities. These changes will be expensive depending upon th e number of test cells at each manufacturer and it will not be possible for manufacturers to modify today’s robust chassis dynamometer certification test sites by MY 2013 ( certification testing done in CY2012).

• N2O emissions measurement requires a new N2O ca libration gas to be NIST (National Institute of Standards and Technology) traceable, typically within ±1.0% of the NIST accepted value. To our knowledge, there are no such standards avai lable “off the shelf” from vendors or NIST. NIST has in the past analyzed special batche s of N2O gas for industr y, but these were one-off custom bottles. [OAR-2009-0472-6952.1, p.47]

For the above reasons, the Alliance recommends that all 40 C.F.R. §1065 requirements be deleted from all chassis dynamometer certificat ion testing of light-duty vehicles, light-duty trucks, and medium-duty passenger vehicles. We recommend retaining th e existing Parts 86 and 600 requirements with modifications to include N2 O instrument specific test procedures in the appropriate sections of 40 C.F.R. §86 Subpart B. These modifica tions could be similar to the analyzer specific procedures being proposed fo r 40 C.F.R. §1065 minus any criteria that are contrary to current Parts 40 C.F. R. §86 and §600. [OAR-2009-0472-6952.1, p.48]

By doing this, EPA would bring executable measur ement certainty for the OEMs trying to meet the GHG requirements and will provide compatibility with the existing light-duty, Part 86 compliant test equipment, software and procedur es. In addition, deleting the Part 1065 references provides OEMs with firm guidance as to what the requirements are for long term facility planning purposes, and removes the uncertainty with the evolving nature of the HD Part 1065 procedures. [OAR-2009-0472-6952.1, p.48]

In the event that EPA decides to pursue actual N2O measuremen t and reporting, as proposed, EPA should provide sufficient lead-time (at leas t until MY 2013) to implement such a program. EPA should also limit the certification test modes for N2O emissions measurement (e.g., FTP mode on emission data vehicle only) to minimize manufacturers' burden. [OAR-2009-0472­ 6952.1, p.48]

Note that the N2O measurement issues could al so be avoided if EPA accepts the previously stated recommendation to eliminate the N2O emission standard. [OAR-2009-0472-6952.1, p.48]

Association of International Au tomobile Manufacturers (AIAM)

EPA proposes capping emission rates for nitrous oxide and methane at current emissions levels. As EPA notes, even after adjusting for the highe r global warming potential of these substances, they collectively account for less than 1 percen t of light vehicle gree nhouse gas emissions. See 74 FR 49507. EPA initially projects no economic impact resulting from these caps (see 74 FR 49511); however, the Agency later no tes that this is not the case. Measurin g and reporting these

5-94EPA Vehicle Program, Feasibility, and Estimated Impacts

emissions will involve additional costs for manuf acturers, particularly in the case of nitrous oxide. Additional test equipment will be needed to measure nitrous oxide emissions, with resulting facility costs for manufacturers. I d., at 49525. Our members re port that the currently available commercial laboratory test equipment fo r nitrous oxide measurement is not capable of accurately and repeatably measur ing the very low levels of nitrous oxide emissions, i.e., 0.001 g/mile level, in vehicle exhaust, thus potentially increasing overall test bur den due to voided tests as well as normal testing. [OAR-2009-0472-7123.1, p.5]

In addition, the nitrous oxide standard proposed by EPA is a vehicle-specific standard, not a fleet average standard as is provided for carbon diox ide, potentially creati ng an additional burden on manufacturers to assure consiste nt compliance across all vehicle models. EPA notes that nitrous oxide emissions vary with different types of catalyst designs, so it would be necessary for manufacturers to assure that each catalyst design in their fleet of vehicles would not increase emissions of that substance. Si nce current emission control tec hnologies for NOx emissions also tend to control N2O, there is no current basis for concluding that overa ll N2O emissions could increase in the future. [OAR-2009-0472-7123.1, p.5]

AIAM concludes that a methane cap is unnecessar y. The only potential scenario for an increase in vehicle methane emissions cited by EPA is a substantial increase in the production of CNG vehicles. Id. at 49525. EPA notes that current emission controls tend to achieve reductions in methane as well, so there is no basis for antic ipating that methane emissions would generally increase. EPA subsequently states that recent C NG vehicles meeting Tier 2 standards have had methane levels consistent with conventi onal vehicles. See Id at 49526. [OAR-2009-0472­ 7123.1, p.5]

Available data and information provide no basis for anticipating that ei ther nitrous oxide or methane emissions will increase in the future, and current Tier 2 (and potentially future standards as well) would tend to reduce emissions of these substances. Additional testing and administrative burdens would be required to co mply with the proposed caps, and new test equipment would be needed to measure nitrous oxi de emissions. For these reasons, we urge EPA to adopt a default CO2 equivalent emission va lue for these substances for the 2012-2016 model years, similar to the approach that CARB took. Testing and reporting of these emissions should not be required. Certificati on should be based on manufactur ers’ providing engineering evaluations and statemen ts. [OAR-2009-0472-7123.1, pp.5-6]

If EPA believes further information is needed to assure that emissions of these substances do not increase, we urge the agency to work with auto manufacturers to pursue a research-type program to conduct testing of new vehicles for these subs tances. The level of testing for such a program would be less than that required if standards we re adopted and would focu s on technologies that EPA believes are most likely to produce higher emissions of the two substances. AIAM would be willing to support a request to Congress fo r additional budget resources for EPA to conduct such a program. As noted below, AIAM proposes a similar approach to address speculative concerns about in-use deterioration of greenhous e gas emissions and testing of air conditioning systems. [OAR-2009-0472-7123.1, p.6]

5-95EPA Response to Comments

Notwithstanding the concerns expressed above, should EPA determine that nitrous oxide and methane regulation in some form are necessar y, those substances should be regulated on a carbon dioxide-equivalent, fleetwide default ba sis, as California has done. In that way, manufacturers would have greater flexibility in choosing methods to achieve equivalent levels of greenhouse gas emission reductions. However, in th e case of nitrous oxides , if EPA should adopt testing requirements, then significant lead-time is needed to address the measurement accuracy and quality control issues mentioned above. In the case of methane, cu rrent EPA test methods and required equipment allow the measurement of this gas; therefore, AIAM members are willing to voluntarily collect and report that info rmation as part of certification testing. [OAR2009-0472-7123.1, p.6]

Center for Biological Diversity

(v) EPA Should Seek to Reduce the Emissions of Nitrous Oxide and Methane, Rather Than Just Holding Their Emissions Constant

EPA proposes to hold emissions of greenhouse gases other than carbon dioxide (nitrous oxide and methane) to a constant level, rather than attempting to reduce these emissions, at zero cost to the auto industry. Proposed Rule, 74 Fed. Reg. 49511. The agency states that it has not identified “clear technical steps” available today to “s ignificantly reduce” these emissions, 74 Fed. Reg. 49513. However, EPA fails to analyze whether any technologies are available to reduce these emission by any amount, and if so, what the costs and benef its might be. This fa ilure is arbitrary and capricious. EPA justifies its position by poi nting out that methane and nitrous oxide emission levels “are extremely low and repres ent only about 1% of total light vehicle GHG emissions.” Id. However, particularly in light of th e potent warming potential of both methane (25 times that of carbon dioxide over a 100 year period) and nitrous oxid e (298 times that of CO2 over a 100 year period), that approach can not be justified. Ind eed, in its proposed Endangerment Finding, EPA has already rejected any claims that GHG emission reductions are unnecessary because their impact is relatively small: “Importantly, because no single greenhouse gas source category dominates on the global scale, many (if not all) individual greenhouse gas source categories could appear too small to matter , when, in fact, they co uld be very significant contributors in terms of both absolute emissions or in comparison to other similar source categories within the U.S.” Endangermen t Finding, 74 Fed. Reg. 18907. The Proposed Rule should be revised to remedy these deficiencies. [footnote] While we believe a CO2 equivalency standard is necessary and should be set, we al so advocate for separate emission levels for all other greenhouse gases to allow more targeted application of relevant technologies. [OAR-2009­ 0472-7265.1, p. 18]

Chew, Yuli, Private Citizen

I favor a “technology-forcing” approach for pr oposed N2O and CH4 standards, similar to NMOG Standard in CARB’s Regulation. For exampl e, there are already CARB SULEV certified CNG / LPG vehicles, there is no reason to “cap” the st andard at a static level of say, Tier 2 Bin 5. This will also ensure that more of the alternative fuel aftermarket engines can be retrofitted into used vehicles with equal to or better than the original standard s. [OAR-2009-0472-7042.1, p.3]

5-96EPA Vehicle Program, Feasibility, and Estimated Impacts

Chrysler Group LLC (Chrysler)

N2O is currently not measured during certification testing and will require additional resources and test facility upgrades if st andards are adopted. N2O is an insignificant portion of the exhaust composition of gasoline-fueled vehicles and is le ss than two percent of the total greenhouse gas contribution. The N2O standard as proposed could also pose an impediment to the widespread introduction of promising advance lean-bum technol ogies that have been demonstrated to reduce greenhouse gas emissions . [NHTSA-2009-0059-0124, p.38]

Recommendations:

Since N2O is a relatively insignificant vehicle greenhouse gas and requires additional analytical resources and costly test facility upgrades to measure, manufacturers should be provided with the option to use assigned values for a represen tative vehicle/fuel technology. [NHTSA-2009-0059­ 0124, p.38]

Clean Energy Fuels

EPA is proposing a methane (CH4) emissions sta ndard or cap of 0.03 g/mi as measured on the Federal Test Procedure, to apply beginning with model year 2012 for both cars and trucks. EPA further believes that this level for the standa rd would be met by current gasoline and diesel vehicles, and 'would prevent large increases in futu re methane in the event that alternative fueled vehicles with high methane emissions, like so me past dedicated compressed NGVs, become a significant part of the fleet.' However, EPA also notes that this source of emissions accounts for as little as 0.2% of the GHG gases from cars and light truc ks. [OAR-2009-0472-7220.1, p.7]

Clean Energy is concerned that the notice app ears to take the position that the cap is not technologically forcing but rath er is meant to ensure methane emissions do not increase. The notice states that '[t]hese caps are designed to ensure that N2O and CH4 emission levels do not rise in the future, rather than to force reduc tions in the already low emission levels .... these standards are not designed to require automake rs to make any changes in current vehicle designs.' At the same time, EPA appears aware that NGV s in the past have had much higher methane emissions than gasoline vehicles. EPA appear s to be confident that controls necessary to meet the more demanding Tier 2 standards will result in lower levels of CH4 emissions for NGVs. But the notice offers up no data or citations to support these conclusions. Without the ability to review the same data that EPA is relying upon, we lack the confidence that EPA apparently has regarding the ability of NGVs to meet the proposed CH4 cap. As noted above, our research into this issue has not revealed any data showing that NGVs will meet the proposed cap. [OAR-2009-0472-7220.1, p.8]

Even if some NGVs can meet the cap, we be lieve adopting a CO2 equivalent average is warranted with methane and nitrous oxide emi ssions appropriately wei ghted for their global warming potential. Providing a CO2 equivalent approach as part of the rule would ensure that the caps do not become an obstacle to NGVs, while at the same time ensuring GHG emissions from such vehicles are no greater th an for gasoline vehicles. Theref ore, we strongly urge EPA and NHTSA to allow NGVs to meet an average standa rd that includes averaged emissions for CO2,

5-97EPA Response to Comments

CH4, and N2O. If this is done, we are confiden t that NGVs will not only achieve the standard but surpass gasoline powered vehicles. Failure to adopt such a standard would seem illogical as the result would disa llow vehicle strategies that could pr ovide less overall GHG gas emissions on a WTW basis. [OAR-2009-0472-7220.1, p.8]

[[Clean Energy also submitted these comments as testimony at the Detr oit public hearing, See docket number EPA-HQ-OAR -2009-0472-6185, pp. 137-139.]]

Cummins Inc.

EPA is proposing stand-alone N2O and CH4 st andards for light-duty vehicles. Cummins recognizes that EPA is setting such standards to cap emissions of N2O and CH4 to ensure that these emissions do not increase in the future with the introduction of new CO2- reducing technologies. While Cummins supports the overall goal, we believe that EPA can achieve the same results with a less costly and less burdens ome approach. The new standards would require that all manufacturers upgrade their facilities to measure N2 O and CH4. The California Air Resources Board proposed a set value of N2O an d CH4 emissions which manufacturers can use to calculate equivalent CO2 emissions from a ve hicle. This approach makes sense since it is known that N2O and CH4 are a sm all percentage of overall greenhouse gas emissions from vehicles. This set value could be adjusted in the future if new GH G-reducing technologies increase the N2O and CH4 emissions compared to average values of N2O and CH4 emitted by current vehicles. This would also ensure that a new technology which reduces the overall GHG emissions is not prevented from entering the ma rket because of the stand-alone N2O and CH4 standards. Cummins recommends that EPA adopts an approach similar to California to account for N2O and CH4 emissions. [OAR-2009-0472-7205.1, p.5]

Environmental Defense Fund

Just as important as EPA’s choi ce to regulate light- duty vehicles is EPA’ s decision to include carbon dioxide (CO 2 ), methane (CH 4 ), nitrous oxide (N 2 O) and hydrofluorocarbons (HFCs) as regulated GHGs under the proposal rule which account for the preponderance of light-duty GHG emissions when weighted by global warming potential. 38 Whether these compounds are considered individually or collectively, EPA ha s a statutory duty to establish “standards applicable to the emission of any air pollutant fro m any class or classes of new motor vehicles or new motor vehicle engines, which in his judgmen t cause, or contribute to, air pollution which may reasonably be anticipated to en danger public health or welfare.” 39 See 42 U.S.C.
§ 7521(a)(1). [OAR-2009-0472-7285.1, p. 10]

Ferrari S.p.a

CH4 is currently measured to determine NM HC emissions, whereas the N2O measurement requires additional instruments for emission laborat ories, with increased costs. Since present emission control technologies for NOx emissions al so tend to control N2O, there is no current basis for concluding that overa ll N2O emissions could increase in the future. The same conclusion could be drawn for methane. The bur dens (laboratory update , testing, reporting)

5-98EPA Vehicle Program, Feasibility, and Estimated Impacts

associated with the measurement of tailpipe nitrous oxide is not justifiable in terms of costs/benefits analysis. For these reasons, we d eem that it is not necessary to set these new additional exhaust standards for CH4 and N2O. [OAR-2009-0472-7214.1, p.3]

Ford Motor Company

We do not believe EPA is compelled to establish full useful life standards for N2O and CH4; the attachment addresses this in more detail. To the extent that EPA desires to pursue this issue nonetheless, the regulations could continue to allow manufacturers to make an 'engineering judgment' attestation - in lieu of formal compliance testing -- beyond just the first couple of years as proposed. Alternatively, EPA could establish generic emissions factors for N2O and CH4 and roll these into the proposed CO2 standa rd. [OAR-2009-0472-7082.1, Cover letter, p. 2]

As we continue to move towards an integrated approach that cons iders the vehicle, the fuel, and the consumer, it is worth highlig hting other policies th at could do more to reduce greenhouse gas emissions from actual in-use operation of motor vehicles compared to some of the additional requirements that EPA is proposing under this rulemaking. For example, EPA is proposing full useful life standards for CH4 (methane) and N2O (n itrous oxide) in additi on to the fleet-average CO2 requirements. The relative contribution of me thane and nitrous oxide to a vehicle's overall greenhouse gas emissions is small compared to CO2 - on the order of 1-3% and 0.3-0.4% respectively. The benefit of expanding the existing criteria pollutant emissions durability requirements to include these greenhouse gases is negligible, relative to other potential measures that could have a much more significant imp act on actual in-use greenhouse gas emissions. [OAR-2009-0472-7082.1, Cover letter, p.]

Regulating Methane(CH4 a nd Nitrous-oxide (N20)

Ford does not support EPA's proposal to regulate CH4 and N20 as stand-alone greenhouse gases. It is well documented that CO2 comprises greater than 90% of the total greenhouse gas emissions from vehicles. There is a simple relationship between CO2 emissions and fuel economy for gasoline and diesel fueled vehicles . In addition, studies conducted by Ford and others in the research arena have shown that the relative contribution of methane and nitrous oxide to a vehicle's overall greenhouse gas emissions is small compared to CO2 - on the order of 1-3% and 0.3-0.4% respectively. Therefore, Ford does not suppor t EPA's proposal to regulate CH4 and N20 as stand alone greenhouse gases.

In addition, regulating CH4 and N20 could have an unintended negati ve CO2 impact and severely limit, restrict, or legislate out of exis tence CO2-friendly technol ogies such as CNG, E85 (nominally 85% ethanol/15% gasoline), HCCI, pHCCI , lean gasoline, or clean diesel in the U.S. market. For example, a cap on CH4 could limit compressed natural gas technologies.

EPA is not compelled to establish not-to-ex ceed standards for N20 and CH4. Under Section 202 (a)(1) of the CAA, the Administrator has considerable discretion to determine whether or not an air pollutant 'causes or contri butes' to an endangerment of public health and welfare and therefore regulation. EPA need not regulate every emission or s ubstance no matter how small or inconsequential its effect. In Ethyl Corp. v. EPA, 541 F.2d 1, (D.C. Cir., 1976), the court

5-99EPA Response to Comments

considered a similar issue under Section 211 of the CAA. The court held that even under a 'cumulative impact theory' in which all emissions of a substance are believed to contribute to an environmental problem, 'emissions must make more than a minimal contribution to total exposure in order to justify regulation under § 21 1 (c)(1 )(A).' 541 F. 2d. at 31, note 62. Here, in light of the minor contributions of N20 and CH4 relative to that of CO2, we believe EPA has the discretion to refrain from regula ting the emission of these substances from motor vehicles on the grounds that their overall contribution to GHG emissions is minimal.

To the extent that EPA desires to pursue this i ssue nonetheless, the regula tions could continue to allow manufacturers to make an 'engineering ju dgment' attestation -- in lieu of formal compliance testing -- beyond just the first couple of years as proposed. Alternatively, EPA could establish generic emissions f actors for N20 and CH4 and roll these into the proposed CO2 standard. According to the late st Intergovernmental Panel on C limate Change Radiative Forcing of Climate Change Report, the global warming potentials of N20 and CH4 are 296 and 23, respectively. Prior CARB analys is suggests that the average values for N20 and CH4 are 0.006 and 0.005. Based on this information, Ford recomm ends the following factor to be used to determine a carbon dioxide equivalent (CO2e) eq uation, in lieu of regulating CH4 and N20 as standalone components.

Recommended equation:

CO2e(gas) = CO2 (gas) + 296N20+23CH4

= CO2 (gas)+ 296 (0.006) +23 (.005)

=CO2 (gas) + 1.9 g/mi

[OAR-2009-0472-7082.1, pp. 11-12]

[Ford also submitted these comments as tes timony at the Detroit public hearing, See docket number EPA-HQ-OAR-2009-0472-6185, pp. 15-16.]

[Ford also submitted these comments as testimony at the New York public hearing, See docket number EPA-HQ-OAR-2009-0472-4621, pp. 31-32.]

[Following comments are from LA Testimony, OAR-2009-0472-7283, pp.90-96]

For example, EPA is proposing full useful life standards for CH4, methane, and N2O, nitrous oxide, in addition to the fleet average CO2 requirements. The relative contribution of methane and nitrous oxide to a vehicle's overall greenhouse gas emissions is small compared to CO2, on the order of 1 to 3 percent and 0.3 to 0.4 percent, respectively.

The benefit of expanding the exis ting criteria pollutant emissi ons durability requirements to include these greenhouse gases is minimal relative to other potential measures that could have a much more significant impact on actual in-use greenhouse gas emissions. Such measures would go beyond the vehicle's design.

5-100EPA Vehicle Program, Feasibility, and Estimated Impacts

For example, significant additional greenhouse ga s emissions reductions could be achieved by reducing the carbon intensity of the nation's overall fuel supp ly through the introduction of alternative low-carbon fuels.

In addition, further reducti ons could also be achieved through more efficient transportation control measures designed to manage increased travel demand. These could include congestion mitigation initiatives, eco-d riving education and awareness programs, and other incentives to encourage consumers to drive more efficiently.

We do not believe EPA is compelled to establis h full useful life standards for N2O and CH4, and our written comments will address this in more detail.

To the extent that EPA desires to pursue these is sues nonetheless, the regulations could continue to allow manufacturers to make an engineering judgment attestation in lieu of a formal compliance testing beyond just the fi rst couple of years as proposed.

Alternatively, EPA could establish generic emissions factors for N2O and CH4 and roll these into the proposed CO2 standard.

Georgia Department of Natural Resources

Also, EPA states in the proposed rule that emissi ons of N2O and CH4 are low and that the rule is not designed to requir e technology to reduce emissions of N2 O and CH4 at this time. EPA then justifies the inclusion of the proposed emissi on standards with the uns upported and conflicting statement that the agency is concerned about thos e emissions increasing in the future. Because of the enormous, unintended consequences of regul ating GHG emissions under the Clean Air Act at this time, and because the proposed rule does no t result in any emission reductions of N2O or CH4, EPA should not finalize any emission stan dards for N2O or CH4 as part of this rulemaking. [OAR-2009-0472-7150.1, pp.4-5]

Honda Motor Company

EPA requested comment on the idea of developing CO 2 -equivalent emissions standard for model years 2012 through 2016. Honda is concerned th at newer technologi es currently under investigation (HCCI, direct inje ction and others) may be advers ely affected by EPA’s proposed cap. Since methane and nitrous oxid e can easily be converted into CO 2 -equivalent emissions, Honda recommends taking a CO2-equivalent ap proach which AIAM also recommends, and Honda supports. [NHTSA-2009-0059-0095.1, pp.6-7]

As the measurement of N 2 O is phased-in, as re commended above, Honda suggests that EPA use a fixed number for CH 4 and N 2 O emissions (e.g., 1.9 g/mile allo wed by California Air Resources Board (CARB)). Additionally, the CO 2 standard needs to be adju sted upward to become a CO 2e standard, taking into consideration CH4 and N2O, for example, 250 grams/mile target for the 2016 fleet becomes 251.9. [NHTSA-2009-0059-0095.1, p.7]

IMPCO Technologies, Inc.

5-101EPA Response to Comments

For over 50 years IMPCO has been the leader in the industrial, power generation and stationary engines sectors. At one time IMPCO was the lead er in the U.S. automotive market, but has not been involved in this market segment for ove r 10 years. IMPCO is reentering the North American alternative fuel vehicle market. To confirm this commitment, in February IMPCO formed its US Automotive Operations Divisi on, dedicated to the design, development, and certification of fuel systems that enable vehicles to operate on alternative fuels. This NPRM directly affects IMPCO’s ability to enter the U.S. automotive market.

Fuel Systems Solutions, Inc. (Nasdaq: FSYS) is the holding entity for two companies: IMPCO Technologies, Inc. based in California, and BRC S.r.L. based in Italy. Both IMPCO and BRC are engaged in designing, manufacturing, marketing a nd supplying advanced products and systems to enable internal combustion engines to run on clean-burning gaseous fuels such as natural gas and propane. In 2008 alone, over 800,000 engines ar ound the globe were converted to operate on these alternative fuels using IMPCO and BRC fuel systems.

EPA has proposed very stringent CH4 and N2O emi ssions standards for alternative fuel vehicles without using substantiating data from alternative fuel vehicles . Meeting these standards could require expensive catalyst desi gn and validation, which would ha ve a significant impact upon the time and cost involved to certify these alternative fuel systems.

Without sufficient evidence to demonstrate th at the gasoline–specifi c and diesel–specific emissions data presented in the NPRM are repr esentative of emissions from natural gas or propane vehicles, IMPCO proposes the following:

• Implement a CO2-equivalent greenhouse gas emi ssion standard with an optional default N2O value; or

• Allow manufacturers to choose whether to meet a CO2–equivalent standard or meet separate CO2, CH4, and N2O emissi ons standards; or

• Postpone this NPRM as it applies to CH4 a nd N2O emissions standards for natural gas and propane vehicles until alterna tive fuel–specific data can be collected and evaluated IMPCO sincerely appreciates the opportuni ty to comment on the subject Proposed Rulemaking as this topic is of paramount importance to IMPCO and to the alternative fuel vehicle industry as a whole.

1. Implement a CO2-Equivalent Approach for Alte rnative Fuel Vehicles Given that the goal of this NPRM is to reduce greenhouse gases from light -duty vehicles, a CO2-e quivalent approach is the most practical and cost–effective method in which to achieve this goal. Setting individual CH4 and N2O emissions standards does not help to achieve this goal. [OAR-2009-0472-7282.1, p.5]

2. N2O Emissions Standards – Aftermarket Vehicles IMPCO performs all of its vehicle emissions testing at outside laboratories. Th ese laboratories are curr ently not capable of measuring N2O, therefore, IMPCO is relying on them to upgrade their equipment. One local laboratory will charge an additional $250 per em issions test to measure N2O. This will add several thousand dollars to the development and cer tification cost of the fuel system. Given the

5-102EPA Vehicle Program, Feasibility, and Estimated Impacts

inherently low total greenhouse ga s emissions from natural gas a nd propane vehicles, directly measuring and controlling N2O will provide no environmental benefit.

IMPCO proposes that EPA offer an optional defau lt N2O value that can be used in lieu of directly measuring these emissions. For exampl e, the California Air Resources Board allows manufacturers to use N2O = 0.006 grams per mile in lieu of measuring N2O exhaust emissions. Alternatively, the GREET N2O emission factor of0.012 grams per mile could be used. [OAR2009-0472-7282.1, p.1]

Manufacturers of Emission Controls Association

While total N2O emissions are much lower th an CO2 emissions, N2O is approximately 310 times more powerful than CO2 at trapping heat in the atmosphere. One of the anthropogenic activities producing N2O in the U.S. is fuel combustion in motor vehicles. In 2006, N2O emissions from mobile source combustion were a pproximately 9% of total U.S. N2O emissions. It is estimated that the N2O emissions account for about 2% of the total GHG emissions from a typical light-duty vehicle. N2O is emitted directly from motor vehicles and its formation is highly dependent on temperature a nd the type of emission contro l system used. Temperatures favorable for N2O formation are achieved inside catalytic converter systems, especially during cold-start conditions when engine exhaust temperatures are lower.

Catalyst efficiency and age are also important factors in N2O fo rmation. At higher efficiencies and lower ages, N2O formation is lower. In a ddition to direct N2O em issions, NOx emissions from mobile and stationary sour ces have a significant impact on atmospheric N2O levels. On late model light-duty gasoline vehicles, modern three-way catalyst-based emission control technology combined with effective cold-start engine calibration stra tegies are very effective at controlling vehicle nitrous oxide emissions. Light-duty vehicl e N2O emission tests results recently published by ARB and Environment Canada in Atmospheric Environment (vol. 43, 2009) indicate that vehicles ce rtified to the lowest emission certification ca tegories (e.g., certified to ARB’s SULEV standards) also have extremely low N2O emissions (in the range of 0.0-1.5 mg/km).

Tightening of hydrocarbon and NOx emission standards over time with the parallel introduction of more effective emission control systems have resulted in lower emissions of N2O from today’s vehicles compared to older vehicles certified to less stri ngent hydrocarbon and NOx standards. The performance of NOx emission contro l technologies for dies el vehicles such as SCR catalysts and lean NOx adsorber cataly sts can also be optimized to minimize N2O emissions from diesel engines.

According to the United Nation’s Internationa l Panel on Climate Change (IPCC), methane is more than 20 times as effective as CO2 at trap ping heat in the atmosphere. Over the last 250 years, the concentra tion of CH4 in the atmosphere ha s increased by 148%. Methane is a byproduct of imperfect fuel combustion. Methane emissions from mobile sources are emitted from exhaust from vehicles using hydrocarbon fu els, but the anthropogeni c contribution of road transport to the global methane inventory is le ss than 0.5%. Emissions of CH4 are a function of the type of fuel used, the desi gn and tuning of the engine, the t ype of emission control system,

5-103EPA Response to Comments

the age of the vehicle, as well as other factors. Although CH4 em issions from gasoline vehicles are small in terms of global warming potential when compared to N2O emissions, they can be high in natural gas-fueled vehicles, as methan e is the primary component of natural gas.

On light-duty gasoline vehicles, modern three-way catalyst-based emission control technology is effective at reducing all hydro carbon exhaust emissions includ ing methane. Tightening of hydrocarbon emission standards over time with the parallel introduction of more effective emission control systems have resulted in lowe r emissions of methane from today’s vehicles compared to older vehicles certified to less stri ngent standards. Catalyst designs can also be optimized in concert with engine control strate gies to oxidize methane exhaust emissions from motor vehicles, including vehicles that operate ex clusively on natural gas or bi-fuel vehicles that can operate on either natural gas or gasoline.

Advanced gasoline and diesel power trains for light-duty vehicles in conjunction with advanced emission control technologies can be optimized to minimize emissions of both N2O and CH4 emissions. In their proposal, EPA has included an emissions cap for both N2O (a 10 mg/mi cap over the FTP test cycle) and CH4 emissions (a 30 mg/mi cap over the FTP test cycle) to ensure that climate change impacts ofthese two potent greenhouse gases are minimized on future lightduty vehicles. These proposed emission caps ar e absolute with no provisions for averaging among light-duty vehicles included in the proposal . MECA believes that these emission caps are achievable with today’s light-duty vehicle powertrain options and s hould be included in the final EPA regulations.

Mercedes-Benz (Daimler AG)

DAG strongly supports the recommendations se t forth by the Alliance of Automobile Manufacturers with regard to the proposed CH4 and N2O standards. The standards as proposed would have a deleterious impact on both clean di esel vehicles and dire ct-injection gasoline vehicles, as well as CNG vehicl es. DAG welcomes the opportunity to work with EPA to develop data and analysis that can better support and define these standards and to ensure that appropriate facilities can be in pl ace for testing and certification to these standards. DAG supports establishment of a focused research program to study a sample of vehicles rather than a reporting and testing program for all vehicles. Doing so w ould provide EPA with de tailed and robust data on these GHGs while reducing time and cost burdens on manufacturers. [OAR-2009-0472­ 7193.2, p.21]

Mississippi Department of Environmental Quality

Also, EPA admits that emissions are low and that the proposed rule is not designed to require technology to reduce emissions of N2O and CH 4 at this time. EPA then justifies the inclusion of the proposed emission standards with conflicting statement that it is concerned about those emissions increasing in the future. Because of the enormous, unintended consequences of regulating GHG emissions under the Clean Air Act atthis time, and because the proposed rule does result in any emission reductions of N2O or CH 4 , EPA should not finalize any emission standards for N2O or CH 4 as part of this rulemaking. [OAR-2009-0472-7102.1, p.5]

5-104EPA Vehicle Program, Feasibility, and Estimated Impacts

Mitsubishi Motors R & D of America (MRDA)

Mitsubishi Motors does not support the new requ irement to measure nitrous oxide (N2O) which will require the acquisition of expensive analyzers that are currently not available on the market. [OAR-2009-0472-7125.1, p.2]

EPA proposes a cap on N2O emissions with very little data on the amount of N2O actually emitted from vehicles. Additionally, it is unknown whether the stringency of the proposed cap will affect the introduction of any advanced te chnologies to improve fuel economy. Clearly, EPA should better understand N2O emissions before establishing standards. Therefore, we propose that EPA should conduct a research test program to determine whether st andards are necessary and if so, the appropriate level a nd measurement method. [OAR-2009-0472-7125.1, p.3]

During their N2O emissions data collection, EP A should consider adopting the method proposed by California in their GHG regulations. This me thod creates a default value for N2O emissions, which would ease the increased expense and uncertainty Automakers would encounter developing a process to measure and report N2 O emissions. Even though EPA has provided an extra year, i.e. MY 2013, before requiring N2O emissions to be reported, there are still many challenges for Automakers. Since true N2O emissions are unknown and not measureable, Automakers will find it difficult to state “veh icles meet the standard (cap) for MY 2012,” especially if added enforcemen t of in-use or confirmatory N2O testing for MY 2012 will be required. Further, a full useful life standard for N2O emissions will require Automakers to conduct extensive test programs to establish de terioration factors – for a compound with an undetermined measurement method. MMC has seri ous practical concerns on how to measure N2O. [OAR-2009-0472-7125.1, p.3]

MMC currently does not own an appropriate N2O analyzer and has never measured N2O emissions at the levels proposed. There are a limited number of N2O analyzers marketed, none of which can accurately measure to the levels re quired in the proposed regulation. At this time, one leading analyzer manuf acturer estimates at least one more y ear of research is needed before an appropriate measurement method will be determ ined. Then, a commercial analyzer will need to be developed. Consequently, to meet the current regulatory pr oposal, analyzer prices will be very high and delivery time will create a significant compliance risk. Analyzers are not the only instruments that will be needed for Automakers to measure N2O emissions - many other facility changes will be necessary, including software and computer upgrades requiring significant leadtime. [OAR-2009-0472-7125.1, p.3]

National Association of Cl ean Air Agencies (NACAA)

Fifth, we are pleased that EPA is seeking to esta blish standards that would control emissions of CO2, hydrofluorocarbons, nitrous oxide and methane from light-duty vehicles. However, we recommend that the agency also establish sta ndards to regulate black carbon, which recent scientific evidence shows is another important pathway fo r climate change. [OAR-2009-0472­ 7071.1, p. 3]

Natural Resources Defense Council

5-105EPA Response to Comments

Nitrous Oxide and Methane Emissions Should be Regulated by Standards that Apply to the Useful Life of Vehicles NRDC strongly supports the proposed standards for nitrous oxide (N2O ) and methane (CH4). According to EPA, these high global warming potential greenhouse gases account for 2.9 percent of emissions from cars and light duty trucks. Placing a standard on these emissions will ensure that their contribution does not grow, even w ith new technology introduction. EPA notes that inattention in the design of nitrogen oxides ( NOx) emissions control technology, especially for lean burn gasoline and diesel engine s, could result in increases in N2O. However, the tradeoff is not necessary and having a standard in place will signal to developers of control technology that N2O emissions must not increase. [OAR-2009-0472-7141.1, p. 11]

A standard on CH4 emissions is also critical to preventing emi ssions increases, especially if automakers produced more vehicles powered by natural gas. Today, CH4 can be controlled using catalyst control technology required for Tier 2 NMOG certification. However, unburned fuel from natural gas vehicles has the potential to slip by the catalyst causing CH4 emissions. We support EPA’s proposal to set standards on CH4 em issions to ensure that engine and exhaust controls are maintained on future natural ga s—and other vehicles—to prevent CH4 emission increases. [OAR-2009-0472-7141.1, pp. 11-12]

Standards on N2O and CH4 should apply for the us eful life of the vehicles. Therefore, auto manufacturers should demonstrat e that N2O and CH4 controls are have the durability to maintain emissions levels at or below the standard levels. [OAR-2009-0472-7141.1, p. 12]

NESCAUM

NESCAUM commends EPA for proposing to regulate nitrous oxide, methane, and hydrofluorocarbons in addition to CO2. These gase s have very high global warming potential and as such should be regulated in addition to CO2. Carbon dioxi de represents 95 percent of global warming emissions from light-duty vehicl es, but nitrous oxide, hydrofluorocarbons, and methane are potent greenhouse gases, and thus it is appropriate that these gases should be controlled in addition to CO2. EPA’s ability to regulate GHG emissions from all aspects of vehicle operation and all vehicle-related polluta nts will maximize reductions from the national program. We ask, however, that the agency include other pollutants in the final rule such as black carbon which is a potent greenhouse forcin g agent. Ozone is also a greenhouse gas, and while the pollutants that contribut e to ozone are regulated under the Tier 2 program, there should be a mechanism to quantify the impact of ozone on global warming and to require more stringent standards if it is deemed necessary. At a minimu m, we ask the agency to establish a mechanism to evaluate and include additional pollutants as scientific understanding of climate forcing agents evolves. [OAR-2009-0472-7235.1, p. 6]

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

4) Caps for Methane and Nitrous Oxide

EPA proposes separate regulati ons imposing a per-vehicle cap on emissions of methane (CH4) and nitrous oxide (N2O), two pot ent GHGs, from cars and light tr ucks. EPA should rethink these

5-106EPA Vehicle Program, Feasibility, and Estimated Impacts

separate caps, and consider combining these ga ses into a single standard along with carbon dioxide (CO2) emissions, accounting for all ga ses on a CO2-equivalent basis. [OAR-2009-0472­ 7232.3, p. 16]

EPA’s proffered justification for this policy choice is that vehicles produce CH4 and N2O “largely independent[ly]” of CO2, and that potential control technologies a nd strategies for these pollutant differ. EPA also notes that it lacks in formation on the emissions of CH4 and N2O from vehicles. [OAR-2009-0472-7232.3, p. 16]

Even if these gases are produced “largely” inde pendently of one another, there is still some overlap as emissions of all these gases are caused by vehicles’ combustion systems. Motor vehicles emit carbon dioxide during the fossil fuel combustion process. During combustion, the carbon stored in the fuels is oxidized and emitted as CO2 and smaller amounts of other carbon compounds. Motor vehicles emit methane through methane content in motor fuel, hydrocarbons passing uncombusted through the engine, and any post-combustion control of hydrocarbon emissions (such as catalytic conv erters). Motor vehicles produ ce nitrous oxide when nitrogen and oxygen react during fuel combustion. [OAR-2009-0472-7232.3, p. 16]

Current and future control technologies for these pollutants may overlap or may not. That is, however, irrelevant. EPA’s goal in these regula tions is to attempt to reduce global warming effects by reducing the amount of GHGs emitted by motor vehicles. In order to do this in the most efficient and effective way, EPA should crea te a single standard to allow manufactures the most flexibility in achieving GHG reductions to allow for the most cost-effective compliance. [OAR-2009-0472-7232.3, pp. 16-17]

EPA’s proposed scheme limits manufacturers’ ability to reduce GHG em issions in the most efficient way possible. For example, it may be cheaper for a manufactur er to produce a vehicle that emits additional methane but less carbon dioxid e, rather than maintain the vehicle’s current methane emission level and decrease CO2 emi ssion only. EPA’s goal is to achieve the most GHG reductions at the least cost, but the proposed regulations w ould not allow the manufacturer to opt for that cheaper option. [OAR-2009-0472-7232.3, p. 17]

Further, EPA’s choice to introdu ce different rules for these two gases further complicates an already complex regulatory scheme, imposi ng more compliance costs on manufacturers. Manufactures must now comply with CAFE sta ndards, carbon dioxide standards, methane standards, and nitrous oxide standards—and ach ieving reductions in one area cannot be counted toward meeting reductions in another area. A s impler and more efficient regulation would set one standard for all GHG emissions on a carbon -dioxide equivalent basis. [OAR-2009-0472­ 7232.3, p. 17]

It is unclear what additional information EPA needs to make this policy choice. As long as a single standard takes into consideration all GHG s produced by the vehicles and weighs them on a CO2-equivalent basis, that standard will notallow for any total GHG emission increase. [OAR2009-0472-7232.3, p. 17]

NGV America

5-107EPA Response to Comments

NGVAmerica and the Canadian Natural Gas Vehicle Alliance respectfully submit the following comments in regards to the U.S. Environm ental Protection Agency’s (EPA) proposed greenhouse gas emission standards for new light-dut y vehicles. These comments arise from the concern that the proposed rules will seriously impact and inhib it natural gas vehicle production in North America to the detriment of realizing the environmental benefits of increased use of natural gas vehicles. Our organizations are very concerned that the proposed methane cap will discourage large manufacturers , including original equipmen t manufacturers (OEMs), from offering natural gas vehicles. We also are conc erned about the negative impact the rules could have on aftermarket conversion manufacturers. While the proposed rules exempt small volume manufacturers of natural gas vehi cles if they are small busines ses, small volume manufacturers who are not small businesses are not exempt from coverage. Thus, in the case of aftermarket conversion manufacturers, the proposed rules could have the uninte nded consequence of discouraging large businesses from continuing to offer aftermarket conversion systems. [OAR2009-0472-11310, p. 1]

NGVAmerica previously submitted comments on this issue prior to the close of the comment period. In its comments, NGVAmerica urged EP A to develop a carbon dioxide equivalent standard as opposed to a cap on methane and nitr ous oxide emissions. We believe that a carbon dioxide equivalent approach is more appropriate. However, we would support a cap on methane emissions -- if properly structured. The comments submitted here underscore the importance of this issue to our associations, a nd come at a time when Canadian officials are considering similar regulations, largely based on EPA’s pr oposed regulations. [OAR-2009-0472-11310, p. 1]

Based on discussions with EPA, it also has beco me evident that additi onal data could assist authorities in making a more reasoned decisi on. Therefore, these comments provide data recently collected from NGV manuf acturers. [OAR-2009-0472-11310, p. 2]

If EPA does move forward with a methane cap, our primary concern with the proposed regulations is the plan to impose a cap of 0.03 gram per mile for CH4 emissions. EPA has indicated that the cap is designed to limit future emissions increases, primarily from natural gas vehicles, and prevent backsliding from current em issions levels by gasoline and diesel fueled vehicles. EPA’s preamble also indicates that the cap on methane emissions is not designed to require automakers to make any changes to emission control designs. Moreover, EPA has indicated that proposed cap on methane emissions will have no economic impact on manufacturers. [OAR -2009-0472-11310, p. 2]

Comments It is respectfully submitted that the proposed methane cap of 0.03 gram per mile is unreasonable with respect to dedicated and bi-f uel natural gas vehicles (NGVs). It appears that the decision to impose such a standard on natural gas vehicles has largely been made based on the current performance of gasoline- and diesel-fueled vehicles and not on the emissions performance of current NGVs. Based on data collected from NGV manufactures and provided below, we propose that a more appropriate standard for such vehicles is 0.5 g/mile. Although higher than that proposed by EPA, the cap we proposed woul d not negate the fact that NGVs produce less overall greenhouse gas emissions th an petroleum fueled vehicles. As with gasoline- and diesel5-108EPA Vehicle Program, Feasibility, and Estimated Impacts

fueled vehicles, the methane level we propose w ould ensure that there is no backsliding with respect to current methane emissions from NGVs. [OAR-2009-0472-11310, p. 2]

Based on data collected from natural gas vehi cle manufacturers, methane emissions for NGVs appear to fall within the range of about 0.1 - 0.4 g/mile -- an insignificant global warming potential compared to vehicles’ CO2 production. The resulting increase in methane emissions for NGVs compared with that of other vehi cles does not undermine the 20–30% reduction in CO2 values arising from use of these vehi cles. Limiting the use of NGVs through an unreasonable cap, therefore, would be counterpr oductive to reducing gr eenhouse gases compared with the environmental benefits of th eir increased use. [OAR-2009-0472-11310, p. 2]

It is evident that EPA did not have access to representative CH4 emissions data for NGVs. NGVAmerica and the Canadian Natural Gas Vehicl e Alliance have therefore assembled a set of emissions data from North Ameri can manufacturers, representative of the industry norm for CH4 emissions. The emissions data covers both dedicated and bi-fuel NGVs from MY 2005–MY 2009. [OAR-2009-0472-11310, p. 2]

Table 1 [See OAR-2009-0472-11310, p. 5 for Table 1] shows the useful life NGV emissions by model year, model, and fuel configura tion for CH4, CO2, and N2O emissions for a representative sample of five vehicles. The Ta ble includes data with global warming potential factors applied to CH4 and N2O emissions, resu lting in total global warming potential of all emissions in g/mile, and the percentage increase in the total global warming potential compared to the CO2 baseline. [OAR-2009-0472-11310, pp. 2-3]

Table 2 [See OAR-2009-0472-11310, p. 6 for Table 2] shows CH4 and CO2 emissions data from 16 representative bi-fuel MY07–09 NGVs, in cluding CO2e/CO2 ratios. [OAR-2009-0472­ 11310, p. 3]

Table 3 [See OAR-2009-0472-11310, p. 7 for Table 3]shows CH4 and CO2 emissions data from 6 representative MY06–09 dedicated NGVs, including CO2e/CO2 ratios. [OAR-2009-0472­ 11310, p. 3]

Two significant conclusions can be drawn from th is data. The first is that the industry norm, covering both bi-fuel and dedicated NGVs, is 0.1–0.4 g/mile CH4. The second is that, at these levels, the increase in global warming poten tial created by CH4 and N2O from natural gas vehicles is in the order of 1% over that of CO2 alone. This sh ould be compared against the 20– 30% reduction in total global warming potential realized by NGVs compared with gasoline vehicles. [OAR-2009-0472-11310, p. 3]

Reducing CH4 emissions from these values w ould create a significant economic impact on manufacturers, with minimal environmental be nefit, and cause changes to current designs, including replacing OEM catalysts with expensive methane spec ific catalysts having higher loadings of precious metals. EPA has indicate d that it does not intend the caps to impose additional costs or require new emission controls. With respect to methane and nitrous oxide emissions, EPA’s preamble acknowle dges that it “has not identif ied clear technological steps

5-109EPA Response to Comments

available to manufacturers toda y that would significantly reduce current emission levels.” [OAR2009-0472-11310, p. 3]

Conclusion NGVAmerica and the Canadian Natural Gas Vehicle Alliance urge EPA to give full consideration to these comments and accordingly m odify its proposed regulations with respect to natural gas vehicles. Based on the industry norm of CH4 emissions data shown above, and recognizing that manufacturers norma lly calibrate to certify their emissions at about 50% of the standard, we urge EPA to adopt a CH4 cap at 0.5 g/mile methane for natural gas fueled vehicles. This proposal is in line with the logic followe d by EPA with respect to the limits it has proposed for such emissions from gasoline vehicles. This will allow manufacturers to continue to produce NGVs on an economic basis, without any back sliding, while providi ng significant greenhouse gas reductions. [OAR -2009-0472-11310, p. 4]

With respect to methane emissions (CH4) and nitrous oxide (N2O) emissions, EPA has proposed a cap, limiting CH4 emissions for all vehicles to no more than 0.030 g/mi and N2O emissions to 0.010 g/mi. With respect to these two pollutants, ma nufacturers are not free to sell vehicles with emission higher than the cap. In addition, the prop osed regulations do not allow manufacturers to use CO2 reductions to offset higher CH 4 or N2O emissions. [OAR-2009-0472-7236.1, p.6]

NGVAmerica has several concerns with respec t to the CH4 and N2O caps proposed by EPA. Providing an average for CO2, while imposing a cap on other greenhouse gas emissions, goes against the trend in how most analyses look at greenhouse gas emissions. In fact, California opted for a CO2-equivalent average that incl uded CO2, methane, and nitrous oxide emissions. We believe an averaging approach is optimal if the goal is reducing greenhouse gas emissions. We also are concerned that the proposed regulat ion focuses exclusively on tailpipe emissions and ignores the upstream emissions or full fuel cycl e impacts of operating motor vehicles. The focus on tailpipe emissions might be necessary in terms of the actual regulation but upstream emissions should not be ignored. As indicated above, NGVs pr ovide real reductions in terms of full fuel cycle greenhouse gas emissions when compared with gasoline vehicles. This is especially true with respect to renewable natural gas. These be nefits should be taken into account when deciding whether to allow averaging of di fferent pollutants and also when developing the credit program. As currently proposed, it is not clear that the benefits of NGVs will be delivered if the caps imposed on methane emissions are adopted. [OAR-2009-0472-7236.1, p.6]

Based on a search of available emission studies , NGVAmerica could not find any instances of NGVs able to meet the proposed CH4 limit of 0.030 g/mi – despite having significantly less CO2-equivalent tailpipe emissi ons when methane and nitrous oxi des are included. A review of the results from the GREET model’s full-fuel cycl e analysis further indicates that typical NGVs are unlikely to be able to meet the proposed ca p. GREET currently estimates that vehicle related emissions of methane are about 0.146 g/mi for de dicated NGVs. Thus, it appears that the current proposal could be prohibitive for manufacturers wanting to produce and sell NGVs in the U.S. It is not clear whether EPA has fully considered the proposed rules impact on NGVs. The rule does provide ample discussion of the issue, however, it is not clear what data EPA is relying upon for its conclusions and it is not clear whether the conclusions regarding the ability to meet the

5-110EPA Vehicle Program, Feasibility, and Estimated Impacts

methane cap apply to NGVs or whether these co nclusions pertain to gasoline powered vehicles. [OAR-2009-0472-7236.1, pp.6-7]

EPA’s notice indicates that the intent of the caps is to ensure that emission levels of these pollutants do not increase as CO2 emissions are reduced. EPA also indicates a number of times that the imposition of the caps is not intended to be technology forcing. At the same time, EPA appears aware that NGVs in the past have ha d much higher methane emissions than gasoline vehicles. EPA appears to be confident that controls necessary to meet the more demanding Tier 2 standards will result in lower levels of CH4 emissions for NGVs. But the notice provides no data or citations to support these conclu sions. Without the ability to revi ew the same data that EPA is relying upon, we lack the confidence that EPA ap parently has regarding the ability of NGVs to meet the proposed CH4 cap. As noted above, our re search into this issue has not revealed any data showing that NGVs will meet th e proposed cap. [OAR-2009-0472-7236.1, p.8]

Even if some NGVs can meet the cap, we be lieve adopting a CO2-e quivalent average is warranted with methane and nitrous oxide emi ssions appropriately wei ghted for their global warming potential. Providing a CO2-equivalent appro ach as part of the rule would ensure that the caps do not become an obstacle to NGVs, while at the same time ensuring greenhouse gas emissions from such vehicles are no greater than for gasoline vehicles. Therefore, we strongly urge EPA to allow NGVs to meet an average stan dard that includes averaged emissions for CO2, CH4, and N2O. If this is done, we are confiden t that NGVs will not only achieve the standard but surpass gasoline powered vehicles. [OAR-2009-0472-7236.1, p.8]

CARB currently allows manufact urers to use a static value of 0.006 g/mi for N2O emissions instead of requiring direct measurement of such emissions. Since N2O is currently not measured over the federal test procedures for emissions and since many emission testing shops are unlikely to have such equipment for several years, it would be advisable to accept the CARB default measurement. This is necessary because the af termarket industry relies on emission testing facilities operated by other businesses. While the ne w rule appears to require facilities to upgrade equipment in order to be able to test for N2O emissions, aftermarket conversion system suppliers are concerned that they will be unable to sati sfy the new N2O requirements if businesses they rely on for emission testing do not acquire the ne cessary equipment. Ther efore, in lieu of requiring testing for N2O emissions, we urge EPA to allow the use of the default figure used by CARB. [OAR-2009-0472-7236.1, pp.8-9]

State of New Jersey

The Department is supportive of the USEPA's proposed approach to regulate methane (CH4) and nitrous oxide (N2O) by means of per-vehicle emission standards th at would act to cap emissions for model years 2012 through 2016 at the current le vels. The USEPA's proposal to separately regulate methane for the first time is a particularly important initial step to ensure that this high global warming potential gas is controlled in the transportation sector. [OAR-2009-0472-7109.1, pp.9-10]

Toyota Motor North America

5-111EPA Response to Comments

Toyota has concerns with setting separate emission standards for N2O and CH4 proposed by EPA. The proposed level only serves as a backslid ing measure and offers little in terms of GHG reduction benefits. Furthermore, Toyota is concerne d with the prospect that these standards may inhibit future technology introduction needed to comply with this regulation. Specifically, EPA should not set the proposed N2O cap standard becau se emissions from direct injection lean burn and diesel engines tend to be higher and these technologies were not co nsidered in developing the cap. EPA should not set the CH4 cap standard because it may exclude the introduction of CNG technology as a means to mitigate CO2. If EPA does intend to move forward with a CH4 standard, Toyota would like EPA to strongly consider allowing exemption for carryover vehicles. [OAR-2009-0472-7291, p.9]

Instead of separate emission standards, Toyot a suggests EPA incorporate N20 and CH4 into a fleet average calculation. The fleet average ad justment would resemble the AB 1493 calculation of: {CO2 + 296 x N2O + 23 x CH4} . For N2O, T oyota proposes to use a constant value (i.e. N2O = 0.006 grams/mile, per AB1493). Merits of the fleet average proposal include the fact that the fleet average does not obstruc t the introduction of specific te chnologies that may be needed to comply with EPA's rule. Toyota's proposal to use the N2O concept also eliminates the challenge of N2O measurement accuracy at th e proposed level of .010 gram per mile. [OAR2009-0472-7291, p.9]

EPA proposes a per-vehicle N2O emission sta ndard, measured over the FTP, which would become effective in 2012MY. EPA believes that current technology gasoline vehicles can meet the standard at no cost and acknowledges that dies els may have modest associated costs to meet the standard. EPA acknowledges the short lead time for facility upgrades necessary for N2O measurement and will allow a complian ce statement for 2012MY. [OAR-2009-0472-7291, p.8]

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

Standards for Non-CO2 GHGs

We support the EPA's proposal to cap non-CO2 GHG emissions at their current levels—CH4 at 0.030 g/mile (p. 49525) and N2O at 0.010 g/mi ( p. 49524)—due to their respective multiplicative global warming potential of 21 and 310 times great er than CO2. The emissions of N2O and CH4 contribute significantly to total CO2-equivalent emissions of GHGs from the lifecycle of conventional and alterna tive transportation fuels and technol ogies. Emissions from these potent GHGs vary significantly depending on a number of f actors, including the type of fuel consumed. As Table 1 illustrates [See OAR-2009-0472-7188.1, p. 7 for Table 1], N2O and CH4 jointly account for approximately 15% of the lifecycl e CO2-equivalent GHG emission impacts from conventional gasoline vehicles, and more than 29 % from some alternative fuel vehicles. [OAR2009-0472-7188.1, p. 6]

Unlike CO2, CH4 and N2O are a function of many complex dynamics, such as the combustion pressure, temperature, and air-to-f uel ratio, the type of fuel used, as well as the age and type of emission control systems operati ng. CH4 and N2O emissions cannot be derived from one or two basic characteristics of a fuel, thus the EPA’ s plan to measure CH4 and N2O emissions during the CAFE tailpipe test will en sure a more accurate assessm ent. [OAR-2009-0472-7188.1, p. 7]

5-112EPA Vehicle Program, Feasibility, and Estimated Impacts

Placing a cap on non-CO2 GHG emissi ons at current levels and di sallowing fleet averaging or emission-level trading is a stra ightforward means of assuring th at CH4 and N2O levels do not increase per vehicle. This approach, as oppos ed to embedding non-CO2 GHG emissions as CO2­ equivalent emissions in the ruling, discourages manufacturers from making other changes to avoid delivering significant CO2 reductions. [OAR-2009-0472-7188.1, p. 7]

Vehicle age affects N2O and CH 4 emissions. Sasaki and Kameoka found that older vehicles produced much higher emissions than newer vehicl es with similar emission control equipment. In this study, the oldest vehi cle tested (which had an odomet er reading of 52,000 km) produced several times the N2O emissions of the newest vehicle (with only 1,000 km of use). Lipman & Delucchi research also suggest s that for most fuels—both no npetroleum and petroleum based fuels—CH4 emissions increase with the age of the catalyst. Based on these findings, it becomes increasingly important to test CH4 and N2O emissions over the vehicle lifetime, and we recommend these tests be included and reported as part of the In-Use Verification Program (IUVP). While the EPA claims not to have 's ufficient data' to determine the appropriate thresholds for CO2, N2O, and CH4 emissions, we do not agree with ex cluding these emissions from the In-Use Confirmatory Program (IUCP). Gi ven that the goal of this ruling is to reduce overall GHG emissions, and the fact that this de cision will have ramifications for many years to come, it is important the EPA ensure that the fleet maintains, within reason, the standards established in this ruli ng. [OAR-2009-0472-7188.1, p. 7]

While we encourage the EPA to enforce th e cap on CH4 and N2O emissions, we also recommend that the EPA remain flexible with regard to possible fu ture technologies. New technologies may significantly reduce the level of carbon dioxide while slightly increasing CH4 or N2O, but result in a net reduction to overall CO2 emissions equivalents. This is due to the characterization factors assigne d to CH4 and N2O, as shown in the following: [OAR-2009-0472­ 7188.1, p. 7]

CO2 emission standard/footprint > 21 * Δ CH4 + 310 * Δ N2O + - Δ CO2

For instance, a technology change in air conditioni ng could improve fuel consumption by as much as 20%, thus reducing not only pressure on fuel sources, but also emissions of CO2 and other tailpipe emissions. However, it may be denied employment despite the offsetting effects of reductions to fuel consumption due to a small non- CO2 increase in GHGs directly from use. If the impacts from CH4 and N2O are increased, bu t the total emission of CO2-equivalent is lowered by using the new technology, the tech nology should be permitted. However, all emissions must remain below the approved CA FE standards for the proposed year. [OAR-2009­ 0472-7188.1, p. 7]

[The following comments are from LA Testimony, OAR-2009-0472-7283, pp.118-119]

Our third point concerns standards for non-CO 2 GHGs. We support the EPA's proposition to cap methane and nitrogen dioxide at current levels due to their respective multiplicative global warming potential of 21 and 310 times grea ter than CO2 according to the IPCC.

5-113EPA Response to Comments

We agree that the cap on methane and nitrogen dioxide is more effective than using CO2 equivalency measures as such measures dilute the primary goal of reducing CO2.

However, we ask that the EPA remain flexible wi th regard to possible future technologies that might reduce the level of carbon dioxide while increasing methane and nitrogen dioxide or vice versa but result in a net reduction in global warming potential. However, total CO2 emissions must remain below the approve d CAFE standards for the proposed year.

Given the potency of methane and nitrogen di oxide in contributing to climate change, we also request the inclusion of incentives, such as a credit system, for reducing nitrogen dioxide and methane emissions below the proposed cap as a means to motivate innovation in clean technologies.

Volkswagen Group of America (Volkswagen)

Volkswagen does not believe standards for CH4 a nd N2O are necessary or warranted, at least in the timeframe of this rulemaking. As EPA points out in the NPRM, the contributions from N2O (2.7%) and CH4 (0.2%) to the total GHG emissions attributed to passenger cars and light-duty trucks is small. In addition, Volkswagen is con cerned that the levels pr oposed by the EPA could result in precluding some future powertrain conc epts with significant C02 reduction potential. Initial test results Volkswagen performed on a C NG vehicle and a flexible fuel concept indicate that the CH4 standard as propos ed by EPA may prevent future certification of alternate fuel vehicles. Additionally the N2O results as meas ured on the CNG concept shows a variability which needs to be investigated in detail. [OAR-2009-0472-7210.1, p.2]

With the test results above, Volkswagen believes that more data are necessary to set a reasonable and appropriate CH4 standard. It appears the CH4 standard in the NPRM is derived from the EPA's database but is focused on conventional c oncepts only. The source for the N2O standard proposed is not obvious but the fi rst test results on an altern ate vehicle concept using CNG indicate that more data specifically on thes e concepts are necessary. Based on these results Volkswagen strongly recommends to postpone th e standards in the current CO2 proposal and delay regulatory actions on CH4 and N2O to a la ter point, allowing more time for engineering evaluation on possible and appropriate standards. As initially stated, it is possible these cap standards may be challenging for certain concepts with significant CO2 reduction potential. [OAR-2009-0472-7210.1, p.6]

The cap standards as proposed by EPA are full useful life standards. These will result in manufacturers establishing deteri oration factors and a certification level lowe r than the proposed standards. We question the usefulness of the proposed cap standards. [OAR-2009-0472-7210.1, p.6]

Also, by EPA's admission there is not a large amount of data available for these emission compounds. In EPA's Memorandum to the Docket dated November 19,2009 entitled, 'Derivation of Proposed N2O and CH4 Cap Standa rds' (Docket EPA-HQ-OAR-2009-0472), EPA acknowledges that there is litt le data available regarding CH 4 and N2O. For this additional reason Volkswagen suggests delaying considera tion of standards for N2O and CH4 until more

5-114EPA Vehicle Program, Feasibility, and Estimated Impacts

emission data is available and a better understand ing of trade-offs with CO2 reduction strategies is available. EPA notes it is concerned with the possibility of increased CH4 and N2O emission levels in the future and suggest s that the proposed standards woul d act as caps to prevent future increases. Volkswagen maintains there is time to ex amine this issue in more detail and still issue standards in the future if an in crease In these emissions is note d or a future cap is warranted. [OAR-2009-0472-7210.1, p.6]

In addition, addling standards for N2O and CH4 re sult in a testing burde n. As EPA notes, new test equipments is required to measure N2O. [OAR-2009-0472-7210.1, p.6]

As discussed, due to the small GHG impact, the po ssible challenges to alte rnative fuel vehicles, the lack of test data, the in-use compliance i ssues, and the increased te st burden, we recommend EPA postpone setting standards for N2O and CH4 until more study of the overall impact of such standards is understood. [OAR-2009-0472-7210.1, p.7]

If EPA is compelled to account for CH4 and N2O emissions, Volkswagen supports the Alliance comments that a CO2 equivalent f actor is appropriate. The app lication of a factor at least eliminates concerns regarding test burd en and in-use issues. [OAR-2009-0472-7210.1, p.7]

Volvo Car Corporation

EPA requests comments on N2O and CH4 emi ssion standards. Given the insignificant contribution of N2O and CH4 from vehicles a nd the burden of implementing such standards, VCC supports the Alliance proposing that EPA instead rely on the use of a factor to account for these emissions. This approach would enable in troduction of certain vehi cle technologies that have an overall GHG benefit. [OAR-2009-0472-7168.1, p.7]

EPA Response

N 2 O and CH 4 Standards – General

EPA received many comments on the proposed N 2 O and CH 4 "cap" standards. A range of stakeholders supported the proposed approach of "cap" standards and the proposed emission levels, including most states a nd environmental organizations that addressed this topic. These commenters stated that EPA needs to address all mobile greenhouse gases under the Clean Air Act, and N 2 O and CH 4 are both more potent contributors to global warming than CO 2 . The Manufacturers of Emissions Controls Asso ciation (MECA) was also supportive.

EPA agrees with the NGO, state, and other comment ers that light-duty vehi cle emissions of these two compounds are currently small but important contributors to the U.S. inventories of emissions. As discussed in detail in Section III. A.2 of the preamble, under section 202(a) (1) the Administrator has significant di scretion in how to structure th e standards that apply to the emission of the air pollutant at issue here, the aggreg ate group of six gree nhouse gases, including N 2 O and CH 4 . EPA has the discretion under section 202( a) (1) to adopt separate standards for each gas, a single composite standard covering vari ous gases, or any combination of these. In this rulemaking EPA is finalizing separate stan dards for nitrous oxide and methane, and a CO 2

5-115EPA Response to Comments

standard that provides for credits based on reductions of HFCs, as the appropriate way to issue standards applicable to emi ssion of the single air pollutant , the aggregate group of six greenhouse gases.

Some auto industry commenters proposed that EPA not set standards at this time, but rather, organize a government-industry te st program to better understand N 2 O emissions characteristics and controls. Since as discu ssed below the cap standards we are establishing are well above most emission levels of most current conventional vehicles, we do not believe that there is a need to delay the setting of standard s while gathering additional data. In the future, further such research could be warranted if EPA were c onsidering more stringent, technology-forcing standards.

Stringency of the N 2 O and CH 4 "Cap" Standards

A number of commenters, primarily auto manufactu rers, expressed concerns that the levels of the proposed cap standards for N 2 O and CH 4 could pose technological challenges for some vehicle technologies and potential ly restrict the development of some technologies that could reduce overall GHG emissions. Auto industry co mmenters, including th e Alliance and AIAM, were concerned that the N 2 O standard could impede the intro duction of, for example, lean-burn gasoline and diesel technologies. Also, these organizations, as well as natural gas vehicle advocates, were concerned that the CH 4 standard could impede the expanded production and sale of CNG or LNG vehicles.

Notably, the focus of these organizations' concerns about the stringency of the standards is on alternative technologies and fuels, not on conventional vehicles. As we discuss in detail in Section III.B.7 of the preamble, EPA's intent wa s to establish the cap standards at levels consistent with those seen in the vast majority of conventional gasoline and diesel vehicles, which we expect to be able to comply with litt le or no new technological effort or expense on the part of auto manufacturers.

However, we recognize that, in the absence of a limitation, the potential for significant emission increases exists with the evolution of new ve hicle and engine technol ogies or the expanded penetration of existing low-production technologie s into the fleet. Indeed, several industry commenters concede as much in stating that they are contemplating introducing vehicle technologies that could result in emissions exce eding the cap standard levels. For example, Volkswagen provided limited data on compresse d natural gas (CNG) and FFV concept cars and NGV America provided limited data on several vehicles (although some of these were vehicles certified as heavy-duty vehicles, so those results are not relevant to this rule). These data generally show higher N 2 O and/or CH 4 levels than current gasolin e and diesel vehicles. The organizations submitting this data do not specify any new or improved emission control technologies that could be applie d to these vehicles, or how cos tly such improvements might be. Clearly, manufacturers wishing to introduce or significantly e xpand production of vehicles incorporating some of these alternative vehicle or fuel technologies may need to make improvements, or make use of the optional CO 2 equivalent compliance approach described below, in order to achieve N 2 O and/or CH 4 emission levels similar to conventional gasoline vehicles and meet the cap standards. Given this lack of information a nd the availability of a

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CO 2 -equivalent compliance option, as described be low, EPA does not ascribe costs to the N 2 O and CH 4 cap standards.

Although the overall GHG program that EPA is establishing is desi gned to encourage innovative technological responses to GHG standards, our genera l intent is not to trade off emissions of one GHG for another. We recognize that catalytic NO x control technologies can maintain or reduce N 2 O emissions in certain cases – for example, NOx control approach used on current Tier 2­ compliant diesel vehicles do not tend to favor the formation of N 2 O emissions – while in other cases these technologies can also increase N 2 O emissions. Diesel cars and light trucks with advanced emission control technology, for example, are in the early stag es of development and commercialization. To the extent that this se gment of the vehicle market develops, the N 2 O standard could require these manufacturers to inco rporate control strategies that would minimize N 2 O formation above the cap standard. (Availabl e approaches for these vehicles may include using electronic controls to limit cata lyst conditions that might favor N 2 O formation and consideration of different catalys t formulations.) Although some of these approaches may have modest associated costs, EPA believes that they will be small compared to the overall costs of the advanced NO X control technologies already required to meet Tier 2 standards. In any event, these phenomena are not well understood or easily predictable today.

Similarly, hydrocarbon c ontrol catalysts can be designed to reduce CH 4 emissions – for example, Honda has certified a dedicated CNG vehicle for several years with CH 4 emissions well below the new CH 4 cap standard – while some designs of natu ral gas and ethanol fueled vehicles can produce higher levels of CH 4 emissions than do similar gasoline fueled vehicles. Thus, the cap standards we are establishing for both N 2 O and CH 4 are meant to encourage developers of new vehicle technologies to address all vehicle GHG emissions simulta neously as these technologies enter the market more broadly (e.g., N 2 O control for lean-burn combustion technologies, and CH 4 controls for natural gas or ethanol fuel t echnologies.) For each of these potential of existing (low-production) vehicle a nd fuel technologies, there are as yet no clear indications from manufacturers for significant production plans.

As the data from commenters above reinforc es, some new technologies would need more technological effort to reach the cap standa rds than others. Also, as discussed below, manufacturers have raised concer ns about test burdens. For thes e reasons, the fina l rule includes an approach to N 2 O and CH 4 standards providing an optional pathway to compliance if a manufacturer chooses to market a vehicle with N 2 O and/or CH 4 emissions approaching or exceeding the cap standards. The final regulation s thus allow a manufacturer to use an optional CO 2 -equivalent approach, as suggested by severa l commenters. In the proposal, EPA sought comment on an approach of expressing N 2 O and CH 4 in common terms of CO 2 -equivalent emissions and combining them into a single standard along with CO 2 emissions. 74 FR at 49524. (California’s “Pavley” program adopted such a CO 2 -equivalent emissions standards approach to GHG emissions.) Se veral auto industry commenters and the Institute for Policy Integrity (NYU) supported this t ype of compliance approach. In lieu of complying with the separate N 2 O and CH 4 cap standards, the compliance al ternative allows a manufacturer (including manufacturers that conve rt vehicles to alternative fuel s) to choose to convert its N 2 O and CH 4 test results (or, as described below, substitute a default N 2 O value for MY 2012-2014) into CO 2 -equivalent values and add this sum to their CO 2 emissions. To avoid issues of

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consistency across a manufacturer's product line, a manufacturer choosing this option for one test group will need to apply this approach to all of the test groups in its fleet. This approach is more environmentally protective overall than the cap standard approach, since the manufacturer will need to reduce its CO 2 emissions to offset the higher N 2 O (and/or CH 4 ) levels, but will not be allowed to increase CO 2 above its footprint ta rget level by reducing N 2 O (or CH 4 ). Manufacturers using the complian ce alternative to address N 2 O and/or CH 4 challenges with an alternative vehicle or fuel technology should face no additional compliance costs. This is because in most cases the alternative vehicle and fuel technologies would likely result in CO 2 levels lower than comparable conventional vehi cles, and so could comply without additional expenditures on controls of N 2 O or CH 4 emissions.

The N 2 O and CH 4 values to be used in the optional CO 2 -equivalent formula will be the measured emission values for these GHGs, except N 2 O in model years 2012 through 2014. For these model years, in response to ma nufacturer testing concerns disc ussed below, manufacturers may use a default N 2 O value of 0.010 g/mi, the same value as the N 2 O cap standard. For MY 2015 and later, the manufacturer would need to prov ide actual test data on th e emission data vehicle for each test group. (That is, N 2 O data would not be required for each model type, since EPA believes that there will likely be little N 2 O variability among model type s within a test group.) EPA believes that its selec tion of 0.010 g/mi as the N 2 O default value is an appropriately protective level, on the high end of current techno logies, as further discussed in Section III.B.7 of the preamble.

Two commenters, the Center fo r Biological Diversity (CBD) a nd a private citizen, supported more stringent cap standards. CBD commented th at in light of the potency of these compounds, EPA should develop standards that do not just ma intain current levels, but reduce emissions over current levels and that EPA had not analyzed either the technologi es or the costs of doing so. EPA did not propose and is not prep ared at this time to establis h "technology forcing" standards for N 2 O and that would require manufacturers to re duce emissions of these compounds below the levels generally seen in current conventional gaso line and diesel vehicles. We believe that the stringent Tier 2 program and the associated NO X fleet average requirement already result in significant N 2 O control in conventional gasoline vehicles, and the agen cy does not expect current N 2 O levels to rise for these vehicles . Moreover, EPA believes that the CO 2 standards will be challenging for the industry and that these standards should be the industry’s chief focus in this first phase of vehicular GHG emission controls. 3 Further, to reduce current emissions would result in costs that would need to then be included in the overall economic impacts of the program and accounted for in establishing a different, potentially less stringent CO 2 standard. Although as discussed above we recognize that some technological approaches may exist for vehicles with alternative fuel and vehicle technologies to address N 2 O or CH 4 emissions above the cap standards, we are not aware of technolog ies that could in the tim e frame of this rule reduce these emissions significantly and consiste ntly below the cap levels, since this could require broad improvements to gasoline vehi cle emission controls across the fleet. The

3 See Massachusetts v. EPA , 549 U.S. at 533 (EPA has significant discretion as to timing of GHG regulations); see also Sierra Club v. EPA, 325 F. 3d 374, 379 (D.C. Cir. 2003) (upholding anti-backsliding standards for air toxics under technology-forcing section 202 (l) because it is r easonable for EPA to assess the effects of its other regulations on the motor vehicle sector before aggressively regulating emissions of toxic vehicular air pollutants.

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commenters do not suggest any tech nologies that could do so. EPA could revisit this decision in the future if such technologies emerge.

Test Burden Issues for N 2 O

Auto manufacturers were almost unanimous in raising concerns about the impacts of a new testing requirement for N 2 O on their test facilities, equipment, and procedures. On the other hand, there were very few concerns about new burdens for CH 4 testing. This disparity in comments can be explained by the fact that manufacturers have historically developed CH 4 testing capability and experi ence for a number of purposes, including compliance with nonmethane organic gases (NMOG) standards. Thus, for CH 4 , the new CH 4 cap standard will not result in new test burdens.

We recognize that N 2 O testing will be new to most manufact urers. However, we do not believe that such testing will impose unreasonable new bur dens, especially in re lation to the cost of complying with the overall GHG standards. As discussed in Section III. B.7 of the preamble, N 2 O measurement equipment capable of accurate m easurement of emissions in the range of the cap standard is now readily available at cost s that, while not trivia l, are not unreasonable compared to other traditional emission measuremen t equipment. For example, EPA in the last two years has purchased and installed cost-eff ective photo-acoustic analysis equipment and has been using it successfully for N 2 O and other testing. Manufacturers ,may need to modify their test facilities and patterns of testing to integrate N 2 O testing into their emission testing programs, but again, these changes are not unus ual and will not be excessivel y costly in mo st if not all

cases.
Still, given the relatively short lead-time before the N2O cap becomes effective and the newness of N 2 O testing to this industry, EPA proposed th at manufacturers be able to apply for a certificate of conformity with the N 2 O standard for model year 2012, provided that they supply a compliance statement based on good engineering judgment. Under the proposal, beginning in MY2013, manufacturers would have needed to base certification on actual N 2 O testing data. This approach was intended to reasonably ensu re that the emission st andards are being met, while allowing manufacturers l ead time to purchase new N 2 O emissions measurement equipment, modify certification test facilities, and begin N 2 O testing. After consideration of the comments, EPA agrees with manufacturers that one year of additional lead -time to begin actual N 2 O measurement across their vehicle fleets may be still be insufficient for manufacturers to efficiently make the necessary facility change s and equipment purchases. Therefore, EPA is extending the ability to certify based on a compliance statement fo r two additional years, through model year 2014. For 2015 and later model y ears, manufacturers will need to submit measurements of N 2 O for compliance purposes. We believe th at this additional leadtime before testing is required also addresses more detaile d technical concerns manuf acturers raised about N 2 O testing early in the program.

Other Comments

Some manufacturers raised que stions and concerns about how EPA could best address potential deterioration of emissions of N 2 O and CH 4 over the life of the vehicles. Although

5-119EPA Response to Comments

catalytic emission control systems generally dete riorate in effectivenes s over time, EPA is not aware of information on current technology vehicl es that would allow specific conclusions on the degree of emissions deterioration. (One commenter, the Bren Working Group at UC Santa Barbara, referenced studies from 1992 and 2002 that indicated that ve hicles of those relative eras showed significant deterioration of N 2 O and CH 4 , respectively.) EPA believes that some degree of emissions deterioration in cu rrent catalytic control systems is likely, but given the limited information available on current technology vehicles , we are not able to determine appropriate independent values for such deterioration. Howe ver, we are not aware of information on current vehicles that would indicate that deterioration of these emission s would be significantly different

– higher or lower – than those of similar conventional emissions. EPA recognizes that manufacturers may not be ab le to develop DFs for N 2 O and CH 4 for all their vehicles in the 2012 model year, and thus EPA is allowing the use of alternative values thr ough the 2014 model year. For N 2 O the alternative value is the DF developed for NO X emissions, and for CH 4 the alternative value is the DF developed for NMOG emissions.

Auto industry commenters also expressed c oncerns that requiring measurement of N 2 O using newer, more general test proce dures developed to apply to all types of vehicles and engines would inherently require a whol esale shifting by manufacturers aw ay from traditional light-duty test procedures. We believe that the require ments we proposed and are now finalizing do not have this effect, and that the manufacturers' concerns are unfounded. The regulatory language being finalized is very specific, referring to 40 CFR Part 1065 in a targeted way to only make reference to those requirements necessary for measurement of N2O. The regulations state very clearly and unambiguously that it is N2O measurement devices al one -- not laboratory hardware, software, calculations, or procedures -- that mu st meet Part 1065 specifications. That is, a manufacturer can continue to us e current light-duty test procedur es for all other purposes while using the N 2 O analyzer specifications in Part 1065 for N 2 O testing.

A commenter from the natural gas vehicle indus try suggests that EPA include upstream fuel GHG emissions in its compliance approach. We agree that the production and distribution of natural gas can produce lower emissions of GHGs than comparable upstream emissions from the petroleum fuels. However, EPA as discussed in detail in Section III.C .3 of the preamble, EPA has concluded that for this rule, we will only co nsider upstream emissions for electric vehicles, given that electricity upstream GHG emissions are about three times higher than gasoline upstream GHG emissions. By co mparison, the difference in ups tream GHG emissions for both diesel fuel from oil and CNG from natural gas are relatively small compared to differences associated with electricity. EPA will continue to assess the issue of upstream emissions in future rulemakings.

5.6. EPA Small Entity Exemption

Organization: Association of International Au tomobile Manufacturers (AIAM) Vehicles Services Consulting, Inc KTM-Sportmotorcycle AG Clean Energy Fuels European Small Volume Car Manufacturers' Alliance (ESCA) Artega Automobil GmbH & Co. KG

5-120EPA Vehicle Program, Feasibility, and Estimated Impacts

Wiesmann GmbH

Comment:

Association of International Au tomobile Manufacturers (AIAM)

The regulatory language proposed in section 86,1801-12(j) is as follows: Businesses meeting the Small Bu siness Administration size standar d defining a small business as described in 13CFR 121.201 are el igible for exemption from the greenhouse gas emission standards specified in § 86.1818–12and associated provisions. So, in order to qualify for the small business exemption, the manufactur er must meet the SBA “size standard.” The “size standards” in 13 CF R 121.201 are specified only in terms of a number of employees, 1000 in the case of vehicle manufact urers. The EPA regulation does not state that the manufacturer must meet the definition of “small business conc ern” (which excludes foreign entities) under the Small Business Act in order to be exempted. There is no justifiable reason to limit the small business exemption to U.S. based companies, and doing so would present serious concerns under international trade agreements. If EPA decides to maintain this small business exemption in the final rule, it should clarify th at the exemption is available to small entities regardless of location. This issue could be avoi ded entirely if EPA a dopts our recommendation to use the small volume certification criterion of 15,000 units U.S. sales annually to exclude small manufacturers for the 2012-16 period.

Vehicle Services Consulting, Inc.

EPA proposed a provision allowing a GHG ex emption BUT ONLY FOR CERTAIN small businesses – those that meet the Small Busine ss Administration (SBA) cr iteria contained in 13 CFR 121.201.6 With this limitation, however, the pr oposed exemption appears to apply only to USA companies. The “US only” limitation may be in violation of WTO requirements. In addition, the “small entity” provision is limite d to auto manufacturers with fewer than 1000 employees – a criterion that is irrelevant to a manufacturer’s ability to comply with emissions standards (whereas the factor hi storically determining SVM status – vehicle sales – does affect ability. [OAR-2009-0472-7083.1, pp.3-4]

KTM-Sportsmotorcycle AG

The small entity conditional exemption appears to be only available to US based firms [OAR2009-0472-7183, p.1]

There are several ways forward that we woul d support, such as extending the small entity conditional exemption to all small volu me manufacturers. [OAR-2009-0472-7183, p.1]

Clean Energy Fuels

[[These comments were submitted as testimony at the Detroit public hearing. See docket number EPA-HQ-OAR-2009-0472-6185, p. 140.]]

5-121EPA Response to Comments

In terms of the Proposal to Defer Standards For Manufacturer's Meeti ng SBA's Definition of Small Businesses:

Clean Energy believes this deferral is appropria te, and we look forward to working closely with EPA and NHTSA in the coming years to desi gn appropriate GHG standards for small volume manufacturers as part of a fu ture regulatory action.

European Small Volume Car Manufacturers' Alliance (ESCA)

There is a provision in the regulation for the ‘s mall entity conditional exemption’. However, the definition applied to small volume manufacturer s in this instance is the Small Business Administration criteria (<1,000 employees), which only allows for US producers to apply for the SECE. If the SECE was extended beyond SVMs based in the US, then this would allow several EU SVMs to participate. [OAR-2009-0472-7287.1, p.4]

ESCA would also support the definition of small entities be ing based on less than 15,000 sales in the US per annum, rather than the SBA defi nition. Several ESCA members have submitted detailed proposals. We hope that EPA/NHTSA is able to consider these proposals and work with the European industry to achieve a workable so lution for both the regula tor and the businesses. [OAR-2009-0472-7287.1, p.4]

Artega Automobil GmbH & Co. KG

The small entity conditional exemption appears to be only available to US based firms. [OAR2009-0472-7481.1, p.1]

Wiesmann GmbH

The small entity conditional exemption appears to be only available to US based firms [OAR2009-0472-7198, p.1]

There are several ways forward that we woul d support, such as extending the small entity conditional exemption to all small volu me manufacturers. [OAR-2009-0472-7198, p.1]

Society of Motor Manufacturers and Traders Limited

There is a provision in the regulation for the ‘s mall entity conditional exemption’. However, the definition applied to small volume manufacturer s in this instance is the Small Business Administration criteria (<1,000 employees), which only allows for US producers to apply for the SECE. If the SECE was extended beyond SVMs based in the US, then this would allow several UK (and EU) SVMs to participate. [OAR-2009-0472-7229.1, p.4]

SMMT would also support the de finition of small entities be ing based on <15,000 sales in the US per annum, rather than the SBA definition. [OAR-2009-0472-7229.1, p.4]

EPA Response:

5-122EPA Vehicle Program, Feasibility, and Estimated Impacts

EPA is clarifying that foreign as well as U.S. manufacturers meeting the SBA size criteria are eligible for the exemption. EPA in fact intende d this result at proposal , although the commenters properly pointed out that this in tent was not clearly expressed. EPA is retaining the SBA size criteria to define small entities and believes that it is important to do so to ensure that all small entities are exempt regardless of sales volume. EPA also proposed that otherwise-exempt small entities submit a one-time notification to EPA. Fo r the reasons stated in Section III.B.8 of the preamble to the final rule, EPA has determin ed that such a cond ition is unnecessary. Consequently, small entities (as defined usi ng SBA size criteria) are exempt from all requirements of the final rule.

In addition, EPA is also deferring standards for small volume manufacturers until a future rulemaking. Comments regarding small volum e manufacturers and how EPA is implementing the small volume manufacturer deferment, in cluding determining small volume manufacturer eligibility, are discu ssed in Section 5.4.2.

5.7 EPA Additional Credit Opportunities for CO 2 Fleet Averaging Program

5.7.1. Air Conditioning Related Credits

Organization: Chrysler Group, LLC (Chrysler) Alliance of Automobile Manufacturers (Alliance) Volkswagen Group of America (Volkswagen) Toyota Motor North America BMW of North America, LLC (BMW) Honeywell International, Inc. Nissan North America, SABIC Innovative Plastic Pittsburg Glass Works California Air Resources Board State of New Jersey National Renewable Energy Laboratory University of California – Santa Barbara Guardian Industries Corp. Environment Michigan Schade, Michael T.

Comment:

Chrysler Group, LLC

Adjustment of NHTSA Standards for EPA Air Conditioning Credits

Harmonization between the NHTSA and EPA pr ograms is a key component to successful implementation of a single National Program. Both agencies realized the importance of harmonization in the Notice of In tent, in which harmonization is mentioned nine times. That Notice describes the harmonization of th e EPA and NHTSA programs as follows:

5-123EPA Response to Comments

'EPA and NHTSA intend to propose two separate se ts of standards, each under their respective statutory authorities. EPA expects to propose a national CO2 vehicle emissions standard .... NHTSA expects to propose appropriate re lated CAFE standards.' [NHTSA-2009-0059-0124, p.11]

We believe that there is a si gnificant discrepancy between the NHTSA and EPA standards when addressing air conditioning credits. In EPA's por tion of the NPRM, investments made in A/C system improvements to lower greenhouse gas emissions are explicitly recognized with greenhouse gas credits. A/C credits are not explicitly available in the NHTSA CAFE rule; credits are assumed in the development of the NHTSA attr ibute-based standards in order to ensure the 'appropriately related' threshold is met. Howeve r, the standards remain inconsistent. [NHTSA2009-0059-0124, p.11]

We believe not all factors were adequately taken into account(e.g. phase-in of alternative refrigerants) to arrive at the industry average AIC credit approximation. [NHTSA-2009-0059­ 0124, p.11]

The issue here has to do with harmonizing the two rules - a key objec tive of a successful National Program. Manufacturers still have to m eet the overall stringenc y of the joint program. [NHTSA-2009-0059-0124, p.12]

Recommendation:

Chrysler recommends that NHT SA recognize each manufacturer's air conditioning improvement plan for 2012-16 model years. [NHT SA-2009-0059-0124, p.14] [[See NHTSA-2009-0059-0124, pp.11-15 for more discussion on this issue]]

Provision of Fuel Economy Air Conditioning Credits

Chrysler believes that the EPA Administrator has authority to define and calculate a manufacturer's average fuel economy. See 49 U. S.C. § 32904(c) ('the Administrator shall measure fuel economy for each model and calculate average fuel economy for a manufacturer under testing and calculation proced ures prescribed by the Admini strator.'). EPCA provides the EPA Administrator with broad disc retion to determine how to calcu late a manufacturer's average fuel economy. [NHTSA-2009-0059-0124, p.16]

The Administrator therefore may exercise her discretion to calc ulate fuel economy in a manner that recognizes the GHG reduction from improved air conditioning systems. She can do this by adding the value of the A/C credits to each model's fuel economy when calculating a manufacturer's corporate average fuel economy. [NHTSA-2009-0059-0124, p.16]

In effect, the NPRM already accomplishes part of this task by setting fo rth industry average A/C credits and requiring that they be taken into ac count when GHG values are translated to fuel economy values. Unfortunately, the NPRM' s use of average A/C credits for this translation, rather than the earned A/C credits, creates a discrepancy between the GHG values and A/C credits that is contrary to the regulatory comp atibility goal of the National Program. In addition,

5-124EPA Vehicle Program, Feasibility, and Estimated Impacts

it discourages manufacturers from applying technol ogy that will exceed the industry average, as the benefits from that added technology will notbe recognized in the CAFE program. [NHTSA2009-0059-0124, p.16]

It is important to note that the process through which the agencies can apply A/C credits in the CAFE program involves only the calculation of a manufacturer's average fleet fuel economy. It does not involve in any way the process through wh ich each vehicle model is to be tested and its fuel economy measured. [NHTSA-2009-0059-0124, p.16]

Alliance of Automobile Manufacturers (Alliance)

The Alliance supports the inclusion of credits fo r mobile air conditioner (MAC) improvements in EPA’s GHG regulation. If stru ctured appropriately, these MAC provisions can provide significant near-term GHG benefits at compara tively low cost. The inclusion of MAC credit provisions was a critical element that enabled the industry to reach agreement in May 2009 with the Administration on a regulatory path forw ard to reduce vehicle GHG emissions. [OAR-2009­ 0472-6952.1, p.8]

Volkswagen Group of America (Volkswagen)

Volkswagen supports the comprehensive comments the Alliance has issued in the topic of air conditioning credit. [OAR-2009-0472-7210.1, p.4]

Toyota Motor North America

` To comply with the CO2 fleet-w ide average standards, EPA pr oposes that manufacturers be able to generate and use credits for improved ai r conditioner (A/C) system s. EPA has structured the A/C provisions to account for A/C direct emissions (leakag e reductions) and A/C indirect emissions (efficiency improvements). Additiona lly, the proposed leakag e reduction credit would take into account the reduced GHG impact from the use of an alternativ e refrigerant. [OAR2009-0472-7291, p.20]

In general, Toyota supports the inclusion of credits for MAC (mobile source air conditioner) improvements in EPA's GHG regulation. The comme nts provided are aimed at ensuring that MAC credit provisions remain ef fective in delivering the appr opriate GHG reduction credits and for providing some incentive for introducing future MAC technology improvements. [OAR2009-0472-7291, p.20]

BMW of North America, LLC (BMW)

BMW supports credits for improved air condit ioning systems as an effective method for reducing GHG emissions and improving fuel economy provided vehicle test procedures remain unchanged. [OAR-2009-0472-7145.1, p.7]

The proposal on mobile air conditioning neglects measures which reduce the transmission of solar energy into a vehicle's interior and the demand for cooling. Therefore, as a technology to

5-125EPA Response to Comments

reduce GHG emissions, improved glazing and shadi ng should also be taken into account and receive appropriate credit. More specifically, we suggest re vising the proposed regulatory language at §86.1866-12 (c) Credits for improving air c onditioning system efficiency to state that air conditioning efficiency credits will also be made available for other technologies, upon approval by the EPA Administrator, if the manufact urer demonstrates that such technologies allow the air conditioning system to achieve C02- equivalent grams per mile emissions reductions comparable to those associated with the tec hnologies identified in §86.1866-12 (c)(l) (i)-(vi). [OAR-2009-0472-11294.1, pp. 1-2]

Honeywell International, Inc.

Honeywell supports the es tablishment of credit opportunities for improved air conditioner (A/C) systems and leakage control technologies to be used in compliance with the fleet wide CO2 emissions average standards. [OAR-2009-0472-7206.1, p.3]

Nissan North America

Similarly, Nissan has invested and will continue to invest in advancements to reduce CO2 emissions associated with air conditioning. The early air conditioning credits as well as the ongoing air conditioning credits, se rve to promote ongoing advances to a vehicle system with the potential to significantly reduce CO2 emissions regardless of vehicle miles traveled. This is particularly true because the structure of the pr oposed air conditioning credit programs predicates credits upon exceeding a baseline average fo r the industry. Only those manufacturers who exceed the industry average can ea rn credits. [OAR-2009-0472-6798.1, p.6]

SABIC Innovative Plastic

The Air Conditioning Credit Should Not Disc ourage or preclude Polycarbonate Glazing.

Because polycarbonate is significantly less dense and weighs substantially less than traditional glass, it offers substantial greenhouse gas reduction opportunities when used in glazing. The potential for polycarbonate to be incorporated in to areas of fixed glaz ing-roof panels, rear quarter panels and backlites - during the model years covered by this rulemaking is strong unless EPA discourages the development by incorporati ng to the list of air conditioning technologies one which is focused on reducing solar generation to the cabin through the use of solar reflective and absorbing technologies designed specifically for glass. Including these technologies would have the unintended effect of discouraging a doption of lightweight polycarbonate glazing.

The EPA greenhouse gas program should not incorporat e into its credit system technologies that would have the result of discour aging the greenhouse gas emissi ons achievable through lighter weight polycarbonate gl azing. [OAR-2009-0472-7080.1, p.4]

Pittsburg Glass Works

It has been estimated by the EPA and Department of Energy’s National Renewable Energy Laboratory (NREL) that about 7 billion gallons of fuel are used annually for air conditioning in

5-126EPA Vehicle Program, Feasibility, and Estimated Impacts

light duty vehicles. Of this 7 billion gallons, almost 2.5 billion gallons of fuel could be saved with technologies that re duce AC power by 30%. Fortunate ly, several technologies are commercially available that can accomplish this objective. A national fuel savings of 2.5 billion gallons annually, and GHG emissions reduction of 22 billion Kg annually could be accomplished with the heat load reduction technology. The cu rrent proposal by EPA would not credit these technologies because the test procedures do not allow for the evaluation of these technologies.

A recent study conducted by NREL under the auspices of the Society of Automotive Engineers and sponsored by the EPA demonstrated that he at load reduction of 30% is possible with commercially available technologies. The heat lo ad reduction technologies resulted in 12 deg C reduction in breath air temperature when compared to a base line vehicle. This temperature reduction was then shown to reduce the Air Conditioning load by 30%. Based on 11,998 annual vehicle miles traveled, and average Air Cond itioning use of 32.6%, NREL calculated that the average fuel consumption could be decrea sed by 11.2 gallons on an annual basis. When multiplied by the total number of vehicles on th e road, these fuel savings would amount to over 2.5 billion gallons on an annual basis.

The current and proposed test procedures call fo r a 10 minute heat soak before the SCO3 test cycles begins. This test soak is performed at 85 de g F. Firstly, these conditions do not reflect real world conditions where vehicles are parked in the sun for long dur ations. It is our recommendation that the soak time be extended to thirty (30) minutes to allow for a more real world heat soak.

The value of heat load reducti on technology has an even greater fuel economy and CO2 impact on vehicles using hybrid and electric technologies. Recent testing with NREL ( www.osti.gov/servlets/purl/957994-YmvAS2 /) has shown that using Infra-Red Reflective Glazing on the windshield and rear window in a Plug-in Hybrid Vehicl e will increase the adjusted, utility factor-weighted fuel econom y from 36.8 to 42.9 miles per gallon during the UDDS cycle. Since the use of Plug-in Hybrid vehi cles is projected to increase in the coming years, the reduction of CO2 emissions from th ese vehicles will be too large to ignore.

Infra-Red Reflective glazing has been commercia lly used in the United States since 1990. The technology has been proven to lower the inte rior cabin temperature and reduce the air conditioning fuel usage. Recent regulations i ssued by the California Air Resources Board ( http://www.arb.ca.gov/cc/cool-cars/ cool-cars.htm ) require the use of heat load reducing glass, starting with the 2012 Model Year vehicles sold in California. The performance requirement is strengthened to all-around gl azing starting with the 2016 Model Year. CARB has calculated the fuel savings and CO2 benefits of the glazing technology and determ ined that it has a net cost savings for the consumer. If the EPA/NHTSA recognize the national impact of these technologies, the cost effectiveness of the glazing technology will improve even further. Since the technology is already going to be comme rcially available and used by the auto manufacturers, it is only na tural for the EPA/NHTSA to r ecognize the cont ribution this technology makes to the CO2 reduction on a national basis.

Fuel consumption and CO2 emissions can be redu ced with heat load re duction technologies that are currently not cr edited by the EPA/NHTSA. Sufficient scien tific data exists to corroborate the

5-127EPA Response to Comments

value of the these technologies in the real world. Savings of ove r 2.5 billion gallons of fuel and reduction of CO2 emissions over 22 billion Kg annually are going to be wasted if these technologies are not included am ongst the technologies by the EPA/NHTSA. Economic analysis by CARB has shown that the Infra-Red Reflect ive glazing will actually save the consumer money while reducing the CO2 emissions. This is an overwhelming argument for the EPA/NHTSA to consider in its evaluation of t echnologies to reduce fuel consumption and reduce CO2 emissions.

We would be glad to provide any further info rmation that the EPA/NHTSA may need for its analysis. [OAR-2009-0472-7244.1, pp.1-3]

California Air Resources Board

CARB staff conducted a comparison of the AC cr edit approach in this proposed rulemaking against California’s Pavley I program in effect and the more recent Environmental Performance Label regulation. The analysis addresses a need to understand how the various AC credit schemes compare and the reason for differences in the credit amounts. CARB’s analysis was provided to EPA for reference. Overall expect ed AC emissions cred its and associated GHG reductions appear similar. While CARB is not suggesting changes to the Final Rule, we recommend that CARB and EPA con tinue dialogue on this issue to reconcile the California and federal approaches so that one uniform approach could apply for the 2017 and later model years. [OAR-2009-0472-7189.1, p.13]

[CARB also submitted these comments as test imony at the Los Angeles public hearing. See docket number OAR-2009-0472-7283, pp. 21-27]

State of New Jersey

It is clear based on numerous studies that air conditioners while in use reduce motor vehicle miles per gallon in the range of 20 percent or more, and that because they are used on the average on a national basis about 25 percent of th e time, air conditioners decrease overall fleet mileage by 5 percent or more. To encourage auto mobile manufacturers to produce more efficient air conditioning systems, the Department suppor ts the USEPA's proposal to amend the current CAFE fuel economy test procedures for light-t rucks to provide for air conditioner operation during testing and to take other steps for improving the accuracy and representative of fuel economy measurements. These steps should be take n as soon as practical and the Department agrees that having the implementation of thes e amendments begin in model year 2017 seems reasonable. The Department also supports the more immediate interim alternative step of providing CAFE program credits under the authority of 49 U.S. C. 32904(c) for light trucks equipped with relatively effi cient air conditioners for model years 2012-2016. The Department agrees that if such credits were adopted, it would be necessary to re flect them in the setting of the CAFE standards for light trucks for the same mo del years. Since this available data on the impacts of air conditioning demonstrates that th e fleetwide average fuel economy obtained from the implementation of this joint rulemaking in actua lity will be at least 5 percent less than the commitment of 35 mpg, it is critical that air conditioning operation and use be considered in all future standard settings. [OAR-2009-0472-7109.1, p.7]

5-128EPA Vehicle Program, Feasibility, and Estimated Impacts

National Renewable Energy Laboratory

In Table III.C.1.1, there are no credits availa ble for passenger compartment thermal load reduction technologies. Reducing the thermal load reduces the A/C fuel use during passenger compartment cool down and steady st ate. It is recomme nded to provide credits for thermal load reduction technologies that would encourage use of these technologies and result in further reductions in GHG emissions. [OAR-2009-0472-4798.1, p.1]

University of California – Santa Barbara, Bren Working Group on Ve hicle Fuel Economy

Mobile Air Conditioning (MAC). Given the pote ncy of CH4, N2O, and other non-CO2 gases in contributing to climate change, we also recomme nd that efficient air conditioning units be treated as a fuel saving technology. Thus we encourage th e EPA to include incen tives, such as a credit system, for reducing N2O and CH4 emissions belo w the proposed cap as a means to motivate innovation in clean technol ogies. [OAR-2009-0472-7188.1, p. 8]

One pound of HFC-134a (a common GHG used in MA C) released to the atmosphere has the same global warming potential as 1,300 pounds of CO2. In the United States alone, MAC use consumes over 7 billion gallons of gasoline every year, emitting over 58 million metric tons of carbon dioxide. Refrigerant leakage adds the equiva lent of over 50 million metric tons of CO2 to the atmosphere. The National Oceanic and Atmospheric Administration (NOAA) reports that 20% of the HFC-134a present in equipment is emitted to the atmosphere each year. In 2004, MAC use emissions accounted for 52% of tota l U.S. HFC-134a emissions: 24,539 metric tons, equivalent to 35,090,770 metric tons of CO2. Though this represents only 0.1 percent of global greenhouse gas emissions from all human activities , reducing these higher forcing substances can yield extra positive effects by increas ing fuel efficienc y. [OAR-2009-0472-7188.1, p. 8]

Industry experts have recognized the ability to cut emissions and produced a list of recommended actions for doing so in a 2007 report to the EPA. Because of the amplified effects of refrigerants on climate change, the EPA should take special care to regu late and encourage the reduction of leakage. [OAR-2009-0472-7188.1, p. 8]

In addition to refrigerant leakage, MAC use reduces efficiency of gas consumption. Well engineered MAC systems account for about 5% of a car’s real fuel consumption, while poorly engineered and low cost systems can use 20% or more. A European study showed that by changing the technology of MAC in a car, fuel efficiency was improved by 0.3 liters/100km and CO2 tailpipe emissions were reduced by 7 grams/km.23 The total CO2 equivalent reduction for such a technology change was 12g/km. By reduci ng the use of these higher forcing substances, extra positive effects can also result from increasi ng fuel efficiency. [OAR-2009-0472-7188.1, pp. 8-9]

Changes in MAC efficiencies can reduce CO2 emissi ons not only directly, but also indirectly via better fuel consumption. Furthermore, more effici ent systems can keep refrigerants with more forcing power than CO2 captured within the syst em. We believe this multiple impact merits attention from the EP A. [OAR-2009-0472-7188.1, p. 9]

5-129EPA Response to Comments

Guardian Industries Corp.

Guardian is committed to the improvement of fuel economy through technology advances. We note, however, that proposals to improve the efficiency of air c onditioning systems miss the clear benefit provided by reducing th e actual heat load on vehicle cabins. Focusing on actual load reduction through technologies that can keep the heat out can actua lly have greater total benefit than improving the efficiency of mechanic al cooling systems. [OAR-2009-0472-7124.1, p.2]

The California Air Resources Bo ard (CARB) has recognized this fact. On June 25, 2009, CARB adopted a regulation requiring reduc ed solar transmission of the glaz ed openings in vehicles in California starting with model year 2012. CARB based its bene fit calculations on testing published by NRELIEP A demonstrating that vehi cle soak temperatures can be significantly reduced using solar reflective glazing. The estimat ed cool-down load reduction results in a 26% drop in A/C fuel consumption. CARB estimated that the rule as adopted in California will reduce CO2 emissions by approximately 0.861 MMT per year and if carried nationwide could generate a saving of 8.30 MMT per year. This estimated benefit is based only on soak temperature reduction and ignores the additiona l dynamic benefit of heat load reduction while operating the vehicle. Glazing heat load reduction technology will pay for itself over time at the consumer level through reduced fuel consumption while providing a more comfortable environment for vehicle occupants. The CARB estimated that th e fuel savings generated would pay back the option cost to the consumer in approximately 7 years after which savings would continue to accrue for the life of the vehicle. [OAR-2009-0472-7124.1, p.2]

Guardian recommends that any Federal emissions standard allow credit for heat load reduction through reduced solar transmission through the gl azing openings of the vehicle. Allocating appropriate emissions credits to heat load reduction technolog ies will add a proven effective method for OEM's to meet the ultimate requirements for effi ciency. [OAR-2009-0472-7124.1, p.2]

Environment Michigan

[[These comments were submitted as testimony at the Detroit public hearing. See docket number EPA-HQ-OAR-2009-0472-6185, p. 68.]]

Credits for air conditioning have already allowed the Department of Transportation to set a fuel economy standard of 34.1 mpg, lower than the Pr esident's goal of 35.5 miles per gallon. The administration should not further weaken the program by allowing automakers to rack up unnecessary credits and comply w ith the standards without building more efficient vehicles.

Schade, Michael T.

A/C on or off ? I would doubt that many people could e xplain how A/C operati on is addressed in calculating the window sticker numbe rs that they use to help d ecide upon a vehicle purchase. Almost every vehicle now has A/C and the manuf acturers just don’t have much of an incentive to design and supply more efficient A/C systems. Is that because they know that there has been no direct CAFÉ benefit because the A/C system s are mandated to be off during fuel economy

5-130EPA Vehicle Program, Feasibility, and Estimated Impacts

testing? On a personal basis, my family driv es Ford Focuses and my observed fuel economy penalty is 10% on the highway and 15 to 20% in the city based upon repeated observations with each vehicle. And the damper ventilation system always heats the ambient air 12 degrees before entering the passenger space so I need to use A/C most of the year. My family has had three Focuses and they are all the same. Yes, a poor de sign, but is it atypical? Probably not. Again, a legislative fix to include realistic levels of A/C operation is probably required. But let’s do it now in a clear and unambiguous manner with a si mple and straightforward description of how A/C plays into the fuel economy. [OAR-2009-0472-7261.1, p.2]

EPA Response:

Window Glazing

The commenters are correct that the rules do not provide air conditioner credits for the use of window glazing technologies, or technologies whic h reduce solar load. However, the EPA does provide for other flexibilities where technologies such as so lar load-reducing window glazing may be eligible for “off-cycle” (rather than A/C) credits under the final rule. That is, they may qualify if EPA believes these technologies are “innovative and novel” and produce CO2e reductions which are not significantly measurea ble on the FTP. See section 86.1865-12 (d) (1) (i) and (ii). Manufacturers woul d have to meet the other requ irements of that regulation, including obtaining EPA approval, before claiming such credits.

Support for Credits

Many commenters noted that the credits are necess ary in allowing them to transition to the new GHG emissions standards. Many commenters al so expressed support for the A/C crediting program. EPA is grateful for the positive support for this aspect of the program

Consideration of A/C Credits Under CAFE

Several commenters urged EPA to take steps to take A/C improvements into account under the CAFE program. Chrysler argued that EPA can do so as part of the calculation process mandated under 49 U.S.C. § 32904(c). Under that subsecti on, EPA measures fuel economy for purposes of assessing manufacturers’ compliance with CAFE standards and then calculates average fuel economy. Chrysler argued that EPA has br oad discretion under EPCA (32904(a)(1)) to determine how to calculate average fuel econom y. The State of New Jersey urged EPA to amend its test procedures to account for use of improved A/C systems by light trucks. In response, by statute, fuel economy for passenger cars must be measured using the Federal Test Procedure, which does not account for air conditioning since it is not turned on during the test procedure. See 49 USC section 32904 (c) and 74 FR at 49458 and 49465. This raises the issue of whether EPA has the discretion to calculate fuel economy for passenger vehicles in a manner that involves adding A/C improvement credits to th e measured fuel economy of a vehicle. EPA need not reach that question as such a step would require amending its calculation procedure regulation. Doing so is effectiv ely beyond the scope of this proceeding due to time limitations. There is no statutory bar to EPA’s amending the test procedure in measuring light truck fuel economy, but is not doing so in this proceeding. In addition to this e ffectively being beyond the

5-131EPA Response to Comments

scope of this proceeding due to time limitations , such a difference in test procedures would necessitate a reanalysis of the maximum feasible average fuel economy level for light trucks for each model year under EPCA.

5.7.1.1. A/C Leakage Credits

Organization: Ford Motor Company Jaguar Land Rover Toyota North America European Automobile Manufacturers Association Association of Intern ational Automobile Manufacturers (AIAM) Chrysler Group, LLC (Chrysler) Alliance of Automobile Manufacturers (Alliance) Volvo Car Corp. Hyundai Motor Company Union of Concerned Scientists Honeywell International, Inc. New York State Department of Environmental Conservation

Comment:

Ford Motor Company

With regard to determining direct air conditioning emissions credits for low leak systems, Ford supports EPA's use of the latest version of the Society of Automotive Engineers (SAE) International Surface Vehicle Standard, J2727, to estimate annual refrigerant leakage from motor vehicles air conditioning systems. SAE J2727 includes conservative allowances for part variability and assembly robustnes s and is more representative a nd more conservative than bench tests and is correlated to real-world leakage. Ford believes these reliability improvements carryover the life of the vehicle resulting in reduc ed service and fewer re-charges. Ford strongly supports the use of SAE J2727 to quantify mobile air c onditioning refrigeran t reductions as it provides a common approach for all manufactures to evaluate their A/C systems direct emissions. [OAR-2009-0472-7082.1, p. 5]

Jaguar Land Rover

Jaguar Land Rover supports the principle of using leakage da ta generated by SAE J2727 to estimate refrigerant leakage from mobile air conditioning systems. Since the leakage formula published in the August 2008 versio n of SAE J2727 differs slightly from that published in the July 2007 version of SAE J2727, Jaguar Land Rover wi shes to state that it regards the August 2008 formula as being the correct ve rsion to use. [OAR-2009-0472-7213, p.1]

Toyota Motor North America

EPA's A/C leakage credits assign larger credits to system designs that are expected to result in greater leakage reduction and are proportionally larger for lo wer GWP refrigerants over the

5-132EPA Vehicle Program, Feasibility, and Estimated Impacts

current R134a. The proposed method for calculating these credits is to choose from a menu of equipment and components and establish a leakag e score. Credits would be generated from leakage reduction improvements that exceed average fleet-wide leakage rates. [OAR-2009-0472­ 7291, p.20]

EPA's NPRM A/C leakage credit proposal is ba sed closely on that being developed through IMAC and the SAE Surface Vehicle Standard J2727, August 2008 version. In the NPRM, EPA references the J2727 leakage scoring system as generally representing a reasonable correlation with real world leakage in vehicles. Similarly, EPA's proposed credit approach would associate each component with a specific leakage rate in gram s per year, which is identical to the values in J2727. The proposed A/C leakage credit provision also provides larger credits as the GWP (Global Warming Potential) value approaches zer o. Hypothetically, a refrig erant with a GWP of 1 would attain maximum credits because the GHG concern from leakage would be eliminated. [OAR-2009-0472-7291, p.20]

Toyota supports EPA's proposal for calculati ng the amount of credit based on J2727 scores. However, Toyota believes that EPA should di rectly reference and incorporate the J2727 methodology since requirements to calculate thes e J2727 scores are curr ently in place in Minnesota and in California for ARB's Environm ental Performance Label. In doing so, EPA's regulation would harmonize with the other regulations and provide consistency for manufacturers to provide the same J2727 reporting data. [OAR-2009-0472-7291, p.20]

European Automobile Ma nufacturers Association

Credits for leakage reduction

Calculation of leakage rate of refrigerant should be defined by reference to SAE J2727 and not by separate definition. Reason: any technical improvement of the SAE J2727 would imply a revision of the law. [OAR-2009-0472-7444.1, p.1]

Association of International Au tomobile Manufacturers (AIAM)

AIAM supports EPA’s proposal to rely on a me nu-based approach to assess air conditioning refrigerant leakage, as set forth in proposed s ection 86.166-12. The leakage rate of refrigerants is very low, and direct measurement of leakage woul d require expensive new test facilities and the development of new test procedures, as EP A notes. See preamble at 49527. Moreover, given anticipated movement toward lower global wa rming potential (GWP) refrigerants, leakage impacts on climate change will likely be substa ntially reduced. However, EPA should allow the flexibility for manufacturers to provide data to substantiate th e achievement of lower leakage rates than predicted by the EPA menu that is based on SAE Standard J2727. [OAR-2009-0472­ 7123.1, p.11]

EPA proposes to use a slightly modified versi on of the SAE J2727 protocol for the menu-based leakage assessment. Instead, EPA should rely on the J2727 protocol as adopted by SAE. The SAE Interior Climate Control Committee reviews the standard regularly and updates it as

5-133EPA Response to Comments

needed. EPA will obtain the best engineering estimates for leakage by using the most current version of J2727 without modification. [OAR-2009-0472-7123.1, p.12]

AIAM supports the Agency’s proposed approach for credits for alternative refrigerants with low Global Warming Potential. We believe it is appropriate to base these credits on the relative GWP values of the current versus alternative refrigerants. In addition, we support EPA’s proposal for additional credit for the end-of-lif e benefits associated with al ternative refrigerants. [OAR-2009­ 0472-7123.1, p.13]

Since the legacy fleet of vehicles, which uses th e current refrigerant with a higher GWP, will be in use for many vehicles into the future, AIAM encourages EPA to work with the SAE committee, auto manufacturers, and the auto service industry to enhance air conditioning maintenance and refrigerant rec overy/recycling. [OAR-2009-0472-7123.1, p.13]

Chrysler Group, LLC (Chrysler)

Leakage Credit and SAE J2727 Methodology

The EPA direct credit methodol ogy assumes zero credit for ve hicles above a set leakage threshold (20.7 gm/year for trucks and 16.6 gm/year for cars) and clips the credit amount for vehicles below a leakage threshold (8.3 g/year for cars and 10.4 gm/y ear for trucks). The Minnesota Pollution Control Agency 2009 MY leakage reporting database illustrates that EPA is not counting approximately 22% (58 plus 22 out of 363 vehicles) of the vehicle population by setting these thresholds. The lower and upper lim its are disincentives to air conditioning system leakage improvements. [NHTSA-2009-0059-0124, p.17]

Recommendation:

The practice of excluding vehicles does not follo w the attribute-based approach used for other facets of this rule. EPA should base credits on a continuous curve and recognize the entire range of potential leakage rate s. [NHTSA-2009-0059-0124, p.17]

Effects of System Aging to Leakage

Chrysler believes there would be no benefit in modifying SAE J2727 to account for system aging effects. There is very limited data to support modifications of this type. A properly designed research program to define such modificati ons would take consider able time. [NHTSA-2009­ 0059-0124, p.17]

Recommendation:

Based on industry and government anticipation of the quick adoption of a low global warming potential ('GWP') refrigerant, the development of such modifications are not required. The NPRM provides incentive to reduce leakage in the short term while final preparation is done to introduce low GWP refrigeran ts. [NHTSA-2009-0059-0124, p.18]

5-134EPA Vehicle Program, Feasibility, and Estimated Impacts

Alliance of Automobile Manufacturers (Alliance)

The Alliance supports EPA’s proposal to util ize the unmodified SAE J2727 standard for estimating refrigerant leakage as a basis for awarding credits for MAC refrigerant leakage reductions. The SAE J2727 standard is a design-based calculation that was developed based on its correlation with vehicle fleet tests and bench test data in a mini-shed. The results have been correlated well to mini-shed tests and vehicle fl eet tests conducted in Europe and Japan. The SAE Improved Mobile Air C onditioning (“IMAC”) program also showed good correlation between SAE J2727 and SAE J2763 mini-shed tests. We agree with EPA’s conclusion that an actual vehicle or bench test program for l eakage mandated by this regulation would be exceedingly difficult to conduct, and would pr ovide little useful additional information. Furthermore, the SAE calculation includes conser vative adjustments for assumed error rates in assembly, whereas any test program would use correctly assembled systems. Thus, SAE J2727 provides an accurate -- or even somewhat conser vative -- estimate of MAC leakage rates for new vehicles. We also agree with EPA’s determina tion that MAC service and repair needs will be reduced as leakage rates fall, and that servic e-related emissions should be expected to fall proportionally. [OAR-2009-0472-6952.1, p.9]

In addition, requirements to calculate J2727 scores are currently in place in Minnesota and in California for ARB’s Environmental Performa nce Label. Automobile manufacturers have systems in place to gather this data, and the Alliance would encourage EPA to remain harmonized with these other regulations thr ough the use of unmodified J2727 data. [OAR-2009­ 0472-6952.1, p.9]

The Alliance also supports EPA’s proposal for calc ulating the amount of credit to award based on the J2727 scores. This formula awards credit s for improvements down to the level of a J2727 score of approximately 8 grams per year of re frigerant leakage. The industry-wide database compiled by the state of Minnesota for 2009 models shows that almost no vehicles currently achieve such a low score. Thus, an appropriate incentive would be creat ed for essentially all vehicles to make improvements in system inte grity, and we would expect prompt and broadbased action by the industry to implement vehicle im provements under this framework, resulting in significant cost-effective GHG reductions. [OAR-2009-0472-6952.1, p.9]

EPA is incorrect, however, in assuming that elec tric compressors will not achieve significant penetration levels within the time frame of this regulation. In fact , electric compressor penetrations could become high enough to be meaningful, and this technology should be encouraged. The Alliance therefore recommends that EPA add a provision allowing a higher level of MAC direct credit for systems that use an electric compressor. [OAR-2009-0472-6952.1, p.9]

There would be little value in modifying the J272 7 standard for these cred it provisions, such as by attempting to account for system aging effects that would occu r later in the vehicle’s life. There is no data on which to base any factor s to adjust SAE J2727 cal culations for in-use deterioration over time. A new rese arch program to gather this da ta would be needed, and this would take time to conduct. Given the favor able outlook for introducing a new, low-GWP refrigerant in the next few years, the developm ent of a SAE J2727 aging factor need not be a

5-135EPA Response to Comments

high priority. EPA makes a reas onable assumption that the im provements in new vehicles leak rates should result in proporti onal reductions throughout the life of the vehicle. The current EPA proposal provides a good, workable incentive structure that will significantly improve MAC leak rates in the near term; in the longer term, leak rates will not be an environmental issue, since low GWP refrigerants will predominate. [OAR-2009-0472-6952.1, pp.9-10]

Volvo Car Corp.

VCC is currently reporting annual MAC leakage to Minnesota and CARB (included in the MAC-credit package). Both Minnesota and CARB accepts alternative refrigerant leakage measurement methods. Volvo uses SAE J2763 (r eal measurement from mini-shed) and VCC would like to propose acceptance of SAE J2763 as an alternative to J272 7 for leakage credit calculation. Please see Attachment 1.

Mobile Air Conditioning (MAC) Credits: EPA pr oposes to credit manufacturers for improved MAC efficiencies and the use of low global wa rming potential refrigerants. The inclusion of MAC credit provisions was a criti cal element that enabled the industry, the Administration, and California to reach agreement in May 2009 on a regulatory path forward to reducing vehicle GHG emissions. The Alliance supports the c oncept of MAC credits and has provided constructive suggestions for improving EPA’s propos ed approach, including the elimination of unnecessary idle air conditioning test procedures. To fulfill the objectives of this rule, EPA also needs to remove any obstacles (i.e., SNAP a pproval) to commercially available alternative refrigerants for the 2012 model year.

MAC efficiency-improving technologies and cr edits. VCC suggests an alternative to the technology list (Proposed Rule ma king, Table III C.1-1) proposed for MAC efficiency credits. Such alternatives would promote developmen t of design improvements not included in the proposed list.

[[Comments on the proposed SAE standards]]

VCC continuously develops the climate system in order to reduce AC leakage and improve durability. As example VCC is mostly using steel as material in the AC pipes compared to most manufactures who are using aluminum which ha s a lower yield-point, limited resistance to external corrosion, wear and chafing.

VCC performs physical test mini-SHED according to test method prescribed as F-gas directive 706/2007/EC . Volvo is convinced that physical measurements re flect real vehicle emissions more accurately than calculations and estim ations. The new proposed leakage measurement standard SAE J2763 (Test procedure for determ ining R134a leakage rates of Mobile Air conditioning systems in a Mini-shed) is equal to the 706/2007/EC directive.

VCC would like to point out seve ral reasons why the actual meas ured leakage (according to SAE J2763) is lower than the calculate d leakage (according to SAE J2727):

5-136EPA Vehicle Program, Feasibility, and Estimated Impacts

[extensive discussion and evidence on the above point continues from OAR-2009-0472-7168.1, pp.8-10]

Hyundai Motor Company

Hyundai supports EPA's proposal to base the A/ C leakage credits on SAE J2727. As EPA notes, refrigerant leakage rates are too low to be m easured with current test equipment and would require new test facilities and procedures in order to measure leakage rates (74 FR 49527). As a result, a design-based methodology is appropriate for determining A/C leakage credits. [OAR2009-0472-7231.1, p.6]

Union of Concerned Scientists

UCS supports the availability of credits tied to A/C leakage and effi ciency improvements. However, we believe it is critical that credit magnitudes accurately reflect real-world emissions reductions. We were surprised by the discrepancy between indivi dual credits specified in the proposed rule, and those previously specified by the California Air Resources Board. We speculate this may be a result of differing ba selines chosen by EPA and CARB, though other factors could be contributing to this as well. Since accurately reflecting emissions benefits offered by improved A/C systems is the ultimate goal, we suggest EPA have additional conversations with CARB to assess discrepanc ies before issuing its final rule. [OAR-2009-0472­ 7181.1, p.10]

Additionally, on the issue of system efficiency with the use of alternative refrigerants, EPA states, [OAR-2009-0472-7181.1, p.11]

It is possible that alternative refrige rants could, without compensating action by the manufacturer, reduce the efficiency of the A/ C system (see discussion of the A/C Efficiency Credit below.) However, EPA believes that manuf acturers will have substantial incentives to design their systems to maintain the efficien cy of the A/C system, therefore EPA is not accounting for any potential efficiency degradation. [OAR-2009-0472-7181.1, p.11]

The agency does not elaborate on the “subs tantial incentives” manufacturers have for maintaining the efficiency of the A/C system. Given that the A/C system’s efficiency (or lack thereof) will not appear on the 2-cycle test, it strikes us that manufacturers, rather, would not have the incentive to maintain the A/C effi ciency system. We recommend the agency review this issue to account for efficien cy degradation associated with certain alternative refrigerants. [OAR-2009-0472-7181.1, p.11]

Honeywell International, Inc.

Direct Emissions from A/C leak age and corresponding leakage cred its should accurately reflect real-world scenarios and th e best available science

Leakage rates should be determined from a re gional-cross section of real world operating conditions and vehicle life

5-137EPA Response to Comments

During Honeywell's initial reading of the Proposed Rule, it appeared that the EPA offered credits that were insufficient for real leakage rates in motor vehicles over time across the varying operating conditions. For example, the assumed em ission (leakage), AvgImpact term, rates of 16.6 to 20.7 g/year for the averag e annual impact of A/C leakage from the use of HFC-I 34a refrigerant is only representati ve of refrigerant emission ra tes for new motor vehicle A/C systems. These rates do not reflec t leakage from vehicles that are 'off-the-lot' or 'used', which have higher emission rates. Aged systems experience all of the following conditions that increase their emission rates: seasonal, daily and in ope ration thermal cycles; vi brations; hardening of hoses and 0- rings; drying out of the shaft seal due to non-operation (or continuous operation for clutchless models); collisions; service (engine or mobile A/C system); and corrosion leaks. [OAR-2009-0472-7206.1, p.4]

The Supplemental Draft Regulatory Impact Anal ysis Proposed Rulemaking to Establish Light Duty Vehicle Greenhouse Gas Emission Standa rds and Corporate Average Fuel Economy Standards, EPA-420-D-09-003, was subsequently released by EPA on September 28,2009 (the 'DRIA'). Upon our analysis of the DRIA, the cont ribution of the MaxCredit term to reflect those conditions impacting aged systems becomes clear. As a result, Honeywell ag rees with EPA that the magnitude of the MaxCredit term is correc t to use as a multiplier in the proposed credit equation. [OAR-2009-0472-7206.1, p.4]

Honeywell concurs with EPA's em issions equation to determine th e net fleet effect of direct emissions due to refrigerant leakage. In summar y, Honeywell agrees that the LeakScore may be used to estimate the leakage of new motor vehicle A/C systems, the MaxCredit term is the correct order of magnitude to account for fleet aging through the vehicle lifetime, and the GWP Refrigerant term accounts for the GWP impact of a lternative refrigerants compared to the current RI34a refrigerant, GWP100 = 1430. [OAR-2009-0472-7206.1, p.4]

EPA should update its leakage emissions assump tions based upon the best available technical studies

Through our analysis of the crediting program, we identified two additional recent publications that we bring to EPA's attenti on. EPA may wish to consider addi ng these studies to its analysis as additional data sources for refrigerant leakage rates of new and used systems. Honeywell asserts that the addition of thes e studies will quantify more accurately the per-vehicle per-year average leakage rates and will update EPA's assumptions based upon the best-available science through the use of the Ma xCredit and AvgImpact te rms. [OAR-2009-0472-7206.1, pp.4-5]

a. Doctoral Thesis of David Souse, Mines ParisTech, Study of Refrigerant Emissions from Mobile Air-Conditioning Compressor Shaft Seal s, Dec 2008. This study found that compressors leak at rates between 5 and 40 g/year (Figure 2-27 ). Aged compressors tested leak at rates of 97 to 1800 g/year when pressurized wi th refrigerant (Table 2-4). b. Denis Clodic, Final Report on Establishing the Leakage Rates of Mobile Air Conditioners, 2004. This study found that the average leakage rate of MAC systems from 1 to 6 years old is 52.4 g/year ± 4.6 g/year . [OAR-2009-0472-7206.1, p.5]

5-138EPA Vehicle Program, Feasibility, and Estimated Impacts

The inclusion of these studies may impact EPA's assumptions regarding average leakage rates associated with mobile A/C systems and provi de a stronger basis for understanding direct A/C emissions due to the leakage of the hydrofl uorocarbon refrigerant in use today. [OAR-2009­ 0472-7206.1, p.5]

The SAE J 2727 Standard Mobile Air Conditioning System Refrigerant Emissions Chart is not an appropriate standard fo r measuring lifetime leakage

EPA proposes that § 86.166-12 of the Proposed Rule utilizes the SAE J2727 design-based procedure as the basis for generating Leakage Cred its. We disagree with the use of this standard because it does not adequately reflect leakage ov er the lifecycle of a vehi cle. In the DRIA, EPA states that the SAE Standard J2727 - HFC-134a Mobile Air Conditioning System Refrigerant Emissions Chart may be used to provide an es timate of the emission rates of new, properly constructed passenger vehicles. However, Honeywell argues that this standa rd is not appropriate for determining the leakage rate for vehicles as they progress through their lifetime. [OAR-2009­ 0472-7206.1, p.5]

We propose that companies wishing to submit for cr edits based on leak tightness of their systems also be allowed the opportunity to design a co mponent life test based on SAE Standard 12763, Test Procedure for Determining Refrigerant Emi ssions from Mobile Air Conditioning Systems. The use of test protocols woul d give a true indication of th e correct selection of leakage reduction parts, as well as provide for the development of additi onal credit goals for manufactures to reduce the overall leakage rate. [OAR-2009-0472-7206.1, pp.5-6]

The adoption of a test procedure in lieu of set credits will better quantify the A/C Leakage reduction credits. Honeywell recommends that these test protocols be developed through a consortium involving the industry with Govern mental Energy Efficiency Improvement Funding. The consortium can build upon existing research th at seeks to quantify su ch efficiencies. For example Souse, 2008, developed such a test protocol for compressor shaft s eals that we feel can be adapted to test standstill, running mode, and endurance cycli ng tests to age a system over a temperature range, vibration conditions, a nd oxygen/temperature control for plastics embrittlement. [OAR-2009-0472-7206.1, p.6]

New York State Department of Environmental Conservation

Air Conditioning Leakage Credits (Preamble Section III.C.1) Reductions in air conditioning refrigerant leaks can reduce ov erall greenhouse gas emissions. The regulation should provide a mechanism to enc ourage designs that redu ce refrigerant leakage over the life of the vehicle, and to award appropriate credit. The Department agrees with EPA's proposal to use an engineering analysis based approach rather than emissions testing. [OAR2009-0472-7454, p.2]

We question the credit formulas proposed in Section 86.1866-12, which differentiate between cars and trucks. While we agree that a larger syst em has the potential to leak a greater volume of refrigerant this potential is better measured by inte rior volume (which relates to the volume of air that must be controlled) rather than an arbitrary classification. Using the proposed formulas, a 15

5-139EPA Response to Comments

gram/mile CO2-equivalent HFC134a system wo uld qualify for 1.2 grams/mile credit in a passenger car. The same system would qualify fo r 4.3 grams per mile credit in a light truck. [OAR-2009-0472-7454, p.2]

EPA Response:

Support for AC Leakage Credits

EPA appreciates the supportive comments for ou r AC leakage crediting program. EPA based the leakage calculation method described in th e regulations (§86.166-12) on the August 2008 version of SAE J2727. Note that SAE J2727 is not incorporated by re ference into the EPA regulations, and that any future revisions or modifications by SAE to the August 2008 version are not approved for calculating a leakage score unless EPA amends the regulations. While we agree with Honeywell that the SA E J2727-base approach to estima ting refrigerant leakage can be improved (in terms of quantifying how leakage in creases as the A/C components age), but we also believe that further study into the rela tionship between component age and leakage is needed before an industry-wide adjustment to the leakage impact can be considered.

In addition, EPA recognizes that there are differences between CA RB’s approach to A/C-related CO2 emissions and the rule we are finalizi ng. The principal difference between these two approaches is in the method used to determine th e impact of direct (leakage) and indirect (A/C power consumption) CO2e emissions: the CARB a pproach used a model tailored to the climate and A/C usage conditions specific to California, whereas the EP A approach used a 48-State model for climate and use conditions. Since this is a national rule, it is reasonable to use a 48­ State model. In addition, EPA also bases leakag e rates on J2727 scores, whereas CARB does not.

Flexibility on Test Procedures

Concerning the comment on allowing flexibility fo r manufacturers to dem onstrate lower leakage rates, EPA will only allow the calculation-based method described in the regulations. While EPA generally prefers performance testing, for an individual vehicle A/C system or component, there is not a strong inherent correlation between a performance test using SAE J2763 and the designbased approach we are adopting (bas ed on SAE J2727, as discussed below). 4 The SAE J2763 test can generate artificially low leakage rates: tests are co nducted under idealized conditions (assembled in a laboratory and tested in a hermet ically sealed chamber) which reduce the realworld influence of seal contamin ation and production va riability. Consequently, before such test results could be validly consider ed as a surrogate for the J2727- based scores, the test method and the J2727 scores would have to be correlated. Establishing such a corr elation would require testing of a fairly broad range of current-technology systems in or der to establish the effects of such factors as production variability and a ssembly practices (which are included in J2727 scores, but not in J2763 measurements). To EP A's knowledge, such a correlation study has not been done. At the same time, there are indications that much of the industry will eventually be moving toward alternative refrigerants with very low GWPs. EPA believes that even if such a

4 However, there is a some correlation between the two in that J2763 measurements were used in the development of J2727 scores and to validate the effect on leakage of various technologies, but J2763 test results were never found to be equivalent the J2727 (which considers other factors, such as variance in assembly procedures) .

5-140EPA Vehicle Program, Feasibility, and Estimated Impacts

correlation were established (and confirmed the appropriateness of the J2763 procedure as an option for assessing availability of credits), a nd some manufacturers were willing to accept the greater testing burden and expense of a J2763-ba sed approach, the program would likely be obsolete at inception due to the expected transiti on to low-GWP refrigerants. For these reasons, EPA is not adopting such an optional direct m easurement approach to addressing refrigerant leakage at this time.

Electric A/C Compressors

EPA acknowledges that A/C compressors powered by electric motors (e.g. as used today in several hybrid vehicle models) were not include d in the IMAC study, and we also acknowledge that this type of compressor does allow for l eakage emission rate reductions beyond our estimate for systems with conventional, belt-driven compressors. EPA agrees with these comments and has incorporated lower minimum emission rates (i .e. minimum allowable leakage score) into the formula in order to allow additional leakage reduc tion credits for vehicles that use sealed electric A/C compressors. The minimum rates allowed for electric compressors are 4.1 and 5.2 g/yr for cars and trucks, respectively – wh ich is 50% lower than the rate s for belt-driven compressors. See section 86.1866-12 (b) (2) (definition of th e Leakage term in the credit equation).

Leakage Score Calculation

AIAM and others commented that EPA should not set a lower limit on the overall leakage score, even for non-electric compressors. EPA has dete rmined not to do so. First, although there do exist vehicles in the Minnesota data with lower scores than our minimum scores, there are very few car models that have scores less than 8.3, and these range from 7.0 to about 8.0 and the differences are small compared to our minimum score. 5 More important, lowering the leakage limit would necessarily increase credit opportunities for equipment design changes, and EPA believes that these changes could discourage the environmentally optimal result of using low GWP refrigerants. Introduction of low GWP refrigerants could be discouraged because it may be less costly to reduce leakage than to replace many of the A/C sy stem components. Moreover, due to the likelihood of some in-use deterioration, even a leak-free (according to J2727) R134a system will have some emissions due to manuf acturing variability, accidents, deterioration, maintenance, and end of life emissions, a furthe r reason to cap the amount of credits available through equipment design. The only way to guarantee a near zero emission system in-use is to use a low GWP refrigerant. For these reasons, and in view of the otherwise overwhelming support by commenters for the program as propose d, EPA has decided for the purposes of this final rule to not change the minimu m score for belt driven compressors.

Leakage Deterioration and In -Use Adjustment Factors

Many commenters stated that no ad justments for in-use deteriorat ion/aging in J2727 approach to calculating refrigerant leakage are necessary. Honeywell, however, commented that real-world leakage rates are higher that those we cite in our rule, and recommended that we increase the

5 The Minnesota refrigerant l eakage data can be found at http://www.pca.state.mn.us/climatechange/mobileair.html#leakdata

5-141EPA Response to Comments

impact of refrigerant leakage in our analysis to account (among ot her things) for deterioration in use. Given the level of effort needed to measure in-use leakage rates due to deterioration (as well as the complexity in determining a statistica lly-significant, industry- wide leakage-vs-age relationship), EPA is not consideri ng a refrigerant leakage deteriorat ion adjustment factor for this rule. Awarding credits for surpassing leakage- based performance also appears to be an undeserved windfall: credits are based on exceed ing a baseline reflecting good performance. Moreover, as explained in the previous response, EPA is structuring the A/C credit provisions so as to encourage the ultimate solution of us e of low GWP refrigerants, and use of such refrigerants obviates any need to account for in-use deterioration.

5.7.1.2. A/C Efficiency Credits

Organization: Denso International America, Inc. Ford Motor Company Jaguar Land Rover Association of Intern ational Automobile Manufacturers (AIAM) Chrysler Group, LLC (Chrysler) Volvo Car Corp. Alliance of Automobile Manufacturers (Alliance) Toyota Motor North America BMW of North America, LLC (BMW) Public Citizen and Safe Climate Campaign Motor and Equipment Manufacturers Association Clean Energy Fuels Honeywell International, Inc. European Automobile Manufacturers Association New York State Department of Environmental

Comment:

Denso International America, Inc.

DENSO strongly supports the inclusion of Mobile Air Conditioning (MAC) credits as part of the GHG Rulemaking. These MAC credits have the abili ty to provide significant GHG benefits in the very near term. Our comments on MAC credits address some of the technical aspects of how indirect credits are awarded and offer some technical suggestions on how the effectiveness of this process could be increased.

DENSO supports the use of a me nu-based approach for awardi ng credits as a short-term approach. In the absence of a well-established test methodology, it provides a clear measure for how credits will be awarded. To further enhance the usefulness of this menu, we would like to make 3 suggestions:

1) Add compressors and internal heat exchangers (IHX) to the list of components that receive credit when exhibiting a COP improvement relative to the 'previous design.' Efficiency

5-142EPA Vehicle Program, Feasibility, and Estimated Impacts

improvements in the compressor and implementati on of an IHX show a significant reduction in engine load and thus, the GHG emitted as a result of operating the MAC system.

2) Make a graduated credit amount based on the COP improvement exhibited by each 'improved' air conditioning component. Such an approach would promote incremental improvements in technologies. Such an additional incentive woul d doubtless result in the a dditional reduction of GHG due to MAC systems.

3) Remove evaporators from the list of co mponents that are awarded credit if a COP improvement is exhibited. Throughout its history in the MAC system, the evaporator component has not been optimized for the purposes of re ducing GHG. The optimizations that have been made to the evaporator were done to redu ce packaging size while maintaining the same performance. This typically results in a thinner, sm aller evaporator that fits into a tighter space in the vehicle. However, this does not add addi tional efficiency to the MAC system. [OAR-2009­ 0472-8765, pp.1-2]

Ford Motor Company

Ford supports the EPA technology based approa ch for quantifying indirect air conditioning emissions credits. Ford believes that EPA should expand the technologies listed in Table III.C.1­ 1 to include the technologies hi ghlighted in red. The high effici ency blower and cooling fan should be separated and granted th e appropriate credits listed. R ecirculated air control with a humidity sensor should be adde d to the list of technologies adding a humidity sensor enables more aggressive use of recirculated and evaporator temperature control, thus allowing the system to operate more efficiently. Consistent with th e Alliance comments, NC control strategies are more sophisticated than simply defaulting to recirculation wheneverthe outside ambient temperature exceeds 75° F and must manage a ho st of factors. The requirement should be changed to state, defaults to recirculation when ever the outside ambient temperature exceeds 75° F with provisions for managing cabin defogging and passenger comfort. Thermal expansion valves should also be added to the list of technologies as it imp roves the air conditioning system efficiency and reduces compressor loads. Likewi se, the internal heat exchanger allows the compressor to work more efficiently and should also be added.

For 2014 and later model years, the proposed requirement to demonstrate at least 30% improvement over current average efficiency leve ls in order to qualify for credits should be changed. A manufacturer should not have to achieve such a larg e step function in order to receive some credit. A more appropriate method may be to allow full credit for a system that achieves a 30% improvement, and partial credit fo r systems that achieve less, at least through 2016. This proposal would allow systems that achieve up to 30% improvement the maximum credit allowed, but would also reward other sy stems that achieve reductions. A system that achieves, for example, an 18% or a 26% improvement also benefits the envi ronment, and there is no valid justification for denying proportional credits for such systems. Improvement in performance can be demonstrated through vehi cle system modeling, bench or vehicle level testing. See Table I below [See OAR-2009-0472-7082.1, p. 6 for Table 1] for a recommended approach to partial credits.

5-143EPA Response to Comments

Ford has consistently improved the efficiency of the AlC systems in its vehicles. For systems that use alternative refrigerants with global warm ing potential (GWP) < 150, Ford recommends that EPA extend the technology based approach th rough 2016 model year. As noted by the EPA, alternative refrigerants may have reduced efficien cy. The physical properti es of refrigerants are the primary factors in the refrigerant system ef ficiency. Performance assessments of alternative refrigerants have been conducted by the automotiv e industry. It has been demonstrated that the physical properties of the alternative refrigeran t R1234yf could result in a reduction of efficiency by 5 to 10 percent compared to R134a in use today with a similar refrigerant system and controls technology. The environmental benefit of the re duction in GWP, 1430 to 4, far outweighs the delta in the system efficiency and thus warra nts the maximum credit currently allowed. [OAR2009-0472-7082.1, pp. 5-7]

Jaguar Land Rover

Jaguar Land Rover supports the pr inciple of air con cr edits and the credit cat egories suggested by EPA certainly form a useful basis for discussion. We believe that intera ction with the industry will enable EPA to refine the categories and in clude categories not previously identified. [OAR2009-0472-7213, p.1]

We would recommend that EPA look into:

introducing new credits fo r humidity sensors; introducing new credits for efficient solar glazing; establishing separate credit values for evaporators and condensers; basing heat exchanger credits on best technology (not on 10 % of previous condition); establishing separate credit values for evapor ator blower fans and c ondenser cooling fans; introducing new credits for internal heat exch angers that boost eva porator and condenser performance. [OAR-2009-0472-7213, p.1]

The comment above, on using be st technology heat exchangers , recognizes that Jaguar Land Rover already uses state of the art heat exchangers and would have difficulty in improving by 10% to qualify for credits. It also recognizes th at other OEMs, working fr om an older baseline, might be able to improve by 10% and qualify for cr edits whilst still using heat exchangers less efficient than ours. We would like to be credite d for what we already do well, not just for improvement. [OAR-2009-0472-7213, p.1]

In relation to credits for the use of recirculated ai r, this has generated a lot of discussion. On the one hand, using recirculated air undoubtedly save s energy. On the other hand, excessive use of recirculated air can cause screen and window mi sting, increase CO2 levels in the cabin, cause dry eye problems (especially for contact lens wearers), cause odor probl ems and even increase the risk of respiratory infecti on. Jaguar Land Rover uses a soph isticated control strategy to optimize the balance of economy, comfort and safety, frequently making use of partial recirculation. The EPA proposal is too simple as it stands and we would encourage EPA to seek a consensus in the industry, on the optimum way to word this part of the credits proposal. [OAR-2009-0472-7213, p.1]

5-144EPA Vehicle Program, Feasibility, and Estimated Impacts

One item on the current air con credits list th at surprised us was credits for an electronic expansion valve. We don't see this as a huge be nefit, as there is generally some conflict of interest between the attempts of the compressor to maintain a stable evaporator temperature and the attempts of the expansion valve to maintain a small amount of superheat. The compressor always wins and having an el ectronic expansion valve doe s not alter this. [OAR-2009-0472­ 7213, p.1]

Association of International Au tomobile Manufacturers (AIAM)

With regard to air conditioning system efficiency credits, EPA also proposes to base credits on a technology menu approach, but only for model years 2012-2013. Thereafter, EPA proposes to require that manufacturers justif y credits based on testing using an idle test developed by the Agency. We have several concerns regarding th e Agency’s proposed idle test approach for a performance-based measurement of air conditioning system efficiency. There are many existing technologies and new ones in development to im prove the energy efficiency of air conditioning systems. The efficiency improvement resulting from the application of each technology does not necessarily apply under all operati ng conditions. For instance, effi ciency improvements in engine cooling fans will typically be apparent at engine idle but not necessarily at road speeds. Variable displacement piston compressors are the original and one of the highest value technologies for improving MAC energy efficiency; however, their be nefit occurs at low and mid-load conditions

- typically road speeds. Testing at high load conditions would not dete ct their energy benefit when compared to fixed disp lacement piston compressors. Seri es Reheat Reduction provides benefits primarily at mid-load conditions. Air Inlet Mixture cont rol provides its benefit at mid and high load conditions when the HVAC system is not already in reci rculation mode. [OAR2009-0472-7123.1, p.12]

In the preamble, EPA requested comments on the potential for using the SC03 test cycle for assessing air conditioning effici ency. While there may be some merits of using the SC03 cycle for this purpose, as we note below, AIAM believes that a focused test program should be carried out in conjunction with industry and other interested stakeholders to determine the best performance test for assessing air cond itioning system efficiency. [OAR-2009-0472-7123.1, pp.12-13]

AIAM recommends that the Agency defer action on the adoption of a performance test to assess air conditioning system efficiency and rely on the menu-based approach. EPA should work with the Society of Automotive Engineers Interior Climate Control Committee to develop a more robust test approach that accurate ly measures system efficiency over a broad range of engine operating conditions. This test procedure could be used to verify the accuracy of the credits set forth in the menu and revise those items as n ecessary, consistent with the research program recommended above. In addition, such a test prog ram could also assess what, if any, effects new low GWP AC systems may have on test proce dure development. It would be especially important to consider the impact of these new AC systems since they will be the dominant AC designs for the foreseeable future. It may be appropriate for EPA to consider an improved performance test for the 2017+ program. [OAR-2009-0472-7123.1, p.13]

Chrysler Group, LLC (Chrysler)

5-145EPA Response to Comments

Re-evaluate the cap on indirect air conditioning credits.

EPA has imposed a cap on the maximum amount of i ndirect credits at 5.7 g/mi. The indirect credit methodology is a design-base d approach that picks from a menu of technologies that are available for credit. The menu is not inclusive of all GHG reducing technologies (e.g., humidity sensor). [NHTSA-2009-0059-0124, p.18]

Recommendation:

Chrysler supports EPA's menu-based approach, as Chrysler and EPA cooperate in this all new GHG reducing arena. However, we be lieve that the indirect credit cap should be increased to be more in line with NREL and ARB studies, which suggest a maximum indirect credit of 10 to 12 g/mi. [NHTSA-2009-0059-0124, p.18]

Design-Based Approach

Chrysler supports a design-based approach us ing a technology menu as a simple method that comprehensively captures A/C system efficiency improvements. [NHTSA-2009-0059-0124, p.18]

The OEM's ability to receive credit for indire ct A/C emission improvements is limited because not all available technologies are on the me nu. These omitted technologies offer significant benefits and need to be recognized for credit. [NHTSA-2009-0059-0124, p.18]

Recommendation:

We support EPA's technology menu design-based approach. However, EPA should consider adding other technologies to this menu wit hout reallocating the cu rrent credit values. Reallocating the current credit values is unnece ssary since total indirect credits are capped. Adding items to the menu only provides flexibility to manufacturers to use different approaches to achieve GHG reductions. [NHTSA-2009-0059-0124, p.18]

Partial Credits

The indirect credit technology me nu should not utilize an 'all or nothing approach.' Partial credit should be given for partial GHG reduction. [NHTSA-2009-0059-0124, p.18]

For example, a system with a pulse width m odulated ('PWM') HV AC blower and a resistor controlled cooling fan should qualify for a porti on of the 1.1 g/mi total credit from the PWM blower and fan technology menu item. The NP RM does not recognize the reduced GHG benefit of these partial implementations even t hough they provide significant GHG reductions. [NHTSA-2009-0059-0124, p.19]

Recommendation: EPA needs to recognize the GHG be nefits of system efficiency improvements with partial indirect cr edit. [NHTSA-2009-0059-0124], p.19

5-146EPA Vehicle Program, Feasibility, and Estimated Impacts

Reduced Reheat Strategies

Reducing the amount of air reheated after cooling is a highly effective strategy to reduce A/C system-related GHG emissions. [NHTSA-2009-0059-0124, p.19]

Automatic Recirculation Strategy

Chrysler agrees with EPA that increased use of air recirculation can significantly reduce the thermal load on a vehicle air conditioning system , thereby reducing the load on the evaporator and decreasing the compressor workload. Increasi ng the use of recirculation will also allow customers to reduce the blower speed more quickly, saving more energy. [NHTSA-2009-0059­ 0124, p.20]

The NPRM would grant credits only if the A/C syst em always defaults to recirculation whenever the outside ambient temperature exceeds 75° F. In practice, actual A/C control strategies are more sophisticated than this, managing factors such as passenger compartment air quality, window defogging, and rear passenger comfort. The definitions in the proposed rule for obtaining these credits require modification of these factors. [NHTSA-2009-0059-0124, p.20]

Several studies describe the concern with cabin air quality and CO2 concentration while driving in recirculation mode. SAE International publishe d the most recent study suggesting that with the A/C system in recirculation m ode, CO2 can build-up in as little as 15 minutes during slow driving conditions. [NHTSA-2009-0059-0124, p.20]

Strategies to mitigate C02 build-up such as sw itching to fresh mode (outside air), partial recirculation mode or other methods after the co ol down phase of the dr iving cycle should be allowed. EPA should allow individual manufactur ers flexibility in choosing and implementing strategies for maintaining passenger compartmen t air quality while stil l earning credits for efficiency improvements. [NHTSA-2009-0059-0124, p.20]

Recommendation:

Chrysler agrees with EPA's proposal to employ recirculated cabin air above 75 O F ambient temperature. Chrysler recommends that the regula tion should allow flexibility in using managed amounts of fresh air primarily for safety and cu stomer comfort. The pr oposal should not require 100% recirculated air while the system is in heater, blend or defrost modes. [NHTSA-2009­ 0059-0124, p.20]

The regulation should require that above ambient temperatures of 75 O F the vehicle must default to recirculation mode during the cool down portion of the drive cy cle. This portion of the drive cycle is defined to be when the blower is set to 50% or higher. The sy stem may then shift to managed intake of outside air or partial recircula tion based on customer comfort, safety or other factors. [NHTSA-2009-0059-0124, p.20]

Air distribution modes that direct air to the windshield or side glass should be exempt from requiring recirculation mode. Th ese modes are typically run in ambient temperatures where

5-147EPA Response to Comments

recirculation mode would not provide much energy saving to begin with but could have significant impact on passenger comfort and safet y. A recirculation strategy that is ambient temperature-based and compensated for A/C system modes that distribute ai r to the vehicle glass should be qualified for A/C cr edit. [NHTSA-2009-0059-0124, p.20]

Electronic Expansion Valve (EXV)

There are concerns with electronic expansion va lves harming compressor durability due to the risk of sending liquid refrigerant to the compressor when trying to control to low superheat. The benefits of the electronic expa nsion valve were minimized when evaluated on vehicles during the SAE IMAC studies. The benefit fr om electronic controlled expans ion valves is further reduced when using reduced reheat st rategies. [NHTSA-2009-0059-0124, p.21]

Recommendation:

Chrysler would recommend removing the credit fo r the electronic expansion valve and allow other GHG reducing technologies on the menu. [NHTSA-2009-0059-0124, p.21]

Oil Separator

Chrysler believes that better defi nition of an oil separator to qu alify for credits is required. The effectiveness of an oil separato r varies based on operating cond itions such as evaporator and condenser load, ambient conditions a nd engine speed. [NHTSA-2009-0059-0124, p.21]

The amount of oil must also be balanced to m eet overall compressor dura bility. Insufficient oil circulation will increase compre ssor operating temperature and w ear. Both of these conditions could lead to increased compressor work and re duced A/C system coefficient of performance ('COP'). [NHTSA-2009-0059-0124, p.21]

Recommendation:

The definition of an oil separato r should be based on an easily veri fiable set of de sign features that uses centrifugal force to separate the oil fr om refrigerant on either the high or low pressure side. [NHTSA-2009-0059-0124, p.21]

If a test is required to verify the effectiveness of an oil separator then it should be performed on the supplier's bench and be limited to 3000 rpm or less, (typical vehicl e usage speed).[NHTSA2009-0059-0124, p.21]

Humidity Sensor

Mobile A/C systems remove moisture from inco ming air to control air discharge temperature. Compressor control is one way by which this is accomplished. Compressor operation quickly removes sensible heat from the air thereby lowe ring the temperature. Frequently the compressor continues cooling the ai r by removing the latent heat due to moisture from incoming air. However, the compressor is cycled when occupant comfort is determined by indirect means

5-148EPA Vehicle Program, Feasibility, and Estimated Impacts

(e.g. discharge air temperature) a nd compressor control is less refi ned than could be had with a humidity sensor. The humidity sensor helps dete rmine the amount of dehumidification needed to achieve passenger comfort and therefore the amo unt of compressor on-time needed. Controlling humidity in a passenger cabin can significantly reduce indirect GHG emissions related to A/C system operation. [NHTSA-2009-0059-0124, pp.21-22]

Recommendation:

Chrysler recommends that EPA a dd humidity sensor to the indi rect technology menu and assign a value of at least 5 g/mi CO 2e credit. [NHTSA-2009-0059-0124, p.22]

Non-A/C Equipped Vehicles

Vehicles that are not equipped with an A/C syst em cannot leak refriger ants and do not consume fuel for A/C system operation. As such they s hould be rewarded maximum A/C credit. [NHTSA2009-0059-0124, p.24]

Volvo Car Corp.

If MAC idle test is kept, VCC believes the proposal needs to be cl arified. Please see MAC recirculation. Several studies describe concerns with CO2 concentrations in the air of the passenger compartment while driving in recirc ulation. High CO2 concentrations lead to drowsiness, headache, fogging etc that may reduce th e driver's ability to safely drive the vehicle. There are several ways to mitigat e CO2 build-up e.g., by switching to outside air, partial outside air or other methods after the cool down phase. These strategies are best managed by the vehicle manufacturers on a vehicle-specific basis. EPA should allow the ma nufacturers the flexibility to choose among these strategies to maintain relevant air quality levels for safe driving while still earning credits for efficiency improvements.

Alliance of Automobile Manufacturers (Alliance)

Although there are substantia l potential MAC efficiency improvements based on known technologies, the EPA proposal needs modifications in order to create the right incentives to fully utilize these technol ogical improvements. Prior to 2014, EPA proposes basing MAC indirect credits on the applicati on of MAC efficiency technologies from a list, with a credit amount assigned to each technology on the list. Beginning with MY 2014, EPA discusses first testing MAC efficiency in either an idle test or a modified SC03 test, and then allowing those vehicles that surpass fleet averages by a minimum threshold on the test to then earn credits based on their use of technologies from the list. [OAR-2009-0472-6952.1, p.10]

MAC efficiency is best evaluated over a range of operating conditions th at are, in total, representative of the real world. Because of the wide range of temperature, humidity, solar load, and other climate conditions that drivers enc ounter in various regions and seasons, precise estimates of overall efficiency are best derived from analytical techni ques such as computer simulations. The GREEN MAC Lifecycle Cl imate Change Performance (LCCP) model developed with EPA provides a good framework for evaluations across a repr esentative range of

5-149EPA Response to Comments

operating conditions. It is not prac tical to attempt either vehicle or MAC system efficiency tests over such a wide range of conditions as are actually encountered by most drivers. While automobile manufacturers each have proprietary energy consumption analysis simulation tools, it would take some time for EPA to establish a co mmon, public one for purposes of this regulation. Therefore, the proposed “menu” technology list approach is a good, simplified way to get an early start toward incentivizi ng implementation of more effi cient technology. [OAR-2009-0472­ 6952.1, p.10]

Some modifications to the technology list woul d create a better incentive structure for rapid progress toward implementing these tec hnologies. [OAR-2009- 0472-6952.1, p.10] [[See OAR2009-0472-6952.1, pp.10-26 for a detailed discussion a bout the modifications to the technology list]]

Toyota Motor North America

EPA proposes that manufacturers making improvements in A/C systems to increase efficiency should be awarded credits based on the CO2 em issions reductions that would result. EPA's proposal uses a design based menu approach to quantify improvements in A/C efficiency and also proposes to begin requiring manufacturers to confirm that t echnologies applying for these efficiency credits are measurably improvi ng the system efficiency. [OAR-2009-0472-7291, pp.20-21]

Prior to 2014, EPA proposes basing MAC indirect cr edits on the application of MAC efficiency technologies from a menu, with a credit amount assigned to each technology on the menu. Figure 10 below shows Toyota's estimates of A/C power consumption reduction that can occur through the adoption of improved A/C technologies. This analysis is based on Toyota Prius - a highly improved A/C system example. [OAR-2009-0472-7291, p.21]

By adopting these technologies, some of whic h were not listed in EPA's proposed menu, A/C power consumption is reduced by about 50% when compared with the baseline A/C system. EPA proposed that the maximum A/C credit of 5.7 g/mi be based on an equivalency to A/C power reduction of 40%. As a result, each technol ogy would be scaled by this 40% factor and therefore, Toyota suggests a modified menu sheet as shown in Table 1 using the equation below:

Credit (g/mile) = Estimated reduction in A/C CO2 emission (%) / 40 (%) x 5.7 [OAR-2009­ 0472-7291, p.21]

BMW of North America, LLC (BMW)

The EPA and NHTSA have succeeded in delivering a balanced approach that forces significant change in vehicle designs while at the same time incentivizing innovation th at can be credited to any auto maker who can prove the benefits eith er during the test cycl e or through their own documented and verified test results. Beyond this , we support the consider ation of credits for improved air conditioning systems as an e ffective method for reducing greenhouse gas emissions. [These comments were submitted as testimony at the New York public hearing. See docket number EPA-HQ-OAR-2009-0472-4621, p. 136.]

