From: William Charmley/AA/USEPA/US 

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

Cc: Moran.robin@epa.gov, james.tamm@dot.gov, Steve.Wood@dot.gov, Ed 

Nam/AA/USEPA/US@EPA, Steve.Wood@dot.gov 

Date: 03/29/2010 02:47 PM 

Subject

: 

2 items for LD GHG/CAFE rule: TSD reference to other rulemaking discussion on fuel 

savings, and high-level summary of costs and benefits 

Chandana - 

here are two items for the package from Friday. 

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

In the estimates of costs and benefits presented in the Preamble and the agencies’ 

RIAs, the agencies have included the full fuel savings over vehicles’ expected 

lifetimes, discounted to their present values using both 3 and 7 percent discount 

rates. More detailed discussion of this approach can be found in Preamble Sections 

III.H.1 and IV.G.6, in Section 8.1 of EPA’s RIA, and in Chapter VIII of NHTSA’s 

RIA. 

2. Table for EPA high-level costs and benefits of the rule. This is in Section I.C.2. 

We will put the same table with very similar text into the Executive Summary of the EPA 

RIA [attachment "EPA Table I.C.2-1.doc" deleted by Tad Wysor/AA/USEPA/US] 
2. Summary of Costs and Benefits of EPA's GHG Standards

 EPA has analyzed in detail the costs and benefits of the final GHG standards. Table 

I.C.2-1 shows EPA’s estimated lifetime discounted cost, benefits and net benefits for all vehicles 

projected to be sold in model years 2012-2016. It is important to note that there is significant 

overlap in costs and benefits for NHTSA’s CAFE program and EPA’s GHG program and 

therefore combined program costs and benefits are not a simple sum of the individual programs. 

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

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

3% Discount Rate $billions 

Costs $51.5 

Benefits $240 

Net Benefits $189 

7% Discount Rate 

Costs $51.5 

Benefits $192 

Net Benefits $140 a

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

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

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

with one of these marginal values, $21 per ton of CO2, in 2007 dollars and 2010 

emissions. As noted in Section III.H, SCC increases over time. The $21/ton value 

applies to 2010 CO2 emissions and grows larger over time. b

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

than other benefits. The same discount rate used to discount the value of damages 

from future emissions (SCC at 5, 3, and 2.5 percent) is used to calculate net present 

value of SCC for internal consistency. Refer to Section III.H for more detail. c Monetized GHG benefits exclude the value of reductions in non-CO2 GHG 

emissions (HFC, CH4 and N2O) expected under this final rule. Although EPA has 

not monetized the benefits of reductions in these non-CO2 emissions, the value of 

these reductions should not be interpreted as zero. Rather, the reductions in nonCO2 GHGs will contribute to this rule’s climate benefits, as explained in Section 

III.F.2. The SCC TSD notes the difference between the social cost of non-CO2 

emissions and CO2 emissions, and specifies a goal to develop methods to value 

non-CO2 emissions in future analyses.