5-150EPA Vehicle Program, Feasibility, and Estimated Impacts

As noted in our previous submission, BMW s upports credits for improved air conditioning systems as an effective method for reducing GHG emissions and improving fuel economy. In addition to the proposed AlC C02 idle test pr ocedure and technology lis t, BMW recommends the following changes: [OAR-2009-0472-11294.1, p. 1]

The proposed rule includes credit for reduced reheat externally-cont rolled and variabledisplacement compressors. Beyond these technologi es, BMW suggests also approving electrical driven compressors since equivalent or even better performance can be achieved. [OAR-2009­ 0472-11294.1, p. 2]

Furthermore, BMW proposes to modify the defini tion of oil separator. Th e definition appears to describe an oil separator outside of the comp ressor: 'Oil separator means a mechanism which removes at least 50 percent of the oil entraine d in the oil/refrigerant mixture exiting the compressor and returns it to the compressor housing or compressor inlet.' Since it is also possible to integrate an oil separator in to the compressor, the definiti on should be modified in the following way: 'Oil separator means a mechanism which removes at least 50 percent of the oil entrained in the oil/refrigerant mixture exiting the compressor or exiting a similar compressor without an external oil separator and returns it to the compressor housing or compressor inlet.' [OAR-2009-0472-11294.1, p. 2]

Public Citizen and Safe Climate Campaign

EPA proposes to give credits for changing refrigerants and improving air conditioning efficiency. The European Union is requiring automakers to switch air conditioning refrigerants, so these credits will be a windfall for automake rs. These credits could cause the second largest reductions in the standard an automaker must meet . We urge that these credits be predicated on “additionality.” That is, EPA mu st safeguard against granting automakers valuable compliance credits for improvements they were planning to make in absence of regulation. EPA and NHTSA still receive product plan information from auto makers, although this information is no longer used as the principal basis on which the agencies set the level of the sta ndards. The product plans could be used by EPA to establish whether cred its for refrigerant switching are additional. [OAR-2009-0472-7050.1, p.8]

Motor and Equipment Manufacturers Association

Credits for A/C Systems Must Accurately Represent the Benefit of the Technology. MEMA appreciates the efforts to quantify the true affect of air conditioning systems (A/C) on vehicle fuel economy. Importantly, the credit sy stem proposed can provide the incentive to invest in the additional technologi es/products needed to help reduce the fuel consumption by the A/C system. To accomplish this, the credit system must accurately represen t the benefits of the significant energy saving technol ogies. [OAR-2009-0472-7121.1, p.7]

[See Docket OAR-2009-0472-7121.1, pp. 7-9 on deta iled comments pertaining to Energy Calculations and Credits, Re vise the Single-Vehicle Test Protocol, and Summary of Recommended Emission Credits. Also s ee OAR-2009-0472-7121.1, Appendix A for Summary of 2000 Compressor Power Consumption Study]

5-151EPA Response to Comments

Clean Energy Fuels

Clean Energy would like to better understand th e proposal for air condit ioning credits based on Table III.A.3-2, whereas projected FFV credits receive 6 credits in 2012 and 0 credits in 2016 and air condition efficiency credits receive 3.1 credits in 2012 and 10.6 credits in 2016. While we support and courage federal efforts that veri fy that FFVs and dual-fu eled alternative fuel vehicles actually operate on alternative fu els beginning in 2016, we believe dual-fueled alternative fuel vehicles powered by natural gas - due to their si gnificant incremental costs - are more likely to operate on natural gas due to cost savings associated with the fuel whereas the cost savings are more questionable with ethanol . Specifically, the cost of a NGV conversion is significantly greater th an the conversion costs associated with Ethanol 85 vehicle. Failure to take advantage of the cost savings associated natura l gas as a transportation fuel defeats the very economic reason for performing a NGV conversion. [OAR-2009-0472-7220.1, p.7]

With this understanding of dual-fu eled alternative fuel vehicles powered by natural gas, it is difficult to understand how improving the air conditio ning efficiencies of a vehicle receives more credits than dual-fueled alternat ive fuel vehicles. dual-fueled a lternative fuel vehicles, that demonstrate the use the alternative fuel, pr ovide both GHG and foreign oil displacement benefits. Air conditioning units , on the other hand, appear to only address GHG emissions and, yet, they receive more credit. This seems count er-intuitive to the proposed National Program's multiple goals as something that achieves half of the objectives should only receive half of the credit. Clean Energy is further concerned that, by providing generous credits to air conditioning efficiency improvements, this will provide yet a nother obstacle to the produc tion of vehicles that are more efficient, operate on lo w to ultra low carbon fuels, or combine both strategies. Clean Energy opposes this generous issuance of credit s as it clearly is intended to water down the rulemaking. [OAR-2009-0472-7220.1, p.7]

[[Clean Energy also submitted these comments as testimony at the Detroit public hearing, See docket number EPA-HQ-OAR -2009-0472-6185, pp. 136-137.]]

Honeywell International, Inc.

Recommendations to improve A/C efficiency credits proposal (indirect emissions)

Honeywell supports EPA's proposal to make av ailable A/C Efficiency Credits for actions manufacturers can take to improve air conditi oning efficiency and reduce fuel consumption. However, we argue that EPA can improve its proposed program so that availability of A/C system credits are based upon verifiable data and the best availa ble science. The Proposed Rule provides credits for A/C system efficiency im provements based on a checklist style approach that Honeywell feels is not wa rranted for efficiency credits for operating systems over wide ranges of operating conditions. In lieu of th is approach, we recommend components of A/C system efficiency are tested individually where such testing is feasible. [OAR-2009-0472­ 7206.1, p.6]

5-152EPA Vehicle Program, Feasibility, and Estimated Impacts

For example, we concur with EPA's estimate of a 0.9 g/mi CO2 A/C effi ciency potential credit for Improved Blower and Fan Motor Control. However, instead of a pre-established credit, we believe that the blower and fan pulse width modulation ('PWM'), cr edits may be quantified easily and tested independently of A/C performance testing using a simple procedure based on the time spent with blower and engine cooling fan 'on time' due to operation of the A/C and heater controls. While a specific procedure currently does not exist, it is easy to visualize a simple timeweighted test based on the typical usage para meters like those in the Green-MAC-LCCP and outlined in SAE Standard 12766 - Life Cycle Analysis to Estimate the CO2 -Equivalent Emissions from MAC Operation to develop th e correct on/off times and associated energy savings. An approach that implemen ts some test certification, inst ead of the checklist strategy, is critical to reflect real-life ope rating conditions because substantia l variance that results from the type of implementation of the fan, its blower PWM controls, and the strategy utilized to improve the energy efficiency. The mere presence of a PWM control does not necessarily optimize the use of the controller and thus sa ve energy; as ,such a check-list credit will not reflect accurately actual avoided GHG emissions. [OAR-2009-0472-7206.1, p.6]

EPA states that manufacturers seeking to ge nerate A/C Efficiency Credits use specific performance tests for model years 2014 and later. We believe that EPA should expedite the use of specific performance tests to reflect real-world operating conditions and emission displacement. We recommend the use of the SAE Standard 12765- Proc edure of Measuring System COP of a Mobile Air Conditioning Sy stem on a Test Bench provides the best methodology of gaining energy-efficiency based credits. SAE Standard 12765, when coupled with the Green-MAC-LCCP developed with su pport of EPA and outli ned in SAE Standard 12766 - Life Cycle Analysis to Estimate the CO 2 - Equivalent Emissions from MAC Operation, can correctly weight the different operating mo des found in the United States to determine an overall country weighting of the vehicle miles traveled for the fleet. [OAR-2009-0472-7206.1, p.7]

With respect to the individual efficiency-impr oving A/C Technologies and Credits proposed in Table III C. 1-1 of the Preamble, we provide the following comments and suggestions: [OAR2009-0472-7206.1, p.7]

Honeywell disagrees with the calculation of reduced reheat using an externally-controlled, variable-displacement compressor credit

Honeywell questions whether an ex ternal control delivers better energy efficiency of compressor operation over internal controls based on conditions within the A/C system. This inference is not founded fundamentally since the extern al effect directly impacts the internal controls , i.e. if the cooling load is high with high te mperature air flowing over an eva porator core. In this scenario, the evaporation pressure in the evaporator is also high, as th e thermostatic expansion valve allows more refrigerant to flow through the evap orator to carry away h eat through the pure fluid pressure-temperature relationshi p (PT chart). If the cooling load is low, then the reduced airstream temperature corresponds to a low evaporation pressure, wh ich can be used as a control to reduce the compressor displacement and save energy. Both internal controls and external controls can give the desired efficiency im provements if implemented correctly. [OAR-2009­ 0472-7206.1, p.7]

5-153EPA Response to Comments

In the DRIA, EPA suggests that reheat is a pena lty on system efficiency. While this assessment is correct for dry regions, reheat is a method to control the humidity in an operating system, particularly in the eastern U.S. where humid ity levels can be very high during the summer months. Since both internal and ex ternal controls typically feed to the onboard computer for system operation, both types of controls can manage system operation effectively. [OAR-2009­ 0472-7206.1, p.7]

Internal, external, and compressor controls should be validated th rough a testing protocol such as SAE Standard J2765 - Procedure of Measuri ng System COP of a Mobile Air Conditioning System on a Test Bench. Honeywell suggests that the credits be applied for optimization of all types of system controls relative to the total en ergy saved to a current production system. [OAR2009-0472-7206.1, pp.7-8]

Reduced reheat using an extern ally-controlled, fixed displace ment or pneumatic variabledisplacement compressor credit

Honeywell's comments are the same as in section 2.1, above. [OAR-2009-0472-7206.1, p.8]

Defaulting to recirculated cabin air credit

EPA proposes to provide a credit for A/C systems that default to recirculated cabin air whenever the outside ambient temperature is higher than 75 degrees Fahrenheit. While Honeywell agrees that the use of recirculated air does reduce the energy required to operate the vehicle air conditioning during times of high ambient temperature, we also believe that placing a default position to recirculation may cause other prob lems specific to the automotive application. Specifically, while the humidity can be managed through the use of a humid ity sensor, the indoor air quality or CO2 concentrations may exceed the ASHRAE 62 guideline value of 1,000 ppm for normally occupied spaces. Note that due to occu pant respiration the CO2 value may rise to a 2 percent saturation value and indu ce a state of drowsiness, or in the extreme, driving while impaired ('DWl'). [OAR-2009-0472-7206.1, p.8]

Honeywell recommends that if a default recirculation door placem ent is to be specified by the credit rule, then additional safety devices will be required for driver/occu pant operational safety. [OAR-2009-0472-7206.1, p.8]

Improved blower and fan motor controls credit

Honeywell concurs with EPA's estimate of a 0.9 g/mi CO2 A/C Efficiency Credit for Improved Blower and Fan Motor Control. Instead of a pre- established credit, however , we believe that the blower and fan PWM credits may be quantifie d easily and tested independently of A/C performance testing using a simple procedure ba sed on the time spent with blower and engine cooling fan 'on time' due to operation of the A/C and heater controls. While a specific procedure does not exist currently, it is easy to visualize a simple time weighted test based on the typical usage parameters like those in the GreenMAC- L CCP and outlined in SAE Standard J2766 - Life Cycle Analysis to Estimate the CO2 -Equivalent Emissions from MAC Operation to develop the correct on/off times and associated energy savings. Once again, a testing procedure is preferable

5-154EPA Vehicle Program, Feasibility, and Estimated Impacts

to a checklist strategy here because of the variable impacts of implementation of the fan, the blower PWM controls, and the st rategy utilized to improve the energy efficiency. In production, these systems will be supplier dependent with so me suppliers providing a superior strategy to provide an energy saving system (controller and motor combinat ion), while other suppliers may only provide a basic PWM system that is not optim ized and thus insufficient to save energy or GHG equivalents. [OAR-2009-0472-7206.1, p.8]

Electronic expansion valve credit

Honeywell requests the EPA revise its assumptions related to the Electronic Expansion Valve ('EXV') and modify the available A/C Effici ency Credit accordingly. Unfortunately, the description of the operation of a conventional thermostatic expa nsion valve ('TXV') provided in the DRIA is incorrect. EPA states that a TXV uses an internal temperature reference to assure a constant temperature level for the expanded refrigerant gas typically a fe w degrees Celsius above the freezing point of water. However, Honeyw ell suggests that a properly operating TXV does not control the evaporator temperature to a c onstant value a few degrees Celsius above the freezing point of water. In contra st, a correct TXV maintains a cons tant superheat of generally 2 to 5 degrees Celsius above the boiling point im posed by the evaporator loading. That is, a properly sized TXV design is intelligent enough to sense when cooling is required based on the cooling characteristic imposed by th e operator. The TXV then adjusts to feed or restrict flow to the evaporator based on the amount of refriger ant needed to balance the load. Proper TXV selection also involves determination of a defau lt size, where as the free zing point of water is approached the flow of refrigerant is maintained such that the evaporat or is not over-cooled, wasting energy and causing core freeze up. The ge neral operation of elec tronic expansion valve is to take a measurement of the suction pressure and cooled air output te mperature to determine the proper algorithm for opening or clos ing the valve. [OAR-2009-0472-7206.1, p.9]

While the electronic expansion valve may offer so me advantages when vehicle operation is on the border of conventional TXV control bands, we question that the mere inclusion of an electronic expansion valve is sufficient to determ ine the proper setting of the valve and control algorithm. We advise that advancements with the electronic expansion valve over the TXV be demonstrated by the vehicle or component manuf acture over a base operati on valve over a range of operating conditions such as those found in SAE Standard J2765. [OAR-2009-0472-7206.1, p.9]

Improved-efficiency evaporat ors and condensers credit

EPA proposes an Efficiency Credit for the use of improved evaporators and condensers. Honeywell concurs with EPA that SAE Standa rd J2765 - Procedure of Measuring System Coefficient of Performance of a Mobile Air Conditioning System on a Test Bench should be used to show system improvements in energy effi ciency and cooling capac ity of systems. [OAR2009-0472-7206.1, p.9]

Oil separator credit

5-155EPA Response to Comments

EPA proposes an Efficiency Credit for manufact urers if oil is prevented from circulating throughout the A/C System due to in efficiencies resulting from h eat transfer effectiveness. While large amounts of oil circulat ing in an operating system can im pact the overall efficiency of a system, Honeywell suggests that if the oil separator is not pr operly designed, the pressure drop losses due to the flow of refrig erant through such a device may ne gatively impact the efficiency of a system. EPA calculates th e credit based upon the findings of the SAE IMAC team for a standard credit of 0.6 g/mi CO2. Instead, we submit that the impact of oil separators be tested identically to evaporators and condensers by using SAE Standard J2765- Procedure of Measuring System COP of a Mobile Air Conditioning System on a Test Bench to determine the overall efficacy and resulting credit of such an additional device. Using the SAE Standard J2765 will enable the accurate determination of the efficiency of such a technology. [OAR-2009-0472­ 7206.1, pp.9-10]

European Automobile Ma nufacturers Association

Credits for improving efficiency

The EPA proposal combines credits for improved evaporators and condensers, and PWM fan and PWM blower. ACEA proposes not to combine the credits for the components, because every optimized component represents an improvement. Each improvement should achieve a credit. If one of the optimized components will be used, a credit should be realized.

Default recirculation:

It is not always favorable to use recirculati on at 75F, because there are a lot of different parameter which influences the benefit: The benefit of recirculation depends on set point air temperature and also on different external conditions like heat pick up from engine hood. So it should be possible to get th e credit if there is an intelligent air recircula tion control, which takes into account these different parameters. [OAR-2009-0472-7444.1, p.1]

Credits for reduced reheat: it is also possible to realize reduced reheat by an electrical compressor, so we suggest to adjust the wordi ng like that: “..Reduced reheat, with either externally-controlled, variable-displacement compressor, or fixed / internally controlled compressor with a control of the ON/OFF temper ature threshold , or el ectrical compressor: 1.7 g/mi.; [OAR-2009-0472-7444.1, p.1]

Credits for improving efficiency (2)

Oil separator: the definition describes an oil se parator outside the compressor: “Oil separator means a mechanism which removes at least 50 percent of the oil entrained in the oil/refrigerant mixture exiting the compressor and returns it to the compressor housing or compressor inlet”. [OAR-2009-0472-7444.1, p.2]

As it is possible to integrate an oil separato r into the compressor the definition should be independent. [OAR-2009-0472-7444.1, p.2]

5-156EPA Vehicle Program, Feasibility, and Estimated Impacts

Credits for improving efficiency (3)

Improved evaporators and condensers : the defini tion references to a standard which is not defined: “Improved evaporators and condensers means that the co efficient of performance (COP) of air conditioning system using improved evap orator and condenser designs is 10 percent higher, as determined using the bench test procedures described in SAE J2765 “Procedure for Measuring System COP of a Mobile Air Conditioning System on a Test Bench,” when compared to a system using standard, or prior model year, component de signs. SAE J2765 is incorporated by reference; see §86.1.” [OAR-2009-0472-7444.1, p.2]

The reference to prior model year means th at OEM which uses already improved heat exchangers in the prior model year, do not get a ny credit. So we suggest to make an absolute definition like an heat exchanger efficien cy. For evaporators / condensers we recommend thresholds based on current technology, e.g.:

Improved evaporators (tube to t ube spacing <14 mm) and condense rs (tube to tube spacing <12 mm) [OAR-2009-0472-7444.1, p.2]

These are the same thresholds as in ou r recommendation on page 12 -- The following recommended thresholds represent high efficien cy standards based on the current state of technology: Condensers: Micro channel tubes with optimized flat tube-to-tube spacing ≤ 12mm. Evaporators: Optimized fl at tube-to-tube spacing ≤ 14 mm. [OAR-2009-0472-7444.1, p.2]

An internal heat exchanger should be added to the list of compone nts/credits. [OAR-2009-0472­ 7444.1, p.2]

Credits for improving efficiency (4)

Credits for improved glazing and shading: We s uggest to integrate possible credits for improved glazing and integrated shading in the GHG. [OAR-2009-0472-7444.1, p.2]

New York State Department of Environmental Conservation

Air Conditioning Efficiency Credit s (Preamble Section III.C.1) EPA is also proposing an engineering analysis based credit program for air conditioning efficiency. Beginning with the 2014 Model Year a ve hicle will have to meet a threshold test in order to be eligible for the credits. This threshold is a maximum of 14.9 grams/minute higher CO2 emissions at idle with the air conditioning on than with the air conditioning off. [OAR2009-0472-7454, p.2]

Testing by the Department suggests that many exis ting vehicles, particularly smaller cars, can nearly meet the proposed threshold. However, a minivan exhibited emissions more than twice the proposed threshold. This suggests that large in terior volume vehicles may have no chance of meeting the threshold for credits. In that case manufacturers have no ince ntive to invest design and production resources into improving the efficien cy of the air conditioning systems for these vehicles. This deprives the environment of th e benefits of improveme nts to the largest air

5-157EPA Response to Comments

conditioning systems. EPA should consider an alternate threshol d that varies with interior volume, at least until a certification emissions testing method for the incremental emissions due to air conditioner operation can be developed. [OAR-2009-0472-7454, p.2]

EPA Response:

A/C Idle Test Threshold

Several commenters noted that the proposed 30% reduction in emissions on the A/C Idle Test to qualify for efficiency credits wa s not desirable, as vehicles which came close to, but did not exceed, the threshold would receive zero credit fo r any of the efficiency -improving technologies on their vehicles. In addition, the New York St ate Department of Environmental Conservation commented that small cars could easily meet the proposed threshold, whereas vehicles with larger interior volumes would not. EPA examined the results of vehicles tested during development of the A/C Idle Test and found little correlation between interior volume and the incremental change in idle test results (A/C on vs off). Because there is environmental benefit (reduced CO2) from the use of even some of these efficiency-improving technologies, EPA believes it is appropriate to scale the A/C efficiency credits to account for these partial improvements. We therefore are modifying our proposed approach on this issue by allowing some credit to still be earned on those vehicles which do not meet or exceed the threshold, while making a multiplicative credit adjustment factor to th e eligible credits. This factor will be scaled from 1.0 to 0, with vehicles demonstrating a 30 % or better improvement (14.9 g/min or lower) receiving 100% of the eligible credit (adj. factor = 1.0), and vehicles demonstrating a 0% improvement - 21.3 g/min or higher result -- rece iving no credit (adj. factor = 0)). See 86.1866­ 12 (c)(5) (iii) (B).

Elimination of EXV Technology from the Menu

Many comments were received stat ing that the EPA estimate for EXV efficiency was too high, that no manufacturers were developing this techno logy within the timeframe of this rulemaking, and that it should not be included on the list of efficiency-improving technologies. These commenters noted that the SAE IMAC report (from which we referenced the expected efficiency improvement) utilized an EXV in conjunction with a more efficient compressor – and not as a standalone technology. Given the uncertainty in the effectivene ss of EXV technology, and that no manufacturers seem to plan on utilizing it, we have removed this technology from the list of efficiency-improving technologies and credits.

Inclusion of IHX Technology in the Menu

Many commenters requested that an internal heat exchanger, or IHX, be added to the design menu. EPA initially considered adding this technol ogy, but in our initial revi ew of studies on this component, we had understood that the value of the technology is limited to systems using the alternative refrigerant HFO-1234yf. Some manufacturers, however, commented that an IHX can also be used with systems using the current refr igerant HFC-134a to improve efficiency, and that they plan on implementing this technology as part their strategy to improve A/C efficiency. Based on these comments, and projections in a more recent SAE Technical Paper, we project

5-158EPA Vehicle Program, Feasibility, and Estimated Impacts

that an IHX in a conventional HFC-134a syst em can improve system efficiency by 20%, resulting in a credit of 1.1 g/mi. 6

Control of Recirculated Cabin Air

In response to comments concerning the applicability and effectiveness of technologies that were or were not included in our an alysis, we have made several changes to the design-based menu. 7 First, we have separated the cred it available for ‘recirculated air’ 8 technologies into those with closed-loop control of the air supp ly and those with open-loop cont rol. By “closed-loop” control, we mean a system that uses feedback from a sensor, or sensors, (e.g., humidity, glass fogging, CO 2 , etc.) to actively control the interior air quality. For those systems that use “open-loop” control of the air supply, we proj ect that since this approach ca nnot precisely adjust to varying ambient humidity or passenger respiration levels, th e relative effectiveness will be less than that for systems using closed-loop cont rol. Consequently, such sy stems should not automatically receive the same credit as an open-loop system. The final rule therefor e provides that open-loop control at different temperatures may receiv e credits on a case-by-case basis upon EPA approval of an engineering analysis submitted by the manufacturer. See 86.1866-12 (c) (iii).

Improved Evaporators and Condensers

In response to comments, we have modified the definition of ‘improved evaporators and condensers’ to recognize that impr oved versions of these heat exch angers may be used separately or in conjunction with one another, and that an engineering analysis must indicate a COP improvement of 10% or better when using ei ther or both component s (and not a 10% COP improvement for each component). Furthermore, we have modified the text of the regulation from proposal to clarify what are considered to be the ‘baseline’ compone nts for this analysis. See 86.1866-12 (c) (v). We consider the baselin e component to be the version which a manufacturer most recently had in production on the same vehicle design or in a similar or related vehicle model. The dimensional ch aracteristics (e.g. t ube configuration/ thickness/spacing, and fin density) of the baseline components are then compared to the new components, and an engineering analysis is required to demonstrate the COP improvement.

Efficiency Difference Between HFO1234yf and R-134a Refrigerants

In the proposal, EPA had requested comments on wh ether the efficiency credit for alternative refrigerants should be adjuste d. Although a few commenters noted that the efficiency of an HFO1234yf system may differ from a current HFC-134a system, 9 we believe that this difference does not take into account any efficiency improve ments that may be recovered or gained when

6 Mathur, Gursaran D., "Experimental Investigation with Cr oss Fluted Double-Pipe Suctio n Line Heat Exchanger to Enhance A/C System Performance,” SAE 2009-01-0970, 2009.
7 Commenters included the Alliance of Automobile Manufacturers, Jaguar Land Rover, Denso, and the Motor and Equipment Manufacturers Association, among others.
8 Recirculated air is defined as air pr esent in the passenger compartment of the vehicle (versus outside air) available for the A/C system to cool or condition.
9 Ford noted that “the physical properties of the altern ative refrigerant R1234yf could result in a reduction of efficiency by 5 to 10 percent compared to R134a in us e today with a similar refrigerant system and controls technology.”

5-159EPA Response to Comments

the overall system is specifically designed w ith consideration of the new refrigerant ’ s properties (as compared to only substituting the new refr igerant). In addition, Ford noted that the environmental benefit of reducing the GWP from 1430 to 4 far outweighed any potential decrease in system efficiency, and that they supported the maximum credit for use of an alternative refrigerant, as provided by this ru le. EPA agrees with these points. Moreover, the agency believes that the idle test used from MY 2014 on as a precondition to obtaining efficiency credits will help ensure that the alternative re frigerant systems will be properly calibrated for efficiency (at least at idle) so as to minimize “ backsliding ” . EPA is therefore not adjusting the credits based on efficiency differences for this rule.

Modifications to the Design-Based Menu

Several commenters requested that adjustments be made to the design-based menu for certain technologies, or that partial credits be grante d for technologies which co me close to, be do not meet, the requirements set forth in this rule. EPA acknowledges that a ny design-based approach is imperfect (in that it cannot capture every design nuance or technology advance that may occur during the timeframe of the rule), but we feel that this approach is sufficient in that it encourages the use of current state-of-the-a rt A/C technologies on vehicles. For technologies such as scroll compressors, which operate more efficiently at high engine speeds than at idle speeds, we believe that the A/C Idle Test is still a valid tool for quantifying the overall efficiency of an a A/C system, as idle time is a significant portion of daily driving. It thus is reasonable to use an idle test as a screening tool. Moreover, any vehicle with a co mpressor design, or A/C component, which does work effectively at idle will likely exhibit poor cooling system performance under this condition (i.e. when interior cooling is especially desired by consumers), and so is unlikely to be used in high volumes by manufacturers.

5.7.1.3. Idle Test Procedure

Organization: Ford Motor Company Honda Motor Company Association of Intern ational Automobile Manufacturers (AIAM) Chrysler Group, LLC Environmental Defense Fund Alliance of Automobile Manufacturers (Alliance) Toyota Motor North America National Renewable Energy Laboratory California Air Resources Board Honeywell International, Inc. European Automobile Manufacturers Association New York State Department of Environmental Conservation Yuli Chu

Comment:

Ford Motor Company

5-160EPA Vehicle Program, Feasibility, and Estimated Impacts

Ford has concerns regarding vehicle testing such as the A/C idle Test as an accurate means to measure the effect of A/C operation. Using the de lta between two tests increases uncertainty and is not a robust test approac h. Ford performed a simple cont rol parameter study, via Computer Aided Engineering (CAE), that shows inherent va riability in the proposed idle test. The results are shown in Chart I: Compressor Power Variability below. [See OAR-2009-0472-7082.1, p. 7 for Chart I]

Ford has experience in running A/C on versus A/C off fuel consumption tests in climatic wind tunnels. As shown in Table II [See OAR-2009- 0472-7082.1, p. 7 for Table II] the data shows inherent variability. Idle conditi ons are the most difficult to cont rol. Facility correlation across industry and government laborat ories is also a concern.

In addition, A/C idle results for HEV are highly de pendent on the state of charge (SOC) of the vehicle prior to the test. Pr econditioning of the vehicle does not define SOC starting requirements for this test. A/C idle test cell ambi ent conditions will require all idle tests to be conducted in environmental chambers which are already fully utilized for other required certification tests. Ford validates ambient test cell environments at 68-86 °F and 50 ± 10 gr/lb. The proposal is for 75±2°F and 50±5 gr/lb. While Ford has a set point of 75°F, the tight control on temperature and humidity could only be achie ved in an environmental chamber. This is impractical from a facility standpoint. Ford reco mmends that the temperature not vary more than ± 5°F from the start of the test and that the humidity be expanded to 50±10 from ±5 gr/lb.

Inclusion of the SC03 test (air conditioning test procedure) into the 5-cycle FE requirement has already taxed the fully utilized environmen tal chambers. Adding a nother SC03 cycle would require significant incremental facility invest ments. The proposed SC03 test for A/C credits would be conducted at environmental conditions di fferent from FE tests meaning that additional environmental chamber testing is required. In addition, the proposed test cycle includes phases without A/C operation and at manual A/C operation points that are not incl uded in the FE test which also prevents optimizing fac ility usage. [OAR-2009-0472-7082.1, pp. 7-8]

Jaguar Land Rover

Jaguar Land Rover understands the in tention of the proposed air con idle test, as a simple test that could be carried out in existing emission fac ilities. However, we consider it would not be a reliable indicator of overall air c on efficiency. For instance, consider the case of a vehicle fitted with a scroll compressor. Such compressors are among the most efficient at normal road speeds, but do not perform well at low speed, including id le conditions. Vehicles equipped with scroll compressors would therefore be unfairly pe nalized in this test . [OAR-2009-0472-7213, p.2]

Honda Motor Company

EPA proposes a new idle-test to determine whet her or not a vehicle qualifies for the designbased air conditioning credits. Honda has three concer ns with this approach. First, the idle-test, proposed by EPA, does not adequately represen t a good metric to determine whether an A/C system is improved or not. Second, EPA’s idle-st op capable vehicles’ exemptions from the idle

5-161EPA Response to Comments

test, and third, the idle test th reshold is an “all or nothing” co ndition that results in unfair treatment. [NHTSA-2009-0059-0095.1, p.8]

Idle Test

In general, the idle test that EPA describes, represents only one conditi on among many in typical driving cycles. This test will potentially disadvantage technologi es which are less effective at idle yet more effective at a higher rpm ranges (e.g. scroll-type compressors). We support AIAM’s proposal for studying a better approach with a 3rd party, together with EPA and industry. [NHTSA-2009-0059-0095.1, p.8]

Exemption from Idle Test

In the idle-test, EPA offers an exemption from the “threshold” if the ve hicle’s air conditioning system is “solely powered by electricity” and ca n operate while the engine remains off for “at least 2 minutes.” [NHTSA-2009-0059-0095.1, p.8]

Honda believes that these criteria are unnecessarily restrictive. Honda’s Civic Hybrid has an air conditioning system that has two sources of pow er: electric and engine. During idle stop, this system is able to operate electrically for limite d periods of time, but it is not exclusively, nor “solely” powered by electricity. Further, the 2 mi nute requirement is very restrictive. Honda’s own testing of typical driving scen arios in the U.S. (California), Europe (Spain) and Asia (Japan) indicate that the vast majority (more than 90%) of idle events ar e less than 60 seconds in length (see Attachment 4). Although Honda’s idle stop duration is less than EPA’s 2 minute requirement, based on market research it provides significant value. Honda trusts that it was not the intent of EPA to exclude t echnologies like the A/C system in the Civic Hybrid. [NHTSA2009-0059-0095.1, p.9] [[See NHTSA-2009-0059- 0095.1, p.17 for Attachment 4]]

Idle Test Threshold

EPA has established a performance threshold on th e air conditioning idle te st in order to qualify for design-based A/C credits. This threshold crea tes an “all-or-nothing” condition, which is bad policy, and bad regulation. These “step functions ” unintentionally create winners and losers based on potentially minute and insignificant differences in performance. For example, an A/C system whose idle test score is slightly higher than the threshold would not be rewarded for its improved efficiency. This is a big downside of th is policy. In Attachment 5 we show examples of vehicles that have improved air conditioner pe rformance and just miss the threshold of 14.9 grams/minute. Honda does not propose to rela x the 14.9 grams/minute threshold, rather, we suggest that EPA create a linear f unction that seamlessly transitions from 0% of the A/C credits, based upon some average grams/minute value, to 100% of the A/C credits, based upon the 14.9 grams/minute threshold. In this manner, EPA will eliminate the arbitrariness of a single value. [NHTSA-2009-0059-0095.1, p.9] [[See NHTSA -2009-0059-0095.1, p.18 for Attachment 5]]

Association of International Au tomobile Manufacturers (AIAM)

5-162EPA Vehicle Program, Feasibility, and Estimated Impacts

Testing at idle is not reliably repeatable due to changes in the engine id le speed and especially due to changes/variances in vehicle front-e nd airflow and temperature due to front-end recirculation (engine heat recirculating to the fr ont face of the condenser). Available field data indicate that engine idling accounts for only 15 to 20% of vehicl e use. Therefore, testing only at one engine condition, an idle cond ition, would not be repeatable nor is it representative of the widely varying conditions and therefore energy used by the MAC system. Relying on the idle test would encourage the use of technology that reduces energy us age at idle in low to mid ambient temperature conditions at the expense of energy efficiency at road speeds and other conditions. Some of the most ener gy efficient technologies would not show any benefit at this condition – Air Inlet Mixture contro l (which is capable of up to a 35% reduction in overall A/C energy usage) would not likely show any savings in the proposed EPA test procedure. In summary, the proposed test would not encourag e the implementation of many of the most promising technologies that have been devel oped or are under deve lopment. [OAR-2009-0472­ 7123.1, p.12]

We are also concerned about the impact that the Agen cy’s idle test approach would have on manufacturer and Agency resour ces. The Agency’s proposed con cept would establish a new test that would have to be performe d by manufacturers and the Agency on large numbers of vehicles to provide data for greenhouse gas compliance purposes. [OAR-2009-0472-7123.1, p.12]

However, if EPA insists that the idle test approa ch must be included in th e final rule, that test should be considered as only one of the parameters that determines the air conditioning credit. In addition, it is unclear why EPA has proposed to grant efficiency credits only if gains in efficiency of at least 30 percent are achieved. See preamble at 49530. Under proposed section 86.1866-12(c)(5)(iii), only air conditioning system s that increase emissions by less than 14.9 grams per minute, as measured under the Agency ’s idle test, would qualify for credits. The Agency should encourage all efficiency improve ments, and lesser improvements should receive proportionately smaller credits. [OAR-2009-0472-7123.1, p.13]

Hyundai Motor Company

For MY 2012-2013 MY, EPA proposes to use a te chnology menu approach for determining A/C efficiency credits. Beginning in MY 2014, EPA pr oposes the use of an idle test for credit determination and requires a minimum 30 percent system efficiency improvement. We support the comments made by the Association of Inte rnational Automobile Manufacturers (AIAM) regarding the idle test, including:

• The idle test only represents one aspect of A/C system use.

• Testing at idle may not be reliably repeatable due to changes in the engi ne idle speed and frontend recirculation (engine heat recirculat ion to the front face of the condenser).

• New A/C technologies with the potential to improve efficiency may not have efficiency benefits realized during vehi cle idle and thus may not be captured by an idle test.

• The idle test will impose a new test proce dure and test burden on both industry and EPA.

5-163EPA Response to Comments

Like AIAM, Hyundai supports continuing the technology menu approach past MY 2013 and recommends that EPA work with industry to develop an appropriate performance test for potential application with MY 2017 and la ter GHG standards. [OAR-2009-0472-7231.1, p.6]

Chrysler Group, LLC

The A/C idle test's objective is to quantify GHG emissions related to A/C system operation at a given test condition applicable to all vehicles. The GHG emissions associated with A/C-on operation during the idle test are determined and compar ed against the GHG emissions associated with the A/C system off. A value of 14.9 grams/minute CO2 is employed, regardless of cabin volume or vehicle footprint, as a threshold below which the A/C system passes. Passing the idle test allows the OEM to use the menu appr oach to validate A/C indirect credit. Concern exits with the A/C idle test as curre ntly conceived. [NHTSA-2009-0059-0124, p.23]

A concern is that the menu items offering cred it will not always cont ribute to lowered GHG emissions as measured by the A/C system idle te st. The three most valuable indirect menu items may not be effective and theref ore not captured by idle test:

• Automatic recirculation at 75°F - Due to ambient temperature tolerances, the 75°F automatic recirculation strategy may not be active.

• Variable Displacement Compressor or Fixed Displacement Compressor with reduced reheat strategy - The manual idle test is performed at full cold where a reduced reheat strategy would not be active or at diminished capacity.

• The PWM blower contribution is maximized at low to medium blower speeds not captured by the idle test. The PWM cooling fan is not a major contributor since the fan duty cycle at 75°F and idle engine speed is not cons idered high. [NHTSA -2009-0059-0124, p.23]

Automatic temperature control A/C systems greatly benefit during the A/C idle test by providing lowered GHG emissions and also provide customer satisfaction benefits fo r occupant comfort. While this is desirable for OEMs, not all vehicl e segments support an automatic climate control system over the standard manual system due to price point. [NHTSA-2009-0059-0124, p.23]

Vehicles with manual temperature control are at a distinct disadva ntage relative to those with automatic temperature control systems during the A/ C system idle test procedure due to the test boundary conditions. The test boundaries do not re present real world use conditions. [NHTSA2009-0059-0124, p.23]

Recommendation:

The A/C idle test was developed by testing many different vehicles repres enting different levels of A/C control strategy sophisticat ion and technology. As can be s een in the scatter of the A/C idle test results, EPA has not correlated A/C idle test performance with vehicle or A/C system parameters, preferring a 'one size fits all' approach of a 14.9 gram CO2/minute threshold. [NHTSA-2009-0059-0124, p.23]

5-164EPA Vehicle Program, Feasibility, and Estimated Impacts

Chrysler believes correlation could be achie ved between A/C system parameters and GHG emissions levels and supports investing resources as needed to develop a vehicle A/C test that robustly captures GHG emissions reductions. Chrysler believes the current A/C idle test can be improved by defining baseline sets of vehicle para meters such as compressor type, oil separator type, automatic recirculation, etc ., and evaluating the parameters a nd correlating the results that show a trend. This could be used to fully va lidate the indirect technology menu in time for the 2017 model year. [NHTSA-2009-0059-0124, pp.23-24]

Environmental Defense Fund

The Proposed Air Conditioning Credits for Dete rmining Compliance with the Clean Air Act Standards Incentivize Reductions in Hydrofluorocarbon Refrig erants, Which Are Potent Greenhouse Gases.

EPA proposes compliance credits for reducing the greenhouse gases as sociated with air conditioning systems, a policy approach that provides a strong incentive for mitigating hydrofluorocarbon refrigerants, wh ich are powerful greenhouse gas pollutants, as well as the greenhouse gas emissions due to the load associ ated with the air cond itioning operation. 74 Fed. Reg. at 49,482. [OAR-2009-0472-7285.1, pp. 24-25]

The environmental performance and economic flex ibility inherent in the overarching systems based approach under the federal Clean Air Act en able manufacturers to secure cost-effective emissions reductions in non-CO2 greenhouse gases and to efficiently optimize CO2 emissions reductions across the entire vehicle system including the air c onditioning operations:

EPA is proposing an approach that allows ma nufacturers to generate credits by reducing GHG emissions related to A/C system s. Specifically, EPA is proposing a test procedure and method to calculate CO2 equivalent reductions for the full usef ul life on a grams/mile basis that can be used as credits in meeting the fleet average CO2 sta ndards. EPA’s analysis in dicates this approach provides manufacturers with a high ly cost effective way to achieve a portion of GHG emissions reductions under the EPA program. 74 Fed. Reg. at 49,482. [OAR-2009-0472-7285.1, p. 25] Under the CAFÉ program, these reductions are disallowed for passenger cars. 74 Fed. Reg. at 49,468. EDF strongly supports the proposed EPA sta ndards that incentivize reductions in the harmful greenhouse gases associated with air conditioning systems, an approach consonant with the provisions of the Clean Air Act and sound public policy. [OAR-2009-0472-7285.1, p. 25]

Alliance of Automobile Manufacturers (Alliance)

If a test is to be used, designing the specific test procedure is very important. It would be especially important that any tests include an eval uation of energy consumption at moderate MAC loads. Not only are moderate loads the most commonly encountered conditions in the U.S., but the most attractive near term energy effi ciency technologies, such as many of those demonstrated in the IMAC program, tend to give their benefits under moderate loads. At high loads, systems with variable compressors, sophis ticated computer control strategies, and other key IMAC technologies may be indistinguish able from older designs without these

5-165EPA Response to Comments

improvements. In order to provide the right incen tives to fully utilize these technologies, the credit program must identify them as bene ficial and award cred its accordingly. [OAR-2009­ 0472-6952.1, p.26]

The modified SC03 and idle tests discussed by EPA are not representative of real world conditions, since they are not performed over a range of temperatures and air conditioner operating conditions. Some efficiency technologies work well at low loads and others at high loads, and a good test would need to cover a vari ety of conditions like those encountered in the real world. The SC03 cycle is not a good, representa tive test because it only includes high loads. An SC03 cycle at more modera te temperatures, such as 75 o F, would be more representative, but still suffers from the limitations of any test done under a single c limate condition. [OAR-2009­ 0472-6952.1, p.26]

The proposed idle test would also be unreprese ntative of actual driving conditions, and would tend to overestimate air conditi oner energy consumption. Idle speeds are reduced to absolute minimum levels to improve fuel economy ratings . Idle speeds may theref ore be increased in actual driving conditions as accessory loads are a dded, which would tend to make A/C fuel usage appear to be a higher percent of total fuel usage than under a mo re representative drive cycle. Other factors also tend to make an idle test overestimate air conditi oner energy consumption. Engine heat and pavement heat tend to raise compressor loads during prolonged idle to a much greater extent than occu rs in normal driving. Hybrid vehicl es or any vehicle with start-stop technology might not adequately be assessed in this test because there would be no guarantee that the engine would be running. [OAR-2009-0472-6952.1, p.26]

Finally, some specific requireme nts that might be applied, su ch as no recirculation unless automatically controlled and max settings for all ma nual systems, are not representative of real world conditions, and thus unfairly penalize certain designs. In any test pe rformed under a single set of climate conditions, a great deal will depe nd on the specific circumstances and whether or not a vehicle’s efficiency tec hnologies start to oper ate and show their benefits under those specific conditions (and not at a slightly lo wer or higher load). [OAR-2009-0472-6952.1, p.26]

Any laboratory test program inherently involves thorny problems of test variability, differences among test facilities, test procedure definitions, etc. By creating incentives for applications of known efficiency technologies, the proposed desi gn-based menu approach would capture most of the benefits in this area. Ultimately, the goal should be a more sophisticated system of simulations, or other analytical procedures, that can evaluate system efficiency across the full range of operating conditions. The EPA should util ize the “menu” approa ch (and eliminate the A/C idle test or any other vehicle testing for the analysis of A/C efficiency) until a common analytical approach for evaluating the effici ency of MAC systems is developed. [OAR-2009­ 0472-6952.1, p.27]

Test Facilities Impact

The humidity control levels proposed by EPA are t ypically not met in normal fuel economy test facilities during the summer (four to five mont hs of the year), and more expensive SC03 facilities would be needed during those times. The cost associated with using the more expensive

5-166EPA Vehicle Program, Feasibility, and Estimated Impacts

SC03 test facilities is an a dditional undesirable impact of the proposed test. [OAR-2009-0472­ 6952.1, p.27]

In addition, in §86.165-12 New Air conditioning idle test procedure, EPA has proposed a new idle CO2 test to determine the increase in CO2 emissions with AC operation on and off. Concerns are:

• Maintaining the average ambient air temperatur e of “75 ± 2 °F” over the test duration may require expensive climatic test chambers versus a normal emissions test site.

• §86.165-12 (d)(4), “cumulative flow rat e” should be “cumulative mass rate”

• §86.165-12 (d)(5), not sure if it is possible to set a vehicle automatic air conditioning system setting, on all vehicles, to “9 °F” below ambient temperatures. Should allow an alternative if not possible. [OAR-2009-0472-6952.1, p.27]

MAC Test Groups

MAC systems typically use common components acr oss all variants of a vehicle “platform.” Variants might include body styles, such as sedan, coupe, or wagon, as well as various powertrain combinations. While hose lengths and joints may differ sli ghtly in order to be routed around the different engines, the overall variations in J2727 scores are usually very small. The systems would all use the same refrigerant as well as the same efficiency technologies. Thus, the EPA MAC program can effectively cover all vehicles using relativ ely few “tracking vehicles” or test vehicles. This situation differs from tailpip e emissions or fuel econo my testing, where many more configurations would need to be tracked in order to gain a representative estimation of fleet averages. [OAR-2009-0472-6952.1, p.27]

Due to these considerations, EPA should only require a single MAC certification for each vehicle platform in order to earn MAC credits fo r all the vehicles built on that platform. This tracking vehicle could be chosen based on an e ngineering assessment that identifies the “worst case” MAC variant for the platform. If both single and dual evaporator systems are used on a platform, there should be separate tracking of the single and dual systems. If some variants of a platform use electric compressors, such as hybrid vehicles, the electric compressor variants would also need to be tracke d separately. [OAR-2009-0472-6952.1, p.27]

Toyota Motor North America

Beginning in 2014 MY, EPA is considering first te sting MAC efficiency using an A/C CO2 Idle Test and then allowing those vehicles that surp ass fleet averages by a minimum threshold of 30% on the test to then earn credits based on thei r use of technologies from the list. [OAR-2009-0472­ 7291, p.21]

Toyota supports the stru cture and intent of the credit propos al. However, Toyota is concerned that the A/C Idle CO2 Test is poor representation for evaluating A/C system efficiency because it would tend to overestimate A/C energy consumption. As a result, systems forced to comply with

5-167EPA Response to Comments

this test requirement may lead to inappropriate design of A/ C systems. Furthermore, hybrid vehicles or any vehicle with st art-stop technology might not adequa tely be assessed in this test because there would be no guarantee that the engine would be running. [OAR-2009-0472-7291, pp.21-22]

Toyota suggests the use of an a lternative test procedure for ev aluating the A/C efficiency and assigning indirect A/C cred it. Toyota proposes the methodology used on the California Environmental Performance labe l, which incorporates the us e of SC03 data. Specifically; Although it can be argued that th e load in the SC03 may be a b it higher, Toyota feels that the absolute value of A/C SCO3 CO2 emission be ing higher better refl ects the actual A/C performance over that of the proposed A/C Id le CO2 test. Furthermore, this proposal incorporates a scheme already in place in Cali fornia and can address measurement concerns on HV and PHEV technology vehicles . However, Toyota has concerns whether the test vehicle selected for this type of testing (SC03+FTP) woul d be representative. If the selection of the A/C system test vehicle is based solely on the emission data vehicle, it is conceivable that the A/C test results might be compromised. To ensure repres entative testing and reduce testing burden, A/C test groups can be established by system configuration. [OAR-2009-0472-7291, pp.22-23]

This proposed idea would be less burdensome because it incorporates existi ng data so a new test would be unnecessary. Finally, using this approach would provide some incentive for manufacturers to improve the A/C system effici ency performance at the higher load conditions. [OAR-2009-0472-7291, p.23]

National Renewable Energy Laboratory

It is uncertain if A/C systems optimized for reduc ed A/C fuel use at idle (maximize GHG credit) will have an A/C fuel use reduction during real world driving. Figure 2-4 in the DRIA is plots data at idle. Is there corresponding data for A/C fuel use over the SCO3? In testing to support the proposed regulation, EPA encountered a good example of this situation (in th e text at the bottom of page 2-34 of the DRIA). In this case, a ma nufacturer acknowledged that their A/C system has low fuel use and low cooling capacity at idle, but off-idle performed very well. Care needs to be exercised in developing this regu lation to encourage A/C fuel use reduction duri ng all phases of driving and not just at idle. [OAR-2009-0472-4798.1, p.1]

The proposed A/C fuel use idle test does not inco rporate a thermal soak period with solar lamps. This provides no incentive for automobile manuf acturers to reduce the thermal loads on the passenger compartment and realize GHG emissi on reductions beyond improved efficiency A/C equipment. A soak period with solar lamps is recommended. [OAR-2009-0472-4798.1, p.1]

One issue to consider is how to compare A/ C systems with different cooldown rates. An automobile manufacturer might choose to incorp orate a large A/C system to cool occupants quickly while another may choose a low power system that cools slowly. The fuel use during the cooldown for the large system would be high but th e duration would be short. In the idle test, EPA is assuming 50% cooldown and 50% steady st ate A/C fuel use for vehicles with manual A/C control. In the SCO3 test option, it is a ssumed the first cycle measures cooldown A/C fuel use and the second cycle is steady state. Then th e 2 results are averaged to obtain the A/C fuel

5-168EPA Vehicle Program, Feasibility, and Estimated Impacts

use. Both of these approaches assume the cooldown is accomplished during the first cycle and half of the A/C usage occurs during cooldown mode while the other half is steady state. It is recommended EPA assess the 50/50 weighting as sumption and provide supporting information. An alternative is to calculate an average A/ C fuel use by weighting the cooldown and steady state components based on vehicle and A/C use ch aracteristics. A small A/C system would have a higher weighting for the cooldown since this mode of operation o ccurs more often than with a large A/C system. [OAR-2009-0472-4798.1, p.1]

California Air Resources Board

CARB believes EPA should develop and utilize a performance test to quantify AC indirect credit in the future. We support EPA’s suggestion of a modified SC03 test procedure and not the idle test. The proposed AC Idle Test will not capture real world driving conditions because it lacks adequate engine load and speed variance. In th e interim, a menu-driven option for assessing AC indirect emission may buy some time for test development.

Honeywell International, Inc.

Whenever feasible, EPA should utilize the best available testing procedures to measure the performance of A/C efficiency to quantify accurately th e reduction of GHG emissions, and the resulting Efficiency Credits. By adopting testing procedures that incorporate the most up-to-date research and technical informati on underlying the performance of A/C Systems, the proposed credit programs can help meet the Presiden t's greenhouse gas emissions targets and provide integrity to the credit program. [OAR-2009-0472-7206.1, p.10]

European Automobile Ma nufacturers Association

Air conditioning Idle test

ACEA promotes a worldwide harmonized testing approach. The test does not cover the average condition. The set temperature of 66 (=75-9) °F is very low and s eems not to be the average set point of the customers. We propose 71°F. [OAR-2009-0472-7444.1, p.2]

New York State Department of Environmental Conservation

We also believe that EPA should consider the development of an air conditioner incremental emissions certification test. EP A suggests modifying the SC03 test cycle from the Supplemental Federal Test Procedure (SFTP) for this purpose. We concur with EPA's view that the extreme test cell conditions of the curren t SC03 are inappropriate. We also believe that it is not necessary to simulate solar radiation, as is done in the SFT P. Simulating solar radiat ion, while it may make for a more 'real' load on the vehicle, would be a significant expense in an area where relatively small improvements (a maximum credit of < 6 gr ams per mile) are expected . We believe that this level of expense will result in an econom ic decision by manufacturers to not pursue these credits. [OAR-2009-0472-7454, pp.2-3]

Chu, Yuli

5-169EPA Response to Comments

I support the collaboration effort between EPA, industry, the California Air Resources Board, and other stakeholders to move toward increa singly robust performance tests for A/C and may include such changes in this final rule. [OAR-2009-0472-7042.1, p.3]

EPA Response:

A/C Idle Test

Many commenters questioned the ability of the A/C Idle Test to measure the improved efficiency of certain A/C technologies, not ing that the test would overes timate fuel consumption, and in general that the test was not re presentative of real-world driv ing conditions. However, although EPA acknowledges that this test directly simulate s a relatively limited range of technologies and conditions, it accurately estimates A/C efficien cy and performance under those conditions, and we believe that it is sufficien tly robust for the screening purpo se of demonstrating that the system design changes are indeed implemented pr operly and are resulting in improved efficiency of a vehicle’s A/C system, at idle as well as under a limited range of operating conditions. Since idle is significant part of real world and FTP drive cycles (idle represents 18% of the FTP), EPA believes that the focus in this rulemaking on A/C system efficiency under idle conditions, as a screening measure, is justified. Moreover, we believe that a pe rformance test is necessary to assure that efficiency-improving technologies ar e implemented properly and that the vehicle’s A/C system operates in an efficient manner unde r idle conditions. Th e design of the A/C CO 2 Idle Test represents a balancing of the need fo r performance tests whenever possible to ensure the most accurate quantification of efficiency im provements, with practical concerns for testing burden and facility requirements. (Thus, EPA is not adopting the SCO3 test, which contains more drive cycles, but imposes significantly grea ter testing burden.) EPA believes that the Idle Test adds to the robust quantific ation of A/C credits that will re sult in real-world efficiency improvements and reductions in A/C-related CO 2 emissions. Use of the Idle Test as a precondition in order to generate A/C Efficiency Credits will not be required until MY 2014 to allow sufficient time for manufacturers to make the necessary facilities improvements and to gain experience with the test.

Adapting or Modifying Other Test Cycles to Measure Impact of A/C Loads

In the proposal, EPA invited comment on a more comprehensive testing approach to quantifying A/C CO 2 emissions – an approach th at could be somewhat more technically robust, but would require more test time and test facility improve ments for many manufacturer s. EPA also invited comment on using an adapted version of the SCO3, te st (an existing test proc edure that is part of the Supplemental Federal Test Procedure). Ther e were many comments opposed to this proposal, and very few supporters. Most of the commen ts opposing this approach echoed the concerns made by in the NPRM. These included excessive testing burden, limited te st facilities and the cost of adding new ones, and the concern th at the SC03 test may not be sufficiently representative of in use A/C usage. Some co mmenters supported a derivative of the SCO3 test or multiple runs of other urban cycles (such as the LA-4) for quantifying A/C system efficiency. While EPA considers a test cycle that covers a broader range of vehi cle speed and climatic conditions to be ideal, developing such a repres entative A/C test woul d involve the work of

5-170EPA Vehicle Program, Feasibility, and Estimated Impacts

many stakeholders, and would requi re a significant amount of time, exceeding the scope of this rule.

Working to Develop an Im proved A/C Test Procedure

EPA expects to continue working with industr y, the California Air Resources Board, and other stakeholders to move toward increasingly robus t performance tests and methods for determining the efficiency of mobile A/C system s and the related impact on vehicle CO 2 emissions, including a potential adapted SC03 test.

5.7.2. Flex Fuel and Alternat ive Fuel Vehicle Credits

Organization: Environmental Defense Fund Hyundai Motor Company Toyota Motor North America Public Citizen and Safe Climate Campaign Union of Concerned Scientists Natural Resources Defense Council American Petroleum Institute Sierra Club United Auto Workers California Air Resources Board National Automobile Dealers Association (NADA) State of New Jersey Cummins Inc. New York State Department of Environmental Conservation Washington State Depa rtment of Commerce Chew, Yuli

Comment:

Environmental Defense Fund

In terms of flexible fuel vehicl es, I think it would be safe to sa y that we prefer the California approach, which is you don't get any credit with out demonstrating actual use, but, on the other hand, we recognize that NHTSA is under its own ru les and so on under some obligation to give some kind of credit, so I think what EPA is pr oposing for its own program makes sense, at least we're willing to support it, where there is some ki nd of a credit, but that credit will be phased out and will be phased out entirely by 2016 absent an actual showing, and then you also ask a question about, well, how could the manufacturers demonstrate us e, and I think you identify the two principal ways of doing it, one is a nationa l calculation, the number of cars out there, the total amount of ethanol or biofuels of some sort being used by vehicles and you sort of allocate those across the board. Another is to use the onboard computer. I mean, and my understanding is that the onboard computer in a flex fuel vehi cle has to know which fuel is being burned when because the engine may operate a little bit differe ntly depending on which fuel, whether it's an

5-171EPA Response to Comments

ethanol or biofuel or gasoline, so it should be possible. And, again, th ere was testimony during the Vermont Pavley trial about this to adjust that to store inform ation about actual fuel use that could be downloaded during inspection times or otherwise. [These comments were submitted as testimony at the New York public heari ng. See docket number EPA-HQ-OAR-2009-0472-4621, pp. 120-121.]

Hyundai Motor Company

[Following comments are from LA Testimony, OAR-2009-0472-7283, pp.67-72]

[[These comments were submitted as testimony at the Detroit public hearing. See docket number EPA-HQ-OAR-2009-0472-6185, p. 81.]

We also believe that the CAFE flexible fuel cr edit calculation overstates the current real-world use of alternative fuels. However, we understand that this is a cal culation prescribed by statute.

Toyota Motor North America

EPA proposes adopting a flexible fuel vehicl e (FFV) credit mirroring NHTSA's FFV credit, through 2015 model year. After 2015 model year, EPA proposes that FFV credits could be earned to the extent manufact urers could demonstrate use of ethanol in FFVs. [OAR-2009-0472­ 7291, p.23]

Toyota supports EPA's adoption of the FFV credit for producing flexible fu el vehicles (FFVs) through 2015 model year. Because actions take n by manufacturers to comply with EPA's regulation will, to a large extent, be the same as those taken to comply with NHTSA's CAFE regulation, it is appropriate for EPA to consider flexibilities contained in the CAFE program that clearly impact product plans and technology deployment plans alre ady in place or nearly in place. Adopting the FFV credit for a transitional pe riod of time appears to recognize this reality, while providing a pathway to eventually phase-out the fl exibility. [OAR -2009-0472-7291, p.23]

For post-2015 model year, EPA proposes to conti nue to allow a manufactu rer to earn the FFV credit if the manufacturer can demonstrate use of ethanol in FFVs. Toyota does not oppose this demonstration, but suggests that such credit shou ld only be allowed with a demonstration of low life-cycle carbon ethanol usage. As EPA's object ive is reduction of GHGs, simply replacing gasoline with ethanol of the same or simila r GHG life-cycle impact does not further this objective. Notwithstanding the above comments, Toyota is highly uncertain whether an appropriate and robust demonstration of low life- cycle carbon fuel usage can be made for the purposes of generating GHG credits. Substantial chal lenges are likely to be encountered due to the uncertainty of fueling pattern for in-use vehi cles, and the difficulty in retroactively adjusting credits earned in a model year based on evidence of improper fuel use later in the lifetime of the vehicle. Regrettably, Toyota is no t sure these concerns can be adequately addressed by EPA or any other entity at this time. [OAR-2009-0472-7291, p.23]

Public Citizen and Safe Climate Campaign

5-172EPA Vehicle Program, Feasibility, and Estimated Impacts

The flex fuel vehicle (FFV) credit is an unjusti fiable loophole that has allowed manufacturers to evade up to 1.2 mpg of fuel econom y obligation for building vehicles that are capable of running on (but do not actually have to use) a blend of 85 percent ethanol (E85). EISA extended the FFV credits through 2019, although the value of th e credit phases out beginning in 2014. EPA proposes to apply the FFV credit consistent w ith NHTSA’s standards through 2015; after that date, the credit would be based on actual use of E85. We acknowledge that the credit provided in NHTSA’s fuel economy program is a legislativel y mandated extension of an existing program. [OAR-2009-0472-7050.1, p.7]

The FFV credit, offered since the 1988 Alterna tive Motor Fuels Act (AMFA) was enacted, and extended multiple times, has not worked. Its original intent was to encourage ethanol infrastructure, but it did not . The 2002 NAS study on the fuel economy program estimated that FFVs ran on ethanol less than one percent of th e time, and recommended that the FFV credit program be abolished. [OAR-2009-0472-7050.1, p.7]

A sharp uptick in availability of ethanol blended fu el and refueling infrastructure (which is still a minimal fraction of the total refueling infrastr ucture) occurred only after the Energy Policy Act of 2005 (EPAct 2005) mandated the production of a certain volume of ethanol. Then in 2004, California and several other states switched from methyl tert-butyl ether (MTBE) to ethanol to meet oxygenate requirements for summer blend ga soline, which increased demand for 10 percent ethanol (E10). The mandated volum e of ethanol was increased and e xpanded in EISA, to rise to 36 billion gallons by 202 2. [OAR-2009-0472-7050.1, pp.7-8]

The AMFA credit is limited, which effectively caps the number of vehicles it can encourage each manufacturer to build, limiting the usefulness of the credit. AMFA credits have not had a meaningful impact on E85 consumption. Ethanol producers, unable to increase the market penetration of ethanol without in creasing the blending percentage of ethanol in gasoline for wide consumption, have begun to pre ss that policy. [OAR-2009-0472-7050.1, p.8]

EPA raises the option of cappi ng the FFV credits based on vehi cle size instead of using the limitation contained in the CAFE program. We strongly urge EP A not adopt this basis for setting the FFV credit. The credit has already been shown to have little value in increasing the market penetration of ethanol, and sett ing the credit on an attribute ba sis for the greenhouse gas program will do nothing to improve its effectiveness. [OAR-2009-0472-7050.1, p.8]

Public Citizen has long supported predicati ng the fuel economy credit for FFVs on actual consumption of E85, something EPA proposes to do in model years 2015 a nd after. EPA’s recent proposal on its revised Renewable Fu el Standard (RFS2) illustrates th e fact that it is difficult to measure the greenhouse gas emissions from etha nol. The agency has not stated how it will estimate the greenhouse gas emissions from ethanol in E85, or whether ther e will be different values for different feedstocks and production me thods of ethanol. We urge that EPA devise a way to weight the greenhouse gas emissions from ethanol based on the values for different feedstocks and production methods, consistent with what it has done for RFS2. [OAR-2009­ 0472-7050.1, p.8]

Union of Concerned Scientists

5-173EPA Response to Comments

UCS has long opposed the industry’s use of flex fuel vehicle (FFV) credits to lower fuel economy obligations given the facts that the credits are overly generous and very few vehicles outfitted with FFV technology are regularly operate d on E85. We applaud EPA for their proposal to phase this loophole out by mode l year 2016 and require that any post-model year 2015 credits accrued under the program be based on actual E 85 use rather than vehicle capability. The loophole created by these credits ha s eroded oil savings and pollution reductions for more than a decade and, while it is currently set to phase out by 2020 under EPCA, this is not guaranteed; historically, FFV credits have seen multiple ex tensions beyond their originally prescribed duration. If the FFV program were to continue in its current state, it would likely erode the 2016 fleet average between 0.5 and 0.8 mpg-equivalent, depending on the extent of the credit’s use. [OAR-2009-0472-7181.1, p.12]

UCS strongly urges that EPA fo llow through with its proposed handling of FFV credits for model years 2016 and beyond, without modification. [OAR-2009-0472-7181.1, p.12]

[Following comments are from LA Testimony, OAR-2009-0472-7283, pp.103-113]

Finally, flex-fuel vehicle credits must be termin ated. Currently EPA standards allow automakers to use flex-fuel vehicle credits to achieve compliance in the early years of the program. Historically automakers have used FFV credits to lower their fuel economy obligations despite the fact that very few of the vehicles were ever run on these alternative fuels, such as E85.

Beginning in model year 2016, EPA proposes that any FFV credits accrued under its program be based on actual E85 use as opposed to just ve hicle capability. This change would close the FFV loophole and finally make the federal program consistent with California's.

This loophole created by these credits has er oded oil savings and pollution reductions for decades. It is critical that the EPA follow thr ough with its modification of these credits, FFV credits, in 2016. If the FFV program were to con tinue in its current stat e, it would erode the 2016 proposed fleet standard.

Natural Resources Defense Council

Credits generated through sales of flex fuel vehicles (FFVs) and th e advanced technology multiplier do not represent actual GHG reductions . Therefore, we recommend that manufactures be barred from banking, transferri ng or trading these credits to ensure they do not undermine the environmental and technology-forcing goals of the GHG standards. [OAR-2009-0472-7141.1, p. 10]

Flex-Fuel Vehicle Credits Should Be Phased Out No Later than 2015 NRDC strongly supports EPA’s proposal to fully phase out flex-fuel vehicle (FFV) credits by MY 2015. While EPCA authorized FFV credits unde r the CAFE program to promote alternative fuel use, the government’s own reports have c oncluded that FFVs are typically fueled by petroleum, not an alternative fuel. Furthermore, the CAFE credit has al lowed manufacturers to sell vehicles that have lower fuel economy th an would be required without the credit and therefore increase petroleum consumption a nd increase greenhouse gas emissions. For these

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reasons, EPA should phase out current FFV credit s as soon as possible and no later than MY 2015. [OAR-2009-0472-7141.1, p. 19]

NRDC agrees with EPA’s proposal to only allow FFV credits beyond MY 2015 if it can be demonstrated in an enforceable manner that the FFVs are consuming significant volumes of alternative fuel beyond that existing in low-leve l blends of gasoline a nd diesel. The level of eligible credits should be base d on the amount of alte rnative fuel used and the full fuel cycle emissions impacts of that fuel. For non-petroleu m fuels, emissions during fuel production must be included since their full fuel cycle carbon pollution change compared to petroleum fuels is largely based on the emissions that occur during the alternative fuel pr oduction (e.g. the use of cellulosic biofuels in internal combustion engine vehicles can result in lower carbon pollution than petroleum due to carbon absorption durin g the feedstock growing process). [OAR-2009­ 0472-7141.1, p. 19]

American Petroleum Institute

Flexible Fuel Vehicle Credits: In Section III (C)(2)(b), EPA proposes that emissions standards for Flexible Fuel Vehicles (FFVs) be based on their actual carbon dioxide emissions in 2016 and later. The manufacturer would also be required to demonstrate that the alternative fuels are actually being used in the vehicles. EPA cons iders two methods for compliance, a top down approach based on aggregate data from the Department of Energy‘s Energy Information Administration, or a survey program based on data recorded in on-board systems and transmitted back to the manufacturer. The NPRM does not dictate the details on the second option, but requires that the program be based on sound st atistical methodology. API s upports the concept of basing fuel emissions standards on actual emi ssions, but questions the delay until 2016. The DOE EIA top down data approach to complian ce does not necessitate any equipment changes and can be implemented much sooner than 2016. Fuel economy credits for FFV production were originally designed to stimulate ethanol produc tion. The Renewable Fuel Standard requires 36 billion gallons of ethanol per year by 2022 and far exceeds any ethanol market stimulation created by FFV manufacturing. The NPRM proposes to continue a program of FFV credits until 2016. This program should be eliminated with in a much shorter time frame.[OAR-2009-0472­ 7143.1, p.11]

Dedicated Alternative Fuel Vehicles: Fuel econo my calculations for dedicated alternative fuel vehicles should be based on a sound scientific ap proach, not a policy appr oach. API requests that EPA remove the multiplier and establish a met hod of determining the actual GHG impact from dedicated alternative fuel vehicles.[OAR-2009-0472-7143.1, p.12]

Sierra Club

We welcome EPA’s decision to exclude FFV credits in 2016 – one of the transitional aspects of this proposal. FFV credits under th e CAFE system have long been recognized as flawed, leading to increased oil consumption. While NHTSA is bound by EISA to phase out FFV credits by 2019, EPA’s action is a much needed shift away fr om credits that, in reality, have undermined the oil savings from the fuel economy program. [OAR-2009-0472-7278.1, p.16]

5-175EPA Response to Comments

EPA proposes to shift to awarding FFV credits in 2016 and beyond to actual use of E-85. Recent scientific reports have conclude d that on a lifecycle basis, corn ethanol may in fact increase greenhouse emissions. We would urge EPA to cons ider not giving credits for E-85 consumption. Fuel volumes are mandated under RFS2 and the fuel is otherwise subsidized through other policies. The cost to automakers to produce FFV s is nominal and need not be incentivized through vehicle program with th e potential cost of increased greenhouse gas emission. In testimony at the Renewable Fuel Standard he aring on June 9th, 2009, Sierra Club urged the administration to consider emissions from the tran sportation sector as a w hole– getting standards for vehicles and fuels right as we ll as reducing how much we driv e. As the fuel mix in the US diversifies with more biofuels and unfortunately more Canadian tar sands and other dirty fuels, the impact of emissions from these non-conven tional fuels on the transportation sector, on a lifecycle basis, must be accounted for to ensure we do not erode the reductions promised from these standards. We urge that EPA use a realis tic greenhouse gas factor for E-85 in determining the credits for use of the fuel. EPA should provide this factor for corn ethanol grandfathered under EISA. [OAR-2009-0472-7278.1, p.16]

EPA’s Clean Air Act authority is consistent with a full lifecycle accounting of fuels and should be used to ensure that a consistent and correct GHG metric is established that also avoids unintended consequences. Given th e controversy that has surrounde d FFV credits, we urge EPA to set clear guidelines for E-85 in the ve hicle program context. [OAR-2009-0472-7278.1, p.16]

United Auto Workers

The UAW also supports the agencies proposals on flex-fuel and alternative-fuel vehicle credits. We believe that sufficient quantities of alterna tive fuels will be availabl e and in use to make these credits useful after 2015 in the EPA’s program . The proposed rule also correctly applies the statutory intent regarding the application of these credits unde r the CAFE regulations. [OAR2009-0472-7056.1, p.3]

California Air Resources Board

In addition to the non-zero grams/mile ZEV upstr eam factor discussed earlier, we have the following comments on other aspect s of the proposed crediting system. EPA has proposed credit provisions designed to provide manufacturers with compliance flexibility, help ease the transition into the national GHG program, and provide incentives for the development and production of advanced GHG technologies. Consis tent with the Low-Emission Vehicle and Zero-Emission Vehicle programs for light-duty vehicles, CARB include s similar provisions in its GHG program and is generally supportive of including such provisions in the national GHG program. However, while we agree that incl uding credit mechanisms in the national GHG program is appropriate, we believe that such provisions should not undercut the primaryobjective of the program, namely achieving significant reductions of GHG emissions from lightduty vehicles.

EPA requested comment on its proposed FFV crediting. CARB recognizes that FFV credits without a specific demonstration of alternative fuel usage are included in EPA’s GHG program for model years 2012-2015 in cons ideration of manufacturers’ l ead time requirements. While

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CARB does not believe that such credits are ne cessary, or even appropr iate for a GHG program, we are pleased that EPA will base these credits on verifiable alternative fuel usage beginning in 2016. We also agree with EPA that such credits should not be available in model years 2009­ 2011. [OAR-2009-0472-7189.1, p.12]

[CARB also submitted these comments as test imony at the Los Angeles public hearing. See docket number OAR-2009-0472-7283, pp. 21-27]

National Automobile De alers Association (NADA)

Under EISA, flex fuel credits are available until MY 2019 for automakers using such technology. EPA proposes to phase out this credit in MY 2015. To be “consistent and harmonized,” EPA should adopt the policy Congr ess has and not one CARB fa vors. [OAR-2009-0472-7182.1, p.8]

State of New Jersey

[State of New Jersey also submitted these co mments as testimony at the New York public hearing, See docket number EP A-HQ-OAR-2009-0472-4621, pp. 115-117.]

Flexible Fueled Vehicle (FFV) program and its associated credits: We support the proposal to only allow FFV credits if they are based on a manu facturer's demonstration that the alternative fuel is actually being used in the vehicles. Th is approach will ensure that these emission reduction credits are based upon real and verifiable reductions. The Department also supports the USEPA's statement that the abil ity to generate credits upon a de monstration of usage of the alternative fuel will provide an actual incentive to see that such fuels are used. However, we stress that the use of credits for FFVs should be allowed only if the credits are based on actual CO 2 emission reductions (both fuel usage and em ission rates). Therefor e, in crafting the requirements for that demonstration, we support fo llowing a method that is the same or similar to the California Air Resources Board's method of verification through either: 1) scientific sampling and survey; or 2) the service data when the vehicles are brought back for servicing at their dealership. [OAR-2009-0472-7109.1, p.4]

Cummins Inc.

Cummins supports EPA’s proposal to provide CO 2 credits for Flexible Fueled Vehicles (FFV) corresponding to the amount allowed by the amended Energy Policy and Conservation Act (EPCA). However, EPA is proposing these cr edits only for 2012-2015 model years (MYs). To keep as much consistency as possible with the CAFE program, we urge EPA to extend the FFV credit availability unt il MY 2019 (same as CAFE ). [OAR-2009-0472-7205.1, p.4]

Starting in MY 2016, EPA is proposing to remove the 0.15 “volumetric conversion factor” in CO 2 emissions calculations for FFVs and also requ ire manufacturers to demonstrate that the actual fuel is being used in their vehicles. As mentioned earlier, Cu mmins believes that EPA should adopt a holistic view of life-cycle analysis to determine CO 2 benefits of alternative fuels like ethanol and bio-diesel. The li fe-cycle analysis could then be used to determine a ‘credit’ based on CO 2 reductions compared to a conventional (gasoline or diesel) vehicle, which a

5-177EPA Response to Comments

manufacturer would be able to claim based on the number of such vehicles produced and by demonstrating the actual use of bio-fuel. Such ‘credit’ is necessary to recognize the true CO 2 benefits of such low carbon intensity bio-fuel s and encourage their us e by providing a level playing field with other CO 2 -reducing technologies employed on the vehicles. [OAR-2009-0472­ 7205.1, p.4]

New York State Department of Environmental Conservation

Flexible Fuel Vehicles (FFVs) and Alternative Fu el Vehicle Credits (Pream ble Section III.C.2) We support EPA's intention to eliminate the arbitrary, unscientific, and unsupportable, 0.15 emissions multiplier from the tailpipe greenhouse gas emissions calculation for FFVs and alternative fueled vehicles beginning with th e 2016 model year. We w ould prefer its immediate elimination. We also support EPA's requirement th at manufacturers demonstrate that alternative fuel is actually used before including the alternative fuel CO 2 emissions in the calculation of the FFV's overall certification emissions. Again we favor implementing this provision with the 2012 model year, rather than waiting until the 2016 model year. [OAR-2009-0472-7454, p.3]

Washington State Department of Commerce

[Following comments are from LA Testimony, OAR-2009-0472-7283, p.126]

We support allowing for reasonable credits for flex-fuel vehicles only based on demonstration that these vehicl es are running on alternative fuel . We intend to submit separate documentation with some ideas on how this demonstration could be achieved.

Chew, Yuli

After MY 2015, I support EPA’s pr oposal to allow FFV credits only based on a manufacturer’s demonstration that the alternativ e fuel is actually being used in the vehicles. I support following CARB’s method of verification ei ther through: 1) scientific sa mpling and survey; or 2) through the service data when the vehicles are brought back to service in their de alership. The alternative fuel usage percentage data are captured as part of OBDII criteri a. [OAR-2009-0472-7042.1, p.1]

I am concerned about too much “windfall” credits from the trucks. FFV credits can only be obtained as what alternative fu els are being used in CARB’s Re gulation. I support the credits be revised after 2016 based on the actual environm ental impacts for the useful life of the vehicles.[OAR-2009-0472-7042.1, p.3]

I welcome EPA develop a mechanism based on the same treatment of alternative fuel use by CARB, either through scientific surveys or data recorded in the actual OBDII data. The credits should be based on the actual usage and the amount of greenhouse gas saved on a lifetime wellto-wheel analysis approach without the FFV credits. [OAR-2009-0472-7042.1, pp.3-4]

I welcome EPA’s real-world reductions approach for alternative fuel vehicles. I would also suggest to limit the percentage of credits from trucks that can be used to normalize the debits for

5-178EPA Vehicle Program, Feasibility, and Estimated Impacts

the cars, or diminish the value of the credits fr om trucks that can be carryforward, e.g. decrease 20% of the worth over the next model year. [OAR-2009-0472-7042.1, p.4]

EPA Response:

For the GHG program, EPA is allowing FFV cred its corresponding to the amounts allowed by the amended EPCA but only during the period from MYs 2012 to 2015. EPA received comments supporting and opposing its approach for MY2012-2015 FFV credits. Several commenters, while not favoring EPA’s approa ch for MY 2012-2015, focused their comments on supporting EPA’s approach for MY 2016 and later. EPA continues to believe that several manufacturers have already taken the availability of FFV credits into account in their near-term future planning for CAFE and this justified reli ance indicates that these credits need to be considered in assessing necessary lead time for the CO 2 standards. A numbe r of manufacturers in fact commented that EPA’s credits programs ar e necessary in allowing them to transition to the new standards. EPA thus believes that allowi ng these credits, in the near term, is needed to provide adequate lead time for manufacturers to implement th e new multi-year GHG standards, but that for the longer term ther e is adequate lead time without the use of such credits.

As proposed, for MY 2016 and later manufacturer s will need to consider actual vehicle performance in assessing whether credits would be generated, and in doing so reliably estimate the extent to which the alternative fuel is actua lly being used by vehicles in order to count the alternative fuel use in the vehicle’s CO 2 emissions level determination. Beginning in MY2016, the FFV credits as described above for MY2012-2015 (including the 0.15 factor and the assumption for 50% alternative fuel/50% gasoline used) will no longer be available for EPA’s GHG program. Rather, GHG compliance values w ill be based on actual emissions performance of the FFV on conventional and alternative fuels, weighted by th e actual use of these fuels in the FFVs.

Starting with model year 2016, as proposed, EPA thus will no longer allow manufacturers to base FFV emissions on the use of the 0.15 factor credit, and on the use of an assumed 50% usage of alternative fuel. Instead, EPA believes the appropriate approach is to ensure that FFV emissions are based on demonstrated emissions performance. This will promote the environmental goals of the final program. EPA received several comments supporting its proposal to use this approach for MY2016 and late r instead of the EPCA approach. Under the EPA program in MY2016 and later, manufacturers wi ll be allowed to base an FFV’s emissions compliance value in part on the vehicle test values run on the alternative fuel, for that portion of its fleet for which the manufacturer demonstrates utilized the a lternative fuel in the field. Without this demonstration, the default rule is to assume FFVs operate on 100% gasoline, and the emissions value for the FFV vehicle will be ba sed on the vehicle’s tested value on gasoline. However, if a manufacturer can demonstrate that a portion of its FFVs are using an alternative fuel in use, then the FFV emissions complian ce value can be calculated based on the vehicle’s tested value using the alternativ e fuel, prorated based on the per centage of the fleet using the alternative fuel in the field. EPA believes this approach will provide an actual incentive to ensure that such fuels are used. The incentive aris es since actual use of the flexible fuel typically results in lower tailpipe GHG em issions than use of gasoline and hence improves the vehicles’ performance, making it more likely that its performance will improve a manufacturers’ average

5-179EPA Response to Comments

fleetwide performance. Based on ex isting certification data, E85 FFV CO 2 emissions are typically on average about 5 percent lower on E85 than CO 2 emissions on 100 percent gasoline. Moreover, currently there is li ttle incentive to optimize CO 2 performance for vehicles when running on E85. EPA believes the above approach provides such an incentive to manufacturers and that E85 vehicles could be optimized thr ough engine redesign and calibration to provide additional CO 2 reductions.

This approach will promote greater use of altern ative fuels, as compared to a situation where there is no usage requirement. This is also c onsistent with EPA’s overall commitment to the expanded use of renewable fuels under the ru les implementing section 211 of the Act. Therefore, for these additional reasons, EP A is basing the FFV program for MYs 2016 and thereafter on real-world re ductions: i.e., actual vehicle CO 2 emissions levels based on actual use of the two fuels, withou t the 0.15 conversion factor specified under EISA.

EPA received a few comments that the credits based on the EPCA methodology should be allowed through MY2019, as they are in the CA FE program. As noted above, EPA included FFV credits based on the EPCA methodology for th e early years of the program because some manufacturers have already incor porated the credits into their n ear-term product plans and to not allow them could be very disruptive. As part of providing needed lead time, EPA believes it is appropriate not to undermine this legitimate re liance by manufacturers and so to allow FFV credits based on the EPCA methodology for a limited, needed period. By MY 2016, manufacturers will have sufficient time to plan to meet standards without generating further FFV credits based on the EPCA methodology. EPA be lieves it is important to transition to a methodology that bases FFV emissions values on the actual use of the fuel and the actual emissions of the vehicle when operated on the fu el. Unlike EPCA, CAA section 202(a) (1) does not mandate that EPA treat FFVs in a specific way. Instead EPA is required to exercise its own judgment and determine an appropriate appro ach that best promotes the technology-based, emission reduction goals of this CAA section. Under these circumstances, EPA will treat FFVs for model years 2012-2015 the same as under EPCA, as part of providing sufficient lead time given manufacturers’ compliance strategies which rely on the existence of these EPCA statutory credits, as explained above. Several commenters supported EPA’s proposed approach for MY2016 and later.

EPA received comments that EPA should restri ct banking, transferri ng or trading MY2012-2015 credits because the credits do not represent actual GHG reductions. EPA did not propose or request comment on such restrictions and has not a dopted any credit restrictions for FFV credits. EPA believes that retention of su ch banking, transferring and tradi ng of credits is needed through MY 2015 for the same reason that the credits themselves need to be retained. Manufacturers have indicated reasonably that th ese strategies incorporating such credits are already part of their compliance strategies, and that th ey cannot readily change course . Thus, in order to provide needed lead time in the first program model y ears, EPA is not altering banking, trading, and transferring of these credits.

Sierra Club submitted comments urging EPA to consider not giving credits for E-85 consumption for MY2016 and later. Sierra Cl ub commented “fuel volumes are mandated under RFS2 and the fuel is otherwise subsidized thr ough other policies. The cost to automakers to

5-180EPA Vehicle Program, Feasibility, and Estimated Impacts

produce FFVs is nominal and need not be ince ntivized through vehi cle program with the potential cost of increased greenhouse gas emission.” As noted above, GHG compliance values will be based on actual emissions performance of the FFV on conven tional and alternative fuels, weighted by the actual use of these fuels in the FFVs. The only “credit” available to manufacturers is through their optimization of the FFV’s emissions performance on the alternative fuel and the real-w orld use of the fuel.

Comments regarding the use of life-cycle emissi ons in FFV credits calculations are addressed below. Comments regarding FFV credits cap s for MY2012-2015 are also addressed below.

Natural Gas Vehicle Comments

Organization: NGVAmerica Clean Energy Fuels

Comment:

NGVAmerica

NGVAmerica supports EPA’s plan to provide CO 2 credits to manufacturers of alternative fueled vehicles based on the credit mechanism currently provided for such vehicles under the fuel economy regulations. The fuel economy regulations use a factor of 0.15 for alternative fuel vehicles. Under EPA’s proposal, th is same factor would be used to reduce the greenhouse gas emissions output of alternative fuel vehicles, thus enhancing the potential credits that such vehicles could earn. The proposed GHG regulations would provide the enhanced credits for 2012

– 2015 after which time they would no longer be provided for flex-fue led or dual-fueled alternative fuel vehicles. In fact, starting in 2016, EPA only take into account the emission benefits of flex-fueled or dual-fu eled alternative fuel vehicles if the manufacturer can verify or appropriately estimate the level of alternative fuel utilization in its alternative fuel vehicles. Dedicated alternative fueled vehicles, however, w ould be assumed to operate on alternative fuel since they can only operate on one fuel. Thus, dedi cated vehicles would c ontinue to earn credits based on their use of alternative fuel but they would no longer benefit from the enhanced credits provided in years 2012 – 2015. [OAR-2009-0472-7236.1, p.9]

We support EPA’s proposed enhanced credits fo r 2012 - 2015 but note that these credits do not apply to the caps imposed on CH 4 and N 2 O emissions. As we understand the current proposal, the enhanced credits only apply with respect to CO 2 emissions. Thus, the cap on methane emissions, unless changed, would still be a bur den on manufacturers and potentially limit the introduction of some NGVs. A ssuming our concerns regardi ng the caps are addressed, we believe the credit program and the added incentive provided for alternative fuel vehicles could encourage manufacturers to increase their NGV offerings. If EPA adopts a CO 2 -equivalent approach for all vehicles, the enhanced gree nhouse gas emission credits for alternative fuel vehicles should be based on the average of th e three pollutants multiplied by 0.15. If EPA as an alternative only provides a CO 2 -equivalent approach for NGVs and other alternative fuel

5-181EPA Response to Comments

vehicles, we advocate that the factor of 0.15 be applied on ly against the CO 2 emissions of NGVs for purposes of the greenhouse gas cr edit program. [OAR-2009-0472-7236.1, p.9]

NGVAmerica also believes the proposal regardi ng alternative fuel vehicles should be expanded. As proposed, the credit program would not provid e enhanced incentives for manufacturers of NGVs after 2015, and there are no early credits for such vehicles. EPA’s proposal, however, would provide incentives for electric vehicles and other advanced technology vehicles until 2016; it also would provide early credits for such vehicles beginning in 2009. In addition, the credits for advanced technology vehi cles are structured differently than those for alternative fuel vehicles, potentially making them more valuable. The credits assume that electric vehicles replace comparable gasoline powered vehicles and operate on electricity. The credit mechanism magnifies the benefits of these vehicles by multiplying each produced vehicle by 1.2 – 2.0, so that it appears that a manufacturer has produced a larger number of such ve hicles for purposes of averaging CO 2 emissions. [OAR-2009-0472-7236.1, p.10]

Providing the credits proposed fo r advanced technology vehicles while not also providing similar credits for NGVs is inherently unfair since it is no t at all clear that such vehicles will provide real-world benefits that are s uperior to NGVs or even gasoline vehicles when full-fuel cycle emissions are considered. As the NAS report indicat es, it is not clear that electric and plug-in electric vehicles will provide any benefits ove r higher fuel-efficiency gasoline vehicles. Given these factors, we urge EPA to provide the follo wing additional incentive s for dedicated and dualfuel NGVs: 1) provide early cred its for dedicated vehicles goi ng back to MY 2009 as proposed for other vehicles, and 2) extend the enhanced credits using the 0.15 conversion factor for two additional model years (2016 – 2017) for manufact urers of dedicated a nd bi-fuel vehicles capable of demonstrating that the vehicles opera te a majority of the time on alternative fuel. [OAR-2009-0472-7236.1, p.10]

The current proposal provides enhanced credits fo r alternative fuel vehicl es without any showing that such vehicles operate on alternative fuels. These credits are ava ilable until 2015 after which time enhanced credits are no longer provided and alte rnative fuel use is only taken into account if the manufacturer can demons trate the alternative fuel is used. We believe an added incentive for dedicated vehicles and dual-fuel ve hicles that actually use alternative fuel is warranted as a way of encouraging manufacturers to increase their offerings of dedicated vehicl es and in order that they would take a stronger inte rest in ensuring that the vehicl es they make actually operate on alternative fuels. Under our pr oposal, manufacturers of all dedi cated vehicles and dual-fuel vehicles which are demonstrated to operate more than 50 percent of the time on alternative fuel would continue to receive enhanced credits for such vehicles in model years 2016 and 2017. [OAR-2009-0472-7236.1, pp.10-11]

Clean Energy Fuels

Clean Energy supports EPA's plan to provide CO 2 credits to manufacturers of alternative fueled vehicles based on the credit mechanism currently provided for such vehicles under the fuel economy regulations. The fuel economy regulations use a multiplier of 0.15 to factor the fuel economy of alternative fuel vehicles. This sa me factor would be used to reduce the GHG emissions output of alternative fuel vehicles, thus enhancing the potential credits that such

5-182EPA Vehicle Program, Feasibility, and Estimated Impacts

vehicles could earn. The proposed GHG regulations would provide the enhanced credits for 2012

- 2015 after which time they would no longer be provided for FFVs or dual-fueled alternative fuel vehicles. In fact, starti ng in 2016, EPA would no longer ta ke into account the emission benefits of FFVs or dual-fueled alternative fuel vehicles unless the manufacturer can verify or appropriately estimate the level of alternative fuel utilization in its alternative fuel vehicles. Dedicated alternative fueled vehicles, however, w ould be assumed to operate on alternative fuel since they can only operate on one fuel. Thus, dedi cated vehicles would c ontinue to earn credits based on their use of alternative fuel but they would no longer benefit from the enhanced credits provided in years 2012 - 2015. [OAR-2009-0472-7220.1, p.8]

We support EPA's providing the proposed enhan ced credits for 2012 - 2015 but note that these credits do not apply to the caps imposed on CH 4 and N 2 O emissions. As we understand the current proposal, the enhanced credits only apply with respect to CO 2 emissions. Thus, the cap on methane emissions, unless changed, would still be a burden on manufacturers and potentially limit the introduction of some NGVs. Assuming our concerns regarding the caps are addressed, we believe the credit program and the added incentiv e provide for alternative fuel vehicles could encourage manufacturers to increase their NGV offerings. If EPA and NHTSA adopt a CO 2 e approach for all vehicles, the enhanced GHG emissi on credits for alternative fuel vehicles should be based on the average of the three polluta nts multiplied by 0.15. If EPA and NHTSA as an alternative only provides a CO 2 e approach for NGVs and other alternative fuel vehicles, we then would advocate that the factor of 0.15 be applied only against the CO 2 emissions of NGVs for purposes of the GHG credit pr ogram. [OAR-2009-0472-7220.1, p.8]

Clean Energy also believes the proposal regardin g alternative fuel vehicles should be expanded. As proposed, the credit program would not provid e enhanced incentives for manufacturers of NGVs after 2015, and there are no early credits fo r such vehicles. EPA's and NHTSA's proposal, however, would provide incentives for electric ve hicles and other advan ced technology vehicles until 2016; it also would provide early credits for such vehicles beginning in 2009. In addition, the credits for advanced technology vehicles are structured differen tly than those for alternative fuel vehicles, potentially making them more valuable. The credits assume that electric vehicles replace comparable gasoline powered vehicles and operate on electricity. The credit mechanism magnifies the benefits of these vehicles by multiplying each produced vehicle by 1.2 - 2.0, so that it appears that a manufacturer has produced a larger number of such ve hicles for purposes of averaging CO 2 emissions. [OAR-2009-0472-7220.1, pp.8-9]

Providing the credits proposed fo r advanced technology vehicles while not also providing similar credits for NGVs is inherently unfair since it is no t at all clear that such vehicles will provide real-world benefits that are s uperior to NGVs or even gasoline vehicles when full-fuel cycle emissions are considered. As the NAS report indicat es, it is not clear that electric and plug-in electric vehicles will provide any benefits ove r higher fuel-efficiency gasoline vehicles. Given these factors, we urge EPA to provide the follo wing additional incentive s for dedicated and dualfuel NGVs: 1) provide early cred its for dedicated vehicles goi ng back to MY 2009 as proposed for other vehicles, and 2) extend the enhanced credits using the 0.15 conversion factor for two additional model years (2016 - 2017) for manufacturer s of dedicated and bi-fuel vehicles capable of demonstrating that the vehicl es operate a majority of the time on alternative fuel. [OAR-2009­ 0472-7220.1, p.9]

5-183EPA Response to Comments

The current proposal provides enhanced credits fo r alternative fuel vehicl es without any showing that such vehicles operate on alternative fuels. These credits are ava ilable until 2015 after which time enhanced credits they are no longer provided and alternative fuel use in only taken into account if the manufacturer can de monstrate the alternative fuel is used. We believe an added incentive for dedicated vehicles and dual-fuel vehicles that actu ally use alternative fuel is warranted as a way of encouraging manufacturer s to increase their offerings of dedicated vehicles and in order that they would take a stro nger interest in ensuring that the vehicles they make actually operate on alternative fuels. U nder our proposal, manufactur ers of all dedicated vehicles and dual-fuel vehicles which are demonstrated to operate more than 50 percent of the time on alternative fuel would continue to receive enhanced credits for such vehicles in model years 2016 and 2017. [OAR-2009-0472-7220.1, p.9]

[[Clean Energy also submitted these comments as testimony at the Detroit public hearing, See docket number EPA-HQ-OAR -2009-0472-6185, pp. 139-140.]]

EPA Response:

The commenters are requesting addi tional credits for na tural gas vehicles, and suggest extending the use of the 0.15 factor disc ussed above for MY2012-2015, to additional model years. EPA is retaining the use of the 0.15 factor for FFVs, dual- fuel vehicles, and alternative fuel vehicles through MY 2015 as proposed. Natural gas vehicles will be eligible for these credits. As described above, EPA is not extending the us e of the 0.15 factor beyond MY2015. EPA did not expand the advanced technology vehicle credits to cover other technologies beyond PHEVs, EVs, and fuel cell vehicles for reasons described in Section 5.7.3 of this RTC and Section III.C.3 of the preamble to the final rule. EPA also does not believe that it would be appropriate to create a unique credit opportunity for natural gas vehicles by extending the use of the 0.15 factor for natural gas vehicles beyond the MYs 2012-2016. Several commenters strongly supported EPA moving away from using this factor as soon as possible because the factor is not based on actual emissions reductions.

The commenter also raises an issue regard ing the interplay between standards for N 2 O and CH 4 and credit generating opportunities if compliance is measured on a CO 2 -equivalent basis. As discussed in Section 5.5 and Sec tion III.B.7. of the preamble to the final rule, EPA is allowing manufacturers to comply with N 2 O and CH 4 standards on a CO 2 equivalent basis. The commenter states that “if EPA adopts a CO 2 -equivalent approach for a ll vehicles, the enhanced greenhouse gas emission credits for alternative fuel vehicles should be based on the average of the three pollutants multiplied by 0.15.” EPA believ es the commenter meant the sum rather than the average of the three pollutants. In response, manufacturers must appl y the 0.15 factor to only the CO 2 emissions value and not to the N 2 O and CH 4 CO 2 -equivalent values when summing the emissions under the FFV credits provisi ons. Applying the 0.15 factor to CH 4 and N 2 O emissions under the CO 2 equivalent approach (thereby reducing th e emissions values by 85 percent) would provide the manufacturer with credits not envisioned in the proposal and not included in the CAFE program, and would result in the loss of feasible, cost-e ffective emissions reductions. Moreover, any credits under this rule for N20 or CH4 reductions are not justified, since the standards themselves are no-backsliding caps, a nd credits should only be earned for performance

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which surpasses some benchmark representing g ood performance. See Section III.B.7 to the preamble to the final rule. Although EPA is not extending the use of the 0.15 factor to model years other than 2012-2016, natural gas vehicle manuf acturers are eligible to earn early credits if they meet the requirements of the ea rly credits program being adopted.

Biofuels Life-cycle Emissions Comments

Organization: Georgia-Pacific (GP) American Forest and Paper Association (AF&PA) Dinter, Bridget Schade, Michael

Comment:

Georgia-Pacific (GP)

Tailpipe Emission Standards Should Exempt CO 2 from Combustion of Biomass derived Fuels. If EPA nevertheless promulgates GHG tailpipe emission standards, those emission standards should recognize that CO 2 emissions from the combustion of fuels derived from biomass (“biofuels”), because of the principle of car bon neutrality and best Ca rbon accounting practices, do not contribute to climate change and should not be counted against the proposed grams per mile emission standards. This would (1) make the GHG tailpipe emission standards consistent with the endangerment that the standards are su pposed to be mitigating and (2) encourage the substitution of renewable fuels for fossil fuels, which EPA already is seeking to accomplish through other provisions in the pr oposed Tailpipe Rule. In fact, since the carbon-neutral motor vehicle emissions of CO 2 from biofuels do not contribute to the increase in atmospheric CO 2 concentrations which constitute the public enda ngerment in EPA’s view, EPA lacks a statutory basis for restricting motor vehicle CO 2 emissions to the extent that they result from use of biofuels.

[See Docket Number OAR-2009-0472-7122.1, pp.6-9 fo r detailed comments pertaining to: Biofuel Combustion Is Carbon-Neutra l and EPA Must Account for the CO 2 -Neutrality of Biofuels To Be Consistent With Its Endangerment Finding]

American Forest and Paper Association (AF&PA)

Tailpipe Emission Standards Should Exempt CO 2 from Combustion of Biomass-derived Fuels If, despite the reasons set fo rth above, EPA nevertheless pr omulgates GHG tailpipe emission standards, those emission sta ndards should recognize that CO 2 emissions from use of fuels derived from biomass (“biofuels”), because of the principle of carbon ne utrality and best carbon accounting principles, do not contribute to climat e change and should not be counted against the proposed grams/mile emission standards. Th is would (1) make the GHG tailpipe emission standards consistent with the endangerment that the standards are supposed to be mitigating and (2) encourage the substitution of renewable fuels for fossil fuels, which EPA already is seeking to accomplish through other provisions in the propos ed GHG tailpipe standard s. In fact, since the

5-185EPA Response to Comments

carbon-neutral motor vehicle emissions of CO 2 from biofuels do not contribute to the increase in atmospheric CO 2 concentrations which EPA has proposed to find endangers public health and welfare, EPA would lack a statutory basis for restricting motor vehicle CO 2 emissions to the extent that they result from us e of biofuels. [OAR-2009-0472-7126.1, p.5]

[See Docket Number OAR-2009-0472-7126.1, pp.6-9 fo r detailed comments pertaining to: Biofuel Combustion Is Carbon-Neutra l, EPA Must Account for the CO 2 -Neutrality of Biofuels To Be Consistent With Its Endangerment Finding, and The Proposed GHG Tailpipe Standards Could Be Modified To Recognize Biofuel CO 2 -Neutrality]

Weber, David

There is no mention in the test procedure of a f actor for bio-derived fuels. For example, there needs to be some allowance for OEM's to make a rrangements to sell B100 diesel trucks to fleets and that the fuel economy number should count a B100 diesel truck as a zero CO 2 g/mi vehicle. This would need for the fleet owner to sign a writt en contract that he wi ll only use the truck with B100 fuel for the life of the vehicle.

If CO 2 g/mi is a metric that is important, then the metric should actually be non-renewable (& verifiable) CO 2 g/mi. That is, B100 usag e should count as zero CO 2 g/mi. If energy dependency is important, then biodiesel will be more home-grown, so the balance of trade will be improved. [OAR-2009-0472-1410, pp. 2]

Dinter, Bridget

I support the overall goal of greenhouse gas reducti on, but find that the alternative fuel credit program proposed by the EPA has a serious flaw. This flaw is that th e credit program only considers the emissions of the ve hicle without regard to the em issions created by production of the fuel for the vehicle. [OAR-2009-0472-7250.1, p. 1]

The credit program designed by the EPA must be changed to include emissions involved in the production of alternative fuels. The current program only considers emissions that come directly from the vehicle as shown by the pr oposal’s statement that, “...the CO 2 emissions of FFV’s will be represented by the aver age of two things: the CO 2 emissions while operating on gasoline, and the CO 2 emissions operating on the alternative fuel multiplied by 0.15” 74 Fed. Reg. at 49,780. Calculating the carbon emissions in this manner is inaccurate because it does not take into account the difference in carbon emissions in produc tion of the fuels. Because of this inaccurate calculation method, the credit program creates incentiv es to produce vehicles th at will lead to an overall increase in carbon emissions. [OAR-2009-0472-7250.1, p. 1]

The EPA must consider the emission of carbons in the production of alternate fuels when giving alternative fuel credits or th e overall emissions of carbon a nd other harmful pollutants may increase. A popular alternative fuel is corn ethanol. Under the current EPA proposal manufacturers of vehicles that run on corn ethanol will receive credits for emitting fewer greenhouse gases, but corn ethanol actually is wo rse for the environment than gasoline. In the article Total versus urban: Well-to-wheels assessme nt of criteria pollut ant emissions from

5-186EPA Vehicle Program, Feasibility, and Estimated Impacts

various vehicle/fuel systems , researchers studied the overall car bon emissions of alternative fuels versus gasoline. Even though the researchers as sumed future technological advancement in ethanol production, the study found th at using vehicles run on corn ethanol instead of vehicles run on gasoline would result in significantly hi gher carbon emissions a ssociated with use of vehicles. In addition to emitting more carbon, corn ethanol fueled vehicles emit 17-23% more volatile organic compounds, have up to 143% mo re emissions of PM�2.5, and have significantly greater NOx emissions (Hong, 1800-1802). The researchers who published Climate change and health costs of air emissions from biofuels and gasoline agree that corn ethanol would increase carbon and other dangerous emissions. Comparing combined climate change and health costs from emissions of gasoline run vehicles and thos e of corn ethanol run vehicles, these researchers found that corn ethanol vehicles always incurred larger costs. The combined climate change and health costs for gasoline run vehicles is $469 m illion while corn ethanol run vehicles have a combined climate change and health cost ranging from $472 million to $952 million depending on production methods. These studies make it very apparent that using corn ethanol as a fuel alternative would cause an incr ease in carbon emissions and othe r harmful emissions. This is why the EPA must rewrite the proposal to take into account the production emissions of fuels when determining whether or not to award cred its for flexible fuel vehicles. [OAR-2009-0472­ 7250.1, pp. 1-2]

The EPA’s current proposal for vehicle emission st andards contains a cred it program to reward companies that invest in alternative fuel vehicl es. This program is flawed because it does not have measures to insure that the alternative fuels decrease carbon emi ssions when considering production of fuels. If the EPA does not take meas ures to ensure that credits are only given to alternative fuels that will not cause more harm than gasoline, these fuel emission standards will only lead to greater environmental degradation. Th is is why the EPA must investigate alternative fuels to ensure that these fuels will not worsen the environment before giving the automobile manufacturers incentives to create vehicles that use them. [OAR-2009-0472-7250.1, p. 2]

Schade, Michael

The premise that the contained renewable ethanol is completely free of net carbon emissions is part of the E85 example calculation. Has th e heavy energy input to the crop production, conversion to ethanol, and transpor tation of raw materials and ethanol been premised to be zero? If yes, should a pragmatic estimate of those ener gy inputs and their carbon content be included as a partial offset to the premised E85 net carbon benefit? [OAR-2009-0472-7261.1, pp. 5]

EPA Response:

Georgia-Pacific and the American Forest & Paper Association commented that EPA’s emission performance methodology should include lifecy cle GHG emission reductions associated with biofuel use. Furthermore, if ve hicles are fueled with biofuels that do not contribute to climate change, then they should not be counted agains t the gram/mile tailpipe emission standards. Citizens Bridget Dinter and Mi chael Schaede commented that EPA should include the lifecycle performance of biofuels in its final FFV credit progr am and consider the fact that that not all E85

5-187EPA Response to Comments

has the same lifecycle GHG performance, e.g., et hanol made from corn versus cellulosic biomass.

EPA believes that tailpipe emissi ons from all vehicles including those fueled by biofuels must be controlled under the standards es tablished by this rule regardle ss of upstream emissions. After considering these comments, EPA is not includi ng the lifecycle GHG performance of biofuels (e.g., E-85 and B100) in its tailpipe emission standards or its FFV credit program. EPA recognizes that every motor vehicle fuel a nd fuel production proce ss has unique upstream GHG emissions impacts, but fuel life-cycle GHG emi ssions impacts are beyond the scope of this rulemaking. EPA believes that tailpipe emissions from all vehicles including those fueled by biofuels must be controlled under the standards established by this rule regardless of upstream emissions. EPA has wide discretion under section 202( a)(1) and has chosen to first focus on vehicle tailpipe GHG emissions, both because tailpipe emissions ar e the largest si ngle source of vehicle life-cycle GHG emissions, and because the EPA motor vehicle program has traditionally focused on tailpipe emissions. In addition, the nation is already on track for increasing biofuel use in response to the Energy Independence and Security Act of 2007 (EISA). EISA set aggressive biofuel targets reaching 36 billi on gallons of renewable fuel by 2022, 21 billion gallons of which are advanced second-generatio n biofuels. The potenti al lifecycle GHG benefits associated with increased biofuel usage are already captured under EPA’s recently-finalized RFS2 program and therefore should not be doub le-counted under today’ s Light-Duty Vehicle GHG program. Not only will it be challenging enough for automakers to demonstrate FFV E85 usage, the fungible nature of the fuel distribut ion system will make it difficult to determine the feedstocks used to make the biofuel portion of the fuel. And since the RFS2 rule already requires refiners and importers to blend an increa sing amount of advanced biofuels into their fuel (e.g., cellulosic ethanol), the im proved lifecycle performance of E85 is already captured under that program.

EPA’s authority to adopt emissions standards und er section 202(a)(1) is not limited to motor vehicles powered by fuels other than biofuels. Vehicles operating on biofuels do emit GHGs, and as discussed in the preamble, from a lifecycl e perspective biofuels su ch as ethanol are not carbon neutral in the sense the commenter uses. EPA’s recently promulgated Renewable Fuel Standard Program shows that, when you take into account aggregate lifecycle emissions including non-tailpipe GHG emissions (such as feedstock growth, transportation, fuel production, and land use), ethano l from corn using advanced production technologies emits about 20 percent less GHG than gasoline from oil. 10

EPA considered the issue of upstream emissi ons and aggregate lif ecycle GHG emissions of vehicles in the context of compliance values to us e for vehicles that operate in whole or in part on electricity, as well as flex fuel vehicles (such as vehicles that operate on either gasoline or E85). See preamble section III.C.3. From this it is appropriate to include biofuel-powered vehicles in the emissions standard s, and to assign their measured tailpipe emissions of GHGs as their compliance value for purposes of this rulemaking. They do emit GHGs as tailpipe emissions, and their aggregate lifecycle emissions are not very different from the gasoline or diesel they replace. The renewable fuel program already provides a mandate for increased use of

10 Regulation of Fuels and Fuel Additives: Changes to Re newable Fuel Standard Program (75 FR 14670, March 26, 2010)

5-188EPA Vehicle Program, Feasibility, and Estimated Impacts

such biofuels, and a change in the emissions st andards in this rulemaking is not needed to provide an additional incentive. The FFV credit in place through MY2015 already provides an incentive for manufacturers to pr oduce vehicles capable of using a biofuel, and this rulemaking is directed at automobile manufacturers and wh at they can do, not the operators of the vehicle who actually choose whether to use the biofuel. Changing the emissions standards for vehicles that use biofuels would not likel y change how much biofuels are actually used. For example, data show that, on average, FFVs operate on ga soline over 99 percent of the time, and on E85 fuel less than 1 percent of the time. 11 This has occurred notwithstanding the CAFE credit for FFVs.

This is also fully consistent with the endange rment and contribution findings. EPA included all motor vehicles emissions in calculating emissions for purposes of the contribution finding, and did not exclude emissions from vehicles operated by biofuels. In addition, the content or form of the emissions control to follow unde r section 202(a)(1) was not relevant to the determination that the air pollution of atmospheric concentrations of GHGs endanger public health and welfare.

Single Fleet-wide Cap Comments

Organization: Honda Motor Company Association of Intern ational Automobile Manufacturers (AIAM)

Comment:

Honda Motor Company

In the preamble, EPA and NHTSA state the inten tion of this regulation “...is to set forth a carefully coordinated an d harmonized approach to implemen ting these two statutes.” While harmonization is good, clearly the intent is not to make the regulations identical. EPA has sought to increase flexibility wherever possible, a nd this is often not the case where NHTSA is constrained by statute. Flexib le Fuel Vehicle (“FFV”) cred its is one such case. EPA acknowledges that OEMs have relied in their planning on credits associated with FFVs, and is therefore planning to allow FFV credits thr ough 2015, and thereafter in tending to allow FFV credits only where fuel use can be proven. EPA’ s credit limits for FFVs (Table III.C.2-1) continue NHTSA’s statutory-requirement to limit FFV credits by Car and Truck fleets. [NHTSA-2009-0059-0095.1, p.5]

Since EPA is not required to follow NHTSA’s statutory limits and EPA is interested in maximizing flexibility, Honda recommends that each OEM be allowed to maximize its FFV credits on a fleet-wide basis. Each OEM could ca lculate its own car & truck fleet mix and apply this to the limits described in the aforementi oned table. In the case where an OEM has a 70% mix of passenger cars and a 30% mix of light trucks in MY2012, an OEM could determine its fleet-wide credit limits as follows:

11 EPA 2010, Renewable Fuel Standard Program (RFS2) Regul atory Impact Analysis, Section 1.7.4. EPA-420-R10-006. February 2010. Docket EPA-HQ-OAR-2009-0472-11332

5-189EPA Response to Comments

70% x 9.8 g/mile (car FFV credit limit in 2012) + 30% x 17.9 g/mile (truck FFV credit limit in 2012)

This approach enables Honda to offer E85 models that make the most sense for customers and their interest in fuel use. For example, by focusing exclusively on E85 trucks, Honda can maximize its E85 market and the potential for actual E85 fuel use. [NHTSA-2009-0059-0095.1, p.5]

Association of International Au tomobile Manufacturers (AIAM)

Under the proposal, flexible fuel vehicle (FFV) credit caps are applied separately to each manufacturer’s car and truck fleet . In the case of the CAFE standa rds, this approach is required by statute. The effect of the separate caps is to require manufacturers to market FFVs in both fleets if they want to earn the maximum cred it. However, the marketability of FFVs varies depending on such factors as the local availability of refueling infrastructure and the type of vehicle. AIAM urges EPA to establish a single cap for all FFVs and allow manufacturers to allocate the credit between their car and truc k fleet as they deem most appropriate. By eliminating the separate caps, manufacturers wo uld receive enhanced compliance flexibility while reducing consumer cost impacts. We r ecognize that our recommendation would involve reduced harmonization between th e CAFE and greenhouse gas programs, but in this case the flexibility benefits outweigh the loss in harmonization. We would support a legislative amendment that would allow the same approach to be taken with regard to the CAFE program. [OAR-2009-0472-7123.1, p.15]

EPA Response:

EPA understands the comments that allowing manufact urers to combine their car and truck fleets into a single fleet for purposes of genera ting MY2012-2015 FFV standards would give them more flexibility to target their FFVs to the market segments they believe are most likely to use E85. EPA also agrees that although this is not allowed under EPCA, the CAA would allow EPA discretion to structure th e program in this way. However, the lead time concerns that persuaded EPA to replicate the EPCA FFV credits in the GHG rule through MY 2015 result from manufacturers’ reliance on the EPCA regime , which does not include these additional flexibilities.

Additional Comments

Organization: Ford Motor Company Chrysler Group LLC (Chrysler)

Comment:

Ford Motor Company

FFV Credits

5-190EPA Vehicle Program, Feasibility, and Estimated Impacts

Ford supports the inclusion of FFV credits in the EPA program. The Energy Independence and Security Act of 2007 (EISA) defines the credits al lowed in the CAFE program. Ford agrees with EPA that by calculating the FFV CO 2 credit limit based on the indivi dual manufacturer standards calculated from the footprint curves tracks more cl osely to the CAFE FFV credit limits. In order to harmonize the EPA and NHTSA programs to the greatest extent possible, Ford does not support the use of the proposed FFV CO 2 Standard Credit Limits for cars and trucks shown in Table III.C.2-1 of the preamble. Ra ther, to ensure that the proper amount of credit is allocated to a manufacturer, Ford recommends adopti on of the calculated method for the FFV CO 2 credit limit.

FFV Credits-Demonstration of Alternativ e Fuel Usage / Ratio of Operation

Ford urges the agencies to provide manufacturers with flexibility in demonstrating alternative fuel use and ratio of operation, a nd agrees that the 'top-down' appr oach described in the preamble of the proposed rule is reasona ble and should be retained. Th is method, which uses national alternative fuel use data coupled with a VMT analysis using the EPA Motor Vehicle Emission Simulator model to determine the ratio of alternat ive fuel and base fuel for new vehicles being sold, is the most cost-effectiv e and least error-prone option. A cost-effective alternative is essential to provide manufacturer s with adequate incentives to continue producing FFVs (which may have difficulties and/or additional cost in meeting certain requirements). Allowing the use of national alternative fuel us e data would eliminate the expe nse of adding an on-board data collection system, as well as the difficulty of acce ssing such systems and the chance of errors in gathering the data.

Of course, the addition of a fuel-use requireme nt only serves to penalize the automobile manufacturers for the lack of an adequate E 85 fueling infrastructure. The agencies should institute additional programs to promote the ava ilability of E85 at filling stations around the country, so that consumers will be able to take fu ll advantage of the flex -fuel capabilities of the many FFVs on the road.

Ford also recommends that differences in refueling frequency of newer and older FFVs be accounted for. Awareness of FFV capability (and therefore likelihood of re fueling) is higher for current models than older models, and will increase further as the alternative fuel becomes more available. Therefore, these newer vehicles shoul d be given appropriately larger portion of the alternative fuel use credit. This portion or amoun t could be determined by EPA with surveys of current and past FFV customers as well as other analysis. [OAR-2009-0472-7082.1, pp. 8-9]

Chrysler Group LLC (Chrysler)

Chrysler supports the inclusion of flexible fuel and alternative fuel vehicle incentives. These incentives encourage manufacturers to continue production of vehicles capable of running on alternative fuels as the production and distribut ion systems of such fuels are developed. The lower carbon intensity of such fuels is an oppor tunity for further greenho use gas reductions and increased energy independence. The continuance of such incentives recognizes the important potential of this technology to reduce GHGs. [NHTSA-2009-0059-0124, p.35]

5-191EPA Response to Comments

However, Chrysler is concerned that the proposed flexible fuel and a lternative fuel vehicle credits are not harmonized between the EPA a nd NHTSA programs. The EPA flexible fuel vehicle greenhouse gas credits are capped in a manner inconsistent with NHTSA's CAFE program. The caps result in more stringent greenhouse gas standards th an CAFE standards. [NHTSA-2009-0059-0124, p.35]

EPA Response:

Credit Limits

The FFV credit limits for CAFE are 1.2 mpg for model years 2012-2014 and 1.0 mpg for model year 2015. 12 In CO 2 terms, these declining FFV credit limits translate to declining CO 2 credit limits over the four model years. As the CAFE standard increases num erically, the credit limit becomes a smaller fraction of the standard. EPA proposed, but is not adopting, credit limits based on the overall proj ected industry average CO 2 standards for cars and trucks. EPA also requested comments on basing the calculated CO 2 credit limits on the individual manufacturer fleet-average standards calculate d from the footprint curves. Ford commented supporting this approach and also in support of harmonizing with CAFE to the gr eatest extent possible. EPA also received comments from Chrysler recommending that the credit limits for an individual manufacturer be based instead on that manufacturer’s fleet average performance. The commenter noted that this approach is in line with how CAFE FFV credit limits are applied. This is due to the fact that the GHG-equivalent of the CAFE 1.2 mpg cap will vary due to the non-linear relationship between fu el economy and GHGs/fuel consumption. EPA agrees with Chrysler’s suggested approach since it best ha rmonizes how credit limits are determined in CAFE and is needed to address issues of l ead time, as explained above.. EPA intended and continues to believe it is appr opriate to provide essentially the same FFV credits under both programs for MYs 2012-2015. Therefore, EPA is finalizing FFV credits limits for MY2012­ 2015 based on a manufacturer’s flee t-average performance. For example, if a manufacturer’s 2012 car fleet average emissions performance was 260 g/mile (34.2 mpg), the credit limit in CO 2 terms would be 9.5 g/mile (34.2 mpg – 1.2 m pg = 33.0 mpg = 269.5 g/mile) and if it was 270 g/mile the FFV credit limit would be 10.2 g/mile.

Methodology for MY2016 and Later Demonstration of Actual Alternative Fuel Usage

In the proposal, EPA considered an option of establishing a rebuttable presumption using a “topdown” approach based on national E-85 fuel use to assign credits to FFVs sold by manufacturers under this program. For example, national E-85 volumes and national FFV sales could be used to prorate E-85 use by manufacturer sales vo lumes and FFVs already in-use. EPA would conduct an analysis of vehicle miles travelled (VMT) by year for all FFVs using its emissions inventory MOVES model. Usi ng the VMT ratios and the overall E-85 sales, E-85 usage could be assigned to each vehicle. This method would account for the VMT of new FFVs and FFVs already in the existing fleet usi ng VMT data in the model. The model could then be used to determine the ratio of E-85 and gasoline for new ve hicles being sold. Fluctuations in E-85 sales and FFV sales would be taken into ac count to adjust the credits annually.

12 49 U.S.C 32906 (a).

5-192EPA Vehicle Program, Feasibility, and Estimated Impacts

Ford commented in support of this type of methodology and reco mmended “that differences in refueling frequency of newer and older FFVs be accounted for. Awareness of FFV capability (and therefore likelihood of refueling) is higher for current models than older models, and will increase further as the alternative fuel becomes more available. Therefore, these newer vehicles should be given appropriately larg er portion of the alternative fuel use credit. This portion or amount could be determined by EPA with surveys of current and past FFV customers as well as other analysis.” EPA is fina lizing its intention to conduct a top-down analysis upon written request. EPA will consider Ford’s comments rega rding vehicle refueling frequency in conducting this analysis, with the understanding that VM T and refueling frequenc y are closely related.

EPA understands that Ford would like EPA to promot e the availability of E-85 refueling stations. However, these comments regarding refueling infrastructure are beyond the scope of this rulemaking.

5.7.3 Advanced Technology Vehicle Incentives fo r Electric Vehicles, Plug-in Hybrids, and Fuel Cells

In the proposal, EPA stated the following: “EPA is proposing additional credit opportunities to encourage the early commercialization of adva nced vehicle powertrains, including electric vehicles (EVs), plug-in hybrid el ectric vehicles (PHEVs), and fuel cell vehicles (FCVs). These technologies have the potential for more sign ificant reductions of GHG emissions than any technology currently in commercial use, and EPA believes that encouraging early introduction of such technologies will help to enable their wider use in the future, promoting the technologybased emission reduction goals of section 202(a)(1) of the Clean Air Act.”

Specifically, EPA proposed two mechanisms by whic h advanced technology vehicles could earn credits: 1) a zero grams/mile compliance valu e for EVs, FCVs, and PHEVs when operated on grid electricity, and 2) a vehicle multiplier in the range of 1.2 to 2.0. EPA requested comment on providing some type of incentive for advanced technology vehicles, the appropriateness of both the zero grams/mile and vehicle multiplier incentive mechanisms, and on any alternative approaches for addressing advanced technology vehicle incentives.

EPA received significant public comment on this issue. Most of the commenters responded directly to EPA’s request and focused their comments on the proposed zero grams/mile and vehicle multiplier mechanisms. Accordingly, th ere is significant overlap among the comments on this issue, and the structure of this section is to provide a comprehensive sampling of excerpts of 49 of the most detailed public comments on th is topic (in Section 5.7. 3.1), in alphabetical order, followed by an EPA response to the comments organized into 4 sections:

 Whether to provide an incentive for a dvanced technology vehicles (Section 5.7.3.1)

 The zero grams/mile compliance value for EVs, FCVs, and PHEVs when operated on grid electricity (Section 5.7.3.2)

 The vehicle multiplier (Section 5.7.3.3)

 Miscellaneous issues related to the adva nced technology vehicle incentive program (Section 5.7.3.4)

5.7.3.1 Comments

5-193EPA Response to Comments

Organization:

Alliance of Automobile Manufacturers (Alliance) American Council for an Energy Efficient Economy BMW of North America, LLC (BMW) BorgWarner California Air Resources Board Chew, Yuli Chrysler Group LLC (Chrysler) Clean Energy Fuels Cummins Inc. Ecology Center Energy, Environmental & Pub lic Utility Practice Group Environment Michigan Environment New Jersey Environmental Defense Fund eTec Fisker Automotive, Inc. Ford Motor Company Glasser, Mark Honda Motor Company Honeywell Transportation Systems Hyundai Motor Company International Council on Clean Transportation Investor Network on Climate Risk Karplus, Valerie J. Massachusetts Department of Environmental Protection Mercedes-Benz (Daimler AG) Mitsubishi Motors R & D of America (MRDA) Motor and Equipment Manufacturers Association National Association of Cl ean Air Agencies (NACAA) National Automobile Dealers Association (NADA) Natural Resources Defense Council New York State Department of Environmental Conservation New York University School of Law, Institute for Policy Integrity (IPI) Nissan North America Northeast States for Coordinated Air Use Management Physicians for Social Responsibility, Los Angeles Public Citizen and Safe Climate Campaign SABIC Innovative Plastic Sierra Club South Coast Air Quality Management District State of New Jersey State of Washington Department of Ecology Toyota Motor North America

5-194EPA Vehicle Program, Feasibility, and Estimated Impacts

Union of Concerned Scientists United Auto Workers University of California, Santa Barbara, Bren Working Group on Vehicle Fuel Economy University of Pennsylvania, Environmental Law Project U.S. Coalition for Advanced Diesel Cars Volkswagen Group of America (Volkswagen)

Comment:

Alliance of Automobile Manufacturers (Alliance)

Tailpipe CO2 from EVs and the Elect ric-Only Portion of PHEVs/EREVs

EPA proposes to include EVs in th e fleet average calculation at a ra te of zero g/mi. EPA likewise proposes to include as zero g/mi of CO2 the el ectric portion of PHEVs, EREVs, and fuel cell vehicles. 74 Fed. Reg. 49,533-4. The Alliance supports this approach since customers need to receive a clear signal that they have made the ri ght choice by preferring an EV, PHEV or EREV. However, the Alliance recognizes the need fo r a comprehensive approach with shared responsibility in orde r to achieve an overall carbon reduction. [OAR-2009-0472-6952.1, p. 29]

Advanced Technology Vehi cle Credit Multiplier

EPA has taken into consideration the additional ef fort that manufacturers will take in introducing Advanced Technology Vehicles (ATVs) to the public. 74 Fed. Reg. 49,533. It is also extremely important that this multiplier be treated the same for all ATVs; the battery electric vehicles, extended range electric vehicles, plug-in hybrid electric ve hicles and fuel cell vehicles EPA mentions in the NPRM. Moreover, the hydr ogen internal combustion engine vehicle should also be included as an advanced technology ve hicle covered by the multip lier. This technology is under development by some manufacturers toda y and has zero CO2 emissions. The H-ICE vehicle needs to receive the same credit multiplier and advanced technology vehicle treatment to prevent EPA from showing technology preferences or limiting possible technologies. [OAR2009-0472-6952.1, pp.29-30]

Considering all of the issues and challenges to introduce ATVs, the 2.0 multiplier is needed longer than a single model year. Instead of decr easing the ATV multiplier by a factor of 0.2 each year, with the multiplier completely phased out by the 2017 model year, EPA should maintain a 2.0 credit multiplier until ATVs make a 10% penetr ation into the vehicle market. Without this penetration level, it will be impossible for the true environmental benefits of ATVs to be realized. Extending the 2.0 multiplier will make ATV costs more reasonable and promote these technologies. [OAR-2009-0472-6952.1, p.30]

While building ATVs is the respon sibility of the automotive indus try, it takes more than just production for true emissions reductions from ATVs to be realized. It is necessary to have fueling and service infrastructure to support th ese technologies. Customers will not purchase ATVs if they can neither fuel them nor have them repaired. Developi ng and establishing this infrastructure for the nation will take a long time -- far more than a single year, or even the time

5-195EPA Response to Comments

frame outlined within this regulation. In fact, when examining all of these issues, a multiplier even greater than 2.0 should be considered. [OAR-2009-0472-6952.1, p.30]

In encouraging these technologies, Congress has re peatedly provided consumers with tax credits for their purchase of ATVs. The reason behind thes e tax credits are to offset the additional cost of purchasing an ATV and the environmental benefit each ATV provides. The same reasoning holds true to manufacturers: each ATV is very expensive, and manufactur ers need the additional credits to help offset the expense, especially gi ven the infrastructure cha llenges, fluctuating fuel prices and the resulting difficulty of predicting consumer demand. [OAR-2009-0472-6952.1, p.30]

American Council for an Energy Efficient Economy

ACEEE does not support the use of Advanced T echnology Vehicle (ATV) credits. ATV credits would apply weights of greater th an one to certain vehicles in calculating manufacturer average emissions, in effect crediting those vehicles with greater reductions than they will actually provide. Use of such credits would detract from the emissions reductions achieved by the proposed standards. A reasonably stringent GHG emissions standards program provides an incentive for the production of low-emitting vehicles simply by virtue of those vehicles’ ability to help manufacturers reach the requ ired average emissions levels.

ACEEE actively supports government programs to accelerate the development and deployment of advanced technology, high-effici ency vehicles, including for ex ample existing tax credits for hybrids and plug-in hybrids, as we ll as the $2.4 billion allocated by the 2009 American Recovery and Reinvestment Act for batter y manufacturing, electric drive pr ograms and the deployment of electric vehicles. A standards pr ogram is not, however, well-suite d to incentivizing particular technologies, because the result is to undermine the standards. Such incentives can also have unintended, adverse consequences, as the dual fu eled vehicle (AMFA) credit demonstrates. The AMFA credit both reduces the fuel savings of th e CAFE program and allows manufacturers to lag in developing high-efficiency vehicles. The AMFA credit also i llustrates how difficult it is to eliminate a credit of this kind once it has b een put in place, even when it is broadly acknowledged that the program does not serv e the intended purpose and in fact is counterproductive.

By contrast, off-cycle technology cr edits should be considered if they can be plausibly shown to deliver actual reductions that otherwise w ould go unrecognized under the rule. Further, EPA should take into account the potential for emissi ons reductions from off-cycle technologies in setting the level of standards beyond 2016. This will increase the emissions reductions that can be achieved through the rule.

Recommendations: 1. Attribute to advanced technology vehicles on ly those emissions reductions they are expected to achieve. If ATV credits must be created, minimize the multiplier used and ensure that the program is not extended be yond 2016. 2. Consider permitting off-cycle credits for vehicle technologies that can be shown to achieve quantifiable reductions in emissions; take into account potential reducti ons from these technologies in setting standards beyond 2016. 3. For purposes of the rule, define emissions of EVs as full fuel cycle emissions, adjusted as appropriate

5-196EPA Vehicle Program, Feasibility, and Estimated Impacts

to account for upstream emissions from gasoline vehi cles. 4. Calculate EV emissions to reflect i) the efficiency of the vehicle (kwh per mile), and ii) emissions associated with electricity generation in the power pool where the vehicle is purchased, using marginal emissions rates based on reasonable assumptions abou t time-of-day charging patterns.

[ACEEE also submitted these comments as testimony at the New York public hearing, See docket number EPA-HQ-OAR-2009-0472-4621, pp. 140-144.]

BMW of North America, LLC (BMW)

Advanced technology vehicles play a major role in attaining sustainable mobility in the long term. Therefore, the right fram ework has to be established early on for less carbon-intensive vehicles which are currently available but face un certain market and customer expectations. The regulatory framework also strongly determines how advanced technology vehicles are perceived in the market. Consequently, BMW supports EPA's proposal regarding the greenhouse gas emissions calculation for electric vehicles and multipliers for advanced technology vehicles. [OAR-2009-0472-7145.1, p.5]

An increase in advanced technology vehicles will result in a mix of fuels and electric power used in the transportation sector. The environmental impact of the latter strongly depends on the mix of fossil and non-fossil power generation which is defined by national or the utilities' corporate energy policies and beyond the control of vehicle manufacturers. By proposing to calculate the emissions of an electric vehi cle with 0g/mi, EPA is properly endorsing the concept of shared responsibility. BMW therefore would greatly appreciat e the promulgation of a final regulation that considers only tailpipe emissions and treats electric vehicles with 0g/mi. This is a clear signal for sustainable mobility and suggests to customers that they have made the right choice. [OAR-2009-0472-7145.1, p.5]

The intention of EPA and NHTSA is to achieve the highest possible degree of harmonization in both regulations. Therefore, BMW recommends tr eating electric vehicles in the GHG regulation in the same way as in the CAFE regulation. For CAFE purposes, the electric energy consumption is converted into a petroleum equivalent fuel economy ''mpge”= 82,049[Wh/gall]/ Energy Consumption [Wh/mi]. To be treated equally in both regulations for electric vehicles a much higher mpg figure should be achieved by the conv ersion of electric energy consumption into mpge, as there indeed is no ga llon consumption. [OAR-2009-0472-7145.1, p.6]

In order to reflect a proper consideration of other advanced technol ogy vehicles, i.e. rangeextender vehicles or plug-in hybrids, these vehicles should be evaluated in relation to electric vehicles and their greenhouse gas impacts. [OAR-2009-0472-7145.1, p.6]

Beyond the regulatory framework dir ectly and exclusively addressi ng the auto industry, and with respect to overall greenhouse gas reduction a nd shared responsibilities, a comprehensive approach should be considered which addresses th e stakeholders involved. Instruments such as cap-and-trade, carbon taxes, etc. which are currently under discussion should be evaluated to implement a comprehensive approach for the de- carbonization of the trans portation sector in the most effective and cost-efficient manner. [OAR-2009-0472-7145.1, p.6]

5-197EPA Response to Comments

Multiplier for Advanced Technology Vehicles

In addition to the calculation of greenhouse ga s emissions from advanced technology vehicles, EPA is proposing to grant multipliers for a certain time period. In order to encourage the market penetration of these vehicles, BMW believes a c onstant multiplier of 2 is appropriate. Beyond this, BMW also recommends considering multip liers for clean diesel vehicles that meet California's strict emissions requirements for criteri a pollutants in order to increase their market share and deliver a clear signal by regulators in support of this hi ghly cost efficient and rapidly available policy option. As clean diesel vehicles c ontribute significantly to reduced greenhouse gas emissions at a reasonable price, a multip lier of up to 1.5 should be appropriate. [OAR-2009­ 0472-7145.1, p.6]

With respect to this joint ru lemaking and to achieve as much consistency between both the GHG and CAFE standards as possible, BMW recomm ends adoption of multi pliers for advanced technology vehicles in the CAFE re gulation as well. [OAR-2009-0472-7145.1, p.6]

As an incentive for performance improvement, we also strongly support the proposed credit options available to all manufacturers, including availability of advanced technology credits in the form of a multiplier to encourage commercia lization of electric vehicles and off cycle innovative credits for new CO2 emissions reduc tions technologies w hose benefits are not currently captured in the test procedures. [These comments were submitted as testimony at the New York public hearing. See doc ket number EPA-HQ-OAR-2009-0472-4621, pp.135-136.]

BorgWarner

Moreover, the joint proposal allows for varyi ng credit options and multipliers for vehicles operating on different fuels. Because these vehicles compete in the same market, it creates market deformation. For example, the suggest ed allowance under the advanced technology credits for plug-in electric or plug-in hybrid electric vehicles provides for a 0 (g/ml) CO2 measurement and counts the vehicle volumes as two times their actual value. This drives very aggressive support for vehicle elec trification and associated tec hnologies. In today's atmosphere of limited capital this could al so impede the development a nd market introduction of more conventional, cost-effective solu tions that utilize existing in frastructure in large volumes resulting in better real-world results. [OAR-2009-0472-7289, p.2]

California Air Resources Board

Second, EPA needs to assign a non-zero upstream greenhouse gas emission factor for zeroemission vehicles (ZEVs). EPA has proposed to ma ke additional credits available for advanced technology vehicles such as electr ic vehicles (EVs), plug-in hybr ids and fuel cells. However, EPA is proposing to ignore the lif ecycle greenhouse gas emissions of these vehicles by assigning a value of zero grams per mile towards compliance with the national standard. Furthermore, the NPRM proposes that a multiplier ranging from 1.2 to 2.0 be assigne d for each vehicle. While the intent is to encourage the early development a nd production of advanced vehicle powertrains – a goal with which CARB agrees – th e proposed credits for these tec hnologies are excessive. In light of some manufacturers’ announcements fo r large scale production of EVs, the potential

5-198EPA Vehicle Program, Feasibility, and Estimated Impacts

magnitude of these credits may delay the implementation of improved GHG technologies on conventional vehicles, thereby reducing th e effectiveness of the proposed program.

Accordingly, EPA should strike a balance between encouraging advanced vehicle development and protecting greenhouse gas reductions by as signing lifecycle emission s to these vehicles. Several studies suggest that a lifecycle em ission value of 200 grams per mile would be appropriate for EVs on the national grid. Assigning that or a similar supported value will provide appropriate credit applying the 1.2-2.0 vehicl e multiplier. Because significant numbers of commercially available EVs and fuel cell vehicl es will be needed in the 2020 timeframe to achieve the greenhouse gas reductio ns required to meet the long term goal of reducing global warming, such credits should be restricted to EVs and fuel cel l vehicles only. [OAR-2009-0472­ 7189.1, p.2]

[CARB also submitted these comments as test imony at the Los Angeles public hearing. See docket number OAR-2009-0472-7283, pp. 21-27]

Chew, Yuli

However, in order to advance newe r and efficient technologies, I be lieve that there still need to have multipliers for Battery Electric Vehicl es (BEV) over 100 miles range and Fuel Cell Vehicles (FCV) to meet one of our en ergy goals: energy independence. [OAR-2009-0472­ 7042.1, p.3]

I support the second issue by expressing credits ba sed on vehicle lifetime mileage estimates. A typical lifetime miles for cars is less than for trucks. A dirtier truck will have more environmental impact when putting into service as compared to a Partial Zero Emission Vehicle that has a warranty of 15 years or 150,000 miles. The environmental impact on a truck can be tens of times over the introduction of a battery el ectric vehicle into the sa me marketplace. [OAR2009-0472-7042.1, p .3]

I support the use of “bonus” credits to encourag e the earlier introducti on of new technologies vehicles. However, the approach should be si milar to what CARB adopted in ZEV Regulation. This can vary from giving a factor of 1.0 for u tility EV with less than 50 miles range to 7.0 for Type V FCV that can travel over 300 miles range and has a fast ch arge of less than 15 minutes. The three technologies, EV, PHEV and FCV should not be given the same value. They are preferred to phrase down over the same block of time range as CARB’s ZEV Regulation, 2009 ­ 2011, 2012 – 2014, and 2015 and beyond. I would support “bonus” multiplier be allowed for FCV beyond 2017 and BEV that can travel beyond 100 miles range BEV. [OAR-2009-0472­ 7042.1, p.4]

Rather than treating EV having 0 g/ mi of GHG, I would prefer that it the EV should just get the benefits of what the grid offers. Similar to Califo rnia’s grid, EV is still considered to have an upstream emission of 130 g/mi. Over time, it shoul d be based on the weighted average of these advance vehicles technologies are applied. [OAR-2009-0472-7042.1, p.4]

5-199EPA Response to Comments

For multiplier of EV after 2016, while awarding di fferent multipliers based on different grids are difficult to achieve, EPA should based the actu al contribution to the greenhouse gas reduction based on the distribution of the vehicles based on the weighting contribution of the grid at which these vehicles are deployed. [OAR-2009-0472-7042.1, p.4]

Chrysler Group LLC (Chrysler)

Chrysler agrees with the EPA that incentives should be provided to 'encourage the early commercialization of advanced vehicle powertrains.' [NHTSA-2009-0059-0124, p.26]

Advanced Technology Vehicle Volume Multiplier

Although great strides have been taken recently in the development and commercialization of advanced technology vehicles, the incremental co sts of these technologies remain high. Volume multipliers effectively reduce the technology cost per ton of emissions reduced to a level more equivalent to that of applying improvements to conventional technologies. As shown in the table below, Chrysler estimates a volume multiplier of 3-6X for advanced technology vehicles is necessary to achieve cost parity with the cost / benefit ratios assume d by EPA for conventional technology improvements. As a ma rketplace develops increasing volumes, the incremental costs of the technology drop, but the cost to emission benefit ratio con tinues to remain much higher. [NHTSA-2009-0059-0124, p.26]

Recommendation

Chrysler recommends that a minimum volume multiplier of 3-6X be applied to advanced technology vehicles as an incentive for early production of advanced technology vehicles. [NHTSA-2009-0059-0124, p.26]

Phase Down of the Advanced Technology Vehicle Volume Multiplier

Advanced technology vehicle volume production is still in its infancy. Aside from a few small volume manufacturers producing a handful of vehicles per year , no manufacturer has placed a significant number of advanced technology vehicles in the hands of common customers. In the near term, the ability to apply advanced technology powertrains to vehicles is limited by several factors including the lack of a commercially viable and affordable battery, vehicle redesign/refresh schedules and current economic conditions. [NHTSA-2009-0059-0124, p.27]

The historical market penetra tion of hybrid electric vehicles (HEV) suggests that significant volumes of advanced technology vehicles will not occur within the time frame of this rulemaking. The first modem mass market HE V (Honda Insight®) was introduced in 1999.5 Four years later (2003) the HEV market penetr ation was only 0.3%.6 The next five years saw a market penetration growth of approximately 0.5% per year, reaching 2.6% in 2008. 7 To this day, hybrid electric vehicles still have not become a common consumer choice in the marketplace, almost ten years after their ma ss market introduction. Given that advanced technology vehicles also require infrastructure changes for viability (such as home and public

5-200EPA Vehicle Program, Feasibility, and Estimated Impacts

electrical charging stations) and higher price, th ese vehicles are likely to have similarly slow market penetration rate s. [NHTSA-2009-0059-0124, p.27]

Recommendation

Chrysler recommends that the volume multiplie r not be phased down for the period considered by this rulemaking. [N HTSA-2009-0059-0124, p.27]

Volume Multipliers for Different Advanced Technology Vehicle Types

At this early stage of advanced technology ve hicle development there are no clear 'winners'. Chrysler recommends that the vehicle multiplier should be the same for all advanced technology vehicles. [NHTSA-2009-0059-0124, p.27]

Assignment of an Electric Vehicle Op eration Emission Value of 0 g/mi

Chrysler supports the assigned value of 0 g/mi greenhouse gas em issions for the electric portion of the operation of advanced tec hnology vehicles. This a pproach is consistent with other federal programs, by not forcing upstream emission acc ounting on downstream manufacturers. For example, electric generation power plants do not account for emissions associated with producing their energy feedstock. The approach is also consistent with existing light-duty vehicle Tier 2 emission regulations in which vehicle manufacturers are responsible for emissions produced by vehicles, but are not responsible for controlling emissions associated with the production and transportation of conv entional fuels. [NHTSA-2009-0059-0124, p.27]

Advanced technology vehicle credits will not result in a lack of innovation and application of greenhouse gas reducing technologies on conventi onal internal combustion engine fleets.

Oral testimony at the Detroit, MI public hearing on this Proposed Rule indicated some concern that manufacturers may be able to fore go sign ificant improvements in conventional fleets based on producing significant volumes of advanced technology vehicles. However, in the time frame of this rulemaking, advanced tec hnology vehicles are not expected to achieve significant market penetration. Furthermore, to remain competitiv e, all manufacturers, re gardless of advanced technology vehicle production, wi ll need to make similar ga ins in conventional vehicle efficiency. [NHTSA-2009-0059-0124, p.28]

Clean Energy Fuels

[These comments were submitted as testimony at the Detroit public hearing. See docket number EPA-HQ-OAR-2009-0472-6185, pp. 134-136.]

Tank to Wheels Undervalues Low to Ultra Low Carbon Fuels and Potentially Overvalues Zero Emission Vehicle Strategies

Clean Energy believes it is pot entially irresponsible, and possi bly hazardous, to exclusively regulate vehicles on a 'tank to wheels' basis, as su ch an analysis fails to evaluate the upstream

5-201EPA Response to Comments

emissions associated with the very strategies a rulemaking aims to promote. For example, according to the lifecycle pathways provided by the California Air Resources Board for various fuels, electric vehicles that draw on a Califor nia marginal electricity mix of natural gas and renewable energy sources (which is the best case scenario) achieve a carbon intensity value of 38.78 g/MJ CO2eq whereas a CNG light-duty vehicl e powered by bio-methane produced from a California landfill can achieve 11.26 G/mj CO2eq ta rget (or roughly a 71 percent advantage over an electric vehicle). By not accounting for upstream emissions, the bio-methane advantage would be erased and the new value for that CNG vehicle would be 68 g/MJ CO2 eq or a 43 percent disadvantage. That's a problem because it sends exactly the wrong message to the market. Any rulemaking that places the lowest ca rbon fuel strategies at a disadvantage to poorer strategies is counterproductiv e, and we encourage both EP A and NHTSA to revise the rulemaking to prevent such an outcome. By eval uating zero emission vehi cle strategies from a 'tank to wheel' only perspective, the rule fails to capture the actual greenhouse gas benefit, in fact, it overestimates it, and it prevents superior strategies from entering the transportation market. We highly disc ourage this practice.

Cummins Inc.

EPA is proposing credits for advanced technologie s such as fuel cell ve hicles, plug-in hybrid electric vehicles, etc. to enc ourage their development. Cummin s supports providing such credits to manufacturers in the form of a volume multiplier and 0 g/mile CO2 emissions for electric operation for MY 2012-2016. Cummins urges that, after MY 2016, EPA should take a holistic view of CO2 emissions from such vehicles, including upstream emissions from electricity generation. This would ensure a level playing field for all CO 2-reducing technologies in the light-duty vehicle market . [OAR-2009-0472-7205.1, p.4]

Ecology Center

The Ecology Center would like to comment on the Advanced Technology Vehicle Credits provision in the proposed rule, aimed at incentiviz ing early commercializati on of electric vehicle technologies. While we are suppor tive of the general intent of the proposed credits, we are concerned that the combination of both a multip lier and a zero grams/mile of CO2 value for electric propulsion may be overly generous and could unfairly skew a manufacturer's compliance obligations. We also understand that the intent is for use only in the 2012 - 2016 timeframe, but are concerned that these credits could become increasingly part of a firm's compliance strategy toward the end of the compliance period when th e credits would be scheduled to end. It would seem to make more sense to phase-down any cred its allowed in a manner similar to the dual-fuel vehicle credits. In general, however, we believe more work is needed to study both the potential affect of this proposed provision on compliance a nd achieved emission levels, as well as the way the credits are structured, includ ing their timing. [OAR-2009-0472-4068, p.2]

Energy, Environmental & Pub lic Utility Practice Group

How the Rule Could Encourage Public Charging Infrastructure

5-202EPA Vehicle Program, Feasibility, and Estimated Impacts

The EPA and NHTSA have a unique opportunity fi nally to help solve this dilemma by making PCI eligible for CO2 credits unde r the Rule, like advanced air conditioners credits and other technologies. The importance of deploying vehicl es and refueling infrastructure in a single coherent system is a consistent theme in prior anal yses of transition barriers to alternative fuels. By classifying PCI as a technology eligible fo r CO2 credits EPA could help support a business case for the deployment of PCI in advance of PEVs , thus helping to create the necessary market conditions for electric technology to take root. Absent such s upport it seems unlikely that the Rule will induce a significant leve l of vehicle electrification. The Agency readily admits that the proposed standards can be met with existing e nhancements to internal combustion engine technology and with little to no pe netration of diesel engines, hybrid electric vehicles (HEV), plug-in hybrid electric vehicles (P HEV), or pure-battery electric ve hicles (BEV). In other words, by themselves, the CO2 standards will not necessa rily induce investment in electric technology. More will be needed. [OAR-2009-0472-7251.1, p.3]

By allocating CO2 credits to PCI under the Rule , EPA would align the benefits of PCI with primary beneficiaries in the value chain, the vehicle OEMs, by monetizing the fuel economy benefits of charging infrastructure. In turn, th e Agency could help to solve the longstanding 'chicken or egg' problem of how to pay for a lternative fuel infrastructure before significant numbers of alternative fuel ve hicles are on the road. At the same time EPA and NHTSA would reduce the costs of compliance with the Rule by expanding the supply of credits available to OEMs. [OAR-2009-0472-7251.1, p.3]

To create market conditions that will spur i nvestment in public charging infrastructure, the Agency should provide CO2 credits to public charging stations at a level approximating their impact on fuel economy and market development. This approach is similar to the Agency’s proposal to provide air conditioning leakage cr edits of between 12.6 and 15.7 g/mi CO2e for investments in improvements to A/C systems. [OAR-2009-0472-7251.1, p.3]

[See Docket Number OAR-2009-0472-7251.1, pp.1-4 for detailed comments pertaining to: Why Lack of Public Charging Infrastructure is a Barrier to PEV Market Penetration and How the Rule Could Encourage Public Charging Infrastructure]

Why EPA Should Provide Credits fo r Public Charging Infrastructure

Sustained government policies will be crucial to the deployment of PCI, a key enabler of vehicle electrification and e nhanced petroleum and carbon reduc tion. Much like how fiber optic infrastructure investment in the late 1990’s fostered an explosion of information technology, abundant PCI will be a critical factor in the elec trification of vehicles. By crediting PCI under the Rule, EPA could encourage deployment of PC I and thereby achieve greater petroleum and carbon reduction. [OAR-2009-0472-7251.1, p.8]

See Docket Number OAR- 2009-0472-7251.1, pp.4-23 for detailed comments pertaining to: Background on PEV Charging and Why EPA Should Provide Credits for Public Charging Infrastructure] \

Environment Michigan

5-203EPA Response to Comments

[These comments were submitted as testimony at the Detroit public hearing. See docket number EPA-HQ-OAR-2009-0472-6185, pp. 68-69.]

Second, we're concerned that electric vehicles will be given lavish credits that will undercut the actions automakers must take to reduce emissions from the rest of their fleet. The proposal ignores the very real emissions th at result when electric vehicles ar e charged with electricity that is often generated from coal and natural gas.

Environment New Jersey

We also want to make sure that although Envi ronment America and Environment New Jersey are huge supporters of alternative t echnologies like electric cars, we do want to ensure that the credits are not so much that they will underc ut actions the automakers would do to reduce emissions from the rest of thei r fleet. [EPA-HQ-OAR-2009-0472-4621, p.76]

Environmental Defense Fund

The Final Standards Should Be Designed to Account for the Real-World Greenhouse Gas Emissions Associated with Electric Vehicles

EPA’s proposed treatment of emissions from el ectric vehicles profoundly under counts the actual global warming emissions that will occur. The Agen cy has proposed to include electric vehicles (“EVs”) in each manufacturer’s flee t-wide standard and to treat EVs as if they had emissions of zero grams per mile of CO2. As EPA notes, “in real ity, the total emissions off-set ... is not zero, as there is a corresponding incr ease in upstream CO2 emissions due to an increase in the requirements for electric utility generation.” [OAR-2009-0472-7285.1, p. 24]

While we appreciate the agency’s interest in pr omoting advanced technologies such as EVs, there are a host of policies to support the adva ncement of EVs and the zero grams per mile standard is plainly unrepresentative of the e nvironmental realities of using EVs. A recent National Research Council study concluded that the health and non-climate related environmental impacts of traditional pollutants as sociated with EVs are comparable to, and in some cases higher than, those associated with conventional gasoline and diesel engines, on a lifecycle basis. When considering greenhouse gas em issions of different types of vehicles, the same report concluded that EVs caused lowe r CO2 emissions than conventionally-fueled vehicles, but higher emissions than vehicles fu eled by hydrogen or certain types of E85 fuel. Furthermore, when the California Air Resources Board (“CARB”) considered the same question, CARB determined that EVs account for 130 grams per mile of upstream emissions. CARB built flexibility into the an alysis by allowing manufacturers to lower the 130 grams per mile number by demonstrating, among other things, the percentage of electricity generated in California by renewable sources. [OAR-2009-0472-7285.1, p. 24]

The greenhouse gas emissions profile of the na tion’s electricity genera ting portfolio varies considerably from state-to-state and across region al electricity grids. Fu rther, the greenhouse gas burden of EVs will depend not only on the emissions profile of the grid but the volume and time of use. While EDF supports commercialization of these advanced technologies, we also strongly

5-204EPA Vehicle Program, Feasibility, and Estimated Impacts

request that Agencies ensure anal ytical rigor in their deployment. Accordingly, we ask that EPA, with its considerable in stitutional expertise at the convergence of electricity and the environment, develop a rigorously tailored emissi ons rate associated with upstr eam electricity generation that is properly applied to EV s. [OAR-2009-0472-7285.1, p. 24]

You asked some questions about your proposals for electric vehicles and plug-in hybrid electric vehicles. These are very exciting technologies and I think you're right to think about ways of encouraging them, particularly in the early years. Some kind of an early commercialization credit probably makes sense. Whether it should start off at two in an earlier year like 2011 or 2012 may be fine. Scaling it down, in our view, we w ould recommend that you phase it out by 2016, the same year in which you're phasing out the flex fu el vehicle credit absent actual showing. I think you do propose phasing it out by 2017, but that, of cour se, is a future rulemaking. So it seems to me there would be some -- after all, that's s till, you know, eight model years away or seven model years away, I guess, six model years awa y, but that's what we would, you know, urge you to do. [These comments were submitted as te stimony at the New York public hearing. See docket number OAR-2009-0472-4621, p. 122.]

eTec

I am aware that the commenting period is over for the CAFE standards, but I was hoping to submit my suggestions nonetheless.

I have attached an article that is to be published in the next issue (January/February) of the International Journal of Electri c and Hybrid Vehicles (IJEHV) that discusses hybrid vehicle nomenclature and fuel economy procedures for plug-in hybrids. I would be happy to discuss my thoughts with the relevant EPA personnel, and I can be reached at this email address. [OAR2009-0472-7670, p.1]

[Comment referenced above, Docket Number OAR-2009-0472-7670.1, is a copyrighted document.]

Fisker Automotive, Inc.

In alignment with the goals to reduce fuel consumption and emissions, Fisker Automotive encourages correlating credits and deficits to a metric that refl ects this directly—fuel savings. The proposed regulation currently reads,

“The amount of credit earned is determined by multiplying the number of tenths of a mpg by which a manufacturer exceeds a standard for a pa rticular category of automobiles by the total volume of automobiles of that category manuf actured by the manufactur er for a given model year.' [OAR-2009-0472-8732.1, p.2]

MPG is the inverse of consumption: as consum ption approaches zero, MPG approaches infinity. This opens a window for automakers to game th e regulation. Conceivably, an automaker could sell a PHEV with a large electric range to achieve hundreds of MPG and earn thousands of credits. This would then allow the automaker to offset hundreds of vehicles that fail to meet

5-205EPA Response to Comments

baseline requirements. This counters the regulati on goals. Figure 1 below illustrates the problem. We compare credits earned to fuel savings for a base requirement of 30.2 mpg (average passenger car requirement in 2011). [OAR -2009-0472-8732.1, p.2] [See Docket Number OAR2009-0472-8732.1, pp.2-4 for more detailed discussion on this issue]

Ford Motor Company

Advanced Technology Vehicle Credit

To promote the research, development and manu facture of advanced te chnology vehicles, Ford supports the use of a volume multiplier of 2.0 for a ll electric vehicles (E Vs), plug-in electric vehicles (PHEVs), and fuel cell vehicles for 2012 - 2016 model years. Also, putting EVs into the CO2 calculation at 0 grams/mile is appropriate to support the introduction of new technology in the marketplace. The proposed phase-down or discounting of the volume multiplier for this rulemaking is not appropriate. Once consumers have accepted the advanced technology and there is adequate volume in the market, minimum 10% volume, Ford believes it would then be appropriate to differentiate be tween EVs and PHEVs for advan ced technology credits. Both types of technologies are capable of relatively wide ranges of petroleum or CO2 displacement over the life of the vehicle. The different operating characteristics, including climate sensitivity, and projected miles travelled would also be factors for differentiating and applying appropriate credits. [OAR-2009-0472-7082.1, p. 8]

Glasser, Mark

[These comments were submitted as testimony at the Los Angeles public hearing. See docket number EPA-HQ-OAR-2009-0472-7283 p.204-205]

And my major concern with these credits, these carbon credits, that these are not allowed to so dilute the real meaning of what you're doing here and what we're doing here because electric cars do -- just like Lucas picked up, they have a carbon imprint, and that needs to be adjusted to, you know, automakers that are coming out with wonderf ul electric vehicles. But to have them say that there's no imprint, I think, is really going to dilute the power of the bill and -- or the legislation that you're doing. And to me, the most important thing is that we don't let those credits really become a way to easily avoid the intent of wh at you are trying to do and what we all need to be done

Honda Motor Company

EPA proposes to set the upstream portion of EV s, PHEVs and FCEVs to zero grams/mile. EPA requests comments on this approa ch. Honda believes that EPA should separate incentives and credits from the measurement of emissions. Ho nda believes that without accounting for the upstream emissions of all fuels, inaccurate comparisons between technologies will take place. Relying upon EPA’s regulation, policy makers – in the U.S. and around the world – may make unfavorable technology comparisons and set mi sdirected policies as a result. [NHTSA-2009­ 0059-0095.1, p.2]

5-206EPA Vehicle Program, Feasibility, and Estimated Impacts

A compelling example exists. According to DOE’s GREET model, the upstream emissions of a Toyota Prius are 46 grams/mile, a nd the tailpipe emissions are 198 grams/mile, for a total of 244 grams/mile. By contrast, the GREET model estim ates the average upstr eam emissions of a comparably sized Battery Electric Vehicle (B EV) are 256 grams/mile. Without commenting on the merits of creating incentives for electric vehicl es, it is clear that zero grams/mile for the BEV would lead one to believe that BEVs have a cl early superior greenhouse ga s profile compared to similarly sized hybrid gasoline vehicles. [NHTSA-2009-0059-0095.1, pp.2-3]

EPA’s regulations need to be comprehensive and transparent. By zeroing out the upstream emissions, EPA is conflating incentives and cr edits with emission acc ounting. In discussions with EPA staff, the question of “double counting” arose. This argument points out that electric power generation is under its own regulations, an d including the upstream emissions in this regulation would result in “double counting.” Honda observes that upstream emissions are necessarily correlated with the intensity-based em issions regulation of light duty automobiles. In the case of petroleum refineries, significant increases in fuel economy on the part of automobile manufacturers could result in a “w indfall” for the refineries’ if their tonnage caps were not adjusted accordingly. These two arguments suggest that not only the upstream emissions of electricity but the upstream emissions of all fuels ought to be include d in EPA’s regulation. [NHTSA-2009-0059-0095.1, p.3]

EPA could take two different a pproaches to the upstream issu es: 1) All greenhouse gas targets could be increased to reflect the upstream emissi ons of gasoline, or 2) set all greenhouse gas standards based on gasoline-fueled vehicles and then adjust all other fuels to use a credit for the comparable upstream gasoline-fuel. Honda recomme nds the latter approach, simply because of the wide communication of the 2016 goals set by EPA of 250 grams/mile. According to the GREET model, referenced above, the upstream emissi ons of the gasoline fuel are equivalent to 23% of the gasoline vehicle’s tailp ipe emissions. [NHTSA-2009-0059-0095.1, p.3]

Advanced Technology Vehicles Credits

In Section III, EPA requests comment on thei r proposed “multiplier” for EVs, PHEVs and FCEVs. Comment is requested on th ree aspects of this incentive, in cluding: a) the level of the multiplier, b) on how the multiplier might differentia te various technologies, and c) on the timing and rate of phasing out the multiplier. [NHTSA-2009-0059-0095.1, p.4]

Honda supports introduction of a multiplier. As we project much more stri ngent standards in the not-too-distant future, it is be neficial, yet extraordinarily expe nsive, for OEMs to bring more advanced technology to market. The early introd uction of technology has th e salient benefit of helping to mature the technology in small volumes before it is required in large volumes to meet future regulations. The forecasted stringency by some policy makers (not the least of which includes California’s Air Resources Board, “CA RB”) for the next ten to twenty years is staggering. Considering this, incentives that st rictly follow the greenhouse gas benefits miss a larger point. Advanced Technologies are usua lly costly and uncerta in; encouraging all technologies, at this early stag e is helpful. [NHTSA-2009-0059-0095.1, p.4]

5-207EPA Response to Comments

Honda recommends that the multiplier differe ntiates between more and less advanced technology. For example, a BEV with a 50 mile ra nge is significantly less advanced than a 100 mile range BEV. Honda proposes a formula for establishing the relative multiplier for PHEV, BEV and FCEVs:

((EAER / 40) x Quick Refueling Multiplier) + 1

EAER is the all electric or equivalent al l electric range of th e PHEV, BEV or FCEVs

Quick Refueling Multiplier has two values: 1 fo r vehicles with no quick fueling capability (defined as being capable of replac ing 95% of the vehicles range in ≤ 15 minutes, the same definition used by CARB in its ZEV Regulation) and 2 for vehicles capable of quick fueling.

Examples:

A 40 mile EAER (or AER) PHEV 40/40 x 1 + 1 = 2.0

A 100 mile AER BEV 100/40 x 1 + 1 = 3.5

A 300 mile Range FCEV 300/40 x 2 + 1 = 16.0 [NHTSA-2009-0059-0095.1, p.4]

These values are greater than those initially envisioned by EPA (between 1.2 and 2.0), however, the greater values are essential if EPA is determ ined to truly incentivize these costly, advanced technologies. Further, Honda does not believ e the multiplier should phase out before 2016. The transition to advanced technologies will take many years, and OEMs do not expect the costs associated with these vehicles to be reduced dramatically by 2016. [NHTSA-2009-0059-0095.1, p.5]

[Following comments are from LA Testimony, OAR-2009-0472-7283, pp.96-103]

First, the zero-grams-per-mile CO2 for electric vehicles. EPA proposes to set the CO2 value for the electric portion of plug-in el ectric vehicles and battery elect ric vehicles to zero, and EPA further proposes to set the CO2 value for fuel cell electric vehicles to zero as well.

Honda believes that this policy is misguided and creates significant incorrect perceptions about the relative merits of various vehicle technologies. Honda has wo rked on alternative fuel vehicle technologies and their social benefits for more th an two decades, but the social benefits of any technology must be understood and meas ured on a well-to-wheel basis.

It is clear that there are no sp ecial virtues to be associated with zero tailpipe greenhouse gas emissions if the well-to-tank portion is very high.

Additionally, without a comprehensive well-to-wh eel assessment of greenhouse gases, EPA and others who rely upon EPA's assessments will improperly favor or signal preferred technologies. If the agencies want to promote electric vehi cles, it can do so through Super Credits as we discuss below.

5-208EPA Vehicle Program, Feasibility, and Estimated Impacts

Super Credits. We understand and support EPA's effo rt to encourage the introduction of plug-in hybrid electric vehicles, battery el ectric vehicles, and fuel cell elec tric vehicles. However, these technologies do not necessarily warrant the same credit multiplier solely because they qualify as one of these technologies.

There's a great deal of difference between a 50-mile battery electr ic vehicle and a 100­ mile battery electric vehicle for example. And fu el cell electric vehicles represent significantly more challenging technology sets.

In order to achieve our long-te rm social goals, it is importa nt to recognize and reward more advanced and sophisticated technology. We are ready to work with EPA on developing an appropriate performance-based metric that will more accurately differentiate advanced technologies.

Honeywell Transportation Systems

EPA historically has developed re gulations that establish hard emissions targets while providing the industry the flexibility to develop new t echnologies to meet its compliance obligations, without technology forcing. However, in its Prop osed Rule EPA deviates from its traditional method of regulation and seeks to favor certain technologies. EPA propos es additional credit opportunities for certain technologies such as electric vehicles ('EV '), plug-in electric vehicles ('PHEV'), and fuel cell vehicles, including a mu ltiplier in the range of 1.0 to 2.0 applied per vehicle sold. Honeywell believes that it is in the interest of better regulation and good governance not to force technology. While it suppor ts EPA's proposal to phase out the multiplier after 2016, Honeywell also suggests that EPA pha se out the proposed EV credits after 2016. As proposed, this credit program is inconsistent with EPA's historical practice of implementing emission control requirements in a manner that allows for technological flexibility. [OAR-2009­ 0472-7165.1, p.6]

Honeywell has two recommendations to ensure that the EV credit allocation adopted reflects the real world operating conditions of PHEV s and re sults in actual reduc tions in CO2 emissions. First, in order to meet EPA's GHG emission reduction goals, it is critical to account for the emissions involved with generati ng the electricity used to char ge the EVs. Applying upstream emissions to EV or to the plug- in portion of PHEV will ensure actual GHG emissions targets are met, as proposed by the California Air Resource Board ('CARB'). This will ensure that carbon dioxide emission reductions are achieved, rather than merely being transferred from one source to another excluded source. [OAR-2009-0472-7165.1, pp.6-7]

Next, Honeywell suggests that EPA establish a mechanism based on best available science to verify that the plug-in capability of PHEV s is in fact utilized for those vehicles in order to earn commensurate credits. Verification will minimize the over-allocation and exploitation of credits by accurately determining the emissions associated with actual plug-in use. Preventing the overallocation of credits is critical for EPA to meet its GHG reduction goals, esp ecially if the credits are to be extended beyond 2016. [OAR-2009-0472-7165.1, p.7]

Hyundai Motor Company

5-209EPA Response to Comments

EPA proposes a credit multiplier of 2.0 for advanced technologies, like plug-in hybrid electric vehicles (PHEV), electric vehicl es (EV) and fuel cell vehicles (FCV). Hyundai supports the use of the multiplier but believes that the various advanced technology types (i.e. EV, PHEV, and FCV) should not receive an equally-valued cred it multiplier. While we do not believe that the application of the credit multiplier should be overly complex, like California's method for applying ZEV credits by technology type with add itional criteria such as battery power, range, etc., we do support a reasonable, unique credit multiplier for each specific technology. [OAR2009-0472-7231.1, p.4]

International Council on Clean Transportation

EPA proposed to assign zero car bon emissions for electricity us ed by vehicles. The agency acknowledges that in reality CO2 emissions w ould be higher due to emissions from electric utility generation and that this is not an appropriate long-term approach. However, EPA sees a value in using zero carbon emissions as an inter im solution in order to promote electric vehicles and asks for comments on this proposal.

ICCT recognizes that there is s ound justification for providing a te mporary incentive for electric vehicles in order to help them overcome market and infrastructure barriers. However, we are concerned that applying a zero carbon value fo r electric vehicles cr eates a loophole enabling OEMs to comply with the sta ndards primarily by producing a nd offering a relatively small number of electric vehicles. This would allow manufacturers to either scale back the use of efficiency technology on the majority of their vehicles or to use the technology to enhance vehicle performance, putting manufacturers that di d not offer electric vehicles at a competitive disadvantage and continuing the horsepower wars.

ICCT was founded around the Bellagio Principles , which were set forth by principal regulators around the world in 2001. This was a consensus document on preferred government policies for shaping the future of motor ve hicle technology and transportati on fuels worldwide. The second Bellagio principle states: “Base policies solely on performance compared to societal objectives, and not give special considerati on to specific fuels, technologies , or vehicle types.” In keeping with this principle, we recommend that the agen cies include a realistic assessment of incremental upstream emissions from passenger vehicles.

The multiplier used for electric vehicles and plug-in hybrids for 2012 through 2015 already provides an incentive for electr icity use. Funding and financial incentives offered by federal, state, and other governments provide additional incen tives for electric vehicles. Thus, there is no need for an additional incentive, especially one that could distort the effici ency of the standards.

In the long run, it is important to address the issue of enormo us regional differences in carbon from electricity generating power plants. For example, based on current electricity generation, electric cars would be a great idea for reducing CO2 emissions in France because of its heavy reliance on nuclear energy, but would not be so g ood in Germany because of the high percentage of coal use. Similar regional diffe rences in carbon intensity exist from state to state in the US. It is important for EPA to address these differe nces when developing a sustainable policy on electricity use in vehicl es. [OAR-2009-0472-7156.1, pp.12-14]

5-210EPA Vehicle Program, Feasibility, and Estimated Impacts

[ICCT also submitted these comments as tes timony at the Detroit public hearing, See docket number EPA-HQ-OAR-2009-0472-6185, pp. 62-63.]

Investor Network on Climate Risk

I would like to raise one con cern that could potentially underm ine the effectiveness of the National Program and that other [These comments were submitted as testimony at the New York public hearing. See docket number EPA-HQ-OAR-2009-0472-4621, p. 152.] panelists have addressed today as well. Speci fically, the proposed advanced technology credits for electric vehicles and plug-in hybrid electric vehicles. Un less such credits account for the greenhouse gas emissions resulting from electricity generation, gr eenhouse gas emissions from such vehicles are likely to be underestimated. [These comments were submitted as testimony at the New York public hearing. See docket number EPA-HQ-OAR-2009-0472-4621, p. 153.]

Karplus, Valerie J. I write to comment on the treatment of plug-in hybrid electric vehicles (PHEVs) and electric vehicles (EVs) in the proposed per mile CO2 emi ssions rule for light-duty vehicles. As currently written, the regulation has the pote ntial to be both costly and ine ffective, because it incorrectly omits electricity-related emissions from PHEVs and EVs, and weights their contribution more heavily towards meeting the regulatory target. These distortions could potentially lead to a worsening of total CO2 emissions relative to the projected base line over the 2012 to 2016 compliance period (see attached f ile for detailed supporting inform ation and calculations). The EPA should revise the rule to in clude the CO2 emissions from gene rating electric power used for vehicle propulsion. Even with the most aggressive targets for inve stment in renewable electricity sources, the emissions intensity of grid-supplied electricity will not fall substantially over the next 10 to 15 years, the period used to asse ss impact of the new regulation. A reasonable measure could be based on average (or the aver age marginal) national grid CO2 emissions per kilowatt-hour, adjusted for modest expected grid efficiency improvements over a vehicle’s lifetime. Moreover, the time scales involved in any transition to low carbon vehicle and fuel technologies at scale may call for a longer time horizon for compliance (for example, 2020 or beyond), and perhaps also a more stringent target. In doing so, the EPA would allow time for carefully considered investment in developmen t and adoption of technologies that would most cost-effectively lead to deep reductions in light-dut y vehicle emissions. [OAR-2009-0472-7280,
p. 1] [See OAR-2009-0472-7280.1 for a detail ed discussion of this issue.]

Massachusetts Department of Environmental Protection

Massachusetts agrees that all-elec tric vehicles and plug-in hybrids are an important part of the strategy to reduce greenhouse ga s emissions from the motor vehicle sector and that it is appropriate to provide incentives for this purpose. However, we have two primary concerns about EPA's proposal to give EVs a greenhouse gas (GHG) rati ng of zero emissions and to provide a credit multiplier.

(a) Lifecycle greenhouse gas analyses conducted by EPA and by the California Air Resources Board (CARB) have found that vehicles powered by electricity have substantially lower GHG emissions per mile traveled than gasoline fueled vehicles. However, these emissions are not zero,

5-211EPA Response to Comments

and EPA should not count EVs as having zero emissions. Instead, EPA should use the best available science to estimate the upstream emissi ons from generation of electricity, and combine that with the greater efficiency of electric ve hicles to obtain an appr opriate value for those vehicles in grams of carbon per mile driven.

(b) Utilizing a multiplier to increase the weigh ting of EVs within the overall fleetwide MPG calculation for an automobile manufacturer s hould be done with gr eat caution, and would preferably be based on an analysis of the ince ntives needed to achie ve a level of acceptance where EVs can be sold in the market without in centives. The multiplier should be at the lower end of the range that EPA and NHTSA are consider ing, such as 1.2, rather than at the high end of 1.8. Allowing the use of a higher multiplier could re sult in a manufacturer with significant sales of EVs substantially increasing its fleetwide average GHG emissions and decreasing its miles per gallon (MPG). With a multiplier of 1.8, the av erage could be allowed to drop by perhaps 10 miles per gallon or more and increase C02 em issions greatly, depending on the number of EVs and the other characteristics of the fleet. This wo uld be a disastrous resu lt given the need to greatly reduce GHG emissions to achieve our sh ared climate goals. In addition, as EPA has discussed, any multiplier utilized should be de signed to phase out over a few years, by around 2016, so that manufacturers do not develop a la rge stake in its continuance. [OAR-2009-0472­ 7195.1, pp.1-2]

Mercedes-Benz (Daimler AG)

DAG strongly supports the provision of credits in the EPA program for advanced powertrains. These credits supply needed public policy suppo rt for the commitment by DAG and others to produce more fuel efficient and lower emitting vehicles. DAG not only will be introducing into the United States market zero emission vehicles, such as the Mercedes Benz F-cell and a fully battery operated smart car, but also will continue to increase its offerings of other forward technologies, such as clean diesel vehicles and plug in hybrids. Public policy should favor not only fuel cells and batteries, but also the bridging technologies th at can significantly reduce CO2 emissions in the short term while the mark etplace for zero emission mobility develops.

EPA proposes advanced powertrain credits at a multiplier between 1.2 and 2.0 for full electric, plug in hybrid and fuel cell vehicles. EPA seek s comment on whether the multiplier should be the same for all advanced technologies or shoul d be scaled and whether it should be phased down over time. DAG suggests that a multiplier be applicable to al l advanced powertrain technologies in accordance with the amount of CO2 reductions they provide as compared to traditional gasoline internal combustion engines.

Specifically, DAG suggests a credit system as follows: (i) BEV and FCEV zero emission vehicles would receive a multiplier of 2.0; (ii) plug-in hybrids, range extenders and hydrogenICE vehicles would receive a multiplier of 1.8; (iii) electric hybrids with either diesel or gasoline would receive a multiplier of 1.5; and natural gas, cl ean diesels and vehicles with stratified direct injection gasoline would rece ive a multiplier of 1.2. This multiplier system both rewards manufacturers for investing in zero emission and far-forward tec hnologies and also encourages manufacturers to increase the transformation of traditional products from pure gasoline-based powertrains to hybrids and diesels.

5-212EPA Vehicle Program, Feasibility, and Estimated Impacts

Pure zero emission vehicles should receive th e maximum benefit and manufacturers should be encouraged to bring to market the most advanc ed technologies. Batter y and hydrogen vehicles that are not zero emissions s hould receive the next most si gnificant multiplier. The U.S. government currently encourages the marketing of clean diesels and hybrids through federal tax credits that expire in MY 2011. These vehicles continue to offer substantial benefits over traditional gasoline vehicles. While diesels produce more CO2 per gallon than gasoline engines, they produce less CO2 per mile than gasoline engi nes. The additional fuel economy of a diesel engine overcompensates, from a CO2 emissions standpoint, for the higher per gallon emission of CO2. Mercedes Benz diesel engines have up to an approximate 40% fuel economy advantage and an emissions benefit of up to 22% compared to their gasoline counterparts. In addition, EPA estimates an up to 26% CO2 reduction for light- duty diesels equipped with SCR. EPA should not allow support in the near term for these techno logies to undercut their introduction. Rather, EPA should continue to encourage these technologies upon the expiration of the federal tax credits by providing them a multiplier of 1.5. A final category fo r natural gas, lean burn diesel and stratified direct injection gasoline vehicl es would encourage their intr oduction, as the fuels for these vehicles become more available in the United States.

Also significant is that the multipliers be availa ble at the same levels throughout the model years covered by this rulemaking. As EP A has stated, these model years constitute a transitional period into a CO2 regulatory regime. The deployment of both advancing and advanced powertrains is critical throughout this time frame. Scaling down cr edits previously availabl e is more applicable to credit programs that are phasing out reliance on a particular technology, such as flex fuel vehicles, rather than those that are intended to encourage reliance and commercialization of the technologies under consider ation. [OAR-2009-0472-7193.2, p.17]

Similarly, we hope that every vehicle we introduc e will be an instant success, but experience shows that there are always inevitable growing pa ins. Our relative experience with clean diesels in the U.S. demonstrate [These comments were submitted as testimony at the New York public hearing. See docket number OAR-2009-0472-4621, pp. 50.] that customers need time and added incentives to widely adopt new technology. Ou r company, like several others, plans to soon introduce a limited quantity of batt ery electric vehicles and hydroge n fuel cell vehicles into the U.S. market. The advanced vehicle technology cr edits are critical incentiv e for early introduction of these vehicles by all manufacturers during this critical final proving stage. [These comments were submitted as testimony at the New York public hearing. See docket number OAR-2009­ 0472-4621, p. 51]

Mitsubishi Motors R & D of America (MRDA)

Mitsubishi Motors supports the advanced tec hnology vehicle multiplier and zero gram/mile CO2 emission level for battery electric vehicles (B EVs). These important regulatory mechanisms provide significant temporary support as Automakers begin to commercialize advanced technology vehicles. [OAR-2009-0472-7125.1, p.2]

Mitsubishi Motors supports the availability of advanced technology vehicle (ATV) credits. The proposed 2.0 multiplier and zero gram/mile CO2 em ission level for battery electric vehicles (BEVs) help justify the cap ital investment needed for th is technology. These regulatory

5-213EPA Response to Comments

mechanisms will also promote ATV introduction in to the market. These measures incentivize the effort needed to build infrastructure for thes e vehicles – the infrastructure will create the sustainable market. [OAR-2009-0472-7125.1, p.2]

Considering the challenges facing ATV introduc tion, it is apparent that the proposed 2.0 multiplier is needed beyond MY 2012. It would be more beneficial to maintain a 2.0 credit multiplier until ATV sales reach 10% of the annual fleet sales volume. The true environmental benefits of ATVs are unlikely to be measurable before this penetration level – this is an investment in only near term technology that can provide signif icant long term GHG reductions. If this approach is not palata ble, another approach to encourage the production of ATVs would be to allow each manufacturer to have their ow n 2.0 multiplier and associated phase-in period as each manufacturer introduces ATVs. It mainta ins credits for OEMs, who are only able to develop ATVs later and will need ATVs to be competitive in the future. [OAR-2009-0472­ 7125.1, p.2]

By extending the 2.0 multiplier, it will make AT V costs more reasonable and further promote these technologies. While building ATVs is the re sponsibility of the automotive industry, it takes more than just ATV production for true emissions reductions from ATVs to be realized. It is necessary to have fueling and service infrastructu re to support and sustai n these technologies. No one would purchase ATVs if they can neither fuel them nor have them repaired. Developing and establishing this infrastructure for the nation will take a lot of time, far more than a single year or even the time frame outlined within this regulation. [OAR-2009-0472-7125.1, p.2]

Once ATVs are sustainably commercialized, we belie ve it is appropriate to differentiate highly developed, efficient ATVs with an efficien cy factor. This factor should be based on demonstrated vehicle performance as measured on the FTP and highway test cycles. [OAR2009-0472-7125.1, p.3]

Some parties desire to assign electric power generation emissions to the vehicle – this is unprecedented and introduces an artificial burden on this emerging technology. Historically, fuel production (“well-to-tank”) emissions were never assigned to the vehicl e utilizing the fuel. Vehicle emissions are currently measured and regulated by the amount of compounds directly emitted by the vehicle. Obviousl y, BEVs do not emit CO2, therefor e the proposed zero g/mile emission level is appropr iate. [OAR-2009-0472-7125.1, p.3]

Additionally, Congress has provided consumers with tax credits to encourage their purchase of ATVs. The reason behind these tax credits are to offset the additional cost of purchasing an ATV and are justified by the environmental benefit each ATV provides. The same reasoning holds true for Automakers, since each ATV is very expensive and Automakers need the additional credits to help offset the expense, especially given the ultimate size of the ATV market is uncertain. [OAR-2009-0472-7125.1, p.3]

[Following comments are from LA Testimony, OAR-2009-0472-7283, pp.85-87]

Another opportunity for technological and environmental progress is the advanced technology vehicle credits, both the zero grams per mile emissions rate and the multiplier. These

5-214EPA Vehicle Program, Feasibility, and Estimated Impacts

measures will make the near-term advanced technology vehicles more cost-effective and promote these technologies in the U.S. market.

Also, please remember advanced technology vehicles will only be successful with the construction of their fueling infrastructure.

Motor and Equipment Manufacturers Association

Lastly, regarding EPA's request for comment on a dvanced technology vehicle credits for electric vehicles, plug-in hybrids, and fuel cells, MEMA supports the additional credits proposed. Also, we support the assignment of zero gm/mile CO2 em issions for electric vehicles and plug-in hybrid vehicles when operating in the all electric mode, and fuel cell vehi cles for early credits and for the 2012-2016 timeframe. [OAR-2009-0472-7121.1, p.6]

[See Docket [OAR-2009-0472-7121.1, pp.5-6 for detailed comments on Hybrid and Electrification/Accesso ry Technologies]

National Association of Cl ean Air Agencies (NACAA)

NACAA would also like to take this opportunity to offer co mments on several other issues related to this proposal. First, NACAA supports the concept of providing credits for the production of advanced vehicles to incentivize full commerci alization of electric drive technologies, such as battery el ectric and fuel cell vehicles. We urge, however, that EPA assign a national average upstream emissions factor to each advanced technology (t aking into account the lifecycle emissions of the vehicle system), rather than assuming zero grams per mile CO2 for all electric-powered vehicles, wh ich could significantly and inap propriately erode the actual GHG emissions reductions to be achie ved by the national program. We note that there are various studies available – includi ng ones conducted by the California Air Resources Board, MIT, Argonne/GREET, the University of California-Davi s and the U.S. Department of Energy – that can be used to estimate national average upstrea m CO2 emissions for emerging electric drive and fuel cell vehicles. [OAR-2009-0472-7071.1, p.3]

National Automobile De alers Association (NADA)

ATV credits are a cornerstone to incentivizing the introduction of cutti ng edge and often very expensive technologies. Such cr edits should be technology-neut ral and should be set at a multiplier level generous enough and be available long enough to serve as a successful incentive. In all likelihood, this may m ean making such credits available beyond MY 2016. This is particularly critical given that ATVs do not involve a simple “if you build it they will come” proposition. Their successful intr oduction will require huge invest ments in refueling and service infrastructure. For dealerships, this will mean ne w service and repair tools, parts inventories, technician training, service information, and pos sibly new on-site refu eling infrastructure. Extensive new customer point-of-sale educati on and support likely will require a focus on at home or business refueling options. On this latter point, the National Program should include credits for manufacturers who market through th eir dealers the advanced technology home or

5-215EPA Response to Comments

business refueling systems that may be need ed for some of these vehicles. [OAR-2009-0472­ 7182.1, p.8]

The proposal doesn’t and shouldn’t take into account upstream GHG emissions for electric propulsion, just as it doesn’t and shouldn’t do so for other propul sion systems/fuels. If and when Congress decides to regulate upstream GHG emissions, it will do so. [OAR-2009-0472-7182.1, p.8]

Natural Resources Defense Council

Treating Advanced Technology Vehicles as “Z ero” Emissions Undermines Pollution and Technology Benefits of Program

NRDC believes the emission scoring for all vehicles should be based on their true full fuel cycle emission impacts. EPA has proposed to assign el ectric-drive vehicles, such as plug-in hybrid electric vehicles, battery electric vehicles and hydrogen fuel ce ll vehicles, an emissions rate of 0 gCO2/mi. However, in reality these vehicles ha ve non-zero emissions ra tes due to the upstream production and transmission of their fuel source, electricity or hydrogen. As discussed in more detail below, EPA should specify an upstream emi ssions factor for these fuels to be used for calculating their GHG emissions compliance value. The upstream emissions factor should be multiplied by a vehicle’s efficiency to determine its emissions per mile.

EPA’s proposal that electric-dri ve vehicles be treated as “ze ro emissions” and given credit multipliers of up to two-fold will undermine the emission benefits of the program and will have the unintended consequence of slowing the deploy ment of conventional cleaner vehicle emission reduction technologies into the fleet.

To illustrate our concerns, we estimate the imp act of the EPA proposal on Nissan’s compliance strategy. Nissan has indicated th at they could produce at leas t 100,000 Leaf electric cars annually by MY 2016, which is about 10 percent of their e xpected overall car sales. If the EVs are assigned a 0 g/mi emission rate and a 2.0 multiplier, we estimate that the Nissan’s gasoline car fleet would average about 8 mpg lower fuel eco nomy than if Nissan di d not produce any EVs, about 31.5 vs. 39.5 mpg. That is, Nissan would have to do very little, if anything to improve the performance of their gasoline-powered car fleet from today’s levels.

An electric-drive vehicle’s emissions compliance value (in gCO2/mile) should be calculated as the product of that vehicle’s i ndividual efficiency (in kWh/mi le) measured during compliance testing and a national grid emissions factor (i n gCO2e/kWh), which would be specified by EPA for each model year. For plug-in hybrid electric vehicles, which use a combination of electricity and gasoline fuel, the emission ra te should be a weighted average of the electric miles emissions rate and gasoline miles emissions rate using an electric-drive utility factor.

The grid-electricity greenhouse gas emissions f actor (in gCO2e/kWh) should be based on the marginal emissions of electricity generati on and delivery to support vehicle charging. The emissions factor should include both CO2 and non-CO2 GHGs from all steps in the electricity production and delivery chain from prim ary fuel extraction to electricity transmission

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and vehicle charging for end users. To the exte nt practical, EPA should incorporate marginal emissions into the MY 2012-2016 rule, using the best availabl e public data on electricity emissions. Future rulemakings should leverage a well developed, tran sparent analytical framework for marginal emissions.

Using the framework, the EPA should provide nea r- and medium-term estimates of grid emission factors in a way that both enables stakeholders to estimate the emissions impacts of fleets of plug-in vehicles and provides automakers with a clear indication of how electric-drive vehicles in future model years can contribute to standard s compliance. If policies are adopted that will change electricity emissions f actors, then EPA should update th e emissions factors after public notice and review.

Once the annual electricity grid emission factors on a national or regional basis are determined, EPA should calculate a grid emi ssions factor (again in gCO2e/ kWh) that can be applied to specific vehicle model years. A vehicle’s emissi ons scoring will be the product of the grid emissions factor assigned to that vehicle model year and the vehicle efficiency. The model year values would be the average of the annual electricity grid emission f actors (calculated above) over the years that comprise the bulk of the ope rational years for the m odel years in question. The averaging to calculate the model year grid f actor should include weig hting toward the in the earlier years of a model year’s operation due to typical scrappag e and VMT degradation that will reduce electricity use by th at model year over time.

NRDC recommends setting the model year grid factor in five-model-year p. The five modelyear set value would then be the compliance grid emission factor fo r all the vehicles within those five model years. The specification of a grid emissi ons factor for a set of model years is preferred over an individual factor for each model year because it will discourage manufacturers from delaying the introduction of an advanced vehicle by a year or two to take advantage of a lower grid emissions factor under a situati on where the grid is cleaning up rapidly.

Below is an illustrative example of how the emi ssion scoring would be calculated for a vehicle once the grid emissions factor for the model year has been determined. The calculation results in a scoring of 147 gCO2/mi for an electric vehicl e such as the Nissan Leaf. While not zero, the vehicle’s emissions rate is 67 grams lower th an the MY 2016 value for a vehicle of similar footprint, which could continue to provide a significant incentiv e for automakers to build the vehicle.

Example of Electric Drive Vehicle Emissions Scoring (Note: all values are for illustrative purposes only)

The equation that describes the overall calculation is:

Emission Rate (gCO2/mi) = Model Year Grid Emissions Factor (gCO2e/kWh) * Adjusted Vehicle Efficiency (kWh/mi) – Upstream Gasoline Emissions Adjustment

Three major steps are necessary to determine the values for the equation:

5-217EPA Response to Comments

1. Model Year Grid Emissions Factor is set for all vehicles in a five-model-year block. Calculating the grid emissions f actor for the model years involv es a series of analyses as described previously in this section. For simplicit y, we assume a value for the set of model-years based on the marginal electricity generation for charging those vehi cles that is 50 percent from coal plants and 50 percent from natural gas plan ts. Under this assumption, the Model Year Grid Emissions Factor is 790 gCO2e/kWh.

2. Adjusted Vehicle Efficiency is determined by fi rst stating with the efficiency rating over the same 2-cycle Federal Test Procedure (FTP) us ed to test conventional vehicles. For our illustrative calculation, we use 0.224 kWh/mi to approximate the Nissan Leaf expected performance. The FTP value is then corrected up ward to account for electr icity losses that occur from converting the AC wall outlet electricity to DC for charging the vehicle battery. We assume 88 percent conversion efficiency to get a vehi cle and charging effi ciency of 0.254 kWh/mi. Multiplying by the grid emissions factor of Step 1 results in 201 gCO2/mi.

3. To enable a fair comparison to gasoline vehicles , a final adjustment is necessary to remove the equivalent of the upstream gasoline emissions th at are not included in the compliance calculation for the National Program standards. Upstream emissions are estimated by EPA to be 19,102 gCO2e/Mbtu of gasoline. Using the energy cont ent of gasoline and the fuel economy of a gasoline vehicle with a similar footprint to the Leaf, about 41.4 in MY 2016, we calculate the upstream adjustment to be 54 gCO2e/mi. The fina l vehicle efficiency value is the difference from Step 2 above and 54 gCO2e/mi, or 147 gCO2/mi.

Example EV = 790 gCO2e/kWh * 0.254 kWh/mi – 54 gCO2e/mi = 147 gCO2/mi

For comparison, a conventional MY 2016 gasoline vehicle of the same footprint would have a compliance standard of 214 gCO2/mi, 46 percent higher than the example EV.

For hydrogen fuel cell and hydrogen internal combustion engine vehicles, EPA should supply a fuel production emissions value, in gCO2e/kgH 2, following a methodology analogous to that of electricity. To determine the vehicle complia nce emissions rate (in gCO2/mi), the hydrogen production emissions factor would be multiplied by the vehicle propulsion efficiency measured in kgH2/mi.

Advanced Vehicle Technology Multiplier Should Be No Higher than 1.2 to Prevent Slowing Adoption of GHG Reduction Technologi es in Conventional Vehicles

To avoid an on-going unintended conseque nce of slowing conventional technology advancements in this rule and future rules, NRDC recommends multiplier values for advanced technology vehicles of 1.2. The agency should gr adually phase-out the multiplier prior to MY 2017. Phasing-out the multiplier should not pose a challenge for automakers since as EPA’s technical assessment demonstrates, compliance to the fleet average standards can be achieved using conventional technologies.

In the Notice of Proposed Rulemaking (NPRM) , EPA expresses a desire to encourage the introduction of electric-drive vehicles through th e use of multiplier cred its. Multiplier credits,

5-218EPA Vehicle Program, Feasibility, and Estimated Impacts

however, should not undermine needed advancemen ts in conventional vehicles that serve the vast majority of the market. If set too large, the multiplier could actua lly result in fewer GHG reductions than are projected from the Nationa l Program met solely by conventional vehicle technology because the credits earned by a small number of advanced technology vehicles could meet a large portion of a manufacturer’s GHG reduction obligation and void the need for emissions reduction technology across a manufacturer’s broa der fleet. [OAR-2009-0472-7141.1,
p. 13-18; footnotes deleted]

[[These comments were submitted as testimony at the Detroit public hearing. See docket number EPA-HQ-OAR-2009-0472-6185, p. 23.]]

NRDC believes that the emissions scoring for all vehicles should be based on their true full fuel cycle emissions impact. Electric vehicles such as plug-in hybrid elec tric vehicles, battery electric vehicles, and hydrogen fu el cell vehicles have in reality non-zero emissions rate due to the upstream production and transmission of their fuel source electricity or hydrogen.

For electric, we would recommend that the emi ssions scoring should be based on the vehicle's specific efficiency test results in kilowatt hours per mile multipli ed by a national grid emissions factor in grams of CO2 per kilowatt.

For plug-in hybrid electric vehicles which use a combination of el ectricity and gasoline fuel, the emissions rate should be a weighted average of th e electric miles emission s rate and the gasoline miles emissions rate using an electric drive util ity factor.

A similar approach should be applied to hydr ogen fuel cell vehicles and hydrogen internal combustion engine vehicles with a grams of CO 2 per kilogram hydrogen f actor applied to the propulsion efficiency.

New York State Department of Environmental Conservation

Electric Vehicles

EPA proposes to give credit to electric vehicl es, plug-in hybrids, and fu el cell vehicles through several mechanisms. First, through 2016, these vehi cles would be counted as two vehicles (but their emissions would be only counted once). Second, EPA proposes to assume that electric operation emissions are 0 grams/mile. [OAR-2009-0472-7454, p.3]

We recognize the desire and n eed to create incentives to support deployment of advanced technology vehicles, and accept that crediting mech anisms such as those proposed are one means to do so. We are concerned, however, that if le ft unconstrained, this mechanism could permit less development of low-emitting vehicles in other por tions of the fleet as electric vehicles become more widespread. It is therefor e important that EPA revisit the crediting mechanism as advanced vehicle technologies mature. [OAR-2009-0472-7454, p.3]

EPA's use of the multiplier and the decision to assume that electric vehicles have zero GHG emissions are policy decisions made by EPA in or der to facilitate the development of electric

5-219EPA Response to Comments

vehicles. Given the current make- up of the nation's electric grid, the use of electric vehicles will result in upstream emissions from power plan ts that the federal government should address through other means, such as a national cap-a nd-trade program for carbon emissions. In the long term, the federal government should seek to impl ement policies that redu ce the power sector's reliance on fossil fuels and enable the full emission re duction potential of elec tric vehicles to be realized. As this program evolves, EPA should strive to utilize the best science and data available, including calculati ons of upstream emissions from production of electricity and hydrogen (or other advanced fuels) and realistic energy storage and utilization rates. [OAR2009-0472-7454, p.3]

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

Electric Vehicles

EPA proposes providing incentives for automob ile manufacturers to produce more electric vehicles. The structure of this incentive is to assign those ve hicles zero carbon emissions and also to multiply their weight (counting them as 1.2 to 2.0 cars) during fleet averaging. EPA should reconsider this approach. First, EPA itself recognizes that these electric vehicles do not have a zero carbon emissions value: electric vehicles run on ener gy from an electric grid, and producing this electricity emits carbon. EPA’s pr oposal does not account for these emissions. In contrast, California’s standards assign electric vehicles a ca rbon emissions value of 130 g/mi— the average amount of GHGs emitted by the California grid to charge the ba ttery and to construct the car. EPA should pursue a sim ilar policy—either by assigning all el ectric vehicles the average amount of GHGs emitted by use of electricity across the country’s grid, or by requiring manufacturers to report the sp ecific average amount of GHGs emitted for each electric vehicle model. [OAR-2009-0472-7232.3, p. 17]

Second, by counting each electric vehicle as up to two vehicles when averaging, EPA’s proposal actually increases the amount of GHG emissions emitted from motor vehicles. For example, suppose a manufacturer’s 2016 fleet is comprised of 100 electric cars that emit 130 g/mi of carbon and 200 standard cars that emit 300g/mi of carbon (more than the 2016 carbon grams per mile standard). After accounting for electric ca rs as zero and doubling th em, the manufacturer’s average would be 150 g/mi, well under EPA’s st andard of 205 g/mi of carbon. However, that fleet is actually emitting closer to 243 g/mi of carbon—which is over EPA’s standards and allows for much more GHG emission. Under the credit and trading system, however, the manufacturer will be granted credits. It can then sell these credits to another manufacturer with a fleet with GHG emissions above the limit—ther efore allowing for increased GHG emissions not only from the first manufacturer’s fleet but al so from the second manufacture’s fleet. [OAR2009-0472-7232.3, pp. 17-18]

Moreover, through this system, as more manufactur ers produce electric car s, the total amount of GHG emissions from motor vehicles will increase . The more electric cars produced (and counted as zero emissions and doubled in weight duri ng averaging), the more GHG emissions will be allowed from other cars, fleets, a nd manufacturers. In essence, EP A’s program allows for a triple undercounting of GHG emissions—once by not account ing for emissions from electric cars, twice by counting electric cars more than once when averaging, and finally by allowing the

5-220EPA Vehicle Program, Feasibility, and Estimated Impacts

credits to be traded to other manufacturers —and allowing for increases in GHG emissions at every step. [OAR-2009-0472-7232.3, p. 18]

Finally, this proposal inexplicab ly subsidizes one form of GHG reducing technology (electric cars) over others. As explained, this form of subs idization actually allows for more GHGs to be emitted as more electric cars are produced. Any form of subsidization of new technology should be neutral with respect to GHG emissions—and it should definitely not contribute to their increase. Although it may be a valid policy goa l to incentivize new technology, EPA should achieve this goal by providing grants and subsidie s to manufacturers and sc ientists exploring all promising GHG reducing technologies. By giving in flated regulatory incentiv es to a certain type of technology rather than allowing manufacturer s to find the most efficient and effective solution, EPA will disincentivize other forms of technology that may be more cost-effective at reducing GHG emissions. Moreover, by attempting to subsidize technolo gy through use of the averaging and trading system, EP A undervalues the real GHG emissions of manufacturers’ fleets and distorts interferes with the GHG reduc tion benefits of the rule. [OAR-2009-0472-7232.3, p. 18]

Nissan North America

Nissan strongly endorses EPA’s proposal to measur e the carbon emissions va lue of the electric portion of vehicles at zero grams per mile for the model years covered by this rulemaking.

Not only is EPA’s proposal the best policy decision to promote EV deployment, it is also legally required. EPA and NHTSA have chosen to util ize the current federal test procedure for measuring fuel economy in vehicles. Significantl y, those procedures were designed to measure the tailpipe emissions from internal combustion e ngines and provide for elec tric vehicles to be assigned a measure according to a petroleum equi valency factor. The testing and calculation procedures to be used in the CAFE and GHG pr ograms do not account for upstream emissions in the production, refining, or delivery of petr oleum to vehicles ope rating on petroleum.

There is no rational basis for EPA to discriminate in the regulatory program based on the form of fuel used, especially when doing so would detrac t from the very public policy EPA has endorsed. Were EPA to account for upstream CO2 emissions for electric vehicles and not do so for vehicles using other forms of propulsion, EPA would be discriminating between regulated products and would also be discriminating between regulated partie s by virtue of the technologies and strategies they have chosen to comply with the regulatory requirements.

EPA has properly, from both a policy and a legal perspective, proposed to treat all vehicles equally by accounting for CO2 tailpipe emissions alone. [OAR-2009-0472-6798.1, pp. 3-4]

Finally, as noted above, Nissan endorses the po licy of promoting advanced vehicles based on battery and fuel cell technologi es. Consistent with focusing on tailpipe emissions and encouraging the most advanced technologies to eliminate tailpipe CO2 emissions, Nissan suggests that the advanced tec hnology vehicle credits be struct ured to recognize zero emission vehicles from those that have some tailpipe emissions. Accordingly, Nissan suggests that full

5-221EPA Response to Comments

battery electric and fuel cell vehicles be pr ovided a maximum multiplier with plug-in hybrid vehicles provided a significant but lower multiplier. [OAR-2009-0472-6798.1, p.6]

Northeast States for Coordinated Air Use Management

EPA has proposed to allow manuf acturers to receive additional credits for the placement of advanced technology vehicles, including pure elect ric vehicles, fuel cell vehicles, and plug-in hybrid electric vehicles. NESCAUM is concerned that the prefer ential crediting proposed by EPA may be too generous by assuming a zero (0) grams per mile CO2 equivalent for vehicles powered by electricity. While we strongly support incentives for the introduction of advanced technology vehicles, we are concer ned that the magnitude of credits being offered for these vehicles may unnecessarily weak en the overall effectiveness of the proposed standards. We encourage EPA to re-evaluate its advanced techno logy vehicle credits to ensure an appropriate level of credit is provided by c onsidering the whole vehicle, e.g., vehicle technology and fuel system. A number of studies are available to assist the agency in developing assumptions for the CO2 resulting from electricity generation as ar e models (such as GREET ) to estimate upstream emissions.

With regard to the multiplier EPA has proposed for advanced technology vehicles, NESCAUM urges the agencies to establish a multiplier at the lower end of the range proposed in this rulemaking. A multiplier of 2.0 could result in er osion of the GHG standards and fleet average GHG emissions significantly greater than 250 gr ams per mile. A multiplier on the low end of what EPA has proposed and ramping down to 1 by 2016 could provide incentives for manufacturers to place electric vehicles but woul d pose less of a risk of eroding the overall standards than will the higher multiplier. [OAR-2009-0472-7235.1, p.5]

Physicians for Social Responsibility, Los Angeles

[Following comments are from LA Testimony, OAR-2009-0472-7283, pp.79-85]

Additionally, EPA should reconsider its credit mu ltiplier of two proposed for these vehicles as proposed. A manufacturer could accrue significant credits with electr ic vehicles but then do little to improve the rest of its fleet. This is not adequate to protect public health.

Public Citizen and Safe Climate Campaign

EPA’s proposed credits for advanced technology vehicles such as pl ug-in hybrid electric vehicles (PHEVs) and battery electric vehicles (EVs) must reflect real environmental benefits, must not be overly generous, and should be worth no more than the real world greenhouse gas reductions. EPA proposes to give credits for these vehicl es by applying a multiplier which could range between 1.2 and 2, while valuing the EVs as having 0 gCO2/mi, and assigning PHEVs 0 gCO2/mi, for the “electric portion” of operation. Pa rt of EPA’s motivation in offering this credit is to encourage manufacturers to produce these vehicles. But efforts to encourage production should not undermine the fundamental goal of reducing greenhouse gas emissions. There are other, better incentives for automa kers to build these vehicles, and many of the major automakers

5-222EPA Vehicle Program, Feasibility, and Estimated Impacts

have already announced plans to offer PHEVs and EV s. Some analysts project that more models will be offered that plug-in than hybrid el ectric vehicles in 2011. [OAR-2009-0472-7050.1, p.5]

Based on publicly-announced plans for introducing EVs and PHEVs into the vehicle fleet, the 0 gCO2/mi valuation of electric operation, combin ed with a multiplier of 2 could offset a manufacturers’ compliance burden by as much as ha lf, in the case of Nissan’s Leaf EV, to a third for GM’s Volt PHEV. EPA acknowledges that the re al greenhouse gas impact of EVs is not zero, and therefore, providing such a large volume of credits could actually result in greater greenhouse gas emissions from gasoline vehicles than if these vehicles we re not introduced into the fleet. EPA should not establish a regime in which efforts to encourage production of EVs and PHEVs undermine the overarching goals of improving fuel economy and reducing greenhouse gas emissions. [OAR-2009-0472-7050.1, p.5]

If EPA applies a multiplier for these vehicles, we suggest that it should not be higher than 1.2 times the greenhouse gas emissions associated with a vehicle, and that it should phase out over the course of the program. A multiplier that pha ses out by 2016 retains the incentive to introduce EVs and PHEVs with less diminution of comp liance with the standards. Phasing out the multiplier sends a signal to the industry that these credits will not continue into the standards for model year 2017 and beyond. This is appropriate gi ven that these vehicles, while considered “advanced” today, would not be considered adva nced a few years from now, when the next round of standards is being considered. To the ex tent that these credits entice manufacturers to build these vehicles sooner, phasing out the credit s would also encourage manufacturers to build more of these vehicles earlier in the program to capture the greatest value of credits. [OAR-2009­ 0472-7050.1, p.5]

EPA should include in its final rule some more detailed discussion of its intent to update its fuel economy labeling program to include estimates of mpg equivalents for EVs and PHEVs. While we [OAR-2009-0472-7050.1, p.5] appreci ate that EPA is currently working on this proposal, we urge that the agency make some mention of its thought process in this matter. The automakers have already made public claims about expected mpg equivalents for EVs and PHEVs. If EPA is silent on this matter, th en the public message is that the cl aims made by the industry are correct. [OAR-2009-0472-7050.1, p.6]

We urge that EPA develop a means for estimating full fuel cycle emissions, including upstream emissions from electricity production for EVs and PHEVs. Emissions for electric vehicles for compliance accounting should be measured by multiply ing vehicle efficiency (kWh/mi) by a grid emission factor (gCO2/kWh), yielding emissions in gCO2/mi. The grid emissions factor should be applied on a state or regional basis to vehicles in the states in which they are first sold. This would account for differences in greenhouse gas intensity of electric power generation in different parts of the country. It would also encourage deployment of these vehicles in the regions where they will provide the biggest decrease in greenhouse gas emissions. EPA should publish state or regional greenhouse gas emissi on factors for multiple model years, and the agency should provide an opportunity for public comment on the emission factors. This will permit automakers to plan for compliance taking into account the emissions of EVs and PHEVs. [OAR-2009-0472-7050.1, p.6]

5-223EPA Response to Comments

The EPA should develop a similar methodology fo r estimating the upstream fuel emissions component for hydrogen fuel cell and hydrogen co mbustion vehicles. A fuel emission factor must be estimated in gCO2/kgH2. The hydrogen emi ssion factor should take a weighted average for different production methods of hydrogen. Emissions from hydr ogen fuel cell or combustion vehicles would be estimated by multiplying the vehicle efficiency in kgH2/mi by the emission factor. [OAR-2009-0472-7050.1, p.6]

SABIC Innovative Plastic

SABIC-IP strongly endorses the multipliers propo sed for electric, plug-in hybrid and fuel cell vehicles. By encouraging the de ployment of these vehicle type s during the time frame covered by the rule, the multiplier also furthers the re direction of the vehicle fleet towards one fundamentally designed for lower emissi ons and better fuel economy. [OAR-2009-0472-7080.1, p.3]

Sierra Club

Electric Vehicle Compliance Value

Although battery electric vehicl es do not emit greenhouse gases th rough a tailpipe when driving, electricity generated to power these vehicles does result in increased emissions. EPA acknowledges these upstream emissions in the proposed rule, stating: [OAR-2009-0472-7278.1, p.11]

“In reality the total emissions off-set relative to the typical gasoline or di esel powered vehicle is not zero, as there is a correspondi ng increase in upstream CO2 emi ssions due to an increase in the requirements for electric ut ility generation.” [OAR-2009-0472-7278.1, p.11]

Instead of attempting to account for upstream em issions, EPA simply ignores them. As electric vehicle production and use are expanded, and in futu re rounds of standards, it is critical that EPA and NHTSA treat electric vehicles in an accurate manner and in away that does not undermine the integrity of the pr ogram. [OAR-2009-0472-7278.1, p.11]

In this rulemaking, EPA should deri ve a national grid emissions f actor (in gCO2e/kWh) for each model year and combine that value with vehicl e efficiency (in kWh/mile) to obtain a more accurate measure of each electric vehicle’s performance. The na tional grid emissions factor should account for upstream emissions from the ma rginal electricity that is generated and delivered for vehicle charging. Additionally, EPA could use a regional approach for emissions from electricity generation; creating a system that will encourage electric vehicle sales in regions that have the cleanest grid and will have the greatest greenhouse gas reductions. While we are not proposing a certain value for grid emissions, we do believe that electric vehicles emit less pollution than average vehicles currently on the road. A recent report by American Solar Energy Society, sponsored by Sierra Club, estimated that on average, electric vehicles emit 42% less greenhouse gases per mile than conventional vehi cles, but emit more than a Toyota Prius. The emissions factor for electric vehi cles cannot ignore emissions fr om generating electricity. This factor can be reduced over time as renewable electricity increases. If EPA finalizes a zero

5-224EPA Vehicle Program, Feasibility, and Estimated Impacts

emissions factor for EVs it will very difficult to set a different value for standards that apply in 2017 and beyond. [OAR-2009-0472-7278.1, p.11]

We are concerned that when combined with a compliance value of 0 grams/mile, advanced technology vehicle credits could allow automakers that produce a moderate number of electric vehicles to meet a significant portion of their comp liance obligation in 2016 with advanced technology vehicle credits or accru e a significant amount of credit s they can carry forward into the next round of standards. Se veral manufacturers, most notably Nissan, have announced plans to build and sell significant numbe rs of electric vehicles in th e years covered by these proposed standards. These credits could enable manuf acturers to produce less efficient (and more polluting) models in their fleets and slow the de ployment of conventiona l technologies that can boost fuel economy and lower emissions now, when emissions reductions are most needed. EPA must ensure that all credits amount to real reductions – magnifying an unreal 0 emission value could undermine the program. [OAR-2009-0472-7278.1, p.12]

Further, advanced technology credits should not be available prior to 2012. Vehicles sold through 2011 were planned well before these propos ed standards, and credits awarded prior to 2012 would be windfall credits. If EPA includes th ese credits in the final rule, we urge that advanced technology credits not be available for banking, carrying forward or carrying back. In a program designed to reduce greenhouse gas emi ssions, these credits do not represent actual emission reductions. Carrying forward advan ced technology credits could slow technology adoption in the future, countering the intent of the credit. In sum, we oppose the use of an advanced technology vehicle multiplier. However, if EPA proposes a multiplier in the final rule, we urge that it start no higher than 1.2 in model year 2012, ramp down annually and phase out by 2016. EPA should be very clear that this multiplie r will ramp down and not be continued in the next round of standards. [OAR-2009-0472-7278.1, p.12] [Sierra Club also submitted these comments as testimony at the Detroit public hearing, See docket number EPA-HQ-OAR-2009­ 0472-6185, pp. 28-29.]

We strongly urge EPA to address both the emission factor and multiplier in the final rule. We believe that EVs can be a critical part of a clean vehicle future , but we are concerned that the credits EPA proposes will taint these vehicles as automakers use credits to offset improvements in their gasoline vehicle fleets or sold to another automaker. Each EV will be associated with increased gasoline consumption or greenhouse ga s emissions. These credits could be viewed much like credits under the CAFE program for flex ible fuel vehicles (FFVs). Automakers apply FFV credits (up to 1.2 mpg) toward meeting CAFE standards and the program has been associated with increasing oil consumption. Fi nally, consumers will understand that electricity has emissions – a zero value will mislead consumers. Fixing these problems now will give EPA greater flexibility in setting standards fo r EVs in future years. [OAR-2009-0472-7278.1, p.12]

[The following comments were submitted as tes timony at the Detroit public hearing. See docket number EPA-HQ-OAR-2009-0472-6185, pp. 27-28]

The emissions associated with plug-in electric vehicles cannot be ignored. Although electric vehicles emit no global warming pollution while driv ing, producing the electri city to power them certainly does. Battery electr ic and plug- hybrid electric ve hicles can provide significant

5-225EPA Response to Comments

reductions in emissions with a cleaner electri cal grid and we shoul d be encouraging the development and deployment of battery technolog ies. However, we should consider whether there are better ways to incentivize electric vehi cles than ignoring the upstream emissions from electricity generation in a progr am designed to reduce greenhouse gas emissions. As electric vehicle production and use are expanded, and in futu re rounds of standards, it is critical that EPA and NHTSA treat electric vehicl es in an accurate manner.

South Coast Air Quality Management District

Second, the South Coast AQMD staff view the EP A credits for electric vehicles as overly permissive. Under ARB's strict accounting of el ectric vehicle credits for its greenhouse gas standards, electric vehicles ar e credited with greenhouse gas em issions of 130 grams per mile calculated based on the average upstream emissions of the California grid.

The California grid is heavily dominated by na tural gas and renewable power sources. On a per capita basis, the California grid is 50 percent lower in greenhouse gas emissions than the national grid.

Even with these life-cycle emission advantages for electric vehicles us ed in California, ARB insists that the upstream emissions be fully reflected in the well-t o-wheel carbon accounting.

In stark contrast, the EPA credits national electric vehicles with zero greenhouse gas emissions per mile thereby ignoring the upstrea m emissions entirely. This assumption risks damaging the credibility of the overall EPA gr eenhouse gas emissions standards program as it employs inappropriate carbon accounting practices.

In addition, EPA is proposing a multiplier of up to two to one, which amplifie s the impact of this lax EV credit criterion. As a re sult, 13 gasoline cars could effec tively be exempted for every single electric vehicle cred ited under the EPA program.

This dilution in program effectiveness should be minimized as much as possible. At a minimum, the AQMD staff recommend that EPA put a limit on the number of vehicl es which would qualify for the zero gram EV credit and that any credits be aligned ultimately with ARB's life-cycle credit methodology which suggests a cr edit value closer to 200 gram s nationally rather than zero.

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

State of New Jersey

General advanced technology vehicle credit comme nts: The Department supports the promotion of alternative fuel vehicles, wh ich includes electric vehicles, a nd advocates a diversified vehicle fleet as the only way the Stat e can meet its statewide greenhou se gas reduction limits. In addition, the Department agrees with the USEPA that it is important to ensure that deployment of new vehicle technologies or fuel s does not result in increases in emissions of greenhouse gases. Overall, we strongly support th e use of appropriately valued 'bonus' credits to encourage the earlier introduction of new adva nced vehicle power trains, incl uding electric vehicles (EVs),

5-226EPA Vehicle Program, Feasibility, and Estimated Impacts

PHEVs and fuel cell vehicles (FCVs). The Depa rtment supports the USEPA's statement that these technologies have the poten tial for more significant reduc tions of greenhouse gas emissions than any technology currently in commercial use a nd that encouraging early introduction of these technologies will help to enable their wider use in the future.

In administering these 'bonus' credits, the Depa rtment feels strongly that the three primary vehicle technologies (EVs, PHEVs and FCVs) shoul d not be given the same value. Instead, the Department supports differentiating between EV s and PHEVs for advanced technology credits. As described by USEPA on page 49533 of the proposal, PHEVs should be provided a lesser multiplier compared to EVs. The PHEV multiplie r should be prorated based on the equivalent electric range of the vehicle in order to incentivize battery te chnology development. In addition, the Department recommends a credit approach th at provides different credit levels to even further differentiate between vehicle types, sim ilar to the approach adop ted by California in its Zero Emission Vehicle (ZEV) regul ations. California's approach allows these credits to vary from a factor of 1.0 for utility EVs with less than a 50 mile range to 7.0 for Type V FCVs that can travel over 300 miles and have a fast char ge time of less than 15 minutes, thereby providing increased credit for the most efficient techno logies. Another possible method for determining credits would be to base the multipliers on th e projected greenhouse gas contributions of the vehicles, including the contribu tion of the grid supplying powe r to the location where the vehicles are recharged. While we understand th at this last method would be difficult to implement, the Department encourages the USEPA to reexamine the possibility of using a broader, lifecycle approach to determining these credits.

Finally, the Department agrees with a phasing down of the credits over time as vehicle development and production costs decline due to ec onomies of scale and other factors. However, New Jersey, instead of completely eliminating the 'bonus' credits, support s the continuation of some level of 'bonus' credit for FCV and longer ra nge battery electric ve hicles (BEVs). [OAR2009-0472-7109.1, p.3]

Zero Emission Vehicle credits: Th e Department is concerned that the proposal's assumption of zero grams per mile CO2 equivalent for vehicles powered by electricity does not include the full life cycle emissions of ZEVs. While we agree that this approach is appropriate in the initial years to serve as an incentive for the production of th ese vehicles, it does not re present the full well-towheel emissions from these vehicles, and so s hould not be continued indefinitely. While we strongly support incentives for the introducti on of advanced technology vehicles, we are concerned that the magnitude of credits being o ffered for these vehicles may, in the long term, unnecessarily weaken the overall effectiveness of the proposed standards. The Department encourages the USEPA to re-evaluate its advanced technology vehicle credits to ensure that an appropriate level of credit is provided by consid ering the entire life cycl e of each vehicle, e.g., vehicle technology and fuel, to provide a bala nce between encouraging advanced vehicle technologies while protecti ng the greenhouse gas emission reductions. [OAR-2009-0472-7109.1, p.4]

[State of New Jersey also submitted these co mments as testimony at the New York public hearing, See docket number EP A-HQ-OAR-2009-0472-4621, pp. 115-117.]

5-227EPA Response to Comments

State of Washington Department of Ecology

Ecology also takes this opportunity to comment on several other issues re lated to this proposal. First, we support EPA's proposal of additional credit to encourage the early commercialization of advanced vehicle power trains in cluding electric vehicles, plug-i n hybrid vehicles and fuel cell vehicles. As for the proposed credit multiplier approach, Ecology encourages EPA to assign a national average upstream emission factor to ea ch advanced technology, rather than using the proposed zero gram per mile CO2, for use in calculating the cred it. [OAR-2009-0472-7299, p.2]

EPA acknowledges that for each EV sold, in reality the total emissions is not zero, since there is a corresponding increase in upstream CO2 emissions due to an increase in the requirements for electric utility generation. As such, EPA's pr oposal to assign zero grams per mile CO2 could result in credits that are larg e enough that they could substan tially reduce, the actual greenhouse gas reductions provided by the nati onal program. [OAR-2009-0472-7299, p.2]

Toyota Motor North America

EPA proposes to allow early advanced technolog y vehicle (ATV) credits for sales of EVs, PHEVs, and fuel cell vehicles. First, EPA proposes to assign a 'zero' GHG value for the electric operation portion for such vehicles, in e ssence providing a second incentive for such technologies. Second, EPA's proposal includes a sales multiplier in the range of 1.2 to 2.0 for all eligible vehicles. EPA is considering a phase down in sales the multiplier by model year 2016. [OAR-2009-0472-7291, p.24]

Toyota agrees with the concept of providing early credits for thes e advanced technology vehicles in terms of the 'zero' assigned GHG value for the electric operation portion. While non-zero upstream fuel production emissions will exist for these technologies, recognizing the 'zero' tankto-wheel emissions of the vehi cle itself should provide a marginal incentive for OEM's to consider these technologi es. [OAR-2009-0472-7291, p.24]

Toyota is concerned with EPA's proposal to offer a range of sales multipliers. The 'zero' assigned GHG level for these vehicles would provide an incentive, and is more directly tied to a performance criterion (electric operating range) than a sales multiplier. It is unclear why EPA proposes, in essence, a double credit fo r these technologies. [OAR-2009-0472-7291, p.24]

Of course, compliance incentives alone are not su fficient to promote wide -scale deployment of these technologies, nor do such incentives provide any clear bene fit in compelling consumers to actually purchase advanced techno logy vehicles. In order to trul y promote commercialization of advanced technology vehicles such as plug-in hybr ids, electric vehicles and fuel cells, Toyota urges EPA and NHTSA to continue to work with OEMs, states, energy providers, NGOs and others to lower the barriers to widespread commercialization of these promising technologies, especially adequate refueling infrastructure a nd the codes and standards necessary to support it. [OAR-2009-0472-7291, p.24]

Union of Concerned Scientists

5-228EPA Vehicle Program, Feasibility, and Estimated Impacts

EPA has requested comment on proposed credit flexibilities that “encourage the early commercialization of advanced vehicle powertrains, including electric vehicles (EVs), plug-in hybrid electric vehicles (PHEVs), and fuel cell vehicles.” We break these flexibilit ies up into two categories. [OAR-2009-0472-7181.1, p.7]

First, is the proposed use of a dvanced technology vehicle credits for EVs, PHEVs, and FCVs in which a multiplier is applied to the number of vehicles sold, thus counting as more than one vehicle in the manufacturer’s fleet average. These credits would be an additional incentive above and beyond existing, and substantial, vehicle R& D tax incentives, loans, grants, and joint development programs for such technologies. EP A proposes a multiplier in the range of 1.2 – 2.0 and solicits comment on both its ma gnitude and whether it should be held constant or ramp down over time. [OAR-2009-0472-7181.1, p.7]

UCS recognizes the rationale for such credits, bu t we are concerned about the magnitude of the multiplier and its effect on eroding actual emissi ons savings offered by the rule. At least one manufacturer – Nissan – has already announced plans to pr oduce up to 150,000 EVs annually beginning as early as 2012. Given Nissan’s stated intentions, on e questions whether advanced technology vehicle credits will en courage early adoption of EV t echnology, or whether they will merely provide windfall surplus credits to a company whose advanced technology development efforts are already underway. [OAR-2009-0472-7181.1, p.7]

The same is especially true for model year 2009-2011 EVs, for which EPA also proposes providing credits. Given EPCA’s requirement of finalizing rules 18 months before the model [OAR-2009-0472-7181.1, p.7] year, such vehicles alre ady have fully developed marketing plans that will not be affected by the MY2012-MY2016 ru le. Providing credits for these model years simply provides the manufacturers w ith windfall credits, an approach fundamentally inconsistent with the stated objective of the policy. [OAR-2009-0472-7181.1, p.8]

Second, EPA proposes use of an emission factor of zero g/mi in the assessment of EVs, (the electric portion of) PHEVs, and FCVs. While EPA acknowledges that “in reality the total emissions...is not zero,” it rationalizes the use of such a factor because it “is also interested in promoting very advanced technologies such as EVs which offer the future promise of significant reductions in GHG em issions.” [OAR-2009-0472-7181.1, p.8]

UCS strongly objects to this appr oach, as it lacks technical jus tification, erodes savings of the program, and even stands in stark contrast to re cent assessments performe d by the agency itself. According to the joint EPA-DOE website fu el economy.gov , a recent (2003) pure electric vehicle is responsible for nearly half as much heat-trapping emissions as its gasoline-powered counter part. The 2003 RAV4 EV has a stated annu al carbon footprint of 3.9 tons of CO2, while the gasoline (2-wheel drive, automatic transmi ssion) version has an a nnual carbon footprint of 8.0 tons. [OAR-2009-0472-7181.1, p.8]

Credit Consequences

As demonstrated below, the consequences of offering either of these advanced technology incentives – individually or toge ther – at volumes in line with Nissan’s stated production are not

5-229EPA Response to Comments

trivial. According to Automotive News, Nissa n expects to have 20,000 Leafs pre-sold by the third quarter of 2010, and intends to produce 150,000 units annually starting in late 2012. For the purpose of examining the upper bound impacts, let us assume Nissan’s 2012 car sales reside at 958,696 units (including electric vehicles) with a conventional passenge r car fleet average stringency of 263 g/mi. The inclusion of 0 g/mi for 150,000 passenger car electric vehicles would provide Nissan with approximately 7.5 million megagrams of credit, with no multiplier in effect. If an advanced technol ogy vehicle credit multiplier were used, the credit amount would increase further, to between 8.8 million me gagrams and 13.0 million megagrams (corresponding to a multiplier of 1.2 and 2.0, respectively). By contrast, the use of an emission factor that acknowledges the upstream environmental impact of electric drive vehicles would dampen the quantity of surplus credits that could be accrued, resulting in cr edits more reflective of actual tons saved. Assuming no multiplier, the use of a 130 g/mi emission factor (the value assigned to EVs in the California Pavley program) would yi eld credits of 3.8 million megagrams. Multiplier use would increase credit amounts to between 4.4 million and 6.6 million megagrams (again, corresponding to a multiplier of 1.2 and 2.0, respectiv ely). As summarized in Table 1, the effect of choosing a 0 g/mi factor over an alternative EV factor such as 130 g/mi yields the generation of between 3.7 and 6.4 million additional megagrams of credit. Similarly, as shown in Table 1, use of a 2.0 sales multiplier dramatically boosts ma nufacturer credits an additional 2.8 million to 5.5 million megagrams. [OAR-2009-0472-7181.1, p.8]

[See docket OAR-2009-0472-7181.1, p.9 for Table 1. Po ssible Credit Accrual Resulting from Sale of 150,000 Nissan Leaf EVs megagrams]

Putting this into a comparative context, even assuming the more modest multiplier of 1.2, adoption of a 130 g/mi factor for 150,000 Leaf EV s would weaken the compliance stringency for Nissan’s remaining passenger car fl eet from 263 g/mi to 293 g/mi. Use of a 0 g/mi factor would weaken the compliance stringency from 263 g/mi to a troubling 322 g/mi (an erosion of an astounding 6.2 mpg-equivalent from Nissan’s passenger car fleet). These values are higher than those of the average Model Year 20 08 car and fleet. [OAR-2009-0472-7181.1, p.9]

While UCS supports policies that encourage advanced technology development, we see no reasonable justification to provide windfall credits of this sort . Given the numerous incentives already in place to promote advanced technology development (R&D tax incentives, loans, grants, joint development programs, etc.), UC S strongly recommends th at (a) no credits be offered before model year 2012 or after model year 2016 (by when commercialization decisions will have been made); (b) the use of a 0 g/mi emission factor be abandoned; (c) an emission factor reflective of actual in-use emissions, consistent with current research, be adopted; and (d) a multiplier no higher than 1.2 be used, with a rampdown of 0.05 per year (i.e. 1.20 in 2012; 1.15 in 2013; declining to 1.0 in 2016). This ram pdown would provide a smooth transition for manufacturers while rewarding the earliest actors, as well as ensure that credits see a proper unset. Alternatively, a more aggressive rampdow n could be employed that is triggered once a manufacturer reaches a specific cumulative sale s level, such as the first 200,000 units. [OAR2009-0472-7181.1, p.9]

Further, it was unclear from our reading of the pr oposed rule whether the agency plans to allow trading, banking, or borrowing of advanced technology vehicle credits. UCS believes that any

5-230EPA Vehicle Program, Feasibility, and Estimated Impacts

credits accrued for advanced technologies s hould not be available fo r trading, banking, or borrowing. The proposed advanced vehicle credits do not represent actual emission reductions and thus should not be availabl e to manufacturers for the purpos e of balancing emission deficits, or for trading to other manufacturers. More over, banking of credits would slow future technology adoption, undermining the concep t behind the credit. [OAR-2009-0472-7181.1, p.9]

Should the agency decide to employ advanced technology credits, we urge the agency to consider that manufacturers have a history of becoming depende nt on credits, opting to choose them over actual improvements when more cost effective. As such, it is critical that any advanced technology credits be limited in availabili ty (quantity and duration), and that they be designed to truly accelerate tec hnology as well as to minimize the loss of near term emission reductions that will occur. [OAR-2009-0472-7181.1, p.9]

Lastly, on a related note, UCS questions the underlying methodology used for computing advanced technology vehicle credits. The calcu lations assume approximately 191,000 miles of [OAR-2009-0472-7181.1, p.9] life time travel for passenger cars, and more than 220,000 miles of lifetime travel for light trucks. We believe it is unreasonable to assume that the first round of advanced technologies such as EVs, FCVs and PHEVs would see lifetime VMT as high as their conventional counterparts, and that use of the high er VMT artificially infl ates the savings that those vehicles could provide the environment. Technology limitations as well as infrastructure limitations (causing, for example, limits to EV dr iving range) each play into advanced vehicle VMT levels, and should be accounted for when a ssessing the value of credits accrued by such technologies. As such, UCS recommends the ag encies modify VMT assessments for advanced technology vehicles in the calculati on of credits. [OAR-2009-0472-7181.1, p.10]

[Following comments are from LA Testimony, OAR-2009-0472-7283, pp.103-113 (p.108)]

Second, compliance credits should be based on real-world performance. UCS is concerned that the NPRM includes credits for advanced ve hicles that could erode the benefits of the program and give automakers credit for actions undertaken to meet Ca lifornia's Zero Emission Vehicle program.

California's ZEV program requires automakers to manufacture and sell zero emission vehicles. By 2014, the current California program could re sult in close to 60,000 pl ug-in hybrid electric vehicles as well as 7,500 pure battery elec tric or fuel-cell vehicles on the road.

The proposed federal program would allow manuf acturers to accrue cr edits for vehicles that incorporate advanced zero emission techno logies. This credit woul d provide automakers with a credit multiplier in the range as proposed of 1.2 to 2.0 for advanced vehicles. In essence, this allows advanced vehicles such as plug-ins, electric, and fuel-cell vehicles to count as more than one vehicle in a manufacturer's fleet average.

Compounding this is EPA's proposal to use an emissions factor of zero grams per mile for electric vehicles and the electric portion of plug-ins.

5-231EPA Response to Comments

While UCS supports flexibility in compliance mech anisms, credits should be based on real and verifiable emissions reductions. This means that credits for electric drive should be based upon average life-cycle emissions from electrici ty, including upstream emissions from power generation.

The assumption that all electric vehicles have zero emissions will erode the benefits of the federal program and could dela y widespread adoption of cost-e ffective technologies available today to reduce emissions.

Plus, automakers already producing ZEVs to m eet California's ZEV ma ndate will also get credit under a federal program, credit that might far exceed their actual life-cycle emissions.

Therefore, UCS recommends that in this rule no advanced vehicle credits be offered before model year 2012 or after model year 2016 and that the use of a zero-grams-per-mile emission factor be abandoned and that an emission factor reflective of actua l in-use emissions consistent with current research be adopted.

And we recommend a multiplier of no higher than 1.2 be used; to abandon the 2.0, start with 1.2, and then decline to .05 per year, going to ju st the 1.0 in 2016 for these advanced vehicles. And the credits should expire once a manufacturer surpasses a cer tain volume threshold, such as 200,000 advanced vehicles sold.

[Union of Concerned Scientists also submitte d these comments as testimony at the New York public hearing, See docket num ber EPA-HQ-OAR-2009-0472-4621, pp. 99-101.]

United Auto Workers We are also supportive of EPA’s proposal to provide compliance flexibility through a multiplier for electric-drive technologies and for so-c alled off-cycle technology credits. We believe strongly that these proposals will provide a desirable incentive to bring into production advanced fuel-saving technologies that have the potential to radically re duce the greenhouse gas emissions from motor vehicles. Although we recognize that th is will cause a slight near-term reduction in the total amount of greenhouse gas emissions a voided, it will hasten the day when these technologies can be produced in large volumes. This will ultimately result in greater emissions reductions in the medium and long term because of the cost reductions expected with increased volumes of these advanced t echnologies. [OAR-2009-0472-7056.1, p.3]

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

Credits for Electric Vehicles

The EPA proposes using a multiplier (ranging from 1.2-2.0) for electric vehicles (EVs), plug-in hybrid electric vehicles (PHEVs), and fuel ce ll vehicles produced from MY 2012 through MY 2016. As a result of a multiplier, advanced techno logy vehicles can be counted as up to two vehicles when annual fleet fuel efficien cy averages are calcu lated. [OAR-2009-0472-7188.1, p. 5]

5-232EPA Vehicle Program, Feasibility, and Estimated Impacts

Although we acknowledge that the use of a multiplie r would be effectively promote utilization of cleaner technologies, we contend that the multiplier should be set at the lower end of the range (1.2) to avoid eroding the benefits of this propo sed ruling. A multiplier in the higher range would not be conducive to curbing greenhouse gas pol lution and would not be commensurate with the environmental benefit. Additionally, we urge the EPA to phase down the multiplier by 0.05 per year, so that it starts at 1.2 in 2012, and declines to 1.0 in 2016. [OAR-2009-0472-7188.1, p. 5]

In addition to the abovementioned credits, the EP A proposes using an emissions factor of 0 g/mi for EVs and PHEVs. As the EPA acknowledges in the NPRM, battery-powered vehicles do not produce emissions at the tailpipe. However, thes e are not zero-emissions vehicles. Emissions are produced where the power is generated, and electr icity production is gree nhouse gas intensive. In fact, according to the DOE, 44.7% of the electricity generated in the U.S. is produced from coalfired power plants. [OAR-2009-0472-7188.1, p. 6]

On average, in the United States, the ge neration of each kWh produces 1.36 pounds, or 617 grams, of CO2. By comparison, combustion of a gallon of ga soline emits approximately 8,900 grams of CO2. Therefore, one gallon of gasoline produces sim ilar greenhouse gas emissions as nearly 15 kWh of electric power. For example, if the Tesla Roadster uses 21.7 kWh to travel 100 miles, then the CO2 emissions from gene rating its power will be 13,389 grams (617 g x 21.7kWh), or the equivalent of 1.5 gall ons of gasoline. [OAR-2009-0472-7188.1, p. 6]

Another consideration is that em issions change dramatically by region due to variations in the electricity mix. In states where nearly 80% of electric power co mes from fossil fuels (such as Kansas and Missouri), each kWh produces 1.87 pounds or 849 grams of CO2. As a result, in those states the same vehicle would emit 18,423 gram s of CO2 or the equivalent of 2.07 gallons of gasoline to travel 100 miles. This analysis shows that ignoring el ectric power production emissions provides incomplete and misleading information. The agency must account for high emission energy sources and rechargeable electr ic cars should not be given a zero emissions rating. [OAR-2009-0472-7188.1, p. 6]

As noted in the proposed rulemaking, electricit y generation represents the largest source of greenhouse gas emissions in the U.S. (p. 49508), while transportation s ources are second. Giving excessively generous credits to vehi cles that rely on grid electricity translates into simply shifting the burden from a tailpipe to a smokestack, with out achieving significant improvements. [OAR2009-0472-7188.1, p. 6]

University of Pennsylvania, Environmental Law Project

Assignment of Zero Emissions to Advanced Technologies

Currently, the proposed rule evaluates advanced t echnology vehicles like plug-in electrics as if they were responsible for no greenhouse gas em issions whatsoever. Yet these vehicles run on energy sources like electricity, which do generate significant gree nhouse gasses in their production. Although these vehicles ar e certainly very efficient, their operation still contributes greenhouse gases to the atmosphere, and there is lit tle policy justification for benefiting these advanced technologies so signifi cantly over alternatives like gas hybrids. Furthermore, the sale

5-233EPA Response to Comments

of a relatively small number of these vehicles might allow a manufacturer to significantly reduce the extent to which it must make efficiency improvements in the rest of its fleet. [OAR-2009­ 0472-7286.1, p. 18]

U.S. Coalition for Advanced Diesel Cars

The Coalition applauds EPA and NHTSA for champi oning reality-based solutions to our national petroleum end GHG reduction objectives. In each of the credit mechanisms described above, the agencies demonstrate the impor tance of controlling off-cycle emissions through a holistic approach that is not chained excl usively to a pair of 40-year old test procedures. Each of these reality based compliance features demonstrates r ecognition of a simple truth: the success of the proposed regulations will be based on the dail y reductions in petroleum barrels and well-towheel GHG tons, not on a "fleet aver age" compliance certificate for the regulated parties. And to achieve those daily reductions, vehicles employing technologies mu st appeal to U.S. consumers and must sell in high annual volumes.

The universe of possible fuels for light duty vehicl es contains relatively few that have a higher energy density than gasoline. Diesel is one of t hose fuels. A gallon of diesel has 11 percent more energy than a gallon gasoline (and a gallon of B 10 has 12 percent more energy than a gallon of E10). Because of this energy density, the transpor tation and distribution of diesel fuel to users around the country produces less GHG per usable unit of energy. Additionally, the refining of diesel fuel requires less ener gy and produces fewer GHG emissions compared to a gasoline baseline. Taken together, these reduced off-cycle emissions contribute additional benefits to society when high density diesel is substituted for lower density gasoline. Unlike its treatment of FFVs and other credit mechanisms proposed, howeve r, EPA is not proposing to count these real diesel GHG offsets. According to recent EPA research, the up-s tream GHG emissions associated with refining, transporting, distri buting and storing transportation fu els are [that for] every gallon of diesel fuel substituted for a gallon of gasoline, an off cycl e benefit of 280 GHG grams occurs. Returning to the pickup truck example shown on page 12, in which a 24 mpg diesel engine is sold in place of the standard 18 mpg engine, th e 3,700 lifetime gallons of fuel saved would also generate an off-cycle GHG benefit of 1 metric ton. Over 221,199 lifetime mile s traveled, this is the equivalent of an off cycle credit of 4.7 grams per mile. This value is on the order of the maximum MAC efficiency credit of 5.7 g/mile that EPA proposes under its offcycle credit mechanism.

Clearly, the off cycle benefits of diesel fuel should be co mprehended in EPA's historic GHG rulemaking process as these benefi ts are already documented in th e agency's technical research. Since EPA proposes off-cycle credit mechanisms to incentivize such solu tions as roof-top solar panels, surely the Administrator recognizes a pa rallel disincentive exists for proven technologies that are deliberately excluded from the off-cycle credit mechanism. We urge EPA to adopt rules that comprehend the holistic, full-cycle GHG perf ormance recognizing that vehicles and fuels work as a system in our national efforts to re duce the C02 inventory and petroleum consumption. [OAR-2009-0472-7496, p. 13-14]

Volkswagen Group of America (Volkswagen)

5-234EPA Vehicle Program, Feasibility, and Estimated Impacts

With regards to additional cred it flexibilities, Volkswagen al so supports the EPA's proposal. Credit for GHG reductions from air conditio ning, advanced technology vehicles, C02 performance credit and flexible fuel vehicl es have the potential to offer significant GHG reductions and we believe it is appropriate for th e EPA to recognize these reductions and provide an avenue for manufacturers to utilize credit for these vehicl es and technologies. [OAR-2009­ 0472-7210.1, pp.3-4]

With regards to advanced technology vehicles, Vo lkswagen supports credit for these vehicles to the maximum extent possible. To that end Vo lkswagen believes the maximum credit proposed by EPA (2 credits per vehicle for fuel cell, ba ttery electric and grid connected hybrids) Is appropriate over the full length of this proposed regulation. We also support the EPA proposal to set zero emission tailpipe performance for the elect ric portion of operation of a vehicle with zero emission capability to zero grams per mile ove r the length of the proposed regulatory period. Volkswagen believes that incentives are necessary to help the commercialization of these types of vehicles and the credit as proposed will provid e some benefit for these vehicles as they are introduced to the market through the 2016 MY. Th e credit level and the handling of the CO2 performance of these vehicles can be re-addre ssed during the regulatory process for a National program for 2017 and beyond. If anything, Volk swagen believes that during the 20122016 timeframe additional credit could be allowed for these vehicles. We do not believe that volumes for these vehicles during this timeframe will be significant enough to resu lt in excessive credits for automakers. [OAR-2009-0472-7210.1, p.4]

Volkswagen also supports the flexibility provided in the regulation to allow credit for real world GHG reductions that are not captured on the releva nt test cycles. We believe that these GHG reductions can be significant and can also offer significant benefit to c onsumers. We urge the EPA to maintain a viable pathway and mechanis m for evaluating these types of technologies. Volkswagen also notes that some technologies ma y offer benefits on the relevant test cycles while also offering either signifi cant or greater benefits to cust omers in real world usage. We propose that EPA accommodate this type of tech nology that may have benefit both on and offcycle. An example of this could be various forms of stop/start systems. It is possible that certain designs or strategies for stop/start systems will yield varied results over the fuel economy test cycles versus off-cycle modes. For example, Volkswagen believes some stop/start systems may yield a 1-2 percent improvement over the fuel econo my test cycles but yield an 8 percent benefit in real world driving for the customer. Volkswagen plans to discuss this type of technology in more detail with EPA staff in the future, but for the purposes of this rulema king it is important to establish that CO2 performance cred it is possible and that a fair pr ocess is in place to evaluate and grant the correct credit for a given techno logy. In addition, Volkswagen recommends that credits from CO2 performance technology under r eal world driving condi tions should be In effect over the full time period of this regulation. Volkswagen also notes that measurable and documented real world GHG reductions due to technology related improvements to vehicles should not be strictly related to new or innovative technical measures - it is possible that simple, known technology could yield significant re al world GHG reductions. [OAR-2009-0472-7210.1, p.4]

Volkswagen also supports the EPA's efforts to harmonize the GHG regulation with the current NHTSA regulation by offering GHG credits for FFV vehicles at the same level as the CAFE:

5-235EPA Response to Comments

credit available in the NHT SA CAFE: regulation through the 2012 - 2015 MY. For 2016 MY and beyond the application of a factor based on FFV use is appropriate. We support EPA's efforts to allow flexibility through two pathways (EPA factor or manufact urer factor) after the 2015 MY. [OAR-2009-0472-7210.1, p.4]

EPA Response:

5.7.3.2 Comments on Whether to Provide an In centive for Advanced Technology Vehicles

Comments on whether EPA should provide a ny kind of incentive to promote advanced technology vehicles during the MY2012-2016 timeframe covered in this rulemaking fell into three general categories. While this section summar izes the overall comments with respect to the general concept of incentives, th e following two sections provid e summaries of more targeted comments on the zero gram/mile compliance value and the vehicle multiplier.

The first group of commenters explicitly endorsed both the con cept of providing some kind of incentive for advanced technology vehicles as well as at least one of the two proposed incentives (the zero gram/mile compliance value and the vehicle multiplier). This group included every automaker that commented on this topic: BM W, Chrysler, Ford, Honda, Hyundai, MercedesBenz/Daimler AG, Mitsubishi, Nissan, Toyota, and Volkswagen. In addition to individual automakers, several other auto industry companie s and associations were represented in this group of commenters as well, including the Allia nce of Automobile Manufacturers, Cummins, the Motor and Equipment Ma nufacturers Association, the National Automotive Dealers Association, SABIC Innovative Pl astic, and the United Auto Worker s. The State of New Jersey and the Washington Department of Ecology al so submitted comments supporting a temporary incentive. Many of these comments recognized the market barriers facing advanced technology vehicles, and that an incentive program could prom ote technologies that c ould yield much larger GHG emissions benefits in the future.

A second group of commenters expressed general support for some kind of temporary incentive for advanced technology vehicle incentives, but argued that EPA’s propos ed incentive program, in its entirety, was too generous, and stated e xplicit opposition to one or both of EPA’s incentive mechanisms. These commenters included the California Air Resources Board, the Ecology Center, the Environmental Defe nse Fund, Honeywell Transportati on Systems, the International Council on Clean Transportation, th e Massachusetts Department of Environmental Protection, the National Association of Clean Air Agencies , the Natural Resources Defense Council, the New York State Department of Environmenta l Conservation, the Northeast States for Coordinated Air Use Management, the South Co ast Air Quality Management District, and citizen Yuli Chew. These commenters generall y suggested that EPA re -evaluate the overall incentive program to seek a better balance be tween promoting advanced technology vehicles and minimizing the loss of GHG emissions benefits of the overall program.

A third group of commenters explicitly or imp licitly opposed the concept of any incentives for advanced technology vehicles (not e that an advanced technology vehicle could, of course, still earn an emissions credit based on superior emissions performance). This group included the

5-236EPA Vehicle Program, Feasibility, and Estimated Impacts

American Council for an Energy Efficient Econo my, the New York University School of Law/Institute for Policy Integrity, Public Citizen /Safe Climate Campaign, Sierra Club, and the Union of Concerned Scientists. Although some of these groups di scussed vehicle multipliers of 1.2, phasing out to zero over the MY2012-2016 timefr ame, it seems most likely that most or all of these groups cited the 1.2 vehicle multiplier only to emphasize their support for the lowest possible multiplier. That is, the general tone of their comments suggested that they might have well supported no multiplier had that been within the range of the EPA proposal. The thrust of these comments is that compliance values should be based on full fuel-cycle environmental performance and that there is no need for speci al regulatory incentives for advanced technology vehicles.

After considering the public comments, EPA agrees with the first two groups of commenters that it is appropriate to provide a temporary regulatory incentive to promote early commercialization of technologies that have the potential to produce very large GHG emissions reductions in the future, but which face major market challenges. EPA believes that EVs, PHEVs, and FCVs are potential GHG “game changers” if major cost a nd consumer barriers can be overcome and if there is a nationwide transformation to low-GHG el ectricity (or hydrogen, in the case of FCVs). EPA has adopted the concept of advanced technol ogy incentives in several of its most recent and important rulemakings under Titl e II of the Clean Air Act. 13 EPA further agrees with the second group of commenters that the pr oposed incentive program was ex cessive, and is finalizing a restructured incentive program that EPA believe s strikes a more reasoned balance between nearterm environmental performance and long-term environmental goals. Although EPA disagrees with the third group of commenters, who argued for no incentive program whatsoever, EPA is structuring the rule to cap the number of vehicl es eligible for the incentive program and has projected the potential loss in GHG emissions benefits that could result from the restructured incentive program. As discussed in the preamble and RIA, EPA projects that the restructured incentive program could reduce the GHG emissions benefits of the program by approximately 25 million metric tons, or less than 3 percent of th e projected GHG emissions benefits of the overall
program. 14 EPA believes this is a reasonable balan ce given these technolo gies’ potential for GHG reductions in a regime where upstream GHG em issions are separately controlled. Finally, in response to concerns expre ssed by many commenters, EPA empha sizes that the restructured incentive program only applies to the MY2012-2016 timeframe covered by this final rule, and that EPA will reassess the issue of whether to have any incentives for advanced technology vehicles for model years 2017 and beyond based on the status of advanced technology vehicle commercialization and othe r relevant factors.

5.7.3.3 Comments on the Zero Grams/Mile Comp liance Value for EVs, FCVs, and PHEVs When Operated on Grid Electricity

EPA proposed a zero grams/mile compliance valu e for EVs and PHEVs when operated on grid electricity (and for FCVs, though EPA received fe w comments on FCVs, presumably because of the expectation of low sales in MY2012-2016). The zero grams/mile compliance value is an incentive in that, while it accurately accounts for tailpipe GHG emissions, it does not reflect the

13 For example, the Tier 2 Light-Duty Vehicle, 2007 Heavy-Duty Highway, and Tier 4 Nonroad Diesel rulemakings.
14 See Regulatory Impact Analysis, Appendix 5.B.

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increase in upstream GHG emissi ons associated with the electric ity used by EVs relative to the upstream GHG emissions associated with the gasoline or diesel fuel used by conventional vehicles. For example, based on GHG emissions from today’s national average electricity generation (including GHG emissions associated with feedstock extraction, processing, and transportation) and other key a ssumptions related to vehicle el ectricity consumption, vehicle charging losses, and grid transmission losses, a midsize EV might have an upstream GHG emissions of about 180 grams/mile, compared to the upstream GHG emissions of a typical midsize gasoline car of about 60 grams/mile. Thus, the EV would cause a net upstream GHG emissions increase of about 120 grams/mile (in general, the net upstream GHG increase would be less for a smaller EV and more for a larger EV). The zero grams/mile compliance value provides an incentive because it is less than th e 120 grams/mile value that would fully account for the net increase in GHG emissions, countin g upstream emissions. The net upstream GHG impact could change over time, of course, based on changes in electricity generation or gasoline production. EPA received more comments on the proposed zero grams/mile compliance value for EVs (and PHEVs operated on grid electricity) than any other issue associated with advanced technology vehicle incentives.

A majority of commenters were opposed to th e proposed zero grams/mile compliance value for EVs and PHEVs operated on grid electricity: American Council for an Energy Efficient Economy, the California Air Resources Board, citizen Yuli Chew, Clean Energy Fuels, Environment Michigan, Environm ent New Jersey, Environmental Defense Fund, citizen Mark Glasser, Honda, Honeywell Transportation Sy stems, the International Council on Clean Transportation, citizen Valerie Karplus, the Massachusetts Department of Environmental Protection, National Association of Clean Air Agencies, Natural Resources Defense Council, the New York State Department of Environmental Conservation, the New York University School of Law/Institute for Policy Integrity, Public Citizen/Safe Climate Campaign, Sierra Club, the South Coast Air Quality Manageme nt District, the Wash ington Department of Ecology, Union of Concerned Scientists, the Univ ersity of California/Santa Ba rbara Bren Working Group on Vehicle Fuel Economy, and the University of Pennsylvania/Environmental Law Project. The core of these comments was that while tailpipe GHG emissions of vehicles operated on grid electricity is zero, the net full fuel-cycle GHG emissions are not zero, du e to the upstream GHG emissions associated with electricity ge neration, and ignoring these emissions could “undermine” the overall GHG benefits of the prog ram. The Natural Resources Defense Council provided a specific methodology for calculating full fuel-cycle GHG emissions for EVs. While opposed to the zero grams/mile compliance value, the South Coast Air Quality Management District suggested that, if EPA were to mainta in the incentive, EPA should consider limiting the number of vehicles which would qualify for the incentive.

Several automobile companies and others suppo rted the proposed zero grams/mile compliance value: the Alliance of Automobile Manufactur ers, BMW, Chrysler, Cummins, Ford, MercedesBenz/Daimler AG, Mitsubishi, the Motor and Equipment Manufacturers Association, the National Automobile Dealers Association, Niss an, the State of New Jersey, Toyota, and Volkswagen. Several of these commenters pointe d out that previous motor vehicle regulations have focused on tailpipe emissions only, and Nissan stated that excluding upstream GHG emissions is “legally required” under Clean Ai r Act section 202(a)(1). The National Automotive

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Dealers Association stated that Congress will decide whether to regulate upstream GHG emissions from electric utilities.

EPA’s final incentive program retains the zero grams/mile compliance value for EVs and FCVs, and for PHEVs when operated on grid electricity, a position supported by most automakers and a few other commenters. But, EPA disagrees wi th Nissan that excluding upstream GHGs is legally required under section 202(a)(1). In this rulemaking, EPA is adopting standards under section 202(a)(1), which provides EPA with broad discretion in setting emissions standards. This includes authority to structur e the emissions standards in a wa y that provides an incentive to promote advances in emissions control technolog y. This discretion includes the adjustments to compliance values adopted in the final rule, the multipliers we proposed, and other kinds of incentives. In response to the comment of Nissa n, EPA recognizes that we have not previously made adjustments to a compliance value to acco unt for upstream emissions in a section 202(a) vehicle emissions standard, but that does not mean we do not have authority to do so in this case. In addition, EPA is not directly regulating upstream GHG emissions from stationary sources, but instead is deciding how much value to assign to a motor vehicle for purposes of compliance calculations with the motor vehicle standard. Al though the logical place to start is the emissions level measured under the applicable test procedure, section 202( a)(1) does not require that EPA limit itself to only that level. For vehicles above the cumulative vehicle production volume caps described below, EPA will adjust the measured valu e to a level that reflects the net difference in upstream GHG emissions compared to a comparable conventional vehicle. This will account for the actual GHG emissions increase associated wi th the use of the EV. As shown above, upstream GHG emissions attributable to increased electricity production to operate EVs or PHEVs currently exceed the upstream GHG emissions attributable to gasoline vehicles. There is a rational basis for EPA to account for this net differen ce, as that best reflects the real world effect on the air pollution problem which th e rule addresses. For vehicles above the cumulative vehicle production volume caps, EPA is reasonably and fa irly accounting for the incremental increase in upstream GHG emissions from both the electric vehicles and the conventional vehicles. Consequently, EPA is not, as Nissan suggeste d, arbitrarily counting upstream emissions for electric vehicles but not for c onventional fuel vehicles. EPA also agrees with the National Automotive Dealers Association that Congress w ill consider whether to regulate GHG emissions from utilities, and that will be one factor that EPA will consider in future deliberations about how to treat vehicles that operate on grid electricity.

In response to the general concerns of many commenters about the potential of the zero grams/mile compliance value to possibly “undermine” the entire program, and the recommendation from the South Coast Air Quality Management District that EPA consider limiting the number of vehicles qualified to re ceive the incentive, EPA is adding a cumulative cap on the total production of EVs, PHEVs, and FCVs for which an individual manufacturer can claim the zero grams/mile compliance va lue during MY2012-2016. The cumulative vehicle production volume cap will be 200,000 vehicles, ex cept those manufacturers that sell at least 25,000 EVs, PHEVs, and FCVs in MY2012 will have a cap of 300,000 vehicles for MY2012­ 2016. This higher cap option is an additional incentiv e for those manufacturers that take an early leadership role in aggressively and successfully marketing advanced t echnology vehicles. These caps are one way to limit the poten tial GHG benefit losses associated with the incentive program and therefore are another response to the concerns that the proposed incentives were excessive

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and could significantly undermine the program’s GHG benefits. If, for example, 500,000 EVs were produced in MY2012-2016 that qualified for th e zero grams/mile compliance value, the loss in GHG benefits due to this program would be about 25 million metric tons, or less than 3 percent of the total projected GHG benefits of this program. 15 EPA believes this modest potential for reduction in near-ter m GHG emissions control is more than offset by the potential for very large future GHG emissions reductions th at commercialization of these technologies could promote. The rationale for these caps is that an incentive is most critical when individual automakers are beginning to introduce advanced technologies in the ma rket, and less critical once individual automakers have successfu lly achieved a reasonable market share and technology costs decline due to greater producti on volumes and experience. EPA believes that cap levels of 200,000-300,000 vehicles over a five model year period are reasonable, as production greater than this would indicate that th e manufacturer has overcome at least some of the initial market barriers to these advanced technologies. Further, EPA believes that it is unlikely that many manufacturers will a pproach these cap levels in the MY2012-2016 timeframe.

Production beyond the cumulative vehicle produc tion cap for a given manufacturer in MY2012­ 2016 will have its compliance valu es calculated according to a methodology that accounts in full for the net increase in upstream GHG emissions. Fo r an EV, for example, this would involve: 1) measuring the vehicle electricity consumption in watt-hours/mile over the 2-cycle test (for example, a midsize EV might have a 2-cycl e test electricity consumption of 230 watthours/mile), 2) adjusting this watt-hours/mile value upward to account for electricity losses during transmission and vehicle charging (div iding 230 watt-hours/mile by 0.93 to account for grid/transmission losses and by 0.90 to reflect loss es during vehicle charging yields a value of 275 watt-hours/mile), 3) multiplying the adjusted watt-hours/mile value by a nationwide average electricity upstream GHG emissions rate of 0.642 grams/watt-hour at the powerplant 16 (275 watt-hours/mile multiplied by 0.642 grams GHG/wa tt-hour yields 177 grams/mile), and 4) subtracting the upstream GHG emissions of a co mparable midsize gasoline vehicle of 56 grams/mile to reflect a true net increase in upstream GHG emissions (177 grams/mile for the EV minus 56 grams/mile for the gasoline vehicle yiel ds a net increase and EV compliance value of 121 grams/mile). 17 18 This methodology is similar to th at advocated by the Natural Resources

15 See Regulatory Impact Analysis, Appendix 5.B.
16 The nationwide average electricity upstream GHG emissi ons rate of 0.642 grams GHG/watt-hour was calculated from 2005 nationwide powerplant data for CO 2 , CH 4 , and N 2 O emissions from eGRID2007 ( http://www.epa.gov/cleanenergy/energy-resour ces/egrid/index.html), converting to CO 2 -e using Global Warming Potentials of 25 for CH 4 and 298 for N 2 O, and multiplying by a factor of 1.06 to account for GHG emissions associated with feedstock extraction, transportation, and processing (based on Argonne National Laboratory’s The Greenhouse Gases, Regulated Emissions, and Energy Us e in Transportation (GREET) Model, Version 1.8c.0, available at http://www.transportation.anl.gov/modeling_simul ation/GREET/). EPA recognizes that there are many issues involved with projecting the electricity upstream GHG emissions associated with future EV and PHEV use including, but not limited to, average vs marginal, daytime vs nighttime vehicle charging, geographical differences, and changes in future electricity feedstocks. EPA chose to use the 2005 national average value because it is known and documentable. Values appropriate for future vehicle use may be higher or lower than this value. EPA will reevaluate this value in future rulemakings.
17 A midsize gasoline vehicle with a footprint of 45 square feet would have a MY2016 GHG target of about 225 grams/mile; dividing 8887 grams CO2/gallon of gasoline by 225 grams/mile yields an equivalent fuel economy level of 39.5 mpg; and dividing 2208 grams upstream GHG/gallon of gasoline by 39.5 mpg yields a midsize gasoline vehicle upstream GHG value of 56 grams/mile. The 2208 grams upstream GHG/gallon of gasoline is calculated

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Defense Council, with the one meaningful di fference being the use of a national average electricity upstream GHG emissions rate, rather than a marginal rate, an issue addressed in Section 5.7.3.4 below.

The full accounting methodology for the portion of PHEV operation on grid electricity would use this same approach. PHEV compliance values will be determined by combining zero grams/mile for grid electricity operation with the GHG emissions from th e 2-cycle test results during operation on liquid fuel, and weighting these values by the percentage of miles traveled that EPA believes will be performed on grid electricity and on liquid fuel, which will vary for different PHEVs. EPA is currently consider ing different approaches for determining the weighting factor to be used in calculating PHEV GHG emissions compliance values. EPA will consider the work of the Society of Auto motive Engineers Hybrid Technical Standards Committee, as well as other relevant factors. EPA will issue a final rule on this methodology by the fall of 2010, when EPA expects some PHEVs to initially enter the market.

5.7.3.4 Comments on Vehicle Multiplier

EPA proposed a vehicle multiplier for EVs, PHEV s, and FCVs in the range of 1.2 to 2.0 and sought comments on the level of the multiplier and various ways it might best be structured. The proposed vehicle multiplier would also have been an incentive as it would have allowed an EV, PHEV, or FCV to count as more than one vehicl e in an individual manufacturer’s fleet average compliance calculations. For example, a vehi cle multiplier of 2.0 would have effectively doubled the effective credit associat ed with an EV, PHEV, or FCV.

Nearly every automaker and industry-related group strongly supported a vehicle multiplier, including the Alliance of Automobile Manufact urers, BMW, Chrysler, Cummins, Ford, Honda, Hyundai, Mercedes-Benz/Daimler AG, Mitsubish i, the Motor and Equipment Manufacturers Association, the National Automobile Dealer s Association, Nissan, SABIC Innovative Plastic, United Auto Workers, and Volkswagen. Some automakers supported vehicle multipliers in excess of the proposed range of 1.2 to 2.0, for example, Chrysler supported vehicle multipliers as high as 6.0 and Honda supported levels as high as 16.0 (for a FCV with a 300-mile range). About half of these organizations supported universal vehicle multipliers, and about half supported differential multipliers. Some of these commenters, such as the Alliance for Automobile Manufacturers, For d, and Mitsubishi, also supported the concept of maintaining incentives until a certain market threshold was achieved. Also supporting a vehicle multiplier were the California Air Resources Board, citizen Yuli Chew, the State of New Jersey, and the Washington Department of Ecology.

A second group of commenters supported, or at least appeared willi ng to accept, a vehicle multiplier of 1.2, at the low end of the propos ed range. These commmenters also generally advocated that the vehicle multiplier be phase d out by MY2016. These commenters included the Massachusetts Department of Environmental Protection, Natural Resources Defense Council,

from 19,200 grams upstream GHG/mmBtu (Renewable Fuel Standard Program, Regulatory Impact Analysis, Section 2.5.8, February 2010) and multiply ing by 0.115 mmBtu/gallon of gasoline.
18 Manufacturers can utilize alternate calculation methodologies if shown to yield equivalent or superior results and if approved in advance by the Administrator.

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Northeast States for Coordinated Air Use Mana gement, Public Citizen/Safe Climate Campaign, Sierra Club, Union of Concerned Sc ientists, and the University of California/Santa Barbara Bren Working Group on Vehicle Fuel Economy. As menti oned previously, the tone of some of these comments suggests that some of these commente rs might have supported no multiplier had that been within the range of the EPA proposal.

There were a few commenters that explicitly re jected any vehicle multipliers, including the American Council for an Energy Efficient Econo my, the New York University School of Law/Institute for Policy Integrit y, and Toyota. The first two co mmenters rejected the need for any kind of incentive, while Toyota argued that a “double credit” was unne cessary and that the zero grams/mile compliance value is more directly tied to the vehicle t echnologies that EPA is incentivizing.

EPA’s final advanced technology vehicle incen tive program will not include any vehicle multipliers. In general, EPA agrees with the overall thrust of the majority of commenters that the proposed incentive program was too generous, and in particular we agree with Toyota that the zero grams/mile compliance value is more directly targeted to EVs, PHEVs, and FCVs than a vehicle multiplier, which could also apply to a wide number of other technologies. EPA agrees with those commenters that sugge sted some type of market threshold above which any incentives would be phased out, and we believe that the cumulative vehicle production volume caps discussed above reasonably implement this idea, providing a proper incentive for initial commercialization but limiting the potential loss in GHG emissions reductions associated with that incentive.

5.7.3.5 Comments on Miscellaneous Issues Related to the Advanced Technology Vehicle Incentive Program

A few commenters raised the issue of whether EPA should expand the speci fic technologies that are eligible for the advanced technology vehi cle incentives. For example, the Alliance of Automobile Manufacturers suggest ed that hydrogen-fueled inte rnal combustion engines be added, BMW advocated that clean diesel vehicles be included, and Mercedes-Benz/Daimler AG argued that both diesel vehicles and natural gas vehicles be incentivized. While not explicitly recommending that diesel vehicles be included in the advanced technology vehicle incentive program, the U.S. Coalition for Advanced Dies el Cars recommended that EPA recognize the full-fuel cycle GHG benefits based on diesel ’s higher energy density (leading to less GHG emissions from fuel distribution) and lower en ergy losses during refini ng. EPA is not expanding the list of eligible advanced vehicle technologi es primarily because all of these technologies utilize internal combustion engines, which have dominated the personal vehicle market in this country for the last 100 years and do not presen t the same level of market challenges to automakers as EVs, PHEVs, and FCVs. EPA agr ees that these other t echnologies face market barriers (e.g., hydrogen fuel availa bility, and natural gas on-board storage), but EPA believes the barriers are far less than those faced by EVs, PHEVs, and FCVs.

With respect to the arguments about diesel’s full fuel-cycle GHG emissions benefits, EPA reiterates that the final GHG emi ssions standards are tailpipe st andards, and EPA is not taking into account fuel upstream GHG emissions issues at this time, with the single exception of

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electricity. While the tailpipe standards are fuel neutral, EP A recognizes that every motor vehicle fuel and fuel producti on process has unique upstream GHG emissions impacts. EPA has discretion in this rulemaking under section 202(a ) (1) on whether to account for differences in net upstream GHG emissions relative to gasoline pr oduced from oil, and intends to only consider upstream GHG emissions for those fuels that ha ve significantly higher or lower GHG emissions impacts. At this time, EPA is only making su ch a determination for electricity, given that electricity upstream GHG emissions are about three times higher than gasoline upstream GHG emissions. The difference in upstream GHG emissions for both diesel fuel (the U.S. Coalition for Advanced Diesel Cars cites a value of 11% lower for diesel fuel, based on EPA data) and compressed natural gas are much lower, on a relative basis.

Related to the discussion above in Section 5.7.3.3 on the zero grams/mile compliance value, several commenters raised issues regarding th e appropriate electricity upstream GHG emissions rate to use. Although EPA did not ask for commen ts on this issue, these comments are relevant in that, though EPA is retaining the zero gram s/mile compliance value, vehicles produced in excess of the cumulative vehicle production volume caps discussed above will have their compliance values generated, in part, by an assumed electricity upstream GHG emissions rate. EPA has chosen to use the 2005 national average electricity upstream GH G emissions rate, and although several commenters supported this appr oach, others did not. Several commenters, including the American Council for an Energy Efficient Economy, Natural Resources Defense Council, and Sierra Club, recommended that EPA use a “marginal” electricity upstream GHG emissions rate, to account for the fact that vehi cle use of grid electricity will be an additional demand that would likely be met by a different mi x of electricity feedst ocks than the national average. Given that many of the lowest- GHG electricity sources, such as nuclear and hydropower, are base sources and operated 24/7 except when for ced down for maintenance or by extraordinary conditions, marginal electricity sources are often fuel ed with coal or natural gas, with higher GHG emissions than the typical base load. Othe r commenters, including the International Council on Clean Transportation and Public Ci tizen/Safe Climate Campaign, suggested that EPA consider di fferential electricity upstream GHG emissions rates reflecting the fact that there are significant differences in how electricity is generated in different regions and states. Accordingly, an EV sold in a state where coal is the domi nant electricity feedstock would have a higher electricity upstream GHG emissions ra te than an EV sold in a state where little coal is used. EPA recognizes that these are both legitimate is sues, and that there are other relevant issues as well such as daytime vs nighttime vehicl e charging, changes in future electricity feedstocks, etc. EPA has chosen to use the 2005 national average electricity upstream GHG emissions rate discussed above in part because it is known and documentable. Values appropriate for future vehicle use may be higher or lower than this value, and EPA commits to reevaluating these complex issu es in any future rulemakings.

Finally, Honeywell Transportation Systems suggested that EPA establish a mechanism to verify the percentage of PHEV vehicle miles traveled on electricity and gasoline. The vehicle miles traveled weighting between electricity and gasoli ne will be a primary determinant of the overall GHG emissions compliance value for a PHEV. EPA agrees with Honeywell that this is an important issue as the weighting factor will be a critical element in determining PHEV GHG emissions compliance values, as discussed above. EPA is not proposing a specific approach for determining or verifying the we ighting factor at this time, but EPA does commit to monitor

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independent work in this area (for example, the work of Society of Automotive Engineers Committee J1711) and to issue a final decision on a methodology for determining this weighting factor by the fall of 2010.

5.7.4. Off-cycle Technology Credits

Organization: Ford Motor Company Honda Motor Company Mercedes-Benz (Daimler AG) Association of Intern ational Automobile Manufacturers (AIAM) Chrysler Group LLC (Chrysler) Alliance of Automobile Manufacturers (Alliance) Hyundai Motor Company Toyota Motor North America BMW of North America, LLC (BMW) Public Citizen and Safe Climate Campaign Union of Concerned Scientists Natural Resources Defense Council Sierra Club United Auto Workers State of New Jersey INRIX Chew, Yuli

Volkswagen

Comment:

Ford Motor Company

Off-Cycle Credits Ford agrees with EPA's approach to allow prov isions that would provide additional flexibility through introduction of advanced technologies that achieve real-world GHG emission reductions. Ford is willing to work with EP A and other OEMs to facilitate consumer focus groups, develop education training programs and develop simulation methods to verify other advanced technologies that demonstrate real-w orld GHG emission reductions. Ford agrees with the Alliance that this is best handled via manufacture r guidance letters, as these technologies emerge and are develope d. [OAR-2009-0472-7082.1, p. 8]

Honda Motor Company

EPA proposes optional credit opportunities for “innovative technologies that reduce vehicle CO 2 emissions but the benefits are not captured in the 2 cycle test proce dures. This proposal is welcomed by Honda, however, to assure fairne ss and transparency, Honda recommends that EPA publish information about each proposed technol ogy credit as well as a brief description of the technology and allow a sufficient time for pub lic comment. After considering the input from the public, EPA could establish a final rule afte r which the credit would become effective one

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year later. This would create a level playing field and assu re a thorough discussion of the proposed technologies and their credits. [NHTSA-2009-0059-0095.1, p.10]

Additionally, EPA proposes that the off-cycle te chnology “must not be significantly measurable over the Federal Test Procedure and the Highway Fuel Economy Test.” Honda believes this is unfortunate, since a technology that has significant off-cycle be nefits may also have some measurable benefits on the 2 cycle test (FTP and HFET). EPA should not deny such technologies that demonstrate some benefit on FTP and HFET. [NHTSA-2009-0059-0095.1, p.10]

EPA proposes that an OEM repeat the 5 cycle te sting both with and without the proposed offcycle technology. EPA’s testing proposal work s well if the technology cannot demonstrate any benefit on the FTP and HFET tests. On the other hand, if EPA agrees with Honda that it is reasonable to allow some benefit on the FTP and HF ET tests, then a different comparison test is required, to avoid double-count ing. [NHTSA-2009-0059-0095.1, p.10]

Honda proposes that only the US06, SC03 and Cold LA-4 be repeated with and without the proposed technology activated in order to accurate ly count off-cycle credits. (see Attachment 6 for examples). [NHTSA-2009-0059-0095.1, p.10] [[See NHTSA-2009-0059-0095.1, p.19 for Attachment 6]]

Mercedes-Benz (Daimler AG)

DAG also strongly supports the proposed credits for off-cycle technologies that are able to achieve substantial CO 2 reductions which, like A/C improvements, are not reflected in the federal test procedures. These credits acknowledge th at technology improvements can reduce emissions and improve fuel efficiency in ways that are not measured strictly thr ough tailpipe testing. The European Union has already begun a similar pr ogram recognizing these benefits. The current proposal will further develop and ex pand new technologies in this area.

DAG is committed to working with EPA to impl ement the proposed credit system. DAG concurs that the 5 cycle test is an appropriate starti ng point for measuring the emission reduction values of off-cycle technologies and that alternative pathways should also be available. In determining whether a particular technology is in widespread use, it will be impor tant to take into account the vehicle segment. Only in that way can EPA ensure the widespread deployment of off-cycle technologies throughout the light duty fleet.

[OAR-2009-0472-7193.2, p.18]

First, the proposed rule includes incentives for early introduction of vehi cle innovations that do not show up on the dyno test, but all of us know can have a si gnificant effect on greenhouse gas emissions. For example, air conditioning refrig erants and eco-innovation such as solar panels result in a more significant environmental benefi t than the effect it may have on the customer experience. The proposed rule encourages co mpanies like ours to adopt these innovations regardless of the corresponding va lue that our customers might assign to these innovations. [These comments were submitted as testimony at the New York public hearing. See docket number OAR-2009-0472-4621, pp. 50.]

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Association of International Au tomobile Manufacturers (AIAM)

As for the off-cycle credits, EPA should facilitate transparent and fair evaluation of both the offcycle credits for technologies and of the technolo gies themselves, so that all companies would have a fair opportunity to avail themselves of the credits. EPA should publish proposed off-cycle approaches in the Federal Register as they ar e requested by a manufacturer, allow a reasonable amount of time for comment on the proposed appro ach, and then, if the request is granted, make the credits available one year after the final decision by the Agency. These comments on the offcycle credits apply not only to the early credits but also to those that would be used in the 2012­ 2016 period. [OAR-2009-0472-7123.1, p.14]

Chrysler Group LLC (Chrysler)

The methodology for calculating off-cycle techno logy credits should not be defined for this rulemaking.

At the time of this Proposed Rule, there is no clear understanding of what off-cycle technologies currently exist or will be invent ed in the future. Setting specific test requirements to prove the value of such technologies is therefore premat ure. Regulations promulgated by this rulemaking should simply allow for the generation of off-cy cle credits without setting a specific test procedure. As manufacturers wish to generate these credits, methodolog ies could be developed through future guidance. [NHTSA-2009-0059-0124, p.28]

Off-cycle Technology Credits should not be limited to only 'new or innovative' technologies.

The restriction of off-cycle technology credits to 'new or innovative' technologies is problematic. The initial application of a ny technology by a manufacturer i nvolves some level of learning, regardless of whether the technology is comple tely new to the industry or innovative in its application. In addition, both terms w ould appear to restrict such cr edits to the initi al application of the technology within a manufacturer's fleet; once implemented other ve hicle applications and later model years may not receive cred it for the technology. [ NHTSA-2009-0059-0124, p.28]

Just as improvements to air conditioning systems will receive credit, improvements which are not otherwise captured by standa rd testing should also be gi ven credit, regardless of how commonplace a certain technology beco mes. [NHTSA-2009-0059-0124, p.28]

Off-cycle technology credits should be provi ded for the California 'Cool Car' program.

In June 2009, the California Air Resources Bo ard approved new GHG standards for California vehicles that will impose increasingly stringent limits on the total transmission of solar energy (Tts) on glass used in light-duty vehicles and light-duty trucks. Those requirements, like the CO 2 standards proposed for the National Program, will take effect in MY 2012 and become increasingly stringen t through MY 2016. Also, like the Nation al Program, the new California standards, called the 'Cool Cars' regulation, are intended to reduce GHG emissions (and thus increase fuel economy) through the use of sma ller, more efficient ai r conditioners. [NHTSA2009-0059-0124, pp.28-29]

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If California's final Cool Cars rule can not be met through compliance with the National Program, EPA and NHTSA should provide off-cycle technology credits for the efforts that manufacturers will have to undertake to meet the requirements of the Cool Cars rule. That recognition is appropriate from an environmental perspective, and will miti gate, to some extent. [NHTSA-2009-0059-0124, p.29]

Alliance of Automobile Manufacturers (Alliance)

Off-Cycle Credits

EPA has proposed allowing manufactur er the opportunity to earn off-cycle credits for new and innovative technologies that reduce CO 2 . This Alliance supports the concept of providing credits as a way to further incentivize technology develo pment in this area. However as proposed, the Alliance is concerned that th e current proposal does not o ffer manufacturers enough certainty with regards to credit application and testing in order to take advant age of these credits. Furthermore, EPA’s proposal does not offer a level playing field to all ma nufacturers in terms of possible credit availabilit y. [OAR-2009-0472-6952.1, p. 53]

Recommendation:

Rather than attempting to quantify CO 2 reductions with a prescrib ed test procedure on unknown technologies at this time, EPA should handle cred it application and testing guidelines via future guidance letters, as these technologies emerge and are developed. [OAR-2009-0472-6952.1, p. 53]

Hyundai Motor Company

We support off-cycle technology credits for technol ogies that provide a GHG benefit in the real world but that are not captured during the fuel economy test cy cles. Off-cycle technology credits will incentivize innovative GHG reduction technologies.

Hyundai is concerned that it will be difficult to de termine the real world use and/or benefits of the off-cycle credits. While EPA suggests that cr edits could be calculated using the 5-cycle fuel economy test cycle, this cycle will not dem onstrate the benefits of many innovative fuel efficiency technologies, like gr een- or eco-driving guides, pred ictive cruise control, or econavigation routing. An example of the benefits of predictive cruise cont rol is the ability to maximize fuel economy during hill climbs by reduci ng acceleration on the incline in anticipation of an oncoming decline. Preliminary studies of these technologies show a substantial fuel economy benefit, up to 12 percent, but such benefits would not be measurable on any dynamometer test cycle. Thus, in cases where the 5-cycle fuel economy test cannot provide meaningful measurement, EPA should allow a simple calculation of benefits based on good engineering judgment. We believe that off-cycle credits will be important for spurring technology and obtaining real wo rld benefits; a simplified pro cess to assess benefits will expedite implementation.

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EPA also noted that the off-cycle technol ogy credits are only available for innovative technologies that have not been widely a dopted (74 Federal Regi ster (FR) 49534). Hyundai believes that it may be appropriate to provide an off-cycle credit even once widespread adoption of an innovative technology has occurred. One exam ple is the reflective glazing which California will require on vehicles beginni ng in MY 2012. California believes that there is a GHG reduction from the application of reflective glazing materi als in motor vehicles; the glazing blocks solar heat absorption into a parked vehicle, resulting in a cooler ve hicle interior and reduced air conditioner (A/C) use. The extension of off-cycle credit s for technologies lik e reflective glazing would provide manufacturers with an incentive to adopt the technology not just in California but nationwide. The off-cycle credit should be used to encourage continued app lication of beneficial off-cycle technology, whether innova tive or not. [OAR-2009-0472-7231.1, p.4]

Toyota Motor North America

EPA proposes the opportunity to earn off cy cle credits for technologies that reduce CO 2 , but where CO 2 reduction benefits are not captured over the 2-cycle test procedure used for fleet average standard compliance (e.g. off cycle). EP A plans to approve only technologies that are innovative, or novel approaches to reducing GHG emissions. EPA proposes a two-tiered process for demonstrating the CO 2 reductions not captured by the FTP and HFET test procedures. Manufacturers could determine bene fit of the technology via the 5- cycle test methods used for fuel economy label values. Or, if existing test cycles are not adequate, EPA will advise manufacturers in developing test procedures to estimate the e ffectiveness of the technology. [OAR-2009-0472-7291, p.24]

Toyota agrees with the concept of providing credit for CO 2 reductions that can be reflected from off cycle contributions. In doing so, EPA is providing incentives to promote technology developments in this area. However, to fully take advantage of these credits, manufacturers require more certainty in determining credit a pplication and testing re quirements before making commitments to use these technol ogies. Toyota is concerned that th e lack of specificity in the current proposal could result in inconsistent ap plication of credits among manufacturers who are using the same technology. As a result, Toyota reque sts that EPA refrain fr om offering off cycle credit until the method to measure off cycle pe rformance has been fair ly established. [OAR2009-0472-7291, pp.24-25]

BMW of North America, LLC (BMW)

Off-cycle technologies can deliver a viable contribution to redu ce greenhouse gas emissions and to improve fuel economy. Therefore, BMW greatly appreciates that EPA has proposed off-cycle technologies for compliance flexibility in this ru lemaking. To bring off-cycle technologies to the market, an efficient approval process based on al ready existing or adopted procedures should be implemented. Further, BMW strongly supports EPA' s proposed approach for evaluating credits from off-cycle technolog ies. [OAR-2009-0472-7145.1, p.6]

Public Citizen and Safe Climate Campaign

5-248EPA Vehicle Program, Feasibility, and Estimated Impacts

EPA proposes to give automakers credits for certain advanced technologies that may reduce greenhouse gas emissions from motor vehicles, but for which the reductions cannot be measured by EPA’s current five-cycle emissions test. Examples of such t echnologies are active aerodynamics, adaptive cruise control and solar panels on hybrids. The EPA does not provide details on how it proposes to estimate the value of these credits or the greenhouse gas emission reductions related to any given technology. Presumab ly, the credits would vary for each specific technology and specific vehicle on which it is installed. [OAR-2009-0472-7050.1, p.6]

The agency cites creating a market incentive for these technologies as motivation for providing them. While we acknowledge that it is possible that such credits may encourage manufacturers to install these technologies, we ar e skeptical that the credits woul d be sufficient to significantly increase technology penetration. Moreover, the setting of a st rong, mandatory standard alone would provide ample incentive for manufacturers to pursue cost-effective technologies that reduce greenhouse gas emissions. In addition, manufact urers are likely to market vehicles with these technologies for reasons other than th eir environmental impact. For example, active aerodynamics can reduce road noise, something wh ich may resonate strongly with consumers. Automakers have already begun to market adaptive cruise control as a sa fety technology, not an efficiency technology. There is especially little reason to give credit s for technologies that automakers intend to instal l anyway. [OAR-2009-0472-7050.1, p.6]

EPA cites no quantitative estimate of the gree nhouse gas emission reducti ons associated with these technologies, presumably because no suffi ciently rigorous estimates are available. The agency has not developed tests to estimate the ac tual greenhouse gas emissions reductions from these technologies in a real world context. The proposal does not even suggest that EPA has contemplated how it would estimate real worl d emission reductions from these technologies. Without its own framework, the agency would th en be dependent on each automaker to provide estimates of emissions reductions from off-cycle technologies, and then th ere is no guarantee of consistency in the test procedure used to develop the [OAR-2009-0472-7050.1, p.6] estimate. If the automakers conduct the tests, then there would likewise be no pub lic participation in developing the tests. [OAR-2009-0472-7050.1, p.7]

EPA should not grant credits for off-cycle emission s, unless it also proposes test procedures for estimating the emissions reductions, comparing them to measured on-road reductions and ensuring that the industry will not be granted cr edits for technologies that amount to marketing gimmicks. Still, these credits, like those for advanced techno logy vehicles, may or may not provide an incentive for automakers to incor porate these technologies. These technologies in particular, since their impact cannot currently be measured on EPA’s emissions test, seem unlikely to be motivated by regulation, but rather by consumer demand and other market forces. EPA must not grant the automakers credits for ac tions automakers would ta ke in absence of the regulation. [OAR-2009-0472-7050.1, p.7]

Union of Concerned Scientists

UCS is supportive of credits generated by “off-cy cle” technologies, as long as the off-cycle credits being given correspond to actual greenho use gas emissions reductions yielded by the technology in a real-world environment. We s upport the notion of meas uring the credits under

5-249EPA Response to Comments

the 5-cycle test. However, the alternative option laid out in the proposed rulemaking, the caseby-case approach to assessing off-cycle credits, raises some concerns. While we wholeheartedly agree with EPA’s position that “the [alternativ e option’s] demonstration program should be robust, verifiable, and capable of demonstrating th e real-world emissi ons benefit of the technology with strong statistica l significance,” the proposal does not appear to include any opportunity for public comment on the approach take n to quantify credits pr ior to the agency’s acceptance of the approach. Given the broad number of stakeholders with experience in the issues pertaining to these technologies, we believe it would be prudent to add an additional step soliciting and heeding public comment on any “a lternative” approach to assessing off-cycle credits before any credits are grante d to manufacturers. [OAR-2009-0472-7181.1, p.11]

Natural Resources Defense Council

Off-Cycle Technology Credits Should Only Be Awarded for Real and Verifiable GHG Reductions While NRDC appreciates EPA’s efforts to eval uate GHG reduction techno logies that are not identified under current compliance tests and to encourage continued i nnovation this area, EPA should not provide credits until such technologies can be verified as providing real and enforceable GHG reductions. As GHG reductions are identified and evaluated, EPA should consider the widespread adoption of these tec hnologies when setting future standards. [OAR2009-0472-7141.1, p. 18]

For MY 2012-2016, EPA should only award off-cycle cr edits to vehicles af ter the agency has verified actual GHG reductions through certification testing. The certification process should be initiated by an automaker petitioning for off- cycle credit consideration. Upon receipt of the petition, EPA should propose a test procedure for publ ic review and only allow its use for credit generation after consideration of stakeholder comments. The magnit ude of the credits offered per vehicle should account for any degradation in the off-cycle technology over th e life of the vehicle and not base the credits solely on pe rformance during the test. Additionally, test procedures should be subjected to period review to keep up with the latest technology advancements both in the off-cycle technologies and the other vehicle characteristics as each may impact the level of GHG reductions that shou ld be attributed to the off-cycle technology. Finally, EPA should ensure that the benefits of the technology can be verified and enforced in use. [OAR-2009-0472-7141.1, pp.18-19]

Sierra Club

We support limited “off-cycle” technology credits, as long as they represent accurate, verifiable emissions reductions. It is critical that EPA establish an effectiv e certification process that is open for public comment. We note that some have proposed that technologies such as traffic alerts that could redirect drivers away from tra ffic jams and other “eco” driving technologies be eligible for CAFE credits. When determining the eligibility of technologies, EPA should be clear that only those which relate to the vehicle, and not behavior-changi ng technologies, should be eligible. Further, technologies th at receive off-cycle credits shoul d be periodically reassessed to ensure the continued accuracy of em issions reductions. [OAR-2009-0472-7278.1, p.15]

5-250EPA Vehicle Program, Feasibility, and Estimated Impacts

State of New Jersey

In addition, the Department supports the option to allow manufacturers to generate credits through 'off-cycle' technologies that have been verified by the USEPA or the CARB. [OAR2009-0472-7109.1, p.8]

Chew, Yuli

I support “off-cycle” technologies that have been accepted by SAE or CARB. CARB’s study indicated that air-c onditioning may use as much as 5.5% of the total light-duty vehicle fuel use. As such, I support giving GHG credits for innova tive measures such as Cool Car Standard proposal in CARB http://www.arb.ca.gov/rega ct/2009/coolcars09/cool cars09.htm Manufacturers can claim credits up to verifiable hot soak performance tests on the GHG emission reductions achieved. [OAR-2009-0472-7042.1, p.2]

Volkswagen

Volkswagen also supports the flexibility provided in the regulation to allow credit for real world GHG reductions that are not captured on the releva nt test cycles. We believe that these GHG reductions can be significant and can also offer significant benefit to c onsumers. We urge the EPA to maintain a viable pathway and mechanis m for evaluating these types of technologies. Volkswagen also notes that some technologies ma y offer benefits on the relevant test cycles while also offering either signifi cant or greater benefits to cust omers in real world usage. We propose that EPA accommodate this type of tech nology that may have benefit both on and offcycle. An example of this could be various forms of stop/start systems. It is possible that certain designs or strategies for stop/start systems will yield varied results over the fuel economy test cycles versus off-cycle modes. For example, Volkswagen believes some stop/start systems may yield a 1-2 percent improvement over the fuel econo my test cycles but yield an 8 percent benefit in real world driving for the customer. Volkswagen plans to discuss this type of technology in more detail with EPA staff in the future, but for the purposes of this rulema king it is important to establish that CO 2 performance credit is possible and that a fair process is in place to evaluate and grant the correct credit for a given techno logy. In addition, Volkswagen recommends that credits from CO 2 performance technology under real world dr iving conditions should be in effect over the full time period of this regulation. Vo lkswagen also notes that measurable and documented real world GHG reductions due to technology related improvements to vehicles should not be strictly related to new or innovative technical measures - it is possible that simple, known technology could yield signifi cant real world GHG reductions.

EPA Response:

Public Citizen and Safe Climate Campaign comm ented that “while we acknowledge that it is possible that such credits may encourage manufacturers to inst all these technologies, we are skeptical that the credits woul d be sufficient to significantl y increase technology penetration. Moreover, the setting of a strong, mandatory sta ndard alone would provide ample incentive for manufacturers to pursue cost-e ffective technologies that re duce greenhouse gas emissions. In addition, manufacturers are likely to market vehicles with these technologies for reasons other

5-251EPA Response to Comments

than their environmental impact. For example, active aerodynamics can reduce road noise, something which may resonate strongly with consumers. Automakers have already begun to market adaptive cruise control as a safety t echnology, not an efficiency technology. There is especially little reason to give credits for technologies that automa kers intend to install anyway.” In response, EPA disagrees that setting a str ong mandatory standard alone would provide ample incentive for technologies that reduce emissions where those em issions reductions not captured by the certification test procedur es. Indeed, there is some potential for the opposite result, since manufacturers are less likely to develop technologies which bring them no benefit in complying with the standards. Also, EPA has taken a ri gorous approach in de termining the type of technologies that are eligible for credits in orde r to provide manufacturers with an incentive to develop these new technologies. One of the prim ary criteria is that the technologies be new and not in widespread use. EPA does not believe it would be practical to also try to predict that the application of the new technology would occur at the same rate or not at all without the opportunity to generate credits. Nor does EPA believe that in determining eligibility that it should matter if candidate technologies offer additional benefits to consumers in addition to emissions reductions, only that the technol ogy is new and innovative and does not provide significant emissions reductions on the 2-cycle test.

The same commenter stated that “the proposal does not even sugge st that EPA has contemplated how it would estimate real world emission reductions from these technologies.” The final rule in fact provides that if the 5- cycle option is utilized, the manufacturer must determine CO 2 emissions both with and without the technology installed and operating. Section 86.1866-12 (d) (2) (i) goes on to detail precisely how this comparison is to be effectuated. Manufacturers using an EPA-approved alternative methodology must make the same demonstration. Section 86.1866-12 (d) (2) (ii) (B) and (C). In addition, the technology mu st be demonstrated over the vehicle’s useful life, the manu facturer must account for deteri oration, and the technology must improve CO 2 emissions beyond the driving conditions of the 2-cycle (FTP and HFET) test procedures. Section 86.1866-12 (d) (1) (ii) and (iii).

EPA is finalizing off-cycle cred it provisions for eligible inno vative technologies, defined as technologies that are relatively ne wly introduced in one or more ve hicle models, but that are not yet implemented in widespread use in the light -duty fleet. EPA will not approve credits for technologies that are not innova tive or do not provide novel a pproaches to reducing greenhouse gas emissions. Manufacturers must obtain EPA approval for new and in novative technologies at the time of vehicle certifi cation in order to earn credits for th ese technologies at the end of the model year. This approval must include th e testing methodology to be used for quantifying credits. Further, any credits for these off-cy cle technologies must be based on real-world GHG reductions not significantly captured on the current 2-cycle tests and verifi able test methods, and represent average U.S. driving conditions.

EPA is finalizing a two-tiered process for demonstrating the CO 2 reductions of an innovative and novel technology with benefits not significantly captured by the FT P and HFET test procedures. First, a manufacturer must determine whether th e benefit of the techno logy could be captured using the 5-cycle methodology currently used to determine fuel economy label values. EPA established the 5-cycle test methods pursuant to section 206 (h) of the Act to better represent real-world factors impacting fuel economy (amo ng other things), including higher speeds and

5-252EPA Vehicle Program, Feasibility, and Estimated Impacts

more aggressive driving, colder temperature operation, and the use of air conditioning. If this determination is affirmative, the manufacturer must follow the procedures described below (as codified in today’s rules). If the manufacturer finds that the tec hnology is such that the benefit is not adequately captured using the 5-cycle appr oach, then the manufacturer would have to develop a robust methodology, subject to EPA ap proval, to demonstr ate the benefit and determine the appropriate CO 2 gram per mile credit. As discussed below, EPA is also providing opportunity for public comment as part of the approval process for such non-5-cycle credits.

EPA received a few comments regarding the 5-cycle approach. Some commenters were supportive of the 5-cycle approach. Although not commenting directly on the 5-cycle testing methodology, the Alliance and some manufacturers ra ised general concerns that the proposed approach did not offer manufact urers enough certainty with regard to credit applications and testing in order to take advantage of the cred its. The Alliance further commented that the proposal did not provide a level playing field to all manufact urers in terms of possible credit availability. The Alliance recommended th at rather than attempting to quantify CO 2 reductions with a prescribed test procedure on unknow n technologies, EPA s hould handle credit applications and testing guidelines via future guidance letters, as techno logies emerge and are developed.

EPA believes that the 5-cycle te sting methodology is one clear a nd objective way to demonstrate certain off-cycle emissions contro l technologies, as discussed above . It provides certainty with regard to testing, and is availabl e for all manufacturers. As discu ssed below, there are also other options for manufactures where the 5-cycle test is not appropriate. EPA is retaining this as a primary methodology for determining off-cycle cr edits. For technologies not able to be demonstrated on the 5-cycle test, EPA is finaliz ing an approach that will include a public comment opportunity which we believe addresses commenter concerns regarding maintaining a level playing field.

EPA received several comments recommending that the approval process include an opportunity for public comment. As noted a bove, some manufacturers are con cerned that there be a level playing field in terms of all ma nufacturers having a reasonable opportunity to earn credits under an approved approach. Commente rs also want an opportunity for input in the methodology to ensure the accuracy of credit determinations for these technologi es. Commenters point out that there are a broad number of stakeholders with experience in the issues pertaining to the technologies that could add value in determini ng the most appropriate method to assess these technologies’ performance. The Alliance, Fo rd, Chrysler, and Toyota commented that the procedures should be established via future gui dance documents but did not mention needing a public opportunity for comments. EPA agrees with comments supporting a public process, and is including an opportunity for public comment as part of the approval process. If and when EPA receives an application for off-cycle cred its using an alternat ive non 5-cycle methodology, EPA will publish a notice of availa bility in the Federal Register with instructions on how to comment on draft off-cycle cred it methodology. The public inform ation available for review will focus on the methodology for determining cred its but the public review obviously is limited to non-confidential business information. The timing for final approval will depend on the comments received. EPA also believes that a pub lic review will encourag e manufacturers to be thorough in their preparation prior to submitting their application for credits to EPA for approval.

5-253EPA Response to Comments

EPA will take comments into consideration, and where appropriate, work with the manufacturer to modify their approach prior to taking final action regarding any off-cycle credits methodology. EPA will give final notice of its de termination to the general public as well as to the applicant. Off-cycle credits would be available in the model year following the final approval. Thus, it will be imperative for a manufacturer pursuing this option to begin the process as early as possible.

Ensuring Real-world Emissions Reductions

EPA received comments that credits should be real and verifiable and should take into account deterioration. The final rule requires exactly this: credits can be generated “by implementing innovative technologies that have a measurable , demonstrable, and verifiable real-world CO 2 reduction.” Section 86.1266 (d). Credits thus mu st be based on real a dditional reductions of CO 2 emissions and must be quantifiable and verifiable with a repeatable methodology. Moreover, as proposed, manu facturers must quantify CO 2 reductions associated with the use of the innovative off-cycle technologies such that the credits could be applied on a g/mile equivalent basis, as is the case with A/C system improvements. Again as proposed, the technologies upon which the credits are based woul d be subject to full useful life compliance provisions, as with other emissions controls. Unless the manufacturer can demonstrate that the technology would not be subject to in-use deterioration over the usef ul life of the vehicle, the manufacturer must account for deterioration in th e estimation of the credits in order to ensure that the credits are based on real in-use emissi ons reductions over the life of the vehicle. We believe including an opportunity for public comment s as part of the approval process also helps address commenters’ concerns regarding ensuring that credits are real and verifiable because interested parties will have an opportunity to evaluate these asp ects of the credits.

Test Procedures

EPA also received comments that the off-cycle cr edits provision highlight s the inadequacy of current test procedures, and that there is a clear need for updated certification test procedures. As discussed in preamble section III. B., EPA beli eves the current test procedures are adequate (and indeed, essential as a practical matter, a nd legally mandated for the CAFE standards) for implementing the standards finalized today. Ho wever, EPA is interested in improving test procedures in the future and believes that th e off-cycle credits program has the potential to provide useful data and insights both for the 5-cycle test proce dures and also for other test procedures that capture off-cycle emissions.

New and Innovative Criteria

Some commenters also raised concerns regardin g the possibility of givi ng off-cycle credits for technologies that manufacturers are already usin g, and would therefore have serious concerns about an approach that did not include the eligibility requirements for new and innovative technologies. EPA agrees, and is thus finalizi ng the “new and innovative” criteria as proposed. That is, the potential to earn o ff-cycle credits will be limited to those technologies that are new and innovative, are introduced in only a limite d number of vehicle models (i.e., not in widespread use), and are not signi ficantly captured on the current 2-cycle tests. This approach

5-254EPA Vehicle Program, Feasibility, and Estimated Impacts

will encourage future innovation, which may lead to the opportunity for future emissions reductions.

EPA received comments from a few manufacturers that the “new a nd innovative” criteria should be broadened. The commenters pointed out that there are technol ogies already in the marketplace that would provide em issions reductions off-cycle and that the rule should provide further incentives for th eir use. Volkswagen and Honda comme nted that some technologies that provide reductions on the 2-cycle test should be eligible for off-cycle credits. Volkswagen suggested that, for example, off-cycle credits shou ld be given for start-st op technologies. EPA’s modeling projects that start-stop technology will be widely used by manufacturers in meeting the CO 2 standards. Start-stop technology already achieves a significant CO 2 benefit on the current 2­ cycle tests, which is why many manufacturers have announced plans to adopt it across large segments of the fleet. EPA recognizes there may be additional benefits to start-stop technology beyond the 2-cycle tests (e.g., heavy idle use), an d that this is likely the case for other technologies on which manufacturers will rely to meet the MY2012-2016 standards. EPA plans to continue to assess the off-cy cle potential for these technologie s in the future. However, EPA does not believe that off-cycle credits should be granted for technologi es which we expect manufacturers to utilize widely th roughout the fleet in meeting the CO 2 standards. Such credits could lead to double counting, as there is already some CO 2 benefit over the 2- cycle tests. EPA expects that most if not all tec hnologies that significantly reduce CO 2 emission on the 2-cycle test will also reduce CO 2 emissions during the wide variety of in-use operation that is not directly captured in the 2-cycle test. This is no differe nt than what occurs from the control technology on vehicles for criteria pollutants. Thus, the catalytic converter and other emission control technology operate to reduce emissions throughout in -use driving, and not just when the vehicle is tested on the specified test procedure. The aim for this off-cycle credit provisions is to provide an incentive for technologies that achieve real-world CO 2 emission reductions but which normally would not be chosen as a GHG contro l strategy because their GHG benefits are not significantly measured on the specified 2-cycle te st. It is not designed to provide credits for technology that does provide signif icant GHG benefits on the 2-cycle test and, as expected, will also typically provide GHG benef its in other kinds of operation.

Some commenters raised the “Cool Car” initiative in California as a potential source of off-cycle technology credits. The commenters note that window glazing technology provides off-cycle emissions reductions by reducing the demand on A/C systems. EP A did not propose and is not finalizing credits specifically for this technology, as it did for A/C system credits. EPA also is not including a final determination regarding the eligibility of any particular off-cycle technologies in this rulemaking, as these are cas e-by-case determinations made according to the procedures set out in 86.1866-12 (d). Manufactur ers must apply for off-cycle credits, which includes making the case for why the technology is eligible for credits according to EPA’s criteria, and their proposed methodology for dete rmining the amount of credits, as described above.

Additional Comments on Specific Technologies

Organization: INRIX

5-255EPA Response to Comments

Herzlich Consulting, Inc. PurigeN98

Comment:

INRIX

INRIX wishes to draw the agencies’ attention to the emergence of deeply ‘connected vehicles’ and their potential impact on GHG emissions a nd fuel economy. INRIX supplies traffic and routing information to SYNC2-equipped vehi cles, Ford Motor Company’s groundbreaking invehicle information system as part of the Traffi c, Directions and Information service available on Ford MY 2010 and beyond equipped vehicles. Si nce initial launch in May 2009, tens of thousands of Ford vehicles have activated servic es that allow their vehicles to get to their destination more directly via tu rn-by-turn navigation, and more quickly and safely, by alerting drivers to and routing drivers around traffic conge stion, incidents, construction and other events that lengthen the time a specific tr ip takes. Early indications are th at a significant percentage of trips are being re-routed to avoi d trouble spots, impacting the di stance traveled and time spent traveling and idling. [ NHTSA-2009-0059-0079.1, pp.1-2]

SYNC is a strategic element of Ford’s North American automobile business with over 80% of vehicles Ford sells now equipped with SYNC. Standa rd with SYNC is three years of the Traffic, Directions and Information serv ice built-in the purchase pric e. The ground-breaking technology and business model is creating a groundswell of activity across the auto industry to respond and get new vehicles as deeply connected as SYNC . As a result, during th e time period of this rulemaking, millions of vehicles sold will be ‘connected’ with the expressed purpose of increasing trip efficiencies, directly impacti ng fuel use/efficiency and GHG emissions for specific trips. Connected vehicles are more effi cient than non-connected ve hicles and clearly fit the policy framework of reducing GHG emissions and fuel consumption per unit of economic activity. [NHTSA-2009-0059-0079.1, p.2]

As air conditioners and flex fuel vehicles are pr esently identified in the NPRM as candidates for credits, we strongly urge the EPA and NHTSA to coordinate clos ely with the USDOT’s Research and Technology Administration’s ITS Join t Program Office to research the impacts of connected vehicles on GHG emissions and MPGs a nd to establish the appr opriate CAFE and/or CO 2 credit regime at the earliest possible date. W ith our increasing pool of trip data, INRIX is ready to assist the agencies in this effort. [NHTSA-2009-0059-0079.1, p.2]

Connected vehicles are smarter, more efficien t vehicles. Public policy should promote their adoption as benefits will accrue to the broader na tion, not just the individuals making better trips. [NHTSA-2009-0059-0079.1,p.2]

Herzlich Consulting, Inc.

Please include my previous August 6, 2009 comments (below) sent to Docket Management in response to NHTSA's call for public input into TREAD ACT tire reliabilit y considerations. High purity nitrogen inflation of tires is also directly applicable to your call for tec hnologies eligible

5-256EPA Vehicle Program, Feasibility, and Estimated Impacts

for 'Off-cycle Innovative Technology Credits'. Ev en though this letter desc ribes tire reliability advantages gained by high purity nitrogen inflation, better inflati on pressure retention resulting from nitrogen's molecular structur e offers improved fuel economy (lower rolling resistance) for the billion tires travelling about 3 trillion miles per year on our roads. Tire science and peer reviewed rubber oxidation and diffu sion chemistry already establishe s that the benefits of high purity nitrogen inflation are real and offer an easy win-wi n consumer/EPA conservation technology that is 'shovel ready' to contribute to meeting EPA's off- cycle technology carbon footprint goals. [ OAR-2009-0472-4567, p. 1]

Attached is a current CV that quantifies the training and expe rience that I base my opinions on. Upon review of the NPRM, I would like to offer certain observations and recommendations relevant to additional opportunities to enha nce tire reliability and your TREAD ACT mission. Inflation maintenance is an accepted requirement for satisfactory tire reliability. It is a demonstrated scientific fact that nitrogen inflation offers longer term pressure retention than air. It is a proven reality which also offers other potential tire performance improvements related to the accepted chemical principles describing the ox idative weakening of the tire’s structure. The reduced heat and strain generation associated with proper inflation will in itself slow the degradation chemistry. However the improved pressure retention offered by nitrogen will offer additional value if the purity of nitrogen in th e tire reduces the oxygen co ntent to less than 5%. This is a scientifically proven in papers by Baldwin of Ford. The Michelin high oxygen durability test (which I support) demonstrates the oxidative weakening effect even with a superior undamaged innerliner under short term test conditions. Tokita (Uniroyal) and Waddell (ExxonMobil) are just a few of the studies pr oving the advantage fo r high purity nitrogen inflation. Industry compounders (tire chemists) co mpetently recognize this effect and address it with complex, difficult and costly antioxidant system s. However, it is realized that these systems are subject to fugacity as well as other longe r term potency reductions. Until recently, nitrogen enrichment equipment reliability and a lack of infrastructure was a legitimate reason for the passive approach the industry took toward a more strongly worded high pu rity nitrogen inflation recommendation. A nitrogen inflation infrastruc ture is now commercially in place. The marketing segment (dealers) of the industry and State regulators are alre ady moving forward (ie: CA and PA). More knowledgeable new car dealer s are making it part of the prep process. I would estimate many tens of millions of tire miles are already benefitting from this simple tire enhancement technology. Higher pre ssure tires (lower rolling resi stance) and smaller air chamber designs will magnify and make the advantages of high purity nitrogen pr essure retention even more valuable to the objectives of the TREAD ACT as well as the environment. NHTSA and the industry should now update it’s current passive, non-objecting position and take a more proactive role recognizing high purity nitroge n as the inflation method of c hoice for best tire performance. Despite improvements in innerliner permeability technology, the value of high purity nitrogen inflation will continue to be of important valu e when addressing real world causes of oxidative intra-carcass pressurization that results when the innerliner func tion is compromised by impacts, mounting bead damage, punctures, improper repa irs and structural de ficiencies. [OAR-2009­ 0472-4567, pp. 1-2]

Conclusions: Reliable high purity nitrogen enri chment technology is now commercially and economically available. The service infrastructu re is rapidly developing or already in place,

5-257EPA Response to Comments

making past technical and market relate d objections no longer valid. [OAR-2009-0472-4567, p. 2]

PurigeN98

1. Reference

Federal Register / Vol. 74, No. 186 / Monday, September 28, 2009 / Proposed Rules Docket ID No. EPA-HQ-OAR-2009-0472 and/or NHTSA –2009–0059 Off-cycle technology credits, on page 49534 of the Federal Register / Vol. 74, No. 186 / Monday, September 28, 2009. [OAR2009-0472-7201, p.1]

Off-Cycle Innovative Technology Credits - EPA is proposing a credit oppor tunity intended to apply to new and innovative techno logies that reduce vehicle CO 2 emissions, but for which the CO 2 reduction benefits are not captured over the 2-cycle test procedure used to determine compliance with the fleet averag e standards (i.e., “off-cycle”). E ligible innovative technologies would be those that are relativel y newly introduced in one or more vehicle models, but that are not yet implemented in widespread use in the light -duty fleet. Further, any credits for these offcycle technologies must be based on real-world greenhouse gas emission reductions not captured on the current 2-cycle tests and verifiable test methods, and represent average U.S. driving conditions. [OAR-2009-0472-7201, p.1]

2. Suggested program

“Inflation of vehicle tires with Nitrogen at automotive manufact uring plants and at automotive service providers” [OAR-2009-0472-7201, p.1]

a. Why should EPA consider this as part of the Off-Cycle Innovative Technology Credits program?

Vehicle tire under-inflation is a rampant problem in our countr y. While it has sometimes been dismissed as a minor issue, it had become a ca mpaign issue when Candidate Barack Obama had stated that if all Americans inflated their tires properly ........, they could save as much oil as new offshore drilling would produce. Time magazine had acknowledged it is as “the cheapest, cleanest, quickest and easiest way to ease our addiction to oil, re duce our pain at the pump and address global warming. [OAR-2009-0472-7201, p.2]

Benefits of inflating tires with nitrogen are not apparent in the current CAFÉ standard test methods because use over time and consumer behavior are not fully accounted for. In short term tests, tires perform very similarly when filled w ith either clean dry air or pure nitrogen. However, benefits of pure nitrogen become noticeable over time as tires filled with nitrogen retain pressure for longer time, combined with the stark reality that consumers “DO NOT” check tire pressure properly and do not top off tires re gularly. Filling tires with nitr ogen will significantly reduce the impact and severity of tire under- inflation and reduce vehicle fuel consumption, increase tire life and reduce CO 2 emissions. [OAR-2009-0472-7201, p.2]

5-258EPA Vehicle Program, Feasibility, and Estimated Impacts

b. What is the problem that Nitrogen tire inflation program addresses?

i. Filling tires with nitrogen will partially addr ess the rampant tire under-inflation problem in our country as is well documented by the following information.

1. The U.S. DOE estimated that under-inflated tire s wasted a total of 1.2 billion gallons of fuel used in cars and LTs in 2005.

2. 'A motorist survey this year by the RMA found that 85% of American drivers do not properly check tire inflation pressure. This is an alarming statistic since tires are the only part of a vehicle in contact with the road and a critical vehicl e safety component,' said James MacMaster, chairman of the RMA Board of Directors.

3. EPA’s Emission Facts (EPA420-F-00-013) in dicates that a 1% decrease in CO 2 emissions for every 1% decrease in fuel consumption. Using em ission data provided in the EPA fact sheet, the 1.2 billion gallons of wasted fuel transl ates to 12 million tons/yr of extra CO 2 emissions resulting from under-inflated tires.

4. The National Highway Traffic Safety Admini stration (NHTSA) estimat es that under-inflated tires are a factor in 660 fataliti es and 33,000 crash injuries each year. Additional research shows that 27 percent of passenger cars on U.S. roadways are driven with one or more substantially under-inflated tire, according to a NHTSA survey. [OAR-2009-0472-7201, p.2]

5. 'Drivers across the U.S. can battle rising gas prices by simply maintaining proper tire inflation,' said Takao Oishi, Yokohama’s CEO and president. 'Current sta tistics indicate that 82 million vehicles have under-inflated tires, whic h means more rubber is hitting the road and, accordingly, miles-per-gallon is le ssened. In fact, tire experts specula te that 2.8 billion gallons of gas is wasted by U.S. drivers each year simply because they're driving on under-inflated tires.'

6. The National Highway Traffic Safety Administrati on estimates that proper tire inflation could help save about 49-79 lives and prevent 6,585 to 10,635 injuries per year. (Source: National Highway Traffic Safety Administration Study on Under-Inflated Tires, August 2001).

7. The Rubber Manufacturer's Association estimate s that 250,000 car crashes a year result from improperly inflated tires. [OAR-2009-0472- 7201, p.3] [[See Docket Number OAR-2009-0472­ 7201, pp.3-7 for a detailed discussion on the followi ng topics; What are the benefits of Nitrogen tire inflation, what are the potential costs, is there a cost benefit analysis to show the total benefits and costs of NTI on a national basis, ar e there technical studies conducted to prove NTI is superior, where is NTI used correctly, what are the future tr ends in tire manufacturing and what will be the impact of nitrogen.]]

EPA Response:

EPA appreciates the comments and understands that the technologies described by these commenters have the potential to result in emi ssions reductions under cert ain circumstances as well as other benefits for consumers. EPA is not establishing a specific credit for these

5-259EPA Response to Comments

technologies in this rulemaking, as it is for A/C systems. A specific credit for “connected vehicles” or nitrogen tire infl ation was not considered in the proposal. For off-cycle credits, it will be the responsibility of the ma nufacturers to apply for credits, if they so choose, and to show why the technology is eligible under the new and innovative technology criteria. Also, manufacturers not using the 5-cy cle test procedure, as woul d likely be the case for the technology described by the commenters, must quantify emissions reductions, as discussed above. EPA is not making eligibility determinati ons on specific technologi es as part of this rulemaking. However, we note that if the techno logy is in widespread use it may be difficult for the manufacturer to make the case that it is a new and innovative technology. With regard to nitrogen tire inflation, EPA belie ves manufacturers in determini ng credits would also need to address concerns regarding the fact that tires do not last the life of the vehicle and there would be some need to refill tires. There is no guarant ee that consumers would use nitrogen during these tire-refilling events.

Diesel Fuel Upstream Emissions

Organization: U.S. Coalition for Advanced Diesel Cars

Comment:

For more than 20 years, EPA has been concerned w ith 'off-cycle' emissions that occur in the realworld but are not measured on the FTP or HF ET drive cycles that control vehicle design, technology selection and calibrati on. In its 2006 label rulemaking, EP A made this point clear:

'EPA had become concerned that the FTP omitte d many critical driving modes and conditions that existed in actual use, and that emissions could be substan tially higher during these driving modes compared to the FTP. Manufacturers freque ntly designed their ve hicles' emission control systems to meet the specified FTP test conditions, often neglecting emissions control over other driving conditions, resulting in higher real-world emi ssions.' [OAR-2009-0472-7496, p.12]

Congress called for action under sections 206(h) a nd 202(j) of the Clean Air Act Amendments of 1990, leading EPA to develop new 'supplemental' test procedures that were designed to reflect the real-world driving conditions where fuel is consumed and emissions are created. By 2006, these supplemental test procedures became pa rt of the 5-cycle methodology used by EPA to reflect real-world city, highway and combined fuel economy for light du ty vehicles. As above, however, the basis for fleet average performa nce under CAFE and the proposed GHG rules has not been updated. [OAR-2009-0472-7496, p.12]

In the current joint NPRM, EPA and NHTSA c ontinue to state the importance of linking automotive technology development, production a nd implementation to reality-based accounting procedures designed to assure maximum real-w orld reductions in fuel consumption and GHG emissions. In addition to the 'zero g/mile' treat ment for electricity that EPA states may be appropriate on an interim basis but not long-term, there are se veral other off-cycle credit mechanisms proposed:

5-260EPA Vehicle Program, Feasibility, and Estimated Impacts

-Credits for more energy efficient mobile ai r conditioners (MAC). Because the MAC is not turned on during the FTP or HFET tests, these MA C, efficiency credits would be available to manufacturers only if they can be demonstrated to measurably reduce GHG emissions in realworld, off-cycle conditions. -Credits for MAC systems designed to reduce the probability of refrigerant leaks. In the event of a leak, chemical refrigeran ts contribute GHGs to the atmospheric inventory. -Credits for advanced, low global warming potentia l (GWP) MAC refrigerants that minimize the GHG inventory impact even in the event of a real-world leak. -Flex Fuel Vehicle (FFV) credits for vehicle wh ich, for example, can ope rate on either E85 or E10 gasoline in the future. Through 2016 and be yond, EPA will recognize th e holistic, well-towheel performance of the renewable fuel c ontent by zeroing out the GHG emissions produced. under EPA vehicle test procedures th at are attributable to the bio co mponent of that fuel. In other words, the up-stream, 'well-to-tank' GHG benefits of the renewable component are counted as an offset to the 'tank-to-wheels' GHG emissions EPA measures in its laboratory vehicle certification calculations. -Other off-cycle credits for technologies such as solar roof panels, ac tive cruise control and active aerodynamics. These credits are proposed to be exclusively available for 'new and novel' technologies but only after robus t demonstration of off cycle, real-world GHG reductions not captured on the 2-cycle te sts. [OAR-2009-0472-7496, pp.12-13]

The Coalition applauds EPA and NHTSA for champi oning reality-based solutions to our national petroleum end GHG reduction objectives. In each of the credit mechanisms described above, the agencies demonstrate the impor tance of controlling off-cycle emissions through a holistic approach that is not chained excl usively to a pair of 40-year old test procedures. Each of these reality based compliance features demonstrates r ecognition of a simple truth: the success of the proposed regulations will be based on the dail y reductions in petroleum barrels and well-towheel GHG tons, not on a 'fleet average' compliance certificate for the regulated parties. And to achieve those daily reductions, vehicles employing technologies mu st appeal to U.S. consumers and must sell in high annual volumes. [OAR-2009-0472-7496, p.13]

The universe of possible fuels for light duty vehicl es contains relatively few that have a higher energy density than gasoline. Diesel is one of t hose fuels. A gallon of diesel has 11 percent more energy than a gallon gasoline (and a gallon of B 10 has 12 percent more energy than a gallon of E10). Because of this energy density, the transpor tation and distribution of diesel fuel to users around the country produces less GHG per usable unit of energy . Additionally, the refining of diesel fuel requires less ener gy and produces fewer GHG emissions compared to a gasoline baseline. Taken together, these reduced off-cycle emissions contribute additional benefits to society when high density diesel is substituted for lower density gasoline. Unlike its treatment of FFVs and other credit mechanisms proposed, howeve r, EPA is not proposing to count these real diesel GHG offsets. According to recent EPA research, the up-s tream GHG emissions associated with refining, transporting, distributing and storing transportation fuels. [OAR-2009-0472-7496, p.13]

For every gallon of diesel fuel substituted for a gallon of gasoline, an off cycle benefit of 280 GHG grams occurs. Returning to the pickup tr uck example shown on page 12, in which a 24 mpg diesel engine is sold in place of the standard 18 mpg engi ne, the 3,700 lifetime gallons of

5-261EPA Response to Comments

fuel saved would also generate an off-cycl e GHG benefit of 1 metric ton. Over 221,199 lifetime miles traveled, this is the equiva lent of an off cycle credit of 4 .7 grams per mile. This value is on the order of the maximum MAC efficiency cr edit of 5.7 g/mile that EPA proposes under its off-cycle credit mechanism. [OAR-2009-0472-7496, pp.13-14]

Clearly, the off cycle benefits of diesel fuel should be co mprehended in EPA's historic GHG rulemaking process as these benefi ts are already documented in th e agency's technical research. Since EPA proposes off-cycle credit mechanisms to incentivize such solu tions as roof-top solar panels, surely the Administrator recognizes a pa rallel disincentive exists for proven technologies that are deliberately excluded from the off-cycle credit mechanism. We urge EPA to adopt rules that comprehend the holistic, full-cycle GHG perf ormance recognizing that vehicles and fuels work as a system in our national efforts to reduce the CO 2 inventory and petroleum consumption. [OAR-2009-0472-7496, p.14]

EPA Response:

The commenter is recommending br oadening the off-cycle credits concept, which is focused on the off-cycle benefits of new and innovative vehi cle technologies, to include potential upstream emissions reductions associated with fuels. Th e commenter notes that diesel fuel has higher energy density than gasoline and comments “[b]ecau se of this energy density, the transportation and distribution of diesel fuel to users around th e country produces less GHG per usable unit of energy. Additionally, the refining of diesel fuel requires le ss energy and produces fewer GHG emissions compared to a gasoli ne baseline. Taken together, th ese reduced off-cycle emissions contribute additional benefits to society when high density diesel is substituted for lower density gasoline.” Including these types of potentia l upstream benefits is beyond the scope of the proposal, as EPA did not propose or seek comments on such a concept. EPA focused its offcycle credits proposal on vehicle improvements a nd does not believe it is appropriate to include life-cycle fuels emissions in determining off-cy cle credits. Please s ee Section 5.7.3, Incentives for Advanced Technology Vehicles, for a di scussion of how EPA is addressing upstream emissions of electric vehicles and why EPA is not applying an upstream emissions approach to other fuel types. Please also see Section 3.4 regarding additiona l comments concerning upstream emissions attributable to fuels.

Additional Comments

Organization: United Auto Workers

Comment:

We are also supportive of EPA’s proposal to provide compliance flexibility through a multiplier for electric-drive technologies and for so-c alled off-cycle technology credits. We believe strongly that these proposals will provide a desirable incentive to bring into production advanced fuel-saving technologies that have the potential to radically re duce the greenhouse gas emissions from motor vehicles. Although we recognize that th is will cause a slight near-term reduction in the total amount of greenhouse gas emissions a voided, it will hasten the day when these technologies can be produced in large volumes. This will ultimately result in greater emissions

5-262EPA Vehicle Program, Feasibility, and Estimated Impacts

reductions in the medium and long term because of the cost reductions expected with increased volumes of these advanced t echnologies. [OAR-2009-0472-7056.1, p.3]

EPA Response:

EPA appreciates the supportive comments. EPA be lieves the comments regard ing a slight nearterm reduction in the total greenhouse gas emissi ons avoided was in reference to proposed advanced technology vehicle cred its. Comments on this topic are addressed in Section 5.7.3. EPA is taking several steps, discussed above, to ensure that off-cycle credits are based on actual emissions reductions and therefore EPA does not believe off-cycle credits will result in a loss of emissions benefits.

5.7.5. Early Credit Options

5.7.5.1. Credits Based on Early CO 2 Reductions

Organization: Ford Motor Company Association of Intern ational Automobile Manufacturers (AIAM) Chrysler Group LLC (Chrysler) Alliance of Automobile Manufacturers (Alliance) Volkswagen Group of America (Volkswagen) Toyota Motor North America Public Citizen and Safe Climate Campaign Union of Concerned Scientists Natural Resources Defense Council Sierra Club California Air Resources Board National Automobile Dealers Association (NADA) State of New Jersey New York State Department of Environmental Conservation Mass Comment Campaign (2,332) (unknown organization) South Coast Air Quality Management District Environment Michigan Chew, Yuli Seal, Kathy

Comment:

Ford Motor Company

Early Credit Flexibility and Pathways

The agencies' proposal to provide for the use of early credits in the 2009 -2011 model years is a reasonable approach. The early credit pathways provide flexibility and lead-time in order to bridge the stair-step increase in stringency between the 2011 MY CAFE standards and the

5-263EPA Response to Comments

aggressive GHG reduction target s in the 2012-2016 timeframe. Th e EPA proposal recognizes the GHG reduction technology being incorporated into the current fleet and rewards manufacturers for over-complying with the standards. The GHG reduction technology being implemented on the current fleet provides the nation with the ab ility to track real GHG reductions immediately. [OAR-2009-0472-7082.1, p. 5]

Association of International Au tomobile Manufacturers (AIAM)

AIAM supports EPA’s proposed “four pathways” a pproach for earning early “fleet average” credits as well as the early air conditioning, adva nced technology, and off-c ycle credits. All of the proposed credits are designed to appropriately reward manufact urers that achieve levels of efficiency that exceed expected levels.

EPA invited comment on whether the proposed earl y credits provide a “w indfall” and whether the credits reward “real world” emission reduc tions. EPA does not explain what is meant by “windfall” credits. In our vi ew, the CAFE program and the California greenhouse gas program provide a general benchmark fo r appropriate levels of vehi cle efficiency for the 2009-2011 period. Early credits would reward companies that exceed this be nchmark. In order to qualify for credits under EPA’s proposal, manufacturers would have to offer vehicles th at achieve efficiency levels that exceed typical current levels. Any resulting credits would truly be earned, not a windfall, and would result in real world fuel savings and lower greenhouse gas emissions. [OAR2009-0472-7123.1, pp. 13-14]

In the public hearings on the pr oposed standards, several partie s expressed concerns regarding the appropriateness of th e early credits that were proposed by EPA, arguing that the credits are too “generous.” In our view, the proposed early cr edits are essential to assure the feasibility of the proposed standards. Manufacturers’ needs for su ch credits should be evaluated in the context of the historic nature of the proposed standards (in terms of the dramatic changes the standards will necessitate in vehicle design) and the ec onomic environment in which manufacturers are being called upon to implement these changes. The ear ly credits provide an essential safety valve for the transition to the aggressive new standards program. [OAR-2009-0472-7123.1, p.14]

Early fleet average credits under pathways 1, 2, and 3 are based on credits and debits earned in the California program. These provisions are nece ssary to counter CARB’s proposal to require manufacturers with net debits in California at the end of the 2011 model year to use and retire federal credits to make up for the California debits . To the extent that California will require that debits be carried over from the California to the federal program, it is only fair that credits be carried over as well. AIAM has oppos ed California’s claim to author ity to cancel Federal credits. We urge NHTSA and EPA to s upport our concerns on that poin t. California has no direct regulatory authority over the Federal program, a nd AIAM therefore does not believe that CARB has the power to require a forfeiture of Federa l credits. Moreover, in the 2012 model year and thereafter, a manufacturer will have the option under the California program of continuing to comply separately with the California program or transitioning fully to the federal program, in which case compliance with the federal program will be “deemed” to be compliance with the California program. Should a manufacturer transiti on to the federal program, the intent of the commitment letters signe d by the parties to the national sta ndards agreement is that it will no

5-264EPA Vehicle Program, Feasibility, and Estimated Impacts

longer have any compliance obligations with rega rd to California after that date. We urge NHTSA and EPA to address our concer ns on this point. [OAR-2009-0472-7123.1, p.14]

Chrysler Group LLC (Chrysler)

Chrysler recommends that all of the proposed early fleet av erage greenhouse gas reduction 'pathways' be included in the final rule.

EPA notes that certain proposed pathways 'coul d be eliminated to simplify the program'. However, Chrysler disagrees that elimination of a potential early cr edit option would not diminish its overall flexibility. Given that EPA proposes to allow manufacturers to select the early fleet average pathway taken at the end of the 2011 model year, but proposes to disallow using multiple pathways for the 2009-2011 early credit program, it makes sense to provide the maximum number of options for evaluating potential credit scenarios. [NHTSA-2009-0059­ 0124, p.29]

For early fleet average greenhouse gas reducti on credits based on California regulations (Pathways 1 and 2), the 2.0 g/mile adjustment to the California greenhouse gas standards is not appropriate if the measurement metric is carbon-related exhaust emissions.

EPA proposes four 'pathways' through which early fleet average greenhouse gas reductions can receive credit in the 200 9-2011 model years. Two of these pathways (Pathway 1 and Pathway 2) are based on California greenhouse gas regulation standards. EPA proposes to set the baseline standards for these pathways by lowering the California standards by 2.0 g/mile. This adjustment is based on the premise that N 2 O and CH 4 'are included in the Califor nia GHG standards, but not included in the credits program .' [NHTSA-2009-0059-0124, pp.29-30]

Although it is true that N 2 O is not included in the carbon-re lated emission ('CREE') metric proposed by EPA, CREE does include CH 4 (as part of the total hydrocarbon ('THC' term) plus the addition of CO. It seems as though the 2 g/mi adjustment was made based on a belief that the metric, which would be compared to the standard, only would include the CO 2 term. Chrysler emission test data suggests that the THC a nd CO components of the CREE metric will add approximately 0.8 (on a small car) to 3.0 (on a larg e truck) g/mi combined city/highway. These values equate to a 1.7 g/mi contribution ba sed on a 60/40 car/truck fleet mix. [NHTSA-2009­ 0059-0124, p.30]

Chrysler recommends that no adjustment to the California standards be made for evaluating the early fleet average greenhouse gas reduction by Pathwa ys 1 and 2 if CREE is used as the metric. [NHTSA-2009-0059-0124, p.30]

Chrysler supports EPA's inclusi on of air conditioning credits in the assessment of California and Clean Air Act Section 177 state fleet averages, and the availability of air conditioning credits outside of these states.

EPA's proposed methodology ensures that air conditioning credits are not double counted in states where a greenhouse gas regulation program is in affect for the 2009 through 2011 model

5-265EPA Response to Comments

years while recognizing the surplu s nature of greenhouse gas reductions which occur outside of these states. [NHTSA-2009-0059-0124, p.30]

Alliance of Automobile Manufacturers (Alliance)

The Alliance applauds the efforts of the EPA NPRM to provide as much flexibility as possible and we support the EPA’s efforts to provide au tomakers with legitim ate opportunities to bank early fleet average credit based on real greenhouse gas (GHG) reductions from products designed to meet current regula tions. This proposed fleet average credit provides much needed flexibility to the regulations a nd provides manufacturers with addi tional lead time to implement some of the technologies that are needed in th e later years of the pr oposal. Nonetheless, the proposed regulation is stringent: it would not allow banked early flee t average credit to last into the later years, nor would it pr ovide easy windfall credit that w ould slow the implementation of new technology. Even with this flexibility, all au tomakers will be challenged to meet this proposed regulation. [OAR-2009-0472-6952.1, p.7]

The Alliance supports EPA’s proposal in the NPRM to allow early fleet average CO 2 credit. 74 Fed. Reg. 49,536. The Alliance also supports EPA’s pr oposal to provide flexibility by allowing automakers to use four different pathways to earn early fleet average credit. The EPA correctly observes that a wide range of auto makers are currently selling vehi cles in the U.S. market with different fleet mixes and sales volumes. The f our pathways proposed provide reasonable options to such a diverse group of manuf acturers. Also, the proposed early fleet average credit offers real-world CO 2 reductions, rewarding automakers for pr oviding fleet performance that exceeds the California and Federal st andards. [OAR-2009-0472-6952.1, p.7]

The credit and the pathways proposed by the EPA would not result in a “windfall.” Regarding the credit proposed under the California programs (Pathways 1, 2 and 3), since EPA has granted the waiver request for California’s GHG regulat ions, credits earned under these regulations are appropriate. California’s GHG regul ations have been approved by the state of California since 2004, and at least some automake rs, anticipating possible waiver approval, prepared for the implementation of the California GHG regulations beginning as early as MY 2009. In addition, CARB appears to have anticipated that lead time was necessary to implement GHG reduction technologies and concluded that, considering needed lead time, the MY 2009 – 2011 standards are appropriately stringent. CARB anticipated the banking of credit during the early years of the California GHG regulations in anticipation of th e stringent requirements in later model years. [OAR-2009-0472-6952.1, pp.7-8]

It is this new technology that a llows manufacturers to earn the cr edit. Therefore, the credit does not provide a “windfall” that will prevent the implementation of new technologies, but rather it encourages and rewards such actions. [OAR-2009-0472-6952.1, p.8]

The EPA would also protect from excessive use of early credit with the fi ve year carry forward restriction on such credit. This means the any cr edit earned in MY 2009, cons idered the best year for opportunity for auto manufacturers to earn cr edit, is not useful past MY 2013. This proposed additional safeguard would appropria tely restrict the trading of ear ly fleet average credit. [OAR2009-0472-6952.1, p.8]

5-266EPA Vehicle Program, Feasibility, and Estimated Impacts

The early fleet average credit pathways are also appropriate to balance the traditional credit allowed under the NHTSA fuel economy regula tions. The EPA GHG regulation and the NHTSA CAFE program should mirror each other as much as possible and the early credit fleet average program is an important component of that harmonization. [OAR-2009-0472-6952.1, p.8]

Volkswagen Group of America (Volkswagen)

Regarding the credit flexibilities in the NPRM relative to the EPA GHG proposed regulation, Volkswagen supports the credit flexibilities out lined by the EPA. In particular, Volkswagen supports the early fleet credit progr am that provides manufacturers with the ability to outperform the existing NHTSA and California GHG regulati on in the 2009 through 2011 timeframe to earn credit during these years. This provides auto ma nufacturers with the flexibility needed to plan their product strategy and the introduction of GHG reduction tec hnologies over the course of this regulation. Volkswagen supports the EPA proposal to provide four different early fleet credit pathways, as the EPA correctly recognizes that the auto companies have very diverse sales volumes and fleet mixes and that various pathways are necessary to provide flexibility to all automakers. [OAR-2009-0472-7210.1, pp.2-3]

In addition, providing early fleet credit flexibility is consiste nt with the type of carry forward/carry back provision allowed under th e current NHTSA CAFE system. Manufacturers are currently allowed to bank a nd use CAFE credit and will fully implement this ability in the 2009 through 2011 period in anticipation of the new NHTSA regulation beginning on 2012 model year. In an effort to harmonize the EPA GHG and the NHTSA CAFE programs for 2012 - 2016 as much as possible, it is entirely appropria te for the EPA to utilize early fleet credits during the 2009 - 2011 time period. This will allow manufacturers to utilize a similar fleet approach to both regulations. We do not believe early fleet credit results in windfall credit, as manufacturers have planned and prepared fo r compliance in the 2009 -2011 time period and deserve credit if they can exceed the applicable standards fo r that time window. [OAR-2009­ 0472-7210.1, p.3]

Toyota Motor North America

Toyota supports EPA's proposal to provide cr edits for achieving early GHG emission reductions by over complying with the existing NHTSA CAFE standards or GHG standards adopted by the State of California (and subsequently adopt ed by numerous other states) during 2009 through 2011 model years. To the extent that over co mpliance with these pr ograms - and thus the emission benefits - are real, th e overall objectives of EPA's pr ogram can be achieved while providing manufacturers with needed flexibility to deploy technology in a manner consistent with product cycles, market uncertainties, and othe r factors. Further, EPA has routinely provided early credit opportunities when adop ting its regulations, including s ituations in wh ich California regulations have preceded EPA' s regulations, as is the case w ith the subject proposal. [OAR2009-0472-7291, p.19]

Public Citizen and Safe Climate Campaign

5-267EPA Response to Comments

EPA proposes four opportunities for automakers to bank early windfall greenhouse gas emission credits for model years 2009-2011: (1) averagin g credits, (2) air c onditioning credits, (3) advanced technology vehicle credits, and (4) off-cy cle credits. The averag ing credits are divided into four pathways from which EPA proposes manufacturers may choose a pathway for earning early credits. Manufacturers must choose one pathway only, but they can wait until 2011 to choose it. [OAR-2009-0472-7050.1, p.4]

The four pathways for averaging credits are ba sed on over-compliance for fleets of vehicles either (1) nationwide, (2) in California and th e other states which have adopted California’s standards under Section 177 of the CAA (“177 states”), (3) st ates outside California and the 177 states, or (4) to forego all Ca lifornia-based credits and earn CA FE credits in states outside California and the 177 states. Pathways 1 and 2 allow manufacturers to earn credits for overcompliance with the California standards either nationwide or in California and the 177 states. Pathways 3 and 4 would allow manufacturers to apply credits for over-compliance with CAFE standards in states outside Calif ornia and the 177 states. Early cred its would be permitted to be traded and transferred without limitation. The only limitations on early cr edits are automakers would have to clear any deficit for model year s 2009-2011 before it could apply credits to model year 2012 and beyond, and credits would be subject to the five-year carry- forward limit. [OAR2009-0472-7050.1, p.4]

We object to granting any credits for exceeding standards in California and the 177 states in 2009-2011. Manufacturers exceeding these requirement s need not be rewarded in the National Program, which does not take effect until 2012. We recommend that if EPA grants any early action credits that it [OAR -2009-0472-7050.1, p.4] use a hybrid of Pathways 2 and 3, where manufacturers would earn credit s for exceeding compliance with the California baseline, but only for the fleet of vehicles sold outside California and the 177 states. [OAR-2009-0472-7050.1, p.5]

No CAFE-based credits should be granted fo r model years before 2011. The EISA clearly prohibits the trading and transfer of credits earned in thes e model years, and we believe this could function as a backdoor means by which au tomakers could trade credits that would otherwise be nontransferable. If CAFE-based cred its are granted for any of the alternatives, we urge that EPA bar these credits from transfer or trading. [OAR-2009-0472-7050.1, p.5]

Union of Concerned Scientists

EPA proposes an opportunity for manufacturers to accrue “early credits” in model years 2009­ 2011 by over-compliance with a baseline sta ndard. According to EPA, [OAR-2009-0472-7181.1, p.10]

The baseline standard would be set to be equi valent, on a national level, to the California standards. Potentially, credits could be generated by over-compliance with this baseline in one of two ways – over-compliance by the fleet of vehicl es sold in California and the CAA section 177 states (i.e., those states adopti ng the California program), or ove r-compliance with the fleet of vehicles sold in the 50 states. EPA is also pr oposing early credits base d on over-compliance with

5-268EPA Vehicle Program, Feasibility, and Estimated Impacts

CAFE, but only for vehicles sold in states outside of California and the CAA section 177 states. [OAR-2009-0472-7181.1, p.10]

UCS is concerned that the approach as stated wi ll erode the rule’s energy and emissions benefits because the credits offered will not reflect real, surplus emissions. In order to ensure that the credits accrued are based on actual emissions reducti ons, it is essential that the baseline for each model year not be defined as e quivalent to the California standa rds, but rather as the more stringent of CAFE or the California standa rd. Because model years 2009 and 2010 will see California standards less stringen t than CAFE standards, the rule as proposed would supply manufacturers with credits simply for complying w ith the law. Further, it also appears that based on the proposed rule, manufacturers may be able to acquire credits simply by shuffling cleaner vehicles into California or CAA Section 177 states. While we are generally supportive of flexibility mechanisms, we recommend that the ag ency modify its proposal to close these early credit loopholes. [OAR-2009-0472-7181.1, p.10]

[Following comments are from LA Testimony, OAR-2009-0472-7283, pp.103-113]

Third, early credits for overcompliance must refl ect real surplus emissi ons. EPA proposes an opportunity for manufacturers to accrue ea rly credits in model years 2009 through 2011 by overcompliance with a given baseline standard.

However, since CAFE is actually more stri ngent than California standards in 2009 and 2010, automakers merely minimally complying w ith federal fuel economy standards can accumulate credits, extra credits, for emission standards.

To ensure that the credits accrued are based on actu al surplus, surplus emissions reductions, it is essential that the baseline for each model year no t be defined as merely equivalent to California standards for those early years but , rather, as the more stringent -- in any given year, the more stringent of CAFE or the Calif ornia standard for that year.

Further, it also appears that, based on the proposed rule, manufactur ers may be able to acquire credits simply by shuffling cleaner vehicles into California or ot her Section 177 states.

Natural Resources Defense Council

Early Credits Should Only Be Awarded for Real and Surplus Emissions Reductions, Eliminating Windfalls that Undermine Pollu tion and Oil Savings Benefits NRDC concurs with EPA’s overall objective to ensu re that early credit programs result in “realworld” emission reductions that are “actual” and “surplus.” Un fortunately, it is clear that Pathways 1 and 2 do not meet the intent of th e Agency. The reason is that in model year 2009 (and likely model year 2010) the CAFE standard s result in a lower emission rate than the California program’s GHG standards. As s hown in the Table 1 below [See OAR-2009-0472­ 7141.1, p. 12 for Table 1], the design of Pathways 1 and 2 allow automakers to accrue credits simply by complying with the CAFE program. [OAR-2009-0472-7141.1, p. 12]

5-269EPA Response to Comments

To eliminate this “windfall” credit opportunity, NRDC recommends that the national baseline for MY 2009 (and possibly MY 2010) be set at the GHG level which results from complying with the applicable national standards, which for that year are the CAFE standards. EPA proposes to prohibit the trading of early cr edits from MY 2009 between firms, to exclude FFV credits from the early credit program and to allow early credit s to remain eligible for carry-forward for no more than five years. These limitations mitigate the problem, but they do not fully eliminate windfall credit generatio n. [OAR-2009-0472-7141.1, p. 13]

[[NRDC also submitted these comments as test imony at the Detroit public hearing, See docket number EPA-HQ-OAR-2009-0472-6185, pp. 23-24.]]

Sierra Club

We object to proposed early action credits. These credits for vehicles sold between model years 2009-2011 will be awarded to vehicles that were designed prior to the proposed standards. If early credits are to be allowed, automakers should be required to declare which pathway they will use before accruing credits, not at the end of 2011. Further, early credits should be based on the most stringent standard that applies. In seve ral years, California’s Pavley standards are lower than federal CAFE standards, thereby giving automakers the opportunity to receive windfall credits simply by opting to comply with a weaker standard. [OAR-2009-0472-7278.1, p.15]

[[Sierra Club also submitted these comments as testimony at the Detroit public hearing, See docket number OAR-2009-0472-6185, pp. 29-30]

California Air Resources Board

CARB does not support the proposed provisions for early credits pr ior to implementation of the national GHG program unless such credits are accr ued by exceeding California’s requirements in California and those states that have adopted California’s program. Of the four pathways proposed, Pathway 2 more closely matches this criterion. Nonetheless, should EPA chose to retain all four pathways in the final rule, we strongly support incorporating in the final rule the provisions proposed by EPA to pr ohibit trading between manufactur ers of credits earned in model year 2009, require the use of credits earned in 2009 to offset debits accrued in 2010-2011, and prohibit trading between ma nufacturers of credits earned in model year 2009. These are reasonable proposals designed to assure that cred its earned in the earl y years do not provide a windfall for vehicle manufacturer s and that the emission reducti ons envisioned for the national GHG program are realize d. [OAR-2009-0472-7189.1, p.3]

[CARB also submitted these comments as test imony at the Los Angeles public hearing. See docket number OAR-2009-0472-7283, pp. 21-27]

National Automobile De alers Association (NADA)

EPA should mirror the CAFE program’s time-honored early fleet average credits as they are essential to compliance with th e National Program’s ambitious targets. As proposed, the early fleet average credit scheme is too complex. es pecially given that CARB’s 2004 standards need

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not be considered and, in any event, in no way trump the MY 2009-2011 CAFE standards. [OAR-2009-0472-7182.1, p.7]

State of New Jersey

The Department supports the USEPA's real-world reductions approach for alternative fuel vehicles, as well as its efforts to prevent unrealist ic excess credits from tr ucks, risking a delay of the introduction of advanced vehicle technologi es across the industry from the 2012 and later USEPA greenhouse gas emission standards. However, we suggest that in addition the Agencies limit the fraction of credits from trucks and onl y allow trading of credits among same vehicle categories. These additional precautions will ensure that the credits from trucks cannot be used to normalize the debits from passenger cars, or dimini sh the value of the credits from trucks that can be carry-forward.

The Department supports the prohibition of tr ading proposed model year 2009 generated early credits between firms under the proposed Pathwa ys 1, 2 or 3 due to the anomalous nature of model year 2009. If trading were allowed for th e 2009 model year, there is a potential for the generation and trading of a large amount of credits which are in fact not excess.

The Department seeks clarification from th e USEPA on how the proposed credit Pathways would interface with California's and the section 177 states' (including New Jersey's) enforcement of the California greenhouse gas standards during the 2009 to 2011 model years.

Finally, the Department prefers li miting the Early Fleet Average CO 2 credits to Path 1 (California-based Credits for National Fleet) an d Path 2 (California-based Credits sold in California plus CAA 177 States) and opposes the addition of Path ways 3 and 4. Pathways 3 and 4 could result in the generation of CAFE credits which are in fact not excess credits. [OAR2009-0472-7109.1, p.8]

New York State Department of Environmental Conservation

EPA proposes to allow early credits to be ge nerated for the 2009-2011 model years, and notes that some manufacturers will likely generate large numbers of 2009 model year credits. To minimize the potential 'windfall' for manufacturers, we suggest that the 5 model year lifespan of these early credits should start immediately, even though there will be no deficits to offset until at least the 2012 model year. T hus 2009 model year credits woul d expire at the end of the 2014 model year. [OAR-2009-0472-7454, p.2]

Mass Comment Campaign (2,332) (unknown organization)

Likewise, manufacturers must not be permitted to rack up windfall credits for exceeding the standard in advance of the 2011 mo del year. For passenger cars the existing standard has been in effect since 1985, and for light trucks, it has been only nominally increased in the past 20 years. Any credits earned for early compliance must not be available for trading among manufacturers. [OAR-2009-0472-5747, p.1]

5-271EPA Response to Comments

South Coast Air Quality Management District

First, early credits under the fe deral program for 2012 to 2016 vehicles may be used in such a way as to possibly reduce the stringency of the ARB program. This would be a negative unintended consequence which s hould be avoided wherever possible.

EPA should consider establishing a cap on the number of early credits to en sure that California's greenhouse gas standards are not undermined. At a minimum, the South Coast MD staff recommend that there be a full public accounting of these early compliance earned and traded credits to ensure the greatest tr ansparency in public disclosure.

Such disclosure may itself serve as a constraint on excessive credit re liance given the possible negative publicity associated with compliance via imported credit use.

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

[[These comments were submitted as testimony at the Detroit public hearing. See docket number OAR-2009-0472-6185, p. 68.]]

Environment Michigan

Specifically, we're concerned that the proposed sta ndards allow automakers to rack up credits for new vehicles sold from 2009-2011 that exceed exis ting standards. These ar e vehicles that had been planned years before thes e new standards were announced. Au tomakers should not be given windfall credits for cars that were already in the pipeline.

Chew, Yuli

I support this EPA’s position in preventing unreal excess credits from trucks and prohibiting the trading of model year 2009 generated early credits between firms, risking a delay of additional technology across the industry from 2012 and later EPA CO 2 standards. I would like to suggest that trading be limited to credit s among same vehicle categories, not using credits from trucks to equalize the debits from the cars. [OAR-2009-0472-7042.1, p.4]

For the four fleet average-based CO 2 early credit pathways EPA is proposing, I would welcome just limit the Early Fleet Average CO 2 credits to Path 1(California-based Credits for National Fleet) & Path 2 (California-based Credits sold in California plus CAA 177 States). CAFE-based credits shouldn’t be added to these Greenhouse Gas credits. The credits from trucks should be limited for use to equalize the debits from trucks only. [OAR-2009-0472-7042.1, p.4]

Seal, Kathy

Second of all, please minimize the credits th at automakers are allowed to receive for vehicles that were sold before new standards take effect in 2012. Please don't give them these windfall credits that have been talked about.

5-272EPA Vehicle Program, Feasibility, and Estimated Impacts

EPA Response:

EPA received comments from manuf acturers in support of the propos ed early credits program as a necessary compliance flexibility. The Allianc e commented that the early credits reward manufacturers for providing fleet performance that exceeds California and Federal standards and do not result in a windfall since manufacturers have added new t echnology in anticipation of the grant of California’s waiver request and in reliance on the credit generating and banking provisions available under the Ca lifornia program. AIAM commented that early credits are essential to assure the feasibilit y of the proposed standards and the need for such credits must be evaluated in the context of the dramatic change s the standards will necessitate in vehicle design and the current economic environment in whic h manufacturers are called upon to make the changes. Manufacturers also supported retaining all four of the proposed pathways, commenting that eliminating pathways would dimini sh the flexibility of the program.

EPA also received comments from many environm ental organizations and states that the program would provide manufactur ers with windfall credits because manufacturers will not have to take any steps to earn cred its beyond those that are alrea dy planned and in some cases implemented. These commenters were particularly concerned that the Ca lifornia truck standards in MY 2009 are not as stringent as MY 2009 CA FE, so overcompliance with the California standards will automatically re sult in a windfall in MY 2009, and possibly even MY2010 (the truck standard in California is less stringent than that of CAFE in MY2010, but the California passenger car standard is more st ringent than that of CAFE). These commenters supported an early credits program based on ove rcompliance with the more stri ngent of either the CAFE or California standards in any gi ven year. CARB commented: “should EPA choose to retain all four pathways in the final rule, we strongly supp ort incorporating in the final rule the provisions proposed by EPA to prohibit trading between ma nufacturers of credits ea rned in model year 2009, require the use of credits earned in 2009 to offset debits accrued in 2010-2011, and prohibit trading between manuf acturers of credits earned in model year 2009. These are reasonable proposals designed to assure that cred its earned in the earl y years do not provide a windfall for vehicle manufacturer s and that the emission reducti ons envisioned for the national GHG program are realized.”

EPA is retaining the early credits program because EPA judges that they are not windfall credits, and (as documented in the comments above) manufact urers in some cases have reasonably relied on the availability of these cr edits, and have based early mode l year compliance strategies on their availability so that the credits are needed to provide adequate lead time for the initial years of the program. See, e.g. Commen ts of the Alliance. The same reasoning holds for authorizing early credits for exceeding CAFE standards in non-California states. However, as discussed below, EPA is restricting cred it trading for MY2009 credits ea rned under the California-based pathways. Also, under the California-based Pa thways 1 and 2, EPA is requiring manufacturers to cover any deficits incurred against the baseline levels es tablished by EPA during the three year period 2009-2011 before credits can be carried forward into the 2012 model year. For example, a deficit in 2011 would have to be su btracted from the sum of credits earned in 2009 and 2010 before any credits could be applied to 2012 (or later) model year fleets. EPA is including this provision to help ensure that th e early credits generated under this program are consistent with the credits available under the Ca lifornia program during these model years. In

5-273EPA Response to Comments

its comments, CARB supported these restrictions as a way to prevent credits from being unearned windfalls, and EPA ag rees with this comment.

Credit Restrictions

EPA received comments that the proposed appr oach under the California-based pathways will provide windfall credits to manufacturers because the MY2009 California light truck standards are less stringent than the corresponding CAFE standards, so that credits are necessarily generated for merely complying with the MY 2009 CAFE standard, which manufacturers will likely do in any case.. Although thes e credits could be considered wi ndfalls if looked at for this one isolated model year, they are not when the program is viewed in proper perspective. Credits are not based solely on performance in MY 2009. They are based on performance over a three model year period, MYs 2009-2011. As noted in th e proposal, EPA expects that the requirement to over comply over the entire th ree model years should mean that the credits that are generated are real and are in excess of wh at would have otherwise occurr ed. However, because of the circumstances involving the 2009 model year, in pa rticular for companies with significant truck sales, there is some concern that under Path ways 1, 2, and 3, there is a potential for a large number of credits generated in 2009 against the Californi a standard, in particular for a number of companies who have significantly over-achieved on CAFE in recent model years. Some commenters were very concerned about this i ssue and commented in su pport of restricting intercompany trading of MY2009 credits under the California-base d pathways as a means of properly cabining generation and u tilization of these credits. EPA requested comments on this approach and is finalizing this credit trading restri ction based on continue d concerns regarding the issue of windfall credits for MY 2009 under th e California-based prog ram. EPA wants to avoid a situation where, contrary to expectation, some part of the early credits generated by a manufacturer are in fact not excess, where companies could trade such credits to other manufacturers, risking a delay in the addition of new technolo gy across the industry from the 2012 and later EPA CO 2 standards. Therefore, manufactur ers selecting Pathways 1, 2, or 3 will not be allowed to trade any MY 2009 credits that they may generate. See section 86.1867-12 (a) (1) (vi), (a) (2) (ii), and (a) (2) (vii).

UCS commented that it appears that based on the proposed rule, manufacturers may be able to acquire credits simply by shuffling cleaner vehicles into California or CAA Section 177 states. In response, EPA does not believe there will be a strong incentive for manufacturers to shuffle cleaner vehicles into California and 177 states du e to the early credits program. EPA is adopting credit trading restrictions for MY 2009 Californi a-based credits and requi ring manufacturers to use the same pathway over the thre e-year period and make up defi cits during any of those three years, as discussed above. These provisions wo uld deter manufacturers from using this strategy in MY2009 when the California stan dard is less stringent than CAFE. Manufacturers have the option of earning early credits for its cleaner vehicles both inside and outside of California and 177 states, so there would not be much incentive to shuffle cleaner vehicles. Also, significantly shuffling vehicles would present challenges for the manufacturer that would likely outweigh any possible marginal benefit.

5-274EPA Vehicle Program, Feasibility, and Estimated Impacts

EPA received a variety of additional comment regard ing early credit restrictions. Public Citizen and Safe Climate Campaign commented “No CAFE-b ased credits should be granted for model years before 2011. The EISA clearly prohibits the tr ading and transfer of credits earned in these model years, and we believe this could functi on as a backdoor means by which automakers could trade credits that would otherwise be nontransferable. If CAFE -based credits are granted for any of the alternatives, we urge that EPA bar these credits from transf er or trading.” The State of New Jersey and others co mmented that EPA should restrict the transfer of early credits between vehicle classes, and were especially concerned about truck credits being used for passenger cars. SCAQMD commented that EPA should consider es tablishing a cap on the number of early credits to ensure that California's greenhouse gas standards are not undermined. In response, EPA is not finalizing restrictio ns on transferring or trading cr edits beyond the restrictions discussed above for MY2009 credits under the Ca lifornia-based pathways. EPA understands that EISA does not allow credit transfers or trading until MY2011. However, EPA does not believe that the early credits are windfall cr edits because they are based on manufacturers achieving emissions reductions beyond those re quired. Therefore, EPA does not believe additional credit restrictions limiting how manufacturers use th e credits are appropriate in implementing the independent authority of sectio n 202 (a)(1). EPA does not believe the program will result in a “backdoor” way for manufacturers to transfer or trade credits in a manner forbidden under EISA since the EISA restrictions remain in place for CAFE. Also, because EPA does not believe that the early credits are wi ndfall credits, EPA is not placing a cap on the amount of early credits a manufact urer may generate. The early cr edits are an important part of the flexibility provided to manuf acturers to transition to the ne w standards and hence a proper means of providing needed lead time to meet the new standards.

New York State Department of Environmental C onservation commented th at the 5-year credit life should start in the year th e credits are generated. For ex ample, 2009 model year credits would expire at the end of the 2014 model year. The Alliance also commented on this topic, noting that EPA would protect from excessive use of early credit with the proposed five year carry forward restriction on ear ly credit. (Note that the Alliance commented that MY2009 credits would not be useful after MY2013. Howeve r, credits may be carried forward for five years after the model year in which they are ea rned and therefore MY2009 credits would be able to be used in MY2014, after which they would expire.) The reco mmendation is consistent with EPA’s proposed program and EPA is adopting this a pproach for the credit life of early credits in the final rule. (See §86.1867-12(a).) Additional comments regard ing credit carry-forward are addressed in Section 5.3.

Early Credit Pathways

The Alliance, AIAM, and several manufacturers commented in support of retaining the four Early Credits Pathways in order for manufacturers to retain the flexibility provides by the four different pathway choices.

Public Citizen and Safe Climate Campaign comm ented “We object to granting any credits for exceeding standards in California and the 177 states in 2009-2011. Manufacturers exceeding these requirements need not be rewarded in th e National Program, which does not take effect until 2012. We recommend that if EPA grants any ear ly action credits that it use a hybrid of

5-275EPA Response to Comments

Pathways 2 and 3, where manufacturers would ea rn credits for exceeding compliance with the California baseline, but only for the fleet of vehicles sold outside California and the 177 states.” In response, the rationale for the comment is unclear. EPA doe s not agree that California-based credits should only be allowed outside of Calif ornia and the section177 states. Manufacturers that achieve emissions reductions beyond those required by the Californi a standards should be eligible for credits in California and the sect ion 177 states. EPA is requiring manufacturers to offset any credit deficits in any of the MYs 2009-2011 in order to carry California-based credits forward into the 2012 and later model years. Also, these credits will not be double-counted with California credits since California is not implem enting their standards fo r 2012 and later model
years.

CARB commented that it does no t support the proposed provisions for early credits prior to implementation of the national GHG program unl ess such credits are accrued by exceeding California’s requirements in Calif ornia and those states that ha ve adopted California’s program. Of the four pathways proposed, Pathway 2 more closely matches this criterion, in their view. The State of New Jersey and othe rs provided similar comments. In response, EPA is retaining all of the proposed credit pathways, including early credits based on the CAFE standards for vehicles sold outside of the California and the se ction 177 states. EPA is restricting the trading of MY 2009 credits earned under the Calif ornia-based pathways and also requiring manufacturers to offset all deficits accrued ag ainst the California-based program baseline for MYs 2009-2011. CARB commented in support of these provisions as a way to address windfall credits issues.

Sierra Club commented that if ear ly credits are to be allowed, automakers should be required to declare which pathway they will use before accr uing credits, not at the end of MY 2011. The reasoning for the comment is unclear and EPA does not believe that this type of early election is necessary. EPA notes that it is requiring manufacturers to use th e same pathway for the entirety of the early credits program, and therefore ma nufacturers cannot switc h back-and-forth among options from year-to-year in order to maximize credits. Proper accounting of early credits is required at the end of the early credits program , and EPA must approve the early credits report documenting that accounting.. S ee section 86.1867-12 (e), (a).

NADA commented that the early credits proposa l was too complex and that EPA should allow credits based on CAFE standards na tionwide. In response, the pr oposed approach of four credit pathways was supported by manufacturers and EPA does not believe the provisions will be too complex. EPA is not providing an option for CAFE-based credits nationwide because the California program is in effect for MYs 2009-2011 and EPA believes it is appropriate to base early credits on achieving GHG emissions redu ctions beyond those required by California and the section 177 states.

Transparency

EPA received comments that there be a full publ ic accounting of early compliance earned and traded credits to ensure the grea test transparency in public disclo sure. EPA plans to make this type of information available to the public. Please see Section 5.10.1 for EPA’s full response to comments regarding data transparency and availa bility. See also sec tion 86-1867-12 (e) setting

5-276EPA Vehicle Program, Feasibility, and Estimated Impacts

forth the reporting requirements for early cred it reporting. Such reports, among other things, must document both the manufact urer’s elected pathway but pr ovide detailed documentation of credit calculation for each aver aging set (i.e. vehicle type) for which credits are claimed to be generated.

Baseline for California-based Pathways

In establishing the baselines for California-base d credits pathways, EPA proposed to adjust the California standards by 2.0 g/mile to account for the exclusion of N 2 O and CH 4 , which are included in the California GHG standards, but no t included in the federal GHG credits program. Chrysler commented that “Although it is true th at N20 is not included in the carbon-related emission ('CREE') metric proposed by EPA, CREE does include CH 4 (as part of the total hydrocarbon ('THC' term) plus the addition of CO . It seems as though the 2 g/mi adjustment was made based on a belief that the metric, which w ould be compared to the standard, only would include the CO 2 term. Chrysler emission test data sugge sts that the THC a nd CO components of the CREE metric will add approximately 0.8 (on a small car) to 3.0 (on a large truck) g/mi combined city/highway. These values equate to a 1.7 g/mi contribution based on a 60/40 car/truck fleet mix.” Chrysler recommended that no adjustment to the California standards be made for evaluating the early fleet average greenhouse gas reduction by Pathways 1 and 2 if CREE is used as the metric.

In response, the commenter is corr ect, and therefore the final leve ls shown in the table below are 2.0 g/mile higher than proposed. EPA is adopting the CREE metric which already accounts for CH 4 , and EPA agrees that the THC and CO co mponents of CREE offset the 2.0 g/mile EPA proposed to add to the California standards.

California Equivalent Baselines CO 2 Emissions Levels for Early Credit Generation

Model Year Passenger Cars and Light Trucks with an LVW of 0­ 3,750 lbs Light Trucks with a LVW of 3,751 or more and a GVWR of up to 8,500 lbs plus Medium-duty Passenger Vehicles 2009 323 439 2010 301 420

California Program Debits

AIAM commented “AIAM has opposed California’s cl aim to authority to cancel Federal credits. We urge NHTSA and EPA to s upport our concerns on that poin t. California has no direct regulatory authority over the Federal program, a nd AIAM therefore does not believe that CARB has the power to require a forfeiture of Federa l credits. Moreover, in the 2012 model year and thereafter, a manufacturer will have the option under the California program of continuing to comply separately with the California program or transitioning fully to the federal program, in which case compliance with the federal program will be “deemed” to be compliance with the California program. Should a manufacturer transiti on to the federal program, the intent of the commitment letters signe d by the parties to the national sta ndards agreement is that it will no longer have any compliance obligations with rega rd to California after that date. We urge NHTSA and EPA to address our concerns on this point.”

5-277EPA Response to Comments

In response, the EPA and CARB programs will ope rate independently of one another. If a manufacturer has a deficit in California and has the option under the California program of offsetting that deficit with EPA surplus credit s, the manufacturer w ould have the option of notifying EPA to remove a number of credits as determined by the manufacturer from their EPA credits bank. EPA would then confirm that the credits have been removed. This would be the extent of EPA's involvement. There are no requi rements in EPA's regulations to compel and manufacturer to use their EPA credits to offset a deficit in California. However, EPA does not believe it should prevent a manufact urer from opting to use their su rplus EPA credits in this way, if that is a provision of the California program.

Enforcement

The State of New Jersey commented that “The Department seeks clarification from the USEPA on how the proposed credit Pathways would in terface with California' s and the section 177 states' (including New Jersey's) enforcement of the California greenhous e gas standards during the 2009 to 2011 model years.” EPA is adopting ear ly credits provisions that, although based on the standards adopted by Californi a, are completely independent of the California program from an implementation standpoint. In other words, EPA has established the baseline against which credits will be earned based on the California sta ndards. However, EPA will implement its early credits program independently acco rding to EPA final regulations.

Organization: Hyundai Motor Company Kia Motors

Comment:

Hyundai Motor Company

Hyundai supports that EPA will allow manufact urers to obtain credits for MY 2009 through 2011 based on over-compliance w ith applicable California GHG and/or NHTSA CAFE regulations.

Moreover, we believe that th e calculation of early credits for over-compliance with the GHG standards should reflect the standards to which each manufacturer was actually subject during MY 2009 through 2011. For instance, companies that were exempt from California regulations should not be subject to the Calif ornia baseline standard when calculating early credits from California and Clean Air Act Sect ion 177 states. More specificall y, we request that EPA add an additional early credit option ba sed on over-compliance with CAFE standards in 50-states for manufacturers that were classified as IVM under the Calif ornia regulations. On principle, manufacturers should receive credits for exceeding applicable requirements. [OAR-2009-0472­ 7231.1, p.4]

Kia Motors

5-278EPA Vehicle Program, Feasibility, and Estimated Impacts

[These comments were submitted as testimony at the Los Angeles public hearing. See docket number EPA-HQ-OAR-2009-0472-7283, p.172]

However, we do believe that early credit ge neration should be based on the standards to which each manufacturer was subj ect under the Californi a regulations. An additional early credit option based on overcompliance with CAFE sta ndards in 50 states should be considered.

EPA Response:

EPA understands that some manufacturers are no t subject to the California standards in MYs 2009-2011. This does not mean that it is appropria te for such manufacturers to earn credits against some other baseline. EPA continues to believe that the California baseline remains the most appropriate to use as a measure for genera ting early credits. Most obviously, it is the only GHG standard available for comparison, and also, as discussed in section III.D.1 of the preamble to the final rule, a good starting measure for evalua ting technical feas ibility of light duty vehicle GHG control capability. There are no other standards that meet th ese criteria. Indeed, earning credits against standards less rigorous than Calif ornia’s would raise legitimate concerns about windfall credits since credits could be earned for non-optimized performance. Thus, EPA is retaining the four early credits pathways as proposed and is not adding a fifth pathway for 50­ state CAFE-based credits. A manuf acturer not being subject to the California standards of course does not prevent it from earning early credit s using the California-based pathways. Such manufacturers may still earn early credits under the California-based pathways if they are able to demonstrate emissions reductions per the require ments of the early credits program – i.e. overcomplying with the levels es tablished by those standards.

5.7.5.2. Other Early Credits

Organization: Alliance of Automobile Manufacturers (Alliance) Hyundai Motor Company

Comment:

Alliance of Automobile Manufacturers (Alliance)

The EPA’s proposed implementation of the early fleet average credit is also appropriate. Regarding early A/C credit, the Alliance agrees w ith the proposal to measure early A/C credit per the procedures outlined in Section III.C.5.b. Applying any additional early credit such as FFV credit and applying vehicle defi nitions per the existing Californi a regulations is practical for the proposed California pathways and also ensure s that there are not wi ndfall credits. [OAR2009-0472-6952.1, p.8]

Hyundai Motor Company

We also support EPA's early credits for air conditioner system improvements, advanced technology and off-cycle technolog y. We believe these credits pr ovide program flexibility and optimize cost effectiveness, as well as re warding early adopters. [OAR-2009-0472-7231.1, p.4]

5-279EPA Response to Comments

EPA Response:

EPA is promulgating early credits options for A/C credits as proposed . With regard to FFVs, as proposed, EPA is also allowing manufacturers to include alternative comp liance credits earned per the California alternative compliance program . These alternative compliance credits are based on the demonstrated use of alternative fuels in flex fuel vehicles. As with the California program, the credits are available beginning in MY 2010. Therefore, these early alternative compliance credits are available under EPA’ s program for the 2010 and 2011 model years. FFVs are otherwise included in the early credit fleet average based on their emissions on the conventional fuel. EPA will also use the Califor nia vehicle definitions for the California-based pathways as proposed.

EPA is finalizing early incentives for advanced technology vehicles with the changes described in Section 5.7.3. Manufacturers may use the 0 g/ mile value for vehicles sold in MY2009-2011 consistent with the approach being finalized for MY 2012-2016. Any vehicles sold prior to MY 2012 under these provisions must be counted ag ainst the cumulative sales cap of 200,000 (or 300,000, if applicable) vehicles.

5.8 Feasibility of the CO 2 Standards

5.8.1. EPA Reference Vehicle Fleet for Evaluating Further CO2 Reductions

Organization: Environmental Defense Fund

Comment:

[Following comments are from LA Testimony, OAR-2009-0472-7283, pp.72-79]

Fleet mix assumptions. The reductions to be re alized by these proposed standards are highly dependent on assumptions about fleet composition in model years 2012 through 2016. We urge federal policy makers to find smart ways to ensu re the assumptions about fleet mix reflect the fleet composition in the real world.

EPA Response:

The commenter is correct that pred ictions of future fleet compositi on are of critical importance in establishing the standards, a nd EPA's projections are based on the best information and methodology of which it is aware. As set out in de tail in section II.B of the preamble to the final rule, and chapter one of the joint TSD, EPA (a nd NHTSA) based the projection of total car and total light truck sales for MYs 2011-2016 on projections made by the Department of Energy’s Energy Information Administration (EIA). EI A publishes a mid-term projection of national energy use called the Annual Ener gy Outlook (AEO), specifically the AEO 2010 Early Release. To further account for changes between car and truck designs, EPA purchased (and shared with NHTSA) forecasts from two well-known industry analysts, CSM Worldwide (CSM), and J.D. Powers. Determining which traditionally-defined tr ucks will be defined as cars for purposes of this final rule using the revised defin ition established by NHTSA for MYs 2011 and beyond

5-280EPA Vehicle Program, Feasibility, and Estimated Impacts

requires more detailed information about each vehicl e model. This is described in greater detail in Chapter 1 of the joint TSD. The forecasts obtained from CSM provided estimates of car and truck sales by segment and by manufacturer, but not by manufacturer for each market segment. Therefore, NHTSA and EPA needed other inform ation on which to base these more detailed projected market splits. For this task, the agen cies used as a starting point each manufacturer’s sales by market segment from model year 2008, whic h is the baseline fleet. Because of the larger number of segments in the truck mark et, the agencies used slightly different methodologies for cars and trucks, as described in s ection II.B.3 of the preamble to the final rule and chapter 1 of the joint TSD.

EPA notes further that the use of publically available information to project reference fleets is a far more transparent process than used in prev ious fuel economy rulemakings, and allows the public to fully participate and evaluate the ag encies' projections. Most commenter’s agreed.

5.8.2. Effectiveness and Costs of CO2-reducing Technologies

Organization: Environmental Defense Fund

Comment:

III. THE PROPOSED STANDARDS CAN BE ACHIEVED THROUGH COST EFFECTIVE, AVAILABLE TECHNOLOGIES THAT WILL PRESERVE CONSUMER CHOICE AND SAVE CONSUMERS MONEY.

Light-duty vehicle manufacturers can achieve the proposed standa rds through a variety of cost effective and readily-available technologies. EPA's staff produced a report for the National Research Council identifying over two dozen t echnologies in production or impending that can be deployed to cut greenhouse gases and improve fuel economy. These include, among others, technological innovations in e ngine manufacture lik e engine friction re duction and cylinder deactivation, transmission advances, hybrid driv e train utilization, mitigation of air conditioning emissions, aerodynamic improvements, and low-rolling resistance tires. Indi vidually, each one of these technologies can reduce CO 2 emissions by as much as 15 percent from a baseline vehicle’s emissions. EPA’s staff concluded that the synergistic impacts of including multiple GHG reduction technologies in a single vehicle are often less than the sum total of each technology’s individual impact. [OAR-2009-0472-7285.1, pp. 17-18]

The attached table [See OAR-2009-0472-7285.1, p. 18- 22 for the Summary Table] summarizes some of these available technologies. Sour ce: EPA Staff Technical Report: Cost and Effectiveness Estimates of Technologies Used to Reduce Light-duty Vehicle Carbon Dioxide Emissions, EPA420-R-08-008, March 2008 “EPA technical staff concludes there are a large number of technologies which can be applied to cars and trucks that are capable of achieving significant reductions in greenhouse gas emissi ons, and improve vehicle fuel economy, at reasonable costs.” ES -1. [OAR-2009-0472-7285.1, p. 18]

5-281EPA Response to Comments

Incremental costs are negligible for many technologies like low- friction lubricants and still modest for more comprehensive technologies like hybrid drive trains. Furthermore, EPA predicts many technology cost will benefit from the learning curve phenomenon, a decrease in unit cost as cumulative production increases. On averag e, EPA and NHTSA esti mate that these new technologies will increase the cost of model y ear 2016 vehicle by less than 1,100 dollars but, as a result of fuel savings, the average consumer w ill save 3,000 dollars over th e life of the vehicle. Moreover, consumers who finance their new-car purchase with a loan will save $12– $14 per month throughout the duration of the loan. These statistics underscore EPA technical staffs’ conclusion that “there a large number of technol ogies which can be applied to cars and trucks that are capable of achieving significant reduc tions in greenhouse gas emissions, and improve vehicle fuel economy, at reasonable costs.” [OAR-2009-0472-7285.1, pp. 22-23]

Manufacturers can also incorporate new, light-weight materials into vehicle design as a means of producing more fuel-efficient, safe vehicles. The proposed rule also contains compliance flexibilities like fleet averaging and other meas ures to provide cost savings, broad consumer choice and flexibility in meeting compliance obligations. As examined below, compliance flexibilities must be rigorous and well-designed to achieve lig ht-duty emissions requirements. [OAR-2009-0472-7285.1, p. 23]

V. THE TIME TESTED HISTORY OF THE NATION’S CLEAN AIR LAWS SHOWS THAT EPA CAN DRAMATICALLY AND COST-EFF ECTIVELY REDUCE EMISSIONS FROM MOTOR VEHICLES TO PROTECT HUMAN HEALTH AND THE ENVIRONMENT. The EPA has a long history of successfully securing protective, cost-effective emission reductions from the nation’s passenger vehicles, often c onfronted with claims from the regulated community that the mandated reductions were imp racticable. As documented in the table below [See OAR-2009-0472-7285.1, p. 26 for the table.], EPA achieved substantial nationwide reductions in lead, carbon monoxide , and nitrogen oxides while vehi cle miles traveled has risen substantially. [OAR -2009-0472-7285.1, p. 25]

Some will invariably make similar claims th at reductions in heat-trapping greenhouse gas emissions are beyond the nation’s reach. But the time tested history of Clean Air Act regulation and American innovation suggests that thes e claims are likewise misplaced. [OAR-2009-0472­ 7285.1, p. 25]

EPA Response:

EPA appreciates these comments, which generally affirm our estimates made in support of the NPRM. EPA has continued to evaluate both th e cost and effectivene ss of the technologies available to reduce GHG emissions and has updated several of these estimates. The reader is referred to Chapter 3 of the Joint TSD for these updated estimates.

5.8.3. Technology "Packages" and their Cost and Effectiveness

Organization: Shaw, Donald F.

Comment:

5-282EPA Vehicle Program, Feasibility, and Estimated Impacts

The auto industry does not presently have the technology to achieve these fuel standards with vehicles that meet the needs of the American public. Why punish the citizens with such requirements before the technology is ready especially consideri ng the small claimed benefits. Let’s give the techno logy more time to develop. Large families will need to drive two cars to get to participate in family ac tivities including vaca tions. Where is the benefit? [OAR-2009-0472­ 7270.1, p. 1]

EPA Response:

The technologies which NHTSA and EPA project ar e available for manufactur ers to apply in the MY 2012-16 timeframe are described in detail in Chapter 3 of the Joint TSD. Essentially every technology included in our projec tions of technical feasibili ty are already being used commercially somewhere in the world on light-duty vehicles. As explained in section III.D of the preamble to the final rule, the expanded use of these technologies is primarily a function of lead time needed to develop vehicle designs whic h incorporate these technologies. It is also a function of manufacturers’ abil ity to modify or build product ion facilities to produce the components required by these technol ogies and the cost of doing so.

EPA and NHTSA have developed their projections of the cost and effectiveness of these technologies so that vehicle utility is not affected. This means that the agencies accounted for the costs of preserving vehicle ut ility in their cost estimates. In addition, the baseline vehicle fleet which EPA and NHTSA use to project complia nce consists of 2008 model year vehicles. This fleet reflects the wide variet y of vehicles currently preferred by U.S. car purchasers. This includes vehicles with sufficient passenger capacity for large families. NHTSA and EPA presume that these vehicles will continue to be preferred by many purchasers in the future. In fact, both the GHG and fuel economy standard s account for the inherently higher fuel consumption of larger vehicles by basing the standards on vehicle size (‘footprint’, the product of vehicles’ track width and wheel base). Therefore, EPA disa grees with Mr. Shaw that the proposed and final GHG and fuel economy standards are not feasible for a wide range of vehicle types and will limit the types of vehicles which will be produced by manufacturers and made available to customers

5.8.4. Manufacturer's Application of Technology

Organization: American Petroleum Institute

Comment:

Fuel Specification Changes: The proposed rule and Draft Technical Support Document outline several options available to automakers in ac hieving fuel economy improvements. One of the options is Gasoline Direct In jection (GDI) with lean burn technology. EPA and NHTSA state that sulfur specification below 15 parts per million (ppm) is a key technical requirement to enable lean burn GDI. The Alliance of Automo bile Manufacturers is currently advocating a maximum allowable sulfur concentration of 10 parts per million to enable Lean Burn GDI. However, EPA and NHTSA analyses did not co nsider lean burn GDI technology for the 2012­ 2016 timeframe of this rulemaking because of the cost and short compliance timeframe.

5-283EPA Response to Comments

Likewise, EPA should ensure that fuel specifica tion changes should not be considered in this rulemaking without adequate consideration for th e associated impacts on the refining industry. Since lean burn GDI technology is not necessary or even expected to be developed in order to comply with this rulemaking, a sulfur sp ecification change is unnecessary. [OAR-2009-0472­ 7143.1, p.10]

EPA Response:

Consistent with the proposal, EPA is not cons idering the use of lean -burn gasoline direct injection technology in projecting means by whic h manufacturers would comply with the final GHG standards. Therefore, there is no associated need for ultra low sulfur gasoline to enable compliance in the MY 2012-2016 timeframe. Howe ver, EPA may consider the benefit of this engine technology when evaluating GHG standard s beyond the 2016 model year. If that is the case, EPA will also consider the feasibility and co st of gasoline sulfur reduction to enable leanburn technology.

Organization: Mr. Richter - Environmental Capital Partners

Comment:

The first, and most importantly, is the competitiven ess of our auto industry relies on it, it relies on innovation. In the global economy, only those companies that continue to improve their technologies maintain market share, and these examples are Apple and Microsoft in the IT sector. The money and effort spent by the U.S. au to industry to maintain low mileage standards has torpedoed our own car industry and left us less competitive and innovative at a time of rising oil prices, of course, and increa sing demand for more efficient, le ss polluting cars. As a result, today's average new vehicle sold in the U.S. has virtually the same fuel economy as a new vehicle sold 20 years ago. [Comment submitted as testimony at the New York public hearing [EPA-HQ-OAR-2009-0472-4621, pp.161-162]]

EPA Response:

EPA appreciates the implication of Mr. Richter's comment that the proposed GHG standards will help the U.S. auto industry innovate in the area of fuel efficiency and GHG emission control and help maintain its competitiveness both in the U.S. and globally. EPA did not attempt to monetize the value of this benef it. Such benefits are difficult to quantify, but directionally support the need for this final rule.

Organization: Ford Motor Company

Comment:

Transparency

Ford is generally supportive of the approach that the agencies are proposing for using third-party sources to forecast future industry sales volum es across the different vehicle segments. We

5-284EPA Vehicle Program, Feasibility, and Estimated Impacts

utilize some of the same sources (e.g. J.D. Power). However, predicting various technology penetration rates, benefits, and overall costs is more complex and is predominately a function of manufacturers' confidential business and product plan s. To the extent that the agencies will use other sources for this type of information, Ford is concerned about how robust that information will be in determining the stringency and feasibil ity of the standards. As discussed earlier, the methodology used to establish the truck piecewise linear lower limit is an example of this

concern.

Ford is applying new technologies and making considerable invest ments in future innovations. Our confidential submission in response to the Request for Product Plan Information and other agency inquiries reflects these actions and quantif ies their impact on our ability to improve fuel economy and reduce GHG emissions. Inherent in these plans are risks including customer acceptance, timing, technology interaction, attribute tr ade-offs and competing resource priorities.

Ford recommends that the EPA only release current engine, transmission and fuel economy information, in a manner consistent with the practice for the current (2009 MY) EPA Fuel Economy Guide. There should be no disclosure to the public of any confidential business information or trade secrets, including informa tion relating to cost and financial expenditures, warranty, model-specific product plan projections (including vehicle and volumes), powertrain and vehicle hardware detail, a nd associated fuel economy. Disclo sures of this kind would result in significant competitive damage and would discourage innovati on and competition among manufacturers generally. The Fr eedom of Information Act, and EPA's own regulations, provide for the protection of confidential business information from public disclosure. See 5 U.S.C. § 552(b)(4) and 40 CFR Part 2, Subpart B. See also Section 208(c) of the CAA related to the protection of trade secrets. The proposed rule he re would not, and should not seek to, alter any of these protections for confidential business in formation or trade secrets. Accordingly, any disclosures in the Compliance Report or the Fuel Economy Trends re port should not include proprietary information. Moreover, EPA should follo w the procedures outlined in 40 CFR Part 2, Subpart B, to resolve any issues regarding the proposed disclosu re of information for which a manufacturer has asserted a claim of confidentiality. [OAR -2009-0472-7082.1, pp. 25-26]

EPA Response:

EPA appreciates these comments and assures Ford a nd all agency stakeholders that confidential business information will always be treated as su ch, and any potential disclosures of information will be handled according to the Code of Federa l Regulations. Importantly, EPA has not relied on such future product planning in setting the GHG standards. Instead, EPA has used publicly available information to build a baseline and re ference case fleet, and has then relied on the OMEGA model to apply technology packages using EPA (and NHTSA) generated cost and effectiveness information for individual technolog ies. In the end, the fleet makeup is generated by the OMEGA model and not by using manufac turer product plans. For that reason, manufacturers need not worry th at the technology penetrations predicted by the OMEGA model reflect product plan information provided confidentially to EPA.

5.8.5. EPA Projections for How Manufacturers Wou ld Decide Between Options to Improve CO2 Performance to Meet a Fleet Average Standard

5-285EPA Response to Comments

Organization: International Council on Clean Transportation

Comment:

ICCT agrees with the concept of manufacturer learning and suppor ts the use of learning curves to adjust costs. This empirical observation was described for the first time by aircraft pioneer Wright in 1927 and has been found to be true for many technologies and industry sectors in general. Therefore, it is reasona ble to expect direct costs for fuel economy measures to decrease as market introduction of the technologies app lied proceeds, as suggested by both agencies.

Determination of appropriate learning curves and how they should be adjusted over time and production volumes is not easy. However, the adjustments have a major impact on costs assessments. ICCT believes this area should be developed further for future rulemakings. Following are some specific suggestions for areas of improvement.

According to learning curve theory, the observed decrease of production costs is ascribed to three effects: (1) “Learning by searching”: Op timization of product properties caused by scientific research (e.g. reducing the amount of a catalyst needed for an exhaust after-treatment device). (2) “Learning by doing”: Optimization of production processes caused by experience gained during ongoing production (e .g. reduction of mounting times for an existing assembly line manufacturing process). (3) “Economies of scale”: Reducti on of production costs caused by advantages from transition from prototype ma nufacturing of small quantities to mass production (e.g. lower purchase prices for pre-products and raw materials due to increased market power).

Except for “learning by searching” the cost redu cing effects are caused by increased production volumes rather than time passing. For most of the technologies assessed in the proposal it is reasonable to assume that most of the time-de pendent research would have been completed by 2012, which is the first year of learning curves are applied in the pr oposal. Given generally accepted elements of the concept of learning cu rves, a production volume-based assessment of future costs is more appropria te than a time-based approach.

The learning curve rate describes the rate of cost reductions for each doubling of production volume. For example, a volume-based learning curv e rate of 10% would mean that initial costs would be reduced by 10% as cumulative production volume doubles. An important feature of the concept is that doubling of cumu lative production volume happens at a relatively fast rate during early implementation of a new technology but more slowly later on. Consequently, cost reduction slows down as application of th e technology becomes more widespread.

The agencies handle these differences by classi fying technologies into groups for which none, volume or time based learning curve effects are assumed (Table 3-4 on page 3-10 of the TSD). ICCT agrees it is appropriate to apply a lower rate of learning to some of the technologies assessed. However, the agencies a pplied a flat rate of 20% for a ll technologies to which learning was applied, and did not apply any volume ba sed learning to other t echnologies. A better approach would be to vary the learning curve ra te while retaining a volume-based approach for all technologies. A differentiati on of learning curve factors by type of technology would likely improve the accuracy of the proposal.

5-286EPA Vehicle Program, Feasibility, and Estimated Impacts

As a technology becomes more mature and produc tion volumes grow, the co st reduction process tends to slow down. The learning curve concep t includes this effect, as the doubling of cumulative production volumes occurs at a faster rate during implementa tion process and at a slower rate later on. The agenci es end the learning curve proc ess and assume a 3% time-based decrease of production costs af ter completion of two 20% volum e-based (NHTSA) or time based (EPA) learning curve steps. While this recogn izes that the learning process slows down, the change is abrupt and somewhat arbitrary. ICCT believes it w ould be advantageous to use a model that is able to dynamically take into account cumulative production volume over time. This would apply a continuous learning curve ra te over the entire lifetime for each technology, without having to assess threshold values for ch anging learning curve rates and floor cost values.

NHTSA assumes production costs to decrease by 20% as soon as a cumulative production volume of 300,000 units has been reached. This im plies that the technol ogy incremental cost estimates given in tables 3-20 to 3-22 of the draft TSD should be interpreted as costs for a cumulative production volume of 150,000 units. It w ould be helpful to clarify the correctness of this interpretation, in order to be able to compare the costs with other technology cost data.

ICCT does not agree that volume-based learning is over for the ‘power-split hybrid electric vehicle’ and only time-based learning curve is to be applied. While pow er-split hybrids have been on the market long enough to achieve high production volumes, the production ramp up has been very slow and the initial costs were very high. In addition, virtually all power-split hybrid vehicles have been equipped with NiMH batte ries. Future vehicles will make use of Li-Ion battery technology, bringing about changes to the entire vehicl e technology design.

[OAR-2009-0472-7156.1, pp.17-20]

EPA Response:

EPA agrees that varying the le arning curve rate by type of technology would likely improve the accuracy of the cost estimates. However, EPA currently does not have sufficient information upon which to base such variation. The Agency welcomes information from ICCT or other sources that could shed light on how learning curve factors should be varied by technology type. Short of such information, EPA believes that th e 20 percent factor used provides the best and appropriately conservative estimate of learning rates in the automotive sector.

EPA also agrees with ICCT that using a model that is able to dynamically take into account cumulative production volume over time would impr ove the cost estimates on a year-over-year basis, although EPA does not believe it would ha ve any meaningful impact on the outcome of the analysis. That is, EPA does not believe it wo uld provide any meaningf ul differences in the level of standard that could be supported or the overall cost of the Agency’s rules. By comparison, NHTSA does take into account cumu lative production volume over time although it still relies on threshold volume estimates made using good engineering judgment to determine where learning effects occur. In both cases – the EPA approach and the NHTSA approach – EPA believes that the cost estimates for 2016 MY ve hicles are as good as can be predicted today. That is, EPA believes that the appropriate leve l of learning has been applied to the 2016 cost

5-287EPA Response to Comments

estimates regardless of when the learning st eps actually occured – 100,000 units; 500,00 units; year 2013; year 2015 – is not as important as having arrived at the best estimate for 2016.

As regards Tables 3-20 to 3-22 of the draft joint TSD, the costs presented there were the draft cost estimates used by NHTSA a pplicable in the 2012 MY. This should have been made more clear in the table headings.

As regards the comment on volume-based learni ng and power-split hybrids, EPA agrees with ICCT on this point. In fact, EPA actually ap plied volume-based learning in the proposal and have clarified that in chapter 3 of the final joint TSD (see Joint TSD Table 3-4).

5.9. Reserved

5.10. EPA Certification, Comp liance, and Enforcement

5.10.1. Compliance with Fleet-Average CO2 Standards

Organization: General Motors Ford Motor Company Ferrari S.p.a Association of Intern ational Automobile Manufacturers (AIAM) Chrysler Group LLC (Chrysler) Environmental Defense Fund Alliance of Automobile Manufacturers (Alliance) Toyota Motor North America BMW of North America, LLC (BMW) Public Citizen and Safe Climate Campaign Union of Concerned Scientists Natural Resources Defense Council Sierra Club University of California, Santa Barbar a, Bren Working Group on Vehicle Fuel Economy People's Republic of China New York State Department of Environmental Conservation Automotive Aftermarket Indus try Association (AAIA) Chew, Yuli

Comment:

General Motors:

Among the highlights of the proposal is 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 technologi es, and the price of fuels that consumers may see in the market place. All of these factors make it critical that automakers have some ability to

5-288EPA Vehicle Program, Feasibility, and Estimated Impacts

cope with changes or unexpected outcomes, and we believe the proposed rule provides such flexibility. (OAR-2009-0472-6185, p.11)

One area of difference between the NHTSA and EPA programs is the treatment of emergency/law enforcement vehicles within th e CAFE/GHG programs. The CAFE law provides a manufacturer with the opportuni ty to exclude emergency vehi cles from its CAFE fleet by providing written notice to NHTSA and EPA (49 USC 32902(e)). The EPA GHG regulatory program has not included such an exclusion opportunity for emergency/law enforcement vehicles. [OAR-2009-0472-6953.1, p.31]

This exclusion is very sensible and practical b ecause these special purpose vehicles are specially outfitted in ways that adversel y impact vehicle fuel economy/CO 2 emissions so they can effectively serve as the front li ne for law enforcement agencies throughout the United States. As such, they are engineered and equipped for ex tremely demanding performance in real-world emergencies -- situations rare ly involved in normal civili an use. [OAR-2009-0472-6953.1, p.31]

EPA should provide a manufacturer with the same opportunity to exclude emergency vehicles from the GHG standards it adopts in this rulema king. This is first of all important to further maximizing the consistency between the EPA and NHTSA regulations. Wit hout this consistency, a manufacturer may find itself challenged to continue providing the performance needs of the federal, state and local governmental purchaser s of emergency vehicles. If production of these vehicles becomes relevant in the overall compliance of a company with the EPA vehicle GHG program, a manufacturer must decide whether to degrade the performance of the vehicles or restrict their sales of this type of vehicle. Both are unnecessary and unfortunate outcomes for the constituencies that need these em ergency vehicles. [OAR-2009-0472-6953.1, p.31]

GM recommends that EPA revise its rule to provide this important opportunity by (1) adding a definition of “emergency vehicles” to 86.1803-01 that mirrors or cross-references 49 USC 32902(e); and (2) amending 86.1818-12 to provide that for any vehicle for which a manufacturer provides notice to NHTSA and EPA of its exclus ion from CAFE, the vehicle is also excluded from EPA’s greenhouse gas sta ndards. [OAR-2009-0472-6953.1, p.31]

Ford Motor Company:

Greenhouse Gas Emissions Testing and Data Generation Protocols

Ford strongly supports the proposal to use the current CAFE testing protocol to measure and report CO2 values. This enables the common use of vehicles, testing resources, databases and submittal/reporting to accomplish both GHG and CAFE requirements. Ford agrees with EPA's proposal to use common data substitution and analytically derived fuel economy (ADFE) provisions.

Consistent Fleets for the CAFE and GHG programs

One area of difference between the NHTSA a nd EPA programs is the fleets within the CAFE/GHG programs. The fleets differ by the treatment of emergency/law enforcement vehicles

5-289EPA Response to Comments

and by the geographic areas included in CAFE and emissions programs. Both of these differences go against the agencies' stated intent ions of harmonization, tr ansparency, and parallel calculations and reporting. The following sections suggest small regulatory adjustments that could bring the fleets into alignment.

1. Emergency / Law Enforcement Vehicles

The CAFE law provides a manuf acturer with the opportunity to exclude emergency vehicles from its CAFE fleet by providing written noti ce to NHTSA and EPA (49 USC 32902(e)). EPA's proposed GHG regulatory program should includ e a similar provision excluding emergency vehicles from the GHG fleet averaging requirement.

This exclusion is sensible and practical because special purpose vehicles such as the Crown Victoria Police Interceptor are sp ecially outfitted in ways that gi ve law enforcement officials the performance and features they need in a vehicle th at serves a critical ro le in their police work. The vehicles are engineered and equipped to help the police respond to real -world emergencies -- situations that demand a lot of th e vehicle, and that ar e rarely encountered in normal civilian use. On the whole, the addition of these features te nds to reduce the fuel economy and increase the GHG emissions relative to the base vehicl e. Below [See Table V at OAR-2009-0472-7082.1, p. 28] are some examples of features in Ford's law enforcement vehicles that negatively affect fuel
economy.

EPA should provide a manufacturer with an opport unity to exclude emergency vehicles from the GHG standards it adopts in this rulemaking. This is important to maintaining consistency between the EPA and NHTSA regulations. Without this consistency, a manufacturer may find itself challenged to continue providing the perf ormance needs of the federal, state and local governmental purchasers of emergency vehicles. If these vehicles cannot be excluded, and the production of these vehicles becomes a key variable in the ability of a ma nufacturer to comply with within the GHG program, that manufacturer may be forced to choose between 1) deciding whether to degrade the performance of the emergency vehicles, 2) deciding to restrict the sales of its emergency vehicles, potentially even exit ing the market altogether, or 3) facing noncompliance with the federal GHG standards. Any of these outcomes would be both unfortunate and unnecessary. It is clear that, like the CA FE program, the GHG program should protect the law enforcement constituencies that need th ese emergency vehicles and depend on their performance.

Section 202(a) of the CAA allows EPA to prescrib e standards “applicable to the emission of any air pollutant from any class or classes of new motor vehicles... “ The language “class or classes” indicates that EPA may apply its standards to particular types or categories of vehicles, and likewise make exclude particular types or categor ies of vehicles when there is reason to do so. This language gives EPA the authority to incorp orate regulatory provision s excluding emergency vehicles from the fleet average requirement.

Ford recommends that EPA revise its rule to provide this important opportunity by (1) adding a definition of 'emergency vehicles' to 86.1803-01 that mirrors or cross-references 49 USC 32902(e); and (2) amending 86.1818-12 to provide that for any vehicle for which a manufacturer

5-290EPA Vehicle Program, Feasibility, and Estimated Impacts

provides notice to NHTSA and EPA of its exclus ion from CAFE, the vehicle is also excluded from EPA's greenhouse gas standa rds. [OAR-2009-0472-7082.1, pp. 28-29]

2. Geographic Location of GHG Fleet Vehicles

The CAFE law defines the vehicles that are to be included in EPCA. Eff ectively, this means the 50 states, the District of Columb ia and Puerto Rico. Under Secti on 302(d) of the CAA, the term 'State' is defined to include the District of Columbia, Puerto Rico, the Virgin Islands, Guam, American Samoa, and the Commonwealth of Nort hern Mariana Islands. As such, manufacturers are required to send U.S.-certified vehicles to th ese districts and territories as well as the 50
states.

In Ford's case, the additional territories under the CAA definiti on amounts to a difference of only about 1,000 vehicles in a model year. While this is a relatively small volume in comparison to Ford's overall U.S. sales, the addition of these ve hicles to the GHG fleet av erage would create an administrative burden for Ford. These 'additional' vehicles are not easily identified on a model type, base level, configurati on, or subconfiguration level. Fu rthermore, maintaining both a 'CAFE fleet' and a 'GHG fleet' is likely to cause confusion, and would add to the already difficult situation of credit tracking. The administrative burden in adding th ese vehicles to the fleet is greater than any environmental benefit one woul d hope to obtain. Moreover, having a difference in the fleet definitions would conflict with EPA's and NHTSA's intention of promoting consistency and allowing manufacturers to submit one data set in satisfaction of both CAFE and GHG requirements.

Since the CAFE fleet is defined by EPCA, it does not appear that NHTSA has the authority to broaden the list of territo ries to which the EPCA fleet defini tion applies. On the other hand, we believe that EPA has the discreti on to align its GHG fleet with th e CAFE fleet for administrative purposes. It is clear that all of the territories listed under the CAA must receive vehicles certified to U.S. emissions standards, and we are not suggesting otherwise. However, the vehicles delivered to such territories do not have to be counted under EPA regulations designed to determine fleet average GHG emissions. Ford therefore recommends that EPA amend the definitions in 86.1803-01 to clarify that, for pur poses of emissions compliance reporting and fleet averaging only, the fleet is co mposed of vehicles for the 50 st ates, the District of Columbia and Puerto Rico. Alignment in th is way will not cause any adverse emissions either overall or for the territories not mentioned in EPCA. Those te rritories will receive the same vehicles they would receive otherwise. By ma king the discretionary decision to exclude this small volume of vehicles from the fleet average determination, EP A will help align the fleets that manufacturers must manage and that the agencies will evaluate. [O AR-2009-0472-7082.1, pp. 29-30]

Ferrari S.p.a:

We believe that the Tier 2 test group can adequately represent CO 2 emissions for certification purposes. We agree with EPA that is proposing to require a single Emission Data Vehicle that would represent the test group for both Tier 2 and CO 2 certification. The manu facturer would be allowed to initially apply the Emission Data Vehi cle’s CO2 emissions value to all models in the test group, even if other models in the te st group are expected to have higher CO 2 emissions.

5-291EPA Response to Comments

However, as a condition of the certificate, this surrogate CO 2 emissions value would generally be replaced with actual, model-level CO 2 values based on results from CAFE testing that occurs later in the model year. This mode l level data would become the offi cial certification test results (as per the conditioned certificate) and would be used to determine compliance with the fleet average. This approach gives more flexibility to vehicle manufacturers to plan fuel economy tests for the various vehicle models in the same test group. [OAR-2009-0472-7214.1, p.4]

Association of International Au tomobile Manufacturers (AIAM):

EPA proposes to release to the public GHG compliance information. See preamble page 49559. Any such release should not in clude proprietary confidential business information that was provided by the manufacturer to EPA. For exam ple, public dissemination of information regarding manufacturer plans to earn future credits could rele ase information about future product plans that would otherwise be confidenti al. EPA regulations regarding exemptions from the release of agency information to the public are based on the Freedom of Information Act, 5 USC 552(b). Those regulations exempt from public release “trade secrets and commercial or financial information obtained from a pe rson and privileged or confidential.” See 40 CFR Part 2, section 2.105(a)(4). Future credit plans should fall in this category. AIAM recommends that EPA’s final rule clarify how confidential bus iness information will be protected. [OAR-2009­ 0472-7123.1, p.17]

Chrysler Group LLC (Chrysler):

NHTSA's CAFE program allows manufacturer to exclude emergency vehicles from its CAFE fleet by providing written notice to NHT SA and EPA (49 USC 32902(e)). The EPA GHG regulatory program has not included this exclusion. [N HTSA-2009-0059-0124, p.36]

This exclusion is practical because these spec ial purpose vehicles are outfitted in ways that adversely impact vehicle fuel economy/greenh ouse gas emissions so they can effectively perform their duties throughout the Un ited States. [NHTSA-2009-0059-0124, p.36]

Recommendation:

Chrysler recommends that EPA re vise its rule by adding a definiti on of 'emergency vehicles' to 86.1803-01 that mirrors or cross-referen ces 49 USC 32902(e); and amending 86.1818-12 to provide that for any vehicle fo r which a manufacturer provides notice to NHTSA and EPA of its exclusion from CAFE, the vehicle would also be excluded from EPA's greenhouse gas standards. [NHTSA-2009-0059-0124, p.36]

Environmental Defense Fund:

EDF recognizes the complex, calibrated policy- making involved in designing a program to achieve the outcomes in greenhouse gas reductions and fuel efficiency improvements provided for under the proposal while providing the flexibili ty for a smooth, cost-effective transition. In finalizing this proposal, we as k that the agencies examine the collective implications of multilayered flexibilities and the potential to erode the program’s performance. While the

5-292EPA Vehicle Program, Feasibility, and Estimated Impacts

comments below examine these issues in more detail, we respectfully offer two overarching recommendations. [OAR-2009-0472-7285.1, p. 2]

Transparency and Accountability thr ough Annual Compliance Reports. The Obama Administration and EPA Administ rator Lisa Jackson have prov ided vital leadership in reclaiming transparency and accountability in go vernment policy-making. The dual public policy import and complexity of this program warrant bri nging to bear the rigorous transparency that is the hallmark of government accountability. Purs uant to 5 U.S.C. §553(e), EDF formally and respectfully petitions the U.S. Environmental Protection Agency and the U.S. Department of Transportation to finalize as part of this propos ed rulemaking a commitment to provide an annual public compliance report examining the program’s performance. The report should be publicly announced and accessible March of each year following the completion of the preceding calendar year. The compliance report should include any recommended adjustments to the program, enforcement actions, or prospective polic y action to ensure the policy objectives are achieved. [OAR-2009-0472-7285.1, p. 2]

Enhanced Resources for Program Accountability. Under the Administrations of Presidents William Clinton, George W. Bush and Barack Obama, the U.S. Environmental Protection Agency has provided leadership in crafting policies to reduce a su ite of airborne contaminants from the transportation sector. These initiatives , addressing a number of major source categories and a variety of pollutants, provide for consider able human health and environmental benefits. We respectfully ask that the Agency seek expa nsive compliance and enforcement resources to ensure that these initiatives are durable in ac hieving the emission reductions that will provide healthier air and a safer environment for millions of Americans. [OAR-2009-0472-7285.1, p. 2]

Alliance of Automobile Manufacturers (Alliance):

Fleet Average CO 2 Reporting Requirements (Proposed re gulations in 40 C.F.R. 600.514-12)

EPA is proposing that manufacturers submit pre- model year and supplementary fleet-average CO 2 reports. [OAR-2009-0472-6952.1, p.51]

Confidential Business Information ve rsus Transparency in Reporting

In the Joint Notice, U.S. EPA requests commen t of potential changes in its annual Compliance and Trends reports and related publications in light of the GHG standards, as follows:

EPA periodically provides mobile source emission s and fuel economy information to the public, for example through the annual Compliance Re port and Fuel Economy Trends Report. EPA plans to expand these reports to include GHG pe rformance and compliance trends information, such as annual status of credit balances or debi ts, use of various credit programs, attained versus projected fleet average emission levels, and final compliance status for a model year after credit reconciliation occurs. We seek comment on all aspects of public dissemination of GHG compliance information. 74 Fed. Reg. at 49,559 (footnotes omitted). [OAR-2009-0472-6952.1, p.67]

5-293EPA Response to Comments

The Joint Notice does not illuminate how U.S. EPA intends on expanding the annual Compliance and Fuel Economy Trends reports. Nor does it i ndicate whether U.S. EPA plans to expand any publications other than th ese reports. However, it is important to observe that much of the new information required in the proposed GHG regulati ons, like much of the certification-related information reported to U.S. EPA by individual manufacturers under othe r regulations currently in force, is confidentia l and competitively sensitive -- a fa ct recognized in one of the annual reports cited in the Joint Notice. Moreover, th e Joint Notice proposes no changes in U.S. EPA’s regulations governing the treatm ent of confidential business in formation in Part 2 of the Agency’s regulations. See 40 C.F.R. §§ 2.201 et seq. [OAR-2009-0472-6952.1, p.67]

Therefore, the only reasonable in terpretation of U.S. EPA’s pr oposal is that the Agency’s “expansion” of these reports is limited to considering (i) the release of additional aggregated data, rather than manufacturer-specific data or other information whose release would compromise a manufacturer’s competitive position, (ii) certification data, and (iii) past model year information on GHG technologies that would be apparent to the public from inspection of a given vehicle. The Alliance members do not oppose the publication of aggregated, industry-wide data that, as has been the cas e historically, protects the conf idential status of individual manufacturer’s information submissions to U.S. EPA. The Alliance also does not oppose release of GHG emissions certification data nor the pub lication of technological information otherwise available to the public by alte rnate sources. [OAR-2009-0472-6952.1, p.67]

Two statutes structure and limit U.S. EPA’s author ity to expand the cove rage and scope of its annual reports. Section 208(c) of the Clean Air Act requires U.S. EPA to avoid disclosures not consistent with the Trade Secrets Act, codified at 18 U.S.C. § 1905. See 42 U.S.C. § 7542(c) (requiring U.S. EPA to comply with “the purposes of §1905 of Title 18.”). Section 1905 does not merely and narrowly protect 'trade secrets,' etc ., but instead, any 'information which concerns or relates to the trade secrets.' 18 U.S.C. § 1905; see Wright et al ., 26 Fed. Prac. & Proc. Evid. § 5644 (Trade Secrets Act is a 'good example' of an 'expansive' federal statute 'that include[s] much more than what is genera lly understood by the phrase 'trade secret.''). The clause 'concerns or relates to' in §1905 establishes that Congress intended a broad interpretation be imparted to §1905 standing alone, in addition to Clean Air Act section 208(c)’s expansive reference to the 'purposes of section 1905.' U.S. EPA in the Joint Notice has suggest ed no basis to depart from its longstanding practice of disclosing solely in formation that would not compromise the competitive position of any manufacturer. Cf. Qwest Communications Intern. Inc. v. FCC, 229 F.3d 1172 (D.C. Cir. 2000) (where an agency de parts from established precedent concerning disclosures without a reasoned explanation, its decision will be vacated as arbitrary and capricious); accord MCI Worldcom, Inc. v. General Services Admin., 163 F. Supp. 2d 28 (D.D.C. 2001), citing Pontchartr ain Broadcasting Co., Inc. v. FCC., 15 F.3d 183, 185 (D.C. Cir. 1994), and Graphic Communications Intern. Uni on, Local 554 v. Salem-Gravure Div. of World Color Press, Inc., 843 F.2d 1490, 1493 (D.C. Cir. 1988). [OAR-2009-0472-6952.1, p.68]

In addition, U.S. EPA must respect the limits on its disclosure authority under the Freedom of Information Act, and in particular Exemption 4 therein that protects confidential business information of a competitively sensitive nature fr om public release. See 5 U.S.C. 552(b)(4); and see generally Public Citizen Health Research Group v. FDA, 704 F.2d 1280, 1290-1291 (D.C.Cir. 1983). Exemption 4 bars the release of company-specific sa les and market share

5-294EPA Vehicle Program, Feasibility, and Estimated Impacts

information upon a showing that the disclosure of such information would impose competitive harm. See, e.g., Sharkey v. FDA, 250 Fed. A ppx. 284, 287-292 (11th Cir. 2007: Continental Oil Co. v. Federal Power Com’n, 519 F.2d 31, 35-36 (Fif th Cir. 1975). The settled case law under Exemption 4 thus requires U.S. EPA to maintain the types of limits on disclosure of information in annual reports that it has tr aditionally maintained. Provided U.S. EPA’s expanded reports respect those limits, and as such are expanded only insofar as th e Agency’s regu latory program will now cover GHG emissions in addition to othe r regulated emissions, the Alliance and its members do not object to the apparent intent of this provision of the Joint Notice. [OAR-2009­ 0472-6952.1, p.68]

Toyota Motor North America:

EPA proposes to determine compliance with the fleet average CO 2 standards when the model year closes out, as is currentl y the protocol under EPA's Tier 2 program as well as under the current CAFE program. The compliance determin ation would be based on actual production figures for each model year and on model level emissions data collected through testing over the course of the model year. EPA would then requir e manufacturers to provide this information to EPA via an end-of-year report. Final determ ination of compliance with fleet average CO 2 standards may not occur until several years after th e close of the model year due to flexibilities of carry forward and carry back credits and the remediation of de ficits. Any failure to meet the fleet average standard after credit opportunities ha ve been exhausted would result in penalties, as prescribed under the CAA. [OAR-2009-0472-7291, pp.27-28]

Setting aside the issue of penalties for noncomplia nce with the proposed fleet average standard (discussed later in this Attachment), Toyota supports the concept of a fleet-wide average compliance calculation determined at the end of th e model year. Such an approach is consistent with the approach used in the NHTSA CAFE program and would directionally support harmonization between the programs. [OAR-2009-0472-7291, p.28]

BMW of North America, LLC (BMW):

BMW believes the flexible compliance options provi ded in this proposed rule are a prerequisite and appropriate for auto manufact urers to achieve these aggressive technology forcing standards. This is especially true for manufacturers lik e BMW offering a 'feature-dense' product portfolio but having a low share of light trucks in their fl eets. Such manufacturers face more stringent fleet standards requiring additi onal efforts to comply. Therefore, the proposed compliance options provide the needed lead time for the developmen t and introduction of fu el saving technologies into their vehicle fl eets. [OAR-2009-0472-7145.1, p.2]

Public Citizen and Safe Climate Campaign:

The agencies should improve compliance transparency by providing end-of-year compliance data for each model year. Manuf acturers who are out of complia nce but intend to return to compliance in a future model year should be identified in this report. Knowing where each manufacturer stands at the end of each model year will assist the public and the agencies in establishing the technologically feasible and economically practic able level of standards for

5-295EPA Response to Comments

subsequent model years. This will also help agencies and the public evaluate whether the standards that have been promul gated years in advance have kept pace with the advancement and adoption of technology. Knowing whether automake rs have fallen short or exceeded standards will help establish the technologically feasible level of sta ndards for model years after 2017. [OAR-2009-0472-7050.1, p.4]

Union of Concerned Scientists:

We believe the agencies could further improve transparency by having a clear public accounting of credits and program compliance. Over th e years, it has been exceedingly difficult to independently verify whether ma nufacturers are complaint with th eir CAFE obligations, and we have concerns that the same will hold true with manufacturers’ vehicle greenhouse gas obligations. Given the numerous compliance fl exibility mechanisms being proposed by the agency – as well as significant opportunity for trading, transferring, banking, and borrowing of credits – we feel it is critical that manufacturers’ compliance ledgers be documented, publicly available, and sufficiently granular to assess by which measures companies are complying with the regulations. [OAR-2009-0472-7181.1, p.12]

For example, for each model year, this would include, but not be limited to, each manufacturer’s: actual car average greenhouse gas emissions performance; actual light truck average greenhouse gas emissions performance; amount of credits (on at least a fleet average ba sis) accrued or used through advanced technology vehicle credits, ea rly credits, A/C credits, off-cycle technology credits, flex fuel vehicle credit s, and use of temporary lead-time allowance alternative standards; amount of total banks/debits accrued in each ye ar; and a running balance of banks/debits. We [OAR-2009-0472-7181.1, p.12] urge the agency to undert ake an effort to provide clear public accounting of credits and program compliance. [OAR-2009-0472-7181.1, p.13]

Natural Resources Defense Council:

Credit Transactions and Automakers’ Credit or Debit Status Should be Transparently Reported Annually to Allow for Public Eval uation of Program Effectiveness

Effective public support for th e National Program is dependent on transparency on that the program is working effectively. To enable the public to evaluate the effectiveness of the program, EPA should publish an annual public re port that includes at minimum the following quantitative information on credits (in megagram s or metric tons) for each manufacturer’s car and light truck fleets:

-the amount of cumulativ e credits or deficits; -the amount of credit transfers made by a manufact urer between its car an d light truck fleets (if any); -the amount of credits traded between manuf acturers including which manufacturers were involved and the car/truck credit origination and destination; -the amount of credits generated, for each manufactu rer’s car and truck flee t, from the additional credit opportunities including: air conditioning related credits, Flex Fuel Vehicle and Alternative

5-296EPA Vehicle Program, Feasibility, and Estimated Impacts

Fuel Vehicle credits, Advanced Technology Vehi cle Credits for electric vehicles, plug-in hybrids, and fuel cells, off-cycle t echnology credits, early credit options

For each of the five additional credit opport unities above, EPA should specify the basis for calculating the credits and indicate how many cr edits were awarded for each mechanism. For example, EPA should indicate how many plug-in hybrid electric vehicles earned advanced technology multiplier credits for a manufacturer’s car fleet and how EPA calculated the credit per vehicle type. For off-cycle technology credits, EPA should speci fy what technologies earned the credit. For each manufacturer using the early credit pathways, EPA should describe for which pathway the credits were awarded. [OAR-2009-0472-7141.1, pp. 10-11]

Sierra Club:

Strengthen transparency measures regarding the st atus and impacts of cred it accrual and use. We strongly support the proposal to make all information regardi ng credits, includ ing status of credit balances and attained versus projected fleet average emission leve ls, publicly available. The proposal allows credits to be traded over a 9 year time frame; we strongly urge EPA to limit this timeframe and to publish data regardi ng credit balances and use on an annual basis, including sales of cr edits between companies. [OAR-2009-0472-7278.1, p.17]

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

Finally, we strongly encourage all test results to be made publicly available and easily accessible for both research and consumer awar eness purposes. [OAR-2009-0472-7188.1, p. 10]

[University of California, Santa Barbara, Br en Working Group on Vehicle Fuel Economy also submitted these comments as testimony at the Los Angeles public hearing. See docket number OAR-2009-0472-7283, pp.119-121]

People's Republic of China:

We suggest the United States regularly publishing the monitoring information about the greenhouse gas emissions and corporate aver age fuel economy of domestic and import vehicles. [OAR-2009-0472-11269, p.3]

New York State Department of Environmental Conservation:

Compliance and Enforcement (Preamble Section III.E) We agree with EPA that an effective compliance pr ogram is essential to achieving the benefits of the standards. We are particular ly pleased to see that EPA has not adopted the 'pay-to-pollute' philosophy of the CAFE program, where compara tively minor fines substitute for compliance. [OAR-2009-0472-7454, p.4]

EPA proposes to determine compliance after the mode l year ends, in a manner similar to the Tier 2 light duty vehicle emissions program. Manufacturers would produce a preliminary compliance plan including planned production, e xpected emissions values, and e xpected credit activity, etc,

5-297EPA Response to Comments

with limited emissions testing data. Certificates of Conformity would be conditioned on ultimate satisfaction of the greenhouse gas average standard requirements. Complete CO2 test values would be submitted over the course of the model year, as is currently done with CAFE. Since deficits can be carried for thre e subsequent years, final complia nce determination may not occur for several years. We Agree with EPA that this approach best accommodates credit banking and trading, and provides the most e fficient use of manufacturer cert ification testing resources. [OAR-2009-0472-7454, p.4]

Yuli Chew, (private citizen)

I am very concerned that importers will be c ontinuing to import large quantities of heavy duty trucks that will not meet the GHG fleet average on it own is they ar e included as part of a larger family. For example, GM might have been able to sell small quantities of Hummer H2 and yet meet the CAFÉ standard. At this moment, Hu mmer Brand has been sold to Sichuan Tengzhong of China. With attribut e-based system, the impact of penal ties is diluted. The importers may continue to import substantial quantities of these GHG unfriendly vehi cles as just minor increased cost basis and do not participate in efforts to reduc e GHG. I suggest that if the quantities of the importers exceed 4,500 vehicles per year, they should follow the same rule as for local large manufacturers or acti ons be curtailed. [OAR-2009-0472-7042.1, p.2]

I support a web-based transparent database repor ting system to EPA assess validity of credits, especially those obtained from third- party credit broke rs. [OAR-2009-0472-7042.1, p.3]

EPA Response:

In general, there was widespread support for the us e of current CAFE testing protocol to measure and report CO 2 values, to provide a preliminary complian ce plan to EPA, and to calculate a fleetwide average greenhouse gas emission compliance le vel for each manufacture r at the end of the model year.

Transparency

EPA received considerable comment about the need for transparency in its implementation of the greenhouse gas program and specifically about the need for public access to information about Agency compliance determinations. Many comme nts emphasized the importance of making greenhouse gas compliance information publicly availa ble to ensure such transparency. EPA also received comment from industry about the need to protect c onfidential business information. Both transparency and protection of confiden tial information are longstanding EPA practices, and both will remain priorities in EPA’s impl ementation of the greenhouse gas program. EPA periodically provides mobile so urce emissions and fuel economy information to the public, for example through the annual Compliance Report 19 and Fuel Economy Trends Report. 20 As proposed, EPA plans to expand these reports to include GHG performance and compliance

19 2007 Progress Report Vehicle and Engine Compliance Activities; EPA-420-R-08-011; October 2008. This document is available electronically at http://www.epa.gov/otaq/about/420r08011.pdf
20 Light-Duty Automotive Technology and Fuel-Economy Trends: 1975 Through 2008; EPA-420-S-08-003; September 2008. This document is available electronically at http://www.epa.gov/otaq/fetrends.htm

5-298EPA Vehicle Program, Feasibility, and Estimated Impacts

trends information, such as annual status of cr edit balances or debits , use of various credit programs, attained fleet average emission levels compared with standards, and final compliance status for a model year after cr edit reconciliation occurs. EPA in tends to regularly disseminate non-confidential, model-level and fleet informati on for each manufacturer after the close of the model year. EPA will reassess data release needs and opportunities once the program is underway.

Other sources of public information that EPA may expand to include GHG compliance information include:

 Green Vehicle Guide - typically published in May, July, September, October and every three months until the end of the model year; (see www.epa.gov/greenvehicles );

 Certification test data summary – contains certification test data 21 - typically published in October; (see www.epa. gov/otaq/crttst.htm);

 Fuel economy test car list– cont ains city and highway test data 22 – typically published in October; (see www.epa.gov/otaq/tcldata.htm ); and

 EPA Document Index System (DIS) - update d quarterly – contains applications for certification, copies of ce rtificates, etc; (see http ://iaspub.epa.gov/otaqpub /)

In addition, EPA and DOE publish the Fuel Economy Guide information on the web at www.fueleconomy.gov which contains a summary of all the Fuel Economy Labels (window stickers) on new cars and trucks. The FE Labels contain model type city, highway and combined fuel economy values (weighted 55 % city and 45% highway) which ha ve been adjusted to reflect real world conditions. Unadjusted city, highway and combined mpg values for each model type are also available at this site. Currently, th e FE Guide is published in May, July, September, October, and then every 2-3 months until the end of the model year.

EPA will work with interested pa rties to release an a ppropriately detailed level of greenhouse gas compliance information and test data that sa tisfies the need for public review without compromising the CBI needs of industry. We do not intend to publish prospective manufacturer compliance plans, or future projected production volumes. Initially EPA intends to release actual end-of-year production volumes and GHG emissions in formation at the model type level. We anticipate publishing manufacturer and model type GHG information including:

 manufacturer’s annual compliance level (credit/debit status for each applicable passenger car or truck category);

 the number and type of credits and debits accumulated each year;

 the number and type of early credits earne d and reported with manufacturer’s 2011 model year report;

 credit transfers for a manufacturer between car and truck categories; and

 credit trades between manufacturers.

21 Currently does not contain CO 2 data.
22 Currently contains total HC, CO and CO 2 emission data (but not CH 4 or N 2 O data).

5-299EPA Response to Comments

Concerns That Manufacturers Will Shift Light Truck Product into Heavy-Duty Truck Products

Comments from Mr. Yuli Chew expressed concer n that automobile ma nufacturers would shift light truck product into heavy- duty truck product (which are unregulated for CAFE and GHG emissions).

On October 20, 1999, the International Center for Technology Assessment (ICTA) and 18 other environmental and renewable en ergy industry organizations file d with EPA a “Petition for Rulemaking and Collateral Relief Seeking th e Regulation of Greenhouse Gas Emissions from New Motor Vehicles under Section 202 of the Clean Air Act.” As discussed in the proposal (74 FR 49507, September 28, 2009), on April 2, 2007, the U.S. Supreme Court held in Massachusetts v. EPA that greenhouse gases were within th e definition of air pollutant under the Clean Air Act and remanded the case to the U.S. Court of Appeals for the District of Columbia Circuit for further action. H eavy-duty vehicles are among the ve hicle classes addressed by the petition and it is likely that EPA will respond to the petition as part of a future rulemaking.

Excluding Emergency and Law Enforcement Vehicles

Currently, emergency and law enforcement vehicles are excluded from CAFE requirements, ref. 49 USC 32902(e). Comments from Chrysler, Ford Motor Company and General Motors recommend that EPA provide the manufacture r “with the same oppor tunity to exclude emergency vehicles from the GHG standards” (as provided by CAFE requirements). Both manufacturers recommend such changes for consistency with CAFE requirements and to prevent problems supplying emergency vehicles and law en forcement vehicles (inc luding vehicles with special performance needs) to fede ral, state and local governments.

These manufacturers believe this provision is necessary because law enforcement vehicles (e.g., police cars) must be designed with special performance and features necessary for police work -- but which tend to raise GHG emissions and reduce fu el economy relative to the base vehicle. These commenters provided several examples of features unique to these special purpose vehicles that negatively impact GHG emissions, su ch as heavy-duty suspensions, unique engine and transmission calibrations, and heavy-duty components (e.g., batteries, stabilizer bars, engine cooling). These manufacturers believe consistenc y in addressing these vehicles between the EPA and NHTSA programs is critical, as a manufacturer may be challe nged to continue providing the performance needs of the federal, state, and loca l government purchasers of emergency vehicles.

EPA is not finalizing such an emer gency vehicle provision in this ru le, since we believe that it is feasible for manufacturers to apply the same type s of technologies to the base emergency vehicle as they would to other vehicles in their fleet, and given the relatively small impact the limited number of emergency and law enforcement vehi cles would have on a manufacturer’s overall fleet average. However, EPA also recogni zes that, because of the unique “performance upgrading” needed to convert a base vehicle into one that meets the performance demands of the law enforcement community – which tend to increas e GHGs relative to the ba se vehicles - there could be situations where a manufacturer is mo re challenged in meeting the GHG standards than the CAFE standards, simply due to inclusi on of these higher-emitting vehicles in the GHG

5-300EPA Vehicle Program, Feasibility, and Estimated Impacts

program fleet. Although EPA does not believe that the limited information in front of it at this time supports finalizing such an exclusion for emergency vehicles toda y, we do believe it is important to continue to assess this issue in th e future. EPA plans to continue to assess the characteristics of these emergency vehicles and to continue to assess wh ether special provisions for addressing them are warranted, as requested by the manufacturers. EPA plans to undertake this evaluation as part of a follow-up rulemaki ng in the next 18 months (this rulemaking is discussed in the context of small volume manufacturers in Preamble Section III.B.6.).

Follow-Up Reports Documenting th e Effectiveness of the Program

Comments from the Environmental Defense F und recommended that EPA and NHTSA provide an annual public compliance report examining the program’s effectiveness, including any recommended adjustments to the program, enfor cement actions or prosp ective policy action to ensure the policy objectives are achieved.

As discussed in the Transparency section above, EPA periodical ly provides mobile source emissions and fuel economy information to the public, for example through the annual Compliance Report and the Fuel Economy Trends Re port. EPA plans to expand these reports to include GHG performance and compliance trends in formation, such as annual status of credit balances or debits, use of various credit prog rams, attained fleet average emission levels compared with standards, and final compliance st atus for a model year af ter credit reconciliation

occurs.

Geographical Location of Gr eenhouse Gas Fleet Vehicles

One manufacturer commented that the CAFE sa les area location defined by Department of Transportation regulations is di fferent than the EPA sales area location defined by the CAA. DOT regulations requ ire CAFE compliance 23 in the 50 states, the Di strict of Columbia, and Puerto Rico. However, current EPA emissi on certification regulati ons require emission compliance 24 in the 50 states, the District of Columbia, the Puerto Rico, the Virgin Islands, Guam, American Samoa and the Commonwealth of the Northern Mariana Islands.

The commenter stated that EPA has the discretion under the CAA to align the sales area location of production vehicles for the greenhouse gas fl eet with the sales area location for the CAFE fleet and recommended that EPA amend the defi nitions in 40 CFR 86.1803 accordingly. Such an

23 DOT regulations at 49 CFR 525.4(a)(5) read “The term customs territory of the United States is used as defined in 19 U.S.C. 1202.” Section 19 U.S.C. 1202 has been re placed by the Harmonized Tariff Schedule of the United States. The Harmonized Tariff Schedule reads in part that "The term 'customs territory of the United States'...includes only the States, the Distri ct of Columbia, and Puerto Rico."
24 Section 216 of the Clean Air Act defines the term comm erce to mean “(A) commer ce between any place in any State and any place outside thereof; and (B) commer ce wholly within the Di strict of Columbia.” Section 302(d) of the Clean Air Act reads “The term ``State'' means a State, the District of Columbia, the Commonwealth of Puerto Rico, the Virg in Islands, Guam, and American Samo a and includes th e Commonwealth of the Northern Mariana Islands.” In addition, 40 CFR 85.1502 (14) regarding the importation of motor vehicles and motor vehicle engines defines the United States to include “the States, the District of Columbia, the Commonwealth of Puerto Rico, the Commonwealth of th e Northern Mariana Islands, Guam, Am erican Samoa, and the U.S. Virgin Islands.”

5-301EPA Response to Comments

approach would exclude from greenhouse gas requirements production vehicles that are introduced into commerce in the Virgin Islands, Guam, American Samoa, and the Commonwealth of the Northern Mariana.

EPA believes that the approach suggested in the comments woul d introduce an undesirable level of complexity into the certification process and result in confusion due to vehicles intended for commerce in separate geographical locations be ing covered under a sing le certificate. In addition, the vehicles sold into these additional areas will have the same options for technology upgrade as vehicles sold in the areas coved by the CAFE program, and there is no technological basis to treat them differently. For these reas ons, EPA will retain the proposed greenhouse gas production vehicle sales area location.

5.10.2. Vehicle Certification

Organization: Ford Motor Company Mercedes-Benz (Daimler AG) Association of Intern ational Automobile Manufacturers (AIAM) Alliance of Automobile Manufacturers (Alliance) Toyota Motor North America National Association of Cl ean Air Agencies (NACAA) Sierra Club Motor and Equipment Manufacturers Association Honeywell Transportation Systems Cummins Inc. New York State Department of Environmental Conservation U.S. Coalition for Advanced Diesel Cars Hyde, James

Comment:

Ford Motor Company

Ford supports use of the 3% confirmatory retest criteria for the GHG program. This is consistent with current fuel economy label a nd CAFE retest criteria. There is not any technical justification for different values. In addition, Ford supports an engineering evaluation in lieu of testing at altitude. Any deviation in emissions control pr actices could be described in the auxiliary emission control device descriptions submitte d by manufacturers at ce rtification. [OAR-2009­ 0472-7082.1, p. 10]

Test Cycle Requirements

Five-cycle testing is not appropr iate for the GHG program. It is not consistent with the program goal of GHG compliance at the fleet level while mirroring the current CAFE program protocol that utilizes the FTP (city) and Highway tests (HFET). It would also increase the manufacturer burden, complexity, and prototype requi rements without corresponding benefits.

5-302EPA Vehicle Program, Feasibility, and Estimated Impacts

In addition, Ford supports the current FTP 55/45 c ity/highway weighting split. Although a lot has changed since the 55/45 city/highway split was developed over 20 years ago, it should not be assumed that drivers commuting on the road today w ould get from point A to point B at a higher average speed. One must also consider that more time is spent on the road today during the trip (Le. congestion impact). The current 55/45 aligns more closely with the average consumers drive patterns, taking into account modern -day congestion. [OAR-2009-0472-7082.1, p.10]

Carbon-Related Exhaust Emissions Data

Ford does not support the agencies' request to provide fleet-average carbon-related exhaust emissions data (e.g. CWF* +1,571 *CO+C02). We understand that depending on the type of fuel other constituents would also require reporting; however, Ford sees no value in providing the agency fleet-average carbon related emissions values. Both carbon mo noxide (CO) and nonmethane hydrocarbon are currently re gulated constituents, and with this rule CO2 will also be regulated. Additional reporting requirement s should not be adopted. [OAR-2009-0472-7082.1, p. 11]

Submittal of Compliance Plans

Ford recommends that EPA approve the proposed CO2 compliance plan that it is requiring manufacturers submit before the model year and be fore the certification of any test group. EPA's vision of the compliance plan, as desc ribed in the NPRM, is as follows:

EPA is proposing that manufacturers submit a comp liance plan to EPA prior to the beginning of the model year and prior to the certification of any test group. This plan would include the manufacturer's estimate of its footprint-ba sed standard (Section III.B)... 74 FR at 49560.

EPA seeks comment on the proposal to require manufacturers to submit compliance plans, and also on the criteria the agency should use to evaluate the sufficiency of such plans.

In general, Ford has no objection to a requireme nt for manufacturers to submit a plan to EPA showing how the manufacturer intends to comply with fleet average GHG standards. One plan covering both the car and truck fleets should suffice. As we envision it, the plan would be submitted at the cert preview stage and would include: projected volumes for the car and truck fleet in aggregate and projected GHG fleet averag es for the model year; projected fleet average air conditioning credits, informa tion showing how the manufacturer plans to avail itself of any other flexible mechanisms; the manufacturer's pl an for addressing any deficits that may have been accrued in past model years; and the manufact urer's overall projected credit/debit status at the end of the model year in question. The more specific model type information would not be provided at the certification prev iew meeting, but instead when av ailable at the end of model year timing.

The fact that the manufacturer has submitted a compliance plan for EPA's review should not simply be forgotten once the model year is underway. Compliance with fleet average GHG standards depends not only on what the manufact urer does (producing X volume of vehicles with Y fuel economy), but it also depends how on cons umers react to those vehicles, which in turn

5-303EPA Response to Comments

depends fluctuations in fuel prices, and a hos t of other economic, demographic, and cultural trends that may affect consum er behavior. To the extent th at manufacturers have difficulty achieving compliance with fleet average GHG st andards, there is a good chance that such problems may be based on marked increases or decreases in fuel prices, economic instability, market shifts, Acts of God (e.g., weather events that force a plant to shut down for some period of time), strikes, or other developments outside a manufacturer's control. In the event of eventual noncompliance, the compliance plan submitted by th e manufacturer should be considered in any potential enforcement action. If a manufacturer followed its plan but failed to achieve compliance due to changed external circumstan ces, the imposition of penalties may not be appropriate. [OAR-2009-0472-7082.1, pp. 12-13]

Reporting Requirements

EPA reporting requirements in Pa rt 600.512-12 (Model Year Report)

Ford recommends that Part 600.512- 12 include a statement that 'sub mission of data to the agency that is provided in sufficient detail such that th e relevant fleet averages can be confirmed fulfills that portion of this regulation'. This will provid e manufacturers with flexibility to work with agency staff to provide the required data in the most efficient manner. In the proposed regulation, EPA is very specific about what data is required to be submitted. Ford generally agrees with the regulation, except for the carbon-related exhaust em issions data as discussed earlier. Ford supports the agency's efforts to collect data in su fficient detail so as to confirm a manufacturer's calculations. However, much of the data re quired in 600.512-12 for the model year report is actually required to be submitted during the certi fication and fuel economy labeling processes. In fact, EPA staff has been working collaboratively with industry for a few years to use a new EPA VERIFY database. In designing VERIFY, EPA staff recognized th at much of the final fuel economy data has previously been submitted. Conse quently, data files sent to VERIFY actually reference 'index' or use identification numbers instead of resubmitting the same data time and time again.

Ford also recognizes that some of the data required in 600.512-12 is not included in submissions for other processes, such as the listing of both domestically a nd non-domestically produced car lines and corporate officer attestation. For this, manufacturers s hould have the option to submit a separate report for the model year that woul d contain just the addi tional information.[OAR-2009­ 0472-7082.1, pp. 13-14]

EPA reporting requirements in Part 600.514-12

Ford recommends that EPA include a st atement in Parts 600.512-12,600.514-12 and 537.7 that 'submission of data to either agency that is pr ovided in sufficient detail such that the relevant fleet averages can be confirmed fulfills the porti on of this regulation.' Merely copying the CAFE pre-model year reporting requirements doesn't a ddress long-standing issues with that reporting nor does it minimize a manufacturer's burden.

Part 600.514-12 includes requirements for duplicitous and outdated information such as interior volume index, which is already supplied by manuf acturers as part of the carline submission at

5-304EPA Vehicle Program, Feasibility, and Estimated Impacts

certification and is used for fuel economy labe ling classification, and al so SAE net rated power in kilowatts and the number of carburetor barr els. In 2005, the Alliance commented upon this in comments for the rulemaking for the Average Fu el Economy Standards of Light Trucks, Model Years 2008-2011. The response from NHTSA was 'The NPRM did not propose to revise the data reporting requirements aside from requiring the foot print related data and elimination of data currently required to be reported is outside the scope of this rulemaking. Moreover, consideration of such revisions would require coordination with the EPA to ensure consistency between the two agencies' regulatory programs, given the jo int responsibilities unde r the Energy Policy and Conservation Act (EPCA). However, the agency w ill work to evaluate the necessity of the data currently required to be reported and will consider potential revisions in future rulemakings.' 74 FR at 17654. For the final rule, the agencies shou ld work together to streamline the reporting process and eliminate duplicative requirements. [OAR-2009-0472-7082.1, p. 14]

Mercedes-Benz (Daimler AG):

EPA requests comment with regard to whethe r the 3% value curren tly used during CAFE confirmatory testing is also appropriate for use in the CO 2 program to determine whether a retest is required. See 74 Fed. Reg. 49454, 49562 (Sept. 28, 2009). DAG agrees that th e traditional 3% CAFE variance factor is appropriate for dete rmining whether a re-test is necessary. However, DAG believes it is critical for th e confirmatory calculation pro cedure used for CAFE to be modified in the case of CO 2 compliance determinations.

Confirmatory testing that is within 3% of the ma nufacturer’s original test results are within the parameters of normal testing variation and do not represent a dispar ity under 40 CFR Part 600.008-08 and 40 CFR Part 86.1835-01. The 3% fact or is not the critical issue for CO 2 compliance. The critical issue is how EPA treats confirmatory test va lues that are also within the 3% variance factor.

Under the current CAFE testing regime, which EPA proposes to continue for CO 2 , if a confirmatory test result is belo w the recognized 3% vari ance factor, the conf irmatory test result is used as the compliance value. See 40 CFR Part 86.1835-01(iii). See also Dear Manufacturer Letter, VPCD-99-06 ( LDV, LDT, SVM) Apr il 22, 1999. Thus, under CAFE certification, if a confirmatory test value is within the r ecognized standard variation, EPA replaces the manufacturer’s value. This represents the poten tial that each test confi guration could have its manufacturer’s CO 2 value reduced by up to 2.9% through the confirmatory test process. Such a variation is not large for any one model but can be significant if multiplied across a fleet of vehicles. In addition, such a variation is not as critical under a CAFE compliance program where the worst case scenario is a potential penalty pa yment. Under the CAA, however, EPA has noted that even small variations above the fleet standard can have si gnificant consequences since the penalty option is not available.

In view of the need for manufacturers to be secure and precise in their CO 2 compliance planning, DAG recommends that these sections be amended to allow the manufacturer to continue to use the manufacturer’s original test result that demons trates a less then 3% variation in confirmatory testing, rather than the results of the confirmatory testing, as the official GHG and fuel economy test results. This would be similar to the system in Europe where the manufacturer’s original test

5-305EPA Response to Comments

result is deemed the official resu lt if the confirmatory test is w ithin 4% of the original testing. This system recognizes that testing discrepanc ies within the 3% are within normal testing variation and is consistent with not requiring yet further re-testing. This is true regardless of the number of confirmatory tests conducted.

This change is essential to allow manufacturer s the appropriate certain ty for planning purposes. Using the results of the conf irmatory tests unduly endangers planning certainty because unanticipated discrepancies might reduce a projecte d compliance margin. As a result of the more draconian GHG enforcement program, manufacturers re quire more certainty that their original testing will match their final GHG results as long as those values remain within the normal testing variation parameter of 3%. [OAR-2009-0472-7193.2, pp.18-21]

Association of International Au tomobile Manufacturers (AIAM):

It is also not clear what the significance of a fa ilure to meet the in-use standard would be. We presume that there would be enforcement conseque nces only if the fleet average standard is not met, so only a widespread deterioration problem would affect fleet average compliance. There should be no enforcement consequences directed at a single model, w ithout evidence of fleet average noncompliance. In any case, EPA should clarify in the final rule what procedure it would follow in enforcing a noncompliance with in -use standards, and what would constitute such a noncompliance. [OAR-2009-0472-7123.1, p.7]

EPA proposes to require manufacturers to submit a pre-model year compliance plan and conduct a pre-model year conference with Agency staff. See preamble at 49560. The EPA plan would be similar to the CAFE pre-model year report but would also contain information on anticipated credits. The preamble does not identify a clear pur pose for the review of the plans, criteria for evaluating the plans, or consequences if EPA finds the plans to be unacceptable. [OAR-2009­ 0472-7123.1, p.16]

Alliance of Automobile Manufacturers (Alliance):

CREE

• CO is already a regulated const ituent; therefore, there is no need to include it as an additional requirement in CREE.

• EPA is proposing that CH4 be a regulated constituent. Since NMHC is already a regulated constituent, there would be no need for HC to be included in CREE.

• The CREE equations in several sections of 40 C.F.R. 600-113-08 [i.e., (h )(2), (i)(2), (j)(2), (k)(2) &(l)(2)], appear to put constituents in a CO2-equivalent value. The HC components, however, do not follow this convention and instead use carbon weight fraction (CWF). Also, it is unclear how the CH4 factor of 10.916 in (k )(2) was determined. [OAR-2009-0472-6952.1, p.43]

• The “double jeopardy” issue asso ciated with including previously regulated constituents into the CREE calculation will be avoided. [OAR-2009-0472-6952.1, p.44]

5-306EPA Vehicle Program, Feasibility, and Estimated Impacts

Given the above issues and the fact that CH 4, N2O and all the non-CO2 CREE constituents are marginal contributors to GHG, the Alliance pr oposes a simplificati on: regulate only CO2 emissions with the addition of a factor to account for the cont ribution of CH4 and N2O. This would mean that anywhere th e currently proposed regulation requires th e use of CREE, CREE would be replaced with the measured CO2 value plus an added factor to account for N2O and CH4. [OAR-2009-0472-6952.1, p.44]

In the preamble, EPA proposes that manufact urers submit a compliance plan prior to the beginning of the model year and prior to the certif ication of any test group. This contradicts the regulatory language in 600.514-12(a )(2)(i) which states “The pr e-model year report required by this section for each model year must be s ubmitted during the month of December (e.g., the premodel year report for the 2012 model year must be submitted during December, 2011).” [OAR-2009-0472-6952.1, p.51]

EPA also needs to clarify what information is required in the pre-model year and supplementary reports. [OAR-2009-0472-6952.1, p.51]

Recommendation:

Assuming that EPA wants the GHG pre-model year report before the certif ication of any test group, the report would have to be due in December of the model year minus two years (e.g., MY 2012 report would be due in December 2010) and EPA should correct the regulatory language accordingly. [OAR-2009-0472-6952.1, p.51]

Manufacturers use various methods for projecting their fleet aver age CO2 compliance so details such as model type CO2 values may not be available at the time th e certification preview meeting as suggested in the preamble. Therefor e, the Alliance suggests that the only items needed for the GHG pre-model year report are th e projected total produc tion volume, projected fleet average CO2 values, projected fleet aver age CO2 standards and projected fleet average CO2 credit status. The additional detail could be made available in the same timeframe as the pre-model year CAFE reports that ar e required by NHTSA. [OAR-2009-0472-6952.1, p.51]

There is no need for EPA to spell out the de tail regarding what w ould be required in a “supplementary” report. The regulation should simp ly be that the supplementary report should contain sufficient detail to allow proper analys is of the situation. The Alliance supports EPA’s proposed mobile sources GHG reporting requireme nts for CO2 measuring and reporting of new vehicles in accordance with the current em issions certification pro cedures. EPA has also expressed an interest in collecting additional in-u se data as a means for continually updating and improving inventory assessments from total mobile source fleet emissions. [OAR-2009-0472­ 6952.1, p.51]

Confirmatory Testing Process (Proposed re gulations in 40 C.F.R. 86.1835-01 and 600.008-08)

EPA has proposed to add a “within 3%” requirement for CO2 when determining whether additional confirmatory testing needs to be performed. In addition, EPA has proposed that a

5-307EPA Response to Comments

manufacturer needs to accept the highest CO2 va lue if they are accepting the lowest FE value during the confirmatory test process. [OAR-2009-0472-6952.1, p.52]

The proposed addition of a 3% CO2 requirement crea tes an additional pathway that could lead to additional manufacturer and EPA confirmatory testing burden. The a dditional testing could potentially delay certification schedules and ve hicle launch. The Alliance fails to see how this duplicative judgment criterion can be justifie d in terms of overall GHG benefit. [OAR-2009­ 0472-6952.1, p.52]

Recommendation:

Because of the close relationship between CO2 and FE, the addition of the CO2 requirements only serve to make the decision- making process more complicated without any real benefit. The manufacturers propose the removal of the new CO2 criteria and to continue to allow the decisions to be made based on th e FE criteria. [OAR-2009-0472-6952.1, p.52]

Running Change Data Requirements (Propos ed regulations in 40 C.F.R. 600.507-12)

EPA has proposed additional crite ria for EV, HEV, PHEV, fuel cell and advanced technology vehicles. The proposed criteria stat es that additional data is re quired if calibration changes are made that result in a 4% decr ease in FE. [OAR-2009-0472-6952.1, p.52]

Recommendation:

The real purpose of the running change data requirements is to provide the method for the possible recalculation and updating of fuel economy label values. Th erefore, these criteria should be deleted from the regulation and readdresse d in future advanced technology FE label rulemakings. [OAR-2009-0472-6952.1, p.53]

Toyota Motor North America:

In addition to CO2, EPA proposes that the emi ssions measured from each test vehicle shall include hydrocarbons (HC) and carbon monoxide (CO), for purposes of compliance with the fleet average and in-use standards. All three of these measured exhaust constituents are used to determine the amount of fuel burned over a given te st cycle via the 'carbon balance equation' and are an integral part of the current fuel econom y test and calculation. To account for the carbonrelated combustion products, HC emissions are adju sted by a coefficient th at reflects the carbonweighted fraction (CWT) of th e fuel being burned and CO emissions are adjusted by a coefficient that Page 4 of 31 reflects the CWF of the CO molecule. EPA proposes that the carbon related exhaust emissions of each vehicle be calculated according to the following formula, where HC, CO2 and CO2 are in units of grams per mile:

CREE g/mi = CWF*HC + 1 .571 *C O + CO2 [OAR-2009-0472-7291, pp.7-8]

Toyota has concerns with EPA's CREE proposal for several reasons.

5-308EPA Vehicle Program, Feasibility, and Estimated Impacts

-The CREE calculation does not le nd itself well to a fleet average standard. A better metric would be using COZ to determine compliance with fleet average standards .

-HC and CO are already regulated constituents, so there is no need to again include these emission measurements into another standard, as proposed.

-The contribution of HC and CO in the CREE fo rmula is approximately 1% of the overall CO2 equivalent value. [OAR-2009-0472-7291, p.8]

Thus, there appears to be little technical ba sis to support the proposed CREE calculation. [OAR2009-0472-7291, p.8]

EPA proposes to keep the current Tier 2 struct ure for cars and trucks in the certification requirements for CO2. At certifi cation, manufacturers would use the CO2 emission level from the Tier 2 Emission Data Vehicle (EDV) as a surroga te to represent all of the models in the test group. Following further certification testing w ould generally be required to demonstrate compliance with the fleet average CO2 standard. EPA's issuance of a certificate would be conditioned upon the manufacturer's s ubsequent model level testing a nd attainment of the actual fleet average. EPA proposes to require a single EDV that would represent the test group for both Tier 2 and CO2 certification. The manufacturer w ould be allowed to initially apply the EDV's CO2 emissions value to all models in the test group. However, as a conditi on of the certificate, this surrogate CO2 emissions value would genera lly be replaced with actual, model level CO2 values based on results from CAFE testing that occurs later in the model year. This model level data would become the official certification te st results and would be used to determine compliance with the fleet average. [OAR-2009-0472-7291, p.28]

Toyota clearly supports the establishment of a fl eet average CO2 standard. However, Toyota has concerns with the practical aspect of EPA's proposal. These standards will not be established until completion of all model level testing at the end of the model year. Thus, a manufacturer could be producing 'noncomplying vehicles' duri ng the model year and would not know it until after the model year fleet average calculations were completed. Depending on the interpretation of the regulations, a manufacturer could be deemed to have produc ed uncertified configurations. Toyota does not support conditi onal certificates as EPA pr oposes. [OAR-2009-0472-7291, p.28]

3% CO2 Criteria

As part of the current CAFE and Tier 2 complia nce programs, EPA selects a subset of vehicles for confirmatory testing with th e goal of validating the manufactur ers test results. EPA proposes that CO2, N2O, and CH4 would be added to the em issions measured as part of the Tier 2 and CAFE confirmatory testing. These emission va lues measured at the EPA laboratory would continue to stand as official as is current practice under the ex isting regulatory programs. [OAR2009-0472-7291, p.29]

EPA's proposal would follow the cu rrent practice of fuel economy testing in that, during EPA's confirmatory testing the EPA CO2 value differs from the manufacturers value by more than 3%, manufacturers could request a re-test. The result s of the re-test would then stand as official

5-309EPA Response to Comments

regardless of manufacturers previous value. In the NPRM, EPA proposes to allow the re-test request based on 3% or greater disparity since a manufacturers fleet average emissions level would be established on the basis of model leve l testing only. EPA requests comment on whether the 3% value currently used duri ng the CAFE confirmatory testi ng is appropriate and should be retained under the proposed GHG program. [OAR-2009-0472-7291, pp.29-30]

Toyota believes that EPA's proposed 3% th reshold on CO2 is unnecessary. Vehicle fuel economy, which is closely correlat ed to tailpipe CO2, ha s been reported by th e industry since the advent of CAFE program in 1975. The current 3% criteria on fuel economy under the CAFE confirmatory program has been an effectiv e means for making confirmatory judgments on manufacturers fuel economy results. As a result , assigning another 3% cr iteria on CO2, as EPA proposes, seems like an unnecessary certification requirement when the 3% fuel economy threshold can accomplish the same confirmatory objective. Additionally, Toyota is concerned that introducing an additional 3% criteria for CO 2 adds no value to the confirmatory process while imposing the risk of causing delays in cer tification and vehicle st art of production. [OAR2009-0472-7291, p.30]

National Association of Cl ean Air Agencies (NACAA):

Fourth, EPA indicates that it will continue to use the same test me thods and test fuels to certify vehicles affected by this proposal. NACAA reco mmends, however, that EPA begin using realworld fuels. Similarly, NHTSA should also us e real-world fuels for testing purposes. The association also recommends that EPA determ ine GHG emissions from new vehicles based on a calculation that incorporates lif ecycle costs. [OAR-2009-0472-7071.1, p.3]

Sierra Club:

The proposed greenhouse gas and fuel economy sta ndards represent a tremendous step forwards in terms of reducing pollution and improving vehi cle efficiency. However, the tests used to measure fuel economy and vehicle emissions compliance remain mired in the 1970s. EPA is proposing to use the two tests that currently de termine compliance with CAFE standards, the Federal Testing Procedure (FTP), or “city” test, and the Highway Fuel Economy Test (HFET), or “highway” test. Rife with arcane assumptions that do not represen t real-world driving conditions or behaviors, these two tests resu lt in fuel economy values that are significantly higher than those achieved in real-world driving – the new green house gas standards correspond to CAFÉ values and will similarly differ from real world emissions. [OAR-2009-0472-7278.1, p.17]

Designed when the national speed limit was 55 mile s per hour, drivers are assumed to average 48 miles per hour and reach a maximum of 60 mph on the highway and to never turn on accessories such as air conditioners or heaters. Today, 99 percent of cars are sold with air conditioners and the EPA has found that more than 28% of dr iving occurs at speeds greater than 60 mph. Acceleration and deceleration rates used in the [OAR-2009-0472-7278.1, p.17] tests also do not represent real-world behavior. Dynamometers available in 1974 could not simulate real-world acceleration rates; therefore, the city and highway tests prescrib ed acceleration rates of 3.3 and 3.2, respectively. Today the same acceleration rate s are being used to measure fuel economy,

5-310EPA Vehicle Program, Feasibility, and Estimated Impacts

even though on-road driving studies have f ound maximum acceleration rates of roughly 11-12 mph/second. [OAR-2009-0472-7278.1, p.18]

It is clear that new testing procedures are needed. We are encouraged by language in the proposed rule that “both agencies recognize that these test procedur es are not fully representative of real world driving conditions ,” and that “both EPA and NHTS A are interested in developing programs that employ test procedures that are more representative of real world driving conditions, to the extent authori zed under their respectiv e statutes.” We recognize that NHTSA is somewhat constrained by EPCA in its ability to develop new test proced ures for cars, but has more latitude when testing light trucks. Simila rly, we recognize that EPA has wide authority under the Clean Air Act to design new, more accu rate testing procedures. Going forward, we strongly support the development of test procedures that reflect real-world driving conditions and behaviors and for MY 2017 and beyond and that standards be set at these real world levels so that labels and program compliance are us ing the same values. [OAR-2009-0472-7278.1, p.18]

Motor and Equipment Manufacturers Association:

Test Cycle Split for Driving Condition Calculatio ns Must Be Revised to Reflect Real World MEMA supports regulations aimed at improving real-world fuel economy and reducing emissions and we applaud the NHTSA and the EPA for their effort to harmonize these regulations. Today, in the 21st century, as growth in Amer ica has expanded far beyond our metropolitan centers, more and more driving miles are accrued on the highway. The driving profile of Americans has changed; hence the conclusion of a 2006 EPA study that found today's average driver accumulates about 57 percent of th eir miles on the highway. Yet the proposed rule relies on a 1970s-era driving calcu lation (a split of 55 pe rcent city and 45 percent highway) that places more emphasis on city driving, thus prom oting the development of technologies geared toward city driving. [OAR-2009-0472-7121.1, p.3]

The calculations in the rule, as proposed, w ill discourage the American auto industry from producing solutions that meet c onsumer demand for efficiency in highway driving. The industry will make cost-benefit decisions on technologies to maximize the fuel economy numbers with a 55-city/45-highway split and will make long-term technology and capital decisions without an assurance that those decisions will produce real-w orld results for the consumer and the country. The industry should not be put in a position to wait until 2017 when the EPA proposes to update its driving data (as discussed in the NPRM); havi ng to wait gives rise to uncertainty, which, in the automotive industry, holds up decision-making and product planning. In an industry that relies heavily on long-term planning, design, and production cycles, this is not acceptable. The 2006 data provides much more current and accurate data on the driving profile, which will significantly reduce uncertainty. This rulemaking is the opportunity to make the change. The industry should be provided with firm direction now so that solutio ns chosen at present will not only be more realistic and meet today's consumer demands, but al so will provide more industry certainty through 2017 and beyond. [OAR-2009-0472-7121.1, p.4]

In order to improve and achieve the goals of the National Program to represent driving conditions in the real world, NHTSA and EPA must consider revising the te st result calculations to more accurately reflect the nation's driving behavior as illustrated in the 2006 study. MEMA

5-311EPA Response to Comments

believes that America needs a broad portfolio of technologies that maximize our ability to achieve fuel efficiency and reduce emissions. A rule that ignores toda y's real world driving habits will limit choice while forcing consumers to base automotive purchases on outdated fuel efficiency information. Therefore, MEMA urges NHTSA and EPA to change the calculations in the final rule to reflect a 43 percent city/57 percent highway split. MEMA believes that realworld benefits can only be achieved with real-world measures. This simple approach - a minor change with big consequences - could have profound effects on deployment of research funds and capital investment, on the choices of vehicle technologies, and on the real-world results for the consumer, emissions reduction, and fuel efficiency. [OAR-2009-0472-7121.1, p.4]

Honeywell Transportation Systems:

Consistent with Honeywell's support for m eeting EPA and NHTSA's fuel economy and GHG goals, we believe that the calculati on procedures should be revised to reflect accurately actual inuse driving style. With respect to the proposed calculation of GHG emissions and CAFE, the city to highway weighting must be adjusted to mo re accurately match the national vehicle mile traveled ratio based on data that best reflect actual driving conditions. Using a more accurate ratio will promote the technologies that maximi ze efficiency for the lowest cost. [OAR-2009­ 0472-7165.1, p.7]

It is our understanding that EPA is aware of this discrepancy in test cycles as exemplified by the changes implemented for vehicle fuel economy labe ling. Adjusting the weighting of test cycles will result in more robust control of CO2 emi ssions and petroleum consumption. This does not require new testing; rather EP A should adjust the VMT ratio ba sed on a more realistic driving mix for calculating CAFE and carbon dioxide emissions. [OAR-2009-0472-7165.1, p.7]

Cummins Inc.:

The FTP and HFET 2-cycle test were estab lished by EPA over 30 years ago to measure emissions and to calculate fuel economy for CA FE purposes. The two cycles are weighted 55% for city driving and 45% for highway driving. EPA previously determined that not only does the 2-cycle test not reflect real-wor ld driving patterns, but also th e 55/45 weighting does not reflect the typical driving experience. In 2006, EPA esta blished a 5-cycle procedure to more accurately reflect what consumers achieve in the real world and used that to calculate fuel economy values for labeling purposes. Using the 5-cycle test, vehi cle sticker miles-per-gallon (mpg) values for both city and highway generally decreased betw een 8% and 30%. However, EPA is still using the outdated 2-cycle test pr ocedure. [OAR-2009-0472-7205.1, p.2]

In a rulemaking where EPA established the 5-cycl e test procedure for fuel economy labeling, the Agency concluded that the national light-duty fleet’s breakdown for vehicle miles traveled (VMT) is 43% city and 57% highway driving. EPA used this 43/57 cycle weighting to determine the city, highway and combined fleet fuel effici ency in its “Light- Duty Automotive and Fuel Economy Trends” annual reports which provide the Agency’s estimate of the fuel consumption and CO2 emissions for a fleet over its useful lif e. However, EPA still continues to use the old 55/45 city/highway weighting for CAFE and now the proposed GHG standa rd program. We urge EPA and NHTSA to revisit this issue and revise th e weighting factors to be tter reflect real-world

5-312EPA Vehicle Program, Feasibility, and Estimated Impacts

driving patterns such that the new GHG and CAFE standards drive vehicle designs which maximize the societal benefits. [OAR-2009-0472-7205.1, p.3]

New York State Department of Environmental Conservation:

Certification Test Fuel New York has historically commented in applicable rulemakings that in-use fuels should be used for certification. The same holds true for this proposal. We believe that there [OAR-2009-0472­ 7454, p.3] exists some opportunity for manufacturer s to reduce the effect ive stringency of the greenhouse gas standards by adjusting the compositi on of certification fu els within the overly broad ranges allowed by EPA. In particular, aromatics have approximately twenty percent greater CO2 emissions per unit of combustion energy than paraffins. Low aromatic content formulations that could not be produced across the gasoline or diesel fuel pool could easily be produced in certification fuel vol umes. It appears that for gaso line a reduction in CO2 emissions of six to seven percent could be gained, with no corresponding emissions reduction in the field. Certification gasoline and diesel fuel specifi cations should be amended to require minimum aromatics content consistent w ith the norm for commercial gaso line and diesel fuel. [OAR-2009­ 0472-7454, p.4]

U.S. Coalition for Advanced Diesel Cars:

According to a 2006 EPA study, today's average driver accumulates approximately 57% of their miles on the highway. Yet the proposed rule relies on a 1970's-era driving calculation that places more emphasis on city driving, thus promoting th e development of technologies geared toward 'stop and go' driving. The Coalition believes that America needs a broad por tfolio of technologies that maximize our ability to achieve fuel e fficiency and reduce GHG emissions. A rule that ignores today's driving habits will limit choice because it will discourage automakers from developing solutions that reflect the reality of modem consumer dr iving habits and needs. [OAR2009-0472-7496, p.3]

The Coalition recommends a change to the propo sed rule to reflect a 43% city/57% highway cycle weighting when calculating a vehicle's fuel economy and CO2 emissions. This simple update does not require any changes to the test pr ocedures which we feel should not be changed in this ruling. This calculation change more accura tely represents today's driving behavior based on the EPA's own assessments and data. The rule should capture a techno logy neutral approach that empowers consumers to choose a solution th at is right for them. No specific vehicle technology will meet all of America's driving needs. All options must be available in order to achieve our administrative, le gislative and societal objectiv es of improving fuel economy, reducing GHG emissions and advancing en ergy independence. [OAR-2009-0472-7496, p.3]

The Coalition maintains that C ongress has made its intentions abundantly clear: EPA must provide the automotive industry w ith reality-based calculation pr ocedures on which to compare the effectiveness of technology choices to re gulated parties under rapidly changing limits. Specifically, the Coalition urges EPA and NHTSA to reconsider the following aspects of the proposed rule: [OAR-2009-0472-7496, p.3]

5-313EPA Response to Comments

Use accurate data

EPA should not employ test cycle weighting fact ors that do not reflect current, real-world driving patterns where American fuel is c onsumed and GHG emissions are created. EPA should apply the findings of its exhaus tive 2006 study of current Americ an driving patterns that prove average consumers accumulate 43 percent of all m iles at speeds akin to city driving and 57 percent at speeds akin to highway driving (43/57) This real-world definition of driving patterns is markedly different than historic, 1976-cycle weightings used for compliance under Corporate Average Fuel Economy (CAFE) regulations (55% city and 45% highway) that EPA and NHTSA propose to retain under the new GHG regul ations. EPA should not launch 21st century regulations with a compliance mechanism drivin g technology selection and vehicle calibration that is rooted in a 1970s mileag e mix that the agency has alrea dy declared obsolete in earlier rulemaking.[OAR-2009-0472-7496, p.3]

Be consistent

EPA employs the 43 percent city/57 percent high way cycle weighting for purposes of measuring the private and public results to be generated by the new rules in real-world driving, while proposing to retain the obsolete 55/45 cycle weighting for purposes of measuring the GHG saving potential of vehicles produ ced under the new rules. We urge EPA to universally use the most accurate calculation procedures for purpos es of measuring both vehicle compliance and regulatory benefits. [OAR-2009-0472-7496, p.4]

Consider the consumer

By recognizing the adverse consequences of an outdated drivecycle weighting, we urge the Administration to promote broad consumer choice, not limit it. [OAR-2009-0472-7496, p.4]

The Coalition applauds EPA and NHTSA for main taining the 'diesel equi valency factor' of 1.0 under the new rules. This long-establ ished factor appropriately treats one gallon of diesel fuel to be equivalent to one gallon of pure gasoline in th e calculation the agency utilizes to convert the results of its gram-per-mile tailpipe tests in to mpg equivalents. These mpg equivalents are utilized by NHTSA in administering the CAFE program and by EPA for label fuel economy reporting to the American public. By withdrawin g discussion of a change in the diesel equivalency factor - that would treat a diesel vehicle as if it were running on gasoline - the EPA has recognized that fuels have different charact eristics as they genera te motive power and are consumed in the American economy, includ ing biofuels like E85 and B20. [OAR-2009-0472­ 7496, p.11]

The coalition urges the EPA to align its vehicle cer tification test procedures with fuels that are commercially available to the Am erican public. Vehicles should be certified with fuels that American consumers can actually buy in the real world. [OAR-2009-0472-7496, p.12]

Mr. James Hyde (private citizen):

5-314EPA Vehicle Program, Feasibility, and Estimated Impacts

Certification Gasoline: Current certification gasoline specifications do not addre ss fuel properties which impact the measured C02 emissions and fuel economy of vehicles. There are no specifications for the energy content of the fu el or for the carbon:hydrogen ratio. The loose specifications of aromatics at 0-35 vol% and olefins at 0-10 vol% leave much room for variations in both C02 emissions and fuel economy. The components of gasoline vary substantially in energy content and carbon weight fraction. Th erefore, the measured emissions and fuel economy can vary (or be varied) de pending on choices about the composition of the gasoline. [OAR-2009-0472-7258.1, pp. 1-2]

Fortunately, there are no methods for simultaneous ly increasing fuel economy and reducing C02 emissions by gasoline compositional changes. To the extent, however, that the C02 regulation and the CAFE regulation impact individual vehi cle manufacturers, some gasoline compositional changes could enhance meeting one of the standards. [OAR-2009-0472-7258.1, p. 2]

C02 emissions depend only on the carbon content of the fuel, while fuel economy is impacted by all elements in the fuel which are capable of combining with oxygen and giving off heat. Principal among these is hydrogen. For most hydrocarbons found in gasoline, hydrogen constitutes from 7 to 17 weight % of the co mpound. Benzene is particularly hydrogen poor and therefore carbon rich. The proper ties of some typical gasoline components are shown in Table 1. [OAR-2009-0472-7258.1, p.2] [See OAR- 2009-0472-7258.1, p. 2 for Table 1]

As can be seen in Table 1, toluene produces c onsiderably more CO2 per unit of heat than do most other gasoline components. In fact, all aromatics will cause higher C02 emissions per gallon of gasoline than does w hole gasoline. [OAR-2009-0472-7258.1, p.2]

The figure below (which uses actual data fr om EPA report No. EPA-450/4-80-036) shows the impact of aromatics content on g C02/ga llon for commercial fuels. [OAR-2009-0472-7258.1, p.2] [See OAR-2009-0472-7258.1, p. 3 for the figure]

A manufacturer with sufficient CAFE credits (o r willing to pay the monetary penalties), but having trouble meeting the CO2 standards could d ecrease the aromatics content of the gasoline used for certification to decrease C02 emissi ons. Current regulations do not address this issue. [OAR-2009-0472-7258.1, p.3]

Fuel Property Corrections to Fuel Economy Calculations: In 1984 General Motors petitioned EPA to have its CAFE numbers adjusted because the properties of the gaso line used to make the measurements had changed from that in 1975 when the program began. EPA chose to use an equation that 'would compensate for fuel propert y changes and yield a calculated fuel economy value equal to that which the current equati on [then 40CFR600.113-78] w ould yield if 1975 test fuel had been used.' [50FR27188, July 1, 1985] The new equation [40CFR600.113-87] uses the carbon weight fraction (CWF), specific gravity (s g) and net heating value (NHV) of the actual gasoline and corrects the mpg to values for these parameters which were assumed to be current in 1975. The assumptions used here have not been verified for current technology vehicles or fuels. [OAR-2009-0472-7258.1, p. 3]

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Substantially Similar: With the addition of C02 as a certification emissi on EPA must consider a reinterpretation of the substantially similar interpretation for gasoline. Gasoline properties which impact C02 emissions will be an additional criterion for determining if a commercial gasoline is substantially similar to certification gasoline. Th is leads to the issue that certification gasoline does not contain any oxygenates, while commercial gasoline is essentially required to contain an elevated level of oxygenates. On a C02 per unit energy basis, ethanol is about 4% higher than certification gasoline. Blends of 10 vol% ethanol with certificati on gasoline would then produce about 0.4% more C02/mi (assuming that mileage is directly related to fuel energy content). [OAR-2009-0472-7258.1, p. 4]

The Basic Relationship Between CO2 Emissions and Fuel Economy: A basic premise of the combined GHG/CAFE rulemaking is that there is a definite and predictable relationship between CO2 emissions and fuel economy. In general this relationship exists when the CO2 emissions and fuel economy are measured with the same vehicle, fuel and test cycle/conditions. For certification gasoline EPA has esse ntially defined this relationshi p as 8887 grams CO2 equals 1 gallon. [OAR-2009-0472-7258.1, p. 5]

EPA, however, allows manufacturers to calculate fuel economy instead of measuring it. This is the procedure called 'analytically derived fuel economy' or ADFE. In the ADFE process, a manufacturer used fuel economy related properties of an untested vehicle to calculate what its fuel economy would be expected to be based on the fuel economy of a similar vehicle. There is, however, no procedure to calculate the expected CO2 emissions of the untested vehicle. In the past EPA has allowed the C02 emissions of the tested vehicle to be entered into its database. This practice distorts the C02 to mpg relationship and does not provide a correct value for CO2 emissions. Additionally, since th e use of ADFE is highly variab le among manufacturers, its impact is not uniform. The current rulemaking do not appear to address this concern. [OAR2009-0472-7258.1, p. 6]

The magnitude of this effect is shown in the figure below which shows th e percentage deviation from the nominal value of 8887 for MY2009 and Fuel 61 (the standard EPA certification gasoline). [OAR-2009-0472-7258.1] [See OA R-2009-0472-7258.1, p. 6 for the figure]

The data points outside the central cluster s how the combined impacts of ADFE and fuel property corrections. The deviati ons from zero are much too large for the proposed programs. [OAR-2009-0472-7258.1, p. 6]

EPA Response:

Test Procedures

See section 5.1.2 for EPA’s response to comments regarding the weighting of city and highway fuel economy and greenhouse ga s emission test results. 25 See Section III.B.1 of the preamble to

25 Comments from the Alliance did not directly address the c ity/highway test procedure, but did indirectly support the use of the current city and highway test procedures . For example, Alliance comments indicated that “The Alliance supports the joint rulemaking, including the proposed coordinated framework and structure. Further, the Alliance supports the proposal that both NHTSA and EPA use an attribute-based approach.” AIAM comments

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the final rule for more detailed information on CO 2 test procedures, Section III.C.1 on Air Conditioning Emissions, and Section III.B.7 for N 2 O and CH 4 test procedures.

EPA will continue to allow certain testing flexib ilities that exist under the CAFE program. EPA has always permitted manufacturers some ability to reduce their test burden in tradeoff for lower fuel economy numbers. Specifically the practice of “data substitution” enables manufacturers to apply fuel economy test values from a “worst case” configuration to other configurations in lieu of testing them. The substituted values may only be applied to configurations that would be expected to have better fuel economy and for whic h no actual test data exist. EPA will continue to accept use of substituted data in the GHG program, but only when the substituted data are also used for CAFE purposes.

EPA's regulations for CAFE fuel economy testi ng permit the use of anal ytically derived fuel economy data in lieu of actual fuel ec onomy testing in certain situations. 26 Analytically derived data are generated mathematically using expr essions determined by EPA and are allowed on a limited basis when a manufacturer has not tested a specific vehicle configur ation. This has been done as a way to reduce some of the testi ng burden on manufacturers without sacrificing accuracy in fuel economy measurement. EPA has issued guidance that provides details on analytically derived data and that specifies the conditions when anal ytically derived fuel economy may be used. EPA will apply the same guidance to the GHG program and will allow any analytically derived data used for CAFE to also satisfy the GHG data reporting requirements. EPA will revise the terms in the current equations for analytically derived fuel economy to specify them in terms of CO 2 . Analytically derived CO 2 data will not be permitted for the Emission Data Vehicle representing a te st group for pre-production certification, only for the determination of the model level test resu lts used to determine actual fleet-average CO 2 levels.

EPA is also retaining the definitions needed to determine CO 2 levels of each model type (such as "subconfiguration," "configuration, " "base level," etc.) as they are currently defined in EPA's fuel economy regulations.

Note that additional Response to Comments inform ation about test procedures are contained in section 5.1.2 of this document.

Retest Criteria

Under current practice, if during EPA’s confirmatory fuel economy testing, the EPA fuel economy value differs from the manufacturer's value by more than 3%, manufacturers can request a re-test. Results of the re-test stand as official, even if they differ from the manufacturer value by more than 3%. EP A proposed extending this practice to CO 2 results, but manufacturers commented that th is could lead to duplicative te sting and increased test burden. EPA agrees that the close relationship between CO 2 and fuel economy precludes the need to

(outlined in section 5.1.2. of this Response to Comments document) indicate that “AIAM does not support fundamentally changing the fuel economy/greenhouse test procedures at this time. Our relu ctance to support such changes is due to the impact that such changes could have on the eff ective stringency of the standards.”
26 40 CFR 600.006-08(e)

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conduct additional confirmatory tests for both fuel economy and CO 2 to resolve potential discrepancies. Therefore EPA will continue to a llow a re-test request based on a 3% or greater disparity in manufacturer and EP A confirmatory fuel economy test values, since a manufacturer's fleet average emissions level would be estab lished on the basis of model level testing only (unlike Tier 2 for which a fixed bin standard structure provides the opportunity for a compliance buffer).

Carbon-Related Exhaust Emissions (CREE) Data

EPA received comments from the Alliance, Ford and Toyota questioning the appropriateness of using CREE emissions instead of simply CO2 emissions or CO2 plus weighted CH4 and weighted N2O emissions. Toyota comments, fo r example, state that “The CREE calculation does not lend itself well to a fleet average sta ndard. A better metric would be using CO2 to determine compliance with fleet average sta ndards. HC and CO are already regulated constituents, so there is no need to again in clude these emission measurements into another standard, as proposed.”

For the purposes of compliance with the fleet average and in-use standards, the emissions measured from each test vehicle will include hydrocarbons (HC) and carbon monoxide (CO), in addition to CO 2 . All three of these exha ust constituents are current ly measured and used to determine the amount of fuel burned over a given test cycle using a “car bon balance equation” defined in the regulations, and thus measurement of these constituents is an integral part of current fuel economy testing. As explained in Sec tion III.B of the preamble to the final rule, it is important to account for the total carbon conten t of the fuel. Theref ore the carbon-related combustion products HC and CO must be in cluded in the calculations along with CO 2, and any other carbon-containing exhaust components such as aldehyde emissions from alcohol-fueled vehicles. CO emissions are adjusted by a coe fficient that reflects th e carbon weight fraction (CWF) of the CO molecule, and HC emissions are adjusted by a coefficient that reflects the CWF of the fuel being burned (the molecular we ight approach doesn’t work since there are many different hydrocarbons compounds being accounted for). Thus, EPA will calculate the carbonrelated exhaust emissions, also known as “CR EE,” of each test vehicle according to the following formula, where HC, CO, and CO 2 are in units of grams per mile:

carbon-related exhaust emissions (g rams/mile) = CWF*HC + 1.571*CO + CO 2
where: CWF = the carbon weight fraction of the test fuel

As part of the current CAFE and Tier 2 complia nce programs, EPA selects a subset of vehicles for confirmatory testing at its National Vehicle and Fuel Emissions Laboratory. The purpose of confirmatory testing is to validate the manuf acturer’s emissions and/or fuel economy data. Under this rule, EPA will add CO 2 , N 2 O, and CH 4 to the emissions measured in the course of Tier 2 and CAFE confirmatory testing. The N 2 O and methane measurement requirements will begin for model year 2015, when requirements fo r manufacturer measurement to comply with the standard also take effect. The emission values measured at the EPA laboratory will continue to stand as official, as un der existing regulatory programs.

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Test Fuel

The National Association of Clean Air Agencies (NACAA) and the U.S. Coalition for Advanced Diesel Cars commented that EPA and NHTSA s hould use test fuels that are commercially available to the American public and can be purch ased in the real worl d. New York State and Mr. James Hyde commented that the current test fuel specifications for aromatics (currently 0­ 35% by volume) and olefins (currently 0-10% by volume) leave much room for variations in both CO2 and fuel economy;” and recommended th at EPA should take a fr esh look at these and other test fuel properties to de termine if changes are necessary.

EPA is also concerned about th e representativeness of current test fuel, but considers major revisions to test fuel(s) to be outside the scope of this GHG rule. Changes such as those suggested in comment would have ramifications for the stringency of EPA emission standards (for criteria pollutants and CO2 emissions); fuel economy labeling requirements, CAFE requirements and gas guzzler requirements. In addition, for CAFE testing EPA is required by statute to “use the same procedures for passenge r automobiles the Administrator used for model year 1975 (weighted 55 percent urban cycle and 45 percent highway cycle), or procedures that give comparable results;” ref. 49 USC 32904(c) and 40 CFR 600.510-08.

EPA will take these comments under advisement if we initiate any future rules related to test fuel specifications used for emissions and fuel economy testing.

Conditional Certificates

There was general support among most commente rs to harmonize GHG test procedures with CAFE test procedures, including the concep t of issuing certifi cates based on the CO 2 certification level of the emission-data vehicl e until additional fleet average data can be generated to demonstrate compliance with the fleet average CO2 standard. However Toyota expressed concerns with the practical aspect of issuing conditiona l certificates based on compliance with the fleet average CO2 standard at the end of the model year. Toyota is concerned that a manufacturer “could be produc ing ‘noncomplying vehicles’ during the model year and would not know it until after the m odel year fleet average calculations were completed.” For that reason, Toyota did not support the concept of issuing conditional certificates.

Under Tier 2 and other EPA emi ssion standard programs, vehicl e manufacturers certify a group of vehicles called a test group. A test group t ypically includes multiple vehicle car lines and model types that share critical emissions-related features. 27 The manufacturer generally selects and tests one vehicle to represent the entire test group fo r certification purposes. The test vehicle is the one expected to be the worst case for the em ission standard at issue. Emission results from the test vehicle are used to a ssign the test group to one of seve ral specified bins of emissions

27 The specific test group criteria are described in 40 CFR 86.1827-01, car lines and model types have the meaning given in 40 CFR 86.1803-01.

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levels, identified in the Tier 2 rule, and this bi n level becomes the in-use emissions standard for that test group. 28

Since compliance with the Tier 2 fleet average depends on actual test group sales volumes and bin levels, it is not possible to determine compliance with the fleet average at the time the manufacturer applies for and rece ives a certificate of conformity for a test group. Instead, EPA requires the manufacturer to make a good faith dem onstration in the certification application that vehicles in the test group will both 1) comply th roughout their useful life with the emissions bin assigned, and 2) contribute to fleet-wide complia nce with the Tier 2 average when the year is over. EPA issues a certificate for the vehi cles included in the test group based on this demonstration, and includes a condition in the ce rtificate that if the manufacturer does not comply with the fleet average, then production vehicl es from that test group will be treated as not covered by the certificate to the extent needed to bring the manufacturer’s fleet average into compliance with Tier 2.

The certification process often occurs several months prior to production and manufacturer testing may occur months before the certificate is issued. The certification process for the Tier 2 program is an efficient way for manufacturers to conduct the needed test ing well in advance of certification, and to receive the needed certificates in a time frame which allows for the orderly production of vehicles. The use of a condition on the certificate has been an effective way to ensure compliance with the Tier 2 fleet averag e. The condition will be applied similarly under the greenhouse gas program.

Thus, EPA believes it is appropria te to, and will finalize the conditional certificate concept as proposed for several reasons, as follows:

 to reduce manufacturers’ test burden;

 to be consistent with the Tier 2 fleet average NOx compliance requirements (which has experienced very few problems); and

 to harmonize the GHG process as much as possible with the current fuel economy and CAFE process,

Diesel Equivalency Factor

The U.S. Coalition for Advanced Diesel Cars supported EPA and NHTSA’s proposal to maintain the current ‘diesel equivalency factor’ of 1.0 under the new rule s, stating that this “long established factor appropriately tr eats on gallon of diesel fuel to be equivalent to one gallon of pure gasoline.”

EPA received no other comments on this issue, and is finalizing as proposed the 1.0 diesel equivalency factor for purposes of measur ing fuel economy values used in calculating manufacturers’ CAFE levels.

28 Initially in-use standards were different from the bin leve l determined at certification as the useful life level. The current in-use standards, howe ver, are the same as the bin levels. In a ll cases, the bin level, reflecting useful life levels, has been used for determining compliance with the fleet average.

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Running Changes

EPA proposed revisions to paragraph § 600.507-12, regarding running ch ange requirements for advanced technology vehicles (including electric vehicles, fuel cell vehicles, hybrid electric vehicles and plug-in hybrid electric vehicles). The proposed regulation changes would require manufacturers in some cases, to re-label and submit additional CAFE/GHG data for running changes which are expected to result in less fuel efficient (or optionally result in more fuel efficient) vehicle operation as compared to th e original fuel economy/GHG emission data. The proposed revision to paragraph §600.507-12 is highlighted in the bold text, below:

§600.507-12 Running change data requirements.

(a) Except as specified in para graph (d) of this section, the manufacturer shall submit additiona l running change fuel economy and carbon-related exhaust emissions data as specified in paragraph (b) of this section for any running change appr oved or implemented under §§86.079–32, 86.079–33, or 86.082–34 or 86.1842–01 as applicable, which:

(1) Creates a new base level or,

(2) Affects an existing base level by:

(i) Adding an axle ratio which is at least 10 percent larger (or, optionally, 10 percent smaller) than the largest axle ratio tested.

(ii) Increasing (or, optionally, decreasing) the road-load horsepower for a subconfiguration by 10 percent or more for the individual running change or, when considered cumulativel y, since original ce rtification (for each cumulative 10 percent increase using the originally certified road-load horsepower as a base).

(iii) Adding a new subconfigurati on by increasing (or, optionally, decreasing) the equivalent test we ight for any previously tested subconfiguration in the base level.

(iv) Revising the calibration of an el ectric vehicle, fuel cell electric vehicle, hybrid electric vehicle, plug -in hybrid electric vehicle or other advanced technology vehicle in such a way that the city or highway fuel economy of the vehicle (or the energy consumption of the vehicle, as may be applicable) is expected to become less fuel efficient (or optionally, more fuel efficient) by 4.0 percent or more as compared to the original fuel economy label values for fuel economy and/or energy consumption, as applicable.

Comments submitted by the Alliance recommended that “The real purpose of the running change data requirements is to provide the method for the possible recalculati on and updating of fuel

5-321EPA Response to Comments

economy label values. Therefore, these criteria should be dele ted from the regulation and readdressed in future advanced technology FE label rulemakings.”

EPA proposed these regulation changes for several reasons. First, EPA doe sn’t agree with the Alliance comment that “The real purpose of the running change data requirements is to provide the method for the possible recalculation and upda ting of fuel economy label values.” Although the provisions of 40 CFR 600.314-08(b) require th e manufacturer to recalculate and re-label vehicles in cases where the fuel economy decr eases by 1.0 mpg or more (and may optionally relabel vehicles in cases where the fuel econom y increases by 1.0 mpg or more) the proposed running change requirements also apply to CAFE and GHG requirements. Since these requirements are applicable to GHG and CAFE te sting requirements, EPA believes that it is appropriate to include these change s in the current GHG/CAFE rule.

Second, the provisions of §600.507-12 were last updated in 1984 (49 FR 13832, April 6, 1984). At that time, EPA did not consider the fuel economy/GHG ramifications related to today’s advanced technology vehicles.

Third, EPA is concerned that t echnically, the fuel economy of a dvanced technology vehicles can be influenced by a plethora of design parameters that are outside the nor mal design parameters of conventional vehicles. For example, fuel economy and GHG emissions of conventional vehicles are affected by changes in axle ratio, vehicle weight, and vehicle drag (or road-load horsepower), as currently addressed in th e provisions of §600.507-12. However, the fuel economy and GHG emissions of advanced technol ogy vehicles can be influenced by many other calibration parameters, including battery regenera tion strategy, the percen t of useable battery (deep cycle) energy used, the percent of elect rical (verses engine) ope ration, the speed ranges during electrical operation, optimized internal combustion engine operation (e.g. calibrated to operate closest to best brake-sp ecific fuel consumption), etc. These parameters for advanced technology vehicles are not addres sed in the current provisions of §600.507-12. In some cases, the effect of calibration changes for these paramete rs may have considerably more impact on fuel economy/GHG emissions than changes in axle rati o, vehicle weight, and vehicle drag. EPA is concerned that without the pr oposed regulations, running change s could be made to production vehicles that may adversely a ffect the GHG emissions of the ve hicle but that would not be required to be supported by test data. Such unt ested running changes coul d adversely affect and bias the fleet average GHG and CAFE calculations.

Fourth, EPA believes that it is appropriate to require relabeling when running changes to advanced technology vehicles result in fuel econo my changes. This provides a safeguard to EPA that manufacturers won’t take advantage of the labeling/running change process, e.g., by developing fuel economy labels on “best case” fuel economy pre-production fuel economy calibrations and then make running changes that improve driveability but decrease fuel economy in production vehicles. In addition, these re gulation changes provide manufacturers with increased flexibility to re-label that dem onstrate improved fuel economy. Without these regulation changes, manufacturers would be prohibited by the provi sions of §600.314-08 from revising the fuel economy label values of vehicl es with improved fuel economy until the next model year. Although the Alliance comments did not address this increased flexibility (to

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optionally re-label vehicles when running cha nges improve fuel economy) EPA believes that the Alliance and other automobile manufacturers would not oppose this option.

Fifth, the regulation changes are no t expected to increase manufactur er burden substantially. For example, in the 2010 model year, manufacturers re-l abeled 8 out of 1135 tota l model types (as of February 1, 2010) due to running change reasons outlined in §600.314-08 and §600.507-12. Of the eight re-labeled vehicles, fi ve resulted in increased fuel economy label values and three resulted in decreased in fuel economy label valu es. Thus, EPA believes that the regulations will have a relatively minor effect on manufacturer testing burden.

In summary, EPA does not believe that there is anything to be gained by delaying these running change requirements and re-p roposing them in the ongoing fuel economy labeling rule (as recommended by the Alliance). Thus, for the reasons outlined above, EPA believes it is appropriate to finali ze the revisions to 40 CFR 600.507-12 as proposed.

Content of Pre-Model Year Report

Several commenters raised concerns about EP A’s proposal for requiring manufacturers to submit GHG compliance plans. AIAM stated that EPA did not identify a cl ear purpose for the review of the plans, criteria for evaluating the plans, or consequences if EPA found the plans to be unacceptable. AIAM also expressed con cern over the appropriateness of requiring manufacturers to prepare regulat ory compliance plans in advan ce, since vicissitudes of the market and other factors beyond a manufacturer’s direct control may change over the course of the year and affect the model year outcome. Finally, AIAM commented that EPA should not attempt to take any enforcement action based on an asserted inadequacy of a plan. They felt that compliance should be determined only after the e nd of a model year and the subsequent credit earning period. The Alliance commented that ther e was an inconsistency between the proposed preamble language and the regulatory language in 600.514-12(a)(2)(i). The preamble language indicated that the compliance report should be su bmitted prior to the begi nning of the model year and prior to the certific ation of any test group, while the regu latory language stated that the premodel year report must be submitted during the month of December. The Alliance pointed out that if EPA wanted GHG compliance plan informa tion before the certifica tion of any test groups, the regulatory language woul d need to be corrected.

EPA understands that a manufacturer’s plan may ch ange over the course of a model year and that compliance information manufacturers present pr ior to the beginning of a new model year may not represent their final compliance outcome. Rather, EPA views the compliance plan as a manufacturer’s good-faith projec tion of strategy for achieving compliance with the greenhouse gas standard. EPA understands that compliance with the GHG program will be determined at the end of the model year after all appropriate cr edits have been taken into consideration.

As stated earlier, a requirement to include GHG compliance information in the new model year compliance preview meetings is consistent with long standing EPA policy. The information will provide EPA with an early overview of the manufacturer’s GHG compliance plan and allow EPA to make an early assessment as to possible issues, questions, or conc erns with the program in order to expedite the certif ication process and help manufac turers better unde rstand overall

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compliance provisions of the GHG program. Theref ore, EPA is finalizing revisions to 40 CFR 600.514-12 which will require manufacturers to subm it a compliance plan to EPA prior to the beginning of the model year and prior to the cert ification of any test group. The compliance plan must, at a minimum, include a manufacturer’s pr ojected footprint profil e, projected total and model-level production volumes, project ed fleet average and model-level CO 2 emission values, projected fleet average CO 2 standards and projected fleet average CO 2 credit status. In addition, EPA will expect the compliance plan to explain th e various credit, transfer and trading options that will be used to comply w ith the standard, including the am ount of credit the manufacturer intends to generate for air conditioning leak age, air conditioning efficiency, off-cycle technology, and various early cred it programs. The compliance plan should also indicate how and when any deficits will be paid o ff through accrual of future credits.

EPA has also corrected the inconsistency between the proposed preamble and regulatory language with respect to when the compliance report must be submitted and what level of information detail it must contain. EPA is finalizing revisions to 40 CFR 600.514-12 which require the compliance plan to be submitted to EP A prior to the beginning of the model year and prior to the certificati on of any test group.

5.10.3. Useful Life Compliance and In-use Compliance Standard

Organization: Ford Motor Company Honda Motor Company Ferrari S.p.a Association of Intern ational Automobile Manufacturers (AIAM) Chrysler Group LLC (Chrysler) Alliance of Automobile Manufacturers (Alliance) Mitsubishi Motors R & D of America (MRDA) Hyundai Motor Company Volkswagen Group of America (Volkswagen) Toyota Motor North America NGVAmerica State of New Jersey University of California, Santa Barbar a, Bren Working Group on Vehicle Fuel Economy People's Republic of China Chew, Yuli

Comment:

Ford Motor Company:

The benefit of expanding the exis ting criteria pollutant emissi ons durability requirements to include these greenhouse gases is ne gligible, relative to other potential measures that could have a much more significant impact on actual in -use greenhouse gas emissions. Such measures would go beyond the vehicle's design. For example, significant a dditional greenhouse gas emissions reductions could be ach ieved by reducing the carbon intensity of the nation's overall

5-324EPA Vehicle Program, Feasibility, and Estimated Impacts

fuel supply (through the introduction of alternativ e, low-carbon fuels). In addition, further reductions could also be achieved through more efficient transporta tion control measures designed to manage increased travel dema nd. These could include congestion mitigation initiatives, eco-driving educa tion and awareness programs, and other incentives to encourage consumers to drive more efficientl y. [OAR-2009-0472-7082.1, Cover letter p. 2]

Durability Deterioration Requirements

The existing durability procedures are designe d around the expectation that criteria pollutants will increase over time because of decreasing eff ectiveness of the catalytic converters and other key emission control devices. However, the function of a catalyst is to conve rt criteria pollutants to water vapor and CO2. To the extent that cat alyst function does degrade, CO2 emissions will decrease with reduced control capability. Since there are no after-treatment devices currently able to control CO2 emissions, performance degr adation of such devices over time is a nonissue. [OAR-2009-0472-7082.1, p. 11]

Greenhouse Gas Compliance Program

In-use GHG Measurement and Reporting Requirements

Ford believes that in-use GHG measuremen t and reporting requirements would be an unnecessary waste of resources for a CO2 program. For criteria polluta nts, in-use testing is used to identify in-use problems, validate the accur acy of the certification program, verify the manufacturers' durability proce sses, and support emissions modeli ng efforts. Criteria pollutant emissions can increase over the useful life of a vehicle due to a loss in effectiveness of aftertreatment systems; therefore in-use testing is a critical component of a comprehensive compliance program for such pollutants. Howeve r, as acknowledged by EPA, unlike traditional criteria pollutants, vehicle CO2 emission levels depend primarily on fundamental vehicle design characteristics and do not change significantly over time (see Section 111.E.4 of the preamble). In-use CO2 results will be s ubstantially similar to the results observed during model-level certification testing. Therefore in-use GHG requirements would in crease testing costs without providing additional environmental or public health benefits. For that reason. we propose that inuse GHG measurement and reporting require ments for manufacturers be dropped.

CO2 emissions are inversely correl ated with the fuel economy of th e vehicle. To evaluate the inuse CO2 emissions performance of our vehicles, Fo rd conducted an analysis of City FE results from customer vehicles procured and tested in accordance with IUVP requirements. These results are presented in Chart 1 abov e. [See OAR-2009-0472-7082.1, p. 15 for Chart 1]

The data evaluated consisted of City FE te st results from over 850,2001 thru 2006 model year (MY) in-use customer vehicles. The results fr om each vehicle were compared to the most applicable City CAFE program value based on it s configuration (i.e., eq uivalent test weight, transmission type, chassis type, etc.). The per cent difference of the IUVP and CAFE City test results were calculated and plot ted on the above histogram shown in Chart 1. Over 75% (i.e., 647/857) of the IUVP vehicles sampled achieved City FE test results equal to or better than their associated City CAFE test resu lts. In light of data showing th at emissions of the constituent

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typically improve over time, a requirement for an in-use testing program aimed at CO2 would force the expenditure of resources for no real purpose.

Certainly, the CAA does not requir e in-use testing covering all vehicles and all pollutants. Section 206(b) authorizes EPA to conduct such test s, but leaves it to EPA's discretion to decide what specific testing is necessary and appropriate . However, it is clear under the Act that the purpose of any such testing must be 'to dete rmine whether new motor vehicles...do in fact conform with the regulations with respect to whic h the certificate of conf ormity was issued... ' In other words, any testing that EPA does require sh ould be justifiable on the grounds that it is has a reasonable chance of detecting non-conformities in the vehicles as certified by the manufacturer.

In-use testing for CO2 emissions is not a re asonable way of looking for non-conformities in vehicles as certified. First, as noted above, the data shows that fo r the vast majority of vehicles CO2 emissions actually improve in-use. Therefore, there should not be any significant concern that CO2 emissions from vehicles as a whole will degrade as the vehicle population ages. Second, to the extent that the CO2 emissions of individual vehicles may increase over time, the cause of this phenomenon is likel y to either be 1) unknown, or 2) attributable to factors outside of the manufacturer's control. Such factors could include failure of the customer to maintain the vehicle properly, alterations to the vehicle by the customer, or acci dents/abuses in the vehicle's history. Unlike criteria pollutants, where a failur e to meet emissions standards can usually be traced to one or two specific possible causes, there are a whole host of potential causes of degraded fuel economy and increased GHG emissions. To the extent that a recall was ever conducted for failure to meet in-use testing crite ria for CO2, it is not clea r that there would be any 'defect' for a manufacturer to remedy, or any specific action th e manufacturer could take to fix the issue. For these reasons, Ford recomme nds that EPA drop its proposed in-use testing program for CO2.

If, in spite of the comments above, EPA does require an in-use compliance program, Ford believes that three elements must be put in place to minimize the burden of the program. First, Ford supports the idea of an EPA assigned dete rioration factor of zero (additive) or one (multiplicative) for CO2 useful life compliance but requests that manufacturers also be allowed to conduct whole-vehicle mileage accumulation to generate improvement factors for CO2 useful life compliance.

As noted above, historical durabil ity data confirms that CO2 c ontrol is stable and on average improves slightly with vehicle use or over time. In light of the above data, EPA should allow for the use of an improvement fact or (i.e., negative deteriorati on factor) for CO2 useful life compliance. For example, the data shown in Table 1 above [See OAR-2009-0472-7082.1, p. 16 for Table 1] indicates that ra ther than the deterioration f actors suggested by the EPA; improvement factors of as much as 2.0% coul d be warranted. When a ppropriate, manufacturers should be allowed to apply an improvement factor to their CO2 certification test data to reflect that CO2 performance improves over time.

Second, if EPA requires in-use tes ting, Ford also supports the crea tion of a separate in-use CO2 standard with an adjustment factor of at least 10 %. To address issues of variability, separate inuse standards must provide manufacturers with an appropriate compliance margin. In-use FE

5-326EPA Vehicle Program, Feasibility, and Estimated Impacts

differences of 20% were observed in an eval uation of 2001 through 2006 MY fuel economy (FE) data from the IUVP program (see Chart 1). Of the 857 test points eval uated, over 99% of the results would comply with in-use standa rds set with a 10% adjustment factor.

Third, If EPA requires in-use CO2 testing, th e HFET CO2 emissions result measured during CAFE testing should be used in combination with the in-use Federal Te st Procedure (FTP) CO2 emissions measured over the FTP cycle. To be consistent with CAFE, EPA proposes to combine the CO2 emission results from the FTP and HFET te st cycles using the same calculation used to determine FE for CAFE purposes. Since the prop osed CO2 standard would reflect a composite value of FTP and HFET results, EPA asserts that it is necessary to include the HFET emissions tests in IUVP to enable EPA to compare an in-u se CO2 level with a vehicle's in-use standard. However, since CO2 emissions have already b een demonstrated to be stable throughout the useful life of vehicles, in-use HFET testi ng provides no benefit and unnecessarily burdens manufacturers.

[OAR-2009-0472-7082.1, pp. 14-17]

N2O and CH4

Ford believes that N2O and CH4 reporting requi rements are most appropriately handled through attestation or an annual unregulat ed emissions report, rather than integrating it as part of all testing and requiring facility upgrades as well as the increased on-going per test costs. EPA acknowledges that N2O and CH4 emission levels from modern vehicle designs are extremely low and represent only about 1% of total light -duty vehicle GHG emissions (see Section III.3.a). It is anticipated that current vehicle designs will meet the pr oposed N2O and CH4 requirements. For that reason, and to avoid the additional cost of upgrading in-use testi ng facilities to enable N2O and CH4 measurement and reporting, we believe in-use N2O and CH4 compliance should be handled through an attestation or an annual unregulated emissions report. [OAR-2009-0472­ 7082.1, p. 17]

In-Use Testing GHG Exclusions

Ford supports EPA's recommendation for the exclus ion of CO2 , N2O, and CH4 from the In-Use Compliance Program (IUCP) thresholds. The IUCP is recall type testing used to identify in-use compliance concerns. For traditional criteria polluta nts, IUCP testing provides an opportunity to remedy in-use compliance concerns. Unlike traditi onal criteria pollutants, CO2 performance is a function of vehicle design and can not be remedied in the field with the addition of emissions control devices. For that reason, CO2 performa nce should be excluded from IUCP thresholds. [OAR-2009-0472-7082.1, p. 17]

Honda Motor Company:

EPA proposes setting a compliance factor threshold for IUVP testing. And yet, no enforcement is planned for IUVP vehicles exceeding the threshold. In discussions with staff, for example, we were unable to determine the practical plan for addressing IUVP cases where the tested vehicle exceeds the threshold. How many test cases are requi red to determine that the threshold for the

5-327EPA Response to Comments

subconfiguration (or vehicle confi guration or base model or mode l type) has been exceeded? If the margin for a specific vehicle is 22 grams (e.g. a vehicle with an original value of 220 grams and a margin of 10%) and the IUVP test exceeds the original value by 23 grams, is the failure equivalent to 1 gram or 23 grams? In light of a threshold and no enforcement plan, Honda suggests that the threshold be eliminated, even while requiring the data from the IUVP. After sufficient experience with the data, EPA can make a more informed decision regarding appropriate thresholds and enfo rcement actions related to the IUVP. Of course, none of this prevents EPA from asking OEMs for additional in formation cases where IUVP data interests EPA. [NHTSA-2009-0059-0095.1, p.7]

If EPA rejects the aforementione d proposal to eliminate the IUVP threshold, Honda would like to address EPA’s proposal for a “10% adjustment factor to provide so me margin for production and test-to-test variability that could result in differences be tween initial model-level emission results used in calculating the fl eet average and any subsequent in -use testing.” Honda notes that model-type emissions are the result of a process that accumulates subconfiguration, configuration and base-level data into a single model-type prof ile. There can be considerable variation within a single model type, yet EPA’s proposal only a llows for variation for production and test-to-test. [NHTSA-2009-0059-0095.1, p.7]

When OEMs submit data to EPA, the model- type profile is cons tructed from numerous subconfigurations, both with a nd without emissions data (see Attachment 2). Honda proposes that where data exists at th e subconfiguration level, OEMs in -use testing should be based upon 10% variability from the subconfiguration data. In the cases where subconfiguration data does not exist, EPA needs to allow for additional variability. The current CAFE rules allow for considerable variability between Model-T ype MPG and subconfigurations. Although Honda does not have a specific recommendation, Honda encourages EPA to set appropriate, additional variability from the Model-Type emissions prof ile to the un-tested subconfiguration level. [NHTSA-2009-0059-0095.1, pp.7-8] [[See NH TSA-2009-0059-0095.1, p.15 for Attachment 2]]

Honda also proposes a slight cha nge to the 10% variab ility proposed by EPA. If variability is based strictly as a percentage of the certification level, in absolute terms, the dirtiest cars will have the greatest margin, while the cleanest cars will have the least margin. Honda suggests that the variability margin be partially based on the ce rtification level of the car and partially based on the projected fleet-wide emissions complia nce levels (TABLE I.D.2–4). In the example shown in Attachment 3, Honda recommends a hybrid approach to setting the in use variability. Rather than the 10% of the certified level, H onda proposes using 5% of the projected fleet average for the year and 5% of the tested value. The result of this approach is to slightly reduce the margin for the dirtiest vehicles and provide a slightly larger margin for the cleaner, more challenging vehicles. [NHTSA-2009- 0059-0095.1, p.8] [[See NHTSA-2009-0059-0095.1, p.16 for Attachment 3]]

Ferrari S.p.a:

EPA proposes in-use CO2 standards that would appl y throughout a vehicle’s useful life, with the standard determined by adding a 10 percent adju stment factor to the model-level emission results. This proposal is made notwithstanding EPA’s statement that there is no current basis for

5-328EPA Vehicle Program, Feasibility, and Estimated Impacts

believing that the emissions of carbon dioxide or fuel economy deteri orate in-use. [OAR-2009­ 0472-7214.1, p.4]

Finally, we note a discrepancy between the fleet-based CO2 standards and a single model or version in-use compliance standards. As for methan e and nitrous oxide standa rds, the in-use test program proposed by EPA is intended to address a theoretical problem. If EPA is concerned about possible deterioration of vehicle characteri stics and devices that could affect the in-use CO2 emissions (contrary to present data and ev aluation by EPA), we suggest a research program to demonstrate the need to monitor these emission s for the vehicle useful life. Then, the in-use higher standards may be defined. Dock et No. EPA-HQ-OAR- 2009-0472 and NHTSA-2009­ 0059 – NPRM GHG-CAFE MYs 2012-16 – Ferrari Comm ents. Accordingly, we deem necessary not to adopt in-use standards. EPA proposes a zero (additive) or one (multiplicative) deterioration factor for carbon dioxide, because it is recognized that vehicle carbon dioxide emissions generally do not deterior ate in-use. But EPA also states that such deterioration factor could be modified later. This is an important change that shoul d be addressed carefully, because it could further increase the stringency of the CO2 standards. Moreover, it will affect the harmonization with CAFE regul ation. [OAR-2009-0472-7214.1, pp.4-5]

Association of International Au tomobile Manufacturers (AIAM):

EPA also proposes in-use carbon dioxide standa rds that would apply throughout a vehicle’s useful life, with the standard determined by a dding a 10 percent adjustment factor to the model level emission results. This proposal is made not withstanding EPA’s statement that there is no current basis for believing that the emissions of carbon dioxide or fuel economy deteriorate in use. [OAR-2009-0472-7123.1, p.6]

Data from EPA’s current in-use compliance te st program indicate that CO2 emissions from current technology vehicles increase very little with age and in some cases may actually improve slightly. The stable CO2 levels are expected be cause unlike criteria polluta nts, CO2 emissions in current technology vehicles are not controlled by after treatment sy stems that may fail with age. Rather, vehicle CO2 emission levels depe nd primarily on fundamental vehicle design characteristics that do not change over time. Therefore, vehicles de signed for a given CO2 emissions level would be expected to sustain the same emissions profile over their full useful life. See preamble at 49562. [OAR-2009-0472-7123.1, p.6]

Under EPA’s in-use verification program (IUVP), manufacturers would be required to add a highway fuel economy test (HFET) for each in-use test vehicle. See preamble at 49563, proposed section 86.1845-04. [OAR-2009-0472-7123.1, p.6]

There is no requirement in the Clean Air Act that mandates in-use te sting. Although the Clean Air Act provides that emissions standards are to be applicable for the “useful life” of the vehicle, no particular level of te sting to assure compliance over the useful life is mandated by the statute, and EPA has the discretion to craft a compliance testing progra m that does not include in-use testing. See 42 USC 7521(a)(1). [OAR-2009-0472-7123.1, pp.6-7]

5-329EPA Response to Comments

In addition to the lack of any demonstrated n eed for an in-use test program, there are other practical problems as well. The model type emi ssion level that serves as the proposed basis for the in-use standard is an average value, not a test result across all the models in a particular test group. Not all vehicle configuratio ns or subconfigurations in th e test group are tested. If a vehicle selected for in-use testing were from a higher emitting configuration due to its basic characteristics, the test vehicle would be expect ed to have higher emissions than the model type average. In addition, certificati on vehicles must represent mean production tolerances, so by definition half of production vehi cles would be expected to ha ve higher emissions than the certification vehicle. EPA’s propos ed approach only deals with th e test-to-test variability and does not address these other problems. [OAR-2009-0472-7123.1, p.7]

A fundamental complication associated with an in-u se standard for carbon dioxide is that, unlike the current program for criteria pollutants, th ere is no opportunity for a manufacturer to “over comply” by creating additional compliance headroom to reduce the impact of the previously noted problems. Under the curren t program for criteria pollutants, manufacturers usually certify to emissions levels well below applicable standa rds to provide for the possibility of production variability, among other things.

As with the methane and nitrous oxide standards, th e in-use test program proposed by EPA is intended to address a theoretical, speculative problem. We do not sugge st that it is inappropriate for EPA to be concerned about in-use deteri oration of carbon dioxide emissions, but requiring significant amounts of additional testing by manufactur ers at this stage is not justified. A more appropriate approach would be a research program to evaluate wh ether there is a deterioration problem, particularly with new technology. Th is program could be similar to AIAM’s recommendation above with respect to methan e and nitrous oxide standards. [OAR-2009-0472­ 7123.1, p.7]

If EPA decides to pursue an in-use testing pr ogram for compliance purpo ses, notwithstanding the current lack of an indication of an in-use deterioration problem, it should at least adopt a different approach. One improvement would be to apply the 10 percent factor to the test result of the most similar configuration that was tested for certification, rather than the model type average. This would make the in-use standard more representative of the test vehicle. [OAR2009-0472-7123.1, p.7]

The current EPA regulations gove rning the in-use vehicle pr ogram (IUVP) provide for EPA approval of a reduction in test burden, based on a manufacturer’s demonstration of consistent compliance with in-use standards. See section 86.1852-01. Despite recent discussions with auto manufacturers on reducing IUVP test burden, such reductions have not yet materialized, and EPA is now proposing increasing IUVP te st burdens by adding th e highway test. AIAM requests the Agency consider the overall IUVP test burden on manufacturers and continue to work with manufacturers to identify ways to reduce overall IUVP test burden while satisfying the need for additional testing for gr eenhouse gas purposes. [OAR-2009-0472-7123.1, pp.7-8]

EPA proposes a zero (additive) or one (multipli cative) deterioration f actor for carbon dioxide, because it is recognized that vehi cle carbon dioxide emissions generally do not deteriorate in use. EPA also raises the possibility of changes in deterioration factors wh ich could be ordered by

5-330EPA Vehicle Program, Feasibility, and Estimated Impacts

Agency staff in compliance plan discussions with the manufacturer ( see preamble at 49562). A change in the deteriorat ion factor would be equivalent to a change in the stringency of the standard. A change of this sort would elimin ate the harmonization achieved between CAFE and greenhouse gas standards. Because of the significant consequences of a change in a deterioration factor, such a change should only be implem ented after notice and opportunity for comment. AIAM agrees with EPA that a change in a deteri oration factor would requi re adequate lead-time to enable the manufacturer to comply. See proposed section 86.1823- 08(m)(1)(ii). [OAR-2009­ 0472-7123.1, p.8]

In the case of a manufacturer that is in clea r compliance jeopardy, a pr e-model year compliance meeting to discuss future compliance assuranc e may be appropriate on an ad-hoc basis. However, we question the value of preparing regulatory compliance plans in advance as a general matter. Such plans are likely to change, since they are subject to the vicissitudes of the market. Developing and evaluating these plans will take time and effort, but by the time the plans are evaluated by EPA, the manufacturer’s comp liance strategy may well have changed. [OAR2009-0472-7123.1, p.16]

The Agency should not attempt to take any enfo rcement action based on an asserted inadequacy of a plan. Compliance should be determined only after the end of a model year and the subsequent credit earning period. This characterization of the pre- model year plan should be in the final rule. [O AR-2009-0472-7123.1, p.16]

Chrysler Group LLC (Chrysler):

[[These comments were submitted as testimony at the Detroit public hearing. See docket number OAR-2009-0472-6185, p. 49]]

In addition, the proposed rule would apply in-use testing requirements to these standards. We would propose that EPA gather da ta on specific test plans and we 're willing to work with EPA on those matters.

Alliance of Automobile Manufacturers (Alliance):

In addition to CO2, CREE includes the following c onstituents depending on the type of fuel that is used; total hydrocarbons (HC), carbon m onoxide (CO), methane (CH4), nonmethane hydrocarbons (NMHC), methanol (CH3OH), form aldehyde (HCHO), ethanol (C2H5OH) and acetaldehyde (C2H4O). The proposed regulations require that deteriorated values are used in the calculation of CREE. While some of these constituents currently have useful life standards and already have DFs, some do not. Th erefore, manufacturers may be required to rerun all forms of durability vehicle testing in order to establish DFs for these constituents.

Model Type CREE Standard (Proposed regulations in 40 C.F.R. 86.1865-12)

EPA has proposed that there be a model type CR EE standard set equal to the model type CREE value that is obtained during the flee t-average CREE calculation. [OAR-2009-0472-6952.1, p.48]

5-331EPA Response to Comments

The establishment of a model type CREE standard has some inherent flaws. First, the model-type CREE value is an average of test data. Since it is an average, some of the official data that went into the calculation of the standa rd will automatically fail the standard. Second, these standards will not be established until all testing is comple ted after the end of a model year. This means a manufacturer could be producing “failing” data during the model year and would not know this until after the model year fleet average calculations have been completed. Depending on the interpretation of the regulations, a manufacturer could be deemed to have produced uncertified configurations. [OAR-2009-0472-6952.1, p.48]

Recommendation:

Fleet-average CO2 standards are sufficient fo r manufacturers to prove compliance to the GHG emission regulations and there is no need for mo del type CREE standards. Additionally, as noted above, CREE is not as useful a metric as is CO2, which should be the only measured GHG emission value. [OAR-2009-0472-6952.1, p.48]

In-Use Requirements (Proposed regula tions in 40 C.F.R. 86.1818-12, 86.1845-04 and 86.1846­ 01)

EPA has proposed that the model type CREE standard be multiplied by 1.1 to establish an in-use model type CREE standard. In addition, since the proposed mode l type CREE standard is a combination of FTP and HFET tests, in-use highway testing would also be re quired to be able to compare in-use data to the model type CREE standard. [OAR-2009-0472-6952.1, p.49]

Recommendation:

It is premature to establish in-use CO2 sta ndards. Unless and until one CO2 standard can be established for a particular category of vehicles, th e concept of an in-use CO2 standard will be an unachievable goal. The concept of establishing fleet-average CO2 sta ndards by footprint and allowing vehicles with a particular footprint to exceed the footprint standard as long as they are offset by other vehicles that ach ieve better than their footprin t standard is in essence an admission that the establishment of a CO2 “emi ssion standard” for a particular category of vehicles is a difficult if not impossible task. [OAR-2009-0472-6952.1, p.49]

The establishment of fleet-average CO2 emission standards and the associated procedures for demonstrating certification compliance to those st andards is a sufficient method for establishing in-use compliance to the CO2 emission standard . Additional in-use testing will provide little benefit and does not warrant the additional cost and burden. There is no need for additional inuse testing (either by manufacturers or by EPA) at this time. [OAR-2009-0472-6952.1, p.49]

The need for in-use data to capture any possibl e deterioration in CO2 levels from advanced technology vehicles (hybrids, PHEVs) is not technically supportable at this time. EPA can better achieve its goal of increased knowledge about deterioration of CO2 on advanced technology vehicles through a focused research program to study a relatively sma ll sample of vehicles rather than through comprehens ive reporting for all ve hicles. [OAR-2009-0472-6952.1, p.49]

5-332EPA Vehicle Program, Feasibility, and Estimated Impacts

Finally, even though EPA is not going to require in-use compliance programs based on N2O and CH4 results, the concept of N2O and CH4 standards with no certification margin is inconsistent for IUVP since IUVP serves as a surveillance program and not a certif ication program. (Note that this issue could be avoided if EPA accepts the recommendation to drop the N2O and CH4 standards as stated prev iously.) [OAR-2009-0472-6952.1, p.49]

The Alliance views in-use repor ting as unnecessary because CO2 emissions do not significantly change over a vehicle's lifetime. CO2 emissions are unlike traditional criteria pollutants, which may have a propensity to increase over time, because CO2 is not controlled through specific emission control devices or after-treatment syst ems which may be susceptible to degradation over time. This phenomenon is well understood as the automotive industry has provided data to EPA during previous GHG discussions and EPA has confirmed that their in-use compliance test program data also shows that CO2 emissions has not increased with age. [OAR-2009-0472­ 6952.1, p.51]

In-Use Testing and Remedies

EPA must also recognize the fundamental di fferences between compliance with currently regulated emissions and GHG emissions in other portions of its proposed enforcement program. Congress made a decision in 1975 when it adopted EPCA to create a program to regulate fuel economy outside the Clean Air Act, and to assign responsibility for that program to NHTSA, not EPA. EPCA did not include an in-use pe rformance requirement for a number of reasons, including the fact that the fuel economy performance of vehicles in good repair does not deteriorate with age or mileage. In the GHG reporting rulemaking, the Alliance provided test data confirming that CO2 emissions remain stable from such vehicles. [OAR-2009-0472-6952.1, pp.56-57]

EPA proposes, however, to treat GHG standa rds -- which are largely dependent on a manufacturer’s applicat ion of fuel economy technologies to reduce carbon dioxide emissions -- on the same footing as standards for other regulat ed emissions. It is critical to recognize that under the Clean Air Act, EPA’s in-use recall enfor cement authority is lim ited to situations in which a nonconformity determination is based on the performance of “properly maintained and used” vehicles, and can be remedied by repair. 42 U.S.C. § 7541(c)(1); see Center for Auto Safety v. Ruckelshaus, 747 F.2d 1 (D.C. Ci r. 1984) (EPA lacks authority to require manufacturers to remedy a nonconfor mity by means other than repair). Vehicles that have been properly maintained and used will exhibit the st able to slightly-improved CO2 control levels confirmed in the data that the Alliance s ubmitted in the GHG reporting rulemaking. In that respect, in-use testing for compliance with th e GHG standards is unnecessary and cannot as a practical matter support a recall-and-repair order. Such test ing is certainly not mandated by the Clean Air Act. And, in addition to being impract ical and unproductive, the presumptive goal of such testing (to obtain a recall, when the test data wa rrant) would be inconsistent with EPCA -- and inconsistency with EPCA must be a voided in all parts of EPA’s program. See Massachusetts, supra. [OAR-2009-0472-6952.1, p.57]

In addition, there are several implementation concer ns that need to be considered and which are outlined in Section VII as it applie s to GHG emissions. [OAR-2009-0472-6952.1, p.57]

5-333EPA Response to Comments

Mitsubishi Motors R & D of America (MRDA):

There are significant challenges in the increased stringency between the 2011 and 2012 model years. The rate of this increase will likely result in excessive co sts and burdens as many vehicles are quickly reconfigured to comply with these new standards. [OAR-2009-0472-7125.1, p.1]

Hyundai Motor Company:

EPA proposes an in-use standard at ten percent above the model- level CO2 certification data. As noted in EPA's preamble, there is no headroom built into the CO2 certification levels (74 FR 49564) so EPA will provide a ten percent margin a bove the certified vehicle results to allow for test-to-test variability and/or production variability. EPA notes that the EPA's fuel economy labeling and CAFE confirmatory test results were evaluated for test-to-test variability and EPA's current in-use compliance program for age-rela ted CO2 impacts (74 FR 49562, 49564). It is not clear to us how these assessments were conducted , because the data is not available in the draft Regulatory Impact Analysis. We believe that EPA should include the analysis for the ten percent increase for in-use standards in the Regulatory Impact Analysis.

We also recommend that EPA analyze the any voluntarily submitted-C02 data from FTP testing for the In-Use Verification Program (IUVP) and co mpare that data with CAFE model-level FTP test data. This analysis would provide EPA with additional information on the variation between certification and in-use FTP test data a nd validation of the ten percent value.

However, there is a fundamental issue with using model-level CO2 data for the in-use standards. Model-level data is the result of sales-weighted average emission and fuel economy test data for multiple vehicle configurations and sub-configura tions. As a result, the model-level data cannot be directly compared to the CO2 performance of a particular in-use vehicle. EPA should revisit the appropriate test data for evaluating in-use vehicle CO2 as compared to the certification value. [OAR-2009-0472-7231.1, p.6]

Volkswagen Group of America (Volkswagen)

Volkswagen also has concerns regarding in-use test burden, compliance is sues and certification issues associated with this proposed notice. We believe in-use testing for GHG compliance is not necessary for conventional vehicles, where we believe there is ample evidence that CO2 GHG emissions do not degrade over time. If EPA remains concerned that there are future vehicles such as hybrids that may have CP2 GHG performan ce that deteriorates over time, Volkswagen believes a test program between the industry and the agencies is a more appropriate way to understand the potential problems or issues related to situat ions where a vehicle's GHG emissions would increase in-use. Volkswagen pledges support for any program that would study in-use GHG emissions. [OAR-2009-0472-7210.1, p.7]

Toyota Motor North America

In-Use Standards

5-334EPA Vehicle Program, Feasibility, and Estimated Impacts

For each model type, EPA proposed in-use CO2 st andards set at a level 10% higher than the model-specific levels used in calculating the fleet average. EPA proposes the 10% adjustment factor to provide some margin for production and test-to-test variability that could result in differences between initial model level emission re sults used in calculating the fleet average and any subsequent in-use testing. Th e in-use standard would apply fo r the same useful life period as in Tier 2 and, similarly, EPA proposes to a llow several options for predicting in-use deterioration, including full vehi cle testing, bench aging, and the application of a deterioration factor based on engineering j udgment. [OAR-2009-0472-7291, pp.28-29]

Toyota is concerned whether certification test data is representative of in-use results. Certification data may vary among the vehicles in the test group and va riability is inherent among correlation with laboratories. This must be taken into consideration when comparing certification data and in-use data. For CO2, ther e would be no margin for development because the value established in certificat ion would be directly applied to the in-use standard. The in-use test result provided under IUVP will be inconsiste nt with the certificati on vehicle because the certification vehicle specifications will likely differ from the act ual configuration of the IUVP selection vehicle. Thus, Toyota believes that it is premature to introduce a CO2 in use standard at this time. Toyota suggests that EPA allow time to generate sufficient in-use CO2 data, which would occur under the IUVP program, before maki ng judgments on an in-use standard for CO2. [OAR-2009-0472-7291, p.29]

In addition, Toyota is concerned w ith the lack of data to assess the compliance factor that EPA proposes in the regulation. Without adequate da ta, Toyota is concerne d that assigning a 10% factor may lead to a margin that would compromise HEV and PHEV technology vehicles. Therefore, EPA should not establis h an in-use standard or a comp liance factor until sufficient inuse data has been collected through the In-Use Ve rification Program (IUVP) as discussed later in these comments. [OAR-2009-0472-7291, p.29]

Finally, it is not clear what reme dial action a manufacturer would take in case of noncompliance with the in-use standard . W ithout a clearly malfunctioning or deteriorated part causing noncompliance, the technical options to improve the fuel economy (and thus lower CO2) of an in-use vehicle are unclear at best. Further, even in the scenario where an in-use noncompliance is found, the overall fleet average stan dard might still be achieved if other models have better inuse performance when compared to thei r certification levels. [OAR-2009-0472-7291, p.29]

Useful Life Testing (IUVP and IUCP)

EPA regulations under the CAA require a vehicle to comply with emission standards over its useful life and require manufacturers to conduct in-use testing as a c ondition of certification. Toyota would like to respond to sp ecific aspects of the In-Use Verification Program (IUVP) and the In-Use Compliance Program (IUCP). [OAR-2009-0472-7291, p.30]

IUVP

Manufacturers must procure and te st private vehicles and report the results to EPA under the auspices of the In-Use Verification Program (I UVP). Currently manufacturers test low mileage

5-335EPA Response to Comments

and high mileage vehicles over the FTP and US06 cycles, provide evaporative emissions data, and on-board diagnostics information. EPA uses IUVP data to identify in-use problems, validate certification process, verify manufacturer's durability programs and support emission modeling efforts. EPA proposes that for IUVP testing, a manufacturer will provide emission data for CO2 and also for N20 and CH4. EPA also proposes that manufacturers perform th e highway test cycle as part of IUVP. Since the proposed CO2 sta ndard reflects a combined value of FTP and highway results, EPA's rationale for inclusion of the highway test is to enable EPA to compare an in-use CO2 level with a vehicle' s in-use standard. [OAR-2009-0472-7291, p.30]

Toyota supports EPA's intent to include CO2 as pa rt of the IUVP data as a necessary means to validate the certification process. Furthermore, Toyota accepts the additional requirement to conduct highway testing under IUVP in order to en able the necessary comp arison of a vehicle's in use standard to the measured in-use CO2 level. However, T oyota does not agree with the need to include N2O as part of the IUVP measurement and reporting criteria. N2 O is not a significant factor of transportation emissions. N2O is not currently measured and proven N2O emission measurement techniques and instrumentation equi pment have not been established. To fill the need for emission inventory purposes, EPA shoul d consider using default values or other analytical techniques that can provide robust GHG data representa tion in the interim. If EPA does move forward with N2O measurement and re porting, validation and lead time for facility upgrades must be addressed. [OAR-2009-0472-7291, pp.30-31]

IUCP

In-Use Confirmatory Program (IUCP) is a manuf acturer conducted recall quality test program that is used by EPA for the basis of a recall order. To be subjecte d to an IUCP audit, a threshold of 1.30 times the certification standa rd and an additional requirement that at least 50% of the test vehicles for that test group fail for the same pollutant. Citing a lack of data with which to make a determination on appropriate thre sholds, EPA proposes to exclude IUVP data for CO2, N2O, and CH4 emissions from IUCP thresholds. EPA re quests comments on their proposal to exclude CO2, N2O, and CH4 from the IUCP threshold. EP A proposes to add CO2, N2O, and CH4 to the emissions measurements it collects during surve illance testing. And EPA proposes a separate rulemaking to establish IUCP CO2, N2O, and CH 4 threshold criteria when more data form EPA's internal surveillance program has been obtained. [OAR-2009-0472-7291, p.31]

Toyota agrees with EPA's proposal to exclude CO2, N2O, and CH4 from the IUCP program threshold criteria. However, rather than rely on collecting data from EPA's internal surveillance program in order to assess this threshold issue in th e future, EPA should consider a joint test program with industry as a cost effective m eans to learn more about these emissions and respective measurement techniques. [OAR-2009-0472-7291, p.31]

NGVAmerica

We also urge EPA to provide in the final rule that manufacturer s of NGVs may continue to use existing protocols allowed for aging catalysts with respect to criteria pollutants when demonstrating useful life emissions of me thane. As proposed, it appears that NGV

5-336EPA Vehicle Program, Feasibility, and Estimated Impacts

manufacturers would have to deve lop new protocols. Further, we submit that any changes that EPA may require to catalyst aging protocols fo r determining CH4 useful life emissions would result in a prohibitive cost incr ease. Therefore, we request th at currently used catalyst aging protocols be considered acceptable for measuring all useful life tailpi pe emissions, including CH4 and N2O. [OAR-2009-0472-11310, p. 3]

State of New Jersey:

The Department supports the USEPA's position that once sufficient data have been obtained, InUse Confirmatory Program threshold criteria fo r CO2, N2O, and CH4, and also HFCs, should be included through a subsequent rulemaking.[OAR-2009-0472-7109.1, p.9]

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

We recognize the EPA’s efforts to determine real world fuel economy of vehicles before they enter the market. However, we recommend that the EPA further monitor vehicles after they have been released off the line to ensure they are continuing to perform within a reasonable margin of the CAFE and GHG standards. The Federal Regist er recognizes that 'tes ting requirements may continue post-certification.' We would like to see this sugges tion applied across all vehicle categories. It would not be difficult to stipulate procedures fo r manufacturers to follow to assure continued vehicle performance. One possibili ty is adapting the 'In Use Vehicle Program' currently in place to help measure real world ve hicle emissions and fuel efficiency. The addition of equipment that measures these factors could be added to all, or a select sample, of vehicles. Additionally, the technology for measuring in-use fuel economy and vehicle emissions currently exists and would be relatively inexpe nsive to implement. [OAR-2009-0472-7188.1, p. 9]

Testing conducted after vehicles have been driven under real wo rld conditions provides critical feedback. If vehicles are not mainta ining consumption levels after initial time of testing, then it is possible that implemented technologies may not be continuing to perform as they age. We urge the EPA and NHTSA to continue to monitor on -road performance over a vehicles’ lifespan. The EPA could conduct this testing, but they may also require manufacturers to provide verification that the fuel efficiency and GHG emissions of their fleet of vehi cles has not declined beyond an acceptable margin over time. If the burden of proof is on the manufacturers, they may have the option of performing testing themselves or employing a third party to conduct sufficient assessments of the manufacturers’ in-use vehicl es. Based on existing data, an expected decrease in performance over a given time span should be allowed. However if fleets fail to meet the expected performance levels over time, action s hould be taken by the EPA. For example, if on road monitoring determines that the efficiency of a vehicle declines more than 10 percent within its first 3 years of use, the manu facturers should be required to pay the same penalty that would have been incurred if the or iginal fleet standards had not been met. [OAR-2009-0472-7188.1, p. 10]

Continued monitoring of vehicle performance also creates the ab ility to better determine if current testing procedures are accurate and adequate . If there is a trend in vehicles failing to reflect EPA estimated fuel economy under real worl d driving scenarios, this could suggest flaws in the testing methodology that should be rectified. The EPA s hould not only collect, but also

5-337EPA Response to Comments

utilize the database generated by continual tes ting in order to devel op a robust testing model based on real world data. For example, vehicle emissions and fuel economy ascertained by the above method after one year of on-road use should closely reflect figures determined by the EPA at the time of initial tes ting. [OAR-2009-0472-7188.1, p. 10]

[University of California, Santa Barbara, Br en Working Group on Vehicle Fuel Economy also submitted these comments as testimony at the Los Angeles public hearing. See docket number OAR-2009-0472-7283, pp.119-121]

People's Republic of China:

In order to reflect the principle of fairness and justice, we sugge st that vehicles sampled by the United States for test should be affirmed on the vehicle state by the vehicle manufacturer, no matter in the pre-production au thentication, in-use verifica tion program (IUVP), in-use confirmatory test program (IUCP), or other e xperiment programs demonstrating the conformity of the vehicle. [OAR-2009-0472-11269, p.3]

Yuli Chew (private citizen)

I support EPA’s position that once sufficient data have been obtained, In-Use Verification Program (IUVP) threshold criteria for CO2, N2O, CH4 and even HFC should be included in later rulemaking and forms part of the determination of in-use criteria pollutants when they are in their first and thir d year of service. [OAR-2009-0472-7042.1, p.5]

EPA Response:

In-Use Standards

EPA received comments from the Alliance, AIAM , Ferrari, Ford, Honda, Hyundai, Mitsubishi, Toyota and Volkswagen. Some comments r ecommended changes to EPA’s proposed in-use standards. Many comments recommended that EPA should not adopt in-use standards and should instead conduct an in-use “research” test program. AIAM, for example, recommended that “A more appropriate approach would be a re search program to evaluate whether there is a deterioration problem, particul arly with new technology.”

For Tier 2, the in-use standard and the standard used for fleet average calculation are the same. In-use compliance for an individual vehicle is determined by comparing the vehicle’s in-use emission results with the emission standard levels or “bin” to which the vehicle is certified rather than to the Tier 2 fleet average standard for the manufacturer. This is because as part of a fleet average standard, individual vehicles can be cer tified to various emission standard levels, which could be higher or lower than the fleet averag e standard. Thus, it would be inappropriate to compare an individual vehicle to the fleet average, since that vehicle could have been certified to an emission level that is different than the fleet average level.

This will also be true for the CO 2 fleet average standard. Therefore, to ensure that an individual vehicle complies with the CO 2 standards in-use, it is necessary to compare the vehicle’s in-use

5-338EPA Vehicle Program, Feasibility, and Estimated Impacts

CO 2 emission result with the approp riate model-level certification CO 2 level used in determining the manufacturer’s fleet average result.

There is a fundamental difference between the CO 2 standards and Tier 2 standards. For Tier 2, the standard level used for the fleet average calc ulation is one of eight different emission levels, or “bins,” whereas for the CO 2 fleet average standard, the sta ndard level used for the fleet average calculation is the model-level certification CO 2 result. The Tier 2 fleet average standard is calculated using the “bin” emi ssion level or standar d, not the actual certif ication emission level of the certification test vehicle. So no matte r how low a manufacturer’s actual certification emission results are, the fleet average is still ca lculated based on the “bin” level rather than the lower certification result. 29 In contrast, the CO 2 fleet average standard wi ll be calculated using the actual vehicle model-level CO 2 values from the certification test vehicles. With a specified certification emission standard, su ch as the Tier 2 “bins,” manuf acturers typically attempt to over-comply with the standard to give themselv es some cushion for potentially higher in-use testing results due to emissions performance deteri oration and/or variability that could result in higher emission levels during subsequent in-use testing. For our CO 2 standards, the emission level used to calculate the fleet average is th e actual certification vehi cle test result, thus manufacturers cannot over comply since the certif ication test vehicle result will always be the value used in determining the CO 2 fleet average. This is the me thod used for compliance with the CAFE fleet average, and EPA is using the same a pproach here to be consistent with the CAFE approach. If the manufacturer attempted to design the vehicle to achieve a lower CO 2 value, similar to Tier 2 for in-use purposes, the new lower CO 2 value would simply become the new value used for calculating the fleet average.

The CO 2 fleet average standard is based on the perf ormance of pre-production technology that is representative of the point of production, and while there is e xpected to be limited if any deterioration in effectiveness for any vehicle dur ing the useful life, the fleet average standard does not take into account the test to test variab ility or production variabi lity that can affect inuse levels. Therefore, EPA believe s that unlike Tier 2, it is necessa ry to have a different in-use standard for CO 2 to account for these variabilities. EPA proposed an in-use standard that was 10% higher than the appropriate model-level certification CO 2 level used in determining the manufacturer’s fleet average result.

As described above, manufacturers typically desi gn their vehicles to emit at emission levels considerably below the certification standards, for example to account for deterioration in the emissions control system, productio n variability, testing variabilit y, and other factors. This intentional difference between the actual emission level and the emission standard is referred to as “certification margin,” since it is typically the difference between the certification emission level and the emission standard. The certificatio n margin can provide manufacturers with some protection from exceeding emission standards in-use, since the in-use standa rds are typically the levels used to calculate the fleet average. For Ti er 2, the certification margin is the delta between the specific emission standard level, or “bin,” to which the vehicle is ce rtified, and the vehicle’s certification emission level.

29 In a similar fashion, the fleet av erage for heavy-duty engines is calculated using a Family Emission Level, determined by the manufacturer, which is differen t from the emission level of the test engine.

5-339EPA Response to Comments

Since the level of the fleet average standard does not reflect this kind of variability, EPA believes it is appropriate to set an in-use standard that provides a reasonable cushion for in-use variability that is not accounted for in the test level used to determine compliance w ith the fleet average. EPA proposed a factor of 10% that would serve this function. The factor would only be applicable to CO 2 emissions, and would be applied to the model-level test resu lts that would be used to establish the model-level in-use standard

EPA selected a value of 10% for the in-use stan dard based on a review of EPA’s fuel economy labeling and CAFE confirmatory test results for the past several vehicle model years. The EPA data indicate that it is common for test variabil ity to range between three to six percent and only on rare occasions to exceed 10%. EPA believes that a value of 10% should be sufficient to account for testing variability and any production variability that a manufacturer may encounter. EPA considered both higher and lower values. The Tier 2 fleet as a whole, for example, has a certification margin approaching 50%. 30 However, there are some fundamental differences between CO 2 emissions and other criteria pollutants in the magnitude of the pollutants. Tier 2 NMOG and NO X emission standards are hundredths of a gram per mile (e.g., 0.07 g/mi NO X & 0.09 g/mi NMOG), whereas the CO 2 standards are four orders of magnitude greater (e.g., 250 g/mi). Thus EPA does not believe it is appr opriate to consider a va lue on the order of 50 percent. In addition, little de terioration in GHG emissions cont rol is expected in-use. The adjustment factor addresses only one element of what is usually built into a compliance margin.

The intent of the separate in-use standard, ba sed on a 10% compliance fact or adjustment, is to provide a reasonable margin such that vehicl es are not automatically deemed as exceeding standards simply because of normal variability in test results. EPA has some concerns, however, that this in-use compliance fact or could be perceived as provid ing manufacturers with the ability to design their fleets to generate CO 2 emissions up to 10% higher than the actual values they use to certify and to calculate the year end fleet av erage value that determines compliance with the fleet average standard. This concern provides an additional rationale for requiring FTP and HFET IUVP data for CO 2 emissions to ensure that in-use values are not regularly 10% higher than the values used in the fleet average cal culation. If in the course of reviewing a manufacturer’s IUVP data it become s apparent that a manufacturer’s CO 2 results are consistently higher than the values used for calculation of th e fleet average, EPA will discuss the matter with the manufacturer and consider possi ble resolutions such as changes to ensure that the emissions test data more accurately reflect the emissions level of vehicles at the time of production, increased EPA confirmatory testing, and other similar measures.

Commenters generally did not comment on whet her 10% was the appropriate level for the adjustment factor. Honda did support use of the proposed 10% adjustment factor for the in-use standard. But Honda also recommended that the 10% adjustment factor be applied to subconfiguration data rather than the model-leve l data unless there was no subconfiguration data available. Honda also expressed some concer n over the inequity a 10% value would provide between high- and low-emitting vehicles. They sugge sted that rather than using a straight 10% multiplicative adjustment factor applied to the model-level CO 2 value for all vehicles, it would

30 See pages 39-41 of EPA’s Vehicle and Engine Complia nce Activities 2007 Progress Report (EPA-420-R-08-011) published in October, 2008. This document is availabl e electronically at http://epa.gov/otaq/about/420r08011.pdf

5-340EPA Vehicle Program, Feasibility, and Estimated Impacts

be more equitable to take the sum of a 5% multiplicative factor applied to the model-level CO 2 value and a 5% factor applied to the manufacturer’s fleet CO 2 target.

EPA understands that use of a multiplicative adjust ment factor would result in a higher absolute in-use value for a vehicle that has higher CO 2 than for a vehicle with a lower CO 2 . However, this difference is not relevant to the purpose of the adjustment f actor, which is to provide some cushion for test and production variability. EPA does not believe the difference would be great enough to confer the higher-emitting vehicles with an unfair advantage with respect to emissions variability.

Given that the purpose of the in-use standard is to enable a fair comparison between certification and in-use emission levels, EPA agrees that it is appropriate to apply the 10% adjustment factor to actual emission test results rather than to model-type emission levels which are production weighted. Therefore, EPA is finalizing an in -use standard that applies a multiplicative 10% adjustment factor to the subconfi guration emissions values, if such are available. If no emissions data exist at the subconfiguration level the adjust ment will be applied to the model-type value as originally proposed. If the in-use emission result for a vehicle ex ceeds the emissions level, as applicable, adjusted as just described by 10%, then the vehicle will have exceeded the in-use emission standard. The in-use standard will a pply to all in-use compliance testing including IUVP, selective enforcement audits, and EPA’s internal test program.

In-Use Testing Requirements (Including IUVP, IUCP, CH4 and N2O Measurements)

EPA received comments from the Alliance, AIAM, Chrysler, Ford, the Peoples Republic of China, Toyota and the University of California, Santa Barbara regarding manufacturer’s in-use testing requirements. Most comments from au tomobile manufacturers recommended that in-use testing was not needed. Ford, for example, commented that “in-use GHG measurement and reporting requirements for manufacturers be dropped.” Regarding EPA’s proposed in-use requirement to perform highway tests, Ford commented that “in-use HFET testing provides no benefit and unnecessarily burdens manufacturers.” Toyota, on the other hand, commented that “Toyota supports EPA’s intent to include CO2 as part of the IUVP data as a necessary means to validate the certification process. Furthermore, Toyota accepts the additional requirement to conduct highway testing under IUVP in order to en able the necessary comp arison of a vehicle’s in-use standard to the measured in-use CO2 leve l.” The University of California, Santa Barbara commented that “We urge the EPA and NHTSA to continue to monitor on-road performance over a vehicles’ lifespan.”

Sections 202 (a) (1) and 202 (d) of the CAA require a vehicle to comply with emission standards over its regulatory useful life and affords EPA broad authority for the implementation of this requirement. The response to noncompliance can ra nge from adjusting a manufacturer’s credit balance to the voluntary or mandato ry recall of noncompliant vehicles. These potential remedies provide manufacturers with a st rong incentive to design and build complying vehicles.

Currently, EPA regulations require manufacturers to conduct in-use testing as a condition of certification. Specifically, manuf acturers must commit to later pr ocure and test privately-owned vehicles that have been normally used and mainta ined. The vehicles are tested to determine the

5-341EPA Response to Comments

in-use levels of criteria pollutants when they are in their first and fourth y ears of service. This testing is referred to as the In-Use Verifi cation Program (IUVP) testing, which was first implemented as part of EPA’ s CAP 2000 certification program. 31 The emissions data collected from IUVP serve several purposes. IUVP result s provide EPA with annual real-world in-use data representing the majority of certified vehicl es. EPA uses IUVP data to identify in-use problems, validate the accuracy of the certificati on program, verify the ma nufacturer’s durability processes, and support emission modeling efforts. Manufacturers are re quired to test low mileage and high mileage vehicles over the FTP a nd US06 test cycles. They are also required to provide evaporative emissions, onboard refueling vapory recove ry (ORVR) emissions and onboard diagnostics (OBD) data.

Manufacturers are required to provide data for all regulated criteria pollutants. Some manufacturers have voluntarily submitted CO 2 data as part of IUVP. EPA proposed that manufacturers provide CO 2 , N 2 O, and CH 4 data as part of the IUVP . EPA also proposed that in order to adequately analyze and assess in-use CO 2 results, which are base d on the combination of FTP and highway cycle test results, the highway fu el economy test would also need to be part of IUVP. The University of California, Sant a Barbara expressed support for including N 2 O and CH 4 emissions as part of the IUVP. Manufacturer comments were almost unanimously opposed to including any GHG standards as part of the IUVP. Specifically, indus try commented that CO 2 emissions do not deteriorate over time and in so me cases actually improve. Ford provided data for several 2004 through 2007 model y ear vehicles th at indicate CO 2 emissions actually improved an average of 1.42% when vehicl es were tested over 5,000 miles. Since CO 2 emissions do not deteriorate over time, manufac turers commented that including CO 2 emissions and the highway test cycle as part of the IUVP would provide no benefit and w ould unnecessarily burden manufacturers. Manufacturers also commented that N 2 O and CH 4 emissions are very low and by EPA’s own account only represen t about 1% of total light-dut y vehicle GHG emissions. They also expressed concern over the cost and burden of measuring N 2 O for IUVP, since many manufacturers use contractor la boratories to assist in their IUVP testing and many of these facilities do not have the nece ssary equipment to measure N 2 O. They stated that since it was unnecessary to include CO 2 emissions as part of IUVP and since N 2 O and CH 4 were such small contributors to GHG emissions, it di d not make sense to include N 2 O and CH 4 as part of the IUVP either. They felt that N 2 O and CH 4 could be more appropriately handled through attestation or an annual unre gulated emissions report.

As discussed above, although EPA shares the vi ew expressed in manufacturer comments that historical data demonstrate little CO 2 deterioration, in-use emissions can increase for a number of reasons other than deterioration over time. For example, production or design errors can result in increased GHG emissions. Compon ents that aren’t built as they were designed or vehicles inadvertently assembled improperly or with th e wrong parts or with pa rts improperly designed can result in GHG emissions greate r than those demonstrated to EPA during the certification process and used in calculating the manufacturers fleet average. The “stacking” of component design and production tolerances can also result in in-use emissions that are greater than those used in calculating a manuf acturer’s fleet average.

31 64 FR 23906, May 4, 1999.

5-342EPA Vehicle Program, Feasibility, and Estimated Impacts

EPA believes IUVP testing is also important to monitor in-use versus certification emission levels. Because the emphasis of the GHG program is on a manufacturer’s fleet average standard, it is difficult for EPA to make an assessment as to whether manufacturer’s vehicles are actually producing the GHG levels claimed in their fleet average without some in-use data for comparison. For example, EPA has expressed con cern that with the in-u se standard based on a 10% adjustment factor, there would be an incen tive for manufacturers to develop their fleet average utilizing the full range of the 10% in-use standard. The only way for EPA to assess whether manufacturers are designing and producing vehicles that meet their respective fleet average standards is for EPA to be able to review in-use GHG emissions from the IUVP.

Finally, EPA does have some concern about potential CO 2 emissions deterioration in advanced technologies for which we currently have no in-use experience or data. Since the CAFE program has never had an in-use requirement and toda y’s final regulations are the first ever GHG standards, there has been no need to focus on GHG emissions in use as there will be with the new GHG standards. Many of the advanced tec hnologies that EPA expect s manufacturers to use to meet the GHG standards have been introduced in production vehicles, but until now not for the purpose of controlling gree nhouse gas emissions. For example, advanced dual-clutch or seven-speed automatic transmissions, and start-stop technologies have not been broadly tested in the field for their long-term CO 2 performance. In-use GHG performance information for vehicles using these technologies is needed for many r easons, including evaluation of whether allowing use of assigned deterioration factors for CO 2 in lieu of actual deteriora tion factors will continue to be appropriate.

Therefore, EPA is finalizing the requirement th at all manufacturers must provide IUVP emission data for CO 2. EPA will also require manufacturers to pe rform the highway test cycle as part of IUVP. Since the CO 2 standard reflects a combined value of FTP and highway results, it is necessary to include the highway emission test in IUVP to enable EPA to compare an in-use CO 2 level with a vehicle’s in-use standard. EPA understands that requiring manufacturers to also measure N 2 O and CH 4 will be initially cha llenging, since many manufact urer facilities do not currently have the proper anal ytical equipment. To be c onsistent with timing of the N 2 O and CH 4 emissions standards for this rule, N 2 O and CH 4 will not be required for IUVP until the 2015 model year.

Another component of the CAP 200 0 certification program is the In-Use Confirmatory Program (IUCP). This is a manufacturer-conducted recall quali ty in-use test program that can be used as the basis for EPA to order an emission recall. In order for vehicles tested in the IUVP to qualify for IUCP, there is a threshold of 1.30 times the certification emission standard and an additional requirement that at least 50% of the test vehicles for the test group fail for the same pollutant. EPA proposed to exclude IUVP data for CO 2 , N 2 O, and CH 4 emissions from the IUCP thresholds EPA felt that there was not suffi cient data to determine if the existing IUCP thresholds were appropriate or even applicable to those emissions. The Un iversity of California, Santa Barbara disagreed with EPA’s concerns and recommended that CO 2 , N 2 O, and CH 4 emissions all be subject to the IUVP threshol d criteria. Manufacturers commented that since CO 2 performance is a function of vehicle design and cannot be remedied in the field with the addition or replacement of emissions control devices like traditional crite ria pollutants, it would not be appropriate or necessa ry to include IUCP thres hold criteria for GHG emissions.

5-343EPA Response to Comments

EPA continues to believe that the IUCP is an important part of EPA’s in-use compliance program and it will continue to be so for trad itional criteria pollutants. For GHG emissions, EPA believes the IUCP will also be a valuable future tool for achieving compliance, but believes that there is insufficient data today to determine whether the current IUCP threshold criteria are appropriate for GHG emissions. Once EPA can gath er more data from the IUVP program and from EPA’s internal surveillance program described below, EPA will reassess the need to exclude IUCP thresholds, and if warranted, pr opose a separate rulema king establishing IUCP threshold criteria which may include CO 2 , N 2 O, and CH 4 emissions. Therefore, for today’s final action, EPA will exclude IUVP data for CO 2 , N 2 O, and CH 4 emissions from the IUCP thresholds.

Remedies for Noncompliance with In-Use Standards

EPA received significant comment fr om industry expressing concern with the in-use standard. The comments focused on concerns about manufacturer liability for in-use CO 2 performance and for the most part did not addre ss the proposed 10% adjustment le vel or even the need for an adjustment to account for variability. Some commen ts suggested that an in-use standard is not necessary because in-use testing is not mandated in the CAA. Others stated that since there is no evidence that CO 2 emission levels increase over time, ther e is no need for an in-use standard. Finally, there was a general concern that failure to meet the in-use standard would result in recall liability and that recall can only be used in cases where it can be de monstrated that a “repair” can remedy the nonconformity.

The concern over recall liability in cases where there is no effective repair remedy has some legitimate basis. For example, EPA agrees there would be a concern if a number of vehicles for a particular model were to have in-use emi ssions that exceed the in-use standard, with no effective repair available to remedy the noncompliance. However, EP A does not anticipate a scenario involving exceedance of the in-use stan dard that would cause the Agency to pursue a mandatory recall unless there is a repairable cause of the exceedance. At the same time, failures to emission-related components, systems, software , and calibrations do occu r that coul d result in a failure of the in-use CO 2 standard. For example, a defec tive oxygen sensor that could cause a vehicle to burn excessive fuel would result in higher CO 2 levels that could exceed the in-use standard. While it is likely that such a problem would also affect other emissions as well, there would still be a demonstratable problem that can be repaired and a recall may be valid. Therefore, EPA believes that a CO 2 in-use standard is statutor ily required and can serve as a useful tool for determining compliance with the GHG program.

Deterioration Factors

In general, there was widespread support for the proposed use of an assigned DF of 1.0 multiplicative deterioration factor (or a zero additive deterioration factor) for CO2 emissions. Ford supported this concept, but also commented that EPA’s durability process “should allow for the use of an improvement fact or (i.e. negative de terioration factor) for CO2 useful life compliance.” AIAM commented that any possibl e changes in deterior ation factors in the compliance plan discussions with the manufactur er would be equivalent to a change in the

5-344EPA Vehicle Program, Feasibility, and Estimated Impacts

stringency of the standard” and “should only be implemented after not ice and opportunity for comment” due to lead-time reasons.

EPA believes that the useful life period established for criteria pollutants under Tier 2 is also appropriate for CO 2 . Data from EPA’s current in-use co mpliance test program indicate that CO 2 emissions from current technology ve hicles increase very little w ith age and in some cases may actually improve slightly. The stable CO 2 levels are expected because unlike criteria pollutants, CO 2 emissions in current technology vehicles are not controlled by after treatment systems that may fail with age. Rather, vehicle CO 2 emission levels depend prim arily on fundamental vehicle design characteristics that do not change over ti me. Therefore, vehicles designed for a given CO 2 emissions level will be expected to sustain the same emissions pr ofile over their full useful life.

As noted, sections 202 (a) 91) and 202 (d) of the CAA require emission standards to be applicable for the vehicle’s full useful life. U nder Tier 2 and other ve hicle emission standard programs, EPA requires manufacturers to demonstr ate at the time of cer tification that the new vehicles being certified will continue to meet emission standards throughout their useful life. EPA allows manufacturers several options for predicting in-use deterioration, including full vehicle testing, bench-aging specific components, and application of a dete rioration factor based on data and/or engineering judgment.

In the specific case of CO 2 , EPA does not currently anticipat e notable deterioration and has therefore determined that an assigned deterioration factor be applied at the time of certification. At this time EPA will use an additive assigned deterioration factor of zero, or a multiplicative factor of one. EPA anticipates th at the deterioration f actor will be updated from time to time, as new data regarding emissions deterioration for CO 2 are obtained and analyzed. Additionally, EPA may consider technology-spec ific deterioration factors, s hould data indicate that certain CO 2 control technologies deterior ate differently than others.

In response to Ford’s comments, EPA agrees with industry comments that there is little evidence to indicate that CO 2 emission levels from current-tec hnology vehicles in crease over time, however EPA also believes that the evidence is in conclusive at this time to indicate that CO 2 emission levels from current technol ogy vehicles decrease over the full useful life of the vehicle. Thus, EPA also believes that data are inconclusi ve with respect to an “improved” deterioration effect of CO 2 emissions (integrated over the useful life of the vehicle). For this reason, EPA is not adopting durability requirements which woul d allow for an “improvement factor” (i.e. negative deterioration factor) or for an option to generate data leading to use of an improvement factor for CO 2 useful life compliance. Further, EPA is treating CO 2 consistently with the longstanding treatment of other em issions, in that the regulations require any deterioration factor that is determined to be less than 1 to be se t equal to 1. EPA will, however, continue to work with manufacturers to collect and analyze data that could improve overall understanding of inuse CO 2 emissions.

In response to AIAM’s comments, during complian ce plan discussions prior to the beginning of the certification process, EPA will explore with each manufactu rer any new technologies that could warrant use of a different deterioration fact or. For any vehicle model determined likely to experience increases in CO 2 emissions over the vehicle’s useful life, EPA continues to believe

5-345EPA Response to Comments

that manufacturers should not be allowed to us e the assigned deteriora tion factor but rather should be required to establish an appropriate deteriorati on factor. If such an instance were to occur, EPA would allow manufacturers to use, for example, the whole-vehicle mileage accumulation method currently offered in EPA's regulations. 32

5.10.4. Credit Program Implementation

Organization: Ford Motor Company Chew, Yuli (private citizen)

Comment:

Ford Motor Company:

Ford supports EPA and NHTSA's proposed approach to the GHG/CAFE credit structure. In some cases, clarifying language should be adde d to meet the goals of a harmonized program. [OAR-2009-0472-7082.1, p. 2]

Ford supports the proposed reporting requireme nts, provided that confidential business information is protected under existing la ws and regulations. [OAR-2009-0472-7082.1, p. 2]

Advanced Technology Definitions

In general, Ford supports the definitions of advanced technology vehicles, but offers the following recommendations and clarifications. Ford recommends that the el ectric vehicle, fuel cell and plug-in hybrid definitions be modified as follows:

Electric vehicle means a motor vehicle that is powered solely by an electric motor drawing current from a rechargeable energy storage syst em, such as from storage batteries or other portable electrical energy st orage devices, including hydroge n fuel cells, provided that:

(1) Recharge energy must be drawn from a source off the vehicle, such as residential electric service; and

(2) The vehicle must be certified to the emission standards of Bin #1 of Ta ble S04-1 in paragraph (c)(6) of §86.1811.

(3) EVs can not have an onboard co mbustion/generator system as a means of providing electrical
energy.

Fuel cell means an electrochemical cell that prod uces electricity via the non-combustion reaction of a consumable fuel, typically hydrogen.

32 40 CFR 86.1823-08

5-346EPA Vehicle Program, Feasibility, and Estimated Impacts

Plug-in hybrid electric vehicle (PHEV) mean s a hybrid electric vehi cle that: (1) has the capability to charge the battery from an off-vehicle electric source, such that the off-vehicle source cannot be connected to th e vehicle while the vehicle is in motion. It is possible to produce a PHEV with a very small battery, that would provide some incr eased FE but very limited range, and these vehicles should not be forced into a ch arge-sustaining calculation or test method due to a limited range.

Ford also recommends that the EPA provide the definition and method of determining the 'equivalent all-electric range'. The standard test for determining the equivalent all electric range could be based on the EPA UDDS cycle, under th e test conditions specified in SAE J1711, or equivalent test method specified by EPA. Ford is willing to work with EPA and industry to develop an appropriate test methodology. [OAR-2009-0472-7082.1, pp. 23-24]

Chew, Yuli (private citizen):

I believe a credit lifespan of 5 years is appr opriate. This Regulation should harmonize with CARB’s Regulation of having a useful life of five years to avoid confusion and allows Intermediate Volume Manufacturers to orderly place their strategies in the transition. If this is proposed, however, I believe that the usefulness of the credits fr om trucks should be curtailed, with 20% reduction annually or more in their ability to balance out the deficit in the cars. [OAR2009-0472-7042.1, p.3]

EPA Response:

Advanced Technology Definitions

EPA proposed specific definitions for the vehicle technologies eligible for these provisions. One manufacturer suggested the followi ng changes in their comments:

 Insert an additional criterion for electric vehi cles that specifically states that an electric vehicle may not have an onboard co mbustion engine/generator system.

 A minor deletion of text from the definition for “Fuel cell.”

 The deletion of the requirement that a PHEV have an equiva lent all-electric range of more than 10 miles.

EPA agrees with the first comment. As writte n in the proposal, a vehicle with an onboard combustion engine that serves as a generator w ould not have been excluded from the definition of electric vehicle. However, EPA believes it should be. Although such a vehicle might be propelled by an electric motor directly, if the indirect sour ce of electricity is an onboard combustion engine then the vehicle is fundamenta lly not an electric vehicle. EPA is also adopting the commenter’s proposed rephrasing of th e definition for “Fuel cell,” which is simpler and clearer. Finally, in the cont ext of the advanced t echnology incentive provi sions in this final rule, EPA concurs with the commenter that the re quirement that a PHEV ha ve an equivalent allelectric range of at least ten miles is unnecessary. In the context of the proposed credit multiplier EPA was concerned that some ve hicles could install a charging system on a limited battery and gain credit beyond what the limited technology woul d deserve simply by virtue of being defined

5-347EPA Response to Comments

as a PHEV. However, because EPA is not finalizing the proposed multiplier provisions (see Section III.C.3) and is instead using as the sole incentive the zero emission tailpipe level as the compliance value for a manufacture r’s fleetwide average, this c oncern is no longer valid. Since EPA is not promulgating multipliers, the concern expressed at proposal no longer applies, and each PHEV will get a benefit from electricity commensurate with its measured use of grid electricity, thus EPA is no longer concerned abou t the multiplier effect. Thus, EPA is finalizing the following definitions in the regulations:

 Electric vehicle means a motor vehicle that is power ed solely by an electric motor drawing current from a rechargeable ener gy storage system, such as from storage batteries or other portable electrical ener gy storage devices, including hydrogen fuel cells, provided that:

o Recharge energy must be drawn from a source off the vehicle, such as residential electric service;

o The vehicle must be certified to the em ission standards of Bin #1 of Table S04-1 in paragraph (c)(6) of §86.1811; and

o The vehicle does not have an onboard com bustion engine/generator system as a means of providing el ectrical energy.

 Fuel cell electric vehicle means a motor vehicle propelled solely by an electric motor where energy for the motor is supplied by a fuel cell.

 Fuel cell means an electrochemical cell that prod uces electricity via the non-combustion reaction of a consumable fuel, typically hydrogen.

 Plug-in hybrid vehicle (PHEV) means a hybrid electric vehicl e that has the capability to charge the battery from an off-vehicle elect ric source, such that the off-vehicle source cannot be connected to the vehicl e while the vehicle is in motion.

5-Year Lifespan of Credits

Mr. Yuli Chew supported EPA’s proposed 5-year lifespan of credits. We note that the final rule adopted the 5-year lifespan for credits as proposed.

Credit Transfer Process

Mr. Yuli Chew recommended that credits transfe rred from the truck compliance program to the passenger car program should be devalued by 20% annually or more. There was no technical justification provided with the comment. EPA is not aware of a rationale for devaluing truck compliance credits and therefore did not consider this suggestion.

5.10.5. Enforcement

Organization: Ford Motor Company Association of Intern ational Automobile Manufacturers (AIAM) Alliance of Automobile Manufacturers (Alliance) Volvo Car Corporation Mitsubishi Motors R & D of America (MRDA) Hyundai Motor Company

5-348EPA Vehicle Program, Feasibility, and Estimated Impacts

Toyota Motor North America Natural Resources Defense Council California Air Resources Board Honeywell Transportation Systems National Automobile Dealers Association (NADA) Fisker Automotive, Inc. People's Republic of China

Comment:

Ford Motor Company:

Compliance Penalties

The NPRM states that if a manufacturer fails to comply with GHG standards, EPA determines how many high-emitter vehicles need to be removed from the fleet to achieve compliance. This number of vehicles would be deemed 'nonconf orming' and not covered by a certificate. Manufacturers would be subject to penalties of up to $37,500 per vehicle and injunctive relief, which would presumably include the au thority to require recall under CAA 207.

The CAA gives EPA a variety of powerful enforcem ent tools, which may be appropriate in cases where after treatment systems fail and vehicles with high criteria pollutant emissions need to be taken off the road. However, such enforcement authorities are excessive in the case of a GHG fleet average, which is comparable to a fuel economy standard. The maximum CAFE penalty ever paid has been approximately $30 million. U nder the EPA regime, the potential penalty for 10,000 'nonconforming' vehicles (a relatively small number for a large manufacturer) would be $375 million. That plus the threat of injunction/recall pr ovides EPA with excessive leverage in an enforcement context, especially when the primary cause of non-compliance may be market shifts, economic disruptions, or other factor s outside of the manufacturer's control. Injunction/recall is unlikely to ever be appr opriate, since there is probably no nonconformance (or remedy) as to individual vehicles. Rather than employing its enforcement leverage/discretion on a case-by-case basis, EPA should establis h a separate regulation or policy on GHG enforcement that provides for lower maximum pena lties and limits injunctive relief to egregious violations. In the case of noncom pliance with fleet average GHG standards, the policy should provide for maximum penalties comparable to those under the CAFE prog ram. The violations are comparable, and EPCA indicate Congress's intent as to an appropriate level of penalties for a noncompliance of this kind. [OAR-2009-0472-7082.1, p. 24]

Association of International Au tomobile Manufacturers (AIAM):

As recognized in the proposal, recall is not an appropriate enforcement mechanism for fleetaverage regulations.

Unlike the National Traffic and Motor Vehicle Safe ty Act, EPCA does not provide for recall and remedy in the event of a noncompliance. The pr esence of recall and remedy provisions in the Safety Act and their absence in EPCA is believed to arise from the difference in the application

5-349EPA Response to Comments

of the safety standards and CAFE standards. A safe ty standard applies to i ndividual vehicles; that is, each vehicle must possess the requisite equipment or feature that must provide the requisite type and level of performance. If a vehicle does not, it is noncompliant. ...

In contrast, a CAFE standard applies to a manufac turer’s entire fleet for a model year. It does not require that a particular indivi dual vehicle be equipped with any particular equipment or feature or meet a particular level of fuel economy. It does require that the manufacturer’s fleet, as a whole, comply. ... Thus, under EPCA, there is no such thing as a noncompliant vehicle, only a noncompliant fleet. No particular vehicle in a noncompliant fleet is any more, or less, noncompliant than any other vehicle in the fleet. See 74 FR at 49464. [OAR-2009-0472-7123.1, p.15]

The same rationale that counsels against adopting recall as an enforcement mechanism for CAFE standards would apply with just as much force to corporate average GHG emissions standards. To the extent that a manufacturer fails to m eet the corporate average GHG emissions standard for a given year, it will most likely be because it failed to balance its fleet and sell the proper mix of vehicles, and not because of a failure of an emissions contro l device. Indeed, given the fact that the technologies that reduce GHG emissions relate principally to the efficiency with which the vehicle converts fuel to energy—such as, for example, hybrid or plug-in engines, advanced transmissions, and mass reduction—t hese technologies are not likely to “fail” in the sense that they are not functioning properly to reduce emi ssions. Rather, a fleet of perfectly functioning vehicles may nonetheless fail to meet the GHG emi ssions standard if the anticipated mix is not sold. Under these circumstances, recall would be an entirely inappropr iate remedy. The Clean Air Act gives EPA the discretion to forego orde ring a recall where the failure to meet an emission standard is the result of fleet imba lance. Section 207(c)(1) of the Clean Air Act provides that where “a substantial nu mber of any class or category of vehicles or engines” fail to meet an emissions standard, then the manufact urer is to “submit a plan for remedying the nonconformity of the vehicles or engines,” and th at plan is to provide that the nonconformity “will be remedied at the expense of the manufacturer.” 42 USC § 7541(c). Where the nonconformity is the result of a fleet imbalan ce, then the manufacturer can “remedy” the nonconformity in ways that do not include recalling its fleet. [OAR-2009-0472-7123.1, p.16]

For the above reasons we urge EPA to specify those limited circumstances under which recall would be appropriate for noncompliance with it s greenhouse gas emissions requirements. [OAR2009-0472-7123.1, p.16]

Alliance of Automobile Manufacturers (Alliance):

In-Use Testing: Enforcement of Fleet Average Requirements

EPA proposes to require in-use testing of a vehi cle's CO2 emissions with the emissions compared to the model-level certification CO2 leve l used in calculating th e manufacturer's fleet average. EPA would apply a 10 percent 'complian ce factor adjustment' to the certification CO2 level to account for production and test variab ility. Under EPA’s proposal, one response to a failure to comply with the fleet average standards after all credits have been applied would be to calculate the number of vehicles not meeting the fleet average st andards and treat those vehicles

5-350EPA Vehicle Program, Feasibility, and Estimated Impacts

as not covered by emissions certifica tions, in effect deeming the certif ications as “void ab initio.” See 74 Fed. Reg. at 49,762. The Joint Notice suggests that such an approach to enforcement is consistent with EPA’s enforcement regulations fo r other fleet average requirements that apply to non-GHG emissions. Id. at 49573. [ OAR-2009-0472-6952.1,p.55 ]

Fleet average emissions requirements for GHG emi ssions are fundamentally different from such requirements for other emissions. As NHTSA and the federal courts re viewing fuel economy standards have long recognized, a manufacturer’s ability to meet fleet average fuel economy levels can be dependent on fuel prices and ot her economic factors, which are conditions beyond the control of vehicle manufacturers. This is one reason why NHTSA must consider “economic practicability” in setting CAFE standards. 49 U.S.C. § 32902(f); see e.g. Public Citizen v. NHTSA, 848 F.2d 256, 265 (D.C. Cir. 1988); The de pendence of EPA’s proposed fleet average GHG standards on a manufacturer’s fleet-wide fuel economy makes compliance with the proposed EPA standards subject to the same f actors beyond a manufacturer’s control. Imposition of severe sanctions when a manufacturer do es not comply with the GHG fleet average requirement would be inconsistent with the CAFE program, which by law imposes a comprehensive enforcement program.. The incons istency would have two dimensions: the CAFE law does not make manufacturers liable for penalties if compliance with the fuel economy standards was beyond a manufacturer’s control (49 USC 32913) and EPCA prescribes specific civil penalties that are not contained in th e proposed EPA enforcement rule (49 USC 32912). [OAR-2009-0472-6952.1, p.55]

Similarly, it was long ago settled under the Cl ean Air Act that “unless the cause of the [emissions] nonconformity is within the manufacture r’s control, an imposition of liability would be an unwarranted financial burden on the manuf acturers, unrelated to the strategy of forcing technological progress.” Chry sler Corp. v. EPA, 631 F.2d 865, 888 (D.C. Cir. 1980). When the limits on EPA’s enforcement powers recognized in Chrysler were identified in EPA’s “Tier One” rulemaking in 1991, EPA was careful to lim it the circumstances under which it would use a void-ab-initio sanction:

While the existence of a violation will depend solely on whether the ma nufacturer achieves the applicable [fleet average] phase-in percentage, the Agency reserves the right to exercise enforcement discretion in the asse ssment of civil penalties for th at violation. The EPA recognizes that a manufacturer, notwithstanding its best effo rts, may fail to achieve the required phase-in percentage due to circumstances beyond its cont rol .... Thus, in seeking civil penalties for a violation, EPA will exercise its enforcement discretion according to the circumstances surrounding a violation. In practice, EPA does not intend to bring an enforcement action against a manufacturer if both of the following circumstan ces exist: the shortfall in actual sales from the required percentage is less than or equal to ten percent of the required phase-in percentage, and there is no indication that the s hortfall resulted from bad faith on the part of the manufacturer. [OAR-2009-0472-6952.1, p.56]

56 Fed. Reg. 25,724, 25,729 (June 5, 1991) (emphasis added). The Alliance recommends that if EPA decides to proceed with void ab initio en forcement of the fleet average GHG requirement, EPA should add the “bad faith” elem ent to the text of the rule, to ensure that the regulation reflects the statutory limits on EPA’s enforcemen t powers. This is necessary not only based on

5-351EPA Response to Comments

the limitations on those powers under the Clean Air Act recognized in Chrysler, but also to ensure consistency between the EPA and NHT SA regulatory programs. See Massachusetts, supra. [OAR-2009-0472-6952.1, p.56]

NHTSA and EPA Enforcement and Penalty Assessment for Non-Compliance

In the Preamble to the NPRM, EPA states it is proposing “a compliance program for the fleet average that utilizes CAFE progr am protocols with respect to te sting, a certific ation procedure that operates in conjunction with the existi ng CAA Tier 2 certifica tion procedures, and assessment of compliance with the in-use st andards concurrent with existing EPA and manufacturer Tier 2 emission compliance testing programs.” In addition, EPA states that, with this proposal, the Agency is providing the regulated community with “numerous flexibilities to help achieve compliance.” 74 Fed. Reg. at 49,559. EPA requests comment on all aspects of the compliance program design, including comment s about whether differences between the proposed compliance scheme for GHG and the ex isting compliance scheme for other regulated pollutants are appropriate. [OAR-2009-0472-6952.1, p.57]

The Alliance agrees with EPA’s proposal to determine compliance with the fleet average CO2 standards when the model year closes out, as is currently the protoc ol under EPA’s Tier 2 program as well as under the current CAFE progra m. We also agree that submitting one data set in satisfaction of both CAFE and GHG requirement s is preferred and therefore would not impose unreasonable burdens on automobile manufact urers beyond what is required under the CAFE program. [OAR-2009-0472-6952.1, pp.57-58]

However, the Alliance has serious concerns about EPA’s approach to the assessment of penalties and other relief for non-compliance under the pr oposed Greenhouse Gas Standards for vehicles in Model Years 2012-2016. We recognize that EPA has authority under Section 207(c) of the Clean Air Act 12 (CAA) to requir e manufacturers to r ecall and repair vehicl es if the Agency determines there are a substantial number of vehicles that, although properly maintained and used, do not conform to emissions standards. EPA also has authority under Section 205 to assess civil penalties of up to $37,500 per vehicle for the introduction and sale of uncertified vehicles. [OAR-2009-0472-6952.1, p.58]

Yet, there are critical differences that the EPA has overlooked in its proposal. The CAA recall provision was intended to discourage, and provi des remedies for, situations in which manufacturers produce nonconforming vehicles th at emit pollution in excess of established standards. In the case of criteria pollutants, this could be due to the installation of defective or substandard after-treatment components such as catalysts or NOx traps. In the case of fleet average GHG standards, after- treatment components are not an issue. [OAR-2009-0472-6952.1, p.58]

GHG emissions are primarily a function of fuel ec onomy, which in turn is a function of vehicle size, vehicle design, and overa ll fleet mix. Compliance with fleet average GHG standards depends on many factors; in part icular, whether or not the mark et responds to products in accordance with a manufacturer's ex pectations. The market, in tur n, reacts to a host of forces

5-352EPA Vehicle Program, Feasibility, and Estimated Impacts

including economic conditions, fu el prices, style trends, and other factors. [OAR-2009-0472­ 6952.1, p.58]

Both NHTSA and EPA acknowledge th at these standards will be a significant challenge for auto manufacturers and their suppliers since they will have “...to devot e considerable engineering and development resources before 2012 laying the cri tical foundation for the widespread deployment of upgraded technology across a high percentage of the 2012– 2016 fleet...,” particularly in the current economic climate. 74 Fed. Reg. at 49,466. [OAR-2009-0472-6952.1, p.58]

As EPA and NHTSA are well aware, the Allian ce and its members are firmly committed to meeting the GHG and CAFE Standards proposed for MY 2012-16. The Alliance agrees that both NHTSA and EPA must assess the feas ibility and practicability of th eir standards as they impact: emissions reductions; oil conservatio n; fuel savings by consumers; the auto industry; and, safety concerns. [OAR-2009-0472-6952.1, p.58]

In its proposal, EPA states that “...penalties under the CAA are typically determined on a vehicle-specific basis by determining the number of a manufacturer’s highest emitting vehicles that caused the fleet average standard violati on.” 74 Fed. Reg. at 49,483. Consistent with such an approach, the following scenario w ould be a real possibility if a nd when any manufacturer failed to meet EPA’s GHG Standards. [OAR-2009-0472-6952.1, pp.58-59]

Once the manufacturer failed to comply with fleet average GHG standards, EPA would determine how many high-emitter vehicles need to be removed from the fleet to achieve compliance. This number of vehicles would be deemed 'nonconforming' (subject to recall) AND not covered by a certificate (subject to civil penalty). Manufacturers would be subject to both the expense of a recall and penalties of up to $37,500 pe r vehicle and possibly also injunctive relief. The potential penalty for 10,000 nonconforming vehicl es (a relatively small number for a large manufacturer) would be more than $375 million. Yet this penalty scenario might result from factors outside of a manufacturer’s control, such as the market disruptions associated with a major recession and unforeseen changes in consum er demand and fuel prices. While EPA has considerable discretion in the a ssessment of penalties, it is unclear how or when they would choose to use it. Moreover, it is not clear how EPA could order a recall pursuant to CAA Section 207(c) when there might be no repair remedy to correct nonconformity with a GHG standard. [OAR-2009-0472-6952.1, p.59]

Subjecting manufacturers to liab ility for recalls and debilita ting fines over fleet average GHG emissions does not square with the intent of C ongress when it created the EPCA civil penalty provisions for violations of CAFE. The CAFE penalty for non-compliance is $5.50 for each tenth of a mpg that a manufacturer’s average fuel eco nomy falls short of the standard for a given model year, multiplied by the total volume of thos e vehicles in the affected fleet, manufactured for that model year. 49 USC §32919(b). While the civil penalties assessed under EPCA certainly can be very significant, they are at least an or der of magnitude less onero us than the potential CAA penalties for a similar noncompliance situ ation. Moreover, EPCA does not provide for vehicle recalls due to noncompliance with fuel economy standards, likely because Congress recognized the futility of such a remedy as applied to vehicle fuel economy. [OAR-2009-0472­ 6952.1, p.59]

5-353EPA Response to Comments

To ensure that penalty assessment and enforcem ent authority are properly applied, EPA should establish a separate penalty policy that specifically addr esses non-compliance with the GHG standards being proposed. At a minimum, th e policy should provide for lower maximum penalties for noncompliance with fleet average GHG standards, in line with the penalties assessed under the CAFE program and it should also limit recall relief to egregious violations where a vehicle-specific remedy can be identified. [OAR-2009-0472-6952.1, p.59]

EPA’s proposed methodology for determining the numbe r of vehicles not in compliance is also problematic. EPA proposes to determine this va lue on the basis of the amount of non-offset debits and the fleet average greenhouse gas standard for the year in which the deficit failed to be offset. As noted in Section III.E.6 of the NPRM, this is a departure from “the Tier 2 approach of penalizing vehicles from the year in which the deficit was generated.” The Alliance also notes that this is inconsistent with the approach taken by California’s flee t average greenhouse gas regulation (13 CCR §1961.1 (b)(3)( A)). [OAR-2009-0472-6952.1, p.59]

For example, if a manufacturer has a debit situat ion in the 2012 model year that is not covered by carry back credits from either fleet in th e 2013, 2014, or 2015 model years, the 2012 model year standard should be used to determine th e number of nonconforming vehicles. [OAR-2009-0472­ 6952.1, p.59]

Penalizing vehicles produced in the model year in which an earl ier model year’s debit failed to be offset is not appropriate. The conditional nature of the certificate is fo r a specific test group in a specific model year; any non-conformance with a particular certific ate should be assessed against that particular model year , not against a future model year’s certificate in which vehicles conform to the fleet average greenho use gas standard. [OAR-2009-0472-6952.1, p.60]

Assessing penalties against a later model year fl eet’s vehicles by deeming them not covered by a certificate of conformity also causes issues in the determination of that fleet’s level of conformance. Removal of any vehicles from the fl eet in the year in which a deficit failed to be offset will result in a modification of both that fleet’s standard and average emission level. This effect is compounded by EPA’s proposal to “designa te as nonconforming those vehicles with the highest emission values first.” Due to the attribute-based stan dard, the removed vehicles are likely to be larger vehicles with less stringen t standards, but not necessarily those with the highest difference between their performance and their individual target standard. In fact, the highest emission value vehicles may have emission levels below their target standard. Removal of these vehicles will result in a lowering of the fleet standard (fewer large vehicles) and a lessening of the fleet’s performance to the standard (fewer vehicles below their individual target standard). [OAR-2009-0472-6952.1, p.60]

For the reasons outlined above, the Alliance re commends that the number of non-conforming vehicles be based on the number of debits not offset and the fleet standard from the year in which the debit was incurred. The vehicles that are fu rthest from their specific GHG targets should be designated as the ones not in conformance, for purposes of assessing any penalties. [OAR-2009­ 0472-6952.1, p.60]

Volvo Car Corporation:

5-354EPA Vehicle Program, Feasibility, and Estimated Impacts

The NPRM states that if a manufacturer fails to comply with GHG standards, EPA determines how many high-emitter vehicles need to be removed from the fleet to achieve compliance. This number of vehicles would be deemed 'nonconf orming' and not covered by a certificate. Manufacturers would be subject to penalties of up to $37,500 per vehicle and injunctive relief, which would presumably include the authority to require recall under the Clean Air Act (CAA 207).

The CAA gives EPA a variety of powerful enforcem ent tools, which may be appropriate in cases where after treatment systems fail vehicles with hi gh criteria pollutant emissions need to be taken off the road. However, such enforcement author ities are excessive in the case of a GHG fleet average, which is comparable to a fuel ec onomy standard. The maximum CAFE penalty ever paid has been approximately $30 million. Under the EPA regime, the potential penalty for 10,000 nonconforming vehicles (a relatively small number for a large manufacturer) would be $375 million. That plus the threat of injunction/recall pr ovides EPA with excessive leverage in an enforcement context, especially when th e most likely cause of non-compliance would be market shifts or economic disruptions. Injunction/ recall is unlikely to ever be appropriate, since there is probably no nonconformance (or remedy ) as to individual vehicles. Rather than employing its enforcement leverage/discretion on a case-by-case basis, EPA should establish a separate regulation or policy on GHG enforcement that provides for lower maximum penalties and limits injunctive relief to egregious viola tions. In the case of noncompliance with fleet average GHG standards, the policy should provide for penalties comparable to those under the CAFE program. The violations are comparable, a nd EPCA indicates Congress's intent as to an appropriate level of penalties for a noncom pliance of this kind. [OAR-2009-0472-7168.1 p.6]

Mitsubishi Motors R & D of America (MRDA):

Mitsubishi Motors is concerne d that the extremely strict EP A noncompliance penalties are not harmonized with the NHTSA CAFE noncomp liance penalties. [OAR-2009-0472-7125.1, p.2]

Both EPA and NHTSA have noncompliance pena lties within their re spective standards. However, there is a significant difference between the two penalty structures. NHTSA’s noncompliance penalty is $5.50 for each tenth of a mpg that a manufacturer’s average fuel economy falls short of the standard for a give n model year, multiplied by the total volume of those vehicles in the affected fleet, ma nufactured for that model year. EPA’s GHG noncompliance penalties are based on vehicles ex ceeding criteria pollutant standards, which can be corrected through the replacement of defective or substandard parts. However, a GHG fleet average is highly dependent on ve hicle size, weight, and overall fleet mix – none of which can be remedied with the replacement of parts. Market fluctuations could easily force a manufacturer into noncompliance and subject them to the maximum fine of $37,500 pe r vehicle, which is higher than the market price of most vehicles . These fines could bankrupt a smaller company, such as Mitsubishi Motors, for circumstances beyond their control and are not in the spirit of a harmonized National Program. [OAR-2009-0472-7125.1, p.4]

Hyundai Motor Company:

5-355EPA Response to Comments

EPA discusses that potential remedies may be nece ssary in the event of failure to comply with the fleet average. Hyundai would li ke to suggest two potential op tions for addressing remedies

First, it is possible that an in-use failure will be directly tied to the ma lfunction of a part or component. In many cases, we expect that the part malfunction will also have an impact on other criteria pollutants, and any reme dial action would be based on the emissions impact of the part malfunction. Under this scenario, enforcement action should follow the existing processes for criteria pollutants.

Second, EPA proposes to set an in-use standard at ten percent above the model-level CO2 certification emission level, whic h would apply to all in-use testing, including the In-Use Verification Program, selective enforcement aud its and EPA internal testing. EPA notes that exceeding the in-use standard will be deemed a failure (74 FR 49483). Hyundai would like to suggest that in the event th at an in-use failure is c onfirmed, EPA should provide the manufacturer with the option to readjust the fleet average of the failing model year. This readjustment would necessitate recalculating compliance with the GHG program from that year forward and possibly utilizing and recalculating existing cred its. [OAR-2009-0472-7231.1, p.7]

Toyota Motor North America:

As proposed, each Certificate of Conformity (certificate) would be conditional upon the manufacturer achieving CO2 fleet average standards. Failure to meet the standard, subject to application of appropriate cred its, would require EPA to make a determination as to which vehicles within the test group cau sed the fleet average standard to be exceeded. Toyota has the following concerns:

-First, the proposal could extend the conditional certificate period well beyond the end of the certification model year. In the unlikely event of noncompliance, a manufacturer would be subject to penalties and injunctive orders on an i ndividual basis for sale of vehicles that are not covered by the certificate ( up to $37,500 per vehicle).

-Second, as NHTSA would also assess CAFE fines for the sa me noncompliance scenario, a manufacturer could face fines and penalties from two agencies concerning essentially the same noncompliance. [OAR-2009-0472-7291, p.32]

In the event that EPA moves forward with penal ties, then at a minimum, it should establish a penalty policy that articulates requisite procedures and appropriate fines for non-compliance in advance of program implementation. Such a tran sparent process would av oid potential inequities that could result if manufacturers are forced to enter into closed-door and confidential penalty negotiations with EPA. [OAR-2009-0472-7291, p.33]

Natural Resources Defense Council:

Compliance through Voluntary Fees Should Not Be Permitted EPA should not permit voluntary payments or fees in lieu of achieving actual GHG reductions to satisfy compliance with the GHG standards. Ma nufacturers found in noncompliance should be

5-356EPA Vehicle Program, Feasibility, and Estimated Impacts

subject to enforcement actions that include a combination of vehicle sales restrictions and financial penalties that ar e strong enough to encourage th e aggressive pursuit and implementation of GHG reduction technologies to meet the standards. EPA should not adopt a civil penalty structure for compliance similar to that used for CAFE by NHTSA because it does not adequately force technology innovation across the industry. Throughout the existence of the CAFE program, several manufacturers have chosen to pay fines as a less expensive alternative to implementing the technologies necessary to meet fuel economy standards. As a result, the industry average fuel economy is lower than that expected from CAFE st andards and oil savings are therefore reduced.[OAR-2009-0472-7141.1, p. 20]

EPA has developed multiple mechanisms to ensure that manufacturers have sufficient lead time to deploy the necessary GHG reduc tion technologies to be in full compliance by MY 2016. EPA has proposed to phase out many of the mechanisms because they are meant to only be necessary for an industry transition to GHG standards st ructured under requirements of the CAA. We believe these mechanisms are more than adequate for attaining compliance. The key mechanisms include the Temporary Lead-time Allowance Alte rnative Standard, tradin g of credits coupled with a generous early credit proposal, inclus ion of FFV credits fo r MY 2012-2015, transferring credits between car and truck fl eets, and 3-year carry forward of deficits. EPA specifically included these mechanisms so that all manufactur ers would have a pathway to comply without fees by the 2016 model year. Allowing a volunt ary fee structure woul d certainly stall the deployment of pollution-reduction technologies. [OAR-2009-0472-7141.1, p. 20]

California Air Resources Board:

We disagree with the Alliance comment (in Document ID EP A-HQ-OAR- 2009-0472-6952.1) concerning penalties proposed by EPA under its Cl ean Air Act authority and believe EPA took a reasonable and proper approach. By moving ahead at a technology application level toward the 2020 MY more ambitious than what a straight -line projection under ESIA/EPCA would require, EPA is arguably fulfilling its dut y to address the separate public health and welfare goals not present in EISA/EPCA but required by the Clean Ai r Act, as discussed in Massachusetts et. al. v. EPA, Central Valley, and Green Mountain. Howeve r, to ensure that those greater greenhouse gas emission reductions come to fruition, EPA righ tly eschewed simply a ligning its penalty and enforcement policies with those under th e current CAFE structure. [OAR-2009-0472­ 7189.1, pp.13-4]

[CARB also submitted these comments as test imony at the Los Angeles public hearing. See docket number OAR-2009-0472-7283, pp. 21-27]

Honeywell Transportation Systems:

The Clean Air Act authorizes EPA and NHTSA to co llect fines and other penalties for failure to comply with the fleet average GHG and fuel eco nomy standards. Honeywell believes that any fines imposed and collected under the CAFE & GHG standards should be appropriated to the development of vehicle technologies that continue to improve fuel economy in the future. The direct application of the pena lties collected will support the u nderlying legislative policy and drive innovation. [OAR-2009-0472-7165.1, p.6]

5-357EPA Response to Comments

National Automobile De alers Association (NADA):

The National Program should incorporate NHTSA’s traditional CAFE enforcement tools, including its civil penalty policy, it makes no se nse to apply EPA’s traditional vehicle-based compliance tools to a fleet average program of th is sort. Noncompliance scenarios such as those resulting from a sudden drops in fuel prices are no place for EPA’s recall, de-certification (void ab initio),/ and severe per vehi cle penalty tools. An attempt to shoehorn EPA’s mobile source enforcement strategies into the National Pr ogram would only serve to prove NADA’s contention that the best National Progra m would be one where EPA eff ectively adopted NHTSA’s CAFE standards by reference, wit hout attempting to establish dup licative tailpipe GHG standards. [OAR-2009-0472-7182.1, p.9]

Fisker Automotive, Inc.:

Fisker Automotive recommends higher penalties overall. We recommend a $10 penalty per annual gallon of gasoline consumed beyond the baseline. For a 15 year life, that represents a $0.67 penalty per excess gallon consumed. [OAR-2009-0472-8732.1, p.4]

The regulation currently reads,

“The penalty, as adjusted for inflation by law, is $5.50 for each tenth of a mpg that a manufacturer’s average fuel economy falls shor t of the standard for a given model year multiplied by the total volume of those vehicles in the affected fleet (i.e., import or domestic passenger car, or light truck), manufactured for that model year.' [OAR-2009-0472-8732.1, pp.4­ 5]

Per this initial proposed regula tion, the most consuming new vehi cle sold today (a supercar) would only have a penalty of about $1,100. For the regulation to support real progress, penalties must be much larger—on the order of the cost s to improve fuel economy (through electrification, light-weighting, etc.). [OAR-2009-0472-8732.1, p.5]

This penalty model represents the maximum penalty an automaker can incur for failure to meet fleet fuel economy requirements. Unless individual automakers and the US light duty vehicle fleet as a whole both consistently fail to meet fuel economy targets, no automaker will need to pay these maximum penalties. Automakers will submit carry back plans if they miss the mark, allowing “the following three model years to ear n enough credits to make up for the deficit.” Furthermore, automakers will practice the aver aging, banking, and trading methods allowed to reduce their overall costs. As the US LDV fl eet as a whole increases its fuel economy, the market will allow individual automa ker penalties to fall in step—t hat is, supply of credits will increase and demand will decrease. This ali gns well with regulatory goals. [OAR-2009-0472­ 8732.1, p.5]

People's Republic of China:

We note that, it is the responsibility for EPA to protect public health and benefit, which is totally independent of the responsibility of NHTSA impr oving the energy efficienc y. Given that the fuel

5-358EPA Vehicle Program, Feasibility, and Estimated Impacts

consumption of vehicle is calculat ed directly from the emission of CO2, as to the behavior that violates the emission standard of the greenhouse gas (GHG) and Corporate Average Fuel Economy (CAFE) standard at the same time, we think it is unreasonable that EPA and NHTSA impose punishment respectively. Such kind of behavi or is suggested to be punished only once by one authority of the United States. [OAR-2009-0472-11269, p.3]

EPA Response:

Fleet Average Penalties

Manufacturer comments expressed concern about potential enforcement acti on for violations of the greenhouse gas standards, and the circumst ances under which EPA woul d impose penalties. Manufacturers also suggested that EPA should adopt a penalty stru cture similar to the one in place under CAFE. The California Air Resources Bo ard (CARB) disagreed with the automobile manufacturer comments and expressed their be lief that “EPA took a reasonable and proper approach.”

The CAA specifies different ci vil penalty provisions for noncompliance than EPCA does, providing for a range of potential penalties that are based on ta king the relevant circumstances and factors into consideration, as compared to the specified pe nalty amount under CAFE. This structure has worked well in the past, without predefined penalties under the CAA, and EPA expects it will also work well here. Manufacturer s raised concern over noncompliance driven by short-term market fluctuations, but the ability of manufacturers to generate credits or to rely on future credit generation means s hort term market fluctuations can be addressed without leading to noncompliance. In addition, EPA recognizes that it may be appropriate, should a manufacturer fail to comply with the NHTSA fuel economy standards as well as the CO 2 standard in a case arising out of the same facts and circumstances, to take into account the civil penalties that NHTSA has assessed for violations of the CAFE standards when determining the appropriate penalty amount for violations of the CO 2 emissions standards. This approach is consistent with EPA’s broad discretion to consid er “such other matters as justice may require,” and will allow EPA to exercise its discretion to prevent injustice and ensure that penalties for violations of the CO 2 rule are assessed in a fair and reasonable manner.

The statutory penalty factor that allows EPA to consider “suc h other matters as justice may require” vests EPA with broad discretion to reduc e the penalty when othe r adjustment factors prove insufficient or inappr opriate to achieve justice. 33 . The underlying principle of this penalty factor is to operate as a safety mechan ism when necessary to prevent injustice. 34

In other environmental statutes, Congress has spec ifically required EPA to consider penalties assessed by other government agencies where violati ons arise from the same set of facts. For instance, section 311(b)(8) of the Clean Water Act, 33 U.S.C. 1321(b)(8) authorizes EPA to consider any other penalty for the same incident when determining the appropriate Clean Water Act penalty. Likewise, section 113(e) of the CAA authorizes EP A to consider "payment by the

33 In re Spang & Co. , 6 E.A.D. 226, 249 (EAB 1995)
34 B.J. Carney Industries , 7 E.A.D. 171, 232, n. 82 (EAB 1997).

5-359EPA Response to Comments

violator of penalties previously assessed for the same violation" when assessing penalties for certain violations of Title I of the Act.

Method of Determining Non-Complying Vehicles

EPA received comments from the Alliance, rega rding the method of determining non-complying vehicles. The Alliance indicated that “EPA’s proposed methodology for determining the number of vehicles not in compliance is also problema tic” and “inconsistent with the approach taken by California’s fleet average greenhouse gas regulation.”

EPA proposed that manufacturers will report to EPA their fleet average and fleet average standard for a given model year (reporting sepa rately for each of the car and truck averaging sets), the credits or deficits generated in the current year, the balance of credit balances or deficits (taking into ac count banked credits, deficit carry-forwa rd, etc., and whether they were in compliance with the fleet average standard under the term s of the regulations. EPA will review the annual reports, figures, and calculations su bmitted by the manufacturer to determine any nonconformance.

Each certificate, required prio r to introduction into commerce, will be conditioned upon the manufacturer attaining the CO 2 fleet average standard. If a manufacturer fails to meet this condition and has not generated or purchase d enough credits to cove r the fleet average exceedance following the three year deficit carry-forward, then EPA will review the manufacturer's production for the mo del year in which the deficit originated and designate which vehicles caused the fleet averag e standard to be exceeded.

EPA proposed that the vehicles that would be identified as n onconforming would come from the most recent model year, and some comments pointed out that this was inconsistent with how the NLEV and Tier 2 programs were structured. EPA agrees with these comments and is finalizing an enforcement structure that is essentially iden tical to that for existi ng programs. EPA would designate as nonconforming those ve hicles with the highest emi ssion values first, continuing until a number of vehicles equal to the calcula ted number of non-complying vehicles as determined above is reached. Those vehicles w ould be considered to be not covered by the certificates of conformity covering those model t ypes. In a test group where only a portion of vehicles would be deemed nonconforming, EP A would determine the actual nonconforming vehicles by counting backwards from the last vehicle produced in that model type. A manufacturer would be s ubject to penalties and injunctive or ders on an individual vehicle basis for sale of vehicles not covered by a certificate. This is the same general mechanism used for the National LEV and Tier 2 corporate average standards.

EPA does not agree that it is more appropriate, as Ford suggests, to design ate the vehicles not in conformance as those that are furthest from their specific GHG target values. The methodology EPA proposed has a very specific purpose: to pena lize a sufficient number of vehicles such that the GHG deficit is “offset” by vehicles subject to enforcement action. For example, if the deficit subject to enforcement acti on is 10,000 grams/mile of CO 2 in model year 2016, and the manufacturer’s fleet average standa rd in that year was 250 grams/m ile, the number of vehicles to be penalized would be 10,000 ÷ 250, or 40 vehicles. Since the highest emitters from that model

5-360EPA Vehicle Program, Feasibility, and Estimated Impacts

year will, by definition, be above the averag e of 250 grams/mile, then penalizing those will guarantee that at least 10,000 grams/mile will be addressed by the penalty. (E.g., if those highest emitters emit 300 grams/mile, then penalizing 40 of them will “offset” 40 × 300, or 12,000 grams/mile.) Using Ford’s suggested method will not guarantee that the appropriate excess emissions will be addressed by the penalty. For ex ample, it is possible that those vehicles that are farthest from their target values are still relatively low-emission vehi cles. If EPA chose to use Ford’s methodology, then it’s possible that vehicles that em it 240 grams/mile could be the farthest from their target valu e and thus selected to be pena lized, but if EPA penalized 40 of those vehicles only 9600 grams/mile (40 × 240) of the deficit would be offset. This would be a failure of the fundamental intent of the methodology to remove certific ates such that the deficit is fully accounted for, and thus EPA rejects Ford’s suggestion.

Recall

The Association of International Automobile Manufacturers (AIAM) recommended that EPA should not adopt recall as an enforcement mechan ism for failure to meet both the in-use (model type) GHG emission standard and the corporat e average GHG emission standard. Regarding noncompliance with the corporate average GHG sta ndard, AIAM believes that the Clean Air Act gives EPA the discretion to forgo ordering a recall where the failure to meet an emission standard is the result of fl eet imbalance and remedy the nonconformity in ways that do not include recalling its fleet. Fleet imbalance could occur due to fa ctors which may be outside of a manufacturer’s control, e.g. wher e the manufacturer sells more ve hicles with CO2 levels above the footprint target than they sell vehicles wi th CO2 levels below the footprint target for the respective models). AIAM, thus urged “EPA to specify those limited circumstances under which recall would be appropriate for noncompliance with its greenhouse gas emissions requirements.”

Hyundai Motor Company commented that if an in -use failure can be di rectly tied to the malfunction of a part or component, that enforc ement action should follow the existing processes for criteria pollutants (e.g. the re call process). Hyundai also suggest ed that “in the event that an in-use failure is confirmed, EPA should provide th e manufacturer with the option to readjust the fleet average of the failing model year” (i.e. to ad just the credit or debit balance accordingly to account for the failing in-use vehicles).

EPA agrees with AIAM that r ecall is not a good mechanism for dealing with noncompliance of the corporate average standard. However, recall can be an effective tool for enforcement of the in-use standards. There are a number of problems th at can occur to a specif ic vehicle model that could cause noncompliance with the appropriate in-u se standard and that c ould be repaired, such as a defect in a part or co mponent, a misbuild, or an im properly functioning new technology. Since these types of problems are within a manufacturer’s control, unlike a fleet imbalance due to unanticipated sales fluctuati ons, a recall would be an appropria te and effective mechanism for addressing noncompliance with the in-use standa rd. EPA agrees with Hyundai’s comment that if an in-use failure can be directly tied to the malfunction of a part or component, the appropriate enforcement action should be a recall following th e recall process for criteria pollutants. EPA would also argue that recall would be an appropr iate enforcement tool for misbuild situations where an incorrect part, component . Software, or calibration was in stalled in a vehicle resulting in a failure of the in-use standard.

5-361EPA Response to Comments

Finally, EPA disagrees with Hyundai’s suggesti on that manufacturers be given the option to readjust their fleet average to account for failing th e vehicle model in lieu of a recall action. This would be inconsistent with EPA’s other rules. For example, in the Tier 2 program, if a manufacturer had a test group that were to fail the Bin 5 emissi on standard, it would be required to recall the vehicles and fix the problem that caused the noncompliance. They would not be allowed to retroactively reassign the vehicle to a higher bin and recalcul ate their fleet average (which is fundamentally what Hyundai is suggesting) . The purpose of a recall is to fix a problem with a vehicle that causes an emission noncomp liance. This means a defective part or an incorrect part or calibration, not a fleet imbala nce due to unanticipated sales fluctuations. Allowing a vehicle model that exceeded the in-use standard as a result of a fixable problem to continue to operate in the fiel d would contradict the purpose of the in-use standard. Therefore, the suggestion of readjusting the fleet average in lieu of recall is not an appropriate option and was not considered by EPA.

5.10.6 Prohibited Acts in the CAA

Organization: No comments received

5.10.7. Other Certification Issues

Organization: Ford Motor Company Honda Motor Company Ferrari S.p.a Association of Intern ational Automobile Manufacturers (AIAM) Alliance of Automobile Manufacturers (Alliance) NGVAmerica State of New Jersey Automotive Aftermarket Industr y Association (AAIA); et.al New York State Department of Environmental Conservation

Comment:

Ford Motor Company:

In addition, Ford agrees that additional GHG on-board diagno stic (OBD) monitoring is not appropriate at this time . OBD was envisioned as a means of monitoring devices affecting criteria pollutants that are prin cipally controlled through engine co ntrols and after-treatment devices. CO 2 performance, on the other hand, is influenced by a wide variety of parameters. Malfunctions that impact engine efficiency, su ch as virtually all faults that affect fuel system control, EGR control, variable valve timing control, engine co oling system operation, cylinder misfire, etc. are already monitored by OBD. [OAR-2009-0472-7082.1, p. 17]

Honda Motor Company:

In an existing regulation EPA requi res PHEVs to be equipped with a “useful life indicator for the battery” when the range deteriorat es to less than 75 per cent of its initial range. On the other hand,

5-362EPA Vehicle Program, Feasibility, and Estimated Impacts

in the NPRM, EPA states: “EPA does not plan to require CO 2 emissions as one of the applicable standards required for the OBD m onitoring threshold.” We agree th at more research should be done regarding the need and feasibility of OBD monitoring, yet the PHEV useful life indicator seems to be a kind of OBD monitoring. As suc h, Honda believes that EPA should take this opportunity to clarify its intent with respect to the PHEV us eful life indicator. [NHTSA-2009­ 0059-0095.1, p.10-11]

Ferrari S.p.a:

We support the proposal that at th is time EPA does not require CO 2 emissions as one of the applicable standards required for the OBD m onitoring threshold. It is necessary to gain knowledge regarding the deteriora tion, if any, of the sy stems and devices that affect the fuel economy and the CO 2 emissions to define, if strictly necessary, specific requirements for the OBD system, working closely with CARB. No additional and unnecessary burdens should be adopted for the on-board diagnos tic system. [OAR-2009-0472-7214.1 p.5]

We agree with EPA that is proposing to reta in its current high alt itude regulations so manufacturers would not normally be required to submit vehicle CO 2 test data for high altitude. Instead, they would submit an engineering evaluation indicating that common calibration approaches will be utilized at high altitude, and th erefore the compliance is assured also in these conditions. [OAR-2009-0472-7214.1 p.5]

Association of International Au tomobile Manufacturers (AIAM):

It would be premature for EPA to adopt a requ irement for monitoring carbon dioxide emissions at this time. As EPA observes, it is not cl ear yet whether such monitoring is feasible. See preamble at 49574. [OAR-2009-0472-7123.1, p.11]

Alliance of Automobile Manufacturers (Alliance):

OBD for CO 2 , N 2 O and CH 4 (Proposed regulations in 40 C.F.R. 86.1806-05)

EPA has proposed to eliminate CO 2 as a consideration for OBD monitoring. [OAR-2009-0472­ 6952.1, p.52]

Recommendation:

We agree with EPA’s decision to eliminate CO 2 as a consideration for OBD monitoring. We encourage EPA to consider eliminating CH 4 and N 2 O from OBD monitoring as well. Adding testing for CH4 and N2O would significantly increase the OBD devel opment burden, without significant benefit, since any malfunctions that increase CH 4 and N 2 O emissions will more than likely be caught by current OBD systems. (This i ssue could also be resolved by EPA deciding to eliminate the CH 4 and N 2 O standards as mentioned above in issue 1 Emission Standards.) [OAR2009-0472-6952.1, p.52]

NGVAmerica:

5-363EPA Response to Comments

According to EPA’s proposal, the new regulatio ns, including the proposed methane cap, would not cover small businesses that produce aftermar ket alternative fuel systems. However, the regulations would cover large busin esses that produce aftermarket sy stems. We believe that all aftermarket conversion system manufacturers sh ould be exempt. As currently proposed, the regulations could actually discou rage some large businesses from continuing to offer aftermarket conversion systems with the result that only sm all businesses will continue to do so. [OAR-2009­ 0472-11310, p. 3]

State of New Jersey:

The USEPA indicates in the pr oposal that it plans to evalua te on-board diagnostic (OBD) monitoring technology with regard to monitoring greenhouse gas related emissions systems and components, and use that evaluation to make a de termination as to whether or not to include greenhouse gas related emissions components as part of the OBD requirements in a future regulatory action. The Department supports the inclusion of greenhouse gas emissions-related components as part of the OBD requirements. [OAR-2009-0472-7109.1, p.10]

Automotive Aftermarket I ndustry Association (AAIA):

We are also particularly concer ned that since the Agency is proposing not to expand the systems monitored by the OBD computer, it will be uncer tain to the car companies and the repair industry whether informati on needed to repair and maintain the technologies needed to meet this proposal will be shared with th e independent aftermarket. If pa st history is any indication, the vehicle manufacturers, for competitive and other reasons, will be very reluctant to share this information absent government guidelines. [OAR-2009-0472-7057.1, p.3]

We are concerned that the current service inform ation rule may be limited to parts and systems covered by the OBD system. If EPA does not re quire monitoring of these additional systems which affect greenhouse gas emissions by the OB D system, this rule might be the only proceeding that will consider access to service information for these systems. Therefore, the aftermarket strongly urges that the Agency in clude in this rulemaking provisions so that “emissions-related information” which may be accessed for service and repair would include information for systems on vehicles that impact global warming emissions whether or not they are monitored by the OBD computer. [OAR-2009-0472-7057.1, pp.3-4]

New York State Department of Environmental Conservation:

On Board Diagnostics We support EPA's decision to not require OBD systems to monitor for CO 2 emissions. As EPA notes, there should be relatively little deterior ation. Additionally, failure s that would lead to major CO 2 emission increases would most likely be accompanied by operating problems that would require repair. Increased fu el costs would also encourage repair. Conditions which trigger the Malfunction Indicator Lamp (MIL) too easily c ould reduce the influence of the MIL light on consumer behavior, eroding the real emissions re ductions currently attained when repairs are made based on OBD warnings. [OAR-2009-0472-7454, p.4]

5-364EPA Vehicle Program, Feasibility, and Estimated Impacts

Automotive Aftermarket I ndustry Association (AAIA)

While not mentioned in this pr oposal, vehicle maintenance is ex tremely important to improving fuel economy and reducing greenhouse gas emissi ons for the nation’s vehicle fleet. This importance is supported by information availa ble on the Department of Energy website, www.fueleconomy.gov . [OAR-2009-0472-7057.1, p.1]

According to the DOE website:

Fixing a car that is noticeably out of tune or has failed an emissions test can improve its gas mileage by an average of 4 percent, though results vary based on the kind of repair and how well it is done. Fixing a serious maintenance problem, such as a faulty oxygen sensor, can improve your mileage by as much as 40 percent. [OAR-2009-0472-7057.1, p.1]

The site further states that keeping tires inflat ed to proper pressure can improve gas mileage by around 3.3 percent and using the proper oil for a vehicle can provide a fuel economy benefit of 1-2 percent. [OAR-2009-0472-7057.1, p.1]

Based on these numbers, we estimate (see attachment ) that if all car owners regularly took the above actions to maintain their vehicle, the nation would save 12 billion gallons of gasoline per year. The reductions in petroleum use would translate into a savings to car owners at the pump of $30 billion per year and a reduc tion of 116 million tons of CO2 equivalent every year. [OAR2009-0472-7057.1, p.2]

The estimate for potential greenhouse gas emission reductions from proper maintenance compares favorably with EPA estimates that this proposal will resu lt in approximately 950 million metric tons of ton of carbon dioxide equi valent emissions reductions over the life time of vehicles sold in model years 2012 through 2016. In fact, absent good maintenance, it is very unlikely that EPA will realize the global warm ing emissions reduction goals of this proposal. [OAR-2009-0472-7057.1, p.2]

Please be assured that the independent vehicle re pair industry is committed to working with EPA and the Department of Transportation to ensure th at car owners have access to the repair services necessary to ensure that their vehicles operate at their peak efficiency, thus reducing global warming emissions and depleti on of our energy resources. However, unless action is taken by EPA as part of this rulemaking, the aftermarket is concerned that our i ndustry will not have access to the information, tools and software ne eded to work on the technology that will be utilized by the manufacturers to meet the st andards developed in this proposal. [OAR-2009­ 0472-7057.1, p.2]

There is little doubt that the cha nges to vehicle technology that wi ll be required by the September 28, 2009 proposed rule will be extensive. While it is impossible to predict the extent of technology changes that will occur as a direct result of this rule, it is likely that air conditioning systems, braking, lubricants, turbochargers, and fu el injection systems will all be affected. These changes will mean that the information needed to ensure that these systems are maintained properly also will need to be avai lable to technicians that will ma intain them. Of course, many of

5-365EPA Response to Comments

the systems that impact fuel economy such as the oxygen sensor and ca talytic converter are already covered by EPA’s service information availa bility rules. However, many changes such as those impacting braking and air conditioni ng likely are not covered. [OAR-2009-0472-7057.1, p.3]

In addition, tire pressure sensor s while required by the Nationa l Highway Traffic Administration (NHTSA) for safety reasons, also play an important role in ensuring that vehicles are operating at peak fuel efficiently. As our co mments indicated at the outset, an improperly inflated tire can mean a fuel efficiency loss of 3.3 percent. Yet, there is no requirement for car companies to make available to the independent service industr y any information necessary to ensure that the tire pressure sensor is worki ng properly after a tire is ch anged or repaired. [OAR-2009-0472­ 7057.1, p.3]

If the Agency is planning to revise the definition of emissions to include greenhouse gas emissions, we believe that EPA is also obligated to ensure that the service information rule covers all vehicle systems that impact emissions of greenhouse gases. In developing this rule, EPA must look not only at new tech nologies that will be utilized on internal combustion engines, but also at hybrid systems where items such as regenerative braking might not have been included under the current service information rule , but are essential to ensuring that the hybrid vehicles operate prope rly. [OAR-2009-0472-7057.1, p.3]

EPA Response:

Onboard Diagnostic (OBD) Requirements

The light-duty on-board diagnosti cs (OBD) regulations require manufacturers to detect and identify malfunctions in all monitored emi ssion-related powertrain systems or components. 35 Specifically, the OBD system is required to mon itor catalysts, oxygen sensors, engine misfire, evaporative system leaks, and any other emission control systems direc tly intended to control emissions, such as exhaust gas recirculation (EGR), secondary air, and fuel control systems. The monitoring threshold for all of th ese systems or components is 1.5 tim es the applicable standards, which typically include NMHC, CO, NO X , and PM. EPA did not propose that CO 2 emissions would become one of the appli cable standards required to be monitored by the OBD system. EPA did not propose CO 2 become an applicable standard fo r OBD because it was confident that many of the emission-related systems and components currently monitored would effectively catch any malfunctions related to CO 2 emissions. For example, malfunctions resulting from engine misfire, oxygen sensors, the EGR system, the secondary air system, and the fuel control system would all have an impact on CO 2 emissions. Thus, repairs made to any of these systems or components should also result in an improvement in CO 2 emissions. In addition, EPA did not have data on the feasibility or effectiveness of monitoring various emission systems and components for CO 2 emissions and did not believe that it would be prude nt to include CO 2 emissions without such information.

EPA did not address whether N 2 O or CH 4 emissions should become applicable standards for OBD monitoring in the proposal. Several manufacturers felt that EPA’s silence on this issue

35 40 CFR 86.1806-04

5-366EPA Vehicle Program, Feasibility, and Estimated Impacts

implied that EPA was proposing that N 2 O and CH 4 emissions become applicable OBD standards. They commented that EPA should not include them as part of OBD. They felt that adding N 2 O and CH 4 would significantly increa se OBD development burden, w ithout significant benefit, since any malfunctions that increase N 2 O and CH 4 would likely be caught by current OBD system designs. EPA agrees with the manufacturer’s comments on including N 2 O and CH 4 as applicable standards. Therefore, at this time, EPA is not requiring CO 2 , N 2 O, and CH 4 emissions as one of the applicable standards required for the OBD monitoring th reshold. EPA plans to evaluate OBD monitoring technology, with re gard to monitoring these GHG emissions-related systems and components, and may choose to propose to include CO 2 , N 2 O, and CH 4 emissions as part of the OBD requirements in a future regulatory action.

Plug-in Hybrid Useful Life Indicator for the Battery

Honda commented that existing EPA regulations (40 CFR 86.1806-05(b)(8)(ii)) “require plug-in hybrid vehicles (PHEVs) to be equipped with a “useful life indicator for the battery” when the range deteriorates to less than 75 percent of it s initial range. On the other hand, in the NPRM, EPA states: “EPA does not plan to require CO 2 emissions as one of th e applicable standards required for the OBD monitoring threshold.” H onda recommended that “EPA should take this opportunity to clarify its intent with resp ect to the PHEV useful life indicator.”

EPA believes that it is too early in the development of PHEVs to address this issue at this time. We agree to work with the Indus try and interested stakeholders (including the California Air Resources Board) to assess the need for this re quirement. Should the need for such a device change, regulation changes may be warranted.

Service Information Availability

The GHG rule does not change EPA’s service info rmation regulations re quiring manufacturers to make available any and all emissions-related in formation. EPA will continue to monitor the emissions-related service information that manuf acturers make available to meet existing regulations. As part of EPA’s continuing mon itoring, the agency would consider whether any additional service information re quirements are necessary as an indirect consequence of the promulgation of GHG standards

5.10.8. Miscellaneous Revisions to Existing Regulations

Organization: Alliance of Automobile Manufacturers (Alliance)

Comment:

Alliance of Automobile Manufacturers (Alliance):

Fuel Economy (FE) Data (Proposed regulations in 40 C.F.R. 600.113-08)

EPA has proposed to calculate FE based on dete riorated emission data. This proposal creates several issues:

5-367EPA Response to Comments

• This is a fundamental change to the way FE has been calculated. All prior FE calculations and standards (gas guzzler, CA FE) have been based on emission data that has not been deteriorated.

• FE calculations include the following constituents depending on the type of fuel that is used; total hydrocarbons (HC), carbon monoxide (CO) , methane (CH4), non-methane hydrocarbons (NMHC), methanol (CH3OH), formaldehyde (H CHO), ethanol (C2H5OH) and acetaldehyde (C2H4O). While some of these constituents curren tly have useful life standards and already have deterioration factors, some do not. Therefore, manufacturers may be required to rerun all forms of durability vehicle testing in order to establish DFs for these additional constituents.

• The use of deteriorated emi ssion data contradicts the requirement to downward adjust FE values for test vehicles whose sy stem miles have exceeded 6200 miles.

• This change will require significant changes to existing computer programs that were designed to calculate FE via the tradit ional method. [OAR-2009-0472-6952.1, pp.49-50]

Recommendation:

Because the current emission durability programs were designed to predict traditional emission deterioration and not the effect s that vehicle aging may have on FE, the use of deteriorated emission data in the FE calculation can lead to false and/or inconsistent results based on the manufacturer’s choice of durability program. Requiri ng the use of deteriorated data will penalize those manufacturers who choose to utilize a durability program that develops DFs versus “aged component” testing. When testing with aged co mponents, the only components that are being aged are those that affect the current criteria pollutants. The dynamometer load on the vehicle does not change whether the vehicle is being tested with 4K or 120K aged components; therefore, the amount of fuel consumed during the test, theoretically, will not change. Because the same amount of fuel is being consumed, the increase in HC and CO emissions due to the use of deteriorated emission components is offset by a reduction in the emi ssions of CO2. So, with aged component testing the FE re sult will be the same as the result that is achieved on a low mileage test. On the other hand, if a manufacturer utilizes DFs, the HC and CO values will be deteriorated without a correspond ing decrease in CO2, thereby pe nalizing the FE result. [OAR2009-0472-6952.1, p.50]

Furthermore, EPA is on record stating that ther e is no reason to believe that CO2 emissions will show an increase as the vehicle ages as would be expected with criteria pollutants. Therefore, requiring manufacturers to measure and report in-use CO2 emissions that can be predicted from measurements made at vehicle certification woul d add unnecessary burden that offered little or no additional value. [OAR-2009-0472-6952.1, p.50]

In order to avoid these issues, the Alliance reco mmends that EPA remove the requirement to use deteriorated emission data in the carbon balance equations and retain the current method for calculating FE. [OAR-2009-0472-6952.1, p.50]

EPA Response:

5-368EPA Vehicle Program, Feasibility, and Estimated Impacts

Use of Deterioration Factors in Fuel Economy Calculations

EPA proposed to calculate CREE emissions base d on deteriorated emissions data for the manufacturer’s end-of-year CREE emission leve l and also to determine the in-use CREE emission standard which is applicable to each manufacturer’s specific models. EPA did not intend to propose to calculate fuel economy based on deteriorat ed emissions data, however EPA proposed regulations (74 FR 49772, September 28, 2009) suggested otherwise, as follows:

(g) Calculate separate FTP, highway, US06, SC03 and Cold temperature FTP fuel economy from the grams/mile values for total HC, CO, CO 2 and, where applicable, CH 3 OH, C 2 H 5 OH, C 2 H 4 O, HCHO, NMHC and CH 4 , and the test fuel's specific grav ity, carbon weight fraction, net heating value, and additionally for natural gas, the test fuel's composition.

(1) If the emission values (obtaine d per paragraph (a ) through (e) of this section, as applicable ) were obtained from testing with aged exhaust emission control components as a llowed under 86.1823-01, then these test values shall be used in the calculations of this section.

(2) If the emission values (obtaine d per paragraph (a ) through (e) of this section, as applicable ) were not obtained from te sting with aged exhaust emission control components as a llowed under 86.1823-01, then these test values shall be adjusted by the approp riate deterioration factor determined according to 86.1823-01 before being used in the calculations of this section. [Emphasis added]

The Alliance recommended that “EPA remove the requirement to use deteriorated emission data in the carbon balance equations and retain the current method for calculating FE.”

EPA has corrected this oversight in the final rule.

5.10.9. Warranty, Defect Reporting, and Other Em ission-related Components Provisions

Organization: Alliance of Automobile Manufacturers (Alliance) Toyota Motor North America State of New Jersey Hyde, James (citizen)

Comment:

Alliance of Automobile Manufacturers:

Warranty Requirements

Emission warranty requirements are not appropr iate for mobile air conditioners under the proposed rule, since in-use perf ormance of the MAC system at levels comparable to a new

5-369EPA Response to Comments

vehicle is not needed to achieve the emi ssion levels targeted by EPA. [OAR-2009-0472-6952.1, p.28]

Warranty requirements were established for tailp ipe pollutants, such as CO and NOx, because emissions of those pollutants would rise signific antly if the pollution control devices, such as catalytic converters, fail. This would typically not be the case for MAC components. First, consider the case of indirect emissions from fu el consumed to power the MAC. In the vast majority of MAC failure modes, the system stops cooling and ceases operation -- either because the critical moving parts stop moving or because the system is switched off -- thereby actually reducing the indirect CO2 em issions. [OAR-2009-0472-6952.1, p.28]

Emission warranties should not be required in relation to the i ndirect MAC emissions. The most significant item in EPA’s proposed warranty cove rage, the compressor, can cost over $1,000 to replace. It seems paradoxical a nd disproportionate to impose such high costs in an emissions recall scenario to replace this component, and thereby actually increas e indirect emissions. Although manufacturer warranties ma y typically already be longe r than the two-year period proposed by EPA in this NPRM, in principle there is no sound basis for emission warranty coverage to safeguard indirect emission levels, since indirect emissions go down when the system fails. Finally, it is worth noting that pr oper functioning of these parts is not actually required to achieve the emissions le vels set by EPA. [OAR-2009-0472-6952.1, p.28]

Regarding direct emissions of refrigerant, there is only a negligible environmental impact if refrigerants below a GWP of 150 are released fr om the system, even if the entire charge, typically between 1-2 pounds, is released. Theref ore, emission warranty coverage of joints, hoses, seals, etc. is certainly not needed to pr otect the environmental gains from application of low-GWP refrigerants. While the ultimate costs of the new low-GWP refrigerants are not known with certainty, they are expected to be at a level that would seve rely discourage motorists from repeatedly recharging a system with significant unrepaired leaks (e.g., any cost of over $30 per pound). Therefore, there is no emission-based reas on to mandate warranty coverage to prevent leaks on low-GWP systems, and the potential costs of an emission recall would be disproportionate to any environmental impact of leakage of these re frigerants. [OAR-2009-0472­ 6952.1, p.28]

Any emission warranty requirement s should specifically exclude emission warranty coverage for systems using a refrigerant with a GWP below 1 50. This is consistent with EPA’s position that no emissions warranty is required for zero emissions vehicles. [OAR-2009-0472-6952.1, p.28]

The sole remaining MAC environmental impact woul d be from refrigerant leakage in the current R-134a systems. Given the prospect for fairly ra pid adoption of the low-GWP refrigerants in new vehicles during the time frame of this regulation, this would appear to be a very small basis on which to create an entirely new area of emissions warranty co verage and all the associated elements of an in-use program for air conditioners. EPA should not create a program of warranty coverage for MAC components in pursuit of su ch a small and temporary emissions impact. [OAR-2009-0472-6952.1, p.28]

Toyota:

5-370EPA Vehicle Program, Feasibility, and Estimated Impacts

Air Conditioning systems and related components have not previously been covered under the CAA emission warranty provisions. In recognitio n that the proposed A/C related CO2 emission standards are dependent upon the proper func tioning of components on the A/C system, EPA proposes that the components of these systems be included under the CAA emission warranty provisions, with a warranty of 2 years / 24,000 miles. [OAR-2009-0472-7291, p.31]

Overall, Toyota believes that emission warrant y requirements are not appr opriate for mobile air conditioners under the proposed rule. Emission wa rranty requirements were established for tailpipe pollutants because emissions of those pollutants would rise signi ficantly if the pollution control devices, such as catalytic converters w ould fail. This is not the case for MAC systems since in-use performance of the MA C system at levels comparable to that of a new vehicle is not needed to achieve the emission levels targeted by EPA. Additionally, Emission warranty for A/C systems is unnecessary because manufacturer warra nties typically already are longer than the two-year period proposed by EPA in this NPRM. [OAR-2009-0472-7291, p.31]

With regards to direct emissions resulting from system leakage, there is only a negligible environmental impact if refrigerants below a GWP of 150 are released from the system. Therefore, emission warranty coverage of joints , hoses, seals, etc. would be unnecessary to protect the environmental gains from application of low-GWP re frigerants. Consequently, there would be no emission-based reason to mandate wa rranty coverage to prevent leaks on low-GWP systems, and the potential cost s of an emission recall would be disproportionate. [OAR-2009­ 0472-7291, p.32]

State of New Jersey:

The Department supports the USEPA proposal to include components on the motor vehicle air conditioning system, such as rings, fittings, co mpressors, and hoses, under the Clean Air Act's section 207(a) emission warrant y provisions. [OAR-2009-0472-7109.1, p.9]

Mr. James Hyde (citizen):

Warrantee Issues: CAA §207 addressed 'compliance of vehicl es and engines in actual use'; and includes warranty provisions. S ection 207(a) includes warrantee protection for vehicle owners against defects in 'parts, devi ces, or components designed for em ission control. Section 207 (b) includes warrantee protection for ve hicle owners against 'any penalty or other sanction' resulting from failing a emissions test due to a §207(a) wa rranted item. In the Preamble [po 243] EP A states that it is proposing to 'a number of components of the AlC system, such as rings, fittings, compressors, and hoses' be included under §207(a) . Language to effect this, however, does not appear in the proposed regulatory changes. EPA al so requests 'comment as to whether any other parts or components should be designates as 'e mission related parts' subject to warranty and defect reporting provisions under this proposal.' [Preamble p. 244] [OAR-2009-0472-7258.1, pp. 3-4]

EPA Response:

Background Information

5-371EPA Response to Comments

As outlined in the proposal, Section 207(a )(1) of the Clean Air Act (CAA) requires manufacturers to provide a design/defect warranty that warrants a vehicle is designed to comply with emission standards at the time of sale and will be free from defects that may cause noncompliance over the specified warranty period which is 2 years/24,000 miles (whichever is first) or, for major emission control components, 8 years/ 80,000 miles. The warranty covers parts of the emissions control system. The proposal explained that under the greenhouse gas rule, this coverage would include compliance with the proposed CO 2 , CH 4 , and N 2 O standards. The proposal did not discuss the CAA Sec tion 207(b) performance warranty.

EPA proposed to include air conditioning syst em components under the CAA section 207(a) emission warranty in cases where manufacturers use air conditioning leakage and efficiency credits to comply with th e proposed fleet average CO 2 standards. The warranty period of 2 years/ 24,000 miles would apply. EPA requested comment s as to whether any other parts or components should be designated as ‘‘emission rela ted parts’’ and thus subject to warranty and defect reporting provisi ons under this proposal.

The Alliance of Automobile Manufacturers (All iance), Toyota and the State of New Jersey provided comments. The State of New Jersey supported EPA’s proposal to include motor vehicle air conditioning system components under the emission wa rranty provisions. Both the Alliance and Toyota commented that emission wa rranty requirements are not appropriate for mobile air conditioners because 1) in-use performance of the ai r conditioning system at levels comparable to a new vehicle is not needed to ach ieve the emission levels targeted by EPA and 2) manufacturer general warranties already cover air conditioning sy stems and are typically longer than the two-year/24,000 mile pr oposed emissions warranty period.

Regarding direct emissions (refrigerant leak age), the Alliance and Toyota commented that warranty requirements are unnecessary for refrig erants with a global warming potential (GWP) below 150 because the environmental impact is neglig ible even if refrigerants are released from the system. Regarding indirect emissions (fuel consumed to power the air conditioning system), the Alliance commented that EPA should not requ ire warranty coverage of the air conditioning system because in the vast majority of air conditioning failure modes, the system stops cooling and ceases operation -- either because the cr itical moving parts stop moving or because the system is switched off -- thereby actually reducing the indirect CO 2 emissions.

EPA received no comments regarding 1) other part s or components which should be designated as ‘‘emission related parts’’ subject to warranty requirements, 2) defect reporting requirements, or 3) other requirements asso ciated with warranty and def ect reporting requirements (e.g., voluntary emission-related recall reporting requirements, perfor mance warranty requirements, voluntary aftermarket parts ce rtification requirements or tampering requirements.

Defect Warranty

The defect warranty requirements are provided in Section 207 of th e Act. There are currently no defect warranty regulations. Congress provided under Section 207(a) of the CAA that emissionrelated components shall be covered under the 2 07(a) defect warranty fo r the warranty period outlined in section 207(i) of the CAA. Fo r example, section 207(a) reads in part:

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“....the manufacturer of each new motor vehi cle and new motor vehicle engine shall warrant to the ultimate purchaser and each s ubsequent purchaser that such vehicle or engine is (A) designed, built and equipped so as to conform at the time of sale with applicable regulations unde r section 202, and (B) free from defects in materials and workmanship which cause such vehicle or e ngine to fail to conform with applicable regulations for its useful life (as determined under sec. 202(d)). In the case of vehicles and engines manufactured in the model year 1995 and thereafter such warranty shall require that the vehicle or e ngine is free from any such defects for the warranty period provided under subsection (i)."

Section 207(i) reads in part:

"(i) Warranty Period.---

(1) In General.—For purposes of subs ection (a)(1) and s ubsection (b), the warranty period, effective with respect to new light-duty truc ks and new lightduty vehicles and engines, manufactured in model year 1995 and thereafter, shall be the first 2 years or 24,000 miles of use (whichever first occurs), except as provided in paragraph (2). For the purposes of subsection (a)(1) and subsection (b), for other vehicles and engines the warranty period shall be the period established by the Administrator by regulation (promulgated prior to the enactment of the Clean Air Act Amendments of 1990) for such purposes unless the Administrator subseque ntly modifies such regulation.

(2) In the case of a specified major emission control component, the warranty period for new light-duty trucks and new light-duty vehicles manufactured in the model year 1995 and thereafter fo r purposes of subsection (a)(1) and subsection (b) shall be 8 years or 80,000 m iles of use (whichever first occurs). As used in this paragraph, the term 'specified major emission control component' means only a catalytic convert er, an electronic emissions control unit, and an onboard emissions diag nostic device, except that the Administrator may designate any other pollution control de vice or component as a specified major emi ssion control component if---

(A) the device or component was not in general use on vehicles and engines manufactured prior to the model y ear 1990; and (B) the Administrator determines that the retail cost (exclusive of installation costs) of such device or component exceeds $200 (in 1989 dollars, adju sted for inflation or deflation as calculated by the Administrator at the time of such determination....."

Thus, the CAA provides the basis of the warranty requirements contained in today’s final rule, which will cover “emission related parts” necessary to provide compliance with CO 2, CH 4 , and N 2 O standards. Emission related parts would include those parts, systems, components and software installed for the specific purpose of controlling emissions or those components, systems, or elements of design which must function properly to assure continued vehicle emission compliance, including compliance with CO 2, CH 4 , and N 2 O standards; (similar to the

5-373EPA Response to Comments

current definition of “emission related parts” provided in 40 CFR 85.2102(14) for performance warranty requirements). For example, today’s action will extend defect warranty requirements to emission-related components on advanced technology vehicles such as cylinder deactivation components or batteries used in hybrid-electric vehicles.

Under today’s rule, EPA will extend the defect warranty requirement to emission-related components necessary to meet CO 2, CH 4 , and N 2 O standards, including emission-related components which are used to obtain optional cred its for 1) certification of advanced technology vehicles, 2) credits for reduction of air conditioning refrigerant l eakage, 3) credits for improving air conditioning system efficiency, 4) credits for off-cycle CO 2 reducing technologies, and 5) optional early credits for 2009-2011 model year ve hicles outlined in the provisions of 40 CFR 86.1867-12 (which are required to be reporte d to EPA after the 2011 model year).

Regarding the comments received by the Allian ce and Toyota, that warranty coverage is not needed for air conditioning components, EPA belie ves that the Clean Air Act requires warranty coverage on components used to demonstrate comp liance with the emission standards, including components used in the optional credit program s for reduction of air conditioning refrigerant leakage and air conditioning efficiency improve ments. EPA does not have the discretion to forgo warranty requirements by regulation in today’ s final rule. Thus, the Agency is adopting defect warranty requirements for air conditioning components as proposed. At the same time, if a defect in materials or workmanship does not cause an increase in emissions, then there would not appear to be a breach of the warranty.

Effective date of warranty for compon ents used to obtain Early Credits

Regarding the defect warranty for emission-rela ted components used to obtain optional early credits for 2009-2011 vehicles, the defect warranty should provide coverage for these components at the time the early credits report is submitted to EPA (e.g., no later than 90 days after the end of the 2011 model y ear). For example, the defect warranty for early credit components does not have to apply retroactively (b efore the manufacturer de clares the credits to EPA). The Agency believes this approach is re asonable, because 1) manufacturer’s early credit plans may not be finalized until after vehicles have been produced; 2) manufacturers will be provided satisfactory lead time to provide warranty requirements to customers; and 3) the manufacturer’s basic (bumper-to-bumper) warrant y for air conditioning and other early credit components are typically longer than the two-year/24,000 mile proposed warranty period which will be applicable to most early credit components. ).

Performance Warranty

EPA did not propose any changes to the current performance warranty requirements, because the performance warranty preconditions outlined in section 207(b) of the CAA have not been satisfied. For example, section 207(b) of the CAA comes into play if EPA issues performance warranty short test regulations and determines that there are inspect ion facilities available in the field to determine when vehicles do not comply with greenhouse gas emission standards. Once EPA issues performance warranty short test re gulations, then the CAA performance warranty provisions require the manufacturer to pay for emission-related re pairs if a vehicle is properly

5-374EPA Vehicle Program, Feasibility, and Estimated Impacts

maintained and used, and fails the short test and is required to repair the vehicle. Currently the provisions of 85.2207 and 85.2222 provide performance warranty short test (commonly called an inspection and maintenance or I/M test). The provisions of 85.2207 and 85.2222 provide an I/M test procedure and failure criteria based on an inspection of the onboard diagnostic (OBD) system of the vehicle. The OBD inspection procedure in 85.2222 is currently used in most areas of the country where I/M tests ar e required. For example, a vehi cle fails the OBD test procedure outlined in 85.2222 if the vehicle’s MIL is commande d to be “on” during the I/M test procedure.

Although most areas of the country which require I/M testing use the OBD test procedures outlined in 40 CFR 85.2207 and 85.2222, the NPRM did not propose that the OBD system would be required to monitor CO 2, CH 4 or N 2 O emission performance, ref. 74 FR 49574 and 74 FR 49755. Therefore, the performance warranty pr econditions in section 201(b) of the CAA are not currently in effect for greenhouse gas CO 2 emissions. The performa nce warranty continues to apply for criteria pollutants but does not apply for greenhouse emissions.

Defect Reporting and Voluntary Emissi on-related Recall Reporting Requirements

EPA did not propose any changes to the current de fect reporting and voluntary emission-related recall reporting requirements outlined in the provisions of 40 CFR 85.1901-1909. Although EPA requested comments, we did not receive a ny comments on defect re porting and voluntary emission-related recall reporting requirements. Current regulations require manufacturers to submit a defect report to EPA whenever an emissi on-related defect exists in 25 or more in-use vehicles or engines of the same model year. The defect report is required to be submitted to EPA within 15 working days of the time the manufacturer become aware of that a defect affects 25 or more vehicles. Current regula tions require manufacturers to submit to EPA voluntary emissionrelated recall reports within 15 working days of the date when owner notification begins.

Similar to the design/defect warranty requirements outlined above, the Agency believes that as proposed, defect reporting and voluntary emissi on-related recall reporti ng requirements would apply to emission-related components necessary to meet CO 2, CH 4 , and N 2 O standards for the useful life of the vehicle, in cluding emission-related components which are used to obtain optional credits for 1) certification of advanced technology vehicles, 2) credits for reduction of air conditioning refrigerant leakage, 3) credits for improving air conditioning system efficiency, and 4) credits for off-cycle CO 2 reducing technologies, and 5) optional early credits for 2009­ 2011 model year vehicles outlined in the prov isions of 40 CFR 86.1867-12 (which are required to be reported to EPA after th e 2011 model year). For early cred it components, defect reporting requirements and voluntary emission-related reca ll reporting requirements become effective at the time the early credits report is submitted to EPA (e.g., no later than 90 days after the end of the 2011 model year).

The final rule includes a minor clarification to the provisions of 40 CFR 85.1902 (b) and (d) to clarify that beginning with the 2012 model year, manufacturers are required to report emissionrelated defects and voluntary em ission recalls to EPA, includi ng emission-related defects and voluntary emission recalls related to greenhouse gas emissions (CH 4 , N 2 O and CO2).

5.10.10. Light Vehicles and Fuel Economy Labeling

5-375EPA Response to Comments

Organization: General Motors Ford Motor Company Honda Motor Company Association of Intern ational Automobile Manufacturers (AIAM) Alliance of Automobile Manufacturers (Alliance) Toyota Motor North America Natural Resources Defense Council International Council on Clean Transportation National Automobile Dealers Association (NADA) State of New Jersey New York State Department of Environmental Conservation Automotive Aftermarket Industr y Association (AAIA); et.al Fisker Automotive, Inc. Chew, Yuli

Comments:

General Motors:

GM supports the use of individual fleet utility factors (per SAE J1711 draft procedures) for calculating the fuel economy label for advanced technology vehicles. In addition, GM supports inclusion of metric(s) on the Monr oney label that are easily understandable and meaningful to the average consumer. In this regard, GM recently shared consumer clinic research with EPA staff that included the feedback on such consum ption metrics as “gallons/100 miles” and “$/100 miles”. The use of accurate metrics is imperative -- thus a metric like “mpge” where electricity is converted into an equivalent amount of gasolin e, could lead to false expectations. We look forward to further discussion and plan deta iled comments through the separate labeling rulemaking when it is proposed in th e near future. [OAR-2009-0472-6953.1, p.30]

Ford Motor Company:

Advanced Technology Fuel Economy Labeling

Ford supports the development of new, fair, a nd consistent fuel economy labels for advanced technology vehicles, particularly for plug-in hyb rids and electric vehicles. NHTSA requested comments on appropriate metrics for presenting fu el economy-related information on labels and whether a CO2e grams per mile metric should be considered to facilitate comparisons between conventional vehicles and alternative fuel vehicles . The fundamental purpose of these labels is to provide consumers a mechanism to compare the efficiency of vehicles and powertrains on a consistent basis that is unders tandable. There are many open issues to resolve in the process of developing a consumer-accepted label. Fuel consum ption versus fuel economy has been studied through consumer focus groups at Ford and curren t indications are consumers are not ready or willing to consider fuel consumption as a metric at this time. However, the focus group results indicate that there is a signifi cant value to providing energy info rmation (both petroleum fuel and electrical energy) as separate metrics over standard operating conditions (energy consumed over a fixed distance, e.g., energy per mile, energy pe r 100 miles) because such metrics are linear.

5-376EPA Vehicle Program, Feasibility, and Estimated Impacts

Total cost to the consumer for both electrical an d fuel energy on an annual basis, with standard mileage assumptions, and energy costs is also a ppropriate. For electric vehicles and plug-in hybrids, we support inclusion of the time and amount of kilowatt hours needed to recharge the battery system to a full state, based on standard household circuit systems (11 Ov/15amp). Options should be provided to include shorte r charging times if the vehicle provides the capability.

Ford does not believe that EPA and NHTSA are constrained in providing customers the most informative labels because 'mpg information is currently required by law,' 49 USC § 32908(b)(1) mandates that 'a manufacturer of automobiles shall attach a label. .. containing ... '(A) the fuel economy of the automobile.' According to 49 USC § 32901, 'fuel economy' means the average number of miles traveled by an automobile for each gallon of gasoline (or equivalent amount of other fuel used, as determined by the Administrator under section 3290 4 (c) of this title' (emphasis added). 'Fuel' is defined in that same s ection as 'gasoline,' 'diesel oil,' or 'other liquid or gaseous fuel.' The definition of 'fuel' does not include electricity. 'El ectricity' is, however, otherwise specifically included as one of the en ergy sources listed in the definition of an 'alternative fuel.' 49 U.S.C. § 32901 (a)(1 )(J).

Therefore, a manufacturer must provide a label containing the fuel economy value for the vehicle, expressed as miles driven per gallon of 'fuel,' meaning per gallon of gasoline or an equivalent amount of diesel or other liquid or gaseous fuel. 49 U.S.C. 32901 (a)(1 0). Since electricity is not a 'fuel' but ra ther an alternative fuel, no energy efficiency rating is required for electricity under § 32908( b)(1)(A). Further, special energy e fficiency labeling and information requirements apply for 'dedicated automobiles' and 'dual fuel automobiles' under § 32908(b)(3); however, even in these cases there is no manda te for an equivalent petroleum-based fuel economy (MPGe) metric. Hence, no specific statutory labeling requirement is driving the need for a MPGe value.

At the same time, the Administrator has authority to 'require or authorize' labeling of 'other information' 'related to the information re quired by clauses [32908(b)(1 )](A)-(D) of this paragraph.' 49 U.S.C. § 32908(b)(1 )(F). Therefore, EPA could im plement either an electric consumption or electric economy metric.

Thus, Ford does not support the use of MPGe to describe the energy use of an electrically powered automobile or a plug-in hybrid electric vehicle and disagrees that EPCA, mandates a gasoline-equivalent MPGe fuel economy label va lue. In real-world application, MPGe does not translate into a metric that is understood by most consumers a nd therefore may be misleading by FTC standards and counterproductive to the acceptance of EV and PHEV technology.

If EPA nevertheless decides to pursue labeling that includes MPGe values, we suggest that EPA develop a plan to eventually s unset the MPGe value altogether . An example of an effective approach can be found in the 2007-2008 transition from 2-cycle to 5-cycle fuel economy values wherein labels contained both new and old va lues during a transiti on period, giving greater prominence to the new value. In this situation, we recommend that MPGe be shown in smaller print, as a reference point for the new metrics. Then, as the new metrics become accepted EPA

5-377EPA Response to Comments

should plan to remove MPGe altogether. We exp ect that this transition of consumer acceptance will be quick given the limitations of MPGe to describe the performance of electric vehicles.

PHEVs present significant fuel economy labeling challenges because of their bimodal fuel economy nature. In other words, consumers are li kely to experience very different fuel and electrical economy depending on how far they dr ive their vehicle before recharging and under given driving conditions. In addition, PHEV fuel consumption will likely change significantly once the electrical battery system has been depl eted. Thus, at a minimum the electrical economy and the fuel economy of the vehicle should be in cluded under its optimal dr iving state, typically referred to in standardized tests as charge depl eting mode; and when the battery system has been depleted, typically referred in standardized tests as charge su staining mode. PHEV label formats will be more complex by nature. This complexity can be described in three basic categories and labels can be modularly formatted to address thre e types: electric only, hybr id electric-fuel, and fuel only.

EVs will also present challenges because of th eir range and efficiency sensitivity to driving styles and climate conditions. Cu rrent range testing procedures used by CARB and EPA are in need of revision because they are conducted until the vehicle cannot operate properly, Le., until the vehicle can no longer maintain the driving sc hedule. Such an extreme end condition is not representative of actual vehicle usage because customers will not typically drive until '0' energy remains in the battery system nor until the vehicle can no longer function properly. More typically, vehicles will be driven to a fraction of the full range and recharged, and therefore a more reasonable and representative process is in order. Ford is willing to work with the agencies and industry to update and harmonize these procedures.

In the context of standardized testing, the eff ects of cold temperature (20F) and heater use are currently being studied by industr y as a primary sensitivity factor in an electric vehicles energy efficiency performance, followed by NC load. A hot test temperature (95F) is not expected to have significant effect on battery system and vehicle performance.

In the coming years of EV use, consumer in formation and performance data needs to be captured, perhaps from early manufacturer and gove rnment fleet use, to help in determining appropriate label content for these vehicles. Work is underway within SAE to study these sensitivities and develop standard vehicle te sting practices. Ford s upports this work and encourages the EPA and other agencies to part icipate in studies as well help harmonize the potential requirements.

In addition, prior to the final label proposals, we recommend EPA work jointly with PHEV and EV manufacturers to test dr aft label concepts through focus groups and verify consumer preferences.

Utility Factors

For CAFE purposes, Ford supports a standardi zed fleet utility factor, one based on SAE J2841. EPA requested comment on how the utility factor is calculated and which data should be used to establish it. The fleet utility factor approach is reasonable when applied to a CAFE requirement,

5-378EPA Vehicle Program, Feasibility, and Estimated Impacts

since it represents a fleet-average driving approa ch. However, individual customers will see large variations in the performance of their vehicle's efficiency base d on how much time they are in either charge-depleting or charge -sustaining mode. This could l ead to customer dissatisfaction with a utility-factor deri ved label, as customers have no way of applying it to their own personal driving patterns. Due to these reasons, it is impor tant to highlight the bimodal nature of PHEVs by showing charge-depleting information separate from charge sustaining on the label and not to focus on one type of average label value at this time.

For CAFE purposes, Ford supports a standardi zed utility factor, one based on SAE J2841. The agreed-upon utility factor should be limited in with respect to update frequency in order to provide adequate stability and lead time to facilitate cycle planning for manufacturers. For example, utility factors should be published by the EPA for applicable model years at least 1 to 2 model years in advance. Any furt her updates to the utility factor curves should be made only in future model years, not retro-active to current or previous model years. Since the fleet utility factor represents a national driv ing distribution, it should be rela tively slow to change (barring any significant technology, energy, or infrastructure cost). Frequent updates to the utility factor will not be necessary. [OAR-2009-0472-7082.1, pp. 20-23]

Honda Motor Company:

Generally, Honda proposes that EPA and NHTSA apply the same procedures and logic as SAE standards and CARB regulations to avoid discrepancies. Also, Honda understands that EPA and NHTSA need to define some areas where SAE and ARB are silent – primarily Label issues, CAFE issues and GHG issues. [NHTSA-2009-0059-0095.1, p.12]

Utility Factor Weighting Methods

Honda proposes that Fleet Utility Factors in existing SAE J2841 should be used to combine Charge-Depleting and Charge-Sustaining mode s for GHG and CAFE purposes. On the other hand, Honda also proposes that Individual Utili ty Factor in the upcoming SAE J2841 revision should be used to combine Charge-Depleting and Charge-Sustaining modes for Fuel Economy Labeling purposes. [NHTSA-2009-0059-0095.1, p.12]

The PHEV FE MPG Formula Clarification

The PHEV FE MPG formula in the preamble needs to be re vised to more accurately describe the fuel economy from Charge Depleting and Char ge Sustaining modes. We propose substituting FE CDi for FE i . Similarly, it is also clear that FE gasoline denotes the fuel economy during the Charge Sustaining mode, and hence FE CS will clearly describe this to prevent potential confusion on gasoline consumption between Charge Depleti ng (in a blended PHEV) and Charge Sustaining modes. We propose substituting FE CS for FE gasoline . [NHTSA-2009-0059-0095.1, p.13]

Association of Intern ational Automobile Manufacturers (AIAM)

The proposed regulations seek comment on the pot ential use of metrics other than miles per gallon in consumer informati on regarding fuel efficiency. See preamble at 49576. Consumers

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perceive in-use fuel economy performance, measur ed in “miles per gallon,” to vary greatly for higher efficiency vehicles, although the actual variation in fuel cons umption is not as significant. This perception issue can result in customer dissatisfaction. In addition, consumers need more significant and appropriate information fo r new technologies, such as plug-in hybrid (PHEV) and battery electric vehicles. In part icular, PHEV fuel economy performance varies greatly depending on how the vehicle is used, pote ntially leading to customer misunderstanding. Therefore, a new consumer information label concept should be developed. AIAM would be pleased to work with EPA and NHTSA to deve lop consumer information requirements that include all appropriate information, are c onsumer friendly, and address greenhouse gas emissions as well as fuel effici ency matters. [OAR-2009-0472-7123.1, pp.18-19]

Alliance of Automobile Manufacturers (Alliance):

Fuel Economy Labeling of Advanced Technology Vehicles

Based on manufacturers’ announcements, advanced technology vehicles such as plug-in electric hybrid vehicles and electric vehicles will be on the market very soon. Public acceptance and understanding is key to the success of these new technologies. It is imperative that manufacturers and EPA work together to appropr iately promote the benefits that these vehicles can provide. To that end, the Alliance fully supports the agenci es goals that for these advanced technology vehicles the “labels reflect sound science, treat technologies equitably and provide appropriate information to consumers.” [OAR-2009-0472-6952.1, p.53]

To this end, the Alliance and its member companie s have been working for over a year with EPA and the Society of Automotive Engineers to de velop test procedures, calculation methodologies, metrics and formats. We are committed to contin uing to work with the agency to produce the necessary frameworks for these va rious vehicles. [OAR-2009-0472-6952.1, p.53]

In this GHG/CAFE proposal, EPA seeks commen ts on issues surrounding consumer vehicle labeling in general, and labeling of advanced technology vehicles in pa rticular. EPA further states that it will “initiate a separate rulemaking to explore in detail the information displayed on the fuel economy label and the methodology fo r deriving that information.” [OAR-2009-0472­ 6952.1, p.53]

The Alliance supports the use of u tility factors in creating the appr oach for calculating the label for these advanced technology vehicles (specifically individual fleet utility factors for the label per the recent SAE J1711 draft procedures). Fu rther, the Alliance supports a metric on the Monroney label that is simple and understandable to the consumer. An esoteric metric that consumers have very little frame of reference for understanding will only slow – and may even harm -- the acceptance of advanced technologies. [OAR-2009-0472-6952.1, p.54]

Recommendation:

Unfortunately, this separate label rulemaking will not be complete before many products are ready for the market place. Important in this interim period will be the case-by-case approach that EPA will need to undertake to determine th e label values for various vehicles. In this

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process, EPA must be cognizant of maintain ing a level playing fi eld for all advanced technologies as well as providing consumers a way to compare to current conventional vehicles. [OAR-2009-0472-6952.1, p.54]

Toyota Motor North America:

Although EPA intends to initiate a separate ru lemaking to explore in detail the information displayed on the fuel economy label of advanced technology vehicles, and the methodology to be used for deriving the information, EPA requests comment on these issues as part of the subject proposal. [OAR-2009-0472-7291, p.33]

With the increasing numbers of advanced tec hnology vehicles beginning to be sold, Toyota supports EPA's continued efforts to address potential issues associated with these technologies, including how best to provide re levant consumer information about their environmental impact, energy consumption, and cost. Toyota believes th at providing accurate information is necessary to promote customer acceptance and satisfaction of these advanced technology vehicles. Toyota is concerned that unrealistic or difficult to understand ra tings could set up unrealistic expectations that could sour the market in troduction of these advanced technology vehicles. [OAR-2009-0472-7291, pp.33-34]

One way to encourage consumers to take a mo re proactive approach to reducing greenhouse gases and oil consumption is to provide clear information about consumption, rather than efficiency, as part of EPA's new labeling rule initiative. For liquid fueled vehicles, the fuel consumption metric would communicate to the c onsumer a direct measure of the amount of fuel/energy used and thus directly relates to costs that consumers incur when filling up. Toyota recognizes EPA's previous reluctance to change to a more accurate fuel consumption metric because of the consumer's unfamiliarity with su ch a metric. However, the current MPG measure continues to be misleading and a fuel consum ption metric could be more meaningful to consumers, once the consumers have been familiarized with the different metric. To help educate the consumer, Toyota proposes that EPA consider using both for the short term either on the website or in the fuel econo my guide. [OAR-2009-0472-7291, p.34]

Another approach would provide more detailed information on the label specific to operation on gasoline and to operation on electricity. As an example, a hybrid vehicle label would contain gasoline consumption, the plug-in hybrid vehicle label would contain both gasoline consumption and energy consumption (miles per kilowatt-hour), and the electric vehicle would only show electricity consumption. To avoid confusion to the customer, the electri c and fuel consumption values could be displayed se parately. [OAR-2009-0472-7291, p.34]

Toyota supports the concept of using a utility factor approach as an appropriate methodology to predict/account for the total distance driven in each of the two PHEV modes (i .e. charge depleting and charge sustaining) and calculate fuel economy, incl uding the use of 'fleet' utility factors as currently specified in the most recent SAE J2841 procedure/document . We plan to continue working with EPA and the Society of Automotive Engineers on these test procedures, calculation methodologies, metrics and format issues as one possible approach. [OAR-2009­ 0472-7291, p.34]

5-381EPA Response to Comments

Toyota is currently evaluating all these options. Regardless of the approach ultimately taken by EPA, the label should balance the need for info rmation specific to a given technology with the need for information that can be compared against other vehicles in the marketplace, and at the same time can be understood by consumers. [OAR-2009-0472-7291, p.34]

Natural Resources Defense Council:

Vehicle Labels Should Emphasize GHG Emissions Performance, Fuel Consumption and Operational Costs to Enable Easy Comparisons across Vehicle Classes and Technologies: EPA should update, through a public process, the envir onmental performance and fuel economy labels on new vehicles. Changes to the labels and associ ated calculation methodologies should also be reflected in other public edu cation and consumer purchase guides such as the EPA Green Vehicle Guide ( www.epa.gov/greenvehicles ) and the EPA/DOE Fuel Economy Guide ( www.fueleconomy.gov ). In the NPRM, EPA states that it “plans to seek comment and engage in extensive public debate about fuel consumpti on and other appropriate consumer information metrics as part of a new labeling rule initiative .” NRDC supports such an initiative and urges EPA to act expeditiously to complete th e process in advance of MY 2012. [OAR-2009-0472­ 7141.1, p. 21]

The scope of today’s new vehicle labels should be expanded to include GHG emissions. Consumer awareness of global wa rming pollution and its implicati ons for climate change have grown dramatically in recent ye ars and the GHG emissions should be displayed prominently on the vehicle in terms of GHG emissions per mile of real-world driving. Since EPA plans to continue to use the 2-cycle FTP for vehicl e compliance measurements for MY 2012-2016, the EPA label value should be the compliance value adjusted to reflect typical driving conditions (so-called “5-cycle test”), as is currently done for fuel economy labeling. [OAR-2009-0472­ 7141.1, p. 21] [See OAR-2009-0472-7141.1, pp. 21-23 for fu rther discussion of this issue.]

In sum, NRDC believes a trio of metrics in cluding GHG emissions (in gCO2 per mile), fuel consumption (in gallons or kWh pe r 100 miles) and costs (in $ per mile or $ per year) should be displayed with prominence on new ve hicle labels. [OAR -2009-0472-7141.1, p. 23]

International Council on Clean Transportation:

The agencies asked for comments on how to presen t efficiency information for electric vehicles. The current metric, miles per gallon (mpg), does not apply to electricity us e for battery-electric vehicles and plug-in vehicles. Thus, the electric ity use must be converted into an equivalent number of gallons or a different metric must be used.

ICCT believes this is an opportuni ty to start supplementing the us e of mpg with a better metric. Not only does mpg not work for electricity cons umption, but it is also not appropriate for conventional vehicles as it is a non-linear metric. The linear metric is gallons per mile. MPG is the inverse and distorts the re lationship between the rating and the amount of fuel used. The higher the mpg rating, the greater the distortion.

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Any linear metric would work better, such as ga llons per 100 miles, l iters per 100 km, BTU (or kWh) per mile, grams CO2 per mile, or $ per mile . The latter three sugges tions would also solve the problem with comparing electricity use to gasoline use. Grams CO2 per mile has the additional benefit of treating vehicles a nd fuels together on a consistent basis.

Canada’s experience could provide a valuable guide in how to change the labeling system. Canada added liters per 100 km to their fuel consumption guide, in addition to mpg, many years ago. Such a dual labeling system would be an excel lent way to supplement the use of mpg with a better metric and would allow el ectric vehicles to be compared using the alternative metric. [OAR-2009-0472-7156.1, p.14]

[ICCT also submitted these comments as tes timony at the Detroit public hearing, See docket number EPA-HQ-OAR-2009-0472-6185, pp. 62-63.]

National Automobile De alers Association (NADA):

Dealers have significant point -of-sale purchasing decision expertise and NADA often has provided suggestions on appropria te strategies and language for fuel economy and other vehicle labels. The National Program should clarify that prospective changes to the existing, Monroney based fuel economy label will be made pursuant to a separate well thought out rulemaking. Note that the motoring public only recently became accu stomed to extensive changes to the fuel economy label and its values, and to extensive ch anges to NHTSA’s safety label. With NHTSA soon to begin implementing further changes to its safety label, prospectiv e changes to the fuel economy label should be carefully coordinated so as to avoid undue confusion for consumers. [OAR-2009-0472-7182.1, p. 8]

State of New Jersey:

The Department supports the Agencies' efforts to supply additional information to the consumer regarding environmental impacts, energy consumption, cost, range per charge, time to charge, etc. so that consumer can make informed deci sion before purchasing a vehicle. The label should include a numerical rating and graph-type compar ison for each vehicle's environmental impact in relation to other vehicles in th e same class and include ratings for both criteria pollutants. [OAR2009-0472-7109.1, p.9]

Automotive Aftermarket Industry Association (AAIA); et.al:

The aftermarket also strongly urges the agency to include a public education component not only for car owners to make good choices on vehicles, but also to provide information so that once they own these vehicles that th ey can maintain them. The afterm arket groups listed below would be more than willing to work with the agency to develop such an education program. In fact, much of this information is already on our Be Car Care Aware site www.carcare.org which is widely accessed by car ow ners. [OAR-2009-0472-7057.1, p.4]

New York State Department of Environmental Conservation:

5-383EPA Response to Comments

CAFE and Greenhouse Gas Emission Labels Much of what is currently included on a vehicle' s fuel economy label is mandated by statute. We believe that replacing 'miles per gallon' with a metr ic similar to Europe's liters per 100 kilometers (or gallons per 100 miles) would be desirable in the long run; but it may require statutory changes. [OAR-2009-0472-7454, p.6]

Specifically for greenhouse gas emissions labeli ng, we recommend that the following should be supplied in grams per mile:

- The standard the vehicle -is cer tified to (for example is an al l-wheel-drive sedan a passenger car or light truck?),

- The footprint based target emi ssions rate for the vehicle,

- The actual measured emissions rate for the vehicle,

- The greenhouse gas emission rates used in manufacturers' compliance reporting,

- Any credits (air conditioning, alternative fuel, FF V, etc) applicable to the vehicle. [OAR-2009­ 0472-7454, p.6]

The CAFE rating, in miles per gallon, used i n. manufacturers' compliance reporting should also be presented on the label. [OAR-2009-0472-7454, p.6]

Fisker Automotive, Inc.:

Fisker Automotive recommends a technology-neutral fuel economy label, as shown below. We also propose an interim label solution for ease of transition. See the attached presentation, Fuel Economy Labeling, 2011 & Beyond for more . [OAR-2009-0472-8732.1, p.6] [[See Docket Number OAR-2009-0472-8732.1, pp.8-41 for th e attached presentation]]

Yuli Chew (private citizen):

I support EPA’s efforts to supply additional information to the consumer about their environmental impact, energy consumption, cost, range per charge, time to charge, etc. so that consumer can make informed decision before pur chasing a vehicle. Hopefully, this can build on CARB’s Environmental Performance Label Regulation. [OAR-2009-0472-7042.1, p.5]

EPA Response:

EPA received considerable public input in respons e to the request for comment in the proposal. Since the greenhouse gas rule was proposed in September, 2009, EPA has initiated a separate rulemaking to explore in detail the informati on displayed on the fuel economy label and the methodology for deriving that information. The pur pose of the vehicle labeling rulemaking is to ensure that American consumers continue to have the most accurate, meaningful, and useful information available to them when purchasi ng new vehicles, and that the information is presented to them in clea r and understandable terms.

EPA will consider all vehicle labeling comments received in response to the greenhouse gas proposal in its development of the new labeli ng rule in coming months. We encourage the

5-384EPA Vehicle Program, Feasibility, and Estimated Impacts

interested public to stay engaged and continue to provide input on this issu e in the context of the vehicle labeling rulemaking.

5.11. EPA Estimates of GHG Emissions Re ductions and Their Associated Effects

5.11.1 Impact on GHG Emissions

No substantive comments were received c oncerning the methodology used for calculating the greenhouse gas impacts of the program.

5.11.2 Climate Change Impacts from GHG Emissions

Organization: Environment New Jersey

Comment:

A commenter indicates light-duty vehicles acco unt for about 40 percent of all U.S. oil consumption and when taken with the impacts of global warming which Steve Flint of the Mobile Sources and Fuels Committee of the Na tional Association of Clean Air Agencies (NACAA)] mentioned, and the groundbreaking study from the IPCC in 2007, it's important to emphasize that not only is the science on effect s of climate change becoming more dire, but implications for this country over the course of the next few decades and ultimately leading into the later part of the next centu ry if we do not take action, or if we remain on the status quo. [EPA-HQ-OAR-2009-0472-4621, p.71]

The commenter indicates there is a lot of reason to be optimistic b ecause of the solutions that are happening right now in this country. The comment er indicates the actions in the U.S. Congress with the U.S. House and now the U.S. Senate on the American Clean Energy and Security Act really are moving us forward, talking about clean energy solutions, finally putting a cap on global warming pollution, that is where the rest of the world has been moving to, it is where America must move to. [EPA-HQ-OAR-2009-0472-4621, p.74]

EPA Response:

EPA agrees with the commenter’s assertion that th is action is an important step towards curbing steady growth of GHG emissions from cars and li ght trucks. In the absence of control, GHG emissions worldwide and in the U.S. are projecte d to continue to grow. As provided in Section III.F.1 of the preamble to the final rule, U.S. GHGs are estimated to make up roughly 17 percent of total worldwide emissions in 2010, and the co ntribution of direct emissions from cars and light-trucks to this U.S. share is growing over time, reaching an estimated 19 percent of U.S. emissions by 2030 in the absence of control. Th is steady rise in GHG emissions is associated with numerous adverse impacts on human health, f ood and agriculture, air quality, and water and forestry resources.

5-385EPA Response to Comments

Policy options for reducing GHGs (e.g., cap and tr ade) are not within the scope of this rulemaking nor does EPA propose any reduction strate gies other than those associated with this rule pursuant to Section 202( a) of the Clean Air Act. Organization: New York State Department of Environmental Conservation

Comment:

A commenter indicates that New York State hospita lization and mortality rates due to respiratory illnesses currently exceed the national average and this will only get worse as the planet continues to warm. The comment further notes New York’s agricultu ral industry is likely to be affected by shorter growing systems for cold we ather crops and eventua lly a different crop mix and thus affect New York's tourism and mapl e syrup industries. The commenter notes global warming also poses a significant threat to critical water sources in New York and the combination of higher temperatures and more e rratic landfill will lower water levels and will adversely affect drinking water supplies, power generation, commer ce, and recreational activities. New York State hospitalization and mortality rates due to respiratory illnesses currently exceed the national average and this w ill only get worse as the planet continues to warm. [These comments were submitted as test imony at the New York public hearing. EPA-HQOAR-2009-0472-4621, pp. 12-13]

EPA Response:

EPA finds the comments provided on impacts to human health and public welfare are generally consistent with those provided in preamble Section III.F.2, Climate Change Impacts from GHGs, to this final rule. Section III.F.2 discusses the projected impacts associat ed with climate change and warming temperatures as synthesized from the major scientific assessment reports. As indicated in Section III.F.2, “Increases in re gional ozone pollution relative to ozone levels without climate change are expected due to highe r temperatures and weak er circulation in the United States and other world cities relative to air quality levels without climate change. Climate change is expected to increase regional ozone pollution, with a ssociated risks in respiratory illnesses and premature death. In addition to human health effects, tropospheric ozone has significant adverse effects on crop yields, pasture and forest gr owth, and species composition. The directional effect of climate change on ambien t particulate matter levels remains uncertain.”

Please see preamble Section III.F.2 of the rule fo r a synthesis of key fi ndings regarding observed and projected changes in GHG emissions and associated climate change impacts. The key findings synthesized in Section III.F.2 are primar ily drawn from the major scientific assessment reports of the Intergovernmental Panel on Clim ate Change (IPCC), the U.S. Climate Change Science Program (CCSP), the U.S. Global Ch ange Research Program (USGCRP), and the National Research Council (NRC). Organization: State of New Jersey

Comment:

A commenter indicates that as we are well aware, there is broad scientific consensus that humancaused greenhouse gas emissions are impacting th e earth's climate, and that increasing

5-386EPA Vehicle Program, Feasibility, and Estimated Impacts

atmospheric concentrations of greenhouse gases will result in a very significant adverse global, regional and local environmental impacts. Th e commenter notes the northeastern states are particularly vulnerable to the impacts of climate change with potentially devastating ecological, economic and public health impacts to New Je rsey. The commenter states “Not only does climate change threaten New Jersey's shoreline and ecology, but the soci oeconomic impacts of climate change stand to be profound and costly.” The commenter asserts that because of New Jersey's unique diverse terrain, nearly all of the impacts of climate change, such as rising temperature in our urban areas, s ea level rise jeopardizing our co astal ecosystems and threats to our unique agricultural industries will be experi enced throughout the state. The commenter asserts it is critical that th e world, the nation, the region and New Jersey take immediate and aggressive action to stabilize and then reduce atmospheric greenhouse gas concentrations in order to avoid the most catastrophic impacts of climate change. The commenter states, “The successful reduction of ozone depleting subs tances throughout the nation and the world demonstrates that it can be done.” [These co mments were submitted as testimony at the New York public hearing. See docket number EPA-HQ-OAR-2009-0472-4621]

EPA Response:

EPA agrees with the commenter’s assertion that there is broad scientific consensus that humancaused GHG emissions are impacting the Earth’s cl imate. In addition, EPA notes the comments regarding climate change impacts to the Northeas t are generally consiste nt with those provided in Section III.F.2 of the preamble to this fina l rule. Section III.F.2 provides a summary of observed and projected changes in GHG emissions and associated climate change impacts based on the key findings of Technical Support Document (TSD) 36 for EPA’s Endangerment and Cause or Contribute Findings for Greenhouse Gases Under Section 202 (a) the Clean Air Act. 37 The key findings synthesized here and the inform ation throughout the TSD source document are primarily drawn from the broad sc ientific community in the form of assessment reports of the Intergovernmental Panel on Climate Change (IPCC), the U.S. Climate Change Science Program (CCSP), the U.S. Global Change Research Pr ogram (USGCRP), and the National Research Council (NRC).

In particular, the USGCRP provides present a nd future impacts of climate change on the different regions of the United States in a recent national assessment report entitled Global Climate Change Impacts in the United States

. 38 This report is a key source document for the TSD associated with EPA’s Endangerment and Cause or Contribute Findings for Greenhouse Gases Under Section 202(a) of the Clean Air Act and is referenced in Section III.F.2 of the preamble to this rule. In regard to the Nort heast Karl et al (2009) reports: “The densely populated coasts of the Northeast are particularly vulnerable to s ea level rise, which is projected to rise more than the global average and incr ease the frequency and severity of damaging storm surges, coastal flooding, and related impacts like er osion, property damage, and loss of wetlands.

36 “Technical Support Document for Endangerment and Cause or Contribute Findings for Greenhouse Gases Under Section 202(a) of the Clean Air Act” Docket: EPA-HQ-OAR-2009-0472-11292
37 See 74 FR 66496 (Dec. 15, 2009)
38 Karl, T., J. Melillo, and T. Peterson (Eds.) (2009) Global Climate Change Impacts in the United States. Cambridge University Press, Cambridge, United Kingdom.

5-387EPA Response to Comments

New York State alone has more than $2.3 trilli on in insured coastal property, but some major insurance companies are beginning to withdraw coverage in coas tal areas of the Northeast, including New York City. A coastal flood in New York City currently considered a once-in-acentury event (also known as a 100-year flood) is projected to occur every 10 to 22 years on average by late this century, depending on a hi gher or lower emissions scenario.” EPA acknowledges that the Northeast has diverse terrain and clima tic conditions and thus the projected effects from climate change are likely to be varied. As noted in Section III.F.2, climate change impacts will vary in natu re and magnitude across different regions of the United States.

5.11.3. Changes in Global Mean Temperature and Se a-level Rise Associated with the GHG Emissions Reductions

Organization: Institute for Energy Research

Comment:

A commenter indicates it is quite possible that EPA‘s estimate of the reduction in temperature and sea level rise is an overestimate. The estim ate is predicated on a climate sensitivity in the range of 2°C to 4.5°C in accord with the Intergovernmental Panel on Climate Change‘s (IPCC) Fourth Assessment Report (AR4) 2007. However, ac tual temperature trends after the release of that report and more recent science provide some reasons to believe that a climate sensitivity of 2°C to 4.5°C may be overly se nsitive. [OAR-2009-0472-7225.1, p.6]

EPA Response:

EPA acknowledges the large uncertainty range associ ated with equilibrium climate sensitivity. EPA notes that support of the current consensu s range or likely range (2-4.5°C) comes from many different lines of evidence, the ranges of which are consistent within the uncertainties, relatively robust towards methodological assump tions and similar for different types and generations of models 39 . In addition, the IPCC 40, 41 indicates the levels of understanding and confidence in quantitative estimates of equilibrium climate sensitivity have increased substantially and there is increased confidence of key processes that are important to climate sensitivity due to improved comparisons of models to one another and to observations. Thus,

39 Knutti, R. and G. Hegerl (2008). "The equilibrium sens itivity of the Earth's temperature to radiation changes." Nature Geoscience 1: 735-743.

40 Solomon, S., D. Qin, M. Manning, R.B. Alley, T. Be rntsen, N.L. Bindoff, Z. Chen, A. Chidthaisong, J.M. Gregory, G.C. Hegerl, M. Heimann, B. Hewitson, B.J. Ho skins, F. Joos, J. Jouzel, V. Kattsov, U. Lohmann, T. Matsuno, M. Molina, N. Nicholls, J. Overpeck, G. Raga, V. Ramaswamy, J. Ren, M. Rusticucci, R. Somerville, T.F. Stocker, P. Whetton, R.A. Wood and D. Wratt (2007) Technical Summary

. In: Climate Change 2007: The Physical Science Basis. Contribution of Working Group I to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change [Solomon, S., D. Qin, M. Manning, Z. Chen, M. Marquis, K.B. Averyt, M. Tignor, and H.L. Miller (eds.)]. Cambridge University Press, Cambridge, United Kingdom and New York, NY, USA.

41 Meehl, G.A. et al. (2007) Global Climate Projections. In: Climate Change 2007: The Physical Science Basis. Contribution of Working Group I to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change [Solomon, S., D. Qin, M. Manning, Z. Chen, M. Ma rquis, K.B. Averyt, M. Tign or and H.L. Miller (eds.)]. Cambridge University Press, Cambridge, United Kingdom and New York, NY, USA.

5-388EPA Vehicle Program, Feasibility, and Estimated Impacts

EPA concludes that the use of the climate sensitivity range for the climate analysis for this rule is appropriate and supported by the scientific lit erature from the major assessment reports.

In order to capture some of the uncertainty in the climate system, the changes in projected temperatures and sea level for this rule were estimated across the most current IPCC range of climate sensitivities, 1.5°C to 6.0°C. For each clim ate indicator analyzed the direction of change was the same across the range of climate sensitiv ities. EPA disagrees with the commenter that recent temperature trends after IPCC’s AR4 2007 re port provide adequate reason to believe that the climate sensitivity range of 2°C to 4.5°C is overly sensitive. Three years of additional temperature data are not likely to be sufficient to materially change estimates of climate sensitivity based on the instrument al record and has no impact on es timates of climate sensitivity based on paleoclimate analysis or other methods . Further, we note the commenter does not provide any references or material from the recent scientific liter ature to support this claim.

Organization: Shaw, Donald F.

Comment:

A commenter asserts that the cl aimed benefit (reduction) of 0.007 to 0.016 degrees Celsius (°C) in global mean temperature over 90 years is minus cule when compared to the inaccuracies of temperature measurement and uncertainties invo lved in climate science. The commenter continues to indicate that such small temperat ure numbers are immeasurab le and meaningless as none of the equipment used to measure the temperat ures can attain accuracy even within an order of magnitude of the claimed benefit. The co mmenter further notes the temperature records derived from thermometers and tree rings used by those who support global warming claims are nowhere near that accurate. In addition, the commenter asserts this same issue applies for the proposed reduction in sea le vel rise which is 0.06–0.15 cen timeters (less than 1/16 th of an inch). [OAR-2009-0472-7270.1, p. 1]

EPA Response:

EPA notes the projected reductions in global mean temperature and sea level from the rule are based on climate modeling analysis using a glob al emission reference scenario (no climate policy) and emissions reductions sc enario which were subtracted fr om the reference scenario for the years 2000-2100 based on implementation of the rule as provided in Section III.F.1. This approach attempts to evaluate the impact of th e rule’s emissions reductions in the context of global GHG emissions. The results of the analys is should not be interpreted as detectable changes such as from the instrumental or obser vational records but disc ernible as quantifiable estimates calculated from the two emissions scenarios across a range of climate sensitivities. The observational record for globa l mean temperature (and sea level rise) is likely not sensitive enough to detect the direct response from any singl e mitigation action -- part icularly a subset of emissions from a source category -- for several re asons (e.g., the inertia in the climate system due to the exchange of heat a nd energy between the atmosphere a nd the ocean, longe vity (several decades) of perturbation from GHG emissions, gl obal nature of the emissions problem where no single source dominates). Further, the instrumental record is not designed to detect such isolated signals. Although the commenter is correct that these relatively small changes in climate

5-389EPA Response to Comments

variables would not be measurab le with instrumentation or with observational evidence (e.g., tree-ring data), it does not preclude them fr om being valid in terms of demonstrating the directional changes resulting from the reduction in GHG emissions,

Organization: Institute for Energy Research Shaw, Donald F. Spurgeon, C. M. Devon Energy Corporation Wood, John S. Stanton, Neil Mass Comment Campaign

Comment:

A commenter indicates the proposed rule to regu late greenhouse gas emissions from light-duty vehicles, as well as EPA‘s proposed Endangerm ent and Cause or Contribute Findings for Greenhouse Gases Under Section 202( a) of the Clean Air Act, and Massachusetts v. EPA, 549 U.S. 497, 525 (2007) are all predicated on th e assumption that regu lating greenhouse gas emissions from light-duty vehicles will reduce th e impacts of climate change. The commenter asserts that according to this proposed rule th e climatic benefits from reducing greenhouse gas emissions from light-duty vehicles are very small and therefore will not affect climate change in any meaningful way.

Another commenter indicates that considering th e minuscule benefit over a 90 year period, the benefit of prematurely invoking the miles per gallon (mpg) sta ndards is even less significant. The commenter asks, “What is the net loss over 90 years if the regulation is postponed 10 years past the 2016 date?” The commente r asserts that it is clear that the objective is not science but giving an appearance of doing something. The co mmenter further indicate s that these minuscule benefits will be offset many times by the massive increase in CO2 emissions by China and India and unilateral action is futile. Another commenter indicates that EPA is propos ing to increase the price of automobiles by $1,100 per car (74 Fed. Reg. 49460) in exchange for a projected global temperature decrease of 16 thousandths of a degree Celsius in 90 years. The commenter continues to indicate that according to EPA, sea level is projected to change by at most 1.5 millimeters. The commenter asserts these tiny amounts are so inconsequential that they will not affect global climate at all nor will they affect “public health and welfare.”

EPA Response:

Climate change is a global phenomenon and EPA recognizes that this one national action alone will not prevent it. Importantly, EPA quantitativel y analyzes the potential climate benefits of this rule which has the potentia l to substantially reduce GHGs em issions from the transportation sector, specifically light duty vehicles. The changes in climate e ffects that the rule is projected to produce – average of 2.9 ppm of CO 2 , a few hundredths of a degree Celsius difference in global mean temperature, and 1 to 2 millimeters of sea- level rise, a small increase in ocean pH – are small. However, EPA notes this would be tr ue for any given GHG mitig ation action when taken

5-390EPA Vehicle Program, Feasibility, and Estimated Impacts

alone. Although the magnitude of the avoided climat e change projected here is small, it shows a clear directional signal across all climate sensitiv ities evaluated. The bene fits of GHG emissions reductions can be characterized both qualitative ly and quantitatively, some of which can be monetized (see Chapter 7.5 of the final RIA).

EPA disagrees with the commenter’s assertion that there is little consequence of waiting 10 years after 2016 to enact regulations given the small ma gnitude of climate benefits estimated for the rule. EPA notes a common misunderstanding is th at the risks from climate change can be quickly addressed by emission reductions and th ereby counter negative effects within a few years or decades. However, because of th e longevity of atmospheric GHG gases warming effects persist over long timescales and continue d and future emissions would imply further long-term climate-related effects on the planet 42 . As a substantial portion of CO 2 emitted into the atmosphere is not removed by natural processes for millennia, each unit of CO 2 not emitted into the atmosphere avoids essentially permanent climate change on centennial time scales. The value of EPA’s analysis is not intended to dimi nish the effectiveness of the rule’s effect on global climate conditions but to estimate the bene fits of this particul ar action in reducing GHG emissions and global warming impacts by quantifyi ng these potential reduc tions using the best available science.

EPA does not agree with the view that since ot her countries (e.g., China and India) have higher growth rates of greenhouse gas emissions that the EPA should not act now. Further, EPA does not agree with the commenter that reducing greenhouse gases in th e U.S. will have no effect on global GHG emissions. As indicated in Section III.F of the rule, the U.S. transportation sector is the second largest contributor to this na tion’s greenhouse gas emissions behind only the electricity sector. Transporta tion sources under Section 202(a) 43 of the Clean Air Act (passenger cars, light duty trucks, other trucks and buses, motorcycles, and passenger cooling) represent 23% of total U.S. GHG emissions in 2007 and 4.3% of total global GHG emissions. Moreover, section 202(a) GHG emissions are a significantly larger share of global transport GHG emissions (28.0%) than the corresponding share of all U.S. GHG emissions to the global total (18.4%), reflecting the relative size of the transport sector in the United States compared to the global average. As the Supreme Cour t noted, ‘‘[j]udged by any standard, U.S. motor-vehicle emissions make a meaningful contribution to greenhouse ga s concentrations and hence, * * * to global warming.’’ Massachusetts v. EPA , 549 U.S. 497, 525 (2007).

EPA’s rule takes many factors into consideratio n, and is not premised on the view that the reductions from this rule will themselves have significant impacts on the global climate. As discussed above, no one action will have that effect. The factors EPA takes into account include its legal obligation to set emissions standards applicable to vehicular GHG emissions, given the endangerment and cause or contribute findings made by EPA, its anal ysis of available technology, the cost of the technology, the fuel sa vings that will result from the standard, the

42 Solomon, S., G.-K. Plattner, et al. (2009). "Irrevers ible climate change due to carbon dioxide emissions." Proceedings of the National Academ y of Sciences 106: 1704-1709.

43 Source categories under Section 202(a) of the Clean Air Act are a subset of source categories considered in the transportation sector and do not include emissions from non-highway sources such as boats, rail, aircraft, agricultural equipment, construction/mining equipment, and other off-road equipment.

5-391EPA Response to Comments

greenhouse gas reductions, implicati ons for vehicle safety, consider ation of the rule’s costs in relation to benefits, and other impacts. EPA has considered a wide variety of factors in determining that its GHG emissions standards are a reasonable exercise of its authority under section 202(a) (1). The impact of these reductions on climate ch ange is but one of the factors EPA considered.

Organization: Eadie, R. Frank

Comment:

A commenter indicates there are new scientific pro cedures that actually allow scientists to track both the CO 2 levels and climate indicators such as sea levels going back millions of years instead of hundreds of thousands of years. The commenter indicates that it is known that sea level is rising and will likely accelerate based on projections . New studies that have been done with the models indicate that the standa rds that IPCC used in their pr ojections in 2006 are actually beyond the level of the worst cas e scenario that the IPCC ha d projected. The commenter indicates that instead of 2 °C change between now and the end of the century it may be 4 °C change by the end of the century. The commenter indicates that al l the scientists agree that a warming of four degrees centigrade is simply unacceptable and civilization as we know it will not exist under thos e conditions. [EPA-HQ-OAR-2009-0472-4621, p.172-175]

EPA Response:

EPA acknowledges that the risks and impacts of climate change are occurring now and will continue to increase over this cent ury and that sea level is projected to rise when compared to the previous century. As summarized in the Technical Support Document 44 of EPA's Endangerment and Cause or Contribute Findings for Greenhouse Gases Under Section 202(a) of the Clean Air Act, 45 the IPCC reports that by the en d of the century (2090-2099), sea level is projected to rise by 18 and 59 cm relative to the base period ( 1980-1999). The IPCC projections contain the lowest and highest projections of the 5 to 95% ranges for all Special Report on Emission Scenarios (SRES) reference emi ssion scenarios and include neither uncertainty in carbon cycle feedbacks nor rapid dynamical changes in ice sh eet flow. The projectio ns represent a ‘likely range’ which inherently allows fo r the possibility that the actual rise may be higher or lower.

Recent observations and studies from the scientific assessment literature suggest that sea level rise is likely to be near or above the high end of the IPCC estima tes. For example, according to the Climate Change Science Programs 46 studies have suggested that a global sea level rise of 1 m (and up to 1.4 m) is plausible within this cent ury if increased melting of ice sheets in Greenland

44 “Technical Support Document for Endangerment and Cause or Contribute Findings for Greenhouse Gases Under Section 202(a) of the Clean Air Act” Docket: EPA-HQ-OAR-2009-0472-11292
45 See 74 FR 66496 (Dec. 15, 2009)
46 CCSP (2009) Coastal Sensitivity to Sea-Level Rise: A Focus on the Mid-Atlantic Region . A Report by the U.S. Climate Change Science Program and the Subcommitt ee on Global Change Research. [James G. Titus (Coordinating Lead Author), K. Eric Anderson, Donald R. Cahoon, Dean B. Gesch, Stephen K. Gill, Benjamin T. Gutierrez, E. Robert Thieler, and S. Jeffress Williams (Lead Authors)], U.S. Environmental Protection Agency, Washington DC, USA, 320 pp.

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and Antarctica is added to the factors included in the IPCC estimates. The IPCC 47 notes “dynamic processes related to ice flow not includ ed in current models but suggested by recent observations could increase the vu lnerability of the ice sheets to warming, increasing future sea level rise.” In addition, the Clim ate Change Science Program (CCSP) 48 , finds that the Greenland and West Antarctic ice sheets show acceleration of flow and thinni ng, and that inclusion of these processes in models will likely l ead to sea level projections for the end of the 21st century that substantially exceed the projecti ons presented in the IPCC Fourth Assessment Report (2007).

Importantly, EPA notes that the underlying scientif ic literature does not include predictions of conditions where civilization cannot exist but ra ther, will likely face challenges from climate change and sea level rise. In addition, these ar e global projections and climate change impacts will vary in nature and magnitude across di fferent regions of the United States.

Organization: Environment New Jersey New York State Department of Environmental Conservation

Comment:

Environment New Jersey

A commenter indicates that predictions of a two to four foot sea level rise in New Jersey are incredibly dire. The commenter notes that in New Jersey the Meadowlands, which include such landmarks as New Jersey Turnpike, the Newark Airport and Giants Stadium, all are within floodplain mapping zones for storm surges. The co mmenter further notes that several New York financial firms in Hudson County are on the line of the submerging and storm surge lines. The commenter indicates that the 27 miles of coast of New Jersey is the lion' s share of our tourism industry, a $38 billion industry for the state, as well as home to cas inos and Atlantic City. The commenter indicates that most of New Jersey ’s shore would suffer from storm surge on an unprecedented level and the estimates on real esta te damage and loss are astronomical. [These comments were submitted as testimony at the Ne w York public hearing. See docket number EPA-HQ-OAR-2009-0472-4621, p.73]

New York State Department of Environmental Conservation

Another commenter indicates that sea level rise along New York State’s coastal areas will erode beaches, damage sensitive ecosystems and cause bi llions of dollars in flood damage to vital infrastructure. [These comments were submitted as testimony at the New York public hearing. See docket number EPA- HQ-OAR-2009-0472-4621, p. 12]

47 Meehl, G.A. et al. (2007) Global Climate Projections. In: Climate Change 2007: The Physical Science Basis. Contribution of Working Group I to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change [Solomon, S., D. Qin, M. Manning, Z. Chen, M. Ma rquis, K.B. Averyt, M. Tign or and H.L. Miller (eds.)]. Cambridge University Press, Cambridge, United Kingdom and New York, NY, USA.

48 Clark, P.U., A.J. Weaver, E. Broo k, E.R. Cook, T.L. Delworth, and K. Steffen (2008) Executive Summary. In: Abrupt Climate Change . A Report by the U.S. Climate Change Science Program and the Subcommittee on Global Change Research. U.S. Geological Survey, Reston, VA, pp. 7–18.

5-393EPA Response to Comments

EPA Response:

EPA acknowledges the commenters’ concerns regard ing sea-level rise for the States of New Jersey and New York and note they are generally consistent with the overview of climate change impacts provided in this rule (p reamble Section III.F.2). Secti on III.F of the preamble to the vehicle rule summarizes climate change scie nce and impacts from the major scientific assessment reports (e.g., IPCC, US GCRP, NRC) on climate science. As indicated in Section III.F.2, sea level rise is one of th e potential regional impacts to a ffect the Northeast. Sea level rise is expected to increase storm surge hei ght and strength, flooding, erosion, and wetland loss along the coasts, particularly in the Northeast, Southeast, and islands. Further, Section III.F.2 notes that “Coastal communities and habitats will be increasingly stressed by climate change impacts interacting with devel opment and pollution. Sea level is rising along much of the U.S. coast, and the rate of change will very likely increase in the future, exacerbating the impacts of progressive inundation, storm-surg e flooding, and shoreline erosion. Storm impacts are likely to be more severe, especially along the Gulf a nd Atlantic coasts.” EPA notes however, that localized climate change impact assessments for the specific areas of New York and New Jersey are not estimated as part of this national vehicle rule. Organization: State of New Jersey

Comment:

A commenter indicates the EPA relied on the MAGI CC model to determine the overall impact of its rule on climate change. These modeling results showed small, but quantif iable, reductions in the global atmospheric CO 2 concentration, as well as a reduction in projected global mean surface temperature and sea level rise, from im plementation of the proposal, across all climate sensitivities. The commenter ag rees with the proposal's asse ssment of the emission reduction benefits of the proposal and its impacts on climat e change and encourages the Agencies to move forward with the joint rule. [OAR-2009-0472-7109.1, p.10]

EPA Response:

Similar to the commenter’s assertion, base d on EPA’s modeling approach, EPA notes the emission reductions resulting from this rule di rectionally represent a reduction in the adverse risks associated with climate change.. This mode ling approach attempts to evaluate the impact of the rule’s emissions reductions in the c ontext of global GHG emissions. EPA’s analysis estimates the benefits of this particular action in reducing GHG emissions and global warming impacts by quantifying these potential reductio ns using the best available science.

As mentioned previously, EPA’s rule takes a wide variety of factors into consideration in determining that its GHG emissions standards ar e a reasonable exercise of authority under section 202(a).

Organization: Adcock, James

Comment:

5-394EPA Vehicle Program, Feasibility, and Estimated Impacts

The impact on climate change must be analyzed as part of an assumed na tional and international program to reduce GHG. To attempt to analyze CAFE in isolation is to assume the failure in human efforts to control global wa rming. When you assume a priori the failure in such efforts to control global warming, then the impacts of CAFE towards global warming can indeed be assumed trivial and be discounted away. Again, a priori, in methods of accounting and analysis, NHTSA is assuming the failure of world-wide e fforts to control GHG. Such an assumption is inconsistent with the positions of the current President.

EPA Response:

We agree that addressing climate change will require global acti on, and will rely on both international and domestic programs. However, for the purpose of this rulemaking, it is necessary to quantify the impacts and understand the be nefits of this particul ar action -- which is a part of the greater whole in responding to this challenge.

5.12. EPA Estimated Impact on Non-GHG Emis sions and Their Associated Effect

Organization: Missouri Department of Natural Res ources, Air Pollution Control Program

Comment:

The commenter [EPA-HQ-OAR-2009- 0472-7480, p.1] is concerned that the vehicle standards in the proposed rule may lead to increases in criter ia pollutant and air toxi c emissions from mobile sources. In addition to providing comments on the proposed rule, the commenter also included a variety of comments that pertain to NHTSA’s DEIS (“Criteria Pollutant Emissions” pp. 2-3, “Toxics Pollutant Emissions” pp. 3-4, “Localized Calculation of Emissions Reductions” pp. 4-5, and “Summary of Comments” p. 5 ). The commenter [OAR-2009-0472-7480, pp. 4-5] expresses concern that the results of NHTS A’s DEIS project that some urba n areas may have an increased level of criteria and toxic emissions resulti ng from the rebound effect. These results for nonattainment and maintenance areas are of particular concern because of the air quality status of the two largest urban areas in Missouri. St. Louis is currentl y designated as nonattainment for ozone and PM. Kansas City is designat ed as a maintenance area for ozone.

NHTSA and EPA only examined the emission reductions of benzen e, 1,3-butadiene, formaldehyde, acetaldehyde, and acrolein, but should al so have included other air toxics such as ethylbenzene, toluene, and the xylene isomers. It appears NHTSA and EPA's examination was incomplete, thus, raising questions on the result s of the examination presented in this Federal Register notice. To address these concerns, the agencies should examine the emission reductions of all of the air toxics asso ciated with the extraction, produc tion, distribution, as well as the combustion, of fuel. In Table III.G-2 Annual Air Toxic Emission Impacts of Program (shorttons) on page 49593, NHTSA and EPA presented their estimation of the infl uence of the actions of their proposed National Program on the emissi ons of the aforementioned air toxics. According to the data in 2030 the proposed National Pr ogram would increase th e emissions of 1,3­ butadiene, acetaldehyde, and acrolein, and woul d decrease the emissions of benzene and

5-395EPA Response to Comments

formaldehyde. The increased emissions equaled 100 short tons and the decreased emissions equaled 93 short tons for a net increase of 7 shor t tons of air toxic emissions. These increased emissions were due to downstream impacts refl ecting the effects of the previously mentioned VMT rebound effect rather than upstream impa cts reflecting the extraction, production, and distribution of motor gasoline. The data presente d in Table III.G-2 therefore showed that the proposed actions of the National Program would increase the emissions of the aforementioned air toxics due to the in creased total amount of ga soline undergoing combustion.

Yet the two agencies seemed to ignore the data pr esented in Table III.G-2. The agencies state on page 49709 that, 'For most of these pollutants, the reduction in upstream emissions resulting from lower fuel production and distribution will ou tweigh the increase in emissions from vehicle use, resulting in a net decline in their total emissions.' The data presented in Table III.G-2 contradicts this statement and neither agency pres ented data anywhere else in this notice that supported this statement. To correct this contradiction, NHTSA and EPA should present evidence that demonstrates the actions of the proposed National Program will not increase air toxics emissions from mobile sources. [OAR-2009-0472-7480, pp.2-3]

EPA Response:

EPA understands the commenter’s concern that the GHG vehicle standards may lead to increased emissions of some pollutants from mob ile sources. However, emissions changes alone are not a good indication of local or regional ai r quality impacts. The atmospheric chemistry related to ambient concentrations of PM2.5, ozone and air toxics is very complex, and making predictions based solely on emissions changes is extremely difficult. Full-scale photochemical modeling is necessary to provide the needed spatial and temporal detail to more completely and accurately estimate the changes in ambient levels of these pollutants. The length of time needed to prepare the necessary emissions inventories, in addition to the processing time associated with the modeling itself, precluded EPA from conducting a full-scale photochemical air quality modeling analysis in time for the NPRM. For the final rule, however, EPA performed a national-scale air qualit y modeling analysis to analyze th e impacts of the standards on PM 2.5 , ozone, and selected air toxics (i.e., benzen e, formaldehyde, acetaldehyde, acrolein and 1,3­ butadiene).

As discussed in Section 7.2 of the RIA, EPA’s ai r quality modeling projects that final standards have relatively little impact on am bient concentrations of modeled PM 2.5 , ozone, and air toxics. For annual and 24-hour PM 2.5 , our air quality modeling projects design value changes of ±0.05 μg/m 3 for all Missouri counties, w ith the exception of one county near St. Louis which is projected to see decreases in annual and 24-hour PM 2.5 design values between -0.05 and -0.15 μg/m 3 (Section 7.2.2.1 of the RIA). Ozone design value changes as a result of the GHG standards finalized in this rule are ±0.1 ppb for all counties in Missouri. EPA notes that the commenter’s concerns pertaini ng to NHTSA’s DEIS are addre ssed in NHTSA’s DEIS Comment Response document, available in NHTSA’s doc ket for this rulemaking: NHTSA-2009-0059.

Although a large number of compounds which are cons idered air toxics coul d be impacted by the GHG vehicle standards, EPA focused on those wh ich were identified as national and regionalscale cancer and noncancer risk drivers in past NATA assessments and were also likely to be

5-396EPA Vehicle Program, Feasibility, and Estimated Impacts

significantly impacted by the standards. These compounds include benzene, 1,3-butadiene, formaldehyde, acetaldehyde, and acrolein. In ad dition to developing emission inventories for these explicit model species in our photochemical model, EPA al so developed inventories for a large number of precursor compounds, including ar omatics such as ethylb enzene, toluene, and xylene isomers, through applica tion of speciation profiles in SMOKE (see also Section 7.2.1.2 of the RIA). Thus, EPA does account for changes in the both upstream and downstream emissions of numerous air toxics beyond the five species for which we present air quali ty modeling results.

In addition, EPA is projecting overa ll decreases in most criteria a nd air toxic pollutant emissions due to the GHG standards (see Tables III.G-1 and III. G-2 in the preamble to the final rule). In most cases the net impacts are le ss than 1% of the projected 2 030 inventory. As seen in the tables, EPA projects that the net impact of the program is a sli ght decrease in the majority of modeled emissions, and a slight increase in the re mainder. The calculation of these impacts is documented in RIA Chapter 5 (substantially similar to the analysis presented in the record to the proposed rule). As discussed above, changes in emission inventorie s alone are not a good indication of local or regional air quality imp acts. Overall, EPA’s photochemical air quality modeling indicates that the final standards have relatively little im pact on national average ambient concentrations of the modeled air t oxics. Regional increases in formaldehyde, 1,3­ butadiene, acrolein, and ethanol are not due to the standards finalized in this rule, but are related to our assumptions about the volume of ethanol that will be blended into gasoline. The ethanol volumes will be occurring as a result of the r ecent Renewable Fuel Standards (RFS2) rule and were accounted for by EPA in assess ing the impacts of that rule. 49 For additional detail on air toxics results, please see Section 7.2.2.3 of the RIA.

Organization: Texas Commission on Environmental Quality

Comment:

The commenter [EPA-HQ-OAR-2009- 0472-7180] argues that the rule proposal states that the new GHG emission standards will increase vehi cle efficiency and, thereby, lower fuel consumption. However, the proposal acknowledges that the new GHG emission standards will also likely increase light-duty ve hicle use as a result of the 're bound effect' associated with higher fuel economy, resulting in increa sed criteria pollutant emissions . The 'rebound effect' is defined in the proposal as 'the tendency of drivers to dr ive their vehicles more as the cost of doing so goes down, as when fuel economy improves.' The propos al claims that the an ticipated increase in criteria pollutants associated w ith the rebound effect would be offset by reduced emissions from reductions in domestic fuel refining and distribution br ought about by lowering fuel consumption. [OAR-2009-0472-7180.1, p.2]

The commenter [EPA-HQ-OAR-2009-0472-7180, p. 2] is concerned that new GHG emissions standards for light-duty vehicles w ould result in increases in criter ia pollutant emissions that are of critical importance for comp liance with the NAAQS for ozone , primarily emissions of VOC and NOx. Specifically, the commenter is concerned that “in areas with litt le or no fuel refining

49 EPA 2010, Renewable Fuel Standard Program (RFS2) Regulatory Impact Analysis. EPA-420-R-10-006. February 2010. Docket EPA-HQ-OAR-2009-0472-11332

5-397EPA Response to Comments

industry, such as the Dallas-Fort Worth ozone nonattainment area, th e rebound effect would result in an increase in criteria pollutant emissi ons.” The commenter is also expressed concern about the “anticipated increases in acetalde hyde and 1,3-butadiene.”

The TCEQ has implemented a number of regulatory air quality control strategies in its ozone nonattainment areas to reduce VOC and NO x emissions and is concerned that the adoption of the proposed rules for new GHG emissions standards for light-duty vehicles will have a negative impact on the efforts Texas has made to meet its current and future air quality goals, especially as EPA looks to tighten the ozone standard agai n. Additionally, the EPA is encouraged to align the mobile source control strategies with ozone reduction needs. Texas has made great strides in reducing ozone and ozone precursors from federally preempted mobile sources by incentivizing mobile fleet turnover through our Texas Emi ssions Reduction Plan and the Drive a Clean Machine program, and placing stringent controls on stationary sources. Because mobile source emissions now comprise the majority of NO x emissions in Texas metropo litan areas, EPA should not let its GHG rulemaking initiatives interfere with the ability of states to attain and maintain increasingly stringent National Ambient Air Quality Standards. Unlike GHG emissions, increases in criteria pollutant emissions may have direct health impacts on the citizens of Texas. [OAR-2009-0472-7180.1, p.2]

EPA Response:

The non-GHG inventories and associated air qual ity modeling presented by EPA include the impacts of both the upstream and downstream em ission consequences of the rule, including the impact of a rebound effect. This is descri bed more fully in RIA Chapters 5 and 7.

EPA understands the commenter’s concern about increas es in criteria pollutant emissions that are important to attainment of the ozone NAAQS. EP A does not believe this rule will interfere with attainment of the ozone NAAQS. As discussed in Section 7.2 of the RIA, EPA’s photochemical air quality modeling projects that the final standards have rela tively little impact on ambient concentrations of ozone. Ozone design value cha nges as a result of the GHG standards finalized in this rule are ±0.1 ppb for all Texas counties, wi th the exception of four counties in the greater Houston area which see ozone design value decr eases between -0.1 and -0.2 ppb due to projected upstream emissions decreases in NO X and VOCs from reduced gasoline production. For annual and 24-hour PM 2.5 , our air quality modeling projects design value changes of ±0.05 μg/m 3 for the majority of the counties in Texas. Some Houst on-area counties are projected to see decreases in annual and 24-hour PM 2.5 design values between -0.05 and -0.25 μg/m 3 (Section 7.2.2.2 of the RIA).

Our modeling analysis of air toxics, describe d in Section 7.2.2.3 of the RIA, projects that ambient concentrations of acetaldehyde and 1,3-but adiene will decrease in Texas. EPA notes that we will be analyzing air quality impacts of increased renewa ble fuel use as required by the “anti-backsliding” provisions of Clean Air Ac t section 211(v), which also requires EPA to promulgate mitigation measures as appropriate, following that study.

Organization: South Coast Air Quality Management District

5-398EPA Vehicle Program, Feasibility, and Estimated Impacts

Comment:

The proposed emission standards and compani on fuel economy standards will result in a significant reduction in greenhouse gas emissions as well as provide crucially important cobenefits in reducing criteria em issions in support of attainment of federal and state air quality standards for ozone and fine particulates . [Comments are from LA Testimony, OAR-2009-0472­ 7283, pp.59-67]

EPA Response:

As discussed in the RIA Chapter 7.2, EPA’s air qua lity modeling projects relatively little impact on ambient concentrations of criteria pollutants a nd toxics, but there are ne t benefits associated with reductions in PM 2.5
. Organization: New York State Department of Environmental Conservation

Comment:

EPA's analysis projects criteria pollutant emi ssion reductions as a resu lt of implementation of these standards. In particular, emissions re ductions are expected from fuel production and distribution industries. These reductions are background information, and provide some assurance that criteria pollutant emissions increases are unlik ely. These reductions, and their geographic distribution, are not su fficiently certain to justify viewing them as offsets for emissions increases from other programs such as the Renewable Fuel Standard. [OAR-2009­ 0472-7454, p.5]

EPA Response:

EPA does not view any emissions re ductions from this rule as “pr oviding offsets” for emissions increases from other rules. EPA has an obliga tion under the “anti-backsl iding” provisions of Clean Air Act section 211(v) to analyze the air quality impacts of increased renewable fuel use and promulgate mitigation measures as appropriate.

Organization: Yuli Chew, Private Citizen

Comment:

For the rebound effect, in the CARB’s Regulatio ns to Control Greenhouse Gas Emissions from Motor Vehicles, Final Statements of Reasons, August 4, 2006, ARB staff estimates that the rebound and fleet turnover impacts are essentially o ffset by the benefits from reduced fuel cycle emissions. [OAR-2009-0472-7042.1, p.5]

I also believe that th e rebound and fleet turnover impacts are essentially offset by the benefits from reduced fuel cycle emissions.[OAR-2009-0472-7042.1, p.6]

EPA Response:

5-399EPA Response to Comments

The commenter states that the re duction in upstream emissions decr eases is roughly equivalent to the rebound emissions, and references a California Air Resources Board report ( http://www.arb.ca.gov/regact/grnhsgas/fsor.pdf ). As shown in Preamble Section III.G, for volatile organic compounds (VOC), nitrogen oxides (NOx), and particulate matter (PM 2.5 ), upstream reductions are slightly larger than the emissions incr eases attributed to the rebound effect when a 10% rebound effect estimate is used. There are both upstream and downstream decreases of SOx emissions. EPA provides a fu ll discussion of the impacts of rebound and upstream emissions in Section III.G of the preamble to the final rule and in Chapter 5 of the RIA.

5.12.1 Upstream Impacts of Program

Relevant comments have been included in Section 5.12.

5.12.2 Downstream Impacts of Program

Relevant comments have been included in Section 5.12.

5.12.3. Health Effects of Non-GHG Pollutants Organization: American Lung Association of California Physicians for Social Responsibility, Los Angeles California State Senate Environment New Jersey South Coast Air Quality Management District

Comment:

American Lung Association of California

California’s unique air quality problems demand the strongest po ssible action to fight global warming. Our state is home to some of the wors t air quality in the nati on, largely due to motor vehicles, and this air polluti on crisis has created a public h ealth crisis. The American Lung Association’s 2009 national State of the Air repo rt continued to demonstrate that California dominates the lists of worst polluted cities in the country. The report found that California has 6 out of the top 10 worst ozone polluted cities in the country and again listed the Los Angeles region as home to the worst ozone pollution in America.

Higher levels of death and illness from pollu tion exposures is experienced by vulnerable individuals, including th ose with asthma or other respirator y and cardiac illnesses, the elderly, infants, children, teenagers, low income communities, communities of color, and people living near pollution hot spots including heavily travelle d roads. There are millions of individuals that are particularly vulnerable to pollution in our region.

Just as the transportation sector is the primary s ource of criteria pollution in California, it is also the primary source of greenhouse gases, and glob al warming is expected to worsen ozone pollution and its health effects. California and the rest of th e country depend on this proposed

5-400EPA Vehicle Program, Feasibility, and Estimated Impacts

regulation as a key step to reduce this major source of global warming emissions. Without strong action, rising temperatures from global warmi ng will likely lead to even more illness and suffering from increases in air pollution and po llen production, longer and more intense heat waves, and devastating wildfires and related sm oke exposure. Recent research conducted by UC Berkeley estimates that the public health cost s to California from global warming will add an additional cost of $3 billion to $24 billion a nnually depending on our success in reducing greenhouse gases. Scientists predict that here in Los Angeles, global warming will cause the number of heat wave days to rise dramaticall y, which could lead to a 75-85% increase in the number of days with unhealthy air quality.

[OAR-2009-0472-7216.1, Docket Number OAR-2009-0472-7216/7216.1 These comments are from testimony presented at the LA public hearing.]

Physicians for Social Responsibility, Los Angeles

Also when we focus on the health impacts of th ese tailpipe emissions a nd air pollution, for many years we have spoken, and rightly so, on the issues of asthma and respiratory disease. We must remember that air pollution poses a significant th reat to the health ofwomen who live in hightraffic areas.

Over the last decade, a large number of studies ha ve investigated the possible adverse effects of ambient air pollution on birth ou tcomes. A number of key studi es have been done in Los Angeles. The work of Dr. Beate Ritz, the docto r who worked with Dr. Tracy Woodruff, have shown that -- and both published in Environmental Health Perspec tives -- have shown that there is a significant implication of air pollution in adverse birth outcomes, low birth weight, changes to the health of damaged heart valve development.

[These comments are from LA Testimony, OAR-2009-0472-7283, pages 79-85]

California State Senate

There is a compelling link betw een global warming and air pollution. Warmer temperatures increase our ozone and smog fo rming pollutants. We have al arming and growing respiratory illness, asthma and cancer rates occurring among our youth and the elderly. Several intense heat waves over weeks at a time have caused illne ss and deaths. Lower income neighborhoods that often lack air conditioning are pa rticularly at risk during heat episodes. Agricultural losses, increases in vector borne diseases, and a drama tic increase in loss of property and air pollution from costly wildfires have become the new normal.

California is not the only state that is impacted by air pollu tion. From Denver, to Chicago, to Albuquerque New Mexico, air pollution is a serious health problem. Two year s ago, I testified in Santa Fe, New Mexico as they were having a hearing on adopting California’s Clean Car standards. Several doctors and pediatricians, on their own init iative, came to support the policy because of their concerns of their patients’ hea lth. For many, they said it was the first time they had ever testified at a government hearing.

5-401EPA Response to Comments

[OAR-2009-0472-7275.1, also EP A-HQ-OAR-2009-0472-7283, pp. 13-20]

Environment New Jersey

Something that's clear to residents, especially from north Jersey, is the impacts of light-duty vehicles, cars and trucks, on our air pollution. In New Jersey, the majority of our counties still remain out of compliance with U.S. EPA health sta ndards, to the extent that the asthma levels are certainly higher in New Jersey than other areas. They're especially high in urban areas that are closest to some of the largest highways in the st ate. These are again the externalities that were touched upon in the National Academy of Sciences report and these litera lly mean thousands of asthma attacks per year as well as increased le vels of cancer and heart disease. [EPA-HQ-OAR2009-0472-4621, pp. 77-78]

South Coast Air Quality Management District

[The following comments are from LA public hearing testimony OAR-2009-0472-7283, pp. 59­ 67.]

Over 25 percent of the nation's exposure to the eight-hour ozone standard occurs here in the South Coast Air Basin, while over 50 percent of the nation's 24-hour PM 2.5 standard exposure occurs here.

There are over ten million registered light-dut y vehicles in the South Coast Air Basin. Reductions in fuel use associated with the st andards proposed will therefore have a direct and tangible benefit in terms of public health and welfare in our region.

The Air Resources Board has shown its sensitivity in addressing this issue while carefully balancing social and industry needs to mini mize cost and maximize consumer choice while maximizing overall benefits.

Central to this determination is the imperativ e to improve public hea lth. We are especially pleased, therefore, that the ARB's program is fashioned around the value that there can be no tradeoff between greenhouse gas em issions and criteria emissions.

EPA Response:

EPA agrees that there is a link between climat e change and air polluti on. For instance, as summarized in the Technical Support Docume nt of EPA's Endangerment and Cause or Contribute Findings for Greenhouse Gases under Section 202(a) of the Clean Air Act, according to the Intergovernmental Panel on Climate Change , climate change is expected to lead to increases in regional ozone pollution in the United States. 50, 51

50 “Technical Support Document for Endangerment and Cause or Contribute Findings for Greenhouse Gases Under Section 202(a) of the Clean Air Act” Docket: EPA-HQ-OAR-2009-0472-11292
51 See 74 FR 66496 (Dec. 15, 2009)-8

5-402EPA Vehicle Program, Feasibility, and Estimated Impacts

In addition, emissions from light-duty vehicles contribute to ambient air pollution that poses significant health concerns. S ection 7.1 of the RIA for this ru le details the health effects associated with PM 2.5 , ozone, CO, NOx, SOx and several air t oxics. EPA agrees that air pollution in high-traffic areas is a significant issue; Section 7.1.1.6 of the RIA discusses exposure and health effects associated with tr affic specifically. In addition, s ee Section III.G and III.H of the preamble to the final rule and Chapter 7 of th e RIA for a discussion of the air quality and monetized health benefits of this rule.

5.12.4 Environmental Effects of Non-GHG Pollutants

No comments were received on the environmen tal effects of non-GHG pollutants. The Center for Biological Diversity's comments on the Enda ngered Species Act are addressed in Section 4.7 of this document.

5.12.5. Air Quality Impacts of Non-GHG Pollutants

Relevant comments have been included in Section 5.12.

5.13 EPA Estimated Cost, Econ omic, and Other Impacts

5.13.1 Conceptual Framework for Evaluating Consumer Impacts

“Energy Paradox”

Organization: American Council for an Energy Efficient Economy Consumer Federation of America International Council on Clean Transportation University of Michigan Transpor tation Research Institute (UMTRI) Consumer Federation of America Union of Concerned Scientists James Adcock New York University School of Law, Institute for Policy Integrity (IPI)

Comment:

American Council for an Energy Efficient Economy

In terms of consumer welfare, from this perspective, the discussion of consumer welfare impacts of the proposed rule is troubling. The agencies' finding that raising fuel economy will increase consumer welfare despite the modest share of ve hicles purchased today th at are highly efficient is not a conundrum, but rather a manifestation of extensively studi ed failures in the market for energy for energy efficiency. The vehicles that will enable manufacturers to meet the new standards by and large are not available today. The standards have been designed to allow vehicles in each market segment to attain th e required fuel economy and emissions levels

5-403EPA Response to Comments

without changes to other vehicle properties. [These comments were submitted as testimony at the New York public hearing. See docke t number EPA-HQ-OAR-2009-0472-4621, pp. 146-147.]

Consumer Federation of America

The very large potential efficiency gains es timated by the engineering/economic analysis conducted by NHTSA/EPA, which can be most easily summarized by nothing that, even at the highest and most expensive level, the cost of saved energy is a bout one-third of the price to consume energy, are at the core of a decades long debate over fuel economy standards. In a capitalist economy, when problems are serious, like rising energy prices and imports, and a solution is inexpensive and potentially widely ava ilable, one would expect people to seize it. The existence of the “efficiency gap” immediately raises the question: “W hy don’t people buy more of it?'

The efficiency gap is not new, nor is it confined to the transportation sector. A similar efficiency gap is found in building sector energy consumpti on. As Exhibit I-1 shows, the magnitude of the problem is similar across sectors. In the past few months, four major national research institutions have released re ports that document the huge potential for investments in energy efficiency to lower consumers’ bills and gr eenhouse gas emissions, creating a win-win for consumers and the environment. The National Re search Council of th e National Academy of Sciences has estimated the potential reduction in electricity, natural gas and gasoline at approximately 30 percent, similar to the estima tes of NHTSA/EPA. McKinsey and Company and the American Council for Energy Efficient Econo my have reached a similar conclusion on electricity and natural gas. Across these three sectors, saving en ergy costs about one third of the price of consuming it. See [OAR-2009- 0472-7272.1, pp.15-22] for extensive analysis

[The following comments were submitted as tes timony at the Detroit public hearing. See docket number EPA-HQ-OAR-2009-0472-6185, pp. 108-111]

Our research shows that the market failure is on the supply side as well as the demand side. Survey research shows there is a huge mismat ch between consumer demand and the vehicles offered in the marketplace for efficiency. Analysis shows that consumers began shifting their consumption patterns five years ago, but the automakers were unwilli ng or unable to respond, and they were left with a growing number of vehicles that th ey could not sell.

But the most ironic fact is the following: The be havioral economics literature that the agencies cited in their notice conclude that consumer s are deficient in motivation, perception, and calculation, and that that is a basi s on which to conclude there is a market failure. But at the same time those models incorrectly assume that producers are perfect, ha ve perfect information, perfect foresight, and perf ect analytic capability.

It turns out, as the headline of the Detroit Free Press says today, 'Producers are people, too.' They suffer the same deficiencies of motivation, perception, and calculation, and it turns out they also have perverse incentives to exploit info rmation asymmetries and abuse market power to increase profit.

5-404EPA Vehicle Program, Feasibility, and Estimated Impacts

So these two sets of far-from-perf ect actors come together in a se t of market institutions that compound and magnify their deficiencies. The result is a 30-percent market failure, one of the grossest inefficiencies in our whole economy. We consume 30 percent more energy than we should if we're behaving efficien tly. That shortfall costs consum ers, reduces consumer welfare, and fuel economy standards are the way to address it.

So EPA and NHTSA have an opportunity in the current rulemaking to establish a platform on which a dynamic, innovative automobile sector can be built in America, one which meets the needs for transportation in our continental economy in a manner that saves consumers money, enhances national security thr ough reduced oil imports, and ensure s the transportation sector makes its fair contribution to mee ting the challenge of global warming.

To build that platform it is critically important to recognize the vital ro le that fuel economy standards play in correcting market failures and set standards at a level that captures the full measure of the value of the increased efficiency. In so doing, they will create an environment in which a new automobile industry can thrive. We look forward to working with the agency to build that platform.

International Council on Clean Transportation

The impact of the proposed standards on consumer welfare is the subject of much debate in the proposal, reflecting the lack of clarity and understanding of this issue in general. The debate revolves around the so-called Energy Paradox. A ssuming full information and perfect foresight, standard economic theory says that consumers will make optimal tradeoffs between the purchase price and subsequent operating co sts. In short, the problem is that consumers appear not to purchase products that are in their economic self-interest.

Both agencies chose to exclude estimates of c onsumer welfare loss due to changes in vehicle choice. Although this was done primarily because of methodological concerns, ICCT supports this decision and does not believe there is signi ficant consumer welfare loss in this case. Consumers do undervalue fuel savings because of uncertainty and loss-aversion and generally understand that standards do not reduce th eir welfare, as explained below.

There is substantial circumstantia l evidence that most consumers in the U.S. place a low value onfuel economy. For example, Turrentine and Kurani, 1 conducted an in depth survey of the carbuying histories of 57 California households. N one of these 57 households made any kind of quantitative assessment of the value of fuel savi ngs and only 9 stated they compared the fuel economy of vehicles in making their choice. The selected consumers were largely unaware of their annual fuel cost, in contrast to general know ledge of the daily price fluctuations of a gallon of gasoline. Turrentine and Kurani concluded th at: “When consumers buy a vehicle, they have neither the tools nor the motivation nor the ba sic building blocks of knowledge to make a calculated decision about fuel costs.”

Turrentine and Kurani’s findings were not ba sed upon a representative sample, but they are generally supported by the results of a 2007 national random survey of 1,030 households (Opinion Research, 2007). When asked about th eir last vehicle purchase, 39 percent of

5-405EPA Response to Comments

respondents indicated they did not consider fuel economy at all and, of those who did, only 14 percent mentioned taking fu el costs or gasoline pri ces into consideration.

The question that has been debated for decades is simply – why? This is an extremely important question, as most of the calculati on of consumer welfare is based on the answer. If consumers are already receiving their optimum level of fuel ec onomy, then efficiency standards will decrease their welfare. However, if there are valid reasons why consumers are not making optimal tradeoffs at the time of vehicle purchase, or if the entire question is not being framed properly, then efficiency standards could increase consumer welfare.

NHTSA, EPA, and the U.S. Office of Manage ment and Budget (OMB ) all recognize the importance of the Energy Paradox, but state that it is not currently possibl e to fully account for all effects on consumer welfare. While they all estimate the benefits of the GHG rule would outweigh eventual losses of associ ated private welfare, they sugge st further analyzing the subject of consumer welfare for future rule making:

EPA said they are not able to estimate the cons umer welfare loss that may accompany the actual fuel savings from the proposal and asked for comments “on how to assess these difficult questions in the future”. NHTSA invites comments “on the state of the art of consumer vehicle choice modeling, as well as on the prospects for th ese models to yield reliable estimates of changes in consumer welfare from requiring hi gher fuel economy.” OMB provided a 17 page document containing suggested revisions for sec tions III.H and IV.G of the preamble. While their suggestions were not incorporated into the text in the propos ed rule, their document indicates OMB’s concern about consumer welfare and their desire to se ttle the long-standing issues. Compared to the language in the preamb le, the OMB language is more precise and clear and the text is more structured. For example, they would have rewritten EPA’s request for comments to say, “EPA is not in a position to produce empirical estimates of the magnitude of these losses. We lay out a framework for how EP A will make progress on this issue for future rulemakings.”

NHTSA and EPA accurately discussed the uncerta inty-loss aversion theory in the proposal. However, it was presented as one of an array of possible explanations. Not only is uncertaintyloss aversion sufficient to explain consumer beha vior by itself, but the other forms of market failure can also be viewed simply as factors in creasing the uncertainty of the future fuel cost savings.

Does this mean that customers only value 3 years of fuel savings and that their consumer welfare will decrease if standards force them to save money on fuel from technologies that achieve a fuel-savings based payback in more than 3 ye ars? Not necessarily. There are two important issues that affect the conclusi on: (1) Standards change the st atus quo by removing the option to buy a vehicle without the additional efficiency technology – it is not presented to the customer at all. (2) Standards require everyone to purchase higher levels of efficiency technology, not just individual customers, leading to i ndirect consumer welfare benefits.

The concept of consumer welfare under stan dard economic theory is based upon individual choices. However, efficiency standards affect everyone, not just indivi dual customers. This

5-406EPA Vehicle Program, Feasibility, and Estimated Impacts

changes the calculation of consumer welfare. Th e individual’s welfare is now the sum of the direct impact on the individual and the indirect benefit to the indivi dual of forcing other customers to buy more efficient vehicles.

There is also a potential issue with the consumer welfare of s econd and subsequent owners. In reality, the original purchaser li kely does not assess the full us eful life fuel savings, including uncertainty, when making purchase decisions. Rather , the original purchaser likely assesses the fuel savings for his/her ownership period plus the additional amount the second owner will pay for the higher fuel economy, both including uncerta inty. Because of uncertainty, the original owner severely discounts what the second owner would be willing to pay for the higher fuel economy. If this discounted value is smaller than the value the subsequent owner would place on the fuel savings, including uncer tainty, this creates a loss of welfare for the second owner.

University of Michigan Transporta tion Research Institute (UMTRI)

This section responds to interagency comments received prior to the publishing of the NPRM in the Federal Register. These interagency comm ents are contained in Document ID: EPA-HQOAR-2009-0472-0317.2: “Corporate Average Fuel Economy/Green House Gas (CAFE/GHG) Notice of Proposed Rule Making (NPRM) Su mmary of Interagency Comments under E. 0. (Executive Order) 12866”. The interagency comments are in the form of a suggested rewrite of Section III.H of the “Proposed Rulemaking to Establish Light-Duty Vehicle Greenhouse Gas Emission Standards and Corporate Averag e Fuel Economy Standards”. [OAR-2009-0472­ 3651.1, p.5]

The key paragraph contains the conceptual rationale for the suggested approach.

“The changes in welfare, holding constant vehicle purchases, turn on assumptions about consumers’ private discount rate. Assuming perfec tly competitive markets and perfect consumer foresight, standard economic theory suggests th at in the absence of regulation, consumers currently make optimal trade-offs between th e cost of purchasing a new vehicle and its subsequent operating costs (i.e., fuel expenditures, time spent re fueling, and the benefits of additional driving). The assumption of perfect consumer foresight ha s of course run into serious theoretical and empirical objections in recent year s, especially from behavioral economics. But it is important to see that on the stated assump tion, no net private benefits accrue from the rule, since the regulation will change the purchase price of new cars and the stream of operating costs. The essence of this view is that in the absen ce of the regulation, consumers fully understand their current and future financial positions and optimal ly balance the trade-o ff between upfront costs and future operating costs. For this reason, CAFE or any other regulation that alters this trade-off must harm their private well bei ng. This intuition behi nd this conclusion is best captured by the recognition that automobile companies currently sell vehicles that already comply with the standards set forth in this rule -- yet many consumers choose not to purchase these vehicles.” [OAR-2009-0472-3651.1, p.6]

In evaluating proposed regulations, the benefits and costs of the regula tion must be measured against a baseline. The above paragraph sugge sts that the baseline should be “perfectly competitive markets and perfect consumer fo resight”. However, according to the OMB’s

5-407EPA Response to Comments

guidelines for economic analysis of regulations, the baseline should be th e “best assessment of the way the world would look absent the propos ed regulation”. Perfectly competitive markets and perfect consumer foresight do not describe the way the wo rld looks today and are highly unlikely to describe the way the world would lo ok in the future—with or without the proposed GHG emission standards. [OAR-2009-0472-3651.1, p.6]

Market failure can arise from externalities, market power, and inadequate or asymmetric information. The “market” for clean, fuel-effi cient motor vehicles has all the necessary conditions for market failure. The most significan t are inadequate information about the future and limitations in human rational ity. Neither consumers nor automa kers possess perfect foresight and rationality in making decisions . Calculations of welfare loss based on subjective consumer valuation are always problematic—they are difficult to estimate and difficult to justify. Using the perfect market populated by perf ect producers and perfect consum ers as the baseline against which gains and losses are assess ed assumes that the status quo is the perfect market. [OAR2009-0472-3651.1, p.6]

The OMB guidelines have it right—the baseline should be the way the real world would look absent the regulation. Adopting the approach in the suggested rewr ite of section III.H would get it wrong. [OAR-2009-0472-3651.1, p.6]

In standard economic theory, a perfectly competitive market populated by consumers and firms with perfect foresight is, by definition, a world in which private welfare is maximized. Thus, any regulated change of product attributes or mix of products reduces privat e welfare. Setting the baseline as the perfectly competitive market populated by consumers and firms with perfect foresight, and then “concluding” th at GHG emission regulations result in private welfare loss is an example of a rhetorical tautology. The conclu sion is already present in the assumption. [OAR2009-0472-3651.1, p.7]

The last sentence in the quoted paragraph reads, “This intuition behind this conclusion is best captured by the recognition that automobile companie s currently sell vehicles that already comply with the standards set fo rth in this rule -- yet many consumers choose not to purchase these vehicles.” The statement is misleadi ng. Targets are set vehi cle-by-vehicle based on footprint, however the standard must be met by each company. Thus, it is wrong to say that some vehicles already comply with the standards. [OAR-2009-0472-3651.1, p.7]

Let’s assume that what was meant by the statemen t is that automobile companies currently sell some vehicles that are very fuel-efficient a nd clean, and that some consumers choose not to purchase these clean fuel-efficient vehicles. This is a true statement. However, the observed diversity in consumer purchases does not imply that CAFE necessarily harms private well-being. Since that conclusion is tautologi cally true if one assumes a perf ectly competitive market with consumers and producers with perfect foresight, th e observed diversity in consumer purchases is irrelevant. [OAR-2009-0472-3651.1, p.7]

[UMTRI also submitted these comments as test imony at the Detroit public hearing, See docket number EPA-HQ-OAR-2009-0472-6185, pp. 40-42.]

5-408EPA Vehicle Program, Feasibility, and Estimated Impacts

Consumer Federation of America

[Following is from [OAR-2009-0472-7272.1, p.42]

As discussed in Section II, the Notice barely scratches the surface of the debate over the “efficiency gap” and the policies to deal with it. The terminology applied to describe the failure of energy markets to achieve the level of energy efficiency one w ould expect from a theoretically efficient market has proliferated as concern ove r this problem has grown. The existence of this “efficiency gap” is explained with terms like ba rriers, obstacles, challe nges, imperfections, and failures. These terms are often applied differently by different authors. When all is said and done, however, there is substantia l consensus on the challenges energy efficiency faces.

To establish a framework for explaining the exis tence and magnitude of the market failure, as well as why fuel economy standards are an effective solution to th e problem, this section reviews several literatures.

First, we review the discussion of the issu e in the Notice of Proposed Rulemaking and its supporting documents. The agencies ha ve invited comment on this issue.

Second, we briefly establish the basis for market failure anal ysis in the general economic literature. We start from traditional economic discussions and then move to more recent challenges to the traditional model in tr ansaction cost and be havioral economics.

Third, we review the general “efficiency gap” l iterature. This literature was cited in the Notice and supporting documents.

Fourth, we review the “efficiency gap” literature as it relates directly to fuel economy and the importance of supply-side causes of market failure . This literature was also cited in the Notice and supporting documents.

Union of Concerned Scientists

Consumers also have not had perf ect substitutes available in the market. The assertion that “fuel efficient cars are currently offered for sale, a nd consumers’ purchasing decisions may suggest a preference for lower fuel economy than the prop osed rule mandates” indicates a lack of knowledge about the actual vehicle offerings. Fo r example, in minivans available for Model Year 2010, consumer fuel economy choices rang e from 18-20 mpg. To achieve higher fuel economy a consumer has one choice, a 23 mpg mode l that is smaller and less powerful than the others on the market. While a c onsumer choosing the 20 mpg model instead of the 23 mpg model does indicate that they place more value on the available size and performance than on the benefit of a 3 mpg increase, it does not imply that they would experience a welfare loss if they were given a 23 mpg vehicle with the same size a nd performance as the 20 mpg model. With the technology available to automakers, consumers w ill be able to purchase 2016 models with the same size and performance, and likely even better safety, than they have today while also saving money on fuel. [OAR-2009-0472-7181.1, pp.15-16]

5-409EPA Response to Comments

Finally, the argument that consumers have an intuiti on that allows them to act as if they were operating in a perfect market is belied by the shif ts in sales away from large SUVs that occurred as gas prices shot up in 2007 and 2008. Consumers, and manufacturers, were clearly unprepared for these changes and lacked the foresight and su bstitutes to maintain their welfare. If this intuition exists, it must be based on some unknown ability, as recent work by Kurani and Turentine indicates that consumers “do not have the basic building blocks of knowledge to make an economically rational d ecision.” [OAR-2009-0472-7181.1, p.16]

James Adcock

The "Energy Paradox" Explained: Traditionally more expensive vehicles consume more fuel which corresponds to a generally marketing pa ttern of "conspicuous consumption" by more wealthy consumers - where consumers display th eir personal wealth a nd power through their display of overall consumption. High MPG vehicles such as a Prius turn th is standard marketing paradigm on its head: now the wealthier consumer is paying to display their NON-consumption. Hollywood for example "Living with Ed" has been trying to sell the "less is cool" message for many years now. But then small high-MPG vehicles like the Prius conflict with the general marketing message of a Mfg which is "More is Better." This problem with mixed marketing messages coming from a Mfg was best repres ented by GMC having to decide whether to produce the EV 1 or the Hummer - GMC couldn' t do both because of the oxymoron corporate marketing message involved. Likewise Toyota today falls under consumer pressure to stop manufacturing large trucks and become a "Purely Green" company.

We believe NHTSA continues to misunderstand th e oil shock 1973 : It was high gas prices, NOT CAFE which lead consumers to downsize their choice of vehicles . Higher CAFE standards allow the consumer to be able to afford to buy a larger more safe vehicle than in the absence of CAFE. Consumer preference in vehicles HAS ch anged as indicated by Mfgs advertising MPG NOT HP in their TV ads . That offered MPG is not what consumers desire can be implied by the universal Mfg practice of touting HWY MPG NO T "Combined" MPG in their TV ads. The NHTSA discussion of consumer implied discoun ting rates cannot explai n the success of the Prius . NHTSA needs to be able to explain this "anomaly" and also be able to explain the extremely high consumer satisfaction indices associated with Prius purchases. Recent refusals of consumers to buy large low MPG trucks would imply that it is NHTSA and the Mfgs who are not valuing MPG correctly - not consumers! NHTSA complains that consumers do not correctly value gas savings while allowing Mfgs to widely misrepresent the fuel efficiency of their vehicles, for example by broadcasting television s ads which display HWY MPG as-if it were Combined MPG. The fact that Mfgs feel the ne ed to misrepresent the MPG they are achieving demonstrates that consumers want higher fuel economy than Mfgs are providing. In the face of this CAFE can be seen as fulfilling an important consumer protection role against the misleading Mfgs Advertising.

"If . . . consumers have reliable information to estimate . . . future fuel savings." But consumers DO NOT have such "reliable information!" What c onsumers get is Mfg unreliable information in the way of TV ads that tout unrealistically hi gh MPG while the unreadable fine print on the bottom of the screen says we are quoting HWY MPG not the more realistic COMBINED MPG."

5-410EPA Vehicle Program, Feasibility, and Estimated Impacts

So consumers believe they are buying higher MPG than they are actually getting because Mfgs are misrepresenting MPG in TV ads.

"Compromising Performance" is only a compromise to the extent that consumers WANT their "performance" measured on a "0 to 60" basis. To the extent consumers want their "performance" measured on an "MPG" basis then downsizing engine s cost the Mfgs "Less than Nothing" - thus NHTSA standards based on an assumed "no change in performance" [meaning no change in "0 to 60"] are in fact being set t oo low - because at least some consumers measure "performance" on an MPG basis, not on a "0 to 60" basis.

New York University School of Law, Institute for Policy Integrity (IPI) All other things equal, fully informed and pe rfectly rational consumers should be indifferent between a $1 increase in vehicle purchase price and a $1 savings in net present value of fuel costs. Yet a growing body of evidence suggests that consumers under-wei gh costs that are less salient or accrue in the future, such as shippi ng and handles charges, management fees, sales tax, electricity, and fuel. One very recent study usi ng a novel design and cons ervative assumptions found a significant average undervaluation of vehicle operating costs: consum ers were willing to pay only 25 cents extra to redu ce the net present value of ex pected gas costs by $1. [OAR-2009­ 0472-7232.3, p. 5]

This discrepancy—called the Energy Efficiency Paradox—can be depicted graphically [See OAR-2009-0472-7232.3, p. 5 for the graph.]. At a car’s market price, some consumers will not buy, and others would actually be wil ling to pay more. [OAR-2009-0472-7232.3, p. 5]

The area between the demand curve and the market price—the “consumer surplus”—defines the value consumers attach to a good above its market price. Consumers will buy a car up the point where the purchase price plus the perceived operating costs equals their willingness to pay. However, if actual operating costs are much high er than perceived operating costs, consumers will buy more of this particular car model th an they rationally should. Moreover, economic studies that look only at consum ers’ choices would overestimate consumer surplus and would therefore overestimate the lost consumer welfare fr om restricting the consumers’ ability to select that particular model. [OAR-2009-0472-7232.3, p. 6]

Explanations for the Energy Efficiency Paradox w ill inform the appropriate regulatory response. NHTSA raises the possibility that no paradox exists: rather, consumers might be making a rational choice given uncertainty about future fuel prices and their vehicle’s expected lifetime and usage. Consumers might comp are the known, irreversible, upfr ont purchase price against an unknowable future stream of fuel savings, a nd choose to minimize the former. Regulations restricting such a choice would reduce consumer welfare. The current empirical evidence for such an explanation seems mixed at best: NHT SA should consider whether the evidence is sufficient to warrant adjusting its estimate of the Energy Effi ciency Paradox, but overall support does not seem to justify a conclusion that no paradox exists. [OAR-2009-0472-7232.3, p. 6]

Another possible explanation is th at consumers lack the necessary information to make a rational choice, do not fully appreciate the information pr esented, or are unable to translate information on fuel efficiency into expected fuel savings. This almost certainly is part of the problem, and the

5-411EPA Response to Comments

agencies should continue efforts in the pr oposed rulemaking to improve the labeling and information available to consumers, especially in light of recent rese arch demonstrating how mere differences in the pres entation of numbers can alter consumer valuations. [OAR-2009­ 0472-7232.3, p. 6]

But even if consumers had full information, th e Energy Efficiency Pa radox might persist if consumers apply a high discount rate to operating costs or are espe cially averse to short�term loss. In such a case, there is a legitimate role for government regulation to encourage consumers to consider the long-term costs of car ownership. And, as explored more fully in the next section, government regulation may be necessary to correct market failures that lead consumers to make sub-optimal choices about fuel efficiency. [OAR-2009-0472-7232.3, p. 6]

EPA Response:

For this rule, EPA projects significant private gains to consumers in three major areas: (1) reductions in spending on fuel, (2) time saved du e to less refueling, and (3) welfare gains from additional driving that results from the rebound ef fect. In combination, these private savings, mostly from fuel savings, appear to outweigh by a large margin the costs of the program, even without accounting for externalities.

Admittedly, these findings pose an economic conundrum. On the one hand, consumers are expected to gain significantly from the rules, as the increased cost of fuel efficient cars appears to be far smaller than the fuel savings. Yet these technologies ar e readily available; financially savvy consumers could have sought vehicles with improved fuel efficiency, and auto makers seeking those customers could have offered them . Assuming full information, perfect foresight, perfect competition, and financially rational cons umers and producers, standard economic theory suggests that normal market operations would have provided the private net gains to consumers, and the only benefits of the rule would be due to external benefits. Assuming those conditions, if our analysis projects that there are net private benefits that consumers have not realized in this perfectly functioning market, then increased fuel economy should be accompanied by a corresponding loss in consumer welfare. This calculation assumes that consumers accurately predict and act on all the benefits they will get from a new vehi cle, and that producers market products providing those benefits. The existence of large private net benefits from this rule, then, suggests either that the assumptions noted above do not hold, or th at EPA’s analysis has missed some factor(s) tied to improved fuel econo my that reduce(s) consumer welfare. With respect to the latter, EPA believes the costs of the technologies developed for this rule take into account the cost needed to ensure that all vehi cle qualities (including pe rformance, reliability, and size) stay constant, except for fuel economy and vehicle price. As a result, there would need to be some other changed qualitie s that would reduce the benefits consumers receive from their vehicles. Changing circumstances (e.g., increased demand for horsepower in response to a drop in fuel prices), and any changes in vehicle attrib utes that manufacturers elect to make may result in additional private impacts to vehicle buye rs from requiring increased fuel economy.

5-412EPA Vehicle Program, Feasibility, and Estimated Impacts

The central conundrum has been referred to as the Energy Paradox in this setting (and in several others). 52 In short, the problem is that consumers appear not to purchase products that are in their economic self-interest. There are strong theoretical reasons w hy this might be so. 53 Consumers might be myopic and hence undervalue th e long-term; they might lack information or a full appreciation of information even when it is presented; they might be especially averse to the short-term losses associated with the higher prices of energy efficient products (the behavioral phenomenon of “loss aversion”); even if consumers have relevant knowledge, the benefits of energy efficient vehi cles might not be sufficiently sa lient to them at the time of purchase; or, in the case of vehi cle fuel efficiency, consumers may have relatively few choices to purchase vehicles with greater fuel economy once ot her characteristics, such as vehicle class, are chosen. A great deal of work in behavioral economics identifies f actors of this sort, which help account for the Energy Paradox. 54 This point holds in the context of fuel savings (the main focus here), but it applies equally to the other private benefits, incl uding reductions in refueling time and additional driving. 55

Considerable research suggests that the Energy Paradox is real and significant due in part to consumers’ inability to value future fuel sa vings appropriately. For example, Sanstad and Howarth (1994) argue that consumers optimize be havior without full information by resorting to imprecise but convenient rules of thumb. Cons umers face difficulty in predicting the fuel savings that they are likely to get from a vehicle, for a number of reasons. For instance, the calculation of fuel savings is complex, and consumers may not make it correctly. 56 Larrick and Soll (2008) find evidence that consumers do not understand how to translate changes in milesper-gallon into fuel savings (a concern that EPA is continuing to attempt to address). 57 In addition, future fuel price (a major component of fuel savings) is highly uncertain. Consumer fuel savings also vary across i ndividuals, who travel different amounts and have different driving styles. Studies regularly show that fuel econom y plays a role in consumers’ vehicle purchases, but modeling that role may still be in development. 58

52 Jaffe, A. B., and Stavins, R. N. (1994). The Energy Paradox and the Diffusion of Conservation Technology. Resource and Energy Economics, 16(2), 91-122. Docket EPA-HQ-OAR-2009-0472-11415. 53 For an overview, see id. 54 Jaffe, A. B., and Stavins, R. N. (1994). The Energy Paradox and the Diffusion of Conservation Technology. Resource and Energy Economics, 16(2), 91-122. Docket EPA-HQ-OAR-2009-0472-11415. 55 For example, it might be maintained that, at the time of purchase, consumers take fu ll account of th e time spent refueling potentially saved by fuel-efficient cars, but it might also be questioned whether they have adequate information to do so, or whether that factor is sufficiently salient to play the proper role in purchasing decisions. 56 Turrentine, T. and K. Kurani (2007). “Car Buyers and Fuel Economy?” Energy Policy 35: 1213-1223 (Docket EPA-HQ-OAR-2009-0472); Larri ck, R. P., and J.B. Soll (2008). “The MPG illusion

. ” Science 320: 1593-1594 (Docket EPA-HQ-OAR-2009-0472-0041). 57 Sanstad, A., and R. Howarth (1994). “’Normal’ Markets, Market Imperfections, and Energy Efficiency.” Energy Policy 22(10): 811-818 (Docket EPA-HQ-OAR-2009-0472-11415 ) ; Larrick, R. P., and J.B. Soll (2008). “The MPG
illusion

. ” Science 320: 1593-1594 (Docket EPA-HQ-OAR-2009-0472-0043 )

. 58 Busse, Meghan R., Christopher R. Knittel, and Florian Zettelmeyer (2009). “Pain at the Pump: How Gasoline Prices Affect Automobile Purchasing in New and Used Markets,” Working paper (accessed 6/30/09), available at http://www.econ.ucdavis.edu/ faculty/knittel/papers/gaspaper_latest.pdf (Docket EPA-HQ-OAR-2009-0472-0044)

.

5-413EPA Response to Comments

If there is a difference between fuel savings a nd consumers’ willingness to pay for fuel savings, the next question is, which is the appropriate measure of consumer benefit? Fuel savings measure the actual monetary value that consumers will receive after purchasing a vehicle; the willingness to pay for fuel economy measures the value that, before a purchase, consumers place on additional fuel economy. As noted, there are a number of reasons that consumers may incorrectly estimate the benefits that they get from improved fuel economy, including risk or loss aversion, and poor ability to estimate savings. In addition, fuel economy may not be as salient as other vehicle characteristics when a consumer is considering vehicles. If these arguments are valid, then there will be signi ficant gains to consumers of th e government mandating additional fuel economy. The RIA, Chapter 8.1.2, include s further discussion of these phenomena.

EPA disagrees with the IPI’s characterization of the Energy Efficiency Paradox. In the paradox, as discussed in EPA Preamble III.H.1 and RI A 8.1.2, consumers buy less fuel economy than the cost-effective level. As a result, there are cons umer benefits that are left unrealized. Some economic models of the fuel economy market assu me away the paradox, by adjusting the models to incorporate additional, undefined costs that lead to marginal bene fits equaling marginal costs. In those models, any required increase in fuel economy must make consumers worse off, because they are already buying the cost-e ffective amount. If, however, the savings from improved fuel economy exceed the costs of the technology to provi de it, then consumers can gain from fuel economy standards.

That said, EPA agrees that consumers may not make fuel economy decisions in ways that minimize their costs, and that “there is a legi timate role for government regulation” in this
context.

Discount Rate for Fuel Savings

Organization: Natural Resources Defense Council

Comment:

Fuel Savings Should Be Valued Using a 3 Percent Discount Rate When evaluating the private benefits of fuel savings to consumers, we support the EPA and NHTSA use of a 3 percent discount rate as a reas onable approach since it is consistent with OMB guidance and current DOE practice when ev aluating benefits of energy savings from residential appliance standards. While we appr eciate the richness of the agencies’ discussions regarding the “energy paradox”, the existence of high implicit or revealed consumer discount rates simply points to the need for strong st andards to ensure consumers have access to investments in highly cost-eff ective fuel savings technologi es. The appropriateness of government standards to help overcome market barriers to energy effici ency investments and necessary to meet national energy savings and environmental goals has been well established with decades of state and federal efficiency st andards for appliances, buildings and vehicles. [OAR-2009-0472-7141.1, p. 23]

5-414EPA Vehicle Program, Feasibility, and Estimated Impacts

The use of a 3 percent to evaluate the consumer welfare benefits of fuel savings is fully consistent with guidance from OMB (Circular A-4) for evaluating net benefits in a regulatory analysis. The 3-percent rate is the average real rate of return on long-term government debt over the last 30 years. OMB Circular A-4 also permits the use of a 7 percent di scount rate which is an estimate of the average before-tax rate of retu rn to private capital in the U.S. economy. NRDC believes the lower end of the range is the most a ppropriate to use and has consistently argued for a discount rate of 3 percent or even lower when valuing the bene fits of fuel savings. [OAR-2009­ 0472-7141.1, p. 24]

The use of the 3 and 7 percent discount rates is also the standard DOE practice for evaluating the electricity cost savings for residential appliances. The most recent example is the final rule adopted April 8, 2009 for dishwashers, dehumidifie rs, microwave ovens, electric and gas kitchen ranges and ovens. In this final rule, DOE estimated the benefits and costs of the standards in the following manner:

The benefits and costs of today’s final rule to the Nation can also be expressed in terms of annualized [2006$] values over the forecast period (2012 through 2042). Using a 7-percent discount rate for the annualized cost analysis, th e cost of the standards established in today’s final rule is $17 million per year in increased pr oduct and installation costs, while the annualized benefits are $37 million per year in reduced prod uct operating costs. Using a 3-percent discount rate, the cost of the standards established in today’s final rule is $28 million per year and the benefits are $85 million per year. [OAR-2009-0472-7141.1, p. 24]

The use of an “implicit” or “revealed” consumer discount rate is entirel y inappropriate when evaluating policies that specifically address the ve ry market barriers that create the high implicit discount rates. NRDC strongly di sagrees with interagency comment number 34 that recommends evaluating consumer discount rates of 20 percent, 35 percent, and 50 percent. Such discount rates are inappropriate and inconsistent with previ ous rulemakings on consumer energy efficiency appliance standards by DOE and fuel economy st andards by NHTSA. The 20 percent and higher discount rates represent an ‘implicit’ consumer discount rate that is a result of a number of market barriers to fuel efficiency, exactly which the proposed GHG and CAFE standards are well suited to overcoming. [OAR-2009-0472-7141.1, p. 24]

EPA Response:

EPA has used the standard 3% and 7% discount rate s for its calculation of the benefits from fuel savings in Preamble Section III.H.4. EPA belie ves that whether consumers use high discount rates when they are buying a vehicle is a separa te issue from the fuel savings that they will receive, and the discount rates associated with the money from the fuel savings.

Discount Rate Applied to Future Benefits

Organization: New York State Department of Transportation (NYSDOT)

Comment:

5-415EPA Response to Comments

It is not clear if the same discount rate that is applied to future be nefits is applied to future costs in the proposal. For example, several tables (e.g. Tables IV.G.4-10 through IV.G.4-14) present various cost and benefit values. The titles of these tables imply that a discount rate is applied equally to costs and benefits. However, th e NPRM defines the disc ount rate as follows:

'The Reference Case uses a discount rate of 3 percent to discount future benefits.' Although the sensitivity analyses in the DEIS and NPRM indicate that the onl y economic factors of importance are industry compliance costs, the co st of fuel, and the magnitude of the rebound effect, the DEIS and NPRM should more clearly define how discount rate s are applied to both costs and benefits. As noted in our comments to NHTSA dated September 8, 2008, discount rates should be applied to both benefits and costs. [OAR-2009-0472-7531.1, pp.2-3]

EPA Response:

For the final rule, EPA and NHTSA have used both a 3 percent and 7 percent discount rate to estimate the present value of costs, benefits and ne t benefits associated with the final rule. We have made it clear, both in the text and in the ta bles, which results are associated with a 3 percent discount rate and which ar e associated with a 7 pe rcent discount rate.

Role of Benefit-Cost Analysis

Organization: University of Michigan Transpor tation Research Institute (UMTRI) New York State Department of Transportation (NYSDOT)

Comment:

University of Michigan Transporta tion Research Institute (UMTRI)

Assuming perfectly competitive markets populat ed by consumers and producers with perfect foresight does allow economists to produce estimates of intangible, subjective costs and benefits that appear to be precise. Given the unr ealistic assumptions required, the estimates are questionable. EPA should avoid treating estimates of intangible, subjective gains and losses as if they were tangible and ob jective. [OAR-2009-0472-3651.1, p.7]

Neoclassical welfare economic analysis is what is recommended in EPA-HQ-OAR-2009- 0472­ 0317.2: “Corporate Average Fuel Economy/Green House Gas (CAFE/GHG) Notice of Proposed Rule Making (NPRM) Summary of Interage ncy Comments under E. 0. (Executive Order) 12866”. The foundations of neoclassi cal welfare economics consist of (1) the theory of the consumer as a rational utility maximizing agent, (2 ) the theory of the firm as a profit maximizing agent, (3) perfect foresight by both sets of agen ts, and (4) a perfectly competitive market. In recent years, empirical and conceptual contributions in consumer behavior and the theory of the firm have undermined these foundations. If th e foundations give way, then the apparatus of neoclassical welfare economic anal ysis collapses. Benefit cost an alysis (BCA) is then a dubious tool for policy judgments. [OAR-2009-0472-3651.1, p.7]

5-416EPA Vehicle Program, Feasibility, and Estimated Impacts

What should EPA and NHTSA use to replace benef it cost analysis (BCA)? An alternative tool derived from ecological economics is multi-criteria decision aide (MCDA). This approach to policy analysis takes a wide variety of relevant information into account, and is consistent with the multiple criteria that Congress has dire cted that EPA and NHTSA address in their rulemaking. The merits of MDCA compared to BCA are detailed in a 2005 paper by Gowdy and Erickson. [OAR-2009-0472-3651.1, pp.7-8] [[S ee Docket Number OAR-2009-0472-3651.1, p.8 for a table that outlines their comparison.]]

[[UMTRI also submitted these comments as test imony at the Detroit public hearing, See docket number EPA-HQ-OAR-2009-0472-6185, pp. 40-42.]

New York State Department of Transportation (NYSDOT)

The proposal does not appear to give due consideration to the economic benefits of improved fuel economy at the consumer level. It is not reasonable to assume that the only effect of fuelcosts savings will be a rebound effect. The only econom ic benefit that appears to be considered in the impact analysis is a $0.17/gallon benef it from reducing oil imports. Unfortunately, this anticipated benefit is difficult to comprehend sinc e the DEIS indicates that fuel consumption will increase significantly in the future whet her or not the proposed CAFE standards are implemented. [OAR-2009-0472-7531.1, p.3]

EPA Response:

EPA disagrees that benefit-cost analysis is “a dubious tool” in this framework. Benefit-cost analysis can be (and has been) us ed in situations where not all of the assumptions listed above hold: for instance, it can be used to measur e the effects of imperfect competition. EPA’s assessment of the benefits and costs is in Prea mble Section III.H. Because we believe that benefit-cost analysis is an appr opriate evaluation tool, we have chosen not to use multi-criteria decision aid for this rule.

EPA considers a wide range of economic impacts associated with the final rule. For reference, Chapter 8.4 of EPA’s RIA and Section III.H.10 of the preamble present a summary of costs, benefits, and net benefits of the rule. The net benefits of EPA’s final program consist of the effects of the program on:

 the vehicle program costs (costs of complying with the vehicle CO 2 standards, taking into account FFV credits through 2015, the tempor ary lead-time alternative allowance standard program (TLAASP), full car/truck trading, and the A/C credit program, and other flexibilities built into the final program),

 fuel savings associated with reduced fuel usage resulting from the program,

 greenhouse gas emissions,

 noise, congestion, accidents,

 other pollutants,

 energy security impacts,

 reduced refueling events, and

 increased driving due to the “rebound” effect.

5-417EPA Response to Comments

Imperfect Competition

Organization : James Adcock

In general consumers with differing projections of the "tru e" future cost of SCC and fuel prices will make differing estimates of the utility of the purchase of a particular vehicle. Analysis that assumes one particular "US-wide" value of SC C or fuel costs will thus reach erroneous conclusions about vehicles Mfgs should be offering consumers – consumers hold a wide variety of beliefs on these subjects and thus Mfgs should, if "free market" forces are at work [which they aren't, due to huge barriers to entry into the Au to Industry -- due in part to NHTSA regulations] provide a wide variety of fuel efficiency vehicl es to consumers. But the market doesn't actually work that way. For example Toyotas' great succe ss with the Prius makes it LESS likely not more that other Mfgs will attempt to comp ete in that segment of the market.

NHTSA assumes that citizen do not understand the cost benefits of higher fuel efficiency but ignores the fact that th e vehicle market is not a "perfect market" and Mfgs may not be offering the fuel efficiency vehicles that consumers want. Further, NHTSA regulations and "Grey Market" import restrictions work to make the market even less perfect, since many high fuel efficiency vehicles available overseas are not available to the US citizen.

Contrary to NHTSA statements the US does not in practice represent a "competitive free market" environment compared to the EC market say Great Britain where the consumer has several times as many model choices to choose from. On a st ringency adjusted basis EU and Japan fuel economy standards still remains approx . 2X as strict as the US . NHTSA needs to clearly explain why the US is not competitive in being able to offer similar environmental benefits here . "Consumer perfect knowledge lead s to informed choice" - this cannot happen if the Mfgs do not in fact provide the option of cars with MPG e qual to what consumers want. Consumers cannot buy the car they want in part because NHTSA "G rey Market Laws" prevent importation of most high fuel efficient vehicles built worldwide. In a "perfect market" such barriers do not exist, rather the choice is left to the consumer . Furthe r, the US Auto Market has huge barriers to entry for new competitors due in part to the differences between world EC regulations vs . US specific DOT regulations, and the huge cost of crash testing.

EPA Response:

As discussed in RIA Section 8.1, it is possible that market imperfections on the part of the auto makers may contribute to the existence of the “energy gap.”

Policies influencing consumer purchasing attitudes

Organization: Michael T. Schade James Adcock

Comment:

5-418EPA Vehicle Program, Feasibility, and Estimated Impacts

Michael T. Schade

The Energy Paradox presented and discussed several times in the rule is likely among the most important issues in achieving the national fuel consumption and CO 2 emission reduction targets. Especially of concern to me is how to encourag e a greater public desire for more highly fuel efficient and lower CO2 emitting vehicles. I’m not talking about someone buying a more fuel efficient SUV that will be enabled by this rule but encouraging them to consider trading down to a model that is smaller and even more fuel effi cient. Several episodes of oil shortages and oil driven price swings during the 1970’s and the price spike 2 years ago demonstrate the transitory nature of purchase decision that place a high value on fuel efficiency. The European experience of continually very high fuel taxe s forcing high motor fuel prices and leading to a high priority given to fuel economy in vehicle purchase decisions is demonstrated every day in the nature of the European vehicle fleet composition. Sales esti mate premises are now much more transparent than using confidential manufacturer input. But their accura cy is still vulnerable to major dislocations due to customer buying preferences that may abrup tly (either on a temporary basis or more permanently) change with fuel price sp ikes and troughs. This may be the weakest link in the whole current approach in reducing motor fuel consumption by forcing incremental vehicle improvements. The absolute minimum back stop concept partially deals with this risk but only for the domestic automobile fleet and not for imported cars nor for trucks in total. My only recommendation is a predictable and well underst ood ramping up of motor fuel taxes to a level that will change consumer behavior and crea te pull through demand for much more efficient vehicles. Preferably, these tax in creases would be offset by equiva lent tax cuts in other areas. But I understand that much higher gasoline/diesel federal taxes are not now politically achievable so I’d recommend including in this rule a transparent and hone st discussion of the risk of not adopting policy targeted toward s influencing desired consumer purchasing attitudes. [OAR-2009-0472-7261.1, pp.3-4]

James Adcock:

Lowering the size and weight of vehicles doesn 't cause the consumer to buy these smaller vehicles . Rather, the consumer buys smaller vehicl es to optimize the total cost of ownership to their financial situation given hi gher gas prices . We do not believe either tiny vehicles such as Smart or giant vehicles such as Escalade are in the broader public in terest of safety nor reasonable fuel economy tradeoffs . CAFE and cras h test standards should be developed in a way that makes clear that such extreme size "outliers" are not good consumer choices.

We believe it can be a rational choice on the part of the consumer in terms of morality to risk personal safety by buying a smaller car which is less destructive to the planet and the human race, even while climate change deniers – aggr essive drivers - buy aggr essive design "Monster Trucks."

We believe it is morally unacceptable in modern society, that a consumer be allowed to buy, and a Mfg be allowed to make, a vehicle KNOWN to have low MPG AND which represents a high fatality risk to the occupants of other vehi cles – aka "Aggressive Design ." That NHTSA

5-419EPA Response to Comments

continues to allow this represents a failure to ra tionally regulate the market for either safety or for fuel economy.

EPA Response:

Consumers have different tastes, and choose differe nt combinations of vehicle characteristics. EPA seeks to reduce GHG emissions vehicles wh ile maintaining the quality and variety of vehicles. Consumers have many factors in mind when they choose the vehicles that they buy; switching to a smaller and even more fuel effici ent vehicle may not be possible for everyone.

EPA agrees that vehicle sales estimates are not precise due to factors su ch as those that the commenter mentions. A gasoline/diesel fuel tax is outside the scope of this rule.

EPA’s analysis of this rule in cludes discussion of its impacts in a number of areas, including among others consumer welfare, energy security, climate, other air pollutants, accidents, noise, congestion. Because the baseline is our estimate of the world without the rule, then the effects of not adopting this policy are the negative of the effects of the rule, repo rted in the rulemaking documents.

5.13.2. Costs Associated with the Vehicle Program

Organization: California Air Resources Board

Comment:

We agree with NHTSA that the incremental in creases in average new vehicle costs can be mostly or wholly passed through to consumers, and for this reas on also agree with EPA’s related assumption that cost increases of this magnitude will not create a fleet tu rnover issue. Due to the concurrent improvements in fuel efficiency (and lower emissions ), the higher vehicle purchase price can be offset by the fuel savings within the typical ownership peri od of the first owner. Reduced operating costs could make these new vehicles more attractive to consumers who expect fuel prices to remain high or continue to rise. For th is reason and based on previous CARB analyses for the Pavley GHG rulemaking, we do not believe that the increased vehicle prices will significantly deter consumers from making new vehicle purchases. In fact, our analysis showed that in early years, new sale s would increase slightly as a result of the regulation. Thus, like EPA and NHTSA we believe delayed scrappage or fl eet turnover issues should not be a serious concern at the cost levels currently an ticipated. [OAR-2009-0472-7189.1, p.9]

[CARB also submitted these comments as test imony at the Los Angeles public hearing. See docket number OAR-2009-0472-7283, pp. 21-27]

EPA Response:

We agree with the comment submitted by CARB that the new GHG standa rds should not create a fleet turnover or delayed scrappage issue. We also agree that the incr eased cost of compliant

5-420EPA Vehicle Program, Feasibility, and Estimated Impacts

vehicles can and will be quickly offset by the savings from reduced fuel consumption. We present our "impact on vehicle sales" discussion and our "payback analysis" in section III.H of the preamble and in Chapter 8 of the RIA.

Organization: University of Michigan Transpor tation Research Institute (UMTRI)

Comment:

Section III.H.2 of the “Proposed Rulemaking to Establish Light-Duty Vehicle Greenhouse Gas Emission Standards and Corporate Average Fuel Economy Standards” is concerned with “Costs Associated with the Vehicle Program.” My co mments are in support of the indirect cost multipliers (ICM) used by EPA to account for indi rect costs. As a subcontractor to RTI, I assisted EPA in developing the methodology used to estimate indirect cost multipliers and retail price equivalent multipliers (RPE). [OAR-2009-0472-3651.1, p.4]

The costs to automakers of complying with the proposed regulations should be defined to include only those costs that change due to the re gulations. When complia nce necessitates adding equipment to the vehicle, the compliance costs include direct manufact uring costs associated with new technology (materials a nd direct production labor) plus th e change in those indirect cost items that are affected (e.g., engineer ing development cost). [OAR-2009-0472-3651.1, p.4]

In most cases, direct costs can be estimated wit hout difficulty or controve rsy. However, indirect costs are more difficult to estimate and have been the subject of considerable controversy. The methodology guides EPA analysts in identifying indirect costs that are likely to be affected by regulations. The methodology is supported by estimates of RPE and ICM for several automakers that we derived from recent annual financia l reports and other public data. [OAR-2009-0472­ 3651.1, p.4]

The EPA uses a range of indirect cost multipliers (ICM), depending on the timing of the application of the regulation and the complexity of the technol ogy that is anticipated to be necessary. The multipliers range from 1.11 to 1.64 in the short term and from 1.07 to 1.39 in the long term. In the ICM, the numerator is direct pl us indirect cost and th e denominator is direct cost. The ICM covers direct and indirect costs only; no provision for profits is made. However, the RPE adds profit to the numerator, so the RPE is greater than the ICM. It has been argued that regulatory agencies should use an RPE that is greater than 2.0, which would imply an ICM of 1.90 or higher (assuming a 5 percent profit computed on sales—2.00 X .05 = .10; 2.00 - .10 = 1.90). [OAR-2009-0472-3651.1, p.4]

How reasonable is an RPE of 2.00 or higher? To answer this question, consider GMs financial results for 2004-08, shown in Table 1. [OAR-2009-0472-3651.1, p.4]

GM is an easy case to study, because it provides information in its annual reports on contribution costs in addition to the standard GAAP information on cost of sales. Contri bution costs are closer to direct costs than are cost of sales. [OAR-2009-0472-3651.1, p.4]

5-421EPA Response to Comments

In its annual reports, GM says it considers contribution cost to be costs that vary directly with production. They consist of materi al cost, freight, and policy a nd warranty expenses. There are two differences between GM’s contribution costs and the EPA’s definition of direct costs. GM explicitly excludes direct production labor from contribution costs, wher eas the EPA’s definition of direct costs includes direct production labor. GM includes frei ght and warranty in contribution costs, which the EPA treats as indirect cost s. GM does not report it s direct production labor costs, but we estimate them to be about $9 per year. GM reported warranty and freight costs of $9.7 billion in 2007. Thus, these two expense categor ies roughly offset each other, meaning that, for GM, direct costs are roughly the same as contribution costs. [OAR-2009-0472-3651.1, pp.4­ 5]

Since GM had losses in each of these years, we also computed hypothetical RPE multipliers that would result if GM had the same cost structure but earned a 5 percent pr ofit. These hypothetical RPE multipliers are 1.50 to 1.58. In either the actu al or the hypothetical case, the RPE multipliers are substantially lower than 2.00. [OAR-2009-0472-3651.1, p.5]

The indirect cost multipliers that EPA uses in th e preliminary rule give sensible and fact-based guidance on how indirect costs ought to be estimated. [OAR-2009-0472-3651.1, p.5]

[[UMTRI also submitted these comments as test imony at the Detroit public hearing, See docket number EPA-HQ-OAR-2009-0472-6185, pp. 37-40.]

EPA Response:

The Agency appreciates these co mments and agrees with them.

Organization: Chew, Yuli

Comment:

I support the assumption of 4% for the cost and e ffectiveness estimates for the diesel engine and after treatment system; however, I think a hi gher improvement rate may be attainable considering the fact that the pr oportion of diesel will jump to 4% and 10% of the cars and trucks respectively. In Model Year 2011, diesel technologi es for truck technology classes were allowed to be applied at a 4 percent combined (for DSLT and DSLC) phase-in cap for MY 2011 to account for the higher application rates observe d in the submitted product plans and diesel’s favorable characteristics in truc k applications. [OAR-2009-0472-7042.1, p.2]

As to whether EPA should use a 4% or 6% per year increase in standards, I feel that a 6.0% is closer to what is specified in the CARB Regulation. This will help s to achieve a fleet average of 36.9 mpg or 241 g/mi of CO2 equivalent in 2016. This is more closely related to CARB’s target of achieving 43.4 mpg for cars and 26.8 mpg for trucks, or 205 g/ mi for cars and 332 g/mi of trucks in 2016. [OAR-2009-0472-7042.1, p.2]

EPA Response:

5-422EPA Vehicle Program, Feasibility, and Estimated Impacts

EPA believes that diesel technol ogy has a role in the future li ght-duty fleet. Although the modeling we have done using the OMEGA mode l has not shown a m ove from gasoline technology to diesel technology, that does not mean that EPA is pr ohibiting such an outcome. The rule allows manufacturers to comply with th eir respective fleet aver age standards using any technology they choose to utilize. EPA conti nues to believe that th e cost estimates and effectiveness estimates used in the proposal are appropriate for the final rule.

Regarding the 4% or 6% per year increases in st andards, the commenter states a belief that the 6% per year alternative w ould be more representative of the CARB regulation ( i.e ., Pavley I levels). As EPA’s analysis shows (see Chapter 3 of the RIA), the national GHG standard results in vehicle sales in California of federally co mpliant vehicles that have fleet average GHG emissions equal to the fleet average that would be achieved under the California program In their comments on the proposal, the California Ai r Resources Board agreed that the standards presented in this rulemaking align with Califor nia’s Pavley greenhouse gas emissions standards, and ultimately arrive at the same stri ngency as California’s standards in MY 2016.

Organization: Chew, Yuli; State of New Jersey

Comment:

For the cost estimates for the various hybrid systems, NHTSA use a figure of $320 per KW-hr for 2012 -2016 as compared to $600 per Kw-hr for 2011 Model Year. I feel th at a lower figure of about $260 per KW-hr should be more reasona ble. See page 47 of Report of the ARB Independent Expert Panel 2007 prepared for State of California Air Resources Board. http://www.arb.ca.gov/msprog/zevprog/zevreview/ze v_panel_report.pdf Similar to the price of solar panels, the price dropped drastically if they are mass produced. [OAR-2009-0472-7042.1, p.2; OAR-2009-0472-7109.1, p.9]

EPA Response:

We disagree that a $260 per kW-hr is a more appr opriate cost than the $320 figure used given the timeframe of analysis. Our $320 figure is base d on current (2012 timeframe) best estimates of around $500 per kW-hr and applicati on of manufacturer learning to arrive at an estimated $320 figure in the 2015/2016 timeframe. Note that the Report of the ARB Independent Expert Panel 2007 showed $/kW-hr ranges of $340-420/kW-hr fo r an annual production of 20,000 batteries per year to $240-280/kW-hr for 100,000 batteries per year. No timeframe is provided for these ranges. It is not known currently what level of electric vehicle sa les (and, hence, what level of battery production) will occur within the regula tory timeframe. The agencies do know that the new standards will not force introduction of el ectric vehicles. Hence, the $500/kW-hr in 2012 and $320/kW-hr in 2015 estimates used are not in consistent with the estimates of the ARB Expert Panel. Therefore, we continue to believ e that the estimates we used in the proposal are acceptable for the final rule, especially in light of the very low penetration of technologies dependent on electrification of motive power (i.e., hybrids, electric vehicles, plug-ins).

Organization: Devon Energy Corporation; Donald F. Shaw; C. M. Spurgeon; Neil Stanton

5-423EPA Response to Comments

Comment:

The proposed regulations will harm our economy. A few years ago, the National Highway Safety Administration (NHTSA) estimated that increas ing fuel economy standards to 35 miles per gallon by 2020 would cost the car companies $114 billion. (See De troit News, “Fuel Plan Would Cost Big Three” (March 1, 2007). Inexplicabl y, today NHTSA claims that achieving the 35 miles per gallon fleetwide standard by 2016, four years earlier, would cost only $60 billion. (75 Fed. Reg. 49479). This change from NHTSA is not credible. The cost of technology-forcing regulations do not decrease by half as a result of companies only having half the time to comply with the regulations. [OAR-2009-0472- 10450, p.1; OAR-2009-0472-7270.1, p. 3; OAR-2009­ 0472-7270.1, p. 3; OAR-2009-0472-10169, p.2]

EPA and NHTSA’s plan will increase costs for car companies and further reduce auto company jobs. Higher priced cars and trucks will make lif e more difficult for American families who need affordable transportation options. [OAR-2009-0472-10450, p.1; OAR-2009-0472-7270.1, p. 3; OAR-2009-0472-7270.1, p. 3; OAR-2009-0472-10169, p.2]

EPA Response:

We disagree that the regulati ons will harm our economy. In fact, we believe that the new standards will help our economy by saving consum ers and businesses money currently spent on fuel which can then be spent on other items or invested in ways that boost our economy. The standards will also benefit the economy by in creasing our energy security and reducing our reliance on foreign oil. As for cost estimates and the changes between the 2011 rule and this rule, it is difficult to address this comment gi ven that the commenter does not question specific cost estimates. That being said, it is importa nt to note the difficulty associated with cost estimation and the ongoing effort made by both EPA and NHTSA to use the best available cost information at any given time. Since publicati on of the 2011 final rule, both agencies have sought to continually improve cost estimates – more thorough consideration given to future product planning when adding technology in interm ediate years, better cost estimation through FEV tear down studies like those conducted by FE V under EPA contract, a pplication of learning curve effects to more closely estimate cost re ductions over time -- which have resulted in many cost estimates being lowered. NHTSA and EPA woul d be remiss not to revise cost estimates in light of newer, better information, whether th at information increases or decreases those estimates. Note also that the auto makers di d not challenge the newer cost estimates to any significant degree.

Regarding reducing auto company jobs and making life more difficult for American families, again both agencies disagree. Instead, we belie ve that the new standa rds provide American families with more affordable transportation opti ons since the fuel savings associated with the new standards quickly offset increased new vehi cle costs (within the first month for a vehicle purchased via a typical 5 year loan – see sections III.H.5 and IV of the preamble for more detail). These savings are expected to increase vehicle sa les relative to sales without the new standards (again see sections III.H.5 and IV of the pream ble for more detail) which, in turn, would be expected to increase rather than decrease auto maker jobs.

5-424EPA Vehicle Program, Feasibility, and Estimated Impacts

Organization: Dillard, Joyce

Comment:

In the end, the greenhouse gas emission changes are about a financial system. It affects the daily lives of citizens and impact s their income and economi c capabilities. [OAR-2009-0472-7226.1,
p. 2]

In Los Angeles, California we have Port of Lo s Angeles truck drivers f eeling the pinch of the new monopoly over the greenhouse gas reductions. The free market has been diminished for more bureaucracy and finite control without the proper re gulatory process. [OAR-2009-0472­ 7226.1, p. 2]

EPA Response:

EPA agrees that the daily lives of citizens ar e impacted by greenhouse gas emissions, and that the joint rulemaking for a nationa l program to control greenhouse gases and fuel economy from light-duty vehicles will impact citizens. A closer look at the comments submitted by the commenter suggests that the commenter appear s to be commenting on two topics: public availability of information on greenhouse gas imp acts (“What is needed is a Clearinghouse for the Depository of Scientific and Factual Data as a springboard for industry, individuals, students, parents and children to buy into their future. Access to correct information is a key factor for future results to any environmental issue. Peer-rev iewed information is necessary.” (see page 1)); and cap and trade proposals (“In California, th e State Legislature has passed AB 32 California Global Warming Solutions Act of 2006 for the reduction of greenhouse gases and the implementation of Cap and Trade, a tax. The Stat e of California Natural Resources Agency is processing the CEQA Rulemaking for SB 97 Gree nhouse Gas Emissions, a related bill, which will implement the CEQA California Environmental Quality Act for this process. The Cap and Trade tax is under the purview of a regional entity-Weste rn Climate Initiative WCI, an unelected body, in a non-transparent process. We have no benefit of financia l forecasting, at this point, and no basis for financial respons ibility.” (see page 1)).

As regards the former issue, the agencies have ma de every effort to be as transparent as possible in developing the standards being put into place. That information is, primarily, supportive of the standards being set rather than being sc ientific information surrounding the impact of greenhouse gases on climate change. The agencies have been tasked with creating a national program to address greenhouse gas emissions and fuel eonomy, not to determine the impact of greenhouse gases on climate change.

As regards the latter comment -- regarding cap and trade proposals -- the issue is not germaine to the joint rulemakings as cap a nd trade is not part of either EPA's or NHTSA's programs.

Organization: Brooks, Dawn

Comment:

5-425EPA Response to Comments

I am concerned the costs of the new tec hnology required to produce lower emissions are inaccurate and will be passed onto me, the consumer. According to the report, Proposed Rulemaking to Establish Light -Duty Vehicle Greenhouse Gas Emi ssion Standards and Corporate Average Fuel Economy Standards (2009), the aver age incremental cost of the program is $ 1,409.00 , and is even higher for light trucks at $1,641.00 (p.253). The increased cost is a result of the new emission standards forcing “manuf acturers to apply cons iderable additional technology” (Proposed Rulemaki ng To Establish Light-Duty Vehicle Greenhouse Gas Emission Standards and Corporate Average Fuel Econom y Standards, 2009, p. 253). This plan merely guesses on how manufactures are going to implem ent the proposed policy as the report also states, “NHTSA cannot predict how manufacturer s will respond to the proposed standards” (Proposed Rulemaking To Establish Light-Dut y Vehicle Greenhouse Gas Emission Standards and Corporate Average Fuel Ec onomy Standards, 2009, p. 253). If the agencies involved do not understand what procedures and technology the auto mobile manufacturers will use to implement the requirements of the program, how can the agencies assess an accurate dollar amount for incremental costs?

Furthermore, the projected costs do not include higher sales taxes, insurance increases, and other incidental fees resulting from more expensiv e vehicles. Maintenance costs will increase adding even more burdens to the consumer as the technology will be more complicated and time consuming for mechanics to repair. Consequentl y, incremental projected increased costs do not simply include the new technology added by the au tomobile manufacturers as stated in the report.

The costs of this program, along with the asso ciated costs added to a higher priced, more environmentally friendly vehicle will substantially increase consumer expenses for transportation.

I respectfully request the agency take a more thorough look at projected costs of this proposed program. I understand the benefits; now make me understand the true costs. Do not pass proposed rule EPA-HQ-OAR-2009-0472 until the autom obile manufacturers present their added costs to the redesigned vehicles to fulfill the 201 6 lower emissions and increased fuel efficiency standards. Manufacturer figures will give the agency a more comprehensive understanding of costs to the consumer as a result of these new regulations. [EPA-HQ-OAR-2009-0472-3851, pp 1-2]

EPA Response:

EPA cannot predict what level of costs will be passed on to consumers through increased vehicle prices. EPA does not doubt that some and perhap s all of the costs will in fact be passed on. However, EPA doubts that price increases will occu r equally on all vehicles as auto makers will determine which vehicles can best absorb incr eased prices and which cannot. Importantly, the costs mentioned by the commenter are not the actual cost estimates associated with the proposal. Those mentioned are from sensitivity analys es conducted by NHTSA looking at the costs associated with a 5%/year increase in fuel econo my. The proposal actually called for a 4%/year increase in fuel economy and, therefore, estimated lower costs ($1,020 and $1,127 for trucks and

5-426EPA Vehicle Program, Feasibility, and Estimated Impacts

cars, respectively) than the 5%/year increase. Fu rther, the estimates for the final rule are lower than those for the proposal.

Regarding the agencies’ abilities to estimate co sts given a “lack of unde rstanding” over what auto manufacturers will use to comply with the regulations, EPA disagrees with this comment. In fact, the agency understands ve ry well the technologies at manuf acturer’s disposal to meet the regulations. However, there are so many differen t technologies that can be used ranging from engine friction reductions to improved valve tr ain designs to turboc harging with engine downsizing to more efficient fuel systems to ne w transmissions to hybridization, etc., that it is impossible to know for sure what will be done short of mandating what will be done. Neither EPA nor NHTSA wish to mandate a solution to improving fuel efficiency. Instead, auto manufacturers will consider all the options and how best to satisfy their customers in making their own determination. That said, both agen cies have made use of rigorous engineering analysis to estimate future technology mixes in making our best estimates of future technology
costs.

Regarding higher sales taxes and insurance costs on new vehicles, the comment is accurate that such costs have not been considered in the formal cost estimates (they have been considered in our estimates of consumer payb ack). We have included costs associated with higher warranty expenditures through our indirect cost multipliers but have not included costs associated with increased maintenance. Importantly, we do not know that net maintenance costs for consumers will increase or decrease. With respect to th e A/C program, we believe that maintenance costs will decrease since leakage shoul d be largely eliminated.

Regarding the rule resulting in increased expe nses for transportation, again EPA disagrees. Please refer to our payback analysis which shows that fuel savings will outweigh up front costs within three years for people pur chasing new vehicles with ca sh. For those purchasing new vehicles with a typical five-year car note, the fu el savings will outweigh increased costs in the first month of ownership.

Regarding the request that EPA wait until auto manufacturers have presented their cost estimates, the Agency has given the auto makers an opportunity to respond to its cost estimates and, while some auto makers submitted comments on some aspects of the cost estimates, the auto makers have not challenged them in any me aningful way. Therefore, EPA believes that the cost estimates for the final rule are the best available estimates at this time.

Organization: American Council for an Energy Efficient Economy

Comment:

The agencies also worry that their technology cost estimates may be too low (TSD 4-2). Accuracy of cost estimates is a legitimate con cern in a wide array of rulemakings but is best handled through a sensitivity analysis. It shoul d not be used to impugn the validity of the proposed standards.

EPA Response:

5-427EPA Response to Comments

As noted in the previous response, EPA has give n the auto makers an opportunity to respond to its cost estimates and, while some auto makers submitted comments on some aspects of the cost estimates, the auto makers have not challenged them in any meaningful way. Therefore, EPA believes that the cost estimates for the final rule are the best available estimates at this time.

5.13.4. Reduction in Fuel Consumption and its Impacts

Organization: Competitive Enterprise Institute

Comment:

II. The proposed standards will increase the risk of death and injury related to auto accidents. GHG standards are fuel economy standards. The proposed GHG standard is just a fuel economy standard by another name. EPA co mes very close to acknowledging as much, explaining that therule aims to reduce emissions by increasing fuel economy: [[commenter quotes EPA on OAR2009-0472-7281.1 p.3]] The only difference between EP A’s proposed rule and a 100% “pure” fuel economy standard is that the rule seeks to reduce leakag e of air conditioning-refrigerant GHGs. However, the rule also seek s to reduce “the consumption of fuel to provide power to the A/C system.” So even with respect to vehicula r air conditioning systems, EPA’s proposal targets fuel economy. As the rule states, 95% of a ll GHGs emitted by light duty vehicle are CO2 emissions, and “the only way at present to reduce tailpipe emissions of CO2 is by reducing fuel consumption. [OAR-2009-0472-7281.1, p.2]

EPA Response:

We disagree that the standards will increase th e risk of death and in jury related to auto accidents. Please refer to the preamble section II.G and EPA’s RIA sec tion 7.6 for more detail on this issue.

There are two aspects to the A/C program: re duced refrigerant loss through improved system design (direct GHG reductions); and reduced powe r consumption to operate the A/C system (indirect GHG reductions). The latter of these resu lts in reduced CO2 emissi ons since less fuel is consumed to power the A/C system. The former -- reduced refrigerant loss – results in reductions in far more potent greenhouse gase s. EPA does not disa gree that the new GHG tailpipe standards are, in effect, new fuel econom y standards given that th e only way at present to reduce tailpipe emissions of CO2 is by reducing fuel consumption. That does not alter the fact the greenhouse gases are pollutants under the C AA, and that, having made the findings that emissions of these pollutants may endanger public h ealth and welfare and that emissions of these pollutants from new motor vehicles causes or contributes to that endangerment, EPA has a mandatory legal duty to promulgate emission standards for those ve hicles under section 202 (a)(1). State of Massachusetts v. EPA , 549 U.S. at 533. For the same reason, it is legally irrelevant that CAFE standards directly re gulate vehicular fuel economy. Id. at 531-32. The agencies have chosen to discharge their respective respons ibilities in this joint rulemaking so that a National Program can be established to the benefit of all stakeholders. See id. at 532 (“But that DOT sets mileage standards in no way licenses EP A to shirk its environm ental responsibilities

5-428EPA Vehicle Program, Feasibility, and Estimated Impacts

... The two obligations may overlap, but there is no reason to think the two agencies cannot both administer their obligations a nd yet avoid inconsistency”).

Organization: Consumer Federation of America

Comment:

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

In particular, EPA and NHTSA should balance th e three goals in the underlying statutes of technical feasibility, economic pr acticability, and the need to c onserve energy, and the statutes really are in agreement here, by setting the standard at the mid point of the range between maximum economic benefit and maximum practicable environm ental benefit.

In addition, they should recognize th e higher resale value of more fu el efficient vehicles. They should properly value fuel savings by removi ng the rebound effect from the consumer private welfare analysis and setting it at a lower level in the societal analysis. Rebound has no business in the private valuation.

They should recognize consumer willingness to cha nge their demand for vehicle attributes. The American consumer has shown they are willing to change.

They should assign significant national securi ty value to reducing oil consumption.

EPA Response:

Our rulemaking recognizes consumer willingness to change their demand for vehicle attributes. Should enough consumers demand any given attribut e, then presumably a manufacturer(s) will step forward to provide it. The rules, howev er, do not mandate vehicle attributes from the supply-side. Manufacturers may achieve their re spective standards by any means they choose. We have made every effort to ensure that cons umers will continue to find the attributes they currently demand within the future fleet all whil e consuming less fuel. EPA did this by building technology packages for each vehicle type (refer to Chapter 1 of EPA’s RIA) that maintained in the judgment of staff engineers the key performa nce characteristic (zero to 60 mph acceleration). Each subsequent package generally costs more, provides greater fuel efficiency, and maintains performance relative to the package before it and, hence, the baseline or current vehicle. Should consumers demand more from manuf acturers -- that is, vehicles that consume even less fuel at the expense of some vehicle attributes -- th en some manufacturers may well deliver those vehicles. This would be a demand-side driven outcome.

We have assigned considerable na tional security value to reduci ng oil consumption. Please refer to our analysis as presented in section III. H of the preamble and Chapter 8 of the RIA.

Lastly, EPA disagrees with the comment that rebound mileage should be set lower or even removed from the fuel savings analysis. Ma ny historical studies have shown a correlation

5-429EPA Response to Comments

between changes in total VMT and changes in fuel economy, even when other factors such as gasoline prices are taken into account. As we described in section II of the joint preamble and Chapter 4 of the joint TSD, recent literature sugg ests that the rebound effect is 10% or lower, whereas the larger body of histor ical studies suggests a higher rebound effect. Therefore, we believe a rebound effect of 10% is appropriate for this rulemaking.

Organization: National Automobile Dealers Association (NADA)

Comment:

In the National Program proposal, NHTSA may have inappropriately shifted from its historically justified 15-30 percent rebound effect range to a pr oposed 10 percent. While some justification may be found to support moving toward the lowe r end of the historical range, 10 percent does not appear to be adequately justified. [OAR-2009-0472-7182.1, p.11]

EPA Response:

EPA and NHTSA disagree with the commenter that we did not justify our rationale for shifting our quantified estimate of a rebound effect to 10 per cent. As described in detail in the Joint TSD Chapter 4, a summary of the existi ng literature indicates that a majo rity of the studies estimated that the historical value for th e rebound effect is between 10 and 30 percent. Furthermore, newer research using more recent data suggest that the rebound effect is declining over time and will continue to decline in the future, particularly wh en future projections of income, gasoline prices, and urbanization are taken into account. Based on this body of evidence , we believe there is adequate justification to suppor t reducing the rebound effect to 10 percent for this rulemaking.

Organization: National Automobile Dealers Association (NADA)

Comment:

The National Program proposal is being develope d during one of the most significant economic turndowns in the history of the auto industry. Manufacturers and dealers alike are continuing to experience dire and volatile economic impacts. Where just two years ago new vehicles were being sold in the U.S. at an annualized rate of over 16 million units, today that rate has fallen to an estimated 10.2 million. In that same short time frame, thousands of new car dealers have gone out of business and overall dealership em ployment has dropped by some 100,000 and 200,000. Two large domestic automakers and their dealer s owe their very existe nce to massive federal government intervention. New competition is exp ected soon from China, from India, and even from new domestic startups. Competition is good and dealers look forw ard to selling those vehicles. However, NHTSA and EPA must reco gnize and fully account for these economic and competitive realities when finalizing the National Pr ogram to ensure that, to the greatest extent possible, dealership employment and vi ability is protected. [OAR-2009-0472-7182.1, p.4]

Regarding vehicle affordability, the critical impor tance of fuel price and availability cannot be overstated. New vehicle purchasers typically ar en’t early adaptors of high priced new technologies, nor are they so well off as to ignore fuel efficiency even when fuel prices are high.

5-430EPA Vehicle Program, Feasibility, and Estimated Impacts

Instead, the vast majority of new vehicle purc hasers are payment buyers with multi-year loans who only become keenly interested in fuel economy when fuel prices skyrocket. Clearly, it is very difficult to forecast fuel prices in a free market. By relying on conservative fuel price forecast assumptions, the National Program will at worse achieve better fuel economy and GHG benefits should prices prove to be higher than forecast. On the other hand, should fuel prices prove to be lower than forecast, the result could be a scenario of high priced new vehicles sitting unwanted and unaffordable on dealers lots, with unacceptable negative consequences. [OAR2009-0472-7182.1, p.4]

[National Automobile Dealers Association also submitted these comments as testimony at the New York public hearing, See docke t number EPA-HQ-OAR-2009-0472-4621, pp. 85-88.]

EPA Response:

The agencies reasonably believe that the new standa rds will result in increased vehicle sales (see sections III.H.5 and IV.G.7 of th e preamble, and chapter 8 of EPA’ s RIA for more detail) and, as such, should ensure that dealership employment will not decrease as a result of this rule. Further, our analyses are based on the best available predictions of future fuel prices (AEO 2010 Early Release) which range from $2.61/gall on in 2012 to $3.07/gallon in 2016 (expressed in 2007 dollars and including taxes). While such pr ices are not low by traditional U.S. standards, they are by no means high.

5.13.5 Impacts on U.S. Vehicle Sales and Payback Period

Organization:

BMW of North America, LLC (BMW) State of New Jersey Mr. Richter - Environmental Capital Partners Shaw, Donald F. Chew, Yuli US Steel Corporation University of Pennsylvania, Environmental Law Project National Automobile Dealers Association

Comment:

BMW of North America, LLC (BMW)

Now, as EPA and NHTSA have noted in the propos al, it's important that consumers retain a full range of vehicle choices and you' ve designed the calculation methods to preserve vehicle [These comments were submitted as testimony at the New York public hearing. See docket number EPA-HQ-OAR-2009-0472-4621, pp. 132.] choice, which is very good. For auto manufacturers to meet the aggressive greenhouse gas and CA FE standards proposed in this rulemaking, compliance flexibility and accommodation for different size vehicles must be provided. [These

5-431EPA Response to Comments

comments were submitted as testimony at the New York public hearing. See docket number EPA-HQ-OAR-2009-0472-4621, p. 133.]

State of New Jersey

The Agencies requested commenter input on a nu mber of related topics regarding how the proposal balances the needs of consumers with the need to reduce greenhouse gas emissions from one of the nation's most significant greenh ouse gas emission sources. The Department feels that USEPA and NHTSA have crafted the proposal in a way that will ensure that consumers will continue to have the variety and choice in vehicle models they have come to expect. The standards provide manufacturers with significant flexibility in meeting the proposed greenhouse gas reductions, and New Jersey is confident that the technologi es to reduce vehicle greenhouse gas emissions exist in the market today. Th e phase-in of the standards between 2012 and 2016 allows manufacturers seven years to incorporat e these technologies into greater numbers of vehicles. [OAR-2009-0472-7109.1, pp.5-6]

Mr. Richter - Environmental Capital Partners

And I think as I mentioned as a member of an investment firm that specifically targets the environmental [EPA-HQ-OAR-2009-0472-4621, p.160] I m ean, we feel like this will be the dominant asset in the years to come. I really want to underscore the economic argument as has been used in the past against increasing m ileage standards and it may be the single most important reason for increasing CAFE standards, and I would say there are two real reasons for this. [EPA-HQ-OAR-2009-0472-4621, p.161]

Al Gore famously pointed out that our fleet woul d be unable to be sold in China. I think it's pretty clear that we need to learn from the pa st and not make that mistake again. You know, I'm not going to sit here and predict what kind of cars w ill be sold in the future, but I think all of us in the room will be pretty certain on which ones w on't be sold, and that's the ones that are relying on decades old technology, we will be moving forw ard, and high standards that we can put in with the CAFE standards will increase competitiveness and this is particularly true as it relates to resource efficiency. This re source efficiency pushes innova tion, innovation creates economic opportunity here at home. Last week, GM announced [EPA-HQ-OAR-2009-0472-4621, p.162] plans to invest $230 million in four Michigan plan ts to build the Cruze and the Volt, restoring 500 jobs. I mean, there are so many cascading eff ects that come from investing in innovation. [EPA-HQ-OAR-2009-0472-4621, p.163]

Shaw, Donald F.

The imposition of these standards will impose severe financial hardships on the already economically challenged Auto indus try, resulting in the massive lo ss of jobs and disruption to the entire economy. People will not buy the new impractical cars, but will keep their “useful” autos until they die. [OAR-2009-0472-7270.1, p. 1]

Our economy is already fragile, why risk fu rther deterioration? How much additional government subsidy dollars are required to aid the auto industry ? [OAR-2009-0472-7270.1, p. 1]

5-432EPA Vehicle Program, Feasibility, and Estimated Impacts

Chew, Yuli

As to the economic costs, I believe that that buyer will be more concerned with the full life-cycle costs, personally value savings as the most im portant issue. This is in line with the CARB’s Regulations to Control Greenhouse Gas Emissions from Motor Vehicles, Final Statements of Reasons, August 4, 2006, it stated that “cost effective” is defined as “Economical to an owner or operator of a vehicle, taking in to account the full life-cycle co sts of a vehicle. [OAR-2009-0472­ 7042.1, p.6]

US Steel Corporation

In any case, the application of these aggressive fuel economy standards will require vehicle manufacturers to apply new t echnology, including advanced ma terials (including aluminum, magnesium, composites, and advanced high-strength steels) to vehicles, the sum total of which will raise vehicle prices and slow down sales accordingly with negative consequences to the general economy. [OAR-2009-0472-7197.1, pp.6-7]

University of Pennsylvania, Environmental Law Project

3. Expected Costs of Implemen tation of the Proposed Rule As previously mentioned, some groups worry ab out the economic costs of rule implementation. They argue that the proposed rule could add too much to the price of new cars. This will lead, they say, to people sticking with their older, gas-guzzling cars inst ead of buying new ones, thereby undermining the primary goal of the ru le of lowering vehicle emissions [OAR-2009­ 0472-7286.1, pp. 20-21].

However, most stakeholders, including the auto industry and Auto Deal ers Association support the rule and agree that this st andard can be met without undue co sts. They also point to the benefits of a predictable nationa l standard that will help to lessen uncertainty for the auto industry when they develop new models, and lowe r compliance costs by avoiding a patchwork of rules between the states. Furtherm ore, it will allow them time to build improvements into new models during the normal production and design process, which will minimize the additional costs imposed. [OAR-2009-0472-7286.1, p. 21]

National Automobile Dealers Association

Regarding vehicle affordability, the critical impor tance of fuel price and availability cannot be overstated. New vehicle purchasers typically ar en’t early adaptors of high priced new technologies, nor are they so well off as to ignore fuel efficiency even when fuel prices are high. Instead, the vast majority of new vehicle purc hasers are payment buyers with multi-year loans who only become keenly interested in fuel economy when fuel prices skyrocket. Clearly, it is very difficult to forecast fuel prices in a free market. By relying on conservative fuel price forecast assumptions, the National Program will at worse achieve better fuel economy and GHG benefits should prices prove to be higher than forecast. On the other hand, should fuel prices prove to be lower than forecast, the result could be a scenario of high priced new vehicles sitting unwanted and unaffordable on dealers lots, with unacceptable negative consequences.

5-433EPA Response to Comments

EPA Response:

EPA and NHTSA have included a number of flexib ilities in the rule to reduce the costs of implementation and to increase the options that au to makers have for achieving the standards. We have also considered the lead times for auto makers to comply with the standards. The technologies analyzed in this ru le are, generally, already availa ble. EPA expects that auto companies will continue to pursue new technol ogies. EPA’s Preamble Section III.H.5 and RIA Section 8.1.3 estimate a payback period of under 3 years for the fuel-saving technologies to comply with the standards. If consumers consid er at least 3 years of fuel savings when buying vehicles, then the new vehicles should be more attractive to them than existing vehicles, and sales might increase, as estimated in the analyses found in these sections.

EPA’s benefits analysis incorporat es the life-cycle costs and fuel savings, to reflect the effects of the vehicles over the years. Because (as disc ussed in Response to Comments Section 4.5.1) the evidence is uncertain on the role of fuel economy in consumer vehicle purchases, EPA assumes, in its vehicle sales impact analys is, that consumers consider five years’ worth of fuel savings when buying a vehicle. As also discussed in Response to Comments Section 4.5.1, the role of fuel savings in vehicle purchase need not be the same as the actual savings that will occur.

5.13.6. Non-Greenhouse Gas Health and Environmental Impacts

Organization: Environmental Defense Fund Institute for Policy Integrity at New York University School of Law University of Pennsylvania, Environmental Law Project South Coast Air Quality Management District

Comment:

Environmental Defense Fund

To maximize the benefits of the final standards, it is essential to fully account for the extraordinary and far-reaching protections that result from reducing heat-trapping emissions. Accordingly, the full range of environmental, social, and economic impacts of greenhouse gas emissions should be taken into account when calculating the societal costs of carbon. Where impacts cannot be quantified, federal policy ma kers should present a transparent qualitative analysis along with a recognition that monetized benefits are likely to be underestimates.

The co-benefits of the proposed standards, such as the health benefits from the reductions in smog-forming air pollutants, must also be inco rporated into the economic analysis. And the analysis must not rely on flawed economic assumptions that diminish the value of protecting future generations.

Indeed, we have a solemn duty to provide a secure future for my generation and those that follow. The final rule must reflect th is responsibility thr ough appropriate economic

5-434EPA Vehicle Program, Feasibility, and Estimated Impacts

assumptions while also relying on ethical c onsiderations beyond the scope of economic analysis alone.

[Comments are from LA Testimony, OAR-2009-0472-7283, pp.72-79]

Institute for Policy Integrity at Ne w York University School of Law

Uses of the Social Cost of Carbon: Central estimates of the social cost of carbon should not be us ed in optimization models, and should not replace traditional re gulatory impact analysis for GHG emissions reductions. While incorporating ancillary benefits directly into th e SCC is likely to prove difficult, the interagency group should provide guidance on the types of ancillary benefits typically associated with GHG reductions. [OAR-2009-0472-7246.1, p. 2] [See OAR-2009-0472-7246.1, pp. 39-44 for discussion and commenter recomme ndations related to the uses of the social cost of carbon.]

Ancillary Benefits: There is a significant literature showing the relationship between greenhouse gas reductions and a host of ancillary benefits or “co-benefits.” Because rules that control greenhouse gas emissions will often end up reducing fossil fuel combustion, emission of a range of conventional pollutants associated with fossil fuels can be expected to decline in the face of GHG regulation. Reductions in particulate matter, nitrogen oxides, sulfur dioxides, volatile organic compounds, and other pollutants can be anticipated to acco mpany GHG controls. [OAR-2009-0472-7246.1, p. 41] For example, measures that increase energy effi ciency or encourage clean energy generation will also lead to reductions in local air pollutants, with attendant benefits for human health and ecosystems. Other ancillary benefits include re duced ocean acidification and increased forest preservation. [OAR-2009-0472-7246.1, p. 41]

The magnitude of such ancillary benefits ma y be significant. For example, a forthcoming working paper estimates that repr esentative federal climate legislation would result in healthrelated co-benefits of $3 to $9 per ton of carbon dioxide avoided (due to reductions in conventional air pollutants). Ot her studies, using different me thodologies, have found similarly large benefits. Because the ancillary benefits of greenhouse gas reductions could represent an important component of total bene fits, it is essential for rulema kings that use the interagency SCC estimates not to omit significant ancillary benefits. [OAR-2009-0472-7246.1, p. 42]

One mechanism to take ancillary benefits into account would be to imbed a default estimate of ancillary benefits within the S CC. An estimate of $5-$10 for anci llary benefits could be added directly to the SCC. Incorporat ing these ancillary benefits dir ectly into the SCC would ensure that they were accounted for in regul atory analysis. [OAR-2009-0472-7246.1, p. 42]

However, because different rules will have diffe rent effects on ancillary pollutants, directly incorporating a default ancillary benefit estimate into the SCC is a second-best approach. Transportation rules may have different ancill ary effects than rules governing power plants. Some rules may be directly targ eted at reducing a c onventional pollutant, so incorporating an “ancillary” effect in the SCC c ould result in double counting. Fo r these reason, simply including

5-435EPA Response to Comments

a default assumption concerning ancillary benefits will skew the analysis in some cases. [OAR2009-0472-7246.1, p. 42]

If such a default assumption is not included, it is important for the interagency group to clarify that GHG reductions are often accompanied by anci llary benefits, and al so to provide some guidance for agencies to ensure th at they identify and take account of relevant ancillary effects. Citation to the literature on an cillary benefits associated w ith GHG reductions, as well as a default list of likely ancillar y effects of GHG reductions, and perhaps a default value in a “typical rule,” could also be provided by the interagency group to give guidance for future rulemakings. [OAR-2009-0472-7246.1, p. 42]

We recommend that the interage ncy group give explicit direction to agencies on how to account for ancillary benefits associated with GHG reductions. [OAR-2009-0472-7246.1, p. 42]

University of Pennsylvania, Environmental Law Project

NHTSA has not monetized reductions in toxic air pollutants due to the proposed standards (a benefit), nor potential reduc tions in vehicle performance or utility (a cost) that might result from the proposed standards. However, by any metric , NHTSA expects that the benefits of the proposed standards will vastly outw eigh the costs. [OAR-2009-0472-7286.1, p.16]

South Coast Air Quality Management District

The South Coast AQMD is the nation's largest regi onal air pollution district, and we appreciate this opportunity to testif y on this joint rulemaking.

The AQMD staff strongly support the proposed greenhouse gas emission standards and timeline. The proposed emission standards and compani on fuel economy standards will result in a significant reduction in greenhouse gas emissions as well as provide crucially important cobenefits in reducing criteria em issions in support of attainment of federal and state air quality standards for ozone and fine particulates.

Given the strong correlation of rising temperatur e and increased ozone leve ls, it is especially germane that this hearing is being held in one of the nation's most polluted air basins.

There are over ten million registered light-dut y vehicles in the South Coast Air Basin. Reductions in fuel use associated with the sta ndards proposed will theref ore have a direct and tangible benefit in terms of public health and welfare in our region.

[Comments are from LA Testimony, OAR-2009-0472-7283, pp.59-60.]

EPA Response:

EPA agrees with commenters that it is important to quantify the non-GHG health and environmental impacts associated with the propo sed standard because a failure to adequately consider these ancillary impacts could lead to an incorrect assessment of their net costs and

5-436EPA Vehicle Program, Feasibility, and Estimated Impacts

benefits. Moreover, co-pollutant impacts tend to accrue in the near term, while any effects from reduced climate change mostly accrue over a ti me frame of several decades or longer.

In this final rule, EPA quantifie d and monetized the he alth and environmental impacts related to both PM and ozone in its regulatory impact anal ysis (RIA), based on changes in ambient air quality as determined by full-scale photochemical modeling. Although this modeling was not possible in the timeframe for the proposal, EPA di d perform this modeling for the final rule, as described below.

To model the ozone and PM air quality benefits of the final rule, EPA used the Community Multiscale Air Quality (CMAQ) model (see Chapter 7.2 of the RIA that accompanies the final rule for a description of the CMAQ model). The modeled ambient air quality data served as an input to the Environmental Bene fits Mapping and Analysis Program (BenMAP). BenMAP is a computer program developed by EPA that integrat es a number of the modeling elements used in previous RIAs (e.g., interpolation functions, population projections, health impact functions, valuation functions, analysis and pooling met hods) to translate modeled air concentration estimates into health effects incidence es timates and monetized benefits estimates.

In addition to the non-GHG anc illary health and environmental impacts that EPA quantified for analysis of the final Light-Duty Vehicle GHG st andard, there are a numbe r of other health and human welfare endpoints that EPA was unable to quantify because of current limitations in the methods or available data. For example, EPA has not quantified a number of known or suspected health effects linked with ozone and PM for which appropriate health impact functions are not available or which do not provide easily interpretable outcomes (e.g., changes in heart rate variability). In addition, EPA is curren tly unable to quantify a number of known welfare effects, including reduced acid and particulate deposition damage to cultural monuments and other materials, and environmental benefits due to reductions of imp acts of eutrophication in coastal areas. For air toxics, th e available tools and methods to assess risk from mobile sources at the national scale are not adequate for extrapol ation to benefits assess ment. In addition to inherent limitations in the tools for national-scale modeling of air toxics and exposure, there is a lack of epidemiology data for air toxics in the general population. A ll of the above-mentioned health impact omissions contribute to a likely underestimate of the total benefits attributable to the final rule.

Please refer to Chapter 7.3 of the RIA that acco mpanies the final rule for more information about the quantification and moneti zation of non-GHG-related benefits.

EPA notes IPI and EDF’s recommendation for the interagency group to “give explicit direction to agencies on how to account for ancillary benefits associated with GHG reductions” (7246.1, pg 42). As noted in Section 4.5.4, the SCC TSD reiterates the need to document more thoroughly omitted impacts and monitor the literatu re for emerging research. As the research evolves, the Federal government, including EPA, is committed to exploring how modeling can be improved so that these aspects are better reflected in the SCC.

5.13.7. Energy Security Impacts 437

5-437EPA Response to Comments

Organization: Fraas, Arthur, G.

Comment:

The joint DOT and EPA proposed CAFE standard represents an ambitious and challenging policy initiative that will re duce the oil consumption and the greenhouse gas emissions of light duty cars and trucks for the model years 2012 through 2016. At the same time, this rule will increase the initial purchase pr ice of new vehicles and pose a s ubstantial challenge to car and truck manufacturers in their efforts to comply with the proposed standards. As a result, the proposal raises a number of interesting analytic al and policy questions. This comment will focus on one of these questions—the quantification of the energy security benefits of the proposed rule. [OAR-2009-0472-7523, p. 1]

Energy security benefits—typica lly including several disparate categories: national security benefits, macroeconomic disruption and adjustme nt benefits, and the benefits of exercising monopsony power to counter the ex ercise of market power by oil producing countries—have served as critical arguments in support of the rationale for go vernment policies designed to secure greater energy independence for the United St ates. Over the last several decades, there has been a continuing debate about the nature and ma gnitude of each of these energy security benefit categories and the role that th ey ought to play in shaping U.S. energy policy. The DOT/EPA joint proposal discusses some of these issues and develops an estimate of energy security benefits as an integral part of the joint proposed CAFE rule. In particular, DOT and EPA would incorporate an estimate of the macroeconomic di sruption/adjustment benefits as a part of the proposed rule's decision framework, while exclud ing from the CAFE calculation an estimate of the monopsony premium. [OAR-2009-0472-7523, pp. 1-2]

I support the DOT and EPA proposal to excl ude the monopsony premium from the CAFE calculation although for a more ge neral reason than that put fo rward by DOT and EPA—and will address the proposed macroeconomic disruption/ adjustment benefits incorporated in the calculation of the standard in their CAFE proposal. [OAR-2009-0472-7523, p. 2]

The Monopsony Premium

DOT and EPA Proposed Approach—As a part of the CAFE NPRM, DOT and EPA have proposed to consider only the macroeconomic disruption/adjustment co mponent in developing an estimate of energy security benefits associ ated with a reduction in the consumption of petroleum products. This departs from recent pr actice. In developing estimates of the energy security benefit of reducing petroleum consumption in past rules, DOT and EPA have also included an estimate of the “monopsony premiu m.” The monopsony premium represents the avoided payments to oil producers in foreign coun tries associated with a decline in the world price of oil resulting from decreases in U.S. oil consumption. [OAR-2009-0472-7523, p. 2]

DOT and EPA propose to exclude the monopsony prem ium from the estimate of energy security benefits because this proposed rule adopts a global value for th e social cost of carbon (SCC). DOT and EPA provide their rationale for excluding monopsony benefits as follows (74 FR 49622):

5-438EPA Vehicle Program, Feasibility, and Estimated Impacts

How should the energy security premium be used when some benefits from the proposed rule, such as the benefits of reducing greenhouse gas emissions, are calculated at a global level? Monopsony benefits represent avoided payments by th e U.S. to oil producers in foreign countries that result from a decrease in the world price as the U.S. decreases its consumption of imported oil. Although there is clearly a benefit to the U .S. when considered from the domestic perspective, the decrease in price due to decreased demand in the U .S. also represents a loss of income to oil producing countries. Given the redist ributive nature of this effect, do the negative effects on other countries “net out” the positive impact s to the U.S.? If this is the case, then, the monopsony portion of the energy security premiu m should be excluded from the net benefits calculation for the rule. [OAR-2009-0472-7523, p. 2]

However, DOT and EPA also offer an alterna tive rationale that would justify including the monopsony premium in the estimate of en ergy security benefits (74 FR 49623): “...the global SCC is used in these calculations, not because the global net benefits of the rule are being computed (they are not), but rather becau se in the context of a global public good, the global marginal benefit is the correct domestic benefit against which dom estic costs are to be compared. Similarly, energy security is inhe rently a domestic benefit. Thus, should the two benefits, if they are both vi ewed from this domestic persp ective, be counted in the net benefits estimates for this rulemaking and more generally what are the overall implications of this approach to justifying regulation? If the mo nopsony benefits were incl uded in this case, they could be significant. [OAR-2009-0472-7523, p. 3]

DOT and EPA have requested comment on their approach and on the alternative rationale presented above for including a monopsony premium in the benefits analysis. [OAR-2009-0472­ 7523, p. 3]

Comment on the Monopsony Premium — There is a more general—and I believe more compelling—rationale that justifies the decisi on not to consider the monopsony premium as a part of a benefit-cost analysis of regulatory action than th at offered by DOT and EPA. The monopsony premium reflects a pecuniary externalit y—that is, an externa lity that operates through the effect of the regulatory action on pric es--rather than a dir ect resource effect on a third party. There is a general consensus among economists that pecuniary externalities should not be considered in benefit-cost analyses of governmental actions. Economists point out that the pecuniary externality does not affect resource allocation, but government action to address the pecuniary externality will further distort resource use. In the sp ecific case of energy security benefits, for example, Brown and Huntington, in their September 2009 paper titled “Estimating U .S. Oil Security Premiums,” [See OAR -2009-0472-7523, pp. 7-38 for Brown and Huntington 2009 paper.] exclude the consideration of the mo nopsony premium “because it is not a security concern and because pursuing these gains would dist ort global resource use rather than offset an externality.” Similarly, the October 2009 Nationa l Academy of Sciences (NAS) report on the Hidden Costs of Energy: Unpriced Consequen ces of Energy Production and Use finds with respect to the monopsony premium “...that no externality in the se nse considered in this report exists.” (p. 235) As a result, the NAS report do es not include the monops ony premium as a part of an estimate of the “unpriced consequences ” of energy production and use. [OAR-2009-0472­ 7523, p. 3]

5-439EPA Response to Comments

The existence of an externality is a crucial test because by addressi ng true externalities— sometimes identified as technical externalit ies—government regulation can improve the wellbeing of society. This is the context and purpose of a benefit-cost analysis. On the other hand, addressing a pecuniary externality only serves to affect the tran sfer of income without improving the allocation of resources and the production possibilities of the economy. [OAR-2009-0472­ 7523, p. 3]

There is a policy argument that because OPEC ex ercises market power to inflate the world oil price (by restricting oil production), it would be appropriate for the United States to exercise its monopsony power as a major consumer of oil to reclaim some of the oil revenues realized by oil producing countries. However, there are some c ountervailing reasons that support a decision to exclude the consideration of a m onopsony premium. First, such a policy further distorts the use of oil resources because its effect, like that associated with the exercise of monopoly power, would be to reduce consumption below the opt imal level. Second, the successful use of monopsony power depends on the response of OPEC , other oil producing countries, and oil consuming countries. The exercise of market pow er by the United States is designed purely to transfer income from oil produci ng countries to the United States . Any policy init iative taken for this purpose should carefully develop the rationale for the pursuit of such a “beggar thy neighbor” policy. In any event, even if the re venue transfers realized by exercising monopsony power are used to support a polic y decision to restrict the cons umption of oil through regulation, these transfers are unrelated to a standard extern ality and ought not be included as a part of the benefit-cost analysis of th e rule. [OAR-2009-0472-7523, pp. 3-4]

Oil Disruption Costs

DOT and EPA Proposed Approach—With respect to disruption costs, DOT and EPA have adopted the updated estimates for the macroec onomic disruption/adjustment costs based on a March 2008 study titled “The Energy Security Be nefits of Reduced Oil Use, 2006-2015.” These estimates (in 2007 $) range from $6.70 per barr el ($3 .11- $10.67) in 2015 to $8.12 per barrel ($3.90 - $13.04) in 2030. [OAR-2009-0472-7523, p. 4]

Comment on Oil Disruption Costs—The Septem ber 2009 Brown and Huntington paper develops an alternative, lower estimate of the macroeconomic disruption/ad justment costs. Their estimate of the cost of displacing a barrel of domestic oil with a barrel of imported oil ranges from $2.17 per barrel in 2015 to $2 .37 per barrel in 2030 (in 2007 dollars). The differences in the estimates reported by EPA and Brown and Hunti ngton appear to reside in diffe rences in the approach used in estimating the change in U .S. oil prices re sulting from an oil supply shock. The EPA estimate is based on a methodology that allo cates a portion of the oil suppl y shock to the U.S. and then calculates the effect on oil pr ices using estimates of shor t-run demand and non-OPEC supply elasticity. Brown and Huntington use a world oil market model to develop effects of an oil supply shock on the world oil price and then use the resulting world oil price to estimate U.S. macroeconomic disruption costs. [OAR-2009-0472-7523, p. 4]

In addition, although the October 2009 NAS report on the hidden costs of energy recognizes that “...policies that lead to a reducti on in oil consumption in the Un ited States will most assuredly

5-440EPA Vehicle Program, Feasibility, and Estimated Impacts

reduce our vulnerability to future oil shocks, ...” , it reaches the conclusi on that oil disruption costs are not an externality. As a result, the NAS report recommends that further research is needed to better understand th is possible externality and the report does not include a quantitative estimate of the energy disruption costs of imported oil in developing estimates of the unpriced externalities associated with energy in frastructure and securi ty. (p. 236) [OAR-2009­ 0472-7523, p. 4]

In light of this advice, I believe that DOT a nd EPA need to sort out whether to include a macroeconomic disruption/adjustment cost compone nt in their evaluation of the benefits and costs of the proposed CAFE rule. If DOT and EP A decide to retain some estimate of the disruption costs as an estimate of energy security benefits, the agencies need to justify the decision and develop a reasoned basis for th e magnitude of their estimate taking into consideration the re cent estimates provided by Brow n and Huntington. [OAR-2009-0472-7523,
p. 4-5] [See OAR-2009-0472-7523, pp. 7-38 for Brown and Huntington 2009 paper.]

EPA Response:

EPA appreciates that this commenter felt that that the magnitude of the economic disruption portion of the energy security benefit may be too high. This commenter cites a recent paper written by Stephen P.A. Brown and Hillard G. H untington, entitled "Estimating U.S. Oil Security Premiums" (September 2009) as the basis for hi s comment. EPA reviewed this paper and found that it conducted a somewhat different analysis than the one conducted by ORNL in support of this rule. The Brown and H untington paper focuses on policies and the energy security implications of increasing U.S. demand for o il (or at least holding U.S. oil consumption constant), while the ORNL analysis examines the energy security implications of decreasing U.S. oil consumption and oil imports. These asy mmetrical analyses would be expected to yield somewhat different energy security results.

However, even given the different scenarios c onsidered, the Brown and Huntington estimates are roughly similar to the ORNL estimates. For exampl e, for an increase in U.S. consumption that leads to an increase in U.S. imports of oil, Brown and Huntington estimate a 2015 disruption premium of $4.87 per barrel, with an uncertain ty range from $1.03 to $14.10 per barrel. The corresponding 2015 estimate for ORNL as the resu lt of a reduction in U.S. oil imports is $6.70 per barrel, with an uncertainty range of $3.11 to $10.67 per barrel. Given that the two studies analyze different scenarios, since the Brow n and Huntington disrupt ion premiums are well within the uncertainty range of the ORNL study, and given that the ORNL scenario matches the specific oil market impacts anticipated from th e rule while the Brown and Huntington paper does not, EPA has concluded that th e ORNL disruption security premium estimates are more applicable for analyzing this final rule.

This commenter also felt that the monopsony ef fect should be excluded from net benefits calculations for the rule since it is a “pecuniary” externality or does not represent an efficiency gain. EPA disagrees that all pec uniary externalities should a priori be excluded from net benefits calculations. For example, in the case here, the o il market is non-competitive, and if the social decision-making unit of interest is the U.S ., there is an argument for accounting for the

5-441EPA Response to Comments

monopsony premium to assess the exce ss transfer of wealth caused by the exercise of cartel power outside of the U.S. However, for the final rule, EPA continues to ta ke a global perspective with respect to climate change by using the global SCC value. Theref ore, the EPA did not count monopsony benefits since they “net out” with losses to other countries outside the U.S. Since EPA is taking a global perspective, EPA did not undertake a distributional analysis for this final rule, since the losses to the losers (oil producers that export oil to the U.S.) would equal the gains to the winners (U.S. consumers of imported oil). As a result, EPA continues to included only the macroeconomic disruption portion of the energy security benefits to monetize the total energy security benefits of this rule.

Organization: New York University School of Law, Institute for Policy Integrity (IPI) Mr. Richter - Environmental Capital Partners

Comment:

Energy Security Effects

The agencies consider how the proposed regulati ons might generate three possible benefits to “energy security” by reducing U.S. consumption of petroleum: (1) lower oil prices worldwide as U.S. demand drops; (2) decreased risk to th e U.S. economy from a s udden disruption in oil supplies; and (3) reduced costs fo r U.S. energy security policies. The first effect should be treated as a distributional conse quence, not a standard efficien cy benefit. The second effect should be valued as a benefit, so long as the agencies disaggregate a ny wealth transfers that occur during price shocks. The agencies were just ified in not quantifying the last effect (i.e. treating it as having zero value), provided the agencies in corporate the increased protection value of the Strategic Petroleum Reserve into their calculation of disrupti on effects. [OAR-2009-0472­ 7232.3, p. 12]

Demand Effects

Often referred to as a “monopsony” effect, oil c onsumers in the United States do, in aggregate, exert enough influence on the worldwide demand for oil that a variation in U.S. demand will affect prices (although recent evid ence suggests the effect might be limited). If the proposed regulations reduce U.S. demand, prices will drop, and U.S. consumers will experience some additional savings. [OAR-2009-0472-7232.3, p. 12]

But these perceived savings come at the expense of lost revenue to th e oil suppliers. Globally, there are no net benefits from the demand effects. The agencies currently choose not to calculate any benefits from demand effects because they se lect a global value for th e social cost of carbon, and they believe a consistently global perspec tive on costs and benefits may be required. [OAR2009-0472-7232.3, p. 12]

However, the agencies seek comm ent on another possible approach: “From one perspective, the global social cost of carbon is used in these calcula tion, not because the global net benefits of the rule are being comp uted (they are not), but rather because in the

5-442EPA Vehicle Program, Feasibility, and Estimated Impacts

context of a global public good [lik e climate change mitigation], th e global marginal benefit is the correct domestic benefit against which domes tic costs are to be compared. Similarly, energy security is inherently a domestic benefit. Thus , should the two benefits, if they are both viewed from this domestic perspective, be counted in the net benefits estimates for this rulemaking, and more generally what are the overall implicat ions of this approach to justifying regulation?” [OAR-2009-0472-7232.3, p. 13]

The agencies repeatedly note that demand effects could be “signifi cant.” But the issue of how to include demand effects is not a choice between a global or a domestic perspective on costs and benefits. Rather, the agencies should addr ess the demand effects through a dist ributional analysis. [OAR-2009-0472-7232.3, p. 13]

As the agencies note, wealth transfers are not typically included as a “benefit.” OMB guidance provided in the Circular A4 confirms that cost-benefit analysis focuses on measuring the economic efficiency of a regulation, and wealth transfers do not offer a ny efficiency gains or losses. However, efficiency is not necessar ily the only relevant pol icy consideration, and therefore such transfers and other distributional effects must be cons idered as part of a separate distributional analysis. [OAR-2009-0472-7232.3, p. 13]

The agencies should assess how demand effects might generate distributional gains for U.S. oil consumers at the expense of foreign (and domestic ) oil producers. The agencies could consider how income, or other distributiona l weights, might factor into su ch an analysis. The agencies should also, pursuant to OMB recommendations and the principles of Executive Order 12866, incorporate such a study of de mand effects into a broader di stributional analysis. [OAR-2009­ 0472-7232.3, p. 13]

Note that—given the agencies’ statutory mandate s—there is nothing inconsistent about using a global social cost of carbon estim ate and still giving some prefer ence to policies that generate distributional gains for the United States at the expense of foreign companies or countries. [OAR-2009-0472-7232.3, p. 13]

Disruption Effects

The agencies calculate how reducing U.S. oil consumption will decrease the risk of lost economic output during a sudden, unanticipated disr uption in oil imports and supplies. However, the Joint Technical Support Docume nt suggests part of this calc ulation might include the higher price of imported oil caused by a supply disrup tion and price shock, wh ich, as the agencies acknowledge, is a “wealth transf er.” Such effects are no diffe rent analytically than the demand/monopsony effects considered above. T hus, any such import effects should be disaggregated from the disruption effects, and should instead be consid ered in the type of distributional analysis discusse d above. [OAR-2009-0472-7232.3, p. 14]

Security Policy Effects

The two main security policy effects of reduci ng U.S. demand for oil are: a possible impact on

5-443EPA Response to Comments

U.S. military activities in politically instable re gions that supply oil; and a possible impact on the size or valuation of U.S. Strategic Pe troleum Reserve. [OAR-2009-0472-7232.3, p. 14]

The agencies have chosen not to calculate any budgetary outlays for military expenses as a benefit because, given the size of likely oil import reductions and the broad range of policy objectives targeted by various U. S. military missions, economic analysis predicts military costs are unlikely to change as a result of the proposed regulations. Importantly, this case is distinct from the agencies’ decision not to quantify other uncerta in costs or benefits (particularly, lost consumer welfare), because zero is, according to the best economic analysis, a plausible estimate for this hard-to-quantify element. Therefore, fewer policy and legal risks are raised by the choice not to quantify. It is also co mmendable that NHTSA conducted a se nsitivity analysis on potential military effects. [OAR-2009-0472-7232.3, p. 14]

By decreasing U.S. demand for oil, the proposed re gulations could either decrease the need to maintain such a large Strategic Petroleum Reserve, or it could increase the protective value offered by the current Strategic Petroleum Reserve. The decision not to quantify any cost savings from maintaining a smaller Strategic Petroleum Rese rve is justified so long as the agencies have incorporated the increased protective value from maintaining the current Strategic Petroleum Reserve into the calculation of di sruption effects. [OAR-2009-0472-7232.3, p. 14] Less obvious, but more really more important, is th e connection to our strategic defense. I'm sure you've heard this argument, but the less gas we bu rn, of course, the less foreign oil we import, and it's estimated that we export the equivalent of the TARP bail-out, approximately $750 billion every year to import foreign carbon. That's mo ney flowing out of our economy and primarily into countries that do not have our best interest in mind. The more we rely on other countries for strategic resources, the less stability that we ha ve here at home, less foreign oil imported means more domestic security. [EPA-HQ-OAR-2009-0472-4621, p.160]

EPA Response:

EPA has addressed the monopsony issue in its response to the previous comment.

In the energy security literatu re, the macroeconomic disruption co mponent of the energy security premium traditionally has included both (1) increa sed payments for petroleum imports associated with a rapid increase in world oil prices, and (2 ) the GDP losses and adjustment costs that result from projected future oil price shocks. This comment from the New York University School of Law suggested that the increased payments associated with rapid increases in petroleum prices (i.e., price increases in a disr upted market) represent transfers from U.S. oil consumers to petroleum suppliers rather than real economic costs, and therefor e, should not be counted as a benefit.

The approach recommended by the commentor woul d represent a significan t departure from how the macroeconomic disruption costs associated with oil price shocks have been quantified in the broader energy security literatu re, and the EPA believes it should be analyzed in more detail before being applied in a regulatory context. In addition, the EPA also believes that there are compelling reasons to treat highe r oil import costs during oil suppl y disruptions differently than simple wealth transfers that reflect the exer cise of market power by petroleum sellers or

5-444EPA Vehicle Program, Feasibility, and Estimated Impacts

consumers. According to the OMB definition of a transfer: “Benefit and cost estimates should reflect real resource use. Transf er payments are monetary paym ents from one group to another that do not affect total resour ces available to society...The ne t reduction in the total surplus (consumer plus producer) is a real co st to society, but the transfer from buyers to sellers resulting from a higher price is not a real cost sin ce the net reduction automatically accounts for the transfer from buyers to sellers.” 59 In other words, pure transfers do not lead to changes in the allocation or consumption of economic resources, whereas changes in the resource allocation or use produce real economic costs or benefits.

While price increases duri ng oil price disruptions can result in large transfer s of wealth, they also result in a combination of real resource shortages, costly sh ort-run shifts in energy supply, behavioral and demand adjustments by energy us ers, and other response costs. Unlike pure transfers, the root cause of th e disruption price increas e is a real resource supply reduction due, for example, to disaster or war. Regions where supplies are disrupted (i.e., the U.S.) suffer very high costs. Businesses’ and hous eholds’ emergency responses to supply disruptions and rapid price increases are likely to consume some r eal economic resources, in addition to causing financial losses to the U.S. economy that are ma tched by offsetting gains elsewhere in the global
economy.

While households and businesses can reduce their petroleum c onsumption, invest in fuel switching technologies, or use futures markets to insulate themselves in advance against the potential costs of rapid increases in oil prices, when deciding how extensively to do so, they are unlikely to account for the effect of their petroleum consumption on the magnitude of costs that supply interruptions and accompanying price shocks impose on others. As a consequence, the U.S. economy as a whole will not make sufficient us e of these mechanisms to insulate itself from the real costs of rapid increases in energy prices and outlays that usually accompany oil supply interruptions. 60 Therefore, the ORNL estimate of macroeconomic disruption and adjustment costs that the EPA uses to value energy security benefits includes the increased oil import costs stemming from oil price shocks th at are unanticipated and not inte rnalized by advance actions of U.S. consumers of petroleum products. The EPA be lieves that, as the ORNL analysis argues, the uninternalized oil import costs that occur during oil supply interrup tions represents a real cost associated with U.S. petroleum consumption and imports, and that reducin g its value by lowering domestic petroleum consumption and imports thus represents a real economic benefit from lower fuel consumption.

EPA appreciates the comments on how to account fo r the potential military cost associated with maintaining a U.S. military presence to help secure stable oil supply from potentially vulnerable regions of the world. These comments indicated that EPA should not attempt to monetize U.S.

59 OMB Circular A-4, September 17, 2003. See http://www.whitehouse.gov/omb/assets/omb/circulars/a004/a-4.pdf
60 For a more complete discussion of the reas ons why the oil import cost component of the macroeconomic disruption and adjustment costs in cludes some real costs and does not represent a pure transfer, see Paul N. Leiby, Estimating the Energy Security Benefits of Reduced U.S. Oil Imports: Final Report , ORNL-TM-2007-028, Oak Ridge Na tional Laboratory, March 14, 2008, pp. 21-25.

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military costs nor include these costs in the energy security analysis. At this time, EPA agrees with these comments. In fact, a recent study conducted by the National Academy of Sciences (NAS) 61 notes that it is difficult to di sentangle military spending to achieve political goals from spending to protect petroleum supply routes. Further, it notes that spending to protect petroleum supply routes would not likely ch ange, given a moderate reducti on in oil flowing from volatile regions to the U.S. However, the NAS study also suggests that a very large reduction in oil demand could affect military spending. The EPA ha s adopted the NAS position that a change in military spending is unlikely given a moderate reduction in oil demand, and continues to exclude a monetary estimate of military costs in our energy security calculations for this rule. However, EPA also believes that more examination of this issue may be warranted in the future.

Organization: Environmental Defense Fund.

Comment:

And, finally, there's this looming question about -- and this is discusse d again in the preamble about one of the other factors that NHTSA has to consider about the need to conserve energy -- and I was interested that the preamble quotes from the June 30, 1977 Federal Register to the effect that the need to conserve energy encompasses, and this is a quote from the preamble, the consumer cost, national balance of payments, e nvironmental and foreign policy implications of our needs for large quantities of petroleum, esp ecially imported petroleum. And, by the way, this letter that I attached on the soci al cost of carbon talks about thos e factors in greater length, but then the preamble itself only mentions really thr ee of those four factors, [These comments were submitted as testimony at the New York publ ic hearing. See docket number EPA-HQ-OAR2009-0472-4621, p. 125.] which are the impacts of our national debt on the world oil price, the risks of disruption and securing imported oil m ilitary expenses, which ar e obviously considerable for this country, but it doesn't mention the fourth, which is the impact of our oil consumption in the motor vehicle sector on our balance of pa yments, and I think we have to recognize, you know, a year and a half ago when our trade deficit was at $800 billi on, our current account deficit was almost at $800 billion, oil accounted for almost half of it. Today, because of this recession that we're in, the latest figures are that our trade deficit has been halved, down to a mere $400 billion, but you multiply the amount of oil that we're now importing, which is down from where it was about a year and a half ago, but about 10 million gallons per day total, and a good portion of that is in the motor vehicle se ctor, we are spending [These comments were submitted as testimony at the New York publ ic hearing. See docket number EPA-HQ-OAR2009-0472-4621, p. 126.] 250 to 300 billion dollars on importing oil, which is, you know, two thirds or more of our current, you know, trade deficit, and there is beginning to be in the economic literature a lot of talk about the status of the dollar as a reserve currency, and, you know, the status of the dollar in th e payments for oil. Oil is denomi nated in dollars. Well, the fact is that if that trade deficit and the amount of money that we're spending on imported oil continues, the likelihood th at oil is going to con tinue to be denominated in dollars is going down, and that really has to be a fact or. It's not a factor that the En ergy Information Administration is probably going to take into acc ount, but it does seem to me in the social cost of carbon something that you do need to take into account. If that happened, there could be radical changes

61 Hidden Costs of Energy: Unpriced Consequences of Energy Production and Use , NAS, ISBN - 10: 0-309-14636­ 4. February 2010.

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in the price of oil. So I think, particularly from NHTSA's [These comments were submitted as testimony at the New York public heari ng. See docket number EPA-HQ-OAR-2009-0472-4621,
p. 127.] point of view in setti ng the standard, you really have to take into account the contribution of imported oil to our balance of paym ents and the implications of all that for the sustain ability of the value of the dollar, and, you know, given wo rld trade organization rules, I don't see anyway in which this country can disc riminate between imported oil and domestically produced oil, and, therefore, the only way to reduce the huge contribution that imported oil makes to our trade deficit and our current acc ount deficit and what it's doing to our economy, which is awful, the only way to deal with it is to cut down very significantly in the use of oil in our transportation sector, and what you're doing is a step in the right direct ion, but I believe that this consideration would drive you to be just as aggressive as you possibly can. [These comments were submitted as testimony at the New Yorkpublic hearing. See docket number EPA-HQOAR-2009-0472-4621, p. 128.]

EPA Response:

EPA’s energy security analysis estimates the imp acts of this rule on U.S. oil imports. Clearly, these estimated reductions in U.S. oil imports will have impacts on the U.S. trade balance and balance of payments with other c ountries through time. It is beyond the scope of this analysis to estimate how changes in the U.S.’s trade and balan ce of payments from this rule will influence the world financial system.

5.14. Statutory and Executive Order Reviews

Organization: Competitive Enterprise Institute Institute for Liberty National Asphalt Pavement Association American Chemistry Council, American Ir on and Steel Institute, American Meat Institute, Corn Refiners Association, National Oilseed Proc essors Association Peabody Energy Company American Petroleum Institute

Comment:

Competitive Enterprise Institute

III. The proposed standards will spawn an economically-chilling regulatory morass.

EPA Administrator Jackson certifies that the proposed rule “would not have a significant economic impact on a substantial number of small entities.” In re ality, EPA’s proposed GHG standards will subject millions of previously unr egulated small entities to the risk of new regulation, controls, paperwork, penalties, and litigation. Moreover, th e endangerment finding on which the proposed rule is predicated will also expose the economy as a whole to the risk of unprecedentedly severe constr aints under the NAAQS progr am. [OAR-2009-0472-7281.1, p.10]

Institute for Liberty

5-447EPA Response to Comments

The disproportionate impact of federal envir onmental regulations on the small business sector led President Clinton to suppor t the 1996 Small Business Regulat ory Enforcement Fairness Act (SBREFA). Among other things, SBREFA amended the Regulatory Flexibility Act of 1980 to require a panel of government officials (made up of employees from the EPA, the U.S. Small Business Administration’s (SBA) Office of A dvocacy, and the Office of Management and Budget’s Office of Information a nd Regulatory Affairs) and repres entatives of sm all entities to examine regulatory proposals and suggest less burdensome alternatives that would meet EPA’s underlying environmental protection objectives while minimizing impact on small entities. These panels, entitled, “Small Business Advocacy Review Panels,” issue a report that is published in conjunction with a proposed regulation. That way, th e EPA benefits from sensitivity towards its impact on small business and the public benefits fr om a more transparent di sclosure of benefits, costs, and potential alternatives.

Unfortunately, the EPA did not avail itself of the Small Business Advocacy Review Panel process prior to proposing this rule. This is unfortunate, especial ly since the U.S. Small Business Administration, Office of Advocacy, twice advised the EPA to convene the small business panel well before EPA issued its proposal.

We respectfully request that EP A to withdraw this rule. And, we further request that EPA convene a Small Business Advocacy Review panel under section 609 of the Regulatory Flexibility Act. These recommendations, if follo wed, will allow for EPA to develop alternatives that will minimize the impact on small business while reducing GHG emissions. Our recommendations come at a time when sensitiv ity towards small business not only makes sense; it is of vital importance for our country ’s economic recovery. [OAR-2009-0472-7284.1, p.4]

EPA‘s reliance on Section 609(c) of the RFA to a void the required analysis is equally illogical. That section authorizes EPA to fo rgo the statutory requirement to

― prepare and make available for public comment an initial regulatory flexibilit y analysis describing the rule‘s impact on small entities. 5 U.S.C. § 603(a). The RF A directs that this analysis

― shall be published in the Federal Register at the time of the pub lication of general no tice of proposed rulemaking for the rule. Thus, 609(c) does not exempt EPA from these clear mandates—rather, Section 609‘s small entity outreach

― requirements apply before the EPA proposes a rule. West Va. Chamber of Comm. v. Browner , 166 F.3d 366, 1998 WL 827315, *3 (4th Cir. 1998). [OAR-2009-0472­ 7143.1, p.4]

National Asphalt Pavement Association

Our concern is in EPA's certification statemen t in the current proposal [74 Fed Reg 49629]: ' .... that this proposed rule will not have a signifi cant economic impact on a substantial number of small entities. However, EPA recognizes that some small entities continue to be concerned about the potential impacts of the statutory imposition of PSD requirements that may occur given the various EPA rulemakings currently under consid eration concerning greenhouse gas emissions . .... Concerns about the potential impacts of statutorily imposed PSD requirements on small entities will be the subject of deliberations in that consultation and outreach. Concerned small entities should direct any comments relating to potential adverse economic impacts on small

5-448EPA Vehicle Program, Feasibility, and Estimated Impacts

entities from PSD requirements for GHG emissions to the docket for the PSD tailoring rule.' [OAR-2009-0472-7224.1, pp.1-2]

It is critical that all potentia lly affected entities understand the impact of EPA regulating greenhouse gas emissions under the light-duty vehicl e proposal. In contrast to EPA's suggestion recommending that stationary (i ndustrial) sources addr ess any concerns that they have through comments on the upcoming 'tailoring rule' -- onc e EPA regulates greenhou se gases from lightduty vehicles, these sources will already be subj ect to PSD as defined in the Clean Air Act. Bottom line: the greenhouse gas thre shold values proposed are totally discordant with the current Clean Air Act. As representatives of a small i ndustrial source sector, we implore EPA to correct and address this situa tion now. [OAR-2009-0472-7224.1, p.2]

For example, any state operating permit issued with greenhouse gas, i.e., carbon dioxide thresholds, higher than those identified within th e current Clean Air Act, would be vulnerable to appeal and litigation. Certainly, EPA must fully evaluate the collateral impact this proposal would have on all other aspects of the Clean Ai r Act including, but not limited to, the impact on state and local air permitting authorities, businesse s, industry and the economy in all areas of the country. [OAR-2009-0472-7224.1, p.2]

Once EPA 'regulates' greenhouse gas emissions from mobile sources, the Clean Air Act requires that stationary sources be regul ated under the threshold requirem ents as specified within the Clean Air Act - regardless of any 'tailoring rule' EP A develops - as those thresholds are specified within federal law. [OAR-2009-0472-7224.1, p .2]

Not only are states and local permitting authorities wholly unprepared for the millions of entities that will be required to comply with the Clean Air Act once greenhouse gas standards are set by EPA on light-duty vehicles, but EPA has failed to carefully evaluate the number of sources that could be affected once the light-duty vehicle GHG proposal goes into effect. We think that EPA has grossly underestimated the number and types offacilities that will be impacted by the lightduty vehicle greenhouse gas proposal by becoming s ubject to NSR pollutants and the Title V and PSD requirements. [OAR-2009-0472-7224.1, p.2]

For example, asphalt plants, typically considered as a small industrial source, would now become subject to Title V and PSD permitting as soon as greenhouse gases are regulated under the lightduty vehicle greenhouse gas standa rds. There are over 4,000 of thes e asphalt plants across the country. The same can be said of large malls and hotels, for example. Any source that emits more than 250 tons of carbon dioxide would now be subject to these stringent permitting programs, thereby increasing costs associated wi th paperwork, testing, and more importantly, control or mitigation technologies. Additionally, moving forward with this action will further exacerbate the economic downturn in the road co nstruction and other small industries - some already in dire economic straits, by creating more uncertainty and greater operational expenses. [OAR-2009-0472-7224.1, p.2]

Our industry takes compliance with the Clean Air Ac t seriously. If it is no t the intention of EPA to regulate relatively minor s ources of greenhouse gas emissions, then the statutory language of the Clean Air Act must be amended, or specific a nd clear legislative efforts must be provided to

5-449EPA Response to Comments

the states where these small sources operate. Inevitably, litigation will ensue. Our members, builders of the nation's roads, do not want to resp ond to litigation when thei r operations, as small industrial sources, are in complian ce with the intent of the Clean Air Act - but not in conformity with existing statutory language that la gs behind agency regulation. [OAR-2009-0472-7224.1, p.3]

EPA must not move forward with regulati ng greenhouse gas emissions under the light-duty vehicle proposal until its impact on small and minor i ndustrial sources of greenhouse gas emissions are taken into account. EP A has indicated it is not the intent of the Agency to regulate industrial sources of greenhouse gas emissions below 25,000 tons a nnually. In fact, finalization of this rule will do just the opposit e - it will require small industrial sources to comply with Title V and PSD permitting requirements, and potentia lly face a spate of litigation. [OAR-2009-0472­ 7224.1, p.3]

American Chemistry Council, American Iron and Steel Institute, American Meat Institute, Corn Refiners Association, National Oilseed Processors Association

EPA’s Failure to Analyze the PSD and Title V Effects of Finalizing the Motor Vehicle Rule Runs Contrary to Procedural Requirements

Failure to account for the PSD and Title V implic ations of proposed Motor Vehicle Rule also violates the Regulatory Flex ibility Act and the Paperwor k Reduction Act. [NHTSA-2009-0059­ 0094.1, p.6] [[See Docket Number NHTSA-2009- 0059-0094.1, pp.6-8 for a detailed discussion on this issue.]]

The PRA and the RFA promote overriding public in terests in transparency and ensuring that costs imposed by agency actions are fully consid ered. These are not mere boxes for the Agency to check perfunctorily. Entities affected by agency actions depend on these safeguards in order to be kept abreast of rules that wi ll impact them, and to know how to provide meaningful input. By ignoring the obvious, admitted, and enormous impli cations that this proposed Rule poses for stationary sources, EPA th warts those public interest s. [NHTSA-2009-0059-0094.1, pp.7-8]

Peabody Energy Company

EPA failed to address the economic and regulator y effects of making major sources subject to PSD regulation for their GHG emissions under a number of Executive Orders and statutes

Despite the large economic and regulatory consequen ces that the motor vehicle rule will have on major stationary sources, EPA unaccountably failed to produce the necessary studies of these effects in conformance with the relevant Executiv e Orders and statutes. The motor vehicle rule docket contains an RIA and certain other regulatory reviews, but these analyses are all confined to the direct benefits and e ffects of motor vehicle GHG regula tion and do not address the PSD effects that motor vehicle regulation will automatically trigger. [OAR-2009-0472-7223.1, pp.5­ 6]

5-450EPA Vehicle Program, Feasibility, and Estimated Impacts

EPA seems to have been of the view when it pr omulgated the motor vehi cle rule that it would address the PSD effects of that rule when it undertook the tailo ring rulemaking. EPA did, in fact, produce analyses in the tailori ng rule docket of PSD impacts of regulating GHG emissions under the CAA but only for small sources, not major sources. Indeed, EPA’s RIA and other Executive Order and statutory reviews in th e tailoring rule docket were a ll premised on the notion that the tailoring rule reduces costs associ ated with PSD, on the theory that the tailoring rule defers PSD and Title V regulation of small sources that w ould otherwise occur absent the rule. [OAR-2009­ 0472-7223.1, p.6]

Peabody will comment on that premise in its ta iloring rule comments, but for purposes here EPA completely missed the point that the tailoring rule did not reduce or otherwise affect PSD regulation of major source GHG emitte rs (other than to define the major source threshold). As a result, none of the Executive Order and statutory reviews in the ta iloring rule or motor vehicle dockets addressed the effect on major sources of making GHGs regulated CAA air pollutants through promulgation of the motor vehicle rule. [OAR-2009-0472-7223.1,p.6]

That failure is plain legal error. By re gulating motor vehicle GHG emissions, EPA is automatically initiating PSD regulation of ma jor source GHG emissions. EPA therefore has a responsibility under the Executive Or ders and statutes discussed below to examine the economic and regulatory impacts of th at decision. [OAR-2009-0472-7223.1,p.6]

Moreover, EPA’s error is so fundamental th at it can only be cured by EPA producing the necessary studies as a part of a re-noticed proposed motor vehi cle rule. Each of the Executive Order and statutory reviews discussed below is re quired to be prepared at the time of the notice of proposed rulemaking and is intended to inform the public comment process. Particularly given the potentially very large costs that the motor vehicle rule will impose on major stationary sources and the economy in general, the public is entitled to have the bene fit of EPA’s analysis of these costs when it files comments on th e motor vehicle rule. [OAR-2009-0472-7223.1, p.6]

Finally, it would be no defense for EPA to respond that it cannot at this time precisely monetize the cost of GHG BACT for large sources. In the fi rst place, EPA did not take this position in its motor vehicle proposal. EPA’s reason for not assessing PSD impacts in the motor vehicle rulemaking docket was not because of its inability to estimate BACT costs; it was because EPA evidently did not think of it. Moreover, the Execu tive Orders and statutes discussed below do not require precise monetization, only estimation to the best of EPA’s abil ity. For instance, under Section 3(d) of Executive Order 12291, agencies are required to de scribe potential benefits and costs of the rule and to determine potential net be nefits, including any benefits, effects, and net benefits that “cannot be quantified in monetary terms.” [OAR-2009-0472-7223.1, p.6]

1. Executive Order 12291 – Federal Regulation. Ex ecutive Order 12291 provides that an agency promulgating a “major rule” must prepare, at th e time of the notice of proposed rulemaking, an RIA setting forth essentially a cost-benefit analysis of the rule. EPA agrees that the motor vehicle rule is a major rule and prepared an RIA setti ng forth the costs and bene fits of the rule. That analysis, however, did not discuss the costs and benefits of the PSD regulation that would be triggered automatically by the rule. Among the purpos es of the RIA requirement is to ensure that “[a]administrative decisions sha ll be based on adequate informa tion concerning the need for and

5-451EPA Response to Comments

consequences of proposed government action.” Since one of the main consequences of regulating motor vehicle GHG emissions is PSD regulation of large source GHG emissions, EPA should have included those costs in its motor vehicle RIA. [OAR-2009-0472-7223.1, p.7]

2. Executive Order 12866 – Regulatory Planni ng and Review. Under Executive Order 12866, agencies are required to specify to the Office of Information and Regulatory Affairs (OIRA) in the Office of Management and Budget any actions that the agency believes are “significant regulatory actions.” If the agency or OIRA concludes that an ac tion is a “significant regulatory action,” the agency is required to submit to OIRA the analysis set forth in Section 6(a)(3)(B). If the agency action is a “significant regulatory act ion” because it will “[h] ave an annual effect on the economy of $100 million or more or adversely affect in a mate rial way the economy, a sector of the economy, productivity, competition, jobs, th e environment, public health or safety, or State, local, or tribal governments or communitie s,” the agency is required to submit the more detailed analysis under Section 6(a)(3)(C). EPA concluded that the motor vehicle rule is a significant regulatory action under Executive Order 12866 but the anal ysis was legally deficient because it did not examine PSD impact s on large sources. [OAR-2009-0472-7223.1, p.7]

3. Executive Order 13211 – Energy Effects. Executive Order 13211 requires that agencies produce a Statement of Energy Effects whenever th ey take a “significant energy action,” defined as one that is a significant regulatory action und er Executive Order 12866 and is “likely to have a significant adverse effect on the supply, distri bution, or use of energy.” The motor vehicle preamble says that a Statement of Energy Effects was not required because the rule will not adversely affect the supply, distribution or use of energy, and will in fact have a positive effect through improved automobile fuel economy. Ag ain, however, this conclusion was reached without consideration of PSD eff ects on major sources. As set fort h above, EPA states that, even with the tailoring rule limitations, almost all of the nation’s electric ge nerating and oil refining fleets will become subject to PSD regulation for their GHG emissions. It is inarguable that this regulation will impose costs and therefore potentially affect the supply, distribution or use of energy. At least EPA must examine the issue. [OAR-2009-0472-7223.1, p.7]

4. Unfunded Mandates Reform Act (UMRA). UMRA applies to any Federal mandate that may result in the expenditure by Stat e, local and tribal governments, in the aggregate, or by the private sector of $100,000,000 or more. An agency proposing such a mandate must produce the analysis required by Sec tion 202(a). [OAR-2009-0472-7223.1, p.8]

The motor vehicle preamble states that UMRA doe s not apply to the motor vehicle rule as to possible impacts to state, local or tribal governments but that it does apply as to impacts to the private sector. It states that impacts to the priv ate sector are analyzed in its RIA, but as noted above, that RIA is deficient because it doe s not consider PSD impacts. [OAR-2009-0472-7223.1, p.8]

Additionally, EPA’s conclusion that UMRA does not apply as to im pacts on state governments is incorrect. For the reasons discu ssed above, the tailoring rule do es not automatically prevent small sources from being subject to PSD regulation in “most states,” that is , those that administer their own PSD programs subject to EPA approval. In order for small sources not to be subject to PSD regulation for their GHG emissions in those st ates, the states must amend their laws and

5-452EPA Vehicle Program, Feasibility, and Estimated Impacts

regulations setting forth the 100/250 tpy and zero significance le vels. [OAR-2009-0472-7223.1, p.8]

As a result, under the tailoring rule standi ng alone, state permitting agencies will be overwhelmed with new PSD permit applications. Although states may change those laws, those that wish to do so will require some time to amend their PSD rules through rulemaking and/or legislation. Thus, notwithstandi ng the tailoring rule, making GHGs regulated air pollutants through adoption of the motor vehicle rule could have very large and immediate consequences for state governments in overwhelming their perm it systems before they can make the necessary rule changes. These consequences must be examined under UMRA. [OAR-2009-0472-7223.1, p.8]

5. Executive Order 13132 – Federalism. Executive Order 131312 applies to “policies that have federalism implications,” define d as regulations and other agency actions that have “substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the va rious levels of government.” Agencies may not promulgate regul ations that have federalism implications unless the federal government funds the States’ costs or the agency consults with th e States and provides, in the notice of proposed rulemaking, th e statement set forth in Secti on 6(b)(2)(B). The motor vehicle rule preamble states that EPA does not have to provide this statement because the motor vehicle rule does not impose mandates on an y States. However, for the reas ons just discussed, the motor vehicle rule does impose significant PSD permit bur dens on states. EPA therefore should have provided the relevant statement under Executive Order 13132. [OAR-2009-0472-7223.1, p.8]

6. CAA § 317. Section 317 provide s that EPA must prepare an economic impact assessment before publishing a notice of proposed rulemaking in the federal register for certain specified types of rules. Under Section 317(a)(4), such a statement is required for “any regulation under part C of subchapter I of this chapter (relating to prevention of significan t deterioration of air quality).” [OAR-2009-0472-7223.1, pp.8-9]

Because the motor vehicle rule makes GHGs subj ect to CAA regulation for the first time, and therefore triggers PSD regulation of GHGs for the first time, there is no question that the rule is both a Section 202(a) rule and a PSD rule under part C. Accordingly, EPA was required to but failed to produce the necessary economic impact assessment. [OAR-2009-0472-7223.1, p.9]

7. Regulatory Flexibility Act (RFA). The RFA ge nerally requires that an agency prepare a regulatory flexibility analysis for any rulemaking unl ess it certifies that the rule will not have a significant economic impact on a substantial nu mber of small entities. The motor vehicle preamble concluded that the rule would not cause such an impact because the rule was only targeted at large automakers. EPA, however, di d not examine how many sm all entities within the meaning of the RFA are major sources of GHG emissions that would be subject to PSD regulation. Until that analysis is performed, EPA has no basis to conclude that it is not required to prepare a regulatory flexibi lity analysis. [OAR-2009-0472-7223.1, p.9]

EPA Response:

5-453EPA Response to Comments

The Regulatory Flexibility Act (RFA) generally requires an agency to prepare a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements under the Administrative Procedure Act or any other statute unless the agency certifies that the rule will not have a significant economic impact on a substa ntial number of small en tities subject to the rule. If a covered agency, such as EPA, is unabl e to certify a rule at pr oposal, they must conduct a Small Business Advocacy Review (SBAR) panel.

If an agency certifies that the rule at issue does not have a significan t impact on a substantial number of small entities (SISNOSE), the agency is not required to undertake any regulatory flexibility analyses or conduct a SBAR panel. When considering whether or not a rule should be certified at proposal stage, the RFA requires the agency to look only at the “small entities to which the proposed rule will apply” and small entities “subject to the requirement ” of the specific rule in question. 5 U. S.C. § 603(b) (emphases added). 62 Though the agency must have a “factual basis” for this certifica tion, that factual basis can be s upported by the fact that the rule “does not directly regula te any small entities.” ATA v. EPA , 175 F.3d 1027, 1045 (D.C. Cir. 1999).

Courts have “consistently reje cted the contention that the RFA applies to small businesses indirectly affected by the re gulation of other entities.” Cement Kiln Recycling Coalition v. EPA

, 255 F.3d 855, 869 (D.C. Cir. 2001). The D.C. Circuit has previously addressed an RFA claim in the context of motor vehicle re gulation, and held that EPA was not required to conduct RFA analyses where the rule did not directly impose requirements on small automobile manufacturers. Motor & Equipment Mfrs. Ass’n v. Nichols (MEMA) , 142 F.3d 449, 467 (D.C. Cir. 1998) (EPA is only “obliged to consider the impact of the rule on small automobile manufacturers subject to the rule”).

This rule, as did the rule in MEMA , regulates exclusively large motor vehicle manufacturers and thus has no direct impacts on any small entities. 63 EPA recognizes that in some cases the Clean Air Act will require applica tion of PSD permitting requirements to GHG emissions when the regulatory requirement to control those emissions “takes effect” unde r this rule. However, those permitting requirements are imposed by operation of section 165 of the Clean Air Act and are not imposed by the regulatory requirements contai ned in this separate regulatory action under section 202(a) (1). EPA is not required to base its certification decisi on on indirect impacts

62 Likewise, in discussing the consideration of significan t alternatives to the proposed rule in an initial regulatory flexibility analysis, the RFA refers to the “establishment of differing ... requirements” that take into account the resources available to small entities, the simplification of “requirements under the rule for such small entities,” and “an exemption from coverage of the rule ... for such small entities.”
63 Small manufacturers are exempted from the GHG standards and other regulatory requirements adopted in this final rule. For the proposal, a limited number of small en tities were subject to a proposed reporting requirement, but the economic impact of that proposed regulatory requiremen t was clearly not significant. EPA proposed to exempt small manufacturers and other entities from the GHG standa rds and other regulatory requirements, and the only proposed regulatory requirement they were subject to was a one-time reporting obligation to obtain such exemption. This single regulatory requirement did not have a sign ificant economic impact. For the proposal, EPA was not required to consider the indirect impacts on these small entities of other requirements that were not contained in the proposed rule, but instead flow from the operation of other provisions of the CAA. EPA properly based its NOSISNOSE certification for the proposal on the lack of significant impact imposed by the regulations themselves on small entities subject to the proposed rule. For the final rule, EPA is not adopting this proposed one-time reporting requirement, as it is not needed.

5-454EPA Vehicle Program, Feasibility, and Estimated Impacts

imposed on parties that are not subj ect to the regulatory requirements of this rule, such as parties that are not motor vehicle manuf acturers. EPA properly bases its certification by considering the impacts of the regulatory requirements contained in the proposed and final rule, determining whether these regulatory requirements themselves imposed a significant impact on a substantial number of small entities subject to the rule.

As this rulemaking is limited to issues involve d in setting emissions st andards for large motor vehicle manufacturers, EPA would not be able to account for any potential indirect impacts from separate statutory requirements on entities not directly subject to or impacted by this rule. Even where a rule could “doubtless have economic imp acts in many sectors of the economy,” courts have refused to “convert every rulemaking pr ocess into a massive exercise in economic modeling” by requiring a full RFA analysis. Cement Kiln Recycling Coalition v. EPA , 255 F.3d 855, 869 (D.C. Cir. 2001).

Although the RFA does not apply to this action, EP A recognized that some small entities were concerned about the potential in direct impacts of the statutory imposition of PSD requirements that may occur given the various EPA rulemaki ngs concerning greenhouse gas emissions. In the interest of providing small entit ies a forum to express their concerns in addition to the opportunity provided in the notice and comment process, EPA used the discretion afforded to it under section 609(c) of the RFA to consult with OMB and SBA, with input from outreach to small entities, regarding the potential impacts of PSD regulatory require ments on small entities that might occur as EPA considers regulations of GHGs.

Section 609(c) of the RFA allows agencies to, in their discretion, appl y the provisions of the RFA that address SBAR panels to a rule that “the agency intends to certify... but the agency believes may have a greater than de minimis impact on a substantial number of small entities.” 5 U.S.C. § 609(c) (emphasis added). 64 EPA does not believe that the use of this discretion requires a rigid application of the entirety of section 609(c). Instead, agencies may pick and choose elements of the SBAR panel process to apply as they deem appropriate for the rule at issue.

EPA believes that section 609(c) of the RFA authorizes agencies to engage in outreach similar to that of a formal SBAR panel where, as in this action, the RFA would not otherwise apply due to the certification of the rule. 65 EPA maintains that this action does not have any significant impacts on small entities directly subject to th e rule, and EPA’s use of 609(c) does not indicate otherwise. As indicated by the word “may,” an agency has discretion to invoke this provision in a variety of circumstance and is not limited to thos e situations where it is certain that a rule has a greater than de minimis impact.

64 One commenter misunderstood this provision, believing that Section 609(c) only authorizes agencies to forgo an Initial Regulatory Flexibility Analysis (IRFA). This is not an accurate reading of the statute. Section 609(c) applies where agencies certify that a rule w ill have no SISNOSE under 605(c). When an agency cer tifies no SISNOSE under 605(c), they are not obligated to conduct an IRFA. Since the 609(b) SBAR panel requirements are triggered only when EPA is “required to conduct” an IRFA, Section 609(c) discretion applies only to the SBAR panel process provisions of 609(b), but not the substantive IFRA requir ement. The 4th Cir. opinion referenced by the commenter does not involve agency use of section 609(c) and has no meaningful bearing on the matter at hand.
65 EPA does not believe that section 609(c) of the RFA offers agencies a chance to circumvent the panel process where they do not intend to certify that the rule does not have a SISNOSE, and EPA remains committed to holding SBAR panels where contemplated by the RFA.

5-455EPA Response to Comments

Commenters have cited almost no case law to su pport their claim that EPA has violated the RFA. 66 One case, Aero. Repair Station Ass’n v. F.A.A. , 494 F.3d 161 (D.C. Cir. 2007), is plainly distinguishable from this action. In Aero. Repair , the FAA certified a re gulation that imposed requirements on “employer air carriers”, but which also “expressly require[d] that the employees of contractors and subcontractors be tested” under the regulation. Id. at 177. FAA argued that since the phrase “employer ai r carriers” did not incl ude contractors and subc ontractors, they were not required to consider imp acts on contractors and subcontr actors in fulfilling their RFA obligations. The court rejected the claim, finding that “the 2006 Final Rule imposes responsibilities direc tly on the contractors and subcontractors.” Id. (emphasis added). 67

In this action, the only entities that have responsibilities under this rule are motor vehicle manufacturers, and the rule explicitly exempt s small motor vehicle manufacturers from those responsibilities. No other entities, whether implicitly or explicitly, have any responsibilities under this rule. EPA will not enfo rce this rule agains t anyone other than th e large automobile manufacturers subject to it.

Accordingly, EPA maintains that it has fully complied with the requirements of the Regulatory Flexibility Act in this action. Because this rule does not significantly impact a substantial number of small entities that are subject to the rule, EPA has statutory aut hority to certify this rule under the RFA. Thus, EPA was not required to conduct a SBAR panel or any regulatory flexibility analyses.

EPA rejects the argument that it needs to provi de additional analyses beyond that in the Regulatory Impact Analysis, to be responsive to various Executive Orders on analyses of the costs and benefits of this rule. These Executiv e Orders call for EPA to analyze the impacts of this rule and its requirements, not indirect impact s of statutory requirements that flow from this rule. Likewise, compliance with UMRA and Executive Order 13132 are properly focused don the impacts of this rule on States, not the impacts of indirect effects that flow from this rule. Finally, EPA believes that its RI A satisfies the requirements of Section 317 of the Act, which calls for an analysis of the impacts of the requi rements imposed by this ru le, not indirect effects that flow from it.

The various comments on consideration of the economic impacts of the PSD permitting provisions fail to recogni ze that any analysis of such impact s would not aid EPA in determining what GHG standards to adopt in this rulemaking. They are not related to any of the issues EPA needs to consider and decide in determining the content of the GHG standard s that will apply to automobile manufacturers. EPA has addressed elsewhere the separate issue of whether EPA should delay issuance of this rule because of concerns raised over PSD permitting.

66 EPA is not aware of a prior situation where EPA volunt arily conducted a SBAR panel where the regulatory action at hand triggered a subsequent statutory obligation, and commenters have not indicated otherwise. Although EPA is aware of a handful of examples of othe r agencies voluntarily engaging in regulatory flexibility analyses where their regulatory action arguably triggered a statutory obligation, we note that none of those agencies conducted a SBAR panel prior to proposal. In addition, any an alyses they completed were post proposal. See e.g. 71 Fed. Reg. 8,265 (Feb. 16, 2006).
67 It is also worth noting that the FAA is not a covered agency under the RFA, and thus is not required to complete an SBAR panel.

5-456EPA Vehicle Program, Feasibility, and Estimated Impacts

5.15. Comments on EPA Regulatory Text

Organization: Chrysler Group LLC (Chrysler) Alliance of Automobile Manufacturers (Alliance) New York State Department of Environmental Conservation

Comment:

Chrysler Group LLC (Chrysler):

Clarity of Intent

The intent of the proposed regulatory text is unc lear in several cases a nd additional clarity is required. The following comments are pr ovided. [NHTSA-2009-0059-0124, p.39] [[See NHTSA-2009-0059-0124, pp.39-41 for detailed comme nts regarding the regulatory text]]

Definitions

The following concerns were noted with the defi nitions given in the proposed regulatory text. [[See NHTSA-2009-0059-0124, p.42 for detailed comment s regarding the definitions in the proposed regulatory text]]

Reference to Appropriate Greenhouse Gas Metric

Throughout the proposed regulatory text, a variety of greenhouse gas metrics are referred to (CO2, CO2-equivalent, and CREE). The interming ling of terms can cause confusion, especially in cases where it is unclear whether actual CO 2 emissions are meant or whether a metric which includes CO2 emissions is meant. Chrysler reco mmends that the proposed regulatory text only use the exact term meant in each instance. [NHTSA-2009-0059-0124, p.42]

The following instances were identified where th e apparent intended metric was CREE, but an alternative greenhouse gas metric was specified. [[See NHTSA-2009-0059-0124, p.42 for detailed comments regard ing the regulatory text]]

Reference Issues

Some references within the regulatory text appear to be inco rrect. [[See NHTSA-2009-0059­ 0124, p.43 for detailed comments re garding the regulatory text]]

Regulatory Text Changes Are Indica ted, but Could Not Be Identified

In several instances, the NPRM indicated that mo difications had been made to regulatory text from previously existing language, but Chrysler could not identify the difference between the original and proposed te xt. [NHTSA-2009-0059-0124, p.43]

5-457EPA Response to Comments

86.1803-01 Round, Rounded, or Rounding: Comment 11 not es that the definition is revised, but no difference could be identified.

86.1841-0 1 (b): Comment 21 notes that paragraph (b) is revised, but no difference could be identified. [NHTSA-2009-0059-0124, p.43]

Alliance of Automobile Manufacturers (Alliance):

Net Heating Value (NHV) Determinations (Pro posed regulations in 40 C.F.R. 600.113-08 and 600.510-12)

In the proposed 40 C.F.R. 600.113-08(f)(4)(iii) a nd again in 40 C.F.R. 600.510(g)(1)(ii)(A), EPA proposed to use the ASTM D 240-92 test met hod for determining the NHV for ethanol and alcohol fuels. [OAR-2009-0472-6952.1, p.53]

The current practice for determining NHV for ga soline is ASTM D 3338-92 which has superior precision as compared to that of ASTM D-240. ASTM D 3338 has repeatability and reproducibility of 9 Btu/lb and 20 Btu/lb respectively, whereas ASTM D-240 has repeatability and reproducibility of 56 Btu/lb and 172 Btu/lb respectively. The two methods are not equivalent and if the new procedure (ASTM D-240) is adopted, a bias in fuel properties can be assumed. [OAR-2009-0472-6952.1, p.53]

Recommendation:

The current ASTM D3338 process for determining the Net Heating Value (NHV) should be retained for fuels with ethanol blends that are ≤ 10%. For fuels that ha ve a greater than 10% ethanol composition, EPA should work with indu stry on an acceptable method for determining NHV, possibly with a modified ASTM D 3338 calcu lation and a sample fo r distillation of the gasoline portion of the fu el. [OAR-2009-0472-6952.1, p.53]

New York State Department of Environmental Conservation

Apparent Internal Citation Errors (F ederal Register Notice pages 49759-49762) The proposed language for §86.1848-10(c)(9). incl udes reference to §86.1865-12(k)(7) for the procedure to be used to determine the vehicles deem ed to have been sold in violation of the fleet average C02 standards, in the event a manufacturer does violate those standards. This procedure is found in §86.1865-12(k)(8). Similarly there are other references to paragraph §86.1865­ 12(k)(7) in §86.1865-12(j) and (k) that appear to more prope rly refer to §86.1865-12(k)(8). [OAR-2009-0472-7454, p.4]

Carbon Related Exhaust Emissions Formula (P roposed Amendments to Section 600.113-08) EPA includes the CO2 formed from hydrocarbons and CO as C02 regulated by this standard. We concur with this approach. However the proposed Carbon Related Exhaust Emission equations in 600.113-08(h) reduce hydrocarbons to carbon ra ther than carbon dioxide. [OAR-2009-0472­ 7454, p.5]

5-458EPA Vehicle Program, Feasibility, and Estimated Impacts

The formula for calculating carbon related exhaust emissions (CREE) contain an error in the hydrocarbon term. The equation follows: [OAR-2009-0472-7454, p.5]

CREE = CWF(HC) + 1.571(CO) + (CO2) [OAR-2009-0472-7454, p.5]

The purpose of the 1.571 factor for carbon monoxide is to convert the mass of CO to the mass of an equivalent number of moles of C02. Howeve r, the hydrocarbon term is multiplied by the carbon weight fraction, which converts to the mass of an equivalent number of moles of carbon. Another representation of the proposed equation is: [OAR-2009-0472-7454, p.5]

CREE = CWF(HC) +(44/28)(CO) + ( 44/44) (CO2) [OAR-2009-0472-7454, p.5]

To properly express CREE on a consistent basi s as CO2, the equation should be: [OAR-2009­ 0472-7454, p.5]

CREE = CWF (44/12) (HC) + (44/28) (CO) + (44/44) (CO2) [OAR-2009-0472-7454, p.5]

Or:

CREE = 3.667(CWF)(HC) + 1.571(CO) + (C02) [OAR-2009-0472-7454, p.5]

There appear to be similar errors in the hydroc arbon terms for other, non-gasoline, fuels. [OAR2009-0472-7454, p.5]

EPA Response:

Comments will be addressed below on the followi ng topics: ASTM Test Procedure to Determine the Net Heating Value for Methanol and Et hanol; and Regulatory Text Clarifications.

ASTM Test Procedure to Determine the Ne t Heating Value for Methanol and Ethanol: EPA proposed revisions to paragraphs §6 00.113-08(f)(2)(iii), §600.113-08(f)(4)(iii) and §600.510(g)(1)(ii)(A), regard ing the net heating value (NHV) used for methanol and ethanol fuels. The proposed regulation changes requi red manufacturers to use ASTM D 240-92 test method to determine the NHV for ethanol and methanol fuels.

Comments submitted by the Alliance indicated that that “The current practice for determining NHV for gasoline is ASTM D 3338-92 which has supe rior precision as compared to that of ASTM D-240. ASTM D 3338 has rep eatability and reproduc ibility of 9 Btu/lb and 20 Btu/lb respectively, whereas ASTM D-240 has repeatabil ity and reproducibility of 56 Btu/lb and 172 Btu/lb respectively. The two me thods are not equivalent and if the new procedure (ASTM D240) is adopted, a bias in fuel properties can be assumed.” The Alliance recommended that “The current ASTM D3338 process for determining the Net Heating Value (NHV) should be retained for fuels with ethanol blends that are ≤ 10%. For fuels that have a greater than 10% ethanol composition, EPA should work with industry on an acceptable method for determining NHV, possibly with a modified ASTM D 3338 calculation and a sample fo r distillation of the gasoline portion of the fuel.”

5-459EPA Response to Comments

EPA agrees with the Alliance comments and has corrected the regulations in the final rule accordingly. The reference to ASTM D 240-92 is not needed in paragraphs §600.113­ 08(f)(2)(iii) and (f)(4)(iii) and does not appear in the final rule (because NHV is not used in the fuel economy equation for vehicles operated on ethanol or methanol fuels). Paragraph §600.510(g)(1)(ii)(A) reads in th e final rule as follows:

“(ii)(A) The net heating value for alcohol fuels shall be premeasured using a test method wh ich has been approved in advance by the Administrator.”

EPA intends to work with the Industry to help develop an appropriate test procedure to determine the NHV of alcohol fuels.

Regulatory Text Clarifications: Chrysler and the New York Department of Environmental Conservation submitted a list of paragraphs in th e proposed regulations which Chrysler believes to be ambiguous, to contain typographical mistakes, or to contain incorrect re gulatory references. EPA has made appropriate corrections in res ponse. In addition, Chrysler commented that “Throughout the proposed regulatory text, a variet y of greenhouse gas metrics are referred to (CO2, CO2-equivalent, and CREE). The intermingling of terms can cause confusion, especially in cases where it is unclear whether actual CO 2 emissions are meant or whether a metric which includes CO2 emissions is meant. Chrysler re commends that the proposed regulatory text only use the exact term m eant in each instance.”

EPA appreciates the comments about the errata in the regulations, and the final rule has corrected the regulations, accordingly. The final rule also contains a number of minor amendments to update the regulations as needed and to ensure th at the regulations are co nsistent with changes discussed in the preamble to the final rule . Regarding Chrysler’s comment about the intermingling of CO2 and CREE terms, the fi nal rule revised most of the CO2 emission references to carbon-related exhaust emissions ( CREE) references, where appropriate. The GHG emission standards still refer to a CO2 sta ndard (although CREE emissions are measured and compared to the CO2 standard) because a CO2 st andard is easier for the general public to understand. To prevent confusion about this con cept, the final rule revised the CREE definition contained in §600.002-08, to read as follows:

§600.002-08 Definitions.

Carbon-related exhaust emissions (CREE) means the summation of the carbon-containing constituents of the e xhaust emissions, with each constituent adjusted by a coefficient representing the carbon weight fraction of each constituent, as specified in §600.113-08. For example, carbon-related exhaust emissions (weighted 55 pe rcent city and 45 percen t highway) are used to demonstrate compliance with fleet average CO 2 emission standards outlined in §86.1818(c).

5-460Section 6 Reserved

6-1EPA Response to Comments

6. Reserved

6-2Other Comments

7. Other Comments

............................................................................................................ 2 7.1. Stationary Source and Permitting Issues

.................................................................. 2 7.2. Endangerment Finding

........................................................................................... 69 7.3. Vehicle Life-Cycle Emissions Issues

..................................................................... 80

7-1EPA Response to Comments

7. Other Comments

7.1. Stationary Source and Permitting Issues

Organization: Air Permitting Forum Alliance of Automobile Manufacturers (Alliance) American Chemistry Council (ACC) American Farm Bureau Federation (AFBA) American Forest and Paper Association (AF&PA) American Iron and Steel Institute American Meat Institute American Petroleum Institute Arizona Public Service BCCA Appeal Group (the Group) Brick Industry Association California Cotton Ginners Association (CCGA) Charleston Metro Chamber of Commerce Consumers Energy Corn Refiners Association Council of Industrial Boiler Owners (CIBO) County of Greenville, SC Dow Chemical Company (Dow) Duke Energy Edison Electric Institute Energy-Intensive Manufacturers Working Group Fertilizer Institute Georgia Department of Natural Resources Georgia-Pacific (GP) Industry Coalition Mass Comment Campaign (48 comme nts) (unknown organization) Mississippi Department of Environmental quality National Association of Home Builders (NAHB) National Association of Manufacturers National Climate Coalition National Cotton Ginners Association National Mining Association (NMA) National Oilseed Processors Association National Petrochemical & Refiners Association NISEI Farmers League Peabody Energy Company SCANA Corporation Sierra Research Inc. South Carolina Chamber of Commerce South Carolina Department of Health and Environmental Control South Carolina Manufact urers Alliance (SCMA) South Carolina Pulp & Pa per Association (SCPPA)

7-2Other Comments

Southeastern States Air Resour ces Managers, Inc. (SESARM) Spurgeon, C. M. Stanton, Neil Texas Chemical Council (TCC) Texas Cotton Ginners Association Texas Department of Agriculture Texas Industry Project (TIP) Texas Oil and Gas Association Utility Air Regulatory Group Western Agricultural Processors Association Wood, John

Comment:

Air Permitting Forum

The Air Permitting Forum believes that comprehensive climate legislation is far preferable to using the existing Clean Air Act case-by-case permitting programs to address GHG emissions. These permitting prog rams are resource-intensive for both regulated entities and regulators. Moreover, in an arena in which efficiency is the key to reducing impacts, the case by-case nature of the PSD and Title V programs indicates that they are perhaps the least efficient mechanisms to mitigate the effects of climate change. In sum: [OAR-2009-0472-7253.1, p.1]

[See Docket Number OAR-2009-0472-7253.1, pp.1- 2 for detailed comments on the introduction]

EPA’s Assumption that the Section 202 Rule Will Automatically Trigger PSD Permitting for Sources Solely Based on Their Emi ssions of Greenhouse Gases Is Incorrect The common wisdom is that the Clean Air Ac t and the PSD regulations require EPA to subject to PSD review any source that is major and any modification of a major source above significance levels for any pollutant. The only exception this conventional wisdom allows is for nonattainment pol lutants. [OAR-2009-0472-7253.1, p.2]

[See Docket OAR-2009-0472-7253.1, pp.2-5 for de tailed comments pertaining to: Background, Relevant Statutory and Regulatory Applicability Provisions, Sections 161 and 165(a) Limit PSD Applicability Based on the Location of the Source and Case Law Confirms This Limitation, and EPA Can Implement the Proper Scope of PSD Applicability Under the Existing Regulations]

EPA Has Not Properly Accounted for th e Costs of This Regulatory Action As discussed above, the Clean Air Act and the PSD regulations are structured such that PSD should only impose BACT for GHGs on so urces that are otherwise required to obtain a PSD permit based on their emissions of a NAAQS pollutant. To the extent that EPA continues in its view that PSD will be tr iggered and sources will be classified as

7-3EPA Response to Comments

major for PSD solely on the basis of GHG em issions, the Agency must properly analyze those impacts in this rulemaking. [O AR-2009-0472-7253.1, p.5] EPA has acknowledged in the Proposed Tailoring Rule that, under it s interpretation of th e PSD applicability provisions, some 40,000 sources would be subject to PSD (an estimate that we believe is low). [OAR-2009-0472-7253.1, p.6]

[See Docket OAR-2009-0472-7253.1, pp.5-7 for detail ed comments pertaining to: If EPA Does Not Adopt the Proper Interpretation of the PSD Program’s Scope, It Must Include the Costs of Triggering PSD in Its Section 202 Rulemaking Analysis and Regardless of the Interpretation of the PSD Provisions, EPA Must Include the Costs of Triggering Title V Permitting for Stationary Sources in Its Section 202 Rulemaking Analysis]

Alliance of Automobile Manufacturers (Alliance)

Concerns with EPA’s Position on Implications for Stationary Sour ce Programs Under the Clean Air Act

EPA has stated in the NPRM that the issu ance of regulations under Section 202 of the Clean Air Act will trigger application of the Prevention of Significant Deterioration (PSD) program of the CAA for stationary sources. 74 Fed. Reg. 49,629. EPA has reiterated this interpretation of CAA Section 165 in its propos al regarding reconsideration of the so-called Johnson Memo (74 Fed. Reg. 51,535, October 7, 2009) and in its proposal on the so-called Tailoring Rule for PSD (74 Fed. Reg. 55,292, October 27, 2009). [OAR-2009-0472-6952.1, p.68]

None of the three Federal Register notices cited above contain a thorough discussion of EPA’s legal and policy options with regard to Section 165, nor have they addressed the regulatory impact of automatically and immedi ately triggering PSD on the sources that would be directly affected. Instead, EPA has focused narrowly on the “benefits” of “tailoring” the threshold emissions amount to 25,000 tons for PSD and Title V permitting. [OAR-2009-0472-6952.1, p.69]

The Alliance does not request, and would not support, delaying the final mobile source rule in order to address concerns regardi ng the implications fo r stationary sources. Having said that, the Alliance also believes that the implications of the mobile source rule for stationary sources have not been ade quately addressed by the Agency, and need further analysis. [OAR-2009-0472-6952.1, p.69]

The Alliance urges EPA to deal with this i ssue within the confines of the Johnson Memo and PSD Tailoring rules, as is the Agency’s apparent intent. The Alliance urges EPA to consider ways to avoid the automatic appl ication of the PSD program to stationary sources. Moreover, to the extent that EPA c oncludes the application of PSD for GHGs is inevitable upon issuance of Section 202 regul ations, the Agency should more thoroughly analyze the impacts of the PSD program in the context of the Johnson Memo and PSD Rulemakings. The Alliance does not believe that the Clean Air Act compels EPA to automatically and immediately trigger PSD as a result of the mobile source rule. Further

7-4Other Comments

discussion of the legal and policy issues w ill be provided in Alliance comments on those later proposals. [OAR-2009-0472-6952.1, p.69]

American Chemistry Council (ACC)

EPA Must Assess and Address the Motor Vehi cle Rule’s Impacts on Stationary Sources Before Finalizing the Rule. EPA‘s failure to account for the Title V and PSD consequences of finalizing the Motor Vehicle Rule would render the final Rule bot h arbitrary and capricious, and also invalid based on other procedural requiremen ts for rulemaking. [OAR-2009-0472-7148.1, p.2]

The Associations acknowledge EPA‘s desire to address GHG emissions from mobile sources quickly, as well as NHTSA‘s need to set new fuel economy standards, which must be promulgated at least 18 months before the affected model year (in this case the 2012 model year). 49 U.S.C. § 32902(g)(2). However, as proposed, the Motor Vehicle Rule ignores the enormous burdens the Rule would impose on stationary sources. This omission violates legal requirements for ag ency rulemaking, constitutes arbitrary and capricious action, and is simply bad policy. This is especially so because nearly all the environmental benefits EPA says will result from its promulgation of the Motor Vehicle Rule under CAA authority would also result from the NHTSA rule alone. Yet, unlike NHTSA action to raise corporate average fuel economy (CAFE) standards, the redundant EPA standards promulgated under the CAA woul d have regulatory impacts reaching far beyond the automotive industry and would impo se billions of dollars in additional permitting and compliance costs. [OAR-2009-0472-7148.1, p.2]

Thus, although the Associations take no position on NHTSA‘s proposal to increase CAFE standards, we vigorously object to EPA‘s proposal to fina lize the superfluous Motor Vehicle Rule under CAA Section 202. EP A‘s failure to account here for the PSD and Title V burdens it elsewhere acknowledge s will flow from this rulemaking renders this rulemaking legally invalid. EPA must fully consider those burdens in this rulemaking. [OAR-2009-0472-7148.1, p.2]

[See Docket number OAR-2009-0472-7148.1, cover page 1-2 for deta iled comments]

[See Docket OAR-2009-0472-7148.1, pp. 2-8 for deta iled comments pertaining to: EPA's failure to Analyze the PSD and Title V Effect s of Finalizing the Motor Vehicle Rule Is Arbitrary and Capricious and EPA's Failure to Analyze the PSD and Title V Effects of Finalizing the Motor Vehicle Rule Runs Contrary to Procedural Requirements]

PSD Permitting Requirements Need Not and S hould Not Apply to Stationary Sources’ GHG Emissions Solely by Virtue of EPA Finalizing the Motor Vehicle Rule EPA could properly decline to consider th e PSD impacts of the proposed Motor Vehicle Rule in this rulemaking docket only if those impacts would not, in fact, result from the Rule. EPA has stated that PSD requirements will be triggered when the proposed Motor Vehicle Rule first subjects GHG emissions fr om cars to control—that is, model year 2012. See PSD Interpretive Memo Reconsideration, 74 Fed. Reg. at 51545–46. But EPA

7-5EPA Response to Comments

can interpret the statute and regulations to avoid that result and eliminate the need to analyze the proposed Motor Vehicle Rule‘s effect on stationary sources in this proceeding. Moreover, by doing so, EPA woul d eliminate the need for the legally questionable GHG Tailoring Rule. [OAR-2009-0472-7148.1, p.8]

[See Docket OAR-2009-0472-7148.1, pp. 8-12 for detailed comments pertaining to: EPA‘s View that Issuance of the Motor Vehi cle Rule Automatically Triggers PSD Based Solely on Emissions of GHGs Is Inconsistent with the Plain Meaning of the CAA and EPA‘s Regulations and The Phrase 'Pollutant s Subject to Regulation' Is Also Most Reasonably Interpreted to Exclude GHGs]

EPA Should Exercise its Discretion to De fer Finalizing a Motor Vehicle Rule EPA has clear legal authority to defer prom ulgation of an emission standard under CAA Section 202, even if the Agency proceeds in the near future to finalize a positive endangerment finding under CAA Section 202. It would be arbitrary and capricious for EPA not to exercise that authority because the potential economic consequences of the Motor Vehicle Rule are massive, and unque stionably outweigh any environmental benefits that would flow from EPA placing its imprimatur on the NHTSA rule. [OAR2009-0472-7148.1, p.12]

[See Docket OAR-2009-0472-7148.1, pp. 12-14 fo r detailed comments pertaining to: Nothing Compels EPA to Finalize GHG Emissions Standards for Mobile Sources, Nothing Compels EPA to Finali ze GHG Emissions Standards for Mobile Sources, There Are Numerous Compelling Reas ons to Defer the Motor Vehicle Rule, and EPA Should Not Proceed Under CAA Secti on 202 Until the Agency Considers Acting Under CAA Section 115]

American Chemistry Council, American Iron and Steel Institute, American Meat Institute, Corn Refiners Association, National Oilseed Processors Association

The Associations and their members repres ent a sizeable and diverse collection of commercial interests. The Motor Vehicle Rule would have a substantial and direct effect on the Associations’ members. The Motor Ve hicle Rule, if finalized, would purport to subject greenhouse gases (“GHGs”) to regulation under the Clean Air Act (CAA) for the first time. As a result, under EPA’s current interpretation of its regulations, the Rule would trigger Title V and Prevention of Significant Deterioration (PSD) permitting and emission-control requirements fo r millions of stationary so urces owned and operated by the Associations’ members. These Title V and PSD requirements would impose unprecedented costs and burdens on the Associations’ members, EPA, and state regulatory authorities. [NHTSA-2009-0059-0094.1, p.1]

The Associations acknowledge EPA’s desire to address GHG emissions from mobile sources quickly, as well as NHTSA’s need to set new fuel economy standards, which must be promulgated at least 18 months before the affected model year (in this case the 2012 model year). 49 U.S.C. § 32902(g)(2). However, as proposed, the Motor Vehicle Rule ignores the enormous burdens the Rule would impose on stationary sources. This

7-6Other Comments

omission violates legal requirements for ag ency rulemaking, constitutes arbitrary and capricious action, and is simply bad policy. This is especially so because nearly all the environmental benefits EPA says will result from its promulgation of the Motor Vehicle Rule under CAA authority would also result from the NHTSA rule alone. Yet, unlike NHTSA action to raise corporate average fuel economy (CAFE) standards, the redundant EPA standards promulgated under the CAA woul d have regulatory impacts reaching far beyond the automotive industry and would impo se billions of dollars in additional permitting and compliance costs. [NHTSA-2009-0059-0094.1, pp.1-2]

Thus, although the Associations take no position on NHTSA’s proposal to increase CAFE standards, we vigorously object to EPA’s proposal to fina lize the superfluous Motor Vehicle Rule under CAA Section 202. EP A’s failure to account here for the PSD and Title V burdens it elsewhere acknowledge s will flow from this rulemaking renders this rulemaking legally invalid. EPA must fully consider those burdens in this rulemaking. [NHTSA-2009-0059-0094.1, p.2]

Alternatively, EPA could defer finalizing the pr oposed Motor Vehicle Rule at this time. EPA has ample authority and discretion to do so. And if EPA deferred, NHTSA still could finalize its regulations, yielding nearly all the emissi ons reductions that EPA seeks through the Motor Vehicle Rule , and none of the adverse PSD consequences. Moreover, deferring action on this rulemaking would pe rmit EPA to fully consider the burdens associated with regulating GHGs under the CAA. EPA obviously has not performed or considered this analysis, and instead has improperly deflected comments on these consequences to the proposed GHG Tailoring Ru le, which is inadequate to the task. EPA would abuse its discretion and act arbitrarily if it rushes to finalize the Motor Vehicle Rule before conducting the prope r analysis. [NHTSA-2009-0059-0094.1, p.2]

There are, however, several ways in whic h the unprecedented PSD implications of the Motor Vehicle Rule could be avoided. First, EPA could interpret its PSD authority to ensure that only pollutants for which a Na tional Ambient Air Qua lity Standard (NAAQS) has been set trigger PSD permitting requirement s. This interpretation is faithful to the plain text of the CAA and EP A regulations, as well as Congress’ original vision for the PSD program. Moreover, this interpretation would allow EPA to finalize a rule under CAA Section 202(a) that sets standards for GHG emissions from mobile sources without triggering unprecedented, costly, and burdensom e regulatory consequences for stationary sources. [NHTSA-2009-0059-0094.1, p.2]

EPA Must Assess and Address the Motor Vehi cle Rule’s Impacts on Stationary Sources Before Finalizing the Rule.

EPA’s failure to account for the Title V and PSD consequences of finalizing the Motor Vehicle Rule would render the final Rule bot h arbitrary and capricious, and also invalid based on other procedural requirements for rulemaking. [NHTSA-2009-0059-0094.1, p.2]

7-7EPA Response to Comments

1. If finalized, the Motor Vehicle Rule woul d run afoul of the fundamental prohibition against “arbitrary and caprici ous” agency action. The Suprem e Court has explained that “an agency rule would be arbitrary and cap ricious if the agency has relied on factors which Congress has not intended it to consider, entirely failed to consider an important aspect of the problem, offered an explanati on for its decision that runs counter to the evidence before the agency, or is so implaus ible that it could not be ascribed to a difference in view or the product of agency expertise.” Motor Ve hicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983) (emphasis added). [NHTSA2009-0059-0094.1, pp.2-3] [[See Docket Nu mber NHTSA-2009-0059-0094.1, pp.3-4 for more discussion on this issue.]]

2. EPA apparently seeks to justify its fa ilure to consider the PSD and Title V consequences of the proposed Motor Ve hicle Rule by directing comments on these consequences to the proposed GHG Tailoring Rule docket. It is improper for EPA to ignore these comments because they relate directly to and flow directly from the proposed Motor Vehicle Rule. [[See Docket Number NHTSA-2009-0059-0094.1, pp.4-6 for a detailed discussion on this issue.]]

Because EPA contends that PSD and Title V requirements for stationary sources will result from this rulemaking, it would arbitr ary and capricious for EPA to finalize the Motor Vehicle Rule without considering that consequence. For the reasons stated above, EPA cannot avoid that result by pointing to the GHG Tailoring rulemaking. [NHTSA2009-0059-0094.1, p.6]

In sum, EPA has no choice but to consider the impacts of the proposed Motor Vehicle Rule in this rulemaki ng. [NHTSA-2009-0059-0094.1, p.8]

PSD Permitting Requirements Need Not and S hould Not Apply to Stationary Sources’ GHG Emissions Solely by Virtue of EP A Finalizing the Motor Vehicle Rule

EPA could properly decline to consider th e PSD impacts of the proposed Motor Vehicle Rule in this rulemaking docket only if those impacts would not, in fact, result from the Rule. EPA has stated that PSD requirements will be triggered when the proposed Motor Vehicle Rule first subjects GHG emissions fr om cars to control—that is, model year 2012. See PSD Interpretive Memo Reconsideration, 74 Fed. Reg. at 51545–46. But EPA can interpret the statute and regulations to avoid that result and eliminate the need to analyze the proposed Motor Vehicle Rule’s effect on stationary sources in this proceeding. Moreover, by doing so, EPA woul d eliminate the need for the legally questionable GHG Tailoring Rule. [NHTSA-2009-0059-0094.1, p.8]

The immense burdens associated with PSD permitting that the Agency states would follow from issuance of the proposed Motor Vehicle Rule is not mandated by the Clean Air Act or the PSD regulations but rather is the result of EPA’s interpretations of the statute and regulations. EPA’s textual analysis, however, skip s a crucial step, which is whether the PSD program is act ually applicable under the pl ain language of the statute and regulations to sources that are major only by virtue of GHG emi ssions or to increases

7-8Other Comments

in GHG emissions when a criteria pollutant is not otherwise expe riencing a significant increase. [NHTSA-2009-0059-0094.1, p.8] [[See Docket Number NHTSA-2009-0059­ 0094.1, pp.8-10 for a detailed discussion on this issue.]]

The Phrase “Pollutants Subject to Regulation” Is Also Most Reasonably Interpreted to Exclude GHGs

If EPA does not interpret the statutory provisi ons regarding applicabil ity as discussed in II.A, above, EPA should recognize the unique nature of carbon dioxi de (CO2) and that Congress did not intend such a pollutant to trigger PSD. The endangerment finding under CAA Title II is distinctly different from the air quality purposes of the PSD program. Specifically, carbon dioxide emissions from moto r vehicles are required to be regulated under Title II where, in the Administrator’s judgment, such emissions “may reasonably be anticipated to endanger public health or welfare.” See 42 U.S.C. 7511(a)(1) (emphasis added). To the extent anthropogenic carbon di oxide emissions may reasonably be viewed as presenting an “endangerment” to “public h ealth or welfare” within the meaning of Title II, it does not follow that EPA is th ereby authorized, much less compelled, to regulate CO2 emissions from stationary sources under the CAA’s PSD program. [NHTSA-2009-0059-0094.1, p.10] [[See Do cket Number NHTSA-2009-0059-0094.1, pp.10-12 for a detailed discussion on this issue.]]

American Farm Bureau Federation (AFBF)

At What Point Will The Economic Impacts on Small Businesses be Described ? [OAR2009-0472-7171.1, p.3] As indicated in our comments and the comments of others to the ANPR, the application of these programs will have significant and serious adverse economic impacts on farmers, ranchers, and small businesses as well as sc hools, hospitals and churches. For example, an endangerment finding automatically subjects stationary sources (b uildings, facilities, structures) that have the potenti al to emit more than 250 tons of GHGs per year to costly and burdensome permits under the PSD program . The PSD permits require the applicant to comply with best available control t echnology as a condition for obtaining the permit. Title V requires entities that emit, or have the potential to emit, 100 tons per year of a regulated pollutant to also obtain a pe rmit for such emissions. [OAR-2009-0472-7171.1, p.4]

EPA has failed to perform the required econom ic impact assessment under section 317 of the Clean Air Act. The assessment must be conducted prior to the Tailpipe Rule becoming final. [OAR-2009-0472-7171.1, p.4]

[See Docket Number OAR-2009-0472-7171.1, pp.3-11 for detailed comments pertaining to: The Proposed EPA 'Tailoring rule' does not change the economic implications of regulating GHGs under the Clean Air Act, T itle V Permit Requirements Lead to Fees on Livestock, Application of Re quirements for Prevention of Significant Deterioration (PSD) Permits Will Cause Adverse Economic Im pacts to Agriculture, and Regulation of Greenhouse Gases Under the Clean Air Act Allows Little or No Flexibility]

7-9EPA Response to Comments

The de minimis amount of methane emitted from light duty motor vehicles does not sufficiently “cause or contribute” to the e ndangerment of public health and welfare to warrant regulation under section 202(a) of the Clean Air Act. [OAR-2009-0472-7171.1, p.11] Seeking to join the six different greenhouse gases together as a single “air pollutant” raises a series of questions and issues. As the agency illustrates, not only must these substances be found to “endanger the public h ealth or welfare” but their emission from the sources sought to be regulated must “cau se or contribute” to the air pollution which endangers the public health or welfare. Both of these requirements must be satisfied in order to regulate the su bstance. [OAR-2009-0472-7171.1, p.12]

[See Docket Number OAR-2009-0472- 7171.1, pp.11-14 for detailed comments pertaining to: The de minimis amount of meth ane emitted from light duty motor vehicles does not sufficiently “cause or contribute” to the endangerment of public health and welfare to warrant regulation under s ection 202(a) of the Clean Air Act.]

Section 424 of the FY 2010 Interior-Envir onment Appropriations Act Prohibits the Promulgation of the Tailpipe Rule and th e Tailoring Rule during FY 2010. [OAR-2009­ 0472-7171.1, p.14] As indicated above, once the Tailpipe Rule has been enacted, a number of Clean Air Act programs and requirements are automatically triggered, including permit requirements under Title V. Title V is a self-executing prog ram such that once a pollutant is regulated under any provision of the Clean Air Act (such as the Tailpipe Rule for GHG), no further rulemaking is required to make covered en tities liable to obtain operating permits required by Title V. [OAR-2009-0472-7171.1, p.14]

[See Docket Number OAR-2009-0472- 7171.1, pp.14-15 for detailed comments pertaining to: Section 424 of the FY 2010 Interior-Envi ronment Appropriations Act Prohibits the Promulgation of the Tailpipe Ru le and the Tailoring Rule during FY 2010]

GHG Regulation May Lead to Promulgation of National Ambient Air Quality Standards The Clean Air Act and the subsequent judici al interpretations placed upon it, describes the procedure required by the Administrator once she makes an endangerment determination. [OAR-2009-0472-7171.1, p.15]

[See Docket Number OAR-2009-0472- 7171.1, pp.14-15 for detailed comments pertaining to: GHG Regulation May Lead to Promulgation of National Ambient Air Quality Standards and the pertinent language in Section 108 of the Clean Air Act]

American Forest and Paper Association (AF&PA)

EPA Must Complete Sufficient Regulatory Impact Analyses Before Promulgating Tailpipe Emission Standards The preceding discussion showed how using Clean Air Act authorities to impose GHG emission standards on motor vehicles would impose huge burdens on businesses and on regulatory authorities, not only directly, but also because imposition of GHG emission

7-10Other Comments

limits on new motor vehicles would, pursuan t to the CAA and EPA regulations, mean that tens of thousands of a dditional new and modified statio nary sources would be subject to pre-construction PSD permitting requirement s, as well as requiring Title V operating permits for the first time for millions of sources. In addition to just the cost and delay those sources would incur to apply for such permits, the massive increase in affected sources would overwhelm permitting authorities and result in permitting “gridlock,” dramatically slowing economic deve lopment and innovation. [OAR-2009-0472-7126.1, p.3]

[See Docket Number OAR-2009-0472- 7126.1, pp.3-4 for detailed comments]

EPA Should Defer GHG Emission Standards for Motor Vehicles For the reasons described above, EPA should not promulgate motor vehicle emissions standards for GHGs at this time. The pr oposed endangerment and cause-or-contribute findings that are a prerequisite for such sta ndards raised many issues of first impression that have not yet been adequately addressed by EPA. Congress is in the midst of actively considering comprehensive le gislation addressing climat e change and GHGs, which is much more appropriate than trying to force GHG regulation through Clean Air Act programs that were designed to address entire ly different types of air pollution issues. And the imposition of tailpipe emission standards for GHGs will trigger massive stationary source permitting burdens for businesses and regulatory authorities, burdens that EPA has failed to assess and addr ess as required by law. [OAR-2009-0472-7126.1, p.4]

[See Docket Number OAR-2009-0472- 7126.1, pp.4-5 for detailed comments]

American Petroleum Institute

However, and even though the direct emissi ons reductions and fuel economy costs and benefits of the proposed EPA action and th e proposed NHTSA fuel economy standards are nearly identical, th e proposal entirely ignor es the fact that th e EPA regulations, if finalized, would have dramatically broader a nd more costly effects than the NHTSA rule. Unlike NHTSA action to raise corporate aver age fuel economy (CAFE) standards, new EPA standards promulgated under the Clean Air Act (CAA) would have regulatory impacts reaching far beyond the automotive indu stry and would trigger EPA regulation of GHG emissions from millions of sources never previously subject to regulation of GHG emissions, including millions of sources not pr eviously subject to any CAA regulation at all.

Thus, while API has only very focused objec tions to NHTSA increasing CAFE standards in the manner proposed, see Part IV infra, API strongly objects to EPA finalizing its proposed rule under CAA section 202 authority. API urges EPA to assess and address the dramatically adverse impacts of its proposal under CAA sect ion 202 before finalizing its rule. EPA must assess and appropriately mini mize these impacts, within this rulemaking if EPA is to promulgate section 202(a) standa rds that are not flawed as a matter of law.

7-11EPA Response to Comments

First, EPA must acknowledge that only pollutants for wh ich a National Ambient Air Quality Standard (NAAQS) has been set tri gger Prevention of Signi ficant Deterioration (PSD) permitting requirements.

Second and alternatively, EPA has the full au thority and discretion to defer finalizing CAA section 202(a) standards at this time. [OAR-2009-0472-7143.1, p.2]

EPA Cannot Finalize the 202 Rule Before Evaluating and Addressing Its Impacts on Stationary Sources. [OAR-2009-0472-7143.1, p.2]

EPA‘s Proposed Rule Unlawfully Fails to Analyze Its Effect s. [OAR-2009-0472-7143.1, p.3]

EPA May Not Shunt Comments Regarding the E ffects of its Proposed Car Rule to the Proposed Tailoring Rule. [OAR-2009-0472-7143.1, p.4]

EPA’s View that Issuance of the Proposed Car Rule Automatically Triggers PSD Based Solely on Emissions of GHGs Is Inconsistent with the Plain Meaning of the CAA and EPA’s Regulations. [OAR-2009-0472-7143.1, p.5]

EPA Should Exercise its Discretion to Defe r Promulgation of a Section 202 Rule: EPA has clear legal authority to defer action on this rule, and should do so because the potential economic consequences of the ru le are unprecedented and the environmental benefits of adding its imprimatur to the NHTSA rule are nearly nonexistent.

a. EPA Is Not Compelled to Act at This Time, and Should Exercise Its Discretion to Defer Finalizing New GHG Emissions Standards for Mobile Sources.

b. There Are Numerous Co mpelling Reasons to Defer the Section 202 Rule

Adding EPA’s imprimatur to nearly identi cal NHTSA fuel economy standards will not achieve any marginal environmental benefit. NHTSA standards wit hout this duplicative reliance on the CAA will not trigger PSD results that EPA has labeled “absurd, “impossible,” and “contrary to expressed congr essional intent.” The fact that the timing of the 202 Rule is discretionary means that EPA’s proposed PSD Tailoring Rule cannot be justified under the “absurd re sults” doctrine, and if the PSD Tailoring Rule is rejected the full range of “absurd” and “impossible” re sults will then flow from promulgation of the 202 rule. Further considerations also s upport this conclusion: Ongoing congressional and international deliberations may impact the validity of, or perceived necessity for, the proposed rule. [OAR-2009-0472-7143.1, p.9]

These are only the topic headings, for deta ils please refer to the docket [OAR-2009-0472­ 7143.1]

Arizona Public Service (APS)

7-12Other Comments

APS has significant concerns regarding th e proposed Light-Duty Vehicle Greenhouse Gas Emission Standards and Corporate Averag e Fuel Economy Standards. Specifically, a comparison of the proposed benefits resul ting from the EPA program to the NHTSA program reveals the programs to be virtually identical and that EPA's proposal provides no apparent additional benefit. For this reas on, APS believes that EPA's action is simply a means to regulate greenhouse gas emissions from stationary sour ces through the Clean Air Act Prevention of Significant Deterioration (PSD) and Title V permit programs. As such, APS also believes the economic and envi ronmental cost and be nefits analysis of this joint proposal fails to assess impacts on stationary sources. [OAR-2009-0472-7107.1, p.1]

If this rule is finali zed, a significant number of stationary sources wi ll become subject to PSD and Tide V permitting requirements. However, EPA did not include the economic and environmental consequences of triggering these rules. It is APS' position that EPA either withdraw its portion of the rule or perform a thorough economic and environmental cost and benefit analysis, and provide an adequate public notice and comment period to address the impacts to stationa ry sources. [OAR-2009-0472-7107.1, p.1]

BCCA Appeal Group (the Group)

More importantly, Congress is moving forward quickly on comprehensive legislation that would address the problem of climate change out side of the structure of the current Act. Despite a clear need to proceed with the ut most caution in this important area, EPA has proposed to regulate GHG emissions from motor vehicles in the Proposed Rulemaking to Establish Light-Duty Vehicle Greenhouse Gas Emission Standards and Corporate Average Fuel Economy Standards (the “M otor Vehicle GHG Rule”). Under EPA’s current interpretation of the CAA, the Moto r Vehicle GHG Rule may (as EPA has stated in the Proposed PSD and Title V GHG Tailori ng Rule (the “PSD Tailoring Rule”)3) trigger regulation of GHG emissions from m illions of stationary sources, including hundreds of thousands of Texas sources, many of which have never before been regulated under the Clean Air Act (“CAA”). [OAR-2009-0472-7505.1, pp. 1-2]

The Motor Vehicle GHG Rule, as well as its companion, the PSD Tailoring Rule, are fundamentally flawed, both procedurally and substantively, and Texas, as the nation’s leading energy producer and a leader in chemi cal manufacturing and agriculture, could be significantly impacted by these federal ru lemakings. Most notably, EPA completely failed to evaluate the burdens of triggeri ng PSD and Title V for GHG emissions under the required federal regulatory review statutes and Executive Orders. Furthermore, even had the Agency conducted the required burden analys is, the rule is unlaw ful, would devastate the Texas and national economies, and th e burdens of regulating GHGs under CAA Section 202 far outweigh the insignificant en vironmental benefits of the GHG emission standards. [OAR-2009-0472-7505.1, p. 2]

Accordingly, for all of the reasons discu ssed in these comments, EPA should withdraw the Motor Vehicle GHG Rule, and proceed with caution going forward by allowing both

7-13EPA Response to Comments

the international community and Congress time to develop a comprehensive and sensible approach to the global problem of climate change. [OAR-2009-0472-7505.1, p. 2]

[See OAR-2009-0472-7505.1, pp. 2-11 for commen ts related to PSD and NRS for stationary sources in Texas. These comment s include the following topics: A. The Motor Vehicle GHG Rule Will Disproportionately Ha rm Texas, B. EPA Utterly Failed to Account for these Devastating Impacts to Te xas and the Entire U.S. in its Burden Analysis of the Motor Vehicle GHG Rule, C. A Full Analysis of Actual Impacts on Sectors Beyond Autos Would Demonstrate Th at the Rule Cannot be Justified—the Burdens Associated with the Motor Vehicle GHG Rule Would Devastate the Texas Economy, D. EPA Should Adopt a More Reasona ble Interpretation of the Clean Air Act Under which the Final Motor Vehicle GHG Rule Would Not Trigger PSD For Stationary Sources, and E. Nothing Compels EPA to Action under Section 202 at this Time—the Rule Provides Little or No Benefit and Produces Overwhelming Burdens.]

Brick Industry Association

The Brick Industry Association (BIA) is providing these comments because we are, directly affected by this rulemaking, even though none of our members will be directly subject to the requirements promulgated as a result of this process. As this rulemaking has the potential to impact virtually ever y manufacturer (and many consumers) in the country by its precedent setting regulation of greenhouse gases, this rulemaking directly impacts all of us. The brick industry provide s one of the leading wall cladding materials for both commercial and residential cons truction throughout the country. There are approximately seventy brick manufacturing companies in the United States, with well over sixty of these companies being c onsidered 'small businesses.' [OAR-2009-0472­ 11279, p.1]

In developing the Light Duty rule, and a ssessing the impacts on small businesses, the EPA completely ignored the tens of thousands of facilities that would be impacted by the fact that greenhouse gases would become a regulated pollutant at so me point after this rule goes into effect (we are aware that EPA is still evaluating which specific 'triggering action' will make this happen). By deliberat ely ignoring the broader impact of this rulemaking process, the EPA was able to certif y that there was not a significant impact on a substantial number of small entities 'pursuant to the Regulatory Flexibility Act (5 U .S.C. 601 et seq., as amended by the Small Business Regulatory Enforcement Fairness Act (SBREFA) of 1996).' The EPA is di singenuous at best. [OAR-2009-0472-11279, p.1]

Clearly, publishing the 'GHG Tailoring Rule' fo r the New Source Review Program under Part 50 of the Clean Air Act (publis hed October 27, 2009, 74FR55291) represents significant effort on the EPA's part to m itigate the known impacts of the light Duty rulemaking. That proposal was also certif ied as having no significant impact on a substantial, number of small entities because it results in a net reduction of burden to industry over the burden that would exist if no 'Tailoring Rule' were promulgated. This clearly demonstrates that EPA understands that an impact occurred, based on their

7-14Other Comments

actions, that impacts industry. We assert th at they also should recognize that this impacted industry includes a substantial number of small entities. For our industry, even if the Tailoring Rule is publis hed, the Light Duty Rule means that well over half of our industry will be thrust into the complex, a nd expensive, New Source Review process for the very first time. Some of our industry w ill also be pushed back into Title V, even though they will only be major sour ces for GHG. [OAR-2009-0472-11279, pp.1-2]

The EPA cannot reasonably assert that the Li ght Duty Rule has no significant impact on a substantial number of small entities in one rule, when less than one month later, it publishes another rule that attempts, but falls short, of mitigating those impacts. [OAR2009-0472-11279, p.2]

California Cotton Ginners Association (CCGA)

EPA should review the economic benefit of this rule, considering all costs; both of those currently in the docket, and those outlined in the proposed Tailoring Rule. In addition, EPA should clearly evaluate the benefit of re gulations solely based on CAFE standards. Finally EPA should consider extending the co mment period in this docket, considering the significant additional costs discussed in the Tailoring Rule Proposal. [OAR-2009­ 0472-7139.1, p.2]

[See Docket Number OAR-2009-0472- 7139.1, pp.1-2 for detailed comments]

Charleston Metro Chamber of Commerce

Our Chamber's Environmental Committee has studied the proposed rule and have major concerns primarily relating to the triggering of other provisions of the Clean Air Act (specifically Title V permitting and New Source Review permitting). We do not believe that EPA has adequately evaluated those c onsequences or options for minimizing and avoiding other collateral impacts. Our interp retation is that this rulemaking will trigger other provisions of the Clean Air Act (specifically Tile V permitting and New Source Review (NSR) permitting). [OAR-2009-0472-7061.1, p.1]

Unlike NHTSA, EPA is under no statutory deadline to promulgate the standards that it is now considering. It has the time and the oblig ation to analyze more fully its regulatory proposal and the wide-ranging impacts that it an ticipates will likely be incurred after its finalization. Finally, EPA has failed even to consider possible ways in which it might avoid prematurely imposing significant regulatory burdens, like PSD and Title V requirements, on stationary sources while pursuing mobile s ource regulation under section 202(a). These are matters of the ut most significance, and EPA cannot simply ignore them consistent with its obligati ons under the CAA. For all of the foregoing reasons, Consumers Energy agrees with UAR G and requests that EPA withdraw its portion of the Joint Motor Vehi cle Proposal, that NHTSA revise its regulations as may be appropriate to address this change, and th at EPA engage in a new, more thoroughly reasoned regulatory decision-making process wh ile providing adequate public notice and opportunity for comment on these impor tant issues. [OAR-2009-0472-7264.1, p.2]

7-15EPA Response to Comments

Specifically, EPA has failed to carefully eval uate the number of sources that could be affected once the Light-Duty Vehicle GHG Stan dards go into effect. We feel that EPA has grossly underestimated the number and types of facilities that will be impacted by the light-duty vehicle GHG proposal by becoming s ubject to NSR pollutants and the Title V and NSR permitting requirements. The South Carolina Department of Health and Environmental Control (SCDHEC) has identified over 800 of the currently permitted small sources that would become subject to Tile V and NSR permitting as soon as GHGs are regulated under Light-duty Vehicle GHG st andards. In comparison, South Carolina currently has 281 Title V permitted facilities.

[See Docket Number OAR-2009-0472- 7061.1, pp.1-2 for detailed comments]

Consumers Energy

Consumers Energy is a member of the Utility Air Regulatory Group (UARG). We endorse the comments filed by UARG in this do cket and incorporate them by reference. While we will not reiterate those detailed le gal and technical comments, our comments will highlight several of the issues raised by UARG. [OAR-2009-0472-7264.1, p.1]

1. It is not clear that PSD and Title V permitting requirements would be triggered by the proposed rule. 2. EPA has not established that its proposal is capable of aver ting any endangerment caused by GHG emissions. Therefore, EPA is not authorized to issue proposed standards under Section 202(a) of the CAA. [OAR-2009-0472-7264.1, p.1] 3. EPA has misinterpreted the legal standard for finding endangerment. 4. EPA's proposed regulations would be la rgely duplicative of NHTSA's proposed program, adding essentially nothing. The eff ects of the joint program are too small to attack any climate-related endangerment fruitfully. 5. The environmental and economic impacts an alysis underlying the joint motor vehicle proposal suffers from significant we aknesses and must be revised. 6. EPA Has Time To Take These Issues Into Consideration and Is Obligated To Do So. [OAR-2009-0472-7264.1, p.2]

Although the Agency acknowledge s the speculative and unquan tifiable nature of the matters it has attempted to assess, it fails enti rely to address what may be the single most significant issue associated with its proposed standards -- the potential application of the PSD and Title V permitting programs to GHGs emitted by stationary sources. EPA's attempt to address these issues in other ru lemakings cannot satisfy its obligations to provide adequate public noti ce and opportunity for comment on the impacts of the Joint Motor Vehicle Proposal, and indeed, examin ation of EPA's analysis in the PSD Reconsideration Rule and the Pr oposed Tailoring Rule demonstr ates that issues relevant to this rulemaking will not be analyzed in those proceedings either. [OAR-2009-0472­ 7264.1, p.2]

Council of Industrial Boiler Owners (CIBO)

7-16Other Comments

Although GHGs are not currently 'subject to regulation' under the CAA, once EPA finalizes the LDV rule to regulate GHG em issions under CAA Section 202, strong legal arguments can be made that other CAA re gulatory requirements will be triggered, affecting stationary source CAA compliance. Due to the strong possibility that EPA could be legally compelled to regulate GHG em issions from stationary sources as a result of this regulation, it is unreasonable and ar bitrary for EPA not to analyze impacts on stationary sources that could be required to limit their GHG emissions under a reasonable reading of the CAA. EPA has failed to c onduct a proper regulatory impact analysis. CIBO takes the position overall that the CAA is an inappropriate vehicle for regulating GHG emissions and any effort to reduce GHG emissions from stationary sources is appropriately left to the fede ral legislature in the context of comprehensive, nationwide and economy-wide climate legi slation. [OAR-2009-0472-7271.3, p.2]

ACCORDING TO EPA'S OWN LEGAL ANA LYSIS, GHGS ARE NOT CURRENTLY POLLUTANTS 'SUBJECT TO REGULATION' UNDER THE CAA As EPA explains in its recently proposed rule reconsidering the December 18, 2008 'PSD Interpretive Memo,' and supported by histor ic Agency practice and decisions of EPA officials, GHGs are not polluta nts that are now 'subject to regulation' under the CAA. EPA [OAR-2009-0472-7271.3, p.2] has long held that for a pollutant to be 'subject to regulation' there must be actual control m easures and not only monitoring or reporting requirements. [OAR-2009-0472-7271.3, p.3]

[See docket OAR-2009-0472-7271.3, pp.2-3 for de tailed comments pertaining to: According to EPA's Own Legal Analysis, GHGs are not Currently Pollutants 'Subject to Regulation' Under the CAA]

IF GHGs ARE REGULATED UNDER SECTION 202 OF THE CAA, IT IS LIKELY THAT OTHER REGULATORY REQUIREMENTS WILL BE TRIGGERED In other pending rulemakings, EPA has clea rly stated its view that EPA’s proposed LDV Rule, if finalized as proposed, will trigger other unrelated CAA regulatory requirements. Specifically, under EPA's interp retation of the CAA, regulation of GHGs under Section 202 will trigger requirements under the Prevention of Significant Deterioration (PSD) program . EPA acknowledged this in its October 27, 2009 proposed rule, Prevention of Significant Deteriorati on and Title V Greenhouse Gas Tailoring Rule; Proposed Rule) (Tailoring Rule). In the ope ning paragraphs of the Tailoring Rule, EPA notes that once GHGs are regulated [ OAR-2009-0472-7271.3, p.3] under Section 202(a), PSD permitting requirements will immediatel y apply to stationary sources emitting GHGs above the significance th reshold. [OAR-2009-0472-7271.3, p.4]

[See docket OAR-2009-0472-7271.3, pp.3-4 for deta iled comments pertaining to: If GHGs are Regulated Under Section 202 of the C AA, It is Likely That Other Regulatory Requirements Will Be Triggered]

EPA HAS FAILED TO CONDUCT AN AD EQUATE ANALYSIS OF THE IMPACTS OF THE LDV RULE ON STATIONARY SOURCES. EPA has failed to conduct a complete analysis of the impacts associated with

7-17EPA Response to Comments

regulating GHGs under Section 202(a) of th e CAA. EPA has openly acknowledged that the promulgation of standards to control GHG emissions from light-d uty motor vehicles under Section 202(a) will inevitably trigger PSD permitting requirements for stationary sources; nonetheless, EPA has not included in this proposal an impact analysis that addresses the effect this rule will have on sta tionary sources. This represents a major flaw in the proposed rule. [OAR-2009-0472-7271.3, p.4]

[See docket OAR-2009-0472-7271.3, pp.4-10 for deta iled comments pertaining to: EPA has Failed to Conduct an Adequate Analys is of the Impacts of the LDV Rule on Stationary Sources]

County of Greenville, SC

Greenville County joins the SC Department of Health and Environmental Control (SCDHEC) in that we do not support EP A moving forward with greenhouse gas standards under the Clean Air Act at this time and request that EPA delay this action until adequate evaluation occurs. EP A has not evaluated the detrimental collateral effect that will occur if these standards are finalized. The additional EPA regulation comes at an enormous cost with virtually no additional environmental benefits from greenhouse gas standards on light-duty vehicles. EPA acknowledges that the only way to reduce carbon dioxide (CO2) emissions from light-duty vehi cles is to increase fuel economy and, similarly, that there are no emission control technologies that reduce CO2 emissions from light-duty vehicles. [NHTSA-2009-0059-0101, p.1]

According to DHEC, since the Supreme Court decision, EPA has proposed several actions. First, in February 2009, EPA decided to 'reconsider' the previous administration's decision on whether or not CO2 was a regulated pollutant under Prev ention of Significant Deterioration (PSD). Second, in April 2009, EPA proposed a finding that greenhouse gases contribute to air pollution that may endang er public health or welfare. This decision has not been finalized but we understand that the 'endangerment finding' is currently at the Office of Management and Budget for review. Third, in September 2009 EPA and NHTSA proposed this rule to improve fuel economy and regulate greenhouse gases from light-duty vehicles. And finally, EPA has now proposed a 'tailoring rule' to attempt to address the 'absurd results' that will occur in the Title V and PSD permitting programs for New Source Review regulated pollutants once the light-duty vehicle GHG rule is finalized.

EPA Administrator Jackson, before the Senate Committee on Environment and Public Works and in her January 23, 2009, memorandum to all EPA employees, expressed her commitment to uphold the values of tran sparency and openness in conducting EPA operations. She went on the say in her memo on transparency that, 'The success of our environmental efforts depends on earning and maintaining the trust of the public we serve. The American people will not trust us to protect their health or their environment if they do not trust us to be tr ansparent and inclusive in our decision-making. To earn this trust, we must conduct business with the publ ic openly and fairly.' Greenville County commends EPA Administrator Jackson fo r her commitment to transparency.

7-18Other Comments

With that being said, the county is concerned that EPA may not be as transparent as they should be and that they are sending mixed or confusing messages about the potential impact of the light-duty vehicle GHG proposal on all sources that could be impacted, in particular small business. EPA actually suggeste d to affected entities that they should not comment on the light-duty vehicle GHG proposal but should instea d submit comments on the proposed 'tailoring rule.' SCDHEC expe rts believe that EP A was misleading to suggest this point and that it may inappropriately influen ce small business, industry, and other affected entities to refrain from commenting on an important rulemaking.

It is critical that all potentia lly affected entities understand the impact of EPA regulating greenhouse gas emissions under the light-duty vehi cle proposal. It will be too late to address any concerns that stati onary (industrial) sources have in the 'tailoring rule' as they will already be subject to PSD, as defined in the Clean Air Act, once EPA regulates greenhouse gases from light-duty vehicles. There are fundamental issues related to the 'tailoring rule.' and EPA's continued message of the 'absurd results' and 'administrative burden' of not moving forward with a 'tailori ng rule' only confuses the real situation as the thresholds being proposed are 'illegal' under the Clean Air Act. Any permit issued with thresholds higher than those within the Clean Air Act would be vulnerable to appeal and litigation, even though EPA attempts to just ify the tailoring rule by saying that by not doing so would create results 'so illogical or contrary to sensible policy as to be beyond anything that Congress could reasonably ha ve intended.' We do not understand how EPA could know this and not also know that there is no guarantee their legal inte rpretation to exempt small sources or set different thre sholds in the tailoring rule will not be challenged and upheld in court. EPA moving forw ard in this directi on is very disturbing.

As previously stated, Greenville County has c oncerns about the collat eral effects of EPA moving forward at this time to regulate greenhouse gas emissions from light-duty vehicles. EPA must fully evaluate the colla teral impact this proposal would have on all other aspects of the Clean Ai r Act including, but not limited to, the impact on state and local air permitting authorities, business, i ndustry and the economy to all areas of the country, but in particular stat es like South Carolina who still employ many people in the manufacturing sector. As they have not fully evaluated th e impact to state and local permitting authorities, EPA has not met the requirements under the Unfunded Mandates Reform Act of 2005 for the light-duty vehi cle GHG proposal. EPA even states in the tailoring rule for stationary sources, 'State permitting authorities would be paralyzed by permit applications in numbers that are orde rs of magnitude greater than their current administrative resources could accommodate' yet they have not taken this into consideration in the light-dut y vehicle greenhouse gas proposal.

Finalizing this proposal would have a detrimen tal effect on our state's economy at a time when unemployment is currently at 11.6% a nd is only expected to increase. Once EPA 'regulates' greenhouse gas emissions from mob ile sources, the Clean Air Act requires that stationary sources be regulate d under the threshold requireme nts as specified within the Clean Air Act - regardless of any 'tailoring ru le' EPA develops - as those thresholds are specified within federal law. States and lo cal permitting authorities are totally unprepared for the millions of entities which will be required to comply with the Clean Air Act once

7-19EPA Response to Comments

greenhouse gas standards are set by EPA on li ght-duty vehicles. The permitting process with SCDHEC will become so backlogged as to create a permitting moratorium. New business and industry will not be built; ex isting business will not expand; and, existing business and industry will not repair equipmen t if such repairs would require a permit. Again, these are detrimental effects in the economy and unintended consequences with the minuscule environmental benefit th at would occur from EPA greenhouse gas standards on light-duty vehicles. [NHTSA-2009-0059-0101, pp.2-4]

The commenter has the same concerns as SCDHEC and supports their comments.

Regarding the impact to state and local permitting authorities, one of the areas that EPA has not fully evaluated is that many states, including South Carolina, have state-specific rules that EPA has required be promulgated and approved into the State Implementation Plans that address threshold levels for NS R pollutants. What EPA has also failed to recognize is that regardle ss of the thresholds they establish in the 'tailoring rule,' business and industry (and possibly other sources) within a SIP approved state are still subject to the state specific regulations - which comply with the federal Clean Air Act. This means that if a state were to move forward with i ssuing a permit utilizing the federal thresholds that are established under a tailoring rule, the permit woul d be ripe for appeal and litigation by third parties as th e state rule is more stringen t. To address this EPA has encouraged states to begin the process as s oon as possible to revise these state specific requirements - even knowing that thresholds they are suggesting are illegal because the federal Clean Air Act thresholds are more stringent. We are positive that SCDHEC can not take a regulation to the South Carolina Legislature that violates federal law.

Another area that EPA has failed to carefully evaluate is related to the number of sources that could be affected once the light-duty vehicle GHG proposal goes into effect. The DHEC feels that EPA has grossl y underestimated the number a nd types of facilities that will be impacted by the light-duty vehicle greenhouse gas proposal by becoming subject to NSR pollutants and the Title V and PSD requirements. While SCDHEC continues to evaluate the specific impact to currently pe rmitted SC sources and will make comment to this effect to the 'tailoring rule,' EPA ha s estimated that 12,000 sources in South Carolina could become major sources; therefore, they would become subject to Title V and PSD permitting as soon as greenhouse gases are re gulated under light-duty vehicle greenhouse gas standards. In comparison, South Carolina currently has 281 Title V permitted facilities. In addition to all of the other asso ciated impacts, even the smallest modification or expansion activity may tr igger a PSD technology review and modeling analysis. The technology review would encompass all the trig gered PSD pollutants, not just greenhouse gases. Economically, these facilities w ould have no choice but to abandon any new project or modification. It is interesting to note that many of these facilities would be subject to PSD and Title V because of natura l gas combustion, which is considered to be a clean burning fuel. In add ition, it is expected that new construction would halt because of these new requirements. [OAR-2009-0472-8346, p.4]

Dow Chemical Company (Dow)

7-20Other Comments

EPA should use its discretion and postpone finalizing the proposed rule until all potential impacts are fully considered. EPA has clear legal authority to defer prom ulgation of a GHG emission standard under CAA Section 202, even if the Agency proceeds in the near future to finalize a positive endangerment finding under CAA Section 202. EP A should take the time to deliberately and carefully evaluate and cons ider all potential impacts of the proposed rule before final promulgation, as the agency itself said, “E PA recognizes that some small entities continue to be concerned about the potential impacts of the stat utory imposition of PSD requirements that may occur given the various EPA rulemakings currently under consideration concerning greenhouse gas emissions.” (74 FR at 49629). Even the Supreme Court in Massachusetts v. EPA, whos e ruling is the impetus for this proposal, indicated that EPA has “signi ficant latitude as to the manner, timing, content, and coordination of its regulations with those of ot her agencies.” (Slip op. at 30). [OAR2009-0472-7221.1, p.2]

EPA should not rush to promulgate this or a ny rule that has such an enormous impact on regulated entities, both industrial facilities as well as sma ll businesses, an d potentially devastating effect on the US [OAR-2009-0472-7221.1, p.2] ec onomy without careful and considerable deliberation and discussion w ith affected parties. Rather, EPA should exercise its authority to de fer promulgation of this propos ed rule because the potential economic consequences of the Motor Vehi cle Rule are massive and unquestionably outweigh any environmental benefits that would flow from EPA finalizing the rule. Instead, EPA should allow NHTSA to finali ze its portion of the rule which proposes CAFÉ standards in order to allow that ag ency to meet its Model Year 2012 deadline without finalizing EPA’s porti on of the rule that proposes GHG emissions standards. The NHTSA portion of the rule alone will accomplish both agencies’ stated goal of addressing emissions from light duty motor vehicles to signi ficant environmental benefit without unleashing the devastating cascade effects of triggering the PSD program on small and stationary sources under the CAA. Delaying this rulemaking would eliminate the immediate impact of PSD on these sources, or at least allow EPA the time to evaluate other options and to truly recognize the potential impacts of this proposed rule on stationary sources. As a result, there is no need for EPA to finalize this proposed rule at this time. [OAR-2009-0472-7221.1, p.3]

In this proposal, EPA needs to consider pot ential impacts on stationa ry sources of GHGs. As a part of this rulemaking, EPA needs to consider and assess the potential impact of this rule on stationary sour ces. Even though the Proposed Motor Vehicle Rule purports to concern only regulation of mobile source GHG emissions, EPA has stated in other proceedings that the proposed Motor Vehicl e Rule’s impact is not limited to motor vehicles. In EPA’s Advance Notice of Propos ed Rulemaking (ANPR) to seek public input on the ramifications of regulating GHGs under the CAA (73 FR 44354), the agency stated that a Motor Vehicle Rule woul d trigger PSD permitting requirements for GHG emissions from myriad stationary sources th roughout the United States that had never before been subject to CAA regulation. Becau se EPA has made it quite clear that they believe finalizing this rule will automatica lly impact stationary sources, they are obligated to thoroughly analyze these impacts as part of this rulemaking before final

7-21EPA Response to Comments

promulgation. This evaluation should compare the impacts to any benefit the EPA rule provides above and beyond the propos ed NHTSA Rule. [OAR-2009-0472-7221.1, p.3]

Duke Energy

Duke Energy Business Services LLC (“Duke Energy”), on behalf of Duke Energy Carolinas, LLC, Duke Energy Indiana, Inc., Duke Energy Ohio, Inc., Duke Energy Kentucky, Inc., and Duke Energy Generation Se rvices (“DEGS”), therefore submits the following comments on the Joint Motor Vehicl e Proposal. Specifica lly, the significant flaws and shortcomings of the Joint Motor Ve hicle Proposal necessitate the withdrawal of EPA’s portion of the proposed rule. Duke En ergy continues to support the enactment of environmentally and economically sustainabl e federal climate change legislation. Regulating GHGs under the CAA is th e wrong approach. [OAR-2009-0472-7136.1, p.2]

The U.S. Environmental Protection Agency ’s (“EPA”) has stated its view that promulgation of the GHG motor vehicle standards will subject GHGs to the CAA Prevention of Significant Deterioration (“PSD”) program and the permitting requirements of Title V of the CAA, potentially as soon as the date on which the rule becomes final and effective. Duke Energy believes, however, that EPA’s legal positions in this regard and the analysis presented in the proposed rule are seriously flawed and must be corrected. [OAR-2009-0472-7136.1, p.2]

Moreover, because of EPA’s stated view that promulgation of the GHG motor vehicle standards will subject GHGs to the PSD program and the permitting requirements of Title V of the CAA, and the fact that EPA’s proposed GHG motor vehicle emission standards would be an unnecessary duplication of NHTSA’ s proposed fuel efficiency requirements, EPA’s action is more a proposal to regulat e GHG emissions from stationary sources through the PSD and Title V permitting program s than it is a proposal to regulate GHG emissions from motor vehicles. Yet EPA has fa iled to analyze and address in its proposal what is likely the single most significant issu e associated with its proposed standard – the potential application of the PSD and Title V permitting programs to GHGs emitted by stationary sources. This would include an an alysis of the significant burdens the rule would place on stationary sources and the impact on jobs and the economy, at a time when unemployment is still rising and the economy is struggling to recover from recession. The EPA has instead suggested that similar issues be addressed through its Proposed Tailoring Rule and PSD Reconsiderat ion Rule. Those proceedings, however, will not adequately evaluate the impact of EPA’s proposed joint program with NHTSA; indeed, EPA’s selected approach has effec tively removed all meaningful opportunities to evaluate and provide comments on the eff ect of EPA’s proposed GHG motor vehicle emission standards on stationary sources. A decision to regulate GHG emissions from stationary sources is of such magnitude that it should be made only based on careful analysis and reasoned determinations of cost , technology, and other rele vant factors. It should not result from a back door approach vi a regulation of automobile fuel efficiency with little more than bare acknowledgement. Given the [OAR-2009-0472-7136.1, p.3] significance of the impacts th at are likely to result from the establishment of a CAAbased program to regulate GHG emissions from motor vehicles that, according to EPA,

7-22Other Comments

ultimately result in significant regulation of stationary sources, EPA must analyze these issues adequately as a part of this rulemaking. [OAR-2009-0472-7136.1, p.4]

In addition, because EPA’s proposed regulatory program fails to add significantly to the results that could be achieved through NHT SA’s proposal alone, EPA should instead consider how it might avoid prematurely tr iggering PSD and Title V, including through the option of simply addressing carbon di oxide (“CO2”) emissi ons through NHTSA’s CAFE standards and not through emission st andards promulgated under section 202 of the CAA. EPA is under no statutory or other deadline to promulgate CAA-based regulations of GHGs. It has time and the obl igation to consider and analyze fully the various issues raised by this pr oposed rule, and it should make use of that time. Further, because EPA has additional time to analyze its options, the Agency should examine various mechanisms for regulating under sec tion 202(a) of the CAA that might not result in the imposition of PSD and Title V on countle ss stationary sources. Duke Energy does not believe that EPA’s current proposal woul d necessarily trigger PSD for GHGs, and the Agency should assess whether it has the ab ility to avoid needlessly imposing such significant regulatory burdens through a rulemaking that s hould address only motor vehicles. [OAR-2009-0472-7136.1, p.4]

In summary, for all of foregoing reasons, EPA lacks the legal authority to issue its proposed GHG motor vehicle emission standards under section 202(a) of the CAA. Duke Energy therefore requests that EPA withdraw its portion of the joint Motor Vehicle Proposal and substantially revi se its proposal to eliminate the CAA-based portion of the proposed program. Duke Energy further re quests that EPA engage in a new and substantially more tran sparent [OAR-2009-0472-7136.1, p.4] rulemaking process that addresses all of the significant issues that regulation under section 202(a) of the CAA raises, including the ramifications for stati onary sources and the economy. At the very least, EPA should reopen the comment pe riod on its proposed GHG motor vehicle emission standards to allow the public to pr ovide comments on these serious matters that EPA has, thus far, neglected. [OAR-2009-0472-7136.1, p.5]

In addition to the above comments, D uke Energy strongly supports the comments submitted by the Utility Air Regulatory Group on the Joint Motor Vehicle Proposal and refers EPA to those comments for a more deta il discussion of the i ssues raised above. [OAR-2009-0472-7136.1, p.5]

Edison Electric Institute

Specific Comments on the Light-Duty Vehicle Proposal EEI has no comment on the substance or timing of the applicability of the standards to be applied to light-duty motor vehicles. We unde rstand that they can be applied through the NHTSA regulations without recourse to the CAA and fully support the proposal to implement the NHTSA regulations. [OAR-2009-0472-7212.1, p.2]

However, we believe it is important for EP A to consider whether it should promulgate separate rules under the CAA at this time (which would be almost identical as the

7-23EPA Response to Comments

NHTSA regulations in their impact on vehi cle GHG emissions). Given the interconnected nature of the CAA’s provisions for regulat ing mobile and stationary sources, EPA currently interprets the CAA such that: 1) a final CAA s ection 202 rule applicable to light-duty motor vehicles would trigger regulate d status 2 for the firs t time for stationary sources emitting GHGs as well; 2) new stationa ry sources and those existing sources that modify their facilities above specified si gnificance levels would be subject to PSD permitting requirements; and 3) new and existing sources would be obligated to incorporate applicable GHG requirements in title V operating permits. Unfortunately, EPA does not address or even acknowledge these ramifications for stationary sources in the Proposed Rulemaking, nor does the Agency acknowledge the possible CAA remedies to delay such a triggering event. [OAR-2009-0472-7212.1, p.2]

EEI urges EPA to consider whether the Agency should trigger stationary source regulation before it has developed guidance and ru les to apply to facilities that would be affected by such regulation. We are concerned that the agency could create a regulatory vacuum were it to proceed without developi ng needed guidance for regulated entities and their state and federal regulators once GHG regulations apply to stationary sources. While EPA has proposed two rules addressi ng some aspects of its regulation of GHG emissions from stationary sources, EPA ha s not proposed any approach to guide the applicability of CAA standards to specific facilities seeking to obtain permits. [OAR2009-0472-7212.1, p.2]

EPA staff currently are working on a constr icted schedule to prep are best available control technology (BACT) gui dance under the PSD program, with the assistance of a working group of the Clean Air Act A dvisory Committee (CAAAC), for permitting agencies charged with implementing BACT reviews for GHGs. We believe EPA should consider whether the guidance [OAR-2009- 0472-7212.1, p.2] being deve loped will be in place when GHG regulations are applied to st ationary sources and consider how the stationary source program coul d go forward without such guida nce. We also request that EPA consider whether additional time for the CAAAC working group and EPA staff to complete such guidance would facilitate a more efficient and orderly transition to regulating GHGs under the PSD program and allow enhanced assessment of the options for incorporating GHG requirements into title V operating permits. [OAR-2009-0472­ 7212.1, p.3]

Given the substantial impacts of the Proposal on all stationa ry sources, we request that EPA consider whether administrative necessity requires it to coordinate the timing of this regulation with the issuance of guidance need ed to explain how new GHG regulation will apply to permitting of stationary sources. This is the same standard that EPA proposes to apply in the Tailoring rule. Massachusetts v. EPA clearly indicated that the agency has discretion as to the “manner, timing, conten t, and coordination of its rulemaking with those of other agencies.” [OAR-2009-0472-7212.1, p.3]

Importantly, if EPA delays finalizing the CAA section 202 portion of this proposal, NHTSA’s estimates of the impacts of the pr oposed CAFE standards are nearly identical

7-24Other Comments

to EPA’s estimates of the impacts of its proposed section 202 motor vehicle emissions standards.[OAR-2009-0472-7212.1, p.3]

Finally, delaying the imposition of regulations on stationary sources would be consistent with the Administration’s tran sition team announcement at the end of last year that Congress would have 18 months to pass co mprehensive climate change legislation, obviating the need for piecemeal GHG regulation by EPA via the CAA. Such an 18­ month period would continue through appr oximately July 2010 and provide additional time for Congress to act. Comprehensive le gislation, as noted by many Administration officials and by EEI, is far preferable to CAA regulation to reduce GHG emissions. [OAR-2009-0472-7212.1, p.3]

Consequently, EEI asks EPA to consider the timing of the issuance of its proposed light duty motor vehicles rule, in light of the admi nistrative implications such rules would have for stationary sources, to assu re that the best regulatory gu idance is in place when new GHG related requirements take effect. EEI appreciates the opportunity to provide comments. Questions may be directed to John Kinsman (202-508-5711) or Emily Fisher (202-508-5616). [OAR-2009-0472-7212.1, p.3]

Energy-Intensive Manufacturers Working Group

[[These comments were originally submitted in response to the Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule; Proposed Rule, 74 Fed. Reg. 55292 (October 27, 2009). Because the comments are relevant to related agency proceedings that would culminate in the regulation of greenhouse gas emitters, including the energy-intensive trade-exposed (EITE) members of the Working Group, under the Prevention of Significant Deterioration (PSD ) regulatory scheme, the commenter filed them in this docket.]]

[See Docket Number OAR-2009-0472-11276.1, pp.3-42 for all comments on this issue.]

Fertilizer Institute

Best Available Contro l Technology (BACT) EPA explains in the preamble to the Pr evention of Significant Deterioration (PSD) tailoring rule that the motor vehicle rule will make GHGs a regulated pollutant under the CAA. TFI understands that EPA has formed an advisory committee to evaluate BACT options and that the agency intends to issue guidance on th e subject in conjunction with final regulations. However, EPA has failed to comply with its statutory obligations to analyze the cost of potentia l BACT to impacted industries. Whatever BACT is determined to be, complying with those requi rements will pose a significant cost to the industry. [OAR-2009-0472-7279.1, p.2]

TFI requests that an economic analysis of the implementation of BACT will have on industry and more details regarding acceptabl e BACTs to use for pollution abatement be conducted. [OAR-2009-0472-7279.1, p.2]

7-25EPA Response to Comments

Permitting of PSD and Title V Permitting Programs EPA estimates PSD permit applications woul d increase by 150-fold and process time for applications could take up to ten years. Additionally, EPA estimates that Title V permit applications will increase and years of dela y will result in the program. TFI does not see any near-term benefits to the PSD rule due to the backlog of permits estimated to occur. Furthermore, EPA indicates it will not issu e a State Implementati on Plan (SIP) call or require states to adjust their PSD rules. The result of this will be uncertainty for applicants and an overwhelmed permitting sy stem with little effective results. [OAR2009-0472-7279.1, p.2]

TFI requests that EPA evaluate and provide a solution to the expected permitting system conundrum. [OAR-2009-0472-7279.1, p.2]

Economic Impact Analysis (EIA) EPA, under the CAA, is required to perform an EIA for individual rulemakings under the CAA’s authority. Failure to perform this manda tory obligation is a cl ear violation of the CAA and jeopardizes the credibility and inte grity of EPA’s ability to make informed policy decisions. [OAR-2009-0472-7279.1, p.2]

TFI requests that EPA perform a full EIA and ma ke these findings available to the public. [OAR-2009-0472-7279.1, p.2]

Georgia Department of Natural Resources

We do, however, have significant concerns with the rule as currently proposed, primarily related to the triggering of other sections of the Clean Air Act (specifically Title V permitting and New Source Review permitti ng). We do not believe that EPA has adequately evaluated those impacts. We do not believe that EPA has adequately evaluated the options for mini mizing, or avoiding, these colla teral impacts. Our concerns are described herein along with recommended changes to the pr oposed rule that will still produce the intended results of the rule, while minimizing, or avoiding, these collateral impacts. [OAR-2009-0472-7150.1, p.1]

EPA should evaluate, as a part of this rulemaking, whether or not other sections of the Clean Air Act (specifically Title V permitting and New Source Review permitting) will be triggered by this rule. And, if these other sections of th e Clean Air Act are triggered by this rule, EPA should evaluate, as part of this rulemaking, what the impacts of that triggering are. [OAR-2009-0472-7150.1, p.1]

Our interpretation is that this rulemaking is th e action that triggers other sections of the Clean Air Act (specifically Title V permitting and New Source Review permitting). However, in the proposed rule, EPA actually suggested to affected entities that they should not comment on this issue in this ru lemaking, but should instead submit comments on the proposed 'Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule' (GHG Tailoring Rule). We believe that EPA was in e rror to suggest this

7-26Other Comments

point and that it may inappropr iately influence agencies a nd other affected entities to refrain from commenting on an importa nt rulemaking. [OAR-2009-0472-7150.1, pp.1-2]

The EPA GHG Tailoring Rule is a wholly independent rulemaking from the Light-Duty Vehicle GHG Standards rule. The GHG Tailori ng rule does not trigger the Title V permitting and New Source Review permitting requirements; the Light-Duty Vehicle GHG Standards rule does. EPA should not re ly upon the GHG Tailoring rule to address this issue, particularly in li ght of the fact that the GHG Ta iloring rule may not be in place at the time that EPA finalizes the Light -Duty Vehicle GHG Standards rule. EPA has clearly stated its intent to finalize the Li ght-Duty Vehicle GHG Standards rule by the end of March 2010. The public comment peri od on the GHG Tailoring rule ends on December 28, 2009. EPA is expected to get thousands of comments on the GHG Tailoring rule and it would have only thr ee months to address those comments and finalize the rule. This appears to be a monu mental task if EPA is going to adequately review all of the comments and make necessary revisions to the proposed rule in response to critical comments received. EPA can not assume, as part of this rulemaking, that the GHG Tailoring rule will be finalized on, or before, the Light-Duty Vehicle GHG Standards rule is fina lized. [OAR-2009-0472-7150.1, p.2]

EPA failed to take into account the length of time that it will take for permitting authorities with SIP approved New Sour ce Review (NSR) programs to go through rulemaking (and possibly some state legislat ures), hiring, and training in order to implement the mandate of regulating GHG emissions under the Title V and NSR permitting programs. In Georgia, rulemaking will be required in order to insert the new GHG emission thresholds. Rulemaking will also be required in order to increase Title V fees consistent with the Clean Air Act requirement that permitting programs collect enough revenue to implement the program requi rements. Given the current state of the economic situation in our state and country, th is issue should not be taken lightly. Then, permitting authorities must hire and train sta ff to issue these complicated permits. This could take up to two years after the requirement is triggered. [OAR-2009-0472-7150.1, p.2]

More fundamentally, the GHG Tailoring Rule a ppears to be legally vulnerable and may not provide intended relief from the statutory permitting thresholds for PSD and Title V. If the tailoring rule is vacated, the worklo ad for permitting authorities will increase exponentially at a time when State and Lo cal governments are experiencing severe budgetary challenges due to the current economic climate. Vacatur of the GHG Tailoring Rule seems to be a very real possibility if promulgated as proposed. In the Preamble to the proposed rule, EPA provides a lengthy ju stification for adju sting the statutory permitting thresholds for PSD and Title V, relying on the legal doctrines of 'administrative necessity' and 'absurd results .' However, if the rule is challenged the D.C. Circuit Court of Appeal s could hold that these argumen ts are unpersuasive given the circumstances. The Court could conclude that the proper way to address an excessive burden imposed by statute is to ask Congress to amend the statute. The excessive burden doesn't empower an administrative agency to rewrite the statute. The fact that EPA knowingly promulgated regulati ons that triggered the con cepts of 'administrative

7-27EPA Response to Comments

necessity' and 'absurd results,' when equi valent reductions in GHG emissions from vehicles could have been achieved without these collateral impacts, may weaken EPA's legal justification for the Tailoring Rule even further. The sound appr oach is to prevent the 'administrative necessity' and 'absur d results' by tailoring the GHG and CAFE standards to avoid triggering the permitting requirements, not by attempting to amend administratively the statutory permit ting requirements. [OAR-2009-0472-7150.1, pp.2-3]

In short, EPA failed to consider how the rule would affect state/local air permitting authorities. More specifica lly, EPA failed to comply with the Unfunded Mandates Reform Act of 1995. EPA states in the preamble that this rule only affects manufacturers of cars and light trucks. However, this acti on has the potential to a ffect state/local air permitting authorities immensely because it would cause GHG emissions to become regulated under the Title V and New Sour ce Review permitting programs. The proposed rule does not take this into account. The pot ential impact to state/local air permitting authorities is unprecedented and enormous. In fact, EPA acknowledges in the GHG Tailoring rule preamble that 'State permitting authorities would be paralyzed by permit applications in numbers that are orders of magnitude greater than their current administrative resources could accommodate?' [OAR-2009-0472-7150.1, p.3]

EPA claims that the proposed rule imposes no enforceable duty on any state, local or tribal governments. The basis for this claim is not understood and we believe it to be incorrect. As stated previously, the GHG Tailoring rule acknowledges that state permitting authorities will be 'paralyzed' by th e workload created by the triggering of the Title V and NSR permitting provisions for GHG emissions. In the GHG Tailoring rule, EPA purports to reduce this burden by arbitr arily selecting new GH G emission thresholds of 25,000 tons per year CO2 equi valent (or in some cases 10,000 tons per year). Even if the GHG Tailoring rule is finalized as EPA has proposed it, we be lieve that EPA has significantly underestimated the number of sources that wi ll become subject to the Title V and NSR permitting provisions due to the finalization of the GHG emission standards required by this rule. We will be submitting separate comments to the docket for the GHG Tailoring rule that address this issue. However, the GHG Tailoring rule does not trigger the Title V and NSR permitting provisi ons for GHG emissions; it only attempts to reduce the burden of that trig gering effect. [OAR-2009-0472-7150.1, p.3]

We believe that EPA can accomplish the goals of this rule without triggering other sections of the Clean Air Act (specifically Title V permitting and New Source Review permitting). EPA stated in the preamble that the primary goals of this rule were to achieve substantial reductions of greenhouse gas (GHG) emissions and improvements in fuel economy. [OAR-2009-0472-7150.1, p.4]

EPA, as a policy decision, should not establish GHG emission limits under Section 202(a) of the Clean Air Act at this time. EPA and NHTSA should, instead, establish fuel economy standards that accomplish the desire d goals of substantial reductions in GHG emissions and improvements in fuel economy. Th erefore, the other s ections of the Clean Air Act (specifically Title V permitting a nd New Source Review permitting) would not be triggered. [OAR-2009-0472-7150.1, p.4]

7-28Other Comments

EPA is under no legal obligation (court decisi on or Clean Air Act requirement) to finalize GHG emission limits under Section 202(a) of the Clean Air Act at this time. The preamble states that 'EPA has the discretion to take into consideration NHTSA's CAFE standards in determining appropriate action under section 202(a), and we agree. EPA should take into consideration that the new NHTSA CAFE standards accomplish the goals of the rule and EPA should not fi nalize any GHG emission standards under the authority of the Clean Air Act at this time. [OAR-2009-0472-7150.1, p.4]

Virtually all of the GHG emission reductions required by the proposed rule come from the improvement to NHTSA's CAFE standards. Therefore, the additional EPA regulation comes at an enormous cost with virtually no additional environmental benefits. EPA acknowledges that the only way to reduce CO2 emissions from light-duty vehicles is to increase fuel economy and, similarly, that th ere are no emission cont rol technologies that reduce CO2 emissions from Light-D uty Vehicles. [OAR-2009-0472-7150.1, p.4]

Georgia-Pacific (GP)

EPA’s Failure to Fully Analyze the Burden of the Proposed Section 202 Tailpipe Rule on Stationary Sources Renders the Proposal Unlawful. Finalization of the Sectio n 202 Tailpipe Rule, assuming EPA also finalizes its endangerment finding, will trigger CAA perm itting actions under the PSD and Title V programs. In EPA’s proposed Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule (“ Tailoring Rule”), the Agency stated that the issuance of the Section 202 Rule will automatically trig ger a dramatic increase in PSD (from 300 permits per year to 41,000) and Title V (fro m 14,000 permits per year to over 6 million) permits for stationary sources each year. Yet, EPA failed to analyze this consequence and burden on stationary sources in its Regulatory Impact Analysis for the Section 202 Tailpipe Rule and to seek public comment on th is issue, violating various statutes and Executive Orders. [OAR-2009-0472-7122.1, p.1]

[See Docket Number OAR-2009-0472-7122.1, pp.1-3 for detailed comments pertaining to: EPA Conducted an Insufficient Regulatory Review and Inadequate Public Notice]

EPA Does Not Have to Issue the Section 202 Rule at This Time In the preamble to the proposed Section 202 Tailpipe Rule, EPA states that the joint rulemaking with the NHTSA corporate average fuel economy (CAFE) standards will enable vehicle manufacturers to build a singl e national light duty vehicle fleet that satisfies both CAFE and federal and California emissions standards. However, due to the potential enormous implications of the Sec tion 202 Tailpipe Rule on stationary sources(as previously noted), and the fact that EPA has multiple options available for [OAR2009-0472-7122.1, p.3] regulating GHG from light duty vehicles, EPA should withdraw or postpone its Section 202 Ta ilpipe Rule. [OAR-2009-0472-7122.1, p.4]

[See Docket Number OAR-2009-0472-7122.1, pp.1-3 for detailed comments pertaining to: EPA's proposed Tailoring Rule provide s a reasonable basis for withdrawing or

7-29EPA Response to Comments

postponing the proposed Section 202 Rule and EPA has multiple options to issue lightduty vehicle emissions standards under the CAA]

EPA Failed to Seek Comment on the Timi ng of its Section 202 Rulemaking Action, Violating the Administrative Procedure Act Notwithstanding the numerous issues upon which EPA sought comment in the proposed rule, EPA did not solicit comment on the key su bstantive issue that has been identified above – when the Agency should issue a Section 202 Rule. Without notice of this significant issue in the proposed Section 202 Tailpipe Rule, the proposal notice is unlawful under the Administrative Procedure Ac t and Section 307(d) as described above. See 42 U.S.C. § 7607(d)(3); 5 U.S.C. § 553(b)(3). [OAR-2009-0472-7122.1, p.5]

Industry Coalition

The Associations acknowledge EPA’s desire to address GHG emissions from mobile sources quickly, as well as NHTSA’s need to set new fuel economy standards, which must be [OAR-2009-0472-7673.1, p.1] promulgated at least 18 months before the affected model year (in this case the 2012 model year). 49 U.S.C. § 32902(g)(2). However, as proposed, the Motor Vehicle Rule ignores the enormous burdens the Rule would impose on stationary sources. This om ission violates legal requirements for agency rulemaking, constitutes arbitrary and capricious action, and is simply bad policy. This is especially so because nearly all the environm ental benefits EPA says will result from its promulgation of the Motor Vehicle Rule under CAA authority would also result from the NHTSA rule alone. Yet, unlike NHTSA action to raise corporate average fuel economy (CAFE) standards, the redundant EPA standa rds promulgated under the CAA would have regulatory impacts reaching far beyond the automotive industry and would impose billions of dollars in additional perm itting and compliance costs. [OAR-2009-0472­ 7673.1, p.2]

Thus, although the Associations take no position on NHTSA’s proposal to increase CAFE standards, we vigorously object to EPA’s proposal to fina lize the superfluous Motor Vehicle Rule under CAA Section 202. EP A’s failure to account here for the PSD and Title V burdens it elsewhere acknowledge s will flow from this rulemaking renders this rulemaking legally invalid. EPA must fully consider those burdens in this rulemaking. [OAR-2009-0472-7673.1, p.2]

EPA Must Assess and Address the Motor Vehi cle Rule’s Impacts on Stationary Sources Before Finalizing the Rule. EPA’s failure to account for the Title V and PSD consequences of finalizing the Motor Vehicle Rule would render the final Rule bot h arbitrary and capricious, and also invalid based on other procedural requirements for rulemaking.

[See Docket Number OAR-2009-0472-7673.1, pp.2-8 for detailed comments pertaining to: EPA’s Failure to Analyze the PSD and Title V Effects of Finalizing the Motor Vehicle Rule Is Arbitrary and Capricious, EP A’s Failure to Analyze the PSD and Title V Effects of Finalizing the Moto r Vehicle Rule Runs Contrary to Procedural Requirements

7-30Other Comments

and EPA’s Failure to Analyze the PSD and Title V Effects of Finalizing the Motor Vehicle Rule Runs Contrary to Procedural Requirements ]

PSD Permitting Requirements Need Not and S hould Not Apply to Stationary Sources’ GHG Emissions Solely by Virtue of EPA Finalizing the Motor Vehicle Rule EPA could properly decline to consider th e PSD impacts of the proposed Motor Vehicle Rule in this rulemaking docket only if those impacts would not, in fact, result from the Rule. EPA has stated that PSD requirements will be triggered when the proposed Motor Vehicle Rule first subjects GHG emissions fr om cars to control—that is, model year 2012. See PSD Interpretive Memo Reconsideration, 74 Fed. Reg. at 51545–46. But EPA can interpret the statute and regulations to avoid that result and eliminate the need to analyze the proposed Motor Vehicle Rule’s effect on stationary sources in this proceeding. Moreover, by doing so, EPA woul d eliminate the need for the legally questionable GHG Tailoring Rule.

[See Docket Number OAR-2009-0472-7673.1, pp.8-12 for detailed comments pertaining to: EPA’s View that Issuance of the Motor Vehicle Rule Automatically Triggers PSD Based Solely on Emissions of GHGs Is Incons istent with the Plain Meaning of the CAA and EPA’s Regulations and The Phrase “Pollutants Subject to Regulation” Is Also Most Reasonably Interpreted to Exclude GHGs]

EPA Should Exercise its Discretion to Defer Finalizing a Motor Vehicle Rule EPA has clear legal authority to defer prom ulgation of an emission standard under CAA Section 202, even if the Agency proceeds in the near future to finalize a positive endangerment finding under CAA Section 202. It would be arbitrary and capricious for EPA not to exercise that authority because the potential economic consequences of the Motor Vehicle Rule are massive, and unque stionably outweigh any environmental benefits that would flow from EPA placing its impr imatur on the NHTSA rule.

[See Docket Number OAR-2009-0472- 7673.1, pp.12-14 for detailed comments pertaining to: Nothing Compels EPA to Fi nalize GHG Emissions St andards for Mobile Sources, EPA Has Not Provided Adequate Reasons for Finalizing GHG Emission Standards for Mobile Sources at This Time, and There Are Numerous Compelling Reasons to Defer the Motor Vehicle Rule]

Mass Comment Campaign (48) (unknown organization)

To make matters worse, these regulations would start a regulatory cascade. EPA would start regulating emissions from millions of sources, including large buildings, churches, sports arenas, office buildings, farms, schools, hospitals' you name it. EPA will be forced to regulate greenhouse gases with many sections of the Clean Air Act, including sections 108, 111, and 112. This will further harm our economy, reduce American jobs, and worsen our employment situation. NHTSA already has the ability to regulate fuel economy without EPA further harming the economy.

Mississippi Department of Environmental Quality

7-31EPA Response to Comments

We do, however, have significant concerns with the rule as currently proposed, primarily related to the triggering of other sections of the Clean Air Act (specifically Title V permitting and New Source Review permitti ng). We do not believe that EPA has adequately evaluated those impacts or ha s adequately evaluated the options for minimizing, or avoiding, thes e collateral impact s. In addition, restrictions on GHG emissions from vehicles do not appear neces sary to achieve the goal of reducing GHGs; the CAFE standards alone will achieve this go al. Our concerns are described herein along with recommended changes to the proposed rule that will still produce the intended results of the rule, while minimizing, or avoiding, these collateral impacts.

EPA must evaluate, as a part of this rule making, whether or not other sections of the Clean Air Act (specifically Title V permitting and New Source Review permitting) will be triggered by this rule. And, if these other sections of th e Clean Air Act are triggered by this rule, EPA must evaluate, as part of this rulemaking, what the impacts of that triggering are.

Our interpretation is that this rulemaking is th e action that triggers other sections of the Clean Air Act (specifically Title V permitting and New Source Review permitting). However, in the proposed rule, EPA actually suggested to affected entities that they should not comment on this issue in this ru lemaking, but should instead submit comments on the proposed 'Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule' (GHG Tailoring Rule).1 We believe that EPA was in error to suggest this point and that it may inappr opriately influence agencies to refrain from commenting on an important rulemaking.

The EPA GHG Tailoring Rule is a wholly independent rulemaking from the Light-Duty Vehicle GHG Standards rule. The GHG Tailori ng rule does not trigger the Title V permitting and New Source Review permitting requirements; the Light-Duty Vehicle GHG Standards rule does. EPA must not rely upon the GHG Tailoring rule to address this issue, particularly in li ght of the fact that the GHG Ta iloring rule may not be in place at the time that EPA finalizes the Light -Duty Vehicle GHG Standards rule. EPA has clearly stated its intent to finalize the Li ght-Duty Vehicle GHG Standards rule by the end of March 2010. The public comment peri od on the GHG Tailoring rule ends on December 28, 2009. EPA is expected to get thousands of comments on the GHG Tailoring rule and it would have only thr ee months to address those comments and finalize the rule. This appears to be a monu mental task if EPA is going to adequately review all of the comments and make necessary revisions to the proposed rule in response to critical comments received. EPA cannot assume, as part of this rulemaking, that the GHG Tailoring rule will be finalized on, or before, the Light-Duty Vehicle GHG Standards rule is finali zed. [OAR-2009-0472-7102.1, pp.1-5]

The commenter expresses concern about the cu rrent state of economy the negative effects of the proposed rule due increase in cost and administrative burden.

National Association of Home Builders (NAHB)

7-32Other Comments

[These comments were originally submitted On December 28, 2009 to the following rulemaking docket: Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule, 74 Fed. Reg. 55,292 (Oct. 27, 2009), Docket Nu mber EPA-HQ-OAR2009-0517. Because the NAHB believes that the Ta iloring Rule is intertwined with other EPA actions under the Clean Air Act, the NAHB requests that a copy of the NAHB's Tailoring Rule comments also be fi led to the EPA-HQ-OAR-2009-0472 docket.]

[See Docket Number EPA-HQ-OA R-2009-0472-11278, pp.4-22 for the comments specific to the PSD and Title V GHG Tailoring Rule.]]

[See Docket Number EPA-HQ-OA R-2009-0472-11278, pp.23-42 for the legal comments on EPA's Tailoring Rule and interrelated agency actions.]

National Association of Manufacturers

On November 18, 2009, the following organizations ('the Associations') jointly requested that the Environmental Protection Agency ('EPA') and the National Highway Traffic Safety Administration ('NHTSA') extend the public comment period for the Motor Vehicle GHG Rule, until December 28, 2009 and that EPA extend the public comment periods for both the GHG Tailoring Rule, and the PSD Interpretive Memo Reconsideration, until January 28, 2010 (collectively, thes e three rulemakings are referred to herein as the 'GHG rulemakings'): [OAR-2009-0472-11277, p.1]

American Bakers Association, American Ch emistry Council, American Iron and Steel Institute, The American Meat Institute, Am erican Petroleum Institute, Chamber of Commerce of the United States of America, Co rn Refiners Association, The Institute of Shortening and Edible Oils, National Associ ation of Manufacturers, National Chicken Council, National Council of Farmer Cooperativ es, National Grain and Feed Association, National Oilseed Processors Associati on, National Petrochemical and Refiners Association, The National Renderers Association, Natu ral Gas Supply Association, Society of Chemical Manufacturers and Affiliates. [OAR-2009-0472-11277, p.2]

On November 25, 2009, EPA Assistant Administrator Gina McCarthy replied by letter to Bryan L. Brendle, Director of Energy and Resources Policy for the National Association of Manufacturers ('NAM'), denying the extension request in its entirety. The Associations hereby request that EPA reconsid er its denial of the Associ ations' original November 18 request for extensions of the GHG rulema kings comment periods for the reasons explained in the request. Alternatively, the Associations requ est that EPA make comments submitted in each docket part of the do cket for all three rules, considering all relevant comments received in the PSD Tailoring Rule docket in both the Motor Vehicle GHG Rule and PSD Interpretive Memo Rec onsideration dockets, and vice-versa. A refusal to grant either or both of the A ssociations' necessary and reasonable requests would be arbitrary and capricious due to bot h the close timing and interrelatedness of the GHG rulemakings. [OAR-2009-0472-11277, pp.2-3]

7-33EPA Response to Comments

The close timing of the GHG rulemakings makes it difficult for the Associations and their members to fully analyze the rules, devel op useful data, and submit comments on all relevant aspects of the rules. Problematica lly, the GHG rulemakings were all published in the Federal Register within just one mont h of each other. Meanwhile, many sources, including Associations' members, are also focused and have allocated substantial resources towards analyzing and preparing to comply with the final mandatory GHG Reporting Rule for large emitting sources, which was finalized in September 2009. Further compounding the already tight timelin e, the GHG rulemaking comment deadlines fall within the holiday season-the Motor Vehicle GHG Rule comme nts were due during the Thanksgiving holiday and the GHG Tailoring Rule comments are due immediately after Christmas, times when many U.S. busine sses and state agencies are closed and/or short staffed. As the Associations expl ained in the November 18 request, the GHG rulemakings are legally and technically complex, with significant and likely unprecedented consequences for the Associati ons, their members, and the U.S. economy as a whole. Each rulemaking on its own requi res sufficient time and resources to fully evaluate the consequences of the rulemaki ng, develop data and analyses, and formulate appropriate comments. Given the close timing of the publication of the GHG rulemakings, the current comment periods are simply insufficient to allow the Associations a fair opportunity to do so. [OAR-2009-0472-11277, p.3]

Furthermore, the GHG rulemakings are so in terrelated that ma ny comments on the GHG Tailoring Rule are equally applicable to bot h the PSD Interpretive Memo and the Motor Vehicle GHG Rule, and vice-versa. This is pa rticularly important with regards to the Motor Vehicle GHG Rule's impacts on stati onary sources. At the time of publication, Association members as well as many other U.S. businesses, states, and consumers, were not on notice of the Rule's severe conse quences for stationary sources. The Motor Vehicle GHG Rule does not even mention, le t alone fully address, the impacts on stationary sources; ra ther, it disingenuously presents itself as a rulemaking solely affecting light-duty motor vehicles. Not until October 27, 2009, just 30 days prior to the Motor Vehicle GHG Rule comment deadline, did the GHG Tailoring Rule's publication in the Federal Register put the American publ ic and the regulated community officially on notice that the CAA Sec tion 202 regulations to cont rol GHG emission from motor vehicles would 'trigger PSD and title V appli cability requirements for GHG emissions.' And EPA has still not conduc ted a full Regulatory Impact Analysis assessing the combined results of the three interr elated rulemakings. [OAR-2009-0472-11277, p.3]

Comments submitted in the Motor Vehicle GHG Rule docket reflect the inadequacy of public notice regarding the Rule's impacts on sources other than motor vehicles. As the South Carolina Department of Health and E nvironmental Control explained in comments on the Motor Vehicle GHG Rule:

We are concerned that EPA may not be as transparent as they should be and that they are sending mixed or confusing messages about the potential impact of the light-duty vehicle GHG proposal on all sources that could be imp acted, in particular small business. EPA actually suggested to affected entities that they should not comment on the light-duty vehicle GHG proposal but shoul d instead submit comments on the proposed 'tailoring

7-34Other Comments

rule.' We believe that EPA was misleading to suggest this and that it may inappropriately influence small business, industry, and other a ffected entities to re frain from commenting on an important rulemaking. [OAR-2009-0472-11277, pp.3-4]

The absence of comments on the Motor Vehicle GHG Rule's impact on stationary sources in many submissions, reflects the accu racy of South Carolina's prediction. Many organizations have heeded EPA's directi on to submit comments on PSD and Title V permitting requirements in the GHG Tailoring Rule docket only, and may have missed EPA's subsequent suggesti on that the Motor Vehicl e GHG Rule, and not the GHG Tailoring Rule, imposes these requirements. [OAR-2009-0472-11277, p.4]

To ensure an adequate and complete record for the GHG rulemakings, to give commenters a fair and full opportunity to analyze the proposals individually and collectively, and given the close timing and interrelate dness of the rulemakings, the Associations respectf ully request that either: (1) EPA and NHTSA extend the public comment deadline for the Motor Vehicl e GHG Rule until December 28, 2009, and that EPA extend the public comment deadlines fo r both the GHG Tailoring Rule and the PSD Interpretive Memo Reconsideration until Janua ry 28, 2010; or alternatively (2) that EPA consider comments submitted in the GHG Tailori ng Rule to be submitted in both the PSD Interpretive Memo Reconsid eration and Motor Vehicle GHG Rule dockets, and viceversa. The Associations believe that a failure to grant this reasonable request would be arbitrary and capricious . [OAR-2009-0472-11277, p.4]

The NAM supports the Administ ration’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 stationa ry facilities. Any failure to do so will inflict harm on the ma nufacturing sector for which the NAM must seek appropriate remedies, legislativ e or otherwise. [OAR-2009-0472-7215.1, p.5]

National Climate Coalition

Stabilizing atmospheric greenhouse gas concentr ations will require the transformation of our energy, manufacturing and tran sportation systems. We believe that this is the work of Congress. Federal legislation should not only take a broad, flexible multi-sector approach, but also must be designed to meet multiple objectives, including energy and transportation security, reliability an d affordability; ensuring the economic competitiveness of United States businesses; energy conservation; strategic technology development; and environmental performance. Such legislation should also allow for and define the appropriate involveme nt of other departments and agencies with expertise in

7-35EPA Response to Comments

energy, environment, security and transportati on in addition to EPA – something that is necessary yet not permitted under the Clean Air Act. Our highest priority must be for Congress to establish a uniform national pr ogram that will be consistent with the emerging and overarching international framework. [NHTSA-2009-0059-0086.1, p.4]

For a variety of reasons, the existing Clean Air Act is a poor mechanism for addressing climate change. Congressional in tent in drafting the Clean Air Act was to identify and regulate sources based on their relatively la rge emissions. Such sources typically have also been financially able to bear the costs of regulati on. By establishing major source thresholds, the Act excluded from regulation the large numbers of smaller sources that exist in the United States. The number of statio nary sources subject to regulation has thus historically been relatively small. By a ll estimates, however, this number could grow by at least an order of magnitude , perhaps two, and affect for the first time many previously unaffected sources (e.g., large retail estab lishments, schools, hospitals and government facilities) if greenhouse gases are regulated in the same manner as criteria pollutants under NSR, and Title V — let alone §112, which has even lower thresholds for regulation. [NHTSA-2009-0059-0086.1, pp.4-5]

The permitting thresholds under the Act, however , are keyed to emissions levels that are meaningful only in the contex t of regulating the local and regional health and welfare impacts of lower-emitting criteria or hazardous air pollutants. Even small sources have emissions of CO2 as a result of typical fu el use that would exceed current permitting thresholds on this basis. As EPA itself unde rscored in the ANPR and the Tailoring Rule Proposal, the PSD and Title V programs woul d sweep hundreds of thousands of sources not previously subject to regula tion into the scope of the Clean Air Act, at great cost and consequence for the functioning of the ec onomy and at great administrative burden on regulated sources, EPA, the states and lo cal governments. EPA estimates that its approach in the Tailoring Rule would avoi d over $55.6 billion in the first six years of regulation – or, stated differently, in the absence of the Tailoring Rule, the cost of compliance for affected sources and permitting agencies will increase by more than $55.6 billion. [NHTSA-2009-0059-0086.1, p.5]

Paradoxically, forcing the square peg of gr eenhouse gas emissions into the round hole of the existing Clean Air Act also has the potenti al to create adverse incentives that may stifle innovation and even increase greenhous e gas emissions. This could occur, for instance, if a company decides to delay improvements that wo uld otherwise reduce emissions intensity to avoid triggering regul atory requirements, as we have seen occur time and time again under the New Source Review programs. A practical example of this situation is a turbine upgrade at an electric generating station. While the project results in more efficient production of electricity, if that energy efficiency were projected to result in more criteria pollutant emissions on an annua l basis due to increase d operations, it is likely the project would not be pursued due to the time consuming and expensive requirements of the New Source Review pr ograms, including the likely need to implement additional controls for all pollutant s that exceed the NSR pollutant thresholds. That is contrary to the desi red outcome. [NHTSA-2009-0059-0086.1, p.5]

7-36Other Comments

Regulation under the Clean Air Act has histor ically focused on control of criteria and hazardous air pollutants to address the loca l or regional human health, welfare and environmental impacts. The architecture of the Clean Air Act is thus premised on the concept that state, regional and federal cont rol of emissions will improve air quality in the corresponding area. This is not accurate as to greenhouse gases. The greenhouse effect is global -- and localized (or even United States-wide) emissions reductions will not result in environmental benefits to the United States in the absence of corresponding international action. Moreover, greenhouse gase s at current and projected atmospheric concentrations have no known direct advers e human health impacts to which to link standards, and any environmental and welfar e impacts only occur over substantial time, due to the indirect effects of aggregat e global levels of greenhouse gases. Thus, greenhouse gases present a particular regulator y challenge. The same requirements that apply to emissions of criteria pollutants from stationary sources are not likely optimally to control and provide th e most effective incentive s to reduce greenhouse gases emissions. [NHTSA-2009-0059-0086.1, p.5]

Because the Clean Air Act is such a poor vehicle for addressing climate change, we believe that further federal legislation is the best approach to reduce emissions that may contribute to global warming. We recogni ze that the Supreme Court’s decision in Massachusetts v. EPA may require the Agency to commence regulatory action in absence of, or in the face of delayed, Congressional action. Congress, however, is poised to act. Comprehensive climate change and energy legi slation has been passed by the U.S. House of Representatives, H.R. 2454 - the Ameri can Clean Energy and Security Act of 2009 (Waxman-Markey), and the Senate is consider ing stand alone climate change legislation, the “Clean Energy Jobs and American Power Act” (Kerry-Boxer), a nd energy legislation, S. 1462 - the American Clean Energy Leader ship Act of 2009 (AC ELA). The NCC urges EPA and the Administration to work in suppor t of prompt Congressional efforts, and exercise its authority only where it can adopt flexible, appropriate measures to control greenhouse gases in a manner best designed to facilitate ultimate Congressional action. [NHTSA-2009-0059-0086.1, pp.5-6]

Absent Congressional Action, Should EPA Deci de To Regulate Mobile and Stationary Sources Under The Clean Air Act, It Must Select Appropriate Trigger Dates On Which Regulatory Requirements Would Ap ply to Stationary Sources

EPA proposed three interrelated actions w ith respect to greenhouse gases emissions within weeks of each other: the Light Duty Vehicle Rule, the Interpretive Rule, and the Tailoring Rule. In the Interpretive Rule proposal, EPA supports the position that a greenhouse gas becomes a “regulated pollutant” once it is “subject to regulation” in the form of an “actual control” under a fi nal and “effective” Cl ean Air Act national regulation. See PSD Interpretive Rule, 74 F.R. 51538-41, 51545-46. EPA proposes that the Light Duty Vehicle Rule, which it in tends to finalize by March 30, 2010, would present the first such rule applicable to any greenhouse gas emissions. See PSD Interpretive Rule, 74 F.R. 51547. Unless Congr ess enacts preemptive legislation, the combined effect of EPA’s positions in the PSD Interpretive Rule, the Light Duty Vehicle Rule and the Tailoring Rule (which would pha se-in and tailor appl ication of PSD and

7-37EPA Response to Comments

Title V to stationary sources) would be to s ubject stationary sources to PSD and Title V requirements on the “effective da te” of the Light Duty Vehicl e Rule – as soon as 60 days after publication of the fina l Light Duty Vehicle Rule in the Federal Register (approximately June 2010). See PSD Inte rpretive Rule, 74 F.R. 51545-46; Tailoring Rule, 74 F.R. 55294, 55299- 55300.

The NCC intends to submit comments on the Interpretive Rule supporting EPA’s initial and currently-supported interpre tation that the date on whic h a pollutant becomes subject to an “actual control” under a final national rule is a better measure of the date at which a pollutant becomes “subject to regulation” than the other options discussed by EPA in the Interpretive Rule. However, we also intend to indicate that we believe EPA’s preferred choice of the “effective date” of such a rule , while a better choice than promulgation date, still does not properly mark the date on which a pollutant is actually controlled. Instead, it is the “first substantive compliance date” of that national rule establishing emission standards for greenhouse gases that is the date on which those greenhouse gases will be actually controlled and, thus, subject to regulation. [NHT SA-2009-0059-0086.1, pp.6-7]

Assuming for purposes of these comments th at EPA will implement the “effective date” approach in the Interpretive Rule rather than the “first substa ntive compliance date” approach advocated by the NCC, we request that EPA use the fullest extent of its discretion to set the effective date for the Light Duty Vehicle Rule as one that gives EPA, affected sources and permitting authorities the greatest lead time for implementation of the PSD and Title V programs’ applicability to greenhouse gases. In particular, we request that the effective da te for the Light Duty Vehicl e Rule be set no sooner than January 2, 2011 – the first date on which a 2012 model year vehicle can be produced. See Light Duty Vehicle Rule, 74 F. R. 49454; 40 CFR 85.2302-2304. [NHTSA-2009-0059­ 0086.1, p.7]

EPA has substantial discretion in setting the effective date of the Light Duty Vehicle Rule. While the effective date can be no soone r than 60 days after promulgation, there is no definite limit on how long after promulgation a rule must be effective. As noted by the Supreme Court in Massachusetts v. EPA,” EPA [] has significant latitude as to the manner, timing, content, and coordination of its regulations with those of other agencies.” Slip Op. at 30. Additionally, as documented at length by EPA in the Tailoring Rule, the long-held judicial doctrines of absurd resu lts and administrative necessity support even agency action that would deviate from statut ory language, if such action is necessary to avoid results contrary to C ongressional intent or due to administrative necessity. See Tailoring Rule, 74 F.R. 55311- 55320. [NHTSA-2009-0059-0086.1, p.7]

While the “effective date” the NCC promotes for the Light Duty Vehicle Rule would differ by only six months from that which would result from applying the minimum time between promulgation and effectiveness requir ed by the Congressional Review Act, there are legal and policy factors that make these six months crucial for affected stationary sources and permitting authorities as they sc ramble to comply with PSD and Title V requirements as applied to greenhouse gases. The importance of affording EPA, affected sources and permitting authorities the necessa ry lead time to study and evaluate the

7-38Other Comments

emissions characteristics and control op tions for new pollutants prior to making emissions of those pollutants subject to PSD and Title V permitting requirements cannot be overstated. This is particularly true for s ources that would be ne wly subject to Title V because of their potential to emit GHGs, and would therefore need to apply for Title V permits or synthetic minor permits (and thei r permitting authorities that would need to timely issue these permits). Furthermore, if phase-in approaches such as the Tailoring Rule are to provide true lega l relief for potentially affect ed sources, the states which implement PSD and/or Title V under their own regulations will need this additional time

- and perhaps more - to promulgate their own tailoring ru les. [NHTSA-2009-0059­ 0086.1, p.7]

Thus, EPA should use the fullest extent of its discretion to set the e ffective date of the Light Duty Vehicle Rule’s em ission standards for greenhous e gases in the manner that provides the greatest lead time for EPA, aff ected sources and permitting authorities to comply with the PSD and Title V requirements that will be trigge red by the Light Duty Vehicle Rule. In particular, the “effective dat e” of the Light Duty Vehicle Rule should be set no sooner than January 2, 2011, the first date on which any model year 2012 vehicle could be produced which would have to comply with the greenhouse gas emissions standards in that rule. [NHTSA-2009-0059-0086.1, pp.7-8]

The National Climate Coalition appreciates the opportunity to submit these comments and looks forward to providing further input. We encourage EPA to work with Congress towards prompt national greenhous e gas legislation. If EPA must continue to move ahead with rulemakings under the Clean Air Act, th en we urge the Agency to exercise its discretion to limit applicati on of those sections of the statute that would impose unintended economic harm and divert scar ce public and private resources without commensurate benefit in stabilizing gl obal greenhouse gas concentrations. As appropriate, in the course of regulating greenhouse gases under the statute, EPA also should seek prompt Congressional confirmati on that such harmful provisions may be so limited or need not be implemented to address climate change. [NHTSA-2009-0059­ 0086.1, p.8]

National Cotton Ginners Association

Neither the NCGA nor other gin associations had intended to comment on this proposal since our primary concern is the effect of Greenhouse Gas (GHG) regulations on stationary sources. For this reason, we had not exhausted much effort evaluating this docket until the proposed Greenhouse Gas Tailo ring Rule was proposed on October 27, 2009 (74 FR 55292). The proposed Tailoring Rule is based on the assumption that the act of regulating GHG emissions from automob iles under the Clean Air Act will trigger regulatory requirements that affect stati onary sources (i.e., PSD/NSR and Title V programs) of GHG emissions. In supporti ng documents for the Tailoring Rule, EPA estimates that without this rule, over 6 million stationary sources will become subject to Title V, permitting requirements at a cost of over $38 billion. EPA is using the Tailoring Rule to adjust the stationary thresholds to a more manageable le vel, relying on “absurd

7-39EPA Response to Comments

results” and “administrative necessity” doctrin es as legal justifications for modifying statutory thresholds.

If the analysis of the Tailoring Rule is co rrect, then the additional cost burden for stationary sources shou ld be reflected in the economic analysis for the Light Duty Vehicle GHG Rule. The impact of this rulemaking on stationary sources was not considered. Proper consideration of the complete cost picture is very important in this docket. This is especially true, considering that EPA would gain al most all of their GHG reductions from Light Duty Vehicles through the NHTSA CAFE standa rds. If EPA used the CAFE standards to calculate GHG re ductions, the GHG reductions would remain very comparable, and the unnecessary regulat ory burden on stationary sources could be avoided.

It appears that the origin of the “absurd results” and “administrative necessity” lies in this very docket, and the solution to the “absurd results” and “administrative necessity” is achievable through the CAFE standards w ithout significant lo ss of GHG reduction benefits.

NCGA strongly requests that EPA review th e full economic impact of this rule, considering all costs: both those currently in the Light Duty Vehicl e proposed rule and those outlined in the proposed Tailoring Rule before promulgating any rule for Light Duty Vehicles. In addition, EPA should clearly evaluate the benefits of regulations solely based on CAFE standards. Finally, EPA s hould consider extending the comment period in this docket, considering the significant additional costs that are discussed in the Tailoring Rule proposal. [OAR-2009-0472-7209.1, pp.1-2]

National Mining Association (NMA)

NMA believes that the economic and regulatory implications a final motor vehicle rule will have for all sources of GHG emissions economy-wide will be extraordinarily significant. EPA has neglected, however, to conduct required statutory analyses of these impacts. EPA implies in this rule and explai ns in its proposed PSD tailoring rule that it understands the regulatory consequences under the CAA that will result when the motor vehicle rule is finalized. The agency has not , however, taken the necessary steps to avoid these consequences, nor to avoid the legal ramifications that may jeopardize the rule. [OAR-2009-0472-7237.1, p.2]

A final light-duty motor vehicle rule will trigger regulatory requirements under the PSD program of the CAA that will result in significant economic and regulatory consequences. [OAR-2009-0472-7237.1, p.2]

[See Docket Number OAR-2009-0472- 7237.1, pp.1-2 for detailed comments]

NMA understands that EPA has formed an advisory committee to examine BACT options and that the agency intends to issue guidance on th e subject in conjunction with final regulations. EPA has failed, however, to comply with its statutory obligations to

7-40Other Comments

analyze the cost of potentia l BACT to impacted industries. Whatever BACT is determined to be, complying with those requirements will pose significant cost to industry. If EPA has already gathered informa tion on the type of BACT controls that may be required for industrial source categories, it has not made that information available as part of this rulemaking docket. [OAR-2009-0472-7237.1, p.3]

[See Docket Number OAR-2009-0472- 7237.1, pp.2-3 for detailed comments]

Until State PSD programs are revised, the severe permitting consequences of a final motor vehicle rule that the proposed PSD tailori ng rule is designed to avoid will come to fruition. [OAR-2009-0472-7237.1, p.3]

Even if the PSD tailoring rule is finali zed, and is successful accomplishing what EPA expects it to, all of the consequences described in the tailoring proposal will still occur, at least in the near term. In order for the “beneficial impacts” of the PSD tailoring rule [OAR-2009-0472-7237.1, p.3] to come to fruition, mo st states would first need to adjust their individual PSD programs accordingly. Although EPA approves state programs under the State Implementation Plan (SIP) pr ocess, each state program would remain legal and enforceable under state la w until changed. [OAR-2009-0472-7237.1, p.4]

[See Docket Number OAR-2009-0472- 7237.1, pp.3-4 for detailed comments]

EPA has failed in its statutory obligations to analyze the impacts of its proposed GHG regulations on the public. EPA is required by relevant Executive Orders and statutes to produce studies necessary to fully analyze the large economic and regulatory consequences that the motor vehicle rule will have on major stationary sources. As has been previously stated, EPA has conducted an RIA with respect to the motor vehicle rule , but those analyses are limited to the direct benefits and effects of GHG regulation of motor vehicles, and do not address the PSD effects on major stationary sources triggered thereby. [OAR-2009-0472-7237.1, p.4]

[See Docket Number OAR-2009-0472-7237.1, pp.4-7 for detailed comments pertaining to: Regulatory Flexibility Act, CAA § 317, and Unfunded Mandates Reform Act]

EPA is not obligated to finalize the motor vehi cle rule in the time frame it has identified NHTSA is under a statutory obligation to promulgate CAFE standards by March 30, 2010. EPA has identified this same date as the da te it must finalize the motor vehicle rule. EPA, however, is under no statutor y obligation to promulgate th is rule, nor a deadline to finalize its portion of the Jo int Motor Vehicle Proposal.

EPA has failed in its obligation under various Executive Orders and statutes to review the economic and regulatory impacts on major st ationary sources and the economy as a whole that will result when the proposed motor vehicle rule is finalized and becomes effective. EPA’s attempts to address these i ssues in other rulemakings are also precarious, and at the very least insufficient to satisfy the identified statutory mandates. Unlike NHTSA, EPA is not under deadline to promul gate the proposed standards. EPA has the

7-41EPA Response to Comments

authority and obligation to fully analyze th e broad-ranging and signi ficant impacts that the agency itself recognizes wi ll occur after this proposal is finalized, and to make that analysis available to th e public. [OAR-2009-0472-7237.1, p.8]

For these reasons, NMA urges EPA to withdr aw the motor vehicle rule and undertake a new, public process aimed at sufficiently analyz ing all of the impacts that will result from such action. NMA appreciates this opportunity to submit these comments. [OAR-2009­ 0472-7237.1, p.8]

[See Docket Number OAR-2009-0472- 7237.1, pp.7-8 for detailed comments]

National Petrochemical & Refiners Association

EPA’s Section 202 Rule Should Be Withdrawn or Reproposed Since It Violates Several Statutes and Executive Orders. In the proposed rulemaking, EPA has completely failed to take into account the enormous economic and regulatory consequences of th is rulemaking on stationary sources. Even though the Agency's current interpretation of the CAA considers a final section 202 rule to constitute a “triggering” event that woul d require CAA permitting actions either at the time of promulgation of the rule or upon the e ffective date of the ru le, the proposed rule and its associated “Regulatory [OAR- 2009-0472-7234.1, p.3] Impact Analysis” (“RIA”) thoroughly ignore this conseque nce, a consequence that th e Agency considers to be legally inevitable. Specifically, this proposed rule: [ OAR-2009-0472-7234.1, p.4]

[See Docket Number OAR-2009-0472-7234.1, pp.3-5 for detailed comments pertaining to: Violates the Paperwork Reduction Act, Violates the Regulatory Flexibility Act, Violates Executive Order 12866, Violates the Unfunded Mandates Reform Act, Violates Executive Orders 13132 and 13175, and Violates Executive Order 13211]

EPA Is Not Required Either to Propose or Finalize the Section 202 Rulemaking At This Time. There is no statutory schedul e or judicial order appli cable to this rulemaking. EPA is proposing to regulate GHG emissions fr om individual manufacturer fleets sold in each model year. EPA relies on CAA section 20 2(a) to establish an attribute-based approach for a CO2 fleet-wide standard ba sed on the footprint of the vehicle. EPA separately relies on section 202( a) to propose per-vehicle standards for nitrous oxide and methane emissions. In addition, EPA cites seve ral other sections of Title II of the CAA that are relevant to the sta ndards, including provisions aff ecting Agency discretion with regard to useful life, certific ates of conformity, testing requirements, and warranties. [OAR-2009-0472-7234.1, p.6]

[See Docket Number OAR-2009-0472-7234.1, pp.6-10 for detailed comments pertaining to: There is no statutory schedul e or judicial order applicab le to this rulemaking, There would not be a significant public health or environmental impact if EPA withdraws the proposed section 202 standards or delays finali zation of such standards, EPA proposes to

7-42Other Comments

regulate only three GHGs, and If EPA were to withdraw or delay finalization of the proposal rules, regulatory delay a nd uncertainty would not result]

EPA May Avoid “Impossible” Result s By Redefining PSD Applicability As indicated above, EPA is not compelled to finalize the Section 202 rulemaking at this time, but has significant discre tion as to the manner, timing a nd content of any action that it takes to respond to Mass achusetts v. EPA. In addition, however, EPA can avoid “impossible burdens” the Agency identifie d in the Tailoring Rule (e.g., the nearimmediate expansion of state and local permitting programs to include assessments of GHG emissions) and at the same time properly c onfine the effects of this rulemaking to light duty vehicle manufacturer s. As detailed below, the Agency should redefine PSD applicability to follow the clear language a nd structure of the CAA. By doing so, EPA could proceed to finalize the section 202 rulemaking while not imposing “impossible burdens” it has projected will result from this rulemaking. EPA could also avoid unnecessary and unsupported reliance on admini strative law doctrines in the Tailoring Rule and comply with the CAA in the manne r in which it is plainly written [OAR-2009­ 0472-7234.1, p.10]

[See Docket Number OAR-2009-0472- 7234.1, pp.10-12 for detailed comments pertaining to: EPA May Avoid 'Impossible' Results By Re defining PSD Applicability]

EPA Should Withdraw Its Proposed Section 202 Rules or Delay Finalization of the Rules In Order to Avoid “Impossible” Burdens Th at Could Result from Other CAA Provisions. EPA’s Legal Theories For Reducing the Burden s of the PSD and Title V programs in the Proposed Tailoring Rule Do Not Relieve the Ag ency of the Requirement to Analyze the Burdens That the Section 202 Rule Imposes. Under EPA's current interpretation of the CAA and associated regulations, PSD, and Title V permitting requirements will apply to new, modified and operating sources of GHGs as of 60 [OAR-2009-0472-7234.1, p.15] days following the Federal Register publication of this rulemaking. Since EPA e xpects to finalize the light duty vehicle rulemaking by the end of March 2010, this woul d mean that EPA would seek to apply permitting requirements to new sources and sources undergoing a major modification which increased emissions by late May/June of 2010 and require various state and local permitting agencies to also apply these requi rements. Under EPA's current interpretation of the relevant law and regulations, existing sources could be require d to apply for Title V operating permits covering GHG emissions one year later. [OAR-2009-0472-7234.1, p.16]

[See Docket Number OAR-2009-0472- 7234.1, pp.15-18 for detailed comments pertaining to: EPA has the abil ity to avoid 'impossible' re sults of this rulemaking and EPA must take time and effort to anal yze the full burden of this rulemaking]

The Rulemaking Process Is Unprecedented and Designed to Reach a Predetermined Result and Therefore Violates the Requirements of the Clean Air Act and the Administrative Procedure Act The “joint rulemaking” between EPA and NHTSA is unprecedented and calls into serious

7-43EPA Response to Comments

question how each Agency exerted independe nt judgment in fulfilling their separate statutory responsibilities under the CAA a nd EPCA. Moreover, the history of this rulemaking indicates that EPA and other Admini stration officials engaged in a series of meetings which predated th is proposal and predetermine d the end result of the rulemaking process either directly or thr ough impermissible incentives to promulgate a final rule within certain parameters. Theref ore, the rulemaking violates sections 202(a) and 307(d) of the CAA and requirements of th e Administrative Procedure Act. Since the issues involve the timing, stringency and fina l form of the promulgated standards, they are of central relevance to the rule. [OAR-2009-0472-7234.1, p.18]

[See Docket Number OAR-2009-0472- 7234.1, pp.18-21 for detailed comments pertaining to: This 'joint rulemaking' is unprecedented and prevents EPA from exercising independent judgment, Agreements between th e Administration, EPA, the Department of Transportation ('DOT'), the State of Ca lifornia and auto manufacturers have predetermined the content and overall result of this rulemaking, EPA's consideration and approval of the California waiver reques t under section 209 of the CAA improperly influenced the Agency's actions in this rulemaking]

The Proposed Rule Violates the Administrati ve Procedure Act since EPA Did Not Seek Comment on When the Agency Should Act, By Virtue of this Rulemaking, to Make GHGs “Regulated Air Pollutants” Under the Clean Air Act In its proposed endangerment determination, EPA took comment on the question of whether the Agency should regulate GHGs individually, or as a group. EPA has otherwise indicated that finaliz ation of the endangerment de termination itself will not make any GHG a “regulated air pollutant” und er the CAA. Therefore, if EPA considers this rulemaking to have the effect of maki ng several GHGs “regulated air pollutants,” the Agency must take comment on the question of when the Agency should take action to affect the regulatory status of various GHGs by making them a “regul ated air pollutants” subject to “actual control” unde r the Clean Air Act. As demo nstrated in this rulemaking and in the proposed Tailoring Rule and proposed endangerment determination, EPA fully understands its actions to have enormous c onsequences under the CAA. This notice, by not taking comment on when EPA should take action to impose actual controls on emissions of GHGs under the CAA is deficient under 5 U.S.C. 553(b)(3). In effect, the proposed rulemaking ignores the elepha nt in the room. [OAR-2009-0472-7234.1, p.22]

[See Docket Number OAR-2009-0472- 7234.1, pp.22-23 for detailed comments pertaining to: The Proposed Rule Violates the Administrative Procedure Act since EPA Did Not Seek Comment on When the Agency S hould Act, By Virtue of this Rulemaking, to Make GHGs “Regulated Air Pollutants” Under the Clean Air Act]

Fuel Requirements NPRA also notes and would incorporate by reference comments filed by the American Petroleum concerning proposed fuel requi rements in the Section 202 Rule. Fuel specification changes have not been proposed in this rulemaking, however the proposed rule and Draft Technical Support Document describe vehicle engine and equipment options that EPA believes will require lowe ring current sulfur requirements. NPRA

7-44Other Comments

believes there is inadequate lead time for such an action which would require considerable analysis and a ssessment for its impact on refi neries. NPRA also supports API comments with respect to ethanol blende d certification fuel, fl exible fuel vehicle credits and dedicated alternative fuel vehicles. [OAR-2009-0472-7234.1, p.25]

NISEI Farmers League

The Nisei Farmers League submits these comm ents on behalf of gr owers, packers, and shippers in California, Or egon, Utah, and Washington. NFL represents more than 1,100 operations in these states. We did not intend to participate in this docket, as our primary focus relates to the effect of Greenhouse Ga s (GHG) regulations on stationary sources. For this reason, we had not spent much effo rt evaluating this docket until the proposed Greenhouse Gas Tailoring Rule was filed on October 27, 2009.

The proposed Tailoring Rule is based on the assumption that the act of regulating GHG emissions from automobiles under the clean air act will trigger regulatory requirements affecting stationary sources of GHG emissions. In supporting documents for the Tailoring Rule, EPA estimates that without the Tailo ring Rule, over 6 million stationary sources will become subject to Title V permitting requirements, at a cost of over 38 billion dollars. It would seem logical that if the analysis in the Tailoring rule is correct, then the additional cost burden for stationary sources sh ould be reflected in the economic analysis for this docket. To the best of our knowledge, the impact of this rulemaking on stationary sources was not considered. Proper consideration of the complete cost pictur e is very important in this docket. This is especially true, considering that EPA could gain almost all of their GHG reductions from Automobiles through NHTSA' s CAFE standards. It would seem that if EPA used the CAFE standards to calculate GHG reductions , the GHG reductions would remain very comparable, yet the regula tory burden on stationary sources could be avoided. The proposed Tailoring Rule uses the doctrin e of 'absurd results' as a portion of the justification for the prop osed rule. It would appear that th e origin of the 'absurd result' lies in this very docket, and the solution to the 'absurd result' is achievable in this docket without significant loss of GHG reduction benefits.
EPA should review the economic benefit of th is rule, considering all costs; both those currently in this docket, and those outlined in the proposed Tailoring Rule. In addition, EPA should clearly evaluate the benefit of re gulations solely based on CAFE standards. Finally EP A should consider extending the co mment period in this docket, considering the significant additional costs discussed in the Tailoring Rule proposal. [OAR-2009­ 0472-7142.1, pp.1-2]

Peabody Energy Company

In particular, Peabody believes that EPA has failed, as a part of the motor vehicle GHG rulemaking, to conduct a number of analyses required by Executive Orders and statutes of the highly significant economic and regulat ory effects that will result from PSD

7-45EPA Response to Comments

regulation of major source GHG emissions. Unle ss these analyses are produced and made subject to comment before the motor vehicle rule is finalized, the legal status of that rule will be in jeopardy. Moreover, apart from legal requirements and as a matter of sound regulatory policy, EPA should take the necessa ry steps to understand the consequences that will necessarily flow when the motor vehicle rule is finalized and numerous stationary sources become subject to GHG regulation under the PSD program. [OAR2009-0472-7223.1, p.1]

Peabody understands that EPA has proposed the ta iloring rule in order to defer PSD and Title V regulation for what that rule defi nes as small (non-major) GHG emitters – those whose potential to emit (PTE) CO2e emissions is less than 25,000 tons per year (tpy). Peabody further understands that the motor vehi cle rule preamble as ks that “concerned small entities” address their comments about PSD and Title V to the tailoring rule docket. Except as relevant to our comments here, P eabody will withhold its detailed comments on the small source issue for th at docket. [OAR-2009-0472-7223.1, p.1]

However, Peabody’s concern as to PSD impact s in the present docket relates not to the small-source emitters but to the major-source emitters. Except for defining the major source threshold at 25,000 tpy CO 2e, the tailoring rule does not affect PSD regulation of major stationary sources of GHGs and indeed specifically states that normal PSD requirements will apply to such major sources. Thus, the motor vehicle rule is the EPA regulatory decision point that triggers PSD regulation of major-source emissions of GHGs and therefore, as a matter of law, EPA’s responsibility to examine the PSD consequences of that decision on major sour ces arises here. Accordingly, Peabody directsits comments on the major source PSD issue to the present docket and urges EPA to renotice the rule for further comment when it has produced the necessary studies. [OAR2009-0472-7223.1, p.2]

PSD regulation will have two types of c onsequences for major-source GHG-emitters: it will result in significant Best Available Control Technology (BACT) requirements, and, at least in the near term, will make it very difficult to obtain needed PSD permits or permit modifications. [OAR-2009-0472-7223.1, p.2]

Regulating light-duty motor vehicle GHG emissions will have far-reaching economic and regulatory consequences by s ubjecting most of the nation’ s industrial production to GHG regulation under the PSD program

As the tailoring rule preamble explains, EPA’s motor vehicle rule will make GHGs a regulated pollutant under the Clean Air Act (CAA) and will therefore trigger PSD regulation of major source GHG-emitters. A ccording to the tailo ring rule Technical Support Document (TSD), at the 25,000 t py CO2e threshold, some 13,600 sources are major sources of GHG emissions throughout the economy. This represents the large majority of the nation’s fossil fuel-fired indus trial base and accounts for 87 percent of the CO2 emitted by every stationary source of any size in America. [OAR-2009-0472­ 7223.1,p .2] [See Docket Number OAR -2009-0472-7223.1, pp.2-4 for a detailed discussion on this issue.]

7-46Other Comments

Despite the tailoring rule, re gulating light-duty motor vehi cle GHG emissions will have the further consequence for major sources of essentially making it impossible for them to obtain needed permits, at least in the near term

According to EPA, without the tailoring ru le, regulation of GHGs triggered by the motor vehicle rule will result in sustained regulator y gridlock in the PSD and Title V programs. EPA says that “the number of [PSD] permit a pplications would increase by 150-fold, an unprecedented increase that would far exceed administrative resources.” Moreover, “[p]ermitting authorities have estimated that it would take 10 years to process a PSD application, on average, and the resulting back log would affect the permit applications for all sources, not just GHG emitters. This back log would grow by tens of thousands each year following the triggering of PSD applicability.” EPA esti mates that there would be “some 6.1 million” Title V permit applicati ons, a number that is “almost 100 times greater than what Congress expected,” which would lead to “multi-year delays in permit issuance.” [OAR-2009-0472-7223.1, p.4]

EPA also states that this regul atory gridlock would not be conf ined to just small sources. As EPA states, “a literal app lication of the 100/250 tpy thre sholds would sweep into the PSD program tens of thousands of smalle r sources that Congress did not intend to include, and the resulting stra in on administrative resources would preclude the hundreds of larger sources that Congr ess did intend to be subject to the program from obtaining permits at least for an initial period of time.” [OAR-2009-0472-7223.1, p.4]

EPA says that the tailoring rule will prevent these dire consequences from occurring, but that is not the case, at least in the ne ar term. The tailoring rule preamble frankly recognizes that most states have adopted their own PSD programs. Although these programs are submitted to and approved by EPA as a part of the State Implementation Plan (SIP) process, these programs retain independent legal force under state law. According to EPA, “virtually all of [the se state permit programs] establish the PSD permitting threshold at the 100/250-tpy level,” and in fact “a few states have adopted lower permitting threshold levels.” Similarly, “virtually all EPA approved SIPs establish the significance level for any new pollutant that it covers – in cluding GHG emissions, if covered – at zero.” This means that, under st ate law in most states, once GHGs become regulated pollutants, any major-source modi fication that increases GHG emissions by any amount will trigger PSD applic ability. [OAR-2009-0472-7223.1, pp.4-5]

Under the tailoring rule, these state PSD pr ovisions will no longer be enforceable as a matter of federal law. But, as EPA specifica lly states, the 100/250 tpy state thresholds and the zero state significance levels for CO2 will remain in effect as a matter of state law. Moreover, EPA says it will not issue a SIP Call, impose a Federal Implementation Plan, or take any other action that will require states to change their current thresholds and significance levels. Thus, absent state action to revise thei r PSD regulations, the regulatory gridlock that EPA predicts wit hout the tailoring rule will occur anyway. [OAR-2009-0472-7223.1, p.5]

7-47EPA Response to Comments

EPA seems to be counting on the states’ unila terally revising their PSD regulations, but EPA does not allow them any time to do so before GHGs become regulated pollutants triggering PSD and Title V requirements. Many states could take a year or more to change their regulations, and many require either legislat ive approval or legislative review of some kind. In the meantime, the regulatory gridlock that EPA predicts – for both large and small sources – will be a reality. Of course, EPA could defer the effectiveness of the motor vehicle rule until states have taken the necessary action, but that is not what EPA proposed in the tailor ing rule. Under the re gulatory structure EPA proposes to implement, a very large number of sources, both large and small, will become subject to PSD GHG requirements when the motor vehicle rule goes into effect, with the resulting regulatory quagmire, and that quagmire will abate only if and when most states amend their PSD rules. And i ndeed, since EPA will not compel states to change their rules, and instead takes the posi tion that states can set any thresholds and significance levels below 25,000 tpy CO2e that they want, there is no assurance that states will in fact make the necessary changes. [OAR-2009-0472-7223.1, p.5]

The impact of this state of affairs will ripple through the economy. As permitting comes to a stop because of an overwhelmed permit system, or because of uncertainty as to applicable regulatory requirements, constr uction activity for new projects and for a variety of building and facility expansions and upgrades will be forced to cease. This may not be the result that EP A. [OAR-2009-0472-7223.1, p.5]

EPA cannot validly argue that it is not responsible for an alyzing the costs of BACT controls for major source GHG emissions because of the state role in developing BACT requirements

States that administer th eir own PSD programs undoubtedly play a significant role in determining BACT controls for major source emitters. But that fact does not relieve EPA of the obligation to examine the likely costs of GHG BACT c ontrols that will be made necessary as a result of EPA’s decision to regulate GHG emissions from motor vehicles. [OAR-2009-0472-7223.1, p.9]

As confirmed by the Supreme Court, although states have discretion in making BACT determinations, that discretion is ultimate ly controlled and circumscribed by EPA. As required by the CAA, the Agency promulga ted regulations requiring states that administer their own PSD programs to subm it those programs to EPA for approval as a part of their SIPs. EPA may disapprove a state’s PSD SIP an d/or prevent construction of a project subject to PSD if a state, in EPA’s view, incorr ectly applies BACT requirements. According to the Court, EPA’s authority “extends to ensuring that a state permitting authority’s BACT determination is reasonable in light of the statutory guides.” [OAR-2009-0472-7223.1, p.9]

Thus, since it is EPA that is triggering the GHG BACT requirement by promulgating the motor vehicle GHG rule, and since it is EPA’s responsibility to ensu re that states are conforming to the statutory BACT requireme nts that EPA is trig gering, it is EPA’s obligation to assess the resu lting economic consequences. Although EPA at this time

7-48Other Comments

perhaps cannot know exactly how stringent state BACT determinations will be, it can make reasonable assumptions both as to its own minimum requirements and as to likely states requirements. [OAR-2009-0472-7223.1, p.9]

SCANA Corporation

Either EPA has failed to evaluate the number of sources that could be affected once the Light-Duty Vehicle GHG Standards go into effect carefully, or it has recklessly disregarded the substantial, negative impact s. It would appear that EPA has grossly underestimated the number and types of facilities that will be impacted by the light-duty vehicle GHG proposal by making them subject to PSD pollutants and the Title V and PSD permitting requirements . The South Carolina Department of Health and Environmental Control (SCDHEC) ha s identified over 800 of [OAR-2009-0472-7316, p.1] the currently permitted small sources that they project would become subject to Title V and PSD permitting by virtue of the tri ggering provision as soon as GHGs become regulated under Light- Duty Vehicle GHG Sta ndards. South Carolina currently has 281 Title V permitted facilities. Did EPA evaluate the effects of a tripling of the number of Title V permitted facilities, in South Carolin a alone, including the resources required to process them? We are being told to prepare for a three year permitting process, assuming resources are available. In addition to this impact, even the most minor modification or expansion activity may trigger a Preven tion of Significant De terioration (PSD) technology review and modeling analysis. And the technology review would encompass all of the triggered PSD pollutants, not just GHG. [OAR-2009-0472-7316, p.2]

The GHG Tailoring rule is ill suited to address the problem s caused when the Light-Duty Vehicle GHG Standards trigger the Title V a nd PSD permitting requirements. EPA must acknowledge that the GHG Tailoring rule may not even be in place at the time that EPA finalizes the Light-Duty Vehicl e GHG Standards. EPA has stat ed clearly its intent to finalize the Light- Duty Ve hicle GHG Standards by the end of March 2010. The public comment period on the GHG Tailoring ru le ends on December 28, 2009. EPA undoubtedly will receive thousands of comments on the GHG Tailoring rule. It would be sheer folly to assume that it can consider and resolve those comm ents and finalize the rule in only three months, at least if EP A plans to conduct an honest and meaningful review of comments. No doubt, it will be a monumental task for EPA to review adequately all of the comments and make necessary, meaningful, and responsive revisions to the proposed rule. [OAR-2009-0472-7316, p.2]

Recommended Alternative: EPA should not establish GHG emission limits under Section 202(a) of the Clean Air Act. Instead, EPA and NHTSA should simply work together to establish fuel economy standards that accomplish the desired goals of substantial reductions in GHG emissions and improvements in fuel economy. If this simple and direct approach were taken, the other sections of the Clean Air Act (specifically Title V permitting and PSD permitting) would not be triggered. [OAR-2009-0472-7316, p.3]

[See Docket Number OAR-2009-0472-7316, pp.1-3 for detailed comments]

7-49EPA Response to Comments

Sierra Research Inc.

[Sierra Research Inc. Submitted Docket Number OAR-2009-0472-7977.1 as a comment attachment regarding the NHTSA Proposal for Average Fuel Economy Standards Passenger Cars and Light Trucks Model Year s 2011-2015, Sierra Resear ch, Inc., June 27, 2008. No other comment document from Sierra Research Inc. was received.]

South Carolina Chamber of Commerce

Specifically, EPA has failed to carefully eval uate the number of sources that could be affected once the Light-Duty Vehicle GHG Stan dards go into effect . We feel that EPA has grossly underestimated the number and types of facilities that will be impacted by the light-duty vehicle GHG proposal by becoming s ubject to NSR pollutants and the Title V and NSR permitting requirements. While we continue to evaluate the specific impact to currently permitted South Carolina (SC) sources and will make comment to this effect to the 'tailoring rule,' South Carolina Depart ment of Health and Environmental Control (SCDHEC) has identified over 800 of the curre ntly permitted small sources that would become subject to Title V and NSR perm itting as soon as GHGs are regulated under Light-Duty Vehicle GHG Standards. In co mparison, SC currently has 281 Title V permitted facilities. In addition to this impact, even the smallest modification or expansion activity may trigger a Preven tion of Significant De terioration (PSD) technology review and modeling analysis. Th e technology review would encompass all of the triggered NSR pollutants, not just GHG. Economically, these facilities would have no choice but to abandon any new project or mo dification. It is inte resting to note that many of these [OAR-2009-0472-7298, p.1] faciliti es would be subject to NSR and Title V permitting requirements because of natural ga s combustion, which is considered to be a clean burning fuel. In addition, we would e xpect new construction to halt because of these new requirements. [OAR-2009-0472-7298, p.2]

EPA must not rely upon the GHG Tailoring rule to address the fact that the Light-Duty Vehicle GHG Standards trigger the Title V and NSR permitting requirements. Furthermore, EPA must acknowle dge that the GHG Tailoring rule may not be in place at the time that EPA finalizes the Light-Du ty Vehicle GHG Standards. EPA has clearly stated its intent to finaliz e the Light-Duty Vehicle GHG Standards by the end of March 2010. The public comment period on the GHG Tailoring rule ends on December 28, 2009. EPA is expected to get thousands of comments on the GHG Tailoring rule and it would have only three months to address those comments and finalize the rule. This appears to be a monumental task if EPA is going to adequately review all of the comments and make necessary revisions to th e proposed rule in response to critical comments received. [OAR-2009-0472-7298, p.2]

EPA clearly believes that promulgation of th e proposed Section 202(a) GHG rule will be extremely costly and a regulatory burden as evidenced by its preemptory promulgation of the Tailoring Rule. EPA explicitly states th at the Tailoring Rule was promulgated for the sole purpose of addressing the paralyzing cost s that would be borne by stationary sources in the wake of GHG regulation under Section 202(a). EPA notes in the Tailoring Rule

7-50Other Comments

that as soon as the Section 202(a) GHG rule is finalized, 'GHGs s ubject to regulation under that rule would become immediately subject to regula tion under the PSD program.' If EPA had conducted a proper impact analysis of the proposed Section 202(a) GHG rule, it would have included an assessment of the obvious burdens that would be placed on stationary sources via the PSD permitting tri gger. EPA cannot simply extricate portions of its cost analysis in order to provide a rule that is more economically feasible. Such an approach is arbitrary and doe s not provide the minimal required support for EPA's rule. [OAR-2009-0472-7298, p.2]

The SC Chamber of Commerce believes that many existing facilities will need new Title V or PSD permits to replace, repair or im prove the efficiency of aging equipment, including energy efficiency projects. Permitting delays will force facilities to evaluate the possibility of shutting down domestic ope rations and relocating to beyond the United States borders. Furthermore, small businesses, such as asphalt and concrete batch plants, metals manufacturing, the remaining text ile industry, food packaging, wood products, even hospitals will be subject to many more re quirements than they currently are (not just GHGs but also all other NSR pollu tants). It will be significantly more costly for them to receive a permit and they will experience significant permit delays, discontinued construction and loss of jobs. This permitting process will grind economic development and industrial growth to a halt causing adve rse consequences to an already struggling economy. [OAR-2009-0472-7298, p.3]

[See Docket Number OAR-2009-0472-7298, pp.1-3 for detailed comments]

South Carolina Department of He alth and Environmental Control

It is critical that all potentia lly effected entities understand the impact of EPA regulating greenhouse gas emissions under the light-duty vehi cle proposal. It will be too late to address any concerns that stati onary (industrial) sources have in the 'tailoring rule' as they will already be subject to PSD, as defined in the Clean Air Act, once EPA regulates greenhouse gases from light-duty vehicles. There are fundamental issues related to the 'tailoring rule,' and EPA's continued message of the 'absurd results' and 'administrative burden' of not moving forward with a 'tailori ng rule' only confuses the real situation as the thresholds being proposed are 'illegal' under the Clean Air Act and violate many state laws across the country. Any permit issued with thresholds higher than those within the Clean Air Act and current state laws would be vulnerable to appeal and litigation, even though EPA attempts to justify the tailoring rule by saying that by not doing so would create results 'so illogical or contrary to sensible policy as to be beyond anything that Congress could reasonably ha ve intended.' We do not understand how EPA could know this and not also know that there is no guara ntee their legal interpre tation to exempt small sources or set different thres holds in the tailoring rule wi ll not be challenged or if challenged, upheld in court. We are very c oncerned with EPA movi ng forward in this direction.

Again, we have significant c oncerns about the collateral e ffects of EPA moving forward at this time to regulate greenhouse gas emi ssions from light-duty vehicles. EPA must

7-51EPA Response to Comments

fully evaluate the colla teral impact this proposal would have on all other aspects of the Clean Air Act including, but not limited t o, the impact on state and local air permitting authorities, business, industry and the econom y to all areas of the country, but in particular states like South Carolina who still employ many people in the manufacturing sector. As they have not fully evaluate d the impact to state and local permitting authorities, EPA has not met the requiremen ts under the Unfunded Mandates Reform Act of 2005 for the light-duty vehicle GHG proposal. EP A even states in the tailoring rule for stationary sources, 'State permitting au thorities would be paralyzed by permit applications in numbers that are orders of magnitude greater than their current administrative resources could accommodate' yet they have not taken this into consideration in the light-dut y vehicle greenhouse gas proposal.

Finalizing this proposal would have a detrimen tal effect on our state's economy at a time when unemployment is currently at 12.1% a nd is only expected to increase. Once EPA 'regulates' greenhouse gas emissions from mob ile sources, the Clean Air Act requires that stationary sources be regulate d under the threshold requireme nts as specified within the Clean Air Act -regardless of any 'tailoring ru le' EPA develops -as those thresholds are specified within federal law. States and local permitting authorities are wholly unprepared for the millions of entities who will be required to comply with the Clean Air Act once greenhouse gas standards are set by EPA on light-duty vehicles. Bottom line, the permitting process will become so backlogg ed as to create a permitting moratorium. New business and industry will not be bui lt; existing business will not expand; and, existing business and industry will not repair equipment if such repairs would require a permit. Again, detrimental effects and uni ntended consequences with the minimum environmental benefit that would occur fr om EPA greenhouse gas standards on light-duty vehicles, as almost all of the environm ental benefit comes from NHTSA's CAFE standards.[OAR-2009-0472-7202.1, p.3]

Again, we ask that EPA not move forward unt il further review and understanding of the full collateral impact of regulating greenhous e gases from tailpipes is completed and appropriate public participation is allowe d. We also challenge EPA to take this opportunity to develop a well thought out, comprehensive, holistic, common sense approach to air quality management that focuses on environmental results and not process. [OAR-2009-0472-7202.1, p.6]

In summary the commenter is concerned about detrimental effect on state's economy, budget shortfalls and extra work load related to permitting.

South Carolina Manufacturers Alliance (SCMA)

ACCORDING TO EPA'S OWN LEGAL ANA LYSIS, GHGS ARE NOT CURRENTLY POLLUTANTS 'SUBJECT TO REGULATION' UNDER THE CAA As evidenced by EPA's legal analysis in it s recently proposed rule reconsidering the December 18, 2008 'PSD Interpretive Memo', and supported by historic Agency practice and decisions of EPA officials, GHGs are not pollutants that are currently 'subject to regulation' under the CAA. EPA has long held that for a pollutant to be 'subject to

7-52Other Comments

regulation' there must be actual control m easures and not mere monitoring or reporting requirements. [OAR-2009-0472-7296, p.2]

Although GHGs are not currently 'subject to regulation' under the CAA, once EPA finalizes a rule to regulate GHG emissions under CAA Section 202, legal arguments can be made that other CAA regulatory require ments will be triggered, thus affecting stationary source CAA compliance. Due to the strong possibility that EPA could be legally compelled to regulate GHG emissions from stationary sources as a result of this regulation, it is unreasonable a nd arbitrary for EPA to not analyze impacts on the tens of thousands of sources that could be require d to limit their GHG emissions. EPA has failed to conduct a proper impact analysis. [OAR -2009-0472-7296, p.1] Such an analysis would identify the significant burdens the rule would place on stationary sources and the resulting impact on jobs and the nation's economy. The CAA is not an appropriate vehicle to regulate GHGs and such a task is be tter left for the members of U.S. Congress to address. [OAR-2009-0472-7296, p.2]

[See Docket Number OAR-2009-0472-7296, p.2 for detailed comments]

IF GHGS ARE REGULATED UNDER SECTIO N 202 OF THE CAA, IT IS LIKELYTHAT OTHER REGULATORY REQUIREMENTS WILL BE TRIGGERED [OAR2009-0472-7296, p.2] There are strong legal argument s that indicate that if th e proposed Section 202(a) GHG rule is finalized it will generate an array of other regulatory require ments. Specifically, it is likely that regulation of GHGs under S ection 202 will trigger requirements under the Prevention of Significant Dete rioration (PSD) program. This is acknowledged by EPA in a proposed rule published in the Federal Register on October 27, 2009 (Prevention of Significant Deterioration and Title V Gr eenhouse Gas Tailoring Rule; Proposed Rule) (the Tailoring Rule). In the opening paragraphs of the Tailoring Rule, EPA notes that that once GHGs are regulated under Section 202( a) PSD permitting requirements will immediately apply to stationary sources emitting GHGs above the significance threshold. [OAR-2009-0472-7296, p.3]

[See Docket Number OAR-2009-0472- 7296, p.3 for detailed comments]

EPA HAS FAILED TO CONDUCT AN AD EQUATE ANALYSIS OF THE IMPACTS THAT THIS MOBILE SOURCE GHG RULE WILL HAVE ON STATIONARY SOURCES EPA has failed to conduct a complete analysis of the impacts associated with regulating GHGs under Section 202(a) of the CAA. EPA has openly acknowledged that the promulgation of standards to control GHG em issions from light-duty motor vehicles under Section 202(a) will inevitably trigger PSD permitting requirements for stationary sources; nonetheless, EPA has not included in this proposal an impact analysis that addresses the effect this rule will have on sta tionary sources. This represents a major flaw in the proposed rule. [OAR-2009-0472-7296, p.3]

7-53EPA Response to Comments

SCMA strongly requests that EPA not proc eed with finalizing the proposed Section 202(a) GHG rule because the proposed rule wi ll trigger other regulatory requirements, and EPA has failed to conduct a proper impact analysis . This rule and the other recent GHG regulatory proposals combined demonstrate clearly that EPA s hould defer action to allow the U.S. Congress to settle on a national approach through comprehensive legislation that is economy-wide, which wi ll have a better chance of balancing the economy-altering changes that the proposed finding will ultimately bring. [OAR-2009­ 0472-7296, p.4]

[See Docket Number OAR-2009-0472-7296, pp.3-4 for detailed comments]

South Carolina Pulp & Paper Association (SCPPA)

SCPPA believes that EPA has tremendously underestimated the number and types of facilities that will be impact ed by the light-duty vehicle GHG proposal (i.e ., residential home heating gas-fired furnaces above 0.5 million BTU/hour would trigger the major source thresholds for GHGs). We question wh ether EPA has adequa tely evaluated the consequences and collateral impacts of the proposed rule and request that EPA delay any action until further analysis and understand ing of these impacts has been completed. [OAR-2009-0472-7479, p.1]

Even the smallest modification, energy efficien cy project, or expansion activity at our facilities could trigger a Prev ention of Significant Deterior ation (PSD) technology review and modeling analysis. The technology review would encompass all of the triggered NSR pollutants, not just GHG. Economically, our fa cilities may have no choice but to abandon any new project or modi fication. [OAR-2009-0472-7479, p.1]

EPA must not rely upon the GHG Tailoring rule to address the fact that the Light-Duty Vehicle GHG Standards trigger the Title V a nd NSR permitting requirements. While this sort of rule would reduce th e impacts of EPA's adoption of the GHG tailpipe standards to a degree, the impacts on businesses and regulat ory authorities would still be dramatic, and they would be a direct result of the proposed GHG tailpipe standards for which EPA has never completed a statutor ily required impact analys is. Furthermore, EPA must acknowledge that the GHG Tailoring rule ma y not be in place at the time that EPA finalizes the Light-Duty Vehi cle GHG Standards, or may be rejected by the court as arbitrary and capricious and beyond EPA' s Clean Air Act authority. [OAR-2009-0472­ 7479, p.2]

SCPPA believes that many existing facilities will need new Title V or PSD permits to operate, replace, repair or improve the effici ency of aging equipment, including energy efficiency projects. Permitting delays will for ce facilities to evaluate the possibility of shutting down domestic operations and relocatin g outside the United States. Furthermore, our smaller wood products facilit ies will be subject to many more requirements than they currently are (not just GHGs but also all ot her NSR pollutants). It will be a significant cost for them to receive permits and they will experience significant permit delays, discontinued operation, and loss of jobs. This permitting process will grind economic

7-54Other Comments

development and industrial growth to a halt causing adverse conseque nces to an already struggling economy. [OAR-2009-0472-7479, p.2]

Recommendation SCPPA believes that EPA should not es tablish GHG emission limits under Section 202(a) of the Clean Air Act. EPA should take into consideration that the new NHTSA CAFE standards accomplish the goals of the Light-Duty Vehicle GHG Standards and EPA should not finalize any GHG emission stan dards under the authority of the Clean Air Act. Virtually all of the GHG emission re ductions required by the Light-Duty Vehicle GHG Standards come from the improvement to NHTSA's CAFE standards. Therefore, the additional EPA regulation comes at an en ormous cost with virtually no additional environmental benefits. [OAR-2009-0472-7479, p.2]

Southeastern States Air Resource Managers, Inc. (SESARM)

We do, however, have significant concerns with the subject rule as currently proposed, primarily due to expected impacts from it tri ggering other sections of the Clean Air Act, specifically New Source Review (NSR) and Title V permitting. We do not believe that EPA has thoroughly examined these impacts. We further do not believe that EPA has adequately evaluated the options for minimi zing, or avoiding, these collateral impacts. Our concerns are described herein along w ith recommended changes that will still produce the intended results of the proposed rule while minimizing or avoiding these collateral impacts. [OAR-2009-0472-7137.1, p.2]

EPA must evaluate, as a part of this rule making, whether or not other sections of the Clean Air Act will be triggered by this rule. If so, EPA must evaluate as part of this rulemaking the impacts of such triggering. Our understanding is that this rulemaking is the action that will trigger future requirements for permitting of GHGs under the NSR and Title V programs. However, in the proposed rule, EPA actually suggested that ”small entities” should not comment on the trigge ring issue in this rulemaking, but should instead submit comments on the proposed “P revention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule” (GHG Tailoring Rule).1 We believe that EPA was in error to suggest this point and that it may inappropria tely influence small entities, other affected sources, and permitting agencies to refrain from commenting on an important rulemaking. The EPA GHG Tailoring Ru le is a wholly independent rulemaking from the Light-Duty Vehicle GHG Standard s Rule. The GHG Tailoring Rule does not trigger the NSR and Title V permitting re quirements; the Light-Duty Vehicle GHG Standards Rule does. [OAR-2009-0472-7137.1, p.2]

EPA failed to take into account in the Light-Duty Vehicle GHG Standards Rule the length of time that it may take for permitting authorities with SIP-approved NSR programs to go through rulemaking (which require s approval of state le gislatures in some cases), hiring, and training in order to implement the mandate of regulating GHG emissions under the NSR and Title V permitting programs. [OAR-2009-0472-7137.1, p.2]

7-55EPA Response to Comments

The GHG Tailoring Rule appears to be legally vulnerable and may not provide intended relief from the NSR Prevention of Significan t Deterioration (PSD) and Title V statutory permitting thresholds. If the GHG Tailoring Rule is not finalized in time or is stayed or vacated by the courts, the workload for perm itting authorities will in crease exponentially at a time when state and lo cal governments are experienci ng severe budgetary challenges due to the current economic climate. [OAR-2009-0472-7137.1, p.3]

EPA has failed to evaluate and quantify fu lly the effects of the proposed Light-Duty Vehicle GHG Standards Rule on state and local air permitting authorities. More specifically, EPA does not appe ar to have complied fully with the Unfunded Mandates Reform Act of 1995. EPA states in the preamble that this rule only affects manufacturers of cars and light trucks. However, the proposed rule, if finalized as currently proposed, has the potential to affect state and local air permitting authoritie s immensely because it would cause GHG emissions to become regul ated under the NSR and Title V permitting programs. The proposed rule does not take this into account. The potential impact to state and local air permitting authorities is unprecedented and enormous. [OAR-2009-0472­ 7137.1, p.3]

EPA claims that the proposed Light-Dut y Vehicle GHG Standards Rule imposes no enforceable duty on any state, lo cal or tribal governments. Wh ile the rule may not impose duties on governments as regulated entities, th e negative impact of the rule on state and local permitting agencies cannot be over emphasized. As stated previously, the GHG Tailoring Rule acknowledges that state permittin g authorities will be “paralyzed” by the workload created by the triggering of the NSR and Title V permitting provisions for GHG emissions. [OAR-2009-0472-7137.1, p.4]

In the final Light-Duty Vehi cle GHG Standards Rule, EPA should avoid or minimize the impacts of the triggering effect. EPA can accomplish the goals of this rule without triggering NSR and Title V permitting. [OAR-2009-0472-7137.1, p.4]

Virtually all of the GHG emission reducti ons required by the proposed Light-Duty Vehicle GHG Standards Rule will come from improvements in NHTSA’s CAFE standards. EPA acknowledges that the only wa y to reduce CO2 emissions from light-duty vehicles is to increase fuel economy and th at there are no emission control technologies that reduce CO2 emissions from light-duty vehicles. EPA states in the proposed rule that N2O and CH4 emissions are low and that the proposed rule is not designed to require technology to reduce emissions of these compou nds. EPA then justifies the inclusion of the proposed emission standards with a seemingl y conflicting statement that the agency is concerned about those emissions increasing in the future. Because of the enormous collateral consequences of regulating GHG emissions under the Clean Air Act at this time and because the proposed rule does not require reductions of N2O or CH4 emissions, EPA should not finalize emission stan dards for N2O or CH4 as part of this rulemaking. [OAR-2009-0472-7137.1, p.5]

As an alternative, should EPA promulgate GHG emission limits under Section 202(a) of the CAA, it may be possible to defer regula tion of GHG emissions until the first vehicle

7-56Other Comments

model year required by the Light-Duty Vehicle GHG Standards Rule. [OAR-2009-0472­ 7137.1, p.5]

Spurgeon, C. M.

To make matters worse, these regulations would start a regulatory cascade. EPA would start regulating emissions from millions of sources, including large buildings, churches, sports arenas, office buildings, farms, schools, hospitals—you name it. EPA will be forced to regulate greenhouse gases with ma ny sections of the Clean Air Act, including sections 108, 111, and 112. This will furthe r harm our economy, re duce American jobs, and worsen our employment situation. NHTSA already has the ability to regulate fuel economy without EPA further harming the economy. [OAR-2009-0472-7092.1, p. 2]

Stanton, Neil

To make matters worse, these regulations would start a regulatory cascade. EPA would start regulating emissions from millions of sources, including large buildings, churches, sports arenas, office buildings, farms, schools, hospitals—you name it. EPA will be forced to regulate greenhouse gases with ma ny sections of the Clean Air Act, including sections 108, 111, and 112. This will furthe r harm our economy, re duce American jobs, and worsen our employment situation. NHTSA already has the ability to regulate fuel economy without EPA further harmi ng the economy. [OAR-2009-0472-10169, p.2]

Texas Chemical Council (TCC)

TCC opposes EPA's promulgation of the proposed light-duty vehicle rule because of significant concerns with the rulemaking process with respect to EPA's failure to perform an adequate review and analysis of the re gulatory burdens and costs of this proposed rulemaking thereby depriving the public th e opportunity to comment. In addition, we believe that the CAA was not designed, nor is it functionally suited, for the regulation of GHG emissions from mobile or stationary s ources. Furthermore, moving forward with the rule is unnecessary since the corporat e average fuel economy (CAFE) standard proposed by the National Highway Traffic Safety Administration will accomplish the same environmental benefits, but without the administrative and permitting burden that regulation of GHGs under the CAA is sure to cause. Finally, any regulation of GHG emissions under the CAA would harm the economic viability or the Texas chemical industry. [OAR-2009-0472-7290, p.2]

The Proposed Rule Contains Significant Procedural Deficiencies In the proposed § 202 rulemaking, EPA consider s the impact of the proposal on car and truck manufacturers, but provides insufficient re view and analysis of the impact of this rule on stationary sources. The following stat utes and Executive Or ders require EPA to fully and transparently consider all regulator y costs and impacts of its proposed rules: Paperwork Reduction Act, Regulatory Flexib ility Act, Unfunded Mandates Act, and Executive Orders 12866 (regulatory planni ng and review), 13132 (federalism implications), 13175 (coordination with Indian tribal governments) and 13211 (impacts

7-57EPA Response to Comments

on energy use, supply and distribution). In th e proposed rule, EPA is legally required to consider the full regulatory impact of its ac tion on stationary sour ces and cannot rely on other proposed rulemakings to provide that analysis. [OAR-2009-0472-7290, p.3]

[See Docket Number OAR-2009-0472-7290, pp.2-3 for detailed comments]

The CAA was Not Designed for th e Regulation of GHG Emissions TCC strongly believes that the CAA is not the appropriate t ool for regulating GHG emissions from mobile or stationary sources . Furthermore, there is no compelling reason

- legal or otherwise - for EPA to proceed down this road at this time. In the Massachusetts decision, the Court gave EPA wide flexibility in the manner, timing, content and coordination of it re gulations. Particularly in light of the fact that the U.S. House of Representatives has passed GHG cap-a nd-trade legislation, and the U.S. Senate is deliberating similar legislation, EPA should wait for Congress to proceed before it swiftly moves to regulate GHG emissions under a permitting mechanism that was not constructed, nor intended, to t ackle the regulation of the vast number of sources that emit GHGs.

[See Docket Number OAR-2009-0472-7290, pp.3-6 for detailed comments]

Regulation of GHG Emissions under the CAA Would Harm the Texas Chemical Industry The Texas chemical industry is a leader in our state's economy. Our industry provides almost 600,000 direct and indirect jobs to Texans across the state. These jobs generate $27.3 billion in earnings. The chemical industry has invested more than $50 billion in physical assets in the state and pays over $1 billion annually in state and local taxes. Chemicals are also the state's number one export at over $30 billion annually. The products manufactured in Texas account for 60% of the U.S. chemical production, which go into millions of consumer products and ma ny of which go into energy-efficient, high performance technologies and products for Texa s and the rest of the nation, such as insulation, wind and solar power equipment, lightweight vehicle parts, compact fluorescent light bulbs and energy-effi cient appliances. [OAR-2009-0472-7290, p.6]

[See Docket Number OAR-2009-0472-7290, pp.6-8 for detailed comments]

Texas Cotton Ginners Association

The proposed Tailoring Rule is based on the assumption that the act of regulating GHG emissions from automobiles under the clean air act will trigger regulatory requirements affecting stationary sources of GHG emissions. In supporting documents for the Tailoring Rule, EPA estimates that without the Tailo ring Rule, over 6 million stationary sources will become subject to Title V permitting requirements, at a cost of over 38 billion dollars.

It would seem logical that if the analysis in the Tailoring rule is correct, then the additional cost burden for stationary sources sh ould be reflected in the economic analysis

7-58Other Comments

for this docket. To the best of our knowledge, the impact of this rulemaking on stationary sources was not considered.

The proposed Tailoring Rule uses the doctrin e of 'absurd results' as a portion of the justification for the prop osed rule. It would appear that th e origin of the 'absurd result' lies in this very docket, and the solution to the 'absurd result' is achievable in this docket without significant loss of GHG reduc tion benefits. [OAR-2009-0472-7081.1, pp.1-2]

Texas Department of Agriculture

I am specifically concerned that the GHG provisions included in the motor vehicle proposal may impose Prevention of Significan t Deterioration (PSD) and Clean Air Act Title V permitting requirements on a host of stationary sources . In the proposed PSD tailoring rules, EPA estimates that nati onwide 'small sources' will be subject to approximately $38 billion in permitting co sts under the Title V program. [OAR-2009­ 0472-7300, p.1]

Texas Industry Project (TIP)

Global climate change is a serious issue that is best addressed through concerted international action and/or comprehensive federal legislation, rather than through unilateral agency regulation unde r the current Clean Air Act (“CAA” or the “Act”). Not only did the Supreme Court make clear in Massachusetts v. EPA that the U.S. Environmental Protection Agency (“EPA” or the “Agency”) has substantial discretion regarding the timing of any rule s, but the Court of Appeals fo r the District of Columbia (“D.C. Circuit”) subsequently denied a pe tition to compel EPA action in response to Massachusetts v. EPA. [OAR-2009-0472-7430.1, p. 1]

More importantly, Congress is moving forward quickly on comprehensive legislation that would address the problem of climate change out side of the structure of the current Act. Despite a clear need to proceed with the ut most caution in this important area, EPA has proposed to regulate GHG emissions from motor vehicles in the Proposed Rulemaking to Establish Light-Duty Vehicle Greenhouse Gas Emission Standards and Corporate Average Fuel Economy Standards (the “M otor Vehicle GHG Rule”). Under EPA’s current interpretation of the CAA, the Moto r Vehicle GHG Rule may (as EPA has stated in the Proposed PSD and Title V GHG Tailoring Ru le (the “PSD Tailoring Rule”) trigger regulation of GHG emissions from millions of stationary sources, including hundreds of thousands of Texas sources, many of which have never before b een regulated under the Clean Air Act (“CAA”). [OAR-2009-0472-7430.1, p. 1]

The Motor Vehicle GHG Rule, as well as its companion, the PSD Tailoring Rule, are fundamentally flawed, both procedurally and substantively, and Texas, as the nation’s leading energy producer and a leader in chem ical manufacturing a nd agriculture, could be significantly impacted by these federal rulemakings. Most notably, EPA completely failed to evaluate the burdens of triggeri ng PSD and Title V for GHG emissions under the required federal regulatory review statutes and Executive Orders. Furthermore, even had

7-59EPA Response to Comments

the Agency conducted the required burden analys is, the rule is unlaw ful, would devastate the Texas and national economies, and th e burdens of regulating GHGs under CAA Section 202 far outweigh the insignificant en vironmental benefits of the GHG emission standards. [OAR-2009-0472-7430.1, pp. 1-2]

Accordingly, for all of the reasons discu ssed in these comments, EPA should withdraw the Motor Vehicle GHG Rule, and proceed with caution going forward by allowing both the international community and Congress time to develop a comprehensive and sensible approach to the global problem of c limate change. [OAR-2009-0472-7430.1, p. 2]

[See OAR-2009-0472-7430.1, pp. 2-11 for commen ts related to PSD and NRS for stationary sources in Texas. These comment s include the following topics: A. The Motor Vehicle GHG Rule Will Disproportionately Ha rm Texas, B. EPA Utterly Failed to Account for these Devastating Impacts to Te xas and the Entire U.S. in its Burden Analysis of the Motor Vehicle GHG Rule, C. A Full Analysis of Actual Impacts on Sectors Beyond Autos Would Demonstrate Th at the Rule Cannot be Justified—the Burdens Associated with the Motor Vehicle GHG Rule Would Devastate the Texas Economy, D. EPA Should Adopt a More Reasona ble Interpretation of the Clean Air Act Under which the Final Motor Vehicle GHG Rule Would Not Trigger PSD For Stationary Sources, and E. Nothing Compels EPA to Action under Section 202 at this Time—the Rule Provides Little or No Benefit and Produces Overwhelming Burdens.]

Texas Oil and Gas Association

Introduction EPA’s statement in the PSD Tailoring Rule th at the Motor Vehicle GHG Rule will trigger regulation of GHG emissions from millions of stationary sources has substantive implications for TxOGA members. EPA claims that the PSD Tailoring Rule offers relief and “lessens the regulatory burden” associated with regu lating GHG emissions under the ill-suited federal Clean Air Act (“CAA”). Ho wever, the proposed rule will actually impose burdens on stationary sources, in cluding sources operated by TxOGA members. The PSD Tailoring Rule relies on questionable legal doctrines, rarely, if ever, relied on by courts, violates a host of procedural statut es and executive orders , and is ineffective on its face, as it fails to address PSD [OAR-2009-0472-11275.1, p.1] and Title V thresholds in corresponding state rules. Accordingly, TxOGA recommends that EPA withdraw the PSD Tailoring Rule and instead adopt a more rational interpretation of the CAA. [OAR2009-0472-11275.1, p.2]

[See docket number OAR-2009-0472-11275.1, p.1&2 for detailed comments]

By Declining to Extend the Comment Periods for its GHG Rulemaking, EPA has Deprived TxOGA of a Meaningful Opportuni ty to Comment on the Motor Vehicle GHG Rule and the PSD Interpretive Reconsideration On November 18, 2009, a group of trade associa tions led by the Nati onal Association of Manufacturers (“NAM”) submitted a request to EPA to extend the comment deadlines for the Motor Vehicle GHG Rule, the PSD Inte rpretive Reconsideration, and the PSD

7-60Other Comments

Tailoring Rule. EPA denied NAM’s request. As a result, and as explained in more detail below, TxOGA has been deprived of an adequate opportunity to comment on the Motor Vehicle GHG Rule and the PSD Interpretive Reconsideration. Accordingly, TxOGA respectfully requests that EPA consider th e instant comments on the PSD Tailoring Rule timely filed in both of the other GHG Rulemaking dockets. [OAR-2009-0472-11275.1, p.2]

[See docket number OAR-2009-0472-11275.1, p.2&3 for detailed comments pertaining to: The Close-Timing of the GHG Rulema king Precluded A Thorough and Sufficient Analysis of the Rules and Public Notice Wa s Inadequate Regarding the Motor Vehicle GHG Rule's Impacts on Stationary Sources]

EPA’s Conclusion That PSD Is Automatica lly Triggered By the Motor Vehicle GHG Rule Misinterprets the CAA The PSD Tailoring Rule provides that PSD requirements will be triggered when the Motor Vehicle GHG Rule is finalized. However, the Agency relies on two questionable legal conclusions to support it s factual findings that GHG emissions alone can trigger PSD permit requirements and the co nclusion that, absent an “administrative necessity”-based regulatory relief rule, there will be 40,000 new PSD applications per year. These conclusions are: [OAR-2009-0472-11275.1, p.3]

The CAA requires that GHGs, as regulated po llutants, be considered in determining whether a source is a major source for pur poses of PSD, even though there is no NAAQS for GHGs; and [OAR-2009-0472-11275.1, p.3]

If a source is major for GHGs, it is therefore major for all other regulated pollutants – the “major for one, major for all” policy that EPA has applied in the past to all but nonattainment NSR pollutants under the program. [OAR-2009-0472-11275.1, p.3]

[See docket number OAR- 2009-0472-11275.1, pp.3-7 for detailed comments pertaining to: The CAA Limits PSD Applicability for GHGs to (1) Areas Designated as Attainment or Unclassifiable Under a GHG NAAQS or (2 ) Sources that Require a PSD Permit Based on Emissions of a Criteria Pollutant That Also Will Experience a Significant Increase in GHG Emissions, Alabama Power Supports the Interpretation that a NAAQS is Required as a Prerequisite to Regulation Under the Clean Air Act, and EPA Can Implement the Proper Scope of PSD Ap plicability Under the Existing Regulations]

Alternatively, EPA Should Interpret the Term “Pollutants Subject to Regulation” to Refer Only to Pollutants With Local or Regional Impacts EPA should construe the phrases “any polluta nt” in Section 169(1) and “any pollutant subject to regulation” in Section 165(a) to refer only to conventional pollutants whose emissions have regional or local imp act, rather than any pollutant subject to regulation under the Act. Such an interp retation would automa tically exclude GHGs, which are “global in nature because the GHG emissions emitted from the United States . . . become globally well-mixed.” In the PSD Tailoring Rule, EPA’s own analysis—which demonstrates that Congress could not have in tended those CAA sections to require PSD

7-61EPA Response to Comments

applicability for GHGs, because , if they did, the number of sources requiring PSD permits would rise to absurd and unanticipat ed levels— supports th is interpretation. EPA proposes only one solution to avoid the absurd ity of triggering PS D for GHGs: rewriting the statutory PSD and Title V applicability thresholds and significance levels. [OAR2009-0472-11275.1, p.7]

[See docket number OAR-2009-0472-11275.1, pp.7-8 for detailed comments]

The PSD Tailoring Rule is Not a Relief Ru le and Requires a Full Regulatory Impacts Analysis The PSD Tailoring Rule avoids a full regulat ory impacts analysis on the basis that the Rule is a “relief rule.” To the contrar y, EPA’s decision to in terpret “subject to regulation” such that motor ve hicle emission standards will trigger PSD applicability for 40,000 new PSD permit applications and six m illion new Title V sources creates massive burdens for stationary sources. TxOGA memb ers will experience si gnificant impacts, including increased costs in complying with these new requirements and lengthy delays and/or a complete shut-down of new projects and project-e xpansions due to the Texas Commission on Environmental Quality’s (“TCEQ ’s”) inability to process the influx of new PSD and Title V permit applications. Th ese added costs of doing business and the effective permit moratorium will result in lost jobs and lost profits for TxOGA members. [OAR-2009-0472-11275.1, p.8]

[See docket number OAR- 2009-0472-11275.1, pp.8-13 for detailed comments pertaining to: Even if the PSD Tailoring Rule Offers Limited Relief for Small Sources of GHG Emissions, EPA Must Account for the Remaining Substantial Burdens Imposed by the Rule, By Failing to Assess Costs, the PSD Tailo ring Rule Violates a Ho st of Statutes and Executive Orders That Require Analysis a nd Public Review of Regulatory Burdens, and The Burden Analysis for Title V was Deficient—EPA’s Reliance on States’ Ability to Assess Permit Fees to Cover Additional Ti tle V Permitting Costs is Contrary to the Statute]

EPA Cannot Justify the Tailoring Rule Unde r the Limited and Narrow “Absurd Results” or “Administrative Necessity” Doctrines [OAR-2009-0472-11275.1, p.14]

[See docket number OAR-2009-0472-11275.1, pp.14-16 for detailed comments pertaining to: EPA’s Relian ce on the “Administrative Necessity” Doctrine is Unsupported by Law and EPA has Misapplie d the Doctrine of Absurd Results]

EPA’s Tailoring Rule Is Facially Invalid Becau se It Proposes to Ille gally Rewrite SIP and Title V Approvals To implement its proposed approach, EPA imagines a broad, multi-state SIP revision, retroactively inserting new major source and m odification thresholds into a majority of the states’ existing, approved SIPs. EPA is not suggesting that any state has asked for such a revision. Instead, EPA is announcing an assumption—that states lack the resources to implement EPA’s view of the new challe nge it is creating—and inserting into the states’ plans EPA’s chosen approach to ma naging the challenge. EPA is rewriting the

7-62Other Comments

states’ SIPs, an approach that turns on its he ad the structure that Congress established for SIP planning. The implications of this a pproach would reach well beyond the current issue, and would contravene settled law on the role of EPA and the states in SIP planning. [OAR-2009-0472-11275.1, p.17]

[See docket number OAR- 2009-0472-11275.1, p.17-19 for detailed comments pertaining to: The PSD Tailoring Rule’s Retroactive Re-interpretation of SIP and Title V Submittals and Approvals That Occurred Years (and in Some Cases Decades) Ago Violates Established CAA SIP Revision Pr ocedures and is Unlikely to be Sustained by the Courts and Even if EPA Could Accomplish the Rein terpretation of SIPs and State Title V Programs Under Federal Law, the PSD Ta iloring Rule Provides No Burden Relief Because States Will be Obligated to Follo w Adopted State Regulations and Apply the 100/250 Ton Thresholds]

If EPA Concludes that the CAA and PSD Must Apply to GHGs, EPA Cannot Choose “Winners and Losers” Among Different Re gulated Entities by Ignoring Clear CAA Definitions. EPA’s Decision to Set th e Thresholds Between 10,000 and 25,000 Tons CO2e/Year is Arbitrary and Capricious Finally, EPA’s selected major source thre sholds of 25,000 tpy for PSD and Title V and significance level of 10,000-25,000 tpy for PSD are arbitrary and capricious because there is no health and/or welfare basis fo r these cut-offs. GHGs, such as CO2, are distributed roughly equally throughout the gl obal atmosphere. As a result, localized emissions, unlike emissions of other pollutants currently regulated under the Act, have no direct effect on the region that is the source of the emissions. This stands in sharp contrast to the pollutants currently regulated under th e CAA (e.g., ozone), which create local air quality problems. Therefore, GHG emissions should be viewed on a global scale for purposes of setting applicability thres holds and significance levels. [OAR-2009-0472­ 11275.1, p.19]

[See docket number OAR-2009-0472-11275.1, pp.19-20 for detailed comments]

Finally, Nothing Compels EPA to Action unde r Section 202 at this Time—the Rule Provides Little or No Benefit and Produces Overwhelming Burdens EPA has clear legal authority to defe r promulgation of Section 202 GHG emission standards thereby avoiding the need for the PSD Tailoring Rule altogether, even now that the Agency has proceeded to finalize the e ndangerment and cause or contribute findings under CAA Section 202. Massachus etts v. EPA recognizes that EPA retains significant discretion regarding timing of ru les. And in fact, it would be arbitrary and capricious for EPA to not exercise this discretion because the economic consequences of the Motor Vehicle GHG and PSD Tailoring Rules are so disastrous, while the GHG emission standards themselves will not yield any benefits distinct from the Department of Transportation’s (“DOT”) proposed corpor ate average fuel economy (“CAFÉ”) standards. There are numerous compelling re asons to defer promulgating motor vehicle GHG emission standards at this time. [OAR-2009-0472-11275.1, p.20]

7-63EPA Response to Comments

[See docket number OAR-2009-0472-11275.1, pp.20-21 for detailed comments pertaining to: The Benefits of the Se ction 202 GHG Emission Standards Could be Largely Achieved Through CAFE Standard s Alone and Delaying Promulgation Would Avoid 'Absurd' and 'Impossible' Results]

Utility Air Regulatory Group

Because EPA Has Not Established that Its Pr oposed Section 202(a) Rules Will Avert to Any Significant Extent the Endangerment EPA Proposes To Find -- and, to the Contrary, Has Presented Information that Shows Those Rules Will Not Meaningfully Address ThatEndangerment -- EPA Lacks Any Statutory Basis for Promulgating Those Rules. [OAR2009-0472-7262.1, p.8. Full discussion on pp.8-10]

EPA's Proposed Motor Vehicle Rules Would Be Essentially Duplicative of NHTSA's Proposed Standards and, in Any Event, the Projected Effects of the Joint Program Are Too Slight To Fruitfully Attack Any Climate-Related Endangerment. [OAR-2009-0472­ 7262.1, p.11. Full discussion on pp.11-16]

Agency Analyses of the Environmental and Ec onomic Impacts Associated with the Joint Motor Vehicle Proposal Are Either Entirely Abse nt or Substantially Deficient; EPA Must Prepare Proper Analyses for Public Review and Comment If It Decides To Proceed with This Rulemaking. [OAR-2009-0472-7262.1, p.16. Full discussion on pp.16-21]

EPA Must Take Into Account Reasons Why Promulgation of Final Section 202(a) Rules for GHGs Should Not Trigger PSD and Titl e V Permitting Requirements. [OAR-2009­ 0472-7262.1, p.16. Full discussion on pp.21-24]

For all of the foregoing reasons, and those presented in UARG's other comments, EPA must withdraw its proposed motor vehi cle rules (and NHTSA should revise its regulations, if necessary, to address this cha nge). If EPA decides nevertheless to proceed with its rulemaking, it must prepare and publish a supplemental notice of proposed rulemaking that corrects the deficiencies in the proposed rules as described in these
comments.

Western Agricultural Processors Association

The Western Agricultural Processors Associ ation submits these comments on behalf of the tree nut processing industry in California. WAPA did not intend to participate in this docket, as our primary focus relates to th e effect of Greenhouse Gas (GHG) regulations on stationary sources. For this reason, we had not spent much effort evaluating this docket until the proposed Greenhouse Gas Tailo ring Rule was filed on October 27, 2009. The proposed Tailoring Rule is based on the assumption that the act of regulating GHG emissions from automobiles under the clean air act will trigger regulatory requirements affecting stationary sources of GHG emissions. In supporting documents for the Tailoring Rule, EPA estimates that without the Tailo ring Rule, over 6 million stationary sources

7-64Other Comments

will become subject to Title V permitting requirements, at a cost of over 38 billion dollars. It would seem logical that if the analysis in the Tailoring rule is correct, then the additional cost burden for stationary sources sh ould be reflected in the economic analysis for this docket. To the best of our knowledge, the impact of this rulemaking on stationary sources was not considered. Proper consideration of the complete cost pictur e is very important in this docket. This is especially true, considering that EPA could gain almost all of their GHG reductions from Automobiles through NHTSA' s CAFE standards. It would seem that if EPA used the CAFE standards to calculate GHG reductions , the GHG reductions would remain very comparable, yet the regula tory burden on stationary sources could be avoided. The proposed Tailoring Rule uses the doctrin e of 'absurd results' as a portion of the justification for the prop osed rule. It would appear that th e origin of the 'absurd result' lies in this very docket, and the solution to the 'absurd result' is achievable in this docket without significant loss of GHG reduction benefits.
EPA should review the economic benefit of th is rule, considering all costs; both those currently in this docket, and those outlined in the proposed Tailoring Rule. In addition, EPA should clearly evaluate the benefit of re gulations solely based on CAFE standards. Finally EP A should consider extending the co mment period in this docket, considering the significant additional costs discussed in the Tailoring Rule proposal. [OAR-2009­ 0472-7140.1, p.1]

Wood, John

In addition, under this regulation, the EPA would have the authority to regulate not only moving, but also stationary emitters of car bon dioxide. This would include almost everything that releases car bon dioxide; obvious ones like f actories, businesses, and farms; and not-so-obvious ones, like schools, hospitals, and housing areas. This would also allow the government to step in and c ontrol things which they are not meant to control, such as churches or other places of worship. This regulatory cascade would therefore allow the government to control almost every facet of our lives. [OAR-2009­ 0472-7157.1, p.3]

EPA Response:

As indicated by the above comment summar ies, EPA received numerous comments on issues related to the impacts on stationary s ources, due to the Clean Air Act’s provisions for permitting requirements related to the i ssuance of the GHG sta ndards for new motor vehicles. These comments fall into several categories of issues: 1) comments related to EPA’s interpretation of the CAA’s provisions for subjecting stationary sources to permit regulation after GHG standards are set; 2) comments suggesting that EPA should fully assess (or had underestimated) the stationary source permitting impacts before finalizing the GHG vehicle rule; 3) comments suggesting th at EPA did not adequately consider the permitting impact on small business sources; 4) comments suggesting that EPA should defer setting GHG standards for new motor ve hicles to avoid any stationary source

7-65EPA Response to Comments

permitting impacts; 5) comments stating that EPA failed to provide adequate public notice under section 307(d) of the Clean Air Act and the Administrative Procedure Act; and 6) comments related to the impacts on state and local air agencies in issuing stationary source permits .

The first category of comments pertains to EPA’s interpretation of the CAA’s provisions for when pollutants are “subject to regulation” for the purposes of the federal PSD permitting program after this rule is promulgate d. This issue is addressed in EPA’s final action on Reconsideration of Interpretation of Regulations that Determine Pollutants Covered by Clean Air Act Permitting Programs (“permitting program interpretation”), which was issued on March 29, 2010. Among other things, the Agency’s final permitting program interpretation explains that the PSD permitting requirements will not apply to a newly regulated pollutant until a regulatory requirement to contro l emissions of that pollutant “takes effect.” In addition, th e permitting program inte rpretation addresses several questions regarding the applicability of the PSD and Title V permitting programs to GHGs upon the promulgation of EPA regulat ions establishing limitations on emissions of GHGs from vehicles under Title II of the CAA. As explained in the permitting program interpretation, EPA has determin ed that PSD and Title V permitting requirements will not apply to GHG emi ssions until at least January 2, 2011 , which is the earliest date by which model year 2012 ve hicles meeting the proposed GHG standards can be sold in the United States. Th is determination is consistent with the request made by a number of commenters here, including the National Climate Coalition.

The second category of comments suggests that EPA must fully assess the permitting impacts on stationary sources, including its estimates of how many sources are likely to be subject to GHG permitting requi rements. These are issues that EPA is addressing in developing its final action on the proposed Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule, 74 FR 55292 (October 27, 2009) (“Tailoring Rule”)

. The various comments on consideratio n of the economic impacts of the PSD permitting provisions fail to recognize that a ny analysis of such impacts would not aid EPA in determining what GHG standards to adopt in this rulemaking. Impacts on stationary source are not related to any of the issues EPA need s to consider and decide in determining the content of the GHG standa rds that will apply to automobile manufacturers. The same response applies to those commenters stating that EPA must assess impacts on stationary sources in this ru le if it is promulgated before the tailoring rule. Analyses of indirect impacts on stati onary sources are not le gally relevant to the standard setting issues under c onsideration in this rule. Mo reover, as noted above, EPA has determined in the permitting program interpretation that GHGs will not be air pollutants “subject to regulation” earlier th an January 2, 2011, consistent with the GHG control requirements finalized in this rule. In additi on, EPA plans to finalize the Tailoring Rule in the very near future, and the final Tailoring Rule will address the applicability of PSD requirements for GHG- emitting stationary s ources that are not presently subject to PSD permitting. EPA addr esses below the separate issue of whether EPA should delay issuance of this rule because of concerns raised over PSD and Title V permitting.

7-66Other Comments

The third category of comments, relating to small business impacts, is addressed in Section 5.14 of this Response to Comments document, including EPA’s response to comments regarding compliance with the Regulator y Flexibility Act. As stated in that response, EPA is certifying that the rule does not have a sign ificant impact on a substantial number of small entities after considering the impact s of the regulatory requirements contained in this final rule, on th e small entities directly subject to the rule. Accordingly, EPA is able to certify this rule under the RFA because small entities are exempt from regulation under the rule. As expl ained in that response, this rulemaking is limited to issues involved in setting emi ssions standards for large motor vehicle manufacturers, and EPA would not be able to account for a ny potential indirect impacts from separate statutory require ments on entities not directly s ubject to or impacted by this rule. Accordingly, because the RFA requires the agency to look only at the “small entities to which the proposed rule will apply” and sm all entities “subject to the requirement” of the specific rule in question, 5 U.S.C. § 603( b), the RFA does not apply to small entities indirectly affected by the re gulation of other entities.

The fourth category of comments sugge sted that EPA shoul d defer setting GHG standards for new motor vehicles to avoid such stationary source permitting impacts. EPA is issuing these final GHG standards for light -duty vehicles as part of its efforts to expeditiously respond to the Supreme Cour t’s nearly three year old ruling in Massachusetts v. EPA , 549 U.S. 497 (2007). In that case, the Court held that greenhouse gases fit within the definition of air pollutant in the Clean Air Act , and that EPA is therefore compelled to respond to the rulemaking peti tion under section 202(a)(1) by determining whether or not emissions from new motor vehicles cause or contribute to air pollution which may reasonably be anticipated to endanger public health or welfare , or whether the science is too uncertain to make a reasoned decision. The Court further ruled that, in making these decisions, the EPA Admini strator is required to follow the language of section 202(a)(1) of the CAA. The Court stated that under section 202(a), "[i]f EPA makes [the endangerment and cause or cont ribute findings], the Clean Air Act requires the agency to regulate emissions of the de leterious pollutant." 549 U.S. at 534. As discussed above, EPA has made the two findings on contribution and endangerment. 74 FR 66496 (December 15, 2009). Thus, EPA is requi red to issue standards applicable to emissions of this air pollutant from new motor vehicles 1

. The Court properly noted that EPA retained "s ignificant latitude" as to the "timing ... and coordination of its regulations w ith those of other agencies" ( id .). However, it has now been nearly three years since the Court is sued its opinion, and the time for delay has passed. In the absence of these final standard s, there would be thre e separate federal and state regimes independently regulating light- duty vehicles to increase fuel economy and reduce GHG emissions: NHTSA’s CAFE standa rds, EPA’s GHG standards, and the GHG standards applicable in California a nd other states adopting the California standards. This joint EPA-NHTSA program will allow automakers to meet all of these requirements with a single national fleet because California has indicated that it will accept compliance with EPA’s GHG standards as compliance with California's GHG

1 EPA consequently disagrees strongly with the view of Duke Energy and others that “EPA lacks the legal authority to issue its proposed GHG motor vehicle emission standards under section 202(a) of the CAA”.

7-67EPA Response to Comments

standards. 74 FR at 49460. California has not indicated that it would accept NHTSA’s CAFE standards by themselves. Without EPA’s vehicle GHG st andards, the states will not offer the federal program as an alternat ive compliance option to automakers and the benefits of a harmonized national program will be lost. California and several other states have expressed strong concern that, without comparable federal vehicle GHG standards (not fuel economy standards), the states will not offer the federal program as an alternative compliance option to automakers. Letter dated February 23, 2010 from Commissioners of California, Maine, New Mexico, Oregon and Washington to Senators Harry Reid and Mitch McConnell (Docke t EPA-HQ-OAR-2009-0472). The automobile industry also strongly supports issuance of these ru les to allow implementation of the national program and avoid “a myriad of pr oblems for the auto industry in terms of product planning, vehicle distri bution, adverse economic imp acts and, most importantly, adverse consequences for their dealers a nd customers.” Letter dated March 17, 2010 from Alliance of Automobile Manufacturers to Senators Harry Reid and Mitch McConnell, and Representatives Nancy Pe losi and John Boehner (Docket EPA-HQOAR-2009-0472). Thus, without EPA’s GHG standa rds as part of a federal harmonized program, important GHG reductions as well as benefits to the automakers and to consumers would be lost. 2 In addition, delaying the rule would impose significant burdens and uncertainty on automakers, w ho are already well into planning for production of MY 2012 vehicles, relying on the ab ility to produce a single national fleet. Delaying the issuance of this final rule woul d very seriously disrupt the industry’s plans.

Instead of delaying the LDV rule and losing th e benefits of this rule and the harmonized national program, EPA is directly addressi ng concerns about stationary source permitting in other actions that EPA is taking with rega rd to such permitting. That is the proper approach to address the issue of stationary s ource permitting, as compared to delaying the issuance of this rule for some undefined, indefinite time period.

Some parties have argued that EPA’s issuance of this light-duty vehicle rule amounts to a denial of various administrative requests pe nding before EPA, in which parties have requested that EPA recons ider and stay the GHG endangerment finding published on December 15, 2009. That is not an accurate ch aracterization of the im pact of this final rule. EPA has not taken final action on these administrative requests, and issuance of this vehicle rule is not final agency action, e xplicitly or implicitly, on those requests. Currently, while we carefully consider the pending requests for reconsideration on endangerment, these final findings on endange rment and contribution remain in place. Thus under section 202(a) EPA is obligated to promulgate GHG motor vehicle standards, although there is no statutory deadline for issuan ce of the light-duty vehicle rule or other motor vehicle rules. In that context, issuance of this final light-duty vehicle rule does no more than recognize the current status of the findings -- they are final and impose a rulemaking obligation on EPA, unless and until we change them. In issuing the vehicle rule we are not making a decision on request s to reconsider or stay the endangerment finding, and are not in any way prejudicing or limiting EPA's discretion in making a final decision on these administrative requests.

2 As discussed elsewhere, EPA’s GHG standards ac hieve greater overall reductions in GHGs than NHTSA’s CAFE standards.

7-68Other Comments

A fifth category of comments stated that EP A had failed to give adequate notice under section 307 (d) of the Clean Air Act and the Administrative Procedure Act because EPA did not solicit comment on when to issue th e vehicle rule or present information on stationary source indirect imp acts. EPA in fact “recognize (d) that some small entities continue to be concerned about the potential impacts of the stat utory imposition of PSD requirements” and directed commenters to ad dress those concerns in the PSD tailoring rule. 74 FR at 49629. The number of commen ts received certai nly indicates that commenters were aware of the issue. More to the point, EPA gave notice on all issues relevant to this rulemaking. Commenters that request consider ation of the economic impacts of the PSD permitting provisions fail to recognize that any analysis of such impacts would not aid EPA in determining what GHG standards to adopt in this rulemaking. Such impacts are not related to a ny of the issues EPA n eeds to consider and decide in determining the content of the GHG standards that will apply to automobile manufacturers.

Finally, a number of state en tities stated that EPA failed to comply with the Unfunded Mandates Reform Act of 1995 because the rule ha s the potential to a ffect state/local air permitting authorities because it would cause GHG emissions to become regulated under the Title V and New Source Review permitting programs. This issue is addressed in comment response 5.14.

7.2 Endangerment Finding

Organization: Arthur G. Randol Clark, Roy Coalition for Responsible Regulation Competitive Enterprise Institute Custom Lights and Iron Ford, Jonathan Hagen, David L. Shaw, Donald F. Weber, David

Comment:

Arthur G. Randol

A commenter resubmits comments and attachments previously submitted on the April 24, 2009 Proposed Endangerment and Cause or C ontribute Findings for Greenhouse Gases Under the Clean Air Act (herein referred to as the Findings) and the associated Technical Support Document (TSD) dated April 17, 2009. The commenter notes the submitted comments and attachments include detailed refe rences to science, data, and models used to justify comments in the Endangerment Fi nding which are also the basis for this proposed vehicle rule. The comments pertai n to the validity of models used for the Endangerment Finding analysis, considerati on of economic welfare and national energy

7-69EPA Response to Comments

security consequences, implications for th e National Ambient Air Quality Standards (NAAQS) regulation, and implications for energy costs. [See OAR-2009-0472-7254.1, pp.1-6, and OAR-2009-0472-7254.2, pp.1-44 for significant commentary on the Endangerment Finding]

Coalition for Responsible Regulation

CRR strongly opposes EPA's proposed Greenho use Gas Vehicle Emission Standards Rulemaking, 74 Fed. Reg. 49454-49789 (Sept. 28, 2009) ('Proposed Vehicle Rule'), on the grounds that it presupposes a findi ng that GHGs, including CO2, endanger public health or welfare. EPA does so prematurel y, without scientific basis, and when a separate, still-pending EPA rulemaking is curr ently evaluating this key scientific issue.

Notwithstanding EPA's exp licit acknowledgement that the regulation of GHGs contemplated in the Proposed Vehicle Rule cannot take place until the Proposed Endangerment Finding is first finalized, EP A has nevertheless proceeded to make a de facto endangerment finding in its Proposed Vehicle Rule without a supporting administrative record and without adequate consideration of the underlying climate change science, data or liter ature. In conclusory, unsubstan tiated fashion, EPA asserts: '[t]he primary greenhouse gases of concern ar e directly emitted by human activities ... These gases, once emitted, remain in the atmosphere for decades to centuries ... The heating effect caused by the human-induced buildup of the greenhouse gases in the atmosphere is very likely the cause of most of the observed global warming over the last 50 years. The key effects of climate change obs erved to date and projected to occur in the future include, but are not limited to, more fr equent and intense heat waves, more severe wildfires, degraded air quality, heavie r and more frequent downpours and flooding, increased drought, greater sea level rise, more intense storms, harm to water resources, continued ocean acidification, harm to agricu lture, and harm to wildlife and ecosystems. 74 Fed. Reg. at 49508. See also id at 49630, where a number of similarly unsubstantiated statements are made.

Virtually every one of EPA's bold asserti ons about climate change in the Proposed Vehicle Rule are factually and/or scientifica lly either demonstrably incorrect or lack supporting scientific basis. Some of CRR's me mbers, as well as other commenters, have already systematically rebutted all of EP A's assertions, with supporting scientific documentation, in the detailed Comments the Coalition submitted in EP A's Proposed Endangerment Rulemaking [OAR-2009-0472-7053.1, p.1]

Clark, Roy

The commenter asserts the emission of gree nhouse gases from motor vehicles does not pose any threat to the Earth’s climate. The commenter indica tes: “In spite of everything that has been published about CO 2 induced global warming and the effects of related greenhouse gases, no quantitative relationshi p between climate change and atmospheric CO 2 concentration has ever been demonstrated because none exis ts. The entire global warming case is based on the empirical speculation that the observed 100 ppm

7-70Other Comments

anthropogenic increase in atmospheric CO 2 concentration over th e last 200 years has produced an ‘average’ increase of 1 degree Celsius in the meteorological surface air temperature.”

The commenter asserts that this is flagrant sc ientific fraud based on deliberate distortions of the historical temperature record and inva lid computer simulation by an elite group of climate ‘scientists’ which has been made abund antly clear by the re cent availability of long requested documents from the UK Hadley Climate Center. [OAR-2009-0472­ 7179.1, p. 1]

Shaw, Donald F.

A commenter asserts the globe has not warmed for the last 11 years and recent peerreviewed papers have indi cated that the latest IPCC report (2007) exaggerates the temperature rise by using large positive feedb ack factors. The feedback factors are not scientifically determined and some noted scien tists claim that they are actually negative. The commenter indicates that some scientists have recently indicated that the effects of methane and aerosols have been underes timated and that the impact of CO 2 on warming may be only half that previously believed and the IPCC report erroneously dismisses natural variations as well as methane a nd other gasses as bein g significant. [OAR-2009­ 0472-7270, pp. 1-2]

Custom Lights and Iron

Another commenter indicates that the climate change science is weak at best and it is necessary to wait for better data. The commenter indicates there has been no proof of warming since 1997 based on observati onal data despite increasing CO 2 in the atmosphere. [OAR-2009-0472-7110, p.1]

Hagen, David L.

A commenter notes the EPA’s Endangermen t and Cause or Contribute Findings for Greenhouse Gases Under Section 202(a) of th e Clean Air Act are critically flawed by ignoring:

 The global oil production rates and the neces sity of rapidly finding alternatives to replace rapid declines in existing oil production.

 The costs and rate limitations to providing alternative fuels.

 The investment required to develop alternative fuels.

 The Principles of Scientific Forecasting.

 The Hurst-Kolgomorov parameters of natural climate change.

The commenter also asserts the EPA is re lies on politically-biased science by relying only on the IPCC which has a political mandate to find evidence for anthropogenic climate change. The commenter also indicates the EPA reliance on IPCC models is fatally flawed by ignoring the major imp act of solar/climate correlations, and overestimating the influen ce of CO2. [OAR-2009-0472-7218.1, p.2]

7-71EPA Response to Comments

Competitive Enterprise Institute

The proposed standards are aut horized only if EPA determines that “air pollution” related to GHG emissions from new motor vehicles “m ay reasonably be anticipated to endanger public health or welfare.” However, as explained in my comment on EPA’s endangerment proposal, EPA has not exerci sed its judgment with regard to the fundamental scientific issues – detection, at tribution, and sensitivity – deferring instead to literature reviews produced by external authorit ies. Moreover, the core scientific issues are more “unsettled” today than at any time in the past decade. For example, MIT Professor Richard Lindzen’s re cent satellite study of top-of -the-atmosphere radiative flux indicates that climate sensitivity is six times lower than the mid-range estimate of the Intergovernmental Panel on Climate Change (IPCC). [OAR-2009-0472-7281.1, p.9]

Ford, Jonathan

The commenter asserts that CO2 is not a pollutant. [OAR-2009-0472-7674]

Weber, David

I have not seen convincing scientific evidence that CO2 causes global warming and I have not seen any evidence that global warming will be bad for the environment or that global warming is a health issue. The EPA paper saying that GHG's are a health and safety risk is incorrect and it is not backed up with any data. I have seen on-line reports as evidence that the recent warmi ng of the last 100 years (compa red to the last 2000 years of direct or indirect measurements ) is a normal fluctuation from natural forces and that it is unrelated to CO2 in the atmosphere.

But, even if GHG's do increase temperature, my opinion is that the world would be greener if the average temperature was hi gher. A warmer earth would increase the temperature of the world's oceans. The highe r temperature will cause higher rainfall. Plants grow best with higher rainfall, hi gher temperature and higher CO2 concentration. So, the area of usable agricultural land (i.e . non-desert land and non-permafrost land) will increase if we have more GHG's and higher temperatures.

The Supreme Court [Massachusetts v. EPA] ruled that the EPA may regulate CO2, only if, they determine that CO2 is a GHG and that GHG's are a health risk. They have not done so for either postulate. So, this EP A regulation is not constitutional. [OAR-2009­ 0472-1410]
EPA Response:

This rulemaking is on the issues relevant to issuing emissions standards for new motor vehicles under Section 202(a) of the Clean Air Act. The comm ents are not relevant to the issues and decisions before the Agency in this standard setting rulemaking, as they relate to the separate rulemaking on the enda ngerment and contribution findings.

7-72Other Comments

EPA has made a decision on the endangerm ent and contribution findings, with final Findings published in the Federal Re gister on December 15, 2009 (74 FR 66496). Comments in that rulemaking were carefully reviewed and considered in that rulemaking and addressed in the associated Respons e to Comments document, available at: http://www.epa.gov/climatechange/endangerment.html . EPA is not responding to them here as they are not rele vant to this rulemaking.

EPA refers commenters to the Response to Comments Document associated with the endangerment findings, available at http://www.epa.gov/climatechange/endangerment.html , for numerous detailed responses to comments, including the following topics:

 attribution of observed climate change to anthropogenic emissions of greenhouse gases (Volume 3)

 validity of observations and data used by EPA to determine trends in increasing global mean temperatures (Volume 2)

 discussion of the use of IPCC, USGCRP, a nd NRC reports as the primary scientific basis for the Findings, and response to clai ms that IPCC is a politically biased organization (Volume 1)

Finally, EPA refers the commenter to the Findings, TSD, and Response to Comments document for detailed discussion of the multiple lines of evidence that the climate system is warming and that most of that warming over the last 50 years is very likely due to human emissions of GHGs.

Organization: Arthur G. Randol Clark, Roy Coalition for Responsible Regulation (Holland & Hart) Congress of Racial Equality Ford, Jonathan Hagen, David L. Shaw, Donald F. Spurgeon, C. M. Wood, John S.

Comment:

A few commenters refer to the computer files released from the Climate Research Unit (CRU) at the East Anglia University, UK and indicate it seriously questions the veracity of the temperature data that has been wide ly used in the IPCC and other reports. The commenter indicates that according to news reports the released files and e-mails revealed that the leading scientists from the US and UK (that provide key temperature data to the IPCC) have apparently fudged th e data to exaggerate warming and suppress temperature declines using “tricks” and che rry-picked data. The commenter also asserts there is evidence that the peer review pro cess has been corrupted and technical papers suppressed that question the reported pl ots and temperatures. Another commenter

7-73EPA Response to Comments

indicates the recently released CRU e-mails sh ow scientists refusing to release the data and models for independent scientific review.

A commenter indicates: “Due to the recent release of the e-ma ils and data from “Climatic Research Institute at the University of East Anglia” (which has excessive influence over the IPCC), this proposed rulemaking as well as any other actions related to Greenhouse Gas Emission Standards must be postponed unt il an independent audit of any climate temperature increase due to CO2 has been scientifically verified and all data for this determination has been made public, along with the questionable computer model used.” Commenters request that the EPA suspe nd any actions pending the outcome of all investigations. One commenter indicates “[i] n light of recent developments within the scientific community on climate data and ma nipulation of the peer-review process, EPA should hold off on any further proposed rule making regarding any GHG’s until a formal and full investigation is completed.”

EPA Response:

This rulemaking is on the issues relevant to issuing emissions standards for new motor vehicles under Section 202(a) of the Clean Air Act. The comm ents are not relevant to the issues and decisions before the Agency in this standard setting rulemaking, as they relate to the separate rulemaking on the enda ngerment and contribution findings.

EPA has made a decision on the endangerm ent and contribution findings, with final Findings published in the Federal Re gister on December 15, 2009 (74 FR 66496). Comments in that rulemaking were carefully reviewed and considered in that rulemaking and addressed in the associated Respons e to Comments document, available at: http://www.epa.gov/climatechange/endangerment.html . EPA is not responding to them here as they are not rele vant to this rulemaking.

EPA addressed comments on the recently di sclosed CRU e-mails in Volume 11 of the Response to Comments document associated with the final Findings , which is available
at http://www.epa.gov/climatechange/endangerment.html . In addition, EPA has received multiple administrative petitions for reconsid eration of the Findings, which raise issues related to the released CRU emails. Re sponses are under development and will be made public when completed. Also see the response to the following comment.

Organization: Coalition for Responsible Regulation (Holland & Hart)

Comment:

The commenter opposes EPA’s Proposed Vehicle Rule on the grounds that it presupposes a finding that GHGs endanger public health a nd welfare and EPA does so prematurely, without scientific basis, and when a separa te, still pending EPA rulemaking is currently evaluating this key scientific issue. The commenter urges the EPA Administrator not to finalize the proposed Vehicle Rule until EP A's Proposed Endangerment Finding has been rejected or supported by sound and compre hensive scientific evidence; and until

7-74Other Comments

whatever ensuing Petitions for Reconsidera tion or Petitions for Review regarding the Proposed Endangerment Finding have been fi nally mid fully resolved. The commenter asserts that proceeding with the Proposed Vehi cle Rule prior to finalization and judicial review of the Proposed Endangerment Finding would violate EPA’s st atutory charge, as reinforced by the Supreme Court in Massachusetts v. EPA , 549 U.S. at 533, to first make a finding of GHG endangerment, only after wh ich EPA may prescrib e regulations and promulgate standards to contro l GHG emissions. [OAR-2009-0472-7053.1, p.4]

EPA Response:

EPA has made a decision on the endangerm ent and contribution findings, with final Findings published in the Federal Regist er on December 15, 2009 (74 FR 66496). This rulemaking is on the issues relevant to issuing emissions standards for new motor vehicles under Section 202(a) of the Clean Air Act. The comm ents are not relevant to the issues and decisions before the Agency in this standard setting rulemaking, as they relate to the separate rulemaking on the en dangerment and contribution findings.

EPA has made a decision on the endangerm ent and contribution findings, with final Findings published in the Federal Register on December 15, 2009 (74 FR 66496). EPA notes that these comments, references, and attachments previously submitted by the commenter were carefully reviewed and fully addressed in the Fi nal Findings published in the Federal Register on December 15, 2009 (74 FR 66496) and associated Response to Comments document, available at: http://www.epa.gov/climatechange/endangerment.html EPA is not responding to them here as they are not rele vant to this rulemaking.

EPA is issuing these final GHG standards for light -duty vehicles as part of its efforts to expeditiously respond to the Supreme Cour t’s nearly three-year-old ruling in Massachusetts v. EPA, 549 U.S. 497 (2007). In that case, the Court held that GHGs fit within the definition of air pollutant under in the Clean Air Act , and that EPA is therefore compelled to respond to the rulemaking petition under section 202(a) by determining whether or not emissions from new motor vehi cles cause or contribu te to air pollution which may reasonably be anticipated to endanger public health or welfare , or whether the science is too uncertain to make a reasone d decision. The Court fu rther ruled that, in making these decisions, the EPA Administrato r is required to follow the language of section 202(a) of the CAA. The Court stated that under section 202(a), "[i]f EPA makes [the endangerment and cause or contribute findings], th e Clean Air Act requires the agency to regulate emissions of the deleteriou s pollutant." 549 U.S. at 534. As discussed above, EPA has made the two findings on contribution and endangerment. 74 FR 66496 (December 15, 2009). Thus, EPA is required to issue standards applicable to emissions of this air pollutant from of new motor vehicles.

The Court properly noted that EPA retained "s ignificant latitude" as to the "timing ... and coordination of its regulations with those of other agencies" (id.). However it has now been nearly three years since the Court is sued its opinion, and the time for delay has passed. In the absence of these final standard s, there would be thre e separate federal and

7-75EPA Response to Comments

state regimes independently regulating light- duty vehicles to increase fuel economy and reduce GHG emissions: NHTSA’s CAFE standa rds, EPA’s GHG standards, and the GHG standards applicable in California a nd other states adopting the California standards. This joint EPA-NHTSA program will allow automakers to meet all of these requirements with a single national fleet because California has indicated that it will accept compliance with EPA’s GHG standards as compliance with California's GHG standards. 74 FR at 49460. NHTSA’s CAFE standards by themselves would not lead to this result. Without EPA’s vehicle GHG standards, the states will not be able to offer the federal program as an alternative compliance option to automakers a nd the benefits of a harmonized national program will be lost. California and several other states have expressed strong concern that, without comparable federal vehicle GHG standards, the states will not be able to offer the federal program as an alternative compliance option to automakers. Letter dated February 23, 2010 from Co mmissioners of California, Maine, New Mexico, Oregon and Washington to Se nators Harry Reid and Mitch McConnell (Docket EPA-HQ-OAR-2009-0472). The automob ile industry also strongly supports issuance of these rules to allow implementation of the national program and avoid “a myriad of problems for the auto indust ry in terms of product planning, vehicle distribution, adverse economic impacts and, most importantly, adverse consequences for their dealers and customers. ” Letter dated March 17, 2010 fr om Alliance of Automobile Manufacturers to Senators Harry Reid and Mitch McConnell, and Re presentatives Nancy Pelosi and John Boehner (Docket EPA- HQ-OAR-2009-0472). Thus, without EPA’s GHG standards as part of a federal harm onized program, important GHG reductions as well as benefits to the automakers and to consumers would be lost. 3 In addition, delaying the rule would impose significant burdens and uncertainty on automakers, who are already well into planning for production of MY 2012 vehicles, relying on the ability to produce a single national fleet. Delaying the issuance of this final rule would very seriously disrupt the industry’s plans

Instead of delaying the light-dut y vehicle rule and losing the be nefits of this rule and the harmonized national program, EPA is direc tly addressing concerns about stationary source permitting in other actions that EPA is taking with regard to such permitting. That is the proper approach to address the issue of stationary source permitting, as compared to delaying the issuance of this rule for some undefin ed, indefinite time period.

Some parties have argued that EPA’s issuance of this light-duty vehicle rule amounts to a denial of various administrative requests pe nding before EPA, in which parties have requested that EPA recons ider and stay the GHG endangerment finding published on December 15, 2009. That is not an accurate ch aracterization of the im pact of this final rule. EPA has not taken final action on these administrative requests, and issuance of this vehicle rule is not final agency action, e xplicitly or implicitly, on those requests. Currently, while we carefully consider the pending requests for reconsideration on endangerment, these final findings on endange rment and contribution remain in place. Thus under section 202(a) EPA is obligated to promulgate GHG motor vehicle standards, although there is no statutory deadline for issuan ce of the light-duty vehicle rule or other

3 As discussed elsewhere, for a variety of reasons EPA’s GHG standards achieve greater overall reductions in GHGs than NHTSA’s CAFE standards.

7-76Other Comments

motor vehicle rules. In that context, issuance of this final light-duty vehicle rule does no more than recognize the current status of the findings -- they are final and impose a rulemaking obligation on EPA, unless and until we change them. In issuing the vehicle rule we are not making a decision on request s to reconsider or stay the endangerment finding, and are not in any way prejudicing or limiting EPA's discretion in making a final decision on these administrative requests.

Organization: Consumers Energy

Comment:

The Joint Motor Vehicle Proposal contai ns a number of significant flaws and shortcomings that necessitate withdrawal of EPA's portion of the proposed rule. EPA's analysis demonstrates that it cannot properl y reach an affirmativ e endangerment finding given the inability of the emission standards to avert or to attack fru itfully the source of GHG-related endangerment. Because an affirma tive endangerment finding in this context cannot be legally made, EPA lacks the au thority to finalize its proposed GHG motor vehicle emission standards under section 202(a) of the CAA. In addition, the analyses of economic and environmental costs and benefits of the Joint Motor Vehicle Proposal are wholly insufficient and cannot support EPA's proposed standards. [OAR-2009-0472­ 7264.1, p.2]

Unlike NHTSA, EPA is under no statutory deadline to promulgate the standards that it is now considering. It has the time and the oblig ation to analyze more fully its regulatory proposal and the wide-ranging impacts that it an ticipates will likely be incurred after its finalization. Finally, EPA has failed even to consider possible ways in which it might avoid prematurely imposing significant regulatory burdens, like PSD and Title V requirements, on stationary sources while pursuing mobile s ource regulation under section 202(a). These are matters of the ut most significance, and EPA cannot simply ignore them consistent with its obligati ons under the CAA. For all of the foregoing reasons, Consumers Energy agrees with UAR G and requests that EPA withdraw its portion of the Joint Motor Vehi cle Proposal, that NHTSA revise its regulations as may be appropriate to address this change, and th at EPA engage in a new, more thoroughly reasoned regulatory decision-making process wh ile providing adequate public notice and opportunity for comment on these impor tant issues. [OAR-2009-0472-7264.1, p.2]

EPA Response:

This rulemaking is on the issues relevant to issuing emissions standards for new motor vehicles under Section 202(a) of the Clean Air Act. The comm ents are not relevant to the issues and decisions before the Agency in this standard setting rulemaking, as they relate to the separate rulemaking on the endangerm ent and contribution findings and to other pending actions before EPA. See the respons es above for further discussion of EPA’s reasons for issuing this vehicle rule at this time. In addition, the comment provides no details on their objections to EPA’s analyses of environmental and economic impacts.

7-77EPA Response to Comments

EPA has made a decision on the endangerm ent and contribution findings, with final Findings published in the Federal Re gister on December 15, 2009 (74 FR 66496). Comments in that rulemaking were carefully re viewed and considered in that rulemaking and addressed in the associated Respons e to Comments document, available at: http://www.epa.gov/climatechange/endangerment.html . EPA is not responding to them here as they are not rele vant to this rulemaking.

Organization: Duke Energy

Comment:

Duke Energy Business Services LLC (“Duke Energy”), on behalf of Duke Energy Carolinas, LLC, Duke Energy Indiana, Inc., Duke Energy Ohio, Inc., Duke Energy Kentucky, Inc., and Duke Energy Generation Se rvices (“DEGS”), therefore submits the following comments on the Joint Motor Vehicl e Proposal. Specifica lly, the significant flaws and shortcomings of the Joint Motor Ve hicle Proposal necessitate the withdrawal of EPA’s portion of the proposed rule. Duke En ergy continues to support the enactment of environmentally and economically sustainabl e federal climate change legislation. Regulating GHGs under the CAA is th e wrong approach. [OAR-2009-0472-7136.1, p.2]

The U.S. Environmental Protection Agency ’s (“EPA”) has stated its view that promulgation of the GHG motor vehicle standards will subject GHGs to the CAA Prevention of Significant Deterioration (“PSD”) program and the permitting requirements of Title V of the CAA, potentially as soon as the date on which the rule becomes final and effective. Duke Energy believes, however, that EPA’s legal positions in this regard and the analysis presented in the proposed rule are seriously flawed and must be corrected. [OAR-2009-0472-7136.1, p.2]

The Joint Motor Vehicle Proposal and its supporting documentation makes clear that EPA’s proposed GHG motor vehicle emission standards are largely duplicative of NHTSA’s proposed program and that EPA’s pr oposal will not add in any significant manner to the GHG reductions and associat ed impacts of NHTSA’s proposed CAFE standards. Therefore, EPA cannot properly reach an affirmative endangerment finding to satisfy the requirements of the CAA’s test for finding “endangerment,” rendering EPA’s proposed GHG motor vehicle emission [ OAR-2009-0472-7136.1, p.2] standards legally (and scientifically) unjustifie d. Because an affirmative endangerment finding cannot be legally made, EPA lacks the authority to finalize its proposed GHG motor vehicle standards under section 202(a) of the CAA. [OAR-2009-0472-7136.1, p.3]

EPA Response:

This rulemaking is on the issues relevant to issuing emissions standards for new motor vehicles under Section 202(a) of the Clean Air Act. The comm ents are not relevant to the issues and decisions before the Agency in this standard setting rulemaking, as they relate to the separate rulemaking on the enda ngerment and contribution findings.

7-78Other Comments

EPA has made a decision on the endangerm ent and contribution findings, with final Findings published in the Federal Re gister on December 15, 2009 (74 FR 66496). Comments in that rulemaking were carefully re viewed and considered in that rulemaking and addressed in the associated Respons e to Comments document, available at: http://www.epa.gov/climatechange/endangerment.html . EPA addressed comments in that rulemaking claiming that EPA could not make an endangerment finding because of the relationship of EPA’s GHG st andards to NHTSA’s CAFE standards. See 74 FR 66496, 66507-508 (December 15, 2009). EPA is not res ponding to them here as they are not relevant to this rulemaking.

Organization: Texas Commission on Environmental Quality

Comment:

In providing these comments, the TCEQ emphasizes that it does not support EPA's actions to regulate GHG under the federal Cl ean Air Act (CAA). As stated in TCEQ comments dated June 23, 2009, to EPA's Proposed Endangerment and Cause or Contribute Findings for Greenhouse Gases, the C AA is not an appropriate vehicle for the regulation of GHG, and the proposed endange rment finding, if finalized, would likely force EPA to begin regulating other sources through other major CAA programs resulting in significant impacts to the economy of Texa s and thus, the nation, without measurable environmental benefits. TCEQ recommends that EPA not finalize the GHG emission standards for light-duty vehicles under the proposed rule. [OAR-2009-0472-7180.1, p.1]

EPA Response:

This rulemaking is on the issues relevant to issuing emissions standards for new motor vehicles under Section 202(a) of the Clean Air Act. The comm ents are not relevant to the issues and decisions before the Agency in this standard setting rulemaking, as they relate to the separate rulemaking on the endangerm ent and contribution findings or on other pending or potential rulemakings.

EPA has made a decision on the endangerm ent and contribution findings, with final Findings published in the Federal Re gister on December 15, 2009 (74 FR 66496). Comments in that rulemaking were carefully re viewed and considered in that rulemaking and addressed in the associated Respons e to Comments document, available at: http://www.epa.gov/climatechange/endangerment.html . EPA is not responding to them here as they are not releva nt to this rulemaking. See responses to comments above concerning EPA’s reasons for issuing the light -duty vehicle rule now instead of delaying issuance of the rule.

Organization: Georgia-Pacific (GP)

Comment:

Since the carbon-neutral motor vehicle emissions of CO2 from biofuels do not contribute to the increase in atmospheric CO2 con centrations which constitute the public

7-79EPA Response to Comments

endangerment in EPA’s view, EPA lacks a stat utory basis for restricting motor vehicle CO2 emissions to the extent that th ey result from use of biofuels. [See Docket Number OAR-2009-0472-7122.1, pp.6-9 for detailed comments pertaining to: Biofuel Combustion Is Carbon-Neutra l and EPA Must Account for the CO2­ Neutrality of Biofuels To Be Cons istent With Its Endangerment Finding]

EPA Response:

EPA’s authority to adopt emissions standard s under section 202(a )(1) is not limited to motor vehicles powered by fuels other than biofuels. Vehicles operating on biofuels do emit GHGs, and as discussed in the preamble, from a lifecycle perspe ctive biofuels such as ethanol are not car bon neutral in the sens e the commenter uses.

This is also fully consistent with the endangerment and contribution findings. EPA included all motor vehicles emissions in calculating emissions for purposes of the contribution finding, and did not exclude emissi ons from vehicles operated by biofuels. In addition, the content or fo rm of the emissions control to follow under section 202(a)(1) was not relevant to the determination that th e air pollution of atmospheric concentrations of GHGs endanger public health and welfare. See also Section 5.7.2 of this Response to Comments document.

7.3 Vehicle Life-Cycle Emissions Issues

EPA’s proposed GHG emissions standards are ta ilpipe-based standards, consistent with other EPA vehicle emissions standards. A lthough EPA did not ask for comment on this issue, we did receive four comments fr om organizations recommending that EPA not only account for vehicle tailpipe GHG emissi ons, but also GHG emissions associated with other steps of the vehicle life-cycle. The structure of this section is to provide a sampling of excerpts of these four co mments, followed by an EPA response.

Organization: American Iron and Steel Institute University of Pennsylvania, Environmental Law Project US Steel Corporation Washington State Depa rtment of Commerce

Comment:

American Iron and Steel Institute

Clearly, the regulation's purpose is to redu ce the energy consumption and greenhouse gas emissions (mainly CO2) associated with the combustion of fuel during the driving cycle of light-duty vehicles for the U.S. fleet. AISI is concerned th at focusing only on the driving-phase of a vehicle's life will lead to increased energy consumption and CO2 emissions while reducing vehicle affordability. This is because technology selections will be made to lower driving phase energy use and GHG emissions that will increase energy use and GHG emissions in other phases of vehi cle life, more than offsetting the driving

7-80Other Comments

phase reductions. A methodology based on Life Cycle Assessment [LCA] of the vehicle [considering all phases of a vehicle's life as opposed to only the driving phase] will ensure energy reduction and GHG reduc tions occur. [OAR-2009-0472-7088.1, p.2]

1. Life Cycle Assessment (LCA): In order to ensure the steps taken by automakers to comply with the proposed rule result in lower energy use and GHG emissions, it is critically important that en ergy use and GHG emissions over the full life cycle of the vehicle are considered. Clearly, the reduction in fuel consumption per mile over the driving phase, as the proposed rule stipulates, will dir ectly reduce energy use and GHG emissions for the driving phase of the vehicle's life. However, by ignoring the consequences of the likely steps automakers may use to comply with a driving phaseonly rule [such as mass reduction through mate rials substitution] higher energy use and GHG emissions will result. [OAR-2009-0472-7088.1, p.3]

The proposed rule already considers an expa nded view [beyond driving phase emissions] by encouraging the use of air conditioning refrigerants with low global warming potential. AISI recommends the proposed rule include energy use and GHG emissions attributable to vehicle materials and their manufacturing phase. A methodology is described below. [OAR-2009-0472-7088.1, p.3]

An article (Attachment 1) published by American Metal Market in May 2008 by Dr. Roland Geyer of the University of Californi a-Santa Barbara, thoughtfully explains, in general, the concerns about regulations and unintended consequences. He includes examples of an overenthusiastic approach to the regulation of a single phase of a life cycle, while ignoring the full life cycle of the process or product regulated. A diagram showing energy consumption and GHG emissions during the life cycl e of a vehicle is shown in Figure 2. The LCA approach is deta iled in ISO Standard 14040 Series. Geyer has produced a methodology, endorsed by ISO peer review, through which energy use and CO2 emissions resulting from the selection of materials for vehicles can be evaluated for the entire life cycle of the vehicle. AI SI recommends that materials selection for vehicles be evaluated by a model [such as the Geyer model] that considers life-cycle impact on energy use and GHG emissions. Sim ilar studies and public statements about this approach have been made by automakers. For example, recently published information from Mercedes in its S-Class Environmental Certificate (Attachment 2) shows how car makers are using LCA in materials decisi ons. [OAR-2009-0472-7088.1, p.3] [[Attachment 1 is Docket Numb er OAR-2009-0472-7088.2 which is copyrighted material and not available on FDMS. A ttachment 2 is Docket Number OAR-2009-0472­ 7088.3.]]

EPA and NHTSA should promulgate regulations that require manufacturers to meet regulations by the lowest life cycle emi ssions solution, for example by selecting comparatively low energy and low C02 materi als like high-strength st eel. Materials that lower the overall life-cycle energy use a nd GHG emissions of the vehicle should be preferred to those that consume more energy and raise the total GHG burden. [OAR2009-0472-7088.1, p.6]

7-81EPA Response to Comments

Methodologies for conducting lif e cycles assessment of vehicles are well established through exiting tools such as ISO Standard 14040 Series. Vehicle manufacturers already have the in-house capability of conducting LCA for material s selection and there are many published examples where these studi es have been applied. Many materials suppliers have established materials energy and CO2 emissions databases. The tools for implementing a life cycle assessment guideline for materials selection are already established and in use by some manuf acturers (Attachment 2). [OAR-2009-0472-7088.1, p.6]

AISI strongly recommends the proposed ru le incorporate the energy and emissions associated with creating the materials used in building the vehicle and the energy and emissions saved at end of life through recyc ling. In this way, the re duction in emissions during the driving cycle will not be offset by increases in energy use and GHG emissions associated with use of energy- and GHG inte nsive materials and the lowest total impact on the environment will be ach ieved. [OAR-2009-0472-7088.1, p.6]

AISI supports a national standard that can be uniformly applied in order to reduce the consumption of fuel and the emissions asso ciated with light vehicles. However, the current proposal to regulate based only the vehicle driving phase may very well increase energy use and GHG emissions while increasi ng vehicle cost. Increased vehicle cost would further delay the adoption of complia nt vehicles, slowing the reduction in emissions. [OAR-2009-0472-7088.1, p.8]

To avoid these outcomes, we strongly reco mmend EPA and NHTSA incorporate all life cycle energy use and GHG emissions associated with light-duty vehicles into this rule. A life cycle approach is more consistent with achieving the objectives of the Clean Air Act, the Energy Independence and Security Ac t (EISA) of 2007, and President Obama's October 5,2009 Executive Order on Federal L eadership in Environmental, Energy, and Economic Performance. [OAR-2009-0472-7088.1, p.9]

University of Pennsylvania, Environmental Law Project

Significantly, the EPA/DOT joint proposed rulema king also fails to take into account a few potentially major factors because it fails to do a complete life cycle impact assessment. Thus, while the rule would achie ve the admirable goal of reducing source emissions of GHGs from motor vehicles in operation, the rule could potentially increase overall global GHG emissions. [OAR-2009-0472-7286.1, p. 19]

Automobile manufacturers (and their parts suppliers) may need to build more advanced facilities or convert existing f acilities in order to produce the more advanced vehicles that will be required by the proposed rule. This building process will require the extraction and processing of raw and recycled mate rials into useable building materials, transportation of those building materials to the site of existing or new facilities, and construction. Each of these steps in the re novation or new construction process will be a source of new GHG emissions attributab le to the proposed rule. [OAR-2009-0472­ 7286.1, p. 19]

7-82Other Comments

Aside from the actual physical buildings wher e parts are manufactured or motor vehicles assembled, the tools required for manufacturing and assembly are likely to become more complex and energy intensive. The manufactur e and use of these new tools will require additional GHG outputs. Moreover, vehicles will likely be manufactured of lighterweight materials in order to meet higher fuel economy requirements; some of these materials may be more energy intensive to pr oduce or recycle, leading to increased GHG emissions in those processes at least indirectly attributable to the proposed rule. [OAR2009-0472-7286.1, p. 20]

Finally, consumers will be resistant to purchasing new vehicles because of the increased up-front cost, even with a net savings due to re duction in fuel costs, because they may not take the net savings into account or may not value those savings as highly as an upfront cost savings. In any case, in order to reduce up-front costs to consumers of new vehicles, manufacturers (and their supplie rs) may increase the proportion of vehicle parts produced and motor vehicles assembled in countries w ith cheaper labor. Notw ithstanding the likely impact on the domestic job market, this will also create a greater need to transport such parts to assembly plants and assembled vehicl es to their points-of-sale. This will also result in increased GHG emissions attrib utable to the proposed rule. [OAR-2009-0472­ 7286.1, p. 20]

Importantly, this report does not claim to be able to predic t the increase in GHG emissions that will be associated with th e manufacturing and transportation of the more advanced vehicles that the EPA/DOT joint rule will necessitate. Instead, it aims only to point out that such a complete life cycle anal ysis should be performed in order to assess the net effect the rule will have on GHG emissions. [OAR-2009-0472-7286.1, p. 20]

US Steel Corporation

Life Cycle Assessment (LCA): It is important to consider the impact of compliance to the proposed aggressive fuel economy regulations on energy and CO2 emissions over the full life cycle of the vehicle. Cl early, the reduction in fuel c onsumption per mile over the driving phase, as the proposed NPRM woul d stipulate, will directly reduce energy use and CO2 emissions for the use-phase of th e vehicle’s life. Howe ver, by ignoring the consequences of those probable technologi es (one of which is mass reduction through materials selection) to be used by car companie s to achieve these resu lts, it is possible for higher-energy and CO2-intensive manufacturing of low density materials to offset the benefit of the regulations imposed on the driving phase alone. [OAR-2009-0472-7197.1, p.3 full discussion follows in document]

[[These comments were submitted as testim ony at the Detroit public hearing. See docket number OAR-2009-0472-6185, pp. 102-103.]]

The methodology for a life cycle approach as well as establish an ISO standard 1440, many vehicle manufacturers are already implementing this methodology in vehicle designs. The concern is vehicle makers may sele ct technologies that increase the full life

7-83EPA Response to Comments

cycle energy and CO2 footprint of the vehicle in order to co mply with the tailpipe-only regulations.

We will continue to invest in steel technologies that reduce the full life cycle energy and the CO2 footprint of the vehi cle. Since the 1990s the North American Steel Industry has reduced the energy and carbon in tensity of steel by 33 per cent, more than doubling the target set by the protocol. Looking to the fu ture, the steel industry is exploring over 100 independent CO technologies to reduce or eliminate carbon emissions associated with steel making. We continue to develop new grades of steel both independently and in partnership with the National Science F oundation and universities that will enable additional lightweighting. And at the end-of -life steel will continue to be the most recycled material on the planet, more than all other materials combined.

The combinations of these investments will reduce the energy and CO2 intensity of the steel supply, reduce the amount of steel needed per vehicle, reduce the tailpipe emissions through weight reduction, and reduce the emissi ons at the end-of- life through recycling.

However, without the appropria te regulations, these opportun ities to reduce the energy use and CO2 emissions associated w ith a vehicle may not be realized.

The current fuel economy and tailpipe emissi ons regulations may result in the unintended consequences of increasing the full life cy cle energy used and CO2 emissions of the vehicle.

It is my recommendation and request on behalf of U.S. Steel that the EPA and NHTSA develop policies that comprehe nd the full life cycle environmental impact associated with the vehicle and encourages vehicle manufacturer s to choose technologies that result in the lowest environmental impact on the entire vehicle's life.

Washington State Department of Commerce

[Following comments are from LA Testimony, OAR-2009-0472-7283, pp.123-124]

EPA is structuring their regulati on -- standards, cost-benefit analysis, et cetera -- on the basis of GHG emitted directly from the vehicle. We urge EPA to explore the areas in the regulation where the use of life-cycle GHG emission would not be prevented by statute.

We believe a life-cycle approach would be pa rticularly important and helpful to provide the right incentives, A, to different vehicle t echnologies at a given point in time; and, B, to a given vehicle technology over time.

EPA Response:

EPA’s final GHG emissions standards are vehicl e tailpipe-based standards. The four commenters all suggested that EPA consider accounting for GHG emissions associated with other steps of the vehicle life-cycle. The American Iron and Steel Institute and US

7-84Other Comments

Steel Corporation primarily focus on the GHG emissions impacts associated with producing the materials used in vehicle and co mponent assembly and in materials end-oflife considerations (i.e., recy cling or disposal). The Un iversity of Pennsylvania, Environmental Law Project goes further and suggests that EPA should consider the GHG emissions impacts of building and operating new, more advanced assembly facilities and tooling, and even the potential GHG emissions impacts that might be associated with a greater reliance on imported vehicles and co mponents, on the theory that technologies with a higher up-front cost might be more lik ely to be produced in countries with lower labor costs. Each of these three commente rs makes the point that these non-tailpipe GHG emissions considerations could reduce the effective GHG savings of the program. The University of Pennsylvania, Environmental Law Project suggests that the non-tailpipe GHG emissions impacts “could potentially increase overall global GHG emissions.”

EPA understands the technical i ssues associated with life-cy cle analysis. But, vehicle life-cycle GHG emissions impacts are beyond the scope of this rulemaking. EPA has wide discretion under section 202(a) and has chosen to first focus on vehicle tailpipe GHG emissions, both because tailpipe emissions are the largest single source of vehicle life-cycle GHG emissions, and because the EP A motor vehicle program has traditionally focused on tailpipe emissions. The time involved in developing a methodology and the necessary data, noticing all of the information and assess ing the public comments would significantly delay issuing GHG standards in time for MY 2012 and perhaps later model years as well, undermining any potential benefits of the approach. In addition, extending the vehicle tailpipe GHG emissions standards to include othe r steps of the vehicle lifecycle would reduce the harmonization with NHTSA’s CAFE program, and EPA has reasonably considered such harmonization to be appropriate in this rulemaking.

7-